The Oriental Insurance Co. Ltd. Vs Mercury Rubber Mills

Delhi High Court 24 Nov 2008 FAO (OS) No. 61 of 1987 and C.M. No. 13531/07 (2008) 4 ARBLR 599
Bench: Division Bench
Result Published
Acts Referenced

Judgement Snapshot

Case Number

FAO (OS) No. 61 of 1987 and C.M. No. 13531/07

Hon'ble Bench

Mukul Mudgal, J; Manmohan, J

Advocates

Manjusha Wadhwa, for the Appellant; Partner of party-in-person, for the Respondent

Final Decision

Dismissed

Acts Referred

Arbitration Act, 1940 — Section 20

Judgement Text

Translate:

Mukul Mudgal, J.@mdashThis is an appeal from the judgment dated 09.04.1987 passed by the learned Single Judge of this Hon''ble Court in Suit

No. 2279-A/85 wherein the petition filed by the Respondent herein was allowed and the dispute existing between the parties was referred to

arbitration to ascertain what amount was due to the Respondent from the Appellant, under the contract of insurance.

2. M/s. Mercury Rubber Mills, the Respondent had entered into contract of insurance with the Oriental Insurance Co. Ltd. vide policy No.

2130/302/02211/44/05/80/00034 dated 29.12.1980. The appellant had agreed to pay to the Respondent all losses of profit which the

Respondent might suffer due to the breakdown of its machinery installed at its factory premises situated at 35th K.M. milestone, G.T. Karnal

Road, Rasoi, District Sonepat, Haryana.

3. The insurance policy had an arbitration Clause which reads as under:

If any 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 an arbitrator, to be appointed in writing by the parties in difference, or if they cannot agree upon a

single arbitrator to the decision of two disinterested persons as arbitrators of whom one shall be appointed in writing by each of the parties within

two calendar months after having been required so to do in writing by the other party in accordance with the provisions of the Arbitration Act,

1940, as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar

months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint sole arbitrator, and in case of

disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in

writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings.

It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as herein before provided, if the company has

disputed or not accepted liability under or in respect of this policy. It is hereby expressly stipulated and declared that it shall be condition precedent

to any right to action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage shall be

first obtained.

It is also hereby further expressly agreed and declared that if the Company shall disclaim liability to the insured for any claim here under and such

claim shall not, within 12 calendar months from the date of such disclaimer have been made the subject matter of a suit in a court of law, then the

claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.

4. It is alleged that the machinery of the Respondent broke down during the life of the insurance policy and vide letters dated 12/13th February,

1982, the Respondent submitted the following three claims with the Appellant in respect thereof:

(1) Claim No. 2130/302/44/55/81/00001 for Rs. 6,70,795/-

(2) Claim No. 2130/302/44/55/81/00005 for Rs. 2,77,067/-

(3) Claim No. 2130/302/44/55/81/00017 for Rs. 93,328/-

5. Vide letter dated 29th October 1983, the Respondent requested the Appellant to hand over three cheques in respect of the above said three

claims to the bearer of the letter and further requested that the details of the calculation of the amount to be paid be also sent alongwith the same.

By the letter of the same date, the Appellant sent three cheques to the Respondent stating that the cheques were being sent in full and final

settlement of the claims of the Respondent.

6. The Respondent encashed the cheques and vide letter dated 19th November 1983 wrote to the Appellant that there appeared to be a mis-

calculation in regard to the claims and requested the Appellant to have the matter reconciled. The Respondent requested to the Appellant to refer

the matter to arbitration in terms of the Arbitration in Clause of the Policy. The Appellant however declined to do so, on the ground that the

Respondent having accepted the payment against the said three claims the dispute stood settled and no dispute subsisted for being referred to

arbitration which led to the Respondent filing the petition and an application u/s 20 of the Arbitration Act. On the pleadings of the parties following

issue was framed on 20th March, 1986, Whether any referable disputes arise between the parties

7. The learned Single Judge vide his judgment dated 9th April, 1987 held as follows:

In this view of the matter the following dispute exists between the parties and is to be referred to arbitration:

Whether the cheques for the above said amounts were received by the petitioner from the respondent in full and final settlement of its above noted

three claims If not, what is due to the petitioner from the respondent under the above said claims.

8. The learned Counsel for the Appellant contended that the claims of the Respondent were fully satisfied and no dispute remained between the

parties to warrant reference to arbitration, as per the Arbitration clause. Reliance has been placed on behalf of the Appellant on the decisions in

cases of Kapur Chand Godha Vs. Mir Nawab Himayatalikhan Azamjah, Union of India (UOI) Vs. Gangadhar Mimraj and Another, and Amrit

Banspati Co. Ltd. Vs. Union of India (UOI), . In support of the abovementioned view the Counsel for the Appellant had also relied upon some

documents to support her contention that a full and final settlement of the claims of the Respondent had been made.

9. The Respondent contended that the present appeal had been pending hearing for the last over 21 years. He further contended that the appellant,

being in a dominant position, with a view to frustrate legitimate claims of the Small Scale Industries (SSI) - having admitted the liability under the

Insurance Policy, acted in unreasonable take it or leave it manner, that too after unreasonable delays after the occurrence / survey of accident /

claims during 1981, without providing the details of calculations of the arbitrarily paid (26/29th October, 1983) amounts of Rs. 53,507/-, 53,507/-

and 51,467/- for the three claims of different loss-amounts of Rs. 6,70,795/-, 2,77,067/- and 93,328/- , respectively.

10. The Respondent further contended that mere acceptance of the cheques and their encashment does not mean that the cheques were accepted

in discharge of the whole claim and that the fact that the Respondent while returning the vouchers and thereafter while claiming cheques had been

asking the Appellant to furnish the details of calculation for verification by the Respondent shows that the amounts had not been accepted in full

and final settlement of the claim. It had been further contended that the dispute as to whether or not the Respondent had accepted the above said

three cheques in full and final settlement of their claims is itself an dispute which has to be decided by the arbitrator and not by the court.

11. In our view, the findings of the learned Single Judge of this Court that the claims of the Respondent arose out of the contract between the

parties under the above said policy and whether or not the Respondent had accepted the above said three payments in full and final settlement of

their claim and had given valid discharge to the Appellant is an issue and dispute which has to be decided by arbitration in terms of the arbitration

clause and cannot be decided by the court and this view of the learned Single Judge doe not all for any interference. It has been rightly held that

whether or not the acceptance was in full and final settlement of this claim of the Respondent is itself a difference about the quantum payable to the

Appellant and hence covered by the Arbitration Clause.

12. The Arbitration Clause in simple and plain language lays down that if any difference arises, with regard to the quantum of payment to be made

under the policy, such dispute may be referred to the Arbitration provided that:

(i) There is a liability.

(ii) The Company has admitted such liability. The machinery of the Respondent broke down during the term of the insurance policy and the

Appellant has no way denied their liability to pay the claims of the Respondent. What is being contended in the various proceedings and also in the

present appeal is the amount which is due to the Respondent from the Appellant under the above said claims. Therefore, the view of the learned

Single Judge for referring the matter to Arbitration cannot be faulted, as it has been specifically laid down in the Arbitration Clause of the Insurance

Policy that any difference with regard to the quantum of payment to be made arising out of any claim is to be necessarily referred to Arbitration

provided that the liability to pay the same is accepted by the Insurer.

13. The Court has to ascertain in the all the abovementioned circumstances whether there is accord and satisfaction in the case and the dispute is

arbitrable or not. The position of law has been made aptly clear by the Hon''ble Supreme Court in the case of National Insurance Co. Ltd. Vs.

Boghara Polyfab Pvt. Ltd., wherein it was held that those cases are also arbitrable where either full and final settlement is alleged but there is

substance in the allegation of coercion/undue influence or there were no documents confirming discharge of contract.

14. In the present case, the Appellant has contended that there is a full and final settlement with regard to the claims of the respondent and has also

relied upon certain documents. The learned Counsel for the appellant has also relied upon various judgments to strengthen her contention. We are

prima facie of the opinion that there is some merit in the allegations of coercion and undue influence. However, we do not deem it necessary to

either go into the said allegations or on the merits of the judgments as relied upon by the appellant as, according to the Arbitration Clause in the

Insurance Policy, any difference with regard to claim is to be referred to arbitration. Thus, in our view, to ascertain whether the documents

confirms discharge of contract, evidence is required to be led before the arbitrator.

15. Thus, the dispute with regard to the full and final settlement of the three claims and as to whether any amount is due to the Respondent from the

Appellant under the above said claims is referred to Arbitration to be decided accordingly as per the merits of the case.

16. In view of the above findings the appeal is dismissed and stands disposed of alongwith pending applications. The arbitrators as per the

arbitration clause shall be nominated by both parties within six weeks from today and the parties to appear before the said arbitrators along with

the statement of claim on any day fixed by the arbitrators within six weeks of the appointment of the arbitrators. The arbitrators will render their

award not later than four months from the date of their first sitting.

From The Blog
Bhim Singh, MLA vs State of Jammu & Kashmir & Others (1985)
Oct
18
2025

Landmark Judgements

Bhim Singh, MLA vs State of Jammu & Kashmir & Others (1985)
Read More
The Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan and Others (1962)
Oct
18
2025

Landmark Judgements

The Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan and Others (1962)
Read More