Hi Speed Logistics Pvt Ltd vs The Food Corporation Of India And 5 ...
2023 Latest Caselaw 4547 Gua

                                                                 Page No.# 1/14

GAHC010192842022




                      THE GAUHATI HIGH COURT
  (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

                        Case No. : WP(C)/6317/2022

         HI SPEED LOGISTICS PVT LTD
         232, C.R. AVENUE, INTELLECT HEIGHTS, GIRISH PARK CROSSING, NEAR
         BENGAL JEWELLERY, UNIT NO. 5B, KOLKATA- 700006


         VERSUS

         THE FOOD CORPORATION OF INDIA AND 5 ORS
         REP. BY ITS CHAIRMAN-CUM-MANAGING DIRECTOR, BARAKHAMBA
         ROAD, NEW DELHI, PIN- 110006

         2:THE GENERAL MANAGER (REGIONAL)
          FOOD CORPORATION OF INDIA
          REGIONAL OFFICE
         ASSAM REGION
          PALTANBAZAR
          GHY
         ASSAM
          PIN- 781008

         3:THE ASSTT. GENERAL MANAGER (CONT)
          FOOD CORPORATION OF INDIA
          REGIONAL OFFICE
         ASSAM REGION
          PALTANBAZAR
          GHY
         ASSAM
          PIN- 781008

         4:THE DIVISIONAL MANAGER
          FOOD CORPORATION OF INDIA
          DIVISIONAL OFFICE
          SILCHAR
          CACHAR
                                                                           Page No.# 2/14

             ASSAM
             PIN- 784001

            5:THE GENERAL MANAGER
             NORTH EASTERN FRONTIER RAILWAY
             MALIGAON
             GHY
            ASSAM

            6:THE DIVISIONAL MANAGER
             NORTH EASTERN FRONTIER RAILWAY
             LUMDING DIVISION
             LUMDING
             HOJAI
            ASSAM


Advocate for the Petitioner   : MR A C BORBORA

Advocate for the Respondent : SC, F C I

BEFORE HONOURABLE MR. JUSTICE SUMAN SHYAM

Date of hearing : 17.10.2023.

Date of judgment :        08.11.2023


                               JUDGMENT & ORDER (CAV)

Heard Mr. A. C. Borbora, learned senior counsel assisted by Ms. N. Dey, learned

counsel appearing for the writ petitioner. Also heard Mr. V. K. Singh, learned Standing

Counsel, FCI appearing for the respondents.

2. The writ petitioner herein is a private limited company and is engaged in

transportation business. The Food Corporation of India (FCI) had issued a Notice

Inviting E-tender (NIT) dated 11.06.2021 inter-alia, for awarding the contract of Page No.# 3/14

"Handling and Transportation Contract Ex-Rly Siding Salchapra to FSD Badarpurghat

via Weighbridge including handling at FSD Badarpurghat". The petitioner had

participated in the competitive bidding process and had emerged as the successful

bidder. Consequently, by issuing the order dated 08.11.2021, the petitioner was

appointed as the handling and transport contractor, Ex-Rly Siding Salchapra to FSD

Badarpurghat, at the rates quoted in the tender document. As per the terms and

conditions of appointment, the contract would come to an end on 20.11.2023.

Although, the petitioner company was awarded the transportation contract from Ex-

Rly siding Salchapra to FSD Badarpurghat, yet, the work of handling was awarded

only at the Badarpur FSD meaning thereby that unloading of bags of food

grains/sugar from the loaded trucks and stacking the foods inside the Food Storage

Depot (FSD) only at Badarpur FSD was included within the scope of the contract.

However, in so far as the handling of foodgrains at the Railway siding at Salchapra is

concerned, the same was awarded to another handling contractor, viz., M/S Anup

Trade and Transport (P) Ltd.

3. It is the pleaded case of the petitioner that as and when allotments of

consignment was made to the petitioner at the Badarpur Railway Siding, it had

executed the transportation work as well as the work of handling (unloading) at the

FSD Badarpurghat without any default. Notwithstanding the same, "demurrage" has

been deducted from the running bills of the petitioner which is apparent from the

sanction order issued by the Manager Accounts. According to the writ petitioner,

there is no clause in the contract permitting the authorities to deduct "demurrage"

from the running bills of the petitioner since the petitioner company was not the Page No.# 4/14

handling contractor at the Ex-Railway Siding at Salchapra. It has also been alleged in

the writ petition that the delay in unloading of wagons took place not on account of

any default on the part of the writ petitioner but on account of negligence on the

part of the FCI officials to open the wagon rakes within the "free time" notified by the

Railway authorities and therefore, the writ petitioner cannot be held liable for

"demurrage", if any, charged by the Railway authorities upon the FCI.

4. The respondents have contested the petitioner's case by contending that as

per the terms and conditions of the contract agreement, the petitioner is liable to

pay "demurrage" due to delay in loading the trucks beyond the "free time" notified

by the N. F. Railway authorities. It has been contended that the officials of the FCI

have always received the wagons on time, even if it is in odd hours, late in the

evening and therefore, the allegation made in the writ petition are wholly

unfounded.

5. It is apparent from the documents annexed to the writ petition that the

Railway authorities had notified "free time" for unloading the wagons. Any

loading/unloading taking place beyond the "free time" would invite "demurrage"

levied at the rate of Rs.150/- per 8 wheeled wagon per hour or part of an hour for

detention of wagons in excess of the permissible "free time" for loading or unloading.

It is the admitted position of fact that the petitioner is not the handling contractor at

the Railway siding inasmuch as M/S Anup Trade and Transport (P) Ltd. was the

contractor appointed for handling at the Railway siding. As such, it is evident that

there was no responsibility on the petitioner to unload the railway wagons.

Page No.# 5/14

Notwithstanding the same, the FCI has started levying "demurrage" from the running

bills of the petitioner on the ground that there was delay in unloading of the wagons

due to non-supply of vehicles by the petitioner.

6. In order to appreciate the nature of dispute raised in this writ petition, it would

be apposite to quote the statements made in paragraph 19 of the writ petition,

which are extracted herein below :-

"19. That the petitioner begs to state that the rake placement time is

generally in the night at about 8 P.M. to 10 P.M. and the FCI Officers are not

present at the Railhead to take over charge of the rakes in the night. The rakes

are opened on the next day at about 8 A.M. to 10 A.M. for which Demurrage

Charges are levied upon the petitioner without any default. It is pertinent to

mention herein that on Sundays the FSD Godowns are kept closed and the

petitioner's request to open the FSD's to facilitate unloading of foodgrains falls

into deaf ear. Therefore, loaded trucks arriving at the FSD on Saturdays are

received by the FSD official on next Monday incurring huge demurrages."

7. The reply of the respondents to the said paragraphs is available in paragraph

31 of the counter-affidavit, which is extracted herein below :-

"31. That the statements made in paragraph 19 of the writ petition are not

correct as such vehemently denied by me. It is specifically denied that the FCI

officers are not present at the railhead to take over charge of the rakes in

night. In this connection, the deponent craves to pray that the petitioner be

put to strict proof of the same. In this regard, I say that the FCI officials also Page No.# 6/14

worked on Sunday for doing needful for unloading of wagons if the occasion

arises. I further say that the Divisional Manager on delegation of power (DoP)

by the General Manager, levy demurrage charges as applicable in the lines of

appropriate terms and conditions of Tender agreement."

8. From the above, it would be apparent that the allegation of negligence on

the part of the petitioner company in its failure to place the trucks within the "free

time", is a heavily disputed question of fact. Be that as it may, the other relevant

question that would also arise for consideration of this Court in the present

proceeding was as to whether, as per the terms and conditions of the contract, is it at

all permissible for the FCI authorities to levy "demurrage" upon the petitioner

unilaterally.

9. By referring to the decision of the Supreme Court rendered in the case of Food

Corporation of India and others Vs. Abhijit Paul reported in 2023 (157) ALR 205 Mr.

Borbora, learned senior counsel for the petitioner has argued that the issue raised in

the present writ petition is squarely covered by the aforesaid decision of the Supreme

Court which has affirmed the judgments of the learned Single Judge as well as the

Division Bench of the High Court of Judicature at Tripura rejecting similar claims of the

FCI authorities, relying upon the same condition of the contract Agreement. Mr.

Borbora has argued that the Manager Accounts does not have the jurisdiction or

authority under the law to make unilateral deduction of "demurrage" from the

running bills of the petitioner company, particularly since the petitioner was not the

handling contractor at the Railway siding and hence, did not have any direct role to Page No.# 7/14

play in unloading of the wagons.

10. Refuting the above contention, Mr. V. K. Singh, learned counsel for the FCI

authorities has submitted that the terms and conditions of the present contract are

not the same as those involved in the case of Abhijit Paul (supra) and therefore, the

decision of the Supreme Court in the aforesaid case is distinguishable on facts.

Contending that the contract agreement permits levying of "demurrage" for the

default of the contractor and by arguing that if the FCI is prevented from enforcing

the said clause on account of failure of the handling and transport contractor to

unload the wagons within the "free time", then, it would be wholly unviable for the

Corporation to execute the transport contracts. Mr. Singh has prayed for dismissal of

the writ petition.

11. I have considered the submissions made at the bar and have also carefully

gone through the materials available on record.

12. As is apparent from the facts noted above, the core issue involved in this

proceeding is pertaining to the question as to whether, the FCI was empowered

under the contract agreement to levy "demurrage" and deduct such amount from

the bills of the petitioner. The same issue had arisen for consideration in a writ petition

filed by another FCI contractor, viz., Sri Abhijit Paul before the Tripura High Court,

which was numbered and registered as WP(C) No.367/2012. By the judgment and

order dated 27.02.2015 passed by the Tripura High Court in WP(C) No.367/2012 [Sri

Abhijit Paul Vs. Food Corporation of India and others], it has been held that the levy

of demurrage by the FCI on the petitioner was bad and the same was set aside by Page No.# 8/14

holding that the contractor could be held liable for such "demurrage" if it can be

substantiated that for negligence or dereliction of the contractor, the respondents

(FCI) have suffered loss in the course of transportation but for that purpose, there has

to be an enquiry where the petitioner must have his say. The learned Single Judge

has held that the quantum of damage is to be determined by following the due

process of law and satisfying the requirements of principles of natural justice or by

way of conciliation. It is only in that event, that the petitioner (contractor) can be

asked to make good the loss and not otherwise. The aforesaid order was passed by

taking note of another decision of this Court rendered in the case of Bulbul Enterprise

vs. Food Corporation of India and others reported in AIR 2000 Gau 164 wherein, it was

also held that deductions made by the FCI from the bills of the contractor as

"demurrage" was dehors the terms of the contract and hence, not sustainable in law.

Be it mentioned herein that in both the cases, the contract agreement contained a

provision for levy of demurrages/wharfages upon the contractor, if the Corporation

suffers or incurs any loss due to the negligence of the contractor.

13. The decision of the learned Single Judge of High Court of Judicature at Tripura

in the case of Abhijit Paul (supra), the order of the Division Bench rejecting the appeal

preferred by the FCI against the order of the learned Single Judge and some other

proceedings connected with the same issue, came up for consideration before the

Hon'ble Supreme Court in the case of Food Corporation of India and others Vs. Abhijit

Paul. After considering the terms and conditions of the contract agreement, the

Hon'ble Supreme Court inter-alia has held that since the contractor was not entrusted

with the task of loading or unloading of foodgrains from the Railway wagons under Page No.# 9/14

the contract agreement, hence, the expression "charge" would not include any

liability upon the contractor on account of "demurrages". Consequently, it was held

that the Corporation cannot impose and collect "demurrages" from the contractor.

It is thus apparent that unless the loading and unloading of foodgrains from the

Railway wagons falls within the scope of the contractor's duties under the contract,

"demurrages" as a penalty for non-performance of contractual duties, would

ordinarily not be applicable. The matter could, however, be different if breach of

contract on the part of the contractor is established though any adjudicatory

mechanism.

14. In the present case, the relevant clause of the contract which comes into play

is clause (X)(a), which is reproduced herein below for ready reference :-

"X. Liability of Contractors for losses etc. suffered by Corporation :

a) The contractors shall be liable for all costs, damages, demurrages, wharfage, forfeiture of wagon, registration fees, charges and expenses suffered or incurred by the Corporation due to the contractor's negligence and un-workman like performance of any services under this contract or breach of any terms thereof or his failure to carry out the work with a view to avoid incurrence of demurrage etc. under this contract or breach of any terms thereof or his failure to carry out the work with a view to avoid incurrence of demurrage etc. and for all damages or losses occasioned in the Corporation due to any act whether negligent or otherwise of the contractor themselves or his employees. The decision of the General Manager regarding such failure of the contractor and their liability for the losses etc. suffered by Corporation and the quantification of such losses shall be final and binding on the contractor."

Page No.# 10/14

15. It is no doubt correct that "demurrage" is included in Clause (X)(a) of the

contract. However, since the writ petitioner was not entrusted with the task of

unloading the wagons Ex-Rly Siding Salchapra, in view of the decision of the Supreme

Court in Abhijit Paul (supra) the said clause in the contract agreement, in the opinion

of this Court, cannot be interpreted as a provision in the contract permitting levy of

"demurrage" upon the contractor. It may be the case that due to the default on the

part of the petitioner to place the trucks at the Railway siding, there was delay in

unloading of the Railway wagons on odd occasions as a result of which, the

unloading could not be completed within the "free time", thus inviting demurrage

being imposed by the Railways upon the FCI. However, since the petitioner was not

responsible for un-loading the wagons, the FCI authorities cannot unilaterally deduct

amount of "demurrage" from the bills of the contractor on such count. In other

words, imposition of "demurrage" by the FCI upon the transport contractor, cannot

be based on mere ipse dixit of the General Manager or any other official of the FCI

coming within the definition of Clause I(v) of Annexure-1 of the contract agreement.

Such a claim against the transport contractor would be maintainable only when

there is a proper determination of the claim by following the due process under the

law wherein, the contractor is given sufficient opportunity to produce its/his version

along with evidence. Otherwise, the FCI authorities cannot maintain a claim against

the contractor for recovery of "demurrage" save and except by obtaining a decree

from the civil court or any other adjudicatory order or award.

16. There is yet another aspect of the matter which deserves consideration in this

case. Clause X(a) of the contract agreement envisages the right of the employer to Page No.# 11/14

recover cost, damages, wharfages etc. on the ground of failure on the part of the

contractor to comply with the terms and conditions of the contract. However, there is

no clause in the contract which quantifies the quantum of "damage/demurrage"

that would be recoverable from the contractor nor does the contract specify as to

whether, demurrage would be recoverable from the handling contractor at the

Railway Siding or the transporter. Therefore, it cannot be said that Clause X(a) of the

contract agreement contains a condition for imposing Liquidated Damage (LD) on

the transporting contractor.

17. As per the Black's Law Dictionary (Tenth Edition), Liquidated Damage is an

amount contractually stipulated as a reasonable estimation of actual damages to be

recovered by one party if the other party breaches. If the parties to a contract have

properly agreed on Liquidated Damages, the sum fixed is the measure of damages

for a breach, whether it exceeds or falls short of the actual damage. Naturally,

therefore, unliquidated damage would mean damages that cannot be determined

by a fixed formula and must be established by a judge or jury [see Black's Law

Dictionary].

18. Section 74 of the Indian Contract Act, 1872 deals with compensation for

breach of contract where penalty is stipulated for i.e. Liquidated Damage. Section 74

is extracted herein below for ready reference :-

"74. Compensation for breach of contract where penalty stipulated for.-- [When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is Page No.# 12/14

entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."

19. In the case of Union of India vs. Raman Iron Foundry reported in (1974) 2 SCC

231 the Supreme Court has observed that claim for unliquidated damages does not

give rise to a debt until the liability is adjudicated and damages assessed by a

decree or order of a court or other adjudicatory authority. When there is a breach of

contract, the party who commits the breach does not eo instanti incur any

pecuniary obligation nor does the party complaining of the breach becomes entitled

to a debt due from the other party. The only right which the party aggrieved by the

breach of the contract has is the right to sue for damages. Although the decision in

the case of Raman Iron Foundry (supra) has been over-ruled by a subsequent

decision rendered in the case of H. M. Kamaluddin Ansari & Co. vs. Union of India

reported in (1983) 4 SCC 417 as well as in the case of State of Gujarat vs. Amber

Builders reported in (2020) 2 SCC 540, yet, the findings recorded in Raman Iron

Foundry (supra) as regards the rights of the party to the contract pertaining to the

liquidated and unliquidated damage have remained undisturbed.

20. In another decision of the Supreme Court rendered in the case of Gaziabad

Development Authority Vs. Union of India and another reported in (2000) 6 SCC 113 it

has been observed that in case of breach of contract, damages may be claimed by

one party from the other who has broken its contractual obligation in some way or

the other. The damages may be liquidated or unliquidated. Liquidated damages are Page No.# 13/14

such damages as have been agreed upon and fixed by the parties in anticipation of

the breach. Unliquidated damages are such damages as are required to be

assessed. Broadly, the principles underlying assessment of damages is to put the

aggrieved party monetarily in the same position, as far as possible, in which it would

have been, if the contract would have been performed.

21. From a careful analysis of the decisions of the Supreme Court referred to

above, read in the context of sections 73 and 74 of the Indian Contract Act, it is clear

that, unless the contract agreement itself specifies an agreed amount of damage

which can be levied on the contractor for having breached the conditions of the

contract, any amount claimed by the employer would not automatically translate

into a debt but would merely remain a claim. If the claim is legitimately disputed by

the contractor being one of the parties to the contract agreement, the same would

give rise to a dispute which would have to be adjudicated upon by the Court or

through any other adjudicating mechanism established under the law.

22. In the present case, as has been noted above, there is no Liquidated

Damage clause. Moreover, the petitioner (contractor) was not entrusted with the

work of unloading of the foodgrains at the Railway siding. As such, in view of the

denial on the part of the petitioner of any laches or negligence on its part which can

be seen as a breach of the terms and conditions of the contract, the FCI cannot

unilaterally recover any amount from the contractor as demurrage unless the liability

of the contractor is determined through a process established by law.

23. For the reasons stated herein above, this Court is of the opinion that this writ Page No.# 14/14

petition must succeed and the same is hereby allowed. Consequently, all deductions

made from the previous running bills of the petitioner on account of "demurrage" are

hereby set-aside. The respondents are directed to refund the amounts so deducted

from the running bills of the writ petitioner as "demurrage" within 60(sixty) days from

the date of receipt of a certified copy of this order and also to refrain from deducting

any further amount on account of "demurrage" from the bills of the writ petitioner. It

is made clear that if the deducted amount is not refunded within 60 (sixty) days from

the date of this order, interest at the rate of 9% per annum on the amount, calculated

from the date of this order, till refund of the same shall be payable to the petitioner by

the respondent.

This order would, however, not preclude the respondents from initiating any

action against the writ petitioner for realization of damage and compensation, if any,

in accordance with law and in the light of the observations made herein above.

The writ petition stands disposed of accordingly.

Parties to bear their own cost.

JUDGE

T U Choudhury/Sr.PS

Comparing Assistant