Quick Summary: The Madras High Court, led by Judge N. Anand Venkatesh, overturned a decision that was in favor of Saravana Global Energy Ltd. against SBI General Insurance. The court found problems with how the arbitrator dealt with insurance claims related to flood damage.
In November 2015, Saravana Global's factory in Cuddalore was damaged by floods. They had an insurance policy with SBI General Insurance covering assets worth Rs. 170.50 crores.
Saravana Global asked for Rs. 12.57 crores for the damage. SBI Insurance made temporary payments totaling Rs. 5 crores based on a surveyor's report but disagreed with the final settlement amount.
"The insurance company made a final payment of Rs. 40,51,284/- on 30.03.2017."
The disagreement was about how the damage should be measured. Saravana Global wanted a mix of reinstatement and market value, while SBI wanted market value only, since the repairs weren't completed within a year.
The single arbitrator partly agreed with Saravana Global, allowing claims partly on reinstatement value and partly on market value. The arbitrator also adjusted depreciation rates and awarded interest from the date of the incident.
Assessment Basis: The court found the arbitrator's mixed method of assessment went against the insurance policy terms, which required choosing either market value or reinstatement value.
Underinsurance Calculation: The court criticized the arbitrator for not explaining the underinsurance deduction, making it clearly wrong.
Depreciation Rate: The arbitrator's decision to set depreciation at 50% was seen as random and not backed by evidence, breaking the rules.
Interest Rate: The court said the interest given was not in line with insurance rules, marking it as another wrong part of the decision.
The court canceled the arbitration decision, highlighting the need to stick to policy terms and provide clear reasoning in arbitration decisions. SBI General Insurance was allowed to take back the Rs. 4 crore deposit made during the proceedings.
