1. BAQUER J.-This revision is directed against the order dated 28-6-67 of Mr. A. K. F. Ahmed Subordinate Judge, 3rd Court, Dacca in Money Suit No. 53 of 1965. It arises out of a claim on Insurance Policy.
2. The facts in short are that plaintiff-opposite-party took an insurance against fire for a period of six months from the defen--dant petitioner from 1st September 1964, for the amount of Rs. 20,000. Fire broke out on the night following 18th January 1965, and the plaintiff's godown was burnt. Plaintiff made various correspondences for payment of the insured amount, but the defendant-petitioner by their letter dated 4th November 1965 made various allegations including fraudulent claim, referred to clause 13 of the Policy and denied liability of the company, that is, of defendant- petitioner.
3. On being denied payment of the claim, the plaintiff-- respondent went to Court and the defendant-petitioner, that is, Insurance Company after taking a number of adjournments at long last filed written statement on 14-5-66, the suit of the plaintiff having been registered on 26-11-1965.
4. Thereafter on 1-6-66 the issues were framed. Nearly six months thereafter on 9-12-66 the petitioner filed a petition before the learned subordinate Judge for framing an additional issue and the additional issue was framed by the learned Subordinate Judge as under:- "4. Can the plaintiff enforce the alleged claim in the absence of the arbitral award ? In other words, has the plaintiff any right to bring the suit in the absence of the arbitral award?"
5. The issues already framed on 1-6-66 were:- "(1) Is the suit barred under section 69 of the Partnership Act?
(2) Is the plaintiff entitled to get a decree for the amount claimed?
(3) What relief, if any, is the plaintiff entitled to?"
6. It has been stated in the petition for framing the additional issue that that was the only issue of law although as it appears on 1-6-66 several other issues of law were framed.
7. The learned Subordinate Judge at the instance of the peti--tioner fixed 14-12-66 for a preliminary hearing on this additional issue as framed and it was not till 28-6-67 that this issue No. 4 was taken up for hearing. On this preliminary issue of law as to the maintainability of the suit in the absence of arbitral award, the trial Court held that the suit was tenable and clause 18 of the Policy was no bar to its maintainability. Hence this revision.
8. Mr. A. M. Haidermota, learned counsel appearing for the defendant-petitioner has challenged the order on the ground that clause 18 of the Policy incorporated arbitration as a condition precedent which was binding upon the plaintiff. In other words he means to say that the plaintiff has no locus standi to go to Court without going through the process of arbitration.
9. Mr. Haidermota has cited the decisions in Viney v. Bignold ((1888) L R 20 Q B D 172) Cipriant and others v. Burnett (1933 A C 83 (P C)), Woodal v. Pearl Assurance Company Limited ((1919) I L R K B D 593), and Heyman and another v. Derwins Limited (L R 1942 A C 356) while Mr. Mozammel Huq appearing for the plaintiff--opposite-party has relied on the observations of Lord Haldane in what is known as Jureldini's case (L R 1915 A C 499).
10. Before dilating on these decisions it is necessary to reproduce here clauses 13 and 18 of the Policy itself and also the very letter of the 4th November 1965, from the defendant-petitioner to the plaintiff-opposite-party, as handed over to us by Mr. Haidermota..
11. Clauses 13 and 18 of the Policy runs thus :- "13. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under this Policy; or, if the loss or damage be occasioned by the wilful act, or with the connivance of the insured; or, if the claim be made and rejected and an action or suit be not commenced within three months after such rejection, or (in case of an arbitration taking place in pursuance of the 18th condition of the Policy) within three months after the arbitrator or arbitrators or umpire shall have made their award, all benefit under this Policy shall be forfeited.
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 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 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 requir--ing 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 arbitrator 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 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 this policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained."
12. Letter of the 4th November 1965 is as under :-- "7694/65REGISTERED WITH A/D4th November 65.
13. Mr. Md. Abdul Hakim Howladar.
14. Vill. Khagdi.
15. P. O. Charmugaria.
16. Dt. Faridpur.
17. Dear Sir, Fire on 18th January, '65 at Charmugaria under Fire Policy No. DF/P-2463/65.
18. While going through the survey report and other related papers and documents of your above claim, it is found that the Insured properties in question belong to Mr. Abdul Hakim Howladar and Abdul Rashid Fakir and you have been running. Partnership. Business with Mr. Rashid Fakir since August 1964. But with an ulterior motive to deceive your partner you took policy in your own name only by suppressing the fact to us, which has given doubtful impression about the genuineness of your claim. We have got documentary evidence in this regard. Further it is noted from the record that you have claimed for Rs. 20,000 against the above loss and in support of which you have failed to produce any papers and documents while the real value of the stock alleged to have been destroyed by fire is Rs. 8,600 as assessed by the Surveyors. Over valuation is clearly intentional. Perhaps you know if a fraudulent claim is submitted all benefits under the policy are forfeited.
19. "If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under this policy or, if the loss or damage be considered by the wilful act, or with the connivance of the insured . . . . . All benefit under this policy shall be forfeited."
20. We believe, from the above-noted policy condition you have understood the position. Really we are very sorry as we could not be of any help to you in the matter.
21. Thanking you, Yours faithfully, (Sd.) Z. A. Khan, Zonal Manager. c. c. To : Mr. Pran Gopal Shaha for information. c. c. To: The Office Manager (D), Lahore for information."
22. Moreover in para. 15 of the Written Statement the petitioners have stated that they have rightly repudiated plaintiff's fraudulent claim.
23. Mr. Mozammel Huq, learned Advocate for the opposite --party has argued that the petitioner having once full submitted to the Court by taking several steps, could not press the 4th issue as mentioned as a preliminary point for settlement under Order XIV, rule 2 and that it was only a subterfuge and an afterthought. Relying on Jurefdini's case he has urged that the contents of the letter of the 4th November 1965, as set out already and the stand taken in the written statement itself are such as to go to the very root of the contract. The claim of the plaintiff having been turned down as fraudulent, there was, according to him, no question of going to arbitration.
24. The facts of Viney's case are as under :- "In an action on a fire policy the defendant pleaded that the policy was made subject to a condition that, if any difference should arise in the adjustment of a loss, the amount to be paid should be submitted to arbitration, and the insured should not be entitled to commence or maintain any action upon the policy until the amount of the loss should have been referred and determined as therein provided, and then only for the amount so determined, that a difference had arisen, and the amount had not been referred or determined."
25. And it was held that the determination of the amount by arbitra--4ion was a condition precedent to the right to recover on the policy and the defence was an answer to the action.
26. It is to be noted that in our present case there is an allegation of fraud also which was not the case in Viney's case.
27. The head-notes in the case of Cipriant and others v. Burnett are as under:- "A contract may make the award of a specified tribunal a condition precedent to an action at law without doing so in terms.
28. The tickets sold for a sweepstake in connection with a race meeting Trinidad stated : "This ticket is sold subject to the condition that in the event of any dispute arising with respect to any matters connected with the drawing of the sweep. Stake, or the awarding of the prizes, the decision of the stewards of the Trinidad Turf Club thereon shall be accepted as final."
29. Held that the terms of the ticket, having regard to the ,circumstances belonging to it, made a decision by the stewards -a condition precedent to any action to recover the stakes.
30. It was a case of condition precedent only and in a different contest. Fraud was not alleged or bona fide denied.
31. The facts of the decision in Woodall v. Pearl Assurance Company, Limited are as under:- "In a proposal for insurance against the intending assured stated his occupation and signed a declaration that the answers to the questions therein were true, and that he agreed that the declaration should be the basis of the contract between hint and the insurance company whose policy, subject to the terms and conditions thereof, he agreed to accept. The policy recited the proposal and declaration "with proposal and declaration warranted to be true it is agreed shall be the basis of this contract . . . . And be considered as incorporated 'herein, and any suppression, misrepresentation, or mis-statement of fact in such written proposal and declaration shall ipso facto under this policy null and void"; and it provided that -it was a condition precedent to the recovery of any sum under .The policy that the conditions endorsed thereon should be strictly observed. Condition 8 provided that the policy might be renewed from year to year but only upon condition that nothing had happened to increase the risk, and if the risk was increased by (inter alia) the assured engaging in some other occupation, then "unless notice in writing of such increased risk is given to the company . . . . . And any extra premium that may be required paid . . . . .
32. The policy is void and no claim can be made". By condition 11, "if any question shall arise touching this policy or the liability of the company there--under or the extent or nature of such liability or otherwise however in connection herewith then the assured and all persons claiming through the assured may refer and shall be bound, if the company shall so require, to refer the same to arbitration by one arbitrator to be agreed on or in default of agreement by two arbitrators and their umpire under the Arbitration Act, 1889, . . . . . And no person shall be entitled to bring or maintain any action or proceeding on this policy except for the sum awarded under such arbitration."
33. During the currency of the policy the assured was killed by an accident. The company denied liability on the policy on the ground that the assured either had misstated his occupation in the proposal, or, if not, had changed his occupa--petition for one involving increased risk of which notice as required by condition 8 had not been given to the company, and contended that the policy was therefore void, and they required the dispute to be referred to arbitration under condition 11."
34. It was first held that upon the company requiring arbitration condition 11 made the obtaining of an award a condition precedent` to a right of action ; and secondly, that the company by relying on the terms of the policy which rendered it void in certain events did not thereby repudiate the policy as a binding contract between the parties, and were entitled to rely upon the-- arbitration clause as a defence to the action.
35. Jureidini's case was distinguished on the ground that the arbitration clause there, was a very limited one, only applying to a dispute as to amount and not as to liability. The company there repudiated the contract in toto and all liability under it on the ground of fraud. The question of the arbitration clause never arose because the only question was liability, and, not amount. It was not necessary to resort to the policy for the purpose of avoiding it. Fraud would avoid a policy without any stipulation to that effect. No question of amount arose for arbitration because the company repudiated the whole contract: The facts and decision in Heyman's case are as under:- "When an arbitration clause in a contract provides without any qualification that any difference or dispute which may arise "in respect of" or "with regard to" or "under the contract" shall be referred to arbitration and the parties are at one in asserting that they entered into a binding contract, the clause will apply even if the dispute involves an assertion by one party that circumstances have arisen, whether before or after the contract has been partly performed, which have the effect of discharging one or both parties from all subsequent liability, under the contract, such as repudiation of the contract by one--party accepted by the other, or frustration of the contract.
36. Secus, generally, if the point in dispute is whether the contract containing the clause was ever entered into at all or was void ab initio, for example, because the making of it was illegal.
37. An arbitration clause in a contract provided that "if any dispute shall arise between the parties hereto in respect of this agreement or any of the provisions herein contained or any--thing arising here out the same shall be referred for arbitration in accordance with the provisions of the Arbitration Act, 1888." A dispute having arisen between the parties, the appellants commenced an action against the respondents claiming (a) a declaration that the respondents had "repudiated and/or evidence" an intention not to perform "the contract and (b) damages". The respondents, who admitted the existence of the contract and denied that they had repudiated it, applied to have the action stayed in order that it might be dealt with under the arbitration clause.
38. It was held that the dispute fell within the terms of the arbitration clause and that the action ought to be stayed.
39. It is to be noted that it was not a case of fraud but disagreement.
40. The facts of Jureidini's case as relied upon by Mr. Mozammel Huq, the learned Advocate are as under:- "A claim was made for indemnity for the loss of goods by fire under a policy the conditions of which provided (1) that if the claim were fraudulent or if the loss were occasioned by the wilful act or with the connivance of the insured all benefit under the policy should be forfeited, and (2) that if any difference arose as to the amount of any loss such difference should, independently of all other questions, be referred to arbitration, and that it should be a condition precedent to any right of action upon the policy that the award of the arbitrator or umpire of the amount of the loss if disputed should be first obtained. The insurance company repudiated the claim in toto on the ground of fraud and arson," and it was held that the repudiation of the claim on a ground going to the root of the contract precluded the company from pleading the arbitration clause as a bar to an action to enforce the claim: Mr. Huq has relied particularly on the observations:- "Now, my Lords, speaking for myself, when there is a repudiation which goes to the substance of the whole contract I do not see how the person setting up that repudiation can be entitled to insist on a subordinate term of the contract still being enforced."
41. After a review of the above cases we may turn our attention to the letter itself of the 4th November 1965. The letter is a total repudiation and does not speak of arbitration. On the other hand it speaks of condition 13. Here is a repudiation of the claim on a ground going to the root of the contract of the nature of the Jureidini's case and the company, therefore, cannot plead the arbitration clause as a bar to an action enforcing the claim. Although the first part of the letter refers to difference of amount of loss or damage so as to bring it within arbitration in terms of clause 18 of the policy, there is no specific reference to or insistence upon arbitration in terms thereof. Moreover, the cases cited by the learned counsel for the defendant petitioner turned mainly upon difference as to amount of loss in which case arbitration was considered to be essential as a condition precedent.
42. None of those cases say that even in the case of fraud and total refusal of the claim as here, the effected party must first fulfil the condition precedent of arbitration.
43. As a matter of fact any such provision in the policy agree--ment shutting out the Court even in the case of fraud and total refusal would be against public policy.
44. Moreover, condition 13 of the policy, as set out already in full will show that an "action and suit has to be commenced within three months after such rejection, or in case of arbitration under condition 18 within three months after award".
45. So condition 13 of the policy contemplates suit or action in all cases except in the circumstances of the condition 18 which relates only to difference of amount independently of all other questions.
46. The last line of condition 18, namely, "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, . . . . . . Of the amount of the loss or damage if disputed shall be first obtained." It shows that arbitration is essential and a condition precedent when there is a difference as to amount of loss or damage only.
47. It would be recalled that in the letter of the 4th November 1965, the reference is as to condition 13 only of the policy which speaks of Court and not to clause 18 which refers to arbitration as a condition precedent.
48. The petitioner has not insisted upon the fulfilment of the condition precedent of arbitration in this letter of the 4th November and only raised it as an additional issue after the case had become fully ripe for hearing.
49. There was no application for stay in terms of section 34 of the Arbitration Act and the use of Order XIV, rule 2 of the C. P. C. For deciding the point of arbitration as preliminary issue which was the result of afterthought and after various steps is already taken in Court, is rather out of ordinary. The Arbitration Act itself does not provide for such procedure of deciding things after the party has taken so many steps in Court as stated earlier. There being no application for stay and the petitioner having got into the thickest of the fight in Court already, it seems that it was felt that the only alternative left was to seek relief under Order XIV, rule 2 of the Code of Civil Procedure.
50. For one trying to benefit from the arbitration clause, the procedure is that laid down under section 34 of Arbitration Act which does not provide for deciding the maintainability of the suit.
51. If as a result of an application under section 34 of the Arbitration Act the Court in its discretion stays its hands in favour of the arbitration proceedings and the arbitration proceed--ings take place in the usual course, the suit will thereafter stand disposed of. Section 34 does not provide that the Court shall also enforce the arbitration clause in the agreement.
52. Considering all the circumstances as above, we discharge the rule without any order as to cost.
53. The stay order is vacated.
54. MAHMUD HUSAIN, J.-I agree.