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

1. This is an appeal by special leave against the judgment of the Punjab High Court upholding the decision of a subordinate Judge of Delhi relating to a petition filed by the appellant-company under S. 33, Arbitration Act, against the respondents.The material facts are these. On 22-4-1947; the appellant company insured a car belonging to respondent 1 and issued a policy which fully sets out the terms and conditions of the agreement relating to the insurance. Respondent 1 left his car in a garage at Lahore and came away to India onSubsequently, he learned about the loss of his car, and sent a legal notice dated 18-3-1948 through his advocate, Mr. A. R. Kapur to the Head Office of the company at Calcutta, claiming a sum of Rs. 7,000 for the loss of the car. On 10-4-1948, Mr. Kapur received a letter from the Branch Manager of the Companys office at Amritsar asking for information regarding certain matters stated in the letter. This information appears to have been supplied on 30-4-1948. On 26-5-1948, the companys Branch Manager at Amritsar wrote to respondent 1 repudiating the liability of the company for the loss of the car on the ground that the loss was "due to communal riots which were going on in the whole of Punjab" and was not covered by the agreement of insurance. A similar letter was written again by the Branch Manager on 3-7-1948 to respondent 1 and another letter was written by one Mr. Rattan Lall Chawla representing himself to be counsel for the company to Mr. A. R. Kapur, on 1-8-1948. On 21-11-1949, respondent 1 wrote a letter to the Branch Secretary of the Companys office at Calcutta, stating that his claim was valid and nominating Mr. T. C. Chopra, Assistant Manager, Lakshmi Insurance Company Ltd., Delhi, as arbitrator on his behalf and requesting the company to appoint another person as arbitrator on its behalf. Thereafter, the company presented an application on 29-12-1949, in the Court of the Senior Sub judge, Delhi, under S. 33, Arbitration Act, against respondent 1 and Mr. T. C. Chopra, the arbitrator, who is respondent 2 in this appeal, praying fora declaration to the effect that the reference to arbitration and the appointment of respondent2 as sole arbitrator was illegal;(2) a declaration to the effect that if respondent 2 made any award it would not be binding on the company; and(3) an injunction restraining respondents1 and 2 from taking any proceeding in the matter and respondent 2 from making anythis petition, notice was issued to the respondents, and an injunction was issued directing them not to file any award till the date of the next hearing which was fixed for 31-1-1950. On 4-2-1950, respondent 1 wrote to respondent 2 (the arbitrator) that since no arbitrator had been appointed by the company and since the company had refused to appoint any arbitrator he. (Mr. Chopra) was to act as the sole arbitrator. On 6-2-1950, Mr. Chopra wrote to inform the Insurance Company that he had been appointed sole arbitrator and asked the company to send the statement of its case and to produce all the evidence on 14-2-1950. On 10-2-1950, the insurance company filed a petition before the subordinate Judge Delhi, praying that the respondent be stopped from proceeding further in the matter so that its application under S. 33 may not become infructuous. On 11th February, the subordinate Judge issued notice to the respondents fixing the 17th February as the date of hearing and passed the following(till) the decision of this application the arbitrator should not give or pronounce his award but should continue the14-2-1950, respondent 2 pronounced his award after making a note of the followingG. R. Chopra, the counsel of the defendants, sent a telephone message at 12 A. M. requesting extension till 1 P. M. I agreed and accordingly I waited for him and the plaintiff with his counsel also waited up to 1 P. M. Nobody turned up on behalf of the defendants. I commenced the proceedings and took the statement of the plaintiff and the documents that he hadmade a further note at the end of the award to thisafter the giving of the award a notice was served upon me not to give the award. I have not sent any formal letter to the parties informing them of the award and its24-3-1950, the subordinate Judge passed an order on the companys application under S. 33, dismissing it and holding that the terms of Cl. 7 of the agreement "were comprehensive enough to include the points of disputes between the parties now and as such are triable by the arbitrator and not by the Court" The subordinate Judge concluded his order bytherefore, hold that the reference to the arbitration of the differences is perfectly valid and the points raised by the parties to this application with regard to the abandonment of claim and its becoming irrecoverable are to be decided by thejudgment of the Subordinate Judge was upheld in revision by the Punjab High Court, and the company has now preferred an appeal to this Court by special leave.

Reasoning:
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.