Case: Scindia Steam Navigation Co. Ltd Vs. Union of India

1. This appeal by a certificate issued by the Bombay High Court under Art 133 (1) (a) of the Constitution arises out of a suit initially filed on the Original Side of the Bombay High Court (Suit No. 232 of 1951) by the Bombay Steam Navigation Co. Ltd. (hereinafter called the B. S. N.), and the Eastern Steam Navigation Co. Ltd. (hereinafter called the E. S. N.), against the respondent, the Union of India to recover a sum of Rs. 64,499-6-0 by way of charges for carriage of logs of teakwood timber from the forests of Kanara to Karachi. A further sum of Rs. 445-4-0 was also claimed for storage charges of the said logs at Marmagoa. This latter claim was given up at the time of the hearing of the suit. The B. S. N. then merged in the Scindia Steam Navigation Co Ltd., and so the latter company came on the record in place of the B. S. N. This company is the first appellant before us. The E. S. N. was in liquidation and so its liquidators have joined the present litigation as plaintiff 2 and so they are appellant 2 in this Court.2. The E. S. N. had a ship called Azadi. It appears that the B. S. N. looked after the business of the E. S. N. and arranged on its behalf freight to be carried by the ship belonging to it. In 1947 there was an agreement between the B. S. N. as representing the E. S. N. on the one hand and the Conservator of Forests, North Kanara, representing the North-Western Railway on the other for the carriage of logs of teak-wood timber from the forests in Kanara, first by rail to Marmagoa and then by a steamer belonging to the E. S. N. from Marmagoa to Karachi. Pursuant to this agreement 636 tons of timber were shipped by the Steamer Azadi which left Marmagoa on July 23, 1947. It s common ground that the conditions of the bill of lading provided that the appellants had the right to have the logs of wood remeasured at Karachi but it was agreed between the railway and the appellants that freight should be paid on the basis of 70 per cent more than the measurements shown by the records of the forest department of South Kanara. In the plaint as it was originally filed freight had been claimed on the said bases; but it appears that before the learned trial judge this claim was given up and in consequence the amount claimed was reduced from Rs. 64,699-6-0 to Rs. 44,449/-. It is with this claim that the appellants went to trial against the respondent.3. Soon after the Azadi reached Karachi the partition of India into the two Dominions of India and Pakistan took place on August 15, 1947. And that led to a good deal of correspondence between the parties which shows that the appellants were sent from pillar to post, from one authority to the other, but ultimately their efforts to recover the amount due under the contract failed. That is why the appellants had to file the present suit against the respondent. Their claim against the respondent is based of Art 8 (10 (b) of the Indian Independence (Rights, Property and Liabilities) Order, 1947, (hereinafter call the Order). In the alternative the same amount is claimed on the footing of a Press Communique alleged to have been issued by the respondent on May 22, 1948.4. The respondent denied this claim,. It was urged that the suit as framed was not maintainable and that the plaint did not disclose a cause of action. It was alleged that the suit was barred by limitation. On the merits the respondents case was that the appellants claim was not covered by the Press Communique and that the Press Communique could not afford the appellants a valid cause of action. The appellants contention that the relevant clause of the Order justified the claim was also denied.5. On these pleadings eleven substantive issues were framed by the learned trial judge. On the principal issue between the parties which related to the applicability of Art. 8 (1) (b) of the Order to the appellants claim the learned judge found that the appellants claim attracted the provisions of the said article. In coming to this conclusion the learned judge no doubt noticed the fact that on August 15, 1947, the North-Western Railway which originally ran through the provinces which subsequently became part of Pakistan as well as through some of the Provinces which formed part of India was divided between the Dominions of India and Pakistan into two sections, and the section that was allotted to the share of Pakistan continued to be known as North-Western Railway, while the extension of the railway in the territory of India came to be known as Eastern Punjab Railway. According to the learned judge "if the timber that was carried to Karachi was for the purposes of North-Western Railway as a whole it was obviously at the date, the 15th of August, 1947, which is the appointed date, for the purpose both of that part of the North-Western Railway which went to the Dominion of Pakistan as well as for that part of the North-Western Railway which came to the Dominion of India and became the Eastern Punjab Railway". On this view the learned trial judge reached the conclusion that the suit contract cannot be said to the exclusively for the purpose of the Dominion of Pakistan as required by Art. 8 (1) (a) and so it must be deemed to be a contract falling under Art. (1) (b). The learned Judge then considered the alternative claim made by the appellants on the Press Communique in question and came to the conclusion that the said Communique did not afford a valid basis for the claim. It was not an agreement between the two Dominions, and so it could not attract the provisions of Art. 3(1) of the Order. The appellants case was that the said Communique represented an agreement between the two Dominions and so it fell within Art. 3 (1) of the Order and that made the respondent liable for their claim. This contention has been rejected by the learned trial judge. The plea of limitation raised by the respondent was rejected by the learned judge on the ground that the claim made by the appellants was saved by acknowledgement made by the respondent. With the findings recorded by the learned judge on the other issues we are not concerned in the present appeal. In the result the appellants claim for Rs. 42,449/- was referred to the Commissioner for taking accounts in order to ascertain the amount due to the appellants having regard to the terms of the contract.6. This decree was challenged by the respondent by its appeal before the Court of Appeal in the said High Court. The Appeal Court agreed with the trial Judge in rejecting the alternative basis on which the appellants had made the claim. On the question about the applicability of Article 8(1) (b) of the Order the Appeal Court differed from the trial Judge, and held that the suit contract fell within Art. 8 (1) (a) of the Order. According to the finding of the Appeal Court the contract was for purposes which as from the relevant date were exclusively purposes of the Dominion of Pakistan and so the respondent was not liable under it. On this view the Appeal Court did not think it necessary to consider the question of limitation. Two additional grounds were sought to be raised before the Appeal Court on behalf of the appellants in support of the decree passed by the trial Court. It was urged that by its conduct the respondent was estopped from disputing the validity of the appellants claim and that there was novatio which made the respondent liable. The Appeal Court took the view that both these pleas were pleas of fact which could not be allowed to be raised for the first time in the appeal . As a result of the conclusion that the suit contract fell under Art. 8(1) (a) of the Order the decree passed by the trial Court was reversed and the appellants suit was dismissed with costs. Certain cross-objections had been filed by the appellants claiming additional relief against the respondent, but since the appellants failed on the principal question cross-objections were also dismissed with costs. The appellants them applied for and obtained a certificate from the High Court and with the said certificate they have come to this Court with the present appeal.

Reasoning:
It would thus be seen that in considering the nature of the contract in the present appeal either of the two artificial tests approved by this Court must be applied.It is clear that the fact that the contract in question was made by the Conservator of Forests, Kanara, is immaterial in determining its character under Art. 8 (1), nor is it relevant to consider the fact that the contract had been made on behalf of theRailway. It is obvious that all contracts prior to the appointed day were made by the officers of the Government of India or by or on behalf of the said Government; and so both the Courts below are rightly agreed that in determining the character of the contract who initially made the contract with the appellants is of no relevance. Similarly the respondent cannot rely on the fact that the contract was made on behalf of the NorthWestern Railway and the originalRailway has now been split up into two sections, the Pakistan section being known by the name ofRailway and the Indian section being known by the name of Eastern Punjab Railway. It may be that theRailway on whose behalf the contract was made now runs in Pakistan alone, but that is hardly relevant for determining the character of the contract. In dealing with this question we must look at the substance of the contract and not its form.13. It is true that the timber which was carried to Karachi under the contract was for the purposes of theRailway as a whole and there is no evidence on the record to show that it was intended to be used for that section of the said railway which ran either through Sind or Western Punjab which subsequently formed part of Pakistan. On the other hand, the Appeal Court has found that the goods were lying in Karachi from August 15, 1947, to December 1947, and that it can be taken to be established that these goods were in the Dominion of Pakistan on the relevant date, and had been in fact used for the purposes of theRailway which was in the Dominion of Pakistan. We have already seen that the purpose of the contract is not to be confused with the ultimate user or disposal of the goods, but it appears that the learned trial Judge was somewhat influenced by the fact that the goods under the contract were originally intended for the use of theRailway as a whole and since the use of the said railway as a whole could not be said to be limited to the use of Pakistan alone the contract was not exclusively for the purposes of Pakistan. It is only in that context that we have referred to the finding of the Appeal Court that in the circumstances of this case there can be no doubt that the goods which lay in Karachi from August 15,, 1947, to December 1947, have in fact been used by theRailway which fell to the share of the Dominion ofhave seen the nature of the contract. It was a contract for the carriage of logs of teakwood timber from the Kanara forests to Karachi for the purpose of the railway. The destination of the delivery of goods was Karachi, and the object of securing the goods was to use them for the railway. In such a case it is difficult to resist the conclusion that if this contract had been made on August 15, 1947, it would not (sic) have been exclusively for the purposes of Dominion of Pakistan. It is inconceivable that on the appointed day a contract could have been made for the shipment of goods to Karachi unless the contract was for the purposes of the Dominion of Pakistan. If the contract had been even partially for the purposes of India shipment of all the goods to Karachi would not have been the term of the contract. The same result follows if we apply the alternative test. If Pakistan had existed on the date of the contract, in our opinion, the contract as made would obviously and clearly be for the purposes of Pakistan. That is the view taken by the Appeal Court, and we see no reason to differ from it.15. In this connection the Appeal Court has taken into account the fact that the goods had become the property of Pakistan by virtue of Art. 6 of the Order so that on the appointed day the goods the shipment of which was the subjectmatter of the contract were the property of Pakistan. If that be so, we do not see how we can escape the conclusion that the application of either or the two artificial tests prescribed by Art. 8 (1) will inevitably lead to the conclusion that the contract had been made exclusively for the purposes of Pakistan. We have already seen that the tests enunciated by the Bombay High Court in the case of Chinubhai Jeshingbhai, 54 Bom LR 561: (AIR 1953 Bom 13  ), have been expressly approved by this Court in the case of Chaman Lal Loona, 1957 SCR 1039  : ( (S) AIR 1957 SC 652  ). It is true that in terms the significance of the vesting of the title in the goods by the operation of Art. 6 of the Order to which the Bombay High Court attached considerable importance in the case of Chinubhai Jeshingbhai, 54 Bom LR 561: (AIR 1953 Bom 13  ), has not been noticed by this Court, and so in that sense it may be permissible to urge that that part of the judgment had not been expressly approved. However, such a contention, in our opinion is purely technical. We are inclined to hold that the alternative tests which have been expressly approved by this Court are wholly consistent with the consideration of ownership to which the Bombay High Court attached importance and is both relevant and material in the application of the said tests.If the goods which are theof the contract have become the goods of Pakistan that would be a relevant and material fact in considering whether the contract in question if made on the appointed day would have been made by Pakistan, or whether Pakistan would have made the said contract if it had been in existence on the actual date of the contract. Therefore, in our opinion, the Appeal Court was right in coming to the conclusion that the suit contract fell within the scope of Art. 8 (1) (a) and the assumption made by the appellants that Art. (1) (b) could be invoked against the respondent is not wellmay briefly indicate the broad features of the said correspondence. It appears that on July 10,1948, theRailway Department, Government of Pakistan, Karachi, wrote to the General Manager, N. W. Railway, Lahore, in regard to the question about the disposal of preparation claims outstanding against the undivided Government of India. In this letter he set out the contents of the Press Communique on which the appellants rely. The Collector of Stores, Karachi, drew attention of the appellants to the said Communique by his letter dated July 19, 1948. In their correspondence with the railway authorities the appellants have sometimes described this Communique as joint press notification. Similarly, in their letters written to appellant 1 the railway authorities in Pakistan also have described the said Communique as joint notification "said to have been issued by the Dominions of India and Pakistan". Then we have some letters from the railway authorities in India which would show that the appellants claim was being considered by them. We have, for instance, a letter addressed to the Stores Accounts Officer, E. P. Railway, Delhi, by theOffice at Delhi in which the appellants claim is indicated at serial numbers 4 and 5, and the Stores Accounts Officer is asked to deal with it. The Administrative Officer, E. P. Railway, Delhi, wrote to appellant 1 to say that its claim had been registered and that further action would be taken when orders of the Railway Board had been received. The appellants then reminded the railway officers from time to time and on August 5, 1950, their attorneys were told that the claim was still under verification by the N. W. Railway and until it is verified by the F. A. and C. A. O., N. W. Railway, Lahore, it could not be finalised. The attorneys of the appellants then enquired as to how much time the process of verification would take, but since no satisfactory answer was given the appellants filed the present suit. It is, however, clear that some attempts were made by the railway authorities in India for getting the appellants claim verified but the said attempts did not succeed. Indeed, the learnedfor the respondent, has filed an affidavit by Mr. R. L. Takyar, Legal Assistant, Northern Railway, Baroda House, New Delhi, which shows that in pursuance to the assurance given by the learnedbefore the Bombay High Court attempts were made by the respondent to have the appellants claim verified but the said attempts failed, and it adds that "in the absence of the verification of the claim and the authorisation by the Pakistan Government, the Union of India was not in a position to make any payment ex gratia to the appellants". We sympathise with the grievance made by the appellants that they have been driven from pillar to post and have yet received no satisfaction to their claim either from the Pakistan Government or from the respondent; but the difficulty in the way of the appellants is that the statements in the correspondence to which we have been referred do not at all justify the appellants claim that the Communique represents an agreement between the two Dominions. First of all the appellants should have taken proper steps to prove the said Communique and should have called upon the respondent to produce all relevant documents in respect of the alleged agreement on which the appellants relied. Besides, the terms of the Communique themselves negative the theory that the Communique represents an agreement between the two Dominions. The Communique expressly refers to the discontinuance of payment by the Pakistan Government from about the middle of December owing to difference of opinion between the two Governments about the liability of these payments, and it proceeds to state the decision of the respondent that in order to avoid hardships to suppliers and contractors the respondent had decided that it should undertake initial liability for these payments and recover Pakistans share through Debt Settlement. That sometimes in the course of the correspondence the Pakistan authorities referred to the Press Communique as a joint Communique can hardly assist the appellants in showing that the Communique was the result of an agreement between the two Dominions. It is not unlikely that there may have been some agreement between the two Dominions because the conduct of the railway authorities in India can be satisfactorlly explained only on the basis of some agreement or other; but unfortunately the appellants have not produced sufficient or satisfactory material to prove their case that there was a specific agreement between the two Dominions which brought into play the provisions of Art. 3 (1) of the Order. On the material produced by the appellants the Courts below have made a concurrent finding that no such agreement had been proved. Having gone through the correspondence to which our attention was drawn we are satisfied that the appellants cannot successfully attack the validity or correctness of the said concurrent conclusion. Therefore, if the theory of an agreement between the two Dominions fails the Press Communique cannot help to sustain the appellants claim against the respondent. It is not suggested by the appellants that the unilateral statement which is contained in the Press Communique can itself without anything more help to sustain the appellantsare not impressed by this argument.There can be no doubt that both the pleas are pleas which can be effectively raised only after pleading the relevant and material fact; had been averred in the plaint on which either of the two pleas can be raised and no issue was asked for in the trial Court in respect of either of the said pleas the Appeal Court was justified in refusing leave to the appellants to raise the said pleas for the first time in appeal. In our opinion. Mr. Purshottam is not right in contending that the Appeal Court was unduly technical when it refused leave to the appellants to raise the said pleas.We have already seen that on the pleadings as many as eleven issues were framed by the learned trial Judge. The plaint itself is an elaborately drawn document, and so the appellants cannot be heard to complain if for their failure to make adequate and proper pleadings they are not allowed to raise the plea of estoppel or novatio at the appellate stage. In our opinion, therefore, the Appeal Court was right in not permitting the said pleas to be raised in appeal.