The main legal point established in the judgment is the need to refer disputes to arbitration when there is an arbitral agreement and a genuine dispute, while also considering the potential unfairness and unconscionability of contractual terms.

JUDGMENT :

In this application, filed under Section 11 sub-Section 6 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as the Act for brevity), the applicant M/s Compack Foam Pvt. Ltd., a registered company, has prayed for appointment of Arbitrator for settlement of dispute between it and the National Insurance Company Ltd., i.e. the sole respondent in this case for resolving dispute between them in relation to the insurance claim alleged by it.

2. The facts of the case may be stated as follows:-

The claimant, being a registered company, having its registered office at Raipur Industrial Area was carrying out business of manufacturing of foams etc. It was availing a credit facility by placing its raw materials, good in process and finished stocks as well as the plant and machinery from the State of Bank of India. It has also obtained an insurance policy covering insurance of plant and machinery and tools for Rs. 8.00 crores, stocks of raw, semi and finished goods of the trade for Rs. 2.00 crores and factory building including boundary wall for Rs. 75.00 lakhs. In all insured declared value/sum insured of Rs. 10.75 crores against the Policy No. 462200/11/11/3300000014 w.e.f. 19.04.2011 to 18.04.2012. The said insurance policy covers the risk of the complainant as well as the State Bank of India. A insurance premium of Rs. 1,72,968/- was paid by the company.

That on 16.10.2011, there was fire in the factory premises which caused heavy damage to the stock as well as plant and machinery and the building. The applicant immediately reported the matter to the fire station and requested the fire officer for assessment of the loss. FIR was lodged on the same day. On the request of the applicant, the concerned officer inspected the premises and came to the conclusion that fire hazard occurred because of electric shot circuit and then assessed the loss of electric cable damage to the tune of Rs. 25,63,068.00/-. On 24.01.2012, the applicant filed claim before the respondent giving full details. As per the applicant, an amount of Rs. 5,02,57,301.00/- was the total loss to it. The loss assessor appointed by the respondent-insurance company assessed the loss of Rs. 1,33,68,112/- submitted its report on 26.04.2012. Such report was challenged by the applicant. However, the respondent-company further reduced the said compensation amount, assessed by its own assessor, by another Rs. 12 lakhs and made final assessment of Rs. 1,21,46,885/- against the total loss claimed by the applicant of Rs. 5 crores (approx.).

In the meantime, due to non-settlement of the claim by the respondent-company, the applicant could not repay the loan amount and the State Bank of India declared its account as N.P.A. On 15.10.2014, the applicant prayed the bank for settlement of the loan and, ultimately, on 18.04.2015, the applicant and the bank entered into compromise settlement, and settled the loan amount to the tune of Rs. 9.00 crores with certain conditions. On 28.04.2015, the bank supplied copy of the statement of the loan account which revealed that on 30.11.2012, an entry of Rs. 1,21,46,885/- was shown as credited. On an enquiry, the bank informed the applicant that the Insurance Company had made such payment. Thereafter, the applicant filed an application before this Court and notice was sent to the Insurance Company. The said application was registered as Arbitration Application No. 7 of 2016 which was dismissed on 26.04.2019 giving liberty to the applicant to invoke the jurisdiction of this Court, if needed, after complying with the second limb of Clause 13 of the arbitration agreement which provides for appointment of an arbitrator by each of the parties. In compliance of the said order, and by invoking the second limb of the arbitration agreement the applicant, vide, letter dated 10.05.2019, communicated the respondent that the applicant has already nominated and appointed Hon’ble Mr. Justice Krishan Kumar (Retd.) Judge of the High Court of A