The court held that issues of arbitrability can be left to the arbitral tribunal, unless a claim is ex facie barred, and highlighted the limited review to check and protect parties from being forced to arbitrate when the matter is demonstrably 'non-arbitrable'.

JUDGMENT

Prateek Jalan, J. (Oral)

1. By way of this petition under Section 11 of the Arbitration and Conciliation Act, 1996 ["the Act"], the petitioner seeks appointment of an arbitrator to adjudicate disputes between the parties under an insurance policy bearing No. 370800441710000038, entitled "Contractor All Risk" policy ["the Policy"]. The Policy is for a period of 05.01.2018 to 20.11.2019. Clause 7 of the General Conditions of Contract contains an arbitration clause, which contemplates reference of disputes to a sole arbitrator.

2. The petitioner has made a claim under the Policy, which has been partially accepted by the respondent. The petitioner seeks to raise a dispute as to the balance amount of the claim, in which connection it has invoked the arbitration clause by letters dated 22.06.2022 and 15.02.2023. The respondent replied to the letter dated 22.06.2022 on 21.07.2022, declining reference to arbitration on the ground that the claim has been settled.

3. In these circumstances, the petitioner has approached this Court by way of the present petition under Section 11 of the Act.

4. Notice was issued in this petition on 16.05.2023 and the respondent has also filed a reply to the petition.

5. The principal contention of Mr. Prateek Mishra, learned counsel for the respondent, is that the dispute between the parties is one of liability under the contract, and not of quantum. He submits that disputes as to liability are excluded from the scope of the arbitration clause, as evident upon a plain reading of the arbitration clause. Clause 7 is reproduced below:

"7. If any dispute or difference shall arise as to the quantum to be paid under this Policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator, to be appointed in writing by the parties to or, if they cannot agree upon a single arbitrator within 30 days of any party invoking Arbitration, the same shall be referred to a panel of three Arbitrators comprising of two Arbitrators - one to be appointed by each of the parties to the dispute/difference, and the third Arbitrator to be appointed by such two Arbitrators and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act 1996.

It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this Policy.

It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such Arbitrator/ Arbitrators of the amount of the loss or damage shall be first obtained."

[Emphasis supplied]

6. In support of this argument, Mr. Mishra relies upon a decision of the Calcutta High Court in Kohinoor Steel Pvt. Ltd. vs. Bajaj Allianz Insurance Company, 2011 SCC OnLine Cal 3252 and on the judgments of the Supreme Court in Vidya Drolia and Others vs. Durga Trading Corporation, (2021) 2 SCC 1 and Indian Oil Corpn. Ltd. v. NCC Ltd., (2023) 2 SCC 539.

7. Mr. Mishra submits that the petitioner's claim arises under various heads, including "muck removal". The Surveyor appointed by the respondent has taken the view, in Survey Report dated 26.06.2020, that the claim of muck removal is not covered by the Policy. In these circumstances, he submits that the present case is one in which liability for the claim in question is contested, rather than the quantum.

8. Mr. Shishir Mathur, learned counsel for the petitioner, disputes the interpretation of the Survey Report, as suggested by Mr. Mishra.

9. Having heard learned counsel for the parties, I am of the view that it is not necessary to decide this question conclusively at the pre- referral stage, and the parties' contentions with regard to arbitrability can appropriately be reserved for adjudication by the arbitral tribunal.

10.