Delhi High Court
M/S. Rahul Cargo Pvt. Ltd. vs M/S. National Insurance Company ... on 31 October, 2014
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ C.R.P.No.190/2010
% 31st October, 2014
M/S. RAHUL CARGO PVT. LTD. ..... Petitioner
Through: Mr. Manoj Singh, Advocate.
versus
M/S. NATIONAL INSURANCE COMPANY LTD. & ANR.
..... Respondents
Through: Mr. Pradeep Gaur, Advocate for
respondent No.1.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? Yes
VALMIKI J. MEHTA, J (ORAL)
1. This petition under Section 115 of the Code of Civil Procedure,
1908 (CPC) impugns the order of the trial court dated 7.12.2009 by which
the trial court has rejected an application under Section 8 of the Arbitration
& Conciliation Act, 1996 (hereinafter referred to as 'the Act') filed by the
petitioner/defendant.
2. The facts of the case are that the respondent no.1 herein
alongwith respondent no.2 herein, and who are the plaintiff nos.1 and 2 in
C.R.P.No.190/2010 Page 1 of 9
the trial court, filed a suit for recovery of money/damages of Rs.3,45,975/-
against the petitioner/defendant/carrier on the ground that the
petitioner/defendant/carrier had lost the goods due to a fire during the
contract of transportation and hence was liable under the Carriers Act, 1865.
The respondent no.1/plaintiff no.1 and who is the insurance company had a
contract of insurance with the consigner/ plaintiff no.2 in the suit
(respondent no.2 herein) and plaintiff no.1-company under the contract of
insurance on account of loss of goods covered by the insurance policy paid
the loss amount to the respondent no.2/plaintiff no.2. On the respondent
no.2/plaintiff no.2 receiving the amount under the insurance policy, a letter
of subrogation was issued by the respondent no.2/plaintiff no.2 in favour of
the respondent no.1/plaintiff no.1 and accordingly the subject suit was filed
by both the respondents as plaintiffs against the petitioner/defendant. It is in
this suit that the subject application under Section 8 of the Act had been filed
by the petitioner, and which has been dismissed.
3. Since the impugned order of the trial court is a short order, I
reproduce the same as under:-
"The defendant has filed an application under Order 7 Rule 11 CPC
praying for rejection of the suit on the ground of being barred by
statute. They have invoked the provision of Section 8 of the
C.R.P.No.190/2010 Page 2 of 9
Arbitration & Conciliation Act and have prayed for dismissal of the
suit on the ground that dispute, if any, is to be adjudicated upon by
the arbitrator. The prayer of the defendant/applicant is vehemently
opposed by the plaintiff.
2. Brief facts of this case are that plaintiff no.2 had entrusted the
defendant with the shipment of their consignment. The goods were
insured by plaintiff no.1. On account of an accident, plaintiff no.1,
the insurance company indemnified the loss to plaintiff no.2 and
under subrogation of rights, the claim was assigned in their favour.
The insurance company has now filed the suit for recovery against
the Carrier i.e. the defendant. Plaintiff no.2 is therefore only a proper
party to the lis.
3. Apart from the fact that only a photocopy of the agreement
has been filed by the defendant, a perusal of the same reflects that the
agreement for transportation was signed and executed only between
plaintiff no.2 and the defendant. Terms and conditions qua plaintiff
no.2 cannot therefore be invoked qua the insurance company. The
arbitration clause, can be invoked only where the parties are
signatories to the agreement and there is an ad idem in respect to
submissions to arbitration. Clearly this is not the situation in the
present case. Plaintiff no.1 merely seek to recover dues under
assignment and subrogation, having indemnified the insured for the
damages of the goods. The Arbitration clause therefore cannot be
invoked for adjudication of the claim of plaintiff no.1.
4. This application therefore, does not merit consideration and
is dismissed."
4. Learned counsel for the respondent in support of the impugned
order has relied upon an order passed by a learned Single Judge of this Court
in the case of Golden Highway Goods Carrier Vs. National Insurance Co.
Ltd. in C.M.(M) No.1218/2008 decided on 13.1.2012 and which order reads
as under:-
C.R.P.No.190/2010 Page 3 of 9
"The order impugned before this court is the order dated 18.09.2008
vide which the application field by the petitioner under Section 8 of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as
the 'said act') read with Order 7 Rule 11 of the Code of Civil
Procedure (hereinafter referred to as 'the Code') had been dismissed.
Present suit is a suit for recovery of Rs. 9,12,964/- only. Record shows
that prior to the filing of the suit, a legal notice had been sent by the
National Insurance Company to the present petitioner wherein in para
7 it had been stated that an Arbitrator has been appointed in terms of
Clause 28 of the Arbitration agreement entered into between the
parties. Reply filed by the present petitioner to the said legal notice is
dated 21.11.2005 wherein the very existence of the Arbitration
Agreement had been denied. The Arbitration Agreement which is
placed on record is admittedly an Arbitration Agreement entered
between Ranbaxy Laboratories Limited with Golden Highway
Carriers (Regd.); the arbitration clause had arisen out of this
agreement. The present petitioner had denied the very existence of the
Arbitration Agreement; the petitioner was admittedly not a party to
this Arbitration Agreement. Section 8 of the Arbitration Act
specifically pre-supposes postulates the existence of an Arbitration
Agreement in the absence of which there is no scope of passing any
order under this provision of law. There was no Arbitration agreement
in existence between the National Insurance Company and the present
petitioner. Impugned order declining his prayer under Section 8 of the
said Act thus suffers from no infirmity.
In 2003 (4) RAJ 116 (Del) titled as Sethi Construction Company vs.
Chairman and Managing Director, NTPC a Bench of this court has
noted that a third party i.e. a party who is not a signatory to the
arbitration agreement cannot invoke the provisions of Section 8 of the
Arbitration and Conciliation Act, 1996.
Petition is without any merit; it is dismissed."
C.R.P.No.190/2010 Page 4 of 9
5. Before I turn to the respective arguments, let me at this stage
reproduce five relevant provisions of three separate Acts and which
provisions are Sections 37, 42 and 45 of the Contract Act, 1872, Section
19(b) of the Specific Relief Act, 1963 and Section 40 of the Arbitration &
Conciliation Act, 1996 and these Sections read as under:-
" Provisions of Contract Act, 1872
37. Obligations of parties to contract.- The parties to a contract
must either perform, or offer to perform, their respective promises,
unless such performance in dispensed with or excused under the
provision of this Act, or of any other law.
Promises bind the representative of the promisor in case of the death
of such
promisors before performance, unless a contrary intention appears
from the
contract.
42. Devolution of joint liabilities.-When two or more person have
made a joint promise, then, unless a contrary intention appears by the
contract, all such persons, during their joint lives, and, after the death
of any of them, his representative jointly with the survivor or
survivors, and, after the death of the last survivor the representatives
of all jointly, must fulfil the promise.
45. Devolution of joint rights.- When a person has made a promise
to two or more persons jointly, then unless contrary intention appears
from the contract, the right to claim performance rests, as between
him and them, with them during their joint lives, and, after the death
of any one of them, with the representative of such deceased person
jointly with the survivor or survivors, and, after the death of the last
survivor, with the representatives of all jointly.
C.R.P.No.190/2010 Page 5 of 9
Provision of Specific Relief Act, 1963
Section 19. Relief against parties and persons claiming under
them by Subsequent title. Except as otherwise provided by this
Chapter, specific performance of a contract may be enforced
against-
.........
(b) any other person claiming under him by a title arising
subsequently to the contract, except a transferee for value who has
paid his money in good faith and without notice of the original
contract.
Provision of Arbitration & Conciliation Act, 1996
Section 40. Arbitration agreement not to be discharged by death
of party thereto.
1. An arbitration agreement shall not be discharged by the death of
any party thereto either as respects the deceased or, as respects any
other party, but shall in such event be enforceable by or against the
legal representative of the deceased.
2. The mandate of an arbitrator shall not be terminated by the
death of' any party by whom he was appointed.
3. Nothing in this section shall affect the operation or any law by
virtue of which any right of action is extinguished by the death of a
person."
6. A reading of Sections 37, 42 and 45 of the Contract Act, 1872
shows that on the death of a contracting party, the contract is enforceable by
or against the legal representatives of such a person. As per Section 19(b) of
the Specific Relief Act, 1963, a contract can be enforced against a person
who claims under a party to the contract. As per Section 40 of the Act, an
arbitration agreement does not lapse on account of death of a person and the
arbitration agreement can be enforced by or against the legal representatives
of a deceased party. In law therefore contractual rights are enforceable
against the legal representatives of a person who is a party to the contract,
unless the cause of action is such that it extinguishes because of the death of
a party to the contract. No doubt, an arbitration agreement cannot be
enforced by a person who is not a party to the contract, but, the expression 'a
person who is not a party to the contract' will not include persons who claim
through the parties to the contract i.e legal representatives of the parties to
the contract. Legal representatives of a party to a contract may be either
because of the death of a party or because of transfer of rights under a
contract. It is settled law that rights under a contract can be transferred
though obligations may not be transferred.
7. Once therefore the respondent no.2/plaintiff no.2 transferred his
rights under the transportation of contract to the respondent no.1/plaintiff
no.1 by virtue of letter of subrogation, the respondent no.1/plaintiff no.1
steps into the shoes of the respondent no.2/ plaintiff no.2 and respondent
no.1/plaintiff no.1 therefore will only exercise those rights and obligations
between the consignor/plaintiff no.2 and the carrier/petitioner/defendant.
Since therefore it cannot be disputed that the respondent no.1/plaintiff no.1
as an insurance company is only suing as a subrogee of the rights of the
respondent no.2/ plaintiff no.2, i.e the original rights for claiming loss for the
goods lost under the contract of transportation was of the respondent no.2/
plaintiff no.2, if the contract of the plaintiff no.2/respondent no.2 with the
petitioner/defendant had an arbitration clause, then, this arbitration clause
will bind and operate between the respondent no.1/plaintiff no.1 and the
petitioner/defendant also. Once the respondent no.2/plaintiff no.2 had a
contract of arbitration with the petitioner/defendant, and that is not disputed
that there is an arbitration clause in the contract of transportation between
the respondent no.2/plaintiff no.2 and the petitioner/defendant, then, surely
the respondent no.1/ plaintiff no.1 who steps into the shoes of the respondent
no.2/plaintiff no.2 as its subrogee, will consequentially therefore be bound
by the arbitration clause binding the respondent no.2/ plaintiff no.2 and the
petitioner/defendant.
8. The order of the learned Single Judge of this Court dated
13.1.2012 in C.M.(M) No.1218/2008 which has been reproduced above is
not a judgment but only an order because the order is not a detailed
judgment laying down a ratio by giving reasons and statutory provisions as
to how the arbitration clause between the consignor and a carrier cannot bind
a subrogee of a consigner and the carrier of the goods.
9. In view of the above, the trial court has acted illegally and
perversely in exercise of its jurisdiction in dismissing the application under
Section 8 of the Act filed by the petitioner/defendant. The application filed
by the petitioner/defendant under Section 8 of the Act will be allowed. Suit
will stand dismissed with liberty to the parties to enforce their rights through
arbitration proceedings. Petition is allowed and disposed of in terms of the
aforesaid observations, leaving the parties to bear their own costs.
VALMIKI J. MEHTA, J
OCTOBER 31, 2014
Ne
