The court determined that an insurer's failure to deny liability allows for arbitration despite previous attempts to cancel a policy, reinforcing the principle of minimal judicial interference under Section 11 of the Arbitration Act.

JUDGMENT

[VIA VIDEO CONFERENCING]

Sanjeev Narula, J. (Oral)--The present petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as `the Act'] seeks appointment of an Arbitrator for adjudication of disputes which have arisen between the parties in relation to the `Professional Indemnity Engineers Architects Interior Decorators Inspection and Testing Policy' bearing No. 0401002717P104915422 issued by the Respondent [hereinafter referred to as `UII'] in favour of the Petitioner [hereinafter referred to as `GCL'] for the period of 11th June, 2017 to midnight of 10th June, 2018, applicable retroactively from 12th June, 2015, with an indemnity amount of Rs.25 crores [hereinafter referred to as the `Insurance Policy'].

FACTS

2. GCL has been availing insurance coverage for professional indemnity since 2007, which includes indemnity against acts of dishonesty, negligence, fraud, omissions and errors, as well as loss of documents and breach of confidentiality of clients committed by its employees towards its clients' businesses, which include banking organizations.

3. GCL received notices from its clients - RBL Bank, HDFC Bank and DCB Bank, dated 2nd August, 2017, 8th August, 2017 and 18th January, 2018 respectively, regarding offences committed by its employees. Later, more such notices were received from other banks such as IDBI Bank, DCB Bank and HDFC Bank. The total claims made by the banks was approximately Rs.25 crores. UII was duly intimated of such claims from time to time. FIRs and police complaints were also registered against the suspected persons by GCL between 23rd and 25th January, 2018.

4. On 17th February, 2018, GCL sent a letter to UII informing them of the occurrence of loss and followed it up with an email on 26th March, 2018. UII replied through email on 27th March, 2018, acknowledging its delay in acting on the claims of GCL and sought further clarifications, which were provided vide email dated 27th April, 2018.

5. Thereafter, UII sent a letter dated 18th May, 2018, whereby it sought to cancel the insurance policy [hereinafter referred to as the `Impugned Letter']. The relevant extract of the letter reads as follows:

"Re: Cancellation of Professional Indemnity Engineers, Architects, Interior Decorators Inspection and Testing Policy Insurance Policy No. 0401002717P104915422 valid from 11.06.2017 to 10.06.2018 issued in the name of M/S. Geo Chem Laboratories Pvt. Ltd.

This is with reference to the above policy issued by us. On receipt of your emails regarding losses to the tune of Rs.22.50 crs due to fraud/embezelment as referred by emails dated 12.02.2018/26.03.2018.

On scrutiny of your proposal form & emails and documents including copy of FIRs exchanged with us it is found that the details of claims which you have not revealed in your proposal form thereby misrepresentation and non-disclosure of material facts in proposal form.

Hence in view of policy Condition No. 10, which states as under:

"The Company may at any time cancel the Policy on grounds of misrepresentation, fraud, non-disclosure of material fact or non-cooperation by the insured by sending fifteen days notice in writing by Registered A/D to the insured at his last known address in which case the Company shall return to the insured a proportion of the last premium corresponding to the unexpired period of insurance if no claim has been paid under the policy. The insured may at any time cancel this policy and in such event the Company shall allow ref