IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.01.2011 CORAM: THE HONOURABLE MS.JUSTICE R.MALA Appeal Suit No.239 of 2007 Food Corporation of India, Regional Office, rep. by its General Manager, O/o The General Manager, 124, Greams Road, Chennai-600 006. .. Appellant/Defendant (Cause Titile accepted, vide Order of Court, dated 21.3.2007, in M.P.No.1 of 2007) Vs. M/s.Sri Swarna & Company, Partnership Firm, rep. By its Managing Partner, B.Venugopal Reddy, 329, Thambu Chetty Street, 2nd Floor, Chennai-600 001. .. Respondent/Plaintiff Appeal Suit (First Appeal) against the judgment and decree dated 29.4.2006 in O.S.No.1315 of 2004 on the file of the Additional District Court, Fast Track Court No.1, Chenai-1. For appellant : Mr.M.Imthias For respondent: Mr.R.Sivaraman JUDGMENT The First Appeal is filed against the judgment and decree, dated 29.4.2006 in O.S.No.1315 of 2004 on the file of the Additional District Court, Fast Track Court No.1, Chenai-1. 2. The averments in the plaint are as follows: (a) The plaintiff is a registered partnership firm, carrying on its business as a Transport Contractors. The defendant-Food Corporation of India (for short, FCI), a Government of India undertaking, invited tenders for transport of foodgrains from: (i) Egmore to Pondicherry, for the period from 1.1.2000 to 31.12.2001; https://hcservices.ecourts.gov.in/hcservices/ (ii) Egmore to T.V.Koil, for the period 1.1.2000 to 31.12.2001 and (iii) FSD Arakknonam to FSD TV Koil, for the period from 10.2.2000 to 9.2.2002. The plaintiff-firm submitted the tenders, which were accepted by the defendant-FCI. (b) Accordingly, the defendant as awarded 3 contracts to the plaintiff-firm for transport of foodgrains to the respective destinations. After following the procedures, the defendant accepted the security deposit. The plaintiff-firm commenced operation and it executed the contract to the satisfaction of the defendant-FCI. The foodgrains were loaded at the originating station and the same were delivered to the destination station without any fault on the part of the plaintiff. (c) In every statement showing the truckwise movement of goods, the plaintiff-firm obtained an endorsement showing that the trucks have been despatched with properly covered tarpaulin sealed in the presence of the defendant-FCI and that the goods were despatched with proper weight. The same endorsement was also obtained at the destination station and the goods were in proper condition. (d) The Food Storage Depot of the defendant-FCI had issued a "5 point certificate" to the plaintiff-firm that there is no breach of contract by the plaintiff-firm and the certificate also pointed out that there is no negligence on the part of the plaintiff and hence, the plaintiff is not responsible for loss or damages. (e) The plaintiff-firm in the course of the contract period, raised bills/invoices in respect of the above three contracts during the various dates of contract. The defendant-FCI, without adhering to the spirit of the contract and the work done by the plaintiff-firm, deducted Rs.6,93,195/- (excluding interest) from out of the various invoices raised by the plaintiff-firm towards the transit loss in respect of the above three contracts. In fact, there cannot be transit loss in the movement of the foodgrains, especially when the trucks were fully covered by the Tarpaulin and were examined by the officials of the defendant- FCI, both at the originating station and the destination station and the foodgrains were weighed at the originating stataion by the weighing machines used both at the originating station and the destination station used by the defendant-FCI and the defendant-FCI. Hence, according to the plaintiff-firm, there cannot be any transit loss in the transaction, since the seals were found to be in-tact in the destination-station. (f) In fact, the defendant-FCI issued a letter dated 19.6.2000 indicating that the gain is only due to difference in the different weigh bridges used by the defendant-FCI. It is further alleged that the defendant-FCI used different weigh bridges at the originating station and at the destination station. If the defendant admits that the gain is due to the different weigh bridges being used, the same logic should be extended to the loss, which is also alleged to be due https://hcservices.ecourts.gov.in/hcservices/ to the defendant's weighing bridges being used in the originating and destinating places, and hence, the plaintiff-firm states that the defendant-FCI ought not to have deducted such huge sum from out of the bills submitted to the defendant-FCI. (g) It is alleged by the plaintiff-firm that there is no violation of the terms and conditions prescribed in the contract. The Form No.9 showing the statement of truckwise movement of foodgrains, issued by the defendant-FCI clearly reveals that in respect of each truck, there is either transit gain or transit loss, due to difference in the different weigh bridges used by the defendant-FCI and also due to moisture content. But the defendant-FCI did not adjust the transit loss with the transit gain. (h) The plaintiff-firm furnished monthwise movement of the goods. The plaintiff further submitted that the defendant-FCI has no right in deducting Rs.6,93,195/- from and out of the bills/invoices raised by the plaintiff-firm in respect of three contracts successfully completed by the plaintiff-firm. After issuance of invoice, the plaintiff has come out with the suit. (i) The plaintiff-firm and defendant-FCI exchanged legal notices/reply and since it went in vein, the plaintiff filed for suit for recovery of Rs.9,40,884.02/- along with pendente-lite and future interest @ 15% per annum on the principal sum of Rs.6,93,195/- with quarterly rest, from the date of plaint till the date of payment in full and also for costs. 3. The gist and essence of the written statement filed by the defendant-FCI, are as follows: (a) The defendant-FCI being Government of India undertaking, invited tenders for transport of foodgrains: (i) from Egmore to Pondicherry, for the period from 1.1.2000 to 31.12.2001; (ii) from Egmore to T.V.Koil, for the period 1.1.2000 to 31.12.2001 and (iii) from FSD Arakknonam to FSD TV Koil, for the period from 10.2.2000 to 9.2.2002. (b) The plaintiff participated in the tenders and the tenders were also accepted by the defendant-FCI. As per the terms and conditions of the tender, the plaintiff furnished security deposit and the same was also already refunded to the plaintiff. (c) The foodgrains were loaded in the trucks provided by the plaintiff-firm after proper weighment and the same was fully covered with Tarpaulin and sealed in the presence of the plaintiff's personnel. The shortage was noticed at the destination point at the time of unloading the foodgrains when the weighments were held in the presence of the plaintiff's personnel and hence, the plaintiff alone is liable for shortage. (d) As per the terms of tender, in Clause XI(d), the transport contractor is liable to make good the value of any shortage, wastage or damage to the goods in transit. The "5 point certificate" issued by Food Storage Depot of the FCI was only for the refund of security https://hcservices.ecourts.gov.in/hcservices/ deposit and the same is not the certificate for the purpose of the contractor. (e) It is true that the defendant-FCI deducted a sum of Rs.6,93,195/- towards transit loss from various invoices raised by the plaintiff-firm relating to the above said contracts, which are only in the terms of the tender clause, which is the specifically authorised deduction in the event of transit loss. The plaintiff-firm cannot take any advantage of the alleged transit gain, since the plaintiff is only the transporter and not the owner of the foodgrains. (f) It is the duty of the plaintiff-firm to deliver the exact weighment of the foodgrains loaded at the originating point to the destination point and if any shortfall is found, the plaintiff-firm alone is responsible, since from the time of loading till the delivery of foodgrains at the destination point, the foodgrains were under the control and custody of the plaintiff-firm and they alone are responsible for any shortfall noticed in the weighment at the destination point. (g) The alleged transit loss as claimed by the plaintiff-firm due to different weigh bridges and also due to moisture content, is incorrect. The allegation of the plaintiff that there is transit gain in the transportation of foodgrains, in most of the trips instead of transit loss, is also incorrect. The plaintiff-firm is only the transport contractor and not the owner of the foodgrains, and as such, it is the bounden duty of the plaintiff to deliver the exact quantity of the foodgrains loaded at the originating end to the destination end and they alone are responsible for the shortage detected at the destination end. (h) The plaintiff-firm is very well aware of the tender conditions at the time of participating the tender proceedings and the deductions were made only as per the terms of the tender condition. The defendant prayed for dismissal of the suit. 4. The trial Court, after considering the averments, both in the plaint and in the written statement, and after hearing the arguments of both counsel, framed two issues for consideration. On a perusal of the oral evidence of P.W.1 and D.W.1 and the documentary evidence of Exs.A-1 to A-67 and Ex.B-1, decreed the suit as prayed for in the plaint with costs, with future interest @ 6%. Challenging the judgment and decree of the trial Court, the defendant-FCI has come forward with this First Appeal. 5. After hearing the arguments of both counsel, the following points are framed for determination in this First Appeal: (i) Whether the appellant/defendant-FCI is right in deducting the transit loss as per Clause XX(7) of the terms and conditions of tender/contract ? (ii) Whether the trial Court is correct in decreeing the suit, since the respondent/plaintiff has not made any objection while https://hcservices.ecourts.gov.in/hcservices/ receiving the cheque for transport charges, after deducting the transit loss ? (iii) Whether the judgment and decree of the trial Court are sustainable ? and (iv) To what relief the appellant-defendant-FCI is entitled to ? 6. Learned counsel for the appellant-defendant-FCI submitted that for transporting the foodgrains from Egmore to Pondicherry and other destinations, tenders were called for and the respondent/plaintiff-firm submitted the tender, which was accepted, pursaunt to which, the respondent/plaintiff furnished security deposit, and after fulfilling the procedures, the transport operation commenced. During transportation, admittedly, there is a transit loss. As per Clause XX(7) of the terms and conditions of tender/contract, the respondent-plaintiff-transporter-firm is liable to pay the transit loss. Learned counsel further submitted that as soon as the transportation is over, the plaintiff submitted bills/invoices, which were passed and after deducting I.T., service charges, transit loss, etc., the cheque has been issued for the balance amount. The amount had been received by the respondent/plaintiff without any objection and protest and hence, the plaintiff is estopped from claiming the amount. He further submitted that the trial Court has failed to consider the said aspects. The trial Court also failed to consider the "5 point certificate" marked as Ex.A-7 in which, it was specifically mentioned that all the claims of the contractor have been settled and none is pending. Since the respondent/plaintiff relied on Ex.A-7--"5 point certificate", when once the respondent/plaintiff accepted "one point", the plaintiff- firm ought to have accepted the entire document and not in piecemeal. The defendant-FCI even refunded the security deposit to the plaintiff-firm. The trial Court placed reliance on the plea of the plaintiff regarding the weighing of the goods in different weighing machines, which is totally unwarranted and unsustainable. Learned counsel for the appellant/defendant/FCI prayed for allowing the First Appeal. 7. Per contra, learned counsel appearing for the respondent/plaintiff submitted that admittedly, the goods were loaded and covered with Tarpaulin and the seal has been affixed in the originating loading place, which was verified at the destination point, i.e. the unloading place and in the presence of both parties' representatives, after the seal was found in-tact, then only unloading commenced and hence, there is no negligence on the part of the respondent-plaintiff to cause loss during transit and if at all, there is any transit loss, it is only due to the moisture/monsoon change. 8. Learned counsel for the plaintiff further submitted that there is transit gain also. Furthermore, weighing machine in both the places are different and there is a chance for error in indicating https://hcservices.ecourts.gov.in/hcservices/ the weight of the foodgrains and when once the appellant-defendant- FCI accepted the transit gain, they ought to have accepted the transit loss also and adjusted the same. The transit loss is lesser than the transit gain and so, the trial Court considered this aspect in proper perspective and decreed the suit as prayed for. 9. Learned counsel for the respondent-plaintiff-firm further submitted that merely because the respondent-plaintiff has not raised any objection/protest while raising the transport charges then and there, it does not amount to estoppel or waiver of the plaintiff's claim. He further submitted that the appellant/defendant-FCI has not raised such a plea in the written statement and when once the defendant-FCI accepted the transit gain, it ought to have adjusted/accepted the transit loss also, since the entire load had been covered by the Tarpaulin and the seal was also found in-tact at the destination point. The trial Court considered all the aspects in correct circumspection. To support his submissions, learned counsel for the respondent/plaintiff relied on various of decisions of Apex Court/this Court for the proposition that the claim is not hit by the principle of estoppel and waiver. Learned counsel for the respondent- plaintiff-firm prayed for dismissal of the First Appeal. 10. Points (i) and (ii): The respondent as plaintiff filed the suit for recovery of money from the appellant-defendant-FCI, which deducted for transit loss occurred while the foodgrains of the appellant/defendant/FCI had been transported from the originating point, i.e. Egmore and other place to various other destinations. Calling for the tender, submission of the tender by the respondent/plaintiff and acceptance of the tender of the respondent/plaintiff, furnishing of security deposit, are all not in dispute and for each and every transport of foodgrains, the bills/invoices have been raised . The transport charges have also been received and in some bills/invoices, after deduction of IT, service charges, the transit loss has also been deducted and balance amount paid to the respondent/plaintiff-firm. 11. The only dispute is as to whether the appellant/defendant- FCI is entitled to deduct the transit loss, since the loading was properly covered with Tarpaulin and the seal affixed, which was found in-tact at the destination point at the time of unloading in the presence of both sides' representatives. 12. In this regard, it is relevant to notice various documents marked on either side before the trial Court. Exs.A-1 to 3 are the tender documents submitted by the respondent-plaintiff. The work orders are marked as Exs.A-4 and 5. The letter from the defendant to the plaintiff is Ex.A-6. The "Five Point Certificate" issued by the appellant/defendant/FCI after completion and conclusion of the contract, is marked as Ex.A-7. Exs.A-8 to A-59 are invoices then and there submitted by the respondent/plaintiff and in pursuance of the https://hcservices.ecourts.gov.in/hcservices/ same, the transport charges have been paid. Ex.A-60 is the instructions in respect of abnormal transit gain while in despatch operation on road movement to TV Koil, issued by the District Manager of FCI, Vellore to Assistant Manager, FCI, Arakkonam. The respondent-plaintiff-firm-M/s.Sri Swarna & Co., issued Ex.A-61 notice dated 15.2.2002, to release the transit losses deducted against the Bills, which is less than 0.25% of the total quantity moved by the plaintiff-firm and for payment of security deposit. Ex.A-62 is the letter of the plaintiff-firm, dated 2.7.2001, reiterating the stand taken under Ex.A-61. Ex.A-63 is the statement showing the transit loss and gain for various periods of contract. Ex.A-64 is the plaintiff's advocate notice to the appellant/defendant-FCI for refund of Rs.6,93,195/- claimed under various bills and also for return of security deposit. The acknowledgement card is marked as Ex.A-65. The appellant/defendant sent reply under Ex.A-66, in which they stated that for the quantity short delivered, the contractor is responsible in terms of Clause XX(7) and so, the recovery is in order. In respect of the refund of security deposit, the appellant-FCI demanded that "No Demand Certificate" to be given by the District Office concerned. Ex.A-67 is the details of statement of account filed by the respondent/plaintiff. 13. Both the counsel mainly focussed upon Ex.A-7 "Five Point Certificate". It is seen that the security deposit has also been refunded to the respondent/plaintiff. Even though the respondent- plaintiff filed the statement of accounts/letters, in Exs.A-63 and 67, there is no dispute on the side of the appellant-defendant that the quantum of loss and gain shown by the respondent-plaintiff, is not correct. 14. It is pertinent to note that only after conclusion of the tender/contract, the respondent-plaintiff is entitled to refund of security deposit. At that time only, the plaintiff made a request for return of the amount deducted for transit loss alleged to have been deducted by the appellant-defendant. It is to be noted that Ex.A-60 instructions issued by the appellant-defendant-FCI, District Office, Vellore, to the Assistant Manager of the FCI, Arakkonam Branch Office, to the effect that, "It is seen from the Road Movement Contractor Bill from 1-7 that transit gain noticed at the receiving end, i.e. Asst. Manager (D), FSD, TV Koil", as detailed therein, and it was further observed in Ex.A-60 ..." and further that, " " .... the transit gain is due to improper/excess weighment at the loading point. Therefore, the Asst. Manager (D) is requested to have a check personally on every now and then to avoid such gain in the receiving end otherwise it will be deemed that despatching end is sending the stock on https://hcservices.ecourts.gov.in/hcservices/ excessive weighment and necessary action will be initiated against the defaulter" ...." 15. The above extract of Ex.A-60 shows that the appellant/defendant/FCI staff committed fault while weighing the foodgrains. This would go to show that at the time of loading, the weight of the foodgrains is different from the weight of the foodgrains at the destination point. 16. On 13.2.2003, the respondent/plaintiff-firm sent Ex.A-64 notice through their counsel, which has been received as per Ex.A-65 acknowledgement. In the said notice ExA-64 sent by the respondent/plaintiff's counsel, it is stated as follows:- "2. .... My clients state that there are no transit loss in the movement of food grains from FSD, Egmore to FSD Pondicherry and T.V. Koil. In fact all the trucks were fully covered with tarpaulin and were sealed by FSD Staff only after loading the trucks to FSD, Chennai and Arakonam. Similarly each truck was examined by your staff at Pondicherry and T.V. Koil and were also certified that the truck is fully covered and seals are in tact. Hence there is no question of transit loss in the said transport. In fact technically speaking there is only a transit gain instead of transit loss. It can be noticed there is a transit gain of 53.129 Mts as against transit loss of 32.834 Mts. In fact my client by their letter dated 16.9.2002 had given a detailed statement showing the monthly moved quantities with corresponding losses and gains along with amounts deducted towards transit loss. The above factual position is clearly accepted by you and there is no dispute regarding the above statement. ...." 17. From the said extract of notice Ex.A-64, it is seen that the foodgrains have been loaded fully covered with Tarpaulin and were sealed by the FSD staff only after loading the trucks at FSD Chennai and Arakkonam. Similarly, each truck was examined by the appellant/defendant-FCI at Pondicherry and TV Koil and were also certified that the truck is fully covered and seals are in-tact. Then only, unloading process commenced. 18. Furthermore, as rightly pointed out by the learned counsel appearing for the respondent-plaintiff, when once the appellant- defendant-FCI admitted the transit gain, they ought to have accepted the transit loss also, and there is no tamper of Tarpaulin cover and seals were in-tact. Furthermore, in respect of the transit gain at 53.129 Mts, the transit loss of 32.834 MTs. That factum has not been disputed or denied by the appellant/defendant while issuing reply under Ex.A-66. But since the goods are foodgrains, it is common knowledge that during transit, there might have been some variation in the weight of the goods due to moisture/monsoon, and the https://hcservices.ecourts.gov.in/hcservices/ appellant/defendant accepted that there is a difference in weighing machines in both at the destination places and the originating points, and this factum has been fortified by Ex.A-60 letter, which contains the instructions given by the FCI, Vellore to the FCI, Assistant Manager, Arakkonam. 19. Furthermore, since the goods transported are only foodgrains, during transit, the foodgrains could have gained or lost weight due to moisture/weather condition, and considering the same, 53.129 MTs gain and 32.834 Mts loss, were calculated. 20. In the written statement, the appellant/defendant-FCI in paragraph 5 has stated that as per the terms of tender, Clause XI(d), the transport contractor is liable to make good the value of any shortage, wastage or damage to the goods in transit. But while perusing Exs.A-1 to A-3 tender conditions, the relevant Clause is only Clause XX(7). It is true that as per Clause XX(7) of the terms and conditions governing contract for transport of foodgrains from the originating point to the destination place, the contractor shall be responsible for the safety of the goods while in transit in their trucks/carts/any other transport vehicles, and for delivery of quantity despatched from the railheads/godowns, etc., as the case may be, to the destination or to the recipients to whom the grain etc., is required to be transported by the contractors. In Clause XX(7), it is further stated that the contractors shall provide tarpaulins on the decks of the trucks so as to avoid the loss of grains, etc. through the holes, crevices in the decks of the trucks. The contractors shall also exercise adequate care and take precautions to ensure that the foodgrains bags are not damaged while in transit in their trucks/carts/any other vehicles. They shall be liable to make good the value of any shortage, wastage, losses or damage to the goods in transit at two times the central issue rate for PDS (not RPDS) as fixed by the Government of India as applicable from time to time for all foodgrains. 21. Admittedly, before deducting the amount for transit loss, while passing the bills/invoices for transport/freight charges, the appellant/defendant-FCI did not ascertain as to whether the respondent/plaintiff was negligent in taking care of goods transported. 22. As already stated, at both the ends, i.e. at the originating place and the destination place, the goods were loaded and covered by Tarpaulin and seals have been also affixed in the presence of both sides' representatives, and at the destination point, in the presence of both sides' representatives, the seal had been examined and only after it was found to be in-tact, the unloading process commenced. So, there is no negligence on the part of the respondent/plaintiff. In such circumstances, I am of the view that Clause XX(7) of the terms of the tender/contract, could not help the appellant/defendant to blame the respondent/plaintiff for any default. https://hcservices.ecourts.gov.in/hcservices/ 23. Furthermore, while perusing the invoices/bills, there is no shortage of the number of bags indicated therein during transit from the point of loading to destination. In some trucks, there was a gain and in some trucks, there was loss. This loss is very meagre than what was gained. For example, while perusing Ex.A-8 invoice/bill, in the case of two trucks out of 166, it is calculated as follows: Sl No Despatc h Date TC No Truck No. No. of Bags Despatch Wt. (Net) Receiv ed Date Rec eiv ed bag s Receiv ed Wt. (Net) Differenc e - + 2 3 2.9.2k 3021 PY- 01-K- 7034 140 12.965 2.9.2k 140 12,960 05 | | - 25 2.9.2k 3527 TN- 04-A- 5049 140 12.845 2.9.2k 140 12,850 - | 05 | This shows that there is a meagre loss and gain, which is due to the moisture content and variation in the weigh bridges. In Ex.A-8 invoice/bill, it was mentioned that the total loss is 25 points, whereas