In a recent judgment, the Supreme Court has upheld the sanctity of a full and final settlement by its judgment in United India Insurance Co. Ltd. v Antique Art Exports Pvt Ltd. The said Appeal was filed by the Insurance Company seeking to assail the appointment of Arbitrator by the High Court in exercise of its power Under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the Act).


Brief Facts of the Case


  • Respondent-claimant was running its factory and purchased two Standard Fire and Special Perils Policies.
  • A fire took place in its factory due to a short circuit as alleged by the Respondent-Claimant. The Claimant duly intimated the Appellant Company and a surveyor was appointed thereafter. A report was submitted by the authorized surveyor. Subsequently, the Appellant Company sent an e-mail to the Respondent with intimation that it has approved a certain amount of the claim on account of fire, towards full and final settlement, with complete details of the computed amount.
  • On the same date the Respondent sent a reply accepting the computation and provided the desired details with final discharge voucher and details of the bank account in which the payment was to be credited.
  • After 11 weeks of the abovesaid full and final discharge/settlement, the Respondent claimed that it was coerced into signing on the dotted line of the settlement. Therefore, it rightly approached the High Court for appointment of an Arbitrator to adjudicate the subject dispute.


It was the case of the Appellant that

  • Once the claimant received the settled compensation and subsequently issued a discharge voucher in full and final settlement of its claim, there was a discharge of the contract by accord and satisfaction. As a result, neither any contract nor any claim survived.
  • Further, after 11 weeks of receipt of the settled amount, it was not open for the Respondent, to contend that the discharge was obtained under coercion and undue influence without furnishing any evidence in support thereof.
  • Lastly, Sub-section (6A) of Section 11 of the Act has been introduced by Amendment Act, 2015 with a limited purpose for expediting the arbitral disputes in a time bound manner provided a prima facie arbitral claim/dispute subsists under the arbitral agreement for adjudication by the Arbitrator. In the instant case, as there was no arbitral dispute subsisting after the claim was finally settled.

It was contended by the Respondent that

  • The Respondent was not in a bargaining position and being in financial stress, had no option but to accept the claim on the dotted lines settled by the Appellant.
  • Keeping in view the presence of an arbitration clause in the agreement, it was for the Arbitrator to examine whether the acceptance of the claim by the Respondent was voluntary or under undue influence or coercion


The High Court

  • The Hon’ble High Court held that, once there is existence of an arbitration agreement and acceptance of the payment disbursed by the Appellant company, the question that whether it was under coercion or undue influence, is a matter to be examined by the Arbitrator and accordingly a sole arbitrator was appointed in the matter.

The Supreme Court

  • The existence of an arbitration Clause in the contract of insurance was not disputed.
  • The question which arose for consideration was, whether in the case at hand, the discharge upon acceptance of compensation and subsequent signing of discharge letter was voluntary or under coercion/undue influence. Also, whether the Respondent was justified in invoking Section 11(6) of the Act.
  • The Hon’ble Court held that execution of full and final agreement and receipt of a discharge voucher in itself cannot be a bar to arbitration. It further relied upon it’s decision in in National Insurance Co. Limited v. Boghara Polyfab Private Limited [MANU/SC/4056/2008 : 2009(1) SCC 267] which lays down illustrations as to when claims are arbitrable and when they are not
Backdrop Settlement No Reference/ No Bar to Arbitration 
Claim referred to conciliation/ Pre -litigation Lok Adalat Terms of Settlement drawn and signed by both parties and attested by Conciliator/Members of Lok Adalat No reference to Arbitration
Negotiations are held for settlement of disputed claims resulting in an agreement settling all the pending claims/disputes Settlement made, amount agreed is paid and contractor issues a discharge voucher/ no claim certificate/ full and final receipt No reference to Arbitration
Employer admits part of the claimed amount and expresses that it shall be released only once it is accepted by the contractor as the full and final payment

Subsequently the contractor who is hard pressed on funds signs the dotted line in order to get the amount released.

Such a discharge is under economic duress on account of coercion employed by employer and does not amount to discharge of the contract by accord and satisfaction

No bar to Arbitration
An Insured makes a claim for loss suffered. Claim is neither admitted nor rejected. It is informed to the insured that unless the claimant  gives a full and final voucher for a specified amount (less than the claimed amount), the entire claim would be rejected. The Claimant agrees and issues an undated discharge voucher in full and final settlement. Thereafter only the admitted amount is paid. The accord and satisfaction is not voluntary and is in duress, compulsion and coercion. No bar to Arbitration
Claimant makes a claim which is disputed by the Respondent,. The claimant  who is keen to have a settlement and avoid litigation, reduces the claim and requests for settlement.

Respondent agrees, settles claim and obtains a full and final discharge voucher.

Here even if the claimant might have agreed for settlement due to financial compulsions, commercial pressure or economic duress, the decision was his free choice

No reference to Arbitration


  • Mere allegation that the discharge voucher/no claim certificate has been obtained by fraud/coercion/undue influence by the other party is not sufficient for appointment of the arbitrator unless the party alleging the same is able to produce prima facie evidence to substantiate the allegation. The Court has the power to find out if prima facie the dispute is genuine and requires invocation of Sec. 11(6) of the Act.

In the instant case, the Apex Court reversed the decision of the High Court and held that prima facie no dispute subsisted after the discharge voucher was signed by the Respondent without any demur or protest. The Appellant after 11 weeks of the settlement of claim sent a letter on 27th July, 2016 for the first time raising a voice in the form of protest that the discharge voucher was signed under undue influence and coercion with no supportive prima facie evidence being placed on record. In absence thereof, the Apex Court opined, it must follow that 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 Apex court in a consumer empowering judgment (Pioneer Urban Land & Infrastructure Ltd v Govindan Raghavan) has held that incorporation of one-sided clauses in an agreement between builders and flat purchasers constitutes an unfair trade practice falling under Section 2 (r) of the Consumer Protection Act, 1986

Brief Facts

  • The Appellant/ Builder launched a residential project in Gurugram. The Respondent/Flat Purchaser entered into an Apartment Buyer’s Agreement with the Builder to purchase an apartment in the said project.
  • Per clause 11.2, the Builder was to make all efforts to apply for the Occupancy Certificate within 39 months from the date of excavation (with a grace period of 180 days) and offer possession of the flat to the Respondent. The Builder failed to apply for the Occupancy Certificate as per the stipulations in the Agreement and subsequently the Purchaser approached the National Forum.

National Consumer Disputes Redressal Commission

  • Hon’ble NCDRC passed an exparte Interim Order restraining the Builder from cancelling the allotment made in favor of the Purchaser. Lis pendens Builder obtained the Occupancy Certificate and issued a Possession Letter to the Purchaser.
  • While the Builder sought direction to the Purchaser to take possession of the flat, the Purchaser’s case was that due to inordinate delay of almost 3 years, it had already taken an alternate property and was no longer interested in taking possession.

The National Forum opined in favor of the Purchaser and held that, keeping in view the delay of 3 years in procuring the Occupancy Certificate, the Purchaser could not be compelled to take possession at such a belated stage.

Further, the grounds urged by the Builder for delay were not justified and clauses in the agreement were held to be wholly one sided, unfair and not binding on the Purchaser.

Supreme Court of India

  • The Apex Court upheld the decision of the National Forum. It was opined that the Purchaser made a clear case of deficiency of service on the part of the Builder and the Purchaser was justified in terminating the Apartment Buyer’s Agreement by filing a consumer Complaint. Further rightly so, the Purchaser cannot be compelled to accept the possession whenever it is offered by the Builder.
  • The purchaser was legally entitled to seek refund of the money deposited along with compensation.
  • A perusal of the Agreement revealed stark incongruities between remedies available to both parties, all of which constituted ‘unfair trade practices’ under section 2(r) of the Consumer Protection Act, 1986




Interest Rate

Builder was not required to pay equivalent Interest to the Purchaser for delay in handing over possession. Flat purchaser was entitled to Interest @9% p.a. only. Builder could charge Interest @18% p.a. from the Purchaser for delayed payments
Cancellation of Allotment A Purchaser had to wait for a period of 12 months after the end of grace period, before serving termination notice of 90 days on the Builder, and even thereafter, the Builder got 90 days to refund only the actual installment paid by Purchaser. In any case of delay, interest remained at 9% only. Builder could cancel the allotment and terminate the Agreement if any installment remained in arrears for more than 30 days
Termination On default by the Builder, if the Purchaser failed to exercise his right of termination within the time limit provided in the agreement, then he was no entitled to terminate the Agreement. If Purchaser failed to rectify the default within 30 days of the Termination Notice, then Agreement Automatically stood cancelled. Builder had the right to forfeit the entire amount of Earnest Money towards liquidated damages.
  • It was held that the terms of a contract will not be final and binding, if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder. The contractual terms of the Agreement were declared ex-facie one-sided, unfair, and unreasonable. Appeals were dismissed accordingly.


The Delhi High Court in its recent judgment has reemphasized the supremacy of a written arbitration agreement and the terms contained therein, over any other understanding the parties may come to, orally.

Justice Prathiba M. Singh while dealing with a challenge under section 34(2) of the Arbitration and Conciliation Act, 1996 set aside the award passed by a three-member Tribunal on the ground that the Tribunal was not constituted in consonance with the Arbitration Agreement.

Facts Briefly:

Mother Boon Foods Pvt. Ltd. (Petitioner) was appointed as a contract-manufacturer -for manufacturing and packaging breads- by Mindscape One Marketing Pvt. Ltd. (Respondent), a leading company engaged in the manufacturing and marketing of bread.

A contract was signed to effectuate the aforesaid agreement and subsequently the Petitioner commenced production. Over time, disputes between the parties arose which led to termination of the said agreement. Thereafter the petitioner raised certain claims which were rejected by the Respondent, leading to the invocation of the arbitration agreement.

In furtherance of the invocation, the Respondent constituted a three-member tribunal as opposed to appointing a sole arbitrator as stipulated in the arbitration agreement.

The Petitioner objected to the constitution of the arbitral tribunal and preferred not to participate in the arbitration proceedings.

The Petitioner pleaded violation of the arbitration agreement by the Respondent and challenged the Arbitral Award passed by the Tribunal before the High Court, on the ground that the constitution of three-member tribunal was not in accordance with the agreement.

However it was the Respondent’s case that the three member tribunal was in fact constituted at the instance of the Petitioner, who demanded for a three-member tribunal since it would help meet the ends of fairness. Accordingly, the three member tribunal was constituted to give a fairer adjudication process for the Petitioner.

The Verdict:

The High Court opined that the arbitration agreement in the given case was in the form of an arbitration clause -which was in writing-  in line with the mandate of section 7, given under the Arbitration and Conciliation Act of 1996 (hereinafter “the Act”) . Therefore the same could not have been superseded by any oral demand or agreement.

In view of the Court, if a three member tribunal had to be appointed, then the same ought to have been done with the consent of the Petitioner and in accordance with the provisions of the Act. There was, however, nothing on record to show that the Petitioner indeed demanded for constitution of a three member tribunal. The arbitration agreement, as per the 1996 Act, has to be in writing and since the arbitration clause, which is a part of the contract, was in writing, the same could not have been superseded by any oral demand or agreement.

Furthermore, the Petitioner may have been clever in orally demanding a three member tribunal but clearly, the procedure adopted by the Respondent was impermissible. The Petitioner having raised its objection at the initial stage itself to the constitution of the tribunal but the tribunal having proceeded further with the matter, the Petitioner is entitled to challenge the said constitution at this stage by raising its objections under Section 34. A reliance was also placed on the judgment in the matter of Prime Industries Ltd. v. SEIL Ltd., 2010 LawSuit (Del) 996 which holds that the will of the parties, as reflected in the agreement, has to prevail.