1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPLICATION NO.169 OF 2007 M/s.Opera Clothing .. Applicants Vs. National Insurance Company Ltd. (through: Branch Manager) .. Respondents Mr.G.S. Kulkarni i/b Mr.Sandeep Waghmare for the applicants Mr.A.M.Vernekar i/b M/s.Narichania and Narichania for the respondents CORAM : J. N. Patel, Acting C.J., JUDGMENT RESERVED ON : 05/02/2010 JUDGMENT PRONOUNCED ON : 09/02/2010 ORAL JUDGMENT : 1. The application has been filed for referring the matter to Arbitration in order to adjudicate the dispute regarding the amount payable to the applicants / insured in respect of their flood claim arising from torrential rains and floods in Mumbai on 26.07.05. 2. It is the case of the applicants firm that they are engaged in the business of manufacturing of apparels and ready made garments having its units in 2 Mumbai and Daman. On 7.4.05, they have obtained two policies being Standard Fire and Special Peril Policy, wherein they have insured stock of fabrics and ready made garments of all kinds, finished, semi-finished and unfinished goods, raw material lying at the three sites as specifically mentioned in the Policy No. 260201/11/05/3100000005 for amount of Rs.2,73,30,000/-. They had also insured machinery, elc. Installation, show room, AC windows, split ac, F.F.F. Computers, printers, rakkers, fax, xerox, packing materials etc. lying at the three sites specifically mentioned in the Policy No. 260201/11/05/3100000004 for amount of Rs.2,62,70,000/-. 3. It is the case of the applicants that on 26.07.05 there were unprecedented heavy rains in Mumbai because of which the accumulated water could not drain as it coincided with high tide leading to swelling of all outlets like nalas, storm water, drainage etc. and the entire city and surroundings of Mumbai got flooded. This resulted in the applicant s godowns situated at ’ Kurla being engulfed with water resulting in heavy losses to the applicant because of which the applicant (insured) filed a formal claim dt.23.9.05 with the respondent thereby claiming amount of Rs.2,35,16,687.05 ps (Net of Salvage value of Rs.28,51,980.00). 4. It is the case of the applicants that the respondent Insuring Company ignored the survey reports submitted by the Surveyors recommending substantial amount informed the applicants that only an amount of Rs. 17,05,650/- in respect of Policy No. 260201/11/05/3100000004 (which was for 3 an insurance cover for an amount of Rs.2,62,70,000/-) and an amount of Rs. 1,27,08,367/- in respect of Policy No. 260201/11/05/3100000005 (which was for an insurance cover for an amount of Rs.2,73,30,000/- would be paid by the respondents. 5. The applicants firm had various meetings with the representatives of the respondent on the issue of fair compensation considering the loss suffered by the applicants. The respondents insurer rather than arriving at a reasonable settlement of the insurance claim obtained from the applicant a Final Discharge Voucher under duress and implicit coercion in October 2006 for specified sums of money which was much less than the claim of the applicant to settle the claim of the applicants after obtaining an affidavit dt. 16.8.06 that the said sum is being accepted by the applicant unconditionally and that no claim would be made for any difference in future. 6. After receipt of the claim, the applicants immediately addressed a letter dt. 30.10.06 to the respondents stating that against the applicants policy of Rs. 2.63 Crores, the applicants were forced to accept Rs.1.72 Crores as settlement as the settlement was getting delayed and the applicants were facing acute financial crisis. They also contended that the unfair settlement was on account of major difference in the salvage value actually realized by the applicants at Rs.26 lakhs and the amount forced on the applicants was Rs.50 lakhs and the other deductions were not explained them. 4 7. The applicants were again required to address a letter dated 4.12.06 to the respondents that they have not received any response to the earlier letter dt. 30.10.06 and further, the letter dt.4.12.06 is towards their unsatisfied claim. It is the case of the applicants that the respondents having misplaced the letters requesting them to reconsider the claim of the applicant, applicants by their letter dt.9.2.07 forwarded the photocopies of the same requesting them to take up the matter immediately as they was substantial delay. 8. It is the case of the applicants that except for assuring that their claim would be reconsidered, there was no response and, therefore, the respondents through the advocate addressed a legal notice to the respondents dt.9.2.07 and called upon them to settle the balance claim within 15 days from the date of the receipt of notice failing which, the same may be treated as a notice to invoke arbitration as provided under clause 13 of the General Conditions of Insurance Policy and as per the provisions of Arbitration and Conciliation Act, 1996. The applicants also nominated Hon.Smt.Justice K.K. Baam, former Judge of the court as an Arbitrator and further stated that if the they did not agree for appointment of Hon.Smt.Justice K.K. Baam, (Retd.) as Sole Arbitrator, they may nominate another Arbitrator of their own choice and a Presiding Arbitrator be appointed by both the Arbitrators in terms of the claims laid down by the insurance policy. 9. The respondents did not act on the legal notice dt.9.2.07. Therefore, the 5 applicants wrote another letter dt.6.3.07 reiterating their stand and informed the respondents that they will approach this court under section 11 of the Arbitration and Conciliation Act, 1996. As there was no response to the legal notice, the applicants have filed this application. 10. In reply, the respondents have come up with a case that as there is no arbitration dispute and difference between the applicant and the respondents as contemplated under clause 13 of the General Conditions of Insurance Policy and that only a dispute and difference as to the quantum to be paid under the Policy can be referred to the Arbitral Tribunal for adjudication and no other dispute or difference can be so referred, the application deserves to be dismissed. It is contended by the respondents that the claim of the applicant under the two policies have been already settled and in consideration of the receipt of the payment towards the said claims, the applicant has executed clean and unconditional receipts/loss vouchers absolving the respondents from all liability present or future arising directly or indirectly out of the loss or damage under the said Policies. According to them, the applicants have also given a declaration dt.16.10.06 on oath in the form of an affidavit wherein they have confirmed that the amount of Rs. 1,44,40,633/- less reinstatement premium has been willingly and unconditionally accepted by the applicants as full and final settlement towards the loss suffered by them due to flood and that the applicants have specifically declared that they shall not make any claim or demand or difference at any time in future and that the said amount which is agreed 6 to be paid by the respondents is accepted without any reservation of any nature whatsoever will full understanding and without undue influence of whatsoever nature. They have accepted the payment of the claim in full and final settlement as aforesaid, besides recovering the Salvage Value of the damaged goods and having declared on oath that the applicants have no further claim of whatsoever nature against the said two insurance policies and, therefore, the invocation of the Arbitration Clause subsequent to the receipt of the payment and encashment of the cheques and demanding the Arbitration to arbitrate upon the alleged dispute and differences is not at all maintainable and that the application may be dismissed. 11. The learned counsel appearing for the applicants have drawn my attention to the decision rendered by the Supreme Court in the case of National Insurance Co. Ltd. Vs. M/s.Boghara Polyfab Pvt. Ltd.1 wherein identical issues were involved and this court had referred the matter to Arbitration which has been upheld by the Supreme Court and, therefore, submitted that as the petitioners case is similar to that of M/s.Boghara Polyfab Pvt.Ltd., in all respects, there is no reason why this court should not appoint an arbitrator to refer the dispute for adjudication as per clause 13 of the General Conditions of Insurance Policy. 12. Per contra the learned counsel appearing for the respondents Insurance Company submitted that this is a case where the applicants have executed 1 2008 AIR SUPREME COURT WEEKLY 7084 7 receipts and documents to show that the claim has been finally settled and therefore, there is no dispute between the parties which can be referred to Arbitration and has cited a decision of Delhi High Court in the case of M/s.Polytron & Fragrance Industries (L) Limited Versus National Insurance Co. Ltd.2 wherein the learned Judge has referred to the decision of the Supreme Court rendered in the case of P.K. Ramaiah and Company vs. Chairman and Managing Director, National Thermal Power Corporation3 and held that, where the full and final satisfaction of a claim was acknowledged “ by a receipt in writing and the amount was received unconditionally, it resulted in accord and satisfaction by final settlement of the claims and that the subsequent allegation of coercion is an afterthought and a devise to get over the settlement of the dispute, acceptance of the payment and receipt voluntarily given.” The Court has further held that party having received the amount in full and final settlement of the “ claim, there is accord and satisfaction and there is no existing arbitrable dispute for reference to the arbitration.” In the other case reported as Nathani Steels Ltd. Vs. Associated 2 CD LAW JOURNAL DHC 240 3 1994 SUPP.(3) SUPREME COURT CASES 126 8 Construtions,4 the apex court has held that; once the parties have arrived at a settlement in respect of any “ dispute or difference arising under a contract and that dispute or the difference is amicably settled by way of a final settlement by and between the parties, unless that settlement is set aside in proper proceedings, it cannot lie in the mouth of one of the parties to the settlement to spurn it on the ground that it was a mistake and to proceed to invoke the Arbitration Clause. ” The Court goes on to say that, if this is permitted, the sanctity of contract, the settlement also being “ a contract, would be wholly lost and it would be open to one party to take the benefit under the settlement and then to question the same on the ground of mistake without having the settlement set aside. ” Therefore it is submitted that the matter cannot be referred to Arbitrator. 13. Clause 13 of the General Conditions of the Insurance Policy relating to the Standard Fire and Special Perils Policy also provides as under:- 13. “ If any dispute or difference shall arise as to the quantum to be 4 1995 SUPPL.(3) SUPREME COURT CASES 324 9 paid under this policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of a sole arbitrator to be appointed in writing by the parties to or if they cannot agree upon a single arbitrator within 30 days of any party invoking arbitration, the same shall be referred to a panel of three arbitrators, comprising of two arbitrators, one to be appointed by each of the parties to the dispute/difference and the third arbitrator to be appointed by such two arbitrators and arbitration shall be conducted under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996 It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinabove provided, if the Company has disputed or not accepted liability under or in respect of this policy. It is hereby expressly stipulated and declared that it shall be a condition precedent to any right or action or suit upon this policy that the award by such arbitrator/arbitrators or the amount of the loss or damage shall be first obtained. ” If one takes into consideration the aforesaid facts and circumstances, it is clear that the respondents / insurance company has disputed or not accepted the liability under or in respect of this policy. 10 14. The plea which has been taken before me is that there is accord and satisfaction recorded between the parties arising in respect of quantum of claim under the two insurance policies taken out by the applicants and, therefore, there is nothing which can be referred for arbitration. 15. I have no hesitation to hold that the issues and contentions raised by the respondents in the matter of settlement of claim of the applicants deserves to be referred to the Arbitrator in the light of the view taken by this court in the cases of M/s.Boghara Polyfab Pvt. Ltd. vs. National Insurance Company Ltd in Arbitration Application No.182 of 2006 decided on 19th April, 2007 and in the case of Kabra Extrusiontechnik Ltd. vs. National Insurance Co. Ltd. And Anr. In Arbitration Application No.36 of 2007 decided on 26th March, 2009 wherein identical issues were required to be considered and the decision in the case of National Insurance Co. Ltd. Vs. M/s.Boghara Polyfab Pvt. Ltd. (supra) wherein it was held that particularly in cases where the defendant puts forth the defence of accord and satisfaction on the basis of a full and final discharge voucher issued by the plaintiff, and the plaintiff alleges that it was obtained by fraud / coercion / undue influence and, therefore, not valid. The Civil Court would consider the evidence as to whether there was any fraud, coercion or undue influence and then take a decision. Therefore it will be proper where the Chief Justice/his designate is satisfied prima facie that the discharge voucher was not issued voluntarily and the claimant was under some compulsion or 11 coercion, and that the matter deserved detailed consideration, he may instead of deciding the issue himself, refer the matter to the arbitral tribunal with a specific direction that the said question should be decided in the first instance. 16. In the present case, it is not disputed that the applicants had filed a formal claim with the respondents thereby claiming an amount of Rs.2,35,16,687.05 ps (Net of Salvage value of Rs.28,51,980.00) under the two insurance polices and it is the case of the applicants that the respondents obtained Final Discharge Voucher signed by the applicants under duress and implicit coercion in October 2006 for the said sums after unendingly pursuing the matter and running from pillar to post for such long period of more than one year and the respondents also got executed from the applicants an affidavit dated 16.10.06 that the said sum is being accepted unconditionally and that no claim would be made for any difference in future which was immediately protested after the applicants received the claim under the two policies by their letter dt.30.10.06 by stating that the applicants against their claim of Rs.2.63 Crores were forced to accept Rs.1.72 Crores as settlement as the settlement was getting delayed and the applicants were facing acute financial crisis. 17. Therefore, it can be seen that the applicant has made out a prima facie case which requires adjudication. This court appoints Dr.Mrs.Justice P. D. Upasani, Former Judge of this court as an Arbitrator. Parties to bear their own costs. 12 The Prothonotary and Senior Master to communicate this order to the learned Arbitrator. 18. The application stands disposed of accordingly. (ACTING CHIEF JUSTICE)