Surveyor’s Report Not Sacrosanct, Arbitral Tribunal Has Jurisdiction to Apply Mind Independently: Bombay High Court Dismisses Insurer’s Challenge to Award in Fire Damage Dispute

“Arbitral Tribunal Is Not Bound by the Findings of Surveyor or Expert—It May Adopt a Broad Evaluation or Even Apply Guesswork Where Necessary”, Bombay High Court (Justice Sandeep V. Marne) delivered a detailed and significant judgment in New India Assurance Co. Ltd. v. Shirdi Industries Limited, reaffirming the limited scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996. The Court upheld a three-member arbitral tribunal’s award granting Rs. 30,99,555 to Shirdi Industries towards fire damage under an Industrial All Risk Policy, despite objections raised by the insurer, particularly regarding rejection of the surveyor’s and expert’s partial loss assessments.

The ruling, squarely rooted in arbitration jurisprudence, reinforces the principle that arbitral tribunals enjoy wide discretion in evaluating evidence and are not bound to accept surveyors’ or expert opinions blindly—especially when their findings appear ad hoc or unsupported.

Tribunal Awarded 70% Claim After Disbelieving Surveyor's and Expert's Lower Loss Estimations

The central dispute arose from a fire that broke out on April 6, 2015, at the respondent’s manufacturing plant in Pantnagar, Uttarakhand. Though the main plant remained intact, substantial damage was caused to components including six Platens and loss of Hydraulic Oil and Thermic Fluid used in the production system. Shirdi Industries, insured under an Industrial All Risk Policy, invoked arbitration after the insurer paid only a partial amount of Rs. 31.91 lakhs based on the surveyor’s report.

The arbitral tribunal, by its unanimous award dated September 20, 2022, allowed claims to the tune of Rs. 30,99,555, including for loss of Platens, Hydraulic Oil, Thermic Fluid, VFD AC Drive, and Pressure Transducer. The insurer challenged the award under Section 34, contending that the tribunal arbitrarily awarded 70% of the claimed loss for the oil and fluid, even after an expert appointed by the tribunal itself had recommended only 25%.

The Court, however, found the tribunal’s reasoning cogent and well within its jurisdiction under the Act. “The Arbitral Tribunal has recorded detailed reasons as to why the assessment of loss of Hydraulic Oil and Thermic Fluid could not be restricted to 20% as suggested by Surveyor and 25% as suggested by Expert,” the Court held, while also rejecting the insurer’s contention that such divergence constituted patent illegality.

“Surveyor’s Assessment Was Perfunctory and Arbitrary”

A crucial aspect that swayed the Court was the manner in which the surveyor had conducted the inspections. Noting that the surveyor did not prepare any damage report during the initial visit and conducted the second and third inspections after long delays, the Court endorsed the tribunal’s view that his final assessment lacked credibility.

“The Surveyor’s statements seem to be made in a perfunctory and casual manner... A question would arise as to why only 20% and why not some other percentage, whether more or lesser. This itself makes the ad-hocism and arbitrariness apparent,” the tribunal had noted, and the Court accepted this line of reasoning.

Referring to settled law, Justice Marne reiterated, “As held by the Apex Court in Sri Venkateshwara Syndicate, the Surveyor’s report is not binding even on the insurer. The question of same being binding on Arbitral Tribunal therefore does not arise.”

Tribunal Not Obliged to Accept Expert’s View; Can Apply “Rough and Ready Formula”

Despite the insurer’s reliance on the opinion of an independent expert appointed under Section 26 of the Arbitration Act—who concurred with the surveyor in allowing only 25% loss—the Court held that the tribunal was not bound to accept the expert's assessment. “The Expert appointed by the Arbitral Tribunal has admitted of certain presumptions... due to great passage of time and lack of data,” the tribunal observed before deciding to adopt a 70% figure.

Justice Marne held that the tribunal was entitled to apply a broad evaluative approach or even guesswork to determine damages where precision was impracticable. Citing MSK Projects v. State of Rajasthan, the Court reiterated that:

“In a works contract, the Arbitrator was not expected to go through the minute details to ascertain the exact figure of damages... Once the Arbitrator arrives at a figure, even by guesswork, the Court may not interfere with it, if it is not unreasonable.”

Further, the Court noted that the claim was substantiated by documentary evidence showing the purchase of 16,800 litres of Hydraulic Oil and 8,400 litres of Thermic Fluid post-incident, which was essential for restarting the plant. “Once it is established that the said quantity was necessary for restart of the plant, sufficient material became available before the Arbitral Tribunal for guessing that the actual quantum... would be higher than 20% or 25%,” the Court stated.

Damage to Platens: Tribunal Found Surveyor’s Approach Unjustified

The insurer’s objection to the claim allowed for damage to six Platens also failed to impress the Court. The tribunal had accepted the expert’s opinion that fire could plausibly damage the Platens, particularly since the surveyor had only inspected two out of six and conducted no technical tests. The Court upheld this finding, observing: “The Surveyor further opined that damages to six Platens might have been caused ‘during commissioning of the plant’—but there was no material to support such a finding.”

Claims for VFD AC Drive and Pressure Transducer Unchallenged in Oral Arguments

While the insurer had initially objected to the tribunal’s decision to allow claims towards VFD AC Drive and Pressure Transducer, those arguments were not pressed during oral submissions. The Court, nonetheless, found that the findings were supported by sufficient material on record and did not warrant interference under Section 34.

“Award Does Not Suffer from Patent Illegality or Conflict with Public Policy”

Refusing to re-appreciate the evidence, the Court found that the insurer failed to establish any of the limited grounds under Section 34. “Findings recorded by the Arbitral Tribunal do not suffer from the vice of perversity. There is no patent illegality in the impugned Award,” Justice Marne observed.

The Court also rejected the insurer’s argument that the tribunal had acted in contravention of Section 64-UM of the Insurance Act by appointing an expert. It clarified that Section 26 of the Arbitration Act allows tribunals to appoint experts for assistance on technical matters and that such appointment is distinct from a surveyor appointed under the Insurance Act.

“The Arbitral Tribunal has not appointed a second surveyor as erroneously sought to be suggested by the Petitioner. It has appointed an Expert... Appointment of the Expert was not at the behest of any particular party and the Arbitral Tribunal proceeded to appoint the Expert because it felt need for Expert’s opinion in the peculiar facts and circumstances.”

Ultimately, the Court found no infirmity in the award and dismissed the petition, leaving the parties to bear their respective costs.

Date of Decision: December 9, 2025