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2013 Supreme(Bom) 157
High Court of Judicature at Bombay
ANOOP V. MOHTA
The New India Insurance Company Limited
Versus
Pyarelal Textile Limited & Others
Arbitration Petition No. 923 of 2009
Decided on : 21-01-2013
For the Petitioner:Prakash Lad, Advocate.
For the Respondents:R1, Fereshle Sethna i/by Duttmenon Dunmorr Sett, Advocates.
The main legal point established is that the Arbitral Tribunal, despite expertise, must adhere to the burden of proof, principles of natural justice, and equity, and provide reasoned awards in accordance with law.
Headnote:
Arbitration - Challenge to Majority and Minority Awards - Arbitration and Conciliation Act, 1996 (Section 34) - Section 31 of the Arbitration and Conciliation Act - Insurance Policy - Expertise of Arbitral Tribunal - Reassessment of Surveyor's Report - Judicial Review
Fact of the Case:
The Petitioner challenged an award of Arbitral Tribunal consisting of three members under Section 34 of the Arbitration and Conciliation Act, 1996. The dispute arose from an insurance claim for damages caused by floods to a processing unit. The surveyor's report rejected the claim, leading to arbitration proceedings and subsequent majority and minority awards.
Finding of the Court:
The Court found that the Arbitral Tribunal, despite being experts, reassessed the surveyor's report and granted compensation, overlooking the burden of proof on the claimant and the principles of natural justice and equity. The Court held that the awards were not reasoned and interfered with them, remanding the matter for rehearing.
Issues: The issues included the reassessment of the surveyor's report, the burden of proof on the claimant, the expertise of the Arbitral Tribunal, and the principles of natural justice and equity.
Ratio Decidendi: The Court held that the Arbitral Tribunal, though expert, must respect the burden of proof, principles of natural justice, and equity. It emphasized the need for reasoned awards in accordance with law, and the requirement for evidence to support claims for damages.
Final Decision: The majority and minority awards were set aside, and the matter was remanded for rehearing before the same or another Tribunal, with the opportunity for both parties to lead additional evidence.
The Petitioner (original Respondent) has challenged an award of Arbitral Tribunal, consisting of three members under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act). The challenge is to the majority award of two members and also the minority award, both dated 27 July 2009.
2 The summary of majority award is as under:-
“VII SUMMARY OF AWARD:
Our award is summarised as set out hereafter –
1. Claim warded Rs. 56,48,106
2. Costs awarded " 13,50,265
3. Interest awarded " 21,96,675
Total Award Rs. 91,95,046
VIII NIA is directed to pay the total award of Rs.91,95,046/-(Rupees Ninety One Lakhs Ninety Five Thousand Forty Six Only) before 31st August 2009. If NIA fail to do so, simple Interest @ 18% per annum on the full amount of the award of Rs.91,95,046/-from 28th July 2009 till the date of final payment, will be applicable and shall be paid by NIA as per Subsection 7(b) of Section 31 of the Arbitration and Conciliation Act (as amended).
As stated earlier, as regards the APPTL'S customers' cloth stocks, there are considered to be in APPTL'S trust and are deemed to be covered under the Policy. There is no provision in the policy of Insurance issued by NIA to APPTL about APPTL to first pay their customers in case of any damage and then only recover from NIA. In case of a large claim like this, any Insured would find it difficult, if not impossible to bear such an onerous burden from their own finances. As APPTL are trustees only, to avoid any undue benefit to them, while receiving the payment of the claim, APPTL shall confirm to NIA that APPTL shall obtain full satisfaction letters from their customers and submit the said letters to NIA. APPTL shall comply with this within 15 days of the receipt of the claim award from NIA. This is our joint final award which should be regarded as the Majority Award of the Tribunal. There are no further directions and/or awards.”
3 The findings of minority award is as under:-
“29. My findings on the issues framed under paragraph no.6 above are as under, seriatim:
1. The quantum of claim awarded to claimant is Rs.4557382/-.
2. Interest at the rate of 10% from 30/10/07 till date of payment on the Rs.4557382/-.
3. The claimants have filed a memo of cost of Rs.1500294/-consisting of arbitrators' fees, and legal expenses other Expenses without any supporting bills but certified by their advocate. In view of the facts and the circumstances of the claim I am inclined to award 50% of the above said cost i.e. Rs.750147/-.
4. No other relief.
29. The Respondents are directed to pay Rs.4557382/plus Interest thereon @ of 10% PA as at 27 above till date of payment plus cost of Rs.750147/-.
30. As regards payments to be made to the third party owners of the goods the claimants to pay the respective shares within 15 days from payment received by them from the respondents and file proof of payments to the third parties with the respondents within 7 days therefrom.”
4 As per the Petitioner, the basic facts are as under:-
“1. The Petitioner is a company registered under the Companies Act, 1956 and a Government of India Undertaking. Respondent No.1 is claimant company registered under the Companies Act, 1956. Respondent Nos. 2 to 4 are the Arbitrators who passed two Awards both dated 27 July 2009.
2. The processing unit of Respondent No.1 at Plot No. 19A, MIDC Industrial Areas, Ambernath known as Amber Processors was sick since 2001. Since November 2004, the unit of Respondent No.1 is under lockout till date.
3. On 18 July 2005, Respondent No.1 has insured with the Petitioner its processing unit under policy known as Standard Fire and Special Peril Policy and paid premium of Rs.58,500/+ Rs. 5967/as service tax). There was heavy floods on 26 July 2005.
4. On 30 July 2005, Respondent No.1 informed the Petitioner that damage caused to the Respondent's factory. The loss is suffered due to the calamity. Upon receipt of information the Respondent appointed surveyor.
5.
