MAHARAJ SINGH Vs. VULCAN INS COMPANY LIMITED

JUDGEMENT

(1.) , J.

(2.) THE appellant herein is the sole proprietor of Khatauli Manure Mills, Khatauli, District Muzafar Nagar. He had obtained a loan from the Punjab National Bank Ltd , (hereinafter referred to as the Bank) and executed a mortgage deed dated 10.11.1961 in favour of the Bank hypothecating the fixed assets of the factory as well as the stocks and raw materials kept in the factory premises as security for the loan. THE Bank in turn insured the mortgaged property with the Vulcan Insurance Co Ltd., (hereinafter referred to as the Insurance Company) under three insurance policies for a total amount of Rs. 3,15,000.00. THE relevant terms of these insurance policies would be referred to at a later stage, but, at this stage, it is sufficient to state that these policies contained an arbitration clause under which any dispute between the parties with regard to the loss or damage suffered by the appellant as a result of any accidental fire would be referred to the arbitration of a single arbitrator agreed to by both the parties or in the event of the parties not agreeing to one arbitrator, to the arbitration of two arbitrators, one of whom was to be appointed by each party and in the event of either party not appointing his arbitrator, to the arbitration of a sole arbitrator appointed by one of the parties. It so happened that a fire broke out in the appellant's factory on the night between 28.2.1963 and 1.3.1963. THE Bank informed the Insurance Company of this fire and the representatives of the Bank as well as the Insurance Company inspected the appellant's factory for the purpose of estimating the loss or damage caused by the file. According to the appellant, he suffered a loss of Rs. 24,800.00 so far as the fixed assets were concerned and a loss of Rs. 2,73,000.00 and odd so far as the stocks including the raw materials were concerned. But according to the Insurance Company, the loss caused by the fire was assessed only at Rs. 4,620.00. When the appellant issued a notice to the Insurance Company calling upon it to pay the amount of Rs 2,97,800 and odd representing the loss suffered by him as a result of the fire, the Insurance Company replied totally repudiating this liability to pay any amount to the appellant. THEreupon, the appellant issued another notice to the Insurance Company calling upon it to refer the dispute to arbitration as per the terms of the insurance policies and also named one Mr K.N. Banerjee as arbitrator appointed by the appellant. THE Insurance Company replied saying that since it had repudiated its liability to pay any amount to the appellant it was not agreeable to refer the dispute to arbitration and, therefore, it did not think it necessary to appoint any arbitra or on its behalf. THEreupon, the appellant filed an application in the Court of the Subordinate Judge, 1st Class, Delhi, under section 20 of the Arbirtation Act (hereinafter referred to as the Act) for the filing of the arbitration agreement embodied in the insurance policies and for referring the question regarding the quantum of the loss suffered by the appellant and the question of the liability of the Insurance Company to pay the said amount to the appellant to the arbitration of the arbitrators appointed by the parties or in case the Insurance Company was not willing to appoint an arbitrator, to the arbitration of the sole arbitrator to be appointed by the Court. THE application was resisted by the Insurance Company on various grounds. It was contended that as the Insurance Company had repudiated its liability under clause 13 of the insurance policy, it was not open to the appellant to ask that his claim for the reimbursement of the loss or damage suffered by him be referred to arbitration. It was further contended that the application filed by the appellant under section 20 of the Act was barred by time. THE learned Subordinate Judge framed the following issues : 1. Whether this petition is not maintainable for the reasons given in para Nos. 1 and 3 of the preliminary objections of the reply of respondent No. 1 2. Whether the petition is barred by limitation ? 3. Relief. THE learned Subordinate Judge held issue No. 1 in favour of the appellant. He gave his finding that notwithstanding the repudiation of the appellant's claim by the Insurance Company, the appellant was entitled to invoke the arbitration clause in the insurance policies. But he held issue No. 2 against the appellant and recorded the finding that the period of limitation had been prescribed in clause 19 of the arbitration agreement and that the appellant had not filed the application within the period of limitation prescribed in the said clause. THErefore, on issue No. 3, he dismissed the application filed by the appellant. THE appellant has filed the present appeal against the said order of the learned Subordinate Judge.

(3.) IN the result, the order of the learned lower Court is set aside and the case is remanded to him for the appointment of arbitrators under section 20 of the Act. The appeal is allowed; but there shall be no order as to costs.