Uttarakhand High Court Upholds Award, Finds No Bar To Arbitration After Partial Settlement Of Insurance Claim

The Uttarakhand High Court has recently upheld an arbitral award directing Oriental Insurance Company Ltd. to pay ₹34,000 to Vigyan Chemical Industries in an insurance claim dispute.

The court rejected the insurer's contention that acceptance of a lower amount against the claim prevented the insured from seeking the balance through arbitration.

Justice Ravindra Maithani heard the appeal filed by Oriental Insurance against a District Judge's order refusing to set aside the award.

Observing that acceptance of a part payment did not bar the insured from pursuing the remaining claim, the court held,

"What is argued by the respondent is that the receipt was provided by the appellant and the respondent was made to sign on a doted lines. This fact is not disputed by learned counsel for the appellant. It is not disputed that the appellant had made claim for Rs.1,79,000/-. When he was not given the entire claimed amount, he referred to the matter to the Arbitrator. It cannot be said that under such facts and circumstances the respondent was precluded or estopped from referring the matter to the Arbitrator. The Arbitrator has decided the matter in accordance with law."

The dispute arose after a car insured with Oriental Insurance was stolen in July 1995. Vigyan Chemical Industries claimed ₹1.79 lakh under the policy. Oriental Insurance accepted the claim only to the extent of ₹1.45 lakh.

The insurer argued that Vigyan Chemical Industries had accepted ₹1.45 lakh as full and final settlement of its claim. Having accepted the amount, the company could not later pursue arbitration for any further sum, it contended.

Vigyan Chemical Industries, on the other hand, argued that the receipt had been supplied by the insurer and that it had merely signed on the dotted lines. Since it had not received the entire amount claimed, it sought payment of the balance ₹34,000. When the amount was not paid, it referred the dispute to arbitration.

The arbitral tribunal awarded ₹34,000 along with interest at 18% per annum from February 19, 1997 to August 12, 2003. Costs towards arbitration and stamp paper expenses were also awarded.

Before the High Court, Oriental Insurance further challenged the interest component of the award. It argued that the applicable rate should have been 9% per annum.

The court noted that the scope of interference in appeals arising from arbitral proceedings is limited. It cannot reassess evidence or substitute its own view for that of the arbitrator merely because another view may be possible.

While rejecting the challenge to the interest awarded by the tribunal, the court held,

"Section 31(7)(b) qualifies that unless the award otherwise directs, the amount of arbitral award shall carry interest @ 2% higher than the current rate of interest prevalent on the date of award. Sub Section 31(7)(b) would come into play when the AT had not awarded any interest."

The court held that the arbitral tribunal was empowered to award interest at a rate it considered reasonable. Since the tribunal had specifically considered the issue and awarded interest, no interference was warranted.

It also noted that there was no dispute that Vigyan Chemical Industries had claimed ₹1.79 lakh but received only ₹1.45 lakh. The insurer had also not disputed the company's assertion that the receipt was provided by it and signed on the dotted lines.

Finding no reason to interfere with either the award or the District Judge's order, the court dismissed the appeal.

For Appellant (The Oriental Insurance Company Limited): Advocate I.P. Kohli.

For Respondent (Vigyan Chemical Industries): Senior Advocate S.K. Jain assisted by Advocate Siddharth Jain.