Arbitrability Of Dispute To Be Decided By Arbitral Tribunal, Not At Arbitrator Appointment Stage: Bombay High Court

The Bombay High Court has recently reiterated that whether an insurance dispute is ultimately arbitrable need not be decided while appointing an arbitrator, leaving that question for the arbitral tribunal to consider.

“A distinction has to be maintained between the final issue whether the dispute is arbitrable and the limited enquiry which this Court is required to undertake at the stage of appointment of an Arbitrator,” Justice Amit Borkar observed.

The court accordingly appointed former Kerala High Court Chief Justice Nitin Jamdar as the sole arbitrator in the dispute between Samraj Gold Exports Private Limited and The New India Assurance Co. Ltd.

It kept open questions concerning arbitrability, the validity and effect of repudiation, accord and satisfaction, election, limitation, quantum, and the merits of the claims.

Samraj Gold, which manufactures and exports gold jewellery, had obtained a Jewellers Block Insurance Policy from New India Assurance for the period from January 14, 2019 to January 13, 2020.

According to the company, the policy covered losses arising from the fidelity or dishonest acts of persons entrusted with jewellery or gold and provided fidelity or goldsmith coverage of ₹7 crore.

The insurer repudiated the claim by a letter dated February 28, 2020. Samraj Gold subsequently approached the District Consumer Commission, South Mumbai. It claimed that the complete terms and conditions of the policy, including the arbitration clause, were supplied to it for the first time on July 13, 2021, during those proceedings.

According to Samraj Gold, the Consumer Commission's November 19, 2025 order left questions concerning quantification of actual loss, consequential damages, and the financial impact of the alleged acts open and gave liberty to pursue arbitration over the remaining disputes.

Samraj Gold invoked arbitration on February 20, 2026. New India Assurance declined to concur in the appointment of an arbitrator on March 18, citing the pendency of its appeal before the State Consumer Commission. The company then approached the high court under Section 11 of the Arbitration and Conciliation Act, 1996.

Before the court, Samraj Gold contended that the disputes it sought to refer principally concerned the quantification and calculation of the amounts payable. Its claims included loss of contribution towards overheads and profit allegedly caused by disruption of business for 81 months, loss of profit linked to working-capital rotation, reinstatement or replacement value of bullion, interest, financial burdens arising from its account becoming an NPA, and statutory and GST liabilities.

New India Assurance opposed the appointment. It relied on the restrictive wording of the arbitration clause, under which disputes concerning quantum could be referred to arbitration only when liability was otherwise admitted. The insurer argued that it had repudiated liability altogether and that the dispute therefore fell outside the arbitration agreement.

The insurer also raised limitation and election. It contended that the arbitration notice had been issued almost six years after the February 2020 repudiation. It further argued that Samraj Gold had elected to pursue the dispute before the consumer forum and could not invoke arbitration for the same cause of action.

Justice Borkar observed that the insurer's objection had legal support in earlier Supreme Court decisions concerning restrictive arbitration clauses in insurance policies. Those decisions distinguish between a dispute over the quantum of loss, where arbitration may operate, and a complete repudiation of liability.

The court, however, found that finally deciding whether the insurer's communications amounted to a complete and valid repudiation would require examination of disputed material. The same applied to the objections based on accord and satisfaction and election.

Justice Borkar relied on the Supreme Court's decisions in Ajay Madhusudan Patel, Interplay, In re and Krish Spinning, noting that the enquiry under Section 11 is confined to the existence of the arbitration agreement. Substantive objections requiring examination of evidence are to be left for the arbitral tribunal.

“The Court dealing with appointment of an Arbitrator is not expected to conduct a full trial regarding all disputes raised between the parties,” the court observed.

The court therefore left New India Assurance free to argue before the arbitral tribunal that the arbitration clause is restricted and that its denial of liability takes the dispute outside its scope. Samraj Gold can contest the nature and validity of the alleged repudiation.

The court also left the insurer's election and accord-and-satisfaction objections open. It observed that raising such objections was different from proving them, which could require examination of documents and the circumstances surrounding any alleged settlement or acceptance.

The arbitral tribunal may consider its jurisdiction and arbitrability under Section 16 of the Arbitration and Conciliation Act if those issues are raised. Justice Borkar clarified that the observations in the Section 11 order should not influence the tribunal's decision on the merits.

The court expressly kept open all rights and contentions concerning arbitrability, the validity and effect of repudiation, accord and satisfaction, election, limitation, quantum and the merits of the claims.

For Petitioner (Samraj Gold Exports Private Limited): Advocates Gauraj Shah, Harjot Singh i/by Atique Ur Rehman.

For Respondent (The New India Assurance Co. Ltd.): Advocates Anup Kumar Mathur, Dharmendra D. Jadhav i/by Shrivatsa Legal LLP.