What is the main principle of this case?

If money is accepted on a clear condition of full satisfaction, the claim is discharged. This follows Section 63 of the Indian Contract Act.

Why was the balance claim rejected?

Because the sellers accepted ₹20 lakhs on the condition of full satisfaction. They could not accept the money but reject the condition.

How do Sections 63 and 41 ICA connect here?

Section 63 allows a promisee to accept any satisfaction he thinks fit; Section 41 bars suing the promisor after accepting performance from a third person.

Does a written receipt matter?

Yes. A contemporaneous receipt showing full satisfaction is strong evidence that the parties intended a complete discharge.

What should parties do to avoid disputes?

Write the condition clearly, state that payment is in full and final settlement, and exchange discharge documents at the time of payment.

kapur-chand-godha-v-mir-nawab-himayatali-khan

Kapur Chand Godha v. Mir Nawab Himayatali Khan

1963 AIR 250; 1963 SCR (2) 168 — Accord & Satisfaction • Discharge by Agreement

Supreme Court of India 1963 1963 AIR 250; 1963 SCR (2) 168 Contract • Discharge ~8 min India

Author: Gulzar Hashmi • Published: 26 Oct 2025

Quick Summary

Jewellers sold costly ornaments to the Prince of Berar. Dues piled up with interest. A state committee later offered ₹20 lakhs as full and final settlement. The sellers took two instalments and signed receipts. After that, they tried to claim more. The Supreme Court said: you accepted the money on a clear condition of full satisfaction. The claim is discharged.

Issues

Did the appellants accept ₹20 lakhs in full satisfaction and discharge the debt?
What is the effect of the receipt executed with the second instalment of ₹8,75,000?

Rules

Section 63, ICA: A promisee may remit, extend time, or accept any satisfaction he thinks fit, instead of full performance.
Section 41, ICA: If the promisee accepts performance from a third person, he cannot afterwards enforce it against the promisor.

Together, these allow accord and satisfaction and discharge by agreement.

Facts — Timeline

1937 → 1951 → 1963

31 Jan 1937: Baboo Mull & Co. sell jewellery worth ₹13,20,750 to the Prince of Berar; delivery made, price unpaid.

1948: Last written acknowledgement of debt; with 10% interest, dues rise to ~₹27,79,000.

8 Feb 1949: Military Governor forms the Princes Debts Settlement Committee.

19 Feb 1949: Appellants petition for payment or return of jewellery.

Committee Recommends: Pay ₹20 lakhs in full satisfaction.

27 Sep 1949: First instalment ₹11,25,000 paid (share dispute pending).

14 Feb 1950: Second instalment ₹8,75,000 paid; receipt executed contemporaneously.

14 Aug 1950: Appellants demand balance ₹9,99,940 + interest; no payment.

5 Feb 1951: Suit filed in Bombay High Court.

Trial Court: Favours appellants — says no full satisfaction.

15 Apr 1958: Appellate Court reverses — says ₹20 lakhs accepted in full and final settlement.

Supreme Court: Confirms discharge by agreement; no further claim.

Timeline visual for Kapur Chand Godha v. Mir Nawab Himayatali Khan

Arguments

Appellants (Sellers)

₹20 lakhs was not full satisfaction; only part of a larger due.
Receipt with second instalment did not amount to absolute release.
Sought remaining balance with interest.

Respondent (Prince)

Offer was expressly full and final; acceptance discharged the debt.
Contemporaneous receipt shows intention to settle.
Sections 63 & 41 ICA support discharge by substituted satisfaction and third-party performance.

Judgment

For the Respondent

The Supreme Court held that the appellants took the money on the very condition on which it was offered—full satisfaction. One cannot accept the payment and reject the condition. The discharge is complete; no further amount is recoverable.

Judgment concept image for accord and satisfaction

Ratio (Legal Principle)

Accepting a conditional payment = accepting the condition. Under Section 63, the promisee may accept a lesser or different satisfaction. If he does so in full settlement, the original claim stands discharged. A receipt given at the time supports this conclusion.

Why It Matters

Shows how accord and satisfaction works under Indian law.
Highlights the value of clear receipts and settlement language.
Promotes finality: after full settlement, no further claim survives.

Key Takeaways

Section 63 lets a promisee accept any satisfaction in place of full performance.
Receipt at the time of payment is strong proof of discharge.
After accepting third-party performance (S.41), the promisor cannot be pursued.

Mnemonic + 3-Step Hook

Mnemonic: “Take with Term, Claim is Firm—Discharged.”

Offer: Money is offered on a full and final term.
Accept: Promisee accepts and signs receipt.
End: Original claim ends—accord and satisfaction.

IRAC Outline

Issue

Does accepting ₹20 lakhs with a receipt amount to full discharge of a larger debt?

Rule

Section 63 (accept any satisfaction) + Section 41 (third-party performance bars further enforcement).

Application

Payment made and receipt signed contemporaneously stating full satisfaction; intention to settle is clear.

Conclusion

Debt discharged by agreement; no balance recoverable.

Glossary

Accord: The agreement to accept something different from the original promise.
Satisfaction: The actual performance/payment accepted under the accord.
Discharge: The original obligation ends because the accord is satisfied.