Kapur - (1.) THIS is a plaintiffs' appeal against an order passed by Mr. Tara Chand Gupta, Subordinate Judge, Delhi, staying the suit under Section 34 of the Indian Arbitration. Act.
(2.) THE plaintiffs took out two policies with the Tropical Insurance Company Limited, one on the 30th of April, 1947, for Rs. 80,000/- and the other on the 17th of April, 1947, for Rs. 20,000/-. THEy included risk against damage due to fire or explosion caused by persons taking part in riots or civil commotion. Two of the terms of these policies have been referred to in the course of arguments, THEy are Clauses 10 and 18: "10. This insurance may be terminated at any time at the request of the insured, in which case the company will retain the customary short period rate for the time the Policy has been in force. This insurance may also at anytime be terminated at the option of the Company, on notice to that effect being given to the insured, in which case the Company shall be liable to repay on demand a rateable proportion of the premium for the unexpired term from the date of the cancelment." "18. If any difference arises as to the amount of any loss or damage such difference shall independently of all other questions be referred to the decision of an 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 disinterested persons as arbitrators, of whom one shall be appointed in writing by each of the parties within two calendar months after having been required so to do in writing by the other party. In case either party shall refuse or fail to appoint an arbitrator within two calendar months after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint a sole arbitrator; and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings. THE death of any party shall not revoke or affect the authority or powers of the arbitrator, arbitrators or umpire respectively; and in the event of the death of an arbitrator, or, umpire another shall in each case may be appointed in his stead by the party or arbitrators (as the case may be) by whom the arbitrator or umpire so dying was appointed. THE costs of the reference and of the award shall be in the discretion of the arbitrator, arbitrators or umpire making the award. And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon the policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained." It is alleged that on the 24th of August 1947, the stocks were looted and the building burnt down, and therefore liability under the policies incurred. On the 31st of August 1947, a telegram was sent to the Company saying that the factory had been looted and asking for assessment to be arranged and this was affirmed by a letter. On the 1st of September 1947, the Tropical Insurance Company, hereinafter termed "the company" sent a letter to the plaintiffs repudiating any liability on the ground that the riot risk was not covered under the policy. This was reiterated in a letter of the 18th of September, 1947, which the Company wrote to the plaintiffs, who, however, did not accept this position of the Company and insisted that the riot risk was covered. On the 1st of September, 1947, another letter was sent in which the Company stated that the riot risk was cancelled on the 14th of August and that a registered letter to this effect was sent to the last known address of the plaintiffs.
(3.) ON the 29th September 1947, the plaintiffs wrote back to the defendant company that the two letters sent by them were contradictory, that no registered letter had been received and that the policies could not be terminated at least not without proper notice, and informed them that they will have recourse to a Court of law if their claim was not settled. ON the same day by another letter the plaintiffs informed the Company that the whole factory had been burnt down and looted and that there was a "total loss" and asked them to arrange for an early settlement of their claim. Nothing has been shown on this file that the Company ever challenged the amount of the loss before the suit was brought. On the 1st of December 1947, the plaintiffs brought a suit against the Company for recovery of Rs. 1,00,000 basing their claim on the policies of insurance. On the 22nd of January, 1948, the defendants made an application under Section 34 of the Indian Arbitration Act in which, for the first time, they disputed the amount of loss or damage and stated that under Clause 18 of the conditions of the policy the amount of loss was to be determined by arbitration and alleged that they were ready and willing to refer the question of damages to arbitration and asked for stay under Section 34 of the Indian Arbitration Act. In this connection I may also refer to the written statement of the defendantcompany. In paragraph 6 they, pleaded that the riot and civil commotion risk was terminated and in paragraph 7 they stated that the loss had been fraudulently exaggerated. The Court as I have said above stayed the proceedings under Section 34 of the Indian Arbitration Act.;