[Cites 16, Cited by 0]
Calcutta High Court
M/S Kamarhatty Company Ltd vs M/S Oriental Insurance Company Ltd on 18 December, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 17
ORDER SHEET
AP-COM/506/2024
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
M/S KAMARHATTY COMPANY LTD
VS
M/S ORIENTAL INSURANCE COMPANY LTD
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 18th December, 2025.
Appearance:
Ms. Amrita Pandey, Adv.
Mr. Ashish Anand, Adv.
Mr. Ghanshyam Pandey, Adv.
Ms. Saheli Samanta, Adv.
. . .for the petitioner.
Mr. Abhimanyu Shandilya, Adv.
Mr. Gourab Das, Adv.
. . .for the respondent.
The Court:
1. The petitioner prays for appointment of an Arbitrator, to arbitrate the
disputes between the parties which arose out an Insurance Policy. The
petitioner runs a jute mill. The plant, machinery, building and raw
materials of the said jute mill were insured under a Standard Fire and
Special Perils Policy No. 311200/11/2019/379 (hereinafter referred to
as the said policy) for the period between December 18, 2018 to
December 17, 2019.
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2. It is submitted that on account of two incidents of fire, severe loss and
damage was suffered at the warehouse. The loss had been quantified
in two separate claims. Rs.1,00,15,403/- pertains to the first claim.
The second claim was Rs.1,69,82,803.80. According to the petitioner
part payments were made against each of the claims.
3. It is alleged that, the respondent accepted its liability to pay part of the
claim against the insurance policy, but part of the claim remained
unpaid. A specific averment has been made to the effect that, the
respondent had coerced the petitioner into accepting the partial
payment. However, the petitioner contends to have opposed to such
partial payment. Petitioner denied that the payments were made in full
and final settlement of the claims. As of today, the total outstanding is
more than Rs.1.26 crores in respect of both the claims. The petitioner
submits that, once the liability to pay under the policy was accepted,
the dispute with regard to the quantum should be referred to arbitration
in terms of Clause 13 of the policy which is quoted below.
4. Clause 13 is quoted below:-
"13. If any dispute or difference shall aries (arise] as to the
quantum to be 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
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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 hereinbefore
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
condition precedent to any action or suit upon this policy that
the award by such arbitrator/arbitrators of the amount of the
loss or damage shall be first obtained."
5. The clause states that, in case of disputes arising out of the said policy,
the same shall be referred to a single Arbitrator and if the parties
cannot agree then the same shall be referred to three Arbitrators.
6. The petitioner invoked arbitration by a letter dated 3rd October, 2023.
The respondent rejected the claims of the petitioner sometime in March,
2023.
7. Mr. Abhimanyu Shandilya, submits that the claim is time barred. The
notice invoking Arbitration was issued three years after the payment
had been made. He further submits that the payments were accepted
in full and final settlement of the claim. A discharge voucher was
accordingly signed.
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8. In the affidavit in reply, the petitioner has annexed documents to show
that the report of the surveyor, on the basis of which the payments were
made by the insurance company, had been objected to from the very
beginning and a dispute had been raised at the very initial stage with
regard to the partial payment. The respondent had calculated the sum
assured at a lower rate than what was claimed by the petitioner.
Several documents have been annexed to the said affidavit in reply.
9. In view of the aforementioned facts and circumstances, this Court holds
that, limitation is a mixed question, which makes the said issue a
triable one. The said issue will be decided by the learned Arbitrator.
10. The issue of accord and satisfaction is also a triable dispute, which
has to be decided by the learned Arbitrator.
11. Therefore, this court is of the view that, this application cannot be
rejected even by applying the eye of the needle test. Accord and
satisfaction of the claim as alleged by the respondent, is an arbitrable
dispute, which fall strictly within the domain of the arbitrator.
12. In the decision of SBI General Insurance Co. Ltd. v. Krish Spg.,
reported in (2024) 12 SCC 1, the Hon'ble Apex Court held as follows:-
"118. The dispute pertaining to the "accord and satisfaction" of
claims is not one which attacks or questions the existence of the
arbitration agreement in any way. As held by us in the preceding
parts of this judgment, the arbitration agreement, being separate
and independent from the underlying substantive contract in which
it is contained, continues to remain in existence even after the
original contract stands discharged by "accord and satisfaction".
119. The question of "accord and satisfaction", being a mixed
question of law and fact, comes within the exclusive jurisdiction of
the Arbitral Tribunal, if not otherwise agreed upon between the
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parties. Thus, the negative effect of competence-competence would
require that the matter falling within the exclusive domain of the
Arbitral Tribunal, should not be looked into by the Referral Court,
even for a prima facie determination, before the Arbitral Tribunal
first has had the opportunity of looking into it.
120. By referring disputes to arbitration and appointing an
arbitrator by exercise of the powers under Section 11, the Referral
Court upholds and gives effect to the original understanding of the
contracting parties that the specified disputes shall be resolved by
arbitration. Mere appointment of the Arbitral Tribunal does not in
any way mean that the Referral Court is diluting the sanctity of
"accord and satisfaction" or is allowing the claimant to walk back on
its contractual undertaking. On the contrary, it ensures that the
principle of arbitral autonomy is upheld and the legislative intent of
minimum judicial interference in arbitral proceedings is given full
effect. Once the Arbitral Tribunal is constituted, it is always open
for the defendant to raise the issue of "accord and satisfaction"
before it, and only after such an objection is rejected by the Arbitral
Tribunal, that the claims raised by the claimant can be adjudicated.
***
***
124. In a case with similar facts but where an arbitration
agreement is not in existence, the claimant would have the recourse
to approach a civil court with its claims. Even in such proceedings
before the civil court, it would be open to the defendant to put
forward the defence of "accord and satisfaction" on the basis of the
discharge voucher. Similarly, it would be open to the claimant to
allege that the voucher had been obtained under fraud, coercion or
undue influence. In such a scenario, the civil court would consider
the evidence as to whether there was any fraud, undue influence or
coercion. If the civil court finds that there was none, then it would
reject the claims at the outset. However, if its finds that the
allegations of fraud are true, then it would reject the discharge
voucher and proceed to adjudicate the claims on merit.
125. Once an arbitration agreement exists between parties, then
the option of approaching the civil court becomes unavailable to
them. In such a scenario, if the parties seek to raise a dispute, they
necessarily have to do so before the Arbitral Tribunal. The Arbitral
Tribunal, in turn, can only be constituted as per the procedure
agreed upon between the parties. However, if there is a failure of the
agreed upon procedure, then the duty of appointing the Arbitral
Tribunal falls upon the Referral Court under Section 11 of the 1996
Act. If the Referral Court, at this stage, goes beyond the scope of
enquiry as provided under the section and examines the issue of
"accord and satisfaction", then it would amount to usurpation of the
power which the parties had intended to be exercisable by the
Arbitral Tribunal alone and not by the national courts. Such a
scenario would impeach arbitral autonomy and would not fit well
with the scheme of the 1996 Act."
13. In Shree Saibaba Plasto Products Pvt. Ltd. v. National
Insurance Company Limited, order dated 13.01.2025 in A.P. No. 119
of 2023; this court held as follows :-
"Heard the parties. The petitioner relies on a prescribed form of a
discharge voucher in the affidavit-in-reply, which provides that
execution of the voucher would not foreclose the right of the policy
holder to seek higher compensation before any judicial fora or any other
fora established by law. Contents of such discharge voucher was
communicated by the Insurance Regulatory Development Authority of
India, to all CEOs of the General Insurance Company. According to the
petitioner, the discharge voucher was executed under pressure. The
petitioner relies on a decision of the Hon'ble Apex Court in the matter of
SBI General Insurance Co. Ltd. vs. Krish Spinning, reported in 2024
SCC Online SC 1754, in support of the contention that the referral
Court is only required to see whether there is an arbitration agreement
under clause 13 of the Insurance Policy and whether the petitioner had
raised any dispute by invoking the arbitration clause. According to the
Apex Court, the issue of accord and satisfaction of the claim, should
not be adjudicated by the referral court and the same should be left to
the learned Arbitrator, for a decision. The referral Court should not go
beyond the enquiry as to the existence of the arbitration agreement.
The Hon'ble Apex Court in the said decision considered a matter arising
out of similar facts and circumstances.
The relevant paragraphs of the decision of the Hon'ble Apex Court with
regard to accord and satisfaction and whether the execution of
discharge voucher amounts to discharge and satisfaction, are quoted
below:
"92. The position that emerges from the aforesaid discussion of law
on the subject as undertaken by us can be summarised as follows:-
i. There were two conflicting views which occupied the field
under the Arbitration Act, 1940. While the decisions in
Damodar Valley (supra) and Amar Nath (supra) took the view
that the disputes pertaining to "accord and satisfaction"
should be left to the arbitrator to decide, the view taken in P.K.
Ramaiah (supra) and Nathani Steels (supra) was that once a
"full and final settlement" is entered into between the parties,
no arbitrable disputes subsist and therefore reference to
arbitration must not be allowed.
ii. Under the Act, 1996, the power under Section 11 was
characterised as an administrative one as acknowledged in the
decision in Konkan Railway (supra) and this continued till the
decision of a seven-Judge Bench in SBP & Co. (supra)
overruled it and significantly expanded the scope of judicial
interference under Sections 8 and 11 respectively of the Act,
1996. The decision in Jayesh Engineering (supra) adopted this
approach in the context of "accord and satisfaction" cases and
held that the issue whether the contract had been fully worked
out and whether payments had been made in full and final
settlement of the claims are issues which should be left for the
arbitrator to adjudicate upon.
iii. The decision in SBP & Co. (supra) was applied in Boghara
Polyfab (supra) and it was held by this Court that the Chief
Justice or his designate, in exercise of the powers available to
them under Section 11 of the Act, 1996, can either look into
the question of "accord and satisfaction" or leave it for the
decision of the arbitrator. However, it also specified that in
cases where 6 the Chief Justice was satisfied that there was
indeed "accord and satisfaction", he could reject the
application for appointment of arbitrator. The prima facie
standard of scrutiny was also expounded, stating that the
party seeking arbitration would have to prima facie establish
that there was fraud or coercion involved in the signing of the
discharge certificate. The position elaborated in Boghara
Polyfab (supra) was adopted in number of a subsequent
decisions, wherein it was held that a mere bald plea of fraud or
coercion was not sufficient for a party to seek reference to
arbitration and prima facie evidence for the same was required
to be provided, even at the stage of the Section 11 petition.
iv. The view taken by SBP & Co. (supra) and Boghara Polyfab
(supra) was seen by the legislature as causing delays in the
disposal of Section 11 petitions, and with a view to overcome
the same, Section 11(6-A) was introduced in the Act, 1996 to
limit the scope of enquiry under Section 11 only to the extent
of determining the "existence" of an arbitration agreement.
This intention was acknowledged and given effect to by this
Court in the decision in Duro Felguera (supra) wherein it was
held that the enquiry under Section 11 only entailed an
examination whether an arbitration agreement existed between
the parties or not and "nothing more or nothing less".
v. Despite the introduction of Section 11(6-A) and the decision in
Duro Felguera (supra), there have been diverging views of this
Court on whether the scope of referral court under Section 11
of the Act, 1996 includes the power to go into the question of
"accord and satisfaction". In Antique Art (supra) it was held
that unless some prima facie proof of duress or coercion is
adduced by the claimant, there could not be a referral of the
disputes to arbitration. This view, however, was overruled in
Mayavati Trading (supra) which reiterated the view taken in
Duro Felguera (supra) and held that post the 2015 amendment
to the Act, 1996, it was no more open to 7 the Court while
exercising its power under Section 11 of the Act, 1996 to go
into the question of whether "accord and satisfaction" had
taken place.
vi. The decision in Vidya Drolia (supra) although adopted the view
taken in Mayawati Trading (supra) yet it provided that in
exceptional cases, where it was manifest that the claims were
ex facie time barred and deadwood, the Court could interfere
and refuse reference to arbitration. Recently, this view in the
context of "accord and satisfaction" was adopted in NTPC v.
SPML (supra) wherein the "eye of the needle" test was
elaborated. It permits the referral court to reject arbitration in
such exceptional cases where the plea of fraud or coercion
appears to be ex-facie frivolous and devoid of merit.
93. Thus, the position after the decisions in Mayavati Trading
(supra) and Vidya Drolia (supra) is that ordinarily, the Court
while acting in exercise of its powers under Section 11 of the
Act, 1996, will only look into the existence of the arbitration
agreement and would refuse arbitration only as a demurrer
when the claims are ex-facie frivolous and non-arbitrable."
14. The Hon'ble Supreme Court in Krish Spinnings (supra) further
clarified that, the scope of enquiry at the stage of appointment of
arbitrator was only with regard to existence of an arbitration clause.
Paragraphs 113 and 114 are quoted below:-
"113. Referring to the Statement of Objects and Reasons of the
Arbitration and Conciliation (Amendment) Act, 2015, it was observed in
In Re: Interplay (supra) that the High Court and the Supreme Court at
the stage of appointment of arbitrator shall examine the existence of a
prima facie arbitration agreement and not any other issues. The
relevant observations are extracted herein below:
"209. The above extract indicates that the Supreme Court or High
Court at the stage of the appointment of an arbitrator shall "examine
the existence of a prima facie arbitration agreement and not other
issues". These other issues not only pertain to the validity of the
arbitration agreement, but also include any other issues which are a
consequence of unnecessary judicial interference in the arbitration
proceedings. Accordingly, the "other issues" also include examination
and impounding of an unstamped instrument by the referral court at
the Section 8 or Section 11 stage. The process of examination,
impounding, and dealing with an unstamped instrument under the
Stamp Act is not a time bound process, and therefore does not align
with the stated goal of the Arbitration Act to ensure expeditious and
time-bound appointment of arbitrators. [...]" (Emphasis supplied)"
114. In view of the observations made by this Court in In Re: Interplay
(supra), it is clear that the scope of enquiry at the stage of appointment
of arbitrator is limited to the scrutiny of prima facie existence of the
arbitration agreement, and nothing else. For this reason, we find it
difficult to hold that the observations made in Vidya Drolia (supra) and
adopted in NTPC v. SPML (supra) that the jurisdiction of the referral
court when dealing with the issue of "accord and satisfaction" under
Section 11 extends to weeding out ex-facie non-arbitrable and frivolous
disputes would continue to apply despite the subsequent decision in In
Re: Interplay (supra)."
15. Ajay Madhusudan Patel and Ors. v. Jyotrindra S. Patel and
Ors., reported in (2025) 2 SCC 147, the Hon'ble Apex Court held as
follows:-
76.5. In Interplay, In re [Interplay Between Arbitration Agreements
under A&C Act, 1996 & Stamp Act, 1899, In re, (2024) 6 SCC 1] the
position taken in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.,
(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] was clarified to state that
the scope of examination under Section 11(6) should be confined to
the "existence of the arbitration agreement" under Section 7 of the
1996 Act and the "validity of an arbitration agreement" must be
restricted to the requirement of formal validity such as the
requirement that the agreement be in writing. Therefore, substantive
objections pertaining to existence and validity on the basis of
evidence must be left to the Arbitral Tribunal since it can "rule" on
its own jurisdiction.
76.6.Krish Spg. [SBI General Insurance Co. Ltd. v. Krish Spg., (2024)
12 SCC 1 : 2024 SCC OnLine SC 1754] cautioned that the courts
delving into the domain of the Arbitral Tribunal at the Section 11
stage run the risk of leaving the claimant remediless if the Section 11
application is rejected. Further, it was stated that a detailed
examination by the courts at the Section 11 stage would be
counterproductive to the objective of expeditious disposal of Section
11 application and simplification of pleadings at that stage.
76.7.Cox & Kings [Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4
SCC 1 : (2024) 2 SCC (Civ) 1 : (2024) 251 Comp Cas 680] specifically
dealt with the scope of inquiry under Section 11 when it comes to
impleading the non-signatories in the arbitration proceedings. While
saying that the referral court would be required to prima facie rule
on the existence of the arbitration agreement and whether the non-
signatory party is a veritable party to the arbitration agreement, it
also said that in view of the complexity in such a determination, the
Arbitral Tribunal would be the proper forum. It was further stated
that the issue of determining parties to an arbitration agreement
goes to the very root of the jurisdictional competence of the Arbitral
Tribunal and can be decided under its jurisdiction under Section
16."
16. In the decision of ASF Buildtech Private Limited v. Shapoorji
Pallonji and Company Private Limited reported in (2025) 9 SCC 76,
the Hon'ble Apex Court held as follows:-
"72. The next chapter in the saga of scope and ambit of Section 11 of
the 1996 Act came in the form of the seven-Judge Bench decision of this
Court in Interplay Between Arbitration Agreements under Arbitration Act,
1996 & Stamp Act, 1899, In re [Interplay Between Arbitration Agreements
under Arbitration Act, 1996 & Stamp Act, 1899, In re, (2024) 6 SCC 1]
wherein one of us (J.B. Pardiwala, J.) as part of the Bench, undertook a
comprehensive analysis of Section(s) 8 and 11, respectively, of the 1996
Act and, inter alia, made poignant observations about the nature of the
power vested in the courts insofar as the aspect of appointment of
arbitrator is concerned. It held that the Referral Court, be it the High
Court or the Supreme Court under Section 11 of the 1996 Act
shall examine only the existence of a prima facie arbitration agreement
and not any other issues. The relevant observations read as under:
(SCC pp. 96-97 & 104, paras 196-97 & 220)
"196. The corollary of the doctrine of competence-competence is that
courts may only examine whether an arbitration agreement exists on
the basis of the prima facie standard of review. The nature of
objections to the jurisdiction of an Arbitral Tribunal on the basis that
stamp duty has not been paid or is inadequate is such as cannot be
decided on a prima facie basis. Objections of this kind will require a
detailed consideration of evidence and submissions and a finding as
to the law as well as the facts. Obligating the court to decide issues of
stamping at the Section 8 or Section 11 stage will defeat the legislative
intent underlying the Arbitration Act.
197. The purpose of vesting courts with certain powers under Sections
8 and 11 of the Arbitration Act is to facilitate and enable arbitration as
well as to ensure that parties comply with arbitration agreements. The
disputes which have arisen between them remain the domain of the
Arbitral Tribunal (subject to the scope of its jurisdiction as defined by
the arbitration clause). ...
***
220. The above extract indicates that the Supreme Court or High
Court at the stage of the appointment of an arbitrator shall "examine
the existence of a prima facie arbitration agreement and not other
issues". The other issues not only pertain to the validity of the
arbitration agreement, but also include any other issues which are a
consequence of unnecessary judicial interference in the arbitration
proceedings. Accordingly, the "other issues" also include examination
and impounding of an unstamped instrument by the Referral Court
at the Section 8 or Section 11 stage. The process of examination,
impounding, and dealing with an unstamped instrument under the
Stamp Act is not a time-bound process, and therefore does not align
with the stated goal of the Arbitration Act to ensure expeditious and
time-bound appointment of arbitrators."
(emphasis in original and supplied)
17. Hindustan Petroleum Corporation Limited v. BCL Secure
Premises Pvt. Ltd. reported in 2025 SCC OnLine SC 2746, the
Hon'ble Apex Court held as follows:-
"27. As was held in In Re: Interplay Between Arbitration Agreements
under Arbitration and Conciliation Act, 1996 & Stamp Act, 1899,
since the scope of referral court has to be within the parameter of
Section 11 (6-A), the exercise carried thereon is "examination of the
existence of an arbitration agreement". While "examination" does not
contemplate a laborious or a contested inquiry there is an obligation
in the referral court to "inspect and scrutinize" the dealings, if any,
between the parties. Para 167 of Interplay (supra) reads as under:--
"167. Section 11(6-A) uses the expression "examination of the
existence of an arbitration agreement". The purport of using the
word "examination" connotes that the legislature intends that the
Referral Court has to inspect or scrutinise the dealings between
the parties for the existence of an arbitration agreement.
Moreover, the expression "examination" does not connote or imply
a laborious or contested inquiry. [P. Ramanatha Aiyar, The Law
Lexicon (2nd Edn., 1997) 666.] On the other hand, Section 16
provides that the Arbitral Tribunal can "rule" on its jurisdiction,
including the existence and validity of an arbitration agreement. A
"ruling" connotes adjudication of disputes after admitting
evidence from the parties. Therefore, it is evident that the Referral
Court is only required to examine the existence of arbitration
agreements, whereas the Arbitral Tribunal ought to rule on its
jurisdiction, including the issues pertaining to the existence and
validity of an arbitration agreement. A similar view was adopted
by this Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre
Ltd., (2005) 7 SCC 234]"
(Emphasis supplied)
28. This principle was reiterated lucidly in SBI General Insurance
Company Limited v. Krish Spinning, wherein this Court (speaking
through one of us, J.B. Pardiwala J.) observed as under:--
113. The scope of examination under Section 11(6-A) is
confined to the existence of an arbitration agreement on the basis
of Section 7. The examination of validity of the arbitration
agreement is also limited to the requirement of formal validity
such as the requirement that the agreement should be in writing.
114. The use of the term "examination" under Section 11(6-A)
as distinguished from the use of the term "rule" under Section 16
implies that the scope of enquiry under Section 11(6-A) is limited
to a prima facie scrutiny of the existence of the arbitration
agreement, and does not include a contested or laborious enquiry,
which is left for the Arbitral Tribunal to "rule" under Section 16.
The prima facie view on existence of the arbitration agreement
taken by the Referral Court does not bind either the Arbitral
Tribunal or the Court enforcing the arbitral award.
115. The aforesaid approach serves a twofold purpose --
firstly, it allows the Referral Court to weed out non-existent
arbitration agreements, and secondly, it protects the jurisdictional
competence of the Arbitral Tribunal to rule on the issue of
existence of the arbitration agreement in depth."
(Emphasis supplied)
18. In this case, the arbitration clause is in place. The parties have
exchanged elaborate correspondence on the claims which are
outstanding. A notice invoking arbitration has been issued.
19. Under such circumstances, all the objections raised by Mr.
Shandilya are left open to be raised before the learned Arbitrator.
20. The clause provides for a single Arbitrator and in case of failure of
such mechanism the Clause further provides that the dispute shall be
referred to three Arbitrators. Both the learned Advocates for the
respective parties make a request that a sole Arbitrator may be
appointed for adjudication of the dispute between the parties.
21. The application is disposed of by appointing Hon'ble Justice S.P.
Talukdar, former Judge of the Calcutta High Court, as the Arbitrator, to
arbitrate upon the disputes between the parties. This appointment is
subject to compliance of Section 12 of the Arbitration and Conciliation
Act, 1996.
22. The learned Arbitrator shall fix his remuneration as per the Schedule
of the Act.
23. The application is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
SP/
