Case Note & Summary
The applicant, Vishwa Paper Mills (a division of Yog Industries Ltd.), filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator to resolve a dispute with the respondent, United India Insurance Co. Ltd., arising from a fire insurance claim. The applicant had a fire on 15.2.2009, resulting in loss of stock worth Rs.5,30,61,213/-. The claim was lodged on 16.2.2009, and a surveyor was appointed, but no payment was made until 6.5.2010. Due to financial distress and the threat to the industry's existence, the applicant accepted a payment of Rs.1,59,49,535/- under a full and final settlement receipt. The applicant alleged that the receipt was obtained under coercion and undue influence. The respondent opposed the application, raising the defence of accord and satisfaction based on the receipt and also argued that Clause 13 of the insurance policy permits arbitration only when liability is admitted and the dispute is only as to quantum. The court, relying on the Supreme Court judgment in National Insurance Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC 267, held that the issue of accord and satisfaction is a mixed question of law and fact that should be decided by the arbitrator. The court noted that the applicant had made representations about financial distress and that the delay in payment was significant. The court rejected the respondent's argument that the arbitration clause was limited, as the dispute extended beyond quantum. The court allowed the application and appointed a sole arbitrator to adjudicate the dispute.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) of Arbitration and Conciliation Act, 1996 - Accord and Satisfaction - Full and Final Settlement Receipt - Where the applicant alleged that the settlement receipt was obtained under coercion and undue influence due to financial distress caused by delayed payment, the court held that the issue of accord and satisfaction is a mixed question of law and fact to be decided by the arbitrator, not by the court at the stage of appointment. (Paras 1-3) B) Insurance Law - Arbitration Clause - Clause 13 of Insurance Policy - Reference to Arbitration - The clause permits arbitration only when liability is otherwise admitted and the dispute is only as to quantum. However, the court found that the respondent had not admitted liability and the dispute extended beyond quantum, yet the court proceeded to appoint an arbitrator considering the allegations of coercion. (Para 2)
Issue of Consideration
Whether the existence of a full and final settlement receipt and the defence of accord and satisfaction bar the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the settlement is alleged to have been obtained under coercion and undue influence.
Final Decision
The court allowed the arbitration application and appointed a sole arbitrator to adjudicate the dispute between the parties.
Law Points
- Accord and satisfaction
- Full and final settlement receipt
- Coercion and undue influence
- Section 11(6) of Arbitration and Conciliation Act
- 1996
- Clause 13 of insurance policy
- Reference to arbitration when liability admitted but quantum disputed
