An arbitration clause in an insurance policy that applies to a difference as to the amount of loss or damage does not apply to a claim which the company rejects altogether.

Harnam Singh, J.

1. This is an appeal under Clause 10, Letters Patent from the judgment given by Kapur J. in F. A. F. O. No. 56 of 1949.

2. On 11-6-1947, Bodh Raj Shah, hereinafter referred to as the applicant, took out an insurance policy including riot risk, the amount of insurance being Rs. 50,000 on the house and Rs. 40,000 on the furniture & household goods.

3. On 21st August 1948, the applicant initiated proceedings under Section 20, Indian Arbitration Act, 1940 , hereinafter referred to as the Act. In that application the applicant maintained that in the last week of August 1947, the furniture and household goods covered by the policy were looted in the riots that followed the partition of the country, that he had intimated to the Great American Insurance Company, Ltd., hereinafter referred to as the Com- pany, that the furniture and household goods had been looted and had claimed Rs. 38,000/-from the company on the basis of the insurance policy.

4. In the written statement the company pleaded inter alia that the arbitration clause only applied to a difference as to the amount of loss or damage and not to a claim which the company rejected altogether, whatever the loss might be. The arbitration clause in the policy provides :

"If any difference arises as to the amount of any loss or damage 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 case either party shall refuse or fail to appoint an arbitrator within, two calendar months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint a 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 meetings. The death of any party shall not revoke or affect the authority or powers of the arbitrator, arbitrators of umpire respectively; and in the event of the death of an arbitrator or umpire, another shall in each case be, appointed in his stead by the party or arbitrators (as the case may be) by whom the arbitrator or umpire so dying was appointed. The costs of the reference and of the award shall be in the discretion of the arbitrator, arbitrators or umpire making the award. And it is hereby expressly stipulated and declared that It shall be a condition pre-cedent 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 if disputed shall be first obtained."

5. Oh the pleadings of the parties the Court of first instance fixed the following issue: "Whether suit can be referred to arbitrators under the terms of the policy?"

6. In deciding the issue the Court found for the applicant and ordered the arbitration agreement to be filed in Court.

7. From the order passed by the Court on 14th June 1948, the Company appealed under Section 39 of the Act.

8. In. deciding the appeal Kapur J. thought that when the company was not in a position to admit or deny the loss the dispute fell within the arbitration clause of the policy.

9. Mr. Bishan Narain appearing for the Company basing himself upon -- Jureidini v. National British and Irish Millers Insurance Co. Ltd,, (1915) A C 499 and -- Eagle Star & British Dominions Insurance Co. v. Dinanath, AIR 1923 Bom 249, urges that the arbitration clause only applies to a difference as to the amount of loss or damage.

10. In -- Heyman v. Darwins Ltd., (1942) AC 356, Viscount Simon L. C. examined the decision given i