Full Text
Date of Decision: 22nd November 2022
CHIMES AVIATION PRIVATE LIMITED ..... Petitioner
Through: Ms. Surbhi Mehta, Advocate with Mr.Tumul Puri, Advocate.
Through: Mr. Sagar Dwivedi, Advocate.
JUDGMENT
ANUP JAIRAM BHAMBHANI J.
By way of the present petition under section 11(6) of the Arbitration
& Conciliation Act 1996 („A&C Act‟), the petitioner seeks appointment of an arbitrator in respect of the disputes that are stated to have arisen with the respondent from Aviation Hull All-Risk Policy bearing
No.5003004319P103758018 dated 20.06.2019 („2019 Insurance Policy‟) in respect of an insurance claim made for a Cessna-172R aircraft bearing registration No.VT-CAF that suffered an accident leading to the death of two on-board pilots and also caused severe damage to the aircraft.
2. Briefly, the petitioner seeks reference of its claims in respect of the accident and damage to the aircraft arising under the 2019 Insurance Policy which was valid for the period 22.06.2019 to 21.06.2020, as read with subsequent amendments dated 27.06.2019 and 11.11.2019. It is the petitioner‟s contention that the insurance policy purchased by the petitioner from the respondent dated back to 2014 and has been „renewed‟ from time-to-time for the aircraft.
3. Ms. Surbhi Mehta, learned counsel for the petitioner has first drawn the attention of this court to clause C(7) of Section IV contained in insurance policy dated 18.06.2014 for the period 22.06.2014 to 21.06.2015 („2014 Insurance Policy‟) which comprises an arbitration agreement in the following words: “Arbitration This policy shall be construed in accordance with Indian law and any dispute or difference between the Insured and the Company shall be submitted to arbitration in India in accordance with the statutory provision for arbitration for the time being in force.” (emphasis supplied)
4. Counsel further submits that the policy was renewed on a yearly basis on the same terms and conditions from time-to-time; and the 2019 Insurance Policy was also extended one such extension, as indicated by e-mail dated 29.01.2020 issued by the respondent, which represented that the terms and conditions applicable to the 2019 Insurance Policy were the same as those contained in the 2014 Insurance Policy. That notwithstanding, it is submitted that it later transpired that the arbitration clause in the 2019 Insurance Policy was unilaterally altered by the respondent to read as follows: “Arbitration This Policy shall be construed in accordance with English Law and any dispute or difference between the Insured and the Insurers shall be submitted to arbitration in London in accordance with the statutory provision for arbitration for the time being in force.” (emphasis supplied)
5. Counsel submits that the intention and consent of the petitioner was for submission of any dispute to arbitration in India, which is what was captured in the 2014 Insurance Policy and remains unaltered. Counsel further submits that it has been held by the Supreme Court in various decisions that „renewal‟ of an insurance policy implies repetition of the original policy; and when renewed, a policy is to be extended on identical terms except from a date after expiration of the previous policy. Counsel argues that the Supreme Court has also held that an insurer can only change the terms and conditions of the insurance policy after prior intimation to the insured. In this behalf, reference is made to the following decisions: 5.[1] Biman Krishna Bose vs. United India Insurance Company Limited[1]: On the point that renewal of an insurance policy means repetition of the original policy, which implies revival of the old policy and substitution of obligations under the old policy; and
5.[2] Jacob Punnen & Ors. vs. United India Insurance Company Limited[2]: On the point that when a new term is introduced unilaterally, about which the policy-holder is in the dark, then it cannot be said that the renewed contract has been agreed upon by both the parties; and the fresh terms would not apply. Also, as per the principle of uberrima fide, both the parties have a duty to disclose all material facts within their knowledge.
6. It is submitted that however, without any prior intimation as regards the change in the arbitration clause, and despite the 2019 Insurance Policy being a mere renewal of the earlier insurance policies, the respondent has changed the „place‟ of arbitration to London instead of India, and has also made the policy subject to English law instead of Indian law, which was the case under the 2014 Insurance Policy, which is impermissible in law. It is on this basis that the petitioner submits that this court has territorial jurisdiction to entertain and decide the present petition applying the A&C Act.
7. Furthermore, it is the petitioner‟s submission that since the 2019 Insurance Policy was executed in New Delhi; any notice of claim was to be sent to an address in New Delhi (where the respondent‟s corporate office is situate); the respondent repudiated its claim vide letter dated 20.10.2021 issued from its corporate office at New Delhi; and the registered office of the petitioner is also situate at New Delhi, a-fortiori therefore this court would have territorial jurisdiction to decide the present petition. In this behalf, reference is made to the following decisions: 7.[1] Ravi Ranjan Developers Pvt. Ltd. vs. Aditya Kumar Chatterjee[3]: On the point that when an arbitration clause is vague as to jurisdiction, the principles in the Code of Civil Procedure, 1908 would apply; and 7.[2] Enercon (India) Ltd & Ors vs. Enercon GMBH & Anr[4]: On the point that courts have to adopt a pragmatic, common sense approach to give effect to the intention of the parties and the arbitration clause is not to be construed with a pedantic, technical or purely legalistic mindset while interpreting the same so as to make it unworkable.
8. It may also be noted that in notice dated 07.02.2022 issued by the petitioner to the respondent, raising its claims and invoking arbitration, the petitioner had also nominated an arbitrator, and sought the respondent‟s consent to the nomination. However, it is the petitioner‟s grievance that despite surveyor‟s report dated 10.11.2020 to the effect that breach of the Air Navigation Order does not invalidate the claim, the respondent had still repudiated such claims.
9. Notice on this petition was issued on 30.05.2022; whereupon the respondent filed reply dated 16.08.2022, taking the principal objection that the arbitration provision contained in clause C(7) of Section IV of 2022 SCC OnLine SC 568; paras 3, 20, 31, 32, 42, 47, 48 AIR 2014 SC 3152; para 83 the 2019 Insurance Policy stipulated the “seat of the arbitration to be at London”, contending thereby that this court has no territorial jurisdiction to entertain the petition. It has also been averred in the reply that in view of section 2(2) of the A&C Act as read with the proviso thereto, once parties have chosen the „seat‟ of arbitration outside India, Part-I of the A&C Act does not apply and therefore, neither would section 11 of the A&C Act.
10. Mr. Chinmoy Pradip Sharma, learned senior counsel appearing for the respondent submits that in response to the invocation notice, the respondent caused to be sent reply dated 03.03.2022 asserting that (i) the respondent was refusing to accept any liability; and (ii) that no disputes falling within the ambit of the arbitration clause had arisen between the parties. In its reply, the respondent had also stated that the 2019 Insurance Policy was a fresh insurance policy, obtained by the petitioner against a fresh Request for Proposal made through the petitioner‟s brokers, M/s Zoom Insurance Brokers Pvt. Ltd; and that the petitioner had read and understood and was fully cognisant of all the terms and conditions contained in the 2019 Insurance Policy.
11. Mr. Sharma further submits that these changes in the arbitration clause, stipulating application of English law and the seat of the arbitration being at London were brought about for the first time in the insurance policy for the year 2016-17; and the petitioner had never objected to such change at any point in time, though it was fully aware about the changes.
12. On point of merits of the claim, Mr. Sharma points-out that the provision that breach of Air Navigation Orders would not negate an insurance claim, which was contained in the Pilot Warranty Section of the 2014 Insurance Policy and the insurance policy for the year 2015– 16 („2015 Insurance Policy‟), was not contained in the 2019 Insurance Policy, thereby changing the position, viz. that a claim would be negated for breach of Air Navigation Orders.
13. On point of process and procedure, Mr. Sharma argues that an insurance policy of the kind that is the subject matter of the present proceedings is underwritten and replaced by a „fresh insurance policy‟ every year after assessing the request for quotation, information and disclosure submitted by a proposed insured, viz. the petitioner in this case. It is argued that in keeping with this process and procedure for obtaining insurance cover for the year 2019–20, the petitioner submitted its „Request for Quotation‟ through its authorized representative, M/s Zoom Insurance Brokers Pvt. Ltd.; in response to which the respondent sent a fresh quotation alongwith its terms and conditions; which culminated in the issuance of the 2019 Insurance Policy. It is accordingly the respondent‟s contention that the 2019 Insurance Policy was not a „renewal‟ of the earlier insurance policies held for the aircraft; and the terms and conditions of the policy were agreed upon afresh by the petitioner with the respondent based on the new Request for Quotation; which inter-alia stipulated that the seat of arbitration would be at London and that the policy would be governed by English law.
14. In this behalf, reference is made to the following decisions: 14.[1] BGS SGS Soma JV vs. NHPC Ltd[5]: On the point that when the arbitration clause designates a „venue‟ without any alternative place being designated as the „seat‟, unless there is a significant contrary indicia, the „venue‟ is the juridical seat of arbitration; and 14.[2] PASL Wind Solutions Pvt. Ltd. vs. GE Power Conversion India Pvt Ltd[6]: On the point that though both parties are based in India, parties can consent to a seat of arbitration outside India.
15. Although other contentions and submissions have also been made in relation to the claim and repudiation thereof, in view of the restricted scope of consideration in the present matter, it is not necessary to dwell on such contentions, since it is not the remit of this court in a petition under section 11 of the A&C Act to delve into the merits of the controversies and disputes between the parties.
16. The short point to be decided in the present petition, at this stage, is whether or not this court has territorial jurisdiction to entertain and decide the present petition.
17. Apropos that aspect, it is the admitted position that to begin with, under the 2014 Insurance Policy taken by the petitioner, the transaction and the parties were subject to Indian Law and to arbitration in India. However, it is also the conceded position that the aforementioned aspects of the insurance policy came to be changed for the first time in the insurance policy for the year 2016-2017 („2016 Insurance Policy‟) whereby the transaction and the parties were made subject to English law and to arbitration with „seat‟ at London. However, the petitioner urges that this was a unilateral act on the part of the respondent; and that, this change could not have been made as part of „renewal‟ of the insurance policy.
18. On the other hand, it is the respondent‟s contention that every insurance policy issued for a subsequent year is not a renewal properly so-called, but is a fresh policy inter-alia for the reason that each year the petitioner makes a fresh request for quotation through its agent to the respondent alongwith requisite information and disclosures; and in response to such request for quotation, the respondent sends an insurance policy containing terms and conditions, including financial terms, which the petitioner is then free to either accept or reject. It is the respondent‟s case that the terms and conditions of the 2019 Insurance Policy were as stated therein, nothing more and nothing less; and that such terms stipulated that the transaction would be subject to English law and to arbitration with „seat‟ at London.
19. The record bears-out that the change in the applicable law and seat of arbitration was first introduced in the 2016 Insurance Policy and the same terms remained part of the policy for the subsequent years viz. in the insurance policy for the year 2017-18 („2017 Insurance Policy‟), 2018-19 („2018 Insurance Policy‟) up until the 2019 Insurance Policy. It cannot be gainsaid that the petitioner accepted all such subsequent policies without demur; up-until the time that the claim arose under the 2019 Insurance Policy. Therefore, even if it be assumed, as the petitioner contends, that the insurance policy was a renewal of the previous policy, the previous policy in question would be the 2018 Insurance Policy. Now, admittedly, the 2018 Insurance Policy stipulated that the applicable law would be English law and the seat of arbitration would be at London. Even on the petitioner‟s own submission therefore, there was in that sense, no change in the applicable law and the seat of arbitration from the previous year’s policy.
20. That apart, in the opinion of this court, no principle of law can absolve a contracting party, in this case the petitioner, from reading and understanding the terms and conditions of an insurance contract. Muchless can this plea be accepted where the insurance policy for the previous 03 years contained the very same terms as to applicable law and seat of arbitration. In the facts of the present case, when the insurance policy for the previous 03 years had an arbitration clause governed by English law with the seat of arbitration being at London, it cannot be said that the petitioner was in the dark in respect of that clause and it must be deemed that the renewed contract of insurance was agreed upon in all respects by both the parties.
21. Accordingly, there is no merit in the petitioner‟s contention that the applicable law and seat of arbitration as contained in the 2019 Insurance Policy were changed by the respondent without notice to the petitioner and are therefore illegal or otherwise untenable.
22. In the above view of the matter, this court is of the opinion that it has no territorial jurisdiction to entertain and decide the present petition since the substantive law that governs the contract is English law and accordingly the A&C Act has no application.
23. The petition is accordingly dismissed, though only for lack of territorial jurisdiction. For clarity, such dismissal will not affect the petitioner‟s rights to raise the dispute with the respondent and invoke arbitration, in a court of competent jurisdiction, as may be permissible, in accordance with law.
24. Pending applications, if any, also stand disposed of.
ANUP JAIRAM BHAMBHANI, J NOVEMBER 22, 2022