Case Title: Fresenius Medical Care Dialysis Service India Pvt. Ltd. v. Kerry Indev Logistics Pvt. Ltd.
According to the Delhi High Court, an insured party may still request arbitration even after signing a subrogation-cum-assignment contract with an insurance company.
According to the Single Bench of Justice Sanjeev Sachdeva, subrogation just permits the insurer to stand in the shoes of the insured to recover the losses, rather than eliminating the right of the assured to file a lawsuit against the wrongdoer.
The respondent committed to offer third-party logistics and warehousing services under two identical Warehousing & Logistics agreements that were signed by the parties. After that, a fire broke out, causing the petitioner's stocks and assets to be lost which led to disagreements between the parties.
The petitioner demanded payment from the respondent in exchange for the loss it had endured. The respondent argued that it is not obligated to pay the respondent anything. In light of this, the petitioner referred to arbitration in both contracts.
The petitioner filed the applications under Section 11 of the Arbitration & Conciliation Act for the appointment of the arbitrator since the respondent did not consent to the appointment of the arbitrator and did not appoint its candidate arbitrator.
The contentions of the Respondent were:
There is no surviving claim against the respondent because the petitioner signed a deed of subrogation-cum-assignment in favor of HDFC Ergo General Insurance Company Ltd. and received the full amount of the loss as payment.
Due to the assignment of its right to the insurance company with regard to these claims, the petitioner is unable to pursue its claims against the respondent.
Since the insurance company is not a party to the arbitration agreement, which provides for the settlement of disputes between the parties there cannot be any arbitration between the responder and the insurance company.
Petitioner contended that:
There hasn't been a full assignment in favour of the insurance company, and the agreement between the petitioner and the insurance company is merely a subrogation agreement.
The petitioner is well within its rights to pursue all necessary actions to recover the damages, apply those funds to the settlement sum, and keep the remaining sum.
The insurance provider has also pledged that they will not independently seek to enforce any of the agreement's rights, and that any claim, if any, would be made in the petitioner's name and on behalf.
The Court held that in an assignment, the assured gives upon its full claim in favour of the insurer, citing the Hon'ble Supreme Court's decision in Economic Transport Organization Delhi v. Charan Spinning Mills Pvt. Ltd. (2010). While in subrogation the insurer cannot sue independently in its own name and its claim on the damages would be limited to the amount it has paid to the assured and the remainder would be retained by the assured, the insurer can sue in its own name and becomes entitled to the full amount of damages recoverable from the wrongdoer.
The Court ruled that the arrangement between the petitioner and the insurance company constituted a deed of subrogation cum assignment rather than an assignment simplicitor. It was noted that the petitioner had retained the right, under the provisions of the subrogation deed, to pursue the appropriate course of action for the recovery of damages, which is a feature of the subrogation.
In addition, the Court noted that the subrogation deed demonstrates that any recovery must first be applied toward the settlement sum, with any residual funds being held by the Petitioner. It was decided that the petitioner would not have any claim to the additional sum that may be recovered from the wrongdoer if it had been an assignment, as the respondent claimed.
The Court determined that the agreement between the parties was merely a subrogation rather than an assignment. The Court ruled that subrogation just permits the insurer to stand in the shoes of the insured to recover the losses, rather than eliminating the right of the assured to file a lawsuit against the offender.
The Court decided that even after signing a subrogation-cum-assignment agreement with an insurance provider, the petitioner could still pursue the respondent in arbitration to recover damages under the Warehouse & Logistics agreements.
The Court deferred the arbitrator's decision on whether the petitioner's claim was barred because it had already received the settlement money from the insurance company and hence allowed the petitions.