The Oriental Insurance Co. Ltd. vs Dicitex Furnishing Ltd.

2. The relevant facts in this appeal are that on 17.09.2011, Dicitex obtained a Standard Fire and Special Peril Policy; it was issued by the appellant to cover the stocks of goods lying in its three separate godowns located at Thane, Maharashtra, by three separate endorsements. The total sum insured was @ ₹13 crores. Clause 13 of the terms and conditions of the said policy contained an arbitration clause. On 25.05.2012, a fire broke out at night on the ground floor of the building occupied by RFCL, which fire spread to the first floor of the building and completely engulfed all of the appellant’s three godowns which had stored its goods. All the stocks in all the three godowns were completely destroyed. Dicitex informed the appellant on 26.05.2012, about the fire and the consequential loss. The appellant appointed M/s. C.P. Mehta & Co. as Surveyors and Assessors to survey the loss suffered by Dicitex and to report on the claim to be lodged upon 3 the insurer­appellant, by the said company. Dicitex lodged a total and final claim upon the appellant for a sum of ₹14,88,14,327/­ comprising ₹13,52,85,752/­ towards cost of the materials destroyed and ₹1,35,28,575/­ as overheads. Dicitex claims also to have submitted comprehensive documentary evidence and detailed work sheets in support of the claim made to the insurer. On 14.08.2012, after visiting Dicitex’s factory and the godowns, and after scrutinizing the materials submitted by it in support of its claim, the Surveyor appointed by the insurer filed a Final Survey Report recommending that the claim be settled for an amount of ₹12,93,26,704.98/­ and that after deducting an amount of 5% towards compulsory deduction for excess, a net amount of ₹12,28,60,369/­ be paid over to Dicitex. The latter alleged that a copy of this survey report was not supplied to it, by the insurer, or the surveyor.

3. On 20.09.2012, Dicitex addressed a letter to the appellant’s chairman, informing him of the financial distress that it was facing, requesting for settlement of the claim on priority basis. Dicitex also informed him about a temporary loan obtained ­to the tune of ₹10 crores­ from Union Bank of India for 3 months at 4 a high rate of interest which was due for repayment in September 2012 and requested him that it would be a great financial help if its claim could be settled on priority basis which would mitigate their hardship. Again, on 25.10.2012, Dicitex informed the insurer that the sale value of the goods destroyed was above ₹19 crores and that it had not only lost its goods but also its profits. Dicitex informed that it had already submitted all the documentary evidence supporting the claim to the Surveyor, M/s. C.P. Mehta & Co., yet another letter was addressed to the appellant’s chairman on 31.10.2012 placing on record that it had understood from the surveyor M/s. C.P. Mehta & Co. that the Head Office of the appellant asked for some more information in connection with the claim. Dicitex stated that compiling, organizing and sending various documents totalling around 35,000 in number, entailed voluminous work. It was stated that the surveyor had already gone through those documents and had picked up at random, sample of various concerned records. Dicitex stated that it was arranging to compile the documents and agreed to send them to the surveyor as soon as possible. In other letters (dated 10.01.2012, 28.01.2013), again requests were 5 made to the insurer to release the amounts. Apparently, the appellant appointed a Chartered Accountant (M/s Naveen Jhand & Associates) to carry out a resurvey of the claim made by it (Dicitex). The latter had already furnished 37,700 documents physically, which showed the exact quantity of furnishing fabrics in meters. Dicitex brought to the notice of the Chairman­cum­ Managing Director that the new surveyors had asked for large number of documents again and such documents could not be supplied. On 09.02.2013, addressing the new surveyor M/s Naveen Jhand, Dicitex submitted 37,700 documents and submitted further documents to the said new surveyor. It submitted that since the previous 9 months, it had been providing different documents/information to different people and submitted whatever was requested by the new surveyor in broader form and requested them to submit their report at the earliest.

4. In accordance with the format sent by the insurer and after obtaining Dicitex’s signature, a cheque for ₹3.5 crores was handed over to it. Dicitex signed the discharge voucher on 04.03.2013, when the insurer paid the said sum of ₹3.5 crores to 6 Dicitex as 'on account payment' in the matter of its claim. Union Bank of India endorsed the said discharge voucher. According to Dicitex, all data that was requisitioned by the new surveyor, was provided by it. Several meetings took place between the representatives of the new surveyor, the appellant and Dicitex. Dicitex, mentioned several letters to the appellant, and the surveyor, in 2013 regarding the release of the amounts. Dicitex had also stated that it felt strongly that the new surveyor was just not satisfied with whatever was provided by it though all the data it submitted had proved its genuine claim and the intention of the new surveyor was to somehow reduce the claim. In other letters (such as the one dated 21.02.2014), Dicitex informed the appellant that the surveyor was refusing to commit to any fixed date within which they would be submitting their report and also the appellant’s officials had no answers to its questions with regard to when its claim would be settled. Dicitex requested the General Manager to set a deadline to settle their claim at the earliest. It wrote several letters to the appellant’s officers about the huge financial losses suffered by it due to delay in settlement 7 of the claim. Dicitex informed the General Manager to settle the claim within 15 days.

5. On 27th May, 2014, Dicitex received an email from the appellant stating that a discharge voucher for the balance amount of the claim payable as described was being enclosed. It was requested to execute the voucher along with the bank's discharge on the space earmarked on the left side and send the scanned copy back. By the email dated 28.05.2014, Dicitex replied to the email of 27.05.2014 and referred to the discharge voucher sent by the appellant to it for signature. Dicitex placed on record that its total claim was approximately ₹15 crores and the surveyor had assessed the same at approximately ₹12.93 crores. Dicitex stated that the basis for arriving at the figure of ₹7.16 crores was not explained (by the appellant). It requested the Regional Manager of the appellant to provide the claim assessment working for their understanding to enable Dicitex to take up the matter with their Board of Directors for consideration. The appellant, by email dated 29.05.2014, alleged that M/s. C. P. Mehta & Co. had initially assessed the loss at ₹12,28,60,369/­. However, it had certain issues on the costing; 8 it, therefore, appointed M/s. Naveen Jhand and Associates to have another look at the costing aspect and reconfirm/verify the costing for loss assessment purpose. According to the said report submitted by M/s. Naveen Jhand and Associates, the assessment worked to ₹7,16,30,148/­ and accordingly, the competent authority had granted the claim. The appellant enclosed the working of the claim and requested Dicitex to go through it and send an unconditional discharge voucher duly signed by it and the bankers. Dicitex, the insured did not do so and informed the appellant that it had noticed that what was given was just a statement of calculation, without explanation/basis, that adjustments had resultant deductions in Dicitex’s claim by more than 50% as assessed by the surveyor appointed by the appellant. Dicitex stated that since the appellant had taken 2 years to offer the final settlement of the claim, it (Dicitex) was suffering from a huge financial constraint and had to pay bank interest and installments, salaries and wages, hence, it was left with no alternative but to accept the offer of the appellant reluctantly and was accordingly sending the voucher duly discharged by Dicitex and their bankers for doing the needful. 9 Dicitex alleged that since the appellant did not relent, and insisted that any further payment would be made only if the discharge voucher was executed exactly at the time and in the form and manner as required by it as well as the letter dated 31.05.2014 was withdrawn. Dicitex stated that as it was in urgent need of funds to meet its mounting liabilities, it was coerced into withdrawing its earlier letter of 31.05.2014 and in executing the discharge voucher exactly as dictated by the respondents. By the letter dated 06.06.2014, addressed to the Regional Manager, Dicitex withdrew the letter dated 31.05.2014 submitted along with the discharge voucher for a full and final settlement of their claim. It requested the appellant to remit the claim amount immediately. The discharge voucher was on the letter head of the appellant, duly endorsed by Dicitex’s bankers. In the discharge voucher, it was recorded that it accepted a sum of ₹3,66,30,148/­ in full and final settlement of its claim. It was also recorded that Dicitex voluntarily gave discharge receipt in full and final settlement of their claim, present or future, arising directly/indirectly in respect of the said loss/accident and subrogated all their rights and remedies to appellant in respect of 10 the loss/damages. Further correspondence ensued whereby Dicitex informed the appellant that since there was a huge difference between the total amount claimed by it, and the final claim settlement amount by the appellant, the same was required to be discussed and resolved, failing which Dicitex would be required to invoke the arbitration, as per clause 13 of the terms and conditions attached to the policy. The appellant, by the letter dated 17.07.2014 addressed to Dicitex, informed that it was surprised by the proposal to invoke arbitration after the clean discharge voucher was signed for the sum of ₹7,16,30,148/­ in full and final settlement of the said loss. The respondents denied that there existed any dispute of quantum in respect of the said claim and contended that the amount due to Dicitex arising out of indemnity, arising from the policy was duly verified and assessed based on the documents submitted by Dicitex. The appellant did not agree to Dicitex’s request for any differential amount or request for proceeding for arbitration under the policy. On 24.07.2014, by a letter addressed to the appellant, Dicitex denied that the amount received by it was a clean discharge voucher in full and final settlement of their claim and reiterated 11 that it suffered a major loss of ₹14,16,94,329/­. The surveyor, M/s. C.P. Mehta & Co. had submitted their report assessing the loss at ₹12.93 crores. Dicitex also placed on record that as against approximately the claim of ₹ 14.70 crores, the appellant released only ₹3.50 crores on 04.03.2013 i.e. almost 10 months after the loss had occurred, and after a lapse of 27 months, the appellant made "a take it or leave it" offer of ₹7.16 crores towards full and final settlement of their claim, the discharge was accepted reluctantly by it. Dicitex alleged that upon meeting the appellant’s officers, it was instructed to withdraw the letter of protest and accept the claim settlement unconditionally which was a proof of coercion.

10. In view of the analysis made, the single judge allowed the application, observing as follows:

20. The averments by Dicitex, regarding the circumstances which led it to execute the no objection discharge voucher, are reproduced below:

22. In view of the foregoing discussion, the appeal is held to be unmerited; it is dismissed, without order as to costs.