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KUCHWAR LIME AND STONE CO. V. DEHRI ROHTAS

LIGHT RLY. & CO. LTD. (AIR 1969 SC 193)

PETITIONER: KUCHWAR LIME AND STONE CO.

Vs.

RESPONDENT: M/S. DEHRI ROHTAS LIGHT RAILWAY CO. LTD. & ANR.

DATE OF JUDGMENT: 15/07/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. BHARGAVA, And VISHISHTHA

CITATION: 1969 AIR 193 ; 1969 SCR (1) 359

RELEVANT ACT/ SECTION

Colliery Control Order, 1945 – Clause 5, Clause 4, Clause 6(1), Clause 8

Coaching Tariff – Rule-108 – Clause (2), Clause (8)

Clause 20 in Part -III of the Goods Tariff

Essential Supplies (Temporary Powers) Act, 1946

Railway Act, Section 56

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HEADNOTE:

A quantity of coal was booked by a Colliery to the appellant Company carriage to Banjari station
on the respondent Railway’s line and the freight on the consignment was to be paid by the
appellant Company. The Company declined to take delivery of a part of the consignment which
reached Banjari on November 12, 1954. After some correspondence between the parties as well
as with the Coal Controller, the Railway sold the coal on June 2, 1955, after serving a notice on
the appellant. It thereafter filed a suit against the Company claiming demurrage for 202 days
during which six wagons in which the coal was loaded were detained and ’sought a decree for
Rs. 17,625/14/- after giving credit for the amount realized from the sale of the coal. The trial
court granted ’a decree for about Rs. 1,620/- with interest, but in appeal the High Court decreed
the Railway’s claim in full. In the appeal to this Court by certificate, it was contended on behalf
of the appellant

(i) That the Company being a consignee of the goods booked by the Colliery there was
no privity of contract between the Company and the Railway and no claim for
demurrage or freight lay at the instance of the Railway against the Company; and
(ii) That in any event the Railway ought to be awarded demurrage for only 22 days out of
the total period for which the wagons were detained.

BRIEF FACTS & PROCEDURAL HISTORY

A quantity of steam coal was booked by Colliery to the appellant company (Kuchwar Lime &
Stone Company) to Banjari Station on the Dehri Rohtas Light Railway. The Company accepted
the delivery of one part of the consignment but refused the delivery of the other part on November
12, 1954, at Banjari Station.

After correspondence between the parties and the Coal Controller, the Railway Administration
served the notice on the Company and Colliery on April 28, 1955. The Railway sold the unclaimed
coal at public auction for Rs. 1,050 on June 2, 1955.

After this, the Railway filed a suit against the Company and the Colliery in the Subordinate Court
claiming demurrage for 202 days during which six wagons were remained unloaded, detained, and
sought a decree for Rs. 17,625/14 after giving credit for the amount realized from the sale of the
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unclaimed coal. The subordinate court granted the decree of Rs. 1,620, with interest. However, the
High Court modified the decision of the trial court and granted the decree for the full period.

A quantity of coal was booked by a Colliery to the appellant Company carriage to Banjari station
on the respondent Railway's line and the freight on the consignment was to be paid by the appellant
Company. The Company declined to take delivery of a part of the consignment which reached
Banjari on November 12, 1954 on account of inferior quality of the coal. After some
correspondence between the parties as well as with the Coal Controller, the Railway sold the coal
by public auction on June 2, 1955, after serving a notice on the appellant. It thereafter filed a suit
against the Company claiming outstanding amount of freight and demurrage charges for 202 days
during which six wagons in which the coal was loaded were detained and 'sought a decree for Rs.
17,625/14/- after giving credit for the amount realized from the sale of the coal.

ISSUES BEFORE THE COURT

 Whether consignee (Company) is liable after refusing to take the delivery of the
consignment.
 Is the Railway entitled to demurrage for a full period? Or is it obliged to unload and claim
demurrage only for a reasonable period?

HELD

Trial court: The trial court granted a decree for about Rs. 1,620/- with interest, but in appeal the
High Court decreed the Railway's claim in full.

High Court: The High Court modified the decree passed by the Trial Court and decreed the claim
of the Railway against the Company in full.

SUPREME COURT:

(i) The Company being a consignee of the goods booked by the Colliery there was no privity
of contract between the Company and the Railway and no claim for demurrage or freight
lay at the instance of the Railway against the Company;
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(ii) In any event the Railway ought to be awarded demurrage for only 22 days out of the total
period for which the wagons were detained.
(iii)It is only in those cases where delivery of goods is taken by the consignee that the liability
to pay demurrage may be imposed upon him.

J.C. Shah, J.

It is clear that the Colliery supplied coal in pursuance of the "sanction order" in favour of the
Company and arranged to transport it in wagons which were allotted for that purpose by order of
the Deputy Coal Commissioner. Under the forwarding notes the freight was made payable by the
Company. In these circumstances, it would be reasonable to infer that the Colliery was acting as
an agent of the Company in entering into the contract of consignment and the liability for payment
of freight and of demurrage charges for failure to take delivery of the goods lay upon the Company.

The High Court erred in holding that the Company was liable to pay demurrage for the full period
of 202 days. Railway was entitled to demurrage for the detention of wagons for only one month
and cannot claim the entire amount. The Railway was in the position of a bailee qua the Company
and was bound to minimize the loss. It could have sold off the coal under s, 56 of the Railways
Act. Even assuming that in view of the Colliery Control Order, the Railway could not sell the coal
without the Coal Commissioner's sanction, it could have unloaded the coal from the wagons and
put the wagons to use. Hence, the consignee could be liable only for wharfage.
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JUDGMENT: CIVIL APPELLATE JURISDICTION

The 1965 Civil Appeals Nos. 987 and 988. appeals from Original Decree Nos. 210 and 230 of
1968, which are appeals from the Patna High Court's July 25, 1962, decision and decree. P. K.
Chatterjee and S. V. Gupte represented the appellant in both appeals. For respondent No. 1 (in
both appeals), R. Gopalakrishnan. For respondent No. 2, K. K. Sinha (in both the appeals). Shah,
J., delivered the court's judgment. In July and August of 1954, the East Keshalpur Colliery, also
referred to as "the Colliery," made a reservation at the Kusunda railway station on the Eastern
Railway for the rail transportation of a shipment of steam coal to the Banjari station on the Dehri
Rohtas Light Railway The coal was assigned to the Kuchwar Lime & Stone Company, also
referred to as "the Cornpany," and the company was responsible for covering the freight costs..

Three of the five wagons that had been laden with coal arrived in Banjari and the coal was handed
to the Company; there is no disagreement regarding those three vehicles in these appeals. Six
smaller wagons of the Dehri Rohtas Light Railway, also referred to as "the Railway," were filled
with the cargo of the remaining two wagons, which together weighed sixty tons.

On November 12, 1954, the consignment arrived at Banjari railway station. The consignment
was rejected by the company. Following that, there was correspondence between the Colliery,
the Railway Administration, the Coal Controller, and the Company.

In the end, the coal was sold for Rs. 1,050 on June 2, 1955, after the Railway Administration gave
notice to the Company and the Colliery on April 28, 1955, that they intended to sell the coal of
which delivery had not been taken. The Railway filed an action against the Colliery and the
Company in the Court of the Subordinate Judge, Sasaram, claiming that it was entitled to
demurrage for 202 days during which its wagons were detained at the rate of Rs. 90 per day. The
Railway requested a decree for Rs. 17,625/14, which would cover the demurrage charges and 361
freight payable in respect of the consignment less Rs. 1,050 realized from the sale of the coal.
The Subordinate Judge awarded the Company Rs. 1,620/10 for the litigation, together with
proportionate fees and interest accruing at the rate of 6% annually from December 19, 1957, until
realization.

The Colliery was found not guilty in the lawsuit. The Railway and the Company filed an appeal
with the Patna High Court challenging the order. The Trial Court's ruling was altered by the High
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Court, which also fully decreed the Railway's claim against the Company. In accordance with
the High Court's certificate issued in accordance with Article 1 3 3 (1) (c) of the Constitution, the
Company has filed these two appeals, which have been combined for trial. These appeals are
supported by two arguments.

That since the Railway was the consignee of the goods booked by the Colliery, there was no privity
of contract between the Company and the Railway, and the Railway could not claim freight or
demurrage against the Company; and that in any case, the Railway should only be entitled to
demurrage for 22 days of the entire time the wagons were detained. Coal was a controlled
commodity at the relevant time, and deliveries could only be provided under the Coal Controller's
directives.

The Colliery Control Order, 1945, which was issued in accordance with Defence of India Rules
Rule 81, as well as the Essential Supplies (Temporary Powers) Act, 1946, and the Bihar Coal
Control Order, 1947, regulated the sale and delivery of coal. It was widely accepted that a colliery
could only sell coal with a coal commissioner or deputy's approval. The Divisional Superintendent
of the Eastern Railway received an order from the Deputy Coal Commissioner (Distribution) on
July 13, 1954, approving the East Keshalpur Colliery's supply of 110 tons of steam coal to the
Company.

By that order a priority supply of wagons was also sanctioned in favour of the Company for
transport of coal to the Banjari railway station. It was also recorded in the order that the
quantity of coal mentioned in the order "had been sanctioned on the- account of the Company"
and that sanction for priority supply of wagons had also been accorded, and the Company was
advised to instruct the Colliery to indent for wagons accordingly and to quote the sanction number
given in the order when so indenting. Copies of the order were sent to the Colliery and the
Company. Pursuant to the allotment of coal an order was placed on July 14, 1954 by the Coal
Suppliers Ltd. acting on behalf of the Company, for supply of steam coal to the Com- 362 pany
at Banjari railway station.

The Colliery sent forwarding notes for the shipment of steam coal III-B to the Company in July
and August. Sometime in August 1954, the Company got three wagons of coal. The Company
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complained to the Colliery in writing on August 18, 1954, and September 1, 1954, expressing
dissatisfaction with the quality of the coal that was supplied. The remaining portion of the
consignment arrived in Banjari on November 12, 1954, but the Company refused to accept delivery
and informed the Colliery and the Railway in a letter dated November 23, 1954, that it would not
be responsible for any damages arising from the wagons' stay.
In a letter dated November 30, 1954, the Company asked the Deputy Coal Commissioner
(Distribution) to transfer the Coal Controller to Bihar in order to approve the disposal of coal for
which delivery had not been made. The letter was copied and forwarded to the Company. In a
letter dated January 24, 1955, the Railway informed the Eastern Railway's coal area superintendent
that the Company had declined to accept coal delivery and requested that the Colliery provide
prompt instructions for disposing of the coal. The Railway once more wrote to the Coal Area
Superintendent on February 21, 1955, informing him that the commodities would be auctioned at
auction if they weren't contacted by him two weeks later.

The Railway notified the Company on April 28, 1954, that they had chosen to sell the coal
consignment at public auction in accordance with the Indian Railways Act. They also asserted
their right to demurrage that had accumulated up until that point. The Coal Controller Bihar
recommended the Railway to sell the coal that was left over "in accordance with prevailing railway
rules" at a public auction on May 13, 1955. On June 2, 1955, the Railway went on to sell the coal
consignment.
In accordance with Defence of India Rules §81, the Colliery Control Order, 1945, was issued. It
was further extended under the Essential Supplies (Temporary Powers) Ordinance, 1946, which
was later superseded by the Essential Supplies (Temporary Powers) Act, 1946. No colliery owner
or person acting on their behalf may sell, agree to sell, or offer to sell coal at a price other than the
one set forth in that regard under clause 4 of the Order, according to clause 5. Clause 6(1) stated
that in cases where a colliery owner has written to the Deputy Coal Commissioner (Distribution)
indicating that he is willing to sell directly to consumers and the Deputy Coal Commissioner makes
an allocation to a consumer with his consent for such direct sale, the coal shall be delivered to
the consumer at the price fixed under clause. 4 Clause 8 of the order provides that the Central
Government may from time to time issue such directions as it thinks fit to any colliery owner in
regulating the disposal of his stocks of coal or of the expected output of coal in the colliery during
any period including direc- 363 tions as to the person or class or description of persons to whom
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coal shall or shall not be disposed of, the order of priority to be observed in such disposal, and
the staking of coal on Government account.

The Coal Controller exercised his authority under clause 8 of the Colliery Control Order by issuing
the order. Since counsel has not relied on any specific provision of the Bihar Coal Control Order,
no mention of it is necessary. But, given the conditions under which the Colliery loaded the goods,
it is obvious that the Colliery was functioning as the Company's agent in order to arrange for the
transportation of coal, the property of which had been transferred to the Company by the Coal
Commissioner's orders.

In accordance with the coal supply order approved by the Coal Commissioner and given to the
Company, the Colliery made arrangements to load the coal into the wagons designated for the
Company's coal transportation to Banjari at the Kusunda Railway station. It is evident that the
Colliery provided coal in accordance with the "sanction order" in the Company's favor and made
arrangements for it to be transported to Banjari in wagons that the Deputy Coal Commissioner had
designated for that specific purpose. The Company made the freight due under the forwarding
notes.
Given the circumstances, it would be reasonable to assume that the Colliery entered into the
consignment contract on behalf of the Company, and that the Company was responsible for paying
the freight and demurrage charges in the event that the Company chose not to accept delivery of
the goods. Usually, the consignee, whose convenience the wagon is being held for, is responsible
for paying the demurrage expenses.
"The party primarily liable to pay the demurrage is the party for whose convenience the wagons
are detained." We cannot accept Mr. Gupte's contention on behalf of the Company that the
consignee may only be held liable for demurrage in situations in which he accepts delivery of the
goods. If the wagon is held for the consignee's benefit even though he does not eventually accept
delivery, the Railway will typically be able to hold him accountable for demurrage. Because the
Colliery had signed a consignment agreement with the Railway, we are unable to rule that the
Company was not responsible for paying freight or demurrage charges. However, we believe that
the High Court erred when it determined that the Company was responsible for paying demurrage
for the entire 364 202 day period. On November 12, 1954, the six wagons carrying sixty tons of
coal arrived at the Banjari railway station.
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The Company had refused to accept delivery of the coal both before and after that date. After
giving the owner notice, the Railway was clearly authorized by Section 56 of the Railways Act to
sell the coal consignment. However, the Railway was in the position of a bailee under the
corporation and was obligated to minimize the damage after the reasonable period that may be
required for taking delivery had passed; it could not arbitrarily delay the wagons and demand
demurrage. Even accepting that the Railway could not have sold coal in light of the Colliery
Control Orders without the Coal Commissioner's approval (we do not have an opinion on that
matter), the Railway may have unloaded the coal from the wagons and placed the wagons in the
use.

Upon unloading the wagons, the consignee's liability may be limited to wharfage. R. 108 addresses
the handling and disposal of unclaimed items under Part 1 of the Coaching Tariff. According to
clause (2) of r. 108, if unclaimed booked items are not removed from railway premises within 48
hours of midnight on the day of arrival, a wharfage of two annas per maund or part of a maund for
24 hours or part of 24 hours with a minimum charge for one maund is assessed. Clause (8)
stipulates that:

"Public sales by auction will be held from time to time of all unclaimed or lost property
which has remained in the possession of the railway for the period mentioned below :-

(i) Unclaimed or lost property other than foodgrains which has remained in the
possession of the railway for over three months;
(ii) Unclaimed foodgrains which have remained in the possession of the railway for two
months. At least 5 days previous notice of each auction will be given by advertisement
in a newspaper." Clause 20 in Part 11 of the Goods Tariff provides On all goods
brought on to a railway station and waiting for dispatch without any forwarding note
tendered for the same and all goods not removed from a railway station although the
same is available for delivery a wharf age charge is made on the Dehri Rohtas
Light Railway at the following rate .

It appears that the Railway filed a demurrage claim for the 202-day detention of the wagons on the
grounds that the coal was not removed from the wagons until it was sold at public auction.
Nonetheless, the Railway had an obligation to reduce the loss as much as possible by 365
offloading the coal as soon as a fair amount of time had passed since the consignment arrived and
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by acting quickly to sell the coal. The Railway was required to sell the products at a public auction
as soon as possible since the Company had informed that it would not accept delivery of the goods.
The coal had a maximum worth of Rs. 500, and the freight that needed to be paid was also roughly
Rs. 500. When offered for sale in the month of June 1955 the coal fetched Rs. 1050. In failing
to take any action for a period of more than six months, in our judgment, the Railway did not act
reasonably.

In view of all the circumstances, we believe that the Railway is entitled to demurrage for the
vehicles' one-month stay. Based on that, the Railway is entitled to demurrage of Rs. 2700 and
freight of Rs. 495/14, which is due by the Company, less the Rs. 1050 obtained from the sale of
coal. Consequently, the Railway is entitled to a decree for Rs. 2,145/14. As a result, we alter the
High Court's ruling and grant the Railway's claim for Rs. 2,145/14, with reasonable expenses all
along the line. The Railway shall cover the Company's fees in proportion to the sum for which its
appeal has been rejected by each of the three courts. What the Trial Court decided in favour of
the Colliery directing the Railway to pay. the costs is maintained. There will be one hearing
fee in this Court. There will be no order as to costs of the Colliery in this Court. R.K.P.S.
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DECISION OF THE COURT

When the Colliery entered into the consignment arrangement, it did so on behalf of the Company.
Consequently, the Colliery provided the coal in accordance with the sanction order that the Deputy
Coal Commissioner suggested, which allowed the coal to be transported to Banjari Station in
designated wagons by the appellant-Company.

As a result, by declining to accept the delivery, the Company was liable for the freight and
demurrage costs. The company was wrongly held accountable by the High Court to pay the freight
and demurrage for a period of 202 days, the court said.

The court also decided that the Railway administration might have used its authority under Section
56 of the Railway Act as the Company had refused the delivery. The management of the Railway
was obligated to reduce the loss. It held the title of Bailee qua for the business. The Railway
administration ought to have cleared the coal from the wagons and put them to service once a
sufficient amount of time had passed for the delivery of goods. Therefore, the company's liability
was limited to the wharf age. Given that it did not take action for over half a year, the railway did
not behave fairly. Consequently, the wagons' one-month detention gives the Railway the right to
demurrage as granted to the railway.
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BIBLIOGRAPHY
 http://indiancaselaws.wordpress.com
 www.chddistrictcourts.gov.in
 http://www.indianlawcases.com/