Arbitration awards cannot be set aside unless established error affects validity; financial duress invalidates coercive agreements; indemnity principles necessitate insurer obligation for timely compensation.

JUDGMENT

C. Hari Shankar, J.

1. The New India Assurance Company Limited ("NIA", hereinafter) seeks, by means of the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 ("the 1996 Act"), to challenge an award dated 2nd January 2020, passed by a learned three- member Arbitral Tribunal in arbitral proceedings between NIA and the respondent-Khanna Paper Mills Limited ("Khanna", hereinafter).

Facts

2. Khanna, which is engaged in the manufacture of pulp and paper, availed of the insurance policy provided by NIA, vide Cover Note dated 30th March 2012, valid for the period 1st April 2012 to 31st March 2013, covering a sum of Rs. 1292 crores, including all movable and immovable assets of Khanna.

3. During the period covered by the insurance policy, a fire broke out in the premises of Khanna on 12th June 2012. Considerable losses resulted. Khanna, thereupon, contacted NIA. M/s. Protocol Surveyor and Engineers Pvt Ltd was appointed as the Surveyor, to conduct a detailed survey of the losses suffered by Khanna. The Surveyor submitted an Interim Survey report on 20th June 2012 and a Final Survey report on 7th March 2013. Admittedly, a copy of the Final Survey Report was provided to Khanna only on 27th June 2013, without its annexures.

4. According to Khanna, the delay in clearance of the claim by NIA placed it in financial duress, in which situation it was compelled to sign a blank Joint Discharge Voucher, in which NIA subsequently filled details. A screenshot of the said blank Joint Discharge Voucher, as filed by Khanna before the learned Arbitral Tribunal may be provided as under:

5. The amount paid by NIA to Khanna as per the said Joint Discharge Voucher was Rs. 1,03,16,42,738/-. This, according to Khanna, was much less than its total entitlement as per the insurance policy of NIA.

6. As the contract between NIA and Khanna contained an arbitration clause, the claims of Khanna were referred to arbitration by a learned three member Arbitral Tribunal, which also conducted a site visit on 25th - 26th April 2017.

Khanna's Claims before the learned Arbitral Tribunal

7. Before the learned Arbitral Tribunal, Khanna quantified the additional payments to which it was entitled under the following heads of claim:

"I. Claim on account of Waste Paper Imported (Newsprint), amounting to Rs. 2,53,45,105/-;

II. Claim on account of Waste Paper Imported (Other), amounting to Rs. 10,74,16,427/-;

III. Claim on account of erroneous application of USD/MT rates & Foreign Exchange rates applicable to the assessed quantity of imported pulp for Newsprint, amounting to Rs. 2,45,13,433/-;

IV. Claim on account of Waste Paper (Local) amounting to Rs. 84,62,181/-;

V. Claim on account of complete exclusion of entire stocks of "Work-in-Progress " (WIP) amounting to Rs. 50,77,26,268.86/-;

VI. Claim on account of Differential Custom Duty, amounting to Rs.3,78,86,829/-;

VII. Claim on account of erroneous calculation of losses to Plant and Machinery, amounting to Rs.16,83,144/-;

VIII. Claim on account of the erroneous valuation of the Debris Removal Expenses, amounting to Rs.1,19,89,719/-;

IX. Claim on account of erroneous valuation of Fire Fighting/Debris Removal Expenses/Double Deduction, amounting to Rs.25,26,689/-;

X. Claim on account of erroneous disallowance of reversal of CENVAT credit, amounting to Rs.3,03,129/-."

8. Thereafter, the following two additional claims being claimed XI and XII were added vide an application under Section 23 of the 1996 Act filed on 14th August 2017.

"XI. Declare and direct that the Respondent is not entitled to deduct more than Rs. 50 lakhs towards "excess" and direct the Respondent to refund the excessive deduction of "excess"; and

XII. Direct the Respondent to pay interest in terms of Regulation 9 of the IRDA (Protection of Policyholders' Interest) Regulations, 2002."

The total amount of relief thus sought before the learned Arbitral Tribunal was Rs. 77,46,29,051.86.

The impugned award

9. T