Madras High Court
M/S. Subhashri Bio Energies (P) ... vs Universal Sompo General ... on 22 January, 2021
Arb.O.P.No.408 of 2021
THE HIGH COURT OF JUDICATURE AT MADRAS
Date 29.07.2021
CORAM:
THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR
Arb.O.P.No.408 of 2021
M/s. Subhashri Bio Energies (P) Ltd.,
Represented by its Managing Director,
Mr.S.Durairaju, S/o Meivazhi Subbaraya Ananthar
No.67, Goundampalayam, Kumaramangalam Post,
Tiruchengode Taluk, Namakkal Distruct 637205
Tamil Nadu. . . . Petitioner
Versus
1. Universal Sompo General Insurance Co. Ltd.,
Repeesented by its Chairman and Managing Director,
Registered and Corporate Office,
Unit 401, 4th Floor Sangam Complex,
127, Andheri, Kurla Road,
Andheri (East), Mumbai 400059
Maharashtra.
2. Indian Overseas Bank
Represented by its Assistant General Manager,
Fair Lands, Salem Branch, 5th Cross,
Brindavan Road, Fair Lands, Salem 636016 . . . Respondents
PRAYER : Petition filed under Section 34 of Arbitration and Conciliation Act,
1996 to set aside the Arbitral Award dated 22.01.2021 bearing No.Nil passed by
the Arbitral Tribunal in its entirety, with direction to consider and decide the claim
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of the petitioner on merit and to direct the respondent to pay the costs.
For petitioner : Mr.V. Ravi
For respondents : Mr. Naveenkumar Murthi and
Rajat Khattry [for R1]
Mr. F.N.Benjamin George
ORDER
This Petition has been filed to challenge the Award passed by the Three
Member Arbitral Tribunal rejecting the claim made by the Petitioner seeking the
claim which was originally repudiated by the Insurance Company.
2. The minimum facts necessary for disposal of this Petition is as follows:
2.a. The Claimant is engaged in the business of producing Electricity Power
and Fermented Organic Manure from Bio-degradable Wastes. The 2nd Respondent
has extended financial assistance. As per their request Standard Fire and Special
Peril policy was taken from the year 2010 onwards. Original Policy was taken in
the year 2015-16 which was renewed for the year 2016-2017. The policy covers
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the risk of perils namely Riot, Strike and Malicious Damages besides risk of
buildings stocks, manure, etc., for the value of Rs.89.88 Crores.
2.b As the Petitioner company suffered some setback due to non payment by
the TANGEDCO there arose unrest among the workers. Due to vandalism there
were huge damage to the machinery. Therefore, the Petitioner has lodged a Claim
with the Insurance Company. The Surveyor of the Insurance Company assessed
the damages on four different dates namely 1.9.2016, 8.9.2016, 14.9.2016 and
20.10.2016. However, the Surveyor vide his Report dated 23.11.2016 has
recommended that the claim per-se does not fall within the scope of the policy and
filed the report to the effect that the Claimant made an exaggerated claim. Despite
the Claimant made several attempt to get the claim however the Respondent have
not honoured the claim, on the application made by the Petitioner, Tribunal was
constituted by this Court in O.P.No.637 of 2017.
3. The Respondent took objection before the Arbitral Tribunal that the
Claim is not arbitrable in view of the specific bar contained in the policy
conditions. It is their contention that as against the dispute with regard to the
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quantum of insurance alone, the matter should be arbitrable. In respect of
rejection, the arbitration is totally prohibited under contract. Similarly, they have
also took a note of the fact that Survey Report indicate that there is no vandalism
as alleged by the Petitioner. Accordingly, they sought for rejection of the Petition.
4. Reply also filed. The learned Arbitral Tribunal finally concluded that as
the policy conditions itself prohibit arbitration in view of the Full Bench Judgment
of the Apex Court and held that the Tribunal has no jurisdiction to decide the
issues. However, liberty has been granted to the claimant to approach the
appropriate forum as per law. Challenging the above, the present Original Petition
has been filed.
5. Mr.V. Ravi, learned counsel appearing for the Petitioner Vehemently
contended before this Court to convince the Court that the Arbitral Award is not
according to law. Though he has shown his vehemence in submissions that the
rejection is not proper on facts, This Court is unable to find any of the grounds set
out in Section 34 of the Arbitration and Conciliation Act to challenge the Award is
made out from his submission. Otherwise the main contention of the learned
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counsel Mr.V. Ravi is that since the Tribunal has been constituted by this Court,
Arbitral Tribunal ought to have gone into the issue on the facts. His further
contention is that the judgment cited by the Petitioner before the Tribunal have not
been considered. He cited various judgments and contended that when the
condition of the exclusion containing in the policy not informed to the Petitioner
such condition cannot be invoked. It is his contention that the policy has not been
issued to him immediately which has been received only after lodging the
complaint before the IRDA and the policy was made known to him only in the
year 2017. Therefore it is hiscontention that the judgments cited in this regard
have not been considered by the Arbitral Tribunal. Therefore the Award has to be
set aside.
6. In support of his contention he relied upon the following judgments:
1. New India Assurance Co. Ltd., Ors. vs. Paresh
Mohanlal Parmar [Civil Appeal No.10398 of 2011
dated 4.2.2020 – Supreme Court]
2. Bharat Watch Company Through its Partner vs.
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National Insurance Co. Ltd., through it s
RegionalManager [2019 STPL 4685 SC]
3. M/s. Modern Insulators Ltd., vs. Oriental Insurance
Co. Ltd., [AIR 2000 SC 1014]
4. The United India Insurance Co. Ltd., vs.
M.K.J.Corporation [AIR 1997 SC 408]
5. Oriental Insurance Co. Ltd., vs. J.K.Cement works
[Civil Appeal No.7402 of 2009 – dated 28.01.2020]
6. Oriental Insurance Co. Ltd., vs. National Bulk
Handling Corporation Pvt., Ltd., [(2020) 4 SCC 674]
7. M/s. New India Assurance Co. Ltd., vs. M/s Luxra
Enterprises Pvt. Ltd., and another [AIR 2019 SC 2655]
8. New India Assurance Company Ltd., vs. M/s.Zuari
Industries Ltd., & Ors. [(2009) 9 SCC 70]
9. B.V.Nagaraju vs. M/s. Oriental Insurance Co.Ltd.,
Divisional Office, Hassan [AIR 1996 SC 2054]
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10.Md.Hasibur Rahaman vs. National Insurance Company
[W.P.No.17495(W)of 2008]
7. Mr. Naveenkumar Murthi learned counsel appearing for the 1st
Respondent submitted that from the entire arguments of the learned counsel for the
Petitioner, none of the ground contemplated under Section 34 of the Arbitration
and Conciliation Act is made out. The entire grievance of the Petitioner is
rejection of the Claim. The policy conditions itself stipulate that the dispute
cannot be referable to Arbitration and the same has been upheld by various
judgments of the Apex Court. When the Tribunal has no jurisdiction to decide the
issue, the Tribunal has rightly rejected the same. It is his contention that mere
constitution of Tribunal will not amount to estoppal. Even under Section 16 of the
Arbitration and Conciliation Act, the objection with respect to maintainability can
be very well raised before the Arbitrator including the jurisdictional issue. The
Arbitral Tribunal has rightly rejected the Claim following the law of the land.
Hence, no ground has been made out to pass an Award. Hence, submitted that the
petition may be dismissed.
8. In support of his contention he relied upon the following judgments:
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1. Vulcan Insurance Co. Ltd., vs. Moharaj Singh and
Another [(1976) 1 SCC 943]
2. Jumbo Bags Ltd., vs. The New India Insurance Co.
Ltd., [2016 SCC Online Mad 9141]
3. Oriental Insurance Co Ltd., vs. Narbheram Power
and Steel [(2018) 6 SCC 534]
4. United India Insurance Company Ltd., and Another
vs. Hyundai Engieering and Construction
Company Limited and Others [(2018) 17 SCC 607]
5. South East Asia Marine Engineering &
Construction Ltd., vs. Oil India Limited [(2020) 5
SCC 164]
9. It is well settled that the Award of the Arbitral Tribunal normally could
be interfered only on the following grounds set out in Section 34 of the Act.
“34 (2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
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(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to
which the parties have subjected it or, failing any
indication thereon, under the law for the time being in
force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case;
or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be
set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
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provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in
accordance with this Part; or
(b) the Court finds that—
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being
in force, or
(ii) the arbitral award is in conflict with the public policy
of India.
[Explanation 1.—For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy
of India, only if,—
(i) the making of the award was induced or
affected by fraud or corruption or was in
violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental
policy of Indian law; or
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(iii) it is in conflict with the most basic notions
of morality or justice.
2 [(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the
Court, if the Court finds that the award is vitiated by patent illegality
appearing on the face of the award”
10. Unless any of the above grounds is not made out the Award cannot be
interfered. Similarly scope of Section 34 of the Arbitration and Conciliation Act
is only supervisory it cannot enlarge at an appellate jurisdiction to re-appreciate
the entire facts. As narrated above the zone of dispute is with regard to the
applicability of the Arbitration Clause in the Insurance Policy. It is relevant to
extract the condition governing the parties in the Insurance Policy, which is as
follows:
“13. If any dispute or difference shall arise as to the
quantum to be paid under this policey (liability being otherwise
admitted) such difference shall independently of all other
questions be referred to the decision of a sole arbitrator to be
appointed in writing by the parties to or if they cannot agree
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upon a single arbitrator within 30 days of any party invoking
arbitration, the same shall be referred to a panel of three
arbitrators, comprising of two arbitrators, one to be appointed
by each of the parties to the dispute / difference and the third
arbitrator to be appointed by such two arbitrators and
arbitration shall be conducted under and in accordance with the
provisions of the Arbitration and Conciliation Act, 1996.
It is clearly agreed and understood that no difference or dispute
shall be referrable to arbitration as hereinabove provided, if the
company has disputed or not accepted liability under or in
respect of this policy.”
11. It is to be noted that as per Section 7 of the Arbitration and Conciliation
Act, “arbitration agreement” means an agreement between the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not. The
contract governing the parties play vital role in referring the dispute. Clause 13 of
the policy referred above indicate that what was permissible to be referred to the
Arbitrator is only dispute as to the quantum of the Insurance amount. When the
liability is not accepted or disputed in toto the same is not liable to refer to the
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Arbitration. This conditions of policy have been subject matter of dispute in
various decisions. The larger Bench of the Apex Court in United India
Insurance Company Ltd., and Another vs. Hyundai Engineering and
Construction Company Limited and Others [(2018) 17 SCC 607] and Oriental
Insurance Co Ltd., vs. Narbheram Power and Steel [(2018) 6 SCC 534] has
categorically held that when the parties have agreed only certain dispute alone are
referable and excepted matters are not referable such conditions governing the
parties and the Arbitrator has no jurisdiction to decide the issue. The same has
also been discussed in the later judgment of the Apex Court in Vidya Drolia v.
Durga Trading Corpn. [(2021) 2 SCC 1].
12. The Judgment of this Court in Jumbo Bags Ltd., vs. The New India
Assurance Co. Ltd., [2016 (3) CTC 769] it is held as follows:
“I am of the view that the remedy of Arbitration is not
available to the Petitioner herein in view of the arbitration
clause specifically excluding the mode of adjudication of the
disputes by arbitration, where a claim is repudiated in toto.
The remedy would thus only be of a civil suit in accordance
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with law.”
13. Therefore, when the subject matter was not capable of Arbitration and
the Arbitration jurisdiction was taken away by the specific contract, this Court is
of the view that the view of the Arbitral Tribunal is according to law of land.
Though it is contended by the learned counsel that since the policy conditions
have not been made known to them and exclusion has also not been made, such
clause cannot be pressed into service. Though it is contended that the policy has
not been issued, the fact, particularly, the typed set submitted by the Claimant
indicate that even in the year 2017 itself after making some complaint with IRDA,
the policy copies have been sent to the Petitioner. Such being the position it
cannot be said that he is totally kept away from the conditions of contract. Further
in all previous exchange of correspondence, the issue of exclusion of policy
conditions have never raised, particularly, non-supply of policy copies.
14. No doubt, the Apex Court has held that when the consumer was not
informed about the exclusion of the conditions in the policy, the Insurance
Company is liable to pay. All the above judgments are arising out of Consumer
disputes therefore the same are not applicable. After receipt of the policy in the
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year 2017, according to the Petitioner, even after knowing the policy conditions,
he cannot wriggle out the condition and seek for arbitration, when the policy
conditions governing the party exclude the Arbitration. In such view of the settled
position of law, it cannot be said that the Award passed by the learned Arbitral
Tribunal is against the public policy of India or suffered from any other grounds.
15. Accordingly, the Original Petition is dismissed. Since the entire Claim
has been rejected as observed by the learned Arbitral Tribunal, it is for the
Insurance company to ponder over to settle the assessed damages to the tune of
Rs.30 lakhs assessed by the Surveyor. Otherwise, as rightly held by the learned
Arbitral Tribunal it is well open to the Petitioner to approach the appropriate
forum as per law to establish their rights.
29.07.2021
Index : Yes/No
Internet : Yes/No
ggs
N. SATHISH KUMAR, J.
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ggs
order in:
Arb.O.P.No.408 of 2021
29.07.2021
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