Case: Messrs P. K. Ramaiah and Company Vs. Chairman and Managing Director, National Thermal Power Corporation

2. The appellant had a contract with the respondent on February 7, 1979 to complete the site levelling and grading for Ramagundam Super Thermal Power Project, Ramagundam, Karimnagar Dist., A. P., for a sum of Rs. 1, 74, 33, 334 and the work had to be completed within 15 months. According to the appellants, he completed the work on December 30, 1980. His claim for further amounts was rejected on August 12, 1981. Therefore, he wrote a letter on April 13, 1984 requesting the respondent to settle his claim within a period of one month from the date of its receipt. Though the respondent promised in their letters dated November 10, 1984 and March 7, 1987 to refer the dispute for arbitration, no action in that behalf was taken under clause 57 of the contract. On his application under Sections 8, 11 and 12 of the Arbitration Act, 1940 for short the Act, 5th Additional Judge, City Civil Court, Hyderabad, after hearing the parties appointed Shri P. Chennakesava Reddy, retired Chief Justice, Gauhati High Court as an Arbitrator. The A. P. High Court in C. R. P. Nos. 838 and 839 of 1990 by judgment dated October 31, 1991 held that the appellant had acknowledged the final measurement and accepted the payment in full and final settlement of the contract on May 19, 1981, therefore, there was no subsisting contract for reference. The learned Judge also found that after 3 years from the date of rejecting the claim, the claim was barred by limitation, and set aside the order of the civil court giving rise to this appeal

Court's reasoning:
8. On those facts, this Court held that although there was alleged payment as final satisfaction of the contract, yet as the respondent did not give any receipt accepting the settlement of the claim, the payment was unilateral, so the dispute still subsisted and therefore it was arbitrable dispute and the reference was valid. In Bhan Prakash case also there was no full and final settlement and payment was not received under a receipt. In L. K. AhujaCo. case this Court while laying the general law held that if the bill was prepared by the department, the claim gets weakened. That was not a case of accord and satisfaction but one of pleading bar of limitation without prior rejection of the claim. Therefore, the ratio therein is of little assistance. The Calcutta High Court merely followed the statement of law laid in AhujaCo. case. If is not shown to us that the Chief Construction Manager was competent to acknowledge the liability or an authority to refer the dispute for arbitration. So neither his letter binds the respondent nor operates as an estoppel. Admittedly the full and final satisfaction was acknowledged by a receipt in writing and the amount was received unconditionally. Thus there is accord and satisfaction by final settlement of the claims. The subsequent allegation of coercion is an afterthought and a devise to get over the settlement of the dispute, acceptance of the payment and receipt voluntarily given. In Russell on Arbitration, 19th Edn., p. 396 it is stated that "an accord and satisfaction may be pleaded in an action on award and will constitute a good defence".