Case: Sterling General Insurance Co. Ltd Vs. Planters Airways Pvt. Ltd

2. The facts are these. The appellant is a company doing business in general insurance. The respondent caries on business as a common carrier of goods. The respondent had taken out three transit policies of insurance renewable every year. The policy which is relevant for the purpose of the present appeal is Freight Policy No. CL/REP/257 taken by the respondent in January, 1969, from the appellant against risk of loss or damage to any goods or merchandise during transit.3. In June 1971. the respondent declared to the appellant that it had received for transit a consignment of 185 packages of general merchandise alleged to be of the total value of Rs. 1,10,000/- (approx.) for transportation from Calcutta to various places in Assam and Tripura and paid the requisite premium on the value of goods and the goods stood insured under the said policy. According to the respondent, on the evening of 29-6-1971, the consignment of 185 packages was loaded in Truck No. WGH 8261, and the truck left Calcutta on the same day for Gauhati. It is alleged that the owner of the truck informed the respondent that after the truck reached Barasat on the night of 29th June, 1971, there was a robbery and neither the truck, nor the driver, nor the merchandise could be traced. On 1-7-1971. the respondent sent letters to the officer-in-charge of Jorabagan Police Station, the Assistant Commissioner of Police Intelligence Branch, Lal Bazar, Calcutta-1 and the Deputy Commissioner of Police, Intelligence Branch intimating them that the truck which left Calcutta on 29th June, 1971, had not reached Beniagram at the scheduled time and that the truck, the driver, the assistant and the merchandise could not be traced. A copy of the letter sent to the Assistant Commissioner of Police. Lall Bazar Calcutta was sent to the appellant end it was received by the appellant on 2-7-1971. On 1-7-1971 and 21-9-1971, the respondent lodged the claim for loss with the appellant on the basis that the loss was covered by the policy. On 3-7-1971, the appellant sent a latter to the respondent calling upon the respondent to furnish the particulars as regards the name and address of the owner of the vehicle, the name and address of the driver and other particulars. On 21-9-1971, the respondent informed the appellant by a letter that the information and the records asked for in the letter dated 3-7-1971 were already supplied to Mr. A. L. Chopra, the agent of the appellant on 5-7-1971 when he called upon the respondent for that purpose On 10-10-1971 the appellant wrote to the respondent informing that until the report of the investigation by the police was produced by the respondent, it would not be possible for the appellant to proceed further in the matter. The appellant received a copy of the investigation report by the police at Barasat on 12-5-1972. The report was to the effect that the alleged episode of robbery was false. On this basis, the appellant sent to the respondent a letter dated 4-8-1972 stating the contents of the investigation report of the police at Barasat and asking for the investigation report of Jorabagan Police and Lal Bazar Police. Thereafter the appellant intimated the respondent by letter dated 16-2-1973 disclaiming its liability under the freight policy as regards the loss of the consignment of 185 pages. On receipt of the letter, the respondent wrote to the appellant on 30-3-1973 asking for the ground on which the appellant disclaimed its liability, appellant sent a letter after two months on May 30, 1973, stating that it had nothing to add to what had been stated in its letter dated February 16 1973. Thereafter the respondent took the advice of solicitors and counsel. On 17-8-1973, the respondent filed the application before the High Court under Section 37 (4) of the Act for extension of time for referring the dispute to arbitration till a date 15 days after the order of the High Court. In the application, the respondent stated the reasons for the delay in filing the application in court after receiving the letter dated May 30, 1873. In answer to the application, the appellant contended that Section 37 (4) of the Act had no application that the court had no jurisdiction to extend the time and that even if the court had jurisdiction, there were no valid rounds for extension.4. The application came up for hearing before a learned Judge and he Passed the order extending the time to refer the dispute to arbitration within a fortnight from 14-1-1974.

Reasoning:
6. Clause 1 of the policy states that notice of any accident, loss or damage affecting the insurance shall be given to the Company at the earliest possible date and not later than 30 days from the date of the accident, loss or damage. Clause 2 of the policy provides that in the event of any loss or damage covered by the insurance the insured shall produce and give to the Company all evidence as may be reasonably required by the Company. Clause 9 provides that if the insured shall make any claim knowing the same to be false or fraudulent as regards the amount or otherwise, the insurance shall become void and all claims thereunder shal1 be forfeited. Clause 11 states that all differences arising out of the contract shall be referred to the decision of an arbitrator to be appointed in writing by the parties or if they cannot agree upon a single arbitrator, to the decision of two arbitrators, one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties. It further provides that the making of an award by the arbitrator or arbitrators shall be a condition precedent to any right of action against theThere are no decisions of this Court or of the High Courts concerning the relevant considerations to be taken into account in exercising the jurisdiction for extending time under Section 37 (4) of the Act.Section 16 (6) of the English Arbitration Act, 1934 which is practically the same as Section 27 of the English Arbitration Act of l950 is in pari materia with Section 37 (4) of the Act. Therefore, the interpretation placed by English Courts upon Section 16 (6) and Section 27 of the respective Acts has great persuasive value.Keeping in view these principles, it has to be seen whether in the facts and circumstances of this case, there was reasonable and sufficient ground for not preferring the claim to arbitration within the time specified in clause 12 of the policy and whether there would be "undue hardship" to the respondent if time is not extended.16. It may be recalled that it was on July 1, 1971 and September 21, 1971 that the respondent lodged its claim with the appellant to recover the loss Buffered. Thereafter, various letters passed between the parties. Ultimately, on February 16, 1973, the appellant wrote the letter to the respondent stating that the claim papers submitted in connection with the claim had been scrutinized by the appellant but that it was unable to accept liability for the loss. The respondent then wrote a letter to the appellant on 30-3-1973 complaining about the uncertain language used in the letter dated February 16. 1973 and calling upon the respondent to point out specifically under which clause of exclusion of liability in the policy did the appellant disclaim the liability. The appellant kept quiet for 2 months and then on May. 30, 1973, sent a letter stating that it had nothing further to add to what had been stated in its letter dates February 16, 1973.17. The respondent was having dealings with the appellant in the business of insurance from 1958 onwards and in no instance was the claim made by the respondent rejected by the appellant. The conduct of the respondent in enquiring of the appellant the grounds on which the claim was rejected was quite reasonable. It was only after the grounds of rejection were known that the respondent could have decided whether to resort to arbitration or not. If the grounds of rejection would come within the clause of exclusion of liability under the policy. it would serve no purpose to incur the expense and hardship involved in resorting to arbitration The appellant did not give the reason for disclaiming liability even in its letter dated 30-5-1973. We do not think that there was any lack of promptness on the part of the respondent in waiting for the reply to its letter dated 30-3-1973. And, in the first week of June 1973, the respondent made over the papers to the solicitors viz. M/s. Banerji and Co. for the purpose of taking necessary steps for referring the dispute to arbitration in terms of the arbitration clause in the policy. On or about June 15 1973, the respondent received the written opinion from the Solicitors wherein they stated that since the letter of the appellant disclaiming liability was vague and since the appellant gave no reason for rejection of the claim even in their letter dated 30-5-1973, the appellant might rely upon Clause 12 of the policy of insurance and contend that the reference to arbitration would be beyond time.The solicitors, however, advised that in view of the delay on the part of the appellant and its failure to specify any reason for the disclaimer, the respondent might take steps for nominating an arbitrator and proceed with the reference. When the written opinion was received from the solicitors, the respondent had some doubt, because the solicitors did not give a definite opinion. So, it instructed the solicitors to take the opinion of counsel. After preparing the necessary case for the opinion, the solicitors briefed counsel for opinion on June 28.1973. The opinion of counsel was to the effect that the respondent should apply for extension of time under Section 37 (4) of the Arbitration Act and that was received by the solicitors on 16-7-1973. The respondent was informed of the opinion of counsel end it received a copy thereof on 18-7-1973. After gathering the facts from the records mentioned in the opinion of the counsel the respondent instructed the solicitors to take steps for filing a petition for extension of time. It, however, took some time to gather the facts indicated in the opinion of counsel. On 25-7-1973 the respondents solicitors sent the brief to counsel to draft the petition and the petition was received by them on 30-7-1973. Thereafter it took sometime to prepare a statement from available records.18. In the facts and circumstances of this case, we think the High Court exercised its discretion properly in extending the time. The conduct of the respondent was reasonable. It took all steps it could when it knew about the alleged robbery to inform the police and the appellant. The fact that the Barasat police reported that the case was false does not necessarily mean that the respondent tried to practice any fraud upon the appellant. The respondent had filed a suit against the owner of the truck in question in July, 1972, for recovery of the amount of loss. The respondent also paid the claims arising out of the loss of goods which were transported through the truck. All these go to show the bona fides end reasonableness of the conduct of the respondent. Both the amount at stake and the reasons for delay are material in considering the question of undue hardship. We do not think that any material prejudice would be caused to the appellant by extending the time. There would be undue hardship if time is not extended. as the consequences of non-extension would in any event be excessive and out of proportion to the fault of the respondent, if any, in not being prompt. We do not say that the mere fact that a claim would be barred would be undue hardship. But considering the amount involved and the reasons for the delay, we think it would be undue hardship to the respondent if time is not extended.