Rajendra Kumar Arya vs New India Assurance Co. Ltd.

Abani Mohan Sinha, J.—This appeal by plaintiff-appellant is directed against the judgment and decree of dismissal passed by the learned Judge 4th Bench, City Civil Court, Calcutta in Money Suit No. 65 of 1974. The plaintiff brought this suit for recovery of insurance claim and for other relief�s. He was the owner of motor car Standard Omni bus ADX1353. The vehicle was insured with Commonwealth Assurance Company Ltd. On November 19, 1968. The said company merged with New India Assurance Co. Ltd. after the nationalisation of the insurance with effect from 1.1.1973. The plaintiff obtained a comprehensive risk policy on payment of Rs. 812/- as premium for a sum of Rs. 20,000/- on 19.1.1969. The vehicle was involved in an accident near Cuttack resulting in an extensive damage to it tantamounting the total loss. The fact was brought to the notice of the police and Insurance Company. The Insurance Company instructed the plaintiff to bring the damaged vehicle to Calcutta for getting it repaired thoroughly after an estimate. A claim form duly filed in by the plaintiff was made over to the Insurance Company in due course. The damaged vehicle was brought by the plaintiff to Calcutta by incurring a cost of Rs. 600/ .The plaintiff obtained the estimate from M/s. French Motor Car Company Ltd. of Calcutta at a cost of Rs. 750/-. The estimated cost of the repair was Rs. 12,227.50 including sales tax of parts and materials to be used in repairs. The plaintiff wanted to have the car repaired through reputed concern of M/s. Fench Motor Car Company Ltd. but the defendant, insurer, insisted for having it done by M/s. Broadway Garage of Calcutta. The plaintiff complied with the direction and incurred a further cost of Rs. 50/- for taking the vehicle to such garage. It is the further case of the plaintiff that the defendant, the Insurance Company, under the contract of insurance made itself liable to compensate the plaintiff by making a payment of Rs. 20,000/- for which the car was insured. In spite of repeated demands made by the plaintiff neither the car was delivered to the plaintiff after repair nor the plaintiff was paid any damage for the insured car. The plaintiff sent a letter of demand to the insurer on 24.1.1971 demanding delivery of the car. The plaintiff got an offer for sale of the car, the defendant Insurance Company failed to deliver the car by 31.1.1971 as demanded and the car could not be sold. The defendant did not settle the claim of plaintiff on various pretexts and the plaintiff suffered a loss of Rs. 24,272/-. The plaintiff has prayed for recovery of such sum from the defendant Insurance Company with costs.

The defendant Insurance Company contested the suit by filing a written statement denying all the material allegations of die plaintiff. It contends that under the policy of insurance in case of differences arising out of the contract of insurance the dispute should be referred to the decision of an arbitrator to be appointed in writing by the parties and if they could not agree upon a single arbitrator, to the decisions of two arbitrators appointed by each of the parties within the stipulated period of twelve calendar months. In case of difference between the joint arbitrators an umpire appointed by the arbitrators, the said umpire should sit with the arbitrators and preside over the meeting. It is further case of the defendant that the plaintiff did not care to inform the Insurance Company immediately of the alleged accident and that the plaintiff having failed to comply with the conditions 7 and 8 of the policy was not entitled to recover anything from the defendant Insurance Company, It is its further case that the plaintiff brought the car on his own and not at the direction of the defendant and the alleged estimate of the plaintiff was inflated. It was also contended by the defendant that in terms of condition 7 of the policy the plaintiff was bound to refer the alleged dispute to arbitrators and obtain the award for the claim. The plaintiff having failed to comply with such condition, the plaintiff�s suit, it is contended, was liable to be dismissed with costs.

The learned dial Judge in his judgment held that the contract of insurance incorporated condition No. 7 which requires that all differences arising out of the policy shall be referred to the decision of an arbitrator within 12 months of me disclaimer made by Insurance Company with regard to any liability under insurance claim and that in the present case such disclaimer was made on April 20, 1971.hefurthetheldthatastheplaintiff failed to make a reference to the arbitrator in terms of condition 7 within 12 calendar months of the disclaimer, the plaintiff could not bring the suit in civil court. He further held that the suit was barred by limitation as the damage was claimed by the plaintiff beyond 3 years from the date of occurrence or the causing of the alleged loss and that the date of refusal to pay the damage or the date of disclaimer by the defendant could not extend the period of limitation. Being aggrieved by and dissatisfied with the judgment and decree of dismissal passed by the learned trial Judge, the plaintiff has come up in appeal.

Mr. Sudhir Kumar Bose, the learned Senior Advocate duly assisted by Mr. P.S. Rose representing the. appellant has urged that the learned trial Judge failed to appreciate the respective contentions of the parties as disclosed by the pleadings and evidence on record and came to a wrong finding on the question of facts and on law. According to him, the learned trial Judge observed in his finding that the conditions 7 and 8 of the insurance policy (Exh.9) stood as bar to the suit. The condition 7 as quoted in para 6 of the written statement would only indicate that in case of differences arising out of the policy reference should be made to the single arbitrator or joint arbitrators or umpire etc. and the award passed in such arbitration proceeding should be a condition precedent to any right of action against the company. It further indicates that as soon as the company made a disclaimer of the liability to the insured for any claim, the insured within 12 calendar months from the date of such disclaimer is to refer the matter to arbitration and in default it should be taken that the insured has abandoned his claim and would forfeit his right to recover any claim under the insurance. Condition 8 is a general condition for making a claim under the insurance. In the present case, there is no dispute as to the fact of the accident and the fact of making claim by the insured, i.e. the plaintiff to the insurer, defendant company. The accident took place on 19th January, 1969 and within a week the information of the accident was given to the Insurance Company. Since the information was received, the parties began corresponding over the question of survey of the damage, bringing of the vehicle and repairs, the place of repair and the like. In any of these letters, the defendant did not make out any case that it would not pay the plaintiff his claim under the insurance although it disputed as to the extent or estimate of repairs. It also appears that at the direction from the insurance Company, the plaintiff instead of having the car repaired from M/s. French Motor Car Company Ltd., placed the vehicle with Broadway Garage for repair. It would also appear that the� defendant Insurance Company took time for repairs as the required parts were not available. There is no whisper by the defendant that the plaintiff was required to comply with condition No.7 or it would refer die matter to arbitration or disclaim its liability under the insurance. After receiving repeated letters of demand, it disclaimed the liability only on 20th April, 1971.

Coming to consider the evidence adduced by the parties, we find that the plaintiff proved his case as made out in the plaint. He, as PW1, reiterated on oath the case stated in the paint. It was stated by him that the insurance policy was valid for the period from 19.11.1968 to 18.11.1969,The vehicle mini bus, was involved in an accident on its way to puri on 19.1.1969. He could secure the release of the bus only on 26.3.1969 by the order of the Court at Cuttack. He brought the damaged vehicle by railway and proved the R/Rs., Exhs. 11 and 12. He KM warded the duly filed-in claim form to the Insurance Company which was acknowledged by it on 18.4.1969 by letter, Exh. 14. He submitted the estimate to the insurance Company after obtaining the same from M/s. Fench Motor Car Company Lid Several correspondences on this point were proved by him, vide Exhs. 15 to 19. He also said that the Insurance Company asked him to place the vehicle at Braodway Garage by teller, Exh. 22 and he placed the same. But he could not get delivery of the same. He added that on 20.4.1971 in pursuance of the letter of the Insurance Company Exh. 30, he had been to Broadway gorge to take delivery of the vehicle but found that the vehicle was not repaired. He further informed the Court that neither the vehicle was returned to In at. nor his claim was settled and that he had a talk with one Mr. Mukherjee who told him that the matter would be referred to arbitration. His evidence is corroborated by PW 3 who happened to know the plaintiff and did something in connection with the claim of the plaintiff over the damaged vehicle. He had been to Boradway Garage with the plaintiff and he deposed that one Mr. Mukherjee on behalf of die Insurance Company told him that the mini bus or the vehicle wood be delivered after the repairs and that there was no question of arbitration. PW 1 deposed on behalf of M/s. French Motor Car Company Ltd. where the damaged car was placed for estimate as to repair.

The defendant Insurance Company on the other hand has produced an employee before the Court. He only proved the signatures of one Mr. D.N. Mukherjee in the letters. He did not say anything in .support of case made out in the written statement. He did not say any thing as to forfeiture of plaintiffs right to cairn for the damaged vehicle on plaintiffs failure to comply with the terms of the contract nor did he say even a single word about the disclaimer by the defendant Insurance Company of the plaintiffs claim for the damage to d .1 vehicle in question. His evidence on the other hand indicates that there was exchange of correspondence between the parties on the question of repair, on the question of delivery of the vehicle and payment of damages. In any of those correspondences nothing would, appear to indicate that the defendant Insurance Company at any point of time repudiated the claim of the plaintiff on the ground of non-compliance of Clause 7 of the insurance policy which speaks for reference of all differences to arbitration by single arbitrator or by joint arbitrators or by intervention of umpire and the like. It also does not appear that on any point of time the Insurance Company raised any dispute as to factum of accident, involvement of line vehicle in the accident and the causing of extensive damage Jodie vehicle in such accident. The letters on the other hand clearly convey that the Insurance Company negotiated with the plaintiff and intended to repair the vehicle and in fact, obtained the vehicle in its control at Broadway Garage and that it could not repair the same as some parts were not available. Never the Insurance Company as the evidence indicates, took the stand that it disputed the fact of damage to the vehicle. The only objection it raised was that the estimate by M/s. French Motor Car Company Ltd. was on the higher side. But it cannot take advantage of such objection as it took the vehicle for repair in its control at its appointed garage. It is not the case of the defence that it did deliver the vehicle back after repair or the plaintiff failed to take delivery of the vehicle even after repair.

So, the learned Judge, in our view, was not right in holding that the action brought by the plaintiff for realisation of his cairn on the insurance policy was not maintainable in view of plaintiff�s non-complainance with Clause 7 of the insurance policy which speaks for reference to arbitration. Exh. 30 is alleged letter of disclaimer given by the Insurance Company. This letter indicates that the car was under repair with M/s. Broadway Garage and it could not deliver the car as the same was not in its hands. It blamed the plaintiff for not taking delivery of the car due to negligence. This letter is dated 28th April, 1971. It ultimately repudiated the claim of the plaintiff after attempting to put sole blame on him for the delay and the loss suffered by the plaintiff. Nowhere it made a case or any grievance for non-reference of the matter to arbitration which it stoutly endeavoured to make out in its written statement. It is queer to note that 2 months before this letter it wrote to the plaintiff, the letter Exh. 29, dated 21.1.1971 that the vehicle could not be repaired as the necessary parts to repair the vehicle were not received by it and the matter was kept pending. Another letter Exh. 28, dated 29thSeptember, 1970also indicates that the Insurance Company wrote to the plaintiff that some parts of the vehicle were not available in Calcutta and in Madras and that it arranged to manufacture the said parts and placed the order accordingly and as such it regretted the delay and inconvenience for completing the repair work. The learned trying Judge completely ignored this valuable piece of evidence and the fact disclosed by such evidence and did not at all consider the matter in issue raised in the suit and completely misguided himself in dismissing the suit on a ground though alleged but not proved by the defendant. The facts and circumstances disclosed by evidence on record clearly make out the case that the plaintiff and defendant Insurance Company were at one point of time on agreement that the vehicle would be repaired by the Insurance Company and would be returned to the plaintiff after the repair and the claim would be settled amicably. The defendant Insurance Company did not until issue of letter, Exh.30, disagree to repair the vehicle or to settle the claim of the plaintiff.

The learned advocate representing the Insurance Company, Mr. Chowdhury, has referred to several decisions in support of his contention that the plaintiffs claim was not maintainable in view of the plaintiffs non-compliance with the arbitration clause as incorporated in Clause 7 of the insurance policy. The first decision is the The Vanguard Fire and General Insurance Company Limited, Madras-I Vs. N.R. Sreenivasa Iyer, Trivandrum, . On a careful reading of the decision we are of the view that the facts of the present case differ from the facts of the case referred to. Besides, in the very decision at para 9 the learned Judge observed that it would depend upon the language of the agreement whether the failure to resort to arbitration will or will not be a bar to a suit. Further there can be waiver of any condition precedent to right of action under an insurance policy which can be implied from the acts and conduct of the insurer (para 21 of the decision). In our view, the insurer in the present case by issuing letters, Exhs. 28,29, and 30, reflected that it waived its right to such condition. It agreed to repair the vehicle and now it wanted to go back on its own words in order to frustrate the claim of the plaintiff.

The next decision is the single Bench decision-- The New Great Insurance Company of India Ltd. Vs. United Equipments and Stores (Pvt.) Ltd., . This decision held that the agreement of insurance policy incorporating a clause of arbitration is with in the exception of Section 28 of the Contract Act and that a suit would be premature if such reference of obtaining of award is made a condition precedent to a right of action. The facts of the case differ from the. present one inasmuch as the damaged vehicle was placed for repairing with the Insurance Company at its own appointed garage after negotiation and estimation and ultimately the Insurance Company failed to deliver the car after repair. In the case referred to the car was not placed for survey by the Insurance Company and the damaged car was repaired at the instance of the plaintiff-claimant. In the present case there was clear indication that the Insurance Company intended to get the car repaired and to deliver the same to the plat n tiff for settlement of the claim and it did not and could not deliver as the repairs could not be done for want of available parts. In the present case the disclaimer was made in the last resort but in the case referred to the disclaimer was made at the first instance. In our view, the Scott and A very Clause as propounded by the case of Scott v. Avery 1843 60 All ER1, is of no avail to the defendant company as it waived its right to disclaimer against the plaintiff and it should be bound by rule of estoppel as it invited the plaintiff to place the car for repair at its appointed garage and as it failed to repair the same for want of parts and as it assured the plaintiff that it would repair the car-and deliver the same for which it tried hard. The court should think in this context how far the big establishment like nationalised Insurance Company could be allowed to frustrate the claim of the insured from whom it eagerly took business or persuaded him to do such business on the assurance of covering the risk of any life and property and to get out of its obligation or go back on its promise by having resort to technical pleas or legality or other wise. We may say that it is some sort of unconscionable bargain imposed upon customer who is unwary in the sense that he seldom looks at the details of the insurance policy which is a voluminous and longish document with clauses and sub-clauses, terms and conditions and legal niceties. We may quote the decision of Johnson v. Buttress (1936) 56 CLR 113 at 135: "When a man is occupying a position involving ascendancy or influence over another or a dependence or trust on his part it is his duty to use his position of influence in the interest of no one but the man who is governed by his judgment When he takes from that man a substantial gift of property, it is incumbent upon him to show that it cannot be ascribed to the inequalities between them which must arise from his special position." Similar is the pronouncement in Permanent Trustee Co. v. Bridgewater (193T) APC 14, where the relative position of the parties to a contract is such that it was incumbent on the creditor to establish affirmatively that the transaction was fair, just and reasonable, the transaction, in the absence of such proof, would not stand. It is the duty of the party in whom the confidence is reposed and the reposed party enjoins a position of eminence and influence and of advantage to disclose all the material facts to the other contracting party and he must satisfy the court that the terms are advantageous to the other contracting party, Moody v. Cox and Halt (1917) 2 Ch 71 at 88. Cheshire and Fit foot: Law of Contract, 6th Edition, page 244.

The next decision cited by The Vulcan Insurance Co. Ltd. Vs. Maharaj Singh and Another, in support of his contention that such a clause of arbitration in a contract of insurance is not hit by Section 28 of the Contract Act which prohibits contract in restraint of legal proceedings. It may be said that this is exception one incorporated in Section 28 of the Contract Act. But the whole question centre round the problem in this case is what would be the construction of such clause in relation to the matter in issue in this suit. It is, therefore, necessary to refer to the Clause 7 itself of Exh. 9. It says: "All differences arising out of this policy shall 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 arbitrators, one 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, an umpire appointed in writing by the arbitrators before entering upon the reference. The umpire shall sit with the arbitrators and preside at their meetings and the making of an award shall be 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 12 calendar months from the date of such disclaimer have been referred to arbitration under the provisions herein contained then the cairn shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder." This clause, has several parts. The first pan is all differences arising out of the policy shall be referred to the decision of an arbitrator to be appointed in writing by the parties in difference. The second part is if they disagree as to appointment of a single arbitrator then referred to the decision of two arbitrators, one to be appointed in writing by each of the parties within one calendar month on the failure of requisition in writing as to the appointment of the single arbitrator. The third part is if the parties are in difference as to appointment of two arbitrators then an umpire should be appointed. The fourth part of the clause is that the obtaining of the award shall be a condition precedent to any right of action against the company. The fifth and final part is that the insurance company may disclaim its liability and the claimant or the insured shall refer the disclaimer to arbitration within 12 calendar months from the date of disclaimer and on failure of such reference, the claimant shall be deemed to have abandoned his claim and forfeit his right to recover his claim.

Let us apply the conditions of this clause to the facts of the present case. The evidence adduced by the parties indicates that there was no dispute as to the factum of accident, sufferance of damage in the vehicle in question, the fact of making Claim by the insured to the Insurance Company and the negotiations between the two contracting parties, i.e., the insurer and the insured as to settlement of claim. During the long period of negotiations which started from the date of accident, i.e., 19th January, 1969 till 21st January, 1971,. i.e., the date of issuance of letter, Exh. 29, by the Insurance Company, the Insurance Company never demurred or repudiated or disclaimed its liability. Never it raised any question as to all these facts or expressed its difference on any matter relating to settlement of claim. It is not the case of the defendant that the plaintiff had suffered no loss as a result of the accident or the amount of loss was not to the extent claimed by him, then and then only a difference could have arisen as to the amount of any loss or damage within the meaning of Clause 7 in the policy. The only dispute the Insurance Company raised is putting forward a plea of disclaimer as soon as it received the threat of suit by the insured. This disclaimer, as the evidence indicates, had no nexus with the entire deal and it was put forward abruptly by issue of letter, Exh. 30, on 28th April, 1971. Immediately before issue of such letter it asked the plaintiff to take delivery of the car and expressed its regret for no repair of the car for want of parts etc. Therefore, the dispute or die difference raised by the Insurance Company was not covered by the arbitration clause. On the rejection or repudiation or disclaimer the plaintiff was entitled to start a legal proceeding to recover the claim as it was not possible for him to go to arbitration before on the assurance or the gesture of assurance made by the Insurance Company to get the car repaired and to settle the claim in response to plaintiffs laying of claim to the insurance. This decision in paras 11 and 14 exactly made this observation and we rely upon it. In our view, this decision helped the case of the plaintiff and not of the defendant.

Mr. Bose in support of the case of the plaintiff-appellant had referred to two Division Bench decisions of Allahabad High Court. The first one is Ranjit Singh Vs. State, The second one is The General Assurance Society Ltd. Vs. Mohd. Salim, These two decisions lay down the principles that in the absence of defendant''s praying for staying of the suit u/s 34 of the Arbitration Act, the court has jurisdiction to proceed with the suit and give decision on merits of the claim and die so-called arbitration clause in the Insurance Company policy would not stand as a bar to such suit. In the present case in our view, such prayer could not have been made by the defendant as it did not take the plea before filing of written statement or taking any other step in the proceeding. Reference may be made to a recent decision of the Supreme Court in Rachappa Gurudappa Bijapur Vs. Gurudiddappa Nurandappa and Others, which lays down that where the party sough tan adjournment specifically for filing written statement and obtained time on more than one occasion for such purpose, subsequent application for stay of suit would not be maintainable. In the present case the defendant took the defence of bar of arbitration in the written statement itself. During the entire period of negotiations the defendant did not give any inkling of its intention to raise any dispute or to refer the dispute to arbitration. The contract of insurance is a bilateral contract and every clause would bind the parties bilaterally. The defendant all through the transaction gave out that it was willing and in fact, it did something to inspire in the mind of the insured the confidence that the claim regarding loss or damage would be settled. Now the defendant cannot veer round and go back on its acts and conduct and assurance, only to defeat and frustrate the claim of the plaintiff.

The learned Judgment of the Court below also held that the suit having not been brought within three years of the loss of damage was barred by limitation and that the date of disclaimer or refusal would not extend the period of limitation. This finding in our judgment is entirely erroneous. Article 44(b) of the Limitation Act would apply. As the suit was brought within three years of denial of the claim of the plaintiff underinsurance, the suit was well within time.

So, we are of the view that the judgment and order of the learned court below cannot be sustained in fact and in law. We, therefore allow the appeal on contest with costs. We set aside the judgment and decree of dismissal of the court below As quantification of damage with interest thereon as claimed in the suit is necessary, we remand the suit to the trial court for determination of the amount to be awarded to the plaintiff. The learned trial court should only decide this limited question and pass a decree according to law within 3 months of the receipt of the record. Costs of the hearing of the appeal are assessed at Rs. 1,000/-

Mahitosh Majumder, J.

I agree