2014 (12) TMI 1115 - SC - Companies Law

Validity of appointment of arbitrator for adjudication of dispute u/s 11 of the Arbitration and Conciliation Act, 1996 Arbitrable dispute existed to invoke section 11 or not - Whether the discharge 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 u/s 11 - Held that - Following the decision in National Insurance Co. Ltd. Versus M/s. Boghara Polyfab Pvt. Ltd. 2008 (9) TMI 864 - SUPREME COURT wherein it was held that 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. The plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion - 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, the discharge 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 - upon execution of the letter of subrogation, there was full and final settlement of the claim thus, no arbitrable dispute existed so as to exercise power u/s 11 of the Act - The High Court was not therefore justified in exercising power u/s 11 of the Act and the order of the HC is set aside - Decided in favour of appellant.

Issues Involved:
1. Validity of the appointment of an arbitrator by the High Court.
2. Assessment and settlement of the insurance claim.
3. Allegations of duress, coercion, and undue influence in signing the discharge voucher and subrogation letter.
4. Existence of an arbitrable dispute under Section 11 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Validity of the Appointment of an Arbitrator by the High Court:
The appeal challenges the order dated 30.05.2013 by the High Court of Delhi, which appointed an arbitrator to adjudicate the disputes between the parties. The High Court observed that there was a valid arbitration agreement and disputes covered under it, leading to the appointment of a sole arbitrator despite the appellant's objections.

2. Assessment and Settlement of the Insurance Claim:
The respondent had an insurance policy with the appellant, covering a sum of Rs. 91 crores and 10 lacs. After a fire explosion on 29.10.2009, the appellant's surveyor assessed the damage at Rs. 6,09,77,406/-. The respondent signed a letter of subrogation on 11.03.2011, accepting Rs. 5,96,08,179/- in full and final settlement. The letter of subrogation detailed the rights and remedies transferred to the insurer.

3. Allegations of Duress, Coercion, and Undue Influence:
On 31.03.2011, the respondent alleged that the discharge voucher was signed under extreme duress and coercion due to financial difficulties. The appellant contended that the settlement was voluntary, noting the respondent's substantial annual turnover. The respondent's plea of coercion was supported by a reference to the decision in National Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd., where it was established that if a discharge voucher is executed under fraud, coercion, or undue influence, it is rendered void.

4. Existence of an Arbitrable Dispute Under Section 11 of the Arbitration and Conciliation Act, 1996:
The court examined whether the discharge upon acceptance of compensation and signing of the subrogation letter was voluntary or under compulsion, impacting the jurisdiction under Section 11 of the Act. The law, as stated in National Insurance Co. Ltd. vs. Boghara Polyfab Pvt. Ltd. and Union of India vs. Master Construction Co., requires that allegations of coercion must be prima facie established with material evidence. The respondent's petition lacked detailed particulars, and the delay in raising objections post-settlement indicated the absence of coercion.

Judgment Conclusion:
The court concluded that the respondent's plea was a bald assertion without substantial details or evidence. The financial condition of the respondent did not suggest coercion, and the discharge and signing of the subrogation letter were deemed voluntary. Consequently, the court held that no arbitrable dispute existed, and the High Court's exercise of power under Section 11 of the Act was unjustified. The appeal was allowed, and the High Court's order was set aside, with no order as to costs.

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