IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 5-4-2007 CORAM: THE HONOURABLE MR.JUSTICE R.SUDHAKAR C.M.A.Nos.63, 394, 663, 670, 770 and 1050 of 1999 M/s.P.M.S.Traders, 47, Ramaswami Street, Mannady, Madras. ... Appellant in C.M.A.Nos.63 and 770 of 1999 1. M/s.Jaitex Lungi Company, 47, Ramaswami Street, Mannady, Madras. 2. M/s.P.M.S.Traders, 47, Ramaswami Street, Mannady, Madras. ... Appellants in C.M.A.Nos.394, 663, 670 and 1050 of 1999 -vs- 1. Union of India, owning Southern Railway, rep. by its General Manager, Chennai-600 003. 2. Union of India, owning Northern Railway, rep. by its General Manager, New Delhi. ... Respondents in all the appeals Civil Miscellaneous Appeal No.63 of 1999 is filed under Section 23 of Railway Claims Tribunal Act, 1987 against the order dated 12.6.1998 in O.A.I.No.833 of 1990 on the file of the Railway Claims Tribunal, Madras Bench. Civil Miscellaneous Appeal No.394 of 1999 is filed under Section 23 of Railway Claims Tribunal Act, 1987 against the order dated 12.6.1998 in O.A.No.1213 of 1990 on the file of the Railway Claims Tribunal, Madras Bench. https://hcservices.ecourts.gov.in/hcservices/ Civil Miscellaneous Appeal No.663 of 1999 is filed under Section 23 of Railway Claims Tribunal Act, 1987 against the order dated 12.6.1998 in T.A.I.No.389 of 1990 on the file of the Railway Claims Tribunal, Madras Bench. Civil Miscellaneous Appeal No.670 of 1999 is filed under Section 23 of Railway Claims Tribunal Act, 1987 against the order dated 12.6.1998 in T.A.I.No.366 of 1990 on the file of the Railway Claims Tribunal, Madras Bench. Civil Miscellaneous Appeal No.770 of 1999 is filed under Section 23 of Railway Claims Tribunal Act, 1987 against the order dated 12.6.1998 in T.A.I.No.588 of 1990 on the file of the Railway Claims Tribunal, Madras Bench. Civil Miscellaneous Appeal No.1050 of 1999 is filed under Section 23 of Railway Claims Tribunal Act, 1987 against the order dated 12.6.1998 in T.A.I.No.328 of 1990 on the file of the Railway Claims Tribunal, Madras Bench. For appellants : Mr.B.T.Seshadri in each of the Petitions For respondents: Mr.V.G.Suresh Kumar COMMON JUDGMENT The above Civil Miscellaneous Appeals arise out of the orders passed by the Railway Claims Tribunal dismissing the O.A.No.833 of 1990, O.A.No.1213 of 1990, T.A.I.No.389 of 1990, T.A.I.No.366 of 1990, T.A.I.No.366 of 1990 and T.A.I.No.588 of 1990 & TAI.328 of 1990 filed by the appellants herein claiming compensation against the respondent railways for non-delivery of the goods. 2. C.M.A.No.63 of 1999:- The appellant is manufacturer and exporter of handloom lungies and shirtings and in the course of business they despatched cotton shirtings to New Delhi on the Northern Railway under the following Railway Receipts:- Sl.No. R.R.No. Date Value 1 PA 070889 3/8/84 Rs.10,857.00 2 PA 070891 3/8/84 Rs.11,503.00 3 PA 094919 3/19/84 Rs.8,949.00 https://hcservices.ecourts.gov.in/hcservices/ Sl.No. R.R.No. Date Value 4 PA 096154 3/27/84 Rs.10,000.00 The Railway Receipts were taken in the name of self. The original Railway Receipts together with the Invoices and Hundies, which were drawn in favour of Buyer M/s.Amarapalli Boutique, New Delhi were sent to Punjab & Sind Bank, New Delhi with instructions to the bankers to deliver the documents, on collection of the amount due under the Hundies. The Railway Receipts drawn on self were duly endorsed in favour of Punjab & Sind Bank, New Delhi to enable them to endorse the same in favour of buyer after receipt of payment. When the documents reached the destination and information was given to the buyer, the buyer did not clear the documents in spite of extension of time. Therefore, the appellant instructed their banker to deliver the Railway Receipts 'free of payment' to one Mr.V.K.Goyal, New Delhi to enable him to take delivery of the goods. The Bank delivered the documents to Mr.V.K.Goyal, who in turn took the documents i.e., Railway Receipts, etc., to New Delhi Railway Station for clearing the goods. At that time the Railway authorities informed V.K.Goyal stating that the goods covered under the aforesaid Railway Receipts were delivered on Indemnity Bond on various dates and the goods were not available for delivery. Thereafter, the Plaintiff contacted the Booking station, Southern Railway enquiring whether any Indemnity Bond was executed and the Southern Railway stated on verification that no Indemnity Bond was executed at Madras Central. Therefore, the appellant herein by communication dated 10.8.1984 wrote to the Chief Claims Officer, Southern Railway, Madras informing him about the non-delivery of the goods and demanded compensation and this was followed by another letter dated 13.8.1984 addressed to the General Manager, Northern Railway, New Delhi. The endorsed consignee also made a claim, which was acknowledged by the Northern Railway. There was no reply to any of the communication and a legal notice dated 21.8.1984 under Section 80 CPC addressed to the General Manager of both the Railways were sent and acknowledged. As there was no proper response from the Railway authorities, the appellant filed the suit O.S.No.5476 of 1987 on the file of the City Civil Court, Madras, for compensation on account of non-delivery of the goods. The appellant found that the goods were delivered to unauthorised persons, under forged or fabricated documents and the Railway authorities acting in collusion, have delivered the goods to the person who is not entitled to the same, thereby causing loss to the appellant. It was under those circumstances, the appellant had filed the suit before the City Civil Court, Madras, which was transferred to Railway Claims Tribunal, and renumbered as O.A.No.833 of 1990. 3. Before the Railway Claims Tribunal the defendants/ respondents herein filed written statement admitting despatch of goods from Madras-Central to Delhi. The defendants stated that as per the contract of carriage, the goods were carried to the https://hcservices.ecourts.gov.in/hcservices/ destination and made available for delivery within 7 days after termination of transit. However, the goods were taken delivery on production of valid Indemnity Bonds by intended consignee in whose favour the Hundi and Invoices were drawn. The Indemnity Bonds were also executed by the consignor/consignee to deliver the consignment to the originally intended consignee i.e., Amarapali Boutique. It was contended that the respondents are not liable for the loss on account of non-delivery of the goods, howsoever, caused, seven days after termination of transit in terms of Section 77(2) of Indian Railways Act, 1890 (Act 9 of 1890). It was also submitted that the respondents railway are not liable for any loss, destruction, damage, non-delivery of the goods where there has been fraud practised by the consignor or the consignee or agent of the consignor or consignee under Section 78(b) of the Indian Railways Act. Reply Statement was filed stating that the goods were carried to destination and made available for delivery, but no one turned up for taking delivery within 7 days of termination of transit. However, the goods were taken delivery on production of valid Indemnity Bond on 14.4.1984 and on 26.4.1984. It was also stated that the delivery had been taken on indemnity Bond by the Agent of M/s.Amarapalli Botique and appellant and it was further stated that the consignment was received at destination on 28.2.1984 and 7.3.1984 and delivery was effected on 14.4.1984 and 26.4.1984 on Indemnity Bond. It was further contended that the defendants are not liable for loss, non-delivery as no one turned up for taking delivery within 7 days after termination of the transit. 4. On the above pleadings, the following issues have been framed for trial:- "(1) Whether the Railways delivered the goods at the destination on a proper Indemnity Bond and are therefore liable to pay compensation? (2) Whether any fraud was practised by the consignor or consignee or their agent and whether the Railways are therefore not liable to pay compensation in view of Sec.78(b) of Indian Railways Act? (3) Whether the goods arrived at destination and whether the goods were not taken delivery of by the party within the time allowed by law and whether the Railways are therefore exonerated of their liability under Sec.77(2) of Indian Railways Act? (4) Whether the Railways exercised reasonable foresight and care in the carriage of the goods? https://hcservices.ecourts.gov.in/hcservices/ (5) Whether there was valid claim under Section 78(b) of the Railways Act? (6) Whether the Petitioner is entitled to any compensation and if so, how much? (7) What relief is the Petitioner entitled to?" 5. The parties did not file any affidavit nor any oral evidence has been adduced, but documents have been marked by consent. On behalf of the appellants/applicants Exs.A-1 to A-14 were marked and on behalf of respondents railway no documents were marked. 6 (i) The matter was heard by the Vice-Chairman and (Technical) Member of Railway Claims Tribunal and the Vice-Chairman on Issue No.(l) held that no Indemnity Bond was executed in respect of the consignment at Madras-Central and hence the appellant had not executed Indemnity Bond in respect of the suit consignment for delivery of the consignment. The Vice-Chairman held that the argument of the counsel for Railways that the appellant might have taken delivery of the consignment, cannot be sustained. (ii) Regarding Issue No.(2) the Vice-Chairman of Railway Claims Tribunal held that the Railway staff have colluded in effecting delivery of the suit consignment under forged and defective endorsement and on bogus Indemnity Notes prepared in the appellant's name by staff of second Respondent Railways and also colluded in the act and the Railway staff themselves are involved in such a nefarious act and it is not a wrong delivery or delivery under bona-fide mistake. The Vice-Chairman also held that in view of the fact that the consignment has been released on the basis of bogus Indemnity Notes prepared in the name of the appellant by the Railway staff in collusion with private person, the Railway Administration are not exonerated of their liability under Section 77(2) of Indian Railways Act. (iii) Regarding Issue No.(4) in view of the earlier finding that goods were released on bogus indemnity bonds after termination of transit, no finding has been recorded. (iv) Regarding Issue No.(5) the Vice-Chairman of Railway Claims Tribunal held that proper notice has been given. (v) regarding Issue Nos.(6) and (7) the Vice-Chairman held that the appellant is entitled to compensation and on the question of 'interest' held that the appellant is entitled to 'interest' at the rate of 6% per annum as a measure of damage on the locked up capital upto the date of the suit and thereafter at 12% per annum. https://hcservices.ecourts.gov.in/hcservices/ Accordingly, the Vice-Chairman allowed the Application in part and awarded Rs.41,309/- as compensation together with interest at 6% per annum on the locked-up capital amounting to Rs.6,486/- and further interest at 12% per annum on Rs.41,309/- from the date of filing of the suit till date of recovery with proportionate costs. 7. The Technical Member of Railway Claims Tribunal, while agreeing with the findings of the Vice Chairman in Issue Nos.4 and 5 stated that he is unable to agree with the findings of the remaining issues i.e., Issue No.1, 2, 3, 6 and 7. In other words the Technical Member held that the Railway Administration is absolved of their liability under Section 77(2) of Indian Railways Act, as no application for delivery has been made by the consignee or consignor within 7 days after termination of transit. The Technical Member relied on the judgment of the Madras High Court reported in AIR 1985 Madras 360 (Union of India – vs. - M/s.St.Joseph's Textiles) and which was also confirmed by the Supreme Court in the case reported in AIR 1993 SC 1692. According to the Technical Member the goods were not taken delivery of by the party within the time allowed by law and therefore the Railways were exonerated from their liability. The Technical Member further held that though in this case the delivery was effected under 4 Indemnity Bonds that would not make any difference as far as the liability of the Railways under Sec.77 (2) of Indian Railways Act. Regarding the claim for 'interest' the Technical Member disallowed the pre-suit interest and on those findings the Application was dismissed. 8. In view of the difference of opinion expressed by the Vice-Chairman and Technical Member, as required under Sec.21 of Railway Claims Act, the matter was referred to the third Member and the points which were formulated for the opinion of the Third Member are:- "(1) Whether the Railway staff themselves are involved in nefarious act of releasing the suit consignments under bogus Indemnity Notes and it is not wrong delivery or a delivery made under a bona-fide mistake, and it is not open to the Railways to take shelter under Sec.77(2) of the Indian Railways Act, 1890 to defeat the claim of the Applicants for no fault of theirs? (2) Whether the respondent-Railways is absolved of its liability for wrong delivery under Sec.76-B of the Railways Act, 1890 inasmuch as under the said provision the Railway Administration is absolved of its liability if it in good faith delivers the goods on the production of Original Railway Receipt and the original railway receipt having not been https://hcservices.ecourts.gov.in/hcservices/ produced and the staff of the second respondent-Railways having also colluded in effecting delivery of the suit consignments not under defective endorsements on the Railway Receipts, but under bogus Indemnity Notes prepared in the applicant's name and the staff of the second respondent-railways having also colluded in the said act? (3) Whether M/s.Amarpali Boutique is the buyer-consignee and practised fraud by presenting Indemnity Bonds which were bogus and hence Railways are not liable to pay compensation in view of Sec.78(b) of the Indian Railways Act? and whether can we go into this question in the absence of pleadings in the written statement? (4) Whether the railways are completely exonerated of their liability whatever may be the cause thereof, including under Sec.77(2) of the Railways Act, the goods having not been taken delivery by the party within the time allowed by law? (5) Whether the applicant is entitled to recover interest by way of damages for the locked up capital? (6) Whether the applicant is entitled to recover a sum of Rs.41,309/- as compensation together with interest on the locked up capital at 6% per annum or whether the Application is liable to be dismissed?" 9. The third Member went into the issues and held on Point No.1 that even assuming that the Railway staff themselves are involved in the nefarious act of releasing the consignment under the bogus Indemnity Notes and for that reason the protection under Sec.76-B of the Railways Act is not available to the Railways, still the Railway Administration is not liable for non-delivery of the goods to the rightful claimants under Sec.77(2) of Indian Railways Act. (Provided the wrong delivery is made with whatever motive after the expiry of 7 days after the termination of transit). On Point No.2, the third Member of Railway Claims Tribunal held that in the light of facts of the case, the Railway Administration is not absolved from their liability under sec.76-B of Indian Railways Act. However, he held that since the wrong delivery took place after 7 days of termination of transit, thus making the goods not available for delivery to the rightful claimants, the Railway Administration can plead that it is not responsible for such non- https://hcservices.ecourts.gov.in/hcservices/ delivery as per provisions contained in Section 77(2) of Indian Railways Act. Regarding Point No.3, the Third Member held that even if it is assumed that Railways are liable under Section 76-B of the Indian Railways Act, 1890, still the Railways can get themselves absolved and exonerated from any liability by virtue of Section 77 (2) of Indian Railways Act, 1890. Regarding Point No.(4), the third Member held that the Railways are completely exonerated from their liability whatever may be the case thereof under Section 77(2) of the Indian Railways Act, 1890 if goods are not taken delivery of by the Party with the time allowed by law. Regarding Point No.5, (i.e.) claim for interest, the Third Member held that the Appellant is not entitled to interest for the period prior to the suit though he is entitled to the same as a measure of damage. Regarding Point No.6, the Third Member held that in view of the opinion given on Points 1 to 5 the Application was liable to be dismissed and accordingly the Application was dismissed. The Civil Miscellaneous Appeal No.63 of 1999 is against the rejection of the claim application. 10. It is stated that the basic facts for the purpose of disposal in all the Civil Miscellaneous Appeals are almost similar to that of the appeal in C.M.A.No.63 of 1999 as stated above. C.M.A.Nos.63 of 1999 and 770 of 1999 are filed by M/s.P.M.S.Traders and C.M.A.Nos.394, 663, 670 and 1050 of 1999 are filed by M/s.Jaitex Lungi Company along with M/s.P.M.S.Traders. The learned counsel for the appellants categorically states that factually all cases are similar as that of the prayer in the Civil Miscellaneous Appeal No.63 of 1999 and the respondents' counsel affirms the same. Hence, all the above six appeals are taken together and disposed of by this common judgment. 11. Heard Mr.B.T.Seshadri learned counsel appearing for the appellants and Mr.V.G.Suresh Kumar, learned counsel appearing for the respondents, in all the appeals. 12. Learned counsel for the appellants submitted that the Vice Chairman of Railway Claims Tribunal held that Section 77(2) of the Indian Railways Act, 1890 will not apply to the facts of the present case, however, the (Technical) Member and Third-Member of Railway Claims Tribunal held that though the delivery had been made to parties, who are not entitled to the goods, on false and fabricated Indemnity Notes, the Railway Administration is exonerated of the liability under Section 77(2) of Indian Railways Act, 1890 since there was no claim for delivery by the consignor or consignee within 7 days after termination of transit. He, therefore, submitted that inasmuch as the claims of the appellants have been dismissed on the ground of no liability under Section 77(2) of Indian Railways Act, 1890, the provisions of Section 77 of Indian Railways Act, 1890, should be looked into in the facts and circumstances of the appellants case. https://hcservices.ecourts.gov.in/hcservices/ 13. Section 77 of the Indian Railways Act, 1890, which is relevant for the purpose of this case reads as follows:- “77. Responsibility of a railway administration after termination of transit.- (1) A railway administration shall be responsible as a bailee under Sections 151, 152 and 161 of the Indian Contract Act, 1872 (9 of 1872), for the loss, destruction, damage, deterioration or non-delivery of goods carried by railway within a period of [seven days] after the termination of transit: Provided that where the goods are carried at owner's risk rate, the railway administration shall not be responsible for such loss, destruction, damage, deterioration or non- delivery except on proof of negligence or misconduct on the part of the railway administration or of any of its servants. (2) The railway administration shall not be responsible in any case for the loss, destruction, damage, deterioration or non- delivery of goods carried by railway, arising after the expiry of the period of [seven days] after the termination of transit. (3) Notwithstanding anything contained in the foregoing provisions of this section, a railway administration shall not be responsible for the loss, destruction, damage, deterioration or non-delivery of the goods mentioned in the Second Schedule, animals and explosives and other dangerous goods carried by railway, after the termination of transit. (4) Nothing in the foregoing provisions of this section shall relieve the owner of animals or goods from liability to any demurrage or wharfage for so long as the animals or goods are not unloaded from the railway wagons or removed from the railway premises. (5) For the purposes of this Chapter,- (a) unless otherwise previously determined, transit terminates on the expiry of the free time allowed (after the arrival of animals or goods at destination) for their unloading from https://hcservices.ecourts.gov.in/hcservices/ railway wagons without payment of demurrage, and where such unloading has been completed within the free time so allowed, transit terminates on the expiry of the free time allowed for the removal of the animals or goods from railway premises without payment of wharfage; (b) "demurrage" and "wharfage" have the meanings respectively assigned to them in clause (d) and clause (h) of Section 46C.” Learned counsel for the appellants/applicants, therefore, submitted that the Railway administration is liable as a bailee under Sections 151, 152 and 161 of the Indian Contract Act, upto 7 days after the termination of transit and thereafter, the railway administration will not be responsible, in any case, for loss, destruction, damage, deterioration or non-delivery of goods carried by the railway arising after expiry of the period of seven days after termination of transit. The railway will have to establish their case for exonerating themselves under Section 77(2) of the Indian Railways Act, 1890 by proving the date of termination of transit in terms of Section 77(1) of the Indian Railways Act, 1890. 14. The termination of transit has been explained in Sub Section 5 of Section 77(2) of Indian Railways Act, 1890. It is stated in Section 77(5)(a) of the Act that unless and otherwise previously determined transit terminates on the expiry of the Free time allowed (after arrival of goods in destination) for the unloading from the Railway wagons without payment of demurrage and such unloading has been completed within the Free time allowed, the transit terminates on the expiry of Free-time allowed for removal of animals or goods from the railway premises without payment of wharfage. The important aspect, which the Railway Administration has got to prove before claiming that they have to be exonerated under Section 77(2) of Indian Railways Act, 1890, are the following:- a) The consignment had arrived at destination and is available for delivery; b) Free-time had expired for taking delivery of the goods without payment of wharfage to show termination of transit; c) Seven days expired from the date of termination of transit; Unless these conditions are satisfied, Section 77(2) of Indian Railways Act, 1890, has no application. https://hcservices.ecourts.gov.in/hcservices/ 15. Learned counsel for the appellants/applicants further submitted that in these cases, as already stated, no oral or documentary evidence has been adduced on behalf of Railway Administration. Firstly, there is no evidence to show as to when the goods reached destination i.e., Delhi, except making averments in the written statement that the goods had reached destination and delivery had been taken on Indemnity Notes. Secondly, no evidence was let in to show what is the Free-time allowed at Delhi for clearance of the consignment without payment of wharfage. No evidence has been placed before the Court like Arrival Register to prove the receipt of the consignment at the destination on a particular date. Unless these evidences are placed before the Railway Claims Tribunal, the Railway Administration cannot seek protection under Section 77(2) of Indian Railways Act, 1890. According to the learned counsel for appellants/applicants, the Vice Chairman and the Members of the Railway Claims Tribunal proceeded on the wrong assumption that the goods had reached destination and that they were available for delivery and that neither the consignor nor consignee approached the Railways for delivery within 7 days after termination of transit. But, held that goods were released fraudulently on bogus indemnity bonds. (i) The appellants/applicants had clearly stated in the plaint that on enquiry they came to know that the goods were delivered to some unauthorised persons, who were not entitled to the goods, by production of fabricated Indemnity Bonds. It was further stated by the appellants/applicants that as the original Railway Receipts were available, no delivery could have been effected on Indemnity Bonds. The counsel, however, submitted that this allegation in the plaint does not mean that the appellants/applicants had admitted that the goods reached the destination. This fact is exclusively within the knowledge of the Railways. It is for the Railway Administration to plead and prove the same. The Railway Administration, without any proof of facts for arrival of goods on a particular day, cannot state that the Free-time at the destination station