Z. A. CHANNA, J--.-These 3 High Court appeals, one by an Insurance Company and the other 2 by the insured, against separate judgments of a learned Single Judge of this Court, are being heard together as they raise a common question, namely, the scope of the Arbitration Clause in the concerned insurance policies, including the question whether reference to arbitration under the said clause is barred where the insurance Company wholly denies its liability under the Insurance Policy.
2. High Court Appeals Nos. 49 and 50 of 1973 have been filed by Messrs National Cement Company Ltd., hereinafter for the sake of brevity referred to as the "Cement Company", against the Pakistan General Insurance Company, hereinafter referred to as the Insurance Company, and arise out of Suits Nos. 229/72 and 230/72, which were filed by the Cement Company. High Court Appeal No. 1/1976 has been filed by the Insurance Company against Messrs. Khyber Textile Mills Ltd., hereinafter referred to as the Textile Mills, and arises out of J. M. No. 51/1975 filed by the Textile Mills.
3. The brief facts giving rise to High Court Appeals Nos. 49 and 50 of 1973 are that the Cement Company insured with the Insurance Company its buildings, machineries, plant and stock in trade against fire for a period of 12 months ending on 1-10-196) for the sum of Rs. 1,81,84,000. The Cement Company simultaneously took out another policy for the same period covering loss on gross profits to the extent of Rs. 55,00,000 and paid separate premium in respect of this policy to the Insurance Company.
4. On 25-7-1969, at about 4-00 p.m., a fire broke out in the power house of the Cement Company, as a result of sparking on slip ring of turbo---alternator, which caused vibrations in consequence of which some of the pipes conveying hydraulic oil got broke and the oil leaked out and flowed over the turbine and caught fire. The fire thus, caused spread and engulfed the whole turbine and its assessories causing a shut-down of the entire plant. The Cement Company's General Manager informed the Insurance Company immediately about the fire and the Cement Company registered its claim with the Insurance Company by its Letter dated 26-7-1969. Thereafter, details of the fire and a list of the spare parts which were required to carry out repairs to the turbine were sent by the Cement Company to the Insurance Company. The damaged machinery was inspected by the surveyors of the Insurance Company and correspondence was exchanged between the parties with a view to finalising the report of the surveyors and preparing estimates of the loss suffered by the Cement Company as a result of the fire. The matter thus got prolonged for about 3 years without tangible results. A final effort was made in about June 1972, to reach Settlement but the effort did not bear any fruit. Disappointed with the result of the negotiations and correspondence between the patties, the Cement Company, on 22-7-1972, filed two applications under section 20 of the Arbitration Act, one in respect of its claim for Rs. 55,00,000 on the basis of the consequential loss policy, and the other for Rs. 1,81,84,000 on the basis of its claim under the fire policy. Both these applications were dismissed by the learned Single Judge by identical judgments, dated 8-5-1973, on the ground that- the Arbitration Clause applies only when there is an actual and present dispute as to the amount of loss or damage but since the Cement Company had not claimed any specific amount of loss which the Insurance Company could be held to have denied, the matter fell outside the scope of the Arbitration Clause.
5. The facts in High Court Appeal No. 1/1976 are that the Textile Mills obtained from the Insurance Company a fire policy for the period from 24-9-1974 to 30-9-1975, covering their stock of cotton, cotton yarn and other items belonging to them against loss or damage by fire, while stored and/or lying in the four godowns in the compound of the Textile Mills. The particulars of the godowns and the value of the goods stored in each of them were separately stated in the specifications attached to the policy.
6. On 14-10-1974, a fire broke out in the blow-room of the Textile Mills. Intimation of the fire was telegraphically sent to the Insurance Company by the Textile Mills requesting it to send its surveyors immediately. The Insurance Company sent two surveyors to survey and assess the loss and submit a report. They submitted a joint report to the effect that as the fire had taken place in the blow room the policy did not cover the loss and hence no claim lay against the Insurance Company. This report was disputed .By the Textile Mills and correspondence was exchanged between the parties. In one of their letters, which is dated 30-10-1974, the Textile Mills stated that the fire had broken out in the blow room as a result of a spark from the fan near the machinery and that the fire spread to the adjoining godown, engulfed it and caused very extensive damage. They, therefore, preferred a claim for Rs. 8,96,333 on account of the loss resulting from the fire, but the Insurance Company repudiated its liability and declined to pay on the ground that the loss was not covered by the Insurance policy as confirmed by the joint report of the surveyors. In view of this stand of the Insurance Company, the Textile Mills invoked the Arbitration Clause contained in the conditions of the Insurance policy and requested the Insurance Company to nominate a person to act as sole Arbitrator for the Textile Mill's consideration. The Insurance Company, however, declined to participate in the proposed arbitration on the ground that since the loss was not covered by the, policy, the matter could not be referred for the determination of the Arbitrators. The Textile Mills thereupon appointed Mr. F. R. Merchant, a Chartered Accountant, as the sole Arbitrator. The Insurance company challenged this action of the Textile Mills and filed an application under section 33 of the Arbitration Act, 1940, praying that the Court may determine the effect of the Arbitration Clause, remove the Arbitrator appointed by the Textile- Mills and declare that the reference to Arbitration was improper.
7. It was contended before the learned. Single Judge on behalf of the Insurance Company that the jurisdiction of the Arbitrators under the Arbitration Clause was limited to determining only a dispute between the parties as to the amount of any loss or damage under the policy, and as the Insurance Company had denied its general liability under the policy, there was no dispute as to the amount of loss or damage which could be referred to arbitration under the Arbitration Claus. The learned Single Judge repelled this contention and took the view that since the Textile Mills had preferred a specific claim, which the Insurance Company had categorically declined to pay, there was a present and actual dispute as to the amount of loss or damage, which fell within the scope of the Arbitration Clause and was referable to Arbitration. In support .Of his decision, the learned Single Judge relied upon the decision of this Court in Ismail Abdul Sattar & Brothers v. Eastern Federal Union Insurance Company Ltd. (PLD1959Kar.179), wherein it was held that the refusal by the Insurance Company to admit or deny a specific claim put forward by the insured, was deemed to be a dispute which fell within a similarly worded Arbitration Clause.
8. We have heard Mr. Rauf, who appeared for the Insurance Company in all the 3 appeals, Mr. Iqbal Haider who appeared for the Cement Company (Appellants in H. C. As. Nos. 49 and 50 of 1973), and Mr. Abrar Hassan, who represented the respondents (the Textile Mills) in H. C. Appeal No. 1/1976. Mr. Rauf on behalf of the Insurance Company raised common contentions in the 3 appeals, while the respective contentions of Mr. Iqbal Haider and Mr. Abrar Hassan were based on somewhat different grounds.
9. Since the decision in these appeals turns on the scope and interpretation of the Arbitration Clause, which is common in all the 3 insurance policies, it will be appropriate to reproduce it in extenso. It is in the following terms :--- "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 effect 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 discretion of the arbitrator, or 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."
10. It will also be necessary, for the purposes of appreciating the arguments in the 3 cases, to refer to clause 19 of the Insurance policies in High Court Appeals Nos. 49 of 1973 and 1 of 1976, which is to the following effect :--- "19. In no case whatever shall the Company be liable for any loss or damage after the expiration of twelve months from happening of the loss or damage unless the claim is the subject of pending action or arbitration."
11. In insurance policy in High Court Appeal No. 50 of 1973, the above clause is somewhat differently worded and reads as follows :- "15. In no case whatever shall the Company be liable in respect of any claim under this policy after the expiration of---
(a) one year from the end of the Indemnity Period or, if later,
(b) three months from the date on which payment shall have been made or liability admitted by the Insurers covering the damage giving rise to said claim unless the claim is the subject of pending action or arbitration."
12. Mr. Iqbal Haider, the learned counsel for the Cement Company in H. C. As. Nos. 49 and 50 of 1973, raised a two-fold content on in support of the appeals. His first contention was that the learned Single Judge has failed to appreciate the fact that the Cement Company in its letter, dated 6-8- 1969, had forwarded its claim regarding the quantum of the loss to the Insurance Company, enclosing with that letter the list of spare parts which were to be replaced, and similarly the Cement Company, by its letter, dated 9-8-1969, had preferred specific claim regarding the quantum of its loss, and the Insurance Company, by its letter, dated 11-8-1969, had acknowledged the claim and stated that the claim for the alleged loss had already been registered by them,.
These letters, according to the learned counsel, clearly establish that the Cement Company, within a shortwhile of the occurrence of the loss, had filed its claim with the Insurance Company. His further submission was that even if the demand for a specific amount on account of loss or damage was not made by the Cement Company within the period specified in clause 16 or clause 19 of the 2 insurance policies, the Insurance Company should be held to be estopped from agitating this point on account of its letter of 11-8-1969, unequivocally stating that the claim of the Cement Company had been registered.
13. Mr. Rauf, on behalf of the Insurance Company, on the other band, contended that the Arbitration Clause was a restricted clause, limited only to difference arising as to the amount of any loss which was covered by the insurance policy, and since no specific amount of loss was claimed by the Cement Company, in High Court Appeals Nos. 49 and 50 of 1973, the learned Single Judge rightly rejected the application of the Cement Company for reference to Arbitration. The learned counsel submitted that the words "amount of any loss", as used in the Arbitration Clause, obviously mean the sum claimed on account of the loss and not a mere description or quantity of the goods damaged or totally destroyed. In the latter case the value of the goods damaged or destroyed will have to be ascertained in order to find out the amount of loss clamed. Mr. Rauf contended that the letter of the Cement Company of 6th August does not specify the amount of the loss but merely encloses a list of the parts, which the Cement Company claimed had been damaged or destroyed and needed replacement without specifying the value or cost of these parts. Additionally, the letter does not specify the cost of labour, etc. Involved to the replacement of the parts. Similarly, the letter of the Cement Company of 9-8-1969, merely states that the plant had suffered a total production loss of 3,614 tons of clinker without stating the cost of the same.
14. It was further submitted by Mr. Rauf that as the risk covered by the 3 insurance policies was strictly limited as per the terms of the policies and the specifications appended thereto and further as there was a specific clause in each of the 3 policies specifying excepted risks (risks not covered), and as the contention of the Insurance Company was that the losses or damage were not on account of the risks covered but fell outside the ambit of the insurance policies, there was no dispute which was referable under the policies to arbitration. His contention in other words was that only a present dispute as to the loss or damage resulting from a risk covered by a policy could be referred under the policy to arbitration.
15. The pre-condition for reference to arbitration under the three insurance policies is that there should exist a difference between the parties as to the amount of loss. Furthermore, not only is the sole issue which is referable to arbitration this difference as to the amount of the loss but further because of the Scott v. Avery Clause, which has been engrafted on the arbitration clause, the obtaining of the award is a condition precedent to any right of action or suit upon the policy. In other words, if there should exist, upon a policy similar to the policies in these 3 appeals, a difference between the parties as to the amount of the loss, the difference has to be referred to arbitration, and only after the award has been obtained can a cause of action be brought in respect of other matters arising out of the policy, including any question relating to the liability of the Insurance Company. The validity of the Scott v. Avery Clause was, as is well known, upheld by the House of Lords in the case bearing that title reported in (1855) 5 H L C 809.
16. Now, as we read the arbitration clause in the three insurance policies, a difference between the parties as to the amount of the loss means that the insured should claim a specified amount of loss, say x rupees, while the Insurance Company considers the amount of the loss to be different, that is not x rupees but y rupees. The question that may arise is what is the effect where the insured makes a claim of a definite amount in respect ofthe loss but the Insurance Company keeps silent and neither agrees to the amount claimed nor specifies the amount, which according to it, represents the loss. The question may arise also in somewhat different form where the Insurance Company, while neither agreeing to the amount claimed by the insured nor suggesting its own estimation of the amount of the loss, takes up various pleas, such as non-execution of Contract repudiation of contract or liability, etc. Now, since reference to arbitration and the obtaining of an award before commencing a cause of action or suit are only necessary where a difference has arisen between the parties as to the amount R of the loss, can it be said that in either of the above two examples such a difference has arisen. We are inclined to the view that such difference has not arisen in either of the 2 examples cited above and in either case the right of action or suit upon the policy would not be barred. We are, supported in this view of ours by a number of authorities.
17. In London and forth Western and Great Western Joint Railway Companies v. J. H, Bellington Ltd.
(1899 A C 79), a railway Company sued the respondents for services rendered to them, but the respondents objected to the jurisdiction of the Court on the ground that the matter was one for the Arbitrator to determine and the jurisdiction of the Court was ousted by the London and North Western Railway Company (Rates and Charges) Order Confirmation Act, 1899, which empowered the Company to charge a reasonable sum, by way of addition to the tonnage rate, for certain services rendered to the trader, and provided that any difference arising in respect of this matter was to be determined by an arbitrator to be appointed by the Board of Trade at the instance of either party. It was held by the House of Lords that as there had been no difference existing between the parties before action was brought, the Court and not the Arbitrator had the jurisdiction, The Lord Chancellor, the Earl of Halsbury L. C., who delivered the main judgment, observed : "that a condition precedent to the invocation of the arbitration on whatever grounds is that a difference between the parties should have arisen; and I think that must mean a difference of opinion before the action is launched by formal complaint in the country Court or by writ in the Supreme Court".
18. In Field v. Longden & Sons ((1902) 1 K B 11) 47), a workman, who had been in the employ of the appellants, claimed compensation for injury occasioned to him by an accident arising out of and in the course of his employment. The workman was being paid by the employers compensation, by weekly payments, of the full amount mentioned in Schedule, section 1(b) of the Workmen's Compensation Act, 1897, and they promised to continue to do so during the period of his incapacity. The workman, however, filed a request for arbitration in the country Court for a lump sum compensation and the charges of his Solicitor. It was observed by Collins M. R. That "upon the admitted facts of this case, no question ever did arise; because, on the workman sustaining the injury, the employers commenced and continued to pay to him weekly all that he could possibly be entitled to by way of compensation under the Act" and the employers "never disputed his right to such compensation, and he, of course received it without objection."
19. In Dawood Bhai v. Abdul Qadir (AIR 1931 Bom. 164), it was held that the existence of a difference or dispute is an essential condition for, the arbitrator's jurisdiction. In that case, disputes having arisen between the partners, one of the partners called upon the other partner to render account and pay the amount due from him. On the latter's failure to pay, the partner claiming accounts instituted a suit for accounts and for payment of the amount due to him. The partner against whom the suit was filed applied for stay of the suit on the basis that the agreement between the partners provided that any dispute or difference arising between them in regard to the construction of any of the Articles contained in the agreement or to any division, act or thing relating to the said partnership or to the affairs thereof, shall be referred to arbitration. It was held that "a failure to pay is not necessarily a difference, and. The mere fact that a party could not or would not pay does not in itself amount to a dispute unless the party who chooses not to pay raises a point of controversy regarding, for instance, the basis of the payment or the time or manner of payment.
20. Lastly we may notice on this point the decision from the Indian jurisdiction in Chiranjiv Lal v.
Tropical Insurance Company (AIR 1952 Ph. 63). That was a case relating to an insurance policy covering risk against damage due to fire or explosion. One of the terms of the policy was that the Insurance Company may at any time terminate the insurance on giving notice to the insured. The police also contained an Arbitration Clause, similar to the one in the 3 appeals before us, including the Scott v. Avery Clause. On the stocks being looted and the building being burnt down, the plaintiffs, after some correspondence with the Insurance Company, filed a suit against the Insurance Company for recovery of Rs. 1,00,000 basing their claim on the policy of insurance. The Insurance Company thereon made an application under section 34 of the Arbitration Act, wherein for the first time they disputed the amount of loss and stated that under clause 8 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. It was held that no difference as to the amount of damages which the plaintiff had suffered bad arisen between the parties before the filing of the suit and consequently there was nothing to refer to arbitration and the said suit was barred. In that case, the Insurance Company had also resisted the suit on the ground that the riot risk was cancelled by them by their letter dated 14th of August.
21. We may now revert to the question whether a difference which was referable to arbitration had arisen in any of the 3 matters out of which the present appeals have arisen. In High Court Appeal No. 1 of 1976, the admitted position is that the Textile Mills, through their Lawyer, bad served a notice, dated 5-2-1975, calling upon the Insurance Company to pay a sum of Rs. 8,96,333 in settlement of their claim under their policy. In other words this was the amount of loss under the policy claimed by the Textile Mills. The Insurance Company, in the reply from their Advocates dated 17-2-1975, took the plea that the alleged loss is not covered under c the policy and hence refused to accept the claim of the Textile Mills. There was thus a difference in praesenti between the Textile Mills and the Insurance Company as to the amount of loss under the policy, the former claiming the loss to be of the order of Rs. 8,96,333, while the Insurance Company contending that the loss fell outside the Insurance Policy, in other words that there was no loss covered by the policy.
22. As regards the alleged losses suffered by the Cement Company on account of damage by fire and shortfall in production, though it did not, as held by the learned Single Judge, prefer claims of specific amounts for the losses before making the two applications under section 20 of the Arbitration Act (in Suits Nos. 229 and 230 of 1972), but we find that the Insurance Company itself bad filed, with its objections, the minutes of a meeting held on 16-10-1972, to settle the claims of the Cement Company against the Insurance Company. That meeting was attended, among others, by the Managing Director of the Cement Company and the General Manager of the Insurance Company. The minutes of the meeting disclose that the General Manager of the Insurance Company bad, on the basis of their surveyor's estimate of the losses, offered to settle the claims of the Cement Company for a sum of Rs. 4,000, but the Cement Company declined the offer. This means that while the Insurance Company estimated the losses of the Company as covered by their two insurance policies at Rs. 4,000 the Cement Company, by outright rejection of this offer, differed seriously as to the estimate. There was thus, at least on the date of the above meeting, a difference between the parties as to the losses ox damages arising out of the two policies. Though this meeting was held almost two months after the Cement Company bad filed its applications for reference to arbitration, the meeting was held before the Cement Company had filed its objections and some nine months before decision was given by the learned Single Judge on the 2 references.
We are, therefore, of opinion that even if no difference bad arisen between the two parties, which was referable to arbitration, before making of the two applications by the Cement Company for reference, such difference had arisen before the Insurance Company bad even filed its objections to the two applications. The development which had taken place during the pendency of the proceedings for reference before the learned Single Judge before he passed orders on the applications for reference can be taken due notice of by the Court. For this view reliance is placed on the following passage in the judgment of the Supreme Court in the case of Abdullah Bhai and others v. Ahmed Din (PLD 1964 SC 106):- "An argument has been addressed to us that the suit was premature and should have been dismissed on that ground. The suit had been filed on 17-1-1958, that is long before 31-12-1959 on which date the period of the licence was to terminate. The trial Court had dismissed the suit. The Additional District Judge bad decreed it on a dale when the period of the licence had expired and the appellant had a right to possession. It was open to the appellate Court to have decreed a suit which was premature when it was filed but the cause of action respecting which had arisen during the pendency of the suit. We would not be prepared at this stage to dismiss the suit on this technical ground and to direct the appellants to file a fresh suit."
23. We are, therefore, of the humble opinion that though the 2 applications for reference to arbitration were premature when they were filed, they had ceased to be so during the pendency of the proceedings before the learn--ed Single Judge, and hence it was open to him, in the absence of any other legal impediment, and we say with due respect to the learned Judge, to allow the two applications. In any case, in view of the observations of the Supreme Court in the above-reported case, we have the power to allow the applications for reference as they are no longer premature.
24. This brings us to the main contention of Mr. Rauf that the Insurance Company having repudiated its liability under each of the 3 policies on the ground that the alleged losses not being covered by the policies which were very restrictive, whatever the losses or the damage that the Cement Company or the Textile Mills may have suffered, no reference to arbitration as to the amount of loss was permissible under the policies. In support of his contention the learned counsel placed reliance upon the decisions in Jureidini v. National British & Irish Millers Insurance Company Ltd. (1915 A C 499); Macura v. Northern Insurance Company Ltd. (1925 A C 619), Toiler v. Law Accident Society ((1936) 2 All E R 952.), Shriram Hanutram v. Mohan Lai Company (AIR 1940 Bom. 93), Chiranjiv Lai v. Tropical Insurance Company Ltd. And Muslim Insurance Company Ltd. v. A6dul Hakim (PLD 1970 Dacca 658).
25. None of the above cases, in our humble opinion, support the contention of the learned counsel.
In Jureidini's case, it was held that the repudiation of the claim on the ground of fraud went to the root of the contract, and precluded the Insurance Company from pleading the Arbitration clause as a bar to an action to enforce the claim. In the instant case, no fraud has been alleged on the part of the Cement Company or the Textile Mills and neither has the contract been repudiated and hence the decision in the above case is of no assistance in deciding the appeals before us.
56. The decision in Macura's case also, in our view, is inapplicable to the facts of the present appeals as that decision turned on the question whether the claimant had any insurable interest in the goods insured, since they did not belong to him, and not whether the loss was recovered by the Insurance Policy. It is not disputed that in the present appeals the insured had insurable interest in the goods and machinery damaged or destroyed and the losses suffered. Similarly, the decision in Toiler's case lends no support to the contention of Mr. Rauf since that decision was on the basis that the motorist who claimed damages from the Insurance Company had neither paid the premiums for the insurance policy nor an insurance policy had yet been issued in his favour. In other words no contract of insurance had been executed between the parties.
26. In Hey .Man v. Darvins Ltd. (1942 A C 356) the House of Lords reviewed a number of cases relating to the scope of Arbitration Clause, including the question whether repudiation by one party terminated the contract, and barred reference to arbitration, if the contract contained such a clause. Summarising his views, Vicount Simon L. C. Stated as follows :---- "An arbitration clause is a written submission, agreed to by the parties to the contract, and, like other written submissions to arbitration, must be construed according to its language and in the light of the circumstances in which it is made. If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged contract is contending that it is void ab initio (because, for example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void. But, in a situation where the parties are at one in asserting that they entered into a binding contract, but a difference has arisen between them whether there has been a breach by one side or the other, or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should be regarded as differences which have arisen "in respect of", or "with regard to", or "under" the contract, and an arbitration clause which uses these, or similar, expressions should be construed accordingly."
27. The decision of the Bombay High Court in Shriram Hanutram's case, upon which Mr. Rauf has relied, is again unhelpful for the purpose of determination of the appeals before us, for, in the above reported case it was held, as a matter of fact, that there was no contract or submission in writing and there was mere exchange of some notes between the parties.
28. In Chiranjiv Lai's case, the Insurance Company had repudiated the riot risk in the policy, firstly, on the ground that the policy did not ' cover such a risk, and secondly, that subsequently it had been put to an end to under the provisions of one of the conditions of the policy itself. It was held, relying upon the decision in Jureidini's case, that it is not open to the Insurance Company to repudiate the contract and yet to take advantage of that portion of the contract which refers to arbitration for the purpose of determination of the quantum of damages, and further since there was an allegation on one side that the riot risk had been validly terminated by notice and this allegation was denied by the other side, the matter would in any case would have to be decided by the Court, and for this reason alone, if not for any other reason, the Court should have refused the prayer of the InsuranceCompany to stay the suit for damages. In the present 3 appeals the position is the reverse of that in the reported case, for in the first place applications for reference to arbitration have been filed by the insured and not suits and further it is the Insurance Company which is objecting to the references. What the arbitrators have to decide only is the amount of loss or damage and not the liability to pay of the Insurance Company as was held in the case of Allpha Insurance Company Ltd. v. M. A. Nawaz Company (PLD 1972 Kar. 265). That was also a case of an insurance policy against fire which contained an arbitration clause similar to the arbitration clause in the 3 cases before us. File having broken out in the' factory of the insured, and the claim of the insured as to the amount of loss being disputed by the Insurance Company, the matter was referred to arbitration and an award was given stating the amount of loss. Objections were filed against the award by the Insurance Company, which were, however, overruled by a learned Single Judge of this Court. He accordingly decreed the suit in terms of the award and further directed "that the defendants do pay to the plaintiffs a sum of Rs. 3,61,290, only, including costs of the reference and the award. On L. P. A. Being filed, it was held that not only the award had not fixed the liability of the Insurance Company and hence the decree was in excess of the award, but further the determination of such liability was outside and beyond the terms of reference, and hence the decree passed by the learned Single Judge was set aside.
29. The question whether denial of liability under a policy by the Insurance Company automatically bars reference to arbitration of a dispute or difference between the parties as to the amount of loss was specifically considered in the Karachi case of Ismail Abdul Sattar v. Eastern Federal Union Insurance Company Ltd. (PLD 1959 Kar. 179). The facts of that case were that the plaintiffs had insured their stocks of merchandise against loss or damage by fire under a policy similar to the 3 policies in the present appeals. Fire having occurred and damage caused to the merchandise, the plaintiffs claimed losses from the Insurance Company. The Company repudiated the claim but the plaintiffs referred the matter to Arbitration. It was held that the Insurance Company could not avoid arbitration by denial of liability. We are in respectful agreement with the view' expressed in these two decisions.
30. The Muslim Insurance Company's case relied upon by Mr. Rauf related to an insurance against fire and the policy contained an Arbitration Clause similar to the Arbitration Clause in the 3 appeals before us. The insured in the reported case claimed payment of the insured amount on the ground that his godowns had been gutted-by fire. The Insurance Company repudiated the claim in toto on the ground of frand. The insured thereupon instituted a suit against the insurance Company for recovery of the insured amount, whereupon the Insurance Company pleaded that the Arbitration Clause was a bar to the filing of the suit. This contention was repelled on the ground that the repudiation of the claim on the ground of fraud cut at the very root of the contract and hence the Arbitration Clause could not be treated as a bar to the 'suit. We are in respectful agreement with the decision in that case, which is in accord with the observations of Vicount Simon L. C. In Heyman's case referred to in an earlier part of this judgment, for the Insurance Company having taken the stand that the whole contract was void because of fraud could not take advantage of or rely upon the arbitration clause, which was an integral part of the contract. However, in the instant cases, it is not the contracts or policies which have been attacked or impugned but the liability to pay for the alleged losses, the determination of the amount whereof, according to the policies, is the exclusive prerogative of the arbit--rators in case of difference between the parties as to the amount of losses.
31. For the reasons given by us above and on the basis of the authorities in the cases of Heyman, Ismail Abdul Sattar and Alpha insurance Company Ltd. We are firmly of opinion that there is no substance in the contention of Mr. Rauf that the Insurance Company having repudiated its liability under every one of the 3 policies, reference to arbitration was barred, and hence repel his contention.
32. As regards the contention of Mr. Iqbal Haider that by reason of its conduct and the representations made by it to the Cement Company, the Insurance Company is estopped from invoking or pleading limitation as a bar to the referring to arbitration of the 2 claims of the, Cement Company, we consider it unnecessary to deal with this contention as neither before us nor before the learned Single Judge the plea of limitation was raised by Mr. Rauf. In fact any such question will relate not to the determination of the amount of loss or damage but to the liability of the Insurance Company, which is beyond the purview of arbitration.
33. Accordingly, for the foregoing reasons, we would allow with costs High Court Appeals Nos. 49 and 50 of 1972 and dismiss with costs High Court Appeal No. 1 of 1976.