SUPREME COURT OF INDIA
M/s Bhagwati Prasad Pawan Kumar
Vs
Union of India
Civil Appeal No. 150-151 of 2001
(B. P. Singh and R.V. Raveendran, JJ)
25.05.2006
B.P. SINGH, J.
1. 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.
2. 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".
3. 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 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".
4. 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.
5. 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 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.
6. 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 1973 AIR(Gau) 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.
7. 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.
8. 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.
9. 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".
10. 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.
11. 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.
12. In the impugned judgment and order, the Division Bench of the High Court
has agreed with the view in Rameshwarlal Bhagchand case (supra).
13. We may refer to the other decisions cited at the Bar.
14. In 1972 AIR(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 re g 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 amounted to discharge of the contract.
15. In 1977 AIR(MP) 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."
16. The decision of this Court in : 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.
17. 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.
18. 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 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.
19. 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 by retaining and
encashing the cheques, without reservation. Its subsequent change of mind and
consequent protest did not matter.
20. 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.
21. In this view of the matter these appeals must fail. Accordingly these
appeals are dismissed, but without any order as to costs.