Case: Delhi Cloth and General Mills Limited Vs. Union of India

The background facts areThe appellant is a company. It has set up a fertilizer factory at Kota in Rajasthan. It is said to be an industrially backward area. The factory manufactures Urea for which the main raw material is Naptha. Naptha has to be transported from Koyali Refinery of Indian Oil Corporation. The nearest railway station is Bajuva near Baroda. The nearest railway station serving companys factory is Dadhevi in Rajasthan. The distance between Bajuva and Dadhevi is about 520 Kms. For transportation, the Naptha has been classified by the Railway under Clause 110-B of theBefore the actual setting up of the factory, the company, by its letter dated September 5, 1966 requested the Railway Board for a concessional freight rate for the carriage of Naptha. It requested the Railway Board for fixed station to station rate equivalent to classification 62.5-B. That would have meant reduction of about 43 per cent in the normal tariff under clause 110-B. In that letter it was pointed out that if such concessional rate was not fixed, the company would be put to disadvantageous position as against the other factories located at ports or near the refineries. The Railway Board by its letter Ex. C-5 dated November 5, 1966 agreed to quote station to station rate equal to 85-B (special). In the said letter it was also stated that as the special rate was being quoted ahead of the actual setting up of the factory the freight rate need to be reviewed when the traffic actually begins toWhen the factory was almost ready for operation the company wrote a letter dated June 5, 1967 requesting the Railway Board for charging the rate under classification 62.5-B instead of 85-B (Special). The Railway Board did not accede to the request. On May 31, 1968 the company wrote another letter informing the Railway Board that the movement of Naptha would commence from June/July 1968 and pending decision of the companys earlier request, the Railway Board may permit charging the rate equivalent to 85-B (Special) already offered in terms of the letter Ex. C-5. The Railway Board refused to grant that request also. The Railway Board, however, informed the company in the letter dated July 11, 1968 as followsHowever, if on the basis of facts and figures your cost of production (date to be furnished for at least one complete year) vis-a-vis the sale price of fertilizers, it can be established that production of fertilizers at Kota is uneconomical, until freight concession on the movement of Naptha from Bajuva/Trombay to Kota is granted, the Railway Board would be prepared to reconsider theOn April 19, 1969, the company filed a complaint under Section 41(1)(a) and (b) of the Railways Act, 1890 before the Railway Rates Tribunal Madras. The principal contentions raised in the complaint are asThe Railway Board was estopped and/or precluded from going back on the assurance of quoting station to station concessional rate 85-B when the company had invested a large amount of capital in setting up the factory at a place away from the refinery or port(ii) The rate charges by the Railway for the carriage of Naptha between two stations - Bajuva and Dadhevi was unreasonable under Section 41(1)(b) of the Indian Railway Act, 1890, and(iii) The Railways were showing undue preference or advantage in respect of other traffic and contravening the provisions of Section 28 of the Indian Railways Act,With these and other contentions, the company requested the tribunal to declare the rate charged for the carriage of Naptha as unreasonable and to fix a reasonable rate for suchThe Railway Board in its reply maintained that while quoting the concessional rate equal to 85-B (Special) it was made clear to the company that the rate was subject to review when the traffic starts moving and that concessional rate was provisional in character. The company did not construct the factory relying solely on the concessional rate offered by the Railway Board. There was no scope for any such understanding since the Railway reserved its right to determine the correct rate when the traffic started moving. It was later found that the chemicals have been advisedly given low class rate with a view to encourage fertilizer industry and no further concession was necessary to the company. It was further stated that the question of any undue prejudice or undue favour to any party does not arise when charging the respective class rates for specifiedOn these pleadings the Tribunal considered among others, the followingWhether freight charges, now charged, for the carriage of a companys traffic in Naptha from Bajuva to Dadhevi station are unreasonable under Section 41(1) of the Indian Railways Act, 1890 ?(2) Whether the Railways are contravening Section 28 of the Indian Railways Act in charging the respective class rates for commodities Naptha, chemical manures, divisions A & B, Urea and Gypsum ?(3) Whether the Railways are estopped by the doctrine of promissory estoppel in view of the assurance given in the letter Ex. C-5The Tribunal determined all these questions against the company. It was held that there was no unreasonableness in the rate charged for the carriage of Naptha from Bajuva to Dadhevi. The Railways are not contravening Section 28 of the Railways Act. The rate charged has not caused any prejudice to the company. On the question of promissory estoppel, the Tribunal held that the assurance given by the Railway Board in the letter Ex. C-5 was not mainly responsible for setting up of fertilizer factory at Kota. It was further held that even if Ex. C-5 was an assurance to the company the withdrawal of that assurance has not adversely affected the interests of the company

Reasoning: Section 28 is obviously based on the principle that the power derived from the monopoly of railway carriage must be used in a fair and just manner in respect of all persons and all descriptions of traffic passing over the railway area. In other words, equal charges should normally be levied against persons or goods of the same or similar kinds passing over the same or similar circumstances; but this rule does not mean that, if the railway administration charges unequal rates in respect of the same or similar class of goods travelling over the same or similar areas, the inequality of rates necessarily attracts the provisions of Section 28. All cases of unequal rates cannot necessarily be treated as cases of preference because the very concept of preference postulates competition between the person or traffic receiving preference and the person or traffic suffering prejudice in consequence. It is only as between competitors in the same trade that a complaint of preference can be made by one in reference to theIn the light of these principles, the Tribunal considering the material on record held that there is no evidence produced by the company to justify any grievance under Section 28. We see no reason to disagree with this conclusion. It is, in our opinion, perfectly justified. In fact Mr. K. K. Jain learned counsel for the appellant also did not seriously dispute the correctness of that finding recorded by theThe last and final aspect of the matter to which attention should be drawn is that for the purpose of finding whether an estoppel arises in favour of the person acting on the representation, it is necessary to state that the representation must be clear and unambiguous and not tentative or uncertain. In this context we may usefully refer to the following passage from Halsburys Laws of England (4th Edn., Vol. 16, p. 1071, para 1595)1595. Representation must be unambiguous. - To found an estoppel a representation must be clear and unambiguous, not necessarily susceptible of only one interpretation, but such as will reasonably be understood by the person to whom it is made in the sense contended for, and for this purpose the whole of the representation must be looked at. This is merely an application of the old maxim applicable to all estoppels, that they "must be certain to every intent