2006 Supreme(SC) 536

2006(5) Supreme 85
SUPREME COURT OF INDIA
(From Guwahati High Court)
B.P. Singh and R.V. Raveendran, JJ.
M/s Bhagwati Prasad Pawan Kumar — Appellant
versus
Union of India — Respondent
Civil Appeal Nos. 150-151 of 2001
Decided on 25-5-2006
Counsel for the Parties :
For the Appellant : Rajiv Mehta, Advocate.
For the Respondent : A. Sharan, ASG, T.S. Doabia, Sr. Advocate, Ms. Sunita Sharma, D.S. Mahra, Mrs. Anil Katiyar, Advocates.

IMPORTANT POINT
Section 8 of the Contract Act provides for acceptance by performing conditions of proposal and if there is protest it should be before performing condition before the offer could be considered to have been accepted.

Headnote:Contract Act, 1872 — Section 8 — Acceptance by performing conditions or receiving consideration — Consignment of goods booked with Railways not delivered to consignee and two claims claiming value of goods at Rs. 53,264 and Rs. 51,686 were lodged — Railways admitted claims only to extent of Rs. 9,111 and Rs. 9032/- and enclosed two cheques favouring appellant with letters that cheque be encashed only if claim was accepted fully satisfied — Appellant wrote two letters to Railways stating that claims were placed under protest and demanded balance amount and cheques were encashed — Claim application was filed before Railway claims Tribunal — Tribunal dismissed application holding that appellant accepted amounts of cheque in full and final settlement of claim — High Court dismissed appeal — Appeal — Whether acceptance of two cheques by appellant and their encashment by it did not amount to acceptance of the offer contained in two letters of respondent — Protest and non-acceptance must be conveyed before cheques were encashed — Offeree could not be permitted to change his mind after unequivocal acceptance of offer — No evidence to hold categorical finding whether letters of protest were written after encashing cheques or before encashing the cheques — It was for appellant to plead and prove that he had not accepted offer and had called upon Railways to pay balance amount — By encashing cheques appellant must be held to have accepted the offer — No reason to interfere.

       Held : 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.(Para 7)

       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.(Para 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 it 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.(Para 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. It subsequent change of mind and consequent protest did not matter.(Para 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.(Para 21)