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United India Insurance Co. Ltd. Vs. Darbar Woollen Mills - Court Judgment

LegalCrystal Citation
Subject Company; Arbitration
CourtDelhi High Court
Decided On
Case NumberC.M. No. 2566 of 1983 in F.A.O. (OS) 84 of 1983
Judge
Reported in[1986]60CompCas220(Delhi); 1984RLR405
Acts Arbitration Act, 1940 - Sections 8, 9, 30, 33, 34, 39 and 41; Code of Civil Procedure (CPC), 1908 - Sections 151 - Order 12, Rule 6 and 8
AppellantUnited India Insurance Co. Ltd.
RespondentDarbar Woollen Mills
Excerpt:
.....33, 34, 39 and 41 of arbitration act, 1940 and section 151 and order 12 rules 6 and 8 of code of civil procedure, 1908 - whether court empowered to pass order in relation to arbitration proceedings including power to release rs. 278202 on furnishing security - in relation to arbitration proceedings court's power limited to matter set in second schedule - in present case court passed order under second schedule as such it was not appealable being order under arbitration act - held, appeal to division bench liable to be dismissed. - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had..........under section 41 of the arbitration act read with order 12, rule 6 and section 151 of the code of civil procedure for releasing the amount of rs. 2,78,202.4. the learned single judge agreed that no order under order 12, rules 6 and 8, could be passed, but held that under section 41(b) of the arbitration act read with the second schedule, the court could pass an order in relation to arbitration proceedings which included the power to release the sum of rs. 2,78,202 on furnishing security to the satisfaction of the registrar. this is the order appealed against.5. the first point that has arisen in this case is whether an appeal lies to a division bench. it has been held repeatedly that an appeal lies only under the arbitration act in accordance with the provisions of section 39. in order.....
Judgment:

Kapur, J.

1. This appeal is directed against the interim order passed in I.A. No. 2106 of 1983 in O.M.P. No. 78 of 1983, by a learned single judge on the original side of this court.

2. We had issued a show-cause notice thinking that the appeal involved a short point. The respondents had insured its factory and goods with the United India Insurance Co. Ltd. There was a fire on July 22, 1981, which caused extensive damage. According to the respondent they suffered a loss of Rs. 15,00,000 but made a claim for Rs. 10,50,624. It appears that the insurance company wanted to approve the claim for Rs. 5,78,802 and made an 'on account' payment of Rs. 3,00,000 and sent a receipt for Rs. 2,78,202 which was to be pre-signed before the amount could be paid. However, the insurer wanted a receipt in full and final settlement before the balance sum of Rs. 2,78,202 could be released. The insured, i.e., the claimant, was not willing and, thereforee, applied under sections 8 and 9 of the Arbitration Act, 1940, for appointing a sole arbitrator.

3. The claimant also applied under section 41 of the Arbitration Act read with Order 12, rule 6 and section 151 of the Code of Civil Procedure for releasing the amount of Rs. 2,78,202.

4. The learned single judge agreed that no order under Order 12, rules 6 and 8, could be passed, but held that under section 41(b) of the Arbitration Act read with the Second Schedule, the court could pass an order in relation to arbitration proceedings which included the power to release the sum of Rs. 2,78,202 on furnishing security to the satisfaction of the Registrar. This is the order appealed against.

5. The first point that has arisen in this case is whether an appeal lies to a Division bench. It has been held repeatedly that an appeal lies only under the Arbitration Act in accordance with the provisions of section 39. In order is passed under the Act, it is appealable only under the provisions of the Act and not under any other law. The unanimity of judgments of this court is that an appeal lies only against those particular orders that are detailed in section 39 and against no others.

6. However, there is no reported decision or an order which is passed otherwise than under the Act. This proposition may be stated in slightly different language. If an order is to be passed under the Arbitration Act, it can only be appealed against under the Arbitration Act. But, what of appeals which are not against orders under the Arbitration Act but are passed in relation to proceedings connected with the Arbitration Act ?

7. There do not appear to be many decisions on this question, nor was this point argued in quite this way in any of the cases. Normally, an order is passed either after an award has been made or an order may be passed under section 30, 33, 34 or other similar provisions of the Act. In the present case, there is an application under section 8 and 9 of the Arbitration Act which when decided will be appealable only under the provisions of the Arbitration Act. These are clear cases of orders passed under the Arbitration Act.

8. There can, however, be other decisions in proceedings under the Arbitration Act which are not passed under the Arbitration Act, for example, if there is an adjournment of proceedings before the court or, there is an order dismissing the petition in default. Or, there can be other interim orders like issue of commissions and so on passed during arbitration proceedings under the arbitration Act, but which are not orders under the Arbitration Act as such. In this connection, it may well be observed that the trial of all matters before the civil courts are to be conducted in the manner prescribed by the code of Civil Procedure or some other law. Section 41 of the Arbitration Act also indicates that the provisions of the Code of Civil Procedure are to apply to proceedings under the Arbitration Act pending before the court. The provisions of the code of Civil Procedure include also certain rights to appeal. So, it may be that some orders which are passed under the Code of Civil Procedure are also appealable under the Code of Civil Procedure because such provisions are applied by section 41(a) of the Arbitration Act.

9. In the present case, the order is an unusual one in the sense that the court has directed the deposit of a particular amount without any specific authority being given by the Arbitration Act in a case in which the only proceedings pending are those for appointing an arbitrator. The learned single judge explains that an order can be passed under section 41(b) of the Arbitration Act in relating to arbitration proceedings which are pending and also those which are contemplated. So, the order has been passed under section 41(b) of the Acts as if the proceedings are already pending before an arbitrator.

10. In such a case, i.e., when section 41(b) is applied, the case can only be treated as one under the Arbitration Act because this is the only provision which permits the civil court to pass order in relation to pending or contemplated arbitration proceedings. Then the order becomes one under the Arbitration Act and not under the Code of Civil Procedure.

11. The real difficulty in deciding whether the order is one under the Code of Civil Procedure or one under the Arbitration Act is a matter of degree. In relation to arbitration proceedings, the court's powers are limited to the matter set out in the Second Schedule. If this is a matter set out in the Second Schedule, it is an order passed the Act. If this is a matter covered by section 41(a), it is not an order passed under the Act, but is an order in respect of Civil procedure pending before the court and thus appealable under the civil proceedings pending before the court and thus appealable under the Civil procedure Code or the Delhi High Court Act.

12. Now, let us see whether this is an order passed in relation to arbitration proceedings, or in relation to proceedings pending before the court. The only proceedings which are pending before the court are those for appointing an arbitrator. The payment of the sum of Rs. 2, 78,202 is not at all connected with the proceedings before the court. It is neither an order necessary for proceeding with the matter which is pending in the court, nor is it an order ancillary to the said proceedings. The order, thereforee, does not come under section 41(a) of the Act. It, thereforee, remains to be seen if its is an order under the Second Schedule. Here again, there is some difficulty, as an order under the Second Schedule may be passed rightly or wrongly. If it is an order wrongly passed under the Second Schedule, then also it is not appealable. The correctness of the order cannot be examined if no appeal lies.

13. There are several matters mentioned in the Second Schedule for preservation of the subject-matter of the arbitration proceedings, for detention, for injuction, and so on. The entire Second Schedule is intended to enable the court to pass those orders which the arbitrator himself cannot pass. It may be that strictly speaking the order does not come within the scope of the Second Schedule, if too strictly or rigidly applied. In spirit, it appears to be an order under the Second Schedule.

14. To go back to the question or situation which exists, it may be convenient to summaries the fact in a somewhat different way. There is a party who has insured a factory and goods which were destroyed by fire or have been extensively damaged. That party has initiated a case with an idea of being recompensed under the insurance policy. The insurance company has not accepted the claim of Rs. 10,50,624 but has approved the same for Rs. 5,78,202. It has paid a sum of Rs. 3,00,000, and for the balance insists on a receipt for full and final settlement. This is no less than compelling a settlement. It may be that this is permissible in a business situation, but nevertheless, the company is ready to settle the amount for Rs. 5,78,202 but only if the party concerned gives a receipt for full and final settlement, when it will be debarred from claiming any further amount, it is this situation which has led the learned single judge to direct the company to pay the balance sum of Rs. 2,78,202. The spirit of the order is that this is the The spirit of the order that this is the amount that the company admits is due and the dispute is really in respect of the additional amount that may be payable. If we stay the order of the learned single judge, it means that this amount will not be available to the insured. It may mean that this amount may not be paid for a long period while the arbitration proceedings have still to be commenced and then an award may be given which may be challenged in court and so on. These facts lead one to believe that the order is a fair and just one, although an unusual one. At the same time, the learned single judge has directed that the amount may be withdraw on furnishing security to the satisfaction of the Registrar. This security will ensure the return of the amount though one cannot see the possibility of the amount being refundable because it is practically an admitted amount.

15. This leads one to suppose that the order is not appealable because it is an order passed under the second Schedule.

16. Now, turning to the Second Schedule relating to powers of the court in relation to arbitration proceedings, the first entry is the preservation, interim custody and sale of any goods which are the subject-matter of reference.

17. Though the claim of the insured for compensation can be described as money, it cannot be stated that the money which is claimed are goods which form the subject-matter of the reference. So, many cannot be claimed. So, interim custody or preservation of money is not in contemplation of the first entry.

18. The second entry leads :

'2. Securing the amount in difference in the reference.'

19. It may be stated here that the amount in difference under the reference is an amount exceeding Rs. 5,78,202 but it is not the case of the appellants that they willing to pay the whole amount if a full and final receipt is given in satisfaction of the claim. thereforee, the sum of Rs. 2,78,202 is an amount in difference in the reference because of the attitude of the appellants. This means that the court can pass an order securing the amount in difference. Normally, the court could have passed an order for deposit in court or for security if it wanted to preserve the amount in difference. However, as this is more or less admitted with a small reservation, the court has thought fit that this amount should be deposited in court and withdrawn by the claimant on furnishing security. In a sense, this amount will remain in the court and will, thereforee, be preserved during the pendency of the arbitration proceedings.

20. In addition, the third entry in the Second Schedule allows the detention, preservation or inspection of any property or thing which is the subject-matter of the reference. As the insurance company is a nationalised company, the court would not normally contemplate taking the money out of the hands of the party concerned and directing a deposit in court. However, in the peculiar circumstances of the case, the court could have ordered the amount to be placed in the court and then allowed one of the parties to use the amount on furnishing security.

21. thereforee, on a fuller examination of the situation, it appears that the court has passed an order under the Second Schedule and, thereforee, it is not appealable being an order under the Act.

22. Though in this sense we have approved the order, we cannot help remarking that by this method the court has granted an interim award in favor of the respondents. Normally, it is the arbitrator who has to decide these matters, but, in this way, the court has given an award in favor of the insured claimant. The real controversy is whether the court should permit the party to get an award in this manner. As we have said, this is a matter connected with the merits which would only arise if the appeal was competent. Once it is held that the case falls within the Second Schedule, it must be held that this appeal is not competent and has to be dismissed. So, the question as to whether the order should or should not have been passed has not to be decided by us. We, accordingly, dismiss the appeal in liming.

23. Appeal dismissed.


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