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2019 Supreme(Bom) 806
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. SHRIRAM, J.
Maa Ashish Textile Industries Private Limited - Appellant
Versus
National Insurance Company Limited - Respondent
Commercial Arbitration Petition No. 71 of 2017, 153 of 2017
Decided On : 03-06-2019
Rahul Narichania, Adv., Varsha Ramann, Adv., Shavez Mukri, Adv., A.S. Vidyarthi, Adv., Ruchika Dave, Adv., Asim Vidyarthi, Adv.
Headnote:
Arbitration and Conciliation Act, 1996 – Section 34 – Payment of part of the claim amount – IRDA (Protection of Policyholders Interests) Regulations, 2002 – Regulations 9 – Both the parties to the arbitration proceedings have filed petitions under Section 34 of the Arbitration and Conciliation Act, 1996 impugning the award passed by the sole Arbitrator. Claimant in the arbitral proceedings - M/s. Maa Ashish Textile Industries Private Limited is, for convenience, referred to herein as petitioner and National Insurance Company Limited is, for convenience, referred to herein as respondent. – Petitioner had lodged their claim in two parts, (a) for a sum of Rs.1,95,08,797/- being part of the claim amount not paid together with interest thereon and (b) interest on delayed payment of part of the claim amount. – The first part of the claim for Rs.1,95,08,797/- was rejected by the Arbitrator, which part of the award has been impugned in this petition by petitioner and the Arbitrator allowed the second part of petitioners claim, viz., interest on delayed payment, which part has been challenged by respondent in its petition. – It is settled law that the principle of severability is applicable to an arbitral award where the Full Bench of this Court held that the power vested in the Court under Section 34(1) and 34(2) should not be construed rigidly and restrictedly so as to prevent the Court from setting aside an award partially. – Held, Petitioners claim for interest on delayed payment of the undisputed claim amount is a separate and distinct claim from the claim of Rs.1,95,08,797/-. – The Arbitrator has taken the IRDA Regulations into consideration and has arrived at the conclusion that the queries issued by respondent as well as the resultant Addendum Report were issued belatedly and in violation of the timelines prescribed in Regulation 9 of the IRDA Regulations. – Respondent made part payment of Rs.5 Crores to petitioner on 17.04.2012, i.e., nearly 13 months after the date of the loss, whereas the IRDA Regulations stipulate that the claim ought to be settled by the insurer within 7 days of the assured accepting the settlement offer. Since petitioner accepted the amount of Rs.17,63,78,222/- at the meeting held respondent ought to have settled the claim on or before 16.08.2011. – Moreover, balance amount of Rs.10.68 Crores were paid to petitioner only on 06.12.2012, i.e., 21 months after the date of the loss. – Arbitrator has justly awarded interest in favour of petitioner on delayed payment of the undisputed claim amount of Rs.15,68,69,425/- at 12% p.a. till 17.04.2012 (when part payment of Rs.5 crores was made by respondent) and interest at 12% p.a on the balance of Rs.10,68,69,425/- from 17.04.2012 till 06.12.2012. – With a view to protect the interests of petitioner and considering the already undue delay of respondent in settling petitioners claim, the Arbitrator has rightly awarded further interest of 12% p.a., should respondent not pay the awarded sums within 1 month of the award. – The counsel for respondent cited the decision of the Apex Court in Vedanta Ltd. (Supra) in support of respondents contention that the award of interest at the rate of 12% is far too excessive and penal in nature. – The facts in the present case, however, are entirely different from those in Vedanta Ltd. (Supra). – The said decision is not applicable to the case at hand. – In fact, this Court in Ashirwad Projects V/s. Addhar Mercantile Pvt. Ltd., Arbitration Petition, Order has considered the decision in Vedanta Ltd. (Supra) and held that Vedanta Ltd. (Supra) was an international commercial arbitration, where challenge to interest awarded by the Tribunal was considered in the peculiar facts and circumstances of the case as also the specific clause of the contract. – Petition to set aside an arbitral award does not permit the Court to interfere in matters pertaining to interest granted by the arbitrator. – Moreover, the Arbitrator not only has the power to award pre-reference interest (Godrej Properties and Investments Ltd. V/s. Tripura Construction,2003 SCCOnline(Bom) 13 at paragraph 10), but in the present case, has also exercised his discretion in awarding interest at 12% p.a. Once that discretion is exercised, it cannot be said that the decision is unreasonable. – Petition Disposed
K.R. SHRIRAM, J.
1. Both the parties to the arbitration proceedings have filed petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (the said Act) impugning the award dated 20.10.2016 passed by the sole Arbitrator. Claimant in the arbitral proceedings - M/s. Maa Ashish Textile Industries Private Limited is, for convenience, referred to herein as petitioner and National Insurance Company Limited is, for convenience, referred to herein as respondent.
2. Petitioner had lodged their claim in two parts, (a) for a sum of Rs.1,95,08,797/- being part of the claim amount not paid together with interest thereon and (b) interest on delayed payment of part of the claim amount. The first part of the claim for Rs.1,95,08,797/- was rejected by the Arbitrator, which part of the award has been impugned in this petition by petitioner and the Arbitrator allowed the second part of petitioner's claim, viz., interest on delayed payment, which part has been challenged by respondent in its petition. It is settled law that the principle of severability is applicable to an arbitral award (R.S. Jiwani, Mumbai v Ircon International Ltd., Mumbai, (2010) 1 MhLJ 547) where the Full Bench of this Court held that the power vested in the Court under Section 34(1) and 34(2) should not be construed rigidly and restrictedly so as to prevent the Court from setting aside an award partially.
3. Petitioner, in its arbitration petition no.71 of 2017, seeks to challenge the award on the limited point that the Arbitrator's rejection of petitioner's claim of Rs.1,95,08,797/- is perverse, riddled with contradictions and inconsistencies. Respondent, in its arbitration petition no.153 of 2017, has challenged the award of interest on delayed payment of the claim in favour of petitioner.
4. In my view, the claims of petitioner in the arbitral proceedings are severable and both are two separate and distinct claims. Interfering with the findings of the Arbitrator in one issue will not affect, in fact or in law, the finding arrived at by the Arbitrator on the other issue. In my view, the claim of Rs.1,95,08,797/- for the balance amount is distinct and separate from the claim for interest on delayed payments. Moreover, both the counsel did not question severability. Shri Narichania in fact, argued for it and Shri Vidyarthi did not contest.
5. Respondent had issued a Standard Fire and Special Insurance Policy to petitioner dated 26.05.2010. The period covered was between 24.05.2010 and 23.05.2011. Insured valued was Rs.20,78,56,204/-. The risk covered was petitioner's building, machinery, stocks, etc.
6. A fire broke out in petitioner's factory on 21.03.2011, pursuant to which a claim was raised by petitioner under the policy. Respondent appointed surveyors M/s. Rakesh Narula & Co. (Rakesh Narula) on 21.03.2011 itself, who submitted a Preliminary Survey Report on 22.03.2011. Subsequently, respondent appointed M/s. J. Basheer and Co. (J. Basheer) as Joint Surveyor (together referred to as 'the Surveyors') and after assessing petitioner's losses, the Surveyors submitted a Final Survey Report dated 03.08.2011, quantifying the loss at Rs.17,63,78,222/-. Petitioner agreed to this assessment. Allegedly on the basis of another Final Survey Report dated 29.10.2011 and an Addendum Report dated 31.07.2012, respondent subsequently reduced the claim amount to Rs.15,81,22,177/- of which a sum of Rs.15,68,69,425/- was paid to petitioner on 04.12.2012 as full and final settlement vide discharge vouchers. Petitioner state they signed these discharge vouchers under coercion and without prejudice to their right to recover the unlawful deduction of Rs.1,95,08,797/-. Petitioner invoked arbitration seeking payment of Rs.1,95,08,797/- as well as interest on the belated payment of the claim. The Arbitrator passed an award dated 20.10.2016 (hereinafter 'the Award'), of which one part is impugned by petitioner and the other part by respondent, rejecting petitioner's claim of Rs.1,9
