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

LegalCrystal Citation
SubjectInsurance;Motor Vehicles
CourtDelhi High Court
Decided On
Judge
Reported inII(1984)ACC366
AppellantUnited India Insurance Co. Ltd.
RespondentDarbar Woolen Mills
Excerpt:
- - 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 prescribe by the code of civil procedure or some other law......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 arbitration proceedings which included the power to pay 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 only lies under the arbitration act in accordance with the provisions of of section 39. if an.....
Judgment:

D.K. Kapur, J.

1. This appeal is directed against the interim order passed in I.A. No. 2106/83 in O.M.P. No. 78/83, by a learned single Judge on the original side of this Court.

2. We had issued a show cause notice thinking that 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 22nd July, 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 pre-signed before the amount could be. 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 arbitration proceedings which included the power to pay 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 only lies under the Arbitration Act in accordance with the provisions of of Section 39. If an order is passed under the Act, it is appealable only under the provisions of the Act and under any other law.

6. 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.

7. However, there is no reported decision of 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?.

8. There do not appear to be many decisions on this question and 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 under Sections 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.

9. 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 prescribe 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 includes 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.

10. In the present case, the order is an usual 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 relation to arbitration proceedings which are pending and also those which are contemplated. So, the order has been passed under Section 4(b) of the Act as if the proceedings are already pending before an arbitrator.

11. In such a case, i.e., when Section 41(b) is applied, the case only be treated as one under the Arbitration Act because this is only the provision which permits the Civil Court to pass orders 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.

12. The real 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 under the Act. If it is a matter covered by Section 41 (a), it is not an order passed under the Act, but is on order in respect of civil proceedings pending before the court and thus appealable under the Civil Procedure Code for the Delhi High Court Act.

13. 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 arbitration. 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 it 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.

14. There are several matters mentioned in the Second Schedule for preservation of the subject matter of the arbitration proceedings, for detention, for injunction, 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.

15. To go back to the question or situation which exists, it may be Convenient to summarise the facts in a somewhat different way. There is a party who has insured a factory and goods which have got destroyed by fire or have been extensively damaged. That party has initiated the 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/-, but for the balance insists on a receipt for full and final settlement. This is not 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 amount that the company admits is due and the dispute is really in respect of the 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 withdrawn 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.

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

17. 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.

18. 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 from the subject-matter of the reference. So, money cannot be claimed. So, interim custody or preservation of money is not in contemplation of the First Entry.

19. The Second Entry reads:

2. Securing the amount in difference in the reference.

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 they are willing to pay the whole amount They are only 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 to 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 observe 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 Nationalised company, the court would not normally contemplated 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 in 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.


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