The requirement for arbitration as a condition precedent to any right to action or suit upon the insurance policy, and the interpretation of the arbitration clause in disputes regarding the amount of loss or damage.

( 1 ) THIS is plaintiff's appeal against the Judgement and Decree dt. 23-11-1977 made by the I Additional Civil Judge, Kolar, in O. S. No. 10/1974 on his file.

( 2 ) THE appellant and respondents in this appeal would be hereinafter referred, with reference to the rank and position given to them in the array in the Original Suit.

( 3 ) THE plaintiff-Society instituted the suit, out of which this appeal has arisen, for recovery of a sum of Rs. 31,602/- including the notice charges of Rs. 100/- and interest of Rs. 7,544-44 paise on Rs. 23,957. 56 paise with costs, current interest and such other reliefs as the Court may deem it fit to grant to the plaintiff in the circumstances.

( 4 ) THE averments in the plaint are these : the plaintiff-Society insured the electrical goods in the premises of its Electrical Section with defendant-1 against accidents of fire and consequent losses under Policy No. 128320600. Defendant-1 accepted the policy and assured the plaintiff against any losses due to accidents by fire. On 17-6-1972, the electrical goods stored in the Electrical Section of the plaintiff were damaged due to accidental fire, resulting in a total loss of Rs. 23,957-56 paise. The plaintiff reported the occurrence to defendants-1 and 2 and the authorities of the Department of Co-operation. The Divisional Manager of defendant-1, arrayed as defendant-2, advised the plaintiff to send the claim forms in order to settle the claim of the plaintiff. At the request of defendants-1 and 2, the Fire Loss Surveyor and Assessor, examined as P. W. 1 at the trial of the suit, was deputed to estimate the loss that resulted in the fire accident. P. W. 1 inspected the premises of the plaintiff and assessed the loss at Rs. 22,475-25 paise. Defendant-2 assured the plaintiff to settle the claim on several occasions and agreed to compensate the loss by payment of money. But defendants-1 and 2 put off the payment for no valid reasons at all. Defendants informed the plaintiff in the month of April, 1973, by the letter marked as Ex. P-15, offering to pay a sum of Rs. 5,000/- in full settlement of the claim without as signing any reasons for reducing the claim put forward by it. The defendants, by their own assessment of the loss, correspondence carried on with the plaintiff, and conduct, have conceded the total loss suffered by the plaintiff as claimed. The stand taken by them is unreasonable, unjustified and devoid of any reasons.

( 5 ) WITH these averments, the plaintiff instituted the suit on 1-4-1974 for the recovery of the money.

( 6 ) DEFENDANTS-1 and 2 in their joint written statement, while admitting the fact of plaintiff having insured the electrical goods against fire accidents and consequential losses under the policy referred to in the plaint, contended that the insurance was subject to the terms and stipulations mentioned in the policy and the suit was not maintainable by virtue of Cl. 18 of the policy expressly providing for arbitration as a condition precedent to any right to action or suit upon the policy. They denied the averments in the plaint with regard to the damage suffered by the electrical goods in the Electrical Section of the plaintiff on 17-6-1972 due to any accidental fire, adding that the say of the plaintiff that the total loss was in a sum of Rs. 23,957-56 paise was not correct. They contended that the claim put forth by the plaintiff was false, fraudulent and exaggerated. According to the defendants, the loss at Rs. 22,375-25 paise arrived at by P. W. 1 was baseless and was made on the basis of the plaintiff's self-serving statement and the books of accounts. Defendants-1 and 2 denied the assurance imputed to them and stated that they agreed to pay Rs. 5,000/- only in full settlement of the claim, subject to the acceptance of the same by the Head Office of defendant-1 Company. According to them, the amount of Rs. 5,000/- offered was agreed as ex gratia payment after discussion with the Secretary of the plaintiff