The Union Of India v. M/S. Babulal Uttamchand Bhandari

Patel, J.:— These three revisional applications are filed by the Union of India against decrees of the Small Causes Court allowing the plaintiff's claim for various amounts in respect of loss sustained by them by reason of the loss of goods consigned by them to various places in varying quantities.

2. The facts are admitted that the goods were lost by reason of the negligence of the Railway Administration. In respect of the claims the plaintiffs had served notices to the Union and the Railway Administration, making a claim in respect of the amounts which, according to them, was the loss caused to them. In civil revision application 475/66, out of the total claim made by the plaintiffs the Railway Administration paid a sum of Rs. 1,038.23 P.; in civil revision application 835/66, the Railway Administration paid a sum of Rs. 612.97 P.; and in civil revision application 1286/66, the Railway Administration paid a sum of Rs. 1,083. The plaintiff in each of these cases sued for the balance which, according to him, was due; in the first case it being Rs. 335.15 P., in the second Rs. 445.80 P. and in the third Rs. 300. Amongst other things, the defence of the Union was that as the amount was paid in full and final settlement of the claim, the plaintiffs were not entitled to sue for the balance now claimed by them.

3. The Court below held that the plaintiffs had not accepted the cheques in full and final settlement of the claims and, therefore, they were entitled to sue. As the plaintiffs established negligence on the part of the Railway Administration, it accordingly made decrees in favour of the plaintiffs.

4. Ordinarily, the scope of a revisional application, even under s. 25 of the Presidency Small Causes Court Act, is very limited. See the decisions in Gokal Chand-Jagan Nath v. Nand Ram Das-Atma Ram . 1938 41 Bom. L.R 128, P.C at p. 135. and in Vithalbhai Motibhai v. The Nadiad Electric Supply Co. Ltd. . 1940 41 Bom. L.R 1098. In the cases, however, the point is of some importance and I have, therefore, gone into the question raised at the Bar.

5. In each of these cases, the Railway Administration sent the cheques along with a printed form filled up and signed by the Chief Commercial Superintendent. This was as below:

“Re: Compensation claimed by you.

Inv. No./PWB No. ………….. of ……………..

Ex. ………………………. to …………..

(Bill part No. …………………………….)

Payment to you by a crossed order cheque/M.O Rs. ……………….. in full and final settlement of the claim is being arranged.

Please accept our sincere regrets for the inconvenience caused.

Yours faithfully,

Chief Commercial Superintendent.”

6. It is claimed on behalf of the Union that as the plaintiffs accepted and cashed the cheques, s. 8 of the Contract Act applies. The plaintiffs say that s. 8 may apply to cases where there is unconditional acceptance, and as in this case the plaintiffs did not accept the cheques unconditionally, the plaintiffs are entitled to claim the balance.

7. In England, in such cases the principle of accord and satisfaction is applied. In Day v. McLea . 1889 22 Q.B.D 610. Lord Esher (M.R) said (p. 612):

“The contention, therefore, was that the plaintiffs having kept the cheque must be taken in law to have accepted it in satisfaction. Upon the other side it was contended that the keeping of the cheque could only be evidence of accord and satisfaction, and that whether or not it was taken in satisfaction was a question of fact to be determined according to the circumstances of the case. That argument raises the question whether the fact of keeping a cheque sent in satisfaction of a claim for a larger amount is in law conclusive that there has been an accord and satisfaction. It is said that inference of law must be drawn even though the person receiving the cheque never intends to take it in satisfaction and says so at the time he receives it. All I can say is that if that is a conclusive inference it would be one contrary to the truth. I object to all such inferences of law.”

8. Bowen L.J said (p. 613):

“…It seems to me, as a matter of principle as well as of authority, that the question whether there is an accord and satisfaction must he one of fact. 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 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”.

9. Similarly in Neuchatel Asphalte Co. v. Barnett . [1957] 1 All E.R 362., Denning L.J said (p. 365):

“… It is a well settled rule of construction that, if one party puts forward a printed form of words for signature by the other and it is afterwards found that those words are inconsistent with the main object and intention of the transaction as disclosed by the terms specially agreed, then the court will limit or reject the printed words so as to ensure that the main object of the transaction is achieved. We recently had occasion to invoke this rule in a case when an estate agent sought to get commission on a transaction ‘subject to contract’. We do not allow printed forms to be made a trap for the unwary. So, in the present case, words of this kind on the back of a cheque cannot be made a trap for the unwary: and this is so, even though they are typed and not printed”

10. when a similar question arose.

11. Similarly, the same principles are applied in India in Tata L. & E. Co. v. S. Kartar Singh . [1961] A.I.R Pat. 37. Dipchand v. M. Abhechand & Co. . [1962] A.I.R Cal. 166. and Kapurchand v. Himayatalikhan . [1963] A.I.R S.C 250.. In the last case, the Supreme Court on facts held that as the plaintiff had unconditionally accepted the smaller amount without informing the defendants that he would claim the balance, he was not entitled to sue for the balance.

12. In principle, I do not see how any other conclusion is possible. Sections 3 to 10 of the Contract Act lay down the general principles of formation of agreements and ss. 7 and 8 are particularisation of the principles earlier formulated. If there is a proposal and it is accepted unconditionally, then an agreement is formed between the parties. But if the other side accepts it with a qualification then there is no acceptance but a counter proposal, and if it is not accepted by the proposer, there is no agreement. Section, 7 clarifies this principle and provides that acceptance must be (1) absolute and unqualified and expressed in some usual and reasonable manner unless the proposer pre scribes the manner in which it is to be accepted and that if the acceptance is not in the manner prescribed by the proposer, the proposer must within a reasonable time after receipt of the acceptance insist that his proposal should be accepted as required by him. If this is not done, the section says “he accepts the acceptance”. Section 8 is a further amplification of the principle where from the conduct of a party his acceptance is inferred. This section provides that the performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise is an acceptance of a proposal. Section 8 must be read along with s. 7. In order that acceptance of the proposal be inferred, the acceptance of the consideration must be unconditional. Of course, if by any action on the part of the acceptee the proposer cannot be restored to his former position, then the acceptee cannot be permitted to say that his acceptance should be treated as other than as per the original proposal. But in the absence of such estoppel being applicable I do not see how conditional acceptance can become absolute acceptance when there are no such words in s. 8.

13. In this connection, I may refer to the decision in Haji Mahomed Haji Jiva v. E. Spinner . 1900 I.L.R 24 Bom. 510, S.C 2 Bom L.R 691. which raised similar questions in reference to a certain offer made by the plaintiff to the defendant. It is not necessary to state the facts of the case in detail. It is sufficient to state that the defendant had made an offer to the plaintiff offering to purchase certain bales on certain terms. Thereafter, the plaintiff wrote to the defendant confirming the indent but with some additional terms. Thereupon, the defendant returned this letter saying that, he would claim the goods on the terms originally offered. Ultimately, when the goods were received the defendant insisted and accepted the goods on the terms of the original offer, while the plaintiff insisted that the defendant was bound to take the goods according to the terms mentioned by the plaintiff. The plaintiff declined the delivery of goods and sold it in the market and sued to recover the difference between the agreed price and the price realised on the same together with interest and charges. While considering the question as to the effect of the inactivity of the defendant, Sir Lawrence Jenkins said (p. 524):

“…I take it to be clear that a person making a proposal cannot impose on the party to whom it is addressed, the obligation to refuse it under the penalty of imputed assent, or attach to his silence the legal result, that he must be deemed to have accepted it.”

14. Having regard to the defendant's conduct, the learned Chief Justice held that he had not accepted the obligations under the proposal of the plaintiff. On the contrary, his behaviour pointed to other things.

15. I may refer to the following observations in Sir Dinshaw Mulla's Contract Act, 8th edn. under s. 8 at page 65 where the learned author says:

“No doubt the acceptance of an offered consideration, as such, amounts to giving the promise (whether reciprocal or not) for which it was offered, or else raises an equivalent obligation. But a thing which is offered in one right and for one purpose may be taken under a different claim of right and with a different intent; and in that case (which is exceptional but of some importance) the legal result will not be a contract between the parties, whatever else it is capable of being, unless indeed the party receiving the thing so conducts himself as to lead the proposer reasonably to conclude that there is an acceptance according to the offer; and then the proposer can hold him liable on the universal principle that a man's reasonably apparent intent is taken in law to be his real intent. We cannot suppose that the present section is intended to preclude all inquiries of this kind by making every receipt in fact of a thing offered by way of consideration a conclusive acceptance of the proposal.”

16. With respect, I accept these observations as correct interpretation of the provisions of s. 8. In my view, this section was not intended to give a right to per-sous who had certain obligations to perform, to perform a part, imposing a condition that penalty for silence would be acceptance.

17. Ultimately, the question has to be decided by reference only to s. 63 in order to arrive at the right conclusion on the question as to whether the plaintiffs had accepted the amount offered to them in full satisfaction of the amount due to them. Whether or not, the matter related merely to the performance of the contract or to payment, of damages would not make any difference in the application of the principle.

18. Mr. Vaidya relied firstly upon the decision of the Supreme Court in General Assurance Society v. L.I.C of India . [1964] A.I.R S.C 892.. The question in this case was entirely different. On the Life Insurance Corporation taking over the business of the appellant Company, it became liable under the Act to pay to the latter compensation and was entitled to set off an amount representing the paid-up capital of the insurer and assets representing such part which were allotted to the controlled business of the insurer. The Life Insurance Corporation made a composite offer offering a certain amount in full satisfaction of the compensation payable to the General Assurance Society for the acquisition of its controlled business and making a set off against the said sum of an amount of Rs. 1,71,365, being part of the paid-up capital of the Company which had been allocated to the controlled business of the Company under the rules of the Corporation. To this offer, the Company made a reply that it had accepted only a part of the offer and not the whole. On receiving this reply, the Life Insurance Corporation referred the whole matter to the Tribunal. After the decision of the Tribunal, the matter went to the Supreme Court and a contention was made that the Tribunal had no jurisdiction to decide the matter, as in respect of the part of the proposal accepted by the Company there was no dispute between the parties. In this context the Supreme Court said (p. 895):

“…When one party makes a composite offer, each part thereof being dependent on the other, the other party cannot by accepting a part of the offer, compel the other to confine its dispute only to that part not accepted, unless the party offering the composite offer agrees to that course.”

19. Evidently, this case has no application at all. It only lays down the principle that where there are two heads of dispute dependent upon each other, one party to the dispute cannot choose whether or not the dispute should be settled as a whole or only piecemeal.

20. Mr. Vaidya then invited my attention to the decisions in Behari Lal v. Radhye Shyam;10 Ishaq v. Madan Lal . [1965] A.I.R All. 34. and Amrit Banspati Co. v. Union of India, 12 The decision in Behari Lal v. Radhye Shyam is clearly not a case in point. In this case, a tenant had made certain repairs to the rented premises and then sent a cheque for the rent, deducting the expenses incurred by him, with a covering letter showing the amounts deducted on account of the repairs. The plaintiff accepted the cheque without any objection whatsoever and at no time informed the tenant that he was accepting it in part payment. Later on, he sued the tenant for the balance. Clearly, in this case, by his conduct the plaintiff indicated that he accepted the statement of account as correct and the amount in full satisfaction of the rent. The acceptance being unconditional, the case clearly fell within s. 8 of the Act. Ishaq Abdul v. Madan Lal is also a case which clearly fell within the ambit of s. 8. The plaintiff's agent contacted the defendant and accepted a sum of Rs. 51,000 in full satisfaction of the plaintiff's claim for the price of the goods. The plaintiff received that amount and thereafter brought a suit for damages for breach of the contract, after giving credit for the amount of Rs. 51,000. The Court held that the agent had implied authority to accept the payment in full satisfaction of the claim and that he having accepted the amount in full satisfaction of the claim could not be allowed to approbate and reprobate. The evidence clearly showed that the agent intended and did accept the sum of Rs. 51,000 in full satisfaction of the claim. Once that conclusion was reached, the plaintiff's claim was bound to fail. The last case relied upon is no doubt in point and supports the contention of Mr. Vaidya. The plaintiff sued the Union of India claiming costs of goods lost in transit by the Railway Administration. The Railway Administration had, in the course of correspondence, sent the plaintiff a cheque stating that it was in full and final settlement of the plaintiff's claim as in the present case. The plaintiff accepted the cheque and sued for the balance. In this case also, from the statement of facts as appearing from the judgment it does not appear that the plaintiff accepted the claim conditionally. If that is so, the case must really fall within s. 8. The learned Judge purported to follow the earlier decision of the Court observing in connection with s. 8 (p. 104):

“…The language of the section is rather vague but its meaning is clear. It is based on the principle that if an offer is made subject to a condition, the offeree cannot accept the benefit under the offer without accepting the condition. He cannot take the attitude, ‘I shall accept the benefit but reject the condition’.”

21. With respect, I cannot bring myself to agree with this observation of the learned Judge. This is not a case where any benefit is being given to the plaintiffs. No one obliged the defendants to send the part amount as they did. In the present case, the plaintiffs had clearly indicated to the Railway Administration that the Railway Administration was in the habit of sending cheques in this manner. The plaintiffs made it also clear that they would accept cheques only as part-payment of their claims due from the Railway Administration. If the cheques were sent under these circumstances, it is impossible to permit the Railway Administration then to say that “even though you intimated to us in this manner, still since you have accepted the cheques, you must in law lose the entirety of your claim”.

22. In the result, in my view the decrees are rightly made. The Rule in each case is discharged with costs.

23. Rule discharged.