IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 03.09.2009 Coram: The Honourable Mr.Justice M.CHOCKALINGAM and The Honourable Mr.Justice R.SUBBIAH Original Side Appeal No.249 of 2009 and M.P.No.1 of 2009 National Insurance Company Ltd., No.66, 1st Floor, Greams Road, Chennai-600 006 rep.by its Sr.Divisional Manager, Mr.J.Subbaraman ..Appellant/Petitioner ..vs.. 1. Beardsell Ltd., 47, Greams Road, Chennai-600 006. 2. S.Emmanuel Jeyaraj 3. R.Swaminathan 4. M.A.Ananth ..Respondents/Respondents Original Side Appeal filed under Order XXXVI Rule 1 of Original Side Rules read with Clause 15 of Letters Patent, against the order and decree dated 17.04.2009 passed by a learned single Judge of this Court in O.P.No.674 of 2008. For Appellant : Mr.P.B.Sampath Kumar For Respondents : Mr.A.P.S.Kasthuri Rangan for R1 JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.,) Challenge is made to an order of dismissal made by the learned single Judge of this Court in O.P.No.674 of 2008, whereby the award dated 26.07.2008 made by the majority members of the Arbitral Tribunal was confirmed. 2. Short facts necessary for the disposal of the appeal can be stated as follows: https://hcservices.ecourts.gov.in/hcservices/ The appellant/petitioner insurance company issued two Standard Fire and Special Perils policies valid for the period from 01.01.2005 to 31.12.2005. The first policy covered various stocks, including raw materials, finished goods, semi finished goods, etc. lying in 13 different places, while the latter covered the building, plant and machinery at the first respondent's factory premises at Thane, Mumbai. The policies value are Rs.2,63,05,000/- and Rs.5,38,39,500/- respectively. Due to heavy rain on 26th July, 2005, the 1st respondent suffered damage to its plant and machinery, stocks and materials. Hence, the 1st respondent notified the loss to the appellant/petitioner insurance company, in turn, the insurance company appointed M/s.Protocol surveyors and Engineers Private Limited, to inspect, verify and assess the damage that could have occurred. An interim report was filed on 18.10.2005 and a final report on 23.09.2006. The said surveyor assessed the net liability of the appellant at Rs.49,38,118/-. The stock declaration statement for the month of June, 2005, disclosed only the value of the stock at Thane in the factory premises at Rs.10,40,000/-. Hence, the 1st respondent sent a letter on 04.10.2005 to the appellant under Ex.C-12 stating that they had mentioned the stock of the finished goods alone in the monthly stock declaration statement without including the raw materials and finished goods. It was due to mistake that the raw materials and finished goods were also covered under the policy and hence, a revised statement for the period February, 2005 to July, 2005, showing the stock value as Rs.70,58,598/- was to be considered for payment. The insurance company sent a letter on 10.10.2005 to the Surveyor, as could be seen under Ex.R-2, that the revised declaration statement might be reckoned. The Surveyor found that the revised declaration and bank's statement containing the details of the stock of the raw materials and finished goods for the month of June, 2005 were found to be tallied with the revised statement of the 1st respondent. The surveyor's interim report under Ex.R-9 dated 18.10.2005 and the final report under Ex.R-6 dated 23.09.2006 are also confirmed the same. The appellant offered Rs.3,31,010/- as against the claim assessed at Rs.29,04,669/- by its letter dated 29.08.2007 towards the loss of damage to stocks on the ground that the declaration of stock prior to the date of occurrence of the loss, showed a discrepancy of the stocks actually available on the date of occurrence was noticed. The appellant made a payment of Rs.11,08,325/- towards the damage to the building, plant and machinery as seen under Ex.C-3. Under Ex.C-1 dated 29.08.2007, the appellant insurance company offered to pay Rs.3,31,010/- in full and final statement of the claim, which brought forth the reply from the 1st respondent on 08.10.2007 that the 1st respondent was not ready to accept the same. Hence, the arbitration clause was invoked The claimant appointed three Arbitrators. 3. The Arbitral Tribunal framed 9 issues. On enquiry, the majority of two granting the relief to the 1st respondent to the https://hcservices.ecourts.gov.in/hcservices/ tune of Rs.25,02,982/- in full and final settlement of the claim with simple interest at 12% per annum from 01.01.2007 on Rs.3,31,010/- up to 31.12.2007 and on the sum of Rs.25,02,982/- from 01.01.2007 up to the date of award and on 18% on Rs.25,02,982/- from the date of the award till satisfaction. Aggrieved over the same, the appellant filed the original petition for setting aside the award. 4. The learned single Judge, on scrutiny of the materials and on hearing the submissions made, took a view that it is not a fit case, where the Court could interfere with the award or find any reason to set aside the same and hence, dismissed the original petition. Hence, the appeal has arisen at the instance of the appellant insurance company. 5. Advancing the arguments on behalf of the appellant, the learned counsel would submit that the terms and conditions prescribed by the Tariff Advisory Committee form part and parcel of the policy; that it has got a binding effect; that the learned single Judge has also held that when the clause was part and parcel of the policy, the same was binding on both sides; that once the contents of the Tariff Advisory Committee report form part and parcel of the policy, then any violation of the policy conditions would be invalid; that any violation of such conditions should have been construed as ultra vires, especially when the report stated that any breach should be dealt with as per the relevant provisions of the Income Tax Act, 1938; that the 2nd and 4th respondents herein had prejudged the issue before them in favour of the claimant and had applied the plurality of illogical assumptions to justify the same; that they have also shown over indulgence and assumed facts which were not in existence at all; that the stock value was revised on 04.10.2005 after the occurrence of the accident on 26.07.2005; that there was no provision in the policy for filing revised declaration even if there was a bona fide mistake; that if it was allowed that will go against the very base of the declaration in the policy; that if a declaration was allowed to be revised for whatever reason the very meaning of declaration, the stocks would lose its effect and it could be varied at any time according the convenience of the parties. 6. Added further the learned counsel that entertaining and ratifying a revision of declaration of the value of stock after the date of occurrence would open the flood gates wherein every other insured had one reason or other to ratify the declaration after the date of occurrence rendering the very purpose of the declaration in the policy redendant; that the learned Judge failed to consider the submission of the appellant that the dissenting award of the Arbitral Tribunal which pointed out that adjudicating the revised declaration would amount to 'Ex-gratia award in arbitration'; that the appointment of investigator and the consequent finding that there was a bona fide dispute would not in any way make the appellant insurance https://hcservices.ecourts.gov.in/hcservices/ company liable for payment of claim, especially when the appellant proved beyond doubt that any such variations would amount to violating the Insurance Act; that the investigator appointed to ascertain the bona fide and if the report had found that there was no bona fide, the entire claim would have been repudiated; that the declaration was a one time event and if the privilege of revision of the declaration was given, especially after the occurrence of the event, it might be lied the rights and obligations of the parties which were originally formulated; that any deviation or violation contrary to the prescriptions of the Tariff Advisory Committee was illegal and ultra vires and nobody can ratify or approve any deviation or violations; that the ratification was not communicated to the other parties and hence it will not be binding in law; that the clauses contained in the agreement were clear and unambiguous and the parties have not chosen to provide for any contingencies and thus, the Arbitral Tribunal erred in travelling beyond the scope of the Insurance Agreement and that the 1st defendant has attempted to unjust enrichment and it should not be upheld. Added further the learned counsel that the interest rate awarded by the Tribunal was excessive and this was not also considered by the learned single Judge. 7. Learned counsel for the 1st respondent put forth his submissions in his sincere attempt of sustaining the award and also the order of the learned single Judge. 8. The Court has paid its anxious consideration on the submission made by the learned counsel on either side and also the materials available. 9. Admittedly, the 1st respondent had taken two policies covering building, plant and machinery as well as stocks finished, semi finished and the raw materials in his factory at Thane. The policy amounts in respect of both the polices were paid by the 1st respondent. The payment admittedly would include for the raw materials, semi finished goods and finished goods. The 1st respondent, who suffered damage to its plant, machinery, stocks and materials due to the heavy rain on 26.07.205, putforth its claim. The appellant insurance company appointed its Surveyor referred to above to assess the loss and damage. A final report was also filed on 23.09.2006 following an interim report on 18.10.2005. In the final report, the damage and loss were assessed to Rs.49,38,118/-. It is also not in controversy that the 1st respondent, while had made a stock declaration statement for the month of June 2005, showed the value of the stock in the factory premises as Rs.10,40,000/- and thereafter, sent Ex.C-12 letter that the earlier declaration was pertaining to the stock of finished goods only in the monthly stock declaration but it did not include the raw materials and finished goods and hence, https://hcservices.ecourts.gov.in/hcservices/ placed a revised statement containing the period February 2005 to July 2005, showing the stock value as Rs.70,58,598/-. 10. The main contention raised by the appellant insurance company before the learned single Judge as a bone of contention to set aside the award and equally here also is that once the declaration was made as to the value of the damage, then the insured should not be allowed to make a revised declaration. If allowed, it would be a violation of the contents of the Tariff Advisory Committee report and also against the provisions of the Insurance Act, 1938. This contention was negatived by the learned single Judge. In the considered opinion of the Court, that was a correct view taken by the learned single Judge. Needless to say, the policy taken by the 1st respondent was contractual and the terms found therein would be binding other parties. In the instant case, after the original declaration was made, a revised declaration was made by the 1st respondent on 04.10.2005. It was clearly mentioned therein that in the original declaration, by oversight, the value of the raw materials and finished goods covered under the policies were omitted and hence, there arose the necessity for the revised statement covering for the period from February, 2005 to July, 2005. On receipt of the revised declaration, the appellant insurance company directed its Surveyor to reckon the revised declaration with the bank's statement. Accordingly, the Surveyor of the insurance company found that the revised declaration and the bank's statement in respect of the stocks of the raw materials and finished goods were tallied and has given two reports on 18.10.2005 under Ex.R9 and on 23.09.2006 under Ex.R-6. At this juncture, the Court is able to notice that the insurance company have acted positively by asking its Surveyor to act on the revised statement. Had the intention of the insurance company not to accept the revised declaration as it contended before the learned single Judge and also before this Court, it should have rejected the revised statement itself, but not done so. On the contrary, it has asked its Surveyor to proceed further and obtained two receipts. It is pertinent to point out that the insurance company has not acted on the revised statement, but reserved its right to object the same without prejudice to its right of denying the contents of the report. The appointment of the Surveyor with a direction to act on the revised report should have been only to verify whether there was any wrong declaration made by the claimant and whether it was made bona fide or mala fide. The surveyor’s report made it evident that there was no breach of warranty or policy conditions by the claimant. The letter of the appellant dated 11.07.2006 would indicate that the insurance company had elected and decided not to treat the case as one of under-declarations, warranting invocation of condition No.44 of the declaration clause. 11. It is also an admitted position that the premium for the period 2004-2005 would include in respect of raw materials and https://hcservices.ecourts.gov.in/hcservices/ finished goods, which was covered under the policy. There was no attempt made by the insurance company to refund any part of the premium for the year 2004-2005. All would clearly indicate that the insurance company had elected to waive condition No.4 of the declaration clause and hence, it is too late for the insurance company to raise such a contention that the revised declaration was repugnant to the terms of the agreement. The contention put forth by the learned counsel for the appellant that there was no provision in the policy for final revised declaration, if there was a bona fide mistake. This contention cannot be countenanced. Nowhere the policy stated that a revised declaration should not be made. Thus, the policy does not stipulate whether a revised declaration could be made or could not be made. Under such a situation, the Court has looked into the conduct of the parties. In the instant case, there was a revised declaration made and the same was received by the appellant insurance company and, in turn, it asked its Surveyors to make assessment on the basis of the revised declaration for the materials covered in the revised statement and obtained two reports. On the basis of the revised declaration, the appellant has received premium on the policy during the relevant period. As such, it cannot now be allowed to say that the revised declaration was against the terms of the policy taken by the party. Under such circumstances, the contentions put foward by the learned counsel for the appellant were duly considered by the learned single Judge and has arrived at the correct conclusion that such contentions cannot be countenanced. 12. In so far as the question of interest is concerned, it will be more apt and appropriate to reproduce sub-section 7 of section 31 of the Arbitration and Conciliation Act, which speaks about the payment of interest, as follows: "7(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by a arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment". 13. Regarding the payment of interest, the Apex Court in Civil Appeal No.4197 of 2009 (M/s.Sayeed Ahemd & Co., ..vs.. State of U.P. & Ors.) has held as follows: https://hcservices.ecourts.gov.in/hcservices/ "18. ....As noticed above, clause(b) of sub-section (7) of section 31 of the Act provides that if the award does not otherwise direct, the amount awarded shall carry interest as directed by the award and in the absence of any provision of 18% per annum..." Hence, the interest awarded by the Arbitral Tribunal at 12% per annum till the date of award cannot be disturbed and the 18% subsequent interest is also reasonable and hence, that part of the award has also to be sustained. 14. As rightly pointed out by the learned single Judge, in the absence of any error, which is against the provisions of law or policy, the award could not be interfered with and that there was no reason or ground noticed by the Court to take any other view than the one taken by the majority of the members of the Arbitral Tribunal in respect of the revised declaration. Hence, the order of the learned single Judge has got to be sustained. Accordingly, the appeal fails and is dismissed, leaving the parties to bear their costs. Consequently, connected M.P.is closed. Sd/- Asst.Registrar /true copy/ Sub Asst.Registrar gl To The Sub Assistant Registrar, Original Side, High Court, Madras. +1 cc to Mr.P.B.Sampathkumar, Advocate, SR.No.44573 +1 cc to M/s.Sampathkumar & Associates, Advocate, SR.No.44175 Judgment in O.S.A.No.249 of 2009 RL {CO} TP/6.10.2009. https://hcservices.ecourts.gov.in/hcservices/