On 18th November 2022, the Supreme Court in a Division Bench comprising of Justice A.S. Bopanna and Justice Pamidighantam Sri Narasimha observed that interpretation of contracts concerns the discernment of the true and correct intention of the parties to it. Words and expressions used in the contract are principal tools to ascertain such intention. (Food Corporation Of India & Ors. Vs. Abhijit Paul)
Facts of the Case:
The Corporation, appellant herein, notified a Tender inviting a bid from road transport contractors for transporting foodgrains from railway siding, Churaibari in Assam, to Food Security Depot Chandrapur in Tripura, on a regular basis for a period of two years. The Respondent – Mr. Abhijit Paul, was selected as the successful tenderer. He deposited an amount of Rs. 44,95,000/¬ towards the security deposit, leading to the execution of the contract.
The Corporation awarded several such Work Orders to the Respondent and also to other contractors for transportation of foodgrains between its multiple Food Security Depots. The contract was discharged by performance by July 2014. More than a year thereafter, by a letter dated 22.12.2015 followed by a Notice dated 29.11.2016, the Corporation called upon the contractor to reimburse the amount of demurrages imposed on it by the Railways.
The Corporation explained that it had incurred heavy losses on account of demurrages due to the contractor’s inability to readily provide trucks at railway sidings, inhibiting the Corporation from unloading foodgrains from railway wagons within the “free time” specified by the Railways. The Corporation sought to recover the demurrages from the contractor by withholding the security deposit tendered under the Work Order.
The contractor filed a WP for quashing the illegal and arbitrary action of the corporation which was allowed. The corporation filed a writ appeal which was dismissed on the grounds of delay and a review petition which was also dismissed by the Division bench. The second and third set of appeals arose out of the SLP’s filed by the Contractor.
Contentions of the Appellant:
The counsel for appellant started submissions preempting a preliminary objection about the dismissal of a SLP against an adverse order of the HC on the same issue and relatedly, about not appealing another adverse decision of the HC of Tripura on identical issues. Dismissal of a SLP does not operate as res judicata. He explained that the Corporation refrained from appealing against the judgment of the HC because the amount recoverable therein was low.
“The expression “charges” in clause XII (a) of the Work Order clearly includes demurrages, and the Corporation is empowered to recover the same. The action of the Corporation is unexceptionable as it merely followed the directions of the High Court in an earlier round of litigation where the court directed it to issue notice before taking a decision on the contractors’ liability.”
The cases of Agmatel India Pvt Ltd v. Resoursys Telecom & Ors, Raichand Amulakh Shah and Anr. v. Union of India and Trustees of the Port of Madras v. Aminchand Pyarelal & Ors were referred.
Contentions of the Respondents:
The counsel for the respondents submitted that “Corporation acted arbitrarily. It failed to follow due process of law to determine the liability of the contractors, despite specific instructions in a previous round of litigation. Contractors were not responsible for loading and unloading of foodgrains from railway wagons. Hence, the event which leads to the incurrence of demurrages, i.e., delayed unloading of foodgrains from railway wagons, was not within the scope of contractor’s responsibilities. The Corporation was not entitled to be a judge in their own cause and to unilaterally determine the liability with respect to demurrages.” The cases of State of Karnataka v.Shree Rameshwara Rice Mills, BSNL and Anr. Vs. Motorola India (P) Ltd and J.G. Engineers (P) Ltd v. Union of India were referred.
Observations and Judgment of the Court:
The hon’ble court observed that “It is evident from the contractual provisions and also the admissions of the Corporation in written submissions, that the task of loading or unloading of foodgrains from the railway wagons was not a part of the contract. Thus, based on interpretation of the expression “charges” in the contractual context, we are of the opinion that it did not include liability on account of demurrages. Consequently, the Corporation cannot impose and collect demurrages from the contractors.
With the aid of the provisions in the Handling and Transport Contract from 2010, we are able to understand the intention of the parties while entering into the present Road Transport Contracts. As the present contracts do not involve the task of loading and unloading of foodgrains from the railway wagons as a part of the contractors’ responsibility, there is no clause enabling the recovery of demurrages from them by the Corporation.
Thus, our interpretation of the expression “charges”, as exclusive of liability for demurrages, stands confirmed.” The case of Provash Chandra Dalui and Anr. v. Biswanath Banerjee and Anr. and BESCOM v. E.S. Solar Power Pvt Ltd and Ors were referred by the court.
The Civil Appeals file by the Corporation were dismissed and the decision of the High Court of Tripura in Writ Appeal and Review Petition was upheld.
Case: Food Corporation Of India & Ors. Vs. Abhijit Paul
Citation: CIVIL APPEAL NOS. 8572¬8573/2022 with CIVIL APPEAL NOS.8574¬8579/2022 with CIVIL APPEAL NOS.8580¬8581/2022
Bench: Justice A.S. Bopanna and Justice Pamidighantam Sri Narasimha
Date: November 18, 2022.
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