Isabella Mariam

The High Court at Calcutta Single Bench of Justice Aniruddha Roy dismissed an application under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside an arbitral award. The Court directed the Registrar, Original Side, to release the awarded amount secured in a fixed deposit to the insured party, holding that the execution of a discharge voucher by the insured does not preclude them from claiming additional compensation before a judicial forum. The Court further held that the arbitral award did not suffer from patent illegality and was not opposed to public policy.

The dispute originated from a fire incident on September 2, 2014, at the jute mill of the insured company, which was covered under a valid insurance policy issued by the applicant Insurance Company. The insured had promptly notified the incident and the preliminary surveyor inspected the premises. Subsequently, a final surveyor was appointed. Despite the insured requesting part payments and initiating communication for claim settlement, significant delays ensued, including the final surveyor submitting the report beyond the six-month regulatory period.

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The insured claimed an amount citing financial distress and also invoked arbitration after unsuccessful communications. The Insurance Company contested the claim, asserting that the insured had accepted a settlement by executing a discharge voucher for the sum received. They argued this constituted full and final settlement.

The insured, in response, claimed coercion, undue influence, and misrepresentation in obtaining the discharge voucher and contended that it was entitled to a higher amount under the insurance contract. The arbitral tribunal accepted the insured's claim and granted the remaining balance along with interest.

In challenging the award, the Insurance Company relied on multiple grounds: the alleged accord and satisfaction by discharge voucher, the claimant’s continued dealings with the insurer post-incident, and purported suppression of material facts by the insured. The Insurance Company submitted financial documents (Exhibits ADR-1 to ADR-9) and cited several judgments to support its plea that the award was perverse and opposed to public policy.

The insured argued that the arbitral tribunal had appropriately assessed the evidence, and that the IRDA Circular dated September 24, 2015, which mandates that discharge vouchers do not preclude judicial remedies, was binding.

The Court observed "The execution of discharge voucher would not amount to estoppel on the part of the Insured, if such an Insured is aggrieved with the quantum of compensation fixed by the Insurers/Insurance Company and approaches a judicial forum."

It further recorded that "execution of such discharge voucher also does not foreclose the rights of the Policy Holder/Insured to seek Higher Compensation in accordance with law".

Justice Roy noted that the Insurance Company had failed to process the insured's claim in a timely manner and had not provided justification for the delays. The Court stated that the IRDA Circular was binding and its provisions were applicable in the present case.

On the question of vital evidence, the Court stated that the documents marked ADR-1 to ADR-9 did not qualify as vital evidence that could have altered the arbitral award. The Court remarked, "Any evidence with regard to the financial health of the Insured would have no relevance or material bearing on the adjudication and are not at all vital evidence".

Referring to the IRDA Circular, the Court reiterated that insurers are prohibited from using discharge vouchers as a tool of estoppel.

On the arbitration clause, the Court observed: "The jurisdiction of the Arbitral Tribunal was never challenged. Therefore, the scope of reference between the participating parties was limited only to the extent of determination of quantum of compensation."

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The Court directed that the application under Section 34 of the Arbitration and Conciliation Act, 1996, being AP-COM/186/2024, Old Case No. AP/322/2020, stands dismissed.

It further ordered: "The Learned Registrar, Original Side with whom the awarded amount is lying secured in an interest-bearing Fixed Deposit Account shall take steps forthwith to encash the Fixed Deposit and pay the entire amount with accrued interest thereupon, upon compliance of all formalities, in favour of the respondent insured positively within a period of Four Weeks from the date of communication of this judgment."

Additionally, "The concerned Bank shall also take all necessary steps accordingly."

Advocates Representing the Parties:

For the Petitioners: Mr. Chayan Gupta, Advocate; Mr. Sanjay Paul, Advocate; Ms. Jaita Ghosh, Advocate

For the Respondents: Mr. Sabyasachi Chaudhury, Senior Advocate; Mr. Abhijit Guha Ray, Advocate; Mr. S.E. Huda, Advocate; Mr. Shounak Mukhopadhyay, Advocate; Ms. Anwesha Guha Ray, Advocate

Case Title: The Oriental Insurance Company Limited Vs. The Reliance Jute Mills (International Limited)

Case Number: AP-COM/186/2024, Old Case No. AP/322/2020

Bench: Justice Aniruddha Roy

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