Signing A Blank Discharge Voucher Indicates That A Party Was Acting Under Pressure And Compulsion: Delhi High Court

The bench of Justice C. Hari Shankar held that a discharge voucher signed out of economic duress and compulsion would not extinguish the legitimate claims of a party and it would be open to the party to claim the remaining amount.

The Court also held that the non-supply of documents on which the amount as given under the discharge voucher is based also indicates that it was not signed out of free will.

Facts

The dispute arises out of an insurance policy provided by the New India Assurance Company Limited (Petitioner) to Khanna Paper Mills Limited (Respondent) covering a sum of Rs. 1292 Crores. The policy was for one year period beginning on 01.04.2012.

On 12.06.2012 a fire broke out in the premises of the respondent resulting in destruction of large quantity of material kept therein. Accordingly, the petitioner appointed a surveyor to conduct a detailed survey of the losses suffered by respondent. The surveyor submitted an interim report on 20.06.2012 and the final report on 07.03.2013. However, the copy of the final report was given to respondents only on 27.06.2013 that too without its annexures.

As there was a considerable delay in the release of payments by the petitioner, respondent took few short-term loans (STL) to carry on its business and the due date to repay the loans was approaching due to which it was undress extreme financial duress which led to it signing a blank joint discharge voucher on 29.05.2013. An amount of Rs. 103.16 Crores was accordingly released.

On 03.06.2013, the respondent wrote a letter to the petitioner informing that it has received an amount of Rs. 103.16 Crores as against its claim for 170.1 Crores. It, therefore, requested the petitioner to provide it with the claim settlement details and a copy of the surveyor report to allow it to properly account for the reduction made by the petitioner.

On receiving the copy of the surveyor report, the respondent, on 03.10.2013, issued the notice of arbitration claiming an amount of Rs. 77 Crores.

The impugned award

Before the arbitral tribunal, the respondent contended that the signing of joint discharge voucher cannot result in the full and final settlement of its claims as it was made to sign on a blank voucher undress extreme financial duress. It contended that the petitioner had refused to release the insurance claim amount unless it signed the voucher, moreover, it was not made aware of the sum of amount to be released, therefore, the its claims have not been extinguished.

On the other hand, the petitioner contended that the claims of the respondent got extinguished by virtue of accord and satisfaction as the amount released under the discharge voucher was a full and final settlement of its claim.

The arbitral tribunal held that the discharge voucher was not signed by the respondent out of its free will for the reason that it was made to sign on a blank voucher without being told the amount it was entitled to and without, having in its possession, the relevant documents. Also, it was undress extreme financial duress due to the short-term loans it had taken because of non-release of any interim payment by the petitioner. Moreover, the release of payment was conditional on it signing the discharge voucher, therefore, the claims cannot be said to be dead.

The tribunal allowed all the claims of respondent.

Grounds of Challenge

The petitioner challenged the award on the following grounds:

• The claims stood concluded and settled by accord and satisfaction in view of the Joint Discharge Voucher signed by the parties.
• The grounds of signing a blank voucher and that of extreme financial duress were taken belatedly and were mere afterthoughts.
• The respondent, by its letter dated 03.06.2013, had appreciated the petitioner for releasing the amount of Rs. 103 Crores that shows that the parties were ad idem qua the amount due to the respondent. No objection was taken in this letter.
• The delay in providing the survey report was also attributable to the respondent as it failed to give the requisite details in time.

Analysis by the Court

The Court observed that on the copy of the Joint Discharge Voucher filed by the respondents before the Arbitral Tribunal, the amount to be released under it was not mentioned. The Court held that the petitioner failed, before the arbitral tribunal, to explain how the respondent had a copy of blank discharge voucher whereas the copy filed by the petitioner had the amount mentioned on it. Also, it had not challenged the validity of the copy of the respondent on grounds of fraud or fabrication. Moreover, the witness of the respondent remained unshaken in its cross examination qua the blank voucher.

The Court held that it is not in dispute that the payment was made only on 30.05.2013 which is almost after one year from the date of the fire incident and no interim payment was made in the meantime. It was also not in dispute that respondent had taken various short-term loans and the due date of those loans was approaching when the respondent signed the voucher.

The Court also observed that the respondent was not provided with the final report of the surveyor at the time of signing the discharge voucher and even on 27.06.2013 the report was provided without the annexures.

The Court held that there is no doubt that the respondent was not aware of the amount it was entitled to get under the discharge voucher, the release of payment was conditional on it signing the discharge voucher, it was suffering from financial hardships and was in dire need of money, even if it is believed that it was aware of the amount but it was certainly not aware of the basis of computation of the said amount for the reason that it was not provided with the surveyor report that formed the basis of the amount released under the discharge voucher. It held that all of these facts lead to an inevitable conclusion that the discharge voucher was not signed out of the free will, therefore, the same cannot result in extinguishing the claims of the respondent.

Accordingly, the Court upheld the reasoning of the tribunal that the claims were not dead claims.

Case Title: New India Assurance Company Limited v. Khanna Paper Mills Limited, O.M.P. (COMM) 496/2020

Citation: 2022 LiveLaw (Del) 1161

Counsel for the Petitioner: Mr. Tushar Mehta, Solicitor General of India and Mr. Joy Basu, Sr. Adv, with Mr.Saurav Agrawal, Mr. Saurajay Nanda, Mr.Ribhu Garg, Ms.Vani Sharma, Mr.Vinay Misra, Mr. Ravi Sharma and Mr.Kanak Bose, Advs.

Counsel for the Respondent: Mr. Sachin Datta, Sr. Adv. with Mr. Viksit Arora, Ms. Ritika Jhurani, Mr. Jishnu Bhradwaj, Advs.

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