National Insurance Co.Ltd vs SAT BHUSHAN JAIN

WHETHER the arbitration clause in an insurance policy pertaining to disputes about the quantum of the insurer''s claim (liability under the policy being otherwise admitted) would operate as a jurisdictional bar to the entertainment of a complaint by the redressal agencies under the Act? This is the primal issue raised in this appeal.

THE respondent Sat Bhushan Jain is admittedly the registered owner of truck No. HYE-2497 which was comprehensively insured with the appellant-Insurance Company. During the period covered by the policy, the said truck met with a serious accident near Jaipur on the 22nd of February, 1991 whilst carrying a full load of wood-pulp and was over-turned. THE complainant-owner immediately contacted the appellant''s office at Jaipur and Shri Sandeep Khanna Surveyor and loss assessor was deputed for spot inspector. He prepared a detailed report about the said accident and noticed the individual items and the serious damage to the vehicle. He also got the relevant photographs taken. THE complainant thereafter had to tow the damage truck all the way from Jaipur to Hansi. THEreat Shri Madan Gopal Singla was appointed as a Surveyor and loss assessor by the appellant-company itself for assessing the amount of compensation. At the assessor''s behest, the complainant got the truck repaired at this own expense and submitted the details of the claim. THE Surveyor however, recommended only the payment of an amount of Rs. 19,245/- which obviously was not acceptable to the complainant. It is also the complainant''s case that at Hansi estimates were secured from various workshops for the extensive repairs needed to the truck because of the heavy damage thereto. The Surveyor Shri Madan Gopal Singla after inspection had directed the complainant to get the same repaired at his own expense. Consequently, the claimant incurred the cost of Rs. 62,417.30 paise towards the repair charges of the vehicle and thereafter submitted the bills and receipts thereof for their payment and settlement of the claim. However, these were returned to him on some pretext and later to his consternation he discovered that Shri Madan Gopal Singla Surveyor had recommended only Rs. 19,000/- as compensation. The allegations of malafides are levelled against the company officiais including the surveyor. In the end, a claim of Rs. 70,404.60 paise as compensation alongwith interest was sought as relief.

On notice being issued, the appellants in their written statement raised as many as six preliminary objections. Firstly, the territorial jurisdiction was challenged on the ground that the cause of action had arisen within the Jaipur jurisdiction and secondly the plea was taken that the matter was of such a complicated nature that it could only be adjudicated upon in a civil Court and not in the summary consumer jurisdiction. Lastly, but pre-eminently the plea was taken that in the terms and conditions of the insurance policy it was stipulated that if any difference shall arise as to the quantum to be paid under the policy, the same would be adjudicated upon by an arbitrator to be appointed in writing. Because of this it was pleaded that the District Forum had no jurisdiction to entertain the matter.

ON merits, the broad factual position of the truck having been insured and the same having met with an accident, was not disputed. However, it was pleaded that not one but two Surveyors were appointed to assess the loss and the latter had come to compute the quantum thereof on a detailed basis in his report dated 16th of April, 1991 wherein the recommendation was only for the payment of Rs. 19,245/-. Thereafter, the claim was finalised for Rs. 18,537/- and the said amount was offered to the insured with the relevant documents and vouchers but he had declined to accept the same. An offer to release the said amount afresh was made if it was accepted in full and final settlement. The District Forum on appraisal of the existing material, rejected the objection to the territorial jurisdiction. With regard to the bar of the arbitration clause being pleaded it held that the Consumer Protection Act was supplementary to, and in addition to other legal remedies and the said clause was therefore, no hurdle in the exercise of consumer jurisdiction. The plea that the matter involved complicated questions of law was also negatived. On merits, the District Forum adverted in great depth to the material for the assessment of the loss and partially accepting the complainant''s stand calculated the same to the tune of Rs. 53,855/- and directed its payment alongwith interest at the rate of Rs. 18% per annum from the date of the accident i.e. 20th of February, 1991 upto the date of the actual payment.

MR. Pradeep Bedi, the learned Counsel for the appellant has primarily pressed the appeal on a legal issue. It was forcefully contended that admittedly the insurance policy has a clear-cut arbitration clause which in express terms provides that wherever there is any differences between the parties with regard to the quantum of the claim, the matter must be referred to and resolved by arbitration alone. It was pointed out that herein, the appellant-Insurance Company has admitted its liability under the policy and has assessed the claim at Rs. 18,537/- which it is ready and willing to offer to the complainant. However, the claimant is insisting on a claim of Rs. 70,000/- and therefore, essence the dispute is now narrowed down only to the quantum of the amount payable under the policy. It was submitted that in such a situation, the arbitration clause was a bar to the very entertainment of the complaint by the District Forum which had erred in adjudicating thereon and granting the relief which is assailed. Reliance was placed on I (1992) CPJ 258 (NC), United India Insurance Co, Ltd. v. Ashok Kumar Dash and II (1992) CPJ 359 (NC), M/s. National Insurance Co. Ltd. v. S.D. Arulnathan. As is somewhat patent from the aforesaid submission, the whole controversy has to necessarily revolve around the arbitration clause in the policy. It is therefore, apt to notice the relevant part thereof in extenso : - "8. If any difference shall arise as to the quantum to be paid under the policy, (liability being otherwise admitted) 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 calender months after having been required so to do in writing by the other party in accordance with the provisions of the arbitration Act, 1940, xx xx xx". There is no gain-saying the fact that the aforesaid provision is a contractual arbitration clause which requires a quantum dispute as to the compensation to be settled by arbitration in the first instance. The core question therefore is whether such a clause would be a bar against the beneficient and additional remedies provided under the Act. We are inclined to the view that this very question has by now been authoritatively considered in numerous cases and it would be somewhat wasteful to examine it afresh on principle. It seems unnecessary to multiply the authorities within this jurisdiction. It would be sufficient to refer to the exhaustive order of his Commission in I (1991) CPJ 273, Jagdamba Rice Mills v. Union of India, Ministry of Telecommunications. Therein, after a detailed discussion, both on principle and precedent it stands concluded as under : - "To conclude on the preliminary legal aspect, the answer to the question posed at the very outset is rendered in the negative and it is held that the arbitration provisions of Section 7-B of the Indian Telegraphs Act are not at all a bar against seeking relief under the Act. Indeed the said section has little or no relevance to the adjudication of consumer disputes under the Act."

WHAT is then of significance is the fact that the aforesaid ratio was strenuously assailed before the National Commission. In I (1992) CPJ 90 (NC), Union of India & Ors. v. Jagdamba Rice Mills. The National Commission in a somewhat exhaustive order adverted to the primal challenge to the afore-quoted ratio and in no uncertain terms affirmed the same.

APART from the aforesaid, the National Commission on its own in a somewhat brief but authoritative observation in I (1991) CPJ 42 (NC), Commercial Officer, office of the Telecommunication District Manager, Patna v. Bihar State Warehousing Corporation equally held as follows : "We are not impressed with the contention taken on behalf of the appellant by the learned Counsel Mr. Sanghi that by reason of Section 7(b) of the Indian Telegraphs Act which provides for arbitration, the remedy under the Consumer Protection Act cannot be invoked by the consumers. The existence of a remedy by way of arbitration, even assuming for purposes of discussion that Sec. 7(b) covers this case which, in our view is extremely doubtful, does not preclude an aggrieved consumer from seeking redressal before the forums constituted under the Consumer Protection Act which is a special statute enacted by Parliament for the specific purpose of providing a speedy, cheap and efficacious remedy to consumers before the special forums created for that purpose. We have already indicated this view, though not finally, in our judgment passed by us in the aforementioned case. We hereby affirm that view as our considered opinion in respect of this matter. The ground of objection will, therefore, stand overruled."

Now once it is authoritatively settled that even an arbitration provision mandatorily laid out in a Section of a statute is not a bar to the remedy under the Act then it necessarily follows that a contractual arbitration provision cannot possibly be so. It is elementary that such a contractual agreement must necessarily stand on a much lower pedestal than a statutory arbitration clause. Apart from principle in Jagdamba Rice Mills''s case (supra), this aspect of the contractual arbitration clause was also considered and it was observed as follows : "We are, therefore, inclined to hold that in the large light of Section 3, the remaining provisions of the Act provide additional rights, remedies, forums, and executing processes for the consumer disputes, irrespective of the arbitration clauses, either contractual or statutory. The some what precious recently created rights and remedies of the class of consumers are not to be cut down by construction, unless expressly mandated by a non-obstante clause."

It bears repetition that the view of this Commission in Jagdamba Rice Mills''s case (supra) has been expressly affirmed by the National Commission.

IT remains to advert to the two authorities which were the sheet-anchor of Mr. Bedi''s stand. A bare reference to S.D. Arulnathan ''s case (supra) would show that it does not in the least advances the case of the appellant. The short order passed by the Commission has manifestly been done on a compromise and it is expressly recorded that since the parties are agreed that the matter may go before a panel of arbitrators to be nominated in accordance with the arbitration clause contained in the insurance policy, it was ordered accordingly. Clearly enough, this is neither a precedent nor lays down any ratio deci-dendi on the issue before us. The same is true with regard to the other case relied up i.e. Ashok Kumar Dash''s case (supra). A bare reading of the short order would indicate that the crucial issue before us was not even raised far from being adjudicated upon. The reliance of Mr. Bedi on both the aforesaid cases is thus somewhat misplaced. We are, therefore, inclined to hold the view that Mr. Pradeep Bedi''s vehement contention that a contractual arbitration clause with regard to the quantum of an insurance claim stands on a special footing as against other statutory or contractual clauses of this nature is a totally specious one. One can see no difference whatsoever either on principle or on precedent with regard to a contractual arbitration clause generally and one with regard to the quantum of an insurance claim. Indeed, if such an argument was to be up-held, it would be possible for a recalcitrant insurer to admit a miniscule part of a large claim by the insured and thereby deprive him of the beneficient remedies under the Act. The present case is an example thereof wherein against the insured claim of more than Rs. 70,000/-, he is being offered a sum which is a quarter thereof. However, testing the argument by carrying it to a logical length we has put it to Mr. Bedi that if the Insurance Company instead of repudiating the claim were to offer a sum of Rs. 100/- only, would this fact operate as an ouster of the consumer jurisdiction. He .had hardly any answer thereto. It is a well-settled canon of construction that an interpretation which leads to the startling and inequitous result has to be necessarily avoided. It deserves high-lighting that the somewhat tortuous process of arbitration and thereafter making the award a rule of the Court subject as it is to the long drawn out process of appeals and revisions under the civil law is no match for the summary and expeditious additional remedies now provided to a consumer under the beneficient statute of the Consumer Protection Act.

IN the light of the aforesaid discussion, the answer to the question posed at the out-set is rendered in the negative. It is held that an arbitration clause in an insurance policy pertaining to disputes about the quantum of the insurer''s claim does not operate as a jurisdictional bar against the redressal agencies under the Act. Once it is held as above, the main plank of the appellant falls to the ground. The primal legal challenge to the order under appeal fails and has to be rejected. On merits no serious challenge could be made to the somewhat considered order of the District Forum on the point of the assessment of the complainant''s loss and the compensation awardable thereof. If suffices to notice that the detailed affidavit evidence of the complainant Sat Bhushan Jain himself and his two witnesses Surjit Kumar and Navin Kumar was not at all sought to be challenged by way of cross-examination by the appellant. Their testimony thus stands virtually admitted. Equally the authenticity of the documents produced on the point was not assailed. In such a situation, the District Forum was plainly entitled to place reliance thereupon and no infirmity on this score could be pointed out. Even on an independent appraisal, we are inclined to affirm the assessment of the District Forum.

WE regret our inability to find any merit in this appeal. The same is hereby dismissed with costs which are assessed at a sum of Rs. 300/- only. Appeal dismissed with costs.