Should an arbitration clause be strictly construed?

In the instant case, the parties were bound by the terms and conditions agreed under the policy and the arbitration clause were part of the said insurance policy. The Apex Court while dealing the matter, observed that “It does not need special emphasis that an arbitration clause is required to be strictly construed. Any expression in the clause must unequivocally express the intent of arbitration.” It also laid the postulate in which situations the arbitration clause cannot be given effect to. If a clause stipulates that under certain circumstances there can be no arbitration, and they are demonstrably clear then the controversy pertaining to the appointment of arbitrator has to be put to rest.

Clause 13 of the policy categorically lays the postulate that if the insurer has disputed or not accepted the liability, no difference or dispute shall be referred to arbitration. The thrust of the matter is whether the insurer has disputed or not accepted the liability under or in respect of the policy. The said Part of the Clause clearly spells out that the parties have agreed and understood that no differences and disputes shall be referable to arbitration if the company has disputed or not accepted the liability. The communication ascribes reasons for not accepting the claim at all. It is nothing else but denial of liability by the insurer in toto. The language used is absolutely categorical and unequivocal inasmuch as it stipulates that it is clearly agreed and understood that no difference or disputes shall be referable to arbitration if the company has disputed or not accepted the liability. – Oriental Insurance Company Ltd. vs. Narbheram Power and Steel Pvt. Ltd. (Link : https://sci.gov.in/supremecourt/2017/38870/38870_2017_Judgement_02-May-2018.pdf)