Delhi High Court
Eternity Footwear Ltd. (Formerly ... vs The Oriental Insurance Co. Ltd. on 3 April, 2018
$~36
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 138/2018 & IA 4266-4267/2018
ETERNITY FOOTWEAR LTD. (FORMERLY
KNOWN AS DIAMOND PRODUCT LTD.) ..... Petitioner
Through: Mr S.K. Ray, Mr S.P. Sausan and
Ms Neetika Chaturedi, Advocates.
versus
THE ORIENTAL INSURANCE CO. LTD. ..... Respondent
Through: Mr Pradeep Gaur and Mr
Himanshu Joshi, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 03.04.2018
VIBHU BAKHRU, J
1. The petitioner has filed the present petition under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereafter „the Act‟), inter alia,
impugning the arbitral award dated 03.11.2017 (hereafter „the impugned
award‟) to the limited extent that the Arbitral Tribunal has awarded
interest at the rate of 15% per annum on the sum of ₹2,96,59,810/- from
05.05.2010 till 12.12.2010.
2. According to the petitioner, the said interest ought to have been
awarded from 18.04.2010, that is, 30 days after the receipt of the
Surveyor‟s report. The petitioner also challenges the rate of post award
interest. The Arbitral Tribunal has awarded post award interest at the rate
of 9% p.a, which, according to the petitioner, is inadequate. It is
contended that once the Arbitral Tribunal has found it fair to award
interest at the rate of 15% in case of the delay in payment of the amount
found due to the petitioner, the Arbitral Tribunal could not have
whimsically reduced the same to 9% in case of post award interest.
3. Briefly stated, the aforesaid controversy arises in the context of the
following facts:
3.1 The petitioner is engaged in manufacturing various types of
footwear and has two manufacturing units at A-9, Mayapuri Industrial
Area, Phase-II, New Delhi and other unit at village Moginand, Kala Amb,
Nahan Road, District Sirmour, H.P. The petitioner had subscribed to a
standard fire and special perils policy from the respondent (Oriental
Insurance Co. Ltd. - hereafter „the Insurance Company‟) for an assured
sum of ₹24,25,00,000/- which was increased to ₹27,25,00,000/- with
effect from 30.06.2008, in respect of its manufacturing units for the period
from 20.03.2008 to 19.03.2009.
3.2 On 14.12.2008, a fire broke out at the manufacturing unit of the
petitioner at Kala Amb, which resulted in severe damage to the building,
plant and machinery, stocks, furniture and fixtures, fittings, computers and
peripherals and other movables. The occurrence of the said event was
reported to the Insurance Company by a letter dated 15.12.2008.
3.3 The Insurance Company appointed a Surveyor to assess the damage
suffered. The said Surveyor visited the unit on 16.12.2008 and submitted
a preliminary report dated 16.12.2008 estimating the loss of
₹12,00,00,000/-. In the meantime, the petitioner submitted a provisional
claim on 10.01.2009 to the Surveyor for loss aggregating to
₹13,21,56,318/- in the prescribed format.
3.4 On 30.03.2009, an interim payment of ₹2,50,00,000/- was released
by the Insurance Company to the petitioner. Thereafter, on 10.08.2009,
the petitioner revised its claim to ₹12,02,31,749/-.
3.5 The Surveyor submitted its final report on 18.03.2010 assessing the
total loss of ₹5,46,72,292/- and the petitioner was asked to provide a letter
of consent for receiving the aforesaid amount.
4. It is the case of the petitioner that since it was in dire need of funds,
on 05.05.2010, it submitted the letter of consent for receipt of an amount
of ₹5,46,72,292/- against the actual loss of ₹12,02,31,749/-. Despite
furnishing of the consent letter, the amount was not released within the
prescribed time. It was finally released on 13.12.2010.
5. In view of the disputes, the parties invoked the arbitration clause
and both the parties appointed their respective nominee arbitrators. The
nominee arbitrators concurred in appointment of the presiding arbitrator.
6. The Arbitral Tribunal considered the aforesaid claims and awarded
(i) Interest at the rate of 15% per year for the period 05.05.2010 -
12.12.2010 amounting to ₹27,05,950/- on the sum of ₹2,96,59,810/- paid
by the Insurance Company belatedly; (ii) A sum of ₹2,08,76,700/- on
account of loss of stock; (iii) A sum of ₹75,000/- towards Cost of
Litigation; and (iv) future interest at the rate of 9% per annum on the total
award made amounting to ₹2,35,82,650/- (₹2,08,76,700/- plus
₹27,05,950/-).
7. As indicated above, the petitioner has challenged the impugned
award, essentially, on two grounds. First, that the interest awarded on the
sum of ₹2,96,59,810/- ought to have been computed from 18.04.2010.
The learned counsel appearing for the petitioner referred to IRDA
(Protection of Policyholder‟ Interest) Regulations, 2002, which, inter alia,
provide that the Insurer shall be liable to pay interest at the rate of 2%
above the prevalent bank rate, in certain circumstances. He drew the
attention of this Court to Sub-regulation (5) and (6) of Regulation 9 of the
said Regulations. which read as under:-
"9. Claim procedure in respect of a general
insurance policy
(5) On receipt of the survey report or the additional
survey report, as the case may be, an insurer shall
within a period of 30 days offer a settlement of the
claim to the insured. If the insurer, for any reasons
to be recorded in writing and communicated to the
insured, decides to reject a claim under the policy,
it shall do so within a period of 30 days from the
receipt of the survey report or the additional survey
report, as the case may be.
(6) Upon acceptance of an offer of settlement as
stated in sub-regulation (5) by the insured, the
payment of the amount due shall be made within 7
days from the date of acceptance of the offer by the
insured. In the cases of delay in the payment, the
insurer shall be liable to pay interest at a rate which
is 2% above the bank rate prevalent at the
beginning of the financial year in which the claim is
reviewed by it."
8. It is apparent from the plain reading of Regulation 9(6) of the said
Regulations that the Insurer would be liable to pay the amount within
seven days upon acceptance of the offer by the Insured. In this case, the
petitioner had submitted the consent for receiving the amount on
05.05.2010 and the Arbitral Tribunal has awarded interest at the rate of
15% per year from the aforesaid date. Thus, this Court finds no reason to
interfere with the award of such interest with effect from 05.05.2010 till
the date of payment.
9. The second ground urged by the petitioner relates to the award of
post award interest. This Court is of the view that the post award interest
is at the discretion of the Arbitral Tribunal and award of interest at the rate
of 9% p.a does not warrant any interference by this Court. The post award
interest is to provide the deterrent for early payment of the arbitral award.
Thus, it is not necessary that the Arbitral Tribunal is ought to award post
award interest at the same rate of the pre-award interest.
10. It is also trite law that the scope of judicial review under Section 34
of the Act is limited, and the court will not interfere with the decision of
the Arbitral Tribunal unless any of the grounds as stated under Section 34
of the Act are established. In the present case, the petitioner has sought to
place its claim within the scope of Section 34(2)(b)(ii) of the Act.
However, this Court is unable to accept that the Arbitral Tribunal offends
the public policy of India on the grounds as urged on behalf of the
petitioner.
11. The petition is, accordingly, dismissed. The pending applications
also stand disposed of.
VIBHU BAKHRU, J
APRIL 03, 2018
RK
