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PATNA HIGH COURT
Ramratna Singh, J.
New India Assurance Company Limited
Versus
Kamta Singh
Civil Revision No. 1063 of 1963 ;
Decided On : JANUARY 09, 1964
ARBITRATION - INSURANCE POLICY - DISPUTE REGARDING COST OF REPAIRS - ARBITRATION CLAUSE - WAIVER - JURISDICTION OF SMALL CAUSE COURT - POLICY OF INSURANCE.
Fact of the Case:
The plaintiff insured his car with the defendant Insurance Company against loss, damage, or accident. The car met with an accident and was sent for repairs. The plaintiff paid the repair bill and sued the Insurance Company for recovery of the amount. The Insurance Company contended that the dispute was subject to arbitration as per the terms of the insurance policy and that the Small Cause Court did not have jurisdiction to entertain the suit.
Finding of the Court:
The court held that the dispute was within the ambit of the arbitration agreement contained in the insurance policy and that the Insurance Company had not waived its right to claim reference to arbitration. The court also held that the Small Cause Court did not have jurisdiction to entertain the suit as it was based on a policy of insurance.
Issues: 1. Whether the dispute regarding the cost of repairs was subject to arbitration as per the terms of the insurance policy? 2. Whether the Insurance Company had waived its right to claim reference to arbitration? 3. Whether the Small Cause Court had jurisdiction to entertain the suit?
Ratio Decidendi: 1. The court held that the dispute was within the ambit of the arbitration agreement contained in the insurance policy because the arbitration clause was broad and comprehensive and embraced any dispute between the parties in respect of the agreement or anything arising out of it. 2. The court held that the Insurance Company had not waived its right to claim reference to arbitration because it had filed a petition under Section 34 of the Arbitration Act before taking any other steps in the proceedings. 3. The court held that the Small Cause Court did not have jurisdiction to entertain the suit because it was based on a policy of insurance and the Provincial Small Cause Courts Act barred such suits.
Final Decision: The court allowed the application, set aside the order of the lower court, and directed the Small Cause Court Judge to return the plaint to the plaintiff for presentation before the proper court.
Ramratna Singh, J.
1. This application is directed against an order of the Small Cause Court Judge of Arrah, rejecting certain objections of the defendants who are petitioners in the case. Petitioner No. 1 is an Insurance Company whose head office is in Bombay and branches in Calcutta and Patna. Petitioners Nos. 2 and 3 are those branches. The opposite party insured his car with the said Insurance Company against loss, damage or accident for the period from the 29th June, 1962 to 28th June 1963. The ear met an accident at Arrah on the 6th November, 1962, and was damaged. It was sent tor repairs to Messrs Lawly Sen and Co., who estimated the cost of repairs at Rs. 325/-. Messrs Lawly Sen and Co., repaired the car and gave the plaintiff a bill for Rs. 296.63 nP. after giving a discount of 10 per cent., to which the Insurance Companies are generally entitled, and the opposite party paid the said amount to the repairing Company under a Cash Memo dated the 15th November 1962. There was some difference between the opposite party and the Insurance Company regarding the amount of the cost of repair. The opposite party, therefore, instituted a Small Cause Court suit at Arrah for recovery of the said amount. The petitioners-defendants appeared in the suit and filed a petition slating that the plaintiff could not proceed with the suit without referring the alleged dispute to arbitration in accordance with the terms of the policy of insurance. After some time, the Company also filed another petition contending that a Small Cause Court was not competent to take cognizance of such a suit. Both the petitioners were rejected by the learned Small Cause Court Judge; hence this application in revision.
2. In support of the first objection, Mr. Gujadhar who appeared for the petitioners relied on Sec.34 of the Arbitration Act, 1940 , which reads as follows:
"Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings".
3. As has been held in Gaya Electric Supply Co., Ltd. V/s. State of Bihar, AIR 1953 SC 182:
"....... .from the language of the section, it is quite clear that the legal proceeding which is sought to be stayed must be in respect of a matter which the parties have agreed to refer and which comes within the ambit of the arbitration agreement. Where, however, a suit is commenced as to a matter which lies outside the submission, the Court is bound to refuse a stay. In the words of Viscount Simon L.C. in Heyman V/s. Darwins Ltd., 1942 AC 356 the answer to the question whether a dispute falls within an arbitration clause in a contract must depend on (a) what is the dispute, and (b) what disputes the arbitration clause covers. It the arbitration agreement is broad and comprehensive and embraces any dispute between the parties in respect of the agreement, or in respect of any provision in the agreement, or in respect of anything arising out of it, and one of the parties seeks to avoid the contract, the dispute is referable to arbitration if the avoidance of the contract arises out of the terms of the contract itself. Where, however, the party seeks to avoid the contract for reasons dehors it, the arbitration clause cannot be resorted to as it goes along with other terms o
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