1. Fire insurance claims — Settlement via discharge vouchers — Subsequent challenge alleging coercion — Application for appointment of arbitrator under Section 11(6), Arbitration and Conciliation Act, 1996. (Para 2 , 3 , 4 , 5 , 6 , 8 , 16 )
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2019 Supreme(SC) 688
SUPREME COURT OF INDIA
A.M. KHANWILKAR, AJAY RASTOGI, JJ.
United India Insurance Co. Ltd. - Appellant
Versus
Antique Art Exports Pvt. Ltd. - Respondent
Civil Appeal No(s). 3284 of 2019 (Arising out of SLP(C) No(s). 23956 of 2017) With Civil Appeal No(s). 3285 of 2019 (Arising out of SLP(C) No(s). 23963 of 2017)
Decided On : 28-03-2019
A bald plea of fraud, coercion, or undue influence is insufficient to refer a matter to arbitration after a full and final settlement. The party alleging such coercion must provide prima facie evidence to the court to establish that a genuine arbitral dispute subsists under Section 11(6) of the Act.
Headnote:
Arbitration and Conciliation Act, 1996 Section 11 – Company – Evidence – Acquitted – Illegal - After report was submitted by authorised surveyor, appellant Company sent an e-mail to respondent with an intimation that it has approved its claim for an amount of Rs. account of fire towards full and final settlement with complete details of the amount computed extract of the e-mail sent by the appellant Company to the respondent has been placed on record at in Civil Appeal arising out of and is reproduced – Held, submission of learned counsel for the respondent that after insertion of sub-section to Section Amendment the jurisdiction of this Court is denuded and the limited mandate of the Court is to examine the factum of existence of an arbitration and relied on the judgment in exposition in this decision is a general observation about the effect of the amended provisions which came to be examined under reference to six agreements (five agreements for works and one corporate guarantee) and each agreement contains a provision for arbitration and there was serious dispute between parties in reference to constitution of Arbitral Tribunal whether there has to be Arbitral Tribunal pertaining to each agreement - In and circumstances this Court took note of sub-section introduced by Amendment Act and in that context observed that preliminary disputes are to be examined by the arbitrator and are not for the Court to be examined within the limited scope available for appointment of arbitrator Section of the Act. Suffice it to say that appointment of an arbitrator is judicial power and is not a mere administrative function leaving some degree of judicial intervention when it comes to the question to examine existence of a prima facie arbitration agreement it is always necessary to ensure that the dispute resolution process does not become unnecessarily protracted - In the instant case prima facie no dispute subsisted after the discharge voucher being signed by the respondent without any demur or protest and claim being finally settled with accord and satisfaction and after of settlement of claim a letter was sent – Appeal allowed
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2. Insurer claims accord and satisfaction bars arbitration; Insured contends discharge vouchers were signed under economic duress and coercion, necessitating arbitral adjudication. (Para 7 , 9 , 10 , 11 )
3. A bald plea of coercion is insufficient; the claimant must prima facie establish such allegations with material evidence to invoke Section 11(6) of the Act. (Para 12 , 13 , 14 , 15 , 17 , 18 , 20 , 21 )
4. Where a claim is settled by accord and satisfaction, a mere allegation of coercion without prima facie evidence does not create a subsisting arbitral dispute. (Para 15 , 17 , 19 , 21 )
5. Appeals allowed — High Court order appointing the arbitrator set aside. (Para 22 , 23 )
6. Does the execution of a discharge voucher automatically bar a party from seeking arbitration?
No. Mere execution of a full and final settlement receipt or discharge voucher is not an absolute bar to arbitration if the validity is challenged on grounds of fraud, coercion, or undue influence. (Para 12 , 13 )
7. What evidentiary standard must a claimant meet to challenge a discharge voucher for the purpose of appointing an arbitrator?
A bald plea of fraud, coercion, or undue influence is insufficient. The party alleging such circumstances must prima facie establish them by placing satisfactory material on record before the court. (Para 14 , 15 , 17 )
8. How does the court determine if a dispute regarding a settlement is bona fide and genuine?
The court must examine the facts to find out prima facie whether the dispute is bona fide. If the claim regarding the validity of the discharge voucher lacks credibility, there is no necessity to refer the dispute to arbitration. (Para 14 , 17 )
9. Does the 2015 Amendment to Section 11(6A) remove the court's power to examine the existence of a prima facie dispute?
No. While the amendment aims to expedite disputes, the appointment of an arbitrator remains a judicial power. The court must still ensure a prima facie arbitral dispute subsists to prevent the process from becoming unnecessarily protracted. (Para 20 )
JUDGMENT :
Rastogi, J.
Leave granted.
2. These appeals have been filed by the Insurance Company assailing the order dated 30th May, 2017 passed by the High Court of Delhi appointing an Arbitrator in exercise of power under Section 11(6) of the Arbitration and Conciliation Act, 1996(hereinafter being referred to as “the Act”) to adjudicate the dispute between the parties.
3. The facts in brief manifest from the record and relevant for the present purpose are that the respondent claimant was running its factory situated at 78, Kilo Mile Stone, Karhans Village, Main GT Road, Samalakha, Panipat and purchased two Standard Fire and Special Perils Policies dated 29th June, 2013 and 10th October, 2013. On 25th September, 2013 and thereafter on 25th October, 2013, a fire took place in the factory on account of a short circuit as claimed by the respondent claimant. The appellant Company on receipt of the information appointed M/s. Protocol Surveyors & Engineers Pvt. Ltd. as surveyors and also appointed their investigator to submit the fact finding report. After the report was submitted by the authorised surveyor, the appellant Company sent an e-mail to the respondent with an intimation that it has approved its claim for an amount of Rs. 2,81,44,413/- on account of fire dated 25th October, 2013 towards full and final settlement with complete details of the amount computed. The extract of the e-mail sent by the appellant Company to the respondent has been placed on record at Annexure P-2 in Civil Appeal arising out of SLP(C ) No. 23956 of 2017 and is reproduced as under:-
“From: Jaiprakash1@uiic.co.in
Sent: Thursday, May 05, 2016 1:23 PM
To: Vimal Singh
CC: sangeetagupta@uiic.co.in; vijaysharma@uiic.co.in;
nareshchandolia@uiic.co.in
Subject: Fire Claim dated 25.10.2013
Sir/Madam,
This is to inform you that the Competent Authority has approved your claim for an amount of Rs. 2,81,44,413/- (building Rs. 88,18,691 P & M Rs. 7,32,382 FFF Rs. 3,61,049 Finished Goods, Rs. 1,95,66,389 Fire Fighting Ex. Rs. 59,000 Cost of Debris Removal Rs. 88,187 Total Rs. 2,96,25,698)
Less Excess 5% Rs. 14,81,285 = Rs. 2,81,44,413) of loss dated 25.10.2013 (Claim No. 0407001113C101515001)
In order to release the payment we require following from your end.
1. Confirmation from the concerned bank “Indian Overseas Bank, Defence Colony Branch.
Through mail that in which Account the payment has to be made through NEFT.
2. Deposit Re-instatement premium of Rs.19100/-
3. Fire Fighting expenses bills in original
4. Debris Removal bills in original.
5. Full and final settlement discharge voucher for Rs. 2,81,44,413/- duly endorsed by the bank also without any Subjectivity.
Please furnish.
Jaiprakash
Divisional Manager
United India Insurance Company Limited
10203, IIIrd Floor, Jamuna House,
Padam Singh Road
New Delhi-110005
Mobile : 9910791508
Phone : 28755967, 28755419
jaiprakash@uiic.co.in”
4. On the same date, i.e. 5th May, 2016, the respondent sent a reply accepting the computation and provided the desired details with final discharge voucher and details of the bank account in which the payment was to be credited. The extract of the e-mail and the discharge voucher sent by the respondent is reproduced hereunder:-
“ANTIQUE ART
Exports Pvt. Ltd.
(A Govt. of India Recognized Export House)
PANIPAT OFFICE: 78 K.M. Stone, G.T. Road, karhans Village, Tehsil
Samalkha, Panipat-132103(INDIA)
T:0091-180-3003300 (100 Lines), F: 0091-180-3003311
E:Info@antiqueartexports.com, :www.antiqueartexports.com
| The Divisional Manager United India Insurance Co. Ltd. 10203, 3rd Floor, Jamuna House Padam Singh Road Karol Bagh, New Delhi. | 05.05.2016 |
Kind Attn: Mr. Jaiprakash
Subject : Fire Claim dated 25.10.2013
Dear Sir,
We are in receipt of your email of today’s date, wherein you have asked to furnish certain documents/information for doing the needful at your end. Accordingly, we are submitting herewith desired information/documents for your necessary action.
1. We have already requested our bank to confirm account d
