Contract clauses are not arbitration provisions

Nov 21 2013, 05:54 IST
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SummaryDue to its inability to concur with its earlier decision in the case National Insurance Company Ltd

Insurer issue to larger bench

Due to its inability to concur with its earlier decision in the case National Insurance Company Ltd vs Sinitha, a two-judge bench of the Supreme Court has referred a question relating to insurer’s liability in road accidents (scope of Section 163-A of the Motor Vehicles Act, 1988) to a larger bench. In Sinitha’s case, the apex court had held that the provision was founded under “fault liability” principle as it is open to the owner or the insurance company to oppose any claim by pleading fault ground.

However, the SC, in the case, United India Insurance Co Ltd vs Sunil Kumar, is of the opinion that the liability to compensate under Section 163-A is on the principle of no fault and, so, the question as to who is at fault is immaterial to an enquiry. It said that once it is established death or permanent disablement occurred and the vehicle is insured, the insurance company or the owner shall be liable to pay compensation. Stating this is a beneficial legislation, the court asserted the legislature never wanted the claimant to prove or establish negligence on the part of the owner or the driver as it would defeat the very purpose of the provision, which is to provide immediate relief to the victim.

Contractors lose appeals

In a setback to contractors who undertake government projects, the Supreme Court said that if the agreement provides for settlement of disputes through court, then the decision taken by a chief engineer cannot be treated as an award of the arbitrator. The “use of words to approach the civil court for settlement of disputes’ makes it clear that final adjudicating authority in the case of a dispute is the civil court and not the chief engineer,” it said in a batch of 23 cases lead by P Dasratharama Reddy Complex vs Government of Karnataka. Of the 23 appeals, 17 were filed by contractors who were awarded contracts by the Karnataka government for execution of particular project/works.

In the lead case, P Dasratharama Reddy was awarded contract for construction of bridge across Shimsha river in 1996. The firm did not complete the work alleging lack of cooperation on the part of chief engineer and claimed its dues. Soon after, it sought appointment of an arbitrator for settlement of disputes. However, the Karnataka High Court dismissed its plea on the grounds that if the contractor was not

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