1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRTION PETITION NO.83 OF 2007 The United India Insurance ) Company Limited, ) having its registered and Head ) Office at United India House, ) 24 Whites Road, Chennai-600014 ) and Regional Office at Mumbai ) Regional Office – 1 at Stadium ) House, 5th floor, Veer Nariman ) Road, Mumbai – 400 020 ) .....Petitioners. V/s Crescent International, ) A partnership Firm having its ) Office at 19/6, Mittal Estate, ) Andheri Kurla Road, Marol, ) Andheri (E), Mumbai – 400 058 ) ....... Respondents. ------ Mr. Rahul Mehta i/b KMC Legal Venture for the petitioners. Mr. H.H. Trivedi for the respondents. ------ CORAM: V.M. KANADE, J. DATE : 5th SEPTEMBER, 2008 ORAL JUDGMENT: 1. Petitioners-United India Insurance Company Limited have filed this Petition under section 34 of the Arbitration 2 & Conciliation Act, 1996 (hereinafter referred to as “t he said Act”) to challenge the Award dated 14/11/2006 passed by the Arbitral Tribunal, Mumbai. By the said Award, the Arbitral Tribunal directed the Petitioner to pay a sum of Rs 98,57,070/- with interest @ Rs 9% from 01/05/2003 till the date of actual payment plus costs of Rs 3,00,000/-. 2. Brief facts are as under:- 3. Respondents are a partnership firm carrying on business in chemicals etc. Petitioners had issued the Standard Fire and Special Peril Policy, covering stock of materials which were stored in Gala No.9. This policy was issued to the extent of a sum of Rs 50,00,000/- for the period of validity between 24/07/2002 to 23/07/2003. The second policy was also issued by the Divisional Office of the petitioners, covering the stock of chemicals and plastics in Godown/Gala No.9 and it was to the extent of Rs 50,00,000/- for the period of validity between 28/10/2002 to 27/10/2003. 3 4. On 08/03/2003, a fire broke out in the insured premises and spread to Gala No.9. Respondents informed the said incident of fire to the Divisional Office of the petitioners by their letter dated 09/03/2003. 5. Surveyors were, accordingly, appointed by the petitioners and they took inspection of Godown No.9 and inspected the records made available by the respondents and on the basis of the said material, they issued their final survey report assessing the loss at Rs 66,13,613.77. Petitioners sent a letter to the respondents dated 26/12/2003 informing the respondents about the receipt of the surveyors' report. Respondents, however, were informed that the petitioners needed certain clarifications and true facts were brought to the notice of the respondents viz that the respondents had demolished Gala No.9 without taking prior permission from the Surveyors and, secondly, it was pointed out that there was overwriting in the xerox copy of the lease agreement which was given by the respondents. Thereafter, there was exchange of some correspondence between the petitioners and the respondents. 4 Respondents, thereafter, invoked an arbitration clause and referred the matter to the Arbitral Tribunal. The Arbitral Tribunal, thereafter, passed the impugned Award. 6. Being aggrieved by the said Award, the petitioners have filed this Petition under section 34 of the said Act. 7. Mr. Mehta, the learned Counsel appearing on behalf of the petitioners, submitted that the dispute could not be referred to arbitration as per the arbitration clause. He submitted that the Tribunal did not have jurisdiction to pass an Award. He submitted that in the impugned Award passed by the Tribunal, the issue of jurisdiction was not raised. He therefore submitted that, on this ground alone, the impugned Award is liable to be set aside. 8. On the other hand, the learned Counsel appearing on behalf of the respondents submitted that the issue of jurisdiction had been raised by the petitioners in the Written Statement and, at the request of the petitioners, preliminary issue of jurisdiction was framed by the Arbitral Tribunal and, after hearing both 5 Counsel and perusing the documents on record, the Tribunal was pleased to pass an order on this preliminary issue and it was held that the Arbitral Tribunal had jurisdiction to try and decide the dispute which was referred to it. Counsel for respondents has filed an affidavit of Mr. Mukesh Indravadan Doshi, partner of the respondents dated 22/08/2008. The learned Counsel appearing for the respondents submitted that the petitioners have suppressed this fact from this Court and had also raised this issue as one of the grounds but the petitioners had failed to disclose that the Arbitral Tribunal had decided the preliminary issue before the final award was passed by a separate judgment on 26/10/2005. He submitted that this order was not even challenged in this Petition and, therefore, it was not now open for the petitioners to raise the issue of jurisdiction in this Petition. He submitted that this is a clear case of suppression of facts by the petitioners and, on that ground alone, Petition is liable to be dismissed. 9. There is much substance in the submissions made by the learned Counsel appearing for the respondent. In the 6 affidavit of Mr Mukesh Doshi dated 22/08/2008, the order passed by the Arbitral Tribunal on the issue of jurisdiction is annexed, wherein, the Tribunal, by a reasoned order, had held that the reference was clearly within the jurisdiction of the Tribunal and, therefore, held that it had jurisdiction to decide the dispute. It has also to be noted that this fact has been suppressed by the petitioners in this Petition and only after the respondents were called upon to make their submissions on this issue, the respondents filed an affidavit of Mr. Mukesh Doshi and pointed out that this issue was already concluded by the Tribunal. Petitioners, therefore, have not come to this court with clean hands. If the respondents would not have been heard and if the Petition had been admitted on this point, the petitioner would have got the benefit of getting the Award passed by the Arbitral Tribunal stayed. It, therefore, cannot be said that this is an innocuous or inadvertent mistake on the part of the petitioners. Therefore, an inference will have to be drawn that the petitioners wanted to delay the payment of compensation which was payable to the respondents. This inference gets confirmed from the dilatory tactics which have been adopted by the petitioners in 7 deciding the claim of the respondents. The guidelines which have been framed under the Insurance Act, 1938 which have a statutory force, clearly state that the claim has to be settled by the Insurance Company within 90 days. The chronology of events which I shall refer to hereinafter, clearly shows that the petitioners have adopted dilatory tactics. The roznama of the court shows that time was taken by the petitioners for resolving the dispute. However, after taking number of adjournments, the court was informed that it was not possible to resolve the dispute. Further, the correspondence between the parties also indicates that the petitioners, on the one pretext or other, have failed to settle the claim though the Surveyors who have been appointed as per the provisions of the Insurance Act have submitted their report. The said report also was not accepted by the petitioners. 10. The second submission made by the learned Counsel for the petitioners is that the observations made by the Surveyors were not considered by the Tribunal. He invited my attention to the Surveyors' report and submitted that this report had not been 8 considered by the Tribunal and the Tribunal had arrived at its own conclusion and, therefore, the Award is liable to be set aside. This submission of the petitioners also cannot be accepted. It is a well settled position in law that this court, while exercising its jurisdiction under section 34 of the said Act, can only do so on the grounds which are mentioned in section 34 of the said Act. Section 34 reads as under:- “34. Application for setting aside arbitral award.-(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub- section (2) and sub-section (3). (2) an arbitral award may be set aside by the court only if- (a) the party making the application furnishes proof that- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within 9 the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the court finds that- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation.- Without prejudice to the generality of sub-clause (ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the 10 date on which the request had been disposed of by the arbitral tribunal: Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub- section (1), the court may where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.” From the aforesaid provision, it can be seen that this Court cannot sit in appeal over the findings recording by the Tribunal and also it cannot decide whether the quantum of compensation determined by the Tribunal is proper or not. It is not possible to re-appreciate the evidence which is adduced before the Tribunal and arrive at a different finding than the one which is given by the Tribunal. This court, therefore, cannot sit in appeal over the finding of quantum which is determined by the Tribunal. 11. However, even if the case is examined on merits, 11 there is no error apparent on the face of the record committed by the Arbitral Tribunal. Before rival contentions of both parties are taken in to consideration, it will be relevant to have a quick look at the important provisions of the Insurance Act. Under section 9, sub-section 5 of the Protection of Interest of Policy- holders Regulations, the decision in respect of the claim has to be taken within 30 days, either to pay the claim or to reject the claim. The Insurance Company conveyed their decision by their letter dated 26/12/2003, stating that the Surveyors had assessed the loss at Rs 66,50,541/- The respondents lodged a claim for 1.12 crores by their letter dated 31/12/2003 and, therefore, did not accept the claim of the Surveyors and, thereafter, the respondents invoked the arbitration clause. Under section 64 of the Insurance Act, surveyor has to be appointed and, accordingly, a Surveyor was appointed and they had given their report. This surveyor who has to be appointed under section 64 of the Insurance Act should have license from the competent authority viz. “Insurance Development & Regulatory Authority” (hereinafter referred to “I. D. & R.A.”). It is pertinent to note here that in view of several complaints of delay in 12 assessing loss by Surveyors in collusion and in conspiracy with the insurance employees, I.D. & R.A. enacted the Regulations known as Protection of Interest of Policy Holders and prescribed a procedure for assessment of loss and prescribed time limit for final decision to pay or reject the claim under section 9 for general insurance companies. 12. In the present case, the chronology of events clearly shows that this procedure was blatantly violated by the petitioners – Company. After the Surveyors submitted their report, the Insurance Company wrote a letter dated 26/12/2003. In the said letter, the Insurance Company informed the respondents that the Surveyors had recommended the claim for Rs 66,50,541/-. The Insurance Company does not state whether the Company has accepted the report or not. However, in the said letter, two queries were made; one was regarding the demolition of Gala No.9 without the permission of the surveyor and second was regarding the Surveyors' opinion that the area in the agreement was overwritten as 1870 sq.ft and that the original lease agreement was not produced before the Surveyors 13 by the respondents. Thereafter, there is series of correspondence between the parties. Respondents immediately on 31/12/2003 informed the petitioners that they did not accept the report of the Surveyors. On 04/02/2004, respondents again rejected the offer of settlement by the petitioners on the sum arrived at by the Surveyors. Petitioners then wrote various letters to the Surveyors and the Surveyors by their letter dated 15/03/2004 informed the petitioners that the respondents had pulled down walls of Godown No.9 without their prior permission and that the original lease agreement was not shown to them. On 22/03/2004, petitioners wrote a letter to the respondents informing them that the letter dated 26/12/2003 was only an intimation of the loss and that it was not an offer of settlement. Again on 02/04/2004, the petitioners clarified to the respondents that they had not accepted the liability under the policy. On 08/04/2004, petitioners again addressed a letter to the advocate of the respondents informing them that the question of difference or dispute referable to arbitration did not exist and that the matter could not be referred to arbitration. Thereafter, the respondents moved the Arbitral Tribunal. The said sequence of events and 14 the correspondence between the parties clearly reveals that on the one hand, petitioners did not settle the claim within a period of 30 days as required under the provisions of the Insurance Act and, on the other hand, also showed their unwillingness to refer the dispute for arbitration. 13. Apart from that, though it was contended that the report given by the Surveyors was not accepted in the correspondence between the parties, it was argued before the Arbitral Tribunal that the Surveyors were justified in making deductions of Rs 43,52,641.39 and the entire basis on which the claim of the respondents was denied was the report which was submitted by the Surveyors. This clearly shows that though, on the one hand. the petitioners – Company had justified the Surveyors' report, on the other hand, it had not accepted the claim of the respondents even on the basis of the Surveyors' report. This clearly discloses that the intention of the petitioners was to delay the payment which was due and payable to the respondents/claimants. 15 14. Even before this Court, the learned Counsel appearing on behalf of the petitioners essentially relied upon the Surveyors' report and tried to justify the said report and submitted that the deductions which were made by the Surveyors ought to have been accepted by the Arbitral Tribunal and that the Arbitral Tribunal had erred in not accepting the deductions suggested by the Surveyors. It has to be noted here that the Surveyors had suggested that the original area of Gala No.9 had been overwritten and, secondly, the original lease agreement in respect of Gala No.9 was not shown. The Surveyors, therefore, had suggested that the stock which was allegedly kept by the claimants in Gala No.9 could have been kept there taking into consideration the space which would be occupied by the said stock which consisted of steel drums and sacks and that the volumetric area occupied by drums was not sufficient for the purpose of keeping it in that area. The Arbitral Tribunal, however, has not accepted the finding of the Surveyors on various grounds. It has given cogent reasons why the said finding could not be accepted. It has recorded that the Surveyors had not carried out the actual measurement of Gala No.9 and 16 also did not take into consideration the height of the said Gala. It has further recorded a finding that all other Galas which were destroyed in the fire also belonged to the respondents – Company and, therefore, the Surveyors could have taken inspection of the records of the said Galas in order to confirm whether the said stock either was actually kept in Gala No.9 or was kept in other Galas but was shown to be kept in Gala No.9. Thirdly, it has been stated that the Surveyors have not stated that the invoices or other records were false or fabricated or that the duplicate claims were made by the claimants in respect of the same goods which were kept in Gala No.9 and in the other Galas which were all damaged and destroyed by the fire. The Arbitral Tribunal has taken into consideration individual deductions suggested by the Surveyors and, by giving cogent reasons, has not accepted the said deductions suggested by the Surveyors. Therefore, even on merits, the findings recorded by the Tribunal are not perverse and are based on documentary evidence on record and on oral evidence which is adduced by both the parties. There is, therefore, no substance in the submissions made by the learned Counsel appearing on behalf of the 17 petitioners. No case is, therefore, made out for interference with the Award passed by the Arbitral Tribunal. 15. Petition is accordingly dismissed. Under the circumstances, there shall be no order as to costs. (V.M. KANADE, J.) 18