' The revision petition by defendant, from an order made by Civil Judge, Lyallpur, declining to order a reference to arbitration under section 34 of the Arbitration Act (X of 1940), Appeal before the learned Additional District Judge also failed.
2. Briefly the facts, necessary for the decision of this revision petition, are that petitioner/defendant is an insurance company and by virtue of the terms of its memorandum of association, authorised to enter into insurances of ail kind. On the 1 with of December, 1965, respondent/plaintiff got his "Bedford" truck insured with the Company and obtained comprehensive Insurance Policy No, HW/CV/350/65 for a sum of Rs, 40,000 for a period of one year. Within the stipulated period, i,e, on the 30th of November, 1966, the vehicle met with an accident. Respondent preferred a claim against the petitioner, which gave rise to a dispute, with regard to the damage caused to the vehicle and the extent of the liability of the petitioner to pay the compensation. Respondent filed a civil suit for the recovery of Rs, 9,229.75 alleged to be due under the policy of insurance granted by the petitioner. Petitioner without taking any steps in the proceeding, pursuant to the covenant contained in the policy, desired a reference to arbitration and submitted an application under section 34 of the Arbitration Act for the stay of the proceedings. This application was resisted by the respondent and the trial Court framed the following issue :- ' Whether the proceedings of this suit are liable to be stayed under section 34 of the Arbitration Act?
' After recording the evidence adduced by the parties learned trial Judge dismissed the application on the ground that as the respondent/plaintiff had not signed the insurance policy, there was no agreement between the parties, therefore, the arbitration clause was not binding on him.
3. Mr. Mahboob Ahmad, learned counsel for the petitioner contends that the respondent has come to the Coast on the basis of this policy, to which he is a party and at the same tine maintains that he is not bound by the stipulation contained in the policy to refer the matter to the arbitration. It is further contended that he cannot disaffirm part of the contract on which he is suing. Reliance is placed on Bakar v. The Yorksire Fire & Life Insurance Company (1). In that case the action was brought to recover the sum of 164 5s., alleged to be due under a policy of insurance against fire granted by the defendants to the plaintiff. The defendants denied liability, and desired a reference to arbitration, pursuant to the provision contained in the policy, Lord Coleridge, C. J. Who delivered the main judgment, ruled: "This is an action brought upon a fire insurance policy containing a provision for a reference to arbitration of all disputes arising under (1) (1891) 1 Q B 144 the policy; and a dispute has arisen as to the amount payable in respect of part of the property insured that has been destroyed by fire. The plaintiff sues on this policy, to which he is a party, and at the same time maintains that he is not bound by the proviso to refer contained therein. But he cannot disaffirm part of a contract on which he is suing. It is contended that the policy must be signed by both parties in order to bring it within tee Arbitration Act of 1889. But that Act nowhere says that both parties must sign."
4. The contention of learned counsel is not devoid of force as the-offer to enter into a contract in insurance, as a general role is considered to have been addressed to the insurers by the person who is seeking to protect himself by insurance against loss. He may have been invited by the insurers to put himself into communication with them but whether the invitation cornea to him from the insurers direct through the medium of an agent or as a member of the public through an advertisement, the position remained unchanged and he must submit his proposal which they may accept or decline at their pleasure. The offer, therefore, proceeds from the proposed assured when he has filled up the proposal and forwarded it to the insurer.
5. The terms of an ordinary contract of insurance are not specially arranged between the parties.
The insurers have their own terms upon which they are prepared to contract and from which, as a rule they are not willing to depart. In an insurance policy the assured is compelled to contract with the insurers upon their own terms. There cannot be an acceptance so long as the terms of contract of an insurance arc still under discussion and the premium remains to be fixed. The offer, therefore, must be complete on the face of it and the acceptance must be in the very terms of the offer. In the instant case respondent-plaintiff had made an offer for the insurance of his vehicle which was accepted by the petitioner. Respondent had also paid the premium as fixed. In these circumstances it cannot be said that the contract was not complete and the respondent-plaintiff Is not bound by it,
6. Since the contract of insurance is constituted by the acceptance of an offer, and when premium fixed is paid, then there remains nothing to be done by either party except to perform what has been agreed. Present suit is instituted in respect of a matter about which there is agreement between the insured and the insurer that in case of any dispute, instead of resorting to the ordinary Court, to refer it to arbitration. Thus, for the determination of controversy between the parties, there were two forums available, the Court and the arbitrators. Plaintiff respondent contracted to choose the latter but he has in fact taken the former. It is true that the existence of valid agreement to refer existing or future disputes to arbitration does not oust the jurisdiction of the Courts to entertain a suit relating to the matters agreed to be referred to arbitration. Under section 9, C. P. C. Civil Courts have the jurisdiction to try all suits except those in respect of which their jurisdiction is expressly barred. Again, under the Contract Act, any agreement by which a party is restricted from enforcing his right under or in respect of any contract by usual legal proceedings in a Court of law, is to that extent void, being opposed to public policy. The law however, allows the parties to make a valid agreement to have the present or future disputes settled out of Court by private arbitration Exceptions 1 and 2 to section 28 of the Contract Act provides that such Contract is not illegal.
Leading authority on the subject is Doleman & Sons v. Osset Corporation (1). But which (1) (1912) 3 K B 257 this is so, section 34 of the Arbitration Act permits the defendants to apply to Court to stay the suit, so as to enable the parties to obtain a reference to the arbitrators, and if the Court is satisfied that the plaintiff in the sus and the defendant, making application for the stay of the suit, is a part to the agreement and the suit is 'in respect of any matter agreed to referred", a prima facie duty is cast upon the Court to act upon such agreement. The burden, therefore, lies on the plaintiff to make out sufficient reasons why the matter should not be referred to arbitration and not on the defendant to show that no such reasons exist. Section 34 of the Arbitration Act requires the defendant to mike an application for stay before filing his written statement or taking other steps in the proceedings, but where no application for stay of the suit under this section is made, or the defendant fails to apply at the proper time or where application if made has been refused, the existence of agreement to refer to arbitration does not bar the suit under section 21 of the Specific Relief Act.
7. In the instant case, in my view, there exists a valid agreement to refer the disputes to arbitration and both the Courts below proceeded on a wrong assumption of law that there was no agreement between the parties. The parties having agreed to refer all disputes arising under the policy to a domestic forum, petitioner by virtue of section 34 of the Arbitration Act was entitled to apply for the stay of the suit.
8. It is true that an error in a decision of a Subordinate Court does not by itself involve that the Subordinate Court has acted illegally or with material irregularity so as to justify interference in revision under subsection (c), nevertheless if the erroneous decision results in the Subordinate Court exercising a jurisdiction not vested in it by law or failing to exercise a jurisdiction so vested High Court can interfere in revision under subsection (b) of section 115, Civil Procedure Code.
9. For the foregoing reasons, this revision petition is accepted, the proceedings in suit are stayed and the impugned order made in affirmance of that of the Civil Judge, set aside. It is, however, the duty of the trial Court to see that the parties do not delay the disposal of the arbitration proceedings. The parties are left to bear their own costs.