IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 18.01.2010 CORAM: THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN O.P.No.932 of 2000 M/s.United India Insurance Company Ltd. .. Petitioner versus 1. K.Sarvabhauman 2. K.R.Gururajan 3. R.Rajagopalan 4. G.C.Pappanna Proprietor M/s.Bharat Leather Co. 5. M/s.Standard Chartered Bank 6. Sujatha Subash ] 7. G.C.Sivakumar ] 8. G.C.Sinivas ] Legal representatives of 4th respondent 9. Prithvi Shankar ] 10. Pavithra Shankar ] .. Respondents ----- Prayer: Amended petition under Chapter VII Section 34 of the Arbitration and Conciliation Act, 1996 read with Order 43 Rule 1, 2, 3 & 6 of the Rules of the High Court, Madras Original Side, 1956 against the order of the Arbitral Tribunal dated 27.6.2000. ----- For petitioner : Mr.Guruswaminthan for M/s.Nageswaran & Narichania For respondents : Mrs.Chitra Sampath ----- ORDER This Original Petition is at the instance of the Insurance Company against the order of the Arbitral Tribunal dated 27.6.2000. 2. On the basis of the award, the claimant, fourth respondent herein, made an application before the Tribunal seeking an additional award. On the petitioner's part too, an application was filed under Section 33 of the Arbitration and Conciliation Act, 1996, for a direction that in the light of the decision of the Apex Court reported in AIR 1997 SC 2049 (National Insurance Co. Ltd. Vs. Sujir Ganesh Nayak & Co.) and AIR 2000 HP 11 (H.P.Horticultural P.M. & P. Corpn. Ltd. Vs. U.I.Insurance Co. Ltd.), the arbitral award dated 27.6.2000 had to be set aside on the ground of limitation. 3. By award dated 26.9.2000, the Arbitral Tribunal passed the additional award in the claimant/fourth respondent's application for rectification, granting the prayer. However, as regards the petition filed by the petitioner herein seeking an interpretation on the terms of the agreement, the said claim was rejected by the Tribunal. 4. The only issue raised challenging the award herein in this petition is on the issue of limitation on the claim. The fourth respondent herein carried on business in leather. The fourth respondent had a factory and manufacturing unit at Katpadi and a godown in Chennai. The fourth respondent went in for financial assistance with the fifth respondent herein and in terms of the same, the fourth respondent went in for fire insurance of the building, stock in trade and other materials with the petitioner herein. The Master policy taken by the fourth respondent was for the period from 1.11.1986 to 1.11.1987 for a sum of Rs.28,12,000/-. The fourth respondent suffered two fire accidents, the first accident on 26.12.1986 in the godown and the second accident on 10.1.1987 in the manufacturing unit. Immediately thereupon, the fourth respondent raised his claim on 07.01.1987 for a sum of Rs.15,70,700/- and the second claim on 17.1.1987 for a sum of Rs.2,03,800/- , totalling to a sum of Rs.17,14,500/-. Admittedly, based on the claim thus made by the fourth respondent, the petitioner engaged the surveyor to inspect the premises to assess the damage, who recommended compensation. This is marked as a document under Ex.A6 dated 10.1.1987 and Ex.A9 dated 4.3.1987. 5. While the matter stood thus, there was a criminal prosecution in S.C.No.75 of 1988, relating to the death of one Vijayakumar in the fire accident. By judgment dated 22nd November 1990, the criminal Court acquitted the fourth respondent. The petitioner's officials were examined as witnesses therein. P.W.17 - Srinivasan of the petitioner company, Senior Divisional Officer, deposed on behalf of the petitioner. In the course of examination, the said witness marked Ex.P7. The claim form was filed by the fourth respondent seeking compensation and Ex.P9 as regards the survey conducted by the surveyor engaged by the petitioner. They also marked Ex.A8, xerox copy of the independent policy. It is not denied by the parties herein that the policy was with the Bank with whom the first respondent had financial transaction. 6. Keeping aside all these facts, it is seen from the records that the fourth respondent herein filed a suit in C.S.No.259 of 1990 against the petitioner herein before this Court seeking a decree for a sum of Rs.17,13,800/- as compensation due and payable in respect of the fire accident that took place on 26.12.1986 and the second accident on 10.1.1987 in terms of the master policy issued by the petitioner herein with interest at 18% per annum from 26.12.1986 to 20.12.1989. The said suit was filed in the year 1989 before this Court. During the pendency of the suit, the fourth respondent took out an application in Application No.3314 of 1999 to go before the arbitral Tribunal for settlement of the claim. By order dated 18.11.1999, this Court directed that the dispute be resolved by a panel of three named Arbitrators and the award was to be filed before this Court within a period of three months by the Arbitrators. The fourth respondent laid his claim for a sum of Rs.17,13,800/- towards compensation. 7. The petitioner herein resisted the claim stating that the claim was hit by limitation. Before the Arbitral Tribunal, two issues were raised which are as follows: (i) Whether the claim is barred by limitation? (ii) What amount is due to the claimant on account of the fires on 26.12.1986 and 10.1.1987? 8. The Arbitral Tribunal pointed out that Ex.A1 is the xerox copy of the first page of the master insurance policy issued by the Insurance Company for the period 1.11.1986 to 1.11.1987. The xerox copy of the schedule, in so far as it related to the fourth respondent, covered the fourth respondent's buildings, machinery and stock at Chennai and Katpadi of a total value of Rs.28,12,000/-. Admittedly, the entire policy in original was not produced either by the petitioner or by the respondents. The Tribunal pointed out that even though on an application by the fourth respondent an order was passed directing the fifth respondent Bank to produce the same, the Bank, however, did not produce it. On an application taken by the petitioner before this Court in Application No.3749 of 2001 in this O.P., under order dated 25.4.2002, this Court directed the Bank to produce the original of the insurance policy and the same is now before this Court. 9. Be that as it may, the Tribunal referred to the admitted fact as regards the fire accidents, one in the godown at Chennai and the other in the tannery at Katpadi on 26.12.1986 and 10.1.1987 respectively and to the evidence of R.W.1, the surveyor appointed by the petitioner, who deposed about his visit to the tannery to find out the cause of the fire. As to the plea of limitation, the Arbitral Tribunal agreed with the contention of the fourth respondent that Article 44(b) of the Limitation Act would apply in respect of insurance claims and rejected the plea of the petitioner that the claim was hit by limitation in view of Article 137 of the Limitation Act, that the fourth respondent had not lodged the claim within three years of the damage suffered. Learned Arbitrators held that Ex.A1, the policy produced, was only a xerox copy of the first page of the policy with the photocopy of the schedule and not the original policy. Hence, the claim of the petitioner that the claim should have been made within three years of the fire accident as per the conditions of the policy was rejected. 10. Learned Arbitrators further pointed out to the decision reported in (1994) 3 SCC 324 (Food Corporation of India Vs. New India Assurance Co. Ltd.) that the contract restricting the period of limitation provided under the Limitation Act would be void under Section 28 of the Contract Act. Hence, the claim was held to be within the period of limitation. It must be noted herein that the relief granted to the first respondent herein before the Arbitral Tribunal fixing the compensation is not seriously disputed before this Court. 11. The only issue argued by the learned counsel appearing for the petitioner is on the question on limitation. Even though learned counsel appearing for the fourth respondent questioned the maintainability of the claim of the petitioner in the O.P. before this Court under Section 34 of the Arbitration and Conciliation Act, 1996, as regards summoning the original policy from the Bank, yet she submitted that even going by the clauses therein, the claim is within the period of limitation specified in the contract and hence no exception could be taken to the decision of the Arbitral Tribunal. 12. Learned counsel appearing for the petitioner placed reliance on the decision of the Apex Court reported in AIR 1997 SC 2049 (National Insurance Co. Ltd. Vs. Sujir Ganesh Nayak & Co.) as well as 2009 (1) Consumer Protection Judgments 1 (SC) (H.P. State Forest Company Ltd. Vs. United India insurance Co. Ltd.) and submitted by making particular reference to paragraph 10 that going by the contractual terms under Clause 18, if a claim is not raised within 12 months from the date of the loss, the Insurance Company could not be held liable. In the judgment reported in 2009 (1) Consumer Protection Judgments 1 (SC) (H.P. State Forest Company Ltd. Vs. United India insurance Co. Ltd.), the Apex Court considered the contractual provisions with reference to Section 25 of the Indian Contract Act. In the circumstances, he submitted that the award is illegal and contrary to the provisions of the Act and hence liable to be set aside. 13. Taking note of the rival contentions of the parties, the contractual clause, which has been a subject matter of discussion, hence, needs to be looked at. Clause 18 of the insurance policy states that if a difference arises as to the compensation to be paid under the policy, such difference shall, independent of all questions, be referred to the decision of the Arbitrator to be appointed in writing, by the parties. Clause 19, dealing with limitation on the compensation, reads as follows:  In no case whatsoever shall the Company be liable for any loss or damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action of arbitration. It being expressly agreed and declared that if the company shall disclaim liability for any claim hereunder and such claim shall not within 12 calender months from the date of the disclaimer have been made the subject matter of a suit in a court of law when the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.  14. Going by Clause 19, one can see that an insured has to come before the Insurance company within 12 months from the happening of the loss or damage and unless the said claim is made within a period of 12 months, the further right of the claimant to proceed against for damages does not survive any longer. 15. It is seen from the said clause that beyond the expiry of the 12 months period on the happening of the loss or damages, unless and until the claim is the subject of pending action or arbitration, the Insurance Company shall not, in any manner, be liable for any claim. The contractual provision thus put a bar by way of limitation for the other party to proceed further with the action. But once a party makes a claim within the period of 12 months against the Insurance Company, it is for the Insurance Company to act further on this. But if no such claim had been made within twelve months, the claimant would lose his rights. 16. As far as the present case is concerned, admittedly, immediately on the lodging of the complaint on the first of the fire accidents on 26.12.1986 and for the second fire accident on 10.1.1987, the fourth respondent made a claim on 17.1.1987. The petitioner herein had, in fact, set in motion its course of action in directing the surveyor - R.W.1 for inspection of the premises. The evidence also substantiates the case of the fourth respondent about the Insurance Company moving forward on the claim petition made by the fourth respondent. The evidence herein also supports the fact that the Insurance Company did act on the claim made by the fourth respondent herein. The evidence of the petitioner's representative before the Criminal Court also speaks on the action taken by the petitioner in engaging the services of the surveyor for assessing the damage as well as the cause for the damage. In the background of the said facts, it is seen that the decision of the Apex Court reported in 2009 (1) Consumer Protection Judgments 1 (SC) (H.P. State Forest Company Ltd. Vs. United India insurance Co. Ltd.), is distinguishable; as such, no reliance could be placed by the petitioner on the said decision. 17. A reading of the judgment of the Apex Court reported in 2009 (1) Consumer Protection Judgments 1 (SC) (H.P. State Forest Company Ltd. Vs. United India insurance Co. Ltd.) shows that the insured therein suffered loss on account of heavy rains. This was sometime in September, 1988. The insured made claim before the Insurance Company, which, however, rejected the same. It is seen that after prolonged negotiations, some additional premium was paid. It was stated that having accepted the said premium, the Insurance Company refused to make good the loss. A notice was issued on 7th May 1992 followed by another notice on 7th December 1992. The claim was repudiated in the communication dated 24th December 1982 from the Insurance Company. In the background of the said facts, the Apex Court pointed out that the claim of the insured that the Insurance Company admitted its liability impliedly was not correct, as the surveyors had been appointed on the persistent demand of the claimant and the premium taken thereafter was only to make good the deficiency in the premium that had been paid for the policy for a period of two months. In the background of all these, the Apex Court pointed out that as on the date of flood, there was no insurance policy in existence or any commitment on behalf of the Insurance Company to make the payment. In the background of the said facts, the Apex Court considered the claim of the Insurance Company as to the relevancy of Section 28 of the Indian Contract Act, citing Condition No.19 which is no different from what is now relied on by the petitioner. The Apex Court pointed out "Clause 19 in terms said that in no case would the insurer be liable for any loss or damage after the expiration of twelve months from the happening of loss or damage unless the claim is subject of any pending action or arbitration. Here the claim was not subject to any action or arbitration proceedings. The clause says that if the claim is not pressed within twelve months from the happening of any loss or damage, the Insurance Company shall cease to be liable." The Supreme Court pointed out on facts that there was no dispute that no claim was made nor was any arbitration proceeding pending during the said period of twelve months. The clause therefore has the effect of extinguishing the right itself and consequently the liability also. 18. The Apex Court further pointed out that the said Clauses are normally found in the insurance contract for the reason that undue delay in preferring a claim may open up possibilities of false claims, which might be difficult of verification with reasonable exactitude, since memories might have faded by then and even ground situations might have changed. Lapse of time in such cases might prove to be quite costly to the insurer. If the claim is not made within the stipulated period, the right thus would stand extinguished. Such a clause would not be hit by Section 28 of the Indian Contract Act. 19. Curtailment of the period of limitation is not normally permissible in terms of Section 28 of the Indian Contract Act. The contract clause prescribing a right to be exercised within a specified time and if not exercised resulting in the extinguishment of the right is a permissible one and can be enforced. Consequently, if a policy of insurance provides for a claim to be made within a particular period, it shall stand extinguished by the completion of such time and any subsequent action would be clearly barred. Such a clause is outside the scope of Section 28 of the Indian Contract Act and hence not hit by the provisions of the Indian Contract Act. 20. The decision of the Apex Court as to the effect of Clause 19 of the insurance policy applies to the facts herein too where the very same clause figures in. On the admitted position that the petitioner had, in fact, acted as per Clause 19 of the policy, as rightly pointed out by the learned counsel for the petitioner and the claimant/fourth respondent thus setting in motion the arbitration proceedings by appointing the surveyor, it is difficult to hold that the claim is hit by limitation. Hence, rightly, the Tribunal granted the claim on the aspect that the first respondent had made his claim within the time as per Clause 19. In the circumstances, the award cannot be attacked on the ground of limitation. 21. Learned counsel appearing for the petitioner, however, submitted that except for making the claim, there was no progress from the side of the 4th respondent herein, and hence the said claim is barred by limitation as per clause 19 of the contract. I do not accept the logic in the said submission. The said Clause No.19 does not contemplate a settlement of the claim within the period of 12 months. On the other hand, the said clause contemplates making of a claim within a period of 12 months from the happening of the loss or damage thus initiating action towards that end. Consequently, the claim is not barred by limitation. If for reasons best known to the petitioner, the claim made within a period of 12 months from the date of loss is not touched or acted upon, one cannot plead limitation taking advantage of their inaction to defeat the claim of the insured. The conduct of the Insurance Company thus cannot prejudice the claimant. In the circumstances, in fairness to the claim of the fourth respondent, when the claimant had made the claim within a period of 12 months, even assuming that the Insurance Company had not acted so far for grant of any relief to the claimant, the same cannot be put against the claimant for any relief to be granted. In the circumstances, even applying the law declared by the Apex Court on the facts herein, I do not find any justification in accepting the plea of the petitioner that the decision squarely covers the issue and hence the award has to be set aside. 22. Learned counsel appearing for the petitioner pointed out that after the receipt of the claim, even as early as 1992, the Insurance Company had expressed its acceptance to the claim partially and had called upon the Bank to return the voucher duly discharged for settling the claim. The letters dated 16.3.1992 and 28.2.1992 clearly indicate the conduct of the petitioner in accepting the damage to the materials. Even assuming that to a limited extent only the Insurance Company had agreed, still, the claim is within the period of limitation. Following the order passed in C.S.No.259 of 1990 dated 18th November 1999 directing the parties to go before the named Arbitrator, who shall decide the dispute and file the award within three months from the date of the order, the petitioner filed the claim petition on 6.1.2000. It may be seen that the accident occurred on 26.12.1986 at Chennai and on 10.1.1987 at Katpadi. The first respondent submitted the claim on 7.1.1987 and 17.1.1987 respectively. On 12.11.1989, the first respondent sent a notice. In the meantime, the petitioner's assessors visited the premises to arrive at the value, which, however, was found to be grossly low and hence was objected to by the first respondent. There was no reply sent by the petitioners to the letter dated 12.11.1989. This led to the petitioner filing a suit in C.S.No.259 of 1990 on 19.12.1989. Hence, going by Clause 19 that the first respondent had made a claim which is a subject of pending action before the expiration of 12 months from the happening of the loss, the proceedings initiated are saved by limitation. Consequently, I do not find any justification to disturb the award on the aspect of limitation. As already pointed out, the delay is not attributable to the petitioner and hence, the award stands confirmed and the Original Petition dismissed. There are no merits in the Original Petition and I have no hesitation in confirming the award. ksv 18.01.2010 CHITRA VENKATARAMAN,J. ksv O.P.No.932 of 2000 Dated: 18.01.2010