M/S Vivek Travels Pvt. Ltd. v. National Insurance Co. Ltd.

14. In the present case, admittedly, no such request was made by the petitioner i.e., the policy holder.

15. Further, the second asterisk of sub-clause (b) of Clause III of the IRDAI Circular also does not assist the respondent. As per the second asterisk sub-clause (b) of Clause III of the IRDAI Circular, Clause II of the IRDAI Circular will be deemed to be replaced in all existing Commercial Policies from the date of renewal falling “on or after the date” of the IRDAI circular.

16. Additionally, if the interpretation as sought by the respondent is to be given effect, then that would mean that the arbitration clause in all insurance policies which were in existence on the date of the IRDAI Circular i.e., 27.10.2023 would be automatically deleted.

17. The same cannot be accepted as the fulcrum of the arbitration mechanism is party autonomy. The parties at the time of making a contract are supposed to be ad idem on having their disputes settled through Alternate Disputes Redressal Mechanism of arbitration.

18. If the interpretation that the respondent midway during subsistence of an arbitration clause could unilaterally delete the arbitration mechanism from the Alternate Disputes Redressal Mechanism between the parties, the same would be an antithesis to the arbitral process and cannot be sustained.

19. The second objection taken by the respondent is that since it is a case of repudiation and not regarding quantification of a loss, the same is covered under Condition No. 7 of the Commercial Vehicle Package Policy, as reproduced above. Further, the reliance is placed on the judgment of Oriental Insurance Co. Ltd. v. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534, particularly paragraphs No. 23 and 25 which read as under:- “23. It does not need special emphasis that 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. xxxxxxxxxx

25. The aforesaid communication, submits the learned Senior Counsel for the respondent, does not amount to denial of liability under or in respect of the policy. On a reading of the communication, we think, 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. In the present case, we are not concerned with regard to whether the policy was void or not as the same was not raised by the insurer. The insurance company has, on facts, repudiated the claim by denying to accept the liability on the basis of the aforesaid reasons. No inference can be drawn that there is some kind of dispute with regard to quantification. It is a denial to indemnify the loss as claimed by the respondent. Such a situation, according to us, falls on all fours within the concept of denial of disputes and non-acceptance of liability. It is not one of the arbitration clauses which can be interpreted in a way that denial of a claim would itself amount to dispute and, therefore, it has to be referred to arbitration. The parties are bound by the terms and conditions agreed under the policy and the arbitration clause contained in it. It is not a case where mere allegation of fraud is leaned upon to avoid the arbitration. It is not a situation where a stand is taken that certain claims pertain to excepted matters and are, hence, not arbitrable. The language used in the second part is absolutely categorical and unequivocal inasmuch as it stipulates that it is clearly agreed and understood that no difference or disputes shall be referable to arbitration if the company has disputed or not accepted the liability. The High Court has fallen into grave error by expressing the opinion that there is incongruity between Part II and Part III. The said analysis runs counter to the principles laid down in the three-Judge Bench decision in Vulcan Insurance Co. Ltd. [Vulcan Insurance Co. Ltd. v. Maharaj Singh, (1976) 1 SCC 943] Therefore, the only remedy which the respondent can take recourse to is to institute a civil suit for mitigation of the grievances. If a civil suit is filed within two months hence, the benefit of Section 14 of the Limitation Act, 1963 will enure to its benefit.”

20. The learned counsel for the respondent states that even assuming without admitting, that the disputes were arbitrable, Condition No. 7 of the Commercial Vehicle Package Policy, as reproduced above, shows that only the disputes regarding quantification of loss were arbitrable. The stand of the respondent in the present case is that of “repudiation” of the claims, and not of quantification.

21. I am unable agree. In the present case, as per the Motor Final Survey Report dated 01.10.2024, the assessment of the 1st loss is Rs. 4,40,000/- and that of 2nd loss at Rs. 30,50,000/-, totalling to Rs. 34,90,000/-.

22. The respondent vide Pre-repudiation letter dated 21.01.2025 accepted the 1st loss of Rs. 4,40,000/- but made it subject to submission of repair bills and re-inspection of the vehicle and repudiated the 2nd loss in terms of Condition No. 5 of Commercial Vehicle Package Policy, which reads as under:-

23. Vide final repudiation letter dated 27.03.2025, the respondent repudiated the entire loss relying on Condition No. 5 of Commercial Vehicle Package Policy.

24. To my mind, the judgment of Oriental Insurance (supra) relied upon by the respondent does not assist the respondent. In the said judgment the findings of the Hon‟ble Supreme Court was based on the fact that the insurance company in that matter came to a finding that there was no actual loss suffered by the insured. The same is found in paragraph No. 24 of the said judgment which reads as under:-

”

25. A perusal of the paragraph reproduced above shows that the rejection was on a factual matrix of the loss, whereas, in the present case, the claim of the petitioner has been repudiated only on applicability of a particular clause of the policy (i.e., Condition No. 5 of Commercial Vehicle Package Policy) and not on the factual matrix of the loss suffered by the petitioner. In fact, as per the Motor Final Survey Report it is found that petitioner had suffered loss.

26. For the said reasons, the petition is allowed, with the following directions: i) Mr. Vipul Ganda (Advocate) (Mob. No. 9910804949) is appointed as a Sole Arbitrator to adjudicate the disputes between the parties. ii) The arbitration will be held under the aegis and rules of the Delhi International Arbitration Centre, Delhi High Court, Sher Shah Road, New Delhi (hereinafter, referred to as the „DIAC‟). iii) The remuneration of the learned Arbitrator shall be in terms of DIAC (Administrative Cost and Arbitrators‟ Fees) Rules, 2018. iv) The learned Arbitrator is requested to furnish a declaration in terms of Section 12 of the 1996 Act prior to entering into the reference. v) It is made clear that all the rights and contentions of the parties, including as to the arbitrability of any of the claim, any other preliminary objection, as well as claims/counter-claims and merits of the dispute of either of the parties, are left open for adjudication by the learned Arbitrator. vi) The parties shall approach the learned Arbitrator within two weeks from today.