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Pee Empro Exports Pvt. Ltd. Vs. United India Insurance Co. Ltd. - (High Court of Delhi) (12 Jun 2023)

Referral may be refused only when the Court is certain that a valid arbitration agreement does not exist



In facts of present case, a fire broke out in the premises of the Petitioner due to an electric short circuit, which caused considerable loss and damage to the Petitioner, which was claimed as Rs. 11,47,67,511. Accordingly, the Respondent appointed a surveyor to assess the damage caused and the claim applicable.The claim amount of Rs. 8,38,10,920was released by the Respondent.

Aggrieved by the deficiency in the Claim granted, the Petitioner invoked arbitration in terms of clause 13 contained in the Policy, sent an arbitration notice, calling upon the Respondent to suggest names of the arbitrator and to appoint them by mutual consent, and to resolve the dispute pertaining to the Claim.

Respondent sent a reply denying the existence of any arbitrable dispute between the parties and refused to appoint an arbitrator. Aggrieved by the same, the Petitioner has approached this Court praying for the appointment of a sole arbitrator.

In the present case, Clause 13 of the Policy between the parties contains a valid arbitration agreement, and neither of the parties has disputed the validity and existence of the arbitration clause. Therefore, the arbitration agreement between the parties under Clause 13 would be deemed to be existent and a separate agreement under the Doctrine of Severability, and the arbitration agreement would not have extinguished along with the contract between the parties.

The scope of the Court's power while hearing a Section 11 petition is to test whether or not a valid arbitration agreement exists on the basis of the facts and law. Only when the Court is certain that a valid arbitration agreement does not exist or that the subject matter is not arbitrable, then a referral may be refused, and this is strictly applicable to a very limited category of cases. However, if there is even the slightest doubt, the rule is to refer the dispute to arbitration, and otherwise, it would encroach upon what is essentially a matter to be determined by the tribunal.

Further, a close reading of the clause 13 reveals that only when the Respondent company has accepted its liability, any dispute or difference arising qua the quantum to be paid under this policy shall independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties. In the instant case, the existence of liability has not been disputed by the Respondent Company, therefore, prima facie the dispute regarding the quantum of claims can be determined by an arbitrator.

It is also clear that the issues pertaining to the quantum of claim that is accruable to the Petitioner and whether the Petitioner's claims would be maintainable on account of the Discharge Voucher are to be decided by the Arbitral Tribunal under the kompetenz-kompetenz principle and any decision by this Court would be deemed as going into the merits of the dispute, which is not at all warranted under law. Thus, these issues are not being dealt with in the instant petition under Section 11(6) of the Act.Therefore, in the facts and circumstances of this case, present Court refers the dispute raised herein to an Arbitral Tribunal. Petition allowed.


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