Case Note & Summary
The Supreme Court of India heard appeals by United India Insurance Co. Ltd. against a Delhi High Court order appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, to adjudicate a dispute with Antique Art Exports Pvt. Ltd. The respondent had purchased two Standard Fire and Special Perils Policies for its factory in Panipat, and two fires occurred on 25th September 2013 and 25th October 2013. The insurance company appointed surveyors and investigators, and after receiving their reports, approved the claims: Rs. 2,81,44,413 for the October fire and Rs. 2,20,36,840 for the September fire. On 5th May 2016, the insurer emailed the respondent with the approved amounts and requested documents, including a full and final settlement discharge voucher. The respondent replied the same day, accepting the computation, providing the required documents, and signing the discharge voucher without any protest or reservation. The payments were made. Over 11 weeks later, on 27th July 2016, the respondent for the first time alleged that the discharge was obtained by coercion and undue influence, and subsequently filed an application under Section 11(6) of the Act for appointment of an arbitrator. The High Court appointed an arbitrator, holding that the issue of whether the acceptance was under coercion was a matter for the arbitrator to decide. The Supreme Court allowed the appeals, setting aside the High Court's order. The Court held that once a claim is settled by accord and satisfaction and a discharge voucher is signed without demur, no arbitral dispute subsists. The respondent's belated allegation of coercion, unsupported by any prima facie evidence, could not revive the settled claim. The Court emphasized that under Section 11(6A), the court must confine itself to examining the existence of an arbitration agreement and whether a prima facie arbitral claim exists. Since the claim was fully settled, there was no arbitral dispute, and the appointment of an arbitrator was unjustified. The appeals were allowed, and the impugned order was set aside.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6) and Section 11(6A) of the Arbitration and Conciliation Act, 1996 - Full and Final Settlement - Discharge Voucher - The court examined whether an arbitrator could be appointed when the claimant had accepted the claim amount and signed a discharge voucher in full and final settlement without any demur or protest, and later alleged coercion and undue influence after 11 weeks without prima facie evidence. Held that once a claim is settled by accord and satisfaction, no arbitral dispute subsists, and the High Court erred in appointing an arbitrator without examining whether any prima facie arbitral claim existed (Paras 12-15). B) Contract Law - Accord and Satisfaction - Discharge of Contract - The court considered the effect of a discharge voucher signed without protest. Held that acceptance of payment and issuance of a full and final settlement discharge voucher without any demur or protest results in accord and satisfaction, discharging the contract, and no further claim survives unless the discharge is shown to be vitiated by coercion or undue influence supported by prima facie evidence (Paras 12-14). C) Evidence - Prima Facie Proof of Coercion or Undue Influence - The court assessed whether the respondent's allegation of coercion and undue influence was supported by any prima facie evidence. Held that mere assertion of coercion or undue influence without any contemporaneous documentary evidence or protest at the time of settlement is insufficient to revive a settled claim, and the High Court ought to have examined this aspect before appointing an arbitrator (Paras 13-15).
Issue of Consideration
Whether the High Court was justified in appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the respondent had accepted the insurance claim amount and signed a full and final settlement discharge voucher without any demur or protest, and later alleged coercion and undue influence without furnishing prima facie evidence.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned order of the High Court dated 30th May, 2017, and dismissed the application filed by the respondent under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 11(6)
- Section 11(6A)
- Accord and Satisfaction
- Discharge Voucher
- Coercion
- Undue Influence
- Prima Facie Evidence
