PNP 1 ARBAP42-08=26.8 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. ARBITRATION APPLICATION NO.42 OF 2008 Safiullah Nabi Ahmed Shaikh ..Applicant. Vs. Lubrizol India Pvt. Ltd. ..Respondent. .... Mr. J.S. Kini i/b Mr. Suresh Dubey for the Applicant. Mr. Sachin Chandarana with Mr. Veeral Vakharia i/b M/s. M.K. Ambalal & Co. for the Respondent. ..... CORAM : DR.D.Y.CHANDRACHUD, J. 26 August 2010. P.C. : 1. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996. 2. By a letter dated 9 July 2007 the Respondent awarded a contract to the Petitioner for the purchase of scrap of electrical cables. It is undisputed that the contract is governed by the general terms and conditions of contract. Clause 15 provided for a settlement of disputes by arbitration. The contract was terminated by the Respondent on 17 October 2007. The Applicant responded by a letter dated 22 October 2007 contending that the termination was unlawful. PNP 2 ARBAP42-08=26.8 On 15 November 2007 the Respondent issued five cheques to the Applicant pursuant to the letter dated 14 November 2007, in the amount of Rs.1.36 lacs and stated thus : Please note that the amount being paid is towards full “ and final settlement of your accounts against various contracts mentioned above.” 3. The Applicant encashed the cheques without protest or demur, but sought a reference of the disputes to arbitration. In response the Respondent by its advocate s letter dated 1 December ’ 2007 stated that there was no arbitrable dispute once the cheques have been accepted in full and final settlement. 4. In Bhagwati Prasad Pawan Kumar v. Union of India1, the contractor accepted cheques furnished to him by the Railways in full and final settlement. The Supreme Court observed that the protest and non-acceptance must be conveyed before the cheques are encashed. If the cheques are encashed without prejudice, then it must be held that the offer stood unequivocally accepted and the person to whom the offer is made cannot be permitted to change his mind after an unequivocal acceptance of the offer. This principle must apply to the facts of this case. The Respondent had made it clear by its letter dated 15 November 2007 that it was effecting payment in full and 1 (2006) 5 SCC 311. PNP 3 ARBAP42-08=26.8 final settlement of the accounts of the Applicant under certain contracts. The Applicant did not protest and by encashing the cheques accepted the payment in full and final settlement. A mere demand seeking a reference to arbitration cannot be construed as an act of protest or non-acceptance of the offer made by the Respondent. In these circumstances, there is no arbitrable dispute and the Application under Section 11(6) would have to be dismissed. The Application is accordingly dismissed. (Dr. D.Y.Chandrachud, J.)