M/S. BHAGWATI PRASAD PAWAN KUMAR versus UNION OF INDIA

Citation: [2006] SUPP. 2 S.C.R. 975 · Decided: 25-05-2006 · Supreme Court of India · Bench: B.P. SINGH · Disposal: Dismissed

Judgment (excerpt)

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MIS. BHAGWATI PRASAD PAWAN KUMAR 
v. 
UNION OF r_NDIA 
MAY 25, 2006 
[B.P. SINGH AND R.V. RA VEENDRAN, JJ.] 
Contract Act, 1872-Section 8-Acceptance by performing conditions 
of a proposal-Claim for compensation-Offer of payment of lesser amount 
than the amount claimed-With condition that if not acceptable, the cheque 
to be returned otherwise it would be deemed that offer was accepted in full 
and final satisfaction of its claim-Encashment of cheque-Protest and non 
acceptance of the offer conveyed to the offerer-Further demand of balance 
compensation-Propriety of-Held: The offer prescribed the mode of 
acceptance, and the offeree, by conduct accepted the offer-Hence, cannot 
make a claim later-Determination of acceptance of offer would depend on 
the facts and circumstances of the case-The conduct of offeree whether 
amounted to unequivocal acceptance of offer has to be tested in view of the 
evidence of the case-In the instant case, there is absence of pleading or 
evidence to establish the encashment of cheques subsequent to the protest-
By enchasing the cheques offeree accepted the offer by adopting mode of 
acceptance prescribed in the offer. 
Two consignments were booked in favour of appellant. As the same 
were not delivered, appellant lodged two claims claiming the value of 
the .said goods. Railways admitted the claims, but the amount was lesser 
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than that claimed. It enclosed two cheques, accompanying - Letters 
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stipulating the condition that if the offer was not acceptable to the 
appellant, they should be returned forthwith, failing which it would be 
deemed that the offer was accepted in full and final satisfaction. 
Appellant encashed the cheques (date of encashment not apparent from 
the records) and wrote letter to the Railways stating that the claims 
were placed under protest and could not be accepted and asked to remit 
the balance amount. The balance amount was not paid by the Railways. 
Appellant filed claim before Railway Claims Tribunal claiming balance· 
compensation with regard to the two invoices. The claim application was 
dismissed by the Tribunal. High Court dismissed the appeal, holding 
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that it would be assumed that the cheque was encashcd on the terms 
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975 
976 
SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R. 
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offered by the Railways. Hence the present appeals. 
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Dismissing the appeals, the Court 
HELD: I. 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 ifthe 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 
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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. The offer prescribed the mode of 
acceptance, and by conduct the appellant must be held to have accepted 
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the offer and therefore, could not make a claim later. 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. (984-B-F] 
2. 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. Each case must rest 
on its own facts. The courts must examine the evidence to find out 
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whether in the facts and cireumstances 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 discloses 
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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. (984-F-H, 985-A] 
3. In th

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