THE ORIENTAL INSURANCE CO. LTD. & ANR. versus DICITEX FURNISHING LTD.

Citation: [2019] 14 S.C.R. 389 · Decided: 13-11-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Dismissed

Cited by 3 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
389
THE  ORIENTAL INSURANCE CO. LTD. & ANR.
v.
DICITEX FURNISHING LTD.
(Civil Appeal No. 8550  of 2019)
NOVEMBER 13, 2019
[ARUN MISHRA AND S. RAVINDRA BHAT, JJ.]
Arbitration and Conciliation Act, 1996  – s.11(6) – Application
under, for appointment of arbitrator – Court’s jurisdiction to examine
the arbitrability of the dispute in the context of no objection
certificates/discharge vouchers given by the insured to the insurer
in discharge of the claim – Economic duress or coercion, if exists –
In 2011, the respondent-insured obtained Standard Fire and Special
Peril Policy from the appellant to cover the stocks of goods lying in
its three separate godowns– Total sum insured was @ ` 13 crores–
On 25.05.12, fire broke out destroying the stock in the godowns –
Appellant appointed surveyor – Respondent lodged claim for ` 14.88
crores – Surveyor recommended payment of ` 12.93 crores to the
respondent– However, the appellant appointed new surveyor –
Appellant released ` 3.50 crores on 04.03.13 – Respondent signed
the discharge voucher – As per new surveyor’s report, the assessment
worked to ` 7.16 crores which was offered to the respondent in
May 2014, in full and final settlement of the claim – Accepted
reluctantly by the respondent – By letter dtd. 06.06.14, the respondent
withdrew the letter dtd. 31.05.14 submitted along with the discharge
voucher for full and final settlement of the claim –
Respondent informed the appellant that the huge difference between
the total amount claimed and the final claim settlement amount needs
to be resolved, failing which the respondent would invoke the
arbitration, as per the terms and conditions of the Policy –
Respondent filed application u/s.11(6) for appointment of arbitrator
– Allowed by Single Judge – On appeal, held: An aggrieved party
can be the victim of economic coercion which results in its signing a
document which discharges the other party of its obligations –
Several letters spanning over two years stating that the respondent
was facing financial crisis on account of the delay in settling the
claim,were addressed to the appellant – Overall reading of
respondent’s application u/s. 11(6) clearly shows that its grievance
 [2019] 14 S.C.R. 389
389
A
B
C
D
E
F
G
H
390
SUPREME COURT REPORTS
[2019] 14 S.C.R.
with respect to the involuntary nature of the discharge voucher was
articulated– At this stage, the Court is required to ensure that an
arbitrable dispute exists, has to be prima facie convinced about the
genuineness/credibility of the plea of coercion – It cannot be too
particular about the nature of the plea, which necessarily has to be
made and established in the substantive (arbitration) proceeding –
Reasoning in the impugned judgment cannot be faulted.
Dismissing the appeal, the Court
HELD: 1.1 Proposition (iii) of the conclusions recorded in
Boghara Polyfab visualize duress or coercion on account of
withholding of payments due. The court – in more places than
one, recognized that an aggrieved party can be the victim of
economic coercion which results in its signing a document which
discharges the other party of its obligations. [Para 18][410-C-D]
National Insurance Co. Ltd v Boghara Polyfab Pvt Ltd
(2009) 1 SCC 267 : [2008] 13  SCR 638 – relied on.
New Indian Assurance Co. Ltd v Genus Power
Infrastructure Ltd. (2015) 2 SCC 424 : [2014] 12 SCR
360; Union of India (UOI) and Ors. v Master
Construction Co. (2011) 12 SCC 349 : [2011] 5  SCR
853; Velugubanti Hari Babu v. Parvathini Narasimha
Rao & Anr. (2016) 14 SCC 126 : [2016] 3 SCR 228;
ONGC Mangalore Petrochemicals Ltd. v ANS
Constructions Ltd. and Anr. (2018) 3 SCC 373 : [2018]
2 SCR 598 – referred to.
1.2  Though the pleadings in the initial application under
Section 11(6), Arbitration and Conciliation Act, 1996 are weak,
nevertheless, the materials on the record, in the form of copies
of the inter se correspondence of the parties– which span over 2
years, clearly show that respondent kept repeatedly stating that
it was facing financial crisis; it referred to credits obtained for its
business and the urgency to pay back the bank. The Surveyor’s
report, dated 14.08.2014, recommended payment of
` 12,93,26,704.98/- to respondent. The appellant referred the
matter to a chartered accountant’s firm, to verify certain inventory
and sales figures. It went by the report of the latter, who stated
A
B
C
D
E
F
G
H
391
that the estimate of loss could not be more than ` 7,16,30,148/-.
This is what was offered to respond

Excerpt shown. Read the full judgment & AI analysis in Lexace.