1. This appeal is at the instance of the plaintiff and it arises out of a suit for recovery of a sum of Re. 30,000/- under an Insurance Policy.
2. The case of the plaintiff, a partnership firm, was that the defendant, Commercial Union Assurance Company Limited, entered into a contract of insurance with the plaintiff by issuing a Burglary and House Breaking Policy dated Sept. 17, 1966, indemnifying loss of money to the limit of Rs. 50,000/- in respect of a securely locked countrymada safe in the shop of the plaintiff known as 'Jagadhatri Bhandar', situate at B.T. Road, Titagarh, in the District of 24 Parganas. The said Insurance Policy was renewed from year to year and the amount of insurance cover was subsequently reduced from Rs. 50,000/- to Rs. 30,000/-. The plaintiff paid the last renewal premium on Jan. 7, 1970 and the policy was renewed for a period of 12 months from Jan. 7, 1970 till the anniversary of the date in the succeeding year.
3. The further case of the plaintiff was that on Feb. 6, 1970, four men, three of whom carrying revolvers, rushed into the plaintiffs said shop, Jagadhatri Bhandar, and compelled one of the partners of the plaintiff firm by violence and/or threat of violence to open the safe, and took away at the point of revolvers Rs. 32,871/- from the safe. The plaintiff submitted to the defendant company a claim for the loss of money for Rs. 30,000/- which was the limit of indemnity for loss under the said contract of insurance, although actual loss was more. The defendant company, thereafter, arranged to inspect the loss by its surveyor at the premises in which the said shop of the plaintiff was situate. Ultimately, the defendant company byits letters dated May 4, 1970 and June 26, 1970 informed the plaintiff that the claim was not admissible under the policy inasmuch as there was no forcible and violent entry into the premises at the time of the loss. The defendant company, accordingly, refused to entertain the claim arising out of the risk covered by the said contract of insurance on the allegation that the policy did not cover such a risk and repudiated the contract of insurance and did not take further steps in the matter to implement the terms of the contract of insurance in spite of repeated requests by the plaintiff. The plaintiff, accordingly, instituted the suit for the recovery of the sum of Rs. 30,000/-.
4. The defendant company entered appearance in the suit and contested the same by filing a written statement. Although the defendant company denied the happening of the incident and the loss of money, as alleged by the plain-tiff, the principal defence of the defendant was based on two technical grounds. The first was that the claim of the plaintiff was not admissible under the policy of insurance and the second was that the suit was not maintainable in view of the Arbitration clause as contained in clause (9) of the Conditions of Policy of Insurance.
5. The learned Subordinate Judge, 9th Court, Alipore came to the findings that the plaintiff had failed to prove the alleged incident or that the plaintiff had suffered any loss. Further, it was held that the claim of the plaintiff was not admissible under the Policy of Insurance and that claim was also barred by the Arbitration Clause as contained in clause (9) of the Conditions of the Policy of Insurance. Upon the said findings, the learned Subordinate Judge dismissed the suit. Hence this appeal.
6. The first question that is required to be considered is, whether any such incident had taken place and whether the plaintiff had suffered loss of money to the extent of Rs. 30,000/- as alleged. In order to prove the incident and the loss the plaintiff examined P. W. 1 Man-matha Nath Das, the Accountant of the plaintiff's shop. The plaintiff also examined P. W. 2 Shyamsundar Sadhukhan, one of the partners. It transpires from the evidence of these two witnesses that on Feb. 6, 1970 at about 7-15 P.M. or 7-20 P.M. three persons being armed with revolvers entered into the shoproom. One of them pointed a revolver at the chest of P. W. 2 Shyamsundar. As P. W. 1 challenged the said persons, he was asked by them to keep silent. One of them gave P. W. 1 a push with a knife. P. W. 2 Shyamsundar was asked at the point of revolver to open the iron safe. Out of fear, P. W. 2 opened the safe whereupon the miscreants took the money and left the shop room after locking the door. The telephone line was also disconnected by them. About Rs. 32,500/- that was in the iron safe was taken away by the miscreants. The plaintiff also filed a copy of the diary which was lodged on the same day with the local police station. Further, the plaintiff filed a copy of the Statesman of Feb. 7, 1970 in which the incident was reported. It was inter alia reported in the Statesman that it was the second robbery committed in the area. The police blocked traffic on the Barrackpore Trunk Road and searched all passing vehicles. The report of the incident as published in the Statesman tallied with the evidence of P. Ws. 1 and 2. Further it was reported in the Statesman that one of the employees made a slight movement and he was stabbed.
7. The learned Subordinate Judge could not rely on the evidence of P. Ws. 1 and 2 on two grounds, namely, (1) that they were highly interested persons and (2) that although about 100 persons had assembled after the incident none of them was examined in the case to corroborate the evidence. The F.I.R. was rejected on the ground that the same was not proved in accordance with the law. The report published in the Statesman dated Feb. 7, 1970, which was marked as Ext. 3, was rejected by the learned Subordinate Judge as hearsay as neither the staff correspondent, who made the report, nor anybody from the newspaper, had been examined to prove the source of information or any knowledge about the incident. Similarly, the learned Subordinate Judge could not place any reliance on the entries in the account book of the plaintiff as to the loss suffered by the plaintiff. It was observed by the learned Subordinate Judge that the plaintiff not having filed documents in proof of the collection of the total amount that was made on the following day, that is, on Feb. 7, 1970, the amount entered in the account book could not be relied on. Further, it was observed by the learned Subordinate Judge that as regards the amount claimed there wasno evidence that no part of the amount was recovered by the police during the investigation of the case.
8. The learned Subordinate Judge has not placed any reliance on the evidence of P. Ws. 1 and 2. Admittedly, they were the victims of the incident and were the most competent persons to depose about the same. It is true that they were interested persons, but in our view, that is no ground for rejecting their evidence as to the happening of the incident. We have considered the evidence of P. Ws. 1 and 2 and we see no reason to disbelieve that such an incident had taken place. It has been commented by the learned Subordinate Judge that the plaintiff has not examined any of the persons who had assembled after the incident. We fail to understand how these persons would be competent witnesses, for the simple reason that they were not present at the time of the incident. The learned Subordinate Judge was, however, right in holding that the newspaper report and the F. I. R. were not proved in accordance with law, but in our opinion, P. Ws. 1 and 2 have proved the happening of the incident. The learned Subordinate Judge was not justified in rejecting the entries in the account book which was produced by the plaintiff. We have not been able to follow the reason which has been given by the learned Subordinate Judge in not placing reliance on the entries in the account book. It is not the case of the defendant that the account book was not kept in the regular course of business. The entries find corroboration from the evidence of P. Ws. 1 and 2. In these circumstances, there could be no justifiable reason not to rely on the entries in the account book. One of the grounds for rejecting the entries in the account book by the learned Subordinate Judge was that there was no evidence that no part of the amount was recovered by the police during investigation of the case. We are not at all impressed by this reasoning of the learned Subordinate Judge. It was not the case of the defendant that the police had been able to apprehend the robbers and to recover the amount or any part thereof. In the circumstances, we are unable to accept the reasons given by the learned Subordinate Judge in not placing reliance on the entries in the account book.
9. In this connection, we may refer to a significant fact. The plaintiff by itsletter dated Feb. 11, 1970, Ext. 6 (a), reported about the incident and the loss of money to the defendant company. In reply to the said letter, the defendant company by its letter dated Feb. 26, 1970, Ext. 6 (g), informed the plaintiff that its surveyor, one Mr. S. S. Sarwal, would inspect the loss at the premises of the plaintiff. Thereafter, by its letter dated April 10, 1970, Ext. 6 (f), the company informed the plaintiff that it had received a report from the surveyor, and that the matter was receiving consideration. Lastly, the defendant company by its letter dated May 4, 1970 repupdiated the claim of plaintiff on the ground that as there was no forcible and violent entry into the premises at the time of the loss, the claim was not admissible under the policy. The fact that the surveyor had been to the shop premises and had made inspection is not disputed. It is also in evidence that the surveyor had looked into the account book. It was admitted by the defendant company in Ext. 6 (f), that the surveyor had submitted a report of his inspection. By Ext. 6 (d), the claim was refused by the company on a technical ground and not on the ground that no such incident had taken place, nor had the plaintiff suffered any loss of money. In these circumstances, it will not be unreasonable to presume that the surveyor was satisfied about the happening of the incident and also about the suffering of loss of money by the plaintiff. If the surveyor had not been so satisfied the defendant company would have surely, in their letter, Ext 6 (d) refused the claim of the plaintiff not only on that technical ground, but also on the ground that no such incident hart taken place and there was, there-fore, no question of suffering of any loss of money by the plaintiff. These correspondence have not been considered by the learned Subordinate Judge. In our view, the above correspondence between the parties prove the plaintiffs case that such an incident had taken place, and that the plaintiff had suffered the loss of money as claimed by it. We would, accordingly, hold that the plaintiff has been able to prove that on Feb. 6, 1970, it has suffered loss of the amount as claimed by it as a result of the robbery committed at its shop on that date.
10. We may now consider the technical objections that had been taken by the defendant company in its writtenstatement. It may be stated here, that the defendant company did not examineany witness in the suit. The first objection of the defendant company is that the claim is not admissible under the Insurance Policy as there was no violent and forcible entry into the premises at the time of the loss. In this regard, we may set out below the relevant portion of the Policy:
'Burglary and House Breaking Policy
............if during any Period of Indemnity the Property or any pan thereof whilst within the Premises shall after actual forcible and violent entry of the Premises be stolen or damaged by thieves or if as a consequence of such forcible and violent entry or any attempt threat (sic) there shall occur any damage to the Premises falling to be borne by the Insured then the Company will by payment or at its option by reinstatement or repair indemnify the Insured against such loss or damage.
It is hereby declared and agreed that this Policy shall not extend to cover loss of Property covered by the within Policy if abstracted from Safe or Strongroom following the use of a key to the Safe or Strongroom or any duplicate thereof unless such key has been obtained by violence or the threat of violence to the Insured or to a Member of his Staff.'
11. The indemnity, in the first instance, relates to the circumstance when the property is stolen or damaged or the premises is damaged after an actual forcible and violent entry into the premises. The condition precedent to the Indemnity is the actual and violent entry into the premises. In view of the word 'stolen' in the indemnity clause and the policy being a Burglary and House Breaking Policy, such entry must be without the knowledge and behind the back of the insured. The agreement that is recorded under the schedule is not in respect of burglary or house breaking, but it is in respect of robbery. In this agreement, there is no question of forcible or violent entry, but the company indemnifies the insured against the loss of property abstracted from the Safe or Strongroom as a result of use of the key obtained by violence or threat of violence to the insured or to a member of his staff. Thus, though the policy has been termed as Burglary and House Breaking Policy, by the agreement as embodied in the Schedule, it has been extended to loss of the property on account of robbery as well. In para 670 of Halsbury's Laws of England. 4th Edition, Volume 25, it has been stated that in ordinary practice the protection given by a burglary insurance policy is not confined to loss by burglary in the strict sense, but extends to loss by analogous crimes such as theft and robbery. In the present case, it has been so extended by the agreement under the schedule. In the circumstances, we are unable to accept the contention that as the entry of miscreants was neither forcible nor violent, the claim of the plaintiff is not admissible under the policy.
12. It is, however, contended on behalf of the defendant company that under the agreement the key has to be obtained from the insured or a member of his staff by violence or threat of violence, but as P. W. 2 was compelled to open the safe at the point of a revolver, the condition under the agreement was not fulfilled. We do not think that there is any substance in the contention. In our opinion, there is no difference between the two circumstances, namely, where the miscreants obtains the key from the person in possession of the same by violence or threat of violence and opens the safe with the key, and where he compels such person at the point of a revolver to open the safe with the key. In the first case, the key is actually obtained by the miscreant; in the second case, he does not take the key and open the safe himself, but by a threat of violence he compels such person to open the safe which he does, not voluntarily, but under compulsion, on behalf of the miscreant. In such a case, at the particular moment, the possession by such person of the key is for all practical purposes the possession of the miscreant. In our opinion, the conditions under the agreement do not admit of such a strict and literal interpretation as contended on behalf of the defendant company. The whole object of such conditions seems to be, that the insured should take particular care regarding the proper custody of the key so that it cannot be obtained and used by any person against his will except by violence or threat of violence. In the circumstances, we hold that the conditions under the agreement have been fulfilled.
13. The only other point that remainsto be considered relates to the interpretation of clause (9) of the Policy which isan arbitration clause. Clause (9) provides as follows:
'(9). All differences arising out of this Policy shall be referred to the decision of two Arbitrators, one to be obtained in writing by each of the parties, within the calendar month after having required in writing so to do by either of the parties or in case the Arbitrators do not agree of an Umpire of the parties obtained in writing by the Arbitrators before entering upon the reference. The making of the Award shall be a condition precedent to any right of action against the Company. If the Company shall disclaim liability to the Insured for any claim hereunder and such claim shall not within twelve calendar months from the date of such disclaimer have been referred to arbitration under the provisions herein contained then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.'
14. Under clause (9), the making of the Award has been made the condition precedent to any right of action as it was made in Scott v. Avery, (1856) 5 HLC 811. In that case Lord Cambell observed:
'Now in this contract of insurance it is stipulated in the most express terms, that until the arbitrators have determined, no action shall lie in any Court whatsoever. That is not ousting the Courts of their jurisdiction because they have no jurisdiction whatsoever and no cause of action accrues until the arbitrators have determined.'
Such a clause commonly called Scott v. Avery clause was considered in Heyman v. Darwins Ltd. (1942) AC 356, and Lord Wright observed:
'The contract, either instead of or along with a clause submitting difference and disputes to arbitration, may provide that there is no right of action save upon the award of the arbitrator. The parties in such a case make arbitration followed by an award a condition of any legal right of recovery on the contract. This is a condition of the contract to which the Court must give effect, unless the condition has been 'waived', that is, unless the party seeking to set it up has somehow disentitled himself to do so.' The legality of a Scott v. Avery clause has been upheld in Aghore Nauth Baner-jee v. Calcutta Tramways, (18851 ILR 11 Cal 232. In the present case, besides the Scott v. Avery clause, clause (9) also prescribes the time limit of twelve months from the date of disclaimer by the company of its liability within which the claim has to be referred to arbitration, in default, the claim shall be deemed to have been abandoned. For the present, it is not necessary for us to consider the imposition of time limit by clause (9) which will be referred to at the proper place,
15. Relying on the provision of clause (9), it has been strenuously urged by Mr. Lahiri, learned Advocate for the defendant company, that as the award has been made the condition precedent to any right of action, the suit instituted by the plaintiff was not maintainable. On the other hand, Mr. Bhola Nath Sen, learned Advocate for the plaintiff submits that although, ordinarily the condition precedent under the submission clause would prevail, the same will not apply in view of the facts and circumstances of the present case. He has drawn our attention to the correspondence that passed between the parties before the institution of the suit, which will be referred to presently. It has been stated already that by its letter, Ext. 6 (c), the plaintiff reported the incident to the defendant company and requested to send the claim forms. The defendant company made an investigation of the loss by its surveyor and the latter submitted a report, the defendant company by its letter, Ext. 6 (d), repudiated the plaintiff's claim on the ground that there was no forcible and violent entry into the premises at the time of loss. The plaintiff by its letter dated June 19, 1970, Ext. 6 (c) inter alia contended that it was necessary that there should be actual breaking of the structure of the premises to constitute 'breaking in', and that 'Burglary and House Breaking' would also include a case where the criminals or thieves gain entrance into the premises at the point of firearms, daggers and other dangerous weapons. Thus it appears that by Ext. 6 (c) the plaintiff gave its own interpretation of the term 'Burglary and House Breaking'. The defendant company, however, stuck to the stand taken by it, namely, that as there was no forcible and violent entry into the premises, the plaintiff's claim was not maintainable. On the basis of the above correspondence, it is contended by Mr. Sen that the dispute between the parties related to a pure point of law, namely, the true scope and meaning of the term 'Burglary and House Breaking', andwhether forcible and violent entry would be a condition precedent to the applicability of the term. Further, whether entry into the premises with firearms, daggers and other deadly weapons by miscreants would constitute forcible and violent entry. It is next contended by him that a pure point of law could not be referred to the arbitrators, for it would be beyond the scope of the arbitration agreement as embodied in clause (9). It is submitted by him that the plaintiff did not specifically agree to refer a point of law for the decision of the arbitrators.
16. There can be no doubt that the correspondence referred to above shows that the difference and dispute between the parties was over a pure point of law as to the interpretation of the term 'Burglary and House Breaking.' The question that arises is whether a pure point of law should be referred to arbitration. The principle of law in this regard has been stated in Russell on Arbitration, 17th Edition, Page 85, as follows :
'The Court in the past has shown itself less disposed to grant a stay where the principal issue is a question of law on the proper construction of an agreement than if the dispute involved principally questions of fact. Where in such a document as a building contract or a partnership agreement you have an all-embracing arbitration clause, it may often be bad practice to permit matters of law or construction to go to arbitration for, though such matters are strictly covered by the agreement, they are questions not appropriate to be dealt with by arbitration; and, indeed, it was probably not contemplated that they should be dealt with by arbitration, and it may be futile to allow them so to be.'
17. In Alexander v. Campbell, (1872) 41 LJ Ch 478, a marine insurance contained an arbitration clause in general terms, and the award was made a condition precedent to a right of action. The dispute between the parties was with regard to a question of law. The policy-holder, instead of referring the dispute to arbitration, instituted a suit for recovery of the insurance money. The defendant relied on the arbitration agreement as a bar to the institution of the suit. It was held that by the arbitration clause the parties did not agree to submit a pure question of law to arbitration.
18. Thus it appears that when the parties have not agreed to refer a purepoint of law to arbitration, it cannot be referred. It is not desirable that an arbitrator who is generally a layman having no knowledge in law, should decide a point of law. But where the parties specifically agree to refer a point of law to the arbitrator, in that case, such point of law should be decided by the arbitrator and not by the Court. In Thawardas Pherumal v. Union of India, : 2SCR48 . Bose, J. who delivered the judgment of the Supreme Court, observed as follows (at p. 475):
'Therefore, when a question of law is the point at issue, unless both sides specifically agree to refer it and agree to be bound by the Arbitrator's decision, the jurisdiction of the Courts to set an Arbitration right when the error is apparent on the face of the award is not ousted.'
The above principle of law has been reiterated by the Supreme Court in Union of India v. A. L. Rallia Ram, : 3SCR164 . It is not that an arbitrator is not entitled to decide a point of law if it arises in course of deciding a dispute. But when the parties did not specifically agree to refer a question of law, the decision of the arbitrator on such question may be challenged before the Court if there be an error apparent on the face of the award. When, however, there is no specific agreement between the parties to refer a pure point of law to the arbitrator, one party cannot insist on the other to refer the same. When, therefore, the dispute relates to a pure point of law and there is no specific agreement between the parties to refer a point of law to the arbitrator, there will be no bar to a party to institute an action in a Civil Court for a decision on the point. The arbitration agreement including the Scott v. Avery, (1856) 5 HLC 811 clause will not stand in the way to the maintainability of such an action, for the party who institutes the action has not bound himself by a specific agreement to refer a point of law to the arbitrator. In the instant case, the arbitration clause is in general terms and is wide in amplitude. It also contains a Scott v. Avery clause. In our opinion, when an arbitration clause is in general terms, it does not follow that the parties have specifically agreed to refer a pure point of law to the arbitrator. The dispute between the parties being in respect of a pure point of law, the arbitration clause does notapply and the plaintiff's suit will be quite maintainable. The contention of the defendant company against the maintainability of the suit on the ground that under the arbitration clause the award is a condition precedent to any right of action, is not available as, by each agreement, the parties did not agree to refer a dispute on a pure point of law.
19. It has been already stated that apart from the Scott v. Avery clause, the arbitration agreement also prescribes a time limit of 12 months from the date of disclaimer by the defendant company of its liability within which the claim has to be referred to arbitration, and that in default the claim shall be deemed to have been abandoned. It is contended on behalf of the defendant company that in view of the failure of the plaintiff to refer the dispute to arbitration within the prescribed time limit, the plaintiff's claim shall be deemed to have been abandoned. It has been already found by us that the dispute on a pure point of law is not covered by the arbitration clause and accordingly, there could be no question of referring such a dispute to arbitration within the prescribed time limit after the disclaimer by the defendant company. This contention must be overruled. In this connection, it may be observed that the stand taken by the defendant company in refusing the claim of the plaintiff was not at all justified. Although the case of the plaintiff came within the purview of the agreement embodied under the schedule of the Policy, the defendant company made a disclaimer on the plea of the absence of forcible and violent entry which is applicable only in the case where the property is stolen or damaged without the knowledge and behind the back of the insured, as discussed above.
20. Before we part with this case, we may consider a short point that has been raised on behalf of the plaintiff appellant. It is contended by Mr. Sen that the defendant company having sought to avoid its liability under a contract, that is, having repudiated the contract, the arbitration clause stands set aside. We are unable to accept this contention. In avoiding its liability under the contract, the defendant company relied on the clause in the contract. In other words, the defendant company did not deny the existence or the validity of the contract, but relied on it in support Of its plea. In our view, repudiation ofsuch a nature does not vitiate the contract or make its non-existent so as to enable the other party to regard it as rescinded or set aside and take resort to the institution of an action under the common law of the land contrary to and in violation of the arbitration clause. No other point has been argued on behalf of either party.
21. For the reasons mentioned above, this appeal is allowed with cost. The judgment and decree of the learned Subordinate Judge are set aside and the suit is decreed with costs. It is declared that the contract of insurance covers the loss of money from the safe in the plaintiff's shop, Jagadhatri Bhandar, on Feb. 6, 1970, and that the plaintiff is entitled to be indemnified by the defendant company on payment of Rs. 30,000/-. Further it is directed that the plaintiff is entitled to recover the said sum of Rs. 30,000/- from the defendant company on account of the aforesaid loss sustained by it. The said sum shall bear simple interest at the rate of 6% per annum from date till realisation.