Janah, J. - (1.) THIS appeal is by the defendant and it is against an order passed ,by the trial court refusing to stay the suit under Section 34 of the Arbitration Act. The plaintiffs-respondents instituted the suit against the defendant company for recovery of a certain sum of money. The case made out in the plaint was as follows: Satya Kinkar Kar the predecessor-in-interest of the plaintiffs was the owner of Tata Mercedege Benz Truck No. WBG 6620. The said truck was insured with the defendant company under a comprehensive motor insurance being Policy No. 370/CV/1441. The policy was valid from March 19, 1969 to March 18, 1970. The defendant company in consideration of the premium paid to it by the said Satya Kinkar Kar insured the truck for a sum of Rs. 40,000 against, inter alia, any form of accidental total loss of the truck and also against statutory liability insurance under the Motor Vehicles Act. On May 5, 1969, while the truck was being driven by one Sriram Tewary having driving licence No. ASN/915 which was valid up to November, 1970, it was involved in an accident by colliding against a road side tree near village Douli of Satora-Purulia Boad. The accident occurred as a result of the left wheel coming out of is position. The plaintiffs claimed that the defendant company under the terms and conditions of the policy became liable to indemnify of the owner for the total loss of the truck. On or about 6/7th May, 1969 late Satya Kinkar duly submitted the claim to the defendant company who deputed one Sri N. K. Dutta, a surveyor to survey and estimate the quantum of loss or damages. The said Sri Dutta assessed the loss of Rs. 31,000 which was accepted by the insured Satya Kinkar, who pressed for settlement of claim at RS. 31,000 In December, 1969, Commercial Investigation Bureau of 38 Chandni Chawk Street, Calcutta, wrote a letter to the deceased Satya Kinkar that they had been appointed by the defendant company to process the claim and sought for certain information. The defendant company having confirmed that they had appointed the said Commercial Investigation Bureau, Satya Kinkar furnished all information which was asked for. But no payment having been received by the deceased for about A year, he sent letters through his lawyer in April and June 1971 demanding payment of sum of Rs. 31,000 as assessed by the defendant's surveyor. The defendant wrote to the lawyer of Satya Kinkar that the claim could not be entertained on the ground that the policy was obtained by untrue statements in -the proposal form and the truck was driven at the time of accident by a person who had no licence to drive the truck. Satya Kinkar Kar having died on the 16th March, 1972, the present suit was filed by the plaintiffs as the heirs and legal representatives of Satya Kinkar on 3rd May, 1972.
(2.) THE defendant Insurance Company on being served with summons appeared and filed an application for stay of the suit under Section 34 of the Arbitration Act 1940 on the ground that the Policy contained an arbitration clause which was a condition precedent to any right of action in respect of the matters relating to the said Policy. THE condition relied on by the defendant company being condition No. 8 of the policy is as follows:-- "All differences arising out of this Policy shall be referred to the decision of the Arbitrator to be appointed in writing by the parties in difference or if they cannot agree upon a single Arbitrator to the decision of two Arbitrators, one to be appointed in writing by each of the parties within one calender month after having been required in writing so to do by either of the parties or in case the Arbitrators do not agree of an Umpire appointed in writing by the Arbitrators before entering upon the reference. THE umpire shall sit with the Arbitrators and preside at their meetings and making of an Award shall be a condition precedent to any right of action against the company, If the company shall disclaim liability to the insured for any claim hereunder and such claim shall not within 12 calendar months from the date of such disclaimer have been referred to Arbitration under the provisions herein contained then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder." THE defendant company contended that it was ready and willing to do all things necessary for conducting the arbitration that might be held under the aforesaid clause. Accordingly, the defendant asserted that the parties must be referred to arbitration under the said clause and an Award must be obtained by the plaintiff before he can come to Court. The learned Judge in the trial court after considering the various contentions raised before him came to the conclusion that in the circumstances of the case the suit should not be stayed under Section 34 of the Arbitration Act. The learned Judge, therefore, rejected the defendant's application for stay. Against the said order the defendant company has come up in appeal.
(3.) MR. Majumdar, learned Advocate for the appellant contended that under the conditions of the Policy on which the plaintiff found their claim, arbitra-tion was a condition precedent to the institution of the suit. He contended further that by denying its liability on the ground referred to in its letter dated 5th October, 1971, the company had not taken any plea de hors the contract. He contended that the contract subsisted between the parties but the defendant had no liability by virtue of the terms of the contract. In this connection he drew our attention to Clause 9 of the Policy which is as follows:-- "The due observance of the terms, conditions and endorsements of this Policy in so far as they relate to anything to be done or complied with by the insured and the truth of the statements and answers in the said proposal shall be condition precedent to any liability of the company to make any payment under the Policy." MR. Majumdar argued that Clause 9 of the Policy being what it is the repudiation of its liability by the company was under the said clause, and accordingly, under Clause 8 mentioned hereinbefore the making of an award was a condition precedent to the institution of a suit. In support of this contention he relied upon the decisions in Stebbing v. Liverpool, London and Globe Insurance Co. Ltd. (1917) 2 KB 433; Woodall v. Pearl Insurance Co. Ltd. (1919) 1 KB 593; and Toller v. Law Accident Insurance Society (1936) 2 All ER 952. MR. Dutta learned Advocate appearing on behalf of the respondents contended on the other hand, that the ground on which the liability under the insurance Policy has been repudiated by the defendant invalidates the contract itself. According to him, the repudiation of the claim in the present case goes to the very root of the contract, and if the contract itself goes the arbitration clause contained in the contract also goes. MR. Dutta submitted that in the present case the defendant shall not be entitled to rely upon the arbitration clause which was a subordinate, clause in the entire contract. He has drawn our attention to the preamble of the Policy which states that the statements in the proposal form shall be the basis of the Policy. MR. Dutta pointed out that one of the grounds on which company repudiated the claim being that the insured made false statements in the proposal form, the entice basis of the Policy is knocked out. If wrong answers were given in the proposal form, there was no contract at all.;