An arbitration clause only applies when the insurer admits liability; full repudiation precludes arbitration, and an improperly constituted Tribunal cannot issue an enforceable award.

JUDGMENT :

Subodh Abhyankar, J.

1. This Arbitration Appeal under Section 37 of the Arbitration and Conciliation Act , 1996 has been filed by the appellant-United India Insurance Co. Ltd., against the order dated 14.11.2017, passed by the District Judge, Ratlam in Misc.Civil Case No.22/2007 (old No. 17/2004) whereby, the Award passed by the Arbitrator dated 13.9.2004, has been affirmed and the application filed by the appellant u/s.34 of the Act of 1996, has been rejected.

2. The questions which have fallen for the consideration of this court are as under :-

1.Whether the arbitration clause could have been invoked in the present case.

2.Whether the arbitration tribunal could have proceeded further after one of the arbitrators left the proceedings midway?

FACTS OF THE CASE.

Shorn of details, the facts giving rise to the present appeal are that the respondents no.1 and 2 had obtained a fire policy from the appellants United India Insurance Co. Ltd., covering their stocks, lying in the premises of the Respondent factory. The policy was valid for the period 13.5.1989 to 12.5.1990. During the policy period, a claim was put forth by the respondents, alleging fire in their premises, which resulted in damages. The appellant appointed surveyor/investigator and found that the fire was deliberate, and repudiated the claim vide their communication dated 24.12.1991. Copy of the repudiation letter has also been placed on record. Being dissatisfied by the decision of repudiation, the respondents filed a regular civil suit for recovery of Rs.24,12,500/-/.

During the pendency of suit, the respondents no.1 and 2 moved an application for joining their financer Punjab National Bank, as one of the Defendants. The said application was allowed by the trial court, and the financer of the respondents no.1 Punjab National Bank was also added as one of the defendants. The newly added defendant (Punjab National Bank) moved an application, that since the policy contained an arbitration clause , the matter be referred for arbitration. In spite of opposition by the appellant, the said application was allowed, and the matter was referred to the Arbitration.

The trial court directed the parties to appoint one arbitrator each. Thus, the arbitration tribunal was constituted with three arbitrators, viz., one appointed by the appellants, one by the respondent/insured, and one by the PNB, who was admittedly the non-signatory of the agreement.

The arbitration tribunal vide their award dated 13.9.2004, allowed the claim of the respondent against the appellant and directed for payment of Rs. 24,12,500 with interest to the respondent no.1 Smt Rekha & respondent no.2 Prakiran Being aggrieved of the same, the appellant filed an application u/s.34 of the Arbitration and Conciliation Act , 1996, and by order dated 14.11.2017, the trial court rejected the objections. Hence this appeal.

REGARDING SUBMISSION OF APPELLANT

3. Shri S.V. Dandwavte, learned counsel for the appellant/Insurance Company has submitted that not only that the Arbitration Tribunal itself was not properly constituted, in fact, even as per the Arbitration Agreement between the parties, it was not a dispute which could be referred to the Arbitration Tribunal.

4. Shri Dandavate has drawn the attention of this Court to Clause 13 of the insurance policy which inter alia provides that if any difference arises between the parties as to the quantum to be paid under the policy, liability being otherwise admitted, only 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.