Point of Law: In the absence of any prima facie proof regarding duress/coercion, the court can refuse to appoint an arbitrator.

ORDER :

1. The present arbitration application is filed under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act, 1996) seeking appointment of a sole arbitrator to resolve the disputes between the parties.

2. Heard Mr. G. Ram Chandra Reddy, learned counsel for the Applicant and Mr. V. Sambasiva Rao, learned counsel for the Respondent.

3. The Applicant took the Standard Fire and Special Perils Policy on 17.08.2016 from the Respondent company. The said policy was valid for a period from 28.08.2016 to 27.08.2017. On 06.07.2017, a fire accident occurred in the Applicant company’s factory. The same was intimated to the Respondent and a surveyor was appointed to assess the loss caused to the Applicant. The Applicant submitted a claim of Rs. 12,45,00,000/- towards loss caused by the fire accident.

4. According to the Applicant, after negotiations it restricted its claim to Rs. 7,54,38,689/- and the surveyor only allowed a claim of Rs. 4,20,08,497/- According to the Applicant, the surveyor wrongfully disallowed the claim of Rs. 3,44,30,192/- The Applicant alleged that the surveyor has not assessed the damage properly and on its protest the Respondent company appointed a Chartered Accountant to reassess the loss. The Chartered Accountant reassessed the damage caused to the stocks as Rs. 6,96,64,516/-.

5. Noticing a huge disparity between the assessment made by the surveyor and the Chartered Accountant, the Applicant sought for a meeting to sort out the disparity in assessment of damages. However, the same was not accepted.

6. According to the Applicant, on several occasions it requested the Respondent to settle the claim based on the assessment of the Chartered Accountant and the same was not accepted. The Applicant further states that the Respondent authorities suggested it to accept the amount i.e., Rs. 3,94,00,622/- as assessed by the surveyor till the finalization of the claim.

7. The Applicant accepted the alleged suggestion of the Respondent authorities as it was financially weak and broken. According to the Applicant, they accepted the amount of Rs. 3,94,00,622/- under distress. The Applicant issued a discharge voucher on 06.11.2020 and accepted an amount of Rs. 3,94,00,622/- towards full and final settlement.

8. On 17.06.2021, the Applicant invoked Clause 13 of the Standard Fire and Special Perils Policy and issued an arbitration notice dated 17.06.2021 to the Respondent. The Applicant in the said notice stated that how the assessment of damage by the surveyor was incorrect and how it is entitled to an amount Rs. 3,44,30,192/- The said arbitration clause is extracted below:

“If any dispute or difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independent of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel of three arbitrators, comprising of two arbitrators, one to be appointed by each of the parties to the dispute / difference and the third arbitrator to be appointed by such two arbitrators and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act 1996.

It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinabove provided if the Company has disputed or not accepted liability under or in respect of this policy.

It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon the policy that the award by such arbitrator/arbitrators of the amount of the loss or damage shall be first obtained.”

9. The Respondent replied to the said arbitration notice on 06.07.2021 disputing the claims of the Applicant and stated that there exists no arbitrable dispute