The need for evidence of fraud, coercion, duress, or undue influence to refer a dispute to arbitration under the Arbitration and Conciliation Act, 1996.

1. This petition under Section 11 of the Arbitration and Conciliation Act, 1996 (‘Act’) seeks appointment of an Arbitrator in respect of a claim made by the Petitioner, a partnership firm, under a Standard Fires and Special Perils Policy issued by the Respondent Oriental Insurance Company Limited (‘OICL’) for a sum of Rs.2.75 crores for the period 1st May 2013 to 30th April 2014.

2. There was a serious fire in the factory of the Petitioner at around 10.30 pm on 11th July 2013 causing damage to its property, plant and machinery and stocks. The Petitioner submitted a claim to OICL on 15th August 2013 for a loss aggregating to Rs.2,36,36,380. By a letter dated 28th March 2014, OICL informed the Petitioner that the claim of the Petitioner has been approved to the extent of Rs.1.54 crores. Along with the letter a blank discharge voucher was sent for signature by way of acceptance of the said amount in full and final settlement of the Petitioner's claim. It was stated that if the discharge voucher was not signed, the amount would not be released. On 9th April 2014, the Petitioner sent an email conveying that the sum of Rs.1.54 crores was not acceptable. On 20th May 2014, another email was sent by the Petitioner reiterating the demand for the amount claimed. In response thereto on 22nd May 2014, OICL informed the Petitioner that it could not settle the claimed for a higher amount.

3. Even according to the Petitioner, its partner Mr. Bharat Bhushan did sign the discharge voucher on 22nd May 2014. A copy thereof has been placed on record. However, the case of the Petitioner is that Mr. Bhushan was compelled to sign the said voucher under coercion.

4. The admitted fact is that after the Petitioner sent OICL the signed voucher, which was countersigned also signed by the Petitioner’s bank, the amount of Rs.1.54 crores was transferred electronically by OICL into the account of the Petitioner on 27th May 2014.

5. On 28th May 2014, the Petitioner sent an email to OICL attaching the copy of a detailed letter. The relevant portion of the said letter reads as under:

“Today, you have called me to settle my claim and look into the details of my representation dated 9th April 2014 and 2nd May 2014. On your assurance the moment, I, Bharat Bhushan, Partner reached your DO office, at Shakti Nagar around 11 am, on 22nd May 2014, you fraudulently by exercising undue influence and stating that my rest of the claims can be settled in future, if I refused to take the payment now I won’t be getting a single penny. In fact I have signed in protest. You have taken an undue advantage of my situation. I am already paying huge amount of interest upon the credit taken by us from ICICI Bank. My credit limit is Rs.2,70,00,000 and I have exhausted my credit limit.”

The above letter was addressed to the “The GM Tech (Fire)", OICL.

6. In response to the arbitration notice sent by the Petitioner, OICL has relied upon the discharge voucher signed by the Petitioner to negate the plea for appointment of an Arbitrator. As a result the present petition has been filed by the Petitioner seeking the appointment of an Arbitrator.

7. Mr. Nandwani, learned counsel for the Petitioner, relied upon the decisions in National Insurance Company Limited v. Sehtia Shoes (2008) 5 SCC 400, National Insurance Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC 267, Gayatri Project Ltd. v. Sai Krishna Construction 2013 (15) SCALE 143, Sara International Limited v. Rizhao Steel Holding Group Co. Ltd. 2013 (201) DLT 262 and a judgment of the National Consumer Disputes Redressal Commission, New Delhi dated 15th January 2002 in Revision Petition No. 532 of 1998. It is submitted that the question whether the Petitioner was subjected to undue coercion and compelled to sign the discharge voucher was itself an arbitrable dispute for which evidence had to be led. It is pointed out that the protest was lodged immediately after the transfer of the amount into the Petitioner’s account.

8. I