FOOD CORPORATION OF INDIA & Ors. v. ABHIJIT PAUL

From the Judgment and Order dated 07.09.2018 of the High Court of Tripura at Agartala in Writ Appeal No.56 of 2018 and Order dated 02.01.2019 in Review Pet. No.02 of 2019. A B C D E F G H FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL 731 With Civil Appeal Nos.8574-8579 And 8580-8581 of 2022. Sanjay Parikh, Sr. Adv., Ajit Pudussery, Vijay A. K., Shoeb Alam, Ujjwal Singh, Prashant Shukla, Piyush Dwivedi, Suyash Srivastava, Ms. Shreya Mishra, Shanker Singh, Ms. Aaina Walia, Satyajeet Kumar, Abhay Kumar, Shagum Ruhil, Saurabh Mishra, Advs. for the appearing parties. The Judgment of the Court was delivered by PAMIDIGHANTAM SRI NARASIMHA, J.

Leave granted.

Food Corporation of India1, the Appellant herein, procures and distributes foodgrains across the length and breadth of the country as a part of its statutory duties. In the process, it enters into many contracts with transport contractors. In one such contract, the subject matter of present appeals, the Corporation empowered itself (under clause XII (a)) to recover damages, losses, charges, costs and other expenses suffered due to the contractors’ negligence from the sums payable to them. The short question arising for consideration is whether the demurrages imposed on the Corporation by the Railways can be, in turn, recovered by the Corporation from the contractors as “charges” recoverable under clause XII (a) of the contract. In other words, does contractors’ liability for “charges”, if any, include demurrages?

The Single Judge and the Division Bench of the High Court of Tripura have held that demurrages cannot be recovered as a charge by the Corporation. After examining the contract in its entirety, including its nature and scope, we conclude that the parties did not intend to include liability on account of demurrages as part and parcel of the expression “charges”. The liability of the contractors in the present contracts is clearly distinguishable from other contracts entered into by the FCI in 2010 and 2018, having a different scope and objective. Because of our conclusions, we have upheld the judgments of the High Court and dismissed the appeals filed by the Corporation. Before considering the submissions, analysis and the conclusions, we will refer to the necessary facts and contractual provisions.

There are three appeals. In the first set of appeals arising out of Special Leave Petition Nos. 16009-16010 of 2019, the Corporation 1 hereinafter referred to as ‘Corporation’. A B C D E F G H 732 SUPREME COURT REPORTS [2022] 8 S.C.R. A B C D E F G H 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 tenderer2. He deposited an amount of Rs. 44,95,000/- towards the security deposit, leading to the execution of the contract3. 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. As this demand was bereft of any reason and rightly objected to, it was followed by another letter dated 27.06.2017 by the Corporation. In this letter, 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 objected to this unilateral action, contending that there was no power to recover demurrages under the Work Order. Being unsuccessful in pursuing the Corporation to withdraw the letters, demand and the unilateral action, the contractor filed a writ petition4 before the High Court of Tripura for quashing the illegal and arbitrary action.

This writ petition was allowed by the Single Judge of High Court. It clarified that the Corporation was only entitled to recover losses that were incurred due to the contractor’s dereliction of duties under the contract, as permissible under Section 73 of the Indian Contract Act 1872, which provides for recovery of damages for the breach of a contract. This would not permit the recovery of losses that were causally 2 hereinafter referred to as ‘contractor’. 3 Contract No. Cont.9/NEFR/TC/CBZ-CDR/2011 dated 25.04.2012, hereinafter referred to as ‘Work Order’ or the ‘contract’. 4 WP No. 1351 of 2016. FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL [PAMIDIGHANTAM SRI NARASIMHA, J.] 733 distant from the contractor’s actions. Further, it held that the Corporation had unilaterally determined and imposed demurrages on the contractor, and directed it to settle its claims through a civil suit of recovery. The Corporation filed a writ appeal5 and the Division Bench of the High Court by its order dated 07.09.2018 dismissed the same on the ground of delay. A Review Petition6 filed by the Corporation was also dismissed by the Division Bench of the High Court on 22.01.2019. The present appeals are against the orders in the writ appeal as well as in the review.

The second set of civil appeals are also filed by the Corporation. It arises out of Special Leave Petition Nos. 16063-16068 of 2019 and it impugns the decision of the Division Bench of the High Court of Tripura dated 15.05.2019. Therein, the High Court similarly dismissed the writ appeals on the ground that the Corporation had no power to recover demurrages from contractors under the clauses of the contract therein.

The third set of civil appeals, arising out of Special Leave Petition Nos. 4045-4046 of 2021, are filed by the contractors. They have challenged the orders of the Division Bench of the High Court of Tripura dismissing their writ appeals7 and upholding the decision of the Single Judge of the High Court dated 25.11.2019, directing the contractors to avail alternative remedies.

Submission of Parties : Shri Neeraj Kishan Kaul, learned Senior Counsel appearing on behalf of the Appellant started his submissions preempting a preliminary objection about the dismissal of a Special Leave Petition against an adverse order of the High Court on the same issue8, and relatedly, aboutnot appealing another adverse decision of the High Court of Tripura on identical issues9. Relying on State of Maharashtra v. Digambar10, he submitted that the dismissal of a Special Leave Petition at the admission stage did not operate as res judicata. He also explained that the Corporation refrained from appealing against the aforementioned judgment of the High Court because the amount recoverable therein was low. Moreover, in those cases, the Corporation had already issued No Dues Certificates to the contractors. 5 Writ Appeal No. 56 of 2018. 6 Review Petition No. 02 of 2019. 7 Writ Appeals Nos. 186 of 2020 dated 04.01.2021 and 187 of 2020 dated 18.01.2021. 8 SLP No 3391 of 2018, dismissed in limine on 26.03.2018. 9 Writ Appeal Nos. 25-27 of 2016 (Tripura High Court) 10 (1995) 4 SCC 683. A B C D E F G H 734 SUPREME COURT REPORTS [2022] 8 S.C.R. A B C D E F G H

Before proceeding any further, we make it clear here itself that we do not propose to dismiss the Corporation’s appeals on preliminary objections. We will therefore consider Shri Kaul’s submission on the merits of the case.

Referring to and relying on the contractual clauses, Shri Kaul submitted that the expression “charges” in clause XII (a) of the Work Order clearly includes demurrages, and the Corporation is empowered to recover the same. He relied on the decision of this Court in Raichand Amulakh Shahand Anr. v. Union of India11 and Trustees of the Port of Madras v. Aminchand Pyarelal & Ors12 to say that demurrages constitute a charge. He also submitted that the Handbook used by Corporation13 would demonstrate that “charges” certainly include “demurrage”.

Supplementing the above submissions, Shri Ajit Puduserry, AOR submitted that in the construction of contractual terms, the interpretation proposed by the author of the tender document must be relied on. He referred to Agmatel India Pvt Ltd v. Resoursys Telecom & Ors14 for this purpose. He further submitted that 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. It is his contention that notices were accordingly issued before recoveries were made. Appearing on behalf of the Corporation in the third appeal, Shri Abhay Kumar, AOR, supported the arguments of the Appellant Corporation on the same grounds.

Shri Sanjay Parikh, learned Senior Counsel appearing on behalf of the Respondents submitted that the 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. He also submitted that 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. He took us through the contracts that were executed in