Delhi High Court: In a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator, a Singe Judge Bench of Jasmeet Singh, J., held that where an insurance policy issued after the IRDAI Circular dated 27-10-2023 (‘Circular’) continues to incorporate an arbitration clause, the insurer cannot later invoke the Circular to contend that no arbitration agreement exists. The Court accordingly allowed the petition and stated that there was no reason for the respondent, United India Insurance, to enter into the Insurance Policies with the petitioner, Numero Uno Clothing Ltd., containing the arbitration clauses, as the Circular was in existence on 31-1-2024, when the two insurance policies were issued.
Background
The petitioner had obtained two Standard Fire and Special Perils Policies (‘Insurance Policies’) from the respondent, for the period 31-1-2024 to 30-1-2025. The sum insured under Policy 1 was Rs. 1,04,73,80,000 and under Policy 2 was Rs. 15,00,00,000. Both policies contained arbitration clauses stipulating reference of disputes concerning quantum of claim to a sole arbitrator, or a three-member tribunal if the parties fail to agree.
A fire had broken out on 30-5-2024 at the petitioner’s premises. The petitioner had lodged claims of Rs. 83,36,63,438 under Policy 1 and Rs. 35,37,675 under Policy 2. The respondent had appointed a surveyor who, in the Final Survey Report, assessed losses at Rs. 42,55,93,847 and Rs. 25,12,941 respectively and the respondent thereafter had settled the claim by paying the same.
Dissatisfied with the reduced amounts, the petitioner had invoked arbitration via notice dated 4-6-2025 and nominated its arbitrator. The respondent, through its reply, did not consent to the appointment. The present Section 11(6) petition was filed thereafter.
The respondent had subsequently filed a reply dated 10-10-2025 raising two preliminary objections:
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the petitioner had executed a ‘full and final settlement/discharge voucher’ on 21-5-2025, rendering the dispute non-arbitrable;
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the arbitration clause applies only where liability is admitted, and the respondent had not admitted liability.
The respondent had also contended that the insurance policies were inadequately stamped.
Later, through an application under Order 6 Rule 17 of the Civil Procedure Code, 1908, the respondent sought to amend its reply to introduce an entirely new objection: that no arbitration clause existed in light of the IRDAI Circular and Gazette Notification dated 23-1-2024 (‘Notification’), which, according to the respondent, had de-notified and superseded arbitration clauses in fire insurance policies. The respondent averred that the policies in question, being commercial lines of business, required a separate arbitration agreement, which the parties had not executed.
Analysis and Decision
The Court allowed the respondent’s amendment application, noting that the Circular and Notification were not in dispute and pertained to an official act of which judicial notice could be taken. The amendments therefore formed part of the original reply.
The Court further noted that the Circular existed on 27-10-2023 and had been gazetted on 23-1-2024. Despite this, the respondent had chosen to issue the two insurance policies on 31-1-2024 containing arbitration clauses. The Court opined that by issuing policies after 27-10-2023 with the arbitration clauses intact, the respondent had effectively waived its right to rely on the circular to deny the existence of an arbitration agreement.
The Court also stated that party autonomy lies at the core of arbitration law. If the respondent intended to rely on the circular, it ought not to have included any arbitration clause in the policies issued post-circular. Had the clause been absent, the insured would have had an opportunity to take an informed decision before accepting the policies. The Court observed that the Circular would apply to policies existing as on the date of the circular or on the date of being gazetted. Where a policy had been issued after the circular and still contained an arbitration clause, there was ‘no justification’ for the insurer to argue that the clause stands deleted unless it plainly intended to retain arbitration.
The Court further held that since the policies prescribe a three-member arbitral tribunal, and the petitioner had already nominated its arbitrator, the respondent was directed to appoint its nominee within two weeks of the order being uploaded. The two nominee arbitrators were to appoint the presiding arbitrator within a further two weeks.
Accordingly, the petition was allowed.
[Numero Uno Clothing Ltd. v. United India Insurance Co. Ltd., ARB.P. No. 1274 of 2025, decided on 10-11-2025]
Advocates who appeared in this case:
For the Petitioner: Saurav Agarwal, Ritika Jhurani, Dinesh Sharma, Abhishek Kandwal, Prachi Dubey, Ujwal Sharma, Kiran Devrani, Gauri Bansal, Advocates
For the Respondent: Vishnu Mehra, Senior Advocate, Sanjay Kumar Chhetry, Advocate
Buy Arbitration and Conciliation Act, 1996 HERE
