COURT – Supreme Court
BENCH – J. S. RAVINDRA BHA, J. ARUN MISHRA
This case revolves around one crucial provision, i.e. Section 11(6)-
Although section 11 provides for selecting an arbitrator, section 11 (6) notes that a group may contact the chief justice or an official so directed to take steps in this regard if there are discrepancies or difficulties in the appointment.
Oriental Insurance covered Dicitex's stock products for a total of Rs. 13 crores. The supply was lost owing to a fire, and the corporation reported Rs. 14.88 crore, while the surveyor claimed the original valuation at Rs. 12.93 crore by the insurer.
Despite Dicitex's demands to resolve the claims as soon as possible, the Insurer's surveyor kept putting things off. The insurer gave Dicitex a release voucher 26 months after the crash, valuing the insurance at Rs. 7.16 crore. Furthermore, the Insurer stated that no payments would be made if Dicitex did not accept the discharge voucher.
Due to financial difficulties, Dicitex accepted the discharge voucher but filed a lawsuit within 12 days. On the other hand, the insurer rejected Dicitex's additional charges since they had negotiated an unconditional discharge voucher and were not named an arbitrator for the matter. As a result, Dicitex went to arbitration and lodged a motion to create an arbitrator under Section 11(6).
The Bombay High Court, in granting the appeal, stated that the case was arbitrable since Dicitex had signed the voucher hesitantly due to financial concerns. The Insurer further appealed the ruling to the Supreme Court.
- Whether the respondent had signed the discharge voucher and approved the sum provided.
- Whether under Section 11(6) of the Arbitration and Conciliation Act, 1996, a request to name an arbitrator was created.
The court points out that the insurer's first surveyor proposed a payout of more than 12 crores in favour of the respondent. The insurer, for whatever reason, refused to approve the study and appointed a new surveyor. The court took note of the actions of the new surveyor and the demand for unjustified records, which the respondent issued in the amount of 3700 documents. The applicant was served with a court notice alleging that the defendant was experiencing economic hardship for the last two years. It was in financial distress due to the delay in resolving the lawsuit.
Further, the court observed that an application for arbitration cannot be dismissed exclusively or even mainly because the applicant has signed a mediation arrangement or discharge voucher. A mere allegation of bribery, coercion, duress or improper interference is insufficient. The group making the allegation must prove it prima facie by presenting evidence to the Chief Justice/his designate. If the Chief Justice/his nominee believes the claim has substance, he will vote on it or refer it to the Arbitral Tribunal.
The court stated that the contractee accepted the final payment is complete and absolute satisfaction of all its responsibilities. It was decided that there was no need for an arbitral hearing in this situation.
The court is presumptively persuaded of the genuineness or legitimacy of the intimidation plea. This court affirmed the principle of economic coercion in Associated Construction v Pawan Hans Helicopters Ltd and National Insurance Co. Ltd v Boghara Polyfab Pvt Ltd. As a result, the challenge is dismissed as unjustified. It was denied without an expense order.
This case has been revolutionary because it gives immunity to parties forced to select between "take it or leave it" deals, allowing them to profit from their suffering and financial situation. When a group establishes prima facie evidence of duress or influence in the issuing of discharge vouchers, the matter becomes Arbitrable, and the plaintiff has the opportunity to resolve the charges as though the injustice had not occurred.
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