Delhi High Court
National Insurance Co. Ltd. vs M/S. Pragati Paper Mills Ltd. & ... on 15 March, 2010
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP No. 294/2003
15th March, 2010
NATIONAL INSURANCE CO. LTD. ...Petitioner
Through: Mr. Vishnu Mehra, Advocate.
VERSUS
M/S. PRAGATI PAPER MILLS LTD. & ANR. ....Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be allowed to see
the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
% JUDGMENT (ORAL)
VALMIKI J.MEHTA, J
1. This petition under Section 34 of the Arbitration and
Conciliation Act, 1996, challenges the ex-parte Award dated 15.3.2003
passed by the sole Arbitrator awarding the insured/respondent the amount
with respect to the breakdown caused of a diesel generator set and which
was insured with the petitioner. The present petitioner in spite of various
notices issued to it, failed to appear in the arbitration proceedings. The
Arbitrator, therefore, was forced to proceed ex-parte against the petitioner.
OMP 294/03 Page 1
2. The facts of the case are that the respondent took a Machinery
Breakdown Insurance Policy from the petitioner for a sum of Rs.70 lacs for
the period from 16.9.1999 to 15.9.2000. The respondent paid a premium of
Rs.1,11,720/- as per cover note dated 10.6.1999. The diesel engine of the
DG set suffered a mechanical breakdown on 21.3.2000. The petitioner was
informed of the breakdown and the estimate for repair charges by M/s Uttar
Pradesh Tractors Pvt. Ltd. at Rs.29,71,150/- (Ex.C-3). The petitioner,
however, sought to pay only an amount of Rs.9,90,937/- to the respondent
and who therefore initiated the arbitration proceedings. The petitioner failed
to appoint its own Arbitrator and the Arbitrator appointed by the respondent
in law became the sole Arbitrator.
3. In the arbitration proceedings, the respondent appeared and
proved its claim. The relevant portions of the Award are paras 3 and 4
which read as under:
"3. I have heard Shri R.K. Aggarwal, the Attorney of the Claimant and
perused the documents produced on record and after giving my careful
consideration, I find that the engine of the DG Set during the period when it
broke down stands duly proved and there cannot be any denial to that effect
since the respondent company itself offered to pay a sum of Rs.9,90,937/- as
settlement of the claim. Consequently the break down of the DG SET within
the insurance period also cannot be disputed. The only dispute which remains
to be resolved is with regard to the quantum of loss which is to be
compensated to the claimant. It is also duly proved that after dismantling the
DG Set the same was sent to M/s. U.P. Tractors Pvt. Ltd. who gave the
estimates of repairs of the said diesel engine at Rs.29,71,158-(Ex.C-3) and the
said estimate was further revised to Rs.29,86,060/- (Ex.C-14) on account of
revision of import prices of the spares etc.
4. That as per terms of the Policy, if the repairs charges exceeds market
value of the machine in question at the time of loss, the claim will be settled
on total loss basis i.e. the value of the new machine less depreciation.
OMP 294/03 Page 2
The estimate of repairs of the DG Set in the present case, was given by the
authorised dealer at Rs.29,86,060/-. The cost of the new diesel engine as per
the quotations submitted to the respondent company was Rs.36,78,070/-. It is
therefore necessary to know whether the claim can be settled on repairs basis
or on total loss basis. The DG Set in the present case was purchased on
31.3.95 and was damaged/broke down on 31.3.2000. The DG set was
therefore five years old, and it is therefore necessary that the actual value
thereof as on the date of loss should be taken for the purpose of determination
of the claim of the claimant, whether "on repairs basis" or "on total loss
basis".
That as per page 19 of the booklet "Fixing of sum insured under Fire
Insurance Policies" published by Delhi Insurance Institute, it has been
provided that depreciation should be deducted @ 5% per year. Taking into
account the depreciation of the said DG set @ 5% annually, the "market
value" of the DG Set in question after five years i.e. as on date of
breakdown/loss shall work out to be at Rs.27,58,552/- (Rupees twenty seven
lakhs fifty eight thousand five hundred and fifty two only). As against this,
the actual cost of repair charges as estimated by the authorised dealer is
Rs.29,96,990/-. Thus, the cost of repairs is much more than "the actual
value" of the DG SET and the respondent therefore should pay the
depreciated value of the DG set as on the date of damage, which comes to
Rs.27,58,552/-.
That since the respondent has not placed on record any contrary view before
me, I am therefore inclined to accept the contention of the claimant and award
a sum of Rs.27,58,552/- (Rupees twenty seven lakhs fifty eight thousand five
hundred and fifty two only) in favour of the claimant and against the
respondent towards loss of the diesel engine of the DG Set.
That the claimant has further proved on record the actual expenses amounting
to Rs.15920/- incurred on account of transportation charges and inspection of
crankshaft, which were paid. The claimant is therefore entitled to the
reimbursement of the said amount also.
In view of the above discussion, I therefore pass the following Award in
favour of the claimant and against the respondent:
a) Depreciated value of the
Diesel Engine as on date of
Breakdown/loss/damage Rs.27,58,552/-
b) Expenses incurred on account
of transportation, and the
Fee paid for inspection Rs.15,920/-
----------------------------
Total: Rs.27,74,472/-
----------------------------
(Rupees twenty seven lakhs seventy four thousand four hundred and
seventy two only)"
OMP 294/03 Page 3
4. The scope for interference by this Court with an Award under
Section 34 is now well-settled. This Court does not sit as an Appellate
Court over the Arbitrator's Award. Merely because two views are possible,
this Court will not interfere if the Arbitrator has taken one plausible view.
The aforesaid principles apply in the facts of the present case as it is only the
respondent who appeared in the arbitration proceedings and proved its case
but the petitioner failed to appear in the arbitration proceedings and
therefore did not avail the opportunity to prove its case, if its case assuming
was correct. The aforesaid portion of the Award reproduced by me shows
that the respondent proved the cost which had to be incurred by it with
respect to the repair of the DG set. The Arbitrator, thereafter, has arrived at
the amount of the cost of repair and has also relied on the relevant booklet
for fixing of the sum insured under fire insurance policy and has applying
the same taken the depreciation @ 5% annually. The value of the machine
as per depreciation came to Rs.27,58,552/-and the repair charges came to
Rs.29,96,990/-. As per the policy when the repair charges exceed the cost of
the machinery then it is the cost of machinery and not the repair charges
which have to be awarded to the insured. The Arbitrator, therefore, has
given the depreciated value of the diesel engine as on the date of the
breakdown to the respondent herein.
5. Mr. Mehra, who appeared for the petitioner, very vehemently
contended that the Arbitrator has acted illegally and perversely in not
OMP 294/03 Page 4
referring to the letter dated 28.5.2001 as per which the petitioner offered a
sum of Rs.9,90,337/- to the respondent and which was of course subject to
production of repair bills/replacement invoices. I fail to understand what
can be the argument on the basis of this letter because the facts of the case
make it more than clear that the respondent was not satisfied with the
amount of Rs.9,90,337/- and therefore did not arise any question of
submitting anything to the petitioner with respect to this amount of
Rs.9,90,337/-.
Mr. Mehra, thereafter, relied upon a clause in the policy that the
insurance company will only award such amounts as per its satisfaction on
production of necessary bills and documents that the repairs have been
effected. I am in fact amazed at the tenacity of the petitioner/insurance
company not only because as per the paras of the Award reproduced above
show that the respondent duly proved its case so that it could succeed in its
claim, but also that if the petitioner insurance company had at all any valid
case then it had no reason not to appear in the arbitration proceedings and
contest the claim on merits. Insurance company cannot come up for the first
time in the objections before this Court and take up all these arguments,
more so because the scope for hearing under Section 34 in any case is
circumscribed that unless the decision of the Arbitrator is wholly illegal or
perverse or violative of the contractual provisions, this Court does not
interfere and surely the Award cannot be faulted on these counts.
OMP 294/03 Page 5
6. In view of the above, I do not find any merits whatsoever in
these objections of insurance company, which is most contumaciously
refusing to pay the claim of the respondent. The objections are therefore
dismissed with costs of Rs.15,000/- payable by the petitioner to the Registrar
General of this Court for being utilized towards Juvenile Justice.
With the aforesaid observations, the objection petition stands
disposed of.
VALMIKI J.MEHTA, J
March 15, 2010
Ne
OMP 294/03 Page 6
