In the decision rendered in Union of India vs. Master Construction
Co.(2011) 12 SCC 349
this court observed as under:
“18. In our opinion, there is no rule of the absolute
kind. In a case where the claimant contends that a
discharge voucher or no-claim certificate has been
obtained by fraud, coercion, duress or undue influence
and the other side contests the correctness thereof, the
Chief Justice/his designate must look into this aspect to
find out at least, prima facie, whether or not the dispute
is bona fide and genuine. Where the dispute raised by the
claimant with regard to validity of the discharge voucher
or no-claim certificate or settlement agreement, prima
facie, appears to be lacking in credibility, there may not
be a necessity to refer the dispute for arbitration at all.
19. It cannot be overlooked that the cost of arbitration
is quite huge—most of the time, it runs into six and seven
figures. It may not be proper to burden a party, who
contends that the dispute is not arbitrable on account of
discharge of contract, with huge cost of arbitration
merely because plea of fraud, coercion, duress or undue
influence has been taken by the claimant. A bald plea of
fraud, coercion, duress or undue influence is not enough
and the party who sets up such a plea must prima facie
establish the same by placing material before the Chief
Justice/his designate. If the Chief Justice/his designate
finds some merit in the allegation of fraud, coercion,
duress or undue influence, he may decide the same or
leave it to be decided by the Arbitral Tribunal. On the
other hand, if such plea is found to be an afterthought,
make-believe or lacking in credibility, the matter must be
set at rest then and there.
In our considered view, the plea raised by the respondent is bereft of
any details and particulars, and cannot be anything but a bald assertion.
Given the fact that there was no protest or demur raised around the time or
soon after the letter of subrogation was signed, that the notice dated
31.03.2011 itself was nearly after three weeks and that the financial
condition of the respondent was not so precarious that it was left with no
alternative but to accept the terms as suggested, we are of the firm view that
the discharge in the present case and signing of letter of subrogation were
not because of exercise of any undue influence. Such discharge and signing
of letter of subrogation was voluntary and free from any coercion or undue
influence. In the circumstances, we hold that upon execution of the letter of
subrogation, there was full and final settlement of the claim. Since our
answer to the question, whether there was really accord and satisfaction, is
in the affirmative, in our view no arbitrable dispute existed so as to exercise
power under section 11 of the Act. The High Court was not therefore
justified in exercising power under Section 11 of the Act.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10784 OF 2014 @
SPECIAL LEAVE PETITION (CIVIL) NO.24652 OF 2013
NEW INDIA ASSURANCE COMPANY LTD …. Appellant
Versus
GENUS POWER INFRASTRUCTURE LTD. …. Respondent
Uday U. Lalit, J.
Dated:December 04, 2014
Citation:AIR 2015 SC (SUPP)136
1. Leave granted. This appeal challenges the order dated 30.05.2013
passed by the High Court of Delhi in Arbitration Petition No.212 of 2011
appointing an arbitrator to adjudicate the disputes between the present
parties.
2. The respondent has a manufacturing unit for which it had
purchased a Standard Fire and Special Perils Policy (‘policy’ for short) from
the appellant on 17.04.2009, which policy was for a period of one year and
the total sum assured was Rs.91 crores and 10 lacs only. On 29.10.2009
there was a fire explosion in the adjoining Indian Oil Corporation Terminal
causing extensive damage to the manufacturing unit of the respondent. On
being notified, the appellant appointed a category “A” Licensed Surveyor
and Loss Assessor in compliance of Section 64 UM of the Insurance Act,
1938 to assess the damage. In the assessment of the respondent and as per
the claim lodged by it, the loss caused to its plant and machinery, buildings
fixtures and furnitures and stocks was to the tune of Rs.28.79 crores. It
appears that the Surveyor submitted his final report on 27.07.2010 and
assessed the loss at Rs.6,09,77,406/-. It is contended by the appellant but
denied by the respondent that the final survey report was duly communicated
to the respondent on 01.11.2010.
3. On 11.03.2011 the respondent signed a detailed letter of
subrogation which was on a stamp paper, accepting Rs.5,96,08,179/- in full
and final settlement of its claim under the policy and the relevant portion of
said letter dated 11.03.2011 was to the following effect:
To,
New India Assurance Co. Ltd.
Regional Office
Nehru Place, Tonk Road,
Jaipur
Dear Sir,
That in consideration of claim amount of Rs.5,96,08,179 (Rupees Five
Crores Nintey Six Lakhs Eight Thousand One Hundred Seventy Nine only)
(herein after referred as “Claim amount”) as full and final settlement amount
of our claim No.330203/11/10/01/00100001 arising under policy
No.330203/11/09/11/00000018 (herein after referred as “Policy”) covering
fire loss of my/our factory situated on Plot No.SPL 3, Sitapura, - Industrial
area Jaipur (herein after referred as “Factory Premises”) due to fire that took
place in IOC Terminal on 29-10-2009, we hereby subrogate our rights on
behalf of M/S Genus Power Infrastructures Limited Jaipur (herein after
referred as “Insured”) in favour of New India Assurance Co. Ltd. (herein
after referred as “Insurer”) as under:-
1) That we the Insured hereby subrogate all the rights and
remedies (to the extent provided by aforesaid contract of
Insurance and under the General law and further any other
Law enforceable consequence to the above loss) against the
RIICO, Indian Oil Corporation, Govt. of Rajasthan, other
insurance company or any other agency/authority of Govt.
of Rajasthan, semi Govt. etc. whom so ever is liable in
respect whereof in favour of the Insurer regarding Fire
accident taken place on 29-10-2009 in IOC terminal in
Sitapura Industrial Area, Jaipur and claim arises under
“Policy” covering fire loss of Insured factory in “Factory
Premises” in favour of the “Insurer”.
2) That we the Insured further assign and transfer all rights to
Insurer to recover the claim amount or any part thereof from
RIICO, Indian Oil Corporation, Govt. of Rajasthan, other
insurance company or any other agency/authority of Govt.
of Rajasthan, semi Govt. etc. who so ever is liable.
3) That we the Insured further assign and transfer all rights to
agitate the Claim before the RIICO, Indian Oil Corporation,
Govt. of Rajasthan, other insurance company or any other
agency/authority of Govt. of Rajasthan, semi Govt. etc. who
so ever is liable to pay the compensation/claim. The Insurer
will be entitled to file complaint/claim before any court of
law, tribunal or any other adjudicatory authority and plead
the same on behalf of ourselves and in getting success in
adjudication therein will be entitled to retain the amount
paid…….
……………………………………………………………..
………………………………………………………………
In witness whereof we get our hands on this Subrogation letter on the 11th
day of March 2011.
For Genus Power Infrastructure ltd.
Authorized Signatory
Signature
4. After nearly three weeks i.e on 31.03.2011 the respondent issued a
notice to the appellant stating that the discharge voucher was signed under
extreme duress, coercion and undue influence exercised by the appellant
who took undue advantage of the extreme financial difficulties of the
respondent. The respondent further sought to appoint its nominee arbitrator.
On 21.04.2011 the appellant replied that there was no arbitrable dispute
which existed between the parties inasmuch as the respondent had voluntary
signed the letter of subrogation and had accepted payment in full and final
settlement of its claim. In the meantime on 05.04.2011 the respondent had
filed a petition under section 11 of the Arbitration and Conciliation Act,
1996 (The ‘Act’ for short) before the High Court of Delhi alleging that it had
accepted the payment as stated above because of extreme financial
4Page 5
difficulty, duress and coercion. On 10.05.2013 the High Court after
recording rival submissions of the parties adjourned the matter which was
then taken up on 30.05.2013 when the High Court observed;
“Vide order dated 10th May, 2013, this Court has
already observed that there is a valid arbitration
agreement between the parties and there are disputes
which are covered under the arbitration agreement. The
learned counsel for the respondent submits that the
disputes are not arbitrable. The respondent can raise
this objection before the learned arbitrator.”
In that view of the matter the High Court proceeded to appoint a sole
arbitrator to adjudicate the disputes between the parties.
5. The aforesaid order dated 30.05.2013 is the subject matter of
challenge in the present appeal. Appearing for the appellant Mr. Gaurab
Banerji, learned Senior Advocate submitted that the letter of subrogation
was a detailed agreement which was finalized and signed after negotiations
between the parties and in the presence of two witnesses. The amount
agreed to was the amount recommended by the surveyor, reduced by the
mandatory reinstatement premium payable under clause 15 of the policy and
as such the settlement took place at the amount recommended by the
surveyor. Placing reliance on the financial status of the respondent, it was
submitted that its annual turnover is more than Rs.500 crores for last few
years and it was quite improbable that such a company would feel
financially constrained and stand coerced as alleged, in giving discharge on
receipt of Rs.5.98 crores. Mr. Krishnan Venugopal, learned Senior
Advocate appearing for the respondent submitted that knowing that the
respondent was under tremendous pressure owing to the complete
destruction of its manufacturing unit and not being in a position to negotiate,
the appellant by using its dominant position had forced the respondent to
sign the discharge voucher and accept the payment as stated above. In
support, reliance was placed on the decision of this court in National
Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd.
2009(1) SCC 267
by Mr. Venugopal.
6. The question that arises is whether the discharge in the present case
upon acceptance of compensation and signing of subrogation letter was not
voluntary and whether the claimant was subjected to compulsion or coercion
and as such could validly invoke the jurisdiction under Section 11 of the
Act. The law on the point is clear from following decisions of this court. In
National Insurance Co. Ltd. vs. Boghara Polyfab Pvt. Ltd. in paras 26
and 51 it was stated as under:-
“26. When we refer to a discharge of contract by an
agreement signed by both the parties or by execution of a
full and final discharge voucher/receipt by one of the
parties, we refer to an agreement or discharge voucher
which is validly and voluntarily executed. If the party
which has executed the discharge agreement or discharge
voucher, alleges that the execution of such discharge
agreement or voucher was on account of
fraud/coercion/undue influence practiced by the other
party and is able to establish the same, then obviously the
discharge of the contract by such agreement/voucher is
rendered void and cannot be acted upon. Consequently,
any dispute raised by such party would be arbitrable.
51. The Chief Justice/his designate exercising
jurisdiction under Section 11 of the Act will consider
whether there was really accord and satisfaction or
discharge of contract by performance. If the answer is in
the affirmative, he will refuse to refer the dispute to
arbitration. On the other hand, if the Chief Justice/his
designate comes to the conclusion that the full and final
settlement receipt or discharge voucher was the result of
any fraud/coercion/undue influence, he will have to hold
that there was no discharge of the contract and
consequently, refer the dispute to arbitration.
Alternatively, where the Chief Justice/his designate is
satisfied prima facie that the discharge voucher was not
issued voluntarily and the claimant was under some
compulsion or coercion, and that the matter deserved
detailed consideration, he may instead of deciding the
issue himself, refer the matter to the Arbitral Tribunal
with a specific direction that the said question should be
decided in the first instance.”
7. In the decision rendered in Union of India vs. Master Construction
Co.(2011) 12 SCC 349
this court observed as under:
“18. In our opinion, there is no rule of the absolute
kind. In a case where the claimant contends that a
discharge voucher or no-claim certificate has been
obtained by fraud, coercion, duress or undue influence
and the other side contests the correctness thereof, the
Chief Justice/his designate must look into this aspect to
find out at least, prima facie, whether or not the dispute
is bona fide and genuine. Where the dispute raised by the
claimant with regard to validity of the discharge voucher
or no-claim certificate or settlement agreement, prima
facie, appears to be lacking in credibility, there may not
be a necessity to refer the dispute for arbitration at all.
19. It cannot be overlooked that the cost of arbitration
is quite huge—most of the time, it runs into six and seven
figures. It may not be proper to burden a party, who
contends that the dispute is not arbitrable on account of
discharge of contract, with huge cost of arbitration
merely because plea of fraud, coercion, duress or undue
influence has been taken by the claimant. A bald plea of
fraud, coercion, duress or undue influence is not enough
and the party who sets up such a plea must prima facie
establish the same by placing material before the Chief
Justice/his designate. If the Chief Justice/his designate
finds some merit in the allegation of fraud, coercion,
duress or undue influence, he may decide the same or
leave it to be decided by the Arbitral Tribunal. On the
other hand, if such plea is found to be an afterthought,
make-believe or lacking in credibility, the matter must be
set at rest then and there.
22. The above certificates leave no manner of doubt
that upon receipt of the payment, there has been full and
final settlement of the contractor’s claim under the
contract. That the payment of final bill was made to the
contractor on 19-6-2000 is not in dispute. After receipt of
the payment on 19-6-2000, no grievance was raised or
lodged by the contractor immediately. The authority
concerned, thereafter, released the bank guarantee in the
sum of Rs 21,00,000 on 12-7-2000. It was then that on
that day itself, the contractor lodged further claims.”
8. It is therefore clear that a bald plea of fraud, coercion, duress or undue
influence is not enough and the party who sets up a plea, must prime facie
establish the same by placing material before the Chief Justice/his designate.
Viewed thus, the relevant averments in the petition filed by the respondent
need to be considered, which were to the following effect:-
“(g) That the said surveyor, in connivance with the
Respondent Company, in order to make the Respondent
Company escape its full liability of compensating the
Petitioner of such huge loss, acted in a biased manner,
adopted coercion undue influence and duress methods of
assessing the loss and forced the Petitioner to sign certain
documents including the Claim Form. The Respondent
Company also denied the just claim of the Petitioner by
their acts of omission and commission and by exercising
coercion and undue influence and made the Petitioner
Company sign certain documents, including a preprepared
discharge voucher for the said amount in
advance, which the Petitioner Company were forced to
do so in the period of extreme financial difficulty which
prevailed during the said period. As stated aforesaid, the
Petitioner Company was forced to sign several
documents including a letter accepting the loss
amounting to Rs.6,09,55,406/- and settle the claim of
Rs.5,96,08,179/- as against the actual loss amount of
Rs.28,79,08,116/- against the interest of the petitioner
company. The said letter and the aforesaid pre-prepared
discharge voucher stated that the petitioner had accepted
the claim amount in full and final settlement and thus,
forced the petitioner company to unilateral acceptance
the same. The petitioner company was forced to sign the
said document under duress and coercion by the
Respondent Company. The Respondent Company
further threatened the petitioner Company to accept the
said amount in full and final or the Respondent Company
will not pay any amount toward the fire policy. It was
under such compelling circumstances that the petitioner
company was forced and under duress was made to sign
the acceptance letter.”
9. In our considered view, the plea raised by the respondent is bereft of
any details and particulars, and cannot be anything but a bald assertion.
Given the fact that there was no protest or demur raised around the time or
soon after the letter of subrogation was signed, that the notice dated
31.03.2011 itself was nearly after three weeks and that the financial
condition of the respondent was not so precarious that it was left with no
alternative but to accept the terms as suggested, we are of the firm view that
the discharge in the present case and signing of letter of subrogation were
not because of exercise of any undue influence. Such discharge and signing
of letter of subrogation was voluntary and free from any coercion or undue
influence. In the circumstances, we hold that upon execution of the letter of
subrogation, there was full and final settlement of the claim. Since our
answer to the question, whether there was really accord and satisfaction, is
in the affirmative, in our view no arbitrable dispute existed so as to exercise
power under section 11 of the Act. The High Court was not therefore
justified in exercising power under Section 11 of the Act.
10. In the circumstances, we allow the present appeal in the aforesaid
terms and set aside the order of the High Court . No order as to costs.
………………………..J.
(Anil R. Dave)
………………………..J.
(Uday Umesh Lalit)
New Delhi,
December 04, 2014
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