1. This is petition filed under section 34 of the Arbitration and Conciliation Act whereby the petitioner an insured under a “Loss of Profit (Fire) Policy” availed from the respondent-insurance company, is before the Court assailing an arbitral award dated 24 July 2015 passed by the arbitral tribunal rejecting the claims as made by the petitioner.
2. Briefly, the facts are:
On 1 October 2010 the petitioner availed of the Loss of Profit (Fire) Policy from the respondent for an insured amount of Rs.20 crores on its gross profit.
3. The petitioner is engaged in the production of Marine Chemical Bromine used as a basic chemical for pesticides manufactured in its division known as “Marine Chemicals Division” in its factory/plant situated at Greater Rann of Kutch near Village Dhordo, Taluka Bhuj, Kutch. The petitioner’s plant is installed on a total area of 26,727 acres of land alloted by the Government of India, out of which, 3081.70 acres of land is stated to be utilized in the establishment of reservoirs, ponds, crystallizers etc. for preparation of concentration “Sea Bittern” used for tripping the bromine from it and rest of the land is occupied for plant/godown etc. The production capacity of the petitioner’s plant was stated to be about 6000 mtr. tons per annum.
4. On 6 September 2011 and 7 September 2011 there was heavy rainfall in the Kutch region of Gujarat. It is stated that the rains were higher than the normal annual quantity and were accompanied by winds of higher velocity, thereby flooding the desert and causing destruction such as falling of trees, collapse of buildings, washing of roads etc. The case of the petitioner is that the heavy rainfall resulted in flooding by which the petitioner suffered loss and damage at their factory/plant severely affecting their production, resulting into losses. Hence, on 9 September 2011 and thereafter on 24 September 2011, the petitioner addressed letters to the respondent informing of the flooding and the damages which had occurred and requested to arrange for a surveyor’s visit to assess the loss.
5. It is also required to be noted that the petitioner had a Standard fire and Special Perils Policy wherein the petitioner insured its fixed assets in the factory, stocks and other materials for an insured amount of Rs.35,75,00,000/- under which an amount of Rs.1,72,25,105.88 was paid to the petitioner by the respondent sometime after 12 May 2012 which was received by the petitioner in full and final settlement. In this regard there is no dispute.
6. In regard to the damage caused by the heavy rainfall responding to the petitioner’s request, the respondent appointed Mr. Milind Bhatawadekar as a surveyor for assessing the loss suffered by the petitioner. The details in regard to the various steps which were taken for the survey, need not be recorded, suffice it to observe, that after a preliminary survey report dated 23 June 2012, a final report came to be prepared on 8 January 2013 by the surveyor assessing the petitioner’s claim at Rs.3,59,58,346/-. It needs to be noted that for the preparation of the survey report, the surveyor had obtained from the petitioner appropriate material in regard to the pricing, profits, audited figures etc.
7. After a final survey report was submitted to the respondent by the surveyor, on 28 January 2013 the petitioner addressed a letter to the respondent requesting for release of an adhoc amount of Rs.3,00,00,000/-, as the petitioners were in urgent need of funds.
8. Thereafter on 4 February 2013 the petitioner addressed another letter to the respondent stating that the reduction of 158.314 tons made by the surveyor from the assessed quantity was arbitrary and subjective. The petitioner in the said letter recorded that the petitioner was in fact entitled to an amount of Rs.5,04,20,283/- as opposed to the amount of Rs.3,59,58,346/- as assessed by the surveyor.
9. Thereafter in the context of the petitioner’s letter dated 4 February 2013 the surveyor by his letter dated 6 February 2013, informed the respondent that the output is reduced during the monsoon months due to reduced concentration of bittern which would affect the gross profit. He has explained that the bittern is a stock in process and is not insured and that any gross profit or loss due to this has to be adjusted. He explained that there cannot be any accurate measure for this and hence he has adjusted the same on 50:50 basis for the sake of equity. It is stated that the adjustment is subjective but not arbitrary.
10. Thereafter by a further letter dated 1 March 2013, the petitioner reiterated their request to release an amount of Rs.3,00,00,000/- stating that they were facing a cash crunch. On 23 April 2013, the petitioner addressed an email to the respondent calling upon the respondent to explain as to how the amount of Rs.3,59,58,346/- was being arrived. Subsequently on 23 May 2013, the petitioner sought from the respondent details of the working of the said amount.
11. On 27 May 2013 the petitioner addressed an email to the respondent requesting to release the amount of Rs.3,59,58,346/- being the claim as assessed by the surveyor without any further delay.
12. On 30 May 2013 a discharge voucher was executed by the petitioner interalia agreeing to receive the said amount of Rs.3,59,58,346/- in full and final settlement of their claim under the policy in question. The respondent thereafter on the next day, i.e., 31 May 2013 by NEFT credited the said amount in favour of the petitioner.
13. On 22 October 2013, which is after a period of about 5 months after receiving the compensation under the policy, the petitioner addressed a letter to the respondent interalia recording that the working of the amount of Rs.3,59,58,346/-, being the claim amount paid to the petitioner in full and final settlement was illogical and irrational and did not satisfy the legal test. The petitioner stated that they were entitled to a claim amount of Rs.5,04,20,283/- and as there was difference in the quantum of the amount payable, the petitioner was invoking arbitration.
14. The respondent by a letter dated 15 November 2013 informed the petitioner that the petitioner had received the said amount of Rs.3,59,58,346/- in full and final settlement of its claim under the insurance policy and had also executed a Discharge Voucher, hence the contentions as raised in the petitioner’s letter dated 22 October 2013 invoking arbitration was untenable.
15. It is on this background, disputes were referred to arbitration as arising on the quantum of the compensation. A three Member arbitral tribunal came to be constituted. On 8 December 2014 Statement of Claim was filed by the petitioner praying for the following reliefs:
“a) That this Hon’ble Arbitral Tribunal declare and hold that there is no accord and satisfaction entered between the claimants and the respondents in respect of the claimants claim under the Loss of Profit (Fire) Policy No. 022000/11/10/07/00000370.
b) That this Hon’ble Arbitral Tribunal declare and hold that the respondents are liable to pay to the claimants the sum of Rs.1,89,89,081/- (as per the particulars of claim at Exhibit-”C-17” to the Statement of Claim) together with interest @12% per annum on Rs.1,44,61,937/- from the next date of the Statement of Claim till the Award and thereafter further interest at the same rate or such other rate as the Hon’ble Arbitral Tribunal may award from the date of the Award till payment and/or realisation.
c) For an award directing the respondents to pay to the claimants the sum of Rs.1,89,89,081/- (as per the particulars of the claim at Exhibit - “C- 17” to the Statement of Claim) together with interest @ 12% per annum on Rs.1,44,61,937/- from the next date of the Statement of Claim till the award and thereafter further interest at the same rate or such other rate as the Hon’ble Arbitral Tribunal may award from the date of the Award till payment and/or realisation.
d) For an Award directing the respondent to pay to the claimants the cost of arbitration as determined by the Hon’ble Arbitral Tribunal. And
e) for such further and other reliefs, orders, directions, award as the Hon’ble Arbitral Tribunal in the facts and circumstances of the case may deem fit and proper in the interest of justice.”
16. On 16 January 2015, a Statement of Defence was filed by the respondent. On 27 February 2015, the arbitral tribunal framed the following issues:
“(i) Whether the respondents prove that the arbitration proceedings initiated by the claimants are not maintainable in view of the signing of the discharge vouchers by the claimant?
(ii) Whether the Claimant prove that they have not accepted a sum of Rs.3,59,58,346/- in full and final settlement of their claim under Loss of Profit (Fire) policy?
(iii) Whether the Claimants prove that at the time of signing the discharge voucher which was duly returned by them to the respondents on 31 May 2013, the respondents did not allow the claimants to make any corrections and/or endorsement on the said discharge vouchers?
(iv) Whether the claimants prove that the Final Survey Report dated 8 January 2013 issued by the surveyor Mr. Milind Bhatawadekar wrongly assessed the loss at Rs.3,59,58,346/-?
(v) Whether the claimants prove that the net claim payable to them by the respondents towards the loss of profit under LOP Policy was Rs.5,04,20,283/- and that the balance of Rs.1,44,61,937/- is due and payable by the respondents to the claimants?
(vi) Whether the claimants are entitled to interest for delaying payment of the claim amount set out in particulars of claim at Exhibit C-17 to the Statement of Claim under regulation 9 of the Insurance Regulatory Development Authority (Protection of policy holder) Regulations 2002?
(vii) Whether the claimants prove that the respondent are liable to pay to them a sum of Rs.1,89,89,081/- as per particulars of claim at Exhibit C-17 to the Statement of Claim together with further interest at 12% per annum on the said amount of Rs.1,41,54,947/- from the next date of filing the Statement of Claim till the Award and thereafter further interest at the rate fixed by the Hon’ble Tribunal till payment and realisation?
(viii) Whether the claimants prove that they are entitled to costs?
(ix) What order?”
17. The petitioner examined Mr. Rajendra B. Shah, Chartered Accountant and the Corporate Advisor as its witness. The petitioner also examined a second witness Mr. Nitin Dosa, who was an Insurance broker associated with the respondent. Both these witnesses were cross-examined by the respondent.
18. The arbitral tribunal considering the materials/evidence on record, passed the impugned award on 24 July 2017 rejecting the claims as made by the petitioner. The following is the operative part of the award:
“A. That there is full accord and satisfaction entered into between the claimants and the respondents and the claimants have accepted a sum of Rs.3,59,58,346/- in full and final settlement of all their claims under the Loss of Profit (Fire) Policy No. 022000/11/10/07/00000370.
B. That the respondents are not liable to pay to the Claimants the sum of Rs.1,89,89,081/- (as per the particulars of Claim at Exhibit ”C17” to the Statement of Claim) nor are the respondents liable to pay any interest on Rs.1,44,61,937/- as claimed by the claimants.
C. Both the claimants and the respondents shall bear the fees payable to each Arbitrator in equal proportion. All other costs of the arbitration including legal costs, venue charges, miscellaneous expenses, travel expenses and cost of any consultant appointed by any party shall be borne by the concerned parties respectively.”
19. Mr. Vernekar, learned counsel for the petitioner has limited submissions in assailing the impugned award. The first submission of Mr. Vernekar is making grievance to the following observation of the arbitral tribunal :
“In view of the answer given by Mr. Rajendra Shah to Question No. 164, it is very clear that the claimants have not been able to substantiate their allegations that the claimants were facing financial crises and economic duress due to the delay in the respondents settling their claim and mere bold statements have been made by the claimants in the Statement of Claim. In the absence of any financial documents and other supporting documents, being produced on record the contentions of the claimants that they had suffered economic duress and financial loss is unsubstantiated and not prove by them.”
20. Mr. Vernekar would contend that letters which were addressed by the petitioner prior to the claim amount of Rs.3,59,58,346/- was disbursed in favour of the petitioner on 31 May 2013 would clearly indicate that the claim amount was received by the petitioner, as it was facing a financial crisis and the same was paid to the petitioner in economic duress. It is his submission that when in this context there was sufficient material available on record, the arbitral tribunal could not have recorded the above finding that the petitioner had failed to make out any case of financial crisis and the amounts were not received under economic duress.
21. Mr. Vernekar would next submit that the claim amount purportedly received in full and final settlement was received under economic duress by the petitioner was also clear from the fact that the petitioner had signed the full and final settlement voucher on 30 May 2013 and the actual amount was released on 31 May 2013, which is on the next day.
22. Mr. Vernekar would submit that there is also perversity in the finding recorded by the arbitral tribunal in as much as two circulars of the Insurance Regulatory Development Authority (IRDA) dated 24 September 2015 and 7 June 2015 ought to have been followed by the respondent in settling the petitioner’s claim and more particularly the procedure which is required to be followed for the discharge voucher. It is his contention that these circulars of the IRDA if applied to the facts of the present case, it was quite clear that the claim of Rs.3,59,58,346/- was foisted on the petitioner and it is not a payment which was voluntarily accepted by the petitioner, but accepted under economic duress, the petitioners being in financial crisis. Mr. Vernekar has referred to the finding of the Tribunal in paragraphs 12 and 15 (on internal page 34) of the impugned award in support of his contention that these findings are perverse and hence totally unsustainable.
23. Mr. Vernekar would next submit that the arbitral tribunal ought not to have accepted the logic of Mr. Milind Bhatawadekar, surveyor appointed by the respondent in his letter dated 6 February 2013. It is submitted that the surveyor himself has stated that there cannot be any accurate measure and accordingly an adjustment is made on 50:50 basis and on equity, which was stated to be subjective but not arbitrary. Mr. Vernekar would contend that this explanation of the surveyor in the said letter ought not to have been accepted by the arbitral tribunal and it should have been held that the claim of Rs.3,59,58,346/- on the basis of such report of the surveyor was bad and illegal. It is only on the above submissions, Mr. Vernekar would submit that the arbitral award be quashed and set aside on grounds falling under Section 34 of the Arbitration and Conciliation Act.
24. On the other hand, Mr. Naphade, learned counsel for the respondent would submit that this is a clear case of accord and satisfaction. Mr. Naphade’s principal opposition to the submissions of Mr. Vernekar is that the facts on record are writ large that there was no case as made out by the petitioner of a financial crisis and/or of an economic duress in receiving the claim amount. It is his submission that for the first time, case of economic duress was asserted by the petitioner in the Statement of Claim in paragraph no. 4(w). He would submit that such a case cannot be culled out from the correspondence. He would submit that apart from this, there was no material before the arbitral tribunal to accept such case as urged on behalf of the petitioner in the present proceedings. Mr. Naphade would submit that in fact, a dispute on the quantum of the compensation was itself raised for the first time after a period of 5 months of the petitioner having accepted the claim amount of Rs. 3,59,58,346/- and that too in full and final settlement on 30/31 May 2013. It is submitted that thereafter the petitioner by its letter dated 22 October 2013 invoked the arbitration. Mr. Naphade would submit that in the present facts, such a delay in making out any case of economic duress or a financial crisis was completely an afterthought and was rightly not accepted by the arbitral tribunal. Mr. Naphade referring to the decision of the Supreme Court in New India Assurance Co. Ltd. vs. Genus Power Infrastructure Ltd., (2015) 2 SCC 424)submits that even delay of 3 weeks in regard to the financial condition was held to be fatal so as to non-suit the claimant even in invoking arbitration. According to Mr. Naphade, the Tribunal has rightly rejected the claim of the petitioner on this count.
25. I have heard the learned counsel for the parties at length. With their able assistance, I have also perused the documents as placed on record as also the impugned award. At the outset, it is required to be noted that the petitioner on 30 May 2013 executed a discharge voucher in favour of the respondent to receive the claim amount of Rs.3,59,58,346/- in full and final settlement for the damages suffered by it under the policy in question. No doubt the petitioner addressed some letters to the respondent prior to the receipt of the claim amount on 30/31 May 2013 citing financial difficulties, however, in my opinion, merely recording financial crisis would not be sufficient to accept a case of any economic duress in the petitioner receiving the claim amount on 30/31 May 2013. A case of economic duress was required to be proved by the petitioner on materials/evidence.
26. In the present case, the petitioner waited for a period of 5 months after the receipt of the claim amount and to dispute the said receipt/payment of claim amount of Rs.3,59,58,346/- to contend that it was not a legal settlement of their claim under the insurance policy and the actual payment ought to have been Rs.5,04,20,283/- and ultimately invoking arbitration. In my opinion, certainly this delay in the facts of the case is required to be considered as not only gross but fatal to the petitioner’s case in asserting before the arbitral tribunal of any economic duress or financial crisis.
27. It also cannot be expected of a prudent insured that he would wait for such a long period and in the present case almost 5 months to make a grievance on the quantum of compensation received under the insurance policy if genuinely the amounts were accepted under an economic compulsion and/or that the amounts were unwillingly accepted by the petitioner. This coupled with the fact that it is not a case that on 30/31 May 2013 the amount of Rs.3,59,58,346/- was received under any protest or for that matter without prejudice to the rights and contentions of the petitioner to assail the receipt of the said amount, but it was a payment received by the petitioner from the respondent with complete consciousness of its position and in full and final settlement under the insurance policy.
28. At this stage, it would be necessary to note that the facts of the case are completely different from what fell for consideration before the Supreme Court in National Insurance Company Ltd. vs. Boghara Polyfab (2009) 1 SCC 267). In the said case, although it was a case arising under section 11 of the Arbitration and Conciliation Act, the Court had observed several lacune in the discharge voucher as also the Court noted that immediately on receipt of payment, a complaint was made to IRDA by the insured. In the present case, the petitioner had never approached the IRDA much less immediately after receiving the payment and later for the first time in the dispute notice dated 22 October 2013 the petitioner complained about the quantum as disbursed, being illogical and irrational and not satisfying the legal test.
29. Having perused the findings of the learned arbitral tribunal, the tribunal, in my opinion, is correct in recording that there is no material before it so as to accept the case of the petitioner of any financial crisis and/or of receipt of the compensation amount from the respondent under any economic compulsion. It was always open to the petitioner to place evidence before the arbitral tribunal which would show that the payment which was received by the petitioner was not a true settlement but it was a settlement which was foisted on the petitioner by the respondent, so as to enable the arbitral tribunal to accept the petitioner’s assertion of an economic duress. In the absence of such material before the arbitral tribunal, the finding recorded by the tribunal in paragraph 4(c) as noted above cannot be said to suffer from any perversity or illegality.
30. In so far as Mr. Vernekar’s contention that the circular dated 24 September 2015 and 7 June 2015 issued by IRDA were not adhered by the respondent in discharging the present claim and hence it is required to be construed that the petitioner had a genuine case of financial crisis, also cannot be accepted
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. The circulars issued by IRDA definitely will be the guidelines which are required to be kept in mind and followed by the Insurance Companies in protecting the interest of the insured. However, the circulars are required to be taken into consideration in the context and in their application to the facts of the present case. Merely because the circulars exists and the procedure under the circular is required to be followed, would not be sufficient for the arbitral tribunal to hold that some deviation from the circular would be required to be accepted as an illegal payment in favour of the insured by the insurance company, in the absence of any subjective material. In my opinion, this cannot be the purport of the circulars. The circulars would be required to be applied to the facts in hand. The observations of the tribunal dealing with the circulars in the facts of the case as seen from paragraph 15 of the award cannot be faulted to be such an illegality which would warrant the impugned award to be set aside. Thus, the contention of Mr. Vernekar that a mere deviation from the circulars is required to be accepted as proof of economic duress in my opinion is too wide and hence cannot be accepted. 31. Mr. Naphade would be correct in relying on the decision of the Supreme Court in New India Assurance Co. Ltd. (supra). Although the decision is in thecontext of proceedings falling under Section 11 of the Act, the decision would be relevant in the present context. The Apex Court has observed that mere bald assertion of a financial crisis would not suffice to make an insurance claim on that count and that it would be appropriate for the Court to consider even a delay of three weeks to be fatal. This was also a case where the respondent therein had issued a discharge by signing a letter of subrogation and thereafter had approached the Court for appointment of an arbitral tribunal. The observation as made by the Court is relevant in the present context, as also in regard to the delay on a claim made on the basis of any economic duress. 32. As a result of the above discussion, I am quite certain that no ground whatsoever has been made out under section 34 of the Act much less of any patent illegality and/or of the award being contrary to the fundamental policy of Indian law, for the impugned award to be set aside. The petition is without any merit. It is accordingly dismissed. No costs.