1. This appeal is on behalf of the defendant and it arises out of a suit for recovery of damages to the extent of Rs. 11,165.24 p. The respondent instituted the suit for damages against the appellant on account of loss suffered to a Jeep belonging to the respondent bearing registration No. WBD 231 which was insured with the appellant for a sum of Rs. 24,029.80 p. The lose was suffered as a result of the vehicle being set on fire by some of the workers belonging or who belonged to the respondent, Calcutta Dock Labour Board. It was alleged fey the plaintiff that as a result of the fire the vehicle was heavily damaged and the cost of repair was assessed at Rs. 11,170.24 p. by Khettry Motors. The defendant was informed of the damage and of the cost of repair but the defendant illegally disclaimed its liability. Subsequently, the jeep was repaired by Khettry Motors at a cost of Rupees 11,155.24 p. which was paid by the plaintiff to Khettry Motors. The plaintiff respondent brought the suit for recovery of the said sum on the basis of the comprehensive policy.
2. The defendant contested the suit by filing a written statement. The written statement was filed on February 23, 1970. In that written statement, the defendant denied its liability for the amount claimed, on two grounds. The two grounds were that the plaintiff not having referred the claim to arbitration within 12 calendar months from the defendant's disclaimer of the liability, the claim must be deemed to have been abandoned by the plaintiff in terms of condition No. 7 of the Policy. The second ground was that the damage to the vehicle was caused by riot and the plaintiff was, therefore, not entitled to any compensation in terms of the general exception No. 4 of the Policy. Subsequently, on the date of hearing on 18th May, 1971, the defendant filed an additional written statement which was accepted by the Court. By the said additional written statement the defendant introduced a further defence to the effect that condition No. 7 of the Policy lays down that any dispute between the parties arising out of the Policy shall be referred to arbitration and the making of an award shall be a condition precedent to any right of action against the Corporation. As the dispute in question was not referred to arbitration and no award was made, the suit is not maintainable in accordance with the terms of the said condition No. 7.
3. Originally six issues were framed but subsequently by an order dated 4th August, 1971 the issues were recast and the issues originally framed were substantially altered. The parties went to trial on the issues thus recast. The trial Court, upon a consideration of the materials on record came to the conclusion that the damage was caused by fire but there was no rioting as alleged by the defendant and therefore, it did not fall within the general exceptions contained in Clause 4 of the Policy. The trial court found that although there was repudiation of the claim by the defendant, it was still open to the plaintiff to insist on the performance of the arbitration clause, inasmuch as, the entire arbitration agreement was not repudiated by the defendant. The trial court further found that the contract contained in Clause 7 of the Policy to the effect that claim shall have to be made within 12 months from the date of disclaimer by the insurer was not hit by Section 28 of the Indian Contract Act and that Condition No. 7 of the Policy was valid in law. The trial court, however, found that in the circumstances of the case, the defendant waived its right with regard to the arbitration clause and the suit was, therefore, maintainable. The trial court accordingly passed a decree in favour of the plaintiff.
4. Against the said decision of the trial court, the defendant has preferred the present appeal, Mr. Lahiri, learned Advocate appearing on behalf of the appellant, has supported the finding of the trial court that Condition No, 7 of the Policy is not hit by Section 28 of the Indian Contract Act, He has contended that Section 28 of the Indian Contract Act applies only where the period of limitation to institute a suit is curtailed but it does not apply when such a term in the contract has the effect of extinguishing the right of the plaintiff to sue or it has the effect of discharging the defendant from all liabilities in respect of the claim. He has relied upon the decisions in the Baroda Spinning and Weaving Co. Ltd. v. The Satyanarayan Marine and Fire Insurance Co. Ltd., ILR 38 Bom 344 5 (AIR 1914 Bom 225 (2)); New Great Insurance Co. of India Ltd. v. United Equipments and Stores (Pvt.) Ltd., : AIR1970Cal221 ; Giridharilal Hanumanbux v. Eagle Star & British Dominions Insurance Co. Ltd., 27 Cal WN 955 : (AIR 1924 Cal 186) and Dawood Tar Mahomad Bros v. Queensland Insurance Co. Ltd., AIR 1949 Cal 390. Term 7 of the Contract of Insurance may be referred to in this connection. The said term reads as follows:--
'All differences arising out of this Policy shall be referred to the decision of an Arbitrator to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties or in case the Arbitrators do not agree of an Umpire in writing be appointed by the Arbitrators before entering the reference. The Umpire shall sit with the Arbitrators and preside at their meetings and the making of an award shall be a condition precedent to any right of action against the Corporation. If the Corporation shall disclaim liability to the insured for any claim herein and such claim shall not within 12 calendar months from the date of such disclaimer will be 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.'
5. It is clear from the aforesaid condition that all differences between the parties arising out of the Policy must be referred to arbitration in the manner laid down in the said condition, and the obtaining of an award is a condition precedent to any right of action against the Insurer, In the present case, a dispute arose between the Insured and the Insurer over a claim for compensation made by the plaintiff against the defendant. There is no dispute between the parties that such difference was not referred to arbitration by any of the parties. The contention on behalf of the defendants appellant is that in the absence of any award as contemplated under the said clause the present suit is liable to be dismissed.
6. It is well settled that If the making of an award is a condition precedent for the accrual of a cause of action then the condition has to be satisfied before the plaintiff can institute a suit Mr. De, learned Advocate appearing on behalf of the respondent contended that the repudiation was under the contract and it was not covered by the arbitration clause He contended that the word 'disclaimer' must be a total disclaimer and it cannot be a partial disclaimer. Accord-Ing to him, there is no time limit fixed by the aforesaid Condition No. 7 regarding 'differences' arising out of the Policy. But for 'disclaimer' the time limit is 12 months from the date of disclaimer. He contended that the word 'claim' in the said clause is limited only to a claim for money. According to Mr. De, if the arbitration clause applied then the plaintiff not having referred to arbitration within 12 months, his claim will be deemed to have been abandoned but the right of suit would be there. He contended that otherwise if the right of suit is taken away then the said Condition No. 7 would be hit by Section 28 of the Indian Contract Act. In support of this proposition Mr. De relied on the decision in Vulcan Insurance Co. Ltd. v. Maharaj Singh, : 2SCR62 . He relied on the observations made by the Supreme Court in that case in support of his contention that as soon as there is a rejection of the claim the only remedy open to the claimant is to commence a legal proceeding, namely, a suit for the establishment of the company's liability. After such liability has been determined by the Court, the question of quantum of the loss or damage may have to be referred to arbitration. In so far as this aspect of the matter is concerned it appears that the case which the Supreme Court was considering contained an arbitration clause as well as other clauses relating to the dispute which were quite different from the present case. In the case before the Supreme Court Clause 18 which is relevant for the present purpose specifically mentioned that 'if any difference arises as to the amount of loss or damage such difference...... shall be referred to arbitration'. Similarly, Clause 19 provided that 'in no case whatever shall the company be liable fop any loss or damage after the expiration of 12 months from the happening of loss or damages unless the claim is a subject-matter of pending action or arbitration'. It is in this context the Supreme Court made the observations on which reliance has been placed by Mr. De. On the facts of the two cases, we are unable to agree with Mr. De that in the present case the liability of the defendant has to be determined by the Court at first, and then with regard to the quantum of loss or damage the matter is to be referred to arbitration, A clause as is contained In Condition No. 7 of the Contract of Insurance in the present case, namely, that the obtaining of an award shall be a condition precedent to the right of action or suit upon the policy came up for consideration in the case of Scott v. Avery, (1856) 25 LJ Ex 308 and since then such clauses have commonly come to be known as Scott v. Avery clause. It has been held in a large number of cases that if the arbitration clause is contained in a comprehensive language to include any kind of dispute arising out of the Policy, then, the obtaining of an award by arbitration is a condition precedent to the starting of any legal proceeding. Such a clause has also been held to be a valid one. Mr, De also relied on the decision In the Eagle Star and British Dominions Insurance Company v. Dina Nath, ILR 47 Bom 509: (AIR 1923 Bom 249) in support of his contention that in a contract for insurance containing such a clause the liability of the company has to be determined first in a suit and thereafter the question of determination of the quantum of loss or damage may be fixed by arbitration. The observations of the Bombay High Court relied on by Mr. De in support of his contention were made with reference to Clause 13 of the agreement in that case which contained conditions which were different from the present case. On a proper construction of Clause 7 we are unable to agree with Mr. De that if the Corporation disclaims the liability the Insured will have to have the liability determined by the Court and thereafter the matter should be referred to arbitration for fixing the quantum of loss or damages.
7. The next question to be considered is whether the defendant waived the arbitration clause by repudiating the claim of the plaintiff and also by its own failure to refer to the dispute to arbitration and also by submitting to the jurisdiction of the Court. Before the trial court, it was argued that the defendant repudiated the claim of the plaintiff on a ground which went to the root of the contract contained in the insurance Policy and therefore the defendant was precluded from pleading that the arbitration clause was a bar to the institution of the present suit. Several authorities were cited before the trial Court by the respective parties on this point, In this appeal, however, the said question has not been argued in that way. What was contended before us on behalf of the respondent is that the defendant submitted to the jurisdiction of the Court. It filed a written statement wherein this point was not taken. The parties went to trial upon the pleading as originally filed. Subsequently after more than a year the defendant took this defence in an additional written statement filed by it. It was contended on behalf of the appellant that the additional written statement having been accepted by the Court it related back to the date of filing of the original written statement. The additional written statement became a part of the written statement and, as such, it cannot be said that the defendant had waived its right to insist upon the arbitration clause. It would appear from the issues which were originally framed that the defence of the defendant was that there was non-disclosure and mis-statements by the plaintiff in relation to the Insurance Policy. The defendant challenged the plaintiff's claim on these grounds. The defendant went to trial with this case which was made out by it. Subsequently, when the trial commenced the defendant took up the other defence regarding the arbitration clause. Although the additional written statement was accepted by the Court, it cannot be said that the defence taken in the additional written statement was taken by the defendant when it appeared in the suit to contest the plaintiffs claim. That being the position, it must be held that the defendant waived its right to insist upon the arbitration clause, Therefore, the trial Court was right In coming to the finding that there was waiver on the part of the defendant.
8. It was contended on behalf of the appellant that the Insurance Policy contains certain general exceptions. Under Clause 4 of the general exceptions any accident, loss or damage resulting from strike, riot or civil commotion will not make the Corporation liable for compensation. It was contended that the said clause further provides that it was for the Insured to prove that the accident, loss or damage arose independently of the exceptions mentioned in Clause 4. It was argued that the plaintiff had not been able to prove in the present case that the damage was caused independently of riot. Reference was made to paragraph 4 of the plaint wherein it has been stated that 'some recalcitrant workers maliciously and/or out of grudge and/or with a view to cause damage set fire to the said vehicle'. This statement in the plaint taken along with the evidence, it was contended, showed that the damage was caused by riot. The Labour Officer of the plaintiff who was examined as P.W. 1 has denied that there was any rioting or strike on the relevant date. In cross-examination, it was suggested to him that some workers were armed with deadly weapons and they engaged themselves in rioting. This suggestion was denied by the said witness. On the other hand, the witness examined on behalf of the defendant has admitted in evidence that although several persons were arrested no charge-sheet was submitted. The trial court has considered the evidence of these two witnesses and has come to the conclusion that it cannot be said that there was rioting on the day on which the vehicle was set on fire. He has discussed the legal position in this connection and has referred to the relevant sections of the Indian Penal Code in coming to his conclusion. In our view, we find nothing on record to take a view different from that which has been taken by the trial Court on this aspect of the case.
9. This appeal, therefore, fails and it is accordingly dismissed with costs.
A.N. Banerjee, J.
10. I agree.