While thinking on topics to write the second blog, I came across a SC judgement on an interesting case “United India Insurance Company Ltd. Vs. Antique Art Exports Pvt. Ltd.”(Insurer vs Insured)
To give a background the Insured had purchased 2 standard fire and special peril policies from the Insurer dated June and October, 2013. Unfortunately on 25th September and on 25th October, 2013 fire broke out in the insured’s premises owing to electrical short circuit. The Insurer on receipt of the information appointed surveyors and investigator to submit the fact finding report.
Subsequently after analyzing the reports, the insurer approved the claim for an amount of Rs. 2,81,44,413 towards full and final settlement with complete details of the amount computed. The Insureds accepted the claim amount and signed the Discharge Voucher (DV) which stated “full and final settlement of our fire claim…without any subjectivity“.
Surprisingly, after receiving the settlement, the Insured had invoked the arbitration clause, section 11(6) of Arbitration and conciliation Act,1996 stating that it had signed the DV under “Coercion and undue Influence” by the Insurer.
In its filing in Delhi high court, the insured stated that it was forced to sign on dotted lines on a pre signed discharge voucher given by the insurer to which the insured obliged citing economic duress as well as its loss of bargaining capacity.
Upon Examining the Delhi high court appointed a sole arbitrator stating that the power of court was limited to only appointing arbitrator as per the amended act of 2015 and not examining the existence of coercion or undue influence which is the responsibility of arbitrator.
Subsequently the insurer challenged the high court verdict in the SC, for which the SC held as follows,
- The insured, did not respond or shown any sign of coercion or undue influence during the signing of DV or immediately after that. It was only after 11 weeks of the final settlement the allegation was made, for which there are no prima facie evidence provided, which is the duty of the insured.
- The SC also quoted that, Mere plea of coercion or undue influence is not sufficient in itself for the dispute to invoke the arbitration.
- Also SC refuted the insured plea that the establishment of the coercion and undue influence cannot be completely vested upon the arbitrator and that the court has judicial power and it allows some level of intervention to ascertain the facts, before appointing the arbitrators
- Finally, the SC overturned the high court judgement citing lack of evidence to invoke section 11(6) and appoint arbitrators.
The case was disposed off.
Learnings
- Mere existence of arbitration clause is insufficient to invoke the same
- Coercion and undue influence has to be evidently proved by the party claiming it
- Courts right in examining the arbitrability of disputes at the §11 stage itself.
- Mere acceptance of DV does not foreclose the right to claim higher compensation
References:
Arbitration and conciliation Act, 1996
Section 11 – Appointment of arbitrators
11 (6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
https://www.advocatekhoj.com/library/judgments/announcement.php?WID=11380
Business Management 