D. K. SETH, J. ( 1 ) THE question involved in this case is very short, viz. , whether the allowance of claim of Rs. 1,84,375 as bad debt out of the dues shown at Rs. 6,61,723 in the books of account could be justified under Section 36 (1) (vii) r/w Section 36 (2) of the IT Act, 1961. ( 2 ) RELYING on the facts Mr. Sailen Dutta, learned counsel for the Revenue, submitted that from the relevant materials available on record that in the present case the assessee was unable to establish that the debt became irrecoverable for the purpose of being written off simply on the ground that the assessee had agreed to accept the award of the arbitrator and which ultimately it had accepted. Therefore, according to him, the assessee had waived or foregone its claim by its conduct without attempting to recover the said amount of difference between the claim and the award. Therefore, once the claim is waived or foregone, there cannot be any question of there being any due. Therefore, the AO and the learned Tribunal was right in disallowing the said claim. ( 3 ) MR. J. P. Khaitan, learned counsel for the assessee, on the other hand, points out that once a dispute arises and it is referred to arbitration, one is bound by the award passed by the arbitrator which is subject to challenge in an appropriate proceedings and which was attempted in a company petition and ultimately the assessee had to accept the amount of the award when it found further attempt to recover the same futile. Such a decision was taken with ordinary commercial expedience after exhausting all avenues for recovery of the said amount, and as such the provision contained in Section 36 (2) was definitely satisfied. He further pointed out that the analogy on which the learned Tribunal had proceeded is preposterous and cannot be accepted. The dues always were there but it could not be realised despite the attempt to recover the same, through statutorily recognised and established legal method and manner of recovering a disputed claim. ( 4 ) WE have heard the learned counsel for the respective parties. The fact that the arbitrator had awarded lesser amount than the amount in dispute is not in dispute. ( 4 ) WE have heard the learned counsel for the respective parties. The fact that the arbitrator had awarded lesser amount than the amount in dispute is not in dispute. The award passed may either be governed under the Arbitration Act, 1940, or the Arbitration and Conciliation Act, 1996. An award is enforceable under the 1940 Act when the same is made rule of the Court and under the 1996 Act as a decree by fiction of Section 26 thereof. Thus, the agreement to abide by the award would not be a ground to hold that by accepting the award the assessee had waived or foregone its claim. It is a commercially prudent practice the parties are free to agree and opt for. Once agreed and opted for, the statute governing arbitration binds the parties and the award passed thereon subject to the provisions contained in the statute is binding on them. It appears that an attempt was made in the company petition where the award was questioned. But ultimately when the assessee had accepted the amount awarded by the arbitrator, neither the authorities under the 1961 Act nor the Court is supposed to question the wisdom of the assessee as to the business expedience under which it had accepted the amount, unless it is established to be frivolous or collusive. The fact that the amount was reflected in the books of account and was subject to taxation in earlier years is not in dispute and it becomes irrecoverable after exhausting the statutorily recognised and established and commercially accepted means of recovery. Therefore, it cannot be said that the provisions of Sub-section (2) of Section 36 were not satisfied. ( 5 ) THERE is a distinction between a giving up a claim or waiver of a claim and a failure to recover the claim. In this case, attempt was made to recover the same but failure to recover would not amount to waiver or foregoing the claim itself in view of the provisions contained in the Arbitration Act. No collusion between the assessee and its debtor has since been established or found by any of the authorities. In this case, attempt was made to recover the same but failure to recover would not amount to waiver or foregoing the claim itself in view of the provisions contained in the Arbitration Act. No collusion between the assessee and its debtor has since been established or found by any of the authorities. Therefore, the irrecoverability cannot be questioned and as such the irrecoverable part excluded in the award, having regard to the facts and circumstances of the case, satisfies the ingredients of Section 36 (2) and is a bad debt allowable for deduction under Section 36 (1) (vii ). ( 6 ) IN the circumstances, the appeal succeeds and is allowed. The order of the learned Tribunal is set aside and that of the CIT (A) is hereby affirmed. We answer the question in the affirmative in favour of the assessee and hold that the assessee is entitled to allowance of the claim of Rs. 1,84,375. 00.