United India Insurance Co.Ltd. vs Hyundai Engineering And Construction ...

2. Shorn of unnecessary facts, be it noted that the respondent Nos.1 and 2 constitute a Joint Venture (“JV”). Respondent No.3 awarded a contract on 29th September, 2006 for design, construction and maintenance of a bridge across the River Chambal, which was to be completed within a period of 40 months and was commenced on 5th December, 2007 by the JV after respondent No.3 handed over the site to it. After commencement of the work, a Contractor All Risk Insurance Policy (“CAR Policy”) dated 5th December, 2007 was obtained from the appellants covering the entire project, valued at Rs.2,13,58,76,000/-. The policy contained clause 7, which reads thus:

5. The JV nevertheless entered into correspondence with the appellants to reopen and re-assess its decision of repudiation of the claim. Finally, the appellants informed the respondents that it was unable to “reconsider” the claim which has already been repudiated. The said communication reads thus:

6. As a sequel, the JV vide its letter dated 29th May, 2017 informed the appellants that disputes had arisen between the appellants and the JV and in view thereof it was invoking the arbitration clause No.7 contained in the Insurance Policy and had nominated Dr. V.K. Agrawal as its Arbitrator. The 11 appellants were also called upon to either accept the name of the sole arbitrator or nominate its own arbitrator within 30 days from the date of receipt of the communication. Eventually, respondent Nos.1 & 2 filed a petition under Sections 11(4) & 11(6) of the Act before the High Court of Judicature at Madras being O.P. No.537/2017.

The policy does not cover the loss in the above circumstances. In fact the policy specifically excludes any loss/damage caused by faulty design, defective workmanship/material. Further, the revelations of the expert body and the surveyors indicate willful acts/negligence in execution of work of such nature resulting in the occurrence. In view of the above, we regret to inform you that the claim is found to be not payable and accordingly stands repudiated.

Insurers reserve their right to rely upon any further or other materials/terms in support of the above conclusion and the above circumstances are not exhaustive of the basis for the above decision. Thanking You 9 Yours faithfully Sd/-

15. In view of the above, it must be held that the dispute in question is non-arbitrable and respondent Nos.1 & 2 ought to have resorted to the remedy of a suit. The plea of respondent Nos.1 & 2 about the final repudiation expressed by the appellants vide communication dated 17th April, 2017 will be of no avail. However, whether that factum can be taken as the cause of action for institution of the suit is a matter which can be debated in those proceedings. We may not be understood to have expressed any opinion either way in that regard.

16. Accordingly, we allow this appeal and set aside the impugned judgment and order and further dismiss the original petition No.537/2017 filed by respondent Nos.1 & 2 before the High Court of Judicature at Madras, with liberty to the said respondents to take recourse to a civil suit for mitigation of its grievances, if so advised. We are not expressing any opinion 21 either way on the merits of the issues to be answered in the said proceedings.

17. The appeal is allowed in the aforementioned terms with no order as to costs.

.………………………….CJI.

August 21, 2018.