1. The learned Judge in the Court below summarised the main issue which he had to determine in these words:
The company invokes the special period of limitation provided by Clause 13 of the policies in case of the claim having been rejected. The plaintiff on the other hand claims that an arbitration under Clause 18 having taken place and the suit having been instituted within three months of the date of the award the suit is within time. The substantial question is whether the plaintiff is entitled to invoke the arbitration clause at all in the circumstances. If he is not, then the fact that he did so and obtained an award in his favour will not help him.
2. The real and indeed the only question, which we have to determine, in my opinion, is this, namely, whether in the circumstances of this case the plaintiff was entitled to say that it was right and proper that an arbitration should take place between him and the defendant company. If the plaintiff was entitled to call upon the defendant company to go to arbitration then the matter falls within the latter part of Condition 13 in such manner as to extend the period of limitation within which the plaintiff must bring his action to a date which represents the end of the period of three months from the time when the arbitrator made his award. The respondents to this appeal, that is to say, the defendants in the suit, are faced, as I view the matter, with a dilemma. If it can be successfully contended that this case is governed by the principles laid down in Juredini v. National British & Irish Millers Insurance Co. 1915 A C 499 then it is quite clear that it was not open to the respondents-defendants to rely upon or take advantage of any of the provisions with regard to the special limitation for bringing the suit as provided in Condition 13, the case would fall within the view apparently adopted by Lord Haldane and Lord Dunedin in Juredini v. National British & Irish Millers Insurance Co. 1915 A C 499. On the other hand if it is to be said that this case is one of that class of cases which is covered by the principles enunciated in Stebbing v. Liverpool and London and Globe Insurance Co. Ltd., (1917) 2 K B 433 then the only question which could possibly arise for determination is whether or not a difference had arisen as to the amount of loss or damage alleged to have been sustained by the insured person, that is to say, the plaintiff in the suit, I am clearly of opinion that this matter was of the kind referred to by Lord Reading in Stebbing v. Liverpool and London and Globe Insurance Co. Ltd., (1917) 2 K B 433 where at p. 437 of the report he said:
If the company were seeking to avoid the contract in the true sense they would have to rely upon some matter outside the contract, such as a misrepresentation of some material fact inducing the contract of which the force and effect are not declared by the contract itself. In that case the materiality of the fact and its effect in inducing the contract would have to be tried. In the present case the company are claiming the benefit of a clause in the contract when they say that the parties have agreed that the statements in question are material and that they induced the contract. If they succeed in escaping liability that is by reason of one of the clauses in the policy. In resisting the claim they are not avoiding the policy but relying on its terms.
3. In the present instance the defendant company, by their letters of 5th June and 12th June, were resisting the plaintiff's claim not by saying that the policies themselves had been avoided, but by placing reliance on the provisions contained in the earlier part of Condition 13. A similar situation is described by Lord Sumner in the course of his speech in Macaura v. Northern Assurance Co. Ltd. 1925 A C 619, at p. 631. In that case, referring to Juredini v. National British & Irish Millers Insurance Co. 1915 A C 499, the noble and learned Lord said:
There, persons, who had repudiated the whole contract of insurance, afterwards relied on a limited arbitration clause contained in it, which required the amount payable to be determined by arbitration, and said that, until he had obtained such an award, the plaintiff could not complete his case. It was held that the defendants could not both repudiate the contract in toto and require the performance of a part of it, which only became performable when liability was admitted or established. The present case is the converse. Here an arbitration and award are conditions precedent to any action to enforce the policy. The defendants do not repudiate the policy or dispute its validity as a contract; on the contrary, they rely on it and say that, according to its terms, express and implied, they are relieved from liability.
4. That, in my opinion, has application to the circumstances of the case with which we are now concerned. The sole question is whether any difference had arisen as to the amount of loss or damage. An examination of the letters written by the defendant company shows that what was in controversy was the value of the jute which had been stored in the godown which was covered by the two policies of insurance. The policy-holder, that is, the plaintiff in the present suit, was claiming that the value of the jute which he had lost amounted to no less a sum than Rs. 20,000; on the other hand the insurance company, after they had obtained a report from an assessor, were saying that the total value of the jute was no more than a sum of Rs. 800. Then they proceeded to say that the discrepancy between the two valuations was so great as to raise an inference of fraud on the part of the claimant of such a character as would entitle the defendant company to resist and indeed to reject the claim because it was fraudulent within the terms of Condition 13. Mr. Bose has argued that once the claim has been rejected by the company there is a definite period of limitation prescribed, namely, three months from the date of the rejection and, in effect, the rejection of the claim, no matter on what ground, operates as a bar to any proceedings in law, unless such proceedings are instituted within a period of three months. If that proposition is correct it quite obviously ignores altogether what I will describe as the fifth provision of Condition 13 and entirely obliterates that part of Condition 13 which contemplates that the period of limitation may be extended and will be extended in a case where it is proper that an arbitration should take place. In my opinion, there not only was a 'difference' between the parties as to the amount of loss or damage, but there was such a serious ' difference' as entitled the defendant company in their own opinion to put upon the claimant the stigma of having made a fraudulent claim. In my view there never could be a more serious 'difference' than there was in the present instance. That being so, I can come to no other conclusion than that the last part of provision 5, as I have called it, of Condition 13 came into operation.
5. It is manifestly impossible for the defendant company to argue that where arbitration proceedings are competent those proceedings must be had within the initial period of three months. One has only to observe that both sides are given a period of two months within which to nominate an arbitrator. That at once takes the matter beyond the initial period of three months or may do so. On this point we have the authority furnished by the case in Board of Trade v. Cayzer Irvine & Co. 1927 A C 610. From that case it may be said that where proceedings by way of arbitration are a condition precedent to any proceeding in law the right to bring a suit does not arise until the arbitration proceedings have been completed and an award has been made. As I read the matter, upon the language of Condition 13 and Condition 18, as they stand, there is no sort of limitation prescribed for the institution of arbitration proceedings and, therefore, the institution of any suit consequent upon the result of the arbitration proceedings. It is not without significance, as Mr. Sinha has pointed out, that although all these conditions are in the form of conditions adopted by the English Insurance Companies -they are contained in what is called 'the foreign form'-this particular Insurance Company, though they have adopted practically all the relevant provisions from that form, they have omitted the condition which in the 'foreign form' is Condition 19. That condition reads as follows:
In no case whatever shall the company be liable for any loss or damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration.
6. We do not know-and it is not necessary that we should know-why that provision was not adopted by this particular company, the defendants in this suit, but its absence indicates that there is no limitation within which arbitration proceedings, if they are required, shall be commenced. Therefore once we come to the conclusion that there was a difference between the parties as to the amount of loss or damage sustained, arbitration proceedings become a condition precedent to bringing a suit and the cause of action does not arise until the arbitration proceedings have been terminated. Therefore, it was competent to the present plaintiff to bring his suit at any time within three months of the making of the award by the arbitrator. This suit was brought within that period and therefore it ought not to be dismissed on any ground of special limitation contained in Condition 13 of the policy. I agree, therefore, that this appeal must be allowed, and, having regard to the finding of the learned Judge on the question whether the claim was fraudulent or not taken in conjunction with the award made by the learned arbitrator, I also am of opinion that judgment should be entered in favour of the plaintiff for a sum of Rs. 19,500.
Derbyshire, C. J.
7. This is an appeal against a judgment of Buckland, J.--then the Acting Chief Justice of this Court-delivered on 8th May 1934. By that judgment he decided that the plaintiff in this suit, Bejoy Lal Mukherjee, was not entitled to succeed against the defendants, the New India Assurance Co., Ltd. The suit arises out of a claim made by the plaintiff against the defendant Insurance Company under two policies of fire insurance dated 26th March and 7th April 1931 respectively. By those two policies of insurance the defendants insured jute belonging to the plaintiff who traded as Messrs. S. Devi & Co. at 15 B, Biswakosh Lane,. Bagh-bazaar, Calcutta. The jute in question was situate at Ghosebilla, Jamjami Railway Station in the district of Nadia, Bengal. The first of the two policies was for Rs. 12,000 and was taken out on 26th March 1931. The second policy was for Rs. 8,000 and was taken out on 7th April 1931. The policies remained subject to the conditions and stipulations which are set out on the back of them. The conditions of the two policies are identical.
8. On 17th April 1931 there was a fire, and jute belonging to the plaintiff situated at Ghosebilla, Jamjami Railway Station, was burnt. On 18th April the plaintiff by a letter informed the defendants of the fire. On 23rd April the plaintiff filled in a claim form under the two fire policies and declared that the actual realizable value of the property insured under each item of the above policies under which the claim was made was at the time of the fire Rs. 24,000. He also stated that the loss sustained by him on the jute which had been burnt amounted to the sum of Rs. 20,000 and he claimed the sum of Rs. 20,000 under the two policies. On 5th June the defendants wrote to the plaintiff a letter:
Re: Claim under Policies Nos. 254322 & 254403 Fire in Jute Godown at Ghosebilla, Jamjami Railway Station Alamdanga (Nadia).
Our Assessors, Messrs. Sinclair Murray & Co., Ltd., have to-day forwarded us their assessment report in connection with the above fire estimating the loss at Rs. 800 only against your claim for Rs. 20,000 which appears to them to be fraudulently excessive. In the circumstances we have to refer you to Condition 13 of our policy reading:If the claim be in any respect fraudulent; or if any false declaration be made or used in support thereof; or if any fraudulent means or devices used by the assured, or any one acting on his behalf to obtain any benefit under this policy, all benefit under this policy shall be forfeited.
9. On 9th June the plaintiff wrote back to the defendants:
I have received your letter of the 5th instant to-day and I am surprised to note that assessment report of Messrs. Sinclair Murray & Co., says only Rs. 800. I told your Indian assessors on the day of inspection that I doubt my manager has cheated me and they agreed with me and stated that the stock in godown and outside before fire was not more than Rs. 6,000. I also told the fact in your office immediately after returning from the place. However it is for Rs. 6,000 or Rs. 800, it comes under condition of the policy, and most probably I am a ruined man for the breach of trust of my manager unless the company be kind to consider my case favourably. I solely depend upon the mercy of the company now.
10. On 12th June the defendants wrote back to the plaintiff:
In reply to our letter of the 5th instant we have for acknowledgment yours of the 9th idem. In view of the circumstances we regret to advise you that we repudiate our liability under the above policies as per Condition 13, already referred to in our letter of the 5th instant.
11. On 26th June the plaintiff wrote another letter to the defendants-a very lengthy letter-in which he asked them to investigate the matter further and to pass his claim in full, otherwise he would be reluctantly compelled to seek remedy in Court. On 12th November of the same year the appellant through, his Solicitors Messrs. G.C. Chunder & Co., threatened the defendants with proceedings unless they met the claim. On 27th November the company by a letter of that date drew the plaintiff's Solicitors' attention to the full wording of Condition 13 of the policies under which they contended that any proceedings were too late. On 30th November the plaintiff's Solicitors wrote to the defendants a letter in which they said:
We are surprised that inspite of our client's best endeavours to prove to your satisfaction from independent enquiries that there was no fraud or arson you should have thought fit to take shelter under a technical defence. Assuming that Clause 13 bars a suit, which in the circumstances we contend it does not, we do not see how proceedings under Clause 18 will be barred. If, therefore, you do not admit our client's claim, our client appoints Mr. N.C. Chatterjee, Bar-at-law, the arbitrator, and calls upon you either to accept him as the single arbitrator, or within two months in writing to appoint another arbitrator.
12. On 11th January 1932, some six weeks afterwards, the defendants replied to the plaintiff's solicitors in which they contended that it was too late for arbitration proceedings to begin and they said: 'Under the circumstances we do not see the utility of joining in any arbitration at this stage.' There is a letter in reply of 12th January in which the plaintiff's solicitors argued the matter. The reply in return from the defendants was on 30th January in which the defendants said that they were not satisfied with the honesty of the claim and believed that the claim set up by the plaintiff was dishonest and that the case was a fit case for enforcement of the provisions of Condition 13. By a letter of 28th November 1932 the plaintiff appointed Mr. N.C. Chatterjee, Barrister, sole arbitrator in the reference that he had begun under the arbitration proceedings in the matter of the claim under the two fire insurance policies. The defendants took no part in the arbitration proceedings with the result that Mr. Chatterjee proceeded to hold the reference and on 28th March 1933 he made an award in which he awarded that the plaintiff was entitled to recover from the defendants under the two policies in respect of his jute which had been burnt a sum of Rs. 19,000 and also Rs. 500 as costs. On 19th May 1933 this suit was brought. The suit purports to be on the award. It would be convenient at this stage to read the two conditions of the policies with which we are concerned in this matter. They are Conditions 13 and 18. Condition 13 reads:
If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the assured or anyone acting on his behalf to obtain any benefit under this Policy; or, if the loss or damage be occasioned by the wilful act, or with the connivance of the assured; or, if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or, (in case of an arbitration taking place in pursuance of the 18th Condition of this Policy) within three months after the arbitrator or arbitrators or umpire shall have made their award, all benefit under the Policy shall be forfeited.
13. Condition 18 reads:
If any difference arises as to the amount of any loss or damage, such difference shall independently of all other questions be referred to the decision 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 been required so to do in writing by the other party. In case either party shall refuse or fail to appoint an arbitrator within two calendar months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint a 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 on the reference, and who shall sit with the arbitrators and preside at their meetings. The death cf any party shall not revoke or affect the authority or power of the arbitrator, arbitrators or umpire respectively; and in the event of the death of an arbitrator or umpire another shall in each case be appointed in his stead by the party or arbitrators (as the case may be), by whom the arbitrator or umpire so dying was appointed. The costs of the reference and of the award shall be at the discretion of the arbitrator, arbitrators or umpire, making the award. And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained.
14. Those conditions appear to be some of the standard conditions adopted by the British Insurance Companies on their foreign policies. See Wilfred & OttarBarry's Law of Insurance. In these policies not all the standard conditions have been adopted. There is nothing in Condition 18 which provides that arbitration proceedings must be begun within any fixed time. The standard condition adopted by the British Insurance Companies in respect of foreign policies, Condition 19, provides that in no case whatever shall the company be liable for any loss or damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of a pending action or arbitration. As I said above, most of the standard foreign conditions have been incorporated into these policies, but Condition 19 is not, so that there is in these policies no limit put to the time during which arbitration proceedings can be started. A number of cases have been cited to us during the argument in this matter. Some of those cases deal with the clauses in question, namely Nos. 13 and 18, and what their effect is in certain circumstances. No case has been brought to our notice which is similar in facts to this case.
15. After considering those cases and the facts to which they related it seems to me in the main that the only way to deal with this case is to apply the conditions that have been relied upon, namely Conditions 13 and 18, to the particular facts of this case. It is contended by the defendants that under Condition 13 any action or suit brought in this matter must be brought within three months of 12th June 1931, which is stated by the defendants to be the date when the plaintiff's claim was rejected. As this suit was brought on 19th May 1933 it is contended by the defendants that it is entirely out of time and out of time notwithstanding that it was brought consequent upon arbitration proceedings. The crucial date is 12th June 1931, when the defendants wrote the letter in which they referred to the letter of 5th June and said that they repudiated their liability under the above policies as per Condition 13. It seems to me upon reading the defendants' letter of 5th June which was written in answer to the plaintiff's claim that on 5th June the defendants were disputing the amount of the plaintiff's loss in respect of the jute burnt. They contended that his loss was about Rs. 800, whereas the plaintiff contended that it was Rupees 20,000. On 12th June they still contended that, and the plaintiff still contended that he had lost more than Rupees 800. On 12th June they repudiated their liability under the policies. It seems to me that, both on 5th June and on 12th June there was a difference between the parties as to the amount of loss or damage. That difference was a very serious one, so serious that the defendants founded a charge of fraud upon it, but nevertheless there was that difference. In my opinion, there was both on 5th June and 12th June a difference as to the amount of loss or damage under those policies. As I have said, as a result of that difference the defendants repudiated liability under the policies.
16. It has been contended by Mr. Sinha for the plaintiff that repudiation of liability amounted to a repudiation of the contracts of insurance such as would disentitle the defendants to rely upon the conditions of the policies. See the case in Juredini v. National British & Irish Millers Insurance Co. 1915 A C 499. I think however that the true view of the defendants' repudiation of liability is that they did not repudiate the policy of insurance in toto, but that they repudiated their liability to pay moneys by reason of the operation of Condition 13. See the case in Stebbing v. Liverpool and London and Globe Insurance Co. Ltd., (1917) 2 K B 433 at p. 437 and the case in Freshwater v. Western Australian Assurance Co. Ltd., (1933) 1 K B 515 at p. 527. I am of opinion therefore that the defendants are entitled to rely upon such protection as the conditions of the two policies give them. The only two conditions in question are those set out above, 13 and 18. I have said previously that in my view both on 5th June and 12th June there was between the parties a difference as to the amount of loss or damage under these policies. That being so, it seems to me that the opening clause of Condition 18 applies, namely:
If any difference arises as to the amount of any loss or damage, such difference shall, independently of all other questions, be referred to the decision of an arbitrator.
17. Then follow the other parts of the condition which are not material at the moment. It follows therefore that each of the parties was entitled on 12th June to an arbitration to settle the question that had arisen as to the amount of loss or damage. I think that that was so even though the defendants alleged that the difference was so great that they could raise a charge of fraud in respect of it. I think further that the last part of Condition 18 applies:
And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained.
18. Therefore it seems to me that not only had each of the parties a right to have an arbitration, but that in accordance with the scheme for settling disputes which appears in Condition 18 it was the proper thing that an arbitration should take place and that it must take place before any action or suit was brought upon the policies. The plaintiff did not proceed to arbitration under Clause 18 until 30th November 1931, that is to say, some five and half months after the defendants' liability of 12th June wherein they repudiated liability under the contract. The defendants contend that one of the clauses in Condition 13 of the policy makes this move to arbitration too late. The defendants say that the words:
If the claim be made and rejected and an action or suit be not commenced within three months after such rejection ..... all benefit under this policy shall be forfeited
make the plaintiff's proceeding to arbitration and his starting this suit altogether too late. I am of opinion that in thus contending the defendants have overlooked the fact that the clause which they cite and contend has this effect is joined up with another clause following it, which must be read with it, and when read with it causes a different interpretation to be put upon the words
if the claim be made and rejected and an action or suit be not commenced within three months after such rejection
to have a different meaning. The full wording of the clause is:
If the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or, (in case of an arbitration taking place in pursuance of the 18th Condition of this policy) within three months after the arbitrator or arbitrators or umpire shall have made their award, all benefit under this policy shall be forfeited.
19. In my view, if an arbitration properly takes place under this policy, then the assured is not bound to start his action or suit within three months of the rejection of his claim, but he must start his action within three months after the arbitrator has made his award. The second period may be long after the three months beginning with the rejection of the claim. In my view a difference arose between the parties as to the amount of loss or damage under these policies as was contemplated by Condition 18. Furthermore, it was according to the scheme of arbitration set out in Condition 18 proper, that there should be arbitration proceedings in respect of this dispute. It being proper that arbitration proceedings should be taken in respect of this dispute my view is that the second half of the clause of limitation in Condition 13 applies, namely,
If the claim be made and rejected and an action or suit be not commenced within three months after the arbitrator or arbitrators or umpire shall have made their award, all benefit under this policy shall be forfeited.
20. This suit was commenced within three months of the making of the award by the arbitrator. Therefore, in my view this suit was in time and was properly brought. In the Court below an attempt was made to show that this claim was fraudulent. The learned Judge who tried the case said that he did not think that fraud had been proved beyond all reasonable doubt. Before us in this appeal no attempt was made to support the charge of fraud. Mr. S.M. Bose for the defendants said that he did not propose to do it. The position therefore is that an award has been made by an arbitrator who was appointed pursuant to the provisions of Condition 19. His award stands. It is for Rs. 19,000 and for costs. In my judgment this appeal must be allowed and a judgment be entered for the plaintiff for the sum of Rs. 19,500. This is an appeal by a pauper. The plaintiff must get his costs in the Court below, and as regards the costs in this Court the respondents must pay the successful appellant's attorney's costs in so far as they consist of proper charges for preparation of the paper book and attendance at Court, but no further. The respondents will also pay such court-fees as would have been payable by the appellant had he not been allowed to appeal as a pauper.