United India Insurance Co Ltd v Hyundai Engineering

CITATION – CIVIL APPEAL NO. 8146 OF 2018.

JUDGE – AM KHanwilkar.

FACTS –

The joint venture Company comprising of Respondent 1 (Hyundai Engineering and construction) and 2 (Gammon India) executed a Contractor All Risk Insurance Policy valued at Rs. 2,13,58,76,000/-.
The clause contained that the disputes arising as to the quantum of the claim shall be referred to arbitration and further contained that arbitration shall not be invoked if the company disputes or does not accept the liability at all.
Following an accident, the respondent company filed for the claim of Rs. 1,51,59,94,543/- and accordingly two reports were formed one by the appellant and the other by the Ministry of Road Transport and Highways, Government of India which concluded that the accident occurred due to faulty design and deficient workmanship and thus in pursuance of the report the appellant rejected the claim under clause 7 of the agreement.
The JV Company then approached the Madras High court under section 11(4) and 11(6) for the appointment of an arbitrator.

ISSUE –

Whether the arbitration clause under the agreement shall be interpreted strictly?

The decision of Madras High Court

The Madras High Court held that insertion of the clause 6A in section 11 of the new Arbitration and Conciliation Act, 2015 limits the mandate of the court to just examination of the existence of the arbitration agreement.

JUDGEMENT –

The Court set aside the judgement of HC and held that a conditional arbitration clause under the CAR Policy will be triggered only if the dispute between the parties is limited to the quantum of insurance to be paid under the CAR policy and does not cover a dispute regarding the liability of the Appellant under the CAR policy.
In the present case, the liability should be unequivocally admitted by the Appellant as the same is pre-condition and sine qua non for triggering the arbitration clause.
Therefore, the arbitration clause would come to life only if the Appellant admits or accepts its liability under or in respect of the CAR Policy.
Further, the Court stated, that an enquiry should have been made by the HC before passing any orders, to examine whether the communications sent by the Appellant fell in the excepted category of repudiation and denial of liability under the CAR Policy as a whole, or had the effect of acceptance of liability by the Appellant under the CAR Policy and were limited to a dispute regarding the quantum.
The Court further held that the observations made by the Court in Duro Felguera case are general observation about the effect of the amended provision and are not specific to the issue under consideration.

11) CASE – Radha Chemicals v Union of India

CITATION – Civil Appel No. 10386 of 2018

JUDGE – Justice I.P Mukherjee.

FACTS –

The arbitrator decided an issue in its award. This award was impugned before the Single Judge a High Court under Section 34 of the Act.
The Single Judge opined that the said issue has not been decided correctly by the arbitrator and therefore the award shall be remanded back to the arbitrator to be decided afresh.
This order of the Single judge was challenged before the Division Bench of the High Court which affirmed the decision of the Single judge.
This order of the Division Bench was in appeal before the Supreme Court.

ISSUE–

Whether the Court has the power to remand the matter to the Arbitrator for a fresh decision?

JUDGEMENT –

In this case, the Court noticed and applied the decided position of law in Kinnari Mullick and held that the court while deciding a Section 34 petition has no jurisdiction to remand the matter to the Arbitrator for a fresh decision.
Therefore, the Court found that the Single Judge’s judgment was contrary to the settled position of law in Kinnari Mullick and Another vs. Ghanshyam Das Damani, (2018) 11 SCC 328,and as a result of which the Court set aside both the judgments of the Single Judge as well as the Division Bench.
The Supreme Court held that the limited discretion available to the Court under Section 34(4) to remand an award can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings and such power could not be exercised by deferring the proceedings under Section 34 of the Act.
The Court made it clear that the Court cannot exercise this limited power of deferring the proceedings before it suo moto. Further, the limited remedy available under Section 34(4) is required to be invoked by the party to the arbitral proceedings before the award is set aside by the Court.