1955 Supreme(Cal) 84

HIGH COURT OF CALCUTTA
P. B. Mukharji
NATIONAL FIRE AND GENERAL INSURANCE CO. LTD. - Appellant
Versus
UNION OF INDIA (UOI) - Respondent
Award Case 138  Of  1954
Decided On : MAY 18, 1955

An arbitration clause in an insurance policy that is confined only to the difference about "the amount of any loss or damage" does not give the arbitrators or the umpire jurisdiction to make an award directing payment or determining the liability of payment of any particular party or to whom payment is to be made. However, a larger submission can be made by the parties, either in writing or orally, which can enlarge the scope of the arbitration clause and give the arbitrators or the umpire jurisdiction to decide additional issues, such as the liability to pay and who should pay to whom.

Headnote:

ARBITRATION - INSURANCE - FIRE INSURANCE POLICY - ARBITRATION CLAUSE - SCOPE AND INTERPRETATION - SUBMISSION OF LIABILITY TO PAY AND WHO SHOULD PAY TO WHOM - AWARD DIRECTING PAYMENT - VALIDITY - LUMP SUM AWARD OF COSTS - VALIDITY.

Fact of the Case:

A dispute arose between the National Fire and General Insurance Company Limited (applicant) and Jyoti Krishna Chakravorty (respondent) over a claim for loss of jute by fire at a godown. The jute was insured with the applicant company under two different Fire Insurance Policies. The policies contained an Arbitration clause providing for the appointment of an arbitrator or arbitrators to decide the amount of any loss or damage. The parties failed to agree on a single arbitrator, and the respondent appointed one arbitrator, while the applicant appointed another. The two arbitrators appointed an umpire. The umpire made an award directing the applicant to pay the respondent the sum of Rs. 12,342/- under one policy and Rs. 3,695/8/- under the other policy, and also awarded Rs. 6,582/- as the costs of the reference and the award.

Finding of the Court:

The court held that the arbitration clause in the insurance policy was confined only to the difference about "the amount of any loss or damage" and, therefore, the arbitrators or the umpire had no jurisdiction to make an award directing payment or determining the liability of payment of any particular party or to whom payment was to be made. However, the court also held that in this case there was a larger submission than that represented by the Arbitration Clause in the Policy itself. The court found that the respondent, in his statement before the arbitrators, had expressly submitted to the arbitrators the question of liability to pay and who should pay to whom. The court also found that the applicant, in its answer before the arbitrators, had joined issue on the question of how much was payable by them, far from taking the point that its liability to pay could not at all be determined by the arbitrators. The court held that these statements together constituted a valid arbitration agreement within the meaning of Section 2 (a), Indian Arbitration Act, and that the award, therefore, must have determined by necessary implication that the Union of India had no liability because it made no award against it and because it held that the only liability to pay was that of the Insurance Company and that the right to obtain such payment belonged to respondent Chakravorty and not to the Union of India.

Issues: 1. Whether the arbitration clause in the insurance policy was confined only to the difference about "the amount of any loss or damage" and, therefore, the arbitrators or the umpire had no jurisdiction to make an award directing payment or determining the liability of payment of any particular party or to whom payment was to be made? 2. Whether there was a larger submission than that represented by the Arbitration Clause in the Policy itself? 3. Whether the statements of the respondent and the applicant before the arbitrators constituted a valid arbitration agreement within the meaning of Section 2 (a), Indian Arbitration Act? 4. Whether the award, therefore, must have determined by necessary implication that the Union of India had no liability because it made no award against it and because it held that the only liability to pay was that of the Insurance Company and that the right to obtain such payment belonged to respondent Chakravorty and not to the Union of India?

Ratio Decidendi: 1. The court held that the arbitration clause in the insurance policy was confined only to the difference about "the amount of any loss or damage" and, therefore, the arbitrators or the umpire had no jurisdiction to make an award directing payment or determining the liability of payment of any particular party or to whom payment was to be made. 2. However, the court also held that in this case there was a larger submission than that represented by the Arbitration Clause in the Policy itself. 3. The court found that the respondent, in his statement before the arbitrators, had expressly submitted to the arbitrators the question of liability to pay and who should pay to whom. 4. The court also found that the applicant, in its answer before the arbitrators, had joined issue on the question of how much was payable by them, far from taking the point that its liability to pay could not at all be determined by the arbitrators. 5. The court held that these statements together constituted a valid arbitration agreement within the meaning of Section 2 (a), Indian Arbitration Act, and that the award, therefore, must have determined by necessary implication that the Union of India had no liability because it made no award against it and because it held that the only liability to pay was that of the Insurance Company and that the right to obtain such payment belonged to respondent Chakravorty and not to the Union of India.

Final Decision: The court dismissed the application to set aside the award with costs.