ARBITATION OF INSURANCE CONTRACTS

1.????????????INTRODUCTION

?The main purpose of the Arbitration is to provide the quick redressal of the commercial disputes through this mode of ADR instead of using regular judicial forums. Judicial Interpretation on the Arbitration and Conciliation Act, 1996 which is based on the UNCITRL Model Law and filling the gaps in the act through the judicial orders and became as source of law in this decade has seen several judgements and among them Insurance industry related judgments are also in notable proportion and became a source of law for many. General opinion is that almost all the General Insurance Companies are having similar arbitration clause incorporated in the policy terms and conditions which are having complicated language and detrimental to the interests of the policy holders. The Supreme Court in Municipal Corporation, Jabalpur v. Rajesh Construction Co. Ltd[1] held that the arbitration agreement should be comprehended properly by the court and up-hold the same. The parties who accepted the procedure should not challenge the same and this will result in the litigation beyond the purpose of the agreement followed with terms of contract.

?

(a)?????????Domestic Perspective

Section 2(7A)[2] of the Insurance Act, 1938 ("Insurance Act"), defines an ?"Indian Insurance Company' as any company, association or partnership that can be wound up under the Companies Act, 1956, or the Indian Partnership Act, 1932. Section 2(9)[3] of the Insurance Act defines an 'insurer' as any individual, body of individuals or any corporate body that carries on an insurance business. The fundamental principles and characteristics of an insurance contract includes their standardization, wherein the formation of insurance contracts does not go through a phase of negotiation and the real offeror is actually the insured person.

Arbitration clause mirrors consensus idem of parties to iron out the dispute through arbitration and specifies the procedure to be used for resolution. Section 8[4] and 11[5] of Arbitration and Conciliation Act, 1996 ("the Act")incorporates appointment of arbitrator. However, the contrary can be established if the insurance contract envisages the clauses where insurance company does not accept the liability.

(b)?????????Insurable risk

?

As is the case under English law, Indian law also requires a person entering into an insurance contract to have insurable interest in the subject matter of the contract. Insurable interest must be present in all types of insurance, failing which it would be a wagering contract, which is void.

?

Neither the Insurance Act nor the IRDAI regulations set out precisely what constitutes insurable interest, nor an exhaustive list of risks that can and cannot be insured. However, there is guidance provided by way of other statutes, court judgments and the IRDAI regulations.

?

'Insurable interest' has been defined under Section 7[6] of the Marine Insurance Act 1963. To have an insurable interest in anything, there must be subject matter to insure, the insured should have some legally recognised relationship with the subject matter and the loss of the property should cause pecuniary damage to the insured[7].?If the insured suffers a loss or derives benefit, he or she has an insurable interest in the subject matter of the insurance contract[8]. The courts have held that 'insurable interest is not complete ownership. It need not necessarily even strictly be title and interest in the object insured[9].

?

Further, Paragraph 6(b) of the 'Guidelines on Product Filing Procedures for General Insurance Products' of 18 February 2016[10] states that '[t]he product should be a genuine insurance product covering an insurable risk with a real risk transfer. “Alternate risk transfer” or “financial guarantee” business in any form shall not be accepted including indirect insurance products such as insurance derivatives.'

?

There are specific requirements as far as trade credit policies are concerned, as for instance they cannot cover (1) factoring, reverse factoring and bill discounting; and (2) any receivable arising from a financial service or consultancy service.

?

Further, Indian law recognises the principle that the law will not help a criminal to recover any kind of benefit from or for his or her crime.?Accordingly, the results of a criminal act will typically not fall for cover under an insurance policy and no benefits extend to the perpetrator.

?

Non-admitted insurers are not permitted to directly insure property situated in India or any ship or other vessel or aircraft registered in India. However, a person resident in India is permitted to take or continue to hold a health insurance policy issued by an insurer outside India provided the aggregate remittance does not exceed the limits prescribed by the Reserve Bank of India (RBI). In this regard, a person resident in India may take or continue to hold a life insurance policy issued by an insurer outside India, subject to certain foreign exchange requirements stipulated in the Master Direction – Insurance of 1 January 2016 (as amended) issued by the RBI. Similarly, a person resident in India may take or continue to hold a general insurance policy issued by an insurer outside India, provided that the policy is held subject to the conditions provided under the Foreign Exchange Management (Insurance) Regulations 2015.

?

In addition to the above, foreign reinsurers are allowed to access the Indian market and are permitted to set up branch offices in India or operate through service companies set up in India under the IRDAI (Lloyd's India) Regulations 2016. Non-admitted insurers who are listed with the IRDAI as cross-border reinsurers can reinsure risks in India in accordance with the IRDAI's regulations on the reinsurance of life and general insurance business and subject to compliance with the order of preference for cessions. The restrictions on non-admitted insurers mean that cross-border insurance disputes involving insurers and insureds are scarce in this jurisdiction. Further, even in the case of policies obtained by Indian residents from insurers residing abroad, the Insurance Act 1938 gives policyholders a right to override contrary policy terms in favour of Indian law and jurisdiction as long as the insurance business is transacted in India.

?

(c)??????????Why parties of insurance contract choose Arbitration against the Courts

?

Majority of the insured in the insurance contract is of institutions with commercial nature and they want their disputes to be confidential, expects quick resolution and expertise adjudicators in insurance filed. In USA, there is increase to incorporating the arbitration clauses in the insurance agreements is also explained against the background of the jury system. If there are comprehensive arbitration clauses there is scope to deny the litigation in the courts of law and this will prevent the jury classifying the settlement of claims and award damages for the non-contractual liability. A specific feature of insurance law is that an insurance policy or deed which is issued confirming the agreement is an evidence of the existence of the agreement unlike the other where registered agreement itself is evidence.

?

(d)?????????Some of the advantages of Arbitration in Insurance Disputes

?

(i)???????????Principle of contra proferentum is eliminated in some of the arbitration provisions which is construed against the drafter i.e, insurer in case language deemed ambiguous and in favour of the policy holder.

(ii)?????????Arbitral awards are binding upon the parties and are final and only in the exceptional circumstances appellate review is available.

(iii)???????Enforceability of the foreign arbitral awards is easy compared to the foreign court judgments due to the reason that there are many states that have is mutual recognition of contracting parties through the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

(iv)???????Procedural flexibility provides freedom to agree for procedures and rules for adjudication.

(v)?????????Party autonomy allows choosing the neutral venue and thereby avoiding the scope of bias available to the other parties.

(vi)???????Many big insurers choose the arbitration its confidentiality and no scope for the parallel lawsuits and not lose the reputations in the market.

?

(c)??????????Some of the typical problems of Arbitration in Insurance Claims

?

(i)???????????Selection of Arbitration and specially while selecting neutral umpire.

(ii)?????????Some Arbitration clauses provide for the specific inclusion of the insurance experts who have no interest, but still there is a conflict of interest prevails.

(iii)???????Arbitrators from the insurance background not inclined to enforce the legal principle strictly.

(iv)???????No clear directions on adding the third parties in the arbitration proceedings will result in the inconsistent rulings and incomplete resolution of the disputes.

?

2.????????????CONSTRUCTION AND INTERPRETATION OF INSURANCE CONTRACT

?

“Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement which must be in writing and signed by both parties[11].” Generally, all the Contract legislation will make all the agreements void that are restricting the legal proceedings, but Arbitration Agreement is an exception to it[12].

?

(a)?????????Written Agreements of insurance and re-insurance are commercial in nature

?

Member’s states of United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards i.e., New York Convention can be party to the arbitration and same is reiterated by the New Jersey federal court, in Cornell-Dubilier Electronics, Inc. v. Allianz Versicherungs AG[13], and held that even though the insurers are not from the same country, as they are from the country of New York convention, the polices having arbitration clause allowing arbitration for insurance subject is valid. As per the Kompetenz-kompetenz doctrine, Arbitral Tribunal is empowered to decide on the jurisdictional issues and the existence or validity of an arbitration agreement and restricting the courts interference to minimal level and upholding the objective of Arbitration Act which is an alternative mode of adjudication.

?

(b)?????????Preliminary Issues to be discussed by the Courts

?

The Supreme Court in National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd[14] itself have given a landmark judgment on the subject matter of preliminary issues and divided into three categories that may come for consideration when the application filed under Section 11[15] of the Act.

?

(i)???????????issues which the Chief Justice or his designate is bound to decide;

(ii)?????????issues which he can also decide, that is, issues which he may choose to decide; and

(iii)???????issues which should be left to the Arbitral Tribunal to decide.

?

3.????????????COURT ROLE RESTRICTED TO ONLY IDENTIFY THE EXISTENCE OF ARBITRATION AGREEMENT

?

The Karnataka High Court, India in E-Spring Building Systems (I) Pvt. Ltd., Bangalore vs. Regional Manager, Tata AIG General Insurance Company Ltd., Bangalore[16]?dismissed a petition under section 11[17] of the Act seeking appointment of an arbitrator to enter into reference and adjudicate the dispute between the parties. As per the aforesaid, courts should confine their powers only to the extent of examination of an arbitration agreement. But many judicial decisions have done contrary the legislative intent. In Oriental Insurance Company Ltd. v. Nardheram Power and Steel Private Limited[18] and in United Insurance Company Ltd. v. Hyundai Engineering and Construction Company Ltd[19], the Courts went further and not only examined the existence of arbitration but also interpreted the arbitration clause in the insurance policy and discussed whether the dispute is arbitrable and arbitrators needs to be appointed or not. The Supreme Court of India, in United India Insurance Co. Ltd. and Ors. v. Hyundai Engineering and Construction Co. Ltd. and Ors[20], found that the arbitration agreement could be “activated” or “kindled” upon the competition of the pre-conditions, and the same was “sine qua non for triggering the arbitration clause”.

?

(a)?????????Courts are not expected to Create New Contracts

?

The Supreme Court, in General Assurance Society Ltd., vs. Chandumull Jain and Another[21] held that court role should be confined to interpret the wording in case of ambiguity and not to make a new contract.

?

(b)?????????Loss restricted to coverage of risk

?

Insurer will indemnify the loss suffered and insured should not ask more than the sum insured and coverage taken after the loss occurred and the same confirmed by the Supreme Court in In Oriental Insurance Co. Ltd., vs. Sony Cheriyan[22]

?

(c)??????????Terms of Contract Should are Strictly Adhered

?

The Supreme Court in United India Insurance Company vs. Harchand Rai Chandan Lal[23] and Polymat India P Ltd and Another vs. National Insurance Co. Ltd and Others[24], held that unless there is ambiguity the terms of contract should be adhered as it is with the natural meaning and no outside reference is allowed.

?

(d)?????????Contract of Insurance is a Commercial Contract

?

The Supreme Court in Vikram Greentech India Ltd, vs. New India Assurance Company Ltd[25], held that contract of insurance is also a commercial contract which stands by own terms and by itself. Only difference is the insured should maintain utmost good faith (uberimma fides). The Courts should limit itself in interpreting the terms of contract accepted in writing by the insurance contracts. They should not show the extra liberalism by substituting the terms which the parties were not intended. Even the insured should not claim more than the coverage asked for even though there is more loss[26].

?

4.????????????Arbitration Clause

?

An arbitration clause is an agreement independent of the other terms of the contract or the instrument and should be considered as a collateral term relation to the resolution of disputes and not linked with the discharge of the main contract. Even though Arbitration clause is not mandatory but it is a recommended clause in the insurance agreements and forms part of policy document. It is quite common to include an arbitration clause in the main contract itself. The clause usually reads as follows – ‘All disputes and differences arising under or in connection with this contract will be settled in accordance with provisions of the Act, and the award made in pursuance thereof shall be binding upon both parties thereto’. The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

?

(a)?????????Conflict of Arbitration Clause within itself

?

One of the Insurance Company have entered into an insurance agreement and issued a policy which contains the arbitration clauses hereunder.

?

(1st)???If any dispute or difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel of three arbitrator.

?

(2nd) It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this policy.

?

(3rd)??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 of the amount of the loss or damage shall be first obtained[27].

?

By reading the two clauses it shows the ambiguity among that and insured is deprived of the initiating the Arbitration if liability is disputed and also on other hand will not allow to prefer judicial proceedings on denial of liability without obtaining an award on quantum.

?

The Supreme Court in Oriental Insurance Company Vs Narbheram Power & Steel Ltd[28] held that contracts of insurance should be interpreted in the exact terms based on which contract is drafted and also the reiterated the judgment of Vulcan Insurance Co. Ltd. vs. Maharaj Singh & Anr[29] that cleared the confusion over the Arbitration Clause that allowed the insurers to avoid liability in entirety. Supreme Court upheld the validity of a quantum-only arbitration clause and there is no scope for the arbitration on denial of liability unless the insured and insures will come forward for an independent agreement to arbitrate and held the remedy left is only civil suit for the grievances of the parties.

?

Once the question of liability is raised there is scope for the insured have option to go for the civil court and it is incorrect to say that once there is no arbitration, they are remediless.

?

(b)?????????Specific and serious terms of a Contract should be emphasised

?

(i)???????????Judicial intervention for rescuing parties from unreasonable terms

?

The Supreme Court in Central Inland Water Transport Corpn vs. Brojo Nath Ganguly[30] ?has noted the that word “unconscionable” means something as shows no regard for conscience and which is irreconcilable with what is right or reasonable. The matter before the court was a service contract. A clause in the contract empowered the employer (a Govt. undertaking) to remove an employee by three months’ notice or pay in lieu. The employee, who contested the validity of this clause, was removed by handing him over a three months’ pay packet. The Supreme Court regarded the clause to be constitutionally as well as contractually void. The court added that any term which is so unfair and unreasonable as to shock the conscience of the court would be opposed to public policy therefore also void under section 23[31] of the Contract Act. The contract was not based upon a real consent. It was rather an imposition upon a needy person. The term was unconstitutional because it was so absolute that any officer could be made a target irrespective of his conduct, good or bad.

Whatever is not reasonable is not law. If the parties have agreed to something unreasonable, they should be treated as if they have not agreed at all and released”

?

(ii)?????????An Arbitrator to be appointed in writing by the parties in difference

?

‘Parties in difference’ means generally the insured and insurer in the insurance contract. The person who provides monetary assistance i.e., either the financial institution like Banks or the Government cannot be considered as a party indifference, even though they are made as party to the arbitration proceedings and even their absence and non-joinder will not affect the arbitration award, if insured is appearing and discussing on the terms and conditions of the agreement. The same issue was clarified in by the High Court of Calcutta in National Fire and General ... vs Union of India (Uoi) And Anr[32] .

?

(c)??????????Locus Standi of Third Parties under Section 9[33] of the Arbitration and Conciliation Act, 1996

?

Section 2(1)(h)[34] of the Act defines a "Party" as "a Party to the Arbitration Agreement". An application under Section 9[35] under the scheme of the Act is not a suit. Condition Precedents for appointment of the arbitrator are the existence of an arbitration agreement between the parties and existence of dispute under section 11[36] of the Ac.

?

(i)???????????Conflict of Section 34[37] and 37[38] of ?the Act

In the case of Prabhat Steel Traders Private Limited vs. Excel Metal Processors Private Limited[39], the Bombay High Court held that even though there is locus standi to the non-signatory party to the arbitration agreement as per section 37[40] of Act, still it reasonable to empower the third parties to challenge the interim order of arbitral tribunal under section 17[41] of Act. The Hon'ble Supreme Court in Firm Ashok Traders vs. Gurumukh Das Saluja[42] was pleased to lay down that since remedy under Section 9[43] of the Act flows from arbitration agreement, a third party who is not a party to the arbitration agreement or arbitration proceedings, cannot seek any relief in this section, nor he can be pleaded as party in any application under Section 9[44] of the Act. Therefore, it is in the rarest of rare case, that the relief against Garnishee would be competent under Sec. 9[45] of the Act and not otherwise.

?

(ii)?????????Group of Companies Doctrine

?

In Chloro Controls Indian Private Limited Vs Seven Trent Water Purification Inc and others[46], while interpreting the section 45[47] of the Act, held that “Group of Companies Doctrine”, which is based on the English Law that was developed on the international context, says that it binds the non-signatory parent or sister or affiliates depending on the situation that demonstrate the mutual intention and bind the parties.

?

Multi-party arbitration is also beneficial as:

?

(1st)???It saves time and money i.e., for procedural efficiency.

(2nd) The chance of inconsistent awards is marginalised.

(3rd)??Factual and legal position and facilitating best possible fact-finding mechanism is necessary for equitable and fair justice to all the parties.

(4th)??It is necessary for the purposes of confidentiality and privacy.

(5th)??Where there is a chance that can influence the tribunal.

?

Multi-party arbitration is also problematic sometimes as

?

(1st)???Where there are two different arbitration tribunals were established.

(2nd) Where parties chose to appoint different arbitrators and different arbitrations.

(3rd)??Where parties are not cooperating and scope of it being challenged and ant-enforcement actions can be taken.

?

5.????????????BINDING NATURE OF ARBITRATION AWARDS AND THEIR APPEALS

?

(i)???????????DISCHARGE VOUCHER/ SETTLEMENT INTIMATION VOUCHER

?

In Indian General Insurance Industry there is a practice of Discharge Voucher and will make the payment after receiving of the discharge voucher. This became such an important issue which was drafted in the insurance policy then used to be accepted and suddenly became a contentious issue when it started barring the arbitration and several arbitration awards were challenged before courts of different forums and even in the Supreme Court also on this issue of discharge voucher alone several judgments came and even the Insurance regulator of India, IRDA (Insurance Regulatory and Development Authority) is also forced the issue a circular to the General Insurers. But the practice of discharge voucher is not discontinued and still used by insurers and followed by insured.

?

Discharge Voucher or Settlement Intimation Voucher is collected from the insured by insurer at the time of claim settlement and it states the amount payable which needs acknowledgement of the amount by signing the form. It is in the line with the Section 8[48] of the Indian Contract Act, 1872, i.e., “acceptance by performing conditions, or receiving consideration”.

?

(ii)?????????IRDA CIRCULARS ON ARBITRATION PROCEEDINGS

?

I.R.D.A in pursuant to intervention by the Delhi High Court direction in Oriental Insurance Co. Ltd. v. Government Tool Room and Training Centre[49], had given the advisory circular dated September 24, 2015, revised the same on June 8, 2016 to use the practice of Discharge Voucher must be complete in all respects, and not to kept pending if the amount offered is pending to the extent of assessed amount and shall not be collected under duress, by coercion, by force or compulsion. Once the amount is accepted and discharge voucher for full and final settlement is given by insured, he is estopped from denying the same and claiming for the interest for the delay in settlement.

?

6.????????????JUDICIAL PRONOUNCEMENTS

?

If the policy contains an arbitration clause, the courts in India will direct the parties to arbitrate. If disputes relating to liability are excluded from an arbitration clause, then such a dispute is not arbitrable. Some of the major cases of arbitration in insurance filed

?

(a)?????????Anshupathi Fibers Pvt. Ltd Vs National Insurance Co. Ltd[50]

(b)?????????Garg Acrylics Ltd v United India Insurance[51]?

(c)??????????Mayavathi Trading Pvt. Ltd. Vs Pradyavat Deb Burman[52]?

(d)?????????Mayadas Bhagat Vs Commerical Union Insurance Co. Ltd[53]?

(e)?????????National Insurance Co. Ltd Vs Boghora Polyfab Pvt. Ltd[54]

(f)???????????New India Assurance Co. Ltd Vs Ampoules & Vials Manufacturing Co. ltd[55].

(g)?????????New India Assurance Company Ltd Vs. Genus Power Infrastructure Ltd[56]

(h)?????????ONGC Mangalore Petro Chemicals ltd Vs. ANS Constructions Ltd & Anr[57].?

(i)???????????Pallorbund Tea Ltd. Vs National Insurance Co. ltd[58].

(j)???????????Prabhu Dayal Trilok Chand Vs. Oriental Insurance Co. Ltd[59].

(k)??????????Sterling General Insurance Co. Ltd Vs Lala Bahali Rampuri[60]

(l)???????????Union of India & Others Vs. Master Construction Company Ltd[61]

(m)???????United India Insurance Co. Ltd. v Antique Art Exports Pvt Ltd[62].

?

In New India Assurance Company Limited Vs. Genus Power Infrastructure Limited[63] held that a bald plea of coercion, fraud, duress or undue influence is not sufficient and the party taking that plea should be able to establish prima facie by substantial and material evidence before the Chief Justice/his designate…” In United India Insurance Co. Ltd. v Antique Art Exports Pvt Ltd[64], Supreme Court held that full and final discharge voucher cannot bar arbitration in total. Even though this judgment came after the amendment of Section 11[65], it relied on the National Insurance Co. Limited v. Boghara Polyfab Private Limited[66] and given several illustrations as to when the disputes are arbitrable and even the review petition Antique Art Exports Pvt Ltd vs United India Insurance Co. Ltd[67] ?filed by the insured also dismissed.

?

Vulcan Industries Co. Ltd Vs Maharaja Singh & Anr[68] ?was a case related to denial of liability of the insurance company. No difference or dispute could be referred to arbitration as the clause mentioned in the insurance contract. Supreme Court held that the remedy available in such as case was legal proceedings to be invoked.

The case discusses that if the arbitration clause coaches in a comprehensive language and bears away the right to sue by impending that any kind of dispute arising under insurance policy framework can start a legal proceeding only after an arbitral award has been awarded. It was held that such clauses cannot be conditional precedent as if a dispute raised cannot be referred to arbitration than it must be decided though legal proceedings.

In the absence of an arbitration clause in the policy, an insured can approach a commercial court or a consumer court. If the policy contains an arbitration clause, the courts will direct the parties to arbitrate but the same is not the case when disputes relating to liability are excluded from an arbitration clause.

?

Supreme Court in?Mayavati Trading v. Pradyuat Deb Burman[69]?has clarified that the jurisdiction of the court in deciding an application for arbitral reference is very narrow and limited to examining only the existence of an arbitration agreement and all other questions relating to the arbitrability of the dispute have to be decided by the arbitral tribunal. The presence of the arbitration clause, however, does not exclude the jurisdiction of the consumer courts as settled by a full bench of the NCDRC and subsequently confirmed by the Supreme Court of India in?Emaar MGF Land Limited & Anr v. Aftab Singh[70]

?

The Supreme Court of India has ruled that if the arbitration clause covers quantum disputes only, then disputes on liability cannot be arbitrated[71].?Following the amendments introduced in 2015 to the Act, the role of the court is now limited to examining the existence of the arbitration agreement only[72].However, recently while considering an arbitral reference made under an insurance policy in an application under Section 11[73] of the Arbitration and Conciliation Act 1996, the Supreme Court held that since the insurer had denied liability, the arbitration clause could not be triggered[74]. Similarly, in?United India Insurance Co Ltd v. Antique Art Exports Pvt Ltd[75],?the Supreme Court denied an arbitral reference since a discharge voucher had already been executed. The position in?Antique Art[76]?has been diluted by a judgment of a three-judge bench of the Supreme Court in?Mayavati Trading v. Pradyuat Deb Burman[77],?the Supreme Court has clarified that the jurisdiction of the court in deciding an application for arbitral reference is very narrow and limited to examining only the existence of an arbitration agreement. All other questions relating to the arbitrability of the dispute have to be decided by the arbitral tribunal. Therefore, execution of a discharge voucher is no longer grounds to deny arbitration itself. On 9 August 2019, the Arbitration and Conciliation (Amendment) Act 2019 came into force, introducing further changes to the Act. The tribunal now has a time frame of six months for the completion of pleadings and 12 months thereafter to conclude the arbitration proceedings. This period can be extended by another six months upon the consent of the parties, but further extensions can only be granted by a court.

?

The presence of the arbitration clause, however, does not exclude the jurisdiction of the consumer courts. This principle was settled by a full bench of the NCDRC and subsequently confirmed by the Supreme Court of India[78]. The reasoning adopted is that since the consumer courts are special courts constituted to serve a social purpose, the Act does not bar their jurisdiction.

?

Sections 19[79] and 20[80] of the Marine Insurance Act 1963 set out the requirements of good faith and non-disclosure terms. The above principles are applicable to all classes of insurance and, as they show, the remedy for non-disclosure or misrepresentation under Indian law is avoidance of the policy from the beginning. Even though a policy may not expressly say so, all insurance policies are based on this principle. This duty of disclosure and not to misrepresent facts arises when: (1) a new policy is being taken; (2) an existing policy is being renewed; or (3) an existing policy is amended. An insurer can lose the right to avoid by affirmation and waiver.

?

In?Reliance Life Insurance v. Rekhaben Nareshbhai Rathod[81]?(decided on 24 April 2019), a division bench of the Supreme Court of India extensively dealt with the insured's disclosure obligation and observed that the object of the proposal form is to gather information about a potential client, allowing the insurer to get all information which is material to the insurer to know in order to assess the risk and fix the premium for each potential client. Proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements. Utmost care must be exercised in filling the proposal form. In a proposal form, the applicant declares that she/he warrants truth. The contractual duty so imposed is such that any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer. The system of adequate disclosure helps buyers and sellers of insurance policies to meet at a common point and narrow down the gap of information asymmetries. This allows the parties to serve their interests better and understand the true extent of the contractual agreement.

?

The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute. The fact it would influence the decision of a prudent insurer in deciding as to whether or not to accept a risk is a material fact. As this Court held in Satwant Kaur[82] 'there is a clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance'.

?

Notification requirements are set in the policy document and vary from one policy to another. While some policies require immediate notice, some stipulate a specific time period and others say that notice should be given as soon as practicable. Depending upon the language used, it needs to be assessed whether timely notification is provided.

?

While the IRDAI has issued circulars, we believe that the latest position with respect to the consequences of delay is set out in an August 2018 judgment delivered by a three-judge bench of the Supreme Court in?Sonell Clocks and Gifts Ltd v. The New India Assurance Co Ltd[83].The Supreme Court upheld repudiation on the basis of delayed notification and observed that the notification requirement 'is not a technical matter but?sine qua non?for a valid claim to be pursued by the insured, as agreed upon between the parties'.

?

The Supreme Court in?Bajaj General Insurance Company Ltd v. State of Madhya Pradesh[84]?has emphasised imparting a reasonable business-like meaning to insurance contracts. It ruled that principles of construction applicable to commercial contracts apply and the intention of the parties has to be upheld. The courts cannot form a new contract between parties or increase the exposure of the insurer.

?

Indian law recognises the concept of subrogation by which the insurer is entitled to pursue recoveries in respect of losses suffered by the insured that the insurer has indemnified. This right arises pursuant to both statute and case law.

?

There are numerous case laws dealing with subrogation, of which we consider the?Economic Transport Organization v. Charan Spinning Mills (P) Ltd[85]?decision to be the most prominent. This case was decided in 2010 by the highest court of India, the Supreme Court. The Supreme Court explained that subrogation is inherent, incidental and collateral to a contract of indemnity, which occurs automatically when the insurer settles the claim under the policy, by reimbursing the loss suffered by the insured.

?

In the event that the insured fails to preserve its recovery rights, waives them or generally acts in breach of the subrogation clause, then the remedies available to insurers were explained in?EID Parry (India) Ltd v. Far Eastern Marine Transport Co Ltd and Ors[86].

?

As is laid down in the policy of insurance, the insurer's liability is only to succeed to and not in any way supersede any claim which the insurer may be entitled to make on any carriers or their agents. It is also laid down therein that it is the duty of the assured and the agents in all cases to take such measures as may be reasonable for the purpose of averting or minimising a loss and to ensure that all the rights against the carriers, bailees or other third parties are properly observed and exercised. In particular, the assured or their agents are required to take these steps and failure to comply with this requirement may prejudice any claim under this policy. Under the law of Insurance, the right of the Insurer on payment of the loss to the assured is to be subrogated to the rights of the assured so as to enable the insurer to proceed against the third party and indemnify itself. It is therefore incumbent upon the assured to keep alive his remedies against the carrier or other third party and any default committed by the assured either by allowing the remedy to get time-barred or by abdicating or abandoning, his rights against the carriers or the third party will deprive the insurer of its remedies against the third party for indemnity. In such cases, it is open to the insurer to repudiate the liability under the policy, the loss is not paid to the assured or to lay a counter-claim against the assured for damages if it has paid the loss to the assured.

?

The duty-to-defend clause in an insurance policy essentially states that in the event a claim being made against the named insured for an alleged wrongful act, the insurance company providing coverage at the time has the duty to defend the claim, even if it is subsequently found to be groundless, false or fraudulent. Therefore, although the claim lacks merit, the insurer still has an obligation to defend the claim.

?

7.????????????ISSUES THAT CAN BE REFERRED TO ARBITRATION OR NOT

?

(a)?????????Issues that can be referred to arbitration or not

?

Mere allegation that the discharge voucher/no claim certificate has been obtained by fraud/coercion/undue influence by the other party is not sufficient for appointment of the arbitrator unless the party alleging the same is able to produce prima facie evidence to substantiate the allegation. The Court has the power to find out if prima facie the dispute is genuine and requires invocation of Sec. 11[87] of the Act.

?

(b)?????????Non-Arbitrability of Dispute

?

The Supreme Court in the case of The Vulcan Insurance Co. Ltd., Vs. Maharaj Singh and Another[88] taking the reference of famous Scott v. Avery[89] held that once the insurer disputes the liability then the subject of the case becomes non-arbitrable on the quantum also.

?

(c)???????Fraud played by insured in quantifying the loss become non-arbitrable

?

Madras High Court in M/S. Jumbo Bags Ltd vs M/S. The New India Assurance Co[90], held that the recourse of arbitration is not available if the insured claimed the higher amount by showing more losses by using fraudulent means which is against the principle of Uberrima Fides i.e, Good faith on the part of the insured and the claim was rejected in-toto.

?

(i)???????????Different issues of Quantum under Arbitration:

?

(1st)???Underinsurance

(2nd) Unjustified Surveyor Report.

(3rd)??Need elaborate evidence of law.

(4th)??Limitation

(5th)??Seat of Arbitration

(6th)??Arbitrators have authority only to quantify the damage and cannot authority to pay

?

(ii)?????????Doctrine of functus officio: Exceptions

?

This doctrine forbids arbitrators from altering an award after the award has been rendered. But this doctrine is having some exceptions and one is it applied by Second Circuit Courts of Appeals in General Re Life Corporation v. Lincoln National Life Insurance[91] case in deciding a reinsurance dispute and found that the arbitral award “fails to address a contingency that later arises or when the award is susceptible to more than one interpretation”. It was held that there should be three pre-conditions to be satisfied to come under the preview of the exception under doctrine of functus officio:

?

(1st)???the final award is ambiguous;

(2nd) the clarification merely clarifies the award rather than substantively modifying it; and

(3rd)??the clarification comports with the parties’ intent as set forth in the agreement that gave rise to the arbitration.

?

8.????????????DIFFERENT RULES OF ARBITRATION WORLDWIDE

?

To make the arbitration effective and make a best choice of adjudication some countries are making rules to bring the issue of liability to be decided by the Arbitral Tribunal. This will help the insurers and policy holders to choose the arbitration instead of Court litigation and even a justified answer is expected due to the expertise the arbitrator’s panel comprises off. Association Internationale de Droit des Assurances in Germany have developed some new rules especially for the German D&O cases due to which the insurer liability and coverage are finalised in single arbitration proceedings. In UAE the present position is that all Arbitration is allowed even the disputes arising out of the liability. Even the UAE Code of Conduct for insurers specifies that there should be a separate arbitration agreement or preferably in the separate section as per new law and it is not accepted for the general/printed policy wording in the regular terms and conditions of the policy and in non-compliance of the same makes the arbitration agreement void .

?

Some countries like Hong-Kong and Singapore have introduced legislations permitting the third-party funding for arbitration proceedings which is still seen as against to the principle of “maintenance" and "champerty” in common law jurisdictions. Arbitral awards are appealed on point of law in Hong Kong unlike in UK unless parties opt out (section 69[92] of the Arbitration Act 1996). Right to participate the arbitration proceedings by the interested party through subrogation rights.

?

9.????????????CONCLUSION ARBITRATION OF INSURANCE CLAIMS IS NOT A CURE-ALL.

?

The inadequacy of arbitration clause or the mistake of the parties not to address all the issues such as venue, choice of law, scope of discovery, appeal and enforcement of the award will allow the arbitration proceedings with ambiguity. Even due to lack of sufficient stare decisis, court proceedings are more predictable compared to the arbitration . The principle of contra proferentum, is applied by the court generally, but less in the arbitration agreements. Understanding and interpretation of the provisions are different from one to other, once these terms and conditions are approved by the regulator it is not right on the part of the any forum to give adverse judgment against the drafter who took the approval. The use of the arbitration clauses, may force the consumer to refer the matter to the arbitration instead of the court litigation, but it cannot be seen that there is a shift in the balance of power between the insured and the insurance companies, in fact it is a compliance to the international conventions and moving forward for a better alternative dispute forum than the traditional litigation. The Court instead of making their own contracts and change the intention of the contractual terms, should interpret the specific terms as it is and if they are found illegal then they can make the contract void. In India, the use of Counter offer letter to the settlement intimation letter is less, if insured gives the reasoning by assessing the surveyor report and insurer calculation for a counter offer it can be used if the case goes for an arbitration of any other forum. This will address the issue of the discharge voucher issues to a maximum extent The advantage the policy holders get in the regular court litigation will be marginalised when the same is adjudicated in the arbitration forum containing the members of “insurance professionals”. Parties who have bitter experience through arbitration should avoid the incorporation of the Arbitration clause, once the clause is in existence the parties are bound to accept it and even the courts will look the ways to enforce the agreements in compliance with the law of land.

[1] AIR 2007 SC 2690

[2] Indian insurance company means any insurer, being a company which is limited by shares, and, --

(a)????????which is formed and registered under the Companies Act, 2013 (18 of 2013) as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015 (5 of 2015);

(b)????????in which the aggregate holdings of equity shares by foreign investors including portfolio investors, do not exceed seventy-four per cent. of the paid-up equity capital of such Indian insurance company, and the foreign investment in which shall be subject to such conditions and manner, as may be prescribed.

Explanation. --For the purposes of this sub-clause, the expression control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements;

(c)????????whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business;]

[3] “insurer” means—

(a)????????any individual or unincorporated body of individuals or body corporate incorporated under the law of any country?other than India,? carrying on insurance business [not being a person specified in sub-clause (c) of this clause] which—

(i)????????????carries on that business in?22?[ India ], or

(ii)??????????has his or its principal place of business or is domiciled in?22?[ India ],?23?[or

(iii)?????????with the object of obtaining insurance business, employs a representative, or maintains a place of business, in?22?[ India ] ;]

(b)????????any body corporate [not being a person specified in sub-clause (c) of this clause] carrying on the business of insurance, which is a body corporate incorporated under any law for the time being in force in?22?[India]; or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act, 1913 (7 of 1913)?24?, as defined by sub-section (2) of section 2 of that Act, and

(c)????????any person who in?22?[India] has a standing contract with underwriters who are members of the Society of Lloyd's whereby such person is authorised within the terms of such contract to issue protection notes, cover notes, or other documents granting insurance cover to others on behalf of the underwriters,?25?[but does not include a principal agent, chief agent, special agent, or an insurance agent] or a provident society?26?[as defined in Part III];

[4] Power to refer parties to arbitration where there is an arbitration agreement.—

(1)??????????A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2)??????????The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3)??????????Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

[5] Appointment of arbitrators. —

(1)??????????A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2)??????????Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3)??????????Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4)??????????If the appointment procedure in sub-section (3) applies and—

(a)??????????a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b)?????????the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(c)??????????Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(6)??????????Where, under an appointment procedure agreed upon by the parties,—

(a)??????????a party fails to act as required under that procedure; or

(b)?????????the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c)??????????a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

(7)??????????A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.

(8)??????????The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to—

(a)??????????any qualifications required of the arbitrator by the agreement of the parties; and

(b)?????????other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

(9)??????????In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.

(10)??????The Chief Justice may make such scheme?1?as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him.

(11)??????Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.

(12)???????

(a)??????????Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to ‘‘Chief Justice'' in those sub-sections shall be construed as a reference to the ‘‘Chief Justice of India''.

(b)?????????Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to “Chief Justice” in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court.

[6] Insurable interest defined.

(1)??????????Subject to the provisions of this Act, every person has an insurable interest who is interested in a marine adventure.

(2)??????????In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof.

[7] New India Assurance Co Ltd v. GN Sainani?(1997) 6 SCC 383

[8] OIC v. Sham Lal?AIR 2006 J&K 103

[9] New India Assurance Company Ltd v. TT Finance Ltd and Ors?2013 ACJ 997

[10] Ref No. IRDAI/NL/GDL/F&U/030/02/2016

[11] United Nations. (2008). UNCITRAL Model Law on International Commercial Arbitration 1985. United Nations Publications. Vienna.

[12] Section 28 of Indian Contract Act, 1872 reads as

Agreements in restraint of legal proceedings, void. —?Every agreement,—

(a)??????????by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b)?????????which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent.]

Exception 1.— Saving of contract to refer to arbitration dispute that may arise. —This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.??

Exception 2.— Saving of contract to refer questions that have already arisen. —Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.?19

[13] No. 18-5947 (SDW)(SCM) (D. N.J. Feb. 6, 2019)

[14] (2009) 1 SCC 267

[15] Supra N. 5

[16]2006(3) Kar. L.J. 317 (decided on 22.3.2006)

[17] Supra N. 5

[18] (2018) 6 SCC 534

[19] 2018 SCC OnLine SC 1045        

[20] 2018 SCC OnLine SC 1045

[21] 1966(3) SCR 500

[22] 1999 (6) SCC 451

[23] (2004(8) SCC 644

[24] 2005(9) SCC 174

[25] 2009(5) SCC 599

[26] General Assurance Society Ltd. Vs. Chandumull Jain and another (AIR 1966 SC 1644), Oriental Insurance Co. Ltd. Vs. Sony Cheriyan (1999) 6 SCC 451) and United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal (2004)8 SCC 644

[27] Scott v. Avery Clauses, 5 HLC 811: [1843–1860] All E.R. Rep. 1 HL

[28]IN THE SUPREME COURT OF INDIA, CIVIL APPELLATE JURISDICTION, CIVIL APPEAL NO. 2268 OF 2018, (@ S.L.P. (C) No. 33621 of 2017)        

[29] 1976 AIR 287, 1976 SCR (2) 62

[30] 1986 3 SCC 156, 206

[31] What consideration and objects are lawful, and what not.—The consideration or object of an agreement is lawful, unless— —The consideration or object of an agreement is lawful, unless—" it is forbidden by law;?or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Illustrations

(a)????????A agrees to sell his house to B for 10,000 rupees. Here, B’s promise to pay the sum of 10,000 rupees is the consideration for A’s promise to sell the house and A’s promise to sell the house is the consideration for B’s promise to pay the 10,000 rupees. These are lawful considerations. (a) A agrees to sell his house to B for 10,000 rupees. Here, B’s promise to pay the sum of 10,000 rupees is the consideration for A’s promise to sell the house and A’s promise to sell the house is the consideration for B’s promise to pay the 10,000 rupees. These are lawful considerations."

(b)????????A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here, the promise of each party is the consideration for the promise of the other party, and they are lawful considerations. (b) A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here, the promise of each party is the consideration for the promise of the other party, and they are lawful considerations."

(c)????????A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here, A’s promise is the consideration for B’s payment, and B’s payment is the consideration for A’s promise, and these are lawful considerations. (c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here, A’s promise is the consideration for B’s payment, and B’s payment is the consideration for A’s promise, and these are lawful considerations."

(d)????????A promises to maintain B’s child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of each party is the consideration for the promise of the other party. They are lawful considerations. (d) A promises to maintain B’s child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of each party is the consideration for the promise of the other party. They are lawful considerations."

(e)????????A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful. (e) A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful."

(f)?????????A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful. (f) A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful."

(g)????????A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his principal. (g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his principal."

(h)????????A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful. (h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful."

(i)?????????A’s estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter and would so defeat the object of the law. (i) A’s estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter and would so defeat the object of the law."

(j)?????????A, who is B’s mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, becuase it is immoral. (j) A, who is B’s mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, because it is immoral."

(k)????????A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code (45 of 1860).

[32]AIR 1956 Cal 11

[33] Interim measures, etc. by Court.—A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court—

(i)???????????for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii)?????????for an interim measure of protection in respect of any of the following matters, namely:—

(a)??????????the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b)?????????securing the amount in dispute in the arbitration;

(c)??????????the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d)?????????interim injunction or the appointment of a receiver;

(e)?????????such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

[34] “party” means a party to an arbitration agreement.

[35] Supra N. 33

[36] Supra N. 5

[37] Application for setting aside arbitral award. —

(1)??????????Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2)??????????An arbitral award may be set aside by the Court only if—

(a)??????????the party making the application furnishes proof that—

(i)???????????a party was under some incapacity, or

(ii)?????????the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii)???????the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv)????????the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v)??????????the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b)?????????the Court finds that—

(i)???????????the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii)?????????the arbitral award is in conflict with the public policy of India.

Explanation. —Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.

(3)??????????An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4)??????????On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

[38] Appealable orders.—

(1)??????????An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—

(a)??????????granting or refusing to grant any measure under section 9;

(b)?????????setting aside or refusing to set aside an arbitral award under section 34.

(2)??????????An appeal shall also lie to a Court from an order granting of the arbitral tribunal.—

(a)??????????accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or

(b)?????????granting or refusing to grant an interim measure under section 17.

(3)??????????No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

[39] IN THE HIGH COURT OF JUDICATURE AT BOMBAY, ORDINARY ORIGINAL CIVIL JURISDICTION,???????????????????? ARBITRATION PETITION NO.619 OF 2017        

[40] Appealable orders.—

(1)??????????An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—

(a)??????????granting or refusing to grant any measure under section 9;

(b)?????????setting aside or refusing to set aside an arbitral award under section 34.

(2)??????????An appeal shall also lie to a Court from an order granting of the arbitral tribunal.—

(a)??????????accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or?

(b)?????????granting or refusing to grant an interim measure under section 17.

(3)??????????No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

[41] Interim measures ordered by arbitral tribunal.—

(1)??????????Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.

(2)??????????The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).

[42] AIR 2004 SC 1433

[43] Supra N 33

[44] Supra N 33

[45] Supra N 33

[46] (2013) 1 SCC 641

[47] Power of judicial authority to refer parties to arbitration. —Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

[48] Acceptance by performing conditions, or receiving consideration.—Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. —Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

[49] (2008) CPJ 267 (NC)

[50] 2015 SCC Online NCDRC. 1425

[51] MANU/CF/0839/2014

[52] (2019) 8 SCC 714

[53] MANU/WB/0333/1936

[54] (2009) 1 SCC 267

[55] Manu/MH/3227/2018

[56] (2015) 2 SCC 424 11

[57] (2018) 3 SCC 373

[58] 2016 SCC Online Cal. 4230

[59] 2015 SCC Online Del. 6384

[60] AIR 1966 Allahabad 385

[61] (2011) 12 SCC 349 10

[62] IN THE SUPREME COURT OF INDIA, CIVIL APPELLATE JURISDICTION, CIVIL APPEAL NO(s). 3284 OF 2019 (Arising out of SLP(C ) No(s). 23956 of 2017)

[63] 2015(2) SCC 424

[64] IN THE SUPREME COURT OF INDIA, CIVIL APPELLATE JURISDICTION, CIVIL APPEAL NO(s). 3284 OF 2019 (Arising out of SLP(C ) No(s). 23956 of 2017)

[65] Supra N 5

[66] 2009(1) SCC 267

[67] REVIEW PETITION (C) NO. 1407/2019

[68] 1976 AIR 287

[69] AP No. 565 of 2018

[70] Civil Appeal No. 23512?23153 of 2017

[71]Oriental Insurance Company Limited v. Narbheram Power and Steel Pvt Ltd?(2018) 6 SCC 534

[72] Section 11(6A) of the Arbitration and Conciliation Act 1996 – (6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

[73] Supra N 5

[74] United India Insurance Co Ltd & Ors v. Hyundai Engineering and Construction Co Ltd & Ors?AIR 2018 SC 3932

[75] 2019 5 SCC 362

[76] 2019 5 SCC 362

[77] 2019 8 SCC 714

[78] Emaar MGF Land Limited & Anr v. Aftab Singh?[Civil Appeal No. 23512–23153 of 2017

[79] Insurance is uberrimae fidei. – A contract of marine insurance is a contract based upon the utmost good faith, and if the utmost good faith be not observed by either party, the contract may be avoided by the other party

[80] Disclosure by assured. –

(1)??????????Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known to him. If the assured fails to make such disclosure, the insurer may avoid the contract

(2)??????????Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.

(3)??????????In the absence of inquiry the following circumstances need not be disclosed, namely:—

(a)??????????any circumstance which diminishes the risk.

(b)?????????any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business as such ought to know;

(c)??????????any circumstance as to which information is waived by the insurer;

(d)?????????any circumstance which it is superfluous to disclose by reason of any express or implied warranty.

(4)??????????Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact.

(5)??????????The term “circumstance” includes any communication made to, or information received by, the assured.

[81] SLP (C) No 14312 of 2015

[82] IN THE SUPREME COURT OF INDIA, CIVIL APPELLATE JURISDICTION, CIVIL APPEAL NO. 2776 OF 2002        

[83] 2018 9 SCC 784.

[84] 2020 SCC OnLine SC 401

[85] (2010) 4 SCC 114.

[86] MANU/TN/0570/1983.

[87] Supra N 5

[88] (1976-1 SCC 943)

[89] (1856) 25 LJ Ex 308)

[90] 2016 SCC OnLine Mad 9141

[91] 909 F. 3d 544 (2d Cir. 2018)

[92] Appeal on point of law.

(6)??????????Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.

An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.

(7)??????????An appeal shall not be brought under this section except—

(a)??????????with the agreement of all the other parties to the proceedings, or

(b)?????????with the leave of the court.

The right to appeal is also subject to the restrictions in section 70(2) and (3).

(8)??????????Leave to appeal shall be given only if the court is satisfied—

(a)??????????that the determination of the question will substantially affect the rights of one or more of the parties,

(b)?????????that the question is one which the tribunal was asked to determine,

(c)??????????that, on the basis of the findings of fact in the award—

(i)????????????the decision of the tribunal on the question is obviously wrong, or

(ii)??????????the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and

(d)?????????that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

(9)??????????An application for leave to appeal under this section shall identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted.

(10)??????The court shall determine an application for leave to appeal under this section without a hearing unless it appears to the court that a hearing is required.

(11)??????The leave of the court is required for any appeal from a decision of the court under this section to grant or refuse leave to appeal.

(12)??????On an appeal under this section the court may by order—

(a)??????????confirm the award,

(b)?????????vary the award,

(c)??????????remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court’s determination, or

(d)?????????set aside the award in whole or in part.

The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.

(13)??????The decision of the court on an appeal under this section shall be treated as a judgment of the court for the purposes of a further appeal.

But no such appeal lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal.