India: Arbitration Cannot Be Invoked After The Insured Has Executed A Discharge Voucher Without Protest: (Balkrishna Spintex Pvt Ltd V The New India Assurance Company Ltd)

The Gujrat High Court has held that the insured cannot invoke arbitration after the execution of the discharge voucher without protest.

Facts

The Plaintiff had taken a policy from the defendant to insure its stock and factory in Rajkot. A fire broke out in the Plaintiff's factory and the Plaintiff filed a claim under its policy. The surveyor assessed the claim. The Plaintiff gave written consent to the assessed amounts and executed a discharge voucher without protest. The defendant duly paid the claim.

15 days after the receipt of the assessed amounts, the Plaintiff said that it had received the amounts under duress and was constrained to do so due to financial hardship. The policy contained an arbitration clause and the Plaintiff purported to invoke arbitration to recover the balance amount of its claim.

The defendant resisted the invocation on the ground that the discharge voucher had been signed without protest so there was no arbitrable dispute between the parties. The Plaintiff then filed a petition before the Gujarat High Court to have the dispute referred to arbitration.

Decision

The Gujarat High Court held that no dispute subsisted after the discharge voucher had been signed by the Plaintiff without protest. The Court held that a bald contention of duress was not a tenable ground to invoke arbitration as there was no specific pleading/evidence of undue influence, coercion, threat, etc. In the Court's opinion, the Plaintiff's arguments were a belated afterthought.

The Court followed the view taken by the Supreme Court in United India Insurance Company v Antique Art Exports Pvt Ltd¹ which held that a mere plea of fraud, coercion or undue influence is not enough and the party that alleges such is under an obligation to prima facie establish this by placing satisfactory material on record.

Conclusion

A bald plea of duress/coercion after a discharge voucher (without recording any protest) has been executed by the insured is insufficient to subsequently seek a reference to arbitration.

Footnotes

1 Order dated 10 June 2022 passed by the Gujarat High Court in R/Pet under Arbitration Act No. 66 of 2020.

2 (2019) 5 SCC 362

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