The Oriental Insurance Co. Ltd. v. K. Vijayakumaran Nair and State Bank of Travancore

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN & THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN THURSDAY, THE 21ST DAY OF JANUARY 2016/1ST MAGHA, 1937 Arb.A.No. 39 of 2006 ------------------------AGAINST THE JUDGMENT IN OS (ARB) 261/1994 of SUB COURT, NEYYATTINKARA ## APPELLANT/1ST DEFENDANT: -------------------------------THE ORIENTAL INSURANCE CO. LTD., REPRESENTED BY ITS DEPUTY MANAGER, REGIONAL OFFICE ERNAKULAM NORTH, KOCHI-18. BY ADV. SRI.GEORGE CHERIAN (THIRUVALLA) ## RESPONDENT/PLAINTIFF & 2ND DEFENDANT: ------------------------------------------------------ 1. K. VIJAYAKUMARAN NAIR, S/O. KRISHNA PILLAI, USHA BHAVANAM, SHEDNADA KUTTAMALA P.O., AMBOORI, VAZHICHAL VILLAGE NEYYATTINKARA TALUK. 2. STATE BANK OF TRAVANCORE, KUDAPPANAMOODU P.O., REPRESENTED BY ITS MANAGER. R.1 BY ADV. SRI.J.HARIKUMAR R.1 BY ADV. SRI.HARIKUMAR.S. R2 BY ADV. SRI.R.S.KALKURA THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 14-012016, THE COURT ON 21-01-2016 DELIVERED THE FOLLOWING: ## **P.N.RAVINDRAN & ANU SIVARAMAN, JJ.** ## **= = = = = = = = = = = = = = Arbitration Appeal No.39 of 2006 = = = = = = = = = = = = = = Dated this the 21[st] day of January, 2016** ## **JUDGMENT** ## **Anu Sivaraman, J.** This appeal is filed by the petitioner in I.A.No.1730 of 2005 in O.S.(Arb).No.261 of 1994 on the file of the Court of the Subordinate Judge of Neyyattinkara. The appellant, a public sector insurance company, was the first defendant. It had filed the petition under sections 30 and 33 of the Arbitration Act, 1940 seeking to set aside the award in arbitration. 2. The first respondent had filed O.S.(Arb) 261 of 1994 claiming compensation for the loss sustained by him in a fire which occurred on 12.05.1993 in his poultry farm which was insured by the appellant. As per order passed on 30.09.1997, the dispute involved in the suit was referred to arbitration by the court below with a direction to file the award within four months. Since the two advocates who were appointed as arbitrators, did not agree in the matter of passing of the award, Sri. K.Subhashithan, Advocate, Neyyattinkara was appointed as Umpire and he filed his award on 28.11.2005 allowing the plaintiff to realise an amount of Rs.2,60,025/- with interest at 10.5% per **2** Arbitration Appeal No.39 of 2006 annum from 13.05.1993 till date of realisation from the appellant. It is challenging this award that the appellant approached the court below by filing I.A.No.1730 of 2005. The main contention in the petition was that the arbitration clause in the policy of insurance provided that in case of disagreement between arbitrators, the difference should be referred to an umpire who would then have to sit along with the arbitrators and decide the dispute. However, it is alleged in the instant case that the umpire did not sit along with the arbitrators but decided the dispute on his own. It is stated that evidence was not recorded in the presence of the umpire and that the umpire has misconducted the proceedings and acted in violation of the provisions of the agreement. 3. The first respondent, the plaintiff in O.S.(Arb).No.261mof 1994 who is the first respondent in I.A.No.1730 of 2005 had filed a counter affidavit stating that the petitioner who had participated in the proceedings before the umpire could not turn around and contend that the proceedings of the umpire are void. The appellant had fully participated in the proceedings and the umpire is said to have passed the award after considering the entire evidence recorded before the arbitrators. In any view of the matter, at the hearing conducted by the umpire the appellant had participated without demur. On these Arbitration Appeal No.39 of 2006 **3** pleadings, the court below proceeded to consider the legality of the award. 4. After considering the pleadings and the evidence on record, the court below came to the conclusion that the appellant was a party who had submitted to the jurisdiction of the umpire and taken part in the proceedings before him without any demur. Relying on the decisions of the Apex Court in **N.Chellappan v. Secretary, Kerala State Electricity Board and another** (AIR 1975 SC 230) and **Union of India v. Karsandas Jethabhai and Co.** (AIR 1977 Gujarat 183) the court below held that the umpire had considered the entire evidence recorded by the arbitrators and had heard both sides. With a minor modification regarding the fee payable to the umpire and the arbitrators, the petition filed by the appellant to set aside the arbitral award was dismissed and the court below proceeded to pronounce a judgment and decree in terms of the award. Aggrieved thereby, the present appeal is filed . 5. We heard Sri.George Cherian, learned counsel appearing for the appellant and Sri.J.Harikumar, learned counsel appearing for the first respondent. It is seen from the pleadings in this case that the dispute arises out of a fire accident which occurred on 12.05.1993. **4** Arbitration Appeal No.39 of 2006 The first respondent herein was running a poultry farm which was insured with the appellant herein. A fire occurred in the poultry farm on 12.05.1993 and the poultry shed was destroyed and the birds perished. A claim was preferred by the first respondent showing Rs.7,30,000/- as the damage suffered by him on account of the fire accident. A surveyor appointed by the appellant assessed the loss to the building at Rs.24,653/- and the loss of birds at Rs.14,363/-. The estimate made by the first respondent for loss to the building was Rs.1,00,000/- and loss of birds Rs.58,500/-. It was thereafter that the court below referred the dispute to arbitration. The arbitrators, after taking evidence filed separate awards. Advocate S.S.Kalkura passed an award on 04.01.2003 in favour of the plaintiff for Rs.65,345/- with interest at 10.5% per annum. Advocate Smt.Lathikadevi awarded a compensation of Rs.3,38,450/- with interest at 10.5% per annum by award dated 26.11.2002. In the circumstances, when the two awards were produced before court, Sri.K.Subhashithan, Advocate Neyyattinkara was appointed as an umpire to decide the dispute. The umpire heard the counsel for the parties on 31.10.2005 and passed an Arbitration Appeal No.39 of 2006 **5** award on 21.11.2005. 6. The learned counsel appearing for the appellant points out that there are discrepancies in the dates mentioned in the award. None of the Awards are adequately stamped, it is submitted. It is seen that the award of the umpire was signed only on 28.11.2005. However, the award is seen dated 21.11.2005 which is a serious irregularity contends the counsel for the appellant. The award of the Umpire directed the appellant to pay an amount of Rs.2,60,025/- with interest at 10.5% per annum from 13.05.1993 and costs. Though the appellant had filed I.A.No.173 of 2005 before the court below, it is contended that the court below did not consider the contentions raised and dismissed the application and decreed the suit for Rs.2,60,025/- with interest at 10.5% per annum from 13.05.1993. Learned counsel appearing for the appellant relies on the decision of the Hon'ble the Supreme Court in ## **Associated Engineering Co. v. Government of Andhra** **Pradesh** [AIR 1992 SC 232] and contends that when an umpire decides matter outside his jurisdiction or out steps the confines of the contract, the arbitration court has the jurisdiction to consider Arbitration Appeal No.39 of 2006 **6** the effect of such transgression and if it is an error going to the root of jurisdiction, the award is in excess of authority and is therefore liable to be set aside. 7. Learned counsel for the respondent, on the other hand, would contend that the appellant who is a person who had acquiesced in the appointment of the umpire and participated fully in the proceedings of the umpire cannot turn around and contend that the proceedings of the Umpire who proceeded to hear the parties and consider the evidence adduced before the arbitrators without holding a sitting along with the arbitrators and deciding the issue with reference to the evidence available before him was completely vitiated going by the terms of the arbitration agreement itself. It is contended that the counsel for the parties had attended the hearing conducted by the umpire. No objections were raised to the proceedings of the umpire. The learned counsel appearing for the respondent relies on the decisions of the Hon'ble the Supreme Court in **Inder Sain Mittal v. Housing Board, Haryana and others** (AIR 2002 SC 1157) as also the decision relied on by the court below in the impugned order, that is, **N.Chellappan v. Secretary, Kerala State Electricity Board and another** (supra) to contend that a party who had acquiesced to the Arbitration Appeal No.39 of 2006 **7** proceedings of the arbitrator or the umpire, as the case may be, cannot turn around and later contend that the proceedings were vitiated by irregularities or illegalities. 8. In the instant we are called upon to decide the legality of the order passed by the court below accepting the award of the umpire. The clause in the agreement which enabled arbitration in the Policy of Insurance reads as follows:- “ARBITRATION:- If any difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted), such difference shall independently of all other questions be referred to the decision of an arbitrator to be appointed in writing by the parties in difference, or if they cannot agree upon a single arbitrator, to the decision of two disinterested persons as arbitrators of whom one shall be appointed in writing by each of the parties within two calendar months after having been required to do in writing by the other party in accordance with the provisions of the Arbitration Act, 1940, as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint a sole arbitrator; and in case of disagreement between the arbitrators the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings.” **8** Arbitration Appeal No.39 of 2006 It was on the basis of this provision that the dispute was referred to arbitration. The parties had no demur in the order appointing an umpire when different awards were filed by the two arbitrators appointed by the court. The awards separately passed by the arbitrators also were not stamped. We do not find that the appellant had taken any exception to the procedure followed by the umpire in considering the pleading of the parties and the evidence recorded before the arbitrators to come to his independent conclusion. It is also not seen from the records that any objection to the procedure adopted by the umpire had been raised by the appellant. The question of nonstamping of the award as a reason for the setting aside the same also does not stand to reason since the separate awards passed by the arbitrators also remained unstamped which was also not objected to by the parties before the court below. In **N.Chellappan v. Secretary, Kerala State Electricity Board and another** (supra) the Hon'ble the Supreme Court has held that a party acquiescing in proceedings before the umpire is precluded from challenging the award on the ground of lack of jurisdiction. It was further held that if the umpire, in passing the award makes a mistake of law or of fact, that is not a ground for challenging the validity of the award. In **Inder Sain Mittal v.** **9** Arbitration Appeal No.39 of 2006 **Housing Board, Haryana and others** (supra) it was held that a party who has acquiesced to the invalidity of the proceedings and took chances therein cannot thereafter attack the award which goes against him on the ground that the arbitrators had no jurisdiction to pass the award. It was held that the right of the party to raise objection would be deemed to be waived. The decisions of the Apex Court apply with full force to the case on hand. 9. We also notice that the instant case was with regard to a fire accident which occurred in the year 1993. The arbitrators as well as the umpire were of the opinion that the plaintiff who is the first respondent herein is entitled to amounts in excess of what was offered by the appellant. In the light of the decisions to the effect that the party who had acquiesced to the proceedings before the umpire cannot later challenge the same on the ground of procedural irregularity, the grounds available to challenge an arbitration award fell in a narrow compass as provided in section 30 of the Arbitration Act, 1940. Section 30 of the Arbitration Act, 1940 reads as follows:- **“S 30** .Grounds for setting aside award:- An award shall not be set aside except on one or more of the following grounds, namely:- a) than an arbitrator or umpire has misconducted himself or the proceedings; Arbitration Appeal No.39 of 2006 **10** b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; c that an award has been improperly procured or is otherwise invalid.” It is only in the circumstances set out in section 30 that an award of an umpire can be interfered with. The appellants have no case that they were not heard or permitted to participate in the proceedings before the arbitrators or the umpire at any stage. Apart from the procedural and formal irregularities alleged, the award is not challenged on the grounds referable to section 30. We are therefore of the opinion that the order of the court below is unassailable. The appeal fails and the same is dismissed. There will be no order as to costs. sd/- **P.N.Ravindran,Judge** sd/- **Anu Sivaraman, Judge** sj TRUE COPY P.A.TO JUDGE