Union of India v. State Trading Corporation

FIRST APPEAL NO.672 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.673 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.674 OF 2005 Union of India, .. Appellants. Vs -5- New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.675 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.676 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.677 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.678 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.679 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. WITH

FIRST APPEAL NO.680 OF 2005 Union of India, .. Appellants. Vs New India Assurance Co.Ltd. and anr. .. Respondents. -6- WITH

FIRST APPEAL NO.681 OF 2005 Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO.682 OF 2005 Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO.684 OF 2005 Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO.685 OF 2005 Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO.686 OF 2005 Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO.1839 OF 2006 -7- Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO. 1840 OF 2006 Union of India, .. Appellants. Vs State Trading Corporation Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO. 1844 OF 2006 Union of India, .. Appellants. Vs The New India Assurance Co Ltd and anr. .. Respondents. WITH

FIRST APPEAL NO.130 OF 2003 Union of India, .. Appellants. Vs 1. State Trading Corporation Ltd, and anr. .. Respondents. WITH

FIRST APPEAL NO.132 OF 2003 Union of India, .. Appellants. Vs 1. New India Assurance Co Ltd, and anr. .. Respondents. WITH

FIRST APPEAL NO.943 OF 2004 Union of India, .. Appellants. -8- Vs 1. New India Assurance Co Ltd, and anr. .. Respondents. Mr A.N.Samant, for the appellants-Union of India. Mr R.V.Govilkar with Mr A.A.Motwani, for the respondent-New India Assurance Co. Mr Gurjar for the respondent-State Trading Corporation. CORAM : D.B.BHOSALE,J. CORAM : D.B.BHOSALE,J. CORAM : D.B.BHOSALE,J. DATE : 22.12.2006 DATE : 22.12.2006 DATE : 22.12.2006 ORAL JUDGEMNT: ORAL JUDGEMNT: ORAL JUDGEMNT:

This group of First Appeals raises common questions of law. The factul matrix against which the questions are raised and the parties in all the appeals are similar and, therefore, this group of the Appeals is being disposed of by this common judgment.

The Appeals are by the Union of India, owning and administering different Railway Administrations including Central Railway, North East Frontier Railway, South East Railway and Eastern Railway, with which we are concerned in these appeals. Respondent no.1- State Trading Corporation Ltd, the company registered under the Indian Companies Act and having its registered office at New Delhi, is a Government of India Undertaking ("the STC", for short). Respondent no.2, the New India Assurance Co.Ltd, is a company incorporated under the Indian Companies Act and having -9- its registered office at Mumbai, ("the Assurance Company", for short) with whom the goods in transit were insured by the STC and which, ultimately, reimbursed the STC by paying the amount which was claimed in the suit.

The STC entrusted the Central Railway at Mulund goods, Mumbai consignments of refined Soyabin Oil for despatch and delivery to the Central Ware-Housing Corporation at different destination railway stations on "North East" and "Eastern" and "South East" Railways. At the destination stations on arrival of wagons, the STC noticed a shortage. On their written request for re-weighing the consignment the respondent-railway authorities allowed re-weighment and the shortage was accordingly detected. The railway staff issued shortage certificates in all these cases. The STC on the basis of the shortage certificates, approached the appellants railway administrations claiming compensation for the shortages and since the compensation was not paid, they initially instituted suits in this court. However, the suits were transferred to Railway Claims Tribunal, after it was established under the Railway Claims Tribunal Act, 1987. In all the claim applications, the STC alleged that the railway administrations have failed to use reasonable foresight and caution as a man of ordinary prudence takes for his own goods and as a -10- result of gross negligence and failure to protect goods, they have suffered heavy loss due to shortage of product at the time of delivery and hence they are liable to pay compensation.

All the claims were contested by the railway administrations by filing written statements. They have denied all the allegations and have specifically challenged the claim on the ground of territorial jurisdiction and noncompliance of the provisions of section 78-B of the Indian Railways Act, 1890 (for short, "Act of 1890"). In all the claim cases somewhat similar issues were framed. It would be advantageous to reproduce the issues framed by the Tribunal in one of the cases bearing No.O.A.149/90. The issues read thus:

1. Whether the Applicants prove that they had sent the statutory notice to the respondents in order to pursue their present claim ?

2. Whether the applicants prove that they suffered loss by way of short delivery of Refined Rape Seed Oil in the present case on account of negligence and/or misconduct on the part of the respondent railways ?

3. Whether the applicants prove that they are entitled to the compensation as claimed for in the present claim Application ? -11-

4. Whether the respondent railways proves that the present Claim Application is not maintainable under the law ? All the four issues were answered in favour of the respondents and the railway administrations were directed to pay compensation as claimed in each of the cases/claim applications. In some of the cases an interest at the rate of six per cent per annum from the date of filing of the applications was granted and in some nine percent. The Railway Administrations were granted three months time to make the payment.

I heard the learned counsel for the parties at length. Perused the impugned judgments and all other material to which my attention was specifically drawn. Mr Samant, learned counsel for the appellants, submitted that the STC having subrogated their rights in favour of the Assurance company and having been received their monetary claim have no subsisting claim against the appellants. He then submitted that no decree can be passed against the two railway administrations by the Tribunal. He submitted that the Tribunal at Mumbai has no territorial jurisdiction over the second railway administration, as contemplated under Section 80 read -12- with section 78-B of the Act of 1890. The second railway administration is beyond the territorial limits of the Tribunal at Mumbai. Section 80 of the Act of 1890, according to Mr Samant, provides that only one railway administration can be sued. He also referred to Section 33 of the Railway Claims Tribunal Act, 1987 (for short, "The Tribunal Act") in support of this contention. Mr Samant placed reliance upon the judgment Union of India Vs. Indian Hume Pipe, of this Court in Union of India Vs. Indian Hume Pipe, Union of India Vs. Indian Hume Pipe, AIR 1981 Bombay 414 and unreported judgment of the AIR 1981 Bombay 414 AIR 1981 Bombay 414 learned Single Judge in First Appeal No.1136 of 1992 in Union of India Vs. M/s Eknath Khemchand decided on

6.5.2005. Mr Samant then submitted that the decree against other Railway Administrations must be set aside since the Tribunal at Mumbai has no jurisdiction over them and even the decree against the Central Railway also must fail since admittedly notice, contemplated under section 78-B of the Act, 1890, was not given to the Central Railway. In other words, he submitted that the claim applications of respondent no.1 against Central Railway must fail and the impugned orders passed by the Tribunal deserve to be set aside for want of valid notice under section 78-B of the Act, 1890. In support of this contention, he placed reliance upon the Union of India Vs. unreported judgment of this Court in Union of India Vs. Union of India Vs. Cummins Diesel in F.A.No.1150 of 1991 decided on 2nd may Cummins Diesel in F.A.No.1150 of 1991 Cummins Diesel in F.A.No.1150 of 1991 -13-

2005. He then invited my attention to the operative part of the judgments in some of the appeals to contend that the interest awarded at the rate of nine percent per annum deserve to be set aside and brought down to six per cent only as held by this Court in the case of Maharashtra State Electricity Board Vs. Union of India, Maharashtra State Electricity Board Vs. Union of India, Maharashtra State Electricity Board Vs. Union of India, 2005 (1) Mah.L.J.165. Mr Samant, then fairly submitted 2005 (1) Mah.L.J.165 2005 (1) Mah.L.J.165 that in view of the unreported judgment of this Court in Union of India Vs. Century Textiles in First Appeal No. Union of India Vs. Century Textiles Union of India Vs. Century Textiles 14 of 1995 decided on 17.2.2005, and followed in several other appeals, the question of the "said to contain" railway receipts and the liability of the railways thereunder he cannot carry it further.

Mr Govilkar, learned counsel for the Assurance Company in reply to the submissions of Mr Samant on the question of territorial jurisdiction, submitted that he has instructions to press the decree only against the central railway and in view thereof he fairly stated that I need not enter into the question of territorial jurisdiction. In effect, Mr Govilkar deemed to have conceded that the Tribunal at Mumbai has no jurisdiction over North East Railway. Mr Samant, though raised several questions in view of the submission of Mr.Govilkar, on the point of jurisdiction, ultimately confined the challenge only on the ground that the claim -14- applications must be rejected for want of service of notice to the Central Railway as contemplated under Section 78-B of the Act of 1890 as also under section 106 read with section 107 of Railways Act, 1989 (for short, "Act of 1989"). In the circumstances, I do not deem it necessary to enter into the question of territorial jurisdiction.

Mr Govilkar, however, insofar as the question of notice contemplated under section 78-B of the Act of 1890 is concerned, placed heavy reliance upon the judgment of this Court in Union of India vs. Kalinga Union of India vs. Kalinga Union of India vs. Kalinga Textiles, AIR 1969 Bombay 401 Textiles, AIR 1969 Bombay 401 to contend that the notice Textiles, AIR 1969 Bombay 401 under section 78-B to North East Railway is deemed to be the notice under that provision to the Central Railway and on the basis thereof the Tribunal has rightly awarded the compensation. Mr Govilkar submitted that the notice to one railway administration is notice to other railway administration also and the claim application would not fail on the ground that the notice under section 78-B has not been given to the other railway. Admittedly, in the present case, the notice contemplated by section 78-B was given to other Railway Administration and not to the Central Railway against whom the respondents press confirmation of the order of compensation passed by the Tribunal. In support of this -15- contention he placed reliance upon the judgments of Fir Devkisan Vs. Union of India, other High Courts in Fir Devkisan Vs. Union of India, Fir Devkisan Vs. Union of India, AIR 1966 Allahabad 16, Traders Syndicate Vs Union of AIR 1966 Allahabad 16, Traders Syndicate Vs Union of AIR 1966 Allahabad 16, Traders Syndicate Vs Union of India, AIR 1983 Calcutta 337 and Union of India Vs. India, AIR 1983 Calcutta 337 and Union of India Vs. India, AIR 1983 Calcutta 337 and Union of India Vs. Panipat Wollen and General Mills Co Ltd AIR 1967 Punjab Panipat Wollen and General Mills Co Ltd AIR 1967 Punjab Panipat Wollen and General Mills Co Ltd AIR 1967 Punjab and Haryana 497. Insofar as interest is concerned, Mr. and Haryana 497. and Haryana 497. Govilkar submitted that the Tribunal has rightly awarded 9 % interest and deserves no intereference by this court. Mr Gurjar, learned counsel for the STC, adopted the submissions advanced by Mr Govilkar.

In view of the arguments advanced by the learned counsel for the parties in this group of the appeals, I now proceed to address the questions of service of notice contemplated under section 78-B of the Act of 1890 and the interest.

Mr Govilkar, placed heavy reliance upon the judgment of the Division Bench of this Court in Kalinga Kalinga Kalinga Textiles (supra) Textiles (supra). In that case the Division Bench was Textiles (supra) considering a plea that there was no notice at all served upon either of the two railways, namely, the central railway and the South Eastern Railway. After considering merits of the submission, in paragraph 18 of the judgment it was held that a notice of claim under section 77 was issued by plaintiff no.1 therein and it was duly served upon the General Manager of the South -16- Eastern Railway and that no such notice had been served upon the General Manager of the Central Railway. It is against this backdrop the Division Bench was considering whether notice to South-Eastern Railway under Section 77 could be treated as notice to Central Railway and/or whether claim would fail for want of notice to Central Railway.

Section 78-B of the Act of 1890 had been inserted by Act 39 of 1961. The corresponding old section was section 77 which provided for notification of the claims to refund of overcharges and to compensation for loss. Under this provision, a person was entitled to compensation for the loss of goods delivered to be -19- carried, unless his claim has been preferred in writing to the "railway administration" within six months. It does not make any distinction between railway administrations to which goods were delivered to be carried by the railway and the railway administration on whose railway the destination station lies, or the loss, destruction, damage or deterioration occurred as we find it in section 78B. Even the proviso to section 77 uses the expression "railway administration" only. Whereas section 80 clearly makes distinction between different railway administrations. These provisions were under consideration before the Division Bench in Kalinga Kalinga Kalinga Textiles Textiles and even in Devkisan Vs Union of India and Devkisan Vs Union of India and Textiles Devkisan Vs Union of India and Traders Syndicte Vs Union of India (supra) Traders Syndicte Vs Union of India (supra). Traders Syndicte Vs Union of India (supra)

In the present case, admittedly all the consignments were booked prior to 1.7.1990 and, therefore, there is no dispute that the contracts between the parties in all the cases took place prior to this date and, therefore, all the cases are governed by the Act of 1890. Mr Samant vehemently submitted that the provisions with which we are concerned in these appeals being procedural and do not create any kind of substantive right and obligation between the parties, provisions of Sections 106 and 107 of the Act of 1989 are attracted. In short, he submitted that the -20- provisions of sections 106 and 107 of the Act of 1989 have retrospective operation. In support of this submission, he placed heavy reliance upon the judgment Sudhiraj G. Angur and others Vs. M. Sanjeev and of Sudhiraj G. Angur and others Vs. M. Sanjeev and Sudhiraj G. Angur and others Vs. M. Sanjeev and