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United India Insurance Co. Ltd. Vs. Antique Art Exports Pvt. Ltd. - (Supreme Court) (28 Mar 2019)

A party who alleged plea of fraud or coercion is under obligation to prima facie establish same



Present appeals have been filed by the Insurance Company assailing the order passed by the High Court appointing an Arbitrator in exercise of power under Section 11(6) of the Arbitration and Conciliation Act, 1996/Act to adjudicate the dispute between the parties.

The High Court taking note of the rival contentions of the parties and of Sub-section (6A) of Section 11 of the Act which has been introduced by virtue of Amendment Act, 2015 observed that, once there is existence of arbitration agreement, acceptance of the payment disbursed by the Appellant company, whether it was under coercion or undue influence, is a matter to be examined by the Arbitrator and accordingly proceeded to appoint the sole arbitrator to adjudicate the dispute between the parties.

The existence of an arbitration Clause in the contract of insurance is not in dispute. Execution of full and final agreement, receipt or a discharge voucher in itself cannot be a bar to arbitration.

It is true that, there cannot be a Rule of thumb and each case has to be looked into on its own facts and circumstances, taking note of the broad principles. A mere plea of fraud, coercion or undue influence in itself is not enough and the party who alleged is under obligation to prima facie establish the same by placing satisfactory material on record before the Chief Justice or his Designate to exercise power under Section 11(6) of the Act.

In the given facts and circumstances, the discharge and signing the letter of subrogation was not because of any undue influence or coercion as being claimed by the Respondent. Appointment of an arbitrator is a judicial power and is not a mere administrative function leaving some degree of judicial intervention when it comes to the question to examine the existence of a prima facie arbitration agreement, it is always necessary to ensure that the dispute resolution process does not become unnecessarily protracted.

In the instant case, prima facie no dispute subsisted after the discharge voucher being signed by the Respondent without any demur or protest. The claim had been settled with accord and satisfaction leaving no arbitral dispute subsisting under the agreement to be referred to the Arbitrator for adjudication.

The High Court has committed a manifest error in passing the impugned order and adopting a mechanical process in appointing the Arbitrator without any supportive evidence on record to prima facie substantiate that an arbitral dispute subsisted under the agreement which needed to be referred to the arbitrator for adjudication. Consequently, the appeals are allowed and the order passed by the High Court is accordingly set aside.


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