Case: M/S. Bhagwati Prasad Pawan Kumar Vs. Union Of India

2. 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 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.

Reasoning: 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 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 Act19. 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 matter20. 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