3. The inescapable and inexorable facts are only stated which are required as a
prelude for the adjudication.
4. The applicant herein was the respondent Insurance Company (for short, the
Insurance Company) in the arbitral reference and the respondent herein
was the claimant (for short the claimant) in the reference.
5. The claimant was an insured with the Insurance Company. There was a
valid and existing insurance policy. On September 2, 2014 fire broke out at
the Jute Mill of the claimant. The policy was lawfully enhanced from Rs.22
crores to 32 crores. On September 3, 2014 the incident of fire was duly
notified to the Insurance Company with the substantial loss of finished
goods suffered by the claimant. One Dilip Kumar Saha was appointed as
preliminary surveyor who inspected the premises on September 4, 2014
and September 6, 2014. The preliminary surveyor also inspected both the
manual and computerised records, namely, the stock register of the
claimant. On September 8, 2014, one Sanjoy Dwivedi was appointed as
final surveyor by the respondent. On September 13, 2014 the preliminary
report was submitted by the preliminary surveyor. The time frame of 30
days under Sub-Regulation 2 to Regulation 9 of IRDA (Protection of
Policy Holders' Interest) Regulation, 2002 had expired on September 7,
2014. On October 17, 2014 the final surveyor caused advertisement to be
published in the newspapers to ascertain the salvage value of the salvages.
November 10, 2014 was fixed as the last date for receiving bids pursuant
to salvage process. Three bids were received. Two of which on November 7,
2014, and one was on November 10, 2014. On November 24, 2014
claimant wrote a letter to the Insurance Company claiming a part payment
for a sum of Rs. 10 Crores to enable it to carry on business. On December
3, 2014, the final surveyor sent an E-mail to the Insurance Company
informing of opening of bids received as part of salvage process and
requesting deputation of a responsible officer of the Insurance Company to
be present for the same day. However, none was present on behalf of the
Insurance Company. On December 5, 2014, a meeting was held when the
offers for salvage were opened and the highest bid received was for Rs.
1250/- per metric ton. The final surveyor persuaded the claimant to accept
salvage value at Rs. 1750/- per metric ton. On January 22, 2015
claimant wrote a letter to the Insurance Company requesting for part
payment as sought for in its said previous letter. On March 7, 2015, the
final surveyor sent an E-mail to the claimant urging to accept Rs. 12 crores
40 lakhs as full and final settlement and sent consent letter of the claimant
and the scanned copy was sent through E-mail. Claimant wrote on the said
consent letter subject to terms and condition contained in the Insurance
Policy. On the same day i.e. March 7, 2015, the six months period since
appointment of the surveyor had expired.
6. On March 21, 2015 the final surveyor submitted its survey report and the
report was submitted after expiry of six months period. On March 23, 2015,
claimant wrote a letter to the Insurance Company intimating that till then
the claim was not processed neither any payment was made nor any reply
was received by the claimant from the Insurance Company. The claimant
further raised its demand for payment with an interest. On April 19, 2015,
thirty days stipulated period to offer settlement of claim expired. On June
11, 2015 the claim was filed with the survey report prepared by the final
surveyor and was sent to the Head Office of the Insurance Company after
almost three months. The Divisional Office was sitting on the file without
any authority and jurisdiction as the claim exceeded Rs. 20 lakhs. On
August 18, 2015, internal E-mail of the Insurance Company was sent with
regard to two different rates of salvage in two claim files i.e. claimant and
Hooghly infrastructure, on the basis of which on October 6, 2015 E-mail
was sent to the claimant regarding acceptance of salvage values at
Rs.10,000/- per metric ton. On September 19, 2015, more than after one
year of the fire, supplementary report was filed by the final surveyor to the
Insurance Company without any intimation to the claimant. On September
24, 2015 at page 163 to the application the IRDA circular was published
regarding discharge voucher in settlement of claim, inter alia, directing the
Insurance Company shall not withhold claim amounts and execution of
discharge vouchers does not foreclose the rights of the policy holders to seek
higher compensation before judicial fora or any other fora established by
law. On October 6, 2015 an E-mail was issued by the Insurance Company
to the claimant to accept the salvage value at Rs.10,000/- per metric ton.
The said E-mail further mentioned otherwise the matter may drag and the
same shall attract audit scrutiny. On October 7, 2015, the claimant replied
to the said E-mail stating that increase salvage value of Rs.10,000/- per
metric ton was not acceptable on the basis for such overvaluation which
had no connection to the claimant's case. On October 10, 2015, claimant
wrote a letter to the Insurance Company requesting a judicious settlement of
its claim. On October 16, 2015 the claimant wrote a letter to IRDA
informing of the inordinate delay on the part of the Insurance Company in
settlement of the claim of the claimant. On November 13, 2015 claimant
wrote a letter to the Insurance Company informing about the inordinate
delay of more than one year on the part of the insurance company to settle
the claim of the claimant and the claimant was undergoing through
financial hardship. On March 10, 2016 the claimants agreed for appointing
another surveyor by the Insurance Company to further strengthen the cause
of fire especially as no action was being taken by the Insurance Company
otherwise. On March 15, 2016 the Insurance Company appointed another
surveyor, Mr. K.B. Kuri, the last surveyor for further strengthening the
cause of fire. On March 16, 2016 claimant wrote a letter to the Insurance
Company informing that more than a year had passed without settling the
claim of the claimant and the claimant requested the Insurance Company to
make a part payment of at least Rs. 8 crores, since the claimant was
suffering from financial stress to carry out its business. In April 2016, the
draft report was shared by the last surveyor with the claimant only with
regard to the cause of fire and without enclosure showing the assessment of
loss. On May 20, 2016, at page 191 Volume-II to the application, the
claimant received an E-mail from the said last surveyor containing a pre-
formatted letter of consent together with note of acceptance and instructions
to print both side on the letterhead of the claimant and to sign and stamp
the same. Claimant has been instructed, to get the said letter ready together
with the note of acceptance and the same was issued by the claimant. On
August 31, 2016 the claimant had signed the said pre-formatted discharge
voucher and sent it to the Insurance Company through E-mail. On
September 7, 2016, the Insurance Company credited the bank account of
the claimant to the extent of Rs. 11,17,81,171/-. On September 9, 2016
claimant by its letter written to the Insurance Company demanded the
remaining amount of Rs. 4,43,88,000/-. On September 19, 2016 the
claimant by its letter written to the respondent reiterated its demand to the
said extent of Rs. 4,43,88,000/- and requested the Insurance Company to
furnish the surveyors' reports submitted from time to time.
7. October 27, 2016, the claimant invoked the arbitration clause. Since the
Insurance Company did not accept the nomination of the claimant, an
application was moved under Section 11 of the 1996 Act and the Tribunal
was constituted. The reliefs claimed in the statement of claim by the
claimant is quoted below:-
"a) Declaration that all consent documents caused to be
made by the claimant including letters dated
07.03.2015, 10.03.2016, 20.05.2016 and discharge
voucher dated 31.08.2016 are vitiated by undue
influence, coercion, misrepresentation and fraud and
are liable to be adjudged void and all such
consents/documents are liable to be delivered up and
cancelled, if required
b) Award for Rs. 7,59,29,406.31 against the
respondent;
c) Pendente lite interest and interest upon award at the
rate of 15 percent per annum;
d) Costs;
e) Further and other reliefs;"
8. The statement of claim is available at page-53 at Volume-I of the
application. The statement of defence filed by the Insurance Company is
available at page-200, Volume-II of the application. The rejoinder of the
claimant is available at page 291, Volume-III of the application.
9. The award was made and published by the Arbitral Tribunal on March 2,
2020 at page 430, Volume-IV of the application allowing the claim of the
claimants for the balance sum with interest.
Submissions:
10. The principle ground taken by the Insurance Company that, since by
signing and executing the discharge voucher, the claimant had accepted the
settled amount consciously and after receiving the said settled amount, the
claimant could not have claimed the balance sum. Mr. Chayan Gupta,
learned counsel appearing for the Insurance Company, the applicant herein,
submits that the principle of accord and satisfaction would clearly operate
in the instant facts and circumstances.
11. Mr. Chayan Gupta, learned counsel appearing for the Insurance Company
while developing his points of argument has submitted that, it was not a
case of coercion or undue influence upon the claimant. When the claimant
had accepted its claim as full and final settlement by executing the
discharge voucher, the claimant could not have taken the plea that the
discharge voucher was executed by it under coercion and undue influence
practiced by the Insurance Company upon the claimant. He submits that
had there been any coercion or undue influence practiced upon the claimant
by the Insurance Company, then the claimant subsequently ought not to
have gone for new insurance policy which had been executed with the
Insurance Company. Even previous to this particular incident the claimant
was insured with the same Insurance Company and subsequent thereto
also.
12. Referring to the said IRDA circular dated September 24, 2015, Mr. Gupta
submits that the circular provides for that execution of voucher does not
foreclose the rights of the policy holder to seek higher compensation before
any judicial forum and/or any other fora established by law but in the facts
of the instant case, the claimant has voluntarily and wilfully executed the
discharge vouchers and accepted the payment without protest with the clear
understanding that it did not want to prolong the issue for settlement of its
claim. Therefore, in the facts of the instant case the claimant not only
executed the voucher but also accepted the payment without any protest.
Since the claimant has accepted the payment, the said IRDA circular would
not apply to support the case of the claimant.
13. Referring to pages 500 to 508 of Volume-III of the application and
specifically referring to Exhibit ADR-8 and Exhibit ADR-9 at pages 509 to
512, Volume-III of the application, learned counsel for the Insurance
Company submits that while assessing the value of salvage and the fixation
of its rate, all along the claimant was in communication with the surveyor
appointed by the Insurance Company and in consultation with the claimant
the surveyor has suggested the value for salvage. Therefore, series of
communication were there from time to time between the claimant and the
surveyor and some vital communication at pages 510 to 512 of the
application were not disclosed in the arbitral proceeding by the claimant and
suppressed. Such documents were disclosed by the Insurance Company in
the arbitral proceeding as a part of its counter statement of claim and the
learned Arbitral Tribunal has failed to assess the purport content and
evidential value of those documents. Had those documents been properly
assessed by the learned Arbitral Tribunal in accordance with law, then the
complexion of the award would have been changed and would have gone in
favour of the Insurance Company, that the claimant knowingly and wilfully
executed the discharge voucher after having consultation with the surveyors
and on the basis thereof the claim of the claimant was settled and the
payment was accepted by the claimant under such settlement of claim.
Learned counsel has specifically referred few paragraphs from the impugned
award which, inter alia, are paragraphs 13, 15, 19, 35, 39 and 68 and
submits that the learned Arbitral Tribunal did not consider the defence of
the Insurance Company taken before it, and ultimately no finding was
arrived at thereupon. He then refers to the notes submitted by the
Insurance Company at page 68 to the application and submits that the
same was not considered. Referring to Exhibits ADR- 1 to ADR-9 from the
application, he submits that the Arbitral Tribunal had not taken note of the
content of the same and there was no adjudication on the same.
14. Mr. Chayan Gupta, Learned Counsel for the award-debtor/Insurance
Company further submits that, the plea taken by the insured/award holder
for releasing money by signing the discharge voucher was that the insured
was undergoing a financial stringency at the relevant point of time. Referring
to Exhibit ADR-1, which are financial statement of the insured, Mr. Chayan
Gupta submits that the insured had not undergone through any financial
stress, as would be evident from their audited balance-sheet. There was no
economic duress. Referring to both pre and post Fire Insurance Policies,
Exhibit ADR-2, he submits that the insured even after the fire broke-out
continued with the Insurance Company and even after the disputes
occurred by and between the parties, the insured executed insurance policy.
This, according to him, shows that after executing the discharge voucher
and accepting the insurance claim on account of the subject fire
unconditionally, the insured proceeded for the further insurance policy with
the Insurance Company. Had there been any dispute in the mind of the
insured, it would not have proceeded with for further insurance with the
Insurance Company. He also refers to Exhibit ADR-7, which are the
discharge voucher post fire, to show that the insured all along aware of the
fact that to receive the insurance claim if any, the discharge voucher are
executed as and by way of full and final settlement of the claim and there
remained no further scope for raising any further claim. He also refers to the
Exhibit ADR-8 being the communication relating to disposal of salvage
along-with the communication between the insured and the third Surveyor
being Exhibit ADR-9. Referring to these Exhibits, Mr. Gupta submits that
the insured was all along with the touch of the third Surveyor and on the
basis of the mutual discussion and agreement between the insured and the
third Surveyor evaluation of salvage was done. Therefore, the insured had
no occasion to go beyond those claims on account of salvage as assessed by
the third Surveyor.
15. Mr. Chayan Gupta, Learned Counsel submits that from a close scrutiny of
the award, it would be evident that none of the above Exhibits being ADR-1
to ADR-9 was considered by the arbitral tribunal while adjudicating the
disputes between the parties and passing the award. The award is thus
perverse. He submits that the tribunal had based it's finding by excluding
the vital evidences and relevant materials without taking them into account.
In support, he has relied upon a Division Bench judgment of this Hon'ble
Court In the matter of: Collector of Customs, Calcutta and Ors. Vs.
Biswanath Mukherjee reported at 1974(1) CLJ 251.
16. Mr. Chayan Gupta further submits that, a perverse finding is one which is
on no evidence or one that no reasonable person would have arrived at. If it
is found that the relevant evidence was not considered, despite being there
before the tribunal, finding is of tribunal is perverse. In support, he has
relied upon a decision of the Hon'ble Supreme Court, In the matter of:
Sumitomo Heavy Industries Limited Vs. Oil and Natural Gas
Corporation Limited reported at (2010) 11 Supreme Court Cases 296.
17. Learned Counsel for the Insurance Company then submits that the subject
discharge voucher had not been accepted by the arbitral tribunal as full and
final settlement of the claim. The tribunal had proceeded in a manner which
is beyond the prescribed procedure under the law and thereby the award is
opposed to public policy and should be set-aside. In support, Learned
Counsel has relied upon a Supreme Court decision In the matter of:
Supermint Exports Pvt. Ltd. Vs. New India Assurance Co. Ltd. and
Others, reported at 2021 SCC OnLine Delhi 5237.
18. Mr. Chayan Gupta, Learned Counsel for the Insurance Company further
submits that, when the patent illegality is ex facie on the face of the arbitral
award, the award is liable to be set aside. In support, he has relied upon a
decision of the Hon'ble Supreme Court In the matter of Associate
Builders Vs. Delhi Development Authority reported at (2015) 3
Supreme Court Cases 49.
19. Mr. Chayan Gupta then submits that the finding of the Learned Arbitral
Tribunal, as in the instant case, since without considering the vital evidence
is perverse and liable to be set aside. In support, he has relied upon a
decision of the Hon'ble Supreme Court In the matter of: Ssangyong
Engineering And Construction Vs. National Highways Authority of
India (NHAI) reported at (2019)15 Supreme Court Cases 131.
20. In the light of the above, Mr. Chayan Gupta, Learned Counsel of the
Insurance Company submits that the instant award being perverse and also
being opposed public policy, is liable to be set aside.
21. Mr. Sabyasachi Chaudhury, Learned Senior Counsel appearing for the
insured award holder submits that, the principle challenge allegedly made,
as would be evident from the grounds taken by the Insurance Company in
the setting aside application are on counts:
(a) The award was opposed to public policy;
(b) The award is on the face of it perverse and
(c) Once the discharge voucher has been issued and
accepted by the award holder, there was accord and
satisfaction, hence, the award is bad in law and not
sustainable beyond the said satisfied claim.
22. Mr. Chaudhury, Learned Senior Counsel submits that the claim arose
out of an Insurance Contract. There is no dispute between the parties
that the Insurance Contract was executed. In such case, if a claim is
raised arising out of such contract, such a claim has to be proved by the
claimant and the respondent would have to disprove and dislodge the
claim. It is not the case of the Insurance Company, in the facts of this
case that, the claimant has not proved its claim. The solitary plea of the
Insurance Company is that the claim allowed by the Learned Arbitral
Tribunal was beyond the alleged discharge voucher, under which the
claimant has accepted its claim as full and final settlement. The specific
case of the claimant was that the discharge voucher was signed by the
claimant under coercion and undue influence. The award shows that
such case of coercion and undue influence made out in the claim have
been specifically proved and only thereafter, the claim of the claimant was
allowed.
23. The Learned Senior Counsel for the claimant refers to the Arbitration
Clause from page 132 Volume-1 of the setting aside application. He
submits that the Arbitration Clause itself is clear and accepted by the
parties which, inter alia, provides that if any dispute or difference shall
arise as to the quantum to be paid under the policy liability being
otherwise admitted, such differences shall independently of all other
instances to be referred for decision of a sole arbitrator. Accepting the
said Arbitration Clause the parties herein participated and proceeded with
the arbitration reference. The parties are, now, debarred from raising any
dispute to the contrary.
24. Referring to the IRDA Circular dated September 24, 2015 at page
163, Volume- 2 of the setting aside application, Learned Senior Counsel
submits that the said Circular provides that the Insurance Company shall
not use the execution as of discharge voucher as a means of Estoppel
against the aggrieved policy holder when such policy holder approaches
any judicial forum. Execution of such discharge voucher does not
foreclose the rights of policy holder to seek Higher Compensation before
any judicial fora or any other fora established by law. All the Insurance
Companies were directed to comply with the said instruction. It is not the
case of the Insurance Company that the said Circular is not binding on
them. So long, the said Circular remains binding on the Insurance
Company, the alleged discharge voucher would not have been the plea of
the Insurance Company in support of their case for accord and
satisfaction.
25. Learned Senior Counsel then places the relevant averments made by
the Insurance Company from the statement of defence filed by it in the
arbitral reference. Referring to the pleadings, inter alia, at sub-paragraphs
(a) to (f) to paragraph 14 of the statement of defence, he submits that
the consistent stand of the Insurance Company in the arbitration was
that the insured was a loss making Company. In the notes of arguments
filed by the Insurance Company, the same stand continued. Section 34
application does not contain any pleading to that effect. Subsequently, in
course of the argument, at this stage, it has been urged from the bar
referring to the balance-sheet and financial statement of the Company
being Exhibit ADR-1, 2, 3, 4, 5 and 6 that the financial health of the
Insured was very strong. The Insured has not suffered any financial
duress, therefore, there was no reason for the Insured accept the said
discharge voucher under coercion and undue influence. The said
evidences were never vital evidence at all. He submits that if it is found
that a particular claim raised by the Insured under the Insurance
Contract is proved and found to be payable by the Insurance Company, it
is the obligation of the Insurance Company in law to pay such
compensation irrespective of the nature and character of the financial
health of the Insured.
26. Mr. Chaudhury, Learned Senior Counsel then refers to various
questions and answers from the record of the arbitral proceeding and
those which are quoted in the impugned award and submits that after
considering the entire witness action, Arbitral Tribunal has passed the
award. The award is detailed and well versed.
27. Learned Senior Counsel then submits that the scope of adjudication
under Section 34 of the Arbitration Act is very limited and narrow. On a
detail reading of the instant award it appears that the same is extremely
well versed and well-reasoned. The evidences referred to on behalf of the
Insurance Company being ADR-1, 2, 3, 4, 5, 6 and 7 are not at all vital
evidences. In the light of the scope of adjudication of the arbitral
reference, the evidences relating to financial health of the insured or the
pre and post fire Insurance Policies are not at all vital evidence. Once the
quantum of compensation is in dispute and the quantum claimed by the
claimant is proved in accordance with law and is found to be payable to
the claimant by the Insurance Company under the Insurance Contract, it
is sufficient to pass an award accordingly, for which all these evidences
are not at all material to be looked into as vital evidence. The discharge
voucher ADR-7 being pre and post fire issued by the Insurance Company
are also not vital evidence, as they are not relevant to be considered under
the specific Insurance Contract of which the arbitral reference arose.
Moreover, in view of the IRDA Circular dated September 24, 2015, the
discharge voucher had no relevance when the claim was for adjudication
before the Arbitral Tribunal. The communication being ADR-8 and ADR-9
are not at all vital evidence, as the Claimant/Insured has proved its case
for coercion and undue influence before the Arbitral Tribunal.
28. Mr. Sabyasachi Chaudhury, Learned Senior Counsel appearing for the
insured further submits that, a setting aside Court is not a court of
appeal and consequently errors of facts cannot be corrected by it. A
possible view by the arbitrator on the facts has necessarily to pass muster
as the arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon when he delivers his arbitral award. Thus, an
award based on little evidence or on evidence which does not measure up
in quality to a trained legal mind would not be held to be invalid on this
score. Once it is found that the approach of the arbitrator is not arbitrary
or capricious, then, he is the last word on facts. In support, he has relied
upon the decision of the Hon'ble Supreme Court In the matter of:
Associate Builders (supra).
29. Mr. Chaudhury further submits that the re-appreciation of evidence,
is permitted by the Appellate Court and cannot be permitted under the
ground of patent illegality appearing on the face of award as the setting
aside Court is not an Appellate Court. A mere contravent of a substantive
law, by itself is no longer a ground available to stay an arbitral award. If a
vital evidence being produced before the Arbitral Tribunal and the
Tribunal passing its award fails to look at it and to appreciate the same,
then the award becomes bad in law and against the fundamental policy of
Indian Law and award suffers from patent illegality. In the instant case,
all the vital evidences have been considered by the Arbitral Tribunal and
the evidences referred to on behalf of the Insurance Company which were
not at all vital, the same would have no bearing on the adjudication of the
issue before the Tribunal. Hence, he submits that, the award cannot be
said that it suffers from patent illegality. In support, he has relied upon
the decision of the Hon'ble Supreme Court, In the matter of: Ssangyong
Engineering And Construction (supra).
30. In the light of the above, Mr. Sabyasachi Chaudhury, Learned Senior
Counsel submits that the award does not suffer from any infirmity and
should not be interfered with. He prays for dismissal of Section 34
application.
31. In reply, Mr. Sanjay Paul, Learned Counsel appearing for the
applicant Insurance Company reiterates the earlier submissions and
submits that since Arbitral Tribunal has ignored the vital evidences,
patent illegality is apparent on the face of the impugned award and the
award is perverse and should be set aside. In support, at the reply stage,
Mr. Sanjay Paul has relied upon a decision of the Hon'ble Supreme Court,
In the matter of: Delhi Metro Rail Corporation Ltd. Vs. Delhi Airport
Metro Express Pvt. Ltd. reported at 2024 SCC OnLine SC 522.
32. He submits that the decision of the Hon'ble Supreme Court In the
matter of: Delhi Metro Rail Corporation (supra) was rendered after
considering the judgment cited by Mr. Chaudhury In the matter of:
Associate Builders (supra) and Ssangyong Engineering And
Construction (supra). He submits that since vital evidences were not
considered by the Learned Tribunal, the award is liable to be set aside.
33. Per contra, Mr. Sabyasachi Chaudhury, Learned Senior Counsel
submits that the evidences referred to by the Insurance Company are not
at all vital as already narrated above and therefore, even if those
evidences could be considered, would not have altered the award. He
submits that the setting aside application should be dismissed.
Decision :
34. After considering the rival contentions of the parties and upon perusal
of the materials on record, at the outset, the Arbitration Clause between
the parties and the provisions from the IRDA Circular dated September
24, 2015 are quoted below:
Arbitration Clause:
"If any dispute or difference shall 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 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 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 a conditio0n precedent to any right of 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."
IRDA Circular:
"Reg: Discharge Voucher in settlement of claim
***
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."
35. On a meaningful reading of the Arbitration Clause this Court is of
the considered and firm view that if any dispute or difference shall arise
as to the quantum to be paid under the policy, liability being otherwise
admitted, such differences shall independently of all other questions be
referred to the decision of a sole arbitrator. The Insurance Company
participated in the arbitration reference without any objection as to its
maintainability. The jurisdiction of the Arbitral Tribunal was never
challenged. Therefore, the scope of reference between the participating
parties was limited only to the extent of determination of quantum of
compensation.
36. Next comes, the IRDA Circular dated September 24, 2015. The
Circular indisputably is binding upon the Insurance Company. There
was no challenge to the contrary by the Insurance Company. The
Circular unequivocally shows that Insurers/Insurance Company shall
not use the instrument of Discharge Voucher as a Means of Estoppel
against the Aggrieved Policy Holders, who approaches judicial forum.
The Circular further provides where the liability on quantum of claim
under a policy is established, the Insurers/Insurance Company shall
not withhold the claim. 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. The Circular was directed to be complied with by all
Insurers/ Insurance Companies. On a plain reading of the said
Circular, this Court is of the firm and considered view that, the execution
of discharge voucher would not amount to estoppel on the part of the
Insured, if such an Insured is aggrieved with the quantum of
compensation fixed by the Insurers/Insurance Company and
approaches a judicial forum and execution of such discharge voucher
also does not foreclose the rights of the Policy Holder/Insured to seek
Higher Compensation in accordance with law.
37. This Court is also of the firm view that, where the liability or quantum of the
claim under a policy is established, the Insurance Company shall not
withhold the claim amount and all Insurance Companies are directed to
comply with the provisions of the said Circular. The natural consequence of
the said IRDA Circular is that, if an Insured is aggrieved with the quantum
of claim allowed by the Insurance Company, it may approach the judicial
fora or any other fora established by law seeking Higher Compensation and
execution of the discharge voucher should not operate as an Estoppel on
the part of such Insured neither does it foreclose the rights of the Insured to
seek Higher Compensation.
38. The said Circular is binding upon the Insurance Company.
39. In the light of the above, the impugned award is required to be adjudicated
upon within the limited scope of Section 34 of the Arbitration Act.
40. In this backdrop, when the instant award has been read by this Court
meaningfully, it appears that the Learned Arbitral Tribunal has gone in
detail with regard to the plea of the Insured that the discharge voucher was
executed by it under coercion and undue influence. Apart from that the
Insured had proved its claim independent of execution of the discharge
voucher. In view of the provisions laid down in the said IRDA Circular
dated September 24, 2015, the plea taken by the Insurance Company for
Accord and Satisfaction on the basis of the execution of the discharge
voucher, in any event, would not stand in the eye of law.
41. The award further shows that upon detail witness action and upon
considering all the materials, the Ld. Arbitrator had arrived at its finding
that the insured being the claimant had proved its claim. When an
Insurance Contract is executed, it is the duty and legal obligation of the
Insurance Company to compensate the Insured by paying its claim, if the
Insured has proved its claim in accordance with law. When such a claim is
proved in the eye of law, the Insurance Company has no other alternative
but to pay the said claim to the insured. Unless otherwise agreed by and
between the parties to the relevant Insurance Contract, it is irrelevant and of
no consequence to consider the financial health of the insured or whether
any other Insurance Contract pre and post occurrence of fire was there, in
the facts of the instant case. The claim which is under adjudication allegedly
settled by and between the parties on the basis of any discharge voucher, as
pleaded by the insurance company is wholly irrelevant and immaterial
consideration, when the insured has claimed higher compensation.
42. The evidences as already referred to above, with regard to the financial
health of the Insured at any material point of time, would have no relevance
at all for adjudicating the claim of the insured in the facts and
circumstances of the instant case, therefore, any evidence with regard to the
financial health of the Insured would have no relevance or material bearing
on the adjudication and are not at all vital evidence. In absence of any
agreement by and between the parties that the insurance claim under the
Insurance Contract would depend upon the financial health of the Insured.
43. Similarly, arising out of a particular Insurance Contract, the Insured has
raised its claim in the arbitral reference. The adjudication of such claim
should be restricted only in respect of that particular Insurer/Insurance
Contract and not beyond, therefore, whether the parties have entered into
any previous Insurance Contract or future Insurance Contract and in claims
were raised and the fate of it are wholly irrelevant consideration while
adjudicating the claim raised by the Insured arising out of a particular
Insurance Company. Therefore, the evidence, as referred to above, with
regard to pre and post subject Insurance Contract, arising whereof the
arbitral reference arose, would have no relevance and material bearing in
the adjudication of the reference. Hence, all such evidences are not at all
vital and relevant for adjudication.
44. The objection raised by the Insurance Company that allegedly negotiation
took place by and between the Insured and the Surveyor appointed by the
Insurance Comp[any and the claimant allegedly was paid on the basis
thereof would amount to Accord and Satisfaction of the claim of the Insured
or waiver or estoppel on the part of the Insured, are not tenable in law as
provision under the said IRDA Circular dated September 24, 2015
provides that execution of discharge voucher will not operate as an estoppel
and the Insured can still claim Higher Compensation. Moreover, the
Surveyor did not file their report and settled the claim within the contractual
period and/or the statutory period fixed under the relevant guidelines and
the Insured has proved its claim beyond all reasonable doubt. Therefore, the
evidence, as referred to above according to the Insurance Company that on
the basis of a negotiation between the Insured and the Surveyor, the claim
was settled is not a tenable objection in the eye of law. Hence, the evidences,
as referred to above in this regard not at all vital or relevant for adjudication
of the claim of the Insured, in the facts of this case.
45. In the matter of: Associate Builders (supra) the Hon'ble Supreme Court
had observed as under:
"31.The third juristic principle is that a decision
which is perverse or so irrational that no reasonable
person would have arrived at the same is important
and requires some degree of explanation. It is
settled law that where:
i) a finding is based on no evidence, or
ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which
it arrives at; or
iii) ignores vital evidence in arriving at its
decision,
such decision would necessarily be perverse.
32. A good working test of perversity is contained
in two judgments. In Excise and Taxation Officer-
cum-Assessing Authority v. Gopi Nath & Sons, it
was held:( SCC p. 317, para 7)
"7....It is, no doubt, true that if a finding of fact
is arrived at by ignoring or excluding relevant
material or by taking into consideration irrelevant
material or if the finding so outrageously defies
logic as to suffer from the vice of irrationality
incurring the blame of being perverse, then, the
finding is rendered infirm in law."
In Kuldeep Singh v. Commr. of Police, it was held:
(SCC p.14, para 10)
"10. A broad distinction has, therefore, to be
maintained between the decisions which are
perverse and those which are not. If a decision is
arrived at on no evidence or evidence which is
thoroughly unreliable and no reasonable person
would act upon it, the order would be perverse.
But if there is some evidence on record which is
acceptable and which could be relied upon,
howsoever compendious it may be, the
conclusions would not be treated as perverse and
the findings would not be interfered with."
33. It must clearly be understood that when a court
is applying the "public policy" test to an
arbitration award, it does not act as a court of
appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on
facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity
and quality of evidence to be relied upon when he
delivers his arbitral award. Thus an award based
on little evidence or on evidence which does not
measure up in quality to a trained legal mind
would not be held to be invalid on this score.
Once it is found that the arbitrators approach is
not arbitrary or capricious, then he is the last
word on facts. In P.R. Shah, Shares & Stock
Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., this
Court held : (SCC pp. 601-02, para 21)
"21. A court does not sit in appeal over the award
of an Arbitral Tribunal by reassessing or re-
appreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal has
examined the facts and held that both the second
respondent and the appellant are liable. The case
as put forward by the first respondent has been
accepted. Even the minority view was that the
second respondent was liable as claimed by the
first respondent, but the appellant was not liable
only on the ground that the arbitrators appointed
by the Stock Exchange under Bye-law 248, in a
claim against a non-member, had no jurisdiction
to decide a claim against another member. The
finding of the majority is that the appellant did
the transaction in the name of the second
respondent and is therefore, liable along with the
second respondent. Therefore, in the absence of
any ground under Section 34(2) of the Act, it is not
possible to re-examine the facts to find out
whether a different decision can be arrived at."
34. It is with this very important caveat that the two
fundamental principles which form part of the
fundamental policy of Indian law (that the
arbitrator must have a judicial approach and that
he must not act perversely) are to be understood."
46. In the matter of: Ssangyong Engineering And Construction
(supra) the Hon'ble Supreme Court had observed as under:
"34. What is clear, therefore, is that the expression
"public policy of India", whether contained in
Section 34 or in Section 48, would now mean the
"fundamental policy of Indian law" as explained in
para 18 and 27 of Associate Builders, i.e., the
fundamental policy of Indian law would be
relegated to the "Renusagar" understanding of this
expression. This would necessarily mean that the
Western Geco expansion has been done away with.
In short, Western Geco, as explained in para 28 and
29 of Associate Builders, would no longer obtain, as
under the guise of interfering with an award on the
ground that the arbitrator has not adopted a judicial
approach, the Court's intervention would be on the
merits of the award, which cannot be permitted post
amendment. However, insofar as principles of
natural justice are concerned, as contained in
Sections 18 and 34(2)(a)(iii) of the 1996 Act, these
continue to be grounds of challenge of an award, as
is contained in para 30 of Associate Builders.
37. Insofar as domestic awards made in India are
concerned, an additional ground is now available
under sub-section (2A), added by the Amendment
Act, 2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which
refers to such illegality as goes to the root of the
matter but which does not amount to mere erroneous
application of the law. In short, what is not
subsumed within "the fundamental policy of Indian
law", namely, the contravention of a statute not
linked to public policy or public interest, cannot be
brought in by the backdoor when it comes to setting
aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-
appreciation of evidence, which is what an appellate
court is permitted to do, cannot be permitted under
the ground of patent illegality appearing on the face
of the award."
47. In the matter of Delhi Metro Rail Corporation (supra), the Hon'ble
Supreme Court observed as under:
"40. In essence, the ground of patent illegality is
available for setting aside a domestic award, if the
decision of the arbitrator is found to be perverse, or
so irrational that no reasonable person would have
arrived at it; or the construction of the contract is
such that no fair or reasonable person would take; or,
that the view of the arbitrator is not even a possible
view.24 A 'finding' based on no evidence at all or an
award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside
under the head of 'patent illegality'. An award
without reasons would suffer from patent illegality.
The arbitrator commits a patent illegality by deciding
a matter not within his jurisdiction or violating a
fundamental principle of natural justice."
48. Upon reading the provisions of Section 34 of the Arbitration Act and the
law laid down through various precedences, this Court, now, proceeds to
discuss power and authority of the Court under Section 34 of Arbitration
and Conciliation Act as follows:
(a) An award by an arbitrator can only be set aside
on limited grounds and the supervisory role of
the Court is limited to a narrow extent;
(b) The Court in exercise of its power under Section
34 of the Arbitration Act shall not exercise its
appellate jurisdiction over the award while
examining the correctness of the finding of the
award. A Court while considering the objections
under Section 34 of the Act shall not re-appreciate
the fact finding enquiry, the evidence looked upon
by the Arbitral Tribunal, the entire finding of the
Tribunal and to reassess the evidence before the
Arbitral Tribunal;
(c) When finding of the Arbitral Tribunal and its
conclusion is based on a possible view on the
basis of the records, Section 34 Court shall not
interfere with the award. Section 34 Court shall
not substitute its view when a possible and
plausible view has already been taken by the
Arbitral Tribunal on the basis of the existing
materials before it.
(d) The finding of the Arbitral Tribunal with regard to
construction of a contract is not to be interfered
with, if there is a plausible view taken by the
Arbitral Tribunal and even an error relating to
interpretation of a contract or a document by an
Arbitral Tribunal is regarded as an error within its
jurisdiction and such an error is not amenable for
correction by a Section 34 Court.
(e) While adjudicating the issue before the Arbitral
Tribunal, if the Tribunal does not look into the
evidence or consider the same, which is otherwise
of no relevance or has no material barring in
adjudication of the issue before the Arbitral
Tribunal, such an evidence can and should not be
construed to be a vital evidence before the Arbitral
Tribunal. As such, non-consideration of such
evidence would not render the award perverse.
(f) The important consideration by Section 34 Court
would be whether an evidence, had it been
considered by the Arbitral Tribunal would have
altered the finding of the Arbitral Tribunal on the
existing materials before it and in the event such
is the case, then that particular evidence having a
material bearing and relevance on the issue
should be construed as a vital evidence and non-
consideration of the same would render the award
perverse.
(g) A perverse finding is one which is based on no
evidence or one that no reasonable person would
have arrived at. In the event, it is found that some
relevant and vital evidence had not been
considered or that certain inadmissible evidence
has been taken into consideration, the award may
be perverse.
49. A close perusal of the impugned award would reveal that the Arbitral
Tribunal has dealt with the rival claims of the parties in detail. The
Tribunal has meticulously and meaningfully considered the evidence
before it. The Tribunal has analysed the evidence of the parties on proper
appreciation of their respective witness action. The Arbitral Tribunal has
dealt with the defence of the Insurance Company, in all respect. After all
these exercise the tribunal has come to its finding that the claimant has
proved its claim.
50. In the matter of: Collector of Customs, Calcutta and Ors. (supra)
the Hon'ble Division Bench of this Court had delivered the judgment in a
writ proceeding while examining the judgment of a Tribunal whether was
perverse or not. Firstly, the law applicable for judicial review in a writ
jurisdiction is not the same with regard to the application of law in the
arbitration proceeding. It was held that the decision of the Tribunal was
to be perverse if the Tribunal has given its finding on material not
admissible or has excluded the relevant materials. In the facts of this
case, it is not the case of the Insurance Company that the finding of the
arbitrator was based on such materials which were not admissible in
evidence. The plea taken by the Insurance Company that the Exhibits
ADR-1 to ADR-9 being material evidence were excluded to be looked into
by the Arbitral Tribunal. It has already been discussed above in detail
that had these Exhibits been considered by the Arbitral Tribunal, there
would have been no material alteration in the ultimate finding of the
Arbitral Tribunal in its award. The said Exhibits were not at all relevant
or vital evidence in the facts of this case. Hence, the ratio of the judgment
has no application and relevance in the facts and situation of the instant
case.
51. The ratio laid down In the matter of: Sumitomo Heavy Industries
Limited (supra) has also no application in the facts and situation of the
instant case. Since the Exhibits, as referred to above, were not at all vital
evidence, the consideration of the same was also irrelevant before the
Arbitral Tribunal. The award cannot said to be perverse in absence of
consideration of those evidences.
52. The ratio laid down In the matter of: Associate Builders (supra)
describes the scope and ambit of the authority of Section 34 Court and
the relevant portion have already been quoted above. Since the execution
of the discharge voucher was irrelevant and of no consequence while
considering enhancement of claim of the claimant before the Arbitral
Tribunal and the execution of other Insurance Contracts by and between
the parties had no relevance in the facts of this case and since the
evidence Exhibits being ADR-1 to ADR-9 not being vital evidence in the
facts of this case, it cannot be said that the award suffers from any
patent illegality.
53. In the matter of: Supermint Exports Pvt. Ltd. (supra), the Hon'ble
Supreme Court has held that the finding of the Tribunal which is
altogether against the evidence, it becomes perverse. This is not the case
here. The award shows that the same is a speaking award and was made
by the Tribunal on appreciation of the existing materials before it. The
evidence being Exhibits ADR-1 to ADR-9 were not at all relevant for
consideration. Hence, the award does not suffer from perversity in the
instant case. Thus, the ratio of the judgment has no application in the
facts of the instant case. The arbitrator throughout had a judicial
approach as would be evident on the face of the award and the arbitrator
has acted within the forecorner of law and no perversity is there on the
face of the award. Hence, the ratio laid down In the matter of: Delhi
Metro Rail Corporation Ltd. (supra) has no application in the facts of
this case. There is no patent illegality on the face of the award. There is
no violation of any substantive Indian Law which would be evident on the
face of the award. The award is not opposed to public policy of India at
all.
54. In view of the foregoing discussions and reasons, this Court is of the
considered and firm view that the Award does not warrant any
interference by this Court.
55. The Award dated March 2, 2020 stands.
56. Accordingly, the application being AP-COM/186/2024, Old Case No.
AP/322/2020 stands Dismissed, without any order as to costs.
57. The Learned Registrar, Original Side with whom the awarded amount
is lying secured in an interest bearing Fixed Deposit Account shall take
steps forthwith to encash the Fixed Deposit and pay the entire amount
with accrued interest thereupon, upon compliance of all formalities, in
favour of the respondent insured positively within a period of Four
Weeks from the date of communication of this judgment.
58. The concerned Bank shall also take all necessary steps accordingly.
(Aniruddha Roy, J.)
