ROSAMMA JOSEPH Vs. UNITED INDIA INSURANCE CO LTD

JUDGEMENT

(1.) PLAINTIFF, owner of a lorry filed a suit claiming rs. 2,79,500/- from the insurer as compensation for damage caused to the lorry in an accident on 19-1-1984. Insurer raised various contentions seeking to absolve itself from the liability and also contended that the suit is not maintainable in law inasmuch as plaintiff had not obtained an award preceding the filing of the suit. The trial court upheld this contention and dismissed the suit as not maintainable. Hence this appeal.

(2.) EXT. B1 is the insurance policy. Condition No. 8 of the policy states, inter alia as follows: "if any difference shall arise as to the quantum to be paid under this policy being other wise admitted such difference shall independently of other questions be referred to the decision of an arbitrator, to be appointed in writing by the parties in difference, or if they cannot agree upon a single arbitrator, to the decision of two disinterested persons as arbitrators" The condition further stipulates: "it is clearly agreed and understood that no difference or dispute shall be referable to arbitration, as herein before provided, if the company has disputed or not accepted liability under j or in respect of this policy. It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators or umpire or the amount of the loss or damage shall be first obtained. " The trial court, on a consideration of condition No. 8, held that any dispute regarding quantum of money to be paid under the policy has to be referred for arbitration and it shall be a condition precedent to any right of action or suit upon the policy that the award by such arbitrator, arbitrators or umpire on the amount of the loss or damage shall first be obtained. Correspondence prior to the suit would show that insurer offered to pay compensation of Rs. 94,500/- on the basis of valuation made by the surveyor. But the plaintiff was not satisfied with the offer. Thus it is clear that prior to the suit there was dispute as to the quantum to be paid under the policy. Going by the terms of condition No. 8 of the policy plaintiff could not file a suit without obtaining an award from arbitrator, arbitrators or umpire. It is not the plaintiff s case that prior to the suit insurer had disputed or not accepted the liability under or in respect of the policy. Liability was accepted, but there was a dispute regarding the quantum of compensation payable.

(3.) THE decision of Mathew, J. in Vanguard Fire & general Insurance Co. 's case (1963 KLT 415) came up for consideration before the Supreme Court in Vulcan Insurance Co. Ltd. v. Maharaj Singh & another (AIR 1976 S. C. 287 ). THE contract in that case contained only a pure and simple arbitration agreement regarding dispute as to quantum or extent of loss or damage. THE agreement did not refer to any dispute regarding liability. THE supreme Court therefore held that the dispute raised by the insurer was not covered by the arbitration clause. THE court proceeded to consider the plea of limitation based on the conditions in the contract. In the course of the discussion the Supreme Court adverted to the decisions of English Courts which were considered by Mathew, J. as also other decisions and observed in paragraph 22 as follows: "the two lines of cases clearly bear out the two distinct situations in law. A clause like the one in Scott v. Avery bars any action or suit if commenced for determination of a dispute covered by the arbitration clause. But if on the of her hand a dispute cropped up at the very outset which cannot be referred to arbitration as being not covered by the clause, then the Scott v. A very clause is rendered inoperative and cannot be pleaded as a bar to the maintainability of the legal action or suit for determination of the dispute which was outside the arbitration clause We notice that the arbitration clause in Scoff v. Avery is couched in a comprehensive language stipulating award by an arbitrator as a condition precedent. In our view the Supreme Court has not only disapproved the view taken by Mathew, J. but approved it in the above quoted observation. We are therefore bound to follow that view.