Repudiation Does Not Kill the Arbitration Clause: A Section 11 Appointment on a Jewellers Block Policy

On 14 August 2026, Justice Amit Borkar of the Bombay High Court decided Samraj Gold Exports (P) Ltd. v. New India Assurance Co. Ltd., Arbitration Application (L) No. 12810 of 2026, and appointed an arbitrator on a jewellers block policy where the insurer had already repudiated liability.

The insurer's resistance followed a pattern that most Indian commercial policyholders will recognise. Once liability is denied, the argument runs, there is no live claim under the policy, so there is nothing for an arbitrator to decide and the arbitration clause never comes into play. The Court did not accept that framing. It held that repudiation of liability under an insurance policy does not bar appointment of an arbitrator at the Section 11 stage of the Arbitration and Conciliation Act, 1996.

The reasoning matters more than the outcome. The Court treated repudiation itself, the arbitrability of the dispute, accord and satisfaction, the doctrine of election, limitation, and the interpretation of the arbitration clause as substantive disputed questions belonging to the arbitral tribunal rather than to the referral court. Each of those is a defence an insurer would normally deploy to stop an arbitration before it starts. All six were sent forward.

For a policyholder sitting on a denied commercial claim, the practical effect is that the insurer's denial letter is no longer, by itself, an answer to a Section 11 application.

The argument is not invented. It grows out of the arbitration clause that sits in a large share of Indian general insurance wordings, inherited from the old tariff-era forms and still reproduced in fire, burglary and package policies today.

If any dispute or difference shall arise as to the quantum to be paid under this policy, liability being otherwise admitted, such difference shall independently of all other questions be referred to the decision of a sole arbitrator ... It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this policy.

Read literally, that is a quantum-only clause with an express carve-out. The Supreme Court read it that way in its 2018 decision in Oriental Insurance Co. Ltd. v. Narbheram Power and Steel (P) Ltd., holding that where the clause excludes disputes in which liability is denied, an arbitrator cannot be appointed after repudiation. Insurers have cited that line ever since, often in a single paragraph of a reply that ends the conversation.

What has changed is not the wording. It is who decides what the wording means. A clause that carves out denied claims is only fatal if the referral court reads and applies the carve-out at the appointment stage. If reading it is the tribunal's job, the insurer must argue the point before the arbitrator it said should never have been appointed. That is the shift the Bombay High Court applied.

Section 11 of the Arbitration and Conciliation Act, 1996 lets a party apply to the High Court to appoint an arbitrator when the agreed appointment mechanism fails. What that court is allowed to examine has narrowed steadily.

1. Section 11(6A), inserted by the 2015 amendment, confined the court to examining the existence of an arbitration agreement.
2. The Supreme Court's seven-judge bench in the 2023 Interplay reference described the referral court's role as a prima facie check, with the tribunal retaining competence over its own jurisdiction under Section 16.
3. In SBI General Insurance Co. Ltd. v. Krish Spinning (2024), the Court held that whether a discharge voucher amounts to accord and satisfaction is not for the referral court to decide at the Section 11 stage.

Krish Spinning is the closest ancestor of the Bombay ruling, and it arose out of an insurance claim. The referral court's task is to see whether an arbitration agreement exists, not to try the merits of the defences raised against it.

Against that background, an insurer asking a High Court to construe a quantum-only proviso and dismiss the application is asking the court to do exactly what Section 11(6A) removed from its remit. Whether the carve-out defeats this particular dispute is itself a question about the meaning and scope of the arbitration clause, and the Bombay High Court placed it with the tribunal.

Arbitrability is settled ground. Insurance coverage disputes are private contractual claims between two parties and, following Vidya Drolia (2021), are arbitrable in the absence of an express statutory bar.

The ruling is useful because it names the defences precisely. Each one is a standard insurer objection, and each one was treated as a substantive disputed question rather than a threshold bar.

• Repudiation. Denial of liability does not extinguish the agreement to arbitrate. The agreement survives the dispute it was written for.
• Arbitrability. Whether this class of dispute can be arbitrated is not resolved by the fact that coverage, and not only quantum, is in issue.
• Accord and satisfaction. A signed discharge voucher or full and final receipt is a defence to be proved, including any plea of coercion, not a document that closes the file at the appointment stage.
• Doctrine of election. An insurer arguing that the insured elected a different forum, typically a consumer complaint or a civil suit, must make that case to the tribunal.
• Limitation. Whether the reference is time barred is a mixed question of fact and law. Section 43 applies the Limitation Act, 1963 to arbitrations, and the tribunal can decide the point.
• Interpretation of the arbitration clause. The scope of the clause, including any liability carve-out, is for the tribunal to construe.

The common thread is evidentiary. Each defence needs facts: what the surveyor recorded, when the denial letter was issued, in what circumstances the voucher was signed, what correspondence passed after it. A Section 11 hearing is not built to test any of that, and treating a summary hearing as the place to decide it produces the wrong kind of finding on the wrong record.

A jewellers block policy is a package cover written for the stock cycle of a jewellery business: stock in the shop and strongroom, stock in the window, goods sent out with employees, agents and angadias, goods in transit by post or courier, and goods in the custody of karigars for job work. Each of those sections carries its own conditions, sub-limits and warranties.

That structure produces a high density of coverage arguments. A single loss can raise all of the following at once:

• Which section of the policy applies, and therefore which sub-limit caps the recovery.
• Whether a transit exclusion applies because goods were carried by an unauthorised person or left unattended.
• Whether a stock records or safe warranty was breached, and whether the breach was material to the loss.
• Whether valuation of unsold stock should be at cost, at gold rate on the date of loss, or at declared value.

Add volatile metal prices to a sum insured fixed months earlier and disputes over quantum become routine even when coverage is not contested. When the insurer denies the whole claim on a warranty or exclusion point, the policyholder faces a total loss on a claim that may run to several crore, and the choice of forum stops being procedural.

The surveyor's report is usually the pivot. Because the surveyor reconstructs stock movement from records that a small or mid-sized jewellery business may keep informally, the factual gap between the report and the insured's own account is often the whole dispute. That is precisely the kind of contest a tribunal is equipped to run and a referral court is not.

A denial is a starting position, not a verdict. The sequence below reflects how the defences now break down.

1. Read the arbitration clause before the denial reasons. Establish whether the policy carries a quantum-only clause with a liability carve-out or a wide dispute clause. That single fact shapes every later step.
2. Check the contractual time bar. Indian policy conditions commonly provide that a disclaimed claim is deemed abandoned unless it is made the subject of proceedings within twelve months of the disclaimer. That period runs independently of the Limitation Act and it is short.
3. Do not sign anything described as full and final without a reservation. After Krish Spinning a discharge voucher no longer ends the matter automatically, but a voucher signed without protest still gives the insurer a defence you will have to argue.
4. Issue a Section 21 notice invoking arbitration. Name the dispute, name your nominee if the clause requires one, and serve it on the insurer's registered office. The clock on the appointment mechanism starts here.
5. Preserve the file. The survey report, the insurer's queries, the stock records relied on, the policy wording with all endorsements, and every piece of correspondence after the denial.
6. Apply under Section 11 if the insurer does not appoint. Expect the repudiation objection in reply, and expect the Krish Spinning line of authority to be the answer to it.

Appointment is not recovery. Three limits are worth stating plainly.

First, the tribunal can still hold that the carve-out means what the insurer says it means. Sending the question to the arbitrator changes the forum, not the wording. A tribunal reading the same quantum-only proviso may conclude it has no jurisdiction over a denied claim, and the policyholder will have spent months and fees to reach that answer.

Second, arbitration is not cheap. A three-member tribunal on a mid-sized commercial claim carries arbitrator fees, institutional or ad hoc administration, counsel, and often an independent valuation. On a claim below roughly a crore, the cost curve can consume a meaningful share of what is in dispute. Section 29A requires the award within twelve months of completion of pleadings, extendable by six months by consent, but extensions beyond that need the court.

Third, the alternatives have not gone away. The Insurance Ombudsman is not open to most commercial policyholders, which is the wider dispute-resolution problem for corporate claims, and a consumer complaint is generally unavailable to a business buying cover for commercial purposes. Where the clause is wide enough, arbitration is often the only real forum other than a civil suit, and choosing it early is better than discovering it late.

The durable lesson is at placement rather than at claim. The arbitration clause is a term you can negotiate before you buy, and on a large or specialised risk a broker can usually secure a wide dispute clause, a named seat, a sole arbitrator, and a defined appointment mechanism. Doing that costs nothing at inception. Fighting about it after a denial costs a year.