Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 12.03.2018
+ O.M.P. (COMM) 435/2017 & IA No. 14430-14432/2017
THE UNITED INDIA INSURANCE CO. LTD ..... Petitioner
Versus
MAJA HEALTH CARE DIVISION ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Pradeep Gaur and Mr Amit Gaur.
For the Respondent : Mr Sudhir Nandrajog, Senior Advocate
with Mr Sidharth Joshi, Ms Monika and
Mr Sunil.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The United India Insurance Company Limited (the petitioner)
has filed the present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereafter „the Act‟) impugning an arbitral
award dated 05.08.2017 (hereafter „the impugned award‟) passed by
the Arbitral Tribunal consisting of a sole arbitrator.
2. By the impugned award, the Arbitral Tribunal has partly
accepted the claims preferred by the respondent. The Arbitral Tribunal
has accepted that the total amount payable to the respondent in respect
of its insurance claim would be ₹14,39,86,599/-. After adjusting the
sum of ₹12,62,94,258/-, which has been paid, the Arbitral Tribunal
O.M.P. (COMM) 435/2017 Page 1 of 15
has awarded the balance amount of ₹1,76,92,341/- in favour of the
respondent. The Arbitral Tribunal has also awarded interest at the rate
of 9% per annum on the entire sum of ₹14,39,86,599/- from
28.06.2015 to 18.01.2016 and interest on the awarded amount of
₹1,76,92,341/- from 19.01.2016 to 05.08.2017. The Arbitral Tribunal
has also awarded post award interest at the rate of 12% per annum on
the awarded amount if the awarded sums are not paid within a period
of forty-five days from the date of the award.
3. The petitioner has assailed the impugned award mainly on the
ground that the same is contrary to a settlement arrived at between the
parties. It is the petitioner‟s case that the respondent had agreed to
receive a sum of ₹12,62,94,258/- in full and final settlement of its
claims and the said amount had been paid by the petitioner and,
therefore, according to the petitioner, no dispute survived between the
parties.
4. Briefly stated, the aforesaid controversy arises in the following
context:-
4.1 The respondent is a registered partnership firm and is, inter alia ,
engaged in the business of manufacturing Home Care, Oral Care,
Cosmetics products such as shampoo, hair tonic conditioners, hair
wave sets/lacquers and rises, Hair bleaches and Hair Colorants, etc.
The respondent has manufacturing unit known as Maja Healthcare
Division, VI-John Industrial Estate, Village Kishanpura, Tehsil
Nalagarh, Distt. Solan (H.P.).
O.M.P. (COMM) 435/2017 Page 2 of 15
4.2 The respondent purchased a fire insurance policy dated
26.09.2013 (hereafter „the Policy‟) insuring the respondent for a sum
of ₹20 crores against the specified risks. The said policy was valid
from 26.09.2013 to 25.09.2014. Whilst the policy was in force, a fire
occurred on 24/25.02.2014 at the respondent‟s factory at village
Kishanpura, Tehsil Nalagarh, Distt. Solan. The said fire was first
noticed at about 8.45 p.m. on 24.02.2014. The respondent claims that
despite all efforts to control the fire, the same could be controlled only
around 20.30 hours on 26.02.2014. The respondent claims that due to
the said incident, its factory was gutted and its plant and machinery,
stocks, fixture and fittings were extensively damaged.
4.3 The respondent filed a claim for a sum of ₹22,09,86,740/- with
the petitioner company in October, 2014 indicating the loss suffered
under various heads.
4.4 The petitioner company appointed the surveyors and it is the
respondent‟s case that the said surveyors were provided all
information as sought for by them.
4.5 The surveyors appointed by the petitioner submitted a final
report on 27.04.2015 assessing the amount payable at ₹13,31,57,184
(net of salvage). The respondent states that although the said amount
was much less than its entitlement, the respondent was willing to
accept the same as considerable time had elapsed and the respondent
was in dire need of funds. Accordingly, the respondent furnished a
O.M.P. (COMM) 435/2017 Page 3 of 15
consent letter dated 25.04.2015 expressing its willingness to accept the
said amount as full and final settlement of its claims.
4.6 Notwithstanding the same, the petitioner company further
reduced the said amount on account of four Addendum survey reports:
Addendum survey reports dated 16.09.2015, 20.10.2015, 09.12.2015
and 16.12.2015. In terms of the said report dated 16.09.2015, the net
amount was reduced to ₹13,27,48,548/-; in terms of the said report
dated 20.10.2015, it was further reduced to ₹12,70,34,095/-; in terms
of the said report dated 09.12.2015, the assessed claim was further
reduced to ₹12,40,04,020/-; and in terms of the Addendum survey
report dated 16.12.2015, the amount was further reduced to
₹12,62,94,258/-.
4.7 The petitioner called upon the respondent to accept a sum of
₹12,62,94,258/- in full and final settlement of its claim. The petitioner
sent a printed discharge voucher under the cover of its letter dated
08.01.2016 calling upon the respondent to accept the same in order for
the petitioner to proceed further.
4.8 The respondent executed the discharge voucher as it is their
case that they had no option except to execute the same in order to
receive any payment.
4.9 The petitioner credited an amount of ₹12,62,31,213/- to the
account of the respondent on 18.01.2016.
O.M.P. (COMM) 435/2017 Page 4 of 15
4.10 On 19.01.2016, the respondent company sent a protest letter
with regard to the assessment of loss and settlement of its claims.
Thereafter, on 22.01.2016, the respondent invoked the arbitration
clause in the Policy and the petitioner appointed the Sole Arbitrator to
adjudicate the disputes that had arisen between the parties.
5. It is the respondent‟s case that the surveyors had assessed the
loss of ₹13,31,57,184/-, as per their final report submitted in April of
2015, without considering the records and documents submitted by the
respondent in respect of the loss suffered by it. The respondent claims
that the said loss suffered was not assessed and further the surveyors
took inordinately long time to submit their final report. It is only in
October, 2014 that the surveyors submitted the claim form. The
respondent claims that although the loss was under assessed, the
respondent was willing to accept the said amount and also furnished a
consent letter dated 25.04.2015 indicating its willingness to accept the
same. However, despite the same, the petitioner did not release the
amount of ₹13,31,57,184/- as assessed by the Surveyors in their final
report dated 27.04.2015. By December, 2015, the loss as assessed by
the surveyors was further reduced to 12,62,94,258/-.
`
6. The respondent claims that it had availed of the finances from
various private finances and had to bear higher rate of interest and,
thus, was not in a position to accept any further delay in settlement of
its claim. The respondent further claims that the interest burden was
mounting on a daily basis and its factory was on the verge of closure.
It is alleged that the petitioner took advantage of the precarious
O.M.P. (COMM) 435/2017 Page 5 of 15
financial condition of the respondent and refused to disburse any
amount unless the respondent executed a discharge voucher accepting
the payment as full and final settlement of its claims. The respondent
states that in the aforesaid circumstances, it had no option but to
execute the discharge voucher as demanded by the petitioner. The
respondent contends that the said discharge voucher was not executed
out of its free will but as a result of the economic coercion and
pressure exerted by the petitioner.
7. The Arbitral Tribunal has accepted the aforesaid contention and
has held that respondent‟s acceptance of the loss as assessed was
without free consent.
8. Mr. Gaur, the learned counsel appearing for the petitioner
contended that the Arbitral Tribunal had grossly erred in accepting
that the respondent was under economic pressure to accept the sum of
₹ 12,62,94,258/- as full and final settlement of its claims. He
submitted that there was no evidence on record that any recovery
proceedings had been commenced by any bank and, therefore, the
respondent had been unable to establish that its financial condition
was so precarious that it was compelled to execute the discharge
voucher. He referred to the decision of the Supreme Court in New
India Assurance Company Limited v. Genus Power Infrastructure
Limited : (2015) 2 SCC 424 and United India Insurance v. Ajmer
Singh Cotton & General Mills and Ors. : (1999) 6 SCC 400 in support
of his contention.
O.M.P. (COMM) 435/2017 Page 6 of 15
9. Mr Sudhir Nandrajog, learned Senior Counsel appearing for the
respondent countered the submissions made on behalf of the
petitioner. He submitted that the Arbitral Tribunal was within its
jurisdiction to determine the issue whether the discharge voucher was
signed by the respondent willingly or whether the respondent had been
pressurized to do so? He submitted that the Arbitral Tribunal
considered the evidence placed on record and came to an informed
decision, which did not warrant any interference in these proceedings.
10. He also referred to the Circular dated 24.09.2015 issued by the
Insurance Regulatory and Development Authority of India (IRDA)
wherein it had been clearly stated that the execution of a discharge
voucher does not foreclose the right of the policy holder to seek higher
compensation. He also referred to the cross-examination of the
petitioner‟s witness and submitted that it was disputed that the
petitioner would not have released the amounts due unless the
respondent had executed the discharge voucher.
Reasons and Conclusion
11. At the outset, it would be relevant to observe that it cannot be
disputed that the settlement of the claims preferred by the respondent
had been inordinately delayed. The fire had occurred on
24/25.02.2014 and almost two years had elapsed from the incident but
the claims preferred by the respondent had not been settled.
Admittedly, the respondent had requested for an ad hoc disbursement
of a part of its claims, yet no steps were taken by the petitioner to
O.M.P. (COMM) 435/2017 Page 7 of 15
provide any immediate relief to the respondent. It is also not disputed
that the petitioner had forwarded the discharge voucher for signatures
of the respondent. The said voucher captioned “Claim Disbursement
Voucher” is pre-printed form which only requires the details such as
the policy number and the amount to be filled in. The said voucher
reads as under:-
“CLAIM DISBURSEMENT VOUCHER
Claim No. :
Policy No.: 221600/11/13/11/00000780
Name of bank/branch : Punjab National Bank
Name of Insured: MAJA HEALTH CARE
DIVISION
Bank Account No. of Insured: 1470008700000816
Date: 08.01.2016
In Consideration of approval of my claim referred
above, I/We hereby accept from United India
Insurance Co. Ltd. the sum of Rs.12,62,31,213.00 (Rs.
Twelve Cr. Sixty Two Lac Thirty One Thousand Two
Hundred Thirteen only (approved net Claim amount)
in full and final settlement of my/our claim arising out
of which occurred on 24.2.14 (date of loss) covered
under Policy No. 221600/11/13/11/00000780 valid for
the period from 269.13 to 25.9.2014
I/We hereby voluntarily give discharge receipt to the
Company in full and final settlement of all my/our
claims present or future arising directly/indirectly in
O.M.P. (COMM) 435/2017 Page 8 of 15
respect of the said loss/accident. I/We hereby also
subrogate all my/our rights and remedies to the
Company in respect of the above loss/damages.
One Rupee Rev. Stamp
Signature of insured
Full Name : MAJA HEALTH CARE DIVISION
Address: H.O. Connaught Place, New Delhi
Account No: 1470008700000816”
12. It also cannot be disputed that the petitioner would not have
disbursed the assessed claim without securing the respondent
signatures on the Claim Disbursement Voucher. This was plainly
admitted by Ms Lipika Kalra (who appeared as a witness on behalf of
the petitioner). The relevant question put to the said witness and her
response thereto is set out below:-
“Q.14 Is it correct that Respondent would not have
been paid the amount until and unless the
duly signed discharge voucher received by
the Respondent?
Ans Yes. As per the terms of the agreed bank
clause, the discharge of bank is needed to
discharge the insurers of their liability in
respect of the claim. Hence duly discharge
voucher was requested before the payment of
claim.”
13. It was also affirmed on behalf of the respondent that its
financial condition was precarious and it had availed of loans from
O.M.P. (COMM) 435/2017 Page 9 of 15
private financers and the interest burden was extremely onerous high.
The Arbitral Tribunal had also referred to the letter dated 08.01.2016
under the cover of which the Claim Disbursement Voucher had been
forwarded to the respondent for signature. The relevant extract of the
said letter reads as under:-
“We are pleased to inform you that the competent
authority has approved your claim for full and final
payment of Rs.12,62,94,258/- subject to:
(i) Compliance of Agreed Bank Clause. So,
please send duly discharged voucher duly
signed by you & your bankers named in the
policy.
(ii) Collection of Reinstatement premium of Rs
63045/-. This shall be deducted from the claim
amount & claim shall be paid for
Rs12,62,31,213/-.
(iii) NEFT details duly certified by the banker
named in the policy.
We request for the above documents so as to proceed
further in the matter.”
14. The language of the above letter also makes it amply clear that
the petitioner would not have proceeded further to disburse any
amount unless the respondent had executed the said voucher.
15. The Arbitral Tribunal had accepted that the respondent was
facing financial constrains and its acceptance of the assessed amount
was not with its free consent. This Court finds no infirmity with the
aforesaid view as there is ample material on record for the Arbitral
O.M.P. (COMM) 435/2017 Page 10 of 15
Tribunal to have arrived at the said conclusion.
16. It is also relevant to state that at the material time, IRDA had
issued a circular dated 24.09.2015. The relevant extract of the said
circular reads as under:-
“The Insurance Companies are using 'discharge
voucher' or "settlement intimation voucher" or in
some other name, so that the claim is closed and does
not remain outstanding in their books. However, of
late, the Authority has been receiving complaints from
aggrieved policyholders that the said instrument of
discharge voucher is being used by the insurers in the
judicial fora with the plea that the full and final
discharge given by the policyholders extinguish their
rights to contest the claim before the Courts.
While the Authority notes that the insurers need
to keep their books of accounts in order, it is also
necessary to note that insurers shall not use the
instrument of discharge voucher as a means of
estoppel against the aggrieved policy holders when
such policy holder approaches judicial fora.
Accordingly insurers are hereby advised as under:
Where the liability and quantum of claim under
a policy is established, the insurers shall not withhold
claim amounts. However, it should be clearly
understood that execution of such vouchers does not
foreclose the rights of policy holder to seek higher
compensation before any judicial fora or any other
fora established by law.
All insurers are directed to comply with the above instructions.”
O.M.P. (COMM) 435/2017 Page 11 of 15
17. It is apparent from the above that although the Insurance
Companies were insisting on securing a discharge voucher before
disbursing the claims, the said discharge voucher was only to be used
to keep the books in order and would not preclude the insured from
pursuing its claim. Mr Gaur contended that the aforesaid circular had
been amended by another Circular dated 07.06.2016. The relevant
extract of the said circular reads as under:-
“The Authority has reviewed the matter taking in to
consideration the provisions of the Contract Act, PPI
Regulations and Apex Court Judgements. Taking
equal cognisance of the legal rights of the policy
holders and insurers, the Authority hereby further
directs that-
(i) Wherever there are no disputes by the
insured/s or claimant/s to the amount offered
by the insurer towards settlement of a claim,
the present system of obtaining the discharge
voucher may be continued. However, the
insurers must ensure that the vouchers
collected must be dated and complete in all
respects while obtaining the signature/s of
the insured/s or claimant/s.
(ii) If the amount offered is disputed by the
insured/s or claimant/s, insurers would take
steps to pay the amount assessed without
waiting for the voucher discharged by the
insured/s or the claimant/s.
(iii) Under no circumstances the Discharge
voucher should be collected under
duress, by coercion, by force or
compulsion.
O.M.P. (COMM) 435/2017 Page 12 of 15
Since there is no uniformity in the format/wordings of
the Discharge vouchers in use, Authority would
suggest that the insurers may consider adopting a
standardised format/wording/s of the Discharge
voucher.
Insurers are directed to comply with the above with
immediate effect.”
18. Mr Gaur submitted that in view of the aforesaid Circular, the
respondent could not dispute the full and final settlement as recorded
in the Disbursement Voucher. The reliance placed by Mr Gaur on the
Circular dated 07.06.2016 is misplaced, as it was clearly admitted by
the petitioner‟s witness that the petitioner would not have disbursed
the amount if the respondent had not signed the Disbursement
Voucher. It was also not disputed that the respondent had applied for
ad hoc disbursement; however, the petitioner had failed to make any
such ad hoc disbursement. It is also relevant to state that at the
material time when the respondent had signed the Disbursement
Voucher, the Circular dated 24.09.2015 was operative. This was also
considered by the Arbitral Tribunal. Thus, in view of the Circular
dated 24.09.2015, the respondent could not be precluded from
pursuing its claims.
19. The reliance placed by the petitioner on the decision of the
Supreme Court in the case of New India Assurance Company Ltd.
( supra ) may not be apposite. In that case, the Supreme Court had
considered the question whether in the given facts acceptance of the
compensation and signing of the subrogation letter by the respondent
therein was voluntary or whether the respondent (claimant) was
O.M.P. (COMM) 435/2017 Page 13 of 15
subjected to compulsion or coercion.
20. On the facts of that case, the Court had concluded that a bald
plea of fraud, coercion, duress or undue influence is not enough and
the party who sets up such a plea, must prima facie establish the same
by placing the relevant material before the Chief Justice/his designate.
This was in context of an application under Section 11 of the Act. On
the facts of that case, the Court concluded that the respondent‟s plea
was a bald plea and not supported by sufficient material. The learned
counsel appearing for the petitioner therein had also pointed out that
the respondent‟s turnover was more than ` 500 crores and, therefore, it
was improbable that such a company would feel financially
constrained and stand coerced in giving a discharge receipt of ` 5.98
crores. The facts in the present case are materially different. In the
present case, the surveyors had submitted a financial report assessing
the claim of ₹13,31,57,184/- which the respondent was willing to
accept; however, the petitioner did not accept the same. As stated
above, four further reports were called for from the assessors and
finally the amount offered almost eight months later was reduced to
₹12,62,31,213/-. It cannot be disputed that (i) the disbursement of the
respondent‟s claim was inordinately delayed; (ii) the loss suffered by
the respondent was substantial; (iii) the petitioner would not disburse
the admitted amount without the respondent signing the Voucher; and
(iv) the respondent‟s witness had affirmed that the factory was on the
verge of closure. It is also noteworthy that the respondent had
immediately on receipt of the said amount lodged a protest on
O.M.P. (COMM) 435/2017 Page 14 of 15
19.01.2016.
21. In view of the above, this Court finds no reason to interfere with
the impugned award. The petition is, accordingly, dismissed. All the
pending applications also stand disposed.
VIBHU BAKHRU, J
MARCH 12, 2018
pkv
O.M.P. (COMM) 435/2017 Page 15 of 15