It is common practice that insurers ask insureds to sign a Discharge Voucher (DV) at the time of settling a claim under the Policy. The DV typically contains wording to the effect that the insured is accepting the amount in full and final settlement of all its claims under the Policy. Sometimes the amount assessed and paid is lesser than what has been claimed by the insured under the Policy. It is being increasingly seen that the insureds, after accepting the lesser amount in full and final settlement, invoke the arbitration clause stating that they signed the DV under coercion and undue influence by the insurer owing to their poor financial condition and upon the insurers' insistence to make the DV a pre-condition to the release of amounts under the Policy.

The Courts had earlier in an Application under §11 of the Arbitration & Conciliation Act, 1996 (A&C Act) refused to appoint arbitrators on the ground that there had been full and final settlement of the disputes. This position had changed with the 2015 amendment to A&C Act which limited the court's role in a §11 Application to examining the existence of the arbitration agreement.

The Supreme Court of India in the case of United India Insurance Company Limited v Antique Art Exports Private Limited examined the entire issue in the context of the amended A&C Act and answered the following issues:

  1. Whether the Court can examine allegations of coercion and undue influence while executing a DV in an application under §11 of the A&C Act.
  2. Whether a mere plea of coercion or undue influence in itself is enough to refer the dispute for arbitration.

Brief Facts

In 2013, United India Insurance (Insurer) issued two Standard Fire and Special Perils Policies to Antique Art Exports Private Limited (Insured). 2 separate fires broke out in the Insured's factory and the Insured filed claims with the insurer. The Insurer agreed to settle the claim for an amount of ₹2,81,44,413. The insured accepted the computation and signed a DV which stated that the sum was being accepted in "full and final settlement of our fire claim...without any subjectivity".

After the receipt of the survey report and nearly 11 weeks after the DV was executed, the Insured alleged that the Insurer had exercised undue influence and coerced the Insured to sign the DV. Consequently, the Insured invoked the arbitration clause contained in the Policy.

Delhi High Court

The Insured then filed an application under §11 of the A&C Act before the Delhi High Court for the appointment of an arbitrator. The High Court held that in view of the 2015 amendment to §11 of the A&C Act, the court was to only examine the existence of the arbitration agreement and the questions regarding coercion or undue influence had to be examined by the arbitral tribunal. The High Court therefore appointed a sole arbitrator to adjudicate the disputes.

Supreme Court

The Insurer challenged High Court's order and the Supreme Court, held as follows:

  1. It rejected the insured's plea that the questions of coercion, undue influence etc should be determined by the arbitrator since the jurisdiction of the Court under the amended A&C Act is limited to examining the existence of an arbitration agreement. The Court held that the appointment of an arbitrator is a judicial power and allows some degree of judicial intervention.
  2. The court differentiated the case of Duro Felguera SA v Gangavaram Port Ltd1, which stated that a court's role under the amended §11 is only to examine the existence of the arbitration agreement - nothing more, nothing less. The Court noted that this was only a general observation contained in that judgment and the Court's power under §11 of the A&C Act remains a judicial power.
  3. On that basis, the Court proceeded to examine the questions relating to the validity of the DV. The Court held that the High Court was wrong in appointing an arbitrator as the Insured failed to produce prima facie evidence to support allegations of coercion and undue influence.
  4. It upheld the tests laid down in earlier judgments of the Supreme Court2 and held that bald pleas of coercion and undue influence would not suffice to appoint an arbitrator in the absence of prima facie evidence being produced by the insured in this regard.


The Supreme Court has not referred to Insurance Regulatory and Development Authority of India's (IRDAI) circulars dated 24 September 2015 and 8 June 2016 regarding DVs which state that "the execution of such vouchers does not foreclose the rights of the policyholder to seek higher compensation before any judicial fora". This was despite the fact that the DV in this case was executed on 5 May 2016.

The Supreme Court has deviated from the conventional understanding of the Court's power under the amended §11 of the A&C Act by reiterating that it continues to exercise a judicial function and it can examine the existence of a dispute before appointing an arbitrator. The Court has therefore once again reiterated the principles of the old regime settled in SBP & Co v Patel Engineering (2005) 8 SCC 618. This judgment, along with the recent Supreme Court judgment in United India Insurance v Hyundai Engineering AIR 2018 SC 3932, which laid down that the court would examine whether disputes can be arbitrated under a quantum-only arbitration clause, will result in Courts examining the arbitrability of disputes at the §11 stage itself.


1. 2017 (9) SCC 729

2. New India Assurance Company Limited v Genus Power Infrastructure Limited 2015 (2) SCC 424, National Insurance Company Limited v Boghara Polyfab Private Limited 2009 (1) SCC 267, Union of India and Ors v Master Construction Company 2011 (12) SCC 349

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