S.63 Contract Act | Creditor Can't Insist On Balance Payment After Accepting Lesser Sum In Satisfaction Of Claim: Delhi High Court

The Delhi High Court has held that it is inequitable of a creditor to demand balance payment after accepting a lesser sum towards satisfaction of a claim.

Citing Section 63 of the Indian Contract Act, a division bench of Justices Anil Kshetarpal and Harish Vaidyanathan Shankar held,

“The principles of accord and satisfaction embodied in Section 63 of the IC Act squarely applies. Where a creditor accepts a lesser sum in satisfaction of a claim, it is inequitable to subsequently insist on the balance of the claim.”

Section 63 recognizes that a promisee may accept (accord) any satisfaction he deems fit in discharge of an obligation.

In the case at hand, the Appellant challenged the trial court order dismissing its suit for recovery of Rs.50,41,835/- from the Respondent. The Respondent was the principal contractor for setting up a Sewage Treatment Plants and had subcontracted certain works to the Appellant.

The dispute arose from alleged non-payment by the Respondent for materials supplied and services rendered by the Appellant under the subcontract agreement.

The Respondent opposed the appeal, claiming that the parties had signed a document, recording a full and final settlement in respect of the claims. Net balance of Rs.14,68,165/- was computed to be paid by the Respondent.

Appellant on the other hand claimed that the said document merely recorded particulars of the payments then made, and that the payment of Rs.14,68,165/- recorded therein was not in discharge of all claims but was made, on account, to keep the contract alive and to recommence the work.

Rejecting this contention, the High Court said,

“On a plain reading, the document records the total invoiced amount, retention/security deposits, PBG obligations, TDS, amounts already paid, and a net balance of Rs.14,68,165/-. It is signed by Sh. Manish Kumar Singh, Director of the Appellant, and Sh. Rajesh Vij, Managing Director/Authorized Representative of the Respondent, which clearly evidences that the Appellant was aware of, and expressly acknowledged, the computations and payments recorded therein.”

It added that the informal statements now made by the Appellant that the payment was “not intended as full and final settlement” cannot override the effect of the contemporaneously executed document, which bears signatures of both parties and clearly records the amounts due, payments made, and conditional terms.

It held that the Trial Court correctly applied the principle of accord and satisfaction, noting that once the lesser sum was voluntarily accepted, it would be inequitable for the Appellant to claim additional amounts on the same invoices.

As such, the appeal was dismissed.

Appearance: Mr. Robin George, Mr. Yogesh Bhatt, Advs. for Appellant; Mr. L. K. Singh, Adv. for Respondent

Case title: M/S B S Enviro N Infracon Private Limited v. Vij Contracts Pvt. Ltd.

Citation: 2025 LiveLaw (Del) 1357

Case no.: RFA (COMM) 132/2024

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