Madras High Court

M/Sjagannath Textile Company ... vs Bajaj Allianz General Insurance ... on 29 July, 2021

                                                                                 O.P.No.213 of 2021

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                 DATED : 29.07.2021

                                                       CORAM :

                            THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR

                                                  O.P.No.213 of 2021

                    M/sJagannath Textile Company Limited,
                    Represented by its Managing Director,
                    Mr.Ramesh Kumar Tibrewal,
                    Ramani Krishna Marvel, 2nd and 3rd Floor,
                    DB Road, R S Puram,
                    Coimbatore – 641 002.                                     ... Petitioner

                                                           Vs.

                    Bajaj Allianz General Insurance Company,
                    Represented by its Authorised Signatory,
                    Ragavis Center No.21A, Nethaji Road,
                    Nanjundapuram Main Road,
                    Ramanathapuram, Coimbatore – 641 046.                     ... Respondent

                    Prayer: Original Petition filed under Section 11 of the Arbitration &
                    Conciliation Act, 1996, to appoint the presiding Arbitrator in respect of
                    the insurance policy dated 13.01.2017 entered between the petitioner and
                    the respondent.


                                          For Petitioner     : Mr.P.Mahesh Kumar

                                          For Respondent     : Mr.M.B.Raghavan
                                                               for M/s.M.B.Gopalan Associates


https://www.mhc.tn.gov.in/judis/
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                                                                                       O.P.No.213 of 2021



                                                        ORDER

This Original Petition has been filed for appointment of Presiding

Arbitrator to enter reference in a dispute arising out of Insurance Policy,

dated 13.01.2017, entered into between the petitioner and the respondent.

2.The factual matrix of the case in a nutshell is as follows :

The petitioner is the Insured under the respondent Insurance

Company as per Insurance Policy dated 13.01.2017. The petitioner

intimated to the respondent about the loss suffered due to a fire accident

and claimed insurance under Material Damage and Business Interruption.

The respondent appointed a surveyor, and after survey, they released a

total payment of Rs.4,59,14,995/- under Material Damage section alone.

However, the respondent denied the liability under Business Interruption

section, to the dissatisfaction of the petitioner. Hence, it is the specific

case of the petitioner that, as the Policy provides for referring the dispute

to Arbitration, the matter has to be referred to Arbitration. The petitioner

suggested the name of an Arbitrator, whereas, the respondent nominated

another Arbitrator, and hence, for appointment of a Presiding Arbitrator,

the present Original Application has been filed by the petitioner. https://www.mhc.tn.gov.in/judis/ Page 2/10 O.P.No.213 of 2021

3.The main contention of the learned counsel for the petitioner is

that, though it is the stand of the respondent that the claim under Business

Interruption Section has been repudiated, the same has been objected to by

the petitioner in their reply notice, and after receipt of the reply notice, the

respondent also suggested the name of an Arbitrator, and in pursuance of

the same, both the parties have nominated the names of Arbitrator and

they were, in fact, under the process of nominating the Presiding

Arbitrator. Hence, it is the contention of the learned counsel that the

above conduct of the respondent itself indicates that, in fact, the claim has

not been repudiated. He would further submit that, when the denial of

repudiation was notified to the respondent and when there was no

objection raised immediately and the respondent also suggested for

appointment of an Arbitrator, such a repudiation cannot be construed as

legal. Hence, it is the contention of the learned counsel that an Arbitrator

has to be appointed in this case.

4.The learned counsel for the petitioner would further contend that

the judgments of the Full Bench of the Hon'ble Apex Court, in the case of

United India Insurance Company Limited and another v. Hyundai https://www.mhc.tn.gov.in/judis/ Page 3/10 O.P.No.213 of 2021

Engineering and Construction Company Limited and others reported in

(2018) 17 SCC 607 and Oriental Insurance Company Limited v.

Narbheram Power and Steel Private Limited reported in (2018) 6 SCC

534, will not be applicable to the facts of the present case. The learned

counsel, in his persuasive arguments, tried to distinguish the present case

from the above judgments on the ground that, in those cases, the Insurance

Company has not acted upon after repudiation of the claim, and under

those circumstances, the Hon'ble Apex Court has passed such an order in

those cases, however, in the case on hand, both the parties have already

been in the process of appointment of Arbitrators, therefore, the ratio laid

down by the Hon'ble Apex Court in the aforesaid judgments will not be

applicable to the present case.

5.Contrarily, the learned counsel for the respondent submitted that

the letter of the respondent, suggesting an Arbitrator, clearly shows that

the Insurance Company have shown their intention not to waive their

rights and also without prejudice to their rights, they had suggested an

Arbitrator, and hence, that cannot be construed as an admission that there

is no repudiation. The learned counsel further submitted that, when the

respondent has taken a categorical stand that the claim under Business

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Interruption Section has been repudiated, the terms of the contract cannot

be split into and taken advantage by the petitioner so as to refer the matter

to Arbitration. The learned counsel further contended that, when the law

has been well settled by the Hon'ble Apex Court in the judgments cited

above, wherein, it is held that, in the case of repudiation, the issues are

not arbitrable, only the Civil Court has the jurisdiction to entertain and

decide such issues, and the period of limitation for claiming such damages

before the Civil Court is three years, and hence, prayed for dismissal of

this Original Petition.

6.Heard the learned counsel on either side and perused the materials

available on record.

7.On the facts narrated, when the claim under Business Interruption

is said to have been repudiated, it is relevant to extract the relevant clause

of the Insurance Policy, viz., Clause 12, which reads as follows :

“12.If any dispute or 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 a sole arbitrator, to be appointed in writing by the parties to or, if https://www.mhc.tn.gov.in/judis/ Page 5/10 O.P.No.213 of 2021

they cannot agree 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 be 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 referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this Policy.

It is hereby expressly stipulated declared that it shall be condition precedent to any right of action or suit upon this Policy that the award by such Arbitrator/Arbitrators of the amount of the loss or damage shall be first obtained.” A perusal of the above clause makes it clear that the parties have agreed to

refer the dispute or difference only as to the quantum to be paid under the

Policy (liability being otherwise admitted) and it is clearly spelt out and

understood that no difference or dispute shall be referable to Arbitration, if

the liability has been disputed or repudiated. When the contract

containing the Arbitration clause has spelt out the manner, in which, the

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dispute should be referred to Arbitration, the disputes are referable to

Arbitration only as per the contract and not beyond that.

8.Section 7(1) of the Arbitration & Conciliation Act, 1996, (“the

Act” for brevity) defines what is Arbitration Agreement.

“Arbitration Agreement” means an agreement by 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. Therefore, when the parties have consciously entered into an agreement to

refer only certain types of disputes to Arbitration and categorically agreed

not to refer any other dispute which is rejected or not accepted by the other

side, it cannot be held that the claim which was rejected or not accepted by

other side, has to be referred to Arbitration.

9.In this regard, it is useful to refer to the judgments of the Full

Bench of the Hon'ble Apex Court in United India Insurance Company

Limited (supra). The Hon'ble Apex Court has clearly held that, even

while exercising the jurisdiction under Section 11(6) of the Act, when the

dispute in question is falling within the excepted matters, the same is not

referable to Arbitration. The Apex Court, in categorical terms, has held https://www.mhc.tn.gov.in/judis/ Page 7/10 O.P.No.213 of 2021

that, as per the conditions of the Policy, the disputes arising out of

rejection or repudiation of claims are not arbitrable. In Para No.14 of the

judgment, the Hon'ble Apex Court has held as follows :

“14. .... Thus, the plea taken by the appellants is of denial of its liability to indemnify the loss as claimed by the JV, which falls in the excepted category, thereby making the arbitration clause ineffective and incapable of being enforced, if not non-existent. It is not actuated so as to make a reference to arbitration. In other words, the plea of the appellants is about falling in an excepted category and non-

arbitrable matter within the meaning of the opening part of Clause 7 and as restated in the second paragraph of the same clause.” Similarly, even in an earlier judgment in Oriental Insurance Company

Limited (supra), the same view has been taken by the Hon'ble Supreme

Court.

10.Here, in the case on hand also, the dispute is in respect of

repudiation of the Insurance claim by the respondent company, which is

sought to be referred to Arbitration. Therefore, in the light of the ratio laid

down by the Hon'ble Apex Court, this Court is of the view that, when the

claim has been repudiated by the respondent/Insurance Company, merely

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because the respondent has suggested an Arbitrator without prejudice to

their rights or without waiver of their rights in their Policy, it cannot

construed that the matter can be referred to Arbitration. In such view of

the matter, this petition has to fail. Yet, the petitioner is at liberty to move