Insurance claim-extinguishing clause upheld; belated claim was barred and the arbitral award could not be sustained.

An insurance policy clause that extinguishes the insured's right to claim unless action is taken within the stipulated period was held valid and enforceable, as distinct from a mere contractual curtailment of time that may offend Section 28 of the Indian Contract Act, 1872. Applying the governing Supreme Court authority, the Delhi High Court held that clause 6(b)(ii) barred the respondent's belated claim because it was raised after the prescribed period and was not saved by any pending action or arbitration. As the arbitrator had also failed to address the limitation objection, the arbitral award allowing the claim could not stand and was set aside.

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Issues: Whether the insured's claim was barred by clause 6(b)(ii) of the policy and, if so, whether the arbitral award allowing the claim was liable to be set aside.

Analysis: The policy clause provided that the insurer would not be liable for loss or damage after expiry of 12 months from the happening of the loss unless the claim was the subject of pending action or arbitration. The Court applied the settled position that a contractual stipulation which merely curtails the time for enforcing a right may offend Section 28 of the Indian Contract Act, 1872, but a clause that extinguishes the right itself if no claim is made within the stipulated time is valid. Relying on the governing Supreme Court authority, the Court held that the policy condition was of the latter kind and was binding between the parties. The respondent raised the claim only after the stipulated period had expired, and the arbitrator had also failed to return any finding on the limitation objection.

Conclusion: The claim was not entertainable under clause 6(b)(ii), and the award could not be sustained; it was set aside.

Final Conclusion: The arbitration award was annulled because the respondent's belated claim had stood extinguished under the contractual bar in the insurance policy.

Ratio Decidendi: A contractual insurance clause that extinguishes the insured's right to claim unless action is taken within a specified period is valid and enforceable, and a claim filed beyond that period is barred and cannot support an arbitral award.

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