He signed a full-settlement voucher. Then he said it was under duress.

He accepted ₹84 lakh as full settlement. Then he said the insurer forced his hand. The cotton mill had barely finished counting the money from the first fire when it told the Supreme Court: that signature on the discharge voucher wasn't free consent — it was survival.

Could a company sign away its right to arbitration by accepting a cheque, then turn around and call the whole thing a product of duress? The Supreme Court would have to decide whether a discharge voucher (a document saying the payment settles everything) is the end of the road — or just the beginning of a deeper fight.

Two fires, one insurance policy

Krish Spinning, a cotton spinning firm in Gujarat, held a standard fire insurance policy from SBI General Insurance. In 2019, a fire broke out at the factory. The company claimed losses of ₹1.76 crore. The insurer's surveyor assessed the damage at ₹84.19 lakh — less than half the claim.

Krish Spinning signed a consent letter and a discharge voucher accepting the lower amount. The company received ₹84,08,957. On paper, the matter was closed.

But a second fire had already occurred at the same factory. That claim was much larger, and Krish Spinning says it was in no position to fight. The company's argument: it signed the voucher under financial duress because the insurer was holding the second claim hostage. Take the ₹84 lakh, the insurer effectively said, or risk getting nothing on either claim.

When the second claim was settled

After the insurer settled the second claim as well, Krish Spinning went back to the first one. The company demanded arbitration for the shortfall — the difference between what it claimed and what it was paid. The insurer refused. The discharge voucher, the insurer argued, constituted "accord and satisfaction" (a legal term meaning the parties agreed to settle the dispute, and the settlement was carried out). Under Section 63 of the Indian Contract Act, 1872, a promisee can dispense with or remit performance — meaning the insurer had no further obligation once Krish accepted the money.

Krish Spinning approached the Gujarat High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the provision that lets a party ask the court to appoint an arbitrator when the other side refuses). The High Court allowed the petition and appointed a former judge, Justice K.A. Puj, as the sole arbitrator.

The insurer appealed to the Supreme Court.

The three questions the Supreme Court faced

Justice J.B. Pardiwala, sitting as a single judge, framed the dispute around three issues. First, does signing a discharge voucher automatically kill your right to arbitration? Second, at the stage of appointing an arbitrator under Section 11(6), how deeply can the court examine whether the settlement was genuine? Third, what happens when the arbitration clause in the insurance policy is conditional — meaning it only kicks in when the insurer admits liability but disputes the amount?

The insurer argued that the discharge voucher was a full and final settlement. The arbitration clause itself said disputes "in respect of" the policy shall be referred to arbitration — and once the claim was settled, there was no dispute left. The insurer cited the Supreme Court's own decision in National Insurance Co. Ltd. v. Boghara Polyfab (2009), where the court had held that if the discharge voucher is valid and voluntary, arbitration cannot be invoked.

Krish Spinning countered that the voucher was signed under coercion. The company pointed to the second, larger claim that was pending at the time. The insurer, Krish said, used that pending claim as leverage. The company's financial distress — a factory after two fires — made it impossible to refuse the ₹84 lakh.

Why the arbitration agreement survived the settlement

The Supreme Court turned to the doctrine of separability under Section 16(1) of the Arbitration Act (the principle that the arbitration agreement is a separate contract, independent of the main contract). Even if the main contract is discharged — including by accord and satisfaction — the arbitration agreement survives. It remains available to resolve disputes about whether the accord itself was vitiated (legally spoiled) by coercion, duress, or undue influence.

The court cited the English case Heyman v. Darwins Ltd. (1942), where the House of Lords held that an arbitration clause survives the repudiation of the main contract. The same logic applies here: if Krish Spinning says the settlement was not voluntary, that dispute — about the validity of the accord — is itself a dispute "in respect of" the policy. It falls within the arbitration clause.

The court also examined the insurance policy's arbitration clause. Clause 13 of the Standard Fire and Special Perils Policy said arbitration would apply only if the insurer admitted liability but disputed the quantum (the amount). The insurer argued that by paying the surveyor's assessed amount, it had not admitted liability for the full claim — it had merely paid what it believed was due.

The Supreme Court disagreed. The insurer's payment of a partial amount, the court held, constituted admission of liability. The only remaining dispute was about the quantum — exactly the situation the arbitration clause was designed to handle.

The limited role of the referral court

Perhaps the most significant part of the judgment concerns the scope of judicial review at the Section 11(6) stage. The court clarified that the referral court — the court asked to appoint an arbitrator — must only be prima facie satisfied (satisfied on first impression) that an arbitrable dispute exists. Whether the accord and satisfaction was genuinely vitiated is a matter for the arbitral tribunal, not the court.

This is where the Interplay judgment — a seven-judge bench decision of the Supreme Court on the relationship between the Arbitration Act and the Stamp Act — becomes relevant. The Interplay judgment reinforced the competence-competence doctrine (the principle that the arbitral tribunal, not the court, should first decide its own jurisdiction). The Supreme Court in SBI General v. Krish Spinning applied that same logic to the question of discharge vouchers.

The court distinguished its earlier decision in Boghara Polyfab. In that case, the court had said that if the discharge voucher is valid, arbitration cannot be invoked. But the Krish Spinning court clarified: the question of validity — whether the voucher was signed voluntarily or under coercion — is itself a dispute that must be decided by the arbitrator, not by the court at the referral stage.

The court also relied on Oriental Insurance Company Ltd. v. Dicitex Furnishing Ltd. (2020), where the Supreme Court had held that a discharge voucher does not bar arbitration if the claimant alleges coercion. And on NTPC Ltd. v. SPML Infra Ltd. (2023), where the court had said that the referral court's role is limited to a prima facie examination of the existence of an arbitration agreement.

What this means for insurers and policyholders

For insurers, the message is clear: a signed discharge voucher is no longer a guaranteed shield against arbitration. If the policyholder later claims the settlement was coerced, that claim must go to arbitration — not be dismissed at the threshold. Insurers should document the settlement process carefully, ensuring that the policyholder's consent is free and informed, with no pending claims used as leverage.

For policyholders, the judgment opens a door. Signing a discharge voucher under financial pressure does not necessarily end the matter. But the burden of proving coercion, duress, or undue influence will fall on the party that signed — and that proof will be tested before the arbitrator, not the court.

THE PLAY: If you signed a discharge voucher under financial pressure while a larger claim was pending, you can still invoke arbitration — but you must prove the coercion before the arbitrator, not the court.

The cotton mill's fight over the first fire is now headed to arbitration. The Supreme Court did not decide whether Krish Spinning was actually coerced. It decided only that the question was worth asking — and that the arbitrator, not the court, should answer it.