The main legal point established in the judgment is that a dispute over the quantum to be paid under an insurance policy, where the liability is admitted but the quantum is disputed, is referrable to arbitration.

JUDGMENT :

This is an application under Sections 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short, Act of 1996) for appointment of Arbitrator.

2. Heard Mr. Ankit Singhal, learned counsel, appearing for the applicant as well as Mr. Raj Awasthi, learned counsel, appearing for the respondent.

3. The applicant is a company registered under the Companies Act, 1956 and is engaged in generation of power. The applicant had an ‘Industrial All Risk Policy’ bearing Policy No. 311800/11/2019/322 insuring the plant of the applicant from 17.07.2018 to midnight of 16.07.2019 with the respondent, on a premium of Rs. 2,87,004/- per year.

4. On 17.12.2018, a fire incident broke out in the plant of the applicant and in connection with the loss that had occasioned, the applicant had submitted its claim under the insurance policy in question amounting to Rs. 41,88,980/-. The incident was reported to the respondent on the date of incident itself and pursuant thereto, a Surveyor, namely, Gautam Basu was deputed by the respondent to conduct inspection of the plant. The survey report was submitted on 05.02.2019 and according to the survey report, the net loss assessed was Rs. 4,82,164/-. It was also opined by the Surveyor that as the net assessed loss is less than the policy excess, the insurer does not have any liability. On the basis of the report of the Surveyor, a letter dated 26.12.2019 was issued to the applicant by the Senior Divisional Manager of the respondent, which is as follows:

“By Registered post

26th December, 2019

M/s. Balaji Power Ltd.

Gram-Belsonda,

Murhena Road,

Distt. - Mahasamund

Raipur 493445

Chhattisgarh. 3

Dear Sir,

Re: Claim under Policy No. 311800/11/ 2019/322

Claim No. 311800/11/2019/000051 A/c. Balaji Power Ltd. dt. of loss 17/12/2018

With the reference to above claim, this is to state that, we had deputed Mr. Gautam Basu as surveyor for the above loss. The surveyor has submitted his report.

The Surveyor Report mentions the Net Assessed Loss at Rs. 4,82,164/- after deduction of Salvage which is less than the minimum Policy Excess of Rs. 5 Lacs. Hence, the net liability comes for the Insurer amounts to NIL.

The assessment sheet is attached herewith for reference.

Based on the assessment, the claim is treated as “No Claim” and the file is treated as closed.

Thanking you

Sincerely yours,

Sd/- Illegible

Sr. Divisional Manager”

5. The applicant sent a legal notice to the respondent on 11.06.2020 in terms of Clause No. 12 of the Industrial All Risk Insurance Policy, which provided for invoking arbitration clause and suggested the name of an Arbitrator from the side of the applicant. Request was made to the respondent to nominate a second Arbitrator within 30 days. In response, a letter dated 13.07.2020 declining the request of the applicant was issued by the respondent. The applicant was further requested to withdraw the notice dated 11.06.2020 requesting for nomination of Arbitrator.

6. Mr. Singhal submits that in terms of Clause 12 of the Industrial All Risk Insurance Policy, if any difference arises as to the quantum to be paid under the policy, such difference shall independently of all other questions be referred to the decision of an arbitrator in the manner as provided therein. However, if the liability is not admitted, the dispute shall not be referable to arbitration.

7. Since the applicant had claimed an amount of Rs. 41,88,980/- and the respondent, relying upon the report of the Surveyor, came to the conclusion that there was loss of only Rs. 4,82,164/-, it is a dispute of quantum to be paid and therefore, refusal to appoint arbitrator by the respondent is not tenable in law and therefore, this Court may appoint arbitrator.

8. Relying upon the reply affidavit filed, Mr. Awasthi submits that while the Surveyor had assessed the amount of net loss to the tune of Rs. 4,82,164/-, an amount of Rs. 5,00,000/- is to be deducted towards policy excess on each and every claim as per the insurance policy condition and therefore, it is