The main legal point established in the judgment is that failure to nominate an arbitrator as per the policy results in the claimant's appointed arbitrator having jurisdiction. Additionally, the judgment emphasizes the need to consider depreciation in the value of the insured building while determining compensation.

This appeal is against the dismissal of the Original Petition filed by the appellant under Section 34 of Arbitration Act, Challenging the award of the sole arbitrator.

2. The facts are not in dispute. The 1st respondent had insured her building with the appellant Insurance Company for a declared value of Rs.40,00,000/- on 22.03.1993. The said insurance was periodically renewed for the same value upto 21.03.1998. On 30.11.1997, on account of riot that happened in Coimbatore, the entire building was damaged by fire, so the claimant lodged a claim with the Insurance Company for a value of Rs.40,00,000/-, the value of the insurance policy.

3. The Insurance Company appointed a surveyor, who, assessed the loss at Rs.18,00,000/-. Therefore, the insurance Company offered Rs.18,00,000/- to the 1st respondent/claimant. Since the 1st respondent/claimant was not ready to accept the said amount, she approached the National Consumer Disputes Redressal Commission, by filing an application in OP.No.193 of 1998. Before the Commission, the Insurance Company offered to pay a further sum of Rs.1,40,000/-. The National Consumer Disputes Redressal Commission directed the 1st respondent to receive the said sum of Rs.1,40,000/- without prejudice and directed the parties to go for arbitration as per clause 11 of the Insurance Policy.

4. This order of the National Consumer Disputes Redressal Commission came to be passed on 14.07.2000. Soon thereafter, by a notice dated 29.08.2000, the respondent herein nominated a sole Arbitrator and requested the Insurance Company to either agree for arbitration by the nominated Arbitrator or nominate its own Arbitrator. The Insurance Company took a stand that the dispute is not arbitrable.

Clause 11 of the policy of Insurance Company which provides for arbitration read as follows:

“If any 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 an arbitrator to be appointed in writing by the parties in difference, or if they cannot agree upon a single arbitrator, to the decision of two disinterested persons as arbitrators of whom one shall be appointed in writing by each of the parties within two calendar months after having been required so to do in writing by the other party in accordance with the provisions of the Arbitration Act 1940 as amended from time to and for the time being in force. In case either 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 the arbitrators and preside at their meeting.

It is clearly agreed and understood that of difference or dispute shall be referable to arbitration as hereinbefore provide, 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 condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage shall be first obtained.”

5. Since the Insurance Company has not come forward to nominate its Arbitrator as per clause 11 extracted above, the sole Arbitrator appointed by the claimant entered upon arbitration and sent notice to the Insurance Company for the arbitration proceedings. However, the Insurance Company took hyper-technical stand and refused to appear before the Arbitrator.

6. In fact, the Insurance Company by its letter dated 18.12.2001 addressed to the sole Arbitrator nominated by the insurer claimed that the insurer had no power to appoint the Arbitrator.

7. Left without any