NEW INDIA ASSURANCE COMPANY LTD.versusGENUS POWER INFRASTRUCTURE LTD.

                        (2014] 12 S.C.R. 360


A           NEW INDIA ASSURANCE COMPANY LTD.
                               v.
            GENUS POWER INFRASTRUCTURE LTD.
               (Civil Appeal No. 10784 of 2014)
                       DECEMBER 04, 2014
B
         [ANIL R. DAVE AND UDAY UMESH LALIT, JJ.]

         Arbitration and Conciliation Act, 1996 - s. 11 -
    Appointment of arbitrator - Insurance claim - Discharge of
C insurance contract and settlement of insurance claim -
    Insured subrogated all its rights in favour of insurer - Petition
    uls. 11 by insured seeking appointment of arbitrator alleging
    that it had accepted the payment because of extreme
    financial difficulty, duress and coercion - High Court
D appointing sole arbitrator to adjudicate the dispute between
    the parties - Justification of- Held: Not justified - 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
r;: the claim - Thus, no acbitrable dispute existed so as to
    exercise power uls. 11 of the Act.

        Allowing the appeal, the Court

       HELD: The plea raised by the respondentthat the
F discharge and signing of letter of subrogation was due ·
  to fraud, coercion, duress or undue influence 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
G signed. 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 was voluntary and free
  from any coercion or undue influence. In the
H                                 360
   NEW INDIAASSURANCE COMPANY LTD. v. GENUS                361
          POWER INFRASTRUCTURE LTD.
circumstances, it is held that upon execution of the letter        A
of.subrogation, there was full and final settlement of the
claim. Thus, no arbitrable dispute existed so as to
exercise power under section 11 of the Arbitration and
Conciliation Act, 1996. The High Court was not justified
in exercising power under Section 11 of the Act. [Para 9]          B
[369-C-G]                             .

    National Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd.
2008 (13) SCR 638:2009 (1) SCC 267; Union of India vs.
Master Construction Co. 2011 (5) SCR 853: (2011) 12 SCC            C
349 - referred to.

                     Case Law Reference:
    2008 (13) SCR 638          Referred to          .Para 5, 6
    2011 .(5) SCR 853          Referred to           Para 7        D

    C-IVll APPELLATE JURISDICTION : Civil Appeal No.
101a4 of 2014.

    Ftom the Judgment & Order dated 30,05.2013 of the High
Court of Delhi at Delhi n Arbitration Petition No. 212 of 2011.    E

    Gaurab Banerji, Saurav Agrawal, Madhav Misra, Vyom
Shah (for Devendra Srigh) for the Appellant.

   Krishnan Venugopal, Abhinav Mukerji, Aman Gupta for the         F
Respondent.

    The Judgment of the Court was delivered by

     UDAY U. LALIT, J. 1. Leave granted. This appeal
challenges the order dated 30.05.2013 passed by the High           G
Court of Delhi in Arbitration Petition No.212 of 2011 appointing
an arbitrator to adjudicate the disputes between the present
parties.
                                                .
    2. The respondent has a manufacturing unit for which it        H
    362       SUPREME .COURT REPORTS              [2014] 12 S.C.R.


A  had purchased a Standard Fire and Special Perils Policy
   ('policy' for short) from the appellant on 17 .04.2009, which
   policy was for a period of one year and the total sum assured
   was Rs.91 crores and 10 lacs only. ·on 29.10.2009 therewas
   a fire explosion in the adjoining ln°dian Oil Corporation Terminal
B causing extensive damage to the manufacturing unit of the
   respondent. On being notified, the appellant appointed a
   category "A" Licensed Surveyor and Loss Assessor in
   compliance of Section 64 UM of the Insurance Act, 1938 to
   assess the damage. In the assessment of the respondent and
c as per the claim lodged by it, the loss caused to its plant and
   machinery, buildings fixtures and furnitures and stocks was to
   the tune of Rs.28. 79 crores. It appears that the Surveyor
   submitted his final report on 27.07.2010 and assessed the loss
   at Rs.6,09,77,406/-. It is contended by the appellant but denied
  ·by the respondent· that the final survey report was duly
0
   communicated to the respondent on 01.11.2010.

      3. On 11.03.2011 the respondent signed a detailed letter
  of subrogation which was on a stamp paper, accepting
  Rs.5,96,08, 179/- in full and final settlement of its claim under
E the policy and the relevant porti·on of said letter dated
  11.03.2011 was to the following effect:
          To,                      ,
          New India Assurance Co. Ltd.
          Regional Office
F         Neh,ru Place, Tonk Road,
          Jaipur
          Dear Sir,

       That in consideration of claim amount of Rs.5,96,08, 179
G (Rupees Five Crores Nintey Six Lakhs Eight Thousand One
  Hundred Seventy Nine only) (herein after referred as "Claim
  amount") as full and final settlement amount of our claim
  No.330203/11/10/01/00100001 arising under policy
  No.330203/11109/11/00000018 (herein after referred as
H "Policy") covering fire loss of my/our factory situated on Plot
  NEW INDIAASSURANCE COMPANY LTD. v. GENUS. 363
POWER INFRASTRUCTURE LTD. [UDAY UMESH LAUT, J.)

No.SPL 3, Sitapura, - Industrial area Jaipur (herein after           A
referred as "Factory Premises") due to fire that took place in
IOC Terminal on 29-10-2009, we hereby subrogate our rights
on behalf of M/S Genus Power Infrastructures Limited Jaipur
(herein after referred as "Insured") in favour of New India
Assurance Co. Ltd. (herein after referred as "Insurer") as under:-   B

      (1)   That we the Insured hereby subrogate all the rights
            and remedies (to the extent provided by aforesaid
            contract of Insurance and under the General law and
            further any other Law enforceable consequence to
            the above loss) against the RllCO, lndi.an Oil
                                                                     c
            Corporation, Govt. of Rajasthan, other insurance
            company or any other agency/authority of Govt. of
            Rajasthan, semi Govt. etc. whom so ever is liable
            in respect whereof in favour of the Insurer regarding
            Fire accident taken place on 29-10-2099 in IOC           D
            terminal in Sitapura Industrial Area, Jaipur and
            cl.aim arises under "Policy" covering fire loss of
            Insured factory in ''Factory Premises" in favour of
            the "Insurer".
                                                                     E
      (2)   That we the Insured further assign and transfer all
            rights to Insurer to recover the claim amount or any
            part thereof from RllCO, Indian Oil Corporation,
            Govt. of Rajasthan, other insurance company or any
            other agency/authority of Govt. of Rajasthan, semi       F
            Govt. etc. who so ever is liable.

      (3)   That we the Insured further assign and transfer all
            rights to agitate the Claim before the RllCO, Indian
            Oil Corporation, Govt. of Rajasthan, other insurance
            company or any other agency/authority of Govt. of        G
            Rajasthan, semi Govt. etc. who so ever is liable to
            pay the compensation/claim. The Insurer will be
            entitled to file complaint/claim before any court of
            law, tribunal or any other adjudicatory authority and
                                                                     H
     364      SUPREME COURT REPORTS                         (2014] 12 S.C.R.


 A                plead the same on behalf of ourselves and in
                  getting success in· adjudication therein will be
                  entitled to retain the amount paid ... ;···


 8         ........................................................................
          In witness whereof we get our hands on this Subrogation
     letter on the 11th day of March 2q11.
                                      For Genus Power Infrastructure ltd.
 C                                                Authorized Signatory
                                                              Signature
        4. After nearly three weeks i.e on 31.03.2011 the
   respondent issued a notice to the appellant stating that the
   discharge voucher was signed under extreme duress, coercion
 D and undue influence exercised by the appellant who took undue
   advantage of the extreme financial difficulties of the respondent.
   The respondent further sought to appoint its nominee arbitrator.
   On 21.04.2011 the appellant replied that there. was no
   arbitrable dispute which existed between the parties inasmuch
 E as the respondent had voluntary signed the letter of.subrogation
   and had accepted payment in full and final settlement of its
   claim. In the meantime on 05.04.2011 the respondent had filed
   a petition under section 11 of the Arbitration and Conciliation
   Act, 1996 (The 'Act' for short) before the High Court of Delhi
 F alleging that it had accepted the payment as stated above
   because of extreme financial difficulty, duress and coercion. On
   10.05.2013 the High Court after recording rival submissions of
   the parties adjourned the matter which was then taken up on
   30.05.2013 when the High Court observed;
 G
               "Vide order dated 10th May, 2013, this Court has
         already observed that there is a valid arbitration
         agreement between the parties and there are disputes
        which are covered under the arbitration agreement. The
.H       learned counsel for the respondent submits that the
  NEW INDIAASSURANCE COMPANY LTD. v. GENUS      365
POWER INFRASTRUCTURE LTD. [UDAY UMESH LAUT, J.)
     disputes are not arbitrable. The respondent can raise this    A
     objection before the learned arbitrator."

    In that view of the matter the High Court proceeded to
appoint a sole arbitrator to adjudicate the disputes between the
~~~.                                                               B

     5. The aforesaid order dated 30.05.2013 is the subject
matter of challenge in the present appeal. Appearing for the
appellant Mr. Gaurab Banerji, learned Senior Advocate
submitted that the letter of subrogation was a detailed
agreement which was finalized and signed after negotiations C
between the parties and in the presence of two witnesses. The
amount agreed to was the amount recommended by the
surveyor, reduced by the mandatory reinstatement premium
payable under clause 15 of the policy and as such the
settlement took place at the amount recommended by the D
surveyor. Placing reliance on the financial status of the
respondent, it was submitted that its annual turnover is more
than Rs.500 crores for last few years and it was quite
improbable that such a company would feel financially
constrained and stand coerced as alleged, in giving discharge E
on receipt of Rs.5.98 crores. Mr. Krishnan Venugopal, learned
Senior Advocate appearing for the respondent submitted that
knowing that the respondent was under tremendous pressure
owing to the complete destruction of its manufacturing unit and
not being in a position to negotiate, the appellant by using its F
dominant position had forced the respondent to sign the
discharge voucher and accept the payment as stated above.
In support, reliance was placed on the decision of this court in
National Insurance Co. Ltd. vs. Bog hara Polyfab (P) ltd'.
by Mr. Ven'ugopal.
                                                                 G
     6. The question that arises is whether the discharge in the
present case upon acceptance of compensation and signing
of subrogation letter was not voluntary and whether the claimant

1.   2009(1) S'::C-267.                                            H
    366       SUPREME COURT REPORTS                 [2Q14] 12 S.C.R.


A   was subjected to compulsion or coercion and as such could
    validly invoke the jurisdiction under Section 11 of the Act. The
    law on the point is clear from following decisions of this court.
    In National Insurance Co. Ltd. vs. Boghara Polyfab Pvt.
    Ltd. in paras 26 and 51 it was stated as under:-
B
          "26. 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
c         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
D         contract by such agreement/voucher is rendered void and
          cannot be acted upon. Consequently, any dispute raised
          by such party would be arbitrable.

                 51. The Chief Justice/his designate exercising
E         jurisdiction under Section 11 of the Act will consider
          whether there was really accord and satisfaction or
          discharge of contract by performance. If the answer .is in
          the affirmative, he will refuse to refer the dispute to
          arbitration. On the other hand, if the Chief Justice/his
F         designate comes to the conclusion that the full and final
          settlement receipt or discharge voucher was the result of
          any fraud/coercion/undue influence, he will have to hold that
          there was no discharge of the contract and consequently,
           refer the dispute to arbitration. Alternatively, where the
          ·chief Justice/his designate is satisfied prima facie that the
G
          discharge voucher was not issued voluntarily and the
          claimant was under some compulsion or coercion, and that
          the matter deserved detailed consideration, he may
           instead of deciding the issue himself, refer the matter to

H
  NEW INDIAASSURANCE COMPANY LTD. v. GENUS      367
POWER INFRASTRUCTURE LTD. [UDAY UMESH LAUT, J.]
     the Arbitral Tribunal with a specific direction that the said      A
     question should be decided in the first instance."

   7. In the decision rendered in Union of India vs. Master
Construction Co2. this court observed as under:

            "18. In our opinion, there is no rule of the absolute       B
     kind. In a case where the claimant contends that a
     discharge voucher or no-claim 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       C
     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 no-claim
     certificate or settlement agreement, prima facie, appears
     to be lacking in credibility, there may not be a necessity         D
     to refer the dispute for arbitration at all.

             19. It cannot be overlooked that the cost of arbitration
      is quite huge-most of the time, it runs into six and seven
      figures. It may not be proper to burden a party, who              E
      contends that the dispute is not arbitrable on account of
      discharge of contract, with huge cost of arbitration merely
      because plea offraud, coercion, duress or undue influence
      has been taken by the claimant. A bald plea of fraud,
      coercion, duress or undue influence is not enough and the
      party who sets up such a plea must prima facie establish
                                                                        F
      the same by placing material before the Chief Justice/his
      designate. If the Chief Justice/his designate finds some
      merit in the allegation of fraud, coercion, duress or undue
      influence, he may decide the same or leave it to be
      decided by the Arbitral Tribunal. On the other hand, if such      G
      plea is found to be an afterthought, make-believe or
      lacking in credibility, the matter must be set at rest then
      and there.

2.   c2011) 12 sec 349.                                                 H
     368       SUPREME COURT REPORTS                 [2014] 12 S.C.R.

A                 22. The above certificates leave no manner of doubt
           that upon receipt of the payment, there has been full and
           final settlement of the contractor's claim under the contract.
           That the payment of final bill was made to the contractor
           on 19-6-2000 is not in dispute. After receipt of the
B          payment on 19-6-2000, no grievance was raised or lodged
           by the contractor immediately. The authority concerned,
           thereafter, released the bank guarantee in the sum of Rs
           21,00,000 on 12-7-2000. It was then that on that day itself,
           the contractor lodged further claims."
C      8. It is therefore clear that a bald plea of fraud, coercion,
  duress or undue influence is not enough and the party who sets
  up a plea, must prime facie establish the same by placing
  material before the Chief Justice/his designate. Viewed thus,
  the relevant averments in the peiition filed by the respondent
D need to be considered, which were to the following effect:-
         "(g) That the said surveyor, in connivance with the
         Respondent Company, in order to make the Respondent
         Company escape its full liability of compensating the
         Petitioner of such huge loss, acted in a biased manner,
E        adopted coercion undue influence and duress methods of
         assessing the loss and forced the Petitioner to sign certain
         documents including the Claim Form. The Respondent
         Company also denied the just claim of the Petitioner by
       · their acts of omission and commission and by exercising
F        coercion and undue influence and made the Petitioner
         Company sign certain documents, including a pre-
         prepared discharge voucher for the said amount in
         advance, which the Petitioner Company were forced to do
         so in the period of extreme financial difficulty which .
G        prevailed during the said period. As stated aforesaid, the
         Petitioner Company was forced to sign several' documents
         including a letter accepting the loss amounting· to
         Rs.6,09,55,406/- and settle the claim of Rs.5,96,08,179/-
         as against the actual loss amount of Rs.28, 79,08, 116/-
H'       against the interest of the petitioner company. The said
  NEW INDIAASSURANCE COMPANY LTD. v. GENUS      369
POWER INFRASTRUCTURE LTD. [UDAY UMESH LAUT, J.]
     letter and the aforesaid pre-prepared discharge voucher A
     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 B
     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 c
     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 D
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 the discharge in the E
present case 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. In the circumstances, we hold ·
that upon execution of the letter of subrogation, there was full F
and final settlement of the claim. Since our answer to the
question, Whether there was really accord and satisfaction, is
in the affirmative, in our view no arbitrable dispute existed so
as to exercise power under section 11 of the Ad. The High
Court was not therefore justified in exercising power under G
Section 11 of the Act.
     10. In the circumstances, we allow the present appeal in
the aforesaid terms and set aside the order of the High Court
  No order as to costs.
Nidhi Jain                                      Appeal allowed.   H