ORIENTAL INSURANCE COMPANY LIMITED versus M/S. NARBHERAM POWER AND STEEL PVT. LTD.

Citation: [2018] 4 S.C.R. 826 · Decided: 02-05-2018 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2018]  4 S.C.R.
ORIENTAL INSURANCE COMPANY LIMITED
v.
M/S. NARBHERAM POWER AND STEEL PVT. LTD.
(Civil Appeal No. 2268 of 2018)
MAY 02, 2018
[DIPAK MISRA, CJI, A. M. KHANWILKAR AND
DR. D. Y. CHANDRACHUD, JJ.]
Arbitration and Conciliation Act, 1996: s.11(6) – Appointment
of arbitrator – Dispute between insurer and insured – Insurance
claim – Repudiation of claim – Insurer declined to refer the disputes
to arbitrator as requested by the claimant – Claimant filed
application for appointment of arbitrator – High Court appointed
arbitrator – Appeal by insurer – Held: The arbitration clause
contained in the agreement between the parties clearly stated that
if the insurer disputes the liability under or in respect of the policy,
there can be no reference to the arbitrator – Insurer clearly disputed
the liability to pay damages in toto – The dispute did not pertain to
the quantum –  Such a situation, falls within the concept of denial
of disputes and non-acceptance of liability – Once the insurer
disputed or not accepted the liability under or in respect of the
policy, no difference or dispute could have been referred to
arbitration – The only remedy is to institute a civil suit for mitigation
of the grievances – Insurance.
Deeds and documents: Insurance policy – Interpretation of –
Held: The parties are bound by the clauses enumerated in the policy
and the court does not transplant any equity to the same by rewriting
a clause – The Court can only interpret such stipulations in the
agreement.
Allowing the appeal, the Court
HELD: 1. The arbitration clause contained in the agreement
between the parties clearly states that once the insurer disputes
the liability under or in respect of the policy, there can be no
reference to the arbitrator.  It is contained in the second part of
the clause. The third part of the Clause stipulates that before any
right of action or suit upon the policy is taken recourse to, prior
[2018] 4 S.C.R. 826
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award of the arbitrator/arbitrators with regard to the amount of
loss or damage is a condition precedent.  The High Court  laid
emphasis on the second part and, on that basis, opined that the
second part and third part do not have harmony and, in fact, sound
a discordant note, for the scheme cannot be split into two parts,
one to be decided by the arbitration and the other in the suit.
[Para 8] [832-E-G]
2. The parties are bound by the clauses enumerated in the
policy and the court does not transplant any equity to the same
by rewriting a clause. The Court can interpret such stipulations
in the agreement. It is because they relate to commercial
transactions and the principle of unconscionability of the terms
and conditions because of the lack of bargaining power does not
arise. The said principle comes into play in a different sphere.
[Para 12] [833-D-E]
3. An arbitration clause is required to be strictly construed.
Any expression in the clause must unequivocally express the
intent of arbitration. It can also lay the postulate in which
situations the arbitration clause cannot be given effect to. If a
clause stipulates that under certain circumstances there can be
no arbitration, and they are demonstrably clear then the
controversy pertaining to the appointment of arbitrator has to be
put to rest.  In the instant case, Clause 13 categorically lays the
postulate that if the insurer has disputed or not accepted the
liability, no difference or dispute shall be referred to arbitration.
The thrust of the matter is whether the insurer has disputed or
not accepted the liability under or in respect of the policy.   [Paras
24, 25] [840-D-F]
4. A reading of the communication, shows that the
disputation squarely comes within Part II of Clause 13. The said
Part of the Clause clearly spells out that the parties have agreed
and understood that no differences and disputes shall be referable
to arbitration if the company has disputed or not accepted the
liability. The communication ascribes reasons for not accepting
the claim at all. It is nothing else but denial of liability by the
insurer in toto. It is not a disputation pertaining to quantum. The
insurance-company has, on facts, repudiated the claim by denying
to accept the liability on the basis of the aforesaid reasons. No
ORIENTAL INSURANCE COMPANY v. NARBHERAM POWER
AND STEEL
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[2018]  4 S.C.R.
inference can be drawn that there is some kind of dispute with

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