[Anmol Jain is a fourth year B.Com LLB (Hons.) student at Institute of Law, Nirma University]
On 6 May 2025, the Supreme Court in Arabian Exports Pvt. Ltd. v. National Insurance Co. Ltd. delivered a judgment that decisively strengthened India’s pro-arbitration stance. The case dealt with a practical but contentious issue: whether signing a discharge voucher in “full and final” settlement of an insurance claim bars subsequent arbitration when the claimant alleges economic duress. By holding that such disputes remain arbitrable, the Court reaffirmed that courts adjudicating upon section 11 of the Arbitration and Conciliation Act, 1996 (‘1996 Act’) cannot conduct mini-trials and that the arbitral tribunal alone has the competence to examine allegations of coercion, fraud, or duress.
The judgment is not only a victory for party autonomy, but also a reassurance for policyholders who frequently face the dilemma of accepting inadequate part-payments under financial pressure. By resolving doctrinal tensions in prior case law, the Supreme Court has placed India’s arbitration jurisprudence back on a firmly pro-arbitration track.
The Flood, the Voucher, and the Dispute
Arabian Exports Pvt. Ltd., a meat export company, insured its Taloja plant under two separate policies issued by National Insurance Company, covering both physical infrastructure and stock. In July 2005, unprecedented floods devastated the facility, resulting in losses exceeding INR 5.7 crore. A surveyor acknowledged the scale of the damage, but the insurer delayed settlement for more than three years.
Eventually, in December 2008, the insurer offered INR 1.88 crore in “full and final” settlement. The company, reeling from creditor pressure and mounting financial strain, signed the standardised discharge voucher and encashed the cheque. Within days, however, it reserved its rights and invoked the arbitration clause, demanding the balance. The insurer refused, arguing that accord and satisfaction had extinguished all claims.
The Bombay High Court accepted this argument and dismissed the Section 11 application for appointment of an arbitrator. The central issue before the Supreme Court, therefore, was whether such a discharge voucher precluded arbitration, and whether courts could examine allegations of duress at the referral stage.
The Court’s Answer: Autonomy Over Adhesion
The Supreme Court reversed the High Court, stressing that the arbitration clause survived and that questions of voluntariness, coercion, or economic duress were for the arbitral tribunal to decide.
The Court drew a sharp distinction between Nathani Steels v. Associated Constructions, where disputes were resolved through a negotiated settlement that genuinely discharged the contract, and cases like National Insurance v. Boghara Polyfab, where standardised “no dues” vouchers were signed under compulsion. Only in the former does accord and satisfaction oust arbitration; in the latter, disputes remain arbitrable because coercion, undue influence, or economic hardship may invalidate the apparent settlement.
Equally important was the Court’s reliance on section 11 jurisprudence after the 2015 amendments. Referring to Duro Felguera v. Gangavaram Port and Vidya Drolia v. Durga Trading, the Court reiterated that the referral court’s mandate is limited to verifying the existence of an arbitration agreement. All other issues, including whether the settlement was voluntary, must be left to the arbitral tribunal under the doctrine of kompetenz-kompetenz. To do otherwise would be to conduct a “mini-trial,” which the law prohibits.
The Court also noted the position of policyholders, drawing attention to Insurance Regulatory and Development Authority (IRDAI) circulars clarifying that the execution of a discharge voucher does not foreclose future claims. By upholding this principle in the arbitral context, the Court not only advanced party autonomy but also fortified fairness in insurer-insured relationships.
From Nathani Steels to Arabian Exports: The Arc of Section 11
The Arabian Exports decision can only be fully understood against the backdrop of the evolving Section 11 jurisprudence. Under the Arbitration Act, 1940, courts wielded wide powers at the referral stage, often stifling arbitration. The 1996 Act sought to correct this imbalance, but early case law still allowed extensive judicial interference.
In Nathani Steels, the Court held that amicable settlements preclude arbitration unless formally set aside. While correct in its context, a genuine negotiated settlement, the decision came to be misused by insurers relying on standardised discharge vouchers. Boghara Polyfab recalibrated the law by holding that coerced or compulsory settlements remain arbitrable, recognising economic duress as a legitimate factor.
Parliament then intervened through the 2015 Amendment of the 1996 Act, narrowing the scope of Section 11 to a simple inquiry into the existence of an arbitration agreement. Duro Felguera confirmed this minimalism, while Vidya Drolia clarified that courts must refer disputes unless they are plainly non-arbitrable. Subsequent cases such as Oriental Insurance v. Dicitex Furnishings and SBI General v. Krish Spinning reaffirmed that discharge vouchers did not conclusively extinguish arbitration rights.
Against this backdrop, Arabian Exports completes the doctrinal arc. By synthesising the earlier cases and harmonising the tension between Nathani Steels and Boghara Polyfab, the Court has made it clear that the question of economic duress cannot be used to block arbitration at the referral stage.
Why This Matters: A Reassurance for Arbitration in India
The implications of Arabian Exports are far-reaching. For claimants, particularly policyholders and smaller commercial entities, it provides assurance that accepting part-payments under strain does not mean forfeiting substantive rights. For insurers and powerful contracting parties, it signals that arbitration clauses will be enforced and cannot be bypassed by boilerplate settlements.
From the standpoint of arbitration law, the decision is another step in embedding kompetenz-kompetenz in Indian practice. It strengthens arbitral tribunals’ role as the proper forum for deciding disputes about jurisdiction, voluntariness, and coercion, while restricting courts to their limited referral mandate. The result is a more efficient system, fewer pre-arbitration roadblocks, and greater confidence among commercial parties that arbitration in India will proceed without undue judicial delay.
Finally, the judgment bolsters India’s standing as a pro-arbitration jurisdiction. For years, courts have spoken of making India an arbitration hub, but this ambition requires consistent doctrinal clarity and judicial restraint. Arabian Exportsdelivers both: it curtails judicial overreach, resolves doctrinal ambiguity, and aligns India with international best practices.
Conclusion
The Supreme Court’s ruling in Arabian Exports decisively reaffirms the principle that arbitration agreements survive even where discharge vouchers are signed under economic pressure. Courts at the Section 11 stage must not inquire into voluntariness or coercion; their role is confined to verifying whether an arbitration agreement exists. Questions of duress, accord and satisfaction, or fraud belong to the arbitral tribunal.
By resolving the tension between Nathani Steels and Boghara Polyfab, and by embedding the doctrine of kompetenz-kompetenz more firmly into Indian arbitration law, the Supreme Court has closed an important gap. The message is unambiguous: arbitration is here to stay, party autonomy will be respected, and economic hardship cannot derail the arbitral process.
– Anmol Jain