M/S Sai Balaji Sponge Iron INDIA Private Limited vs. The New INDIA Assurance Company Limited

Held

The Court held that the petitioner had signed the joint discharge voucher with protest, clearly mentioning their intention to agitate further claims through arbitration proceedings. The Court found that there was a dispute regarding the existence of the agreement clause (arbitration clause) and a dispute regarding the claim as per the policy. Therefore, the Court concluded that these disputes required settlement by appointing an arbitrator. The Court reasoned that the protest letter and the reservation of rights by the petitioner were crucial in determining that a dispute still existed, notwithstanding the signing of the discharge voucher. The Court relied on the principle that where an arbitration clause exists and a dispute regarding the claim persists, the court should exercise its power to appoint an arbitrator. Accordingly, the Court disposed of the petition by appointing Sri Justice M.Satyanarayana Murthy, Retired Judge, High Court of Andhra Pradesh, as the sole arbitrator to resolve the disputes between the parties.

Facts

The petitioner company, registered with the Central Excise Department, had 5,936 MT of soft iron, valued at Rs.10,75,68,155/-, attached as penalty for failure to pay excise duty and penalty amounting to Rs.8,38,09,828/-. The petitioner insured these goods with the respondent for Rs.10,00,00,000/-. On October 3, 2019, the goods were damaged due to heavy rainfall. The petitioner filed an insurance claim on October 17, 2019. The respondent appointed a surveyor, who assessed the damage. The respondent issued a joint discharge voucher for Rs.4,60,73,182/- on September 29, 2020, which was signed by the petitioner on protest, stating their right to initiate arbitration proceedings for the remaining claim of Rs.10 crores. The petitioner subsequently filed this application under Section 11(2) & (6) of the Arbitration and Conciliation Act, 1996, for the appointment of a sole arbitrator.

Key Issues

1. Whether the Court has the power to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, when a joint discharge voucher has been signed, despite the petitioner signing it under protest and reserving their right to pursue further claims through arbitration? The petitioner argued that the signing of the joint discharge voucher was on protest, as evidenced by their letter dated January 21, 2021, and a memo filed on July 26, 2022. They contended that Clause 13 of the Insurance Policy clearly stipulates that any dispute regarding the quantum payable shall be referred to a sole arbitrator. They relied on the Supreme Court's pronouncements that once an arbitration clause exists and there is a dispute regarding the amount, the court must appoint an arbitrator. The respondent argued that as per the Court's direction in W.P.No.21341 of 2019, the petitioner signed the joint discharge voucher, and the respondent paid the amount as full and final settlement. They asserted that once the claim is settled, there is no necessity to appoint an arbitrator, and no dispute remains regarding the quantum.