Case: Union Of India Vs.  Modi Industries Ltd.

1. This is an appeal by certificate from a judgment of the Allahabad High Court in a suit filed by the plaintiff-respondent for an injunction against the defendant-appellant restraining it from realizing the sum of Rs. 93,981-8-0 on account of the alleged siding charges for the period December 1, 1949 to March 31, 1956 and from stopping the supply of wagons in the railway siding of the plaintiff and further from cancelling the agreement dated July 4, 1933 for the aforementioned reasons2. The facts necessary for deciding the appeal may be stated. By means of an agreement dated July 4, 1933 the plaintiff entered into an agreement with the Secretary of State for Indian Council through the agent of the North Western Railway (now represented by the Union of India) whereby it was agreed that the former shall lay a railway siding from Begamabad Station Yard of that railway for enabling the plaintiff to carry on its business at its premises. Clause 13 of the agreement was follows:Freight for all classes of goods will be charged upto and from Begamabad Station. Railway Receipts and invoices shall be issued to and from the station only and in accordance with the rates from time to time published in the Goods Traffic Books of this Railway Administration will make the following charges in each direction from every wagon loaded or empty in or removed from the lines A and B mentioned in clause 15 below:(1) Per 4 wheeled wagonRe. One. (2) Per 6 wheeled wagonRe. One and annas eight. (3) Per 8 wheeled wagonRs. Two. Clause 23 of the agreement provided :Notwithstanding anything laid down in the foregoing clauses of this Agreement, it shall be open to the Railway Administration on giving six months notice of such intent, to revise the charges laid down in clauses 8, 12, 13 and 19 of this Agreement. Clause 24 related to termination of the agreement in the event of non-payment of dues within one month of demand. On March, 26, 1949 the Divisional Superintendent of the E. P. Railway (successor in interest of the North Western Railway) informed the plaintiff that the rates were proposed to be increased with effect from April 1, 1949, the increased charges being mentioned in that letter. As this intimation was not in accordance with clause 23 of the agreement the plaintiff refused to agree to the increase. Other objections were also raised, one of the objections being that the charges were excessive. The Divisional Superintendent addressed another letter on May 18, 1949 informing the plaintiff that with effect from December 1, 1949 the charges mentioned therein would be made. A good deal of correspondence and discussions between the representatives of the plaintiff and the railway authorities took place and by a letter dated July 20, 1951 the Divisional Superintendent, intimated that the revised siding charges in force from December 1, 1949 were purely provisional and were subject to revision. Meanwhile and subsequent to the above date the required tests were made to determine the charges. In September l951 the Divisional Superintendent wrote to the plaintiff that the siding charges should be paid with effect from December 1, 1949 to September 30, 1951 at the following rates:(i) Per 4 wheeled wagonRs. 5/-(ii) Per 6 wheeled wagonRs. 7/8/- (iii) Per 8 wheeled wagonRs. 10/- The plaintiff protested against what was called, the exorbitant nature of charges and made it clear that the letter of September 1951 did not comply with clause 23 of the agreement and that the charges were unreasonable and could not be legitimately made. Another letter dated October 26/November 6, 1951 was sent by the Divisional Superintendent saying that the siding charges to be levied with effect from first October 1951 were being assessed and would be intimated to the plaintiff and meanwhile it should continue to pay the charges demanded in the letter of September 1951 provisionally. The Divisional Superintendent addressed another letter dated November 27, 1951 explaining the result of the test and the actual cost of the shunting etc. A demand was made that the revised siding charges should be paid from December 1949 to September 30, 1951 at Rs. 4/- per 4 wheeler, Rs. 6/- per 6 wheeler and Rs. 8/- per wheeler. The plaintiff, however, did not pay the increased rates demanded. On September 29, 1955 the Divisional Superintendent addressed a letter to the plaintiff proposing revision of the siding charges with effect from April 1, 1956 after the expiry of six months according to clause 23 of the agreement. The charges as demanded were as follows:4 wheeled wagon Rs. 120/ 6 wheeled wagon Rs. 210/ 8 wheeled wagon Rs. 350/- On May 17, 1957 the General Manager of the Railway sent a letter to the plaintiff for payment of the amount of Rs. 93,981-8-0 representing the difference between the amount due from December 1, 1949 to March 31, 1956. It was intimated that on failure to make the said payment within one month the supply of wagons would be stopped and steps to determine the agreement would be taken. In May 1957 the plaintiff served a notice under S. 80 of the Civil Procedure Code to the defendant and thereafter in October 1958 the suit out of which the appeal has arisen was filed3. Out of the issues framed by the trial court on the pleadings of the parties the following need be mentioned:(1) Whether the enhancement of the siding charges by the defendant is unjustified, exorbitant and illegal?(2) Whether the demand of Rupees 93,981-8-0 by the defendant is illegal ?(4) Whether the court has no jurisdiction to try the suit?On issue No. 1 the trial court held that the charges demanded were unjustified and exorbitant. It was held that out of the demand of Rupees 93,918-8-0 the demand for Rs. 22,111-3-0 was illegal. On issue No. 4 the trial court expressed the new that it had jurisdiction to try the suit in respect of that portion of the claim whereby the legality of the enhanced siding charges had been challenged on account of being in violation of cl. 23 of the agreement but it had no jurisdiction to try the suit in respect of the second ground whereby the enhanced siding charges had been challenged as unjustified and exorbitant4. The plaintiff appealed to the High Court and the defendant filled cross objections. The High Court affirmed the finding of the court below that the enhancement made by the Railway Administration was high1y unjustified and exorbitant. But it did not accept its finding about the legality of the enhancement and also on the question of the jurisdiction of the civil court. The appeal was consequently allowed in toto and the cross objections were dismissed.

Court's reasoning:
Coming to the facts of the present case it is apparent that one of the main questions involved was whether cl. 23 of the contract between the parties was not void because it contravened S. 29 of the Indian Contract Act. Another question which had to be investigated was whether a proper notice regarding the enhancement of rates had been given in accordance with the terms of the said agreement. From the facts which have been started it appears that the rates were being revised and actually enhanced the rates but then the matter was kept pending and there was exchange of correspondence and discussion between the parties from time to time. No effort was made to enforce the demand made in the various letters and the plaintiff was allowed to make payments according to the rates originally agreed. It was only in May 1957 that the plaintiff was really threatened to make payment of the outstanding amount calculated at the revised rates on pain of the supply of wagons being stopped and the agreement being determined. It is somewhat surprising that in September 1955 the rates which were revised were very much less than those which were demanded for the prior period. The position thus remained in a flexible state and there is a good deal of substance in the submission on behalf of the plaintiff-respondent that a complaint was not filed under S. 41 of the Act because the rates which were being paid and actually accepted were the same as the contractual rates and not the revised or enhanced rates. According to the decisions of this court referred to before it was hardly open to the plaintiff to file a complaint with regard to the reasonableness or otherwise of the rates and charges which had already become due and payable. The plaintiff had no grievance whatsoever with regard to the charges which had been fixed with effect from April 1, 1956 by means of the letter dated September 29, 1955 and therefore there was no question of its filing a complaint with regard to those charges. Its grievance was confined only to the amount which was being demanded on the basis of the revised enhanced rates between the period December 1, 1949 and March 1, 1956. If that amount had actually been realised by the railway authorities the plaintiff could only file a suit for its refund and could not have laid a complaint under Section 41 of the Act before the Railway Tribunal. By analogy the plaintiff could not have filed a complaint with regard to past dues as the Railway Tribunal could not have given any relief in respect thereof following the law laid down by this court. In this view of the matter apart from other questions involving the validity of clause 23 of the agreement as also of the notice or intimation of enhancement of rates on the ground of non-compliance with its terms the suit could not be held barred under S. 26 of the Act and the civil court could grant the relief claimed9. We have not been shown any serious infirmity in the reasoning of the High Court by which it arrived at the conclusion that the question of reasonableness of the charges, keeping in mind the facts of this case, was justiciable. Nor has any justification been shown for reopening the concurrent finding of the two courts below that the rates which were demanded for the period in question were unreasonable. The suit was thus rightly decreed.