VULCAN INSURANCE CO. LTD versus MAHARAJ SINGH & ANOTHER

Citation: [1976] 2 S.C.R. 62 · Decided: 03-10-1975 · Supreme Court of India · Bench: A. ALAGIRISWAMI · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
62 
VULCAN INSURANCE CO. LTD 
v. 
MAHARAJ SINGH & ANOTHER 
October 3, 1975 
[A. ALAGIRISWAMI, P. K. GOSWAMI AND N. L. U'.'ITWALLI, JJ.J 
Arbitrati0'11-Repudiatio11 of claim by insurer-No dispute raised 
about 
quantum of loss dr domfJge-Remedy of insured, whether by suit or arbi1ra-
tion. 
The respondent-insured, claimed from the appeJlant-insurer a certain sum 
on the basis that he. had suffered Joss due tQ fir~. The appellant repudiated 
the claim under cl. 13 of the policy. The respondent thereupon wrote to the 
appellant suggesting arbitration on the dispute as per cl. 18 of the policy. 
The appellant. however, wrote back saying tbat since it had repudiated the claim 
of the respondent the arbitration clause was inoperative. The respondent then 
fi11:d an application under s. 20 of the Arbitration Act, J 940, for the filing 
of the arbitration- agreement· in the Court and for appointment of arbitrators. 
The trial court dismissed the petition as barred unde.r cl. 19 of the policy. 
On appeal, the High Court set aside the order of the trial court and remanded 
the matter to it for appointm.ent of arbitration. 
D 
Allowing the appeal to this Court, 
E 
F 
G 
H 
HELD : ( 1) The difference which arose between the parties on the appel-
lant's repudiation of the claim made by the respondent was not one to which 
the arbitration clause applies and hence the arbitration agreement could not be 
filed and no arbitrator could· be appointed under s. 20 of the Act. The only 
remedy open to the respondent was to comm\mce a suit within three months 
of the date of the repudiation to establish the insurer's liability. [72 B-C]. 
(a) Clause 18 prO\~des that if any difference arises as to the amount of 
any loss or damage such difference 
sh~ll be referred to arbitration. Jf 
the 
rejection of the claim made by the insured be on the ground that he had 
suffer~d no loss as a result of the fire or the amount of loss was not to the 
extent claimed by him tben, and then only a diffierence could have arisen as 
to the amount of any loss or damage within the meaning of the clause. The 
dispute raised in the present case appertained to the liability of the insurer to 
pay any amount whatsoever. 
Sucb repudiation of the claim could not amount 
to the raising of a dispute as to the amount of any loss or damage suffered 
by the insured. [66 G-H]. 
(b) As per cl. 13, on rejection of the claim by the insurer, an action or 
suit has to be commenced withi.n three months from the date of such rejec-
tion; otherwise, all benefits under the policy stand forfeited. 
That is, as soon 
as there is a rejection of the claim, and not the raising of a dispu11e as to the 
amount of any loss or damage, the only remedy open to the claimant is to file 
a suit for establishing the insurer's liability. It may be that after the· liability 
of the insurer is so ~stablished, reference to arbitration under cl. 18 will have 
to be resorted to for determination of the quantum of loss or damage. [67 A-CJ. 
(2) The last part of cl. 18 provides that an award is a condition precedent 
to any right of action or suit. 
But it cannot on that account be contended 
1hat even when there is a repudiation of liability the matter has to go to 
arbitration first. 
If the arbitration clause is couched in a comprehensive langu-
age taking within its ambit any kind of dispute arising under the policy then 
the obtaining of an award by arbitration is a condition precedent to the start-
ing of any other legal proceeding. 
But, reading els. 13 and 18 together, in 
the present case. it must be held that on the rejection or repudiation of the 
claim by tbe insurer the insured is under an obligation to start a legal proceed-' 
ing within three months of such rejection and hence the obtaining of an award 
•
i 
ol. 
I 
VULCAN INSURANCE v. MAHARAJ SINGH (Untwalia, J.) 
63 
in such cases cannot be a condition precedent. If the di>pute is such that can 
go to arbitration then no action or suit can be commenced without obtaining 
an award. 
But the condition of obtaining an award prior to any action or 
suit can never be attracted if the dispute raised cannot be refurred to arbitra-
tion and has got to be determined in a legal proceeding. [67 D-E, G-68 B, 
G-H]. 
Scott v. Avery ( 1856) 25 L.J. Ex. 308; 5H.L.C. 811; Jureidini v. 
Nalional 
Bn'.tish and Irish Millers Insurance Company Ltd. [1915] Appeal Cases 499; 
Heyman and another v. Darwine Ltd. [1942] 1 All England Reports, 337; 
Vi

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