Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1962 Supreme(SC) 164

SUPREME COURT OF INDIA
S.K. DAS, M. HIDAYATULLAH AND J.C. SHAH, JJ.
Lala Kapurchand Godha and others Appellants
Versus
Mir Nawab Himayatalikhan Azamjah, Respondent.
Civil Appeal No. 52 of 1960.
Advocates appeared
Mr. B. R. L. Iyengar, Advocate, for Appellants; Mr. M. C. Setalvad Attorney-General for India (M/s. S. R. Vakil and K.H. Bhabha, Advocate of M/s. J.B. Dadachanji, O. C. Mathur and Ravindra Narain, Advocates of M/s. Dadachanji and Co. with him) for Respondent.
Appeal No. 25 of 1957
D/-15-4-1958-Bom.

Advocates:
B.R.L.Iyengar, DADACHANJI, J.B.DADACHAN, K.H.BABA, M.C.SETALVAD, O.C.MATHUR, Ravindra Narayan, S.R.VAKIL

Acceptance of payment in full satisfaction of a claim, evidenced by the endorsement of full satisfaction on promissory notes, constitutes an accord and satisfaction, discharging the claim and barring the creditor from further action against the debtor.

Headnote:
CONTRACT - Accord and Satisfaction - Acceptance of Payment in Full Satisfaction - Discharge of Claim - S. 63, Indian Contract Act, 1872.
Fact of the Case:

The appellants, a jewellery firm, sold jewellery to the respondent, the Prince of Berar, for Rs. 13,20,750/- on January 31, 1937. The respondent executed a writing acknowledging the purchase and promising to pay the amount with interest at 10% per annum. The respondent made various acknowledgments of the debt until February 15/16, 1948, when he admitted a liability of Rs. 27,79,078-2-0 and promised to pay the amount at his option and leisure. In 1949, a Princes Debts Settlement Committee was set up by the Military Governor of Hyderabad to scrutinise the debts of the respondent and his younger brother. The Committee recommended that the appellants be paid a sum of Rs. 20 lacs in full satisfaction of their claim. The appellants received two payments totaling Rs. 20 lacs, the last of which was made on February 14, 1950. The appellants passed a receipt for the second payment, reserving their right to recover the balance amount due from the respondent. The respondent refused to make payment on the receipt, and the appellants discharged all previous promissory notes and recorded satisfaction of full payment.
Finding of the Court:

The Court held that the appellants had accepted the sum of Rs. 20 lacs in full satisfaction of their claim and duly discharged the promissory notes by endorsing full satisfaction thereon. The Court found that the appellants had given a full discharge when they received the second instalment and that there was no coercion involved in obtaining the endorsements on the promissory notes.
Issues: Whether the appellants had accepted payment of Rs. 20 lacs in full satisfaction of their claim against the respondent and surrendered all the writings duly discharged, resulting in an absolute release of the debt.
Ratio Decidendi: The Court applied Section 63 of the Indian Contract Act, 1872, which provides that a promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. The Court held that the appellants, by accepting the payment of Rs. 20 lacs and endorsing full satisfaction on the promissory notes, had accepted the performance of the promise from a third person (the Hyderabad State) and could not afterwards enforce it against the promisor (the respondent).
Final Decision: The Court dismissed the appeal, holding that the appellants were not entitled to sue the respondent for the balance of the amount.

Judgment

S. K. DAS, J. : This is an appeal on a certificate wanted by the High Court of Bombay under S.110 of the Code of Civil Procedure, and arises out of a suit which the appellants had brought for recovery of Rs. 9,99,940/- with interest and costs from Mir. Nawab Himayatalikhan Azamjah, who was then known as the Prince of Berar, being the eldest son of the Nizam of Hyderabad. The circumstances in which the appeal has arisen are these.

2. On or about January 31, 1937 Baboo Mull and Co., sold and delivered to the Prince of Berar in Bombay various articles of jewellery the aggregate value of which was Rs. 13,20,750/- Lala Kapurchand Godha, who was the first plaintiff in the action and Lala Heeralal Godha, the original second plaintiff, carried on business, in jewellery in partnership with their father and one Lala Baboo Mull (since deceased ) in the name and style of Baboo Mull and Co. It is not disputed that the appellants, now before us own the entire interest in the subject matter of the suit and instead of using the name of Baboo Mull and Co. We shall name the appellants as the person who sold the jewellery to the Prince of Berar on January 31, 1937. A writing dated January 31, 1937 was executed by the Prince of Berar respondent before us, by which he declared and acknowledged having purchased the jewellery specified in a schedule from the appellants at the aggregate price of Rs. 13,20,750/- In that writing (Ex. A) the respondent stated :

"I promise on behalf of myself and my heirs, executors, administrators and successors to pay to you or to your order at my option and leisure at your abovementioned address the said sum of rupees thirteen lacs twenty thousand seven hundred and fifty only together with simple interest thereon @10% ten per cent per annum."

It is not disputed that the jewellery was in fact delivered by the appellants to the respondent and after January 31, 1937 the respondent passed various acknowledgments in respect of the debt due at the time of the passing of the respective acknowledgments. These documents consisted of an acknowledgment of liability and a promise to pay on behalf of the respondent and the last of sue acknowledgements was passed on February 15/16, l948. By that time the debt of Rs. 13,20,750/- with ten per cent interest thereon had increased to about Rs. 27,79,000/- By that last document the respondent admitted his liability for the amount of Rs. 27,79,078-2-0 and promised to pay the amount again at his option and leisure, On April 30, 1948 the appellants presented their bill and some time in January 1949 one of the appellants has an interview with the respondent and was told that the Nizam had passed the bill. In 1949 when Hyderabad was under military occupation after the Police Action, a Committee was set up on February 8, 1949 by the Military Governor known as the Princes Debts Settlement Committee. The report of this Committee shows that it was set up in accordance with a resolution made by the Military Governor in order to scrutinise all debts of the Prince of Berar and his younger brother. On February 19, 1949 the appellants presented a petition to the Military Governor with regard to their claim and asked for payment of the amount due to them or in the alternative for the return of the jewellery. The claim of the appellants was considered by the Committee in para 11 of their report. The Committee recommended that the appellants should be paid a sum of Rs. 20 lacs in full satisfaction of their claim. The Committee further stated that they did not recommend the return of the jewellery. It may be here stated that the Committee consisted of two persons, namely, Zaheruddin Ahmed , who was the Controller of Accounts to the Nizam and A. N. Shah, a member of the Indian Civil Service. It may also be stated that the report of the Committee shows that it made a reduction of about ten percent in the case of all suppliers of goods to the two Princes because the Committee thought that in most of the

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