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2022 (11) TMI 1461 - SC - Indian LawsRecovery of demurrage charges - 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? - does contractors liability for charges if any include demurrages? - HELD THAT - The contracts delegating the responsibility of loading and unloading of foodgrains from railway wagons as an integral part of the contract include a clear and distinctive Clause for the imposition of liability inter alia on account of demurrages. Evidently the liability Clause in these contracts termed the Handling and Transport Contracts is starkly distinct from the present Road Transport Contracts. There are reason to believe that the Corporation statutorily obligated to procure and distribute foodgrains across the nation enters into contracts depending on the services it requires. These contracts naturally vary depending on the needs and purposes of the Corporation. With the aid of the provisions in the Handling and Transport Contract from 2010 we are able to understand the intention of the parties while entering into the present Road Transport Contracts. As the present contracts do not involve the task of loading and unloading of foodgrains from the railway wagons as a part of the contractors responsibility there is no Clause enabling the recovery of demurrages from them by the Corporation. Thus our interpretation of the expression charges as exclusive of liability for demurrages stands confirmed. The Handling and Transport Contract from 2018 similarly involved loading and unloading of foodgrains from the railway wagons within the scope of contractors duties thereby necessitating the inclusion of demurrages as a penalty for non-performance of contractual duties. Thus the present Road Transport Contract is distinct from the Handling and Transport Contract from 2018 as the responsibility of loading and unloading of foodgrains from railway wagons is absent in the present contract. For this reason the Corporation in the present contract has chosen not to include the power to recover demurrages and as such the expression charges cannot be interpreted to include demurrages. Appeal dismissed.
Issues Involved:
1. Whether demurrages imposed on the Corporation by the Railways can be recovered from the contractors under Clause XII (a) of the contract. 2. Interpretation of the term "charges" within the contractual context. 3. Responsibilities of the contractor regarding loading and unloading of foodgrains. 4. Validity of unilateral recovery actions by the Corporation. 5. Applicability of previous judgments and legal principles to the present case. Detailed Analysis: Issue 1: Recovery of Demurrages from Contractors The primary question was whether the demurrages imposed on the Food Corporation of India (Corporation) by the Railways could be recovered from the contractors under Clause XII (a) of the contract. The Supreme Court upheld the High Court of Tripura's decision that demurrages cannot be recovered as a charge by the Corporation. The Court concluded that the parties did not intend to include liability on account of demurrages as part of the expression "charges" in the contract. The liability of the contractors in the present contracts was distinguishable from other contracts entered into by the Corporation in 2010 and 2018, which had different scopes and objectives. Issue 2: Interpretation of "Charges" The term "charges" in Clause XII (a) was debated. The Court noted that the dictionary meaning of "charges" is open-textured and must be understood in the context of the contract. The Court referred to established principles of contractual interpretation, emphasizing that the meaning of terms should be gathered from the contract as a whole and the intention of the parties. The Court found that "charges" did not include demurrages, as there was no provision in the contract requiring contractors to undertake the task of loading and unloading foodgrains from railway wagons. Issue 3: Responsibilities of the Contractor The contract specified that the contractor was responsible for supplying trucks for transportation of foodgrains but did not include responsibilities for loading and unloading foodgrains from railway wagons. This was confirmed by the Corporation's own submissions, which justified the imposition of demurrages solely on the contractor's failure to provide trucks on time. The Court concluded that the task of loading and unloading foodgrains was not part of the contractors' responsibilities under the contract. Issue 4: Unilateral Recovery Actions The contractor objected to the Corporation's unilateral action of recovering demurrages by withholding the security deposit. The Court noted that the Corporation had failed to follow due process and that the unilateral determination of liability was not permissible. The High Court had directed the Corporation to settle its claims through a civil suit for recovery, which the Supreme Court upheld. Issue 5: Applicability of Previous Judgments The Corporation's counsel argued that the dismissal of a Special Leave Petition at the admission stage did not operate as res judicata. The Court clarified that it would not dismiss the Corporation's appeals on preliminary objections and would consider the merits of the case. The Court also examined similar contracts entered into by the Corporation in 2010 and 2018, which included specific clauses for the imposition of demurrages, unlike the present contract. This confirmed that the expression "charges" in the present contract did not include demurrages. Conclusion: The Supreme Court dismissed the Corporation's appeals, upholding the High Court's decisions that demurrages could not be recovered from the contractors under the present contracts. The Court allowed the contractors' appeals, setting aside the High Court's judgments that had directed them to avail alternative remedies. The parties were directed to bear their own costs. The decision clarified that the Corporation could pursue other remedies, such as instituting a suit for recovery, if the law enabled them to do so.
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