LexSBI GENERAL INSURANCE CO. LTD. versus KRISH SPINNING
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[2024] 7 S.C.R. 840 : 2024 INSC 532 SBI General Insurance Co. Ltd. v. Krish Spinning (Civil Appeal No. 7821 of 2024) 18 July 2024 [Dr Dhananjaya Y. Chandrachud, CJI, J.B. Pardiwala* and Manoj Misra, JJ.] Issue for Consideration Issue arose whether the execution of a discharge voucher towards the full and final settlement between the parties would operate as a bar to invoke arbitration; as regards the scope and standard of judicial scrutiny that an application u/s. 11(6) of the Arbitration and Conciliation Act 1996 can be subjected to when a plea of “accord and satisfaction” is taken by the defendant; and as regards the effect of the decision of this Court in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Stamp Act 1899 on the scope of powers of the referral court u/s. 11 of the Act, 1996. Headnotes† Arbitration and Conciliation Act, 1996 – s. 11 – Appointment of an arbitrator – Execution of a discharge voucher towards the full and final settlement between the parties, if would operate as a bar to invoke arbitration – Arbitration agreement contained in a substantive contract, if survives even after the underlying contract is discharged by “accord and satisfaction” – Scope and standard of judicial scrutiny that an application u/s. 11(6) can be subjected to when a plea of “accord and satisfaction” is taken by the defendant: Held: Although ordinarily no arbitrable disputes may subsist after execution of a full and final settlement, yet any dispute pertaining to the full and final settlement itself, by necessary implication being a dispute arising out of or in relation to or under the substantive contract, would not be precluded from reference to arbitration as the arbitration agreement contained in the original contract continues to be in existence even after the parties have discharged the original contract by “accord and * Author [2024] 7 S.C.R. 841 SBI General Insurance Co. Ltd. v. Krish Spinning satisfaction” – Once the full and final settlement of the original contract itself becomes a matter of dispute and disagreement between the parties, then such a dispute can be categorised as one arising “in relation to” or “in connection with” or “upon” the original contract which can be referred to arbitration in accordance with the arbitration clause contained in the original contract, notwithstanding the plea that there was a full and final settlement between the parties – Where the parties are not ad idem over accepting the execution of the no-claim certificate or the discharge voucher, such disputed discharge voucher may itself give rise to an arbitrable dispute – Thus, the position is that ordinarily, the Court while acting in exercise of its powers u/s. 11, will only look into the existence of the arbitration agreement and would refuse arbitration only as a demurrer when the claims are ex-facie frivolous and non-arbitrable – On facts, existence of the arbitration agreement as contained in the insurance policy not disputed by the appellant-insurer – Dispute raised by the claimant being one of quantum and not of liability, prima facie, falls within the scope of the arbitration agreement – Dispute regarding “accord and satisfaction” as raised by the appellant does not pertain to the existence of the arbitration agreement, and can be adjudicated upon by the arbitral tribunal as a preliminary issue – Appointment of the former Judge of the High Court as an arbitrator to resolve the disputes between the parties upheld. [Paras 59, 93, 135, 136] Arbitration and Conciliation Act, 1996 – Arbitration agreement contained in a substantive contract, if survives even after the underlying contract is discharged by “accord and satisfaction”: Held: Arbitration for the purpose of resolving any dispute pertaining to any claim which has been “fully and finally settled” between the parties can only be invoked if the arbitration agreement survives even after the discharge of the substantive contract – Arbitration agreement, by virtue of the presumption of separability, survives the principal contract in which it was contained – Even if the contracting parties, in pursuance of a settlement, agree to discharge each other of any obligations arising under the contract, this does not ipso facto mean that the arbitration agreement too would come to an end, unless the parties expressly agree to do the same – Intention of t
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