IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 14858 of 2003 with CIVIL APPLICATION 11 of 2005 in SPECIAL CIVIL APPLICATION No 14858 of 2003 with SPECIAL CIVIL APPLICATION No 15084 of 2003 to SPECIAL CIVIL APPLICATION No 15181 of 2003 For Approval and Signature: HON'BLE MR.JUSTICE JAYANT PATEL ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : YES Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- ACTION COMMITTEE FOR RESOLVINGGUJARAT SALT MANUFACTURES Versus UNION OF INDIA -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 14858 of 2003 MR KS NANAVATI WITH MR KD GANDHI FOR NANAVATI ASSOCIATES for Petitioner No. 1-2 MR JJ YAJNIK for Respondent No. 1-5 MR AD OZA, Ld. GP for Respondent No. 6 2. Special Civil Application No. 15084 of 2003 NANAVATI ASSOCIATES for Petitioner No. 1 MR JJ YAJNIK for Respondent No. 1 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE JAYANT PATEL Date of decision: 12/01/2005 ORAL JUDGEMENT 1. The short facts of the case are that the petitioners are salt manufacturers including the Action Committee for resolving the problem of Gujarat Salt Manufacturers, who were served with various demand notices by Railway Department of the Union of India respondent herein. The perusal of the demand notices shows that the Divisional Railway Manager (Commercial) at Rajkot called upon the concerned manufacturer, who is original consignor to pay penal freight, unloading charges, detention charges in exercise of power under Section 73 of the Railways Act 1989 (hereinafter referred to as the "Railways Act"). It has been stated in the said communication of demand notices that the consignment was weighed en route at Virangam Railway Weigh-bridge and the overloading was found and the charges are to be recovered for the excess weight and the goods were off-loaded at Virangam itself. The aforesaid aspect is common in respect of all the salt manufacturers, who have received the demand notices and have preferred these petitions. It further appears that the said demand notices pertain to various periods from 1999 to 2001 and there is no dispute on the point that the actual recovery is not effected before the delivery of the goods at the destination station, because it is an admitted position that such demand notices are issued after the goods are delivered at the destination to the consignee or the endorsee. 2. It appears that initially the aforesaid demand notices were challenged by the petitioners herein in the proceedings of SCA No.8939/2001 and other allied matters. In the said petitions this Court (Coram: D.A.Mehta, J.) as per the order dated 8.7.2002 finally disposed of the matter by observing at para 4, 5 and 6 as under: "4. It is agreed between the parties that the petitioners in each of these 4. It is agreed between the parties that the petitioners in each of these petitions shall make a representation against the demand notice, which is the subject matter of dispute in this Special Civil Application and other group of petitions, to the Divisional Commercial Manager (D.C.M.), Vadodara within a period of 30 days from today. It will be open to each of the petitioners to raise all the contentions raised in the petition, including the grievance regarding the tare weight of the wagon and weighment made on the weigh bridge. The D.C.M. shall afford personal hearing to the petitioner, if so demanded. After hearing the petitioner and taking into consideration the representation of the petitioner, the D.C.M. shall pass fresh speaking orders containing reasons regarding the claims / demands made in accordance with law and the provisions of the Railway Manual. The recoveries, if any, shall be made only on the basis of such fresh orders which are to be passed. In the meanwhile, if any recovery has already been effected pursuant to the impugned demands, such recovery shall be subject to adjustment and set off. Pursuant to the fresh order that may be made any recovery shall be effected only after giving the benefit of adjustment as aforesaid, and in case excess amount has been recovered or no amount is recoverable, then it shall be refunded by the Railway Administrator. The refund, if any, shall be made within 30 days from the date of such fresh order, which shall be passed by the D.C.M. within 90 days from the date of receipt of representation made by the petitioner. It is further clarified that recovery, if any, shall be only for the due and recoverable amount after adjustment of amount already recovered. 5. Each petitioner undertakes that it will load the goods only in the bags of standard size as approved by the Salt Commissioner from time to time. If the goods are so loaded in bags of standard size then the Railway Administrator shall carry out test check at the loading station only for the purpose of checking overloading, if any. 6. Upon each of the petitioners making representation within the stipulated time as aforesaid, no recovery shall be made pursuant to the demand notices already issued till fresh orders are passed by the D.C.M. In case an adverse order is passed, the same shall not be enforced for a period of 30 days from the receipt of the order." 3. It appears that in the earlier proceedings of SCA No.8939/2001 and allied matters, the aforesaid demand notices were challenged on the ground, inter alia, that no opportunity of hearing was afforded by the Railway Authority before taking decision to recover the charges under Section 73 of the Railway Act. It is under these circumstances on account of the agreement of the parties, this Court, as referred to hereinabove, directed for giving of opportunity of hearing and of passing fresh orders. 4. It appears that thereafter, the Action Committee for resolving the problems of Gujarat Salt Manufacturers, who have preferred SCA No.14858/2003 preferred application for giving opportunity of hearing and with a view to have the clarification in this regard MCA No.983/2002 in SCA 8939 was preferred by the aforesaid Action Committee and this Court (Coram: D.A.Mehta, J.) as per order dated 30.8.2002 observed that in case the petitioners do not want to represent themselves personally before the respondent Authority at the time of hearing, it will be open to such petitioners to grant authority to its representatives who shall represent the case before the respondent Authority and it appears that thereafter as per the Railway Authority the opportunity was given, whereas the case of the petitioners is that the opportunity of hearing was not given to the representative or to the Action Committee. In the meantime, on 28.3.2003, the order has been passed by the Sr. Divisional Commercial Manager, Vadodara in pursuance of the directions given by this Court for passing a fresh order and it has been observed that the demand notices of penalty is maintained. It is the case of the petitioners that review application was preferred which also has been rejected as per the order dated 27.5.2003 by the concerned Officer, who earlier passed the order dated 28.2.2003 and also the earlier demand notices. In all the group of petitions there is difference of the dates of consignments, the quantum of overload and the charges to be recovered, otherwise they are common points on the aspects that - (i) the charges are sought to be recovered on the ground of overloading from forwarding station; (ii) the excess goods were off-loaded at Virangam Railway Station; (iii) it is the case of the Railways that en route weighing was made at Virangam Railway Station since there is no facility of Railway Weigh-bridge at the forwarding station from where the wagons were loaded. 5. One additional aspect which is contended in the present group of petitions by the petitioners herein is that as per the State Authority - respondent No.6 herein, the weigh-bridge of the Railway at Virangam Station was inspected on 3.8.2001 and it was found to be defective as per the State Authority and, therefore, the seals were applied. However, there is no dispute on the point that the Railway Authority, thereafter, preferred Special Civil Application No.6883/2001 before this Court challenging the action of the State Authority for sealing of the weigh-bridge and as per the order passed by this Court in the said Special Civil Application the seals are removed and the SCA No.6883/2001 is pending as on today. 6. I have heard Mr.K.S.Nanavati, learned Counsel appearing for the petitioners, Mr.Yagnik, learned Counsel appearing for the Railway Authority and Mr.A.D.Oza, learned GP appearing for the respondent No.6 State Authority. 7. Mr.Nanavati, learned Counsel appearing for the petitioners raised the contention that power under Section 73 of the Act can be exercised before the delivery of the goods and not thereafter and, therefore, he submitted that the impugned orders of issuing demand notices and the subsequent weighment by fresh order is beyond the scope and ambit of Section 73 of the Act. To consider the said submission, it would be required to consider the scheme of the provisions of Railways Act, more particularly qua the carriage of goods. Section 72 of the Act provides for maximum carrying capacity for the wagons and trucks. As per Sub-Section (1) of Section 72, the gross weight of the wagon should not exceed the limit as may be fixed by the Central Government for the class of axle under the wagon or truck. Sub-Section (2) of Section 72 provides that subject to the limit fixed under sub-section (1), every railway administration shall determine the normal carrying capacity for every wagon or truck in its possession and shall exhibit in words and figures the normal carrying capacity so determined in a conspicuous manner on the outside of every such wagon or truck. Sub-section (3) of Section 72 provides every person owning a wagon or truck which passes over a railway shall determine and exhibit the normal carrying capacity for the wagon or truck in the manner specified in sub-section (2). Sub-Section (4) of Section 72 of the Act provides that if a railway administration considers it necessary, it may specify the carrying capacity of any specified class of goods or any class of wagon or truck and perusal of the other Sub-sections shows that the same may be for excess of the normal capacity, but it has to be not more than the maximum capacity fixed by the Central Government under Sub-Section (1). Sections 73 and 83 of the Act which are relevant for the purpose of deciding the petition read as under: 73. Punitive charge for overloading a wagon. Where a person loads goods in a wagon beyond its permissible carrying capacity as exhibited under sub-section (2) or sub-section (3), or notified under sub-section (4), of Section 72, a railway administration may, in addition to the freight and other charges, recover from the consignor, the consignee or the endorsee, as the case may be, charges by way of penalty at such rates, as may be prescribed, before the delivery of the goods: Provided that it shall be lawful for the railway administration to unload the goods loaded beyond the capacity of the wagon, if detected at the forwarding station or at any place before the destination station and to recover the cost of such unloading and any charge for the detention of any wagon on this account. 83. Lien for freight or any other sum due. (1) If the consignor, the consignee or the endorsee fails to pay on demand any freight or other charges due from him in respect of any consignment, the railway administration may detain such consignment or part thereof or, if such consignment is delivered, it may detain any other consignment of such person which is in, or thereafter comes into, its possession. (2) The railway administration may, if the consignment detained under sub-section (1) is - (a) perishable in nature, sell at once; or (b) not perishable in nature, sell, by public auction, such consignment or part thereof, as may be necessary to realise a sum equal to the freight or other charges: Provided that where a railway administration for reasons to be recorded in writing is of the opinion that it is not expedient to hold the auction, such consignment or part thereof may be sold in such manner as may be prescribed. (3) The railway administration shall give a notice of not less than seven days of the public auction under Cl. (b) of sub-section (2) in one or more local newspapers or where there are no such newspapers in such manner as may be prescribed. (4) The railway administration may, out of the sale proceeds received under sub-section (2), retain a sum equal to the freight and other charges including expenses for the sale due to it and the surplus of such proceeds and the part of the consignment, if any, shall be rendered to the person entitled thereto." 8. It would be profitable to refer to certain observations of the Apex Court in case of "Jagit Cotton Textile Mills v. Chief Commercial Superintendent, N.R. and Others", reported in 1998(5) SCC, 126. In the aforesaid case, while considering the contention of the Consignee for enabling power of the Railway to recover the amount for overloading at paragraphs 40, 41, and 42 it has been observed by the Apex Court as under: "40. It is to be noticed that the second part of Rule 161-A speaks of discovery of the overweight at the booking point or en route or at the destination and recovery of the penal charge therefore for the entire distance from the booking point to the destination. The rule-making authority must, in our opinion, be deemed to have been aware that title in the goods might have passed to the consignees in several cases after the loading or after the weighment and before the actual delivery of the goods to the consignee such as where the railway receipt is delivered to the consignee against the receipt of price. In our view, the second part of Rule 161-A is quite wide and unrestricted and can be treated as permitting recovery of the penal charges "from the consignor or consignee or the endorsee, as the case may be", though these words are not expressly used in Rule 161-A. That is how the Railways becomes entitled to recover the penal charges from the consignee also even under the old Act. 41. Learned counsel for he consignees, Shri Pankaj Kalra invited our attention to the decision of this Court in Director of Enforcement v. M.C.T.M. Corpn. (P) Ltd. to contend that the "delinquent" is the consignor and hence the consignee cannot be made to pay the penal charges. That case was concerned with the question whether for purposes of proceedings under Section 23(1)(a) of the Foreign Exchange Regulation Act, 1947 the Department had to prove mens rea in cases involving breach of Section 10 of the said Act. It was held that the "delinquency" of the defaulter by reason of wilful contravention of Section 10 had itself established his "blameworthy" conduct and it was not necessary to prove any guilty intention. It was held that officers of the Enforcement Directorate were acting as adjudicators and not as judges of criminal courts and they determine the liability of the contravener for breach of his "civil obligations" laid down under the Act and impose a "penalty" for the breach of the said obligations as laid down under the Act. In that context it was observed that the word "penalty" is a word of wide significance, sometimes it means recovery of an amount as a penal measure in civil proceedings, or an exaction which is not compensatory in character. Reference was made in that case to Corpus juris Secundum, (Vol. 85, p.580, para 1023), to the effect that a "penalty" can be imposed for a tax delinquency which is a civil obligation, entailing remedial and coercive processes, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for violation of criminal or penal laws. Learned counsel also referred to N.K. Jain v. C.K. Shah and Pratibha Processors v. Union of India as to the meaning of penalty. The former case arose under Employees' Provident Funds etc. Act, 1952 and the latter under the Customs Act, 1962. Other decisions relating to strict construction of penal statutes were also referred to. It was contended that when the "delinquent" is the consignor and if Section 73 and Rule 161-A permit punishing the consignee, the said provisions must be held to be in violation of Article 14 of the Constitution of India. 42. In our view, these contentions are not tenable. As has been noticed in our discussion on Points 1 and 2, the railway statutes define "maximum carrying capacity", "normal carrying capacity" (to be marked on the wagon); and the "permissible carrying capacity". No wagon can be loaded beyond the maximum carrying capacity. The wagon could not ordinarily be loaded beyond the normal carrying capacity or up to any upward variation thereof and this limit is called the permissible carrying capacity. Section 73 of the new Act and Rule 161-A of the old Rules permit loading in excess of the permissible carrying capacity without any penal charges, now up to a limit of 2 tones. (Earlier it was up to 1 tonne.) What is now subjected to a penal charge is the excess over and above the permissible level above stated which is always below the maximum limit. In our view, this levy under Section 73 of the new Act and the old Rule 161-A is intended for dual purposes - one is to see that the gross weight at the axles is not unduly heavy so that accidents on account of the axles breaking down, could be prevented. The other reason behind the collection is that, inasmuch as the wagon has carried such excess load up to the destination point at the other end, the replacement cost of the coaches, engines or rails or of repairs to the bridges be covered. In our view, the extra rate is a higher rate, i.e. something like a surcharge for the excess load, to meet the said expense. Therefore, we do not think that any principle of "delinquency" is ingrained in this levy as in the case of breach of civil obligations under the FERA or Customs Act or the Employees' Provident Funds Act. Those cases involved penalties for breach of the Acts and were not concerned with charging a person for services rendered nor with an extra charge for services which involved extra strain to the property of the bailee who had rendered the service. Obviously the Railway Board has kept these aspects in mind while collecting these charges. There is therefore no violation of Article 14. Further, the question of reasonableness of the quantum of any such extra rate cannot be challenged before us and the appropriate forum therefore is the Railway Rates Tribunal. Rule 161-A can therefore, be resorted to for collecting these penal charges from the consignee also. After all, the consignee had received delivery of the overload goods and used the same for their business, commercial or industrial purposes. For the above reasons, a statutory provisions like Section 73 or Rule 161-A which permits levy on such a consignee cannot, in our view, be said to be arbitrary or unreasonable in the context of Article 14." 9. Therefore, in view of the aforesaid observations of the Apex Court, it appears that the recovery of the amount for overloading is of compensatory in nature and cannot be equated with the penalty which may be imposed for breach of the statutory provisions. It also appears that with a view to ensure safety of all railway tracks, wagons itself and other functioning connected therewith, no wagon should be loaded with goods exceeding the normal carrying capacity or permissible carrying capacity and such overloading must be prevented. Any loading of the goods in a wagon exceeding the normal or permissible capacity, if made, may result into damage to the axile of railway tracks, brake down etc., and, therefore, the charges which may be recovered under Section 73 of the Act are like extra higher rate i.e. something like surcharge for excess load to to meet with the said expenses as observed by the Apex Court and the principles of delinquency in the matter of levying of charges cannot be equated with the civil consequences which may arise on account of breach of the statutory provisions of other enactment like FERA, Customs Act, Employees P.F. Act. Even otherwise also, when the goods are carried by Railways as carrier like other agency carrying goods, if the overloading is to result into damage to the carrier itself, recovery of extra charges by the agency of carrier is not a principle unknown and such charges are recoverable. Since the functioning of the railway administration is governed by the statutory provisions, Section 73 expressly authorises for collection of such charges, but merely because the language used is "punitive charges or by way of penalty" it will not carry the same degree of observance of principles of natural justice as may be required in the cases, where there are enabling powers with the authority to impose penalty for breach of the statutory provisions. As such the punitive charges as contemplated under Section 73 of the Act for overloading of a wagon can be said as the charges/rates for extra load material. Section 2(35) defines the rate which would include in fare, freight or any other charge for the carriage of any passenger or goods. Therefore, the applicability of the penal rate or charging of the penal rate in case of overloading are the charges which the railway may charge in case of overloading, but they cannot be said as fully simpliciter penalty like penalty for breach of any statutory enactment or statutory provisions. The aforesaid becomes apparent from the provisions of Section 83 of the Act, which authorises the Railways to exercise the right of lien for the freight or any other sum due which would include the recovery of penal charges in case of overloading. The provisions of Section 83 made by the legislature authorising the right of lien further strengthens the position that the penalty charges for overloading are only by way of additional compensatory measures and not as that of imposition of penalty for breach of any statutory provisions or enactment. 10. It is true that as expressly provided under Section 73 of the Act, the language used by the legislature is "before the delivery of the goods" and, therefore, one of the modes provided for recovery of punitive charges for overloading of the wagons would be of before the deliver of the goods. As per the proviso to Section 73 the railway administration has power to unload the goods loaded beyond the capacity of the wagon, if detected at the forwarding station or at any place before the destination station and to recover cost for such unloading and any charge for detention of any wagon and, therefore, it cannot be said that once the goods are already delivered, even if there was a case for overloading, the punitive charges are not recoverable at all by the railway administration from the consignee or consignor or endorsee as the case may be. However, if the goods are already delivered at the destination point and any charges are to be recovered by railway as per Section 73, such right of recovery shall be subject to additional measure of right of lien under Section 83 in respect to the same