Gujarat High Court
M/S P And T Tex Fab vs The New India Assurance Co. Ltd on 13 December, 2019
Author: S.R.Brahmbhatt
Bench: S.R.Brahmbhatt
C/IAAP/43/2019 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 43 of 2019
With
R/PETN. UNDER ARBITRATION ACT NO. 44 of 2019
With
R/PETN. UNDER ARBITRATION ACT NO. 45 of 2019
With
R/PETN. UNDER ARBITRATION ACT NO. 46 of 2019
With
R/PETN. UNDER ARBITRATION ACT NO. 47 of 2019
With
R/PETN. UNDER ARBITRATION ACT NO. 48 of 2019
======================================
M/S P AND T TEX FAB
Versus
THE NEW INDIA ASSURANCE CO. LTD
======================================
Appearance:
MR HIMANSHU C DESAI(6832) for the Petitioner
MR AJAY R MEHTA(453) for the Respondent
======================================
CORAM: HONOURABLE MR.JUSTICE S.R.BRAHMBHATT
Date : 13/12/2019
COMMON ORAL ORDER
1. Heard learned counsels for the parties.
2. Learned counsels for the parties have jointly submitted that as the issue involved in all the matters are similar and identical, all these petitions be heard together and accordingly, all the matters are heard together and are bing disposed of by this common judgment and order.
3. The petitioners approached this Court by way of these petitions with following prayers.
Page 1 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDERPrayers in IAAP no.43 of 2019
a) Your Lordships may be pleased to pass orders appointing any qualified person as a Sole Arbitrator in accordance with terms of the policy Agreements dated 28.10.2015, 18.11.2016 and 17.12.2016 read with provisions of Section 11 of the Arbitration and Conciliation Act, 1996 for adjudicating the dispute and difference between the Applicant and the Respondent and oblige;
b) Your Lordships may be pleased to pass such other orders as may be necessary, proper and just in the facts and circumstances of the case and oblige;
c) Your Lordship may be pleased to pass orders awarding for costs of this Application to the applicant and oblige.
Prayers in IAAP nos.44 to 48 of 2019
a) Your Lordships may be pleased to pass orders appointing any qualified person as a Sole Arbitrator in accordance with terms of the policy Agreements dated 14.12.2015 read with provisions of Section 11 of the Arbitration and Conciliation Act, 1996 for adjudicating the dispute and difference between the Applicant and the Respondent and oblige;
Page 2 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDERb) Your Lordships may be pleased to pass such other orders as may be necessary, proper and just in the facts and circumstances of the case and oblige;
c) Your Lordship may be pleased to pass orders awarding for costs of this Application to the applicant and oblige.
Thus, by way of these petitions the petitioners prayed for appointment of of an Arbitrator in accordance with the terms of the different policy agreements read with provisions of Section 11 of the Arbitration and Conciliation Act, 1996 for adjudicating the dispute and differences between the parties.
3. The facts in brief as could be culledout from the memo of the petition deserves to be setout as under : 3.1 The petitioners state that they have insured with the respondent company. The following policies have been procured by the petitioners for the period, sum assured and policy number mentioned against the name of the petitioners. The same is in tabular form produced as under : Sr. Insureds Risk and Particulars of the Policy Sum Insured Amount Payment Date of no. (Rs.) claimed (Rs.) Withdrawal Plant & Machinery and accessories 5,50,00,000 5,81,17,500 3,78,14,287 -
SFSP Insurance Policy
No.23050011150100003379
Stocks & Stocks in process 7,50,00,000 7,49,03,249 - Withdrawn
IAAP No.43 of
on
1. 2019
SFSP Insurance Policy 15/12/16
No.23050011150100003645 &
M/s. P & T Tex
22/12/16
Feb
Loss of Profit 1,50,00,000 Amount not - Withdrawn
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C/IAAP/43/2019 ORDER
quantified on
LPO Policy 15/12/16
No.23050011150500000003 &
22/12/16
Concurrent Fire Policy
no.23050011150100003645
2. IAAP No.44 of Building 2,00,00,000 3,57,21,000 1,50,18,036 -
2019
Yogesh Laljibhai SFSP Insurance Policy Siddhapara No.23080211150100000253 Plant & Machinery 1,40,00,000 1,45,02,706 1,07,37,841 SFSP Policy No.23080211150100000254 IAAP No.45 of Stocks 1,50,00,000 1,14,03,269 - Withdrawn 2019 on
3.
SFSP Policy 15/12/16
M/s.Vineet Silk
No.23080211150100000254 &
Mills
22/12/16
Loss of Profit 82,50,000 Amount not - Withdrawn
quantified on
BI (Fire) Policy No.SFSP Policy 15/12/16
No.23050011150500000001 &
22/12/16
Plant & Machinery 1,50,00,000 1,40,31,175 1,02,66,755
SFSP Policy
No.23080211150100000257
IAAP no.46 of
Stocks 5,00,00,000 1,67,60,656 56,84,217
4. 2019
revised to
SFSP Policy 60,00,000
Yogesh Laljibhai
No.23080211150100000257
Siddhapara
Loss of Profit 1,25,15,305 1,18,74,964 - Withdrawn
on
BI (Fire) Policy No.SFSP Policy 20/12/16
No.23050011150500000001 &
22/12/16
Plant & Machinery 7,43,18,700 7,15,76,396 3,83,59,294
SFSP Insurance Policy
No.23080211150100000256
IAAP No.47 of
Stocks 4,13,00,000 3,80,69,978 1,20,65,023
5. 2019
revised to
M/s. Siddhapara SFSP Insurance Policy 1,30,00,000
No.23080211150100000256
Textiles
Loss of Profit 1,60,49,000 1,57,07,792 - Withdran
on
LOP Policy 20/12/16
No.230800211150500000003 &
22/12/16
(Concurrent Standard Fire Policy
No.23080211150100000256
Plant & Machinery 2,50,00,000 2,73,74,176 1,24,19,585
SFSP Insurance Policy
No.23080211150100000255
6. IAAP No.48 of
Stocks 3,00,00,000 2,65,65,484 - Withdrawn
2019
on
SFSP Insurance Policy 15/12/16
M/s. D & V Tex
No.23080211150100000255 &
Fab
22/12/16
Loss of Profit 1,15,19,970 Amount not - Withdrawn
quantified on
LOP Policy 15/12/16
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C/IAAP/43/2019 ORDER
No.230800211150500000002 &
22/12/16
(Concurrent Standard Fire Policy
No.23080211150100000255
3.2 The facts of all these petitions are almost same, barring few minor details, therefore, for the sake of convenience, the facts of leading petition being IAAP 44 of 2019 is taken for ready reference.
It is stated that the factory premises of the petitioner gutted in fire on 27th December 2015 at around 1:30 a.m. Due to the severe fire and watering upon the fire, the factory premises of the petitioners got so much damage. The petitioners intimated about the said fire and loss to the respondent company immediately and registered the claim under the above referred policies.
3.3 It is stated that the liability under the material damage policy was admitted only after due scrutiny and verification by the respondent company and therefore, the respondent company had appointed Surveyor and Loss Assessor M/s.Rakesh Narula & Co. for verifying the genuineness of the claim and ascertaining the quantum of the loss suffered by the petitioners. It is also stated that the above referred policies covering the loss caused to business due to fire.
3.4 The petitioners have submitted their respective claims against the damages suffered to the building, the amount of damage caused to the building as assessed by the surveyor appointed by the respondent and the amount approved by the respondent for the claims are mentioned in the table hereinabove.
3.5 Due to aforesaid facts, there were several communications between the petitioners and the respondents as the dispute has arisen between them. The following sequence of events would crystallize the Page 5 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER dispute between the parties.
a. It is pertinent to note that petitioners have been communicating with the respondent from the year 2017 till 2018 requesting for expeditious action and settlement of insurance of claim of the petitioners. The respondent company has been reluctant to honour the said claims.
b. There are no dispute as to the occurrence of the fire as well as the liability of the respondent company under the Standard Fire and Special Peril Policy. In all the cases, the petitioners have been paid lesser amount than the amount which they have claimed and therefore, the liability has been established under the policy for damages suffered to the Buildings.
c. Therefore, the dispute crystallizes as to the quantum of loss assessment in respect of claim under the Standard Fire and Special Peril Policy.
d. The petitioners were not satisfied with the assessment made by the surveyor appointed by the respondent company and therefore, they have registered protest through discharge voucher before accepting the payment.
e. It is relevant to note that the petitioners have been diligently pursuing for claim settlement with the respondent company through personal meetings and by various written correspondences, however, the Page 6 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER respondents have failed to respond in writing to the said correspondences.
3.6 Thereafter, the petitioners vide notices through their advocates calledupon the respondent company to nominate (anyone from the list mentioned in the notice) as Sole Arbitrator within a period of 30 days from the date of receipt of the notice for speedy resolution of the dispute and differences between them. However, the respondent company refused to appoint Arbitrator through letters sent through Solicitors Tuli & Co. Hence, the present petitions.
4. Shri Desai, learned counsel for the petitioners submitted that the respondent has indemnified the petitioners against peril of fire vide referred policy. It is submitted that the contracts of the policies contain an arbitration clause. There has been fire which caused losses to the insured building, goods and profits of the petitioners. It is also submitted that the petitioners submitted their respective claims during the prescribed time limit and the amount paid to the petitioners is less than the claim made by the petitioners.
5. Learned counsel for the petitioners further submitted that the correspondence between the parties regarding appointment of arbitrator clearly illustrate that in spite of the diligent follow up, there was no response from the respondent company, till the response from respondent's solicitors Tuli & Co. It is further submitted that the respondent has deliberately avoided any written communication about respondent company's actions or inactions. The respondent company's intentions of delaying the settlement of petitioners' claim are denying timely indemnifications of the petitioners' loss. It is submitted that the intention behind procuring the subject insurance policy is to mitigate a peril insured under the Standard Fire and Special Peril Policy.
Page 7 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER6. Learned counsel for the petitioners submitted that the respondent company is withholding the legitimate claims of the petitioners beyond period stipulated by the subject insurance contract and the law of the land. The respondent company has failed to address the issue/dispute of the petitioners and therefore, has failed to perform its promise under the Subject Insurance Contract. It is further submitted that the respondent company has kept petitioners in abeyance and violated the terms and conditions of the Subject Insurance Contract in addition to the regulations framed by Insurance Regulatory and Development Authority.
7. Learned counsel for the petitioners submitted that there exists serious dispute between the parties and therefore, petitioners have invoked arbitration clause under the Subject Insurance Policy and the same is required to be referred to arbitration. It is also submitted that as the terms and conditions attached to the Subject Insurance Contract specifically require the resolution of disputes and differences between the parties pertaining to quantum of money to be paid under the policy, through the medium of arbitration and in accordance with law, the petitioners have no option but to carry all disputes and differences to the arbitral forum. Learned counsel for the petitioners submitted that Clause no.13 of the terms and conditions attached to the policy between the petitioners and the respondents is relevant to reproduce as under : "Clause13"
"If any dispute or difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator to be appointed Page 8 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel of three arbitrators, comprising of two arbitrators, one to be appointed by each of the parties to the dispute/difference and the third arbitrator to be appointed by such two arbitrator and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the company has disputed or not accepted liability under or in respect of this policy.
It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator/arbitrators of the amount of the loss or damage shall be first obtained."
8. Learned counsel for the petitioners submitted that the respondent company has failed to appoint or nominate a Sole Arbitrator and in terms of Clause 13, the appointment is required to be made according to the provisions of the Arbitration and Conciliation Act, 1996. It is further submitted that the respondent company is not accepting submission of the petitioners that discharge voucher is submitted by the petitioners under protest as the banker of the petitioners has given clear discharge. It is also stated that under the agreed bank clause, the Page 9 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER discharge voucher issued by Surat Peoples Cooperative Bank Ltd., (SPCB) pertains to a discharge of the amount received by SPCB and does not absolve the respondent from the liability of paying the established claim to the petitioners. The claims of petitioners are duly established and petitioners are entitled to the balance claim amount and interest thereon.
9. Learned counsel for the petitioners submitted that in total disregard and violation of the IRDA Circulars dated 24th September 2015 and 7th June 2016 on the issue of accord and satisfaction, the respondent through advocate refused to refer the dispute to the Arbitrator/s. It is also submitted that the said circulars clearly indicated that the General Insurance Companies cannot prevent an insured for agitating issue of their claim despite execution of a discharge voucher.
10. Learned counsel for the petitioners submitted that the procedure agreed to by the respondent in terms of clause13 of the terms and conditions, has not been acted upon by the respondent and therefore, the petitioners approached this Court by way of present petition u/s.11(6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator/s.
11. Learned counsel for the petitioners submitted that the respondent ought to have paid the amount claimed against the stock and LOP insurance claim to the petitioners. It is further submitted that the liability under building claim has been established and the dispute is with respect to the quantum of claim has to be referred to arbitration in terms of Clause13 of the subject Insurance Policy. It is further submitted that the petitioners are also entitled to the interest on the amount due in respect of the prearbitration period. Learned counsel for the petitioners submitted that the Court may pass appropriate order qua Page 10 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER appointment of arbitrator.
12. Learned counsel for the petitioners relied on the following authorities :
1. Civil Appeal No. 5733 of 2008 in case of National Insurance Co. Ltd Vs. M.s Beghara Polyfab Pvt. Ltd.. Para27 of said decision reads as under :
"27. Let us consider what a civil court would have done in a case where the defendant puts forth the defence of accord and satisfaction on the basis of a full and final discharge voucher issued by plaintiff, and the plaintiff alleges that it was obtained by fraud/coercion/undue influence and therefore not valid. It would consider the evidence as to whether there was any fraud, coercion or undue influence. If it found that there was none, it will accept the voucher as being in discharge of the contract and reject the claim without examining the claim on merits. On the other hand, if it found that the discharge voucher had been obtained by fraud/undue influence/coercion, it will ignore the same, examine whether plaintiff had made out the claim on merits and decide the matter accordingly. The position will be the same even when there is a provision for arbitration. The Chief Justice/his designate exercising 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 designate comes to the conclusion that the full Page 11 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER 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 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 the arbitral tribunal with a specific direction that the said question should be decided in the first instance. "
2. O.M.P. (Comm) 435 of 2017 & IA No. 1443014432/2017 in case of The United India Insurance Co, Ltd Vs. Maja Health Care Division,
3. Civil Appeal No. 6399 of 2009 in case of M/s. Magma Leasing & Finance Limited & Anr. Vs. Potluri Madhavilata & Anr.
4. 1974 AIR 158, in case of Damodar Valley Corporation Vs. K.K. Kar,
13. Shri Ajay R. Mehta, learned counsel for the respondent filed affidavitinreply, relevant paragraphs whereof reads as under : Preliminary Submissions "...4. I say that the respondent issued a Standard Fire & Special Perils Policy No.23080211150100000253 valid from 14th December 2015 to 13th December 2016 covering loss to the applicant's building including due to fire. The relevant provisions of the SFST are as below :
10. Hypothecation Details :Page 12 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER
Sr. No. Name of Branch
the
Financiers
The Surat
Peoples Co.
Op. Bank
Ltd.
1. Agreed Bank Clause
It is hereby declared and agreed :
a) That upon any monies becoming payable under
this policy the same shall be paid by the Company to the Bank and such part of any monies so paid as may relate to the interests of other parties insured hereunder shall be received by the Bank as Agents for such other parties.
b) That the receipts of the Bank shall be completed discharge of the company therefor and shall be binding on all the parties insured hereunder.
N. B: The Bank shall mean the first named Financial Institution/Bank named in the policy.
"Clause13"
"If any dispute or difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel Page 13 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER of three arbitrators, comprising of two arbitrators, one to be appointed by each of the parties to the dispute/difference and the third arbitrator to be appointed by such two arbitrator and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the company has disputed or not accepted liability under or in respect of this policy.
It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator/arbitrators of the amount of the loss or damage shall be first obtained."
5. I say that on 27th December 2015, a fire broke out at C/1/2; Hojiwada Industrial Estate in Sachin, Surat, the location of the Applicant's building.
6. The applicant notified the respondent of the loss and lodged a claim under the SFSP Policy towards loss to its building.
7. I say that the respondent appointed M/s. Rakesh Narula & Co. as Surveyors.
8. I say that Applicant submitted to the Surveyor its estimated loss under the SFSP Police for Rs.3,57,21,000/.
9. I say that on 10th January 2017, the Surveyor Page 14 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER submitted a Survey Report. The applicant had opted for the reinstatement value clause in the SFSP Policy. However, on 12th December 2016 the applicant addressed a letter to the Surveyor requesting the Surveyor to assess their Building claim on a depreciated value basis. The Survey Report assessed the final assessment of the Building claim and arrived at a net assessment of Rs.1,65,18,702/ after making deductions for depreciation salvage, under insurance and excess. The calculation is reproduced hereunder:
Particulars Amoun
t (in
Rs.)
Gross Assessed 3,20,9
Loss 4,067
Less : 77,02,5
Depreciation 76
Less: Salvage 32,00,0
Value 00
Assessed Loss 2,11,9
under the claim 1,491
Less : 18
Percentage of
under insurance
Less : Under 38,15,3
insurance 57
amount
Assessed Loss 1,73,7
under the claim 6,134
Add: Fire 11,973
Fighting
Expenses
Assessed Loss 1,73,88
under the claim ,107
Less : Excess of 8,69,40
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C/IAAP/43/2019 ORDER
5% of the claim 5
amount, subject
to Maximum
10,000/
Net Assessed 1,65,1
Loss 8,702
10. I say that on 9th August 2017, the Applicant's banker The Surat People's Coop. Bank Ltd., addressed a letter to the respondent with instructions to remit the proceeds of the applicant's claim under the SFSP policy to the Applicant's loan account in SPCB. This instruction was issued because of the assignment of the SFSP policy to SPCB for the various credit facilities enjoyed by the applicant. Therefore, the Agreed Bank Clause was specifically incorporated in the SFSP Policy, which entitles SPCB to accept the settlement amount and issue a discharge voucher to the Respondent. It is further submitted that as per the Agreed Bank Clause, receipt of SPCB shall be complete discharge of the Respondent and shall be binding on all parties insured under the SFSP Policy.
11. I say that on the same day, 9th August, 2017 the Respondent provided a format of the discharge voucher. SPCB respond with the remittance details and stated that they would be submitting the discharge voucher at the earliest. They further instructed the Respondent to remit the proceeds of the claim as per their remittance instructions.
12. I say that on 14th August, 2017 SPCB submitted a Page 16 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER discharge voucher for the sum of Rs. 1,50,18,036/ to the Respondent in full and final settlement of the claim. The discharge voucher in material part states, "I/we give the discharge receipt to the company towards claims arising directly/indirectly in respect of the said accident/loss."
13. On 17th August 2016, Rs. 1,50,09,201 was released to SPCB as a full and final satisfaction of the Applicant's Building claim under the SFSP Policy.
14. I say that on 4th September 2017, the Applicant by way of its letter lodged its protest against the claim settlement by the Respondent. The applicant thereafter issued a follow up letter dated 9th November 2017, to the Respondent protesting the settlement of its claim.
15. I say that on 7th June 2018, the Applicant issued an arbitration notice in respect of its claim under the SFSP Policy to the respondent. The Respondent relied on 18th August 2018 and refused arbitration, as no grounds existed for referring the alleged dispute to arbitration.
16. I say that the Applicant issued a follow up letter dated 21st September 2018 and reiterated its request for arbitration. The Respondent replied on 25th October 2018, stating that no grounds exist to refer the alleged dispute to arbitration.
Accord and Satisfaction of the Applicant's Building Claim Page 17 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER
17. I submit that the position of law on interpretation of insurance policies is settled. The terms and conditions of a policy have to be interpreted strictly and have to be read as they are expressed. There can be no departure from the terms and conditions of the policy on the grounds of equity and it is not open to the Court to add / subtract / amend words of the policy or indeed substitute its own judgment for the express language stipulated in the policy to create what may appear to be more reasonable result. It is a matter of record that the SFSP Policy has an Agreed Bank Clause endorsed and forming part of the SFSP Policy issued by the Respondent.
18. I state that a bare reading of the Agreed Bank Clause would indicate that once the Bank has given a valid receipt in respect of the monies received towards the Applicant's claim under the SFSP Policy, it would amount to a complete discharge of the obligations of the Respondent. Such discharge shall be binding on all parties insured under the SFSP Policy, being the Applicant. I state that the receipt of SPCB and the acknowledgment of payment is contained in the discharge voucher dated 14 August 2017 (Annexure E), which SPCB has executed. This amounts to a complete discharge of the obligations of the Respondent in light of the full and final settlement offered by it and accepted by SPCB. The discharge voucher dated 10 August 2017 (Annexure C) relied upon by the Applicant is invalid as under the Agreed Bank Clause, it was SPCB that was to acknowledge receipt of monies and Page 18 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER discharge the Respondent upon full and final satisfaction of the claim under the SFSP Policy.
19. I say that SPCB was the lead financier to the Applicant and by operation of the Agreed Bank Clause, the monies payable under the SFSP Policy were paid by the Respondent to the Applicant's loan account in SPCB in compliance with subclause (a) of the said Agreed Bank Clause and upon specific instructions of SPCB.
20. I say that, in the circumstances, if the discharge voucher dated 14 august 2017 is to be assailed and challenged on any grounds, then it would have to be SPCB to make the assertion that it acted under duress when accepting and / or executing the said discharge voucher. It is clear from the record that not a single document or writing has been produced, which demonstrate such assertions by SPCB.
21. I say that the Applicant, in light of the foregoing circumstances, as well as the Agreed Bank Clause, is bound by the discharge voucher dated 14th August 2017 and does not even have the locus to challenge or assail its binding effect or legality and invoke the arbitration to raise disputes concerning the alleged balance amounts.
22. I say that in any event, it is established that the only entity which could even make allegations that its consent was obtained under duress SPCB, given the monies Page 19 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER were paid to it by the respondent and there is no document or writing before this Hon'ble Court from SPCB in these proceedings. On this basis, the discharge voucher dated 14th August 2017 continues to be binding and accordingly there cannot be any dispute, which can be arbitrated in the present instance.
23. Furthermore, I say that the purported protest lodged by the Applicant is belated and an afterthought. The applicant by way of its letter dated 4th September 2017 lodged its purported protest against the claim settlement by the respondent. It is a settled position of law that such a protest after the expiry of 3 weeks is not a valid protest. The applicant was under an obligation to protest to the settlement immediately and promptly. I submit that such a belated protest is indicative of the fact that the applicant is attempting to extract monies from the respondent, which are not contractually due and an effort to a windfall gain over and above the lawful contractual settlement by the respondent.
24. I also submit that the fraud/coercion/duress alleged in respect of submission of consent to the building claim is without any material particulars, amounting to mere bald assertions, conjectures and surmises. Therefore, the applicant cannot assail the full and final settlement, especially when there was a belated protest.
25. In light of the foregoing grounds which inter alia include:
Page 20 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDERa. Issuance of the discharge voucher dated 14th August 2017 by SPCB, as per the agreed bank clause, amounting to full discharge of the respondent, b. Accord and satisfaction in light of the full and final settlement between the applicant and the respondent, c. Protest after the expiry of 3 weeks resulting in a belated and an invalid protest, d. Absence of any document or writing demonstrating fraud/coercion/duress on SPCB.
I submit that there is no arbitrable dispute for which this Hon'ble Court is required to appoint an arbitrator/s. The applicant has failed to demonstrate that there exist a dispute in relation to the quantum to be paid, as there is accord and satisfaction between the applicant and the respondent.
26. Without prejudice to the foregoing, I submit that there is no fraud/coercion/duress in the applicant accepting the settlement offered by the respondent. In fact, the applicant has not even pleaded such a case.
27. I state that for the reasons mentioned in the paragraphs (10) to (26) above, the requirements for appointing arbitrator/s has not been satisfied by the applicant.
28. Moreover, I submit that it is now a settled position that the appointment of an arbitrator is a judicial power and not a mere administrative function leaving some degree of judicial intervention, when it comes to the Page 21 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER question to examine the existence of a prima facie arbitration agreement. Furthermore, it is necessary to ensure that the dispute resolution process does not become unnecessarily protracted. As such, the Court exercising jurisdiction under section 11 of the Act, cannot adopt a mechanical approach in appointing an arbitrator without any supportive evidence in record to prima facie substantiate that an arbitrable dispute subsisted under the agreement, which needs to be referred to an arbitrator/s for adjudication.
29. Therefore, I submit that no grounds exist for the appointment of an arbitrator/s for adjudication of any of the applicant's claim.
14. Shri Mehta, learned counsel appearing for the respondent invited Court's attention to the response and reply in affidavitinreply filed by respondent indicating that there is complete denial to the contentions of the petitioner and all the disputes are not required to be referred to the arbitrator. The disputes which are arising only out of SFSP policy in accordance therewith are required to be referred to the Arbitration. It was further contended on behalf of respondent that for reference stated in para10 to 26 of the reply, there is arbitral dispute exists. The close reading of clause 13 of the SFSP policy would show that there was no arbitral dispute existing between the parties and therefore, the petitions are required to be dismissed.
15. The counsel for the respondent submitted that the express wording of the agreed bank clause, which are binding on the applicant and in accordance therewith, Bank discharge voucher would sufficient binding upon the applicant and all. Therefore, there is no requirement of Page 22 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER any further dispute referred to the Arbitration. Learned counsel for the respondent submitted that applicant's have relied upon the IRDA Circulars dated 24th September 2015 and 7th June 2016 under misconception. The 7th June 2016 Circular mandates that insurance companies may obtain discharge vouchers but such discharge vouchers ought not to be obtained under coercion, force or compulsion. In the present case, the respondent obtained a clean discharge voucher from SPCB, as per the Agreed bank clause.
16. In support of aforesaid submission, learned counsel for respondent replied upon following decisions :
(I) decision reported in (2015) 2 SCC 424, in case of New India Assurance Company Limited Vs. Genus Power Infrastructure Limited, para10 of same, reads as under :
"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 the discharge in the 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 Page 23 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER execution of the letter of subrogation, there was full 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 Act. The High Court was not therefore justified in exercising power under Section 11 of the Act.
(II) Decision reported in (2019) 5 SCC 362, in case of United India Insurance Company Limited Vs. Antique Art Exports Private Limted, para12 to 21 reads as under:
"12. The existence of an arbitration clause in the contract of insurance is not in dispute. The question does arise whether the discharge in the present case upon acceptance of the compensation and signing of the discharge letter was voluntary or under coercion or undue influence and the respondent was justified in invoking Section 11(6) of the Act. It is true that execution of full and final agreement, receipt or a discharge voucher in itself cannot be a bar to arbitration and it has been observed by this Court in National Insurance Company Limited Vs. Boghara Polyfab Private Limited 2009(1) SCC 267 at para 44 as under:"
44. None of the three cases relied on by the appellant lay down a proposition that mere execution of a full and final settlement receipt or a Discharge Voucher is a bar to arbitration, even when the validity thereof is challenged by the claimant on the ground of fraud, coercion or undue influence. Nor do they lay down a proposition that even if the discharge of contract Page 24 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER is not genuine or legal, the claims cannot be referred to arbitration. In all the three cases, the Court examined the facts and satisfied itself that there was accord and satisfaction or complete discharge of the contract and that there was no evidence to support the allegation of coercion/undue influence."
13. It further laid down the illustrations as to when claims are arbitrable and when they are not. This may be illustrative (not exhaustive) but beneficial for the authorities in taking a decision as to whether in a given situation where no claim/discharge voucher has been furnished what will be its legal effect and still there is any arbitral dispute subsists to be examined by the arbitrator in the given facts and circumstances and held in para 52 of National Insurance Co. Ltd. Vs. Boghara Polyfab Private Limited (supra) as follows:"
52. Some illustrations (not exhaustive) as to when claims are arbitrable and when they are not, when discharge of contract by accord and satisfaction are disputed, to round up the discussion on this subject are:
(i) A claim is referred to a conciliation or a prelitigation 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/noclaim 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 Page 25 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER 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 contractor either in writing or orally that unless the contractor gives a discharge voucher in the prescribed format acknowledging receipt of rupees six lakhs in full and final satisfaction of the contract, payment of the admitted amount will not be released. The contractor who is hardpressed for funds and keen to get the admitted amount released, signs on the dotted line either in a printed form or otherwise, stating that the amount is received in full and final settlement. In such a case, the discharge is under economic duress on account of coercion employed by the employer. Obviously, the discharge voucher cannot be considered to be voluntary or as having resulted in discharge of the contract by accord and satisfaction. It will not be a bar to arbitration.
(iv) An insured makes a claim for loss suffered. The claim is neither admitted nor rejected. But the insured is informed during discussions that unless the claimant gives a full and final voucher for a specified amount (far lesser than the amount claimed by the insured), the entire claim will be rejected. Being in financial difficulties, the claimant agrees to the demand and issues an undated discharge voucher in full and final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is paid. The accord and satisfaction in such a case is not voluntary but under duress, compulsion and coercion. The coercion is subtle, but very much real. The "accord" is not by free consent. The arbitration agreement can thus be invoked to refer the disputes to arbitration.
(v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who is keen to have a settlement and avoid litigation, voluntarily Page 26 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER reduces the claim and requests for settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might have agreed for settlement due to financial compulsions and commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there cannot be any subsequent claim or reference to arbitration."
14. It is true that there cannot be a rule of thumb and each case has to be looked into on its own facts and circumstances, taking note of the broad principles, it was observed by this Court in Union of India and Others Vs. Master Construction Co. 2011(12) SCC 349 at para 18 as under:"
18. 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 a necessity to refer the dispute for arbitration at all."
15. From the proposition which has been laid down by this Court, what reveals is that a mere plea of fraud, coercion or undue influence in itself is not enough and the party who alleged is under obligation to prima facie establish the same by placing satisfactory material on record before the Chief Justice or his Designate to exercise power under Section 11(6) of the Act, which has been considered by this Court in New India Assurance Company Ltd. case (supra) as follows:
Page 27 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER"9. 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 prima facie establish the same by placing material before the Chief Justice/his designate....."
16. In the instant case averment was made for the first time after 11 weeks of the settlement of claim & release of discharge voucher in the petition filed by the respondent seeking appointment of Arbitrator of undue influence/coercion being used by the appellant in signing the papers on dotted lines is reproduced as under:"
xiii. It is stated that the Respondent occupying a bargaining position as an Insurer coerced and forced the Petitioner to sign on dotted lines on a Presigned Standard Discharge Voucher. The petitioner facing severe financial distress gave in to the pressure tactics of the Respondent and was made to sign a purported Discharge Voucher dated 24.06.2016 for an amount of Rs. 2,20,36,840/( Rupees Two Crore Twenty Lakhs Thirty Six Thousand, Eight Hundred Forty Only) as against the Claim of Rs. 5,12,49,241/ ( Rupees Five Crore Twelve Lakhs Forty Nine Thousand Two Hundred Forty One Only) as a precondition for release of money.
xvii. It is stated that Petitioner vide its Letter dated 27.07.2016 rescinded the purported Discharge Voucher as illegal and void as it was forced on coerced into signing the same in the face of extreme financial duress. The petitioner vide the said letter dated 27.07.2016 called upon the Respondent to pay the balance amount of Rs. 2,92,12,401/( Rupees Two Crore Ninety Two Lakhs Twelve Thousand Four Hundred and One Only) on account of loss suffered by the petitioner as result of fire. The petitioner also claimed an interest @ 18% per annum from the date of incident as well as on the paid amount till date of payment i.e. up to 06.07.2016."
Page 28 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER17. It is true that there cannot be a rule of its kind that mere allegation of discharge voucher or no claim certificate being obtained by fraud/coercion/undue influence practised by other party in itself is sufficient for appointment of the arbitrator unless the claimant who alleges that execution of the discharge agreement or no claim certificate was obtained on account of fraud/coercion/undue influence practised by the other party is able to produce prima facie evidence to substantiate the same, the correctness thereof may be open for the Chief Justice/his Designate to look into this aspect to find out at least prima facie whether the dispute is bonafide and genuine in taking a decision to invoke Section 11(6) of the Act.
18. In the instant case, the facts are not in dispute that for the two incidents of fire on 25th September, 2013 and 25th October, 2013, the appellant Company based on the Surveyor's report sent emails on 5th May, 2016 & 24th June, 2016 for settlement of the claims for both the fires dated 25th September, 2013 and 25th October, 2013 which was responded by the respondent through email on the same date itself providing all the necessary information to the Regional Office of the Company and also issued the discharge voucher in full & final settlement with accord and satisfaction. Thereafter, on 12th July, 2016, the respondent desired certain information with details that too was furnished and for the first time on 27th July, 2016, it took a Uturn and raised a voice of undue influence/coercion being used by the appellant stating that being in financial distress left with no option than to proceed to sign on the dotted lines. As observed, the phrase in itself is not sufficient unless there is a prima facie evidence to establish the allegation of coercion/undue influence, which is completely missing in the instant case.
19. In the given facts and circumstances, we are satisfied that the discharge and signing the letter of subrogation was not because of any undue influence or coercion as being claimed by the respondent and we find no difficulty to hold that upon execution of the letter of subrogation, the claim was settled with due accord and satisfaction leaving no arbitral dispute to Page 29 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER be examined by an Arbitrator to be appointed under Section 11(6) of the Act.
20. The submission of the learned counsel for the respondent that after insertion of subsection (6A) to Section 11 of Amendment Act, 2015 the jurisdiction of this Court is denuded and the limited mandate of the Court is to examine the factum of existence of an arbitration and relied on the judgment in Duro Felguera S.A. Vs. Gangavaram Port Limited 2017(9) SCC 729. The exposition in this decision is a general observation about the effect of the amended provisions which came to be examined under reference to six arbitrable agreements (five agreements for works and one corporate guarantee) and each agreement contains a provision for arbitration and there was serious dispute between the parties in reference to constitution of Arbitral Tribunal whether there has to be Arbitral Tribunal pertaining to each agreement.
In the facts and circumstances, this Court took note of subsection (6A) introduced by Amendment Act, 2015 to Section 11 of the Act and in that context observed that the preliminary disputes are to be examined by the arbitrator and are not for the Court to be examined within the limited scope available for appointment of arbitrator under Section 11(6) of the Act. Suffice it to say that appointment of an arbitrator is a judicial power and is not a mere administrative function leaving some degree of judicial intervention when it comes to the question to examine the existence of a prima facie arbitration agreement, it is always necessary to ensure that the dispute resolution process does not become unnecessarily protracted.
21. In the instant case, prima facie no dispute subsisted after the discharge voucher being signed by the respondent without any demur or protest and claim being finally settled with accord and satisfaction and after 11 weeks of the settlement of claim a letter was sent on 27th July, 2016 for the first time raising a voice in the form of protest that the discharge voucher was signed under undue influence and coercion with no supportive prima facie evidence being placed on record in absence thereof, it must follow that the claim had been settled with accord and satisfaction leaving Page 30 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER no arbitral dispute subsisting under the agreement to be referred to the Arbitrator for adjudication."
17. The Court has heard learned counsels for the parties. The petitioner's counsel has heavily relied upon the Arbitration Clause and decisions of the Supreme Court cited hereinabove to support his contention that there exists a valid Arbitration clause and so called discharge voucher submitted by the Banker cannot preclude the petitioner from seeking reference of the dispute to the Arbitrator under the provisions of the Arbitration Act. The decision cited at bar on behalf of petitioner would clearly indicate that discharge voucher unless it is proved to be without coercion, would not preclude the Court from referring the matter to Arbitrator. The Delhi High Court decision referring to ERDA circular dated 28.9.2015 which has been heavily relied upon by counsel for the petitioner, the said circular is attempted to be explained by counsel for respondent that same is only for the purpose of indicating that discharge voucher may not be obtained forcefully or there should not be any element of coercion while discharging voucher, the same could not therefore be avail to the petitioner, as submitted by counsel for petitioner. The counsel for respondent contended that 'agreed bank clause' stated hereinabove would clearly indicate that the discharge voucher issued by the Bank was valid and appropriately binding to the parties including the petitioner and therefore, same is required to be considered and petition is required to be dismissed as no Arbitrator need to be appointed. The counsel for respondent placed heavy reliance upon the decision of New India Assurance Company Limited (supra) and subsequent decision in case of United India Insurance Company Limited Vs. Antique Art Exports Private Limited (supra) in support of his contention that there cannot be any dispute qua the legal proposition culling out therefrom but a question still warrants consideration is as to whether the scope of any further probe is available to the Court, while considering the application Page 31 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER under Section 11 of the Arbitration and Conciliation Act at the behest of party, especially in view of provisions of Section 16 of the Arbitration Act, is else, it would amount to embarking upon the issue, which otherwise would be appropriately dealt with by appointed arbitrator between the parties.
18. The latest decision in case of Mayavati Trading Private Limited Vs. Pradyuat Deb Burman, reported in (2019) 8 SCC 714, would clearly indicate that Court while examining Section 11 application, needs to be satisfy only qua the existence of dispute and Arbitration clause between the parties. The rest of the questions are better left to the Arbitrators.
19. The Court needs to be mindful of the fact that the present proceedings are only for the purpose of appointment of Arbitrator and as recently held by the Supreme Court in case of Mayavati Trading Private Limited Vs. Pradyuat Deb Burman, (supra) , the Court while examining the matter under Section 11 of the Arbitration Act need not elaborately go into any other aspect except the existence of the arbitration clause. The following observations of the Supreme Court may be extracted and reproduced hereinbelow for ready reference:
"6. Thus, it can be seen that after the amendment Act of 2019, Section 11(6A) has been omitted because appointment of arbitrators is to be done institutionally, in which case the Supreme Court or the High Court under the old statutory regime are no longer required to appoint arbitrators and consequently to determine whether an arbitration agreement exists.Page 32 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER
7. Prior to Section 11(6A), this Court in several judgments beginning with SBP & Co. vs. Patel Engineering Ltd. and Anr., 2005 8 SCC 618 has held that at the stage of a Section 11(6) application being filed, the Court need not merely confine itself to the examination of the existence of an arbitration agreement but could also go into certain preliminary questions such as stale claims, accord and satisfaction having been reached etc.
8. In ONGC Mangalore Petrochemicals Limited vs. ANS Constructions Limited and another, 2018 3 SCC 373, this Court in a case which arose before the insertion of Section 11(6A) dismissed a Section 11 petition on the ground that accord and satisfaction had taken place in the following terms:
"31. Admittedly, nodues certificate was submitted by the contractee company on 2192012 and on their request completion certificate was issued by the appellant contractor. The contractee, after a gap of one month, that is, on 2410 2012, withdrew the nodues certificate on the grounds of coercion and duress and the claim for losses incurred during execution of the contract site was made vide letter dated 121 2013, I.e. after a Page 33 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER gap of 3 ½ (threeandahalf) months whereas the final bill was settled on 10 102012. When the contractee accepted the final payment in full and final satisfaction of all its claims, there is no point in raising the claim for losses incurred during the execution of the contract at a belated stage which creates an iota of doubt as to why such claim was not settled at the time of submitting final bills that too in the absence of exercising duress or coercion on the contractee by the appellant contractor. In our considered view, the plea raised by the contractee company is bereft of any details and particulars, and cannot be anything but a bald assertion. In the circumstances, there was full and final settlement of the claim and there was really accord and satisfaction and in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not, therefore, justified in exercising power under Section 11 of the Act."
The 246th Law Commission Report dealt with some of these judgments and felt that at the stage of a Section 11(6) application, only "existence" of an Page 34 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER arbitration agreement ought to be looked at and not other preliminary issues. In a recent judgment of this Court, namely, Garware Wall Ropes Ltd. vs. Coastal Marine Constructions & Engineering Ltd.,2019 SCCOnLineSC 515, this Court adverted to the said Law Commission Report and held:
(Gareware Wall Ropes Ltd. case, SCC paras 814)
8...
9...
10...
11. This position was further clarified in Boghara Polyfab as follows:
"22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. [(2005) 8 SCC 618]. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (I) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.Page 35 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER
22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.
22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.
22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for Page 36 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).
(ii) Merits or any claim involved in
the arbitration."
12. As a result of these judgments, the door was wide open for the Chief Justice or his designate to decide a large number of preliminary aspects which could otherwise have been left to be decided by the arbitrator under Section 16 of the 1996 Act. As a result, the Law Commission of India, by its Report No. 246 submitted in August 2014, suggested that various sweeping changes be made in the 1996 Act. Insofar as SBP & Co. (supra) and Boghara Polyfab (supra) are concerned, the Law Commission examined the matter and recommended the addition of a new subsection, namely, subsection (6A) in Section 11. In so doing, the Law Commission recommendations which are relevant and which led to the introduction of Section 11(6A) are as follows:
28...
29. The Supreme Court has had occasion to deliberate upon the scope and nature of permissible prearbitral judicial intervention, especially in the Page 37 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER context of section 11 of the Act. Unfortunately, however, the question before the Supreme Court was framed in terms of whether such a power is a "judicial" or an "administrative" power which obfuscates the real issue underlying such nomenclature/description as to the scope of such powers i.e. the scope of arguments which a Court (Chief Justice) will consider while deciding whether to appoint an arbitrator or not i.e. whether the arbitration agreement exists, whether it is null and void, whether it is voidable etc.; and which of these it should leave for decision of the arbitral tribunal.
the nature of such intervention i.e. would the Court (Chief Justice) consider the issues upon a detailed trial and whether the same would be decided finally or be left for determination of the arbitral tribunal.
30. After a series of cases culminating in the decision in SBP v. Patel Engineering, (2005) 8 SCC 618, the Supreme Court held that the power to appoint an arbitrator under section 11 is a "judicial" power. The underlying issues in this judgment, relating to the scope of intervention, were subsequently clarified by Raveendran J. in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd., where the Supreme Court laid down as follows Page 38 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER "22.1. The issues (first category) which Chief Justice/his designate will have to decide are:
(a) Whether the party making the application has approached the appropriate High Court?
(b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement?
22.2. The issues (second category) which the Chief Justice/his designate may choose to decide are:
(a) Whether the claim is a dead (long barred) claim or a live claim?
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection?
22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are:
(a) Whether a claim falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted Page 39 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER or excluded from arbitration)?
(b) Merits of any claim involved in the arbitration."
31...
32...
33. 14. A reading of the Law Commission Report, together with the Statement of Objects and Reasons, shows that the Law Commission felt that the judgments in SBP & Co. (supra) and Boghara Polyfab (supra) required a relook, as a result of which, so far as Section 11 is concerned, the Supreme Court or, as the case may be, the High Court, while considering any application under Section 11(4) to 11(6) is to confine itself to the examination of the existence of an arbitration agreement and leave all other preliminary issues to be decided by the arbitrator."
10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid Page 40 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER down in the judgment Duro Felguera, S.A. (supra) see paras 48 & 59.
11. We, therefore, overrule the judgment in United India Insurance Company Limited (supra) as not having laid down the correct law but dismiss this appeal for the reason given in para 3 above.
12. Mr. Rohatgi now requests us for an extension of the status quo order granted by the trial court for a period of one week from today so that he may adopt other proceedings. This request is granted."
20. in light of this discussion, it can well be said that this Court without going into detail the rival contentions qua the effect of discharge issued by the Bank, agreed bank clause and other issues, refer the matter to the Arbitrator, who will have a jurisdiction to examine all the issue in detail under Section 16 of the Arbitration and Conciliation Act.
21. In view of the aforesaid discussion, it can well be said that there remains hardly any scope for this Court under Section11 of the Arbitration and Conciliation Act, 1996 for embarking upon any detailed probe or investigation and examination of any other issues especially when there is a clear and indisputable existence of arbitration clause in the agreement. This Court is therefore, of the considered view that the parties may takeup all the available contentions before the arbitrator, as Section16 of the Arbitration and Conciliation Act, 1996 provides ample opportunity and scope. Therefore, at this stage, suffice it to say that the Court is of the view that the dispute in question does merit reference to Page 41 of 42 Downloaded on : Sat Feb 01 02:47:31 IST 2020 C/IAAP/43/2019 ORDER the arbitrator for adjudication under the Arbitration and Conciliation Act, 1996 leaving complete liberty to the parties to takeup all the issues including the discharge by the bank and its efficacy or otherwise and this Court's observations being prima facie shall not impede any party to make good the admissible contentions under the law before the arbitrators. The parties have to be given an opportunity to arrive at a consensual name for referring the dispute and therefore, this Court is proposing to adjourn this matter so that in the meantime the parties may arrive at a mutually agreed name and the arbitrator could be appointed for undertaking the arbitration in respect of the dispute failing which the Court would appoint arbitrator for adjudication of dispute. Putup on 10th January 2020.
(S.R.BRAHMBHATT, J.) AMAR RATHOD...
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