Calcutta High Court
Vijai Shree Pvt. Ltd vs Union Of India And Ors on 7 September, 2021
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
Original Side
Present :- Hon'ble Mr. Justice I. P. Mukerji
Hon'ble Mr. Justice Aniruddha Roy
APD 101 of 2017
with
CS No. 145 of 2006
Vijai Shree Pvt. Ltd.
Vs.
Union of India and Ors.
For the Appellant :- Mr. Dhruba Ghosh, Sr. Adv.
Ms. Vineeta Meharia,
Ms. Pritha Bhaumik,
Mr. Aniruddha Sinha,
Mr. Sanjay Bose, Advs.
For the respondent No.6 :- Mr. Aniruddha Mitra,
Mr. Sudhakar Prasad, Advs.
For the respondent No.9 :- Ms. Aparna Banerjee
Judgment On :- 07.09.2021
ANIRUDDHA ROY, J.:
1. This is an appeal from the impugned judgment and order dated January
10, 2017 passed by the learned Judge whereby and whereunder the Civil
Suit C. S. No. 145 of 2006 (Vijai Shree Limited vs. Union of India &
Ors.) was decreed.
2. The scope of the present appeal is very limited. The plaintiff/appellant is
principally aggrieved to the extent the impugned judgment was held
against it that, it would have to replace 288 numbers of damaged gunny
Bales in favour of the sixth defendant at its own cost in terms of the
warranty within a period of three months of the date of the impugned
judgment and only on fulfilling the same it would be entitled to a decree
for payment of money withheld by the sixth defendant. Considering the
scope of this appeal, as stated above, the relevant facts are stated
hereinafter which are not much disputed by the parties as recorded in
the impugned judgment.
PLAINT CASE:
3. The plaintiff carries on business of manufactur ing and trading in
various jute products having its jute mill situated at Shibpur, Howrah,
West Bengal. At the relevant point of time the jute mill was being run
and operated under a scheme sanctioned and approved by the Board For
Industrial And Financial Reconstruction (for short, B.I.F.R.)
4. The plaintiff received orders from the office of the second defendant for
manufacturing B-Twill Bags as per the government orders. The
procedure normally followed is that, various government organizations all
over India, to place their respective orders on the fifth defendant, who in
turn request the office of the second defendant to place orders on various
jute manufacturers. As per the production control orders the jute
manufacturers supply the said B-Twill Bags to the designated
government organizations.
5. On or about June 2, 2003 the third defendant issued an order that, the
plaintiff to produce 780 Bales of B-Twill Bags. Subsequent thereto on
June 3, 2003 the Deputy Director of Supply and Disposals, Kolkata
issued an order that, the plaintiff to sell the said 780 Bales B-Twill Bags
to the Punjab State Cooperative Supply and Marketing Federation Ltd.,
the sixth defendant, through the Governor of Punjab. On or about June
3, 2003 the seventh defendant issued the purchase order upon the
plaintiff to supply the consignment where the price, specifications, terms
and conditions were mentioned.
6. Pursuant and in terms of the said order, the plaintiff manufactured the
necessary bags and despatched them by Railway wagon to Sangrur,
Punjab under Free on Rail (for short, 'FOR") contract. On or about June
23, 2003 the plaintiff informed the sixth defendant that it had
despatched 390 Bales to Sangrur, Punjab under the relevant Railway
Receipts which were mentioned in the said letter. The said goods and
receipts were collected by Punjab State Cooperative Supply and
Marketing federation Ltd., the sixth defendant, (for short, the consumer)
at Sangrur, Punjab and the goods were duly taken delivery and
consumed.
7. The plaintiff then sent Railway receipt, mills specification against the
discharge of goods along with the Quality Assurance Certificate to the
consignee, the sixth defendant and the bills for the said consignment
were sent to the eighth defendant.
8. Sometime in August, 2003 the plaintiff received a letter dated July
18/28, 2003 written by the Acting Director, Quality Assurance to the
Chief Manager (Food grains), Punjab State Cooperative Supply and
Marketing Federation Ltd. and with the said letter, a copy of the letter
dated July 9, 2003 written by the Chief Manager (Food grains), Punjab
State Cooperative Supply and Marketing Federation Ltd. to the Director
of Supplies and Disposals was also attached. It was alleged in the said
letter that 390 Bales which were received by the consignee were badly
affected by rain and the Railway Authority did not accept any remark on
the delivery of the goods. These Bales were lifted by the consignee to
avoid further damages and kept separately. The consignee requested the
Director of Supplies and Disposals to stop payment of the price
equivalent to 390 Bales and further requested the plaintiff to depute
there their representative for a joint inspection.
9. From the letters written for and on behalf of the Director, Quality
Assurance to the consignee it appears that, the Bales got wet during
transit. According to the plaintiff this is not a quality complaint as the
complaint of Gunny Bales getting wet during transit on the wagon, as the
period of supply was during the monsoon. The consignee was advised by
Acting Director (Quality Assurance), Director of Supply and Disposals to
file a claim on the carrier.
10. On or about September 19, 2003 the plaintiff received a letter dated
August 20, 2003 written by the Assistant Director of Supplies Disposals
to the Controller of Accounts, whereby the Controller of Accounts was
requested to withhold the value equivalent to 390 Bales from the bills
raised by the plaintiff.
11. The plaintiff by its letter dated September 5, 2003 informed the seventh
defendant that, the consignment was wet during transit to Sangrur,
could not be the responsibility of the plaintiff in absence of any Railway
Certificate, and, therefore, the claim was untenable. It was also pointed
that, Acting Director, Quality Assurance also suggested that the claims
should have been made on the carrier.
12. By a letter dated September 12, 2003 the Pay and Accounts Officer
informed the plaintiff that a sum of Rs. 35,85,447/- was withheld from a
subsequent bill of a subsequent contract being Bill No. L/78 pending
finalization of the case of the recovery of due from the plaintiff.
13. The plaintiff received the full payment against the supply of 390 Bales
and the sixth defendant had withheld payment from the subsequent
contract in which Bill No. L/78 was raised, which was illegal on the part
of the concerned defendants.
14. The plaintiff was directed to supply 780 Bales of jute bags in view of the
Contract No. C-III/2980/VSL (FW)/204 dated June 3, 2003. The plaintiff
supplied these goods in four lots each containing 130 Bales, 390 Bales,
130 Bales and 130 Bales respectively aggregating to 780 Bales and those
supplies were made in June, 2003 and four numbers of bills were raised
for supply of 780 Bales. The particulars of such bills are stated in
paragraph 15 of the plaint. The plaintiff had received full payment
against the aforesaid 780 Bales which were the subject matter of Order
No. C-III/2980/VSL (FW)/204 dated June 3, 2003.
15. On the basis of the alleged complaint of the consignee, according to the
plaintiff and without Railway Damage Certificate that the Bales were rain
damaged for which Quality Assurance People requested the consignee to
file a claim with the Railways, the sixth defendant had withheld a sum of
Rs. 35,85,447/- from a subsequent and separate contract dated August
1, 2003 under which the plaintiff was asked to supply 910 Bales. Such
supplies were made by the plaintiff without any complaint. The details of
supply are summarized in paragraph 17 of the plaint.
16. The Director of Supply and Disposals had advised the sixth defendant
consignee to lodge its claim against the Railway Authority since the
goods got wet by rain during transit through wagon and the same
according to the plaintiff is not a quality complaint. Till dated the sixth
defendant failed to obtain any certificate from the Railway Authorities
that the goods delivered by the plaintiff and placed at the Railway wagon
were rain damaged nor the Railways had confirmed that the goods were
rain damaged at the time of delivery/despatch.
17. According to the plaintiff in the purported joint inspection the defendant
stated that 65 per cent of the goods out of total 390 Bales allegedly were
in a damaged condition. The sixth defendant by its writing dated
November 16/22, 2005 requested the plaintiff to remove 390 Bales of
rejected stock. The plaintiff contended that there was no joint inspection
and the plaintiff did not authorize any person to attend such joint
inspection. The plaintiff supplied goods strictly in terms of the agreement
and the quality was as per the order placed, therefore, the sum of Rs.
35,85,447/- which was deducted from the subsequent contract by the
sixth defendant was illegal and wrongful.
18. By a letter dated September 24, 2003 the plaintiff raised a demand upon
the fifth defendant to release the sum of Rs. 35,85,447/-.
19. In November 2003, the plaintiff filed a writ petition before this Court
challenging the said decision of withholding of payment by the fifth
defendant at the behest of the sixth defendant from the account of the
subsequent contract awarded to the plaintiff. However, the claim of the
plaintiff in the said writ petition was ultimately relegated to civil suit.
Hence, this civil suit.
20. The reliefs claimed in the plaint are set out herein below:
"(a) Declaration that the alleged joint Inspection Report
dated 18th October, 2003 is bad in law and null and void;
(b) Decree for Rs. 53,55,381.00;
(c) Alternatively, an enquiry be held into the damages
suffered by the plaintiff and a decree be passed against the
defendant for such loss as this Hon'ble Court may deem fit
and proper.
(d) Interests, interim interest and interest on judgment';
(e) Accounts
(f) Receiver;
(g) Injunction;
(h) Attachment
(i) Costs;
(j) Further or other reliefs".
CASE IN THE WRITTEN STATEMENT FILED ON BEHALF OF THE
SIXTH DEFENDANT:
21. The sixth defendant states that it had placed an indent for 50 kg Gunny
Bales for Kharif 2003-04 through the Government of Punjab for its
procurement agency in Punjab and for itself to the Director General,
Supplies and Disposals, Kolkata, by virtue of an indent dated April 21,
2003.
22. Pursuant to the subsequent placement of the aforesaid indent, the
plaintiff had sent 780 Gunny Bales by virtue of six Nos. of Railway
receipts which are mentioned under paragraph 1 (VIII) of the written
statement.
23. After the delivery of the aforesaid Gunny Bales the sixth defendant, by a
letter dated July 9, 2003 intimated the fifth defendant that 390 Gunny
Bales of 50 kg, which were supplied by the plaintiff after being packed on
July 2, 2003 against the Railway Receipt No. 078405207 dated June 22,
2003 were badly affected by rain and the Railway Authorities did nor
accept any remark on the delivery book. By virtue of the said letter the
sixth defendant also intimated that the said Bales were lifted to avoid
further damage and were stagged separately. By the said letter, the sixth
defendant requested the fifth defendant to stop payment with regard to
the 390 Gunny Bales supplied by the plaintiff and also to stop payment
of any other charges connected therewith. The fifth defendant was
further requested to direct the plaintiff to depute their representative for
joint inspection of the rain affected Gunny Bales.
24. The sixth defendant by virtue of another letter dated July 18, 2003
intimated the fifth defendant that the Railway Receipt No. 079405207 as
mentioned in the said previous letter dated July 9, 2003 was wrong and
the same should be read as Railway Receipt No. 074405207 dated June
22, 2003.
25. Pursuant to the aforesaid indent the fifth defendant by virtue of a letter
dated August 20, 2003 intimated the Deputy Controller of Accounts,
Ministry of Commerce, Kolkata, that since the consignee had received
390 Bales in a damaged condition as they were affected by rain, the
payment with regard to the 390 Bales should be withheld. A copy of
the said letter was also sent to the fifth defendant requesting to keep the
damaged material separately for inspection by the representatives of the
plaintiff.
26. The plaintiff by a letter dated October 17, 2003, requested the District
Manager of the sixth defendant to make an arrangement for the
inspection of the said Gunny Bales after segregation of the damaged one.
According to the sixth defendant the plaintiff agreed that the unused and
rejected Gunny Bales would be replaced by them. The plaintiff further
agreed even to pay all the expenses including labour charges, transport
charges, etc., in connection with the wet Gunny Bales, which were
supplied.
27. Subsequently, when a Joint inspection with regard to the damaged
Gunny Bales was held on October 18, 2013, it was found that 65 per
cent of the Bales were in a damaged condition. The inspection report
with regard to the inspection was signed by the representative of the
plaintiff one Mr. R. S. Pandey. The sixth defendant further contented
that out of 780 Gunny Bales supplied by the plaintiff 395 Gunny Bales
were found to be in damaged condition, since they were affected by rains.
Thus, the said 395 Gunny Bales were segregated out of the said 780
Gunny Bales for the purpose of inspection. A joint inspection in
connection with the said 395 rain affected Gunny Bales was held on
November 15, 2003, when, it was found that 107 Gunny Bales were fit
for consumption and 288 Gunny Bales were found to be damaged and
not fit for consumption. The sixth defendant further contended that Mr.
R. S. Pandey was present at the said joint inspection on behalf of the
plaintiff, acknowledged the said fact at the said inspection by signing an
inspection report dated November 15, 2003.
28. Since damaged Gunny Bales were supplied by the plaintiff and found to
be defective, the sixth defendant took immediate steps to intimate the
relevant authority for withholding payment on account of the plaintiff.
29. The sixth defendant further contended that the said suit was barred
under the principles of waiver, acquiescence and estoppels.
CASE IN THE WRITTEN STATEMENT FILED ON BEHALF OF THE
RAILWAYS/THE NINTH DEFENDANT:
30. The Railways acted as a carrier of the consignment. The regulations,
terms and conditions are also mentioned in the relevant Railway
manuals for carriage of goods through railways. The Railway Authority
maintains the relevant records and documents pursuant to Section 62 of
the Railways Act, 1989, which are also available for inspection. The
Railways contended that, the subject Gunny Bales had already been
consumed by the sixth defendant, and hence whatever claims of the
plaintiff, had to be and should be against the sixth defendant, the
consumer of the material and not against the railways who was merely a
carrier. In as much as, the plaintiff's claim was withheld by or at the
behest of the sixth defendant and not by the Railways. Hence, the
Railway has no liability to make any payment to the plaintiff. The
Railways carried the consignments in a water tight wagon. The
possibilities of the consignments getting wet due to percolation of water
or seepage and/or leakage of water did not arise.
31. The Railways further contended that, the consignment was delivered to
the consignee at the destination at Sangrur, Punjab by the Railways after
obtaining due delivery with clear Railway receipts. The Railways had
mentioned the particulars of the wagon numbers and the relevant
invoices numbers all dated June 22, 2003 in paragraph 7 of its written
statement which were unloaded at Sangrur on July 2, 2003 and the
consignee took delivery on the same day i.e. July 2, 2003 without any
remark/objection.
32. The Chief Goods Supervisor, Sangrur, categorically stated that Invoice
No. 5/074405 dated June 22, 2003 ex-Howrah to Sangrur was unloaded
from the wagon: SC/BCX-27042/54.1 on June 2, 2003 against the said
invoice and railway receipt and the consignee received 130 HG Bales on
July 2, 2003 without any remark as per delivery book. It was specifically
stated that no DDN or damage certificate was issued against the said
consignments. Similarly, in case of other two consignments relating to
Invoice No. 6/RR 074406 dated June 22, 2003 and Invoice No. 7/RR No.
074407 dated June 22, 2003 no DDN or damage certificate was issued.
The Chief Goods Supervisor categorically informed the Chief Commercial
Manager, Eastern Railway, Kolkata, that, the three consignments against
Invoice Nos. 5, 6 and 7 all dated June 22, 2003 were unloaded at
Sangrur on July 2, 2003 properly and the consignee had received the
said three consignments on July 2, 2003 without any remark/objection.
It was also stated that, against the said three nos. of invoices no DDN or
damage certificate was issued.
33. When the consignment reached the destination at Sangrur, with
everything perfect and the consignee took delivery of the consignment to
his full satisfaction, then the delivery was given with clean receipt
obtained from the consignee and the consignee accepted the delivery of
said consignment without any remark or objection. If any damage and/or
short delivery or non-delivery would have caused during the carriage to
the consignment, the consignee should have lodged his objection in the
concerned delivery receipt at the destination station at Sangrur, as per
the norms, practice, procedure and usages of the trade. In the instant
case, the consignee took delivery of the consignment without any
objection in the delivery register or otherwise. So the railways had no
obligation or liability towards any damage or non-payment of any
amount to the plaintiff.
34. The Railways obtained clear Railway receipts and no damage certificate
was issued in respect of the consignment. The Railways thus, specifically
denied that the consignment was damaged during transit. The Railways
further denied the statement in the joint inspection report that, 65 per
cent of the consignment out of total 390 Bales was damaged. The
Railways further stated that, the consignee took delivery of the
consignment on July 2, 2003 without any objection and consumed the
goods. The Railways further denied the alleged joint inspection.
35. Except the sixth defendant and the ninth defendant no other defendant,
had filed written statement and contested the suit. Hence the impugned
judgment and order was passed against the sixth and ninth defendant
on contest and ex parte against the rest.
36. The present appeal was preferred by the plaintiff and the sixth defendant
was essentially the sole contestant. Though the Railway was represented
but since no decree was passed against the Railways they chose to be
silent on the merit of the appeal in assailing the impugned judgment and
order.
37. Mr. Dhruba Ghosh, Learned Senior Counsel, being ably assisted by
Ms. Vineeta Meharia, Advocate, appearing for the plaintiff appellant, at
the threshold as his principle and foremost argument in support of his
appeal submitted that, the Learned Court while pronouncing the
impugned judgment had erred in proceeding on the basis that, in view of
the warranty clause contained in Exhibit H, the Certificate of
Warranty (At page 36, Volume-I of the Paper-Book), such warranty
continued until and unless the consignee being the sixth defendant
received the consignment in a perfect condition in terms of the
contractual specifications. Mr. Dhruba Ghosh, Learned Senior Counsel,
further submitted that, under the contract the plaintiff being the
manufacturer of the consignment despatched and sent the same through
Railway wagons on "FOR" basis and under such modality and contract
the obligation of the plaintiff survived till the consignment was placed
and/ or put into the Railway wagon where the title of the consignment
passed from the plaintiff to the sixth defendant, the buyer and not a
single moment thereafter. Mr. Ghosh, then referred to diverse exhibits
namely Exhibit-C, Exhibit-D, Exhibit-E, Exhibit-F, Exhibit-G, Exhibit-
H, Exhibit-I, Exhibit-J, and submitted that, a concluded contract was
executed and entered into by and between the parties whereunder the
plaintiff was obliged to supply 780 nos. of B-Twill Bags (for short, the
consignment) for the ultimate consumption of the sixth defendant at
Sangrur, Punjab. The plaintiff under Railway receipts on or about June
23, 2003 despatched 390 Bales of consignment of agreed and
contractual specifications in all respect under the relevant Railway
receipts and such consignment was ultimately received and collected by
the sixth defendant at Sangrur, Punjab without any objection. At the
time of despatched at Howrah Station in the wagons the relevant Railway
receipts were obtained from the Railway authority, which do not mention
that the consignment of 390 Bales were found to be wet and thus,
defective. The sixth defendant also received the said consignment at
Sangrur, from the Railways without raising any objection. On July 9,
2003 being Exhibit-K, by a letter the sixth defendant for the first time
recorded his objection as to the supply of the 390 Bales of wet
consignment by the plaintiff. The letter was written to the fifth defendant.
Mr. Ghosh, submitted that, the sixth defendant then requested the
Controller of Accounts to withhold the value equivalent to 390 Bales of
consignment from the bills raised by the plaintiff and such equivalent
amount was ultimately deducted from the plaintiff's bill raised under a
subsequent contract.
38. Mr. Ghosh referring to Exhibit-F submitted that, from the Railway
Receipts it would appear that some of the Bales were found to be torn
but none of such found to be water damaged or in a wet condition.
39. Mr. Ghosh, Learned Senior Counsel, then referred to Exhibit V-I to V-IV
(Page 249 of Paper Book, Volume III); Exhibit XI and XII (Page 251
Paper Book, Volume III); Exhibit W (Page 250 of Paper Book, Volume
III) and submitted that, the alleged Mr. R.S. Pandey was never
authorized by the plaintiff to cause any joint inspection of the
consignment and as such he did not represent the plaintiff at the time of
any joint inspection as alleged by the sixth defendant. The witness of the
plaintiff also deposed that the said R.S. Pandey was never authorized by
the plaintiff to attend any alleged inspection. He submitted that, the
relevant documents which were related to the alleged joint inspection of
the consignment were not proved in accordance with the law of evidence.
The sixth defendant used an affidavit-in-opposition in the summary
judgment proceeding, specifically stated that, out of the 385 Bales, 107
Bales were in order and alleged that, the rest 280 Bales were found to be
damaged by water.
40. The Learned Senior Counsel on behalf of the plaintiff, referred to various
paragraphs from the written statement and the relevant oral evidence of
the witness of the sixth defendant and submitted that, the said sixth
defendant did not plead that the consignments were rain affected or got
wet in Howrah Station at Kolkata prior to or at the time of loading the
same at or putting it into the Railway wagon. The onus was always with
the sixth defendant to prove that the subject consignment got wet or
water affected before it was put into the Railway wagon, to establish the
breach on the part of the plaintiff under the said FOR contract and
thereby to get the benefit of the agreed warranty clause. Such had not
happened in the instant case and on the contrary the sixth defendant
had failed to prove the same.
41. Mr. Ghosh then, referred to the relevant pleadings from the written
statement filed by the Railways and the relevant documentary and oral
evidences in connection therewith and submitted that, it was contended
by the Railways there was no chance of water seepage in transit in the
water tight Railway wagon. He further submitted that, it was the
consistent stand of the Railways that the consignment was taken delivery
by or on behalf of the sixth defendant at Sangrur, Punjab, at the
destination point under the FOR contract without recording any
objection whatsoever. This contentions of and the case made out by the
Railways were never challenged by the sixth defendant by way of cross
examination or otherwise. Thus, the sixth defendant had accepted the
same.
42. Mr. Ghosh, on behalf of the plaintiff had relied upon certain provisions
from the Railway Commercial Manual, which are set out hereinbelow:
"2125 Prevention of damage by wet.
(3) Before acceptance, consignment of grains, pulses, seeds,
etc. should be thoroughly examined to see that the contents
are not wet or damped, and if these are not tendered in
good and dry condition suitable remarks must be obtained
on the forwarding notes and reproduced on all the foils of
the invoice vide para 1418.
(4) Goods liable to be damaged by rain water should be
loaded in water-tight wagons, the leaks or holes, if any,
found in a wagon being plugged before loading, assistance
of Train Examiner being obtained where necessary (para
1509).
(5) When non-water-tight wagons are used, goods must be
properly covered by tarpaulins (para 1509).
(6) Floors of wagons must be thoroughly cleaned before
loading.
(7) Damageable consignments must be loaded 18" (46 cms)
away from wagon doors on both sides. Door crevices should
be plugged with gunny strips (para 1507).
(8) All Manholes and ventilators must be closed and secured
before loading consignments damageable by rain.
(9) While unloading consignments like grain and pulses,
sugar, piece-goods, etc, which are ordinarily susceptible to
damage by weight, the outward condition of the bags and
bales should be carefully noted.
(10) If inward consignments are found to have been wet, a
certificate should be obtained from the carriage and wagon
staff, where available, about the condition of the wagon or
wagons in which the damaged goods were received. Where
the carriage and wagons staff are not available, the wagon
should be examined for water-tightness by the unloading
clerk by closing the door and seeing whether rays of light
are coming. A certificate as to whether the wagon was
water-tight or not should be carefully noted in the unloading
tally book.
(11) While unloading, the position of the damaged packages
inside the wagon shall also be carefully noted in the
uploading tally book."
43. It was further submitted that, after the writ petition was relegated to
suit, the present civil suit was filed inter alia claiming a money decree for
a sum of Rs. 53,55,381/-. Out of the said claim the plaintiff had already
received a summary decree for a sum of Rs. 9,83,700/- with interest in
the said civil suit and such summary decree dated February 28, 2008
had already been crystallized in favour of the plaintiff. Hence, the said
civil suit had survived and was tried for the balance amount, on which
the impugned judgment was pronounced.
LEGAL SUBMISSIONS:
44. Mr. Dhruba Ghosh, Learned Senior Counsel for the plaintiff submitted
that, the learned Judge in pronouncing the impugned judgment had
erred in not appreciating the warranty clause mentioned in Exhibit-H
has a limited application in this case. As the title of the consignment had
passed under the provisions of the Sale of Goods Act, 1930, when such
consignment is transmitted on FOR basis through the Railway wagon,
the moment it was loaded in and/or put into the Railway wagon and not
thereafter. In this regard he placed reliance on Section 26 of the Sale of
Goods Act, 1930 and submitted that, unless otherwise agreed, the goods
remain at the seller's risk until the property therein is transferred to the
buyer, but where the property therein is transferred to the buyer the
goods are at the buyer's risk whether delivery has been made or not. In
support of his contention Mr. Ghosh had placed reliance on a judgment
of the Hon'ble Supreme Court in the matter of: M/s Marwar Tent
Factory vs. Union of India & Ors., reported at (1990) 1 Supreme
Court Cases 71.
45. The second fold of legal submissions made on behalf of the plaintiff that,
the sixth defendant by taking a decision and ultimately withholding the
price equivalent to 390 Bales of the consignment from the subsequent
contract of the plaintiff, acted not only unilaterally but also in an illegal,
arbitrary and wrongful manner. The sixth defendant could not have
acted as the judge of its own cause. In support of such contention the
Learned Senior Counsel placed reliance on the following two decisions of
the Hon'ble Supreme Court:
(a) In the matter of: General Manager, North East Frontier
Railway & Ors. vs. Dinabandhu Chakraborty, reported at 1971
(3) Supreme Court Cases 883;
(b) In the matter of: State of Karnataka vs. Shree Rameshwara
Rice Mills Thirthahalli, reported at (1987) 2 Supreme Court
Cases 160.
46. Mr. Aniruddha Mitra, Learned Counsel appearing with Mr. Sudhakar
Prasad, advocate for the sixth defendant opposed the appeal. To support
the impugned judgment and decree Mr. Mitra submitted that, the
warranty clause contained in Exhibit-H still binds the plaintiff. He
submitted that, even though the consignment was carried through the
Railway wagon under FOR Contract, the obligation of the plaintiff
continued till the time the sixth defendant consignee received the
consignment in perfect condition as per the contractual terms, at the
destination at Sangrur, Punjab. Till then the warranty clause was
operative and the plaintiff was bound by it. Thus, he supported the
impugned judgment and submitted that, it was the obligation of the
plaintiff to replace damaged Bales at its own cost in a perfect condition
as per the contractual terms to the sixth defendant and only thereupon
the plaintiff would be entitled to receive the money under the impugned
judgment. Mr. Mitra further submitted that, the decision of the sixth
defendant to withhold the price equivalent to 390 Bales of consignment
from the bills of the plaintiff under the subsequent contract was lawful
and justified, as the same was already paid to the plaintiff earlier.
47. Mr. Mitra, learned Counsel for the sixth defendant then referred to
Exhibits-F and submitted that, while despatching the consignment and
putting the same into wagon by the plaintiff at Howrah Station, the
Railway Authority refused to note the water damage on part of the
consignment as stated above and he contended that the consignment got
wet during transit from plaintiffs jute mill to Howrah Station before the
same was loaded into the wagon. He submitted that, the carriage of
consignment from the plaintiff's jute mill to the Railway wagon at
Howrah Station was done by a third party contractor and not by the
plaintiff itself neither under the actual supervision of the plaintiff. The
season was monsoon so the Bales got damaged by water before the same
was despatched at and put into and boarded on the Railway wagon. Mr.
Mitra then referred to Exhibits-FF and drew attention of this Court to
the oral testimony of the relevant witness of the Railways, to establish
that the Railway wagon was a water tight compartment and there could
be no chance of water seepage by which the Bales would have been
damaged. Thus, he submitted that, it is only before the consignment was
placed into and boarded on the Railway wagon for despatch at Howrah
Station, the consignments got wet and the plaintiff cannot avoid its
obligation under the subject warranty clause, as the goods were not
despatched in a perfect condition as per the contractual terms. Mr.
Mitra, then drew the attention of this Court to the warranty clause and
submitted that, there was no restrictive covenant in the warranty to the
extent that the warranty would bind the plaintiff till the time the
consignment is despatched and put into the Railway wagon. According to
Mr. Mitra, the property in the consignment had passed to the sixth
defendant at Sangrur, Punjab, at the destination point where the sixth
defendant had received the consignment and took delivery thereof.
48. Mr. Mitra, Learned Counsel further referred to the Exhibit-K; Exhibits-
V1 to V4; and Exhibit- 6 to 15 and submitted that, the plaintiff
through its authorized representative namely one Mr. R.S. Pandey
consciously and knowingly agreed for a joint inspection of the water
damaged Bales. Such inspection was held, when the plaintiff through its
said authorize representative duly agreed either to replace the damaged
Bales or to compensate the sixth defendant accordingly. He submitted
that, this being thoroughly a commercial transaction, the plaintiff could
not and cannot contend anything to the contrary at a belated stage as
was done by the plaintiff denying the authority of the said Mr. R.S.
Pandey who participated in the joint inspection or by denying the same
and its purport and content thereof. The said joint inspection report
binds the plaintiff. According to Mr. Mitra, the documents relating to
such joint inspection had duly been proved and the oral testimony of the
relevant witnesses had also proved the same in accordance with the law
of evidence.
49. The learned Counsel for the sixth defendant then submitted that, though
the sixth defendant had received the entire consignment at Sangrur,
Punjab but subsequently within in a short while recorded its objection in
respect of the water damaged consignment before the appropriate
authority and the plaintiff was also made aware of that. Referring to the
necessary Exhibits in this regard namely Exhibits- V series and W and
referring to the oral testimonies of the relevant witnesses, he submitted
that, such contemporaneous objection was duly raised by the sixth
defendant and the plaintiff was known of the same. The plaintiff, thus,
cannot contend anything to the contrary at a belated stage or otherwise.
LEGAL SUBMISSIONS:
50. Mr. Mitra, learned Counsel for the sixth defendant placed reliance on
Section 12 of Sale of Goods Act, 1930 and submitted that, a stipulation
in a contract of sale with reference to goods which are the subject thereof
may be a condition or a warranty. A warranty is a stipulation collateral to
the many purposes of the contract, the breach of which gives rise to a
claim for damages but not to a right to reject the goods and treat the
contract as repudiated. In support of such contention he referred a
passage from the Halsbury's Laws of England, 3rd Edition, Volume-
34, Paragraph-66 at page 42.
51. He then placed reliance on Section 19 of the Sale of Goods Act and
submitted that, where there is a contract for the sale of specific or
ascertained goods the property in them is transferred to the buyer at
such time as the parties to the contract intend it to be transferred.
Unless a different intention appears, the rules contained in Section 20 to
24 of the said Act are the rules for ascertaining the intention of the
parties as to the time at which the property in the goods is to pass to the
buyer.
52. Referring to the above statutory provisions Mr. Mitra, submitted that, it
was all along the intention and agreed between the buyer and the seller
in the present case that the property in the consignment would transfer
in favour of the consignee i.e. the sixth defendant at Sangrur, Punjab
when it received the consignment. Therefore, the warranty clause binds
the plaintiff till then.
53. Per contra, Mr. Dhruba Ghosh, Learned Counsel for the plaintiff
appellant, in reply, submitted that, the sixth defendant had not made out
any case alleging breach against the plaintiff in its written statement,
therefore, the sixth defendant could not travel beyond its written
statement and argue a third case at this appellate stage. Mr. Ghosh,
further referred to the letter dated July 18, 2003 being Exhibit-J (Page-
40 of Paper Book, Volume I) and submitted that, the plaintiff
specifically contended that the Bales got wet during the transit and the
same was not a quality complaint. The sixth defendant was also advised
to lodge a claim against the Railways carrier.
54. Ms. Aparna Banerjee, Learned Advocate, appeared for the Railways, the
ninth defendant, in this appeal. On instruction from her client she
submitted that, since the impugned judgment or any part of it is not
against the Railways, she has no submissions to offer to this Court on
merit of the appeal.
55. After hearing the submissions made by the learned counsels for the
parties and on perusal of the records before this Court including the
short notes filed on behalf of the parties, it appears to this Court that,
the basic facts like the formation and execution of a concluded contract
between the parties and the performance thereof were admitted by the
concerned parties. It was admitted that, the contract was, that the
plaintiff was to supply 780 Bales of B-Twill Bags from its Jute Mill at
Shibpur, Howrah to the sixth defendant for its consumption at an agreed
destination point at Sangrur, Punjab. It was also admitted that, the
entire lot of 390 Bales were despatched by plaintiff and were received by
the sixth defendant at Sangrur, which were transmitted through Railway
wagon under FOR Contract and according to the sixth defendant were
found to be wet and water damaged. Such contention of the sixth
defendant was denied by the plaintiff and the plaintiff claims the price of
the said 390 Bales which had been illegally withheld by the sixth
defendant, hence this suit. It is also admitted by and between the parties
that the parties agreed that the consignment sent through Railway
wagon on FOR basis and the same was so transmitted through Railway
wagons by the plaintiff.
56. The issues thus, fall for consideration in the instant appeal are
essentially three folds, namely;
(i) Whether the obligation of the plaintiff came to an end
immediately after loading the consignments into the Railway
wagons while transmitting the same on FOR basis to Sangrur,
Punjab or such obligation continued till the sixth defendant
received the consignment at Sangrur;
(ii) Whether the warranty clause contained in Exhibit-H was
consequential and was binding upon the plaintiff till the
consignment was despatched and placed into the wagon at
Howrah Station or did it exist till the consignment was received
by the sixth defendant at Sangrur, Punjab;
(iii) Whether the withholding of payment by the sixth defendant of
the price equivalent to 390 Bales from the bills of the plaintiff
raised in a subsequent contract was just and lawful.
57. The impugned judgment and decree needs to be assessed in the light of
the aforesaid three issues.
58. The documentary evidence being Exhibit-E, Exhibit-F, Exhibit-K/
Exhibit-2, Exhibit-I, Exhibit-M, if read with the question nos. 29 to 110
from the examination-in-chief of the plaintiff's witness, it would be clear
that such documentary evidence were duly proved in accordance with
the law of evidence. The same would further clearly show that, the
consignment was manufactured at the jute mill of the plaintiff at
Shibpur, Howrah and then the same was duly despatched for the sixth
defendant by putting the same into the Railway wagon at Howrah Station
by the plaintiff. The relevant Railway Receipts would also suggest that,
the consignment was never wet or water damaged and the same was
transmitted to Sangrur, Punjab for the consumption of the sixth
defendant. Exhibit-FF (Page 80 Paperbook, Volume III) is the water
tight certificate dated June 21, 2003 if read with question no. 152 and
153 of the examination-in-chief of the witness of the sixth defendant, the
same would prove that, the Railway wagon was a water tight
compartment and there was no scope for water seepage on the
consignment during transit. The said documentary evidence was also
proved by the defendant's witness in accordance with the law of
evidence.
59. After the consignment had arrived at Sangrur, Punjab, it is an admitted
position that, the sixth defendant received the same on July 2, 2003
without recording any objection. Such fact would also appear from
"Exhibit-GG" and "Exhibit-JJ". The sixth defendant thereafter on or
about July 9, 2003 for the first time being Exhibit-K lodged an objection
that, the consignment was damaged by rain water.
60. In the written statement filed by the sixth defendant, it was not pleaded
that, the consignment was rain affected or wet or found to be same when
the consignment was despatched or boarded and put into the Railway
wagon at Howrah or prior thereto. The sixth defendant had not been able
to prove such contention also as would be evident from the oral
testimony of the witness of the sixth defendant.
61. The plea raised by the sixth defendant, in so far as, the joint inspection
was concerned that, the plaintiff's authorized representatives namely
Mr. R.S. Pandey had attended the said joint inspection and
acknowledged the defects in the consignments and the same was found
to be water damaged. The plaintiff specifically denied that. The said
Mr. R.S. Pandey was never authorized by the plaintiff to cause the joint
inspection. The plaintiff also denied the purport and content of the joint
inspection report. If Exhibit-V1 to V4, Exhibit-W, Exhibit-X1, Exhibit-
X2; Exhibit-12 are examined in the light of the statement of the
plaintiff's witness and the defendants witness read with their respective
oral evidence, namely, question nos. 174 to 184 of the plaintiff's witness
in examination-in-chief; Question Nos. 185 to 188 of the examination-in-
chief of the plaintiff's witness; Question Nos. 185 to 188 of the
examination-in-chief of the plaintiff's witness; Question Nos. 190 to 193
of the examination-in-chief plaintiff's witness and question no. 43 to 47
of the examination-in-chief of the defendant's witness, it would be clear
that, the said fact of joint inspection by an authorized respective of the
plaintiff or that the plaintiff had agreed for the same was not proved.
62. On a close scrutiny of the warranty clause in Exhibit-H, it appears that,
the consignment while was sent by the plaintiff was dry and in
conformity in all other respects and the same was duly certified and
despatched under the Railway Receipt mentioned in the document. It is
also clear from the said document and the concerned Railway Receipts
that, at the time of despatch by boarding the consignment on the
Railway wagon the consignment was never reported to be water
damaged.
63. In a Free on Rail Contract, the seller is required to deliver the goods on
board the rail. Thus, the obligation of the seller is to bear all expenses
upto and including shipment of goods on behalf of the buyer in a perfect
condition and as per contractual specification. According to the
contractual specifications once the goods are put on board on rail, the
property in the goods passes to the buyer and they are at the risk of the
buyer, who is responsible for their freight, insurance and subsequent
expenses. The principle of FOR is similar with that of the free on board
contracts (FOB), which relieve the seller of responsibility once the goods
are shipped. After the goods had been loaded, technically, "passed the
ship's rail", they are considered to be delivered into the control of the
buyer when the voyage begins, the buyer then assumes all liability
attached with the goods. The buyer may enter into and negotiate on
whatever terms with a forwarder of its choice.
64. On a true and proper construction of Section 26 of the Sale of Goods Act,
1930, speaks of the same legal proposition unless otherwise agreed the
goods at the seller's risk until the property therein is transferred to the
buyer, but when the property therein is transferred to the buyer, the
goods at the buyer's risk, whether the delivery has been made or not.
Hence, on a true construction of Section 26 of the said Act the plaintiff
was required to deliver the goods on board on rail in the instant case.
It was an admitted position by the parties that for transportation of the
consignment it was agreed that the same would be transported from
Howrah Station to Sangrur, Punjab through Railway wagons on FOR
basis, thus, the plaintiff being the seller was responsible to bear till
shipment of goods and board the same on the wagon on behalf of the
buyer in perfect condition as per the contractual specifications and no
further or thereafter. In the instant case it is already proved from the
documentary and also oral evidences, as discussed above, that, the
consignment was despatched and boarded on the Railway wagon without
any water damage and the sixth defendant could not prove anything to
the contrary or could not dislodge the case of the plaintiff to this extent.
65. In the matter of: M/s Marwar Tent Factory (supra), the Hon'ble
Supreme Court was pleased to observe as under:
"11. In order to decide and fix the responsibility for
passing of the decree in respect of the sum of Rs. 51,912
being the full price of 224 tents inclusive of sales tax
deducted from the amount due to the appellant under
another contract by respondent 5, it is pertinent to consider
the question when the property in goods passed from the
seller to the buyer at Jodhpur when the goods were loaded
in railway wagons for delivery to the consignee at Kanpur.
The learned counsel for the appellant drew our attention to
condition No.11 of the schedule of acceptance of tender
dated February 29, 1968. It has been mentioned therein
that the terms of delivery was FOR, Jodhpur i.e. free on rail
at Jodhpur railway station. It has also been mentioned that
before the goods are loaded on railway wagons for delivery
to respondent 5 at Kanpur, the Inspector, I.G.S. North India
will inspect the same at form's premises at Jodhpur and
after approval the said goods will be despatched to its
destination by placing them in the railway wagons at
Jodhpur railway station and the railway receipt has to be
sent to the consignee under registered cover immediately
after despatch of the stores with full details. It is also
stipulated that 95 per cent of the price of the goods will be
paid by respondent 5 on receipt of the railway receipt and
the inspection note and the balance 5 per cent will be paid
after the same reached at the destination in good condition.
Referring to this term for delivery under clause 11 of the
schedule of acceptance of tender, it has been urged by the
learned counsel for the appellant that the delivery was
complete at Jodhpur when the goods were loaded in the
goods train for delivery to respondent 5 at Kanpur and
property in the goods passed to the buyer as soon as the
goods were despatched by railway at Jodhpur. Thereafter,
the risk in respect of the goods despatched remained with
the consignee. The appellant, consigner is entitled to get the
entire price of the 224 tents which were short delivery by
respondents 3 and 4 to respondent 5 at Kanpur in view of
the clear finding by trial court that though the entire
consignment of 1500 tents was actually loaded in the
railway wagons for despatch to the consignee, respondent
5. Respondent 5 duly filed a claim to the railways,
respondents 3 and 4 for the short delivery to the tune of
224 tents immediately after taking delivery of the goods. In
order decide the question as to whether the rights in the
goods passed from the seller to the buyer i.e. from the
appellant to respondent 5 as soon as the goods were loaded
in railway wagons at Jodhpur and the railway receipt was
sent to the consignee, it is pertinent to refer to the meaning
of the words, f.o.r. Jodhpur. In Halsbury's Laws of England,
4th Edition (Volume 41) at page 800, para 940 it has been
mentioned that:
"Under a free on rail contract (f.o.r.) the seller
undertakes to deliver the goods into railway wagons or
at the station (depending) on the practice of the
railway) at his own expense, and (commonly) to make
such contract with the railway on behalf of the buyer
as is reasonable in the circumstances. Prima facie the
time of delivery f.o.r. fixes the point at which property
and risk pass to the buyer and the price becomes
payable."
12. In Benjamin's Sale of Goods (2nd edn), at para 1799 it is
stated as under:
"Stipulations as to time of "delivery". Provisions as to
the time of delivery in an f.o.b. contract are taken to
refer to the time of shipment and not to the time of
arrival of the goods; and this may be so even though
the provision in question contemplates the arrival of the
goods by certain time. Thus n Frebold and Sturznickel
(Trading as Panda O.H.D.) v. Circle Products Ltd.
German sellers sold toys to English buyers f.o.b.
Continental port in the terms that the goods were to be
delivered in time to catch the Christmas trade. The
goods were shipped from Rotterdam and reached
London in November 13; but because of an oversight
for which the sellers were not responsible the buyers
were not notified of the arrival of the goods until the
following January 17. It was held that the sellers were
not in breach as they had delivered the goods in
accordance with the requirements of the contract by
shipping them in such a way as would normally have
resulted in their arrival in time for the Christmas
trade."
13. The question as to the meaning of f.o.r. contract fell for
consideration in the case of Girija Proshad Pal v. national
Coal Co. Ltd. P.B. Mukharji, J. as His Lordship then was
observed in para 11 as follows:
"The words f.o.r. are well known words in commercial
contracts. In my judgment they mean when used to
qualify the place of delivery, that the seller's liability is
to place the goods free on the rail as the place of
delivery. Once that is done the risk belongs to the
buyer."
20. On a conspectus of all the decisions referred to before
as well as the provisions of Section 61 (2) of the Sale of
Goods Act, we are constrained to hold that the plaintiff is
entitled to get a decree of interest on the unpaid price from
January 1, 1969 to December 1, [email protected] 6 per cent per
annum which is considered to be a reasonable rate of
interest, as claimed by the plaintiff-appellant.
21. In the premises aforesaid the appeal is allowed and the
judgments and the decree of the courts below insofar as
then rejected the claims regarding the price of 224 tents and
interest thereon are set aside. The plaintiff-appellant's claim
for the price of the said goods as well as interest thereon @
6 per cent for the period from January 1, 1969 to December
1, 1971 is hereby decreed. The appeal is thus allowed with
costs quantified at Rs. 4000. The claim for interest @ 6 per
cent per annum for the period from January 1, 1972 till date
of payment of amount unpaid is allowed."
66. From the provisions laid down in clause 2125 (9 and 10) of the Railway
Commercial Manual, as set out in paragraph 41 above, it appears that
while unloading the consignments, the outward condition of the bags
and Bales should be carefully noted. It further states that, if inward
consignments are found to have been wet, a certificate should be
obtained from the carriage and wagon staff, where available, about the
condition of the wagon or wagons in which the damaged goods were
received. Where the carriage and wagon staffs are not available, the
wagon should be examined for water tightness and a certificate as to
whether the wagon was watertight or not should be carefully noted in the
unloading tally book. From Exhibit-GG it appears that, the sixth
defendant took delivery of the 390 Bales at Sangrur, Punjab, without
any objection or remark. Exhibit-FF is the water tight certificate issued
by the Railways on June 21, 2003 confirming that, the relevant wagon
was water tight and there was no chance of water seepage within the
wagon, so that, the Bales could be damaged by water. In as much as,
such facts are duly proved and the sixth defendant could not
demonstrate anything to the contrary or to dislodge the purport and
content of the said two Exhibits. In as much as, the case of the sixth
defendant was consistent that, the consignments got wet while being
carriage from the jute mill of the plaintiff to Howrah Station to board on
the wagon and also that, the sixth defendant received the consignments
and accepted the same without any objection or produce at Sangrur,
Punjab and lodged their complaint after about seven days.
67. In the instant case, the sixth defendant had failed to prove that, the
consignments got wet and water damaged during its transit from the jute
mill of the plaintiff to Howrah Station where it was loaded on the Railway
Wagon. On the contrary the plaintiff had been able to prove that, the
consignment was loaded and boarded on the Railway wagon in a perfect
condition as per the contractual terms. Under a free on rail contract
(FOR) the seller undertakes to deliver the consignments/goods into
Railway wagons or at the station depending upon the practice of the
concerned Railways at its own expense and risk and to execute such
contract with the Railways on behalf of the buyer as is reasonable in the
circumstances. Prima facie time of delivery in FOR contract fixes the
point at which property and risk pass to the buyer and the price becomes
payable. FOR is a commercial contract when such contract is executed
between the parties, it means it fixed the place of delivery where the title
in the consignments/goods passes from the seller to the buyer and the
price thereof becomes due and payable by the buyer to the seller. Once
the consignment/goods are boarded in the Railway wagon on the basis of
FOR contract the risk passes and belongs to the buyer.
68. In so far as the plaintiff's other contention is concerned that, the
withholding, of price equivalent to 390 nos. of Bales from the subsequent
contract is arbitrary and illegal, the learned counsel for the plaintiff
relied upon General Manager, North East Frontier Railway (supra). The
said judgment arose from a writ petition where the action of the State
authority was challenged. There is a difference in adjudication between a
writ petition and a regular civil suit. A regular civil suit involves a
detailed trial and a detailed fact finding enquiry on the issues involved.
The documentary evidence are required to be proved by oral testimony by
the witnesses of the parties. Every fact pleaded or denied by the parties
in their respective pleadings necessarily to be proved either to support
their case or to dislodge the case of the adversary. Whereas while
adjudicating a writ petition in a normal course, the same is done on the
basis of affidavit evidence and the documentary evidence attached
therewith. In the facts which are identical to the instant case in so far
as the illegal withholding of price is concerned only, the decision making
process of the erring authority is to be examined by the constitutional
Court on the existing material in its writ jurisdiction and the detailed fact
finding enquiry is not necessary. As such the ratio decided in the said
judgment General Manager, North East, Frontier Railway (supra)
has no relevance in the facts and circumstances of this case.
69. In the matter of: State of Karnataka (supra), the ratio decided therein
has no relevance in the facts and circumstances of this case. In the
instant case the plaintiff had been able prove that there was no breach of
contract on its part.
70. In so far as, the submission of Mr. Mitra, learned counsel for the sixth
defendant that, the warranty executed by the plaintiff being Exhibit-H
was subsisting and binding upon the plaintiff till the sixth defendant
received and accepted the consignment in Sangrur, Punjab, is wholly
misconceived and without any legal basis. Once the parties agreed for
the shipment of the consignment under FOR contract the obligation of
the plaintiff ceased immediately when the consignment was boarded on
Railway wagon in a perfect condition as per the contractual terms and no
further.
71. In view of our foregoing discussions, this Court holds that, the obligation
of the plaintiff came to an end immediately after loading the consignment
into the Railway wagon at Howrah Station. While transmitting the same
under the FOR contract the property in the consignment had passed
from the plaintiff to the sixth defendant immediately when the
consignment was boarded on the wagon at Howrah Station.
Consequently we further hold that, the warranty clause contained in
Exhibit-H ceased immediately the consignment was boarded on the
Railway wagon by the plaintiff at Howrah Station and was not binding
upon the plaintiff till the time the consignment was received and
accepted by the sixth defendant at Sangrur, Punjab. Thus, the two
issues mentioned in paragraph 55 (i) and (ii) are answered accordingly.
72. In view of what this Court has held in the preceding paragraph, this
Court affirms the part of the impugned judgment and order, directing
the sixth defendant to release the withheld payment with interest
forthwith as expeditiously possible. Thus the issue mentioned in
paragraph 55(iii) is answered accordingly.
73. Thus, the portion of the impugned judgment and order directing the
plaintiff to replace the 390 nos. of alleged wet Gunny Bales at its own
cost, stands set aside and reversed. Rest of the impugned judgment and
order stands affirmed.
74. In view of the above APD 101 of 2007 with CS No. 145 of 2006 stands
disposed of.
75. There shall, however, be no order as to costs.
76. Let the appellate decree along with the decree passed by the learned
single judge be drawn up and completed, as expeditiously as possible.
(Aniruddha Roy, J.)
I. P. MUKERJI, J.:-
I have had the privilege of going through the judgment prepared by my
brother, Mr. Justice Aniruddha Roy. I am in full concurrence with the
reasoning adopted by his lordship, the ultimate conclusion reached by
him and the order prepared to be passed. I would like to add a few
observations of my own.
The terms and conditions of carriage are similar for goods "free on board"
and "free on rail". Black's Law Dictionary, 10th Edition defines "free on
board" thus:-
"This is a mercantile-contract term allocating the rights and duties of
the buyer and the seller of goods with respect to delivery, payment,
and risk of loss, whereby the seller must clear the goods for export,
and the buyer must arrange for transportation. The seller's delivery
is complete (and the risk of loss passes to the buyer) when the goods
pass into the transporter's possession. The buyer is responsible for
all costs of carriage."
In M/s. Marwar Tent Factory Vs. Union of India & Ors. reported in
(1990) 1 SCC 71 the Supreme Court said:
"In order to decide the question as to whether the rights in the goods
passed from the seller to the buyer i.e. from the appellant to
respondent 5 as soon as the goods were loaded in railway wagons
at Jodhpur and the railway receipt was sent to the consignee, it is
pertinent to refer to the meaning of the words, f.o.r. Jodhpur. In
Halsbury's Laws of England, 4th Edition (Volume 41) at page 800,
para 940 it has been mentioned that:
"Under a free on rail contract (f.o.r.) the seller undertakes to
deliver the goods into railway wagons or at the station (depending
on the practice of the railway) at his own expense, and (commonly)
to make such contract with the railway on behalf of the buyer as is
reasonable in the circumstances. Prima facie the time of delivery
f.o.r. fixes the point at which property and risk pass to the buyer
and the price becomes payable."
12. In Benjamin's Sale of Goods (2nd edn.), at para 1799 it is stated
as under:
"Stipulations as to time of "delivery". Provisions as to the time
of delivery in an f.o.b. contract are taken to refer to the time of
shipment and not to the time of arrival of the goods; and this may be
so even though the provision in question contemplates the arrival of
the goods by a certain time. Thus in Frebold and Sturznickel
(Trading as Panda O.H.D.) v. Circle Products Ltd. German sellers
sold toys to English buyers f.o.b. Continental Port on the terms that
the goods were to be delivered in time to catch the Christmas trade.
The goods were shipped from Rotterdam and reached London on
November 13; but because of an oversight for which the sellers were
not responsible the buyers were not notified of the arrival of the
goods until the following January 17. It was held that the sellers
were not in breach as they had delivered the goods in accordance
with the requirements of the contract by shipping them in such a
way as would normally have resulted in their arrival in time for the
Christmas trade."
13. The question as to the meaning of f.o.r. contract fell for
consideration in the case of Girija Proshad Pal v. National Coal Co.
Ltd. P.B. Mukharji, J. as His Lordship then was observed in para 11
as follows:
"The words f.o.r. are well known words in commercial
contracts. In my judgment they mean when used to qualify the place
of delivery, that the seller's liability is to place the goods free on the
rail as the place of delivery. Once that is done the risk belongs to the
buyer."
It follows that the seller must give the buyer sufficient notice to enable him
to insure against loss during transit of the goods. When the goods are
delivered "on board" the property in them passes to the buyer.
When the railway receipts were issued by the railway administration the
goods were deemed to be in its possession. Hence, upon issuance of those
receipts the risk in the property passed to the respondent buyer.
We only have to examine the condition of the goods when the railway
receipts were issued.
Now comes the question of proof.
Which party had the burden of proof? What kind of proof had to be
adduced by the appellant/plaintiff?
The burden of proof is very important in this matter. Two principles are
very fundamental. The first is that he who alleges a fact must prove it
(Sections 101 and 103 of the Evidence Act, 1872). The second is that the
burden of proof lies on that person who would fail if no evidence at all
were given on either side (Section 102).
In such a situation, the following passage from Phipson on Evidence is
very relevant:-
"Again, the general rule is that the party who asserts must prove.
Where a party seeks to rely on a particular piece of evidence, and
there is a dispute as to its admissibility, he has the burden of
proving that it is admissible........So far as the persuasive burden is
concerned, the burden of proof lies upon the party who substantially
asserts the affirmative of the issue. If, when all the evidence is
adduced by all parties, the party who has this burden has not
discharged it, the decision must be against him. This is an ancient
rule founded on considerations of good sense and should not be
departed from without strong reasons.
This rule is adopted principally because it is just that he who
invokes the aid of the law should be the first to prove his case; and
partly because, in the nature of things, a negative is more difficult to
establish than an affirmative. The burden of proof is fixed at the
beginning of the trial by the state of the pleadings, and it is settled
as a question of law, remaining unchanged throughout the trial
exactly where the pleadings place it, and never shifting.
In deciding which party asserts the affirmative, regard must
be had to the substance of the issue and not merely to its
grammatical form; the latter the pleader can frequently vary at will.
Moreover, a negative allegation must not be confused with the mere
traverse of an affirmative one. The true meaning of the rule is that
where a given allegation, whether affirmative or negative, forms an
essential part of a party's case, the proof of such allegation rests on
him. An alternative test, in this connection, is to strike out of the
record the particular allegation in question, the onus lying upon the
party who would fail if such a course were pursued."
The issues arose in this way. The appellant/plaintiff as seller claimed
price of the goods from the respondent buyer where the conditions of
carriage were free on rail (FOR). The defence of the respondent buyer was
that the goods in question were badly damaged by water. Hence, they were
not obliged to pay the price.
The Railway receipts only mentioned that a very few bags were torn.
Otherwise, they were clean receipts. The quality assurance certificate
issued between 17th and 19th June, 2003 by the Director, Quality
Assurance of the central government in Kolkata bore the remark
"accepted."
The payment for 288 bales was deducted by the respondent buyer from
monies payable to the appellant/plaintiff in other contracts with the buyer
on the ground that those bales were badly damaged by water.
The essential fact in issue was: whether the goods were damaged by water
or not?
In my opinion, the appellant/plaintiff did not have the burden to prove
the negative fact that the goods which were entrusted with the Railways
were free from rain damage. Delivery of the goods is admitted by the
respondent/defendant. On the above essential fact, the burden was on
the respondent/defendant to prove that the goods when entrusted with
the Railways were rain damaged. It had to prove such condition at that
point of time. That the goods were rain damaged at a later point of time,
would not suffice as immediately on entrusting of the goods with the
railways, the risk in the property had passed to the respondent/buyer.
The appellant/plaintiff has been able to produce as proof of delivery of
goods railway receipts which only contained the remark that an
insignificant number of bags were torn. In other words, apart from this,
there were no complaints whatsoever that the consignment or any part of
it was rain damaged. Secondly, the quality assurance certificate issued
two or three days before the loading of the goods into the wagon showed
that the goods were accepted by the respondent/buyer. The production of
this quantity of evidence was, in my opinion, sufficient for the
appellant/plaintiff, to prove that the goods were indeed entrusted in good
condition to the Railway authority.
The evidence led on behalf of the respondent/buyer that the goods
became water damaged in transit did not prove its case at all because
wetness of the bags at the time of its delivery to the railways was material
and not damage by water during transit.
The goods were at Sangrur on 2nd July, 2003. On 9th July, 2003 the
respondent buyer wrote to the Director, Supplies and Disposals with a
copy to the appellant/plaintiff complaining that the goods were badly
damaged by water. By that time one week from the date of arrival of the
goods at Sangrur had elapsed. The inspection report is signed on 18th
October, 2003. This inspection more than three months after arrival of
the goods does not in any way show that they were rain damaged at the
said point of time.
So, in my opinion, the respondent/defendant had hopelessly failed to
prove their case and discharge their burden of proof.
Hence, the appellant/plaintiff became entitled to recovery of the price of
the goods sold. In that view of the matter, there was no question of the
appellant/plaintiff replacing any goods as they were entitled to the price
of the goods actually supplied.
I would allow the appeal on the same terms as my learned brother.
Certified photocopy of this judgment and order, if applied for, be supplied
to the parties upon compliance with all requisite formalities.
(I. P. MUKERJI, J.)
