IMPORTANT POINT
An arbitration clause requires to be strictly construed.

JUDGMENT

Dipak Misra, CJI.

The respondent – M/s Narbheram Power and Steel Pvt. Ltd. – had entered into a Fire Industrial all Risk Policy No. 31150/11/2014/65 in respect of the factory situated on plot Nos. 11 and 13, Gundichapada Industrial Estate, District – Dhenkanal, Odisha. In October 2013, there was a cyclone named as “Phailin” which affected large parts of the State of Odisha. Because of the said cyclone, the respondent suffered damages which it estimated at Rs. 3,93,36,224.00. An intimation was given to the appellant-insurer and it appointed one Ashok Chopra & Company as surveyor which visited the factory premises on 20th and 21st November, 2013. A series of correspondences were exchanged between the respondent and the insurer. On 22.12.2014, the respondent commented on the surveyor?s report and requested the appellant to settle its claim. As ultimately the claim was not settled, the respondent sent a communication dated 21.01.2017 intimating the appellant that it had invoked the arbitration agreement and requested it to concur with the name of the arbitrator whom it had nominated.

2. The appellant replied to the said letter repudiating the claim made by the respondent and declined to refer the disputes to arbitration between the parties. As the insurer declined to accede to the request made by the respondent, it filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for brevity, „the 1996 Act?) for appointment of an arbitrator so that he could, along with the arbitrator nominated by the respondent, proceed to appoint a presiding arbitrator to adjudicate the disputes and differences that had arisen between the parties.

3. The said application was contested by the insurer and the High Court, considering the language employed in Clause 13 of the policy and the reasons advanced while repudiating the claim of the claimant, appointed a retired Judge of the High Court as arbitrator. The said order is under assail by way of special leave in this appeal.

4. We have heard Mr. P.K. Seth, learned counsel for the appellant and Mr. Sachin Datta, learned senior counsel for the respondent.

5. Placing reliance on Clause 13 of the policy, it is urged by the learned counsel for the appellant that once the claim was repudiated and the insurer had disputed or not accepted the liability under or in respect of the policy, no difference or dispute could have been referred to arbitration. It is his further submission that the High Court has adopted an erroneous approach in the interpretation of the said Clause by expressing the view that it suffers from ambiguity and it needs to be purposively read failing which the arbitration clause becomes meaningless. Reliance has been placed on the decisions in General Assurance Society Ltd. v. Chandumull Jain and another, AIR 1966 SC 1644 Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Co-op. Bank, AIR 2000 SC 10 and United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal, (2004) 8 SCC 644.

6. Learned senior counsel for the respondent, per contra, would contend that the order passed by the High Court is absolutely impregnable and in the obtaining factual matrix, the view expressed by the High Court cannot be found fault with. He would further urge that the letter of repudiation, when appositely understood, does not relate to disputation and non-acceptance of the liability under or in respect of the policy but, in fact, amounts to denial of the claim that basically pertains to the quantum. Learned counsel has drawn a distinction between liability and refusal of the claim not having been substantiated. To bolster the submissions, he has placed reliance on The Vulcan Insurance Co. Ltd v. Maharaj Singh and another, (1976) 1 SCC 943 Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and others, (2013) 1 SCC 641 A. Ayyasamy v. A. Paramasivam and others, (2016) 10 SCC 386 M/s. Jumbo Bags Ltd v. M/s. The New India Assurance Co. Ltd, 2016-2