Kerala High Court Allows Arbitration In Insurance Dispute, Says Discharge Voucher Not A Bar

The Kerala High Court has recently allowed an arbitration request filed by Coco-Latex Exports Private Limited against National Insurance Company Limited, holding that execution of a discharge voucher towards full and final settlement does not bar invocation of arbitration.

“Therefore, I find that objection raised by the respondent on the basis of the discharge voucher issued by the respondent is not sustainable,” the Court said.

Justice S. Manu was dealing with a plea arising out of an insurance claim following a fire at the petitioner's factory.

Coco-Latex Exports, which runs a manufacturing unit, had taken two insurance policies covering its stocks and factory assets. A fire on November 12, 2023 caused widespread damage.

Finished goods, raw materials, machinery, and even a vehicle were affected. The insurer's surveyor assessed the loss at a little under 3.90 crore. When the claim was processed, deductions were applied and the final payout was brought down to roughly 2.91 crore.

The company accepted the amount and signed a discharge voucher on March 12, 2025, recording it as full and final settlement. That did not end the matter. It later questioned the deductions and sought the remaining amount, but the insurer declined to pay anything further.

The dispute then shifted to the arbitration clause in the policies. The company issued notices seeking reference to arbitration. With no agreement on appointing an arbitrator, it approached the High Court.

The insurer resisted the move on two fronts. First, it argued that once the discharge voucher had been executed and the settlement accepted, no dispute survived for arbitration. It also pointed to communications showing that the petitioner had agreed to the settlement before signing the voucher.

Second, it relied on a circular issued by the Insurance Regulatory and Development Authority of India in October 2023, contending that the arbitration clause could not be invoked after the policy period.

The Court was not persuaded by either line of argument.

On the issue of the discharge voucher, the Court referred to Arabian Exports Private Limited v. National Insurance Company Ltd and held that such a voucher, by itself, does not extinguish the right to seek arbitration. The objection that no arbitrable dispute existed was therefore rejected.

The reliance on the IRDAI circular met the same fate. The court noted that the circular itself makes it clear that arbitration clauses in existing policies continue to remain valid until the policy expires, unless the policyholder specifically asks for a replacement. No such request had been made in this case. The insurer's argument that the clause could not be invoked was thus found untenable.

“As far as policies existing on the date of issuance of Annexure R7 are concerned, the arbitration clauses should be treated as valid till the expiry of the policy, unless the policy holder specifically request the insurer to replace the same,” the Court observed.

With both objections addressed, the Court found that disputes between the parties remained unresolved and required adjudication. The arbitration request was accordingly allowed, with a direction to the Kerala High Court Arbitration Centre to nominate a sole arbitrator.

All issues, including the insurer's objections, were left open to be raised before the tribunal.

For Petitioner: Advocates Rajesh Sivaramankutty, Vijina K and Arul Muralidharan

For Respondent: Advocates Latha Susan Cherian and Gibi C George