Case: Union of India Vs. Steel Stock Holders' Syndicate, Poona

This is a defendants appeal by special leave against the judgment and decree of the High Court of Bombay dismissing its second appeal in limine by its order dated August 24,appeal raises important and interesting questions of law relating to the interpretation of some of the provisions of the Indian Railways Act pertaining to the liability of the Railways for breach of contract. The plaintiff/respondent brought a suit for recovery of an amount of Rs. 2, 378.65 nP being the damages for breach of contract resulting from delayed delivery of the goods consigned by the plaintiff through the defendant Railways to be delivered at Poona. The plaintiff which is a firm carrying on its business dealing in iron goods booked a consignment with the defendant on December 15 1961 at Bhillai to be carried to Poona and to be delivered therein to the consignee safely and in good condition. The defendant Railways accepted the offer under a Railway Receipt dated December 15, 1961. It appears that there was some delay in the delivery of the goods at Poona and on enquiries made by the plaintiff it appeared that till May 9, 1962 the goods had not been delivered at all. Thereafter the plaintiff served a noted claim and of suit dated May 9, 1962 on the Railway Administration. Soon after the service of the notice the consignment was delivered on July 21, 1962. According to the plaintiff under the contract or the usage of the Railways the normal period of delivery was ten days and as defendant had committed an inordinate delay in delivering the goods it was liable to pay damages to the plaintiff. The plaintiff, however, calculated the damages by way of interest at the rate of 12% per annum on the locked up capital of Rs. 27, 332-44 which due to rise in prices has swelled to Rs. 35, 476-27 nP. The plaintiff further alleged that the delay in the delivery was due to gross negligence of the defendant Railways which instead of sending the goods direct from Bhillai to Poona diverted them to Aurangabad where the consignment had to be loaded in a meter-gauge train and then to a broad-gauge line and it was only after the defendant received the notice from the plaintiff that it expedited the delivery of the goods. The defendant Railways contested the suit on the ground that there was no inordinate delay, nor there was any contract that the goods were to be delivered within ten days. It is also averred that the plaintiff had led no evidence to show that there was any loss of profits or rise in the market price. The defendant further alleged that the plaintiff was not entitled to claim interest as damages. The Trial Court accepted the plaintiffs case in toto andthat there was an inordinate delay in the delivery of the goods belonging to the plaintiff at Poona;(2) that the goods were first diverted to Aurangabad, although the route from Bhillai to Poona lay via Nagpur and Aurangabad does not fall on the route at all; and(3) that the defendant was guilty of gross negligence and was, therefore, responsible for loss for delay or deviation in carrying theTrial Court, however, found that the figure of Rs. 27, 332-44 the original amount which was deposited by the plaintiff in the Bank against the goods should be taken as the basis for calculation of damages and after calculating interest at the rate of 6% per annum the plaintiff was awarded a sum of Rs. 1250/- including the notice charges and passed a decree for this amount in favour of thedefendant then filed an appeal before the District Judge Poona who upheld the finding of the learned Munsiff and dismissed the appeal. A second appeal taken by the defendant to the High Court of Bombay was also dismissed in limine, and hence this appeal by special leave.Normally it would appear that the appeal was concluded by findings of fact but we find that on the proved facts some clear questions of law arise for decision and therefore this was not a case in which the High Court should have dismissed the appeal in limine.

Court's reasoning:
We are, however, unable to accept this argument. It is well settled that while the Indian Contract Act merely provides certain elementary conditions under which the contract becomes binding on the parties, it does not provide any particular form or condition of a contract. It is, therefore, clear that the parties to the contract may agree to a particular form or condition or of mode in which the contract is to be executed. In case where the Government enters into a contract with a person or vice versa a particular form in which the contract is to be executed has been provided for even by the Constitution and the contract has to be in that form.This does not mean that the provisions of the Contract Act stand superseded either by the Constitution or by the Railways Act which provide for a particular mode or a form in which the contract has to be entered into. Section 72 therefore does nothing more or nothing less than provide for a particular form in which the contract is to be executed and it enjoins that such a form will be prescribed by the railway administration and approved by the Centralthese circumstances, therefore, according to the plaintiff itself, the breach occurred only after the new Act had come into force-whether it was January 1, 1962 or thereafter. There can be no question of the liability arising when the goods were booked and the contract was entered into between the plaintiff and the Railway, because there is no presumption that the contract would result in breach. The plaintiff would be entitled to damages only when t here was a breach of contract and if the said breach, even according to the plaintiff itself, occurred on January 1, 1962 or thereafter, then it is manifest that the case would be covered by the new Act and not by the old Act.The first contention put forward by the Solicitor General was that the case of the plaintiff does not fall under any of the contingencies contemplated by s. 76 of the newthese circumstances, the case of the plaintiff does not fall within the four corners of s. 76, nor does it fulfill any of the categories mentioned therein. If s. 76 does not apply to the facts of the present case, then s. 78 will also have no application, because s. 78 starts with a non obstante clause "Notwithstanding anything contained in the foregoing provisions of this Chapter, a railway administration shall not be responsible". We, therefore, agree with the learned counsel for the respondent that under the new Act the liability of the Railway has been increased so as to take upon itself the responsibility of a commonthese circumstances, therefore, with due respect, we are unable to agree with the somewhat broad view taken by the Allahabad High Court and followed by the Orissa High Court in the cases referred to above. We, on the other hand, prefer to adopt the view taken by the Lahore High Court in the case referred to above. In this view of the matter, it is clear that the word "deterioration" used in s. 76 referred to the physical and actual deterioration of the goods which has admittedly not taken place in the present case. The plaintiff cannot take advantage of s. 76 relying on the word "deterioration" because of the finding of negligence entered by the Courts below. The case of the plaintiff is clearly taken out of the ambit of ss. 76 and 78 and his suit for damage also cannot be defeated on the ground that it is barred by s. 76 or s. 78 of the new Act. We are, therefore, of the opinion that in vie w of the finding of fact arrived by the Courts below the plaintiff is undoubtedly entitled to damages.This brings us to the second contention raised by the Solicitor General, namely, that the plaintiff is not entitled to interest as damages for breach of the contract. It was submitted that what the plaintiff has done is to calculate interest at the rate of 12% which has been reduced to 6% per annum on the amount deposited by him in the Bank which remained locked up for more than six months and to claim the same as damages. It was contended that the plaintiff plainly could not do so in view of the Interest Act under which interest can only be charged before suit if so stipulated by the parties to the contract. It is common ground that in the present case the contract between the parties does not provide for charging any interest for breach ofplaintiff is not claiming the sum decreed by way of interest but he is claiming the damages calculated on a particular basis. As a common carrier the Railway is undoubtedly responsible for breach of contract. In the instant case the Railway Receipt shows that the goods were booked to be carried from Bhillai to Poona which is on the Nagpur route. There was absolutely no reason nor any occasion for the Railway to divert the goods to a different route and for taking the same to a different route and for taking the same to Aurangabad which did not fall on the route to Poona at all. The Courts below, therefore, rightly found that the Railway was guilty of gross negligence.The last quest ion submitted by the learned Solicitor General was that the plaintiff was not entitled to loss of profit or loss of market, because the plaintiff has not pleaded anywhere that he had obtained any permit for the goods which, were a controlled commodity and sustained loss of market. It is true that the plaintiff has not pleaded this fact, but the plaintiff has not at all prayed for any damages on the ground of loss of market or loss of profit. The plaintiff has only claimed nominal damages for the loss which occurred to him because of the amount of money which he had deposited in the Bank and was locked for more than six months due to the delayed delivery. The Trial Court has already scaled down the amount from Rs. 2, 378-65 to Rs. 1, 250/- and we think the Trial Court was fully entitled to do so.