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CASE NO.: Appeal (civil)  150-151 of 2001

PETITIONER: M/s Bhagwati Prasad Pawan Kumar                             

RESPONDENT: Union of India                                                    

DATE OF JUDGMENT: 25/05/2006

BENCH: B.P. SINGH & R.V. RAVEENDRAN

JUDGMENT: J U D G M E N T  

B.P. SINGH, J.

       These two appeals by special leave have been preferred by the  appellant against the judgment and order of the Gauhati High Court in    MA (F). No.180 of 1996 dated May 19, 2000 and the order passed in  Review Petition No.85 of 2000 dated July 28, 2000.  The High Court  by its judgment and order impugned dismissed the appeal preferred by  the appellant against the order of the Railway Claims Tribunal,  Guwahati Bench dated August 30, 1996 in Application No.915 of  1993.  The review petition preferred against the judgment and order of  the High Court was also rejected by order dated July 28, 2000.

       The factual background in which the dispute arose is as  follows:-

       Two consignments of iodised salt were booked in favour of the  appellant.  The first consignment consisted of 767 bags and the second  744 bags.  These consignments were not delivered.  The appellant,  therefore, lodged two claims dated April 26, 1991 claiming the value  of the said goods, namely Rs.53,264/- and Rs.51,686/- in respect of  the two consignments.  By letters dated April 7, 1993 (despatched in  August, 1993) the Railways admitted the claims only to an extent of  Rs.9,111/- and Rs.9,032/- and enclosed two cheques in favour of the  appellant for the sum of Rs.9,111/- and Rs.9,032/- in respect of the  two claims.  Both the cheques were dated July 27, 1993.    The letters  contained  the following condition :-

"In case the above offer is not acceptable to you, the  Cheque should be returned forthwith to this office:  failing which it will be deemed that you have accepted  the offer in full and final satisfaction of your claim. The retention of this cheque and/or encashment thereof  will automatically amount to acceptance in full and final  satisfaction of your above claim without reason and you  will be estopped from claiming any further relief on the  subject".

On receipt of two letters alongwith the two cheques, the  appellant wrote to the Railways two identical letters of August 20,  1993 stating that the claims were placed under PROTEST and could  not be accepted and that the balance amount should be remitted within  15 days.  We extract below one of the letters dated August 20, 1993:-  

"We regret to inform you that our above noted claim has

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been settled for Rs.9111/- instead of Rs.53284/- the  claimed amount.  The same is therefore placed under :  PROTEST : and cannot be accepted.  Please therefore  remit the balance amount to us within a period of 15 days  from the date of receipt of this letter, failing which, we  shall be compelled to lodge a Civil suit against the Rly  for recovery of the balance amount.  Please treat this as  most urgent".

       It is not in dispute that the cheques were encashed, though the  exact date of encashment is not apparent from the record.  It is also  not disputed that the balance amount claimed by the appellant was not  paid by the Railways.  In these circumstances the appellant filed a  claim application before the Railway Claims Tribunal, Guwahati  Bench for Rs.21,151/- and Rs.20,258/- (after adjusting the freight  payable namely Rs.23,022/- and Rs.22,396/-) in all Rs.41,409/- as  balance compensation in regard to the two invoices.                    Before the Railway Claims Tribunal the Railways pleaded full  and final settlement since the cheques were not returned and were in  fact encashed.  The Tribunal took the view that there was no scope for  the applicant to treat the amount as part payment by making a protest  and if the applicant found the amount to be insufficient he should have  returned the cheques because the offer made by the Railways was in  very clear terms, namely \026 that the amount could be accepted only in  full and final satisfaction of the claim or else the cheques had to be  returned.  In this view of the matter the claim application was  dismissed by the Railway Claims Tribunal.   

The appellant preferred an appeal before the High Court which  came up for hearing before a learned Single Judge of the High Court  who referred the matter for consideration by a Division Bench, since it  appeared to the learned Judge that there was a conflict of opinion  between two judgments of Single Judges of the Court in case reported  in AIR 1973 Gauhati 111 : Union of India vs. M/s. Rameshwarlal  Bhagchand and an unreported decision in Second Appeal No. 77 of  1982 of March 11, 1991 (M/s. Assam Bengal Cereals Ltd. vs.  Union  of India).  The matter was heard by a Division Bench of the High  Court and by judgment and order of May 5, 2000 the appeal preferred  by the appellant was dismissed.  

The moot question that arose for consideration of the High  Court was whether the acceptance of the two cheques by the appellant  and their encashment by it did not amount to acceptance of the offer  contained in the two letters of April 7, 1993.  The aforesaid letters of  April 7, 1993, as noticed earlier, offered the amounts contained in the  two cheques in full and final settlement of appellant’s claim and  further provided that in case the offer was not acceptable, the cheques  should be returned forthwith.  It is the case of the Railways that by  retaining the cheques and encashing them, the appellant signified its  acceptance of the amounts comprised in the two cheques in full and  final settlement of its claims.  Such acceptance by conduct is  recognized by Section 8 of the Contract Act.   

On the other hand the appellant contended that it had written a  letter rejecting the offer and placing the claims "under protest" and  called upon the respondent to pay the balance amount claimed by it.   The appellant, therefore, submitted that there was no acceptance by  conduct as envisaged by Section 8 of the Contract Act, and that its  retention of the cheques must be viewed in the light of the protest  made by it under its letters of August 20, 1993.   The sole question  which, therefore, arises for consideration by us is whether by its  conduct, the appellant accepted the offer contained in the letters of the  Railways dated April 7, 1993.  

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Section 8 of the Contract Act reads as under :-

       "8.Acceptance by performing conditions, or  receiving consideration - Performance of the conditions  of a proposal, or the acceptance of any consideration for  a reciprocal promise which may be offered with a  proposal, is an acceptance of the proposal".

       The High Court considered the case of Rameshwarlal  Bhagchand (supra) on which reliance was placed by the Raiwlays.  In  that case the plaintiff-respondent, M/s. Rameshwarlal Bhagchand had  transported 210 bags of groundnut through Railways, but when it took  delivery, the consignments were found to be so damaged as not fit for  human consumption.  It was so certified by the Railway Officer  concerned.  The consignee served a notice on the Railway  Administration claiming compensation in the sum of Rs.2,368.25 ps..   The General Manager sent a cheque in the sum of Rs.1173.19 ps. to  the consignee on May 5, 1964 alongwith a letter stating that the  cheque was being sent in full and final settlement of the claim.  The  consignee encashed the cheque but subsequently communicated to the  General Manager by its letter dated July 29, 1964 that the cheque  received satisfied only a part of the claim and that the balance amount  should be remitted.  Since the General Manager failed to make  payment of the balance amount claimed by the consignee a suit for  recovery of the balance amount was filed.  In these facts the High  Court took the view that the plaintiff having encashed the cheque  without first communicating to the General Manager that it did not  agree to the proposal made by him, it must be assumed in terms  Section 8 of the Contract Act to have accepted the proposal by mere  acceptance of the cheque.  It was held that the fact that it wrote a letter  on July 29, 1964 after encashing the cheque, and denying that the  amount had fully settled its claim, did not alter the position.  If the  consignee did not agree to the offer made by the General Manager in  his communication dated May 5, 1964, it should have communicated  its refusal to accept the offer, before encashing the cheque.  Otherwise  it would be assumed that the cheque was encashed on the terms  offered by the General Manager, and only later the consignee changed  its mind after realizing the proceeds of the cheque.  

       The judgment of the Gauhati High Court in Assam Bengal  Cereals Limited (supra) proceeded on a different set of facts.  In that  case the  consignee/claimant had received an offer from the Railways  to accept the cheque in full and final settlement of its claim.  In  response thereto, by letter addressed to the Railways, it informed the  Railways that the cheque had been retained and the Railways should  give reasons for withholding the balance amount.  It was stated in the  letter that if no reply was received within 15 days, the acceptance of  the cheque would not amount to full and final settlement.   In fact, the  cheque was not encashed for 15 days after issuance of the letter by the  claimant/consignee.  In these facts it was held that that principle laid  down in  Rameshwarlal Bhagchand case (supra) was not applicable to  the case since the claimant had responded to the offer of the Railways  demanding from them the reasons as to why the entire claim was not  admitted, and further provided that unless reasons are assigned within  15 days from the receipt of the letter, the retention of the cheque  would not be treated as acceptance of the payment in full and final  settlement.   In the peculiar facts of the case, therefore, it was held that  the encashment of the cheque did not amount to acceptance of the  offer made by the Railways.   

       In the impugned judgment and order, the Division Bench of the  High Court has agreed with the view in Rameshwarlal Bhagchand

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case (supra).   

       We may refer to the other decisions cited at the Bar.

                In AIR 1972 All 176 : Amar Nath Chand Prakash  vs. Bhearat  Heavy Electricals Limited the facts were that the respondent gave a  contract to the appellant for doing certain construction work which  was completed by the first week of March 1965.  The appellant  company prepared a final bill of the work done on March 29, 1965.   The appellant signed a no claim declaration and also gave a receipt in  token of accepting the amount found due to the appellant.  The  appellant thereafter raised a dispute alleging short payment etc.  It  invoked the arbitration clause and called upon the respondent to  appoint an arbitrator.  When the respondent did not respond to the  notice issued by the appellant, an application under Section 20 of the  Arbitration Act was filed by the appellant.  The respondent contested  the application contending that the appellant having given a no claim  certificate in final settlement of its claim and having accepted the  payment by means of a cheque in full and final settlement of its dues,  it amounted to discharge of the contract alongwith which the  arbitration agreement also stood extinguished and, therefore, there  was no dispute capable of being referred to arbitration.  The High  Court considered the material on record and found that though the  declaration was signed by the appellant, as also the memorandum of  payment, in the final bill there was an endorsement to the effect that  the appellant had accepted the payment under protest.  This was done  on March 29, 1965 whereas the cheque was actually prepared and  delivered much later on December 14, 1965. In the absence of any  oral evidence, the High Court was required to construe the document  in order to ascertain the intention of the contractor in making such an  endorsement and of the company in permitting such an endorsement  to be made.  In the facts of the case the High Court observed that the  endorsement dispelled any intention to remit the performance in  regard to the balance of the claim.  On the contrary it clearly evinced  that the receipt of the amount was not unconditional so as to effect the  discharge of the contract.   On the contrary it safeguarded the position  of the contractor and indicated that he was not accepting the payment  without any reservation.   The appellant specifically stated that he was  receiving the money ’under protest’ which clearly amounted to  making a reservation.  The reservation could only be that the  acceptance of payment was not in discharge of the contract.   Consequently it could not be said that the appellant dispensed with, or  remitted the performance of the contract, for the rest of his dues.   Reliance was placed on the principle enunciated in (1889) 22 QBD  610 : Day  vs.  Mciea in which it was observed :-            "If a person sends a sum of money on the terms that it is  to be taken, if at all, in satisfaction of a larger claim: and  if the money is kept it is a question of fact as to the terms  upon which it is so kept.  Accord and satisfaction imply  an agreement to take the money in satisfaction of the  claim in respect of which it is sent. If the accord is a  question of agreement, there must be either two minds  agreeing or one of the two persons acting in such a way  as to induce the other to think that the money is taken in  satisfaction of the claim, and to cause him to act upon  that view.  In either case it is a question of fact."

        Applying this principle it was held that there was no accord and  satisfaction in the sense of bilateral consensus of intention.  The  appellant made it clear that it was accepting the money ’under  protest’, that is, conditionally.  Under the circumstances it cannot be  said that signing the no claim certificate and the grant of the receipt

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amounted to discharge of the contract.  

In  AIR 1977 Madhya Pradesh 215 : Union of India and  another  vs.  M/s. Gangaram Bhagwandas, the respondent had filed a  suit on January 6, 1970 claiming by way of damages a sum of   Rs.504.58 ps. on account of goods being damaged due to negligence  and misconduct on the part of the Railways and its employees.  While  the suit was pending a cheque for Rs.283.05 was sent under cover of a  letter dated March 6, 1970 which stated that the amount was being  sent in full and final settlement of the claim.  The respondent  encashed the chque.  The High Court on facts found that there was no  denying the fact that the plaintiff did not accept the cheque in full  satisfaction.  It had not passed a receipt in full satisfaction, nor did it  send a receipt to the Railways acknowledging receipt of the amount.   On the contrary, even after receiving the cheque the respondent  prosecuted the suit for the balance of the amount.  The Railway had  led no evidence to show that the intention of the plaintiff was to  accept the cheque in full and final settlement of its claim.  On this  finding, relying upon the principle laid down in Day  vs.  Mciea it was  held that :  

"The question was thus primarily one of fact and since  the defendant did not choose to lead any evidence on the  point nor are there such circumstances brought on the  record to lead to the conclusion that the cheque was  accepted in discharge of the whole debt, I am unable to  come to the conclusion that the acceptance of the cheque  amounted to satisfaction of the whole claim."              The decision of this Court in AIR 1963 SC 250 : Lala  Kapurchand Godha and others  vs.  Nawab Himayatalikhan Azamjah,  may not be of much assistance as  in that case apart from the fact that  the appeal was decided with reference to Section 63 of the Contract  Act,  there was clear evidence on record that the plaintiffs therein had  received the sum of Rs. 20 lakhs in full satisfaction of their claim and  duly discharged the promissory notes by endorsement of "full  satisfaction" and received payment in full.   

       Section 8 of the Contract Act provides for acceptance by  performing conditions of a proposal.  In the instant case, the Railways  made an offer to the appellant laying down the condition that if the  offer was not acceptable the cheque should be returned forthwith,  failing which it would be deemed that the appellant accepted the offer  in full and final satisfaction of its claim.  This was further clarified by  providing that the retention of the cheque and/ or encashment thereof  will automatically amount to satisfaction in full and final settlement of  the claim.  Thus, if the appellant accepted the cheques and encashed  them without anything more, it would amount to an acceptance of the  offer made in the letters of the Railways dated April 7,. 1993.  The  offer prescribed the mode of acceptance, and by conduct the appellant  must be held to have accepted the offer and therefore, could not make  a claim later.  However, if the appellant had not encashed the cheques  and protested to the Railways calling upon them to pay the balance  amount, and expressed its inability to accept the cheques remitted to  it, the controversy would have acquired a different complexion.  In  that event, in view of the express non acceptance of the offer, the  appellant could not be presumed to have accepted the offer.  What,  however, is significant is that the protest and non acceptance must be  conveyed before the cheques are encashed.  If the cheques are  encashed without protest, then it must be held that the offer stood  unequivocally accepted.  An ’offeree’ cannot be permitted to change  his mind after the unequivocal acceptance of the offer.           

It is well settled that an offer may be accepted by conduct.  But  conduct would only amount to acceptance if it is clear that the offeree

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did the act with the intention (actual or apparent) of accepting the  offer.  The decisions which we have noticed above also proceed on  this principle.  Each case must rest on its own facts.  The courts must  examine the evidence to find out whether in the facts and  circumstances of the case the conduct of the "offeree" was such as  amounted to an unequivocal acceptance of the offer made.  If the facts  of the case disclose that there was no reservation in signifying  acceptance by conduct, it must follow that the offer has been accepted  by conduct.  On the other hand if the evidence disclose that the  "offeree" had reservation in accepting the offer, his conduct may not  amount to acceptance of the offer in terms of Section 8 of the Contract  Act.   

Coming to the facts of this case if the appellant, before  encashing the cheques, had sent the communication dated August 20,  1993, it could perhaps be argued that by retaining but not encashing  the cheques, it did not intend to accept the offer made in the letter of  the Railways dated April 7, 1993.  At the same time if the evidence  disclosed that it encashed the cheques and later sent a protest, it must  be held that it had accepted the offer unconditionally by conveying its  acceptance by the mode prescribed, namely \026 by retaining and  encashing the cheques, without reservation.  Its subsequent change of  mind and consequent protest did not matter.  

In the instant case there is neither pleadings nor evidence on  record as to the date on which the cheques were received and the date  on which the same were sent for encashment.  It is, therefore, not  possible to record a categoric finding as to whether the letters of  protest were written after encashing the cheques or before encashing  the cheques.  It was for the appellant to plead and prove that it had not  accepted the offer and had called upon the Railways to pay the  balance amount.  This it must have done before encashing the  cheques.  If the appellant encashed the cheques and then wrote letters  of protest to the Railways, it cannot be held that it had not accepted  the offer by conduct, because at the time when it sent the cheques for  encashment, it had not conveyed its protest to the offerer.   In the  absence of any pleading or evidence to establish that the encashment  of the cheques was subsequent to the protest letters by the appellant, it  is not possible to hold that by encashing the cheques the appellant had  not adopted the mode of acceptance prescribed in the letters of the  Railways dated April 7, 1993.  In the absence of such evidence it must  be held that by encashing the cheques received from the Railways, the  appellant accepted the offer by adopting the mode of acceptance  prescribed in the offer of the Railways.   

In this view of the matter these appeals must fail.  Accordingly  these appeals are dismissed, but without any order as to costs.  27779