The applicant which carries on a general insurance business, issued a fire policy on 24-9-1974 for period ending 30-9-1975 covering stocks of cotton, cotton yarn and other items belonging to the respondents, Khyber Textile Mills Ltd,, against loss or damage by fire, while stored and/or lying in the for detached godowns in the compound of the respondents, as more particularly mentioned in the specification attached to the policy. The value of the goods stored in each of the for godowns was separately stated in the said speci--fication. A fire broke out on 14-10-1974 in the Blow Room of the respondents who advised the applicant by telegram requesting it to send its surveyors immediately. The applicant sent two surveyors to survey and assess the loss, both of whom in their joint report to the applicant stated that as the fire had taken place in the Blow Room, the Policy did not cover the loss. Corres--pondence was then exchanged between the parties and in one of the letters of the respondent dated 30-10-1974, the relevant extract of which is re--produced in paragraph I 1 of the application, the respondents stated that the fire, which broke out in the Blow Room as a result of a spark from the fan near the machinery, spread to the adjoining godown and engulfed the godown and caused very extensive damage. Accordingly, they preferred a claim of Rs. 8,96,333 but the applicant declined to pay on the ground that the loss did not fall within the insurance policy as confirmed by its joint surveyors and that it had no option but to repudiate its liability under the Policy. In the circumstances, the respondent's Advocate after exchanging legal notices invoked to arbitration clause No. 18 contained in the Conditions of the Policy and requested the applicant to nominate a person to act as sole arbitrator for the respondent's consideration. The applicant replied that it was not agreeable to the proposed arbitration for reasons already mentioned by it. Accordingly, the respondents appointed Mr. F. R. Merchant, a Chartered Accountant, the second respondent herein, as sole arbitrator. In these circumstances, the applicant filed the present application under section 33 of the Arbitration Act, 1940, praying this Court to determine the effect of the arbitration clause and to declare that the reference to arbitration by the respondents is 'improper'. It also included a prayer for the removal of the arbitrator appointed by the respondents. The relevant portion of the arbitra--tion clause reads as follows : "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 And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the loss or damage if disputed shall be first obtained."
2. The contention of Mr. A. Rauf, the learned counsel for the applicant, is that as the applicant has denied its general liability under the policy, there is no difference or dispute as to the amount of any loss or damage which could be referred to arbitration under condition No. 18. In this connection, he referred to a previous unreported judgment in Suit No. 229/72 pronounced by me in the case of Messrs Pakistan Progressive Cement Industries Ltd. v. Pakistan General Insurance Company Ltd. In that case, the assured invoked an identical arbitration clause which was resisted by the insurance company which had repudiated its liability under the Policy. But as the assured had preferred no claim to any specific amount of loss or damage suffered by it, which the insurance company can be deemed to have denied, I had held that there was no difference as to the amount of loss or damage which could be referred to arbitration. Further that the jurisdiction of the arbitrators was limited and did not include the determination of the question of liability of the insurance company under the Policy. That case in my opinion, is distinguishable. In the instant case, the respondents had preferred a specific claim for Rs. 8,96,333 which the applicant categorically declined to pay on certain grounds. Thus, there is a present and actual dis--pute as to the amount of loss or damage. In this connection, Mr. Abrar Hasan for the respondent referred to Ismail Abdul Sattar and Brothers v. Eastern Federal Insurance Company Ltd. (PLD 1959 Kar. 179) wherein it was held that the refusal by the insurance company to admit or deny a specific claim put for--ward by the assured was deemed to be a dispute, which fell within an identically worded arbitration clause. Moreover, there is a dispute as to which goods were damaged by fire, the respondents claiming that the insured good in the adjoining godown were destroyed by fire, while the applicant disputes this allegation of fact. The arbitrator has to decide the question, which goods were damaged and then give an award as to the amount of loss or damage. But his jurisdiction cannot extend to adjudicating on the plea raised by the applicant of general repudiation of its liability on the ground that the goods, which were allegedly damaged, were not covered by the policy. This is an independent question and the applicant shall be free to raise it in other pro--ceedings at the relevant time in order to resist the claim of the respondents. But the obtaining of an award by the respondents on the amount of loss or. Damage is a condition precedent to any right of action or suit upon the policy as stated in the condition No. 18 above- quoted.
3. Accordingly, for the foregoing reasons, I would declare that the reference to arbitration on the question of the amount of loss or damage suffered by the respondents, if any, is proper. The application is accordingly dismissed with costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.