Case: Ruby General Insurance Co. Ltd Vs. Pearey Lal Kumar And Another

to which reference was made by Lord Summer, the policy of insurance contained a clause referring to the decision of an arbitrator "all difference arising out of this policy". It also contained a recutal that the assured had made a proposal and declaration as the basis of the contract, and a clause to the effect that compliance with the conditions indorsed upon the policy should be a condition precedent to any liability on the part of the insurers. One of the conditions provided that if any false declaration should be made or used in support of a claim all benefits under the policy should be forfeited. In answer to a claim by the assured, the insurers alleged that statements in the proposal and declaration were false. When the matter came before the arbitrator, the assured objected that this was not a difference in the arbitration and that the arbitrator had no power to determine whether the answers were true or not, or to determine any matters which called in question the validity of the policy. In holding that the arbitrator had jurisdiction to decide the matter, Viscount Reading C. J. observed as follows:"If the company were seeking to avoid the contract in the true sense they would have to rely upon some matter outside the contract, such as a misrepresentation of some material fact inducting the contract of which the force and effect are not declared by the contract itself. In that case the materiality of the fact and its effect in inducing the contract would have to be tried. In the present case the company are claiming the benefit of a clause in the contract when they say that the parties have agreed that the statements in question are material and that they induced the contract. If they succeed in escaping liability that is by reason of one of the clauses in the policy. In resisting the claim they are not avoiding the policy but relying on its terms. In my opinion, therefore, the question whether or not the statement is true is a question arising out of the policy."8. The main contention put forward on behalf of the appellant is that the points in dispute fall outside the jurisdiction of the arbitrator, firstly because the existence of the arbitration agreement is challenged, and secondly because the sole object of the application under S. 33, Arbitration Act, is to have the effect of the arbitration agreement determined. In our opinion, neither of these objections is sound. How can it be held that the existence of the arbitration agreement is challenged, when both parties admit that the clause in the policy which contains that agreement binds them. It is neither partys case that there is no arbitration agreement in the policy. On the other hand, both parties admit that such agreement exists, and each of them relies on it to support its case. It is true that the appellant contends that the arbitration agreement has ceased to be applicable, but that contention cannot be sustained without having recourse to the arbitration agreement. It is said that the agreement no longer subsists, but that is very different from saying that the agreement never existed or was void ab initio and therefore, is to be treated as non existent.9. Again, no question of determining the effect of the arbitration agreement arises, because there is no dispute between the parties as to what it means. The language of the arbitration clause is quite clear, and both parties construed it in the same way. The real question between them is whether respondent1 has or has not complied with the conditions of the agreement. But this question does not turn on the effect of the agreement. This is the view which has substantially been taken by the High Court and in our opinion it is correct.10. The second point urged before us is that the award is invalid since it was made in spite of the Courts injunction directing the arbitrator not to pronounced any award. This point, however, does not, in our opinion, fall within the scope of this appeal. The application under S. 33, Arbitration Act, which is the subject of this appeal, was filed before the award was pronounced. In that application, there is no reference to the award; nor is there any reference to the circumstances which are now stated to invalidate the award and which happened after the application was filed. The learned counsel for the appellant made an application before us praying for the amendment of the petition under S. 33 by introducing certain additional facts and adding a prayer for declaring the award to be invalid, but it was rejected by us. it should be stated that as early as 24-3-1950, the subordinate judge in dismissing the appellants petition under S. 33, made the following observations:"During the pendency of the arbitration proceedings the arbitrator pronounced the award...... The award has now been filed in the Court of S. Mohinder Singh, sub-judge, first class, Delhi. Any objection against the award can be filed there. In this application in which there is no prayer for setting aside the award which exists. I do not think it proper to decide the question of the validity of the award."In our opinion, the subordinate judge correctly indicated the courts which it was open to the appellant in law to adopt for the purpose of questioning the validity of the award, but not having taken that course and not having made any application in the Courts below for amending the petition under S. 33, the company cannot ask this Court to go into the validity of the award by widening the scope of the original petition. This court is always in favour of shortening litigation, but it would be a very unusual step to allow the petition under S. 33 to be amended now and to decide a question involving investigation of facts without having the benefit of the judgments of the Courts below.1

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In the present case, both the parties admit the contract and state that they are bound by it. Indeed, the appellant-company, in order to make good its contention, is obliged to rely and does rely on that part of cl. 7 of the policy which states that if the company should disclaim liability and the claim be not referred to arbitration within 13 months of such disclaimer, the claim shall be deemed to have been abandoned. Evidently, the company cannot succeed without calling in aid this clause and relying on it. Again, respondent 1 does not say that he is not bound by the clause but states that the matter was referred to arbitration before any valid disclaimer was made. The position, therefore, is that one party relying upon the arbitration clause says that there has been a breach of its terms and the other party, also relying on that clause, says that there has been no breach but on the other hand the requirements of that clause have been fulfilled. Thus the point in dispute between the parties is one for the decision of which the appellant is compelled to invoke to his aid one of the terms of the insurance agreement It is thus clear that the difference between the parties is a difference arising out of the policy and the arbitrator had jurisdiction to decide it, the parties having made him the sole judge of all differences arising out of theour opinion, neither of these objections is sound. How can it be held that the existence of the arbitration agreement is challenged, when both parties admit that the clause in the policy which contains that agreement binds them. It is neither partys case that there is no arbitration agreement in the policy. On the other hand, both parties admit that such agreement exists, and each of them relies on it to support its case. It is true that the appellant contends that the arbitration agreement has ceased to be applicable, but that contention cannot be sustained without having recourse to the arbitration agreement. It is said that the agreement no longer subsists, but that is very different from saying that the agreement never existed or was void ab initio and therefore, is to be treated as non existent.Again, no question of determining the effect of the arbitration agreement arises, because there is no dispute between the parties as to what it means. The language of the arbitration clause is quite clear, and both parties construed it in the same way. The real question between them is whether respondent1 has or has not complied with the conditions of the agreement. But this question does not turn on the effect of the agreement. This is the view which has substantially been taken by the High Court and in our opinion it is correct.point, however, does not, in our opinion, fall within the scope of this appeal. The application under S. 33, Arbitration Act, which is the subject of this appeal, was filed before the award was pronounced. In that application, there is no reference to the award; nor is there any reference to the circumstances which are now stated to invalidate the award and which happened after the application was filed. The learned counsel for the appellant made an application before us praying for the amendment of the petition under S. 33 by introducing certain additional facts and adding a prayer for declaring the award to be invalid, but it was rejected by us. it should be stated that as early as 24-3-1950, the subordinate judge in dismissing the appellants petition under S. 33, made the followingthe pendency of the arbitration proceedings the arbitrator pronounced the award...... The award has now been filed in the Court of S. Mohinder Singh, sub-judge, first class, Delhi. Any objection against the award can be filed there. In this application in which there is no prayer for setting aside the award which exists. I do not think it proper to decide the question of the validity of theour opinion, the subordinate judge correctly indicated the courts which it was open to the appellant in law to adopt for the purpose of questioning the validity of the award, but not having taken that course and not having made any application in the Courts below for amending the petition under S. 33, the company cannot ask this Court to go into the validity of the award by widening the scope of the original petition. This court is always in favour of shortening litigation, but it would be a very unusual step to allow the petition under S. 33 to be amended now and to decide a question involving investigation of facts without having the benefit of the judgments of the Courts below.