Can a dispute raised by the Insured be referred to arbitration, after giving a full and final discharge voucher to the insurer? Supreme Court answers

Arabian Exports Private Limited  V/s  National Insurance Company Ltd.  

The Appellant took 2 insurance policies from the respondent towards insuring its stock-in-trade and finished products stored in the cold storage facility and the cold storage unit as also the building, plant and machinery, furniture, fixtures and fittings. The insurance policies had arbitration clause.  

Heavy and unprecedented rainfall caused severe loss to the appellant  due to the damage caused to the factory building, plant and machinery, furniture, fixtures and accessories as well as the stock lying at the plant. 

The surveyor appointed by the respondent acknowledged in his report the loss suffered by the appellant.  

However, the respondent failed to settle the claims of the appellant.  

After a considerable delay, the respondent presented an undated and standardized voucher/advance receipt, which was accepted by the Appellant due to the financial strain and with the pressure exerted by various bankers and creditors.  The respondents then issued a cheque to the extent of the sum mentioned in the voucher.  

The appellant then called upon the respondent to settle and pay the balance amount claimed under the policies, which was ignored by the Respondent.  

Consequently, the appellant invoked the arbitration clause contained in the insurance policies, which was refused by the Respondent. 

The appellant thereafter filed applications u/s 11 of the Arbitration and Conciliation Act, 1996  before the High Court for appointment of an arbitrator.  

The Ld. Single Judge held that the Appellant had accepted the amount from the Respondent as full and final settlement of the claim and therefore no arbitrator could be appointed. 

Before the Apex Court, the appellant submitted that the ‘accord and satisfaction’  was not voluntary but under compulsion, due to the financial difficulties. 

The court observed that the execution of a full and final settlement receipt or a discharge voucher insisted upon and taken, as a condition precedent for release of the admitted dues cannot be a bar to arbitration even when validity thereof is challenged on the ground of fraud, coercion or undue influence.  

As per the doctrine of Kompetenz-Kompetenz, an arbitral tribunal is competent to rule on its own jurisdiction including on the issue of existence or validity of an arbitration agreement.  

The court allowed the appeals and set aside the impugned order of the High Court.  

In The Supreme Court of India  

Civil Appellate Jurisdiction  

Civil Appeal Nos. 6372-6373 Of 2025  

(@ Special Leave Petition (Civil) Nos. 16907-16908 Of 2012)  

Arabian Exports Private Limited   Appellant(S) 

Versus   

National Insurance Company Ltd.     Respondent(S)  

Dated 6th May 2025