R.D Dhanuka, J.:— By this application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short “the said Arbitration Act), the applicant seeks appointment of an arbitrator. The respondents have raised an objection about maintainability of this application on the ground that the applicant had signed the discharge voucher/sheet voluntarily given to the respondents in full and final settlement of all their claims present and/or future arising directly/indirectly in respect of the loss. Some of the relevant facts for the purpose of deciding this application are as under:
2. On 17 September 2011, the applicant obtained a Standard Fire and Special Peril Policy No. 124500/11/2012/457 from the respondent no. 1 to cover the stocks of goods lying in its three separate godowns located at Thane, Maharashtra vide their three separate endorsements. The total sum insured stood at Rs. 13 crores. Clause 13 of the terms and conditions of the said policy contains an arbitration clause. On 25 May 2012, a fire broke out at night on the ground floor of the building occupied by RFCL which fire spread to the first floor of the building and completely engulfed all the three godowns where the stocks of the applicant were stored and resultantly, all the stocks in all the three godowns were completely destroyed.
3. On 26 May 2012, the applicant informed the respondents about the fire and consequential loss. The respondents appointed M/s. C.P Mehta & Co. as Surveyors and Assessors to survey the loss suffered by the applicant and to report on the claim that was to be lodged upon the respondents by the applicant. The applicant lodged a total and final claim upon the respondents for an amount of Rs. 14,88,14,327/- comprising Rs. 13,52,85,752/- towards the cost of the materials totally destroyed and Rs. 1,35,28,575/- as overheads. It is the case of the applicant that the applicant also submitted comprehensive documentary evidence and detailed work sheets in support of the said claim.
4. On 14 August 2012, after visiting the factory of the applicant and the godowns and after scrutinizing the materials submitted by the applicant in support of their claim, the Surveyor appointed by the respondents filed a Final Survey Report with the respondents recommending that the claim be settled for an amount of Rs. 12,93,26,704.98 and that after deducting an amount of 5% towards compulsory deduction for excess, a net amount of Rs. 12,28,60,369/- be paid over to the applicant. It is the case of the applicant that a copy of the survey report was not supplied to the applicant, either by the respondents or by the Surveyor.
5. It is the case of the applicant that on 20 September 2012, the applicant addressed a letter to the Chairman of the respondent no. 1 apprising him of the financial distress that the applicant had faced with and requested for settlement of the claim on priority basis. The applicant informed him that the applicant had obtained a temporary loan of Rs. 10 crores from Union Bank of India for a period of 3 months on a very high rate of interest which was due for repayment in the month of September 2012 and it would be a great financial help if the claim of the applicant was to be settled on priority basis which would mitigate their hardship.
6. By their letter dated 25 October 2012 addressed to the respondent no. 1, the applicant informed that the total sale value of the goods was above Rs. 19 crores and the applicant had not only lost their goods but also their profits. The applicant informed that it had submitted all the documentary evidence supporting their claim to the Surveyor M/s. C.P Mehta & Co. The applicant also informed the Chairman-cum-Managing Director of the respondent no. 1 that the finance was the continuous requirement and it was in this context that the applicant was personally pleading and requesting for immediate settlement of the claim.
7. By the letter dated 31st October 2012 addressed to the Chairman-cum-Managing Director of the respondent no. 1, the applicant placed on record that the applicant had understood from the surveyor M/s. C.P Mehta & Co. that the Head Office of the respondent no. 1 asked for some further information in connection with the claim. The applicant submitted that a very voluminous work was involved in compiling, organizing and sending various documents which would be around 35,000 documents. The surveyor had already gone through those documents and had also picked up at random, sample of various concerned records. Nevertheless, the applicant was making arrangement to compile the documents and agreed to send the same to the surveyor as soon as possible. The applicant placed on record that in the meantime, festive season of Diwali was approaching very fast and the applicant would have to make arrangement for salary and bonus payments without delay to their staffs and workmen to avoid labour unrest and also that the applicant needed to pay monthly interest and installments to the bank. The applicant placed on record that there were financial distress and requested the Chairman-cum-Managing Director to immediately grant ‘on account payment’ of around 80% of the claim amount as assessed by the surveyor. The applicant also conveyed that the applicant expected that the insurance company should stand by the applicant in their difficult times.
8. By their letter dated 10 December 2012, the applicant requested the General Manager of the respondent no. 1 to consider ‘on account payment’ immediately. Vide their letter dated 17 December 2012 addressed to the General Manger of the respondent no. 1, the applicant informed that the delay of over 6 months in settlement of their claim had shaken them and requested that if the matter was delayed beyond 25 December 2012, the applicant shall be paid a substantial amount towards ‘on account payment.’ The applicant conveyed that a loss of around Rs. 14.5 crores had put tremendous pressure on their finances and they were finding it extremely difficult to run normal operations. He was requested to settle the claim at the earliest or release a substantial part of the amount under the head ‘on account payment’ as assured by the General Manager of the respondent no. 1.
9. By their letter dated 28 January 2013 addressed to the respondent no. 1, the applicant alleged that though the Chairman-cum-Managing Director had given instructions for immediate release of ‘on account payment’ to the applicant, his subordinates refused to follow his instructions. The applicant had noticed the distrusting and prejudicial atmosphere at the Head Office. The applicant stated that the HeadOffice of the respondent no. 1 appointed M/s. Naveen Jand and Associates, Chartered Accountants, to carry out almost a resurvey of the claim made by the applicant. The applicant had already submitted 37700 documents physically, which showed the exact number of meters in quantity of furnishing fabrics. The applicant brought to the notice of the Chairman-cum-Managing Director that the new surveyors had asked for large number of documents again and such documents were not possible to be supplied by this kind of industries and requested the Chairman-cum-Managing Director to order immediate release of on account payment and salvage the situation by doing so and not to force the applicant for taking desperate measures.
10. By letter dated 9 February 2013 addressed to the new surveyor M/s. Naveen Jand and Associates, the applicant had submitted 37700 documents and submitted further documents to the said new surveyor. The applicant stated that since last 9 months, the applicant had been providing different documents/information to different people and submitted whatever was requested by the new surveyor in broader form and requested them to submit their report at the earliest.
11. The Union Bank of India addressed several letters placing on record that account of the applicant was overdrawn and running in excess and called upon the applicant to arrange the funds to keep the account within sanctioned limit. Copies of several such letters are annexed to the arbitration application.
12. It is the case of the applicant that in accordance with the format sent by the respondents and after obtaining the signature of the applicant, a cheque for the amount of Rs. 3.5 crores was handed over to the applicant. The applicant signed the discharge voucher on 4 March 2013 when the respondents paid the said sum of Rs. 3.5 crores to the applicant as ‘on account payment’ in the matter of its claim. The Union Bank of India also had endorsed the said discharge voucher. It is the case of the applicant that all data that was requisitioned by the new surveyor was provided by the applicant from time to time. Several meetings took place between the representatives of the new surveyor, the respondents and the applicant.
13. The applicant vide their email dated 19 March 2013 addressed to the new surveyor placed on record that the applicant had provided all data, records and documents for verification of the new surveyor which were asked for from time to time and had spent several months of mandays in satisfying their requirements. The applicant placed on record that the applicant felt very strongly that the new surveyor was just not satisfied with whatever was provided by the applicant though all the data submitted by the applicant had proved their genuine claim and the intention of the new surveyor was to somehow reduce the claim of the applicant.
14. The applicant vide their letter dated 24 September 2013 addressed to the new surveyor placed on record that as the applicant had provided them with all the information/data that was asked for, it was important that the verification was completed and the report was submitted to the respondents urgently. The applicant had also placed on record that the provision of law requires the insurer to appoint outside agency provisionally to verify the claim of the insured.
15. Vide their letter dated 24 September 2013 addressed to the Chairman-cum-Managing Director of the respondent no. 1, the applicant again placed on record that the applicant was constrained to supply voluminous data to the new Surveyor of the respondent no. 1. The applicant also placed on record that the entire procedure followed by the respondent no. 1 to have a virtual resurvey by the new surveyor had compounded the problems and had added enormously to their financial duress.
16. The applicant requested the Chairman-cum-Managing Director of the respondent no. 1 to instruct the Chartered Accountants to complete their scope of work and submit their report. The applicant placed on record that a loss of around Rs. 15 crores would take a big toll on the working capital of any Company. It was also stated that the loss had put tremendous pressure on their finances and they were finding it extremely difficult to run normal operations. The applicant requested the Chairman-cum-Managing Director to settle their claim at the earliest.
17. The applicant vide their letter dated 23rd December 2013 addressed to the Deputy General Manager of the respondent no. 1 placed on record that the process was taking long time and inspite of the mutual efforts, the applicant was not able to conclude the claim. The applicant placed on record that since the process was taking some time, to mitigate their serious financial crisis, the applicant requested the Deputy General Manager to grant an additional adhoc relief which shall help the applicant to meet their prolonged financial obligations. The applicant requested the Deputy General Manager to consider their request sympathetically and to look into the matter on priority.
18. By their letter dated 25 December 2013, in reply to the letter of M/s. Naveen Jand & Associates dated 6 December 2013, the applicant denied the allegations made therein and requested for an early completion of verification and submission of Report to the respondents.
19. The applicant addressed a letter to the General Manager of the respondent no. 1 on 21 February 2014 informing that the surveyor was refusing to commit any fixed date within which they would be submitting their report and also Company officials had no answers to the questions of the applicant as to when their claim would be settled. The applicant requested the General Manager to set a deadline to settle their claim at the earliest. The applicant had also written several letters to the respondents' officers about the huge financial losses suffered by the applicant due to delay in settlement of the claim. The applicant had not received any replies to the letters addressed by the applicant and were incurring unbearable financial burden/cost. The applicant informed the General Manager to settle the claim within 15 days.
20. The applicant vide their letter 26 May 2014 addressed to the Chief Regional Manager of the respondent no. 1 placed on record that the applicant had conveyed their financial problems and urgent need of funds to all top executives including the Chairman and Managing Director of the respondent no. 1. Though around 2 weeks ago, the applicant was finally assured that they would receive the final claim settlement amount shortly, the applicant was eagerly awaiting the said much delayed settlement amount. The respondents, however, did not settle the final amount. The applicant conveyed that the applicant was facing acute financial crisis and those funds were urgently required by the applicant to improve the financial condition of the applicant. The applicant requested the Chief Regional Manager to release the final claim settlement amount immediately without any further delay.
21. On 27 May 2014, the applicant received an email from the respondents to the effect that a discharge voucher for the balance amount of the claim payable as described was being enclosed. The applicant was requested to execute the same along with the Bank's Discharge on the space earmarked on the left side and send the scanned copy back followed by the scanned copy.
22. The applicant vide their email dated 28 May 2014 replied to the email of 27 May 2014 and referred to the said discharge voucher sent by the respondents to the applicant for signature. The applicant placed on record that their total claim was approximately Rs. 15 crores and the surveyor had assessed the same at approximately Rs. 12.93 crores. The applicant had not been explained the basis for arriving at the figure of Rs. 7.16 crores. The applicant requested the Regional Manager of the respondent no. 1 to provide the claim assessment working for their understanding to enable the applicant to take up the matter with their board of directors for consideration.
23. The respondents replied to the email dated 28 May 2014 vide their email dated 29 May 2014 alleging that M/s. C.P Mehta & Company had initially assessed the loss for Rs. 12,28,60,369/-. However, the respondent had certain issues on the costing. The respondent however had appointed M/s. Naveen Jand and Associates to have a relook in the costing aspect and reconfirm/verify the costing for loss assessment purpose. According to the said report submitted by M/s. Naveen Jand and Associates, the assessment works to Rs. 7,16,30,148/- and accordingly, the competent authority had granted the claim. The respondents enclosed the working of the claim and requested to go through the same and send to the respondents an unconditional discharge voucher duly signed by the applicant and the bankers.
24. In response to the said email dated 29 May 2014 the applicant placed on record that after going through the working of the claim, the applicant noticed that it was just a statement of calculation, without explanation/basis for it, that adjustments had resultant deductions of the claim of the applicant by more than 50% as assessed by the surveyor appointed by the respondents. The applicant placed on record that since the respondents had taken 2 years to offer the final settlement of the claim though mentioned to the respondents repeatedly that the applicant was suffering from huge financial constraint and had to pay bank interest and installments, salaries and wages, the applicant was left with no alternative but to accept the offer of the respondents reluctantly and was accordingly sending the voucher duly discharged by the applicant and their bankers for doing the needful.
25. It is the case of the applicant that since the respondents did not show any inclination to relent on any count and instead continued to insist that any further payment would be made to the applicant if and only if the discharge voucher was executed exactly at the time and in the form and manner as required by the respondents as well as the letter dated 31 May 2014 was withdrawn and since the applicant was in urgent need of funds to meet its mounting liabilities, the applicant was coerced into withdrawing its earlier letter of 31 May 2014 and in executing the discharge voucher exactly as dictated by the respondents. By their letter dated 6 June 2014 addressed to the Regional Manager, the applicant withdrew the letter dated 31 May 2014 submitted along with the discharge voucher for full and final settlement of their claim. The applicant requested the respondents to remit the claim amount immediately. The said discharge voucher was on the letter head of the respondent no. 1 duly endorsed by the bankers of the applicant. In the said discharge voucher, it was recorded that the applicant accepted a sum of Rs. 3,66,30,148/- in full and final settlement of their claim. It was also recorded that the applicant had voluntarily given discharge receipt in full and final settlement of their claim present or future arising directly/indirectly in respect of the said loss/accident and subrogated all their rights and remedies to the respondent no. 1 in respect of the loss/damages.
26. The respondent no. 2 addressed a letter dated 21 June 2014 to the applicant forwarding therewith a copy of the letter dated 21 June 2014 signed by the respondent no. 1 recording that the respondents had received a letter dated 31 May 2014 of the applicant but subsequently the applicant had also sent a letter dated 6 June 2014 stating that the applicant was withdrawing the said letter dated 31 May 2014. Accordingly, the claim had been paid in full and final settlement by way of discharge voucher which was also in file. The applicant was informed that as regards meeting, the respondents were ready to have the same in the presence of the Deputy General Manager of the respondents on any convenient dates.
27. It is the case of the applicant that vide their letter dated 21 June 2014, the applicant informed the respondents that since there was a huge difference between what was the total claim amount by the applicant and what was the final claim settlement amount by the respondents, the same was required to be discussed and resolved, failing which the applicant would be required to invoke the arbitration clause 13 of the terms and conditions attached to the policy.
28. The applicant, vide their letter dated 14 July 2014 addressed to the respondents, again placed on record that the applicant had suffered huge financial losses due to the delay in settlement of their claim. It was alleged that after a lapse of 27 months, the respondents had made “a take it or leave it offer” of Rs. 7,16,30,148/- which was less than 50% of their reasonable claim amount. The applicant stated that a voucher was discharged by the applicant on 30 May 2014 with a qualification that the applicant was accepting the amount reluctantly and had also met the officers of the respondent no. 1 to request them to reconsider the unreasonable claim settlement. The applicant was instructed to withdraw the said letter of protest and accept the claim settlement unconditionally. The applicant was forced to accept the offer amount and since there existed a dispute on the quantum of claim settlement paid to the applicant, the applicant proposed to invoke the arbitration clause 13 and to refer the differential amount of around Rs. 6 crores along with the interest. The applicant also suggested the names for appointment of one of them as the sole arbitrator.
29. The respondents, vide their letter dated 17 July 2014 addressed to the applicant, informed that the respondents were surprised to note of the proposal of the applicant to invoke arbitration after the clean discharge voucher was signed for the sum of Rs. 7,16,30,148/- in full and final settlement of the said loss. The respondents denied that there existed any dispute of quantum in respect of the said claim and contended that the amount due to the applicant arising out of indemnity arising from the policy was duly verified and assessed based on the documents submitted by the applicant. The respondents did not agree to the request of the applicant for any differential amount or request for proceeding for arbitration under the policy.
30. The applicant, vide their letter dated 24 July 2014 addressed to the respondents, denied that the amount received by the applicant was in clean discharge voucher in full and final settlement of their claim and reiterated that the applicant had suffered a major loss of Rs. 14,16,94,329/-. The surveyor, M/s. C.P Mehta & Co. had submitted their report assessing the loss at Rs. 12.93 crores. The applicant also placed on record that as against approximately the claim of Rs. 14.70 crores, the respondents had released only Rs. 3.50 crores on 4 March 2013 i.e almost 10 months after the loss had occurred, and after a lapse of 27 months, the respondents had made “a take it or leave it offer” of Rs. 7.16 crores towards full and final settlement of their claim, the discharge was accepted reluctantly by the applicant. The applicant also placed on record that when the applicant met officers of the respondents to reconsider the unreasonable claim settlement, the applicant was instructed to withdraw the letter of protest and accept the claim settlement unconditionally which was a proof of coercion. The applicant suggested another name for appointment of a sole arbitrator.
31. The respondents vide their letter dated 7 August 2014, once again alleged that the applicant was paid Rs. 7,16,30,148/- in clean discharge and full and final settlement of their claim and there existed no dispute with regard to the quantum of claim and refused to appoint any arbitrator.
32. Mr. Mehta, learned counsel appearing for the applicant invited my attention to the insurance policy and also various correspondence exchanged between the parties referred to aforesaid and submits that the applicant had made a claim for Rs. 14 croses based on 37700 documents produced before the Surveyor M/s. C.P Mehta & Co. who had assessed the loss of the applicant approximately at Rs. 12.93 crores. He submits that the respondents however released only Rs. 3.50 crores on 4 March 2013 i.e almost 10 months after the loss suffered by the applicant due to fire and only after a lapse of 27 months made “a take it or leave it offer” of Rs. 7.16 crores towards full and final settlement of their claim. He submits that the applicant had taken a loan of the substantial amount and had to bear the extra burden of high interest costs and found itself defaulting on timely loan repayments. The applicant was unable to pay income tax on time as a result of which, it had to pay a sum of Rs. 23.90 lacs in the year 2012-2013 and a sum of Rs. 11.10 lacs in the year 2013-2014 towards interest for the delayed payments of income tax.
33. It is submitted that even the bankers of the applicant were regularly reminding the applicant for repayment of the loan which was over due. Learned counsel invited my attention to eleven of such letters which were placed on record addressed by the bankers of the applicant during the period between 29 August 2012 and 2nd March 2014. He submits that though the respondents could not have appointed M/s. Naveen Jand & Associates to resurvey the claim and that also without conveying any reason to the applicant, the respondents deliberately appointed the said company with a view to reduce legitimate claim of the applicant. He submits that the applicant was suffering from huge financial constraint and loss which fact was brought to the notice of the respondents from time to time. The applicant had submitted all the documents called for by the said M/s. Naveen Jand & Associates, though not required. He submits that even the said report submitted by M/s. Naveen Jand & Associates was not furnished to the applicant by the respondents. The applicant had to pay charges to the said M/s. Naveen Jand & Associates for the purpose of obtaining a copy thereof.
34. Learned counsel for the applicant submits that the applicant had placed on record about their financial and economical duress from time to time to the respondents and had requested the respondents to settle their claim at the earliest. He submits that the respondents however insisted the applicant that unless the applicant signs the discharge voucher sent by the respondents, the respondents would not even release the said settlement amount. The applicant by addressing a letter dated 31 May 2014 had placed on record that offer of the respondents was accepted by the applicant reluctantly. The applicant had also recorded in the said letter that the applicant was suffering from huge financial constraint and had to pay bank interest and installments, salaries and wages. He submits that the respondents, however, insisted and pressurized the applicant to withdraw the said letter dated 31 May 2014 and made it clear that unless the applicant signs clean discharge voucher without any condition, the respondents would not release any payment. The applicant was under economical and financial duress and due to coercion on the part of the respondents to sign the discharge voucher, once again a format was forwarded by the respondents. The applicant thereafter lodged a protest and once again recorded economical and financial distress of the applicant and had rightly raised dispute referred to the arbitration.
35. Mr. Naidu, learned counsel for the respondents invited my attention to various correspondence exchanged between the parties and submits that the applicant in the arbitration application has not explained as to what transpired between the parties during the period between 31 May 2014 and 6 June 2014. The applicant had submitted two discharge vouchers during the said period. He submits that the applicant had not demonstrated whether the second discharge voucher signed by the applicant was under economical or financial duress under the arbitration agreement. He submits that since the applicant had signed the discharge voucher and accepted the payment made by the respondents unconditionally and confirmed that the said payment was received in full and final settlement of their claim, present or future, arising directly/indirectly in respect of the said loss/accident and subrogated all their rights and remedies to the respondent no. 1 in respect of the loss/damages, there exist no dispute between the parties which can be referred to arbitration. He submits that the applicant having signed the discharge voucher and having accepted the balance amount of Rs. 7,16,30,148/- in full and final settlement due to alleged loss suffered by the applicant, the present arbitration application is not maintainable.
36. Learned counsel for the respondents submits that though the payment was received by the applicant on 9 June 2014, the applicant raised protest only on 21 June 2014. He submits that even in the said letter dated 21 June 2014, the applicant has referred to the discharge voucher dated 31 May 2014 which was not admittedly acted upon by the respondents. The applicant did not recile from the discharge voucher dated 31 May 2014 and thus on that ground also, this arbitration application is not maintainable.
37. It is submitted that the respondents had already replied to the letter dated 21 June 2014 stating that the applicant had withdrawn only discharge voucher dated 31 May 2014. He submits that in the arbitration agreement itself, the applicant has to explain the exact correctness of the allegation of coercion and duress with details and particulars upon the applicant in signing the discharge voucher. He submits that a payment of Rs. 3.50 crores was already made to the applicant as far back as on 4 March 2013 and thus there was no question of economical and/or financial duress upon the applicant.
38. Learned counsel for the respondents placed reliance on the following judgments of the Supreme Court:-
1) New Indian Assurance Company Ltd. v. Genus Power Infrastructure Ltd., decided on 4 December 2014 in Civil Appeal No. 10784 of 2014;
2) S.B.P & Co. v. Patel Engineering Ltd., reported in AIR 2006 SC 450;
3) National Insurance Company Limited v. Boghara Polyfab Private Limited., reported in (2009) 1 SCC 267;
4) Bishundeo Narain v. Seogeni Rai and Jagernath, reported in AIR 1951 SC 280;
5) Sri. Venkateswara Syndicate v. Oriental Insurance Co. Ltd., reported in 2009 ACJ 2837 and;
6) Union of India (UOI) v. Master Construction Co. decided on 25 April 2011 in Civil Appeal No. 3541 of 2011.
39. In support of his submission that in view of the applicant having signed the discharge voucher unconditionally and having accepted the amount in full and final settlement of their claim, the arbitration application is not maintainable. It is submitted that the applicant has proposed to make a claim for the amount which is beyond the sum insured in the contract of the insurance policy. The claim is being not arbitrable and thus no arbitrator can be appointed. In the alternative submission, it is submitted that the applicant shall be directed to lead oral evidence for the purpose of proving the allegation that there was any economical or financial duress on the applicant to sign the discharge voucher and the said payment was not made in full and final settlement of their claim. It is submitted by the learned counsel for respondents that the applicant cannot be allowed to prove their case in rejoinder to the affidavit-in-reply. The applicant did not give such alleged particulars in the arbitration application itself.
40. In rejoinder, the learned counsel appearing for the applicant invited my attention to various paragraphs of the arbitration application and also to the affidavit-in-rejoinder. He submits that the applicant had all throughout informed the respondents about economical and financial duress and repeatedly requested the respondents to settle their claim expeditiously. He submits that the applicant has given various particulars of such economical and financial duress in the arbitration application, in the correspondence and also in rejoinder which will have to be read together.
41. Learned counsel for the applicant submits that the applicant has sufficiently demonstrated in the documents as well as in the pleadings that there was economical and financial duress upon the applicant by the respondents in signing the discharge voucher. He submits that even in the affidavit-in-reply file by the respondents, the respondents have referred to various complaints made by the applicant against some of the officers of the respondents.
42. Learned counsel for the applicant distinguishes the judgments relied upon by the leaned counsel for the respondents and submits that the applicant had demonstrated before this Court from the correspondence which were not disputed by the respondents and also from the pleadings that there was economical and financial duress upon the applicant. The respondents have not disputed the existence of the arbitration agreement. The Chief Justice or his designate thus has to appoint the arbitrator.
43. It is submitted by the learned counsel for the applicant that whether the claim proposed to be made by the applicant would be arbitrable or not is concerned, the respondents can always raise this issue before the learned arbitrator, if the applicant makes any claim over and above the insured sum. Such issue cannot be adjudicated upon by the learned designate of the Chief Justice in these proceedings.
REASONS AND CONCLUSIONS:-
44. A perusal of the judgment of the Supreme Court in the case of S.B.P & Co. (supra) makes it clear that the Chief Justice or his designate, if approached with an application under Section 11 of the Arbitration and Conciliation Act, 1996, has to decide his own jurisdiction and has to indicate that he can also decide the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without any objection. It may not be possible at that stage to decide whether a live claim made, is the one which comes within the purview of the arbitration clause, it would be appropriate to leave that question to be decided by the arbitral tribunal in taking evidence along with the merits of the claims involved in the arbitration.
45. It is held that for the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. It is held that adoption of such procedure would best serve the purpose sought to be achieved by the act of expediting the process of arbitration, without too many approaches to the Court at various stages of the proceedings before the arbitral tribunal.
46. The Supreme Court in the case of National Insurance Company Limited (supra), after adverting to the judgment of a seven judges bench in the case of S.B.P & Co. (supra) and several other judgments on the issue has held that the Chief Justice or his designate may choose to decide or leave them to the decision of the arbitral tribunal whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. In the said judgment, the Supreme Court has carved out three categories of the issues, i.e some of the issues have to be considered only by the arbitral tribunal exclusively, the issues that can be considered by the Chief Justice or his designate only and the issues which can be considered by both. It is held by the Supreme Court in the said judgment that if the Chief Justice or his designate chooses to examine the issue and decides it, the arbitral tribunal cannot re-examine the same issue.
47. It is held that the Chief Justice or his designate will choose whether he will decide such issue or leave it to the decision of the arbitral tribunal, be guided by the object of the Act that is expediting the arbitration process with minimum judicial intervention. It is held that when a respondent contends that the dispute was not arbitrable on account of discharge of the contract under a settlement agreement or discharge voucher or no-claim certificate, and the claimant contends that it was obtained by fraud, coercion or undue influence, the issue will have to be decided either by the Chief Justice or his designate in the proceedings under Section 11 of the Act or by the arbitral tribunal as directed by the order under Section 11 of the Act.
48. It is held that a claim for arbitration cannot be rejected merely or solely on the ground that a settlement agreement or discharge voucher had been executed by the claimant, if it is validity disputed by the claimant. It is held that when the Court referred to a discharge of contract by an agreement signed by both the parties or by execution of full and final discharge voucher/receipt by one of the parties, the Court refers 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 practised 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. In the said judgment, the Supreme Court adverted to its several earlier judgments and has held that in none of the judgments, a proposition was laid down that mere execution of a full and final settlement receipt or a discharge voucher was a bar to arbitration, even when the validity thereof was challenged by the claimant on the ground of fraud, coercion or undue influence, nor did they lay down a proposition that even if the discharge of contract was not genuine or legal, the claims cannot be referred to arbitration.
49. The Supreme Court also observed that the routine insistence by some government departments, statutory corporations and government companies for issuance of undated “no-dues certificate” or “full and final settlement vouchers” acknowledging receipt of the sum which is smaller than the claim in full and final settlement of all claims, as a condition precedent for releasing even the admitted dues, such a procedure, as a condition for releasing an admitted lesser amount is unfair, irregular and illegal and is required to be deprecated.
50. The Supreme Court in the other four judgments relied upon by the learned counsel for the respondents has reiterated the view taken by the Supreme Court in the case of S.B.P & Co. (supra) and in the case of National Insurance Company Limited (supra).
51. A perusal of the averments made in the arbitration application prima facie indicates that the applicant has made allegations of economical and financial duress against the respondents which, according to the applicant, had forced and compelled the applicant to sign such discharge vouchers by the respondents due to delay in sanctioning and paying the legitimate claim of the respondents. In my view, there is no merit in this submission of the learned counsel for the respondents that there were no sufficient pleadings and/or averments made by the applicant in the arbitration application itself. The judgment of the Supreme Court relied upon by the learned counsel for the applicant in the case of New India Assurance Company Ltd. (supra) thus does not assist the case of the respondents.
52. A perusal of the correspondence referred to aforesaid prima facie indicates that first surveyor appointed by the respondents had recommended the payment of more than Rs. 12 crores in favour of the applicant. For some reasons, the respondents did not accept the said report submitted by their own surveyor and the respondents appointed M/s. Naveen Jand and Associates to re-compute the costings.
53. A perusal of the record prima facie indicates that the applicant had furnished more than 37700 documents to the surveyor for their appraisal for submitting the report. The applicant had placed on record from time to time that the applicant had taken loans from the banks who were pressurising for repayment of those loans and interest. The account of the applicant with those banks had drawn the excess amount. The final amount was sanctioned by the respondents only after 27 months of the fire having taken place which caused loss to the applicant. The applicant had produced about 11 letters addressed by the banks to the applicant calling upon the applicant to regularize their bank accounts and showing the excess amount drawn by the applicant in various accounts. The applicant had also placed on record the conduct of the the second surveyor who was, according to the applicant, demanding several other documents which were unwarranted and/or already submitted by the applicant.
54. A perusal of the record also prima facie indicates that even when the respondents had made an adhoc payment of Rs. 3.50 crores to the applicant, the respondents had sent a discharge voucher for signature of the applicant along with an endorsement of their bankers. The respondents had not disputed these allegations of the applicant.
55. A perusal of the correspondence also prima facie indicates that when the respondents insisted for execution of the discharge voucher in the month of May 2014, the applicant once again placed on record that the applicant was facing financial distress and economical duress and in view of various urgent business liabilities, the applicant had signed the said discharge voucher reluctantly. It is not in dispute that the respondents refused to accept such discharge voucher signed by the applicant with letter of protest.
56. It is not in dispute that after few days of such protest letter addressed by the applicant, a discharge voucher was signed by the applicant. It is, however, the case of the applicant that the respondents had insisted the applicant to sign a clean discharge voucher and to withdraw the letter of protest addressed by the applicant, failing which the respondents would not release the amount, even that was reflected in the discharge voucher. The applicant had thereafter withdrawn the letter of 31 May 2014 and signed another discharge voucher. After signing of another discharge voucher, the applicant placed on record their objection that the same was signed due to pressure of the respondents.
57. On perusal of the large number of correspondence exchanged between the applicant and the respondents which were not disputed by the respondents, in my prima facie view, it indicates that the applicant was facing the financial constraint and economical and financial duress on the part of the respondents in not sanctioning and paying the final claim for 27 months from the date of fire. The applicant having faced pressure from their bankers and suffering from other business liabilities including the demand of income tax department, the applicant was under the economical and financial duress and the said discharge voucher thus, in my prima facie view, cannot be considered as an unconditional discharge voucher thereby the applicant giving up their claim in future arising out of the said discharge voucher.
58. In my view, if the applicant would not have signed such discharge voucher acknowledging the payment of the lesser amount than what was alleged to be due to the applicant after 27 months of the loss suffered, the respondents would not have released even the said amount mentioned in the discharge voucher. In my view, if according to the respondents, the applicant was not entitled to recover the amount as claimed by the applicant, but the lesser amount, the respondents could have released the amount as payable according to the respondents, but could not have insisted for execution of a discharge voucher as a pre-condition before releasing such payment.
59. Learned counsel for the respondents could not refer to any provision in the insurance policy or any other provision of law in support of their claim that the respondents were entitled to insist for execution of such discharge voucher before releasing any payment in favour of the applicant with a confirmation not to make any claim in future arising out of the said claim. The Supreme Court has already deprecated the practice followed by the government departments, statutory corporations and government companies for obtaining such undated discharge voucher as the condition for releasing lesser amount and has held that the said procedure is unfair, irregular and illegal. Though the Chief Justice or his designate is empowered to decide the issue as to whether the parties had concluded the contract by recording satisfaction of their mutual rights and obligations thereby receiving the final payment without objection based on the affidavits and the pleadings or can leave the said issue to be decided by the arbitral tribunal, in my view, it would be appropriate if the issue raised by the respondents that the applicant had signed such discharge voucher unconditionally and the issue raised by the applicant that the same was under duress and coercion is conclusively decided by the arbitral tribunal and if necessary, by leading oral evidence. The learned designate of the Chief Justice in case of Yasho Industries Pvt. Ltd. v. The New India Assurance Company Limited in Arbitration Petition No. 314 of 2014 decided on 24 June 2015 which is relied upon by one of the party has taken a similar view. Special leave petition against the said order is rejected.
60. In so far as the issue of arbitrability of the claim raised by the respondents on the ground that the applicant proposed to make the claim amount higher than the insured sum is concerned, if any claim higher than the insured sum is made by the applicant before the arbitral tribunal, the respondents can raise such issue of arbitrability and the same can be decided by the arbitral tribunal. The issue of arbitrability of claim on such ground cannot be decided in these proceedings.
61. Clause 13 of the arbitration agreement of the policy which provides that if any dispute or difference shall arise as to the quantum to be paid under the policy, such difference shall 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. Since the respondents have refused to appoint any arbitrator out of the names suggested by the applicant in their letter dated 14 July 2014 and had not suggested any other name, this application filed under Section 11(6) of the Arbitration Act is maintainable. In my view, the arbitration agreement exists between the parties.
62. I therefore pass the following order:-
(a) Shri Justice P.S Patankar, former Judge of this Court having his address at 1902, Rushab Tower, Zakeria Bunder Cross Road, Off. Rafi Ahmed Kidwai Marg, Sewri (W), Mumbai-400 015 is appointed as nominee arbitrator on behalf of the applicant;
(b) Shri Justice Pramod D. Kode, former Judge of this Court, having his address at Flat No. 702, 7 Floor, Building No. 56.B, Chintamani Judges Co-operative Housing Society Limited, Behind Anik Bus Depot, Pratiksha Nagar, Sion Koliwada, Mumbai - 400 022 is appointed as the nominee arbitrator on behalf of the respondents;
(c) The learned arbitrator nominated by the applicant and the learned arbitrator appointed by this order shall appoint a presiding arbitrator in accordance with the provisions of Arbitration and Conciliation Act, 1996;
(d) Issues raised by the respondents whether there was any accord and satisfaction on the claims made by the applicant or not and as to whether there was any economical duress or coercion upon the applicant or not shall be decided by the arbitral tribunal and the said issues are kept open.
63. Arbitration application is disposed of in the aforesaid terms. No order as to costs.