Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Bom) 938

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SANDEEP V. MARNE, J.
United India Insurance Company Limited - Petitioner
Versus
UPL Limited - Respondent
Commercial Arbitration Petition (L) No. 10809 of 2024 With Interim Application (L) No. 11225 of 2024 With Interim Application (L) No. 11117 of 2024
Decided On : 22-04-2026
Advocate Appeared :
For the Petitioner : Mr. Sharan Jagtiani, Senior Advocate with Ms. Surbhi Agarwal & Ms. Netra Haldankar i/b Dhruve Liladhar & Co.
For the Respondent : Mr. Shiraz Rustomjee, Senior Advocate with Ms. Shreya Parikh, Mr.Archit Jayakar, Ms. Pooja Yadav, Mr. Mihir Kakade & Mr. Kshitij Abbhi i/b Jayakar & Partners

Advocates:
For the Appellants/Petitioners:Mr. Sharan Jagtiani, Senior Advocate with Ms. Surbhi Agarwal & Ms. Netra Haldankar i/b Dhruve Liladhar & Co.
For the Respondents:Mr. Shiraz Rustomjee, Senior Advocate with Ms. Shreya Parikh, Mr. Archit Jayakar, Ms. Pooja Yadav, Mr. Mihir Kakade & Mr. Kshitij Abbhi i/b Jayakar & Partners

Partial payment of insurance claim from single incident admits liability; dispute over balance (overhaul costs) is quantum not liability, arbitrable under policy clause restricting to admitted liability cases.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 16 and 34 - Insurance policy - Arbitration clause restricting reference to disputes as to quantum where liability otherwise admitted - Partial payment towards material damage and business interruption claims arising from single incident admits liability - Balance claim for overhaul expenses cannot be segregated into distinct 'incident repairs' and 'overhaul' - Artificial bifurcation impermissible, dispute relates to quantum not liability - Arbitral award holding dispute arbitrable upheld as not perverse - No unequivocal repudiation of overhaul claim despite tentative letters; prior recommendations for overhaul and joint surveyor reports support admissibility - (Paras 1, 38-75)

(B) Insurance policy - Proximate cause - Incident causing engine trip, bearing damage, vibrations post limited repairs necessitates full overhaul - Evidence including post-repair testing, expert testimony, communications establishing accident as cause despite observations of corrosion etc. post-disassembly - Onus on insurer to prove exclusions not discharged without oral evidence - Arbitral finding not perverse - (Paras 76-83)

Facts of the case:
Gas turbine engine insured under industrial all risk policy suffers damage from oil sump incident leading to alarm, trip, bearing cage breakage - Sent abroad for inspection/repairs - Insurer recommends full overhaul to avoid future claims but later limits payment to direct accident repairs - Partial payment made without specifying full discharge or liability denial - Arbitration invoked for balance including overhaul and interruption losses - Sole arbitrator partly allows claim - Challenge under Section 34 dismissed.

Findings of Court:
Dispute purely quantum, arbitrable; accident proximate cause of overhaul; exclusions inapplicable; award of balance principal, interest, costs upheld.

Issues: Whether balance overhaul claim dispute of quantum or liability under policy arbitration clause; whether incident proximate cause necessitating overhaul or due to pre-existing exclusions like wear, corrosion.

Ratio Decidendi: Partial sanction of single indivisible claim from one incident admits liability making unpaid portion quantum dispute arbitrable - Letters recommending overhaul estop later tentative denials; no final repudiation post claim bills; surveyor reports affirm admissibility - Overhaul required post limited repairs failure, vibrations linked to incident per contemporaneous documents/expert evidence.

Result: Commercial arbitration petition dismissed; award upheld; deposited amount releasable to respondent with interest; 6-week stay on release.

Table of Content
1. accident-triggered engine overhaul claim under policy. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17)
2. parties dispute quantum versus liability arbitrability. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35)
3. arbitration clause limits to admitted-liability quantum. (Para 36 , 37 , 38 , 39 , 40 , 41)
4. insurer conduct implies no liability repudiation. (Para 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66)
5. partial payment creates arbitrable quantum dispute. (Para 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75)
6. accident proximate cause for engine overhaul. (Para 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83)
7. arbitral award upheld under section 34. (Para 84 , 85 , 86 , 87)

Judgment :

SANDEEP V. MARNE, J.

1) When a Gas Turbine Engine is damaged due to an accident and the insured is required to get the Engine overhauled and raises a claim towards the overhauling expenses and the insurer sanctions only the expenses for accidental repairs, whether the dispute relating to non-payment of balance claim is a dispute of ‘quantum’ or dispute of ‘liability’ is the issue that this Court is tasked upon to decide in the present Petition. To paraphrase, whether it is permissible for the insurer to segregate the claim in respect of the damage to the Engine into ‘repairs claim’ and ‘overhaul claim’ and take a stand that mere payment for the former claim does not amount to acceptance of liability in respect of the latter claim, making the latter claim non-arbitrable? The issue arises in the light of typical clause in the Insurance Policy providing for arbitration only in respect of disputes involving quantum and not in respect of those for which the liability is not expressly admitted.

2) Petitioner-Insurance Company has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) challenging the arbitral Award dated 8 December 2023 passed by the learned sole Arbitrator. The Tribunal has treated the claim of the Respondent as a single indivisible claim and has held that since the claim is partially awarded, the dispute relates to ‘quantum’ and not to ‘liability’. The Tribunal has further held that the accident was the proximate cause of overhauling of the Gas Turbine Engine. By the impugned Award, the Tribunal has awarded a sum of Rs.41,98,12,970/- in favour of the Respondent along with simple interest @ 12% p.a. on the entire awarded amount from the date of the award. The Tribunal has also awarded costs of arbitration of Rs. 2 crores in favour of the Respondent.

3) This is the second round of arbitration after the previous award by the Three Member Arbitral Tribunal was set aside by this Court.

FACTS

4) Petitioner is a public limited and nationalised general insurance company incorporated in the year 1938 under the Companies Act, 1913. Respondent, who was previously known as United Phosphorus Limited, is a Public Limited Company incorporated in the year 1985 and is engaged in the business of agrochemicals such as pesticides. Respondent is also a successor in interest of its erstwhile subsidiary of Search Chem Industries Ltd. (SCIL) which has merged into the Respondent.

5) On 22 February 2001, SCIL purchased Industrial All Risk Policy to insure its Captive Power Plant which was installed by the Respondent in its factory at Jhagadia, Gujarat. The Power Plant used a Gas Turbine Engine bearing No. 185-195 (GT Engine) which was manufactured by GE Packard Power Inc. (GE). The policy was valid from 22 February 2001 to 21 February 2002 and covered (i) material damage with the sum insured of Rs.156,00,00,000/- and (ii) business interruption with the sum insured of Rs.11,71,31,000/-

6) The Industrial All Risk Policy included exclusion causes under which the policy did not cover damage to the property incurred by latent defect, gradual deterioration, dis

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2026 Supreme(Bom) 938

Partial payment of insurance claim from single incident admits liability; dispute over balance (overhaul costs) is quantum not liability, arbitrable under policy clause restricting to admitted liability cases.

Cases Referred (6)