A Win for Policy Holder – Delhi HC Restores Arbitral Award against Limitation Clause in Insurance Policy
The appellant purchased three fire insurance policies for building, machinery, stock, raw materials, etc.
On 13.4.2001, the factory suffered extensive damage in the fire and plant & machinery were destroyed.
In January, 2002, the appellant received the payments of Rs.20 lakhs adhoc and Rs.47,93,851/-. On 5.3.2022, the appellant executed the disbursement vouchers.
On 23.4.2004, the appellant raised the dispute that it had been compelled and coerced into accepting the amounts far lesser than the actual losses.
By the Arbitral Award dated 1.8.2007, the claim for Rs.40,84,716.25 ps with interest 9% per annum from 24.10.2001 was allowed.
However, section 34 petition of the Insurer was allowed on the ground that the claim was barred in terms of clause 6(b)(ii) of the Policy that in no case the company be liable for any loss after expiry of 12 months from the happening of the loss unless the claim is the subject of pending action or arbitration.
In section 37 appeal of the Insured, it was HELD that clause 6(b)(ii) is violative of Section of the Contract Act since it extinguishes rights or discharge liabilities upon expiry of 12 months period in any that restricts enforcement. The principle underlying this provision is that every individual must have free and fair access to legal remedies and private contracts cannot take away or undermine this right.
