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TMI Blog2018 (8) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and Conciliation Act, 1966 (for short, "the Act"), with effect from 23rd October, 2015 by insertion of sub-section 6A in Section 11 of the Act, the limited mandate of the Court is to examine the factum of existence of an arbitration agreement. No more and no less. The learned Single Judge placed reliance on the two-Judge Bench decision of this Court in Duro Felguera, S.A. Vs. Gangavaram Port Limited, (2017) 9 SCC 729 and another decision of its own High Court in Jumbo Bags Ltd. Vs. New India Assurance Co. Ltd. 2016 SCC OnLine Mad 9141 : (2016). The appellants, however, placed reliance on a three-Judge Bench decision of this Court in Oriental Insurance Company Limited Vs. Narbheram Power and Steel Private Limited, CTC 761 : (2016) 2 LW 769 3 (2018) 6 SCC 534 where this Court had an occasion to construe a similar clause of an insurance policy as in the present case. Relying on this decision, it is urged that the impugned judgment cannot be countenanced and that the High Court ought to have dismissed the original petition filed by the respondents under Sections 11(4) & 11(6) of the Act read with Rule 2 of the Appointment of Arbitrators by the Chief Justice of Madras High Court S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hereunder and such claim shall not within 3 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 purpose be deemed to have been abandoned and shall not thereafter be recoverable hereunder." (emphasis supplied) 3. During the construction of the bridge, on 24th December, 2009, an accident occurred causing significant loss to the contractor. A detailed claim for a sum of Rs. 1,51,59,94,543/- was submitted by the JV to the appellants, in response to which the appellants appointed one Mr. S. Ananthapadmanabhan, Surveyor and Loss Adjuster, for assessing the loss caused to the contractor. A final report was submitted by the Surveyor on 28th February, 2011 assessing the loss as Rs. 39,09,92,828/-, however, with the finding that the damage was on account of the faulty design and improper execution of the project and not payable un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 7.8.2010. We find that there had been a collapse of the lateral span P3-P4, P4 Pylon and main span structures from S1-S10 segments which fell into the river. On a careful study of the records it is found that the collapsed portion was affected entirely due to faulty design, besides defective workmanship and materials in execution of the project. A few of the relevant factors are observed as under:- In execution of the project it is found that the junction at Pylon P4 was most critical and vulnerable which had to be handled with due care and diligence. An instable equilibrium had been caused at this junction, due to shearing of the slab in the lateral span P3-P4 about 15 mts. From the P4 junction, which caused the tilting of the pylon, dragging with it the spans P3-P4, P3-P2 and Piers P3, P4. The release of restraints on the movement of the bearings at P4 had not been performed in manner necessary, contributing to a massive failure. Lack of coordination and planning between various consultants and failure to properly oversee the execution had been found. There had been change of allocation of work among various joint venture partners which had played a key role in the quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4." (emphasis supplied) 5. The JV nevertheless entered into correspondence with the appellants to reopen and re-assess its decision of repudiation of the claim. Finally, the appellants informed the respondents that it was unable to "reconsider" the claim which has already been repudiated. The said communication reads thus: "UNITED INDIA INSURANCE COMPANY LIMITED HEAD OFFICE 24, WHITES ROAD CHENNAI CIN:U93090TN1938GOI000108 Ref:No.UIIC/ENGG/CLAIMS/17-18/01 Dt:17.04.2017 To KA: Mr. Anupam Gupta The Project Director M/s National Highways Authority of India Project Implementation Unit A-575, Talwandi, Kota (Rajasthan)-324005 Subject: CAR Insurance Policy No.011900/44/07/03/60000001. Settlement of Contractors claim No.010703/44/096/03/90000007. Dear Sir, We refer to your letter Ref:17011/27/2006-Kota/CAR/RJ05/3909 dt. 18.01.2017 and Contractor letter Ref: HZ-6718, dated 04.02.2017 and also the subsequent meeting held at our office Chennai. On perusal of the documents provided, we find that no further points have emerged in support of the claim. In view of the above we regret our inability to reconsider the claim which was repudiated. Yours faithfully (D. Nagalaksh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that arbitration agreement existed in the form of clause 7 of the Insurance Policy, by relying mainly on the decision in Duro Felguera, (supra) and Jumbo Bags Ltd., (supra). 9. We have heard Mr. P.P. Malhotra, learned senior counsel appearing for the appellants and Ms. Meenakshi Arora, learned senior counsel appearing for the respondents. 10. The clause similar to the subject clause 7 of the Insurance Policy came up for consideration before a three-Judge Bench of this Court in Oriental Insurance Company Limited (supra). After analysing the legal principle expounded in a host of decisions, including the decision in Jumbo Bags Ltd. (supra), the Court opined as follows: "23. 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 given effect to. If a clause stipulates that under certain circumstances there can be no arbitration, and they are demonstrably clear then the controversy pertaining to the appointment of arbitrator has to be put to rest. 24. In the instant case, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any such dispute. The appellant company in its letter dated July 5 and 29, 1963 repudiated the claim altogether. Under clause 13 the company was not required to mention any reason of rejection of the claim nor did it mention any. But the repudiation of the claim could not amount to the raising of a dispute as to the amount of any loss or damage alleged to have been suffered by Respondent 1. If the rejection of the claim made by the insured be on the ground that he had suffered no loss as a result of the fire or the amount of loss was not to the extent claimed by him, then and then only, a difference could have arisen as to the amount of any loss or damage within the meaning of clause 18. In this case, however, the company repudiated its liability to pay any amount of loss or damage as claimed by Respondent 1. In other words, the dispute raised by the company appertained to its liability to pay any amount of damage whatsoever. In our opinion, therefore, the dispute raised by the appellant company was not covered by the arbitration clause. 12. As per clause 13 on rejection of the claim by the company an action or suit, meaning thereby a legal proceeding which almost invariably in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qua non for triggering the arbitration clause. To put it differently, an arbitration clause would enliven or invigorate only if the insurer admits or accepts its liability under or in respect of the concerned policy. That has been expressly predicated in the opening part of clause 7 as well as the second paragraph of the same clause. In the opening part, it is stated that the "(liability being otherwise admitted)". This is reinforced and re-stated in the second paragraph in the following words: "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." Thus understood, there can be no arbitration in cases where the insurance company disputes or does not accept the liability under or in respect of the policy. 13. The core issue is whether the communication sent on 21st April, 2011 falls in the excepted category of repudiation and denial of liability in toto or has the effect of acceptance of liability by the insurer under or in respect of the policy and limited to disputation of quantum. The High Court has made no effort ..... X X X X Extracts X X X X X X X X Extracts X X X X
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