JUDGMENT :- 1. This petition, under Section 34 of the Arbitration and Conciliation Act, 1996, has been filed by the petitioners to challenge the award dated 04.12.2008 passed by the learned arbitrator. 2. The parties to the litigatioin entered into a Memorandum of Understanding (MOU) on 05.03.2002. The object of the MOU was to permit the respondent to issue cover notes and the petitioner company was to issue regular insurance policies for one year operating from the date of issue of cover notes. 3. In order to implement the MOU, the respondent no.1 herein deposited a sum of Rs.8,00,000/- (Rupees Eight Lakhs only) to cover the premium for the policies to be issued by the petitioner. The respondent thereafter deposited further sums from time to time to cover premium payable to the insurance policies in the future. The petitioner deputed staff members at the office of the respondent finance company, to issue policies on the basis of cover notes. In December 2004, the petitioner company informed the respondent that account of respondent did not have sufficient cash to meet the premium with respect to 750 cover notes, issued by the respondent. The respondent was accordingly asked to deposit a sum of Rs.25,00,000/- (Rupees Twenty Five Lakhs only) and also furnish indemnity bond to cover insurance policies, issued by the respondent. 4. The parties agreed to cancel the MOU with effect from 15.03.2005. By cancelling the MOU, it was stipulated therein that the respondent will not utilize the cover note with effect from 15.03.2005 and return the unutilized cover notes with indemnity to the petitioner. 5. The parties also agreed to reconcile the account within one month of the date of cancellation of the MOU. 6. In terms of the deed of cancellation, on 27.06.2005, the petitioner company confirmed the credit balance on 31.03.2005, to be Rs.1,91,02,499/- (Rupees One Crore Ninety One Lakhs Two Thousand and Four Hundred Ninety Nine only). Thereafter on 30.06.2006, the petitioner company confirmed the credit balance of respondent to be Rs.173.41 lakhs. In the process of reconciliation, it was pointed out by the petitioner company that the total cover note books, issued to the respondent was 514, out of which, respondent had accounted only for 500 cover notes. The respondent was accordingly directed to return the remaining 14 cover note books. This was complied with by the respondent. 7. In the process of reconciliation, it was pointed out by the petitioner company that the total cover note books, issued to the respondent was 514, out of which, respondent had accounted only for 500 cover notes. The respondent was accordingly directed to return the remaining 14 cover note books. This was complied with by the respondent. 7. On 15.06.2005, the insurance company asked for return of 149 cover note leaves, which was said to be not available in the cover note books. It is not disputed that this direction was also complied with. The respondent company accordingly asked for return of amount due and outstanding. 8. In view of the dispute having arisen between the parties, the respondent thereafter approached the Hon'ble Chief Justice under Section 11 of the Arbitration and Conciliation Act, for appointment of an Arbitrator. The Hon'ble Mr.Justice R.Balasubramanian (Retd.), was appointed as the Sole Arbitrator. The claimant filed a claim petition claiming under eight heads, which read as under: i) Under Claim No.1, the claimant / first respondent herein prayed for a decree for a sum of Rs.173.41 lakhs with interest @ 24% p.a. with effect from 15.03.2005 till date of payment, the amount which was said to be lying to the credit of the respondent. ii) Under Claim No.2, the respondent herein sought refund of Rs.25 lakhs deposited as additional deposit along with interest @ 24% p.a. iii) Under Claim No.3A, claim for Rs.82,75,405/- (Rupees Eighty Two Lakhs Seventy Five Thousand and Four Hundred Five only) along with interest @ 24% was claimed on account of premium paid for 766 policies, which were cancelled. iv) Under Claim No.3B, the respondent herein also claimed a sum of Rs.81.86 lakhs along with interest @ 24% p.a. for refund of amount debited with 687 cover notes, issued either for a fresh policy or for renewal, as no policies were issued against cover notes. v) Under Claim No.3C, the claimant / first respondent herein asked for cancellation of 302 insurance policies and refund of premium of Rs.31.68 lakhs, as the request for cancellation was accepted, but no refund was given. v) Under Claim No.3C, the claimant / first respondent herein asked for cancellation of 302 insurance policies and refund of premium of Rs.31.68 lakhs, as the request for cancellation was accepted, but no refund was given. The interest of this amount was also claimed @ 24% p.a. vi) Under Claim No.4, the respondent prayed for a decree for a sum of Rs.91.40 lakhs along with service tax, said to have been adjusted as difference in premium for a short period and pro-rata premium collected for the same same policy for the balance period. The deduction was said to be contrary to tariff condition GR11 and therefore, is only an after-thought. This amount was debited after the dispute had arisen between the parties. vii) Under Claim No.5, damage to the tune of Rs.3 crores along with interest @ 24% was claimed. viii) Under Claim No.6, a sum of Rs.1 crore was claimed as loss of profit on account of petitioner company having not paid money due to the respondent herein. ix) Under Claim No.7, the claimant submitted the work sheet quantifying the interest payable on the various sums claimed by the claimant. x) Under Claim No.8, the respondent herein claimed the cost of arbitration. Thus, the total sum claimed by the claimant was to the tune of Rs.13,51,95,037/- with interest @ 24% p.a. with effect from 15.03.2005 till 15.02.2008 with pendatile and future interest 9. The main defence to the claim raised by the claimant was that the respondent had committed breach of obligation, as the cover notes were issued without ensuring adequacy of premium. The stand was also taken that some of the cover notes were anti-dated, which resulted in number of claims, being filed against the petitioner company. The amount claimed were said to be beyond the scope of arbitration, as in the petition filed under Section 11, the amount in dispute is stated to be Rs.454.41 lakhs. 10. On merits, the stand of the petitioner company was that the credit of the applicant was never admitted at any point of time, as neither the respondent nor the petitioner company ever sat together and reconciled the accounts. The stand was also taken that the reconciliation for want of details had become a difficult task. 10. On merits, the stand of the petitioner company was that the credit of the applicant was never admitted at any point of time, as neither the respondent nor the petitioner company ever sat together and reconciled the accounts. The stand was also taken that the reconciliation for want of details had become a difficult task. It was also the case set up by the petitioner that as against Rs.173.41 lakhs shown to be the balance as on 30.03.2006, a sum of Rs.2,08,998/- (Rupees Two Lakhs Eight Thousand Nine Hundred Ninety Eight only) was adjusted being the difference in service tax, charged at revised rate of service tax. After adjustment of the amount, the credit balance of the respondent was only Rs.1,68,69,890/-, which was subject to further accounting. Against this credit balance, the petitioner claimed that a sum of Rs.1,00,72,152/- was recoverable, as the difference in premium debited for 1814 policies and another sum of Rs.27,819/-, being the different in premium debited from 01.07.2006 to 31.12.2006. 11. The case of the petitioner was that after adjustment, only Rs.67,69,919/- alone was available as balance, out of this amount, another sum of Rs.27,38,024/- was to be adjusted along with another amount of Rs.1,03,71,774/-. 12. On reconciliation, it was found the petitioner was to recover a sum of Rs.36,01,855/- The petitioner company justified the claim of Rs.25 lakhs, as additional deposit and indemnity bond to meet the payment premium, as deposit with the petitioner, was in adequate, to meet any further claim. 13. It was claimed that there was a breach of Section 64VB of the Motor Vehicles Act, as the cover notes were issued without adequate premium. The insurance company justified the claim on the ground that the petitioner company was exposed to several claims under cancelled cover notes due to non-availability of premium. The defence however was that 801 cover notes, were cancelled on a specified date followed by issuance of fresh policies of insurance. In order to achieve this object, the petitioner had to spend money towards postal and other charges, which resulted in loss to the tune of Rs.10,00,000/- (Rupees Ten Lakhs only) to the petitioner company. 14. The defence however was that 801 cover notes, were cancelled on a specified date followed by issuance of fresh policies of insurance. In order to achieve this object, the petitioner had to spend money towards postal and other charges, which resulted in loss to the tune of Rs.10,00,000/- (Rupees Ten Lakhs only) to the petitioner company. 14. The defence to the claims raised under 3A, 3B and 3C, was that in case any refund on account of cancellation of policies was found due, it had to be paid to the owner of the vehicle and not to the respondent. 15. It was also case that though request for cancellation was received from the respondent, it was not possible without request from the holder of the policy, the claims were accordingly disputed. 16. The main defence was that even assuming that refund of premium was permissible, then also entire premium was not to be refunded, and only the portions for unutilized period could be claimed. The claims under 3A, 3B and 3C were said to be not sustainable. The claim No.4 was said to be contrary to India Motor Tariff Provisions. It was stated in the defence that the respondent was continuously violating the MOU, as the cover notes were issued without providing for adequate deposit amount. 17. The claim Nos. 5 & 6 were said to be unsustainable in law and beyond scope of arbitration clause. That the petitioner was reckless in issuing cover notes without sufficient deposit amount, which was in violation of the MOU. Furthermore, the petitioner was completely prejudiced by the act of the respondent. As already referred to above, the claim was said to be beyond the scope of reference. Under claim no.7, payment of interest was denied. Similarly, liability to pay cost was also disputed under claim no.8. 18. On the pleadings referred to above, the Hon'ble Arbitrator framed the following issues: "(a) Whether the claimant is entitled to Rs.173.41 lakhs as on 30.06.2006 as per letter Ex.C.15 issued by the Insurance Company? (b) Whether the claimant is entitled to return of the indemnity deposit of Rs.25 lakhs from the defendant? (c) Whether the claimant is entitled to refund of premium arising out of cancellation of 1755 insurance policies and if so, for what amount? (b) Whether the claimant is entitled to return of the indemnity deposit of Rs.25 lakhs from the defendant? (c) Whether the claimant is entitled to refund of premium arising out of cancellation of 1755 insurance policies and if so, for what amount? (d) Whether the Insurance Company is entitled to debit the claimant by Rs.1,00,72,152/-including service tax towards 1814 insurance policies claimed for by them? (e) If the insurer is entitled for the above claim, whether the formula applied by them is in accordance with Indian Motor Tariff? (f) Whether the counter claim made by the Insurance Company for Rs.36,01,855/- is maintainable both in law and on facts? (g) Whether the claimant is entitled to interest for deprivation of refund money due on time? (h) To what other reliefs the parties are entitled to?" 19. In the proceedings dated 12.09.2008, the deliberation was held with regard to procedure to be adopted in conducting the arbitral proceedings, wherein, it was agreed that the code of civil procedure need not necessarily be followed. Both the counsels agreed that there was no scope to lead any oral evidence at all. However, in the course of the proceedings, if a need arose to lead evidence, on any particular fact or issue, then with the leave of this tribunal, parties could be permitted to lead oral evidence. It was also agreed that if the tribunal directed the parties to lead oral evidence on any issue, then parties will lead the oral evidence also. 20. The reference to proceedings is made as in the award. It has been recorded that the parties to the dispute had agreed that they will not lead in any oral evidence, and that the Tribunal should decide the dispute on the documents made available by the parties. 21. The Hon'ble Arbitrator decided all the issues together and took note of documentary evidence lead by the respective parties specially the MOU as also the cancellation of previous MOU. 22. The Hon'ble Arbitrator under claim No.1, i.e. refund of Rs.173.41 lakhs recorded the finding that in Para-19 of the written statement, the insurance company affirmed the position of the balance outstanding to the credit of the respondent company. It was on appreciation of pleading that the Hon'ble Arbitrator recorded the finding that the credit balance indicated was available to the credit of the respondent in the cash premium deposit account. It was on appreciation of pleading that the Hon'ble Arbitrator recorded the finding that the credit balance indicated was available to the credit of the respondent in the cash premium deposit account. In view of the admission of credit in favour of the respondent, the Hon'ble Arbitrator considered the legality of the deductions claimed by the insurance company. A deduction of Rs.2,08,998/- (Rupees Two Lakhs Eight Thousand Nine Hundred Ninety Eight only) as difference in service tax collected and payable as per the revised rate of service tax, was rejected on the ground that there no pleadings or documentary evidence to show when the service tax was revised, what was the service tax originally levied and collected and what remained to be collected. 23. The Hon'ble Arbitrator also held that the service tax is levied on the person, who provides service, therefore, service tax was payable by the petitioner or the beneficiary i.e. the policy holder. The Hon'ble Tribunal held that the respondent did not come into picture at all. The Hon'ble Arbitrator held that even if service tax is recoverable, it was to be recovered from the insured, as nothing was stipulated in the MOU that the respondent was liable either for the service tax or to pay the enhanced service tax. 24. Service tax was held to be not part of the premium, but was in addition to the premium. The adjustment of service tax was held to be not sustainable. It was further held that there was no material placed in support of this claim by the insurance company. 25. Similarly, the claim of the insurance company for Rs.1,00,72,152/- as the difference in premium debited for 1814 policies, was not accepted for the reason that if the insurance company had collected lesser premium, than the actual premium payable on such policies, was to be collected from the insured and not from the petitioner. It was also held that there were no materials on record showing that the respondent had agreed to bind themselves for such shortage in any of the documents. 26. The Hon'ble Arbitrator held that to the policy of insurance, the contracting parties are the insurance company and the insured whereas the claimant does not come into picture. It was also held that there were no materials on record showing that the respondent had agreed to bind themselves for such shortage in any of the documents. 26. The Hon'ble Arbitrator held that to the policy of insurance, the contracting parties are the insurance company and the insured whereas the claimant does not come into picture. The Hon'ble Arbitrator held, that the facts on record proved that petitioner company had unilaterally acted, in issuing such policies and for the wrong committed by it, the liability could not be fixed on the respondent. 27. The plea of adjustment of Rs.1,00,72,152/- was decided against petitioner. The adjustment of Rs.27,819/- as difference of premium was also rejected on this account. The Hon'ble Arbitrator held that on account of disallowing of the deductions, a sum of Rs.1,70,78,888/- is due and payable as shown in the credit balance as on 30.06.2006. 28. The Hon'ble Arbitrator also held that besides these, the petitioner made seven more adjustments, amounting to Rs.1,03,71,774/- These entries were on account of reversal of credit entries earlier given. 29. The Hon'ble Arbitrator found that there was no pleading or proof, as to why the credit entries were reversed. A finding was recorded that the credit entries could not be altered unilaterally without notice to the respondent. Similarly entries regarding excess brokerage paid was rejected on the ground that it was to be recovered from the broker not from the respondent. 30. The entry of Rs.10 lakhs towards postal expenses in communicating the cancellation of cover notes to the insured as well as to the statutory authorities, was rejected for want of proof of expenditure incurred. Similarly the entry of Rs.10 lakhs towards the expenses of investigation of documents, postal expenses and administrative expenses was rejected for want of proof of expenditure incurred. 31. It was also held by the Hon'ble Arbitrator that no justification for claim was pleaded or proved. The debit entry of Rs.6,00,000/- (Rupees Six lakhs only) paid to surveyors for professional services was also rejected, as the surveyors were unilaterally appointed by the claimant by exceeding its authority. Otherwise also, there was no proof of payment to surveyors. The other entry of Rs.50,00,000/- (Rupees Fifty Lakhs only) was also not accepted. The Hon'ble Arbitrator also rejected the counter claim on the ground that the petitioner failed to establish that it was entitled to any adjustment. Otherwise also, there was no proof of payment to surveyors. The other entry of Rs.50,00,000/- (Rupees Fifty Lakhs only) was also not accepted. The Hon'ble Arbitrator also rejected the counter claim on the ground that the petitioner failed to establish that it was entitled to any adjustment. Under claim no.1, a sum of Rs.1,70,78,888/- with interest @ 18% p.a from 16.04.2005, i.e. the date fixed under the cancellation, was awarded. The claim of refund of indemnity deposit of Rs.25 lakhs was also allowed, which was deposited to cover up future claims under the cover notes, issued by the claimant without adequate premium, as under the indemnity bond, the respondent had undertaken to meet against any such claims, and till date no such claims were shown to have been raised against petitioner. 32. The Hon'ble Arbitrator also noticed that there was nothing on record as to whether Rs.25 lakhs was adjusted to meet any such claims. Liberty was, however, granted to the petitioner to proceed against respondent, if any such claim arose in future. The Hon'ble Arbitrator thus held that there was no justification to withhold the amount for such a long period. The Hon'ble Arbitrator rejected the claim of Rs.50,00,000/- (Rupees Fifty Lakhs only) also on this ground. 33. Under Claim No.3A, the respondent claimed a sum of Rs.82,75,405/- (Rupees Eighty Two Lakhs Seventy Five Thousand Four Hundred and Five only) on account of premium paid on 766 policies, which were cancelled. The Claim 3B was for a sum of Rs.81,85,588/- (Rupees Eighty One Lakhs Eighty Five Thousand and Five Hundred Eighty Eight only), i.e. the premium collected for 687 policies, which were not issued and the claim No.3C was for a sum of Rs.31.68 lakhs, being the premium paid for 302 policies, which already stood cancelled. Thus, claim was based on the fact that 766 policies were returned for cancellation and the premium paid was to be refunded to the respondent and, that a sum of Rs.81.86 lakhs was debited from the cash deposit account of the respondent for issuing 687 policies, which had not been issued. Whereas, a sum of Rs.31.58 lakhs was claimed, being the premium paid on 302 policies, which stood cancelled. 34. Whereas, a sum of Rs.31.58 lakhs was claimed, being the premium paid on 302 policies, which stood cancelled. 34. The claim was contested on the plea that 766 policies, which were given for cancellation, were not yet cancelled, and, that some of these policies were still enforceable and cancellation was not carried out for want of necessary documents, so as to delete it from the record. It is also the stand of the petitioner, that some of the policies, which were requested to be cancelled, were found to be not genuine, as the insured could not be located. The claim under 3C, i.e. refund of policies, which stood cancelled, was objected to on the ground that it was not disclosed in application, moved under Section 11 of the Arbitration and Conciliation Act. 35. The Hon'ble Arbitrator noticed that the parties did not lead any oral evidence, except to rely on the pleadings and documents, enclosed by each one. The stand of the petitioner company that letter dated 01.09.2006, be read as part of pleading and treated as reply to the claim, raised by the claimant under Claim No.3. The respondent on the other hand also had lead no evidence and relied on letter dated 02.09.2005 and letter dated 28.07.2006. 36. The Hon'ble Arbitrator, on appreciation of documentary evidence came to the conclusion that the letter dated 01.09.2006 was in fact reply to the letter dated 28.07.2006 of the respondent. This was replied by the respondent vide letter dated 20.09.2006 along with notice. 37. The Hon'ble Arbitrator considered this letter, on which reliance was placed, and recorded that letter dated 28.07.2006 contained tabular statement, giving details of claim Nos.3A, 3B and 3C and the amount due under each head. The respondent also enclosed with this letter, the details of policies, including payment, voucher number, its date and premium date, which was duly acknowledged by the petitioner. 38. The receipt of the letter, which was disputed stood acknowledged. Letter dated 01.09.2006 was also replied by the respondent on 20.09.2006, which was also acknowledged, wherein, various claims were explained. The explanation submitted by the insurance company, after six months thereafter, was not accepted by the respondent. 39. 38. The receipt of the letter, which was disputed stood acknowledged. Letter dated 01.09.2006 was also replied by the respondent on 20.09.2006, which was also acknowledged, wherein, various claims were explained. The explanation submitted by the insurance company, after six months thereafter, was not accepted by the respondent. 39. The Hon'ble Arbitrator, on appreciation of documentary evidence, referred to above, came to the conclusion that once the receipt of 1755 policies, sent by the respondent, was accepted, then burden shifted to the petitioner, to show how the claim was not maintainable. It was held that in view of the position explained, it was the insurance company to lead oral evidence to prove as to how these policies were dealt with. 40. The Hon'ble Arbitrator held that the respondent discharged its burden by establishing the return of policies and also proved that the policies were cancelled due to double insurance coverage. The amount claimed i.e. Rs.1,94,69,120/- (Rupees One Crore Ninety Four Lakhs Sixty Nine Thousand One Hundred Twenty only) was duly acknowledged by the petitioner. 41. The Hon'ble Tribunal held that the reply sent to the petitioners was disputed by the respondent. The Hon'ble Arbitrator held that there was evidence by way of letters that the petitioner had debited twice for 687 policies and came to the conclusion that a sum of Rs.81.86 lakhs was due under double entry. 42. The Hon'ble Tribunal further held that mere explanation, which was proved, could not be taken to be proved. It was thus held that no notice was issued by the petitioner, disputing the claim even though receipt of policies was duly admitted. 43. The Hon'ble Tribunal also rejected the plea that the claim was not competent having not been raised before the Hon'ble Chief Justice, for the reason that, under Section 11 of the Arbitration and Conciliation Act, the only requirement was to show the existence of a contract and existence of arbitration clause in the said contract and dispute under the contract, and details were not required to be given, as it was not the reference, but it is only a procedure for appointment of an Arbitrator. The Hon'ble Arbitrator, thus, held that there was no bar to raise the claim, which was not part of application under Section 11 of the Act. 44. The Hon'ble Arbitrator, thus, held that there was no bar to raise the claim, which was not part of application under Section 11 of the Act. 44. The Hon'ble Tribunal, on appreciation of documentary evidence with regard to submission of policies, came to the conclusion that the respondent had successfully proved its claim. The defence of insurance company that only portion of the remaining period of the insurance policy could only be refunded, was rejected for want of evidence to show the unexpired period of each policy, which was cancelled. 45. Consequently, a decree was passed in favour of the respondent and against the petitioner for a sum of Rs.82.75 lakhs, Rs.81.86 lakhs and Rs.31.58 lakhs respectively with interest @ 18% p.a. from 16.04.2005 till the date of payment. 46. As earlier observed, the Hon'ble Tribunal held that as the outstanding claim was admitted and, in defence adjustment was claimed, it was for the insurance company to justify the adjustment. The stand of the petitioner was that the policies were not governed by GR11 and GR12 of India Motor Tariff. 47. The Hon'ble Tribunal held that even for the sake of argument, it is taken that the petitioner was entitled to recover certain amount for expired period, still the question would be from whom to recover. The Hon'ble Arbitrator came to the conclusion that this could be recovered from the insured and not from the respondent. 48. The claim nos.5 & 6 were rejected.