The Supreme Court decision in NIA v. Genus is a
welcome resistance point against the increasing trend for
policyholders to negotiate a policy payment, execute a discharge
voucher confirming the full and final settlement of the claim, and
then allege coercion and duress in an attempt to sidestep the
discharge voucher and secure a further policy payment by
arbitration or litigation.
Genus was insured under a NIA standard fire and special perils
policy for its manufacturing unit located at Jaipur. On 29 October
2009 Genus' property was damaged because of a fire in the
adjoining Indian Oil Corporation premises.
Genus made its policy claim. NIA appointed surveyors who
assessed the loss at Rs.6.09 crores/$1m, and the claim was settled
in accordance with the surveyor's assessment. A detailed letter
of subrogation/discharge voucher was signed by Insured and Insurer
in full and final settlement of the policy claim. 3 weeks later,
Genus claimed that the discharge voucher was procured by coercion,
and it invoked the policy arbitration clause. NIA rejected the
arbitration notice in view of the full and final settlement, and
that led the Insured to issue an application to the Delhi High
Court under §11 of the Arbitration & Conciliation Act
1996. This is the statutory provision that permits the court to
appoint an arbitrator if a party refuses to make an
The Delhi High Court allowed the application on the grounds that
a prima facie case of coercion had been made out. NIA preferred an
appeal before the Supreme Court, which was handled by Tuli &
NIA argued that the discharge voucher was not a standard
discharge voucher, but a detailed agreement, the terms of which
were negotiated between parties prior to execution.
NIA pointed to the absence of any correspondence showing that
the Insured had raised an immediate objection or allegation of
coercion after executing the discharge voucher.
NIA noted that the first objection was only raised by the
Insured 3 weeks after the discharge voucher had been executed.
NIA pointed out by reference to accounting material that, at
the time of execution of the discharge voucher, Genus had funds and
was therefore under no financial constraint to execute the
The Court thereafter proceeded to pass its judgment. It noted
that, apart from making bald allegations, Genus had produced no
material to support its plea of coercion and duress. As a result no
prima facie case of coercion had been made out. The Court accepted
NIA contentions and noted that, at the time of execution of the
discharge voucher, no objections of coercion were raised by Genus
until 3 weeks had passed.
The Court also ruled that Genus was not in a poor financial
condition at the time of settlement of the claim, and therefore the
allegations of coercion had no basis.
The Court accordingly ruled that upon the execution of the
discharge voucher there was full and final settlement of the claim.
As a result no arbitrable claim existed, and the Delhi High Court
order was set aside.
For further information on this topic please contact Tuli &
Tel +91 11 4593 4000, fax +91 11 4593 4001 or email
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