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British India General Insurance Co., New Delhi Vs. United India General Finance (P) Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberCivil Revn. No. 73-D of 1966
Judge
Reported inAIR1971Delhi266
ActsArbitration Act, 1940 - Sections 20
AppellantBritish India General Insurance Co., New Delhi
RespondentUnited India General Finance (P) Ltd. and ors.
Appellant Advocate Mohinder Narain Andley, Adv
Respondent Advocate S.S. Nijhawan, Adv.
Excerpt:
.....relating to custody of a minor child. - andley also contended that the trial court as well as the lower appellate court were wrong in not deciding issues 2 and 3. it was the pleading of the insurance-company that chela ram had no insurance interest at the time the policy was taken out......policy was no longer subsisting. it was also pleaded that an application at the instance of the finance-company respondent no. 1 did not lie. on the pleadings of the parties, following issues were framed:-'1. whether the petitioner was beneficiary and as such has no locus standing to file the petition? 2. whether chela ram has no insurable interest at the time the insurance policy was effected? 3. whether the policy is not binding for the reasons given in the reply? 4. relief.' 2. the trial court by its judgment dated 5-6-1964 took the view that it was not necessary to decide issues nos. 2 and 3 as the same would have to be decided by the arbitrator. on issue no. 1 the trial court took the view that there was an endorsement made on the policy by which respondent no.1 was recognised as.....
Judgment:
ORDER

1. A policy of insurance was taken by Chela Ram, respondent No. 2 with the British India General Insurance Company, petitioner, in the present revision petition. It is a common case that this policy was issued on 16-5-1960 in the name of Chela Ram and was valid for one year up to 31-5-1961 and was renewed for a further period of one year from 1-6-1961 to 31-5-1962. Respondent No. 1 M/s. United India General Finance (P) Ltd., is the financier of the truck which was insured with the insurance company. Respondent No. 2 of the Arbitration Act pleading that the insurance company was refusing to pay on account of the accident and, thereforee, sought to involve Clause 10 of the policy for having the matter referred to the arbitrator.

The petitioner controverter the allegations. It was maintained by the petitioner that Chela Ram had no insurable interest at the time of the accident nor at the date of the entering into agreement of insurance and that the contract of insurance was entered into by misrepresentation and fraud. It was pleaded that the truck had been transferred to the ownership of Kanahiya Lal, respondent NO. 3 and the insurance company was not liable as the insurance policy was no longer subsisting. It was also pleaded that an application at the instance of the finance-company respondent NO. 1 did not lie. On the pleadings of the parties, following issues were framed:-

'1. Whether the petitioner was beneficiary and as such has no locus standing to file the petition?

2. Whether Chela Ram has no insurable interest at the time the insurance policy was effected?

3. Whether the policy is not binding for the reasons given in the reply?

4. Relief.'

2. The trial court by its judgment dated 5-6-1964 took the view that it was not necessary to decide issues Nos. 2 and 3 as the same would have to be decided by the arbitrator. On issue NO. 1 the trial court took the view that there was an endorsement made on the policy by which respondent No.1 was recognised as the owner, but that in spite of this endorsement the only right respondent No. 1 had was to realise the money and it did not give respondent No. 1 a right to invoke the arbitration clause and to file an application under Section 20 of the Arbitration Act. He, thereforee, dismissed the application.

An appeal was taken by respondent No.1. The lower appellate court by its judgment dated 24th December 1966 held that because of the endorsement on the main policy respondent No.1 had the right to institute petition under Section 20 of the Arbitration Act, and by the endorsement it must be treated as a party to the agreement of insurance. It left issues 2 and 3 undecided in the same manner as the trial court had held. It consequently allowed the appeal and remanded the case back to the trial court. It is against this judgment that the present revision petition has been filed.

3. Mr. Andley, the learned counsel for the petitioner, submits that the mere fact that there is an endorsement on the policy, does not mean that respondent No.1 is a party to the contract of insurance and thereforee, entitled to maintain this application for arbitration. According to the learned counsel the endorsement gives only the right to respondent No.1 to claim the money about which the claim may arise out of this policy of insurance, but it does not make the finance-company party to the case, Mrs. Nijhawan learned counsel for the respondent however stated that by the endorsement which was specifically sent to the insurance company it was agreed that the finance-company would have the right to the insurance policy and as respondent No.1 is in the position of a beneficiary, it is entitled to maintain this application under Section 20 of the Arbitration Act. It was maintained by the learned counsel for the respondent that the money for the insurance was also paid by the finance-company and that Chela Ram should be deemed to be only in the position of a trustee and that any claim of money should be to the benefit of the finance-company and thereforee it cannot be held that the finance-company is not entitled to invoke the arbitration clause.

Mr. Andley also contended that the trial court as well as the lower appellate court were wrong in not deciding issues 2 and 3. It was the pleading of the insurance-company that Chela Ram had no insurance interest at the time the policy was taken out. The learned counsel contends that if it could be the time when Chela Ram had no insurable interest as the truck had been transferred to Kanahiya Lal there would be no substituting policy and the question of invoking any arbitration clause in the policy would not arise. Mr. Nijhawan contends that there is nothing to show that Chela Ram had transferred the ownership rights to Kanahiya Lal, respondent No. 3 and maintains that even if it so , the policy would remain subsisting.

The difficulty however is that the courts below have not given any findings on issues 2 and 3. If the contention of Mr. Andley is correct that Chela Ram had no insurable interest at the time when the insurance policy was effected and if his contention in law is also correct then it would follow that there would be no insurance policy and obviously the question of invoking the arbitration clause in such a policy would not arise. It may be that the insurance company may fall to prove that Chela Ram had no insurable interest or that in law even if Chela Ram had transferred the ownership of the truck the insurance-company would still be liable. But that is a matter which obviously had to be decided by the courts below because it was only if they had taken a decision on these two points that further question of the finance-company being entitled to file an application under Section 20 of the Arbitration Act would arise.

In Air 1951 Punj 114, Falshaw, J. also took the view that this question of the transfer of ownership rights should be decided by the trial court before the subsequent question of the third party maintaining an application under Section 20 of the Arbitration Act would arise. In my view, thereforee, the property course would be to remit the case back to the trial court for deciding issues 2 and 3 according to law and merit. In view of the fact that the case is being sent back it is not necessary for me to say anything about the correctness or otherwise about the rival contentions raised by the parties on the point whether it is open to the finance-company to put in an application under Sec. 20 of the Arbitration Act in view of the endorsement.

4. The result is that the judgments of the courts below are set aside and the case is remanded back to the trail court for fresh decision in accordance with law and merits and keeping in view the observations made above. It may be made clear that nothing said in my judgment should be construed as having accepted or rejected any of the contentions on merits. The petition is, thereforee, allowed as indicated above.

5. Petition allowed; cases remanded.


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