Full Text
HIGH COURT OF DELHI
Date of Decision: 08.08.2022
NATIONAL INSURANCE COMPANY LIMITED ..... Appellant
Through: Mr. Vivek Kishore, Mr. Zorawar Singh and Mr. Jayant Rastogi, Advocates.
Through: None.
HON'BLE MR. JUSTICE AMIT MAHAJAN VIBHU BAKHRU, J. (ORAL)
CM No. 34966/2022
JUDGMENT
1. Exemption allowed, subject to all just exceptions.
2. The application stands disposed of. FAO(OS) (COMM) 202/2022 & CM Nos. 34965/2022 & 35256/2022
3. National Insurance Company Limited (hereafter the ‘appellant’) has filed the present intra-court appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereafter ‘the A&C Act’) impugning an order dated 08.04.2022 (hereafter ‘the impugned order’) passed by the learned Single Judge in OMP (COMM) No.547 of 2020. 2022:DHC:3054-DB
4. By the impugned order, the learned Single Judge rejected the application filed by the appellant under Section 34 of the A&C Act seeking to set aside the arbitral award dated 14.08.2020 (hereafter ‘the impugned award’) rendered by the Arbitral Tribunal comprising of a Sole Arbitrator.
5. The controversy in the present case relates to the claims made by the respondent in respect of a Standard Fire and Special Perils Policy purchased by the respondents from the appellant. The relevant facts necessary to address the controversy are as under: - 5.[1] The respondent obtained a Standard Fire and Special Perils Policy, being Policy No. 361700/11/11/3100000359 (hereafter ‘the Policy’) from the appellant for the period beginning 30.09.2011 until 29.09.2012 for a property bearing the address “D-21, Sector-6, District-Gautam Budha Nagar, Uttar Pradesh” (hereafter ‘the Premises’). The insurance covered building, plant & machinery, furniture, fixture and fittings, stock of fabrics/garments and stock in process. 5.[2] On 26.09.2012, a fire, caused by a blast, broke out at the Premises. Subsequently, the appellant was intimated of this incident and appointed M/s Rakesh Kapoor & Company as the Surveyor (hereafter ‘the Surveyor’) to conduct a survey and determine the loss suffered, as required under Section 64UM of the Insurance Act, 1938. 5.[3] Thereafter, the Surveyor visited the premises and performed a detailed inspection. On 07.01.2014, the Surveyor submitted its final survey and assessment report. It assessed the total loss covered by the Policy at ₹12,55,279/-. 5.[4] Aggrieved by the assessment made by the Surveyor, the respondent filed a complaint (Consumer Complaint No.214 of 2014) against the appellant, before the National Consumer Dispute Redressal Commission, New Delhi (NCDRC). During the course of the proceedings, the parties agreed that disputes be referred to arbitration. Accordingly, on 01.04.2016, the aforementioned proceedings were disposed of and the parties were referred to arbitration. A Sole Arbitrator was appointed (the Arbitral Tribunal). 5.[5] The Arbitral Tribunal delivered the impugned award on 14.08.2020, allowing certain claims made by the respondent and awarding a total amount of ₹3,49,27,400/-, in its favour.
6. The learned counsel appearing for the appellant has assailed the impugned order, essentially, on two grounds.
7. First, he submits that the learned Single Judge has erred in not appreciating that the Surveyor could not be appointed by the respondent, which would necessarily have to be appointed by the insurance company, that is, the appellant. He submits that in the present case, the Arbitral Tribunal had relied on the report submitted by one Mr. Brij Mohan Gupta, who is appointed by the respondent and not the appellant.
8. Second, he submits that the learned Single Judge has erred in not appreciating that certain claims, which were in the nature of consequential losses, were allowed. He referred to Clause 9 of the General Exclusions and contended that consequential losses were excluded and therefore, the appellant was not liable for the same. He submits that the Arbitral Tribunal considered the said ground and rejected the same. However, the learned Single Judge has erroneously held that the plea of exclusionary clause was not agitated before the Arbitral Tribunal.
9. The contentions advanced on behalf of the appellant are unpersuasive.
10. In the present case, the Surveyor was appointed by the appellant. However, his assessment was not accepted. It is, in this context, that the respondent had appointed another expert to establish its claim for the loss suffered by it.
11. The Arbitral Tribunal is not proscribed from relying on such evidence as it constitutes relevant material for adjudicating the claims raised by the respondent.
12. This Court is unable to accept that the impugned award is either vitiated on grounds of patent illegality or is in conflict with the public policy of India solely for the reason that the Arbitral Tribunal had relied on the report furnished by an expert appointed by the respondent. This Court concurs with the conclusion of the learned Single Judge to reject the appellant’s challenge to the impugned award.
13. The contention that the award is contrary to law is therefore, unmerited.
14. The contention that the claim in respect of loss of machinery located at the first floor of the Premises is consequential loss, is fundamentally flawed.
15. The Arbitral Tribunal found that seven printing machines were located on the first floor, being computerized and powered by a UPS located on the ground floor.
16. Admittedly, the UPS was burnt in the incident of fire. The same had also resulted in damage to the printing machineries. It is the appellant’s case that the printing machineries were damaged due to a surge in power resulting from the UPS being damaged and therefore, was not a direct loss.
17. The appellant relies on Clause 9 of the General Exclusions, which reads as under: “(A) GENERAL EXCLUSIONS xxxx xxxx xxxx
9. Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind or description whatsoever.”
18. The assumption that the loss to printing machinery located on the first floor was consequential loss and covered by the exclusionary clause, is erroneous. The damage to the machinery was a direct result of the incident of fire. It is not necessary that in an incident of a fire, the particular article be necessarily burnt to result in a loss. All damages that may be caused to the building and assets directly as a result of fire would necessarily have to be construed as a loss caused by fire.
19. A plain reading of Clause 9 of the General Exclusions indicates that it excludes “other consequential or indirect loss”. The same must necessarily be considered ejusdem generis with the preceding expressions – loss of earnings, loss by delay, and loss of market. Clearly, such consequential losses are indirect losses, which are excluded. Damage caused to machinery by the incident of fire is not an indirect or consequential loss.
20. The Court concurs with the decision of the Arbitral Tribunal to reject the said contention. It does not appear from a reading of paragraph 8.[2] of the impugned order that the said ground was urged before the learned Single Judge in the manner that it has been urged before this Court.
21. In any view of the matter, it is a trite law that an arbitral award cannot be interfered with except on the limited grounds set out in Section 34 of the A&C Act.
22. In Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited: (2022) 1 SCC 131, the Supreme Court had also explained that even if a decision is erroneous, it may not be amenable to challenge on the ground of patent illegality. The ground of patent illegality would be available if the error strikes at the root of the matter and vitiates the award on face of the record.
23. In the present case, interpretation of Clause 9 of the General Exclusions – which by no stretch can be stated to be an implausible one – warrants no interference in proceedings under Section 34 of the A&C Act.
24. The appeal is unmerited and, accordingly, dismissed.
VIBHU BAKHRU, J AMIT MAHAJAN, J AUGUST 8, 2022 ‘KDK’