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The Cotton Corporation of India Ltd. Vs. the Oriental Fire and General Insurance Company Limited and ors. - Court Judgment

LegalCrystal Citation
SubjectInsurance
CourtKolkata High Court
Decided On
Case NumberMatter No. 743 of 1983
Judge
Reported inAIR1984Cal355,[1986]60CompCas413(Cal)
ActsArbitration Act, 1940 - Section 37(4)
AppellantThe Cotton Corporation of India Ltd.
RespondentThe Oriental Fire and General Insurance Company Limited and ors.
Appellant AdvocateR.C. Deb, ;N.C. Roy Chowdhury and ;Saibal Ganguli, Advs.
Respondent AdvocateR.N. Dutt, ;S.C. Ukil and ;S.R. Saha, Advs. for Respondent No. 1
Cases ReferredAirways v. Sterling General Insurance
Excerpt:
- .....and the respondent no. 1 and by letter dated 27-8-82 the respondent no. 1 stated that in case of a fire claim, the records of the claimant should not be accepted as the reliable evidence. on the basis of the surveyor's joint statement, the respondent no. 1 denied that there were 1860 bales of cotton in the godown at the time of the fire. the dispute between the petitioner and the respondent no. 1 regarding the number of bales involved in fire, and the quantum of loss suffered by the petitioner arose for the first time in august 1982. it is significant to note that the fire took place in 10-7-81, and 12 months time expired on 9-7-82. therefore the dispute as to the quantum of liability of the respondent no. 1 arose only after expiry of 12 months from the date of fire. the petitioner,.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. This is an application under Section 37(4) of the Arbitration Act for extension of time to make the reference.

2. The admitted facts of this case are as follows : --

The petitioner carried on business in purchase and sale of cotton bales in various parts of India. All these cotton bates are hypothecated with the respondent No. 2, Bank of Baroda and are stored in the godowns of the West Bengal State Warehousing Corporation, the respondent No. 3. The goods stored at the godowns situate at Nos. 27, 28 and 29 of the respondent No. 3 were insured with the respondent No. 1 under a policy of insurance No. 3120/0/0/F-9647/80 dated 3rd October, 1980 against any loss or damage by fire and the petitioner paid the premium of Rs. 48,628/- which was accepted by the respondent No. 1. By mutual agreement, on or about 30-6-81, the aforesaid fire policy was extended to cover the fire risk of the cotten bales stored at godown No. 6 of the respondent No. 3 situate at No. 4. Khagen Chatterjee Street, Calcutta for Rs. 1,00,00.000/-. The said policy contained an arbitration clause as follows : --

Clause 18 :-- 'If any difference shall arise as to the quantum to be paid under this policy I liability being otherwise admitted) such difference shall independently of all other questions be referred to the decisions of an arbitrator, to be appointed in writing by the parties in difference or if they cannot agree upon a single Arbitrator to the decision of two disinterested persons as arbitrators of whom one shall be appointed in writing by each of the parties within two calendar months after having required so to do in writing by the other party in accordance with the provisions of the Arbitration Act, 1940 as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint sole arbitrator; and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering upon the reference and who shall sit with the arbitrators and preside at the meetings .................

Clause 19 : 'In no case whatsoever shall the company be liable for any loss or damage after expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration, it being expressly agreed and declared that if the company shall disclaim liability for any claim hereunder and such claim shall not within 18 calendar months from the date of the disclaimer have been made the subject-matter of a suit under court of law then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.'

3. It is also an admitted fact that on or about 10-7-81 a devastating fire broke out at the godown No. 6 of the respondent No. 3 situate at No. 4 Khagen Chatterjee Street, Calcutta, and the said fire completely destroyed and damaged all the goods kept in that godown by the petitioner. The petitioner immediately informed the respondent No. 1 about the destruction caused by the fire by its letter dated 11-10-81 and the respondent No. 1 appointed M/s. Ascon and Avins as the survey or to assess the loss and damages and in its letter dated 11-7-81 informed the petitioner about the same and sent the claim forms. The petitioner submitted in claim on 16-7-81. On 18-7-81 the surveyors informed the petitioner that they wanted to commence survey and to have physical verification of the stock for that purpose under joint supervision of the surveyor, the petitioner and the respondent No. 3 and that the assessment would be made on an allowance basis. The petitioner by its letter dated 22-7-81 pointed out that the assessment ought to be made on total loss basis and that the petitioner was not agreeable to accept the salvaged goods. The surveyor and the petitioner disagreed regarding the number of bales involved. On physical verification the number of bales were found to be 996 which were sold at Rs. 5,15,000/- by the Surveyors and the said sum was paid to the petitioner in part payment of its claims. On 20-11-81, the surveyor proposed to assess the loss of goods on the basis of counting of the metal bands which were found at the godown at the time of physical verification of salvaged goods evidencing existence of 996 bales only. It should be noted that after the salvaged goods were delivered, a joint statement was prepared and signed by the representatives of the surveyor, petitioner and the respondent No. 3 recording that there was nothing more to deliver from the godown and the delivery was complete. The aforesaid proposal was made by the surveyors on the basis of the said joint statement. By letter dated 4-12-81 the petitioner informed the surveyor that while signing the joint statement, its representative Mr. B. K. Jha did not take into account the bales which were completely destroyed by fire leaving no physical trace and as such the statement should be corrected accordingly. By another letter dated 9-12-81, the petitioner recorded that the surveyors' allegations that there were only 9% bales in the godown was not correct as will be evident from the records of the petitioner as well as that of the respondent No. 3. According to the petitioner 1860 bales of goods were in the godown. By letter dated 14-12-81 (he surveyor insisted that only 996 bales were involved in the fire as mentioned in the joint statement. By letter dated 30-12-81, the respondent No. 3 confirmed that on the date of fire. 1860 bales of cotton were in the godown. But in reply dated 7-1-82 the surveyor refused to accept the said fact on the ground that the fire might destroy the cottons but not the metal bands and as such they would proceed on the basis of the joint statement. Thereafter various correspondence passed between the petitioner and the surveyor. By letters dated 25-4-82 and 28-4-82 the petitioner requested the respondent No. l to settle its claim for Rs. 52,57,199/-. In reply dated 25/26th May. 1982, the respondent No. 1 for the first time asked the petitioner to submit the Fire Brigade Report. In the meantime the compensation for 996 bales was assessed at Rs. 21.94,181/-. It is the petitioner's case that the petitioner, due to administrative reasons, wanted to accept Rs. 20,00,000/- as on account payment without prejudice to its other rights and contentions under the said policy. In the affidavit-in-opposition, para 25 the respondent No. 1, however, alleged that by letter dated 21-6-82 the petitioner agreed to accept Rs. 20,00,000/- in full and final settlement of its loss amounting to Rs. 21.94.1817-. As this letter dated 21-6-82 was not disclosed in the proceeding before me. I directed the parties to disclose this letter and a xerox copy of the letter was produced in Court by the respondent No. 1 and was admitted to be a correct copy by the petitioner. The said letter is kept on record. In this letter the petitioner stated 'We hereby agree to accept on account payment without prejudice to our rights and contentions under the policy'. The-subject matter of this letter was as follows : --

'Fire of 1860 bales in the godown of West Bengal State Warehousing Corporation on 10-7-1981 - Rs. 57,66,200/-.

4. This letter clearly proves that the petitioner was pressing a claim for Rs. 57,66,200/- by way of loss and damage of 1860 bales of goods and was agreeable to accept on account payment without prejudice to its rights and contention under the policy concerned. The respondent No. 1, taking advantage of the fact that the letter dated 21-6-82 was not disclosed by the petitioner, deliberately misconstrued the same in para 25 of its affidavit-in-opposition with the sole motive to mislead the Court. This affidavit was verified by the Regional Manager of the respondent No. 1, Mr. Umanath Sadhu on 9-8-83 and the contents of para 25 of this affidavit was verified by him on oath as true to his knowledge. It is surprising that a responsible officer of the respondent No. 1 has deliberately made this false statement on oath with the mala fide motive to defeat the petitioner's case if possible. It is painful to observe that this respectable insurance company has no respect for truth and its business moral is so low. By letter dated 9-7-1982 the petitioner submitted the Fire Brigade report to the respondent No. 1 as per its demand. Thereafter some correspondence passed between the petitioner and the respondent No. 1 and by letter dated 27-8-82 the respondent No. 1 stated that in case of a fire claim, the records of the claimant should not be accepted as the reliable evidence. On the basis of the surveyor's joint statement, the respondent No. 1 denied that there were 1860 bales of cotton in the godown at the time of the fire. The dispute between the petitioner and the respondent No. 1 regarding the number of bales involved in fire, and the quantum of loss suffered by the petitioner arose for the first time in August 1982. It is significant to note that the fire took place in 10-7-81, and 12 months time expired on 9-7-82. Therefore the dispute as to the quantum of liability of the respondent No. 1 arose only after expiry of 12 months from the date of fire. The petitioner, however, treated this letter of the respondent No. 1 dated 27-8-82 as a disclaimer. Under the circumstances, by a letter dated 25-9-82 the petitioner demanded payment of Rs. 52.51.199/ after giving credit for Rs. 5,15,001/-received by the petitioner as the price of the salvaged goods and further intimated the respondent No. 1 that in default of payment the petitioner would file a suit. Subsequently the petitioner was advised that this letter of the respondent No. 1 did not amount to a disclaimer as the respondent No. 1 admitted its liability partially. By this letter the respondent No. 1 only disputed the quantum of its liability under the said policy and this dispute was referable to arbitration. Thereafter by letter dated 25-1-83 the petitioner informed the respondent No. 1 the petitioner would accept the admitted amount as on account of payment and the balance disputed amount would be referred to arbitration. The petitioner waited for a considerable time for reply but ultimately no reply came from the respondent No. 1. The nature of the dispute between the parties came to light clearly after expiry of 12 months, time from the date of occurrence of fire. As the 12 months, period had already expired on 9-7-82 the dispute could not be referred to arbitration. The petitioner thereafter took legal advice and was instructed to make the present application and this application was taken out in June 1983.

5. It is submitted on behalf of the respondent No. l that the time expired on 9-7-82 and one year had elapsed before the present application was taken out in June 1983. Therefore, this delay should not be condoned. It is to be noted that prior to 9-7-82, the respondent No. 1 never intimated the petitioner in clear terms that they would not receive in evidence the records of the case in possession of the petitioner and the respondent No, 3. The entire transaction for storage of goods is carried on between the petitioner and the respondent No. 3 on the basis of the records kept in the usual course of business and they are admissible evidence under the provisions of the Evidence Act. They are also good documentary evidence in case of a reference to arbitration. The respondent's contention that these records would not be accepted in evidence is arbitrary. As there was no dispute regarding the quantum of respondent's liability earlier, the petitioner could not refer this dispute to arbitration within the agreed period. The time expired not due to any default on the part of the petitioner but due to the conduct of the respondent No. 1 who did not make it clear to the petitioner that they would not accept the petitioner's case of 1860 bales of goods or the records in their possession and that they would only accept 996 bales on the basis of the joint statement recording delivery of goods. It is true that some time was wasted on account of the fact that the petitioner proceeded on the basis that the letter dated 25-9-82 was a disclaimer. This bona fide mistake was corrected by legal advice subsequently. The petitioner should not be penalised for making a bona fide mistake. The present application was made after obtaining legal advice for extension of time. The petitioner is making a huge claim of over fifty two lacs on the allegation that 1860 bales were gutted and the records of the petitioner as well as the respondent No. 3 would prove and corroborate the said claim of the petitioner. On the other hand the respondent No. 1 is refusing to treat as evidence the records of the case kept by the petitioner and the respondent No. 3, in the usual course of business. Under the circumstances it is desirable that this dispute should be decided in a judicial forum on proper evidence. In view of the fact that the dispute itself was raised after expiry of the time by the respondent No. 1, the petitioner was entitled to extension of time to make the reference. The petitioner's counsel relied on : [1975]3SCR136 (Sterling Genera! Insurance Co. Ltd. v. Planters Airways Pvt. Ltd.) where the Supreme Court held :

'In interpreting Section 37(4) of the Act the Court has to take liberal view of the meaning of the word 'undue hardship'. Undue must mean something which is not merited by the conduct of the claimant or is very much disproportionate to it.'

6. He also relied on : AIR1974Cal193 (Planter's Airways v. Sterling General Insurance) where it was held : --

'...'.......... all the relevant facts which are the cause of such delay in the background of a particular case should be taken into account in a practical sense.'

7. Taking into consideration the fact that the dispute was raised after expiry of term and all relevant circumstances of this case, such as the bona fide mistake committed by the petitioner in construing the letter of 25-9-82, the amount of stake involved in this case and the unavoidable delay in obtaining the legal advice and preparing this application and particularly the fact that refusal to exercise my discretion in this case would cause serious hardship to the petitioner, I am of the opinion that it is a fit case where extension should be granted. There is no question of the respondent No. 1 suffering any prejudice in this case as the time had expired due to the conduct of the respondent No. 1 itself. In the petition, the prayer has been made for extension of time for one month. But considering the procedure laid down in the agreement for appointment of arbitrator one month's time will not be sufficient unless the respondent No. 1 co-operates in appointment of a sole arbitrator. In case of disagreement it will take longer time. In view of the provision of the arbitration clause, I feel that unless extension is granted for 4 months, the order passed herein may become ineffective or can be rendered infructuous. In that view of the matter, the time to refer the dispute to arbitration is extended for four months from today. The cost of this application will be cost in the reference. All parties to act on a signed copy of the minutes of this order.


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