Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 3284 OF 2019
(Arising out of SLP(C ) No(s). 23956 of 2017)
UNITED INDIA INSURANCE CO. LTD. .…Appellant(s)
VERSUS
ANTIQUE ART EXPORTS PVT. LTD. .…Respondent(s)
WITH
CIVIL APPEAL NO(s). 3285 OF 2019
(Arising out of SLP(C ) No(s). 23963 of 2017)
J U D G M E N T
Rastogi, J.
Leave granted.
2. These appeals have been filed by the Insurance Company
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assailing the order dated 30 May, 2017 passed by the High
Signature Not Verified
Digitally signed by
DEEPAK SINGH
Date: 2019.03.28
17:12:06 IST
Reason:
Court of Delhi appointing an Arbitrator in exercise of power
under Section 11(6) of the Arbitration and Conciliation Act,
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1996(hereinafter being referred to as “the Act”) to adjudicate the
dispute between the parties.
3. The facts in brief manifest from the record and relevant for
the present purpose are that the respondent claimant was
running its factory situated at 78, Kilo Mile Stone, Karhans
Village, Main GT Road, Samalakha, Panipat and purchased two
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Standard Fire and Special Perils Policies dated 29 June, 2013
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and 10 October, 2013. On 25 September, 2013 and thereafter
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on 25 October, 2013, a fire took place in the factory on account
of a short circuit as claimed by the respondent claimant. The
appellant Company on receipt of the information appointed M/s.
Protocol Surveyors & Engineers Pvt. Ltd. as surveyors and also
appointed their investigator to submit the fact finding report.
After the report was submitted by the authorised surveyor, the
appellant Company sent an email to the respondent with an
intimation that it has approved its claim for an amount of Rs.
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2,81,44,413/ on account of fire dated 25 October, 2013
towards full and final settlement with complete details of the
amount computed. The extract of the email sent by the
appellant Company to the respondent has been placed on record
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at Annexure P2 in Civil Appeal arising out of SLP(C ) No. 23956
of 2017 and is reproduced as under:
“ From: Jaiprakash1@uiic.co.in
Sent: Thursday, May 05, 2016 1:23 PM
To: Vimal Singh
CC: sangeetagupta@uiic.co.in ; vijaysharma@uiic.co.in ;
nareshchandolia@uiic.co.in
Subject: Fire Claim dated 25.10.2013
Sir/Madam,
This is to inform you that the Competent Authority has
approved your claim for an amount of Rs.
2,81,44,413/ (building Rs. 88,18,691 P & M Rs.
7,32,382 FFF Rs. 3,61,049 Finished Goods, Rs.
1,95,66,389 Fire Fighting Ex. Rs. 59,000 Cost of
Debris Removal Rs. 88,187 Total Rs. 2,96,25,698)
Less Excess 5% Rs. 14,81,285 = Rs. 2,81,44,413) of
loss dated 25.10.2013 (Claim No.
0407001113C101515001)
In order to release the payment we require following
from your end.
1. Confirmation from the concerned bank “Indian
Overseas Bank, Defence Colony Branch.
Through mail that in which Account the payment has
to be made through NEFT.
2. Deposit Reinstatement premium of Rs.19100/
3. Fire Fighting expenses bills in original
4. Debris Removal bills in original.
5. Full and final settlement discharge voucher for Rs.
2,81,44,413/ duly endorsed by the bank also
without any Subjectivity.
Please furnish.
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Jaiprakash
Divisional Manager
United India Insurance Company Limited
10203, IIIrd Floor, Jamuna House,
Padam Singh Road
New Delhi110005
Mobile : 9910791508
Phone : 28755967, 28755419
jaiprakash@uiic.co.in
”
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4. On the same date, i.e. 5 May, 2016, the respondent sent a
reply accepting the computation and provided the desired details
with final discharge voucher and details of the bank account in
which the payment was to be credited. The extract of the email
and the discharge voucher sent by the respondent is reproduced
hereunder:
“ ANTIQUE ART
Exports Pvt. Ltd.
(A Govt. of India Recognized Export House)
PANIPAT OFFICE: 78 K.M. Stone, G.T. Road, karhans Village, Tehsil
Samalkha, Panipat132103(INDIA)
T:00911803003300 (100 Lines), F: 00911803003311
E: Info@antiqueartexports.com , :www.antiqueartexports.com
The Divisional Manager 05.05.2016
United India Insurance Co. Ltd.
rd
10203, 3 Floor, Jamuna House
Padam Singh Road
Karol Bagh, New Delhi.
Kind Attn: Mr. Jaiprakash
Subject : Fire Claim dated 25.10.2013
Dear Sir,
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We are in receipt of your email of today’s date,
wherein you have asked to furnish certain
documents/information for doing the needful at your
end. Accordingly, we are submitting herewith desired
information/documents for your necessary action.
1. We have already requested our bank to confirm
account details, in which payment has to be made
through NEFT. Hopefully, you must have received the
same directly from Bank on your email.
2. Regarding reinstatement premium of Rs.19100/, we
request you to deduct the same from claim payment.
3. Original Fire Fighting expenses bills are submitted
herewith for doing the needful at your end.
4. Regarding Debris Removal Bills in original, we are
enclosing herewith separate letter and contents of the
same are selfexplanatory. This payment is to be
released at later date as per our letter.
5. Full and final settlement discharge voucher for
Rs.2,81,44,413/ duly endorsed by the bank is
attached for doing the needful at your end.
While hoping that you will find above information/
documents in line of your requirement, we look
forward to have the immediate transfer of payment of
our claim to our bank.
A line of confirmation in this regard will be highly
appreciated.
Thanking you
Yours faithfully,
For Antique Art Exports Pvt. Ltd.
Ashok Jain
Chairman ”
“ ANTIQUE ART
Exports Pvt. Ltd.
(A Govt. of India Recognized Export House)
PANIPAT OFFICE: 78 K.M. Stone, G.T. Road, karhans Village, Tehsil
Samalkha, Panipat132103(INDIA)
T:00911803003300 (100 Lines), F: 00911803003311
E: Info@antiqueartexports.com , :www.antiqueartexports.com
05.05.2016
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Full and Final Settlement Discharge Voucher
We, Antique Art Exports Pvt. Ltd., 78 KM Stone,
Karhans Village, Tehsil Samalkha, Panipat132103,
Haryana do hereby accept payment of
Rs.2,81,44,413/(Rupees Two Crore Eighty One Lacs
Fourty Four Thousand and Four Hundred Thirteen
only) as full and final settlement against our fire claim
No.:0407001113 C101515001 of loss dated 25.10.2013
without any subjectivity.
For Antique Art Exports Pvt. Ltd.
Sd/
Ashok Jain
Chairman ”
5. Civil Appeal arising out of SLP(C ) No. 23963 of 2017 deals
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with the fire taken place on 25 September, 2013. It is not
disputed between the parties that the facts are similar except
that the claim was settled for Rs. 2,20,36,840/.
6. Indisputedly, both the claims were accepted by the
respondent without any demur or protest, and after full and final
settlement and discharge of claim in reference to both the claims
th th
of the incident dated 25 September, 2013 and 25 October,
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2013, the respondent later through email dt. 11 July, 2016
desired certain details and reports with a break up of
computation including copy of the preliminary survey report etc.
and there was no whisper that any coercion or undue influence,
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etc. was used by the appellant company. The email was replied
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by the appellant on 20 July, 2016 giving all details as desired by
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the respondent. Thereafter on 27 July, 2016 for the first time
nearly almost after 11 weeks of the receipt of claim and full and
final discharge, respondent claimed that fraud, coercion and
undue influence was exercised and he was forced to sign on the
dotted lines without furnishing any prima facie evidence in
support thereof. In furtherance, application came to be filed
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before the High Court on 11 January, 2017 under Section 11(6)
of the Arbitration and Conciliation Act, 1996(hereinafter being
referred to as “the Act”) inter alia that the insurer coerced and
forced the respondent to sign on dotted lines on a presigned
discharge voucher and claimed for appointment of an Arbitrator.
7. The appellant Insurance Company in their reply refuted
such allegations and further stated that the respondent had
signed a letter of subrogation in accepting the payment in full
and final settlement of its claim. Discharge Voucher was sent
without any demur or protest and nothing further survives and
no arbitral dispute subsists for adjudication and so far as the
allegation levelled that the insurer has coerced and put undue
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force upon the respondent to sign on dotted lines on a presigned
standard discharged paper is concerned, there is no prima facie
documentary evidence placed on record except the letter dated
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27 July, 2016 which was sent for the first time after almost
more than 11 weeks of the claim being settled and the
application for appointment of Arbitrator is ill founded and
deserves to be rejected.
8. The High Court taking note of the rival contentions of the
parties and of subsection (6A) of Section 11 of the Act which has
been introduced by virtue of Amendment Act, 2015 observed that
once there is existence of arbitration agreement, acceptance of
the payment disbursed by the appellant company, whether it was
under coercion or undue influence, is a matter to be examined by
the Arbitrator and accordingly proceeded to appoint the sole
arbitrator to adjudicate the dispute between the parties.
9. Shri Vineet Malhotra, learned counsel for the appellant
submits that once the claim was settled and the claimant
received compensation and issued a discharge voucher in full
and final settlement of its claim, there was a discharge of the
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contract by accord and satisfaction. As a result, neither any
contract nor any claim survived. It was also contended that
having received the payment under the said discharge voucher
without any demur or protest, it was not open for the respondent
after 11 weeks of the receipt of the claim and full and final
discharge, to raise a voice that the discharge was obtained under
coercion and undue influence without furnishing any prima facie
evidence in support thereof and placed reliance of the judgment
of this Court in
New India Assurance Company Limited Vs.
Genus Power Infrastructure Limited 2015(2) SCC 424 which
according to him is almost on the same set of facts and
circumstances.
10. Learned counsel for the appellant further submits that sub
section (6A) of Section 11 of the Act has been introduced by
Amendment Act, 2015 with a limited purpose for expediting the
arbitral disputes in a time bound manner provided there is a
prima facie arbitral claim/dispute subsist under the arbitral
agreement for adjudication by the Arbitrator. In the instant case,
as there was no arbitral dispute subsisting after the claim being
finally settled with consent of the parties with due accord and
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satisfaction, Section 11(6) was not available to be invoked by the
respondent in raising a dispute after more than 11 weeks of the
settlement of the claim to the satisfaction of the parties.
11. Per Contra, Shri Dhruv Mehta, learned senior counsel for
the respondent submitted that he is not disputing as far as the
settlement of the claims are concerned but his objection is that
the respondent was not in a bargaining position and being in
financial stress, he had no option but to accept the claim on the
dotted lines settled by the appellant in an arbitrary manner
leaving no choice and mere acceptance in the given
circumstances will not take away the right of the respondent to
establish that it was not voluntary but under undue influence
and coercion and since there is a clause of arbitration in the
agreement, it will be for the Arbitrator to examine as to whether
the acceptance of the claim by the respondent has been voluntary
or under undue influence or coercion and in the given
circumstances, no error has been committed by appointing the
Arbitrator under the impugned judgment.
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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 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
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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
(supra) as follows:
Private Limited
“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 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
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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 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.”
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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:
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“ 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. ”
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17. 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
th th
two incidents of fire on 25 September, 2013 and 25 October,
2013, the appellant Company based on the Surveyor’s report sent
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emails on 5 May, 2016 & 24 June, 2016 for settlement of the
th th
claims for both the fires dated 25 September, 2013 and 25
October, 2013 which was responded by the respondent through
email on the same date itself providing all the necessary
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information to the Regional Office of the Company and also
issued the discharge voucher in full & final settlement with
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accord and satisfaction. Thereafter, on 12 July, 2016, the
respondent desired certain information with details that too was
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furnished and for the first time on 27 July, 2016, it took a U
turn 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 be
examined by an Arbitrator to be appointed under Section 11(6) of
the Act.
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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
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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
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letter was sent on 27 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 no arbitral dispute subsisting under the
agreement to be referred to the Arbitrator for adjudication.
22. In our considered view, the High Court has committed a
manifest error in passing the impugned order and adopting a
mechanical process in appointing the Arbitrator without any
supportive evidence on record to prima facie substantiate that an
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arbitral dispute subsisted under the agreement which needed to
be referred to the arbitrator for adjudication.
23. Consequently, the appeals are allowed and the order passed
by the High Court is accordingly set aside. No costs.
24. Pending application(s), if any, also stand disposed of.
…………………………J.
(A.M. KHANWILKAR)
…………………………J.
(AJAY RASTOGI)
NEW DELHI
March 28, 2019
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