The claimant lacked legal standing to pursue insurance claims as rights had transferred to another entity, rendering the arbitration ineffective.

ORDER :

N.ANAND VENKATESH, J.

1. This petition has been filed under Section 34 (2) of the Arbitration and Conciliation Act, 1996 (for short, the Act) seeking to set aside the award dated 23.10.2021 passed by the Arbitral Tribunal and the further clarification given vide order dated 14.12.2021.

2. Heard both.

3. The case of the petitioner is as follows:

(a) The petitioner is an Insurer. The respondent is the claimant, which is a processor and exporter of cashew nuts, before the Arbitral Tribunal. The dispute arose out of the repudiation and settlement of claims under three insurance policies issued by the petitioner.

(b) The salient features of the insurance policies are as follows:

(i) A Fire Floater Declaration Policy bearing No. 701080211150400000002 covering stocks of Raw Cashew Nuts (RCNs), finished/semi-finished goods and packing materials at multiple locations, including the insured premises situated at Kumaragiri Village, Thattaparai Vilaku, Pudukottai Post, Tuticorin for a floater sum insured of Rs.140,10,00,000/- valid for the period from 22.6.2015 to 21.6.2016;

(ii) A Standard Fire and Special Perils Policy bearing No.71080311150100000113 covering stock of cashew nuts in process at six locations, including the said premises for a sum insured of Rs.15 Crores valid for the period from 22.6.2015 to 21.6.2016; and

(iii) A Standard Fire and Special Perils Policy bearing No.71080311140100000419 covering the building, plant and machinery and furniture and fixtures at Pudukottai premises for a sum insured of Rs.8,25,50,000/- valid for the period from 29.11.2014 to 28.11.2015.

(c) On 22.11.2015, catastrophic floods caused extensive damage to the insured stock of RCNs, machinery, office furniture and the compound wall at the respondent/claimant’s godowns in Kumaragiri Village, Thattaparai Vilaku, Pudukottai, Tuticorin. The respondent reported the loss immediately. The Insurer appointed one Mr.Basheer of M/s.J.Basheer & Associates as the Surveyor. The Surveyor inspected the site on 25.11.2015 and advised mitigative measures including drying the water-soaked RCNs.

(d) Pursuant to the inspection, the Surveyor submitted an interim survey report dated 19.1.2016 recommending an “on account” payment of Rs.2 Crores. Acting thereon, the Insurer released an interim payment of Rs.1.5 Crores on 07.6.2016.

(e) Thereafter, a dispute arose between the parties with regard to the methodology for assessment of loss in respect of the damaged RCN. The respondent/claimant contended that the flood damage had rendered further processing commercially unviable owing to deterioration in yield and quality and accordingly sought to treat the entire stock as a total loss. On the other hand, the Insurer contended that the stock, once dried, remained processable.

(f) In order to resolve the said dispute, a joint sample processing exercise was conducted between 05.5.2016 and 08.5.2016. The kernels obtained from the said exercise were forwarded for analysis to the King’s Institute, Guindy, which certified that the kernels were fit for human consumption and complied with the prescribed food safety standards.

(g) Simultaneously, for the purpose of determining the value at risk and examining the issue of under-insurance, the Surveyor appointed one M/s.RDV Associates, Chartered Accountants on 22.3.2016. The report submitted by the said Chartered Accountant Firm on 10.5.2017, which formed part of the Surveyor’s final assessment, highlighted several discrepancies and deficiencies in the respondent/claimant’s books of accounts.

(h) After prolonged correspondence and upon obtaining belated approval from the Surveyor, the respondent/claimant