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1984 Supreme(Cal) 286
High Court Of Calcutta
Pratibha Bonnerjea
THE COTTON CORPORATION OF INDIA LTD. - Appellant
Versus
THE ORIENTAL FIRE AND GENERAL INSURANCE COMPANY LIMITED - Respondent
Matter 743 Of 1983
Decided On : 08/03/1984
N.C.ROY CHAUDHARY, R.C.DEBNATH, R.N.Dutt, S.C.Ukil, S.R.Saha, SAIBAL GANGULI
In interpreting Section 37(4) of the Arbitration Act, the court should take a liberal view of the term 'undue hardship,' considering all relevant facts and circumstances, including the conduct of the parties, the amount of stake involved, and the potential hardship to the claimant.
Headnote:
ARBITRATION - EXTENSION OF TIME - SECTION 37(4) OF THE ARBITRATION ACT - INTERPRETATION - UNDUE HARDSHIP - RELEVANT CIRCUMSTANCES - BONA FIDE MISTAKE - AMOUNT OF STAKE - UNAVOIDABLE DELAY - PREJUDICE TO RESPONDENT - COOPERATION IN APPOINTMENT OF ARBITRATOR - EXTENSION GRANTED FOR FOUR MONTHS.
Fact of the Case:
Petitioner, engaged in purchase and sale of cotton bales, insured the goods with Respondent No. 1 under a policy that included an arbitration clause. A fire destroyed the goods, and the parties disagreed on the number of bales involved and the quantum of loss. The dispute arose after 12 months from the date of the fire, and the petitioner treated a letter from Respondent No. 1 as a disclaimer, leading to a delay in referring the matter to arbitration.
Finding of the Court:
The court found that the delay in referring the dispute to arbitration was not due to any default on the part of the petitioner but was caused by the conduct of Respondent No. 1 in not clearly communicating its position regarding the evidence to be accepted and its refusal to treat the petitioner's records as evidence.
Issues: 1. Whether the delay in referring the dispute to arbitration was due to undue hardship on the part of the petitioner? 2. Whether the court should exercise its discretion to extend the time for referring the dispute to arbitration?
Ratio Decidendi: 1. The court interpreted the term 'undue hardship' in Section 37(4) of the Arbitration Act liberally, considering it to mean something not merited by the conduct of the claimant or disproportionate to it. 2. The court took into account all relevant facts and circumstances, including the bona fide mistake made by the petitioner, the amount of stake involved, the unavoidable delay in obtaining legal advice and preparing the application, and the fact that refusal to extend time would cause serious hardship to the petitioner.
Final Decision: The court granted an extension of time for four months to refer the dispute to arbitration, considering that one month would not be sufficient due to the procedure laid down in the agreement for appointment of an arbitrator and the possibility of disagreement leading to a longer process.
( 1 ) THIS is an application under Section 37 (4) of the Arbitration Act for extension of time to make the reference.
( 2 ) THE admitted facts of this case are as follows : --The petitioner carried on business in purchase and sale of cotton bales in various parts of India. All these cotton bates are hypothecated with the respondent No. 2, Bank of Baroda and are stored in the godowns of the West Bengal State Warehousing Corporation, the respondent No. 3. The goods stored at the godowns situate at Nos. 27, 28 and 29 of the respondent No. 3 were insured with the respondent No. 1 under a policy of insurance No. 3120/0/0/f-9647/80 dated 3rd October, 1980 against any loss or damage by fire and the petitioner paid the premium of Rs. 48,628/- which was accepted by the respondent No. 1. By mutual agreement, on or about 30-6-81, the aforesaid fire policy was extended to cover the fire risk of the cotten bales stored at godown No. 6 of the respondent No. 3 situate at No. 4. Khagen Chatterjee Street, Calcutta for Rs. 1,00,00. 000/ -. The said policy contained an arbitration clause as follows : --Clause 18 :-- "if any difference shall arise as to the quantum to be paid under this policy I liability being otherwise admitted) such difference shall independently of all other questions be referred to the decisions of an arbitrator, to be appointed in writing by the parties in difference or if they cannot agree upon a single Arbitrator to the decision of two disinterested persons as arbitrators of whom one shall be appointed in writing by each of the parties within two calendar months after having required so to do in writing by the other party in accordance with the provisions of the Arbitration Act, 1940 as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint sole arbitrator; and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering upon the reference and who shall sit with the arbitrators and preside at the meetings. . . . . . . . . . . . . . . . . Clause 19 : "in no case whatsoever shall the company be liable for any loss or damage after expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration, it being expressly
agreed and declared that if the company shall disclaim liability for any claim hereunder and such claim shall not within 18 calendar months from the date of the disclaimer have been made the subject-matter of a suit under court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder. "
( 3 ) IT is also an admitted fact that on or about 10-7-81 a devastating fire broke out at the godown No. 6 of the respondent No. 3 situate at No. 4 Khagen Chatterjee Street, Calcutta, and the said fire completely destroyed and damaged all the goods kept in that godown by the petitioner. The petitioner immediately informed the respondent No. 1 about the destruction caused by the fire by its letter dated 11-10-81 and the respondent No. 1 appointed M/s. Ascon and Avins as the survey or to assess the loss and damages and in its letter dated 11-7-81 informed the petitioner about the same and sent the claim forms. The petitioner submitted in claim on 16-7-81. On 18-7-81 the surveyors informed the petitioner that they wanted to commence survey and to have physical verification of the stock for that purpose under joint supervision of the surveyor, the petitioner and the respondent No. 3 and that the assessment would be made on an allowance basis. The petitioner by its letter dated 22-7-81 pointed out that the assessment ought to be made on total loss basis and that the
