JUDGMENT
S.K. Choudhuri, J.
1. This civil revision by the opposite party under Section 115 of the Civil P. C. is directed against the judgment and order dated 19th Mar. 1979 passed in Miscellaneous Case No. 21/10 of 1973/78, by the Fourth Additional Subordinate Judge, Monghyr, directing appointment of an arbitrator to
settle the difference of the parties and to make the award.
2. This civil revision was placed for hearing before a learned single Judge of this Court, who by his order dated 6th Dec. 1979, has referred this case to Division Bench and that is how it has been placed before us for hearing.
3. It appears that an application under Section 8 (2) of the Arbitration Act was filed by the opposite party to this revision application for appointment of an arbitrator to settle the dispute between the parties and to submit his award for compensation which may tee payable to him. The relevant facts for decision of this revision application are as follows :–
A taxi cab No. BRN 2232 owned by one Sarbeshwar Prasad Singh was insured with the Oriental Fire & General Insurance Company, the General Manager and the Senior Branch Secretary of which are the petitioners before this Court. An accident took place on 16th May, 1971 at 7-30 A.M., between Taxi Cab No. BRN 2232 and the Taxi Cab No. BRN 9772, when they were running between Monghyr and Kharagpur. It is said that the said accident took place two miles away from Kharagpur when those two cabs were passing Chandawali Asthan. They were said to be running in opposite direction. According to the opposite party the driver of Taxi Cab No. BRN 2232 was negligent and therefore the accident took place. The owner of Taxi Cab No. BRN 9772, therefore, filed a claim before the aforesaid Insurance Company. It is not disputed that the Taxi Cab No. 9772 was not insured with the aforesaid Insurance Company, but, however, Taxi Cab No. BRN 2232 was insured with the said Company. After the accident, it is alleged that the claimant lodged an information with the Thana regarding the said accident against the owner of Taxi Cab No, BRN 2232. The claimant thereafter gave his taxi which was damaged in the said accident for survey and assessment of the repair costs and it is said that a sum of Rs. 7,212.50 paise was assessed as the estimated cost for such repairs. The further allegation was that the accident took place because of rash and negligent driving of Taxi Cab No. BRN 2232. The further allegation was that the claimant intimated about the accident to petitioner No. 2 the Senior Branch Manager of the Company.
The claimant opposite party also several times made demand from the Company to compensate the loss suffered by him on account of the said accident, but no heed was paid by the Company. It is alleged that the Company lastly (vide their Memo dated 6-1-1973) expressed its inability to compensate him. The claimant, therefore, sent a notice dated 23rd Mar. 1973 to the Company requesting appointment of an Advocate of the Bar Association, Monghyr, to act as an arbitrator, or in the alternative to name an arbitrator of their own and inform him accordingly. The Company by their letter dated 2nd April, 1973 informed the claimant that there was no scope for referring the matter to arbitration. The claimant, therefore, filed an application under Section 8(2) of the Arbitration Act for appointment of an arbitrator to decide the dispute between the parties, relying upon clause 8 of the conditions attached to the insurance policy of Taxi Cab No. BRN 2232.
4. The Company appeared and contested the matter. According to them, there was no privity of contract between the claimant who is the owner of Taxi Cab No. BRN 9772 and the Company as the said taxi cab was not insured with their Company and, therefore, the claimant cannot take advantage of the arbitration clause.
5. The court below after hearing the parties, appointed an arbitrator to decide the dispute between the parties by the impugned order. Hence, this revision has been filed.
6. Learned Counsel appearing on behalf of the petitioners contended that the judgment and the order of the court below are illegal and without jurisdiction inasmuch as it has assumed that the arbitration clause would govern the present case and the claimant-opposite party, would be entitled to take advantage of the said clause.
7. The argument of the learned Counsel for the claimant opposite party, on the other hand was that the Company was to indemnify the insured against any claim which may be awarded in favour of a third party and, therefore, the arbitration clause would apply though the claimant was not a party to the insurance policy and the claimant ran take advantage of such arbitration clause. In other words, his argument was
that the Company is liable to compensate the third party under the policy of insurance read with Section 95 of the Motor Vehicles Act, 1939, in the event of an accident and the arbitration clause being one of the conditions incorporated in the said policy, the claimant third party is entitled to take advantage of it, and, therefore, under the said clause he can get the dispute referred to arbitration.
8. While appreciating the arguments put forward on behalf of the respective parties, it would be apposite to mention that the claimant-third party filed the application under Section 8 (2) of the Arbitration Act and, therefore, it is necessary to read Section 8 thereof as also the arbitration clause appearing in the insurance policy under condition No. 8 as under:–
“8. Power of court to appoint arbitrator or umpire :
(1) In any of the following cases –
(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not after differences have arisen, concur in the appointment or appointments; or
(b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that if, was intended that the vacancy should not be supplied and the parties or the arbitrators, as the case may be, do not supply the vacancy; or
(c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him;
any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
(2) If the appointment is not made within fifteen clear days after the service of the said notice, the court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference, and to make an award as if he or they had been appointed by consent of all parties.”
The arbitration clause appearing in the .
insurance policy (i.e. Condition No. 8)
reads thus :–
“8. All differences arising put of this
Policy shall be referred to the decision
of an Arbitrator to be appointed in writing by the parties in difference or if they
cannot agree upon a single Arbitrator to
the decision of twp 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 or in case the
Arbitrators do not agree of (to ?) an
umpire appointed in writing by the
Arbitrators before entering upon the
reference. The Umpire shall sit
with the Arbitrators and preside
at their meetings and the making
of an Award shall be a condition precedent to any right of action against the
Company. If the Company shall disclaim
liability to the Insured for any claim
hereunder and such claim shall not with
in twelve calendar months from the date
of such disclaimer have been referred to
arbitration under the provisions herein
contained then the claim shall for all
purposes be deemed to have abandoned
and shall not thereafter be recoverable
hereunder.”
‘Arbitration agreement’ under the Arbitration Act has been defined to mean ‘a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not’. Therefore, it is clear that an arbitration agreement is a contract between the parties who have entered into it.
9. Under Section 8 of the Arbitration Act quoted above, it is only the parties to the arbitration agreement, who can take advantage of the arbitration agreement and it is they who can make an application under Section 8 for appointment of one or more arbitrators as provided therein. A third party to the said arbitration agreement cannot by any stretch of imagination take advantage of the said arbitration clause and get it enforced. Under the general law the persons can take steps for enforcement of the arbitration clause who are the parties to That agreement. Strong reliance was placed by learned Counsel for the opposite party on the clause under which the Company is to indemnify the insured against all sums which the insurer shall regally be liable to pay in respect of the
amount awarded in favour of a third party. This again is an agreement between the insured and the insurer, which is subject to the limits of liability prescribed under Section 95 of the Motor, Vehicles Act. Therefore under the third party risk, the third party has to get an; award against the insured and it is only if he succeeds in getting a claim against, the insured that the insurer has to indemnify the insured under the said third party risk. Merely because of such right of the third party, which has been given to him under the provisions of the Motor Vehicles Act, he does not get the right to enforce the arbitration agreement to which he is no party.
10. Two cases were cited at the Bar. It is worth mentioning them here namely, Khwaja Muhammad, Khan v. Husaini Begum (1910) ILR 32 All 410, a decision of the Privy Council, and Tweedle v. Atkinson (1861-9 WR 781) : (1861) 1 B & S 393. These two cases have reference in a single Judge decision of the Bombay High Court in the case of British India General Insurance Co. Ltd. v. Janardan Vishw Nath Naik (AIR 1938 Bom 217). It will be appropriate to read the head note of the Bombay case:–
”Where a clause in a motor insurance policy has given power to the insurance company to enforce the legal rights of the insured against a third party in the name of the insured, the clause is merely an agreement between the insurer and the insured and does not add to the rights of either party against third person. From the clause it cannot be deduced that a third party equally has a right to sue the company. Similarly if the policy provides that the insurance company shall indemnify the insured against his legal liability in respect of death of, or bodily injury to the passengers, the clause is for the benefit of the insured and does not make the passenger a beneficiary under an implied trust. This being so, the passenger who is a stranger to the contract of insurance cannot sue the insurance company for money payable under the policy.”
About the aforesaid two cases referred to in the Bombay decision, it has been stated therein that in (1910) ILR 32 All 410, there was a marriage contract in which again the beneficiary was expressly named and the ratio decidendi was that the strict rule in (1861) 1 B&S 393
was not appropriate to Indian marriage
contract. Therefore, the aforesaid two cases relied upon at the Bar do not support the contentions of the learned Counsel for the parties.
Some of the observations as noted in the placitum (c) and (d) in the case of Alice Marie “Vandepittee v. Preferred Accident Insurance Company of New York (AIR 1933 PC 11) were also relied upon by learned Counsel for the petitioner. They read as follows:–
“(c) On equitable principles only a person who is a party to a contract can
sue on it. The law knows nothing of a just quaesitum teric arising by way of contract. Such a right may be conferred by way of property, as for example
under a trust, but it cannot be conferred an a stranger to a contract as a right to enforce the contract in personam. But a party to a contract can constitute himself a trustee for a third party of a rightunder the contract and thus confer such rights enforceable in equity on the third party. The trustee then can take steps to enforce performance to the beneficiary by the other contracting party as in the case of other equitable rights. The action should be in the name of the trustee; if however he refuses to sue, the beneficiary can sue, joining the trustee as a defendant. In such cases again the intention to constitute the trust must be affirmatively proved the intention cannot necessarily be informed from the mere general words contained in a contract such as an insurance policy.”
(d) “‘The idea of a person being the cestui que trust under the insurance con-tract is objectionable since the doctrine of the equitable interest of a beneficiary under a contract of a third party relates to benefits under the contract. Whereas in an insurance serious duties and obligations rest on any person claiming to be insured which necessarily involve consent and privity of contract.”
11. Thus the aforesaid Bombay decision and the observations quoted from the aforesaid Privy Council decision sup-port the contention of the learned Counsel for the petitioner. Thus in view of the discussions made above, it is manifest that the arbitration clause which was entered into between the insured and the insurer cannot be taken advantage of by a third person and the said third person cannot, in case a dispute arises with regard to has claim against the insured, take advantage of the said arbitration clause and get such dispute referred to arbitration. The view that I have taken also gets its support from the decision, though obiter, in Des Raj Pahwa v. Concord of India Insurance Co. Ltd., Calcutta (AIR 1951 Punj 114).
12. In the result, this revision application is allowed and the judgment and order of the court below are hereby set aside. In the circumstances of the case I would make no order as to costs.
B.N. Prasad, J.
13. I agree.