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TMI Blog2018 (5) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... . On 22.12.2014, the respondent commented on the surveyor‟s report and requested the appellant to settle its claim. As ultimately the claim was not settled, the respondent sent a communication dated 21.01.2017 intimating the appellant that it had invoked the arbitration agreement and requested it to concur with the name of the arbitrator whom it had nominated. 2. The appellant replied to the said letter repudiating the claim made by the respondent and declined to refer the disputes to arbitration between the parties. As the insurer declined to accede to the request made by the respondent, it filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for brevity, „the 1996 Act‟) for appointment of an arbitrator so that he could, along with the arbitrator nominated by the respondent, proceed to appoint a presiding arbitrator to adjudicate the disputes and differences that had arisen between the parties. 3. The said application was contested by the insurer and the High Court, considering the language employed in Clause 13 of the policy and the reasons advanced while repudiating the claim of the claimant, appointed a retired Judge of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if 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 arbitrator, 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 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 and declared that it shall be a 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." (Emphasis supplied) 8. When we carefully read the aforeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ret such stipulations in the agreement. It is because they relate to commercial transactions and the principle of unconscionability of the terms and conditions because of the lack of bargaining power does not arise. The said principle comes into play in a different sphere. 13. In this context, reference to the authority in Deep Trading Company v. Indian Oil Corporation and others (2013) 4 SCC 35, would be instructive. A three-Judge Bench was dealing with the right of the respondent No. 1 therein to appoint the arbitrator after expiry of the time period. The Court referred to Clause 29 of the agreement that provided for procedure for appointment of the arbitrator. After referring to the authorities in Datar Switchgears Ltd. v. Tata Finance Ltd. and another (2000) 8 SCC 151 and Punj Lloyd Ltd. v. Petronet MHB Ltd. (2006) 2 SCC 638, the Court held:- "19. If we apply the legal position exposited by this Court in Datar Switchgears to the admitted facts, it will be seen that the Corporation has forfeited its right to appoint the arbitrator. It is so for the reason that on 9-8-2004, the dealer called upon the Corporation to appoint the arbitrator in accordance with the terms of Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not commenced within three months after such rejection, or (in case of an arbitration taking place in pursuance of the 18th condition of this Policy) within three months after the Arbitrator or Arbitrators or Umpire shall have made their award, all benefit under this Policy shall be forfeited. x x x 18. If any difference arises as to the amount of any loss or damage 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 .... * * * And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such Arbitrator, Arbitrators or Umpire of the amount of the loss or damage if disputed shall be first obtained. 19. In no case whatever shall the company be liable for any loss or damage after the expiration of twelve months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration." In the said case, the company repudiated its lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clause may be to render two proceedings necessary where there is a dispute as to the amount of the loss as well as a denial of all liability; but this ought not to be a ground of complaint to either of the parties who have made it a term of the contract;" After reproducing the said passage, the Court concurred with the said view. 17. Reliance was placed upon a few paragraphs of the Fifth Edition of MacGillivray on Insurance Law by the learned counsel for the respondent. The said passage reads thus:- "There is a rule of law that parties cannot by their private contract oust the jurisdiction of the court; but it has been held that parties to a contract may nevertheless agree that no cause of action shall arise upon it until any matter in dispute between them shall have been determined by arbitration and then only upon the arbitrators‟ award." On behalf of the respondent, the following passage was taken aid of:- "As a rule, where the amount of the loss or damage is the only matter which the parties refer to arbitration, then if the insurers repudiate any liability on the policy there is no obligation on the assured to arbitrate as to the amount before commencing an act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied because the Respondent No. 1 had commenced the arbitration on the date when he issued the notice dated October 1, 1963; and that his claim was the subject of a pending arbitration within the meaning of Clause 19. Being of this view, the High Court had allowed the appeal. Dislodging the judgment of the High Court, this Court ultimately held:- "24. But in this case on a careful consideration of the matter we have come to the definite conclusion that the difference which arose between the parties on the company‟s repudiation of the claim made by Respondent 1 was not one to which the arbitration clause applied and hence the arbitration agreement could not be filed and no arbitrator could be appointed under Section 20 of the Act. Respondent 1 was ill-advised to commence an action under Section 20 instead of instituting a suit within three months of the date of repudiation to establish the company‟s liability." It is our obligation to mention here that though the respondent has placed reliance upon the said authority, yet the same does not assist him. On the contrary, it dispels the perception of ambiguity in Part II and Part III of the arbitration clause as perc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistent with prevailing approaches in the common law world. Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle." He has further held that the mere allegation of fraud in the factual scenario was not sufficient to detract the parties from the obligation to submit their disputes to arbitration keeping in view the letter and spirit of the 1996 Act. The decision, in our considered view, is not applicable to the case at hand. 23. Though the learned counsel for the respondent has referred to the case of Chloro Controls India Private Limited (supra), yet the same need not be analyzed as it is not an authority remotely relevant for deciding the lis in the present case. 24. It does not need special emphasis that an arbitration clause is required to be strictly construed. Any expression in the clause must unequivocally express the intent of arbitration. It can also lay the postulate in which situations the arbitration clause cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to arbitration. The parties are bound by the terms and conditions agreed under the policy and the arbitration clause contained in it. It is not a case where mere allegation of fraud is leaned upon to avoid the arbitration. It is not a situation where a stand is taken that certain claims pertain to excepted matters and are, hence, not arbitrable. The language used in the second part is absolutely categorical and unequivocal inasmuch as it stipulates that it is clearly agreed and understood that no difference or disputes shall be referable to arbitration if the company has disputed or not accepted the liability. The High Court has fallen into grave error by expressing the opinion that there is incongruity between Part II and Part III. The said analysis runs counter to the principles laid down in the three-Judge Bench decision in The Vulcan Insurance Co. Ltd (supra). Therefore, the only remedy which the respondent can take recourse to is to institute a civil suit for mitigation of the grievances. If a civil suit is filed within two months hence, the benefit of Section 14 of the Limitation Act, 1963 will enure to its benefit. 27. In view of the aforesaid premised reasons, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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