Accord and satisfaction disputes can still be arbitrated when they arise from the contract itself.

A dispute over whether a contract was discharged by accord and satisfaction was treated as arising from the contract itself and therefore falling within the arbitration agreement. The Supreme Court rejected the view that such a question could not be referred to arbitration and held that the matter, including the issue of accord and satisfaction, had to be sent to arbitration under Section 20 of the Indian Arbitration Act. The arbitrator was to decide first whether accord and satisfaction existed and then proceed further only if necessary.

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Issues: Whether the dispute relating to discharge of the contract by accord and satisfaction was referable to arbitration under the arbitration clause.

Analysis: A dispute as to whether the contract stood discharged by accord and satisfaction arises out of the contract itself and is within the scope of the arbitration agreement. The High Court's view that such an issue could not be referred was incorrect, and the matter, including the question of accord and satisfaction, was required to be sent to arbitration under Section 20 of the Indian Arbitration Act.

Conclusion: The dispute was arbitrable and had to be referred to arbitration, with the arbitrator first deciding whether there was accord and satisfaction and, depending on that finding, proceeding further if necessary.

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