New India Assurance Co. Ltd. v. M.K. Mohammed Aslam

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR** **& THE HONOURABLE SMT. JUSTICE P.V.ASHA** **TUESDAY, THE 1ST DAY OF SEPTEMBER 2015/10TH BHADRA, 1937** **Arb.A.No. 27 of 2006 ( ) -------------------------** **AGAINST THE ORDER IN OP(ARB) 269/2004 of DISTRICT COURT,THRISSUR DATED 03-02-2006** ## **APPELLANT/INSURER:** **------------------------------------------------------------** **THE NEW INDIA ASSURANCE CO.LTD REP.BY ITS CHIEF REGIONAL MANAGER, REGIONAL OFFICE M.G.ROAD, KOCHI-11.** **BY ADV. SRI.GEORGE CHERIAN (THIRUVALLA)** ## **RESPONDENT/CLAIMANT:** **----------------------------------------------** **M.K.MOHAMMED ASLAM PROP.INTERSAIL TIMBER TRADERS, VALAPPAD THRISSUR DISTRICT.** **BY ADV. SRI.K.ANAND** **THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 01-09-2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **T.R.RAMACHANDRAN NAIR & P.V.ASHA, JJ.** - - - - - - - - - - - - - - - - - - - - - ## **Arb. Appeal No.27 OF 2006** - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 1[st] day of September, 2015 ## **JUDGMENT** ## Ramachandran Nair, J. This appeal is filed by the appellant Insurance Company aggrieved by the order passed by the District Court, Thrissur in O.P. (Arb.) No.2694/2004. By the arbitral award, an amount of Rs.49,85,231/- with 12% interest has been awarded towards loss of timber in a fire incident occurred at the premises of the respondent claimant. The appellant contends that the total loss if at all could be only Rs.1,74,095/- as per the report of their surveyor. 2. The award is passed by the Arbitral Tribunal consisting of three retired District Judges. Initially the appellant Company appointed Sri.K.Ramachandran as the arbitrator and the claimant appointed Sri.N.K.Vijayan, retired District Judge as the arbitrator. Both these arbitrators appointed Sri.K.Sreedhara Warrier, retired District Judge as Arb.Appeal No.27/2006 2 the presiding arbitrator. Subsequently, Sri.K.Ramachandran resigned and in his place, the respondent appointed Sri.K.Aravindaksha Menon, retired District Judge. Sri.N.K.Vijayan and Sri.K.Aravindaksha Menon again appointed Sri.K.Sreedhara Warrier as the presiding arbitrator to constitute an Arbitral Tribunal. 3. We heard the learned Senior Counsel for the appellant Sri.George Cherian and the learned Senior Counsel for the respondent Sri.T.Krishnaunni. 4. The main contentions of the learned Senior Counsel for the appellant are : 1. Going by the policy existed Ext.A1, stock in open and sized timbers kept in open alone are covered by the policy. Here the items are those kept in a shed and therefore literal interpretation of the terms of the policy alone can be adopted going by the well settled principles. The claim is one not covered by the policy. He relied upon the following decisions in this context : Arb.Appeal No.27/2006 3 **The Central Bank of India, Amritsar v. The Hartford Fire** **Insurance Co. Ltd. ( AIR 1965 SC 1288)** **General Assurance Society Ltd. v. Chandmull Jain and** **another ( AIR 1966 SC 1644** **Oriental Insurance Co. Ltd. v. Sony Cheriyan [(1999) 6 SCC 451]** **Export Credit Guarantee Corporation of India Ltd. v. Garg Sons International [(2014) 1 SCCC 686]** 2. Point No.2 is that there is no insurable interest in the property at the time when the fire incident occurred. It is submitted that the sized timbers belonged to a partnership of which he is one of the partners and therefore the Company is not answerable to the partnership. He relied upon the following decisions to support the argument: **Swaminathan v. Jayalakshmi Amma ( 1987 (2) KLT 292) Contship Container Lines Ltd. v. D.K.Lall and others [(2010) 4 SCC 256]** Arb.Appeal No.27/2006 4 ## **Complete Insulations (P) Ltd. v. New India Assurance Co.** ## **Ltd. [(1996) 1 SCC 221]** 3. While raising arguments with regard to the grounds available under Section 34 of the Arbitration and Conciliation Act, it is submitted that in this case all the principles governing interpretation of policy are given a go bye. The statutory survey reports Exts.R3 and R5 have been brushed aside. 5. The learned Senior Counsel for the respondent submits that none of the arguments are sustainable and the award is a reasoned one and the court below could not have sat in appeal over the reasons stated by the Arbitrators. 6. As regards the first point, our attention is invited to the terms of the policy marked as Ext.A1. The policy is titled as 'Fire Insurance Policy' with effective date 12.5.2000 and the expiry date 11.5.2001. Under the description of property covered, Item No.4 was stock in godown – stock of sized timber and item No.5 stock in open Arb.Appeal No.27/2006 5 and stock of timber logs. The total sum assured shown therein is Rs.1,04,79,900/-. On 7/6/2000 certain changes have been made and against the entry stock in godown :stock of sized timber is corrected to read as stock in saw mill premises ( goods in process) stock of logs for sizing, sawn sizes and partly sawn sizes ; Rs. 5,00,000/- and as regards item No.5, stock of timber logs is corrected to read as “ Stock in openstock of timber logs and sizes” : Rs.95,00,000/-. 7. The learned Senior Counsel for the appellant submits that it is in evidence that the sized pieces were kept in a shed having measurement 7 metres x 12 metres and 3 metres in height. It is submitted by referring to the Chambers dictionary that the meaning of term 'open' will show that 'open' is not understood as a shed or a closed premises. Here sized timber has been kept in closed premises and therefore those goods are not covered by the policy. The award of the Arbitrators, according to the learned Senior Counsel has not properly and correctly interpreted the terms of Ext.A1 policy. 8. The learned Senior Counsel for the respondent explained Arb.Appeal No.27/2006 6 that it was never a closed premises as contended. It is submitted that to prevent the goods from perishing in sun and rain, only tarpaulin covers were put supported by wooden poles and it cannot be termed as a closed premises as now sought to be interpreted. The learned Senior Counsel therefore submitted that the contention cannot be accepted. 9. Of course, the principle relevant in interpreting terms of policy will show that the plain language cannot be changed by surrounding circumstances ( **The Central Bank of India, Amritsar v. The Hartford Fire Insurance Co. Ltd. ( AIR 1965 SC 1288** ). The same principles were reiterated in **General Assurance Society Ltd. v. Chandmull Jain and another ( AIR 1966 SC 1644)** , wherein it was held that in “interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not be made it themselves.” The principle that the Insurable Policy should be strictly considered was reiterated in **Oriental Insurance Co. Ltd. v. Sony** Arb.Appeal No.27/2006 7 **Cheriyan [(1999) 6 SCC 451]** and in **Export Credit Guarantee Corporation of India Limited v. Garg Sons International [(2014) 1 SCC 686]** as well as in **United India Insurance Co. Ltd. v. Harchand Rai ([2004 (3) KLT 560 (SC)]** . 10. The evidence in this case will show that the fire incident occurred in the insured premises on 6.11.2000 and was detected at about 2 a.m.. It was claimed by the respondent that much quantity of sized timber measuring about 11,100 cubic feet had been stacked, which caught fire and it left behind only partly burnt waste scantlings, batten residues and porutu pieces The claimant contended that the fire occurred before 2 .am. and it could be brought to control with great effort including with the help of fire engines and it took long hours to put out the fire. It is clear from the evidence that what remained is certain parts of tarpaulin and going by the plea raised by the claimant the sized timbers were stacked with other cut out pieces as a cover over which tarpaulin were spread by tying them into poles. Even though the learned Senior Counsel for the claimant submitted that the 8 Arb.Appeal No.27/2006 same will turn the area into closed premises, we cannot agree. The poles and tarpaulin covers are not constructions of a permanent nature to negative the idea of 'open'. While the stock remained in open yard, a tarpaulin cover alone was made. Goods were stacked in open itself. It will not go against the description in Ext.A1 and it will not violate the terms of the policy itself. The learned District Judge took the same view, which we concur. Therefore, we reject the said contention. 11. The arguments are mainly raised on the nonacceptance of Ext.R3 report by the surveyor of the company and the acceptance of Ext.A32 report made by the private surveyor engaged by the respondent. Before going into the said question, we will also consider the point raised that there is no insurable interest in the property lost for the claimant on the plea that the sized timber belonged to a partnership. This was answered in paragraphs 24 and 25 of the award of the Arbitrators. In paragraph 24, the Arbitral Tribunal has discussed the issue as to whether the property belonged to a partnership. The evidence of the claimant was adverted to. Going by the discussion in Arb.Appeal No.27/2006 9 paragraph 23, it can be seen that the claimant's case was that he had arranged to start partnership business in two places: one at Kottapuram in Methala Panchayat under the name and style of “ United Timber Company” and yet another one at Peringottukara. Partnership deeds were executed on 18.2.2000. The sized timbers were got ready for transportation to those places before which the fire incident happened. After referring to Exts.A48, A49, A50 which are respectively documents in support of the formation of the partnership, the Arbitral Tribunal was of the view that as the timber was not removed from the claimant's premises and since there is no evidence of transfer of ownership of the item from claimant's proprietorship named as 'Intersail Timber Traders' to 'United timbers', the goods continued to be under the ownership of the respondent. 12. The learned Senior Counsel for the appellant relied upon the admission of PW1 in cross examination. It is submitted that he had admitted that the properties are meant for the partnership. The evidence is to the effect that his investment is by way of such timber Arb.Appeal No.27/2006 10 also. As far as the actual transfer of the item of partnership is concerned, the above alone is the evidence, namely alleged admission of PW1. The learned Senior Counsel for the claimant submitted that there is no admission to the effect that the goods have already been transferred and hence the claimant retained the ownership. Merely because it was meant to be transferred, it will not be a case where he has lost the ownership over it. The Arbitral Tribunal was of the view that there is no evidence to show that there is transfer of ownership of the goods as contemplated under law and the the account books of the claimant do not show the transfer and accordingly, it was held that the goods destroyed by the fire belonged to the claimant covered by Ext.A1 also. The above will show that for want of evidence of transfer of ownership such a view was taken and it cannot be said that the said view is patently wrong. The decisions relied on by the learned Senior Counsel to drive home this point may not apply to the facts herein. The view taken by the Arbitral Tribunal cannot be said to be perverse. 13. Now we will come to the major attack against the arbitral Arb.Appeal No.27/2006 11 award. The claim petition by the respondent asserts that the fire was noticed at 2 a.m. on 6.11.2000. The premises is situated on the western side of NH 17 which is near to the residence of one Ibrahim Haji who was woken up by the passengers of a bus coming that way from Kozhikode side and he was informed of the fire. The people in the nearby locality were alerted also and after people reached the spot, they started trying to put out the fire by pumping water through the electric pump of the said Ibrahim Haji and in the meanwhile fire force also rushed to the spot after getting information from the Police. The first information statement is given by Ibrahim Haji and the Police registered crime as Crime No.324/2000. The respondent was at Dindigal in Tamil Nadu on that day. It is contended by him that the fire could be put out only by 7 a.m. on 6.11.2000 after strenuous efforts taken by the fire force for about 3 ½ hours. Thus the fire had ravaged the premises for six hours continuously. The estimate of loss as per the report of the fire force is Rs.85 lakhs which is also relied upon. It is his case that on 6.11.2000 itself, the information regarding fire was Arb.Appeal No.27/2006 12 furnished to the respondent pursuant to which M/s.Thomas Groom Surveyors, Ernakulam along with officials of the appellant visited and inspected the fire ravaged premises on the same day. The claimant lodged the duly filled Fire Claim Form dated 15.11.2000, where the total amount shown is `71,43,613/- which represent the loss of sizes and loss of log has been shown as `4,32,211/-. Thus the total amount claimed as per the same is `75,75,824/-. He has got a case that the surveyor Sri.T.Thomas was acting arbitrarily and unfairly and had not done a proper loss of assessment which prompted him to complain to the higher officials of the appellant. It is also his case that the surveyor had actually wanted a kick-back of 20% of the amount claimed. Written complaints were given to the Chairman cum Managing Director of the Company. The claimant by special power of attorney appointed M/s. Risk Management and Insurance Consultancy Services, Thrissur to represent him which was not to the like of the surveyor. Ultimately the claimant engaged M/s Prudential Surveyors (P) Ltd, Kaitharam, Palliyil Line, Diwans Road, Kochi - 16 to conduct an Arb.Appeal No.27/2006 13 impartial and independent survey. It is also his case that the company had appointed a qualified retired PWD Executive Engineer Mr.K.U.Varunny, who is a practicing surveyor and loss assessor empanelled by the insurer company and he had visited the premises on two occasions. But his appointment was terminated by the officials of the appellant company abruptly. There were various correspondences with the higher-ups of the company and regarding this aspect also it is his case that after repeated communications alone that too after several months the company permitted to start business. The claimant therefore relies upon the report of the surveyor, who was examined on his behalf as PW2. 14. Before the Arbitrators, the claimant was examined as PW1. PW2 is Ramakrishna Iyer, who conducted survey and he has assessed the loss as Rs.66,31,974. PW3 is the Head Constable of Valapad Police Station as on the date of the incident. PW4 is the Assistant Divisional Officer, Fire Force, Thrissur. Pws 6 to 9 are the other witnesses of the claimant. Rws 1 to 3 have been examined for the Arb.Appeal No.27/2006 14 appellant Insurance Company. The award shows that the Arbitral Tribunal accepted the report Ext.A32 and the quantities reported of sized timber as contained therein by PW2. After finding that the market value is seen calculated taking into consideration the profit, 25% was reduced from the total amount and the actual loss was calculated as 47,14,732/-. Rs.2,70,499/- has been added on account of the partial loss of logs also and thus the award is passed for a total amount of Rs.49,85,231/- with interest @ 12% per annum. 15. The learned Senior Counsel for the appellant submitted that the same is an exaggerated claim. It is submitted that there is no evidence to show the details of the sized timber kept in the premises as on the crucial date. The learned Senior Counsel demonstrated that going by the measurement of the shed, the total quantity that can be stored is only 5244.75 cubic feet and the storing of sawn pieces can be only with the use of packing materials and the space for those materials also had to be accounted for. It is submitted that the plea that all the sawn pieces were eaten by fire may not be correct. The fire also would Arb.Appeal No.27/2006 15 not have reached the internal areas for want of oxygen. In support of his argument, he submits that the wooden poles remained even after the fire without much damage and the plastic sheets were also not fully damaged. Support was sought from the photographs available. Hence he contended that the plea of the respondent that 11,100 cubic ft. sized wood was kept in the shed having a size of 12 x 7 x 3 ½ metres is patently wrong. 16. There are three survey reports in this case. The report prepared by RW2 was marked as Ext.R5 and is dated 20.2.2001. The report of survey by RW3 is marked as Ext.R3 and the third report is by PW2 which is marked as Ext.A32. The first two are by surveyors appointed by the appellant. The emphasis given by the learned Senior Counsel is that the appellant had arranged the second survey conducted by RW3 based on Ext.A8 letter by the claimant. 17. As per the award, the arbitrators have relied upon Ext.A32 and did not rely upon the report by RW3. It is highlighted by Sri.George Cherian, the learned Senior Counsel that the report of RW3 Arb.Appeal No.27/2006 16 is cogent and convincing. Both RW3 and PW2 have gone through the account books, stock registers and other items of evidence. The accounts of the respondent showed that they are not properly maintained and he had huge liability of Rs.45 lakhs to Lord Krishnan Bank, Rs.11 lakhs to Thrissur Co-operative Bank and he had also borrowed Rs.55 lakhs from different persons. The business was in a bad shape. Going by the profit and loss account, it showed that net loss for 1997-98 was Rs.5.27 lakhs, for 1998-99 - Rs.6.62 lakhs, in 1999 -2000 - Rs.14.27 lakhs and the accumulated net loss on 6.11.2000 was Rs.32.12 lakhs. Contrary to the reflection of his financial position, his stock increased from 32 lakhs to Rs.104 lakhs during this period. 18. It is also submitted that it is unlikely and unbelievable that sized timber for about Rs.71 lakhs will be kept expecting buyers to come in the light of the loss which is increasing from year to year. The daily book also shows unprecedent sales immediately after the fire on succeeding days. 19. While emphasizing the fact that the report of RW3 should Arb.Appeal No.27/2006 17 have been accepted, it is submitted that he has verified the books of accounts, purchase and sales invoices, measurement of salvages, measurement of stock, police records and all other documents. It is also stated that respondent has not complained anything about the said valuer. Therefore the same being a report by the statutory surveyor, it should have been accepted, according to the learned Senior Counsel, in the light of the principles stated by the Apex Court in **United India Insurance Co. Ltd. and others v. Roshan Lal Oil Mills Ltd. and others [(2000) (10) SCC 19** ] and **Sri.Venkiteswara Syndicate v. Oriental Insurance Co. Ltd. and another [(2009) 8 SCC 507]** . 20. The learned Senior Counsel for the respondent submitted that in a matter like this contemporaneous reports are also important. The scene mahazar prepared by the Police soon after the incident shows the existence of remnants of partly burnt sized timber. This is deposed by PW3 also. He also relied upon Ext.A55 report wherein a note was made by RW2 in his hand writing stating that stock of logs/sized timber of various species and measurements are there. This can Arb.Appeal No.27/2006 18 only be after seeing the damage caused by the fire. The fire survey report has been heavily relied upon by the learned Senior Counsel in that regard. Further it is stated that the books of accounts of the claimant showed the existence of sized timber in the yard and PW9 Varunni's evidence also supports the respondent. The business was a flourishing one and the accounts showed that everything was in order. 21. Both sides have raised various arguments on the evidence of RW1 who is an expert from the Kerala Forest Research Institute, Peechi. The learned Senior Counsel Sri.George Cherian submits that his evidence ought to have been accepted, whereas the learned Senior Counsel Sri.T.Krishnanunni submits that the alleged inspection by him was without notice to the claimant and therefore it cannot be relied upon at all. 22. The question of availability of sized timber will depend upon various factors. In the report Ext.R3 it is mentioned that the Police in the scene mahazar has recorded the size of the shed as 12.00 metre x 7.00 metre. Police report and the scene mahazar have been Arb.Appeal No.27/2006 19 reproduced. The next item recorded is the fire force report. In the said fire force report, Column 2 gives the details. As against the column description of property, what is described is that “a light roofed wooden shed measuring approximately 45' x 30'' and door frames, doors, rafters, windows, planks of teak wood and valuable woods measuring approximately 11400 cubic feet, kept in the shed were completely and valuable timber laying on the company courtyard partially destroyed in fire.” The date and time of leaving fire is noted as 7 hours on 6.11.2000 and the total time employed is 3 hours 23 minutes. It is seen from the report of RW3 itself that he has verified last three years and current year insured's books of accounts maintained at the premises and the insured has submitted balance sheet and trading and profit account duly signed by him. He has also verified the bank accounts, pass books and personally verified from bank ledger. The stock register was also verified as well as tax assessment orders of 1997-98 were verified. The insured had produced books to the sales tax officer for assessment on 16.2.2001 after loss and ledger had been duly 20 Arb.Appeal No.27/2006 inspected by him. He has also checked the invoices and lists of certain suppliers namely M/s. VCM Timbers, Kottenelloor and M/s. Mangali Timbers, Palghat and various details have been stated in the report. His opinion is that the insured's books of accounts are not properly maintained. 23. As far as sized timbers are concerned, the evidence of PW1 in cross examination is that the measurement of sized timbers cannot be specified as it will be sawn for the purpose of different persons who may require it under different sizes also. Many people will come for materials of standard size. Many others may require different sizes also. It will also depend upon the size of the house and the capacity of the owner who makes the construction. It is also his deposition that door frames and window frames are not being sold as such. The price is being fixed based on girth and quality. PW4, the Assistant Divisional Officer, Fire Force has explained in the chief examination that what is stated as door frames in the report is the sawn pieces required for making door frames and not about the door frames actually 21 Arb.Appeal No.27/2006 finished as such. Therefore, even though in the fire survey report sized timbers are noted as door frames, window frames, it does not appear to be so. The claimant's case is also in respect of sawn pieces. As far as the report of RW2 is concerned, it is seen that he has not verified the account book, stock register etc. 24. Then the question is whether the arbitrators have committed any illegality in not accepting the report of RW3 and in preferring that of PW2. When we come to the report of PW2 Ext.A32, it shows that the surveyors have verified various books of accounts and he has also given evidence that he has contacted suppliers, verified books of accounts, order forms and other various documents. They started the visit from 17.11.2000. The details of investigation and enquiries have been given in the report. It is stated that large quantity of sized timber were consumed in the fire. Charcoal, ashes, partly burnt sized timbers etc. were lying in the yard scattered. The observations are contained in paragraph III. Paragraph IV refers to documents/evidence. Other items include photos, police report, Fire Brigade Report, Sales Tax Arb.Appeal No.27/2006 22 Assessment, Sales Tax Inspection Report, Trading and Profit and Loss, Balance Sheets as on 31.3.2000 and 4.11.2000, stock inventory, Stock Register etc. 25. The learned Senior Counsel for the Insurance Company submits that only if the various particulars tally, if at all sawn pieces have been damaged, the loss could be assessed. The learned Senior Counsel Sri.Krishnanunni submitted that because the water from a pond was used for putting out the fire, a scientific method also was adopted by PW2 to assess the value of sawn timbers lost. Therefore, it is submitted that evidence of PW2 was rightly accepted and the award do not call for any interference. 26. We have considered the rival submissions. Firstly when we come to the award, the Arbitral Tribunal has observed that RW3 had made a remark in his report about the cause of fire and even accused the insured, which is not even the case of the insurer. What is contained in the report of RW3 is that what was burnt and reduced to charcoal are only batten residues, scantlings and porottu. The above Arb.Appeal No.27/2006 23 conclusion was rejected by the Arbitral Tribunal in paragraph 17 of the award. The arbitral tribunal was of the view that reasons stated by RW3 to reject the accounts are also wrong. They were also of the view that since much quantity of the charcoal was admittedly collected, to form such a large quantity of charcoal there shall be a very large quantity of batten residues, scantlings and porottu. The further view is that if sized pieces were not there, there was no reason to have a temporary shed covered with a tarpaulin as scantlings, batten residues, porottu etc. which are waste wood need not be kept in a shed also. These are the main reasons which persuaded the Arbitral Tribunal to reject the report of RW3. 27. The major claim of the respondent is in respect of the loss caused due to the damage of sized timber. Of course, Sri.George Cherian has got a case even in respect of loss of logs, there was no complaint by the respondent to the assessment made, but in spite of that the Arbitrators had awarded more amount. Reference was made to enclosure 25 of RW3's report, a letter by claimant himself to RW3 Arb.Appeal No.27/2006 24 regarding assessment of loss in respect of logs made by the surveyor. The assessment of loss was Rs.174095/- and what is awarded is Rs.2,70,499/-. 28. As far as the award of the arbitrators is concerned, since the provision under Section 34 is invoked, the question is whether how far the assessment of evidence and other matters can be gone into. Sri.George Cherian relied upon various judgments of the Apex Court in that regard, namely, **Oil & Natural Gas Corporation Ltd. v. Saw pipes Ltd. [(2003) 5 SCCC 705]** and **Associate Builders v. Delhi Development Authority [(2015) 3 SCC 49].** 29. In the first of the decisions, the reasons for setting aside an award have been categorised as follows in paragraph 31 : “ The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to: a) fundamental policy of Indian law; or b)the interest of India ; or c)justice or morality; or Arb.Appeal No.27/2006 25 ## d)if it is patently illegal” 30. It was also held that the illegality should go to the root of the matter and if it is only of a trivial nature it cannot be held that the award is against public policy. 31. In the recent decision of the Apex Court in **Associate Builders v. Delhi Development Authority [(2015) 3 SCC 49]** , various decisions have been gone into to reiterate the relevant principles. After referring to the dictum laid down in **ONGC Ltd. v. Western Geco International Ltd. [(2014) 9 SCC 263]** , it has been held in paragraph 29 as follows : “ 29. It is clear that the juristic principle of a “judicial approach” demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.” 32. Sri.George Cherian invited our attention to paragraphs 37 Arb.Appeal No.27/2006 26 and 38 of the judgment in **ONGC Ltd. v. Western Geco International Ltd. [(2014) 9 SCC 263].** It was contended that non application of mind is a defect that is fatal to any adjudication. It was held therein that “application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking.” Paragraph 39 of the said decision is particularly relied upon to contend that perversity or irrationality is a matter for the Court to consider. 33. Going by the above decision it can be seen that if the award is illegal, perverse or irrational, the same can be grounds for interference by the court under Section 34. 34. The question herein will be whether any of these principles are attracted in respect of the challenge made in appeal of the award. The major dispute between the parties is one concerning the question whether damage has actually been caused by the fire to sawn pieces of timber. A reference to the judgment will be relevant here. The learned District Judge while considering the matter in paragraph 7 addressed Arb.Appeal No.27/2006 27 the argument that Ext.A1 policy covers only goods in open and in this case there was a temporary shed and it cannot be said that the destroyed woods were lying in open. The said argument was rejected. The learned Judge concluded that the Arbitrators have correctly relied on the books of accounts to come to their finding regarding the value and quantity of wood lost in fire. Reliance in this context was placed on the evidence of PW2. It is observed that PW2 inspected all the records and verified the stock physically. On comparing the stock with the accounts and other records, PW2 was convinced that the claimant has maintained true and proper accounts. It was held that the accounts books were there on 6.11.2000 itself and RW2 had occasion to glance at it and therefore it cannot be said that the accounts are false and fabricated. Reliance was placed on the decisions in **Oil & Natural Gas Corporation Ltd. v. Saw pipes Ltd. [(2003) 5 SCCC 705]** and held that the petitioner in this O.P. ( the appellant herein) has no case that the making of award was induced or affected by fraud or corruption. Arb.Appeal No.27/2006 28 35. The question whether the rejection of the report of RW3 namely Ext.R3 was correct or not is the major issue raised herein also. Now there are two reports where the accounts and other records have been verified one by RW3 and another by PW2. Of course the arbitrators have chosen to rely upon the report of PW2 and they have stated reasons also. As far as the question whether there is application of mind for not accepting the report of RW3 is a matter which the learned District Judge had to consider. But that issue has not been specifically addressed. There are various tests as far as the court will have to adhere to in a proceedings under Section 34. As we have already noticed the principles stated in two decisions cited above viz. **ONGC'** s case (supra) and **Associate Builders** ' case (supra) will have to be applied to find out whether the award suffers from any infirmity. Such an exercise is not evident on all matters from the judgment of the learned District Judge. Of course, the learned Senior Counsel on both sides have elaborately argued on the various aspects of the evidence adduced, the acceptability of the same and other factors. This Court 29 Arb.Appeal No.27/2006 may not be correct in sifting through the evidence so as to reappreciate them as the grounds are limited so as to interfere. This Court cannot sit in appeal over the award itself and is not having the advantage of discussion on certain matters by the District Court. The reports of both PW2 and that of RW3 varies by a wide margin as far as assessment of loss of sized timber is concerned. Therefore the various matters had to be addressed in that regard by the learned District Judge within the parameters provided by settled principles. We are not oblivious of the fact that the learned Arbitrators have stated various reasons to reject the report of RW3 and their award is a reasoned one. The sustainability of the same is a matter which has been raised by the Insurance Company in the proceedings initiated under Section 34, before the District Court. 36. Therefore, the matter requires a remand for fresh consideration of these aspects. We have already rejected the arguments regarding the interpretation of the conditions in the policy and as to whether the respondent has insurable interest in the property lost. We leave open for consideration the finding in the award with regard to the 30 Arb.Appeal No.27/2006 assessment of loss sustained by the respondent. It will require a consideration of the facts and evidence as relied upon by the parties before the Arbitral Tribunal to find out whether the award in any manner suffers from any patent illegality on that score. Accordingly, the appeal is allowed. The order in O.P. (Arbitration) No.269/2004 is set aside to the above extent and the matter is remanded for fresh consideration by the District Court. The parties shall suffer their costs in this appeal. **T.R.RAMACHANDRAN NAIR, JUDGE** **P.V.ASHA, JUDGE** sv.