The Supreme Court has observed that the questions as to whether the insured was compelled to sign the standardized voucher/advance receipt forwarded to it by the insurer out of economic duress and whether the arbitration claim was sustainable after accepting the offered amount, are within the domain of the arbitral tribunal.

The appeals by special leave were directed against the order of the Bombay High Court in an Arbitration Application.

The Division Bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan held, “In view of the clear legal proposition, we have no hesitation in holding that the High Court was wrong in rejecting the Section 11(6) applications of the appellant. The question as to whether the appellant was compelled to sign the standardized voucher/advance receipt forwarded to it by the respondent out of economic duress and whether notwithstanding receipt of Rs.1,88,14,146.00 as against the claim of Rs. 5,71,69,554.00 the claim to arbitration is sustainable or not are clearly within the domain of the arbitral tribunal.”

Advocate Surekha Raman represented the Appellant while Senior Advocate Manish Singhvi represented the Respondent.

Issue

The issue before the Bench was whether a dispute raised by an insured after giving a full and final discharge voucher to the insurer can be referred to arbitration.

Factual Background

The Appellant company engaged in the business of exporting meat and meat products, took a comprehensive Standard Fire and Special Perils Policy from the respondent as well as a Fire Declaration Policy. In 2005, there was very heavy and unprecedented rainfall, because of which the factory premises at Taloja were completely flooded and got submerged under water for several hours. The appellant suffered severe loss. After a considerable delay, the appellant was presented with an undated and standardised voucher/advance receipt for a sum of Rs. 1,88,14,146.

The appellant while reserving its right to invoke the aforesaid arbitration clause called upon the respondent to settle and pay the balance amount of Rs. 3,83,55,408.00 being the difference between the claim lodged by the appellant and the amount paid by the respondent. The appellant made repeated attempts to resolve the matter, but the respondent did not cooperate. Consequently, the appellant invoked the arbitration clause. The matter reached the High Court when the Respondent disputed such invocation, and the High Court dismissed the two arbitration applications. Aggrieved thereby, the appellant approached the Apex Court.

Reasoning

The Bench, at the outset, noted that the two insurance policies contained an identically worded arbitration clause. “ If there is an amicable settlement of the dispute between the parties unless such settlement is set aside in proper proceedings, it would not be open to one of the parties to invoke arbitration. Therefore, the crucial expression here is ‘amicable settlement’”, it said.

The Bench explained that the doctrine of Kompetenz-Kompetenz is now firmly embedded in the arbitration jurisprudence in India. This doctrine is based on the principle that an arbitral tribunal is competent to rule on its own jurisdiction including on the issue of existence or validity of an arbitration agreement. The object is to minimize judicial intervention which is an acknowledgment of the concept of party autonomy.

Reference was made to the judgment in Oriental Insurance Company Ltd. Vs. Dicitex Furnishing Ltd. (2020) wherein the Court had upheld the concept of economic duress and held that notwithstanding signing of the discharge voucher and accepting the amount offered, the dispute is still arbitrable. Pleading in a Section 11(6) application cannot be conclusive whether there is fraud, coercion or undue influence or otherwise.

As per the Bench, the question as to whether the appellant was compelled to sign the standardized voucher/advance receipt forwarded to it by the respondent out of economic duress and whether arbitration claim was sustainable or not were clearly within the domain of the arbitral tribunal.

Thus, setting aside the impugned order of the High Court and allowing the appeal, the Bench appointed Justice (Retd.) Suresh Chandrakant Gupte as the sole arbitrator.

Cause Title: Arabian Exports Private Limited v. National Insurance Company Ltd. (Neutral Citation: 2025 INSC 630)

Appearance

Appellant: Advocates Surekha Raman, Amarjit Singh Bedi, Shreyash Kumar, Sidharth Nair, Yashwant Sanjenbam, Harshit Singh, AOR M/S. K J John And Co

Respondent: Senior Advocate Manish Singhvi, Advocates Vishnu Mehra, AOR Manjeet Chawla, Advocates Usha Pant Kukreti, Kunal Malhotra

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