Section 11(6) of AA – Powers of Referral Court to decide Arbitrability of Disputes
In this case, PayU Payments filed Section 11(6) petition against the New India Assurance Co in the context of two insurance policies (33 and 34) availed by it through an insurance broker, for various risks of cyber and computer related security breaches.
The petitioner had reported loss of Rs.8,58,12,965/- by way of fraudulent transactions on the Core PG Payment Platform amounting to “e-theft” and “external crime theft” under the policies.
The Insurer repudiated the claims on the ground that the cyber-attack occurred in the vulnerable networks of the Banks and not of the petitioner.
The petitioner invoked section 21 of the AA and served the legal notice for arbitration proposing names of Arbitrators. The Insurer rejected the same.
The Insurer contended that although arbitration clause exists, the subject matter of the dispute is outside the scope of the arbitration clause and it does not apply since the claim itself is repudiated.
The High Court found that if the contentions of Insurer that the dispute cannot be referred to arbitration because of repudiation of claim are accepted, it would amount to a finding that the petitioner’s claims are non-arbitrable. Such a finding would amount to the decision on arbitrability of the dispute while acting as a referral Court. This cannot be done, in view of the law laid down in SBI General Insurance judgment (particularly in para 120) of the Supreme Court.
Judgment dated 18.9.2024 of the High Court of Delhi in ARB.P. 1209 of 2023 of PayU Payments Private Limited Vs. The New India Assurance Co Ltd.
