Question Of ‘Accord And Satisfaction’ Cannot Be Determined Under Section 11 Of The A&C Act: Calcutta High Court

The bench of Justice Shekhar B. Saraf relied on the judgment in Mayavati Trading v. Pradyvat Deb Burman^[1] to hold that a Court exercising powers under Section 11 of the A&C Act cannot determine the question of ‘accord and satisfaction’ in view of Section 11(6A) of the Act.

Facts

The petitioner bought an insurance policy from the respondent. During the tenure of the policy certain damage was caused to the petitioner’s facility. Thereafter, the matter was reported to respondent and a request for the appointment of surveyor was made. Accordingly, a surveyor was appointed to assess the damage caused to the petitioner’s facility.

In the meantime, the petitioner executed an indemnity bond dated 03.02.2018 in favour of the respondent for an amount of Rs. 1,59,60,206/-. Moreover, a letter of subrogation was executed.

The surveyor submitted its report on 04.07.2018 and advised the release of Rs. 1,59,60,206/-. However, this report was not instantly shared with the petitioner. Thereafter, the petitioner executed two discharged vouchers dated 20.12.2018 and 25.02.2019 certifying that there has been full and final settlement between the parties.

However, by subsequent letters the petitioner resiled from its position and requested the respondent to review its claims and raised protests against the assessment made by the surveyor and also stated that they have received even lesser amount. Parties exchanged certain communications, however, on failure of the parties to reach a solution, the petitioner filed an application for the appointment of arbitrator.

Submissions

The petitioner sought the appointment of the arbitrator on the following grounds:

• The issue of ‘accord and satisfaction’ is an issue that necessarily involves determination of facts, therefore, it can only be decided by the arbitrator.
• IRDA circulars also provides that discharge vouchers cannot preclude a party from claiming higher compensation.
• The scope of judicial interference under Section11 of the Act is very limited and the Court cannot decide disputed and debateable questions of facts.

The respondent objected to the maintainability of the petition on the following grounds:

• The claims of petitioner stood discharged on account of signing of indemnity bond, letter of subrogation and two discharge vouchers.
• The request for additional payment or revised amount was made after a long lapse of two and half months from the date of payments.
• There was no mention of any coercion or duress in the letter invoking arbitration and this has been asserted for the first time before the Court.
• IRDA circular dated 08.06.2016 proscribe the petitioner from raising any dispute after executing the discharge vouchers.
• Mere bald plea of coercion or duress would not make a claim that stood discharged by accord and satisfaction, a live claim, therefore, the Court cannot entertain the petition for the appointment of the arbitrator.

Analysis by the Court

The Court held that although the Supreme Court in its judgement in New India Assurance^[2] and United India Assurance^[3] had refused arbitration on the ground of accord and satisfaction between the parties, however, the judgement in New India Assurance was passed prior to the 2015 Amendment and the judgment in United India Assurance was overruled by a larger bench in Mayavati Trading (Supra) wherein the SC held that an issue of accord and satisfaction cannot be decided under Section 11 application.

The Court held that although the judgement in Vidya Drolia has to some extent expanded the scope of interference under Section 11, however, the Court has clarified that disputed and debatable questions of facts cannot be decided under Section 11 and it is only in cases where it is ex-facie clear that the dispute is non-arbitrable or a deadwood that the Court can refuse arbitration.

The Court observed that there was a huge delay in the assessment by the surveyor as it report was filed almost after 30 months since the request by the petitioner. Moreover, the report was not made available to the petitioner before or at the time it executed the discharge voucher/indemnity bond or letter of subrogation.

The Court also observed that the payment was released only after the petitioner had signed the discharge voucher, thus, there is a reasonable apprehension that the discharge vouchers were a pre-condition to the release of payments. Thus, element of coercion cannot be ruled out. Moreover, the IRDA Circulars do not preclude the petitioner from claiming revised payments even after signing discharge vouchers. Consequently, the Court held that the claims are live and requires adjudication.

Accordingly, the Court rejected the objections of the respondent and appointed the arbitrator.

Case Title: Jhajjar K.T. Transco Pvt. Ltd. v. Oriental Insurance Company, AP 449 of 2021

Case Citation: 2023 LiveLaw (Cal) 27

Date: 31.01.2023

Counsel for the Petitioner: Mr. Anirban Ray, Ms. Urmila Chakraborty and Mr. Sabarni Mukherjee

Counsel for the Respondent: Mr. Shubasish Sengupta and Mr. Rajesh Singh

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