M/S Polytron & Fragrance ... vs National Insurance Co. Ltd.
2009 Latest Caselaw 1694 Del

                                                         REPORTABLE

*       IN THE HIGH COURT OF DELHI AT NEW DELHI


                               ARB. P.144/2008


                                   Date of Decision: April 27, 2009



        M/S POLYTRON & FRAGRANCE INDUSTRIES (P) LIMITED
                                                   ...... Petitioner
                       Through: Mr. Prag Chawla, Advocate

                              VERSUS


        NATIONAL INSURANCE CO. LTD.               ..... Respondent
                       Through Mr. Somesh Arora, Advocate with
                       Mr. Yash Mishra, Advocate

        CORAM:
        HON'BLE MISS JUSTICE REKHA SHARMA

1.      Whether the reporters of local papers may be allowed to see the
        judgment? Yes
2.      To be referred to the reporter or not? Yes
3.      Whether the judgment should be reported in the „Digest‟? Yes

REKHA SHARMA, J.

By way of present petition under Section 11(4)(a) of the

Arbitration & Conciliation Act, 1996, the petitioner seeks appointment

of an Arbitrator on behalf of the respondent, allegedly, on the ground

that despite notice, respondent had failed to appoint an Arbitrator in

terms of clause 13 of the Contract of Insurance.

It is not in dispute that the petitioner who has a factory at B-70,

Sector-57, Noida (U.P.) had got the same insured against fire and so

also the stocks, plant, machinery and office equipments vide an

insurance policy No.361303/11/03/3100322 issued in its favour by the

respondent. It is also not in dispute that a fire broke out in the

aforementioned premises on September 13, 2004 resulting in

extensive damage to the building, office equipment, plant, machinery

and stocks lying therein. The petitioner lodged an insurance claim of

Rs.3,60,60,694/- with the respondent who in order to get the loss

assessed appointed a surveyor by the name of Rakesh Kapoor & Co.

The surveyor assessed the loss to the tune of Rs.1,71,23,531/-.

Pursuant thereto, respondent offered to pay a sum of Rs.1,50,72,523/-

to the petitioner which it accepted by way of full and final settlement

and also issued a receipt dated March 29, 2006 in token of satisfaction

of its claim. However, ten days after having accepted the aforesaid

sum of Rs.1,50,72,523/-, on April 07, 2006 petitioner wrote a letter to

the respondent stating therein that it had accepted the lesser amount

than that claimed by it, as it was in acute need of funds and had issued

the discharge vouchers without prejudice to its right to take recourse

to law to recover differential amount, interest and liquidated damages.

Hence, it asked the respondent to provide it with details of deduction

along with reasons thereof. This letter was followed by a notice to the

respondent dated October 26, 2007 alleging therein that the letter of

acceptance whereby the petitioner had agreed to receive the sum of

Rs.1,50,72,523/- was obtained from it under duress and coercion by

the respondent. Accordingly, by virtue of the notice, petitioner invoked

the arbitration clause, informed the respondent that it had already

appointed Mr. Atul Datt as its Arbitrator and called upon the

respondent to appoint its Arbitrator within the next 30 days, failing

which it said that it will take appropriate legal proceedings.

On January 03, 2008, the respondent replied to the notice but

declined to appoint an Arbitrator on the ground that the claim stood

settled between the parties and with that, the contract of insurance

also came to an end including the arbitration clause.

Let me at this stage reproduce the arbitration clause, on basis of

which the petitioner is seeking appointment of an Arbitrator on behalf

of the respondent. The same runs as under:-

"13. 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 is clearly agreed and understood that no difference or dispute shall be referable to arbitration as herein before 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 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."

In view of the aforesaid facts and circumstances of the case, the

question that arises for consideration is, whether after having accepted

the sum of Rs.1,50,72,523/- towards full and final settlement of its

claim, is it open to the petitioner to contend that it did so under duress

and coercion and whether the dispute with regard to quantum of claim

in terms of the arbitration clause still subsists between the parties?

The answer to the aforesaid question is not far to seek. It is

covered by two judgments of the Supreme Court and by a judgment of

this High Court.

The Apex Court in a judgment rendered in M/s P.K.Ramaiah and

Company Versus Chairman & Managing Director, National Thermal

Power Corporation, reported in 1994 Suppl. (3) Supreme Court Cases

126 has 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

Constructions in 1995 Suppl. (3) Supreme Court Cases 324, 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."

Insofar as the judgment rendered by this Court is concerned, it

was in the case of R.K.Silk Mills (India) Limited Vs. National Insurance

Company Ltd. in 2008 VI AD (Delhi) 572. The facts of that case and of

the present case are nearly identical. The petitioner of that case had

also accepted lesser amount than that claimed by it and later alleged

that it was constrained to accepting the lesser amount much less than

the actual loss suffered by it. In that case also, this Court relied upon

the judgments of the Apex Court in M/s P.K.Ramaiah and Company

Versus Chairman & Managing Director, National Thermal Power

Corporation and Nathani Steels Ltd. Vs. Associated Constructions and

held that, "the dispute which could be referable to arbitration

could be only one which pertained to the quantum to be paid

under the policy and since the quantum stood crystallized,

there does not remain any dispute or differences between the

parties. It is entirely another matter that the petitioner may

state that the agreement that was arrived at between the

parties was under some misconception or coercion or undue

influence, but that would have to be decided in separate

proceedings and cannot be the subject matter of the

arbitration as has been clearly indicated in Nathani Steels Ltd.

Vs. Associated Constructions."

Having regard to what has been held by the Apex Court in the

aforementioned two judgments and relying upon the judgment of this

Court, with which I agree, I find no merit in the petition.

In terms of the arbitration clause, the only dispute that could be

referred to arbitration was the one which pertained to quantum to be

paid under the policy. The quantum stood crystallized in view of the

petitioner having accepted the sum of Rs.1,50,72,523/- by way of full

and final settlement. The receipt dated March 29, 2006 bears

testimony to this fact. It is, therefore, not open to the petitioner to

contend that the amount was accepted under any kind of duress or

coercion from the respondent. At least, the Arbitral Tribunal is not the

forum to raise such a dispute. It does not fall within the ambit of the

arbitrable dispute. As observed by the Apex Court in Nathani Steels

Ltd. Vs. Associated Constructions (supra), the petitioner may have its

remedy elsewhere in some other proceeding but not before the

Arbitrators. Again, as said by the Apex Court, if s uch a plea is allowed

to be taken after the acceptance of the amount in full and final

settlement, the sanctity of the settlement would be wholly lost.

In view of what has been noticed above, I hold that there exists

no dispute between the parties as can be referred to the Arbitrators in

terms of the arbitration clause.

For the foregoing reasons, the petition is dismissed.

REKHA SHARMA, J.

APRIL 27, 2009 ka