The present appeal arises from the judgment of a Division
Bench of the Allahabad High Court dated 22.01.2004, upholding
the judgment of the learned Civil Judge dated 22.04.1997, by
which a learned Umpire's Award was set aside.
The facts of this case are that the appellant kept jute
stock in the premises of Haryana Oil Mills situated at Lucknow,
which was mortgaged in favour of the Bank of Baroda. The
Digitally signedoriginalby period for which this stock was insured was from SAPNA BISHT 16:21:24 TLT
27.10.1984, the amount for which the jute was insured was raised
from Rs.10 lakhs to Rs.20 lakhs. The entire stock pledged to the
Bank was insured. By a letter dated 01.07.1985, it appears that
the appellant purchased more stock of jute and asked for an
increase in the value of the insurance policy limited to
Rs.25 lakhs and odd. This, according to the Insurance Company,
was not accepted and is one bone of contention between the
parties. Another bone of contention between the parties is
whether the insured stock should be valued as on the date of the
fire or as on the date of purchase.
The appellant before us produced evidence in the form of
purchase receipts of the value of stock of jute which amounted
to Rs.703.21/- per quintal. However, this was not accepted in
the survey that was done at the behest of the Insurance Company.
By their report dated 07.10.1985, the Surveyors valued stock
@ Rs.404/- per quintal on the basis that no authentic rate
quotations were available in the Lucknow/Kanpur jute market. The
Surveyors, therefore, adopted the spot rate quoted in the
Calcutta market for W-5 quality jute, which was adjusted to the
qualities the insured had in stock, (which was W-4 and TD 5
quality jute), and after adding expenses incurred, an average
rate of Rs.404/- per quintal for both qualities was worked out.
The ultimate amount, therefore, that was offered by the
Insurance Company, based on the Surveyor's report, came to a sum
of Rs.12,30,039.41np. Since this was not accepted by the
appellant, arbitration between the appellant and the respondent
began. Mr. P.B. Agrawal, one learned Arbitrator, found in favour
of the appellant and awarded a sum of Rs.23,55,132.71p., with
interest @ 10 % per annum from 10th March, 1986, up to the date
of the Award and @ 6 % per annum from the date of the Award to
the date of payment. Mr. P.P. Malhotra, another learned
Arbitrator, came to the conclusion that the limit of the fire
insurance policy itself was Rs.20 Lakhs and could not be
exceeded and that the loss suffered by the claimant, as per the
market value prevailing on the date of the fire, came to
Rs.12,30,039.41np as per the Surveyor's report. In view of this
divergence of opinion between the arbitrators, the matter was
referred to an Umpire, namely Mr. S.C. Maheshwari, learned
Senior Advocate. After considering the facts of the case, the
learned Umpire concluded as follows:
“It is thus clear that the Insurance Company
had accepted and agreed to insured's letter dated
1.7.85 and the property covered under the policy in
question stood increased from Rs.20 lakhs to Rs.25,
45, 121.70 with effect from 1.7.85 to 13.10.85 and
simply because an endorsement letter was not issued by
the company before the date of happening, it would not
mean that the Insurance Company can go back from its
commitment. As discussed earlier, the first increment
in the policy from Rs.10 lakhs to Rs.20 lakhs was
though effected from 27.10.84 but the endorsement
letter was issued by the company as late as 11.2.85
and had there been any happening in between 27.10.84
to 11.2.85, the company could not have taken the plea
that the original policy was only for Rs.10 lakhs and
the same was never increased. Having once given the
implied consent, the Insurance Company is now estopped
from pleading that the sum insured was only Rs.20
lakhs and not Rs.25,45,121.70 as claimed by the
claimant.
9. Keeping in mind the evidence led by the parties as
well as the facts and circumstances attending to the
present case, I am of the firm opinion that as on
1st July 1985, the sum insured of the policy stood
increased to Rs.25,45,121.70 np (Rs.23, 13, 747 plus 10
per cent) and the basis of loss settlement also stood
amended to the cost price plus 10 per cent instead of
the market price.
10. There is no dispute about the fact that the
quantity of raw jute involved in the fire was 3122.72
quintals and the cost price of the same was Rs.703.21
per quintal. Both the figures have also been confirmed
by the surveyor appointed by opposite party No.1. On
this basis the cost price works out to Rs.21,95, 927.93
and since the basis of the loss settlement is cost
price plus 10 per cent, the amount works out to Rs.24,
15, 520.72.”
The learned Civil Judge, by his judgment dated 22.04.1997,
found that the learned Umpire had misconducted himself on two
counts; firstly, the fact that the letter dated 01.07.1985
which was sent by the appellant to the Insurance Company, and
no response thereto by the Insurance Company would be taken to
mean that the proposal was accepted. According to the learned
District Judge, there can be no acceptance by implication or by
conduct, and therefore, this part of the Umpire's award was set
aside. Further, it was also held that the value of the goods
should be at the time of the fire and since this is so, the
purchase price of the said goods cannot be looked at.
Therefore, both the conclusions of the learned Umpire were set
aside on the ground that the Umpire misconducted himself, and
the Umpire was directed to file his reconsidered award in light
of the judgment of the learned District Judge within four
months. An appeal from the aforesaid judgment was unsuccessful.
The High Court basically reiterated the same conclusion as the
learned District Judge and found the learned Umpire's Award to
be perverse.
The learned Senior Advocate appearing on behalf of the
appellant has urged before us that the Umpire's award is
certainly a possible view that could be taken on the facts of
the case. The learned District Judge, as well as the High
Court, have exceeded their jurisdiction in treating the
Umpire's award as a first appeal. Equally, according to the
learned counsel, the Umpire having taken Rs.703.21 as a figure
per quintal of jute, did so on the basis of evidence produced
before him and, as the fire occurred within an extremely short
time from the date of purchase, the purchase price would
certainly reflect the market value of the said jute on the date
of the fire. Equally, he placed the Surveyor's report before us
and stated that instead of arriving at a figure based on the
purchase price, the Surveyor was extremely arbitrary in going
to the spot rate for different quality jute, in a completely
different market; arriving at a much lower figure; and,
therefore, the Umpire's award was not merely a possible view,
it was the correct view on the facts of the case. Both the
District Judge and the High Court were incorrect in holding
that the Umpire had misconducted himself and that his award is
beyond jurisdiction.
In reply, Shri Vishnu Mehra, appearing on behalf of the
Insurance Company, has sought to place the judgments of the
District Judge as well as the High Court before us, and has
stated that it is obvious that the Umpire has misconducted
himself on both the counts. He relied upon the judgment of
this Court in Polymat India (P)Ltd. & Anr. vs. National
Insurance Co. Ltd. & Ors.,(2005) 9 SCC 174, for the
proposition that when the insurance policy is written, it can
be amended only in writing and not by conduct of the parties,
and that, therefore, the arbitrator's view was not a possible
view in law on the facts of the case.
We have heard the learned counsel for the parties.
In our view, the learned Umpire took a possible view on the
facts of the case having analysed the evidence before him and
having arrived at the conclusion that the insurance policy was
raised, given the conduct of the Insurance Company, not only
in not replying to the letter dated 01.07.1985 but also in
adjusting the sum of additional premium. It is clear that
though the insurance policy may have to be amended in the
manner known to the law and that too in writing between the
parties, yet estoppel by conduct is a ground the Umpire was
well within his legal ken to hold. Further, in the absence of
anything to rebut the evidence produced on behalf of the
appellant that the purchase price of the jute would reflect
the market value as on the date of the fire, equally the
umpire was well within his legal bounds in arriving at a
conclusion, on facts, that the sum of Rs.703.23/- per quintal
would reflect the market value of the jute stock as on the
date of the fire.
Shri Mehra, learned counsel for the Insurance Company,
cited a judgment Polymat India (P) Ltd. (supra) in reply and
relied on paragraph 22, in particular, that when the terms of
contract have been reduced to writing it cannot be changed
without the mutual written agreement of both the parties. On
the facts of that case, it was found in paragraph 14 that
where three amendments to the policy were suggested by the
petitioner, the Insurance Company by its reply agreed to only
one. This being the case, since the other two amendments were
not, in fact, agreed to by the Insurance Company, the Court
held that where the terms of a contract are in writing they
cannot be changed without mutual agreement of parties. It is
in this context that the Court held that mutuality is
necessary to effect changes in an insurance policy. We have
found on the facts of the present case that the Insurance
Company would be estopped by conduct because of encashing and
adjusting the enhanced insurance premium, which would lead to
the limit being raised to over Rs.25 lakhs. We are, therefore,
of the view that this judgment does not advance the
respondent's case any further.
It has been settled by a catena of judgments under the
Arbitration Act, 1940, that an arbitration award is not to be
lightly interfered with. So far as the grounds for challenge
are concerned, no legal error apparent on the face of the
award or misconduct in the sense of legal misconduct, i.e.
that material evidence that is vital has been ignored, is made
out on the facts of the present case. The arbitrator's
findings can be said to be a possible one on the facts of the
case. We find that none of these findings are, therefore,
impeachable and that, therefore, the impugned judgment
deserves to be set aside. The Umpire's award is thus
resuscitated by us, and payments that have to be made under
the Award shall be made by the Insurance Company within a
period of three months from the date of this judgment.
Mr. Manoj Swarup, learned counsel for the appellant, states
that the Bank is no longer involved in this matter, in that,
all dues to the Bank have since been paid off. We accept this
statement and, therefore, direct the Insurance Company to pay
the appellant his dues within a period of three months from
today.
The judgment of the High Court is set aside. The appeal is
allowed, and the Umpire's award is consequently upheld.
Civil Appeal No(s). 4661/2007
VISHNU BHAGWAN AGRAWAL PROPREITOR & ANR. Appellant(s)
VERSUS
Date : 26-10-2017 This appeal was called on for hearing today.
CORAM :
For Appellant(s) Mr. Manoj Swarup,Adv.
Ms. Lalita Kohli,Adv.
Mr. Abhishek Swarup,Adv.
Mr. Sajid Imam Naqvi,Adv.
For M/s Manoj Swarup And Co., AOR
For Respondent(s) Mr. Vishnu Mehra,Adv.
Mr. B. K. Satija, AOR
UPON hearing the counsel the Court made the following
O R D E R
We have heard the learned counsel for the parties.
The appeal is allowed, and the Umpire's award is
consequently upheld in terms of the signed reportable
judgment.
Pending application(s), if any, shall stand disposed of.
(SAPNA BISHT) (SAROJ KUMARI GAUR) SENIOR PERSONAL ASSISTANT COURT MASTER
(Signed reportable judgment is placed on the file)