Mercury Rubber Mills vs Oriental Insurance Co. Ltd.
1987 Latest Caselaw 235 Del

JUDGMENT

N.C. Kochhar, J.

(1) Messrs Mercury Rubber Mills (the petitioner) had entered into a contract of insurance with The Oriental Insurance Co. Ltd, (the respondent) vide policy No. 2130/302/02211/44/05/80/00034, dated 29th December, 1980 whereby the respondent had agreed to pay to the petitioner all losses of profit which the petitioner might suffer due to break down of its machinery installed at its factory premises situated at 35th K..M. milestone, G.T. Karnal Road Rasoi, District Sonepat, Haryana. The insurance policy had an arbitration clause which reads as under : "IF any difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted such difference shall independently of all other questions be referred to the decision of an arbitrator ; to be appointed in writing by the parties in difference, or if they cannot agree upon a single arbitrator to the decision of two disinterested persons as arbitrator of whom one shall be appointed in writing by each of the parties within two calendar months after having been required so to do in writing by the other party in accordance with the provisions of the Arbitration Act, 1940, as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar months after receipt of notice in writing requiring an appointment the other party shall be at liberty to appoint sole arbitrator, and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings. It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as herein before provided, if the company has disputed or not accepted liability under or in respect of this policy. It is hereby expressly stipulated and declared that it shall be condition precedent to any right to action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage shall be first obtained. It is also hereby further expressly agreed and declared that if the Company shall disclaim liability to the insured for any claim here under and such claim shall not, within 12 calender months from the date of such disclaimer have been made the subject matter of a suit in a court of law, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."

(2) The machinery of the petitioner broke down during the life of the insurance policy and vide letters dated 12/13th February 1982, the petitioner submitted the following three claims with the respondent in respect thereof : (1) Claim No. 2130/302/44/55/81/00001 for Rs. 6,70,795. (2) Claim No. 2130/302/44/55/81/00005 for Rs. 2,77,067. (3) Claim No. 2130/302/44/55/81/00017 for Rs. 93,328. The respondent passed the first and second claims of the petitioner lor Rs. 53,507 each and the third one for Rs. 51,467. Three letters all dated 12th October 1983, in respect of each of the claims had been sent by the respondent to the petitioner intimating this fact and enclosing therewith the vouchers for the signatures of the petitioner staling that the amounts were in full and final settlement of the above said claims. The petitioner stamped and signed the vouchers and returned them to the respondent under its letter dated 15th October, 1983 requesting the respondent, to remit the amount at an early date and further requesting that the calculations in regard to the amounts of claims be also sent to the petitioner so that the same could be verified. Vide letter dated 29th October 1983, the petitioner requested the respondent to hand over three cheques in respect of the above said three claims to the bearer of the letter and further requested that details of calculation of the amount being paid be also sent along with the same. Vide letter of the same date the respondent sent three cheques to the petitioner staling that the cheques were being sent in full and final settlement of the claims of the petitioner. The petitioner encashed the cheques and vide letters dated 19th November 1983, wrote to the respondent that there appeared to be miscalculation in regard to the claims and requested the respondent to have the matter reconsiled. Since there was no response from the respondent, the petitioner requested the respondent to refer the matter to arbitration in terms of the arbitration clause of the policy. The respondent, however, declined to do so on the ground that the petitioner having accepted the payments against the said three claims, their claims stood settled and no dispute subsisted for being referred to arbitration. After having entered into some further correspondence with the respondent, the petitioner has filed this application under Section 20 of the Arbitration Act, praying that the arbitration agreement between the parties be filed in court and the reference be made to the arbitration in accordance with the agreement between the parties.

(3) The petition has been contested by the respondent on i.he ground that the amounts having been accepted in full and final settlement of the claims of the petitioner, no dispute subsisted and as such no reference can be made.

(4) On the pleadings of the parties following issue was framed on 20th March 1986: "WHETHER any referable disputed arise between the parties ?"

(5) It has been contended on behalf of the respondent that the petitioner having accepted the amounts in full and final settlement of its claims is not entitled to claim anything more and the disputes between the parties stood settled and as such no reference can be made to arbitration. Reliance has been placed on behalf of the respondent on Section 63 of the Contract Act, as also on the decisions in cases Lala Kapurchand Godha & Ors. v. Mir Nawab Himayatalikhan Azamjah, , Union of India v. M/s. Gangadhar Mimraj and Another, Air 1962 Pat. 372, and Amrit Banaspati Co. Ltd. v. Union of India, .

(6) The contention of Dr. Sidhu on behalf of the petitioner, on the other hand, is that mere acceptance of the cheques and their encashment does not mean that the cheques were accepted in discharge of the whole claim and that the fact that the petitioner while returning the vouchers and thereafter while claiming cheques had been asking the respondent to furnish the details of calculation for verification by the petitioner shows that the amounts had not been accepted in full and final settlement of the claim. It is further contended that the dispute as to whether or not the petitioner had accepted the above said three cheques in full and final settlement of their claims is itself a dispute which has to be decided by the arbitrator and not by the court. For the first contention reliance ha.s been placed on the decision in case Union of India & Am. v. M/s. Gangaram Bhagwandas, , Messrs Amar Nath Chand Prakash v. Mcssrs Bharat Heavy Electricals Limited, and Dipchand Golecha v. Mis. M. Abhechand and Co., .

(7) Support has been sought from the decision of Hon'ble Supreme Court in case The Union of India v. Kishorilal Gupla & Bros., in regard to the second contention of Dr. Sidhu.

(8) I have considered the arguments advanced at the Bar and have also gone through the authorities relied upon by the learned counsel for the parties.

(9) There cannot be any dispute that if the petitioner had accepted the amounts sent by the respondent in full and final settlement of its claims mentioned above, the disputes between the parties stood settled and the respondent stood discharged and no dispute remained between the parties. If, however, the amounts were accepted subject to reservations and the acceptance was not unconditional, it cannot be said that the acceptance of the amounts would give a valid discharge to the respondent in respect of the entire claim of the petitioner.

(10) In my view the claim of the petitioner arose out of the contract between the parties under the above said policy and whether or not the petitioner had accepted the above said three payments in full and final settlement of their claim and ban given valid discharge to the respondent is a question of fact which has to be decided by arbitration in terms of the arbitration clause and cannot be decided by the court. If any authority is needed for this purpose, reference may be made to the decision of the Supreme Court in case Damodar Valley Corporation v. K.K. Kar, and the decision of this Court in Anoop Puri v. Swinder Kumar Khurana & Am., decided by Sultan Singh, J. on 13th April, 1983 (1983 Delhi High Court Digest, Vol. 13 page 209).

 (11) In this view of the matter the following dispute exists between the parties and is to be referred to arbitration :    "WHETHER the cheques for the above said amounts were received by the petitioner from the respondent in full and final settlement of its above noted three claims ? If not, what amount is due to the petitioner from the respondent under the above said claims ?"  

 (12) Consequently I allow the petition and direct that the arbitration agreement between the parties be filed in court. I also direct the parties to refer their disputes to arbitration in terms of the arbitration clause mentioned above without any unavoidable delay.  

 (13) The parties are left to bear their own costs of these proceedings. Suit No. 2279-A of 1985 stands disposed of.