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High Court Of Calcutta
A. K. GANGULY, PRANAB KUMAR CHATTOPADHYAY
ALAKH KUMAR SINHA - Appellant
Versus
ORIENTAL INSURANCE COMPANY LTD. - Respondent
Special Suit 86 Of 1992
Decided On : 04/04/2001
ARBITRATION ACT, 1940 - SECTION 20 - Deletion of unauthorized claim from petition - Transfer of application to proper court - Interpretation of section 20 of the Arbitration Act, 1940 - Conditions for invoking section 20 - Scope of section 24 of the Code of Civil Procedure, 1908 in arbitration proceedings.
Fact of the Case:
An insurance company filed an application under section 20 of the Arbitration Act, 1940, seeking to refer a dispute regarding a claim for damages to arbitration. The claimant had inflated the claim amount to invoke the jurisdiction of the High Court. The learned single Judge dismissed the application, holding that there was an unauthorized inflation of the claim.
Finding of the Court:
The Court held that the learned single Judge erred in dismissing the application solely on the ground of unauthorized inflation of the claim. The Court found that there was a valid and subsisting arbitration agreement between the parties, and that the dispute between them related to the subject matter of the agreement. The Court also held that section 24 of the Code of Civil Procedure, 1908 is applicable to arbitration proceedings, and that the High Court could suo motu transfer the application to the proper court.
Issues: 1. Whether the High Court erred in dismissing the application under section 20 of the Arbitration Act, 1940, solely on the ground of unauthorized inflation of the claim. 2. Whether section 24 of the Code of Civil Procedure, 1908 is applicable to arbitration proceedings.
Ratio Decidendi: 1. Section 20 of the Arbitration Act, 1940 provides a limited role for the Court in invoking its power to refer a dispute to arbitration. The Court must be satisfied that certain conditions are met, including the existence of a valid and subsisting arbitration agreement, a dispute between the parties with respect to the subject matter of the agreement, and that the dispute is within the jurisdiction of the Court. 2. Section 24 of the Code of Civil Procedure, 1908 is applicable to arbitration proceedings by virtue of section 41 of the Arbitration Act, 1940. This allows the Court to transfer an application under section 20 to the proper court, even in the absence of a petition for transfer.
Final Decision: The Court set aside the judgment of the learned single Judge and directed that the application under section 20 of the Arbitration Act be transferred to the City Civil Court for consideration in accordance with law.
( 2 ) WE, however, do not agree with the approach adopted by the learned single Judge in disposing of the section 20 application, though we find that there has been an unauthorised inflation of the claim by the claimant.
( 3 ) THIS Court finds that the particulars of the claim in this case have been given in paragraph 7 (at page 9) of the claim petition. The said claims are set out below: particulars: 1. Loss to the vehicle due to accident - Rs. 2,30,000. 00
2. Garage charge @ Rs. 500. 00 p. m.from May, 1991 to February, 1992 - Rs. 5,000. 00
3. Idle charge paid to staff for 10 months -Driver @ Rs. 100. 00 p. m. Rs. 10,000. 00 Conductor @ Rs. 850. 00 p. m. Rs. 8,500. 00
Cleaner @ Rs. 550. 00 p. m. Rs. 5,500. 00 Rs. 24,000. 00 Loss of profit for 10 months @ Rs. 2000. 00 p. m. Rs. 20,000. 00
Interest payable on loan amount @ 18% - Rs. 5,200. 00 Compund interest on the amount claim -
(Rs. 2,30,000. 00) @ 18% Rs. 34,000. 00 Expenses incurred for meeting the survey works
etc. as required in persuing the claim Rs. 7,000. 00
Legal expenses in the matter till date Rs. 2,000. 00
Consequential loss and damages caused to vehicle because of lying in garage.
Rs. 1,60,000. 00 Taxes payable to Govt. (or as per Govt. circulars)
Rs. 13,386. 00 Rs. 5,00,586. 00
( 4 ) WE find, in order to invoke the jurisdiciton of this Court a claim was made in paragraph 9 of the claim petition to the following effect:-"9. The plaintiff states that, because of non-payment and/or refusal to make payment of the said sum of Rs. 5,00,586. 00 the plaintiff has suffered further loss and damages in its business and/or reputation and/or goodwill which is estimated at Rs. 7,00,000/ -. "
( 5 ) WE find that the said claim made in paragraph 9 of the claim petition is wholly unauthorised and we direct deletion of the said claim from the petition of claim filed by the claimant. But we do not think in the facts and circumstances of this case that the claimant has no case under section 20 of the Arbitration Act. In this connection the relevant clause as contained in the arbitration agreement is set out hereinbelow:-"if any difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently or any other questions be referred to the decision of the arbitrator to be appointed in writing by the parties to difference or if they cannot agree upon a single arbitrator to the decision of two dis-interested persons as arbitrators of whom one shall be appointed in writing by each of the parties within two calendar months after having been required to do so 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 other 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 on the reference and who shall sit with th
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