Allowed

M/s.Gati Ltd. v. The Oriental Insuranace Company Ltd.

Telangana HC3 Jan 2012ARBAPPL/67/2011

Case brief

AI extract

What is this about?

The High Court entertained an application for appointing an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. The court held that the insurer cannot deny liability based on delay in claim submission where the transaction occurred within the policy period, as per the policy terms.

What did the court decide?

Appointment of Sri C.Rambabu, a retired District Judge, as arbitrator for resolution of disputes relatable to the Courier Liability Insurance Policy dated 31-12-2008.

M/s.Gati Ltd. Vs The Oriental Insuranace Company Ltd. — Insurance | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY

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Arbitration Application No.67 of 2011

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Date:03rd January, 2012

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Between:

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M/s.Gati Ltd., rep. by its Asst. Manager (Legal) M.Dinesh Goud, Secunderabad.

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…Applicant

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And

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The Oriental Insurance Company Ltd., rep. by its Senior Divisional Manager

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…Respondent

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THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY

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Arbitration Application No.67 of 2011

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ORDER:

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This application has been taken out by M/s.Gati Ltd. under subsections (2) and (6) of Section 11 of the Arbitration and Conciliation Act, 1996, (for short, ‘the Act’) r/w. Scheme for Appointment of Arbitrators, 1996, seeking appointment of arbitrator for resolution of the disputes relatable to Insurance Policy, dated 31.12.2008.

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2. The applicant is a company incorporated under the Companies Act, 1956, having its registered office at Hyderabad. It is engaged in the business of supply of chain management, transport and public carrier and logistic services to the customers. The respondent is a Company engaged in the business of insurance having its registered office at Mumbai. The applicant obtained courier Liability Insurance policy from the respondent company for the period period from 01.01.2009 to 31.12.2009 and paid a premium of Rs.40,44,960/-. The policy specified various contingencies. Under the policy, the respondent company undertook to pay to the applicant for the

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accidental loss or damage to the parcels and/or documents and goods etcetera. Pursuant to the policy dated 31.12.2008, the applicant raised various claims amounting to Rs.80,00,000/-. The respondent Company indemnified the applicant to a tune of Rs.11,56,936/-. After expiry of the policy period, the applicant shifted to some other company and obtained policy from National Insurance Company Limited. Thereupon, the respondent Company stopped clearing the claims of the applicant relatable to the policy period on the ground that the claims have been raised after several months contrary to the terms of the policy. According to the applicant, the ground raised by the respondent Company was untenable as the respondent Company earlier cleared various claims of the applicant, which were raised after several months. Since the disputes arose between the applicant and the respondent Company relatable to the policy dated 31.12.2008, the said disputes are required to be settled byway of arbitration as per Condition 8 of the policy. The applicant invoked the arbitration clause and issued a notice proposing the name of Sri Chalapathi Rao, Retd. District Judge, as arbitrator. The respondent Company issued a reply, dated 24.04.2011, disputing the claim of the applicant. Hence, this Arbitration Application seeking the prayer stated supra.

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3. The respondent Company filed counter affidavit resisting the relief sought for by the applicant. A.Prabhu Das, Regional Manager, Hyderabad, Regional Office of the respondent Company, has sworn to the counter affidavit. Issuance of policy is not disputed by the respondent Company. The policy is for the period of one year i.e., from 01.01.2009 to 31.12.2009. The claims, which are not intimated within the period of policy, cannot be maintained. The Memorandum of Understanding between the respondent Company, the applicant and Edelwesiss Ins. Brokers Pvt. Ltd. against Courier Legal Liability Policy is also important document and the compliance of the conditions therein is mandatory. The intimation of the claims is to be made

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immediately, as every claim is to be enquired into through a licensed surveyor/investigator. The claim intimations are to be followed by the applicant arranging survey for damages through IRDA licensed Surveyor. The applicant has to submit documents to the respondent through the third party for full and final settlement of the claim. The entire endeavour of the memorandum of understanding is that the claim intimation is to be done immediately and submission of the claim documents are to be submitted in accordance with the line of the policy terms and conditions. Edelwesiss Ins. Brokers Pvt. Ltd. is a proper and necessary party as it is the said party, which has to monitor and facilitate the claims and the settlement of the claims. Since the very claims are beyond the policy period, they are not admissible and therefore, the application is not maintainable. The claims made during the policy period are either settled or rejected with reasons assigned. Since the very liability is not admitted, the question of referring the dispute to the arbitrator for adjudicating the quantum does not arise.

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4. Heard learned counsel appearing for the applicant and the learned counsel appearing for the respondent Company. 5. Learned counsel appearing for the applicant submits that the respondent having received the premium under Courier Liability Insurance policy cannot be permitted to dispute its liability under the said policy. A further submission has been made rejection of claims made by the applicant on the ground that the claims are not submitted within the policy period is wholly unsustainable since the claims are relatable to the policy period, i.e., from 1.1.2009 to 31.12.2009. He would also contend that the respondent accepted the claims on earlier occasion, which were submitted even after expiry of the policy period. According to the learned counsel, all the claims made by the applicant are relatable to the period from 1.1.2009 to 31.12.2009. Once the claims are relatable to the policy period, the date of claims is not much material and indeed on earlier

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occasion, such claims were settled by the respondent. Learned counsel refers Page No.36 of the material papers wherein the claims settled by the respondent have been detailed. Particular reference has been made to the claims appearing at Sl.No.52, 53, 54, 63, 64, 65, 67, 68 to 87, 97, 908, 100 and 102 to 105.

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6. Per contra; learned counsel appearing for the respondent submits that the applicant has not submitted the claims within the policy period and no reasonable explanation has been offered by the applicant for submitting claims after expiry of eleven months of the policy period. A further submission has been made that under the terms of the policy, what is required to be adjudicated by the arbitrator is only quantum and not the liability. Since the respondent is disputing its very liability on the ground of claims being not submitted by the applicant within the policy period, the question of appointment of arbitrators does not arise. In support of his submissions, reliance has been placed on Clause (10) of the Insurance Policy apart from placing reliance on the judgments of the Supreme Court in National Insurance Company Limited v. Boghara Polyfab Private Limited^[1] , Vikram Greentech India Limited v. New India Assurance Company Limited^[2] .

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7. I n Vikram Greentech India Limited case (2^nd supra), the Supreme Court held that an insurance contract is a species of commercial transactions and must be construed like any other contract to its own terms and by itself. The endeavour of the Court must always be to interpret the words in which the contract is expressed by the parties. The Court while construing the terms of policy is not expected to venture into extra liberalism that may result in rewriting the contract or substituting the terms which were not intended by the parties. The insurer cannot claim anything more than what is covered by the insurance policy.

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8. Clause (10) of the Policy reads as hereunder:-

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“9) The policy shall become null and void and Company shall not be liable to make any payment in respect of any claim if such claim shall be in any manner fraudulent or supported by any settlement or device whether by the insured or by any person on behalf of the insured if the insurance have been continued in consequence of any material misstatement or the non-disclosure of any material information by or on behalf of the insured”.

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9. It is contended by the learned counsel appearing for the respondent that once the respondent company disclaimed liability, the only course open to the applicant is to file a suit within 12 calendar months and the disclaimer cannot be subject matter of arbitration.

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10. I have gone through the reply notice dated 24-4-2011 issued by the respondent. It is nowhere pleaded in the reply that the rejection of the claim of the applicant comes under Clause (10) of the policy. Even in the counter to the application, the respondent has not pleaded that rejection of the claim of the applicant comes within the purview of Clause (10) of the policy. In the absence of any pleadings, it is impermissible for the respondent to contend that rejection of the claim of the applicant comes within the purview of Clause (10) of the policy.

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11. As per the terms of the policy, disputes or differences, if any, between the parties are required to be resolved by way of arbitration. Clause (8) of the policy reads as hereunder:-

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“8)If any dispute or difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration the same shall be referred to a panel of three arbitrators, comprising of two arbitrator to be each of the party to the dispute /difference and the third arbitrator be appointed by such two arbitrators and shall be conducted

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under and in accordance with the provision of the Arbitration and Conciliation Act, 1996”.

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12. The plea of the respondent is that the claims made by the applicant are not before the expiry of the policy period. The question is whether the respondent can reject the claim on the ground of claim not being made within the policy period. The answer is found in the policy conditions. Condition No.16 reads as hereunder:-

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“16) The claim will be paid for all transaction done by the insured during the policy period only even after the expiry of the policy period.”

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13. A plain reading of the above referred clause indicates that the cause for claiming compensation should have occurred within the policy period. However, the claim can be made even after expiry of policy period. Indeed, the applicant made certain claims even after expiry of the policy period in respect of the transactions which have occurred within the policy period and the claims have been settled. Settlement of some of the claims by the respondent have been detailed supra. Once the plea advanced by the respondent for negativing the claim on the ground of its being not liable is rejected, the next issue is only with regard to quantum of amount. As stated above, the quantum is required to be adjudicated by way of arbitration, as provided in clause (8) of the conditions of the policy. In that view of the matter, I find that the applicant made out a valid ground for appointment of an arbitrator for resolution of the disputes between the parties relatable to Courier Liability Insurance Policy dated 31-122008.

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14. Accordingly, the application is allowed appointing Sri C.Rambabu, a retired District Judge, as arbitrator for resolution of the disputes between the parties relatable to Courier Liability Insurance Policy dated 31-12-2008. The arbitrator is at liberty to fix his own fees.

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_____________________ B.SESHASAYANA REDDY, J

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Dt.03-01-2012

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CS/RAR

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THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY

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Arbitration Application No.67 of 2011

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Date:03rd January, 2012