Calcutta High Court
M/S Trs Lift And Shift Services Pvt. Ltd vs Reliance General Insurance Company ... on 4 July, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
IN THE HIGH COURT AT CALCUTTA
ORIGINAL CIVIL JURISDICTION
COMMERCIAL DIVISION
The Hon'ble Justice Sabyasachi Bhattacharyya
AP-COM/344/2024
[Old Case No. AP/455/2023]
M/s TRS Lift and Shift Services Pvt. Ltd.
Vs
Reliance General Insurance Company Limited
For the petitioner : Mr. Rudraman Bhattachariya, Adv.
Mr. Shaunak Ghosh, Adv.
Mr. Rajib Mullick, Adv.
Ms. A. Saha, Adv.
For the respondent : Ms. Aasia Hasan, Adv.
Mr. Pathik Choudhury, Adv.
Hearing concluded on : 26.06.2024
Judgment on : 04.07.2024
Sabyasachi Bhattacharyya, J:-
1. The present application under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as, "the 1996 Act")
arises out of an insurance contract between the parties. The petitioner
purchased a crane, regarding which an insurance policy was issued
by the respondent company on July 30, 2019.
2. On August 16, 2019, the said vehicle/crane was destroyed completely
by fire. The petitioner filed an insurance claim on November 7, 2019.
3. On December 31, 2019, the surveyor appointed by the insurance
company issued a final report, coming to a conclusion that the loss
suffered was to the tune of Rs. 42,71,000/-. On December 30, 2022,
an addendum report was authored by the insurance surveyor,
observing that the loss suffered amounted to Rs. 61,10,750/-.
4. On January 30, 2021, the respondent/insurance company allegedly
admitted in a written communication the claim of the petitioner
partially, upon which the petitioner invoked the arbitration clause in
the agreement between the parties regarding the dispute in respect of
the quantum payable by the insurer, by issuance of a notice under
Section 21 of the 1996 Act on November 8, 2022, suggesting names of
two alternative arbitrators. Subsequently another letter was issued on
December 19, 2022 by the petitioner, altering one of the names of the
proposed arbitrators, who had not agreed to the nomination.
5. On February 15, 2023, the claim of the petitioner was repudiated in
its entirety by the respondent.
6. The learned counsel for the petitioner claims that although
repudiation of the entire claim is otherwise not amenable to
arbitration under the relevant clause, in the present case, there were
repeated reports by the surveyor appointed by the insurance company
itself, admitting partially the claim of the petitioner. The respondent
had even communicated such partial admission by its letter dated
January 30, 2021. The liability to pay was never denied by the
insurance company-respondent at any point of time and the bone of
contention was restricted only to the quantum of claim payable.
7. After the arbitration clause was invoked under Section 21 on
November 8, 2022 and several correspondence having occurred
thereafter, the respondent, merely to dislodge the reference to
arbitration, repudiated the entire claim. It is argued that such post
facto repudiation would not deter the matter from being referred to
arbitration.
8. Learned counsel submits that as per the Insurance Regulatory and
Development Authority of India (Protection of Policyholders' Interests)
Regulations, 2017, notified on June 22, 2017, the insurer has to reject
a claim under the policy within a period of 30 days from the receipt of
the final survey report and/or additional information/documents of
the additional survey report, as the case may be. In the present case,
the repudiation came much thereafter. The final survey report was
published on December 13, 2019 with an addendum dated December
30, 2020 whereas the purported repudiation came on February 15,
2023, only in response to the notice under Section 21.
9. It is argued that, upon receipt of the Section 21 notice by the
respondent on November 11, 2022, the arbitral proceeding had
already commenced. Hence, once a notice was received, the
arbitration is deemed to have commenced and cannot be resiled from.
In support of such contention, learned counsel appearing for the
petitioner cites Milkfood Ltd Vs. GMC Ice Cream (P) Ltd reported at
(2004) 7 SCC 288.
10. The decisions cited by the respondent, it is argued, are on the issue of
non-arbitrability of total repudiation of claim. In the present case,
however, the respondent had admitted partially the claim of the
petitioner. Learned counsel contends that in the case of Vidya Drolia
and Others Vs. Durga Trading Corporation reported at (2021) 2 SCC 1,
the Supreme Court held that where the matter requires examination
of oral and documentary evidence, it has to be necessarily referred to
arbitration for full trial. The question of whether there was repudiation
or not can thus be decided only by the arbitral tribunal.
11. Learned counsel for the respondent/insurance company controverts
such allegation and argues that there is no quantum dispute in the
present case as is evident from the letter dated February 15, 2023,
which is a total repudiation. Once the claim is repudiated in its
entirety, the arbitration clause, which only contemplates quantum
disputes, cannot be invoked.
12. Learned counsel cites the final report of the surveyor according to
which the fire broke out due to engine failure, which is not covered by
the insurance policy.
13. Previously a complaint was filed before the State Consumer Disputes
Redressal Commission, West Bengal by the petitioner bearing
Complaint Case No. CC/1/2022, which was dismissed on July 26,
2022.
14. Learned counsel for the respondent/insurer cites Himani Alloys
limited Vs. Tata Steel Limited reported at (2011) 15 SCC 273 for the
proposition that an admission should be categorical. Unless the
admission is clear, unambiguous and unconditional, the discretion of
the court should not be exercised to deny the valuable right of a
defendant to contest the claim.
15. Citing Vulcan Insurance Co. Ltd. v. Maharaj Singh, reported at (1976) 1
SCC 943, it is argued that if any false declaration is made or
fraudulent means are used by the insured or if the loss or damage be
occasioned by the willful act or with the connivance of the insured, the
claim may be rejected and all benefits under the policy shall be
forfeited.
16. Next placing reliance on M/s Jumbo Bags Ltd. Vs. M/s The New India
Assurance Co. Ltd, reported at 2016-2-L.W.769, learned counsel
argues that the Madras High Court held therein that only the dispute
as to quantum payable under the insurance policy can be the subject-
matter of arbitration.
17. Citing Oriental Insurance Company Limited Vs. Naveram Power Steel
Private Ltd reported at (2018) 6 SCC 534, it is argued that clauses in
insurance policies must be construed strictly. The duty of the court is
to interpret the words in which the contract is expressed by the
parties but it is not for the court to make out a new contract,
howsoever reasonable.
18. Lastly, the judgment of United India Insurance Co. Ltd. v. Hyundai
Engg. & Construction Co. Ltd. reported at (2018) 17 SCC 607 is cited in
support of the same proposition.
19. The question which arises broadly in the present case is whether the
dispute raised by the petitioner falls within the purview of the
arbitration clause in the insurance contract between the parties. Two
cardinal questions need to be answered to decide such question:
i) Whether the liability has been admitted by the insurer at all; and
ii) Whether repudiation of the claim in its entirety after a notice is
issued under Section 21of the 1996 Act can preclude the matter from
being referred to arbitration.
20. To answer the first question, we are to look into the documents
annexed to the parties.
21. The first relevant document after the insurance claim was made by
the petitioner on November 7, 2019 is the so-called "Final Report" of
the surveyor appointed by the respondent-insurer dated December 31,
2019. In the said document, the loss suffered by the petitioner was
quantified at Rs. 42,71,000/- .
22. An addendum report filed by the insurance surveyor on December 30,
2022, almost one year later, shows that the loss was calculated at Rs.
61,10,750/-.
23. All the above documents are annexed to the affidavit-in-opposition of
the insurance company itself.
24. In a communication annexed at page 49 of the writ petition, dated
January 30, 2021, it is seen that the claim of the petitioner was
partially admitted by the insurance company.
25. Thus, there are at least three documents on record which show that
the insurance company quantified the loss suffered by the petitioner,
albeit differently at different points of time.
26. The arbitration clause was invoked by the issuance of a notice under
Section 21 of the 1996 Act on November 8, 2022. The said notice was
received by the respondent on November 11, 2022. Still, the
respondent did not make any whisper that it was repudiating the
entire claim of the petitioner. Hence, at the juncture when the
arbitration clause was invoked by issuance of a notice under Section
21 and the same was received by the respondent, there was no
whisper of repudiation of the entire claim; rather, partial admission of
the claim of the petitioner was apparently made by the respondent by
its letter dated January 30, 2021, which was backed up by a final
report and an addendum report.
27. Section 21 of the 1996 Act provides that unless otherwise agreed by
the parties, the arbitral proceedings in respect of a particular dispute
commence on the date on which the request of that dispute to be
referred to arbitration is received by the respondent.
28. In the present case, there is no agreement otherwise between the
parties and, such, the arbitral proceedings commenced on and from
November 11, 2022, when the petitioner's notice under Section 21 of
the 1996 Act was received by the respondent/insurance company.
29. Once the arbitral proceeding commences, it does not lie in the mouth
of the respondent to say that the commencement of the proceedings
was itself bad, since at the juncture when it commenced there was no
repudiation of the entire claim but only a dispute as to the quantum
payable, which squarely comes within the purview of the arbitration
clause.
30. Apart from the fact that the repudiation was issued long after the
stipulated period on thirty (30) days as per Clause 15, Item 8 of the
Insurance Regulatory And Development Authority of India (Protection
of policy holders' interest) Regulations 2017, the fact remains that
such repudiation appears to be an afterthought, after the respondent
having already admitted the liability to meet the claim in principle,
although differing at various points of time as to the quantum
payable.
31. Thus, as on the date of invocation of the arbitration clause, the
liability of payment of insurance claim was prima facie admitted in
principle. The only dispute was relating to quantum.
32. Hence, the first question is answered in the affirmative. The insurer
appears to have admitted the liability to pay the claim of the
petitioner, although spinning out different figures of the sum payable
at various points of time.
33. Insofar as the second issue is concerned, although there is no specific
bar in the insurance company repudiating the entire claim even
subsequent to the commencement of arbitration, it is arguable as to
whether such repudiation can at all be entertained, in view of the said
stand of the respondent being contrary to its previous admissions. I
must hasten to mention here whether there was any clear-cut
admission of the liability to pay on the part of the respondent, to be
fair, is arguable and cannot be conclusively decided by this Court
under Section 11 of the 1996 Act, since such exercise is by its very
nature administrative and not adjudicatory.
34. However, for the limited purpose of ascertaining as to whether the
matter needs to be referred to arbitration, the materials on record are
sufficient to indicate that the repudiation of the claim came only after
the commencement of arbitral proceedings by receipt of the notice
under Section 21 of the 1996 Act by the respondent and the dispute
pertains to the quantum of the insurance claim payable, which comes
fully under the purview of the arbitration clause.
35. Repudiation of the liability to pay in its entirety post-commencement
of arbitration does not vitiate the reference itself and can at best
furnish food for thought for the arbitral tribunal if the issue is raised
before it. The issues as to whether there was an admission of liability
on the part of the insurer and, if so, whether subsequent repudiation
post-invocation of the arbitration clause can efface the same are to be
dealt with on facts and law by the arbitrator upon assessment of
evidence adduced by the parties.
36. The decisions cited by the respondent primarily pertains to the non-
arbitrability of disputes relating to insurance contracts other than
disputes relating to the quantum. However, those are not germane at
this stage, since it is for the arbitrator to decide as the whether the
insurance company admitted in principle the liability to pay and the
dispute only pertains to quantum or whether the insurer is permitted
to repudiate the claim taking a contrary stand subsequently after
commencement of the arbitration proceeding.
37. As to the respondent's reliance on Himani Alloys limited (supra), the
same was rendered in the context of Order XII Rule 12 or the Code of
Civil Procedure and for such purpose it was held that an admission
should be categorical. In the present case, we are not dealing with a
judgment on admission but merely considering whether there is prima
facie admission of liability to pay on the part of the insurance
company, sufficient to invoke the arbitration clause. Hence, the
standard applicable to Order XII Rule 12 is not attracted in the
present case. The very arguability of the issue as to whether there was
any such admission of liability renders the dispute fit to be referred to
arbitration, leaving it for the arbitrator to decide on merits upon
consideration of the relevant materials and evidence.
38. There is no doubt that, as laid down in Milkfood Ltd. (supra), the
arbitral proceedings commence once notice under Section 29 is
received.
39. Another facet of the matter which is required to be considered is
whether this court, under Section 11 of the 1996 Act, is the
appropriate authority to decide on merits as to the question of
whether the dispute pertains only to quantum or a repudiation of the
entire claim, deciding in the process the ancillary issues such as
whether there was any unequivocal admission of liability to pay on the
part of the respondent and whether post facto repudiation by the
insurance company, contrary to its previous stand, that too after
commencement of the arbitral proceedings, is permissible in law.
40. Section 16 of the 1996 Act recognizes the kompetenz-kompetenz
principle. The arbitral tribunal is clothed with the jurisdiction under
the said provision to rule on its own jurisdiction on all issues,
including objections with respect to the existence or validity of the
arbitration agreement but not limited thereto.
41. Hence, it is best left to the arbitrator, as and when appointed, to
decide on such issues instead of the court, sitting in administrative
jurisdiction under Section 11, to enter into such dispute at all.
42. Section 5 of the 1996 Act, in no uncertain terms, provides that
notwithstanding anything contained in any other law for the time
being in force, in matters governed by Part I, no judicial authority
shall intervene except where so provided in the said Part.
43. Seen in such context, there is no doubt that the matters in issue are
best left to be tried on evidence by the arbitrator. Suffice to say that at
this juncture, there is sufficient prima facie material to indicate that
the dispute related all along to the quantum of claim and the liability
of the insurance company to pay the claim was apparently admitted in
principle by the insurance company by its written communication and
dated January 30, 2021 and the preceding final report dated
December 31, 2019 and addendum report dated December 30, 2022.
44. Hence, the dispute is required to be referred to arbitration, prima facie
coming within the arbitration clause of the insurance contract.
45. In such view of the matter, AP-COM/344/2024 [Old Case No.
AP/455/2023] is allowed on contest, thereby appointing Mr.
Siddhartha Banerjee, (Mobile No: 9830298922), a member of the Bar
Association, as the sole arbitrator to resolve the disputes between the
parties, subject to obtaining a disclosure from the said learned
Arbitrator under Section 12 of the Arbitration and Conciliation Act,
1996 upon both sides having consented to the appointment of a sole
arbitrator. The learned Arbitrator shall fix his own remuneration in
consonance with the provisions of the 1996 Act, read with its
Schedules.
46. It is made clear that the disputes between the parties have not been
entered into on merits by this Court and it will be open to the learned
Arbitrator to decide on all issues, including his own jurisdiction,
without being influenced in any manner by any of the observations
made herein.
47. There will be no order as to costs.
48. Urgent certified server copies, if applied for, be issued to the parties
upon compliance of due formalities.
( Sabyasachi Bhattacharyya, J. )
