A Party Is Not Entitled To Invoke The Arbitration Clause After Signing The Discharge Voucher Without Any Protest Or Demur: Gujarat High Court

The Single Bench of Chief Justice Aravind Kumar held that an application for referring the dispute to arbitration could not be entertained merely on the ground that the party had, within 15 days from the receipt of an amount, contended that the said amount was received by it under duress.

An insurance policy was obtained by the petitioner Balkrishna Spintex Private Ltd. from the respondent New India Assurance Company Ltd. for insuring the factory run by the petitioner. A dispute arose between the parties with respect to the insurance claim raised by the petitioner under the policy. Thereafter, the petitioner filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Gujarat High Court for appointment of the arbitrator.

The respondent New India Assurance submitted before the High Court that the petitioner had received the money after raising a claim under the insurance policy. The respondent added that after receiving the said money, the petitioner had executed a discharge voucher in discharge of a full and final settlement, and that the petitioner had also issued a consent letter giving its consent.

Thus, the respondent averred that no amount was due and payable to the petitioner and, therefore, no arbitrable dispute existed between the parties.

The petitioner Balkrishna Spintex contended that it had raised a claim against the said insurance policy after a fire broke out in its factory premises. The petitioner averred that a sum of money was paid by the respondent to it and that the respondent did not pay the entire amount claimed by the petitioner. The petitioner added that after the said sum of money was received by it, the petitioner conveyed to the respondent that it had received the said money under protest and due to its financial circumstances. Thus, the petitioner averred that the respondent ought to have paid the entire amount claimed by the petitioner and that on account of non-payment of the entire amount, a dispute had arisen between the parties which must be referred to arbitration.

The Court observed that the petitioner had executed a discharge voucher at the time of receiving the said amount under the insurance policy. The Court noted that even before receiving the said amount, the petitioner had issued a consent letter wherein it had settled the claim raised by it for the said amount without any demur. The Court observed that the petitioner had given its consent for the full and final settlement of the claim raised by it. The Court noted that only thereafter the said amount was paid by the insurance company to the respondent.

Hence, the Court ruled that the petitioner was not entitled to invoke the arbitration clause since no arbitrable dispute subsisted after the petitioner signed the discharge voucher without any protest or demur. The Court added that an application for referring the dispute to arbitration could not be entertained merely on the ground that the petitioner had, within 15 days from the receipt of the said amount, contended that the said amount was received under duress.

The Court observed that the Supreme Court in the case of United India Insurance Company versus Antique Art Exports Private Limited (2019) had ruled that where a dispute raised by the claimant with regard to the validity of the discharge voucher, no claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, the dispute need not be referred to arbitration.

The Court noted that the Supreme Court in Antique Art Exports Private Limited (2019) had held that a mere plea of fraud, coercion or undue influence by itself is not enough and that the party who alleges the same is under an obligation to prima facie establish it by placing satisfactory material on record before the Court, in order to exercise the power under Section 11(6) of the A&C Act.

The Court observed that the petitioner had not pleaded undue influence, coercion, threat or that the discharge voucher was signed by it under any compulsion. The Court added that the petitioner had affixed its signature to the discharge voucher.

The Court noted that on the basis of the Surveyor's report, the insurer had quantified the amount that was payable to the petitioner under the insurance policy. The Court added that the said quantification of amount was made known to the petitioner and thereafter, the said amount was paid by the respondent to the petitioner. The Court observed that even prior to receiving the said amount, the petitioner had issued a consent letter agreeing and consenting to receive the said amount.

Thus, the Court held that the petitioner could not contend that it was forced to receive the said amount and that the said contention of the petitioner was only an after-thought.

The Court thus dismissed the petition.

Case Title: Balkrishna Spintex Private Limited versus The New India Assurance Company Limited

Citation: 2022 LiveLaw (Guj) 237

Counsel for the Petitioner: Mr. Akshay A Vakil

Counsel for the Respondent: Mr. Rituraj M Meena

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