A finance company, which is not a party to an insurance contract, cannot maintain an application under Section 20 of the Arbitration Act for referring the dispute to arbitration, even if there is an endorsement on the policy recognizing the finance company's right to claim the insurance money.

ORDER :- A policy of insurance was taken by Chela Ram, respondent

No. 2 with the British India General Insurance Company, petitioner, in the present revision petition. It is a common case that this policy was issued on 16-5-1960 in the name of Chela Ram and was valid for one year upto 31-5-1961 and was renewed for a further period of one year from 1-6-1961 to 31-5-1962. Respondent No. 1, M/s. United India General Finance (P) Ltd. is the financier of the truck which was insured with the insurance company. Respondent No. 1 moved an application under Section 20 of the Arbitration Act pleading that the insurance company was refusing to pay on account of the accident and, therefore, sought to invoke Cl. 10 of the policy for having the matter referred to the arbitrator.

The petitioner controverted the allegations. It was maintained by the petitioner that Chela Ram had no insurable interest at the time of the accident nor at the date of the entering into agreement of insurance and that the contract of insurance was entered into by misrepresentation and fraud. It was pleaded that the truck had been transferred to the ownership of Kanahiya Lal, respondent No. 3, and the insurance company was not liable as the insurance policy was no longer subsisting. It was also pleaded that an application at the instance of the finance-company respondent No. 1 did not lie. On the pleadings of the parties, following issues were framed :-

"1. Whether the petitioner was beneficiary and as such has no locus standi to file the petition?

2. Whether Chela Ram has no insurable interest at the time the insurance policy was effected?

3. Whether the policy is not binding for the reasons given in the reply?

4. Relief."

2. The trial court by its judgment dated 5-6-1964 took the view that it was not necessary to decide issues Nos. 2 and 3 as the same would have to be decided by the arbitrator. On issue No. 1 the trial court took the view that there was an endorsement made on the policy by which respondent No. 1 was recognised as the owner, but that in spite of this endorsement the only right respondent No. 1 had was to realise the money and it did not give respondent No. 1 a right to invoke the arbitration clause and to file an application under Section 20 of the Arbitration Act. He, therefore, dismissed the application.

An appeal was taken by respondent No. 1. The lower appellate court by its judgment dated 24th December, 1966 held that because of the endorsement on the main policy, respondent No. 1 had the right to institute petition under Section 20 of the Arbitration Act, and by the endorsement it must be treated as a party to the agreement of insurance. It left issues 2 and 3 undecided in the same manner as the trial court had held. It consequently allowed the appeal and remanded the case back to the trial court. It is against this judgment that the present revision petition has been filed.

3. Mr. Andley, the learned counsel for the petitioner submits that the mere fact that there is an endorsement on the policy, does not mean that respondent No. 1 is a party to the contract of insurance and therefore, entitled to maintain this application for arbitration. According to the learned counsel the endorsement gives only the right to respondent No. 1 to claim the money about which the claim may arise out of this policy of insurance, but it does not make the finance-company party to the case, Mrs. Nijhawan learned counsel for the respondent however stated that by the endorsement which was specifically sent to the insurance company it was agreed that the finance-company would have the right to the insurance policy and as respondent No. 1 is in the position of a beneficiary, it is entitled to maintain this application under Section 20 of the Arbitration Act. It was maintained by the learned counsel for the respondent that the money for the insurance was also paid by the finance-company and that Chela Ram should be deemed to be only in the position of a trustee and tha