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TMI Blog2019 (11) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant facts in this appeal are that on 17.09.2011, Dicitex obtained a Standard Fire and Special Peril Policy; it was issued by the appellant to cover the stocks of goods lying in its three separate godowns located at Thane, Maharashtra, by three separate endorsements. The total sum insured was @ Rs. 13 crores. Clause 13 of the terms and conditions of the said policy contained an arbitration clause. On 25.05.2012, 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 of the appellant's three godowns which had stored its goods. All the stocks in all the three godowns were completely destroyed. Dicitex informed the appellant on 26.05.2012, about the fire and the consequential loss. The appellant appointed M/s. C.P. Mehta & Co. as Surveyors and Assessors to survey the loss suffered by Dicitex and to report on the claim to be lodged upon the insurer-appellant, by the said company. Dicitex lodged a total and final claim upon the appellant for a sum of Rs. 14,88,14,327/comprising Rs. 13,52,85,752/towards cost of the materials destroyed and Rs. 1,35,28,575/as overheads. Dicitex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the claim made by it (Dicitex). The latter had already furnished 37,700 documents physically, which showed the exact quantity of furnishing fabrics in meters. Dicitex 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 could not be supplied. On 09.02.2013, addressing the new surveyor M/s Naveen Jhand, Dicitex submitted 37,700 documents and submitted further documents to the said new surveyor. It submitted that since the previous 9 months, it 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. 4. In accordance with the format sent by the insurer and after obtaining Dicitex's signature, a cheque for Rs. 3.5 crores was handed over to it. Dicitex signed the discharge voucher on 04.03.2013, when the insurer paid the said sum of Rs. 3.5 crores to Dicitex as 'on account payment' in the matter of its claim. Union Bank of India endorsed the said discharge voucher. According to Dicitex, all data that was requisitioned by the new survey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment purpose. According to the said report submitted by M/s. Naveen Jhand and Associates, the assessment worked to 7,16,30,148/and Rs. accordingly, the competent authority had granted the claim. The appellant enclosed the working of the claim and requested Dicitex to go through it and send an unconditional discharge voucher duly signed by it and the bankers. Dicitex, the insured did not do so and informed the appellant that it had noticed that what was given was just a statement of calculation, without explanation/basis, that adjustments had resultant deductions in Dicitex's claim by more than 50% as assessed by the surveyor appointed by the appellant. Dicitex stated that since the appellant had taken 2 years to offer the final settlement of the claim, it (Dicitex) was suffering from a huge financial constraint and had to pay bank interest and installments, salaries and wages, hence, it was left with no alternative but to accept the offer of the appellant reluctantly and was accordingly sending the voucher duly discharged by Dicitex and their bankers for doing the needful. Dicitex alleged that since the appellant did not relent, and insisted that any further payment would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of their claim and reiterated that it 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. Dicitex also placed on record that as against approximately the claim of Rs. 14.70 crores, the appellant released only Rs. 3.50 crores on 04.03.2013 i.e. almost 10 months after the loss had occurred, and after a lapse of 27 months, the appellant 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 it. Dicitex alleged that upon meeting the appellant's officers, it was instructed to withdraw the letter of protest and accept the claim settlement unconditionally which was a proof of coercion. 6. The position taken by the appellant was that Dicitex was paid Rs. 7,16,30,148/in a 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. In these circumstances, Dicitex approached the Bombay High Court under Section 11(6) of the Act, for appointment of an arbitrator. Dicitex relied on the assessment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test only on 21.06.2014. Even in the letter dated 21st June 2014, Dicitex referred to the discharge voucher dated 31.05.2014 which was not admittedly acted upon by the insurer. Dicitex did not resile from the discharge voucher dated 31.05.2014, and thus on that ground also, this arbitration application is not maintainable. 8. The appellant relied on some decisions of this court (New Indian Assurance Co. Ltd v Genus Power Infrastructure Ltd. (2015) 2 SCC 424. National Insurance Co. Ltd v Boghara Polyfab Pvt Ltd (2009) 1 SCC 267; Union of India (UOI) and Ors. v Master Construction Co. (2011) 12 SCC 349 etc. 9. In the impugned judgment, while allowing the application, the single judge analysed the decisions of this court, including Boghara Polyfab (supra). It was noted that a perusal of the correspondence prima facie indicated that the first surveyor appointed by the insurer had recommended the payment of more than 12 crores in favour of Dicitex. Rs. For some reasons, the appellant did not accept the said report submitted by their own surveyor and instead appointed M/s Naveen Jhand and Associates to re-compute the costings. It was also held that Dicitex had furnished more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Dicitex giving up their claim in future arising out of the said discharge voucher. 58. In my view, if Dicitex would not have signed such discharge voucher acknowledging the payment of the lesser amount than what was alleged to be due to Dicitex 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, Dicitex was not entitled to recover the amount as claimed by Dicitex, 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 precondition 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 Dicitex with a confirmation n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 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." 11. The appellant urges that the impugned judgment is erroneous. It is pointed out that the effect of the decisions in Boghara Polyfab, Master Construction and Genus Power Infrastructure (supra) and having regard to the facts and circumstances of this case, there can be no question that any arbitrable dispute existed between the parties. Having accepted the proffered amounts, and having withdrawn the reservation and protest, Dicitex could not have argued that it was subjected to coercion or that the appellant forced it to sign the final discharge voucher. Emphasis is placed on Dicitex's letter dated 06.06.2014, whereby it withdrew the previous letter dated 31.05.2014, which had contained reservations about the amount offered in full settlement. 12. Counsel for Dicitex urges that this court should not interfere with the impugned judgment. It was urged that the material in the form of the record, particularly the consistent trend of letters, prior to the letter of 06.06.2014 as well as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction are disputed, to round up the discussion on this subject: (i) A claim is referred to a conciliation or a pre-litigation Lok Adalat. The parties negotiate and arrive at a settlement. The terms of settlement are drawn up and signed by both the parties and attested by the Conciliator or the members of the Lok Adalat. After settlement by way of accord and satisfaction, there can be no reference to arbitration. (ii) A claimant makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are held for settlement of the disputed claims resulting in an agreement in writing settling all the pending claims and disputes. On such settlement, the amount agreed is paid and the contractor also issues a discharge voucher/no claim certificate/full and final receipt. After the contract is discharged by such accord and satisfaction, neither the contract nor any dispute survives for consideration. There cannot be any reference of any dispute to arbitration thereafter. (iii) A contractor executes the work and claims payment of say Rupees Ten Lakhs as due in terms of the contract. The employer admits the claim only for Rupees six lakhs and informs the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant and inappropriate statements. It states: "I/we hereby assign to the company, my/our right to the affected property stolen which shall, in the event of their recovery, be the property of the company". The claim was not in regard to theft of any property nor was the claim being settled in respect of a theft claim. We are referring to this aspect only to show how claimants are required to sign on the dotted line, and how such vouchers are insisted and taken mechanically without application of mind." 15. In Master Construction (supra), this Court held that: "20. The Bench in Boghara Polyfab Private Limited in paragraphs 42 and 43, with reference to the cases cited before it, inter alia, noted that there were two categories of the cited cases; (one) where the Court after considering the facts found that there was a full and final settlement resulting in accord and satisfaction, and there was no substance in the allegations of coercion/undue influence and, consequently, it was held that there could be no reference of any dispute to arbitration and (two) where the court found some substance in the contention of the claimants that `no dues/claim certificates' or `full and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such party would be arbitrable. 23. In paragraph 24 (page 284) in Boghara Polyfab Private Limited, this Court held that a claim for arbitration cannot be rejected merely or solely on the ground that a settlement agreement or discharge voucher has been executed by the claimant. The Court stated that such dispute will have to be decided by the Chief Justice/his designate in the proceedings under Section 11 of the 1996 Act or by the Arbitral Tribunal. 24. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or noclaim 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 noclaim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be necessity to refer the dispute for arbitration at all. It cannot be overlooked that the cost of arbitration is quite huge mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner company. The said letter and the aforesaid preprepared 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate itself provided a clearance of no dues, the contractee could not now turn around and say that any further payment was still due on account of the losses incurred during the execution of the Contract. The story about duress was an afterthought in the background that the losses incurred during the execution of the Contract were not visualised earlier by the contractee. As to financial duress or coercion, nothing of this kind is established prima facie. Mere allegation that no-claim certificates have been obtained under financial duress and coercion, without there being anything more to suggest that, does not lead to an arbitrable dispute. The conduct of the contractee clearly shows that "no-claim certificate" was given by it voluntarily; the contractee accepted the amount voluntarily and the contract was discharged voluntarily. Conclusion: 25. Admittedly, NoDues Certificate was submitted by the contractee-Company on 21.09.2012 and on their request Completion Certificate was issued by the Appellant-Contractor. The contractee, after a gap of one month, that is, on 24.10.2012, withdrew the No Dues Certificate on the grounds of coercion and duress and the claim for losses incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute for arbitration at all." Likewise, in Genus Power (supra), the court cautioned that a "bald plea" of coercion, without any supporting material is insufficient for a court to hold that the accord/satisfaction or no dues certificate was involuntarily given. 19. A close look at the facts in the present case would show that though the pleadings in the initial application under Section 11(6) are weak, nevertheless, the materials on the record, in the form of copies of the inter se correspondence of the parties - which span over 2 years, clearly show that Dicitex kept repeatedly stating that it was facing financial crisis; it referred to credits obtained for its business and the urgency to pay back the bank. It is a matter of record that the Surveyor's report, dated 14.08.2014, recommended payment of Rs. 12,93,26,704.98/to Dicitex. Equally, it is a matter of record that the appellant referred the matter to a chartered accountant's firm, to verify certain inventory and sales figures. It went by the report of the latter, who stated that the estimate of loss could not be more than Rs. 7,16,30,148/. This is what was offered to Dicitex, by May, 2014. Dicitex's application under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the offered amount and that since there was a dispute on the quantum of claim settlement paid to the Petitioner, the Petitioner was invoking arbitration proceedings under Clause 13 of the said Policy to recover the differential amount." 21. An overall reading of Dicitex's application (under Section 11(6)) clearly shows that its grievance with respect to the involuntary nature of the discharge voucher was articulated. It cannot be disputed, that several letters - spanning over two yearsstating that it was facing financial crisis on account of the delay in settling the claim, were addressed to the appellant. This court is conscious of the fact that an application under Section 11(6) is in the form of a pleading which merely seeks an order of the court, for appointment of an arbitrator. It cannot be conclusive of the pleas or contentions that the claimant or the concerned party can take, in the arbitral proceedings. At this stage, therefore, the court which is required to ensure that an arbitrable dispute exists, has to be prima facie convinced about the genuineness or credibility of the plea of coercion; it cannot be too particular about the nature of the plea, which necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X
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