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Rules Not to Be Decided at
In a significant ruling, the has reiterated that the question of whether an insurance dispute is ultimately arbitrable need not be decided while appointing an arbitrator under . Justice Amit Borkar held that such must be left for the to determine.
Dispute Over Policy Leads to Arbitration Application
, a manufacturer and exporter of gold jewellery, had obtained a Jewellers Block Insurance Policy from covering losses, including those arising from dishonest acts of employees. The policy had an arbitration clause, Condition No. 19. After the insurer repudiated the claim in , Samraj Gold filed a consumer complaint before the .
In , the Consumer Commission left questions of quantification of actual loss, consequential damages, and financial impact open, granting liberty to pursue arbitration. Samraj Gold invoked arbitration in , but New India Assurance refused to concur, citing a pending appeal before the and contending that the dispute fell outside the arbitration clause.
Insurer's Objections: Clause Only for When Liability Admitted
New India Assurance argued that the arbitration clause—Condition No. 12 of the IAR Policy—was a restricted clause that permitted arbitration only on the of loss when liability was otherwise admitted. Since the insurer had repudiated liability altogether, the clause operated as an exclusion. The insurer also raised issues of limitation, , and the , arguing that Samraj Gold had already elected the consumer forum and could not now seek arbitration.
Samraj Gold countered that the scope of inquiry under Section 11 is limited to the , and all other questions—including the validity and effect of —must be decided by the .
Court: Under Section 11 Confined to Existence of Agreement
Justice Borkar observed that while earlier judgments like and gave weight to restrictive insurance arbitration clauses, the legal position has evolved. Relying on the ’s decisions in , , and , the court noted that confines the court’s examination to the “existence” of an arbitration agreement.
“The Court dealing with appointment of an Arbitrator is not expected to conduct a full trial regarding all disputes raised between the parties,” Justice Borkar said.
The court highlighted that requiring examination of evidence must be left to the tribunal. If the enters into a detailed inquiry—such as whether the insurer’s communications amounted to a complete or whether had occurred—it risks usurping the tribunal’s role and leaving a claimant without a forum.
Precedent Shift: Scope of Arbitrator Appointment Narrowed
The court distinguished previous insurance-specific precedents, noting that they interpreted the arbitration clause on its merits. But after Krish Spinning, the ’s role is restricted to a check of whether a written arbitration agreement exists. Here, the existence of Condition No. 12 was undisputed. Therefore, all contested issues—including the applicability of the restrictive clause, the effect of , limitation, and election—must be raised before and decided by the .
All Objections Open for to Decide
Keeping all rights and contentions open, the court appointed Justice Nitin Jamdar, former Chief Justice of the , as the sole arbitrator. The tribunal is free to consider objections under regarding its jurisdiction and . The court expressly observed that its observations shall not influence the tribunal’s decision.
Justice Nitin Jamdar Appointed Sole Arbitrator
The disposed of the arbitration application, directing the parties to appear before the learned sole arbitrator. All issues concerning , validity and effect of , , election, limitation, , and merits remain open for the tribunal’s independent determination.
The decision reinforces the that courts should minimise intervention at the , leaving complex interpretative and factual disputes to the chosen forum of the parties.
