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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 101 OF 2007
The New India Assurance Company Limited, ]
having its Registered and Head Office at New ]
India Assurance Building, 87, M.G. Road, Fort, ]
Mumbai 400056 and its Divisional Office D.O. ]
140300, 2nd Floor, Star Trade Centre, Sodawalla ]
Lane, Borivali (West), Mumbai - 400092. ]... Petitioner
Vs
M/s. Alan Scott Industries Limited,
ig ]
38/39, Apurva Industrial Estate, Makwana Road, ]
Off Andheri Kurla Road, Marol Naka, ]
Andheri (East), Mumbai - 400059. ]... Respondent
ALONGWITH
ARBITRATION PETITION NO. 1016 OF 2009
The New India Assurance Company Limited, a ]
company incorporated under the Companies Act, ]
and having its Registered and Head Office at New ]
India Assurance Building, 87,Sir M.G. Road, Fort,]
Bombay Regional Office-II, Jeevan Seva . ]
nd
Buildings, 2 Floor, S.V.Road, Vile Parle (West), ]
Mumbai - 400056. ]... Petitioner
Vs
M/s. Alan Scott Industries Limited, ]
38/39, Apurva Industrial Estate, Makwana Road, ]
Off Andheri Kurla Road, Marol Naka, ]
Andheri (East), Mumbai - 400059. ]... Respondent
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Mr. Vishal Sheth i/b Crawford Bayley & Co. for the Petitioner.
Mr. Shailesh Shah with Ms. Nina Kapadia i/b Pandya Gandhy & Co.
for the Respondent.
CORAM : S.J. VAZIFDAR, J.
DATED : 3RD SEPTEMBER , 2010.
COMMON ORAL JUDGMENT :
1. Arbitration Petition No.101 of 2007 challenges an award made
by the arbitral tribunal consisting of three arbitrators dated 13th June,
2006. By an order and judgment dated 5th June, 2008, the learned
single Judge found that the arbitral tribunal had not dealt with three
contentions viz. the non arbitrability of the dispute; that the
Respondent had accepted a sum of Rs.1,10,46,134/- in full and final
settlement of the award and whether the Respondent is entitled to
claim any interest in the absence of a contract and if so, at what rate.
The learned Judge, accordingly, deferred the hearing of the other
grounds of challenge till the decision of the arbitral tribunal on these
questions. In other words, instead of setting aside the award, the
learned Judge considered it appropriate to remit the award to the
arbitral tribunal for a decision on these three issues.
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The arbitral tribunal, therefore, made and published what
is termed as an auxillary award dated 5th May, 2009. The Petitioner
has challenged the auxillary award by filing the above Arbitration
Petition No.1016 of 2009.
2. Both the Arbitration Petitions are, therefore, disposed of by this
common judgment.
3.
The Petitioner had issued two fire and special perils insurance
policies in favour of the Respondent for their socks manufacturing
plant. Under the first policy, the Respondent insured the raw
materials, stock in process, finished, semi-finished goods and packing
material. Under the other policy, the Respondent insured the premises,
machinery etc. Under the policies, compensation was payable either
on a depreciated value basis or, if the insured was able to reinstate/
replace the plant and machinery, on a reinstatement value basis
provided the reinstatement/replacement was carried out within twelve
months from the date of the loss or within such extended period as
may have been allowed by the Petitioner in writing. On 16th
November, 2002, a fire occurred in the Respondent’s plant. The
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Respondent informed the Petitioner about the same. The Petitioner
appointed M/s. Dilbhag Singh & Co. to carry out a preliminary
survey. A preliminary report dated 27th November, 2002 was issued
by the surveyor.
4. Thereafter, on 18th November, 2002, the Petitioner appointed
M/s. B.P. Shah & Associates (hereinafter referred to as “the
surveyors”) as the final surveyors to survey and assess the loss caused
by the fire. The surveyors issued a preliminary report on 2nd
December, 2002 and an interim report on 14th January, 2003. The
interim report recommended payment of Rs.80,00,000/-. The
surveyors issued a final survey report on 8th March, 2004. The loss,
on a reinstatement value basis, was assessed at Rs.2,17,92,373.13 and
on a depreciated value basis at Rs.1,99,01,637.04. The assessment
was based on the Euro exchange rate of Rs.52/-.
5. The Petitioner carried out other investigations which do not
require any detailed mention. Suffice it to state that one of the
investigating agencies M/s. V.B. Associates reported that the cause of
the fire was not malicious and that it was accidental. There is no
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dispute in this regard.
6. Correspondence ensued between the parties wherein the
Respondent requested interim payment to assist it in re-instituting the
plant and machinery and also an extension of twelve months to carry
out the reinstatement/replacement.
The Petitioner made an on-account payment of Rs.
80,00,000/- on 30th October, 2003.
The Respondent requested a further extension and on-
account payment which was apparently not agreed to.
7. Ultimately, the Respondent, by a letter dated 1st January, 2005,
referred to the discussions between the parties and gave its consent for
settling the loss at the depreciated value basis which amounted to
Rs.1,99,01,637/-, subject to adjustment of the payment already
received of Rs.80,00,000/-. By a letter dated 11th April, 2005, the
Respondent reserved its right for settlement on reinstatement value
basis. Details about the utilisation of the on-account payment of Rs.
80,00,000/- were also furnished.
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8. Thereafter, almost fifteen months later, the surveyor issued an
amended report on 24th May, 2005. The amount due on the
depreciated value basis was reduced to Rs.1,90,55,577.97. This
reduction was on account of altering the Euro exchange rate from
Rs.52/- to Rs.48.625/-. Under cover of a letter dated 8th June, 2005,
the Petitioner enclosed a cheque in the sum of Rs.1,10,46,134/-. In
other words, the aggregate amount paid was short by Rs.8,55,503/- on
the basis of the depreciated value calculated in the final report dated
8th March, 2004. Correspondence ensued in this regard between the
parties. The Petitioner having failed to pay the difference of
Rs.8,55,503/-, disputes arose between the parties which were referred
to the arbitral tribunal.
9. The award, including the auxillary award, was challenged
before me on two grounds. Before dealing with the same, it is
necessary to mention that the auxillary award deals with the first two
questions mentioned in the order dated 5th June, 2008, viz. the non-
arbitrability of the dispute and that the Respondent had accepted a
sum of Rs.1,10,46,134/- in full and final settlement of the award. The
award in this regard was not questioned at the hearing. In any event, a
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challenge in this regard would be unsustainable.
10. I have examined the award even on these two questions which
were not raised before me. The arbitral tribunal has dealt with these
questions in detail and if I may say, with respect, in a well reasoned
auxillary award.
For instance, they have not merely stated that though the
receipts executed by the Respondents mentioned that the payments
thereunder were in full and final satisfaction, it was not so. The
arbitral tribunal has considered the legal position, including the
various authorities in this regard. The arbitral tribunal has analysed
all the facts which transpired from the time the fire broke out till the
receipt of the payment while coming to the conclusion. It is on an
analysis of these facts that the arbitral tribunal came to the conclusion
that the receipts had not been executed in full and final settlement of
the award and that the receipts were issued under coercion and in
circumstances where the Respondent had no option but to issue such
receipts. The arbitral tribunal found as a matter of fact that had the
receipts not been issued, the payments, which were already
inordinately delayed, would never have been made which would have
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affected the Respondent drastically. The Petitioner knew about the
same.
11. The analysis of the evidence in this regard can, by no stretch of
imagination, be deemed perverse or unsustainable. It is a highly
probable result of an appreciation of all the facts on record. Thus,
even if I were to come to a different conclusion on an appreciation of
the evidence, it would not justify my setting aside the award.
12. Thus the first two questions stipulated in the order dated 5th
June, 2008, were rightly answered in the Respondent’s favour.
This brings me to the first ground of challenge to the award.
13. Mr. Sheth, the learned counsel appearing on behalf of the
Petitioner stated that the award is perverse, in that it failed to take into
consideration the correct exchange rate for the Euro viz. Rs.48.625
and wrongly considered the same at Rs.52/- per Euro. It was
contended that there was no evidence on the basis of which the
arbitral tribunal could have fixed the exchange rate at Rs.52/- per
Euro.
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14. The submission is not well founded. Even assuming that no
evidence of exchange rate in terms of quotations were furnished
before the arbitral tribunal, it would make no difference in the facts
and circumstances of the present case. The arbitral tribunal placed
considerable reliance upon the fact that the surveyor, who was
appointed by the Petitioner, had himself while making the final report
on 8th March, 2004, taken the Euro exchange rate at Rs.52/-. The
arbitral tribunal expressed surprise as to how this surveyor, who was
senior and experienced had, after a period of about fifteen months,
altered this conversion rate to Rs.48,625/-. As noted by the arbitral
tribunal under the Insurance Regulatory and Development Authority
(Protection of Policyholders’ Interests) Regulations, 2002 (hereinafter
referred to as “IRDA”) clarifications to the report could have been
called for within fifteen days. The same was not done and
convincing reasons were not placed by the Respondent for the delay
in finalising the payment. The arbitral tribunal found the Petitioner
having violated the provisions of Regulation 9 of the IRDA on several
counts. In these circumstances, the arbitral tribunal cannot be faulted
for having proceeded on the basis that the rate fixed by the surveyor
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appointed by the Petitioner initially was the correct rate. This is
especially so in the absence of any valid, convincing reasons having
been furnished by the Petitioner/Petitioner’s surveyor for changing the
exchange rate. I cannot fault the arbitral tribunal for not having
accepted the Petitioner/ Petitioner’s surveyor’s contention regarding
there being a mistake without their having adduced some evidence to
establish the same.
15.
It is interesting to note the surveyor’s evidence. He stated that
on 11th April, 2005, the insurer i.e. the Petitioner wanted the
calculation with the exchange rate of Rs.48.625 which was available
from the website and that he, accordingly, gave the said calculation.
In the cross-examination, there is no evidence which establishes that
the exchange rate of Rs.52/- for the Euro was incorrect. The
quotations on the website do not necessarily indicate the final
exchange rate in all cases and the availability of exchange at that rate
from all dealers.
16. The challenge to the award in this regard is, therefore, rejected.
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17. The next challenge to the award is the grant of interest upto the
date of the award at eighteen per cent per annum. Mr. Sheth stated
that the insurance policies do not contain any provision for interest.
He admitted that the interest is payable in view of the provisions of
Regulation 9 of the IRDA. Regulation 9 reads as under :-
“9. Claim procedure in respect of a general
insurance policy(1) An insured or the claimant shall give notice to the
insurer of any loss arising under contract of insurance atthe earliest or within such extended time as maybe
allowed by the insurer. On receipt of such acommunication, a general insurer shall respond
immediately and give clear indication to the insured on
the procedures that he should follow. In cases where a
surveyor has to be appointed for assessing a loss/claim, it
shall be done so within 72 hours of the receipt ofintimation from the insured.
(2) Where the insured is unable to furnish all the
particulars required by the surveyor or where the
surveyor does not receive the full cooperation of theinsured, the insurer or the surveyor as the case may be,
shall inform in writing the insured about the delay that
may result in the assessment of the claim. The surveyor
shall be subjected to the code of conduct laid down by
the Authority while assessing the loss, and shallcommunicate his findings to the insurer within 30 days
of his appointment with a copy of the report being
furnished to the insured, if he so desires. Where, in
special circumstances of the case, either due to its special
and complicated nature, the surveyor shall under
intimation to the insured, seek an extension from the
insurer for submission of his report. In no case shall a::: Downloaded on – 09/06/2013 16:23:55 :::
12 ARBP101.07.sxwsurveyor take more than six months from the date of his
appointment to furnish his report.
(3) If an insurer, on the receipt of a survey report,
finds that it is incomplete in any respect, he shall requirethe surveyor under intimation to the insured, to furnish
an additional report on certain specific issues as may be
required by the insurer. Such a request may be made by
the insurer within 15 days of the receipt of the originalsurvey report.
(4) The surveyor on receipt of this communication
shall furnish an additional report within three weeks of
the date of receipt of communication from the insurer.
(5) On receipt of the survey report or the additional
survey report, as the case may be, an insurer shall within
a period of 30 days offer a settlement of the claim to theinsured. If the insurer, for any reasons to be recorded in
writing and communicated to the insured, decides to
reject a claim under the policy, it shall do so within a
period of 30 days from the receipt of the survey report or
the additional survey report, as the case may be.
(6) Upon acceptance of an offer of settlement as stated
in sub-regulation (5) by the insured, the payment of the
amount due shall be made within 7 days from the date of
acceptance of the offer by the insured. In the cases ofdelay in the payment, the insurer shall be liable to pay
interest at a rate which is 2% above the bank rate
prevalent at the beginning of the financial year in which
the claim is reviewed by it.”
18. It was submitted that there was no evidence of the bank rate
prevalent at the relevant time. The arbitral tribunal awarded interest at
eighteen per cent per annum. The submission, therefore, is that
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though interest could have been awarded under Regulation 9(6), there
was no evidence that the bank rate prevalent at the material time was
sixteen per cent.
19. I will presume that there was no independent evidence
furnished as to the bank rate prevalent at the material time. I would
be reluctant, however, to set aside the award on this ground in the
facts of the present case. It is important to note that in the statement
of claim, the Respondent claimed interest at eighteen per cent per
annum. The claim obviously was, at least, purportedly on the basis
that it was as per law.
In the reply to the statement of claim, the Petitioner
merely denied that the claimant i.e. the Respondent is entitled to
interest or interest at eighteen per cent per annum. There is no
allegation that the rate of interest at eighteen per cent per annum was
contrary to law. The averment, in fact, indicates that what was in fact
denied was the right to claim interest at all. The auxillary award deals
with the award of interest and the reasons for the same in detail. The
arbitral tribunal has applied the principle under Regulation 9(6) in
awarding interest. The liability to pay interest is not denied. In view
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of the pleadings and in view of there being nothing on record to
indicate that the implied assertion that the rate of eighteen per cent
claimed in the statement of claim is as per law and in view of the fact
that there is no evidence to indicate the contrary, I cannot fault the
arbitral tribunal for having allowed interest at eighteen per cent per
annum.
20. At the highest, even in the event of there having been any
evidence on the part of the Petitioner about the bank rate being less
than sixteen per cent, the award could have been modified by reducing
the rate of interest. In the absence of anything to suggest that the rate
of interest was otherwise than as claimed, I see no reason to do so.
Even assuming this to be a lacunae/error, the same could have been
filled up/remedied without any difficulty. Had the Respondent
suggested another rate of interest, I would readily have modified the
award, had I found the suggestion to be justified.
21. The challenge regarding the award of interest is also, therefore,
rejected.
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22. Lastly, I see nothing wrong in the arbitral tribunal having
awarded interest even for the period from the date of the interim
report dated 14th January, 2003, and the on-account payment of Rs.
80,00,000/- on 29th October, 2003. The arbitral tribunal held that there
was an inordinate delay in finalising the payment. In the
circumstances, the arbitral tribunal having awarded interest during this
period, cannot be faulted.
23.
There are a few observations in the Auxillary award which
appear to be incorrect. However the award can be sustained even on
the basis of the other findings in the award. The apparently incorrect
observations therefore do not warrant setting aside the award.
24. Both the petitions are, therefore, dismissed with costs, fixed at
Rs.10,000/- to be paid on or before 31st October, 2010. This order is
stayed upto 31st October, 2010, to enable the Petitioner to challenge
the same.
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