The Supreme Court decision in NIA v. Genus is a welcome resistance point against the increasing trend for policyholders to negotiate a policy payment, execute a discharge voucher confirming the full and final settlement of the claim, and then allege coercion and duress in an attempt to sidestep the discharge voucher and secure a further policy payment by arbitration or litigation.

The Facts:

Genus was insured under a NIA standard fire and special perils policy for its manufacturing unit located at Jaipur. On 29 October 2009 Genus' property was damaged because of a fire in the adjoining Indian Oil Corporation premises.

Genus made its policy claim. NIA appointed surveyors who assessed the loss at Rs.6.09 crores/$1m, and the claim was settled in accordance with the surveyor's assessment. A detailed letter of subrogation/discharge voucher was signed by Insured and Insurer in full and final settlement of the policy claim. 3 weeks later, Genus claimed that the discharge voucher was procured by coercion, and it invoked the policy arbitration clause. NIA rejected the arbitration notice in view of the full and final settlement, and that led the Insured to issue an application to the Delhi High Court under §11 of the Arbitration & Conciliation Act 1996. This is the statutory provision that permits the court to appoint an arbitrator if a party refuses to make an appointment.

The Delhi High Court allowed the application on the grounds that a prima facie case of coercion had been made out. NIA preferred an appeal before the Supreme Court, which was handled by Tuli & Co.

Supreme Court Arguments:

  1. NIA argued that the discharge voucher was not a standard discharge voucher, but a detailed agreement, the terms of which were negotiated between parties prior to execution.
  1. NIA pointed to the absence of any correspondence showing that the Insured had raised an immediate objection or allegation of coercion after executing the discharge voucher.
  1. NIA noted that the first objection was only raised by the Insured 3 weeks after the discharge voucher had been executed.
  1. NIA pointed out by reference to accounting material that, at the time of execution of the discharge voucher, Genus had funds and was therefore under no financial constraint to execute the discharge voucher.

The Judgment:

The Court thereafter proceeded to pass its judgment. It noted that, apart from making bald allegations, Genus had produced no material to support its plea of coercion and duress. As a result no prima facie case of coercion had been made out. The Court accepted NIA contentions and noted that, at the time of execution of the discharge voucher, no objections of coercion were raised by Genus until 3 weeks had passed.

The Court also ruled that Genus was not in a poor financial condition at the time of settlement of the claim, and therefore the allegations of coercion had no basis.

The Court accordingly ruled that upon the execution of the discharge voucher there was full and final settlement of the claim. As a result no arbitrable claim existed, and the Delhi High Court order was set aside.

For further information on this topic please contact Tuli & Co

Tel +91 11 4593 4000, fax +91 11 4593 4001 or email

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.