# UNION dF INDIA v. STEEL STOCK HOLDERS' SYNDICATE, POONA March 1. 1976

- **Citation:** [1976] 3 S.C.R. 504
- **Court:** Supreme Court of India
- **Decided:** 1976
- **Case number:** Civil Appeal No. !237 of 1968
- **Bench:** P. K. GoswAMI, s. MuRTAZA FAZAL Au
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-df-india-v-steel-stock-holders-syndicate-poona-march-1-1976-6768
- **Pages:** 14

## Headnote

I
Railways Act, 1890 (as amended in 1961)-Ss. 72, 73, 76, 78(d)-Scope
of-Delay in deliverv of Roods-Loss of inter:.est on capital-If, could be measure
of damaRes-If Railways Act overrides Contract Act.
A consignment of iron 12;oods was booked by the respondent by rail on
December 15. 1961. The due date of delivery under the contract or usage
of the railways was December 25. 1961. As the goods were diverted, they
were actually delivered on July 21, 1962. The respondent filed a suit for
damages alleging negligence on the pait of the railway in that, by reason of
diverting the consignment. there was inordinate delay in its delivery which
resulted in loss to it by way of interest on capital. The trial court decreed
the suit but in the matter of damages by way of loss of interest it gave 6%
per annum instead of 12 % claimed by the respondent. The District Court
dismissed the appellant's appeal, and the High Court dismissed the second appeal
in limine.
On appeal to this Court it was coq.tended for the appellant that (i) since
the cause of action was based on del~yed delivery, the case was covered bv
the Railway Act, as amended in 196l, that the applicable section is s. 76
and that. since the conditions mentiorj.ed therein had not been fulfilled.
th~
respondent was not entitled to a decree: {ii) that the respondent could claim
for loss of profit or loss of m~rket as the same was expressly barred by
s. 78(<l) oi the new Act; and {iii)
that the respondent's claim for damages
was not actionable in the absence of any agreement providing interest on
capital as a measure of damages. It was contended for the respondent that
even if s. 76 barred the remedy,
IO$S of profit or market resulting from
delayed delivery \\.'ould amount to "deterioration" contemplated by s. 76.
Dlc;missing the appeal to this Court,'
HEW : In view of the finding of fact arrived at by the courts
below,
the respondent is entitled to damages. f515 Bl
1. (a) The case is covered by the new Act and not by the old Act as contended by the respondent. There could be no question of liability arising when
the goods were booked and the contract was entered into between the resp<'ndent and the railways. because, there was no presumption that the contract would
result in breach.
[512B-C]
·
In the instant case, the cause of action arose when the consignment was
delivered to the respondent on July 21. 1962, that is, after the neW Act came
into force.
The reasonable transit period having expired on January 1. 1962
the breach occurred after the new Act came into force.
(b) Section 76 of the Act has a very limited scope : it contemplates clearly
those cases which fall within the contingencies contemplated bv it.
These
contingencies refer to certain physical factors. viz : actual and ohysical loss.
destruction, damage or deterioration of goods. Where due to dt>lav on the
part of the railway there is physical d¢terioration or diminishing of the value
of the goods. the plaintiff cannot claim damages by way of loss of profits or
loc;s of market plus damages sustaint>d by the actual loc;s or de"tPrioration of
the goods.
In such a case the plaintiff can claim only the actual loss in the
value of the good<I c::iuc;ed by destruction, damage or deterioration and not
loss of profit.
f512F-H]
( c) The word .. deterioration" is ui:.ed in its ordinarv parlance, so as to
include within its ambit the actual phrsicaT act of deterioration. namely, the
change for the worse in the thing itself., [514E-F]
\
i
\
UNION V. STEEL STOCK SYNDICATE
505
B./. Railway Co. Ltd. v. Piana Mal Guiab Singh A.I.R. 1925 Lah. 255,
A
approved.
1
G./.P. Railway Co. & Others v. luRal Kishore
Mukat
Loi A.l.R. 1930
•
All. 132 and Union of India and others v.
Messrs. Sheobux Satya11arayan,
A.J.R. 1963 Orissa 68, not approved.
(d) The words "loss, destruction, damage or deterioration" occurring in
s. 76 must be read ejusdem generis to indicate the actual and physical loss or
change in the JZ:Oods contemplated by that section. In

## Text

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504
UNION dF INDIA
v.
STEEL STOCK HOLDERS' SYNDICATE, POONA
March 1. 1976
[P. K. GoswAMI AND s. MuRTAZA FAZAL Au, JJ.J
I
Railways Act, 1890 (as amended in 1961)-Ss. 72, 73, 76, 78(d)-Scope
of-Delay in deliverv of Roods-Loss of inter:.est on capital-If, could be measure
of damaRes-If Railways Act overrides Contract Act.
A consignment of iron 12;oods was booked by the respondent by rail on
December 15. 1961. The due date of delivery under the contract or usage
of the railways was December 25. 1961. As the goods were diverted, they
were actually delivered on July 21, 1962. The respondent filed a suit for
damages alleging negligence on the pait of the railway in that, by reason of
diverting the consignment. there was inordinate delay in its delivery which
resulted in loss to it by way of interest on capital. The trial court decreed
the suit but in the matter of damages by way of loss of interest it gave 6%
per annum instead of 12 % claimed by the respondent. The District Court
dismissed the appellant's appeal, and the High Court dismissed the second appeal
in limine.
On appeal to this Court it was coq.tended for the appellant that (i) since
the cause of action was based on del~yed delivery, the case was covered bv
the Railway Act, as amended in 196l, that the applicable section is s. 76
and that. since the conditions mentiorj.ed therein had not been fulfilled.
th~
respondent was not entitled to a decree: {ii) that the respondent could claim
for loss of profit or loss of m~rket as the same was expressly barred by
s. 78(<l) oi the new Act; and {iii)
that the respondent's claim for damages
was not actionable in the absence of any agreement providing interest on
capital as a measure of damages. It was contended for the respondent that
even if s. 76 barred the remedy,
IO$S of profit or market resulting from
delayed delivery \\.'ould amount to "deterioration" contemplated by s. 76.
Dlc;missing the appeal to this Court,'
HEW : In view of the finding of fact arrived at by the courts
below,
the respondent is entitled to damages. f515 Bl
1. (a) The case is covered by the new Act and not by the old Act as contended by the respondent. There could be no question of liability arising when
the goods were booked and the contract was entered into between the resp<'ndent and the railways. because, there was no presumption that the contract would
result in breach.
[512B-C]
·
In the instant case, the cause of action arose when the consignment was
delivered to the respondent on July 21. 1962, that is, after the neW Act came
into force.
The reasonable transit period having expired on January 1. 1962
the breach occurred after the new Act came into force.
(b) Section 76 of the Act has a very limited scope : it contemplates clearly
those cases which fall within the contingencies contemplated bv it.
These
contingencies refer to certain physical factors. viz : actual and ohysical loss.
destruction, damage or deterioration of goods. Where due to dt>lav on the
part of the railway there is physical d¢terioration or diminishing of the value
of the goods. the plaintiff cannot claim damages by way of loss of profits or
loc;s of market plus damages sustaint>d by the actual loc;s or de"tPrioration of
the goods.
In such a case the plaintiff can claim only the actual loss in the
value of the good<I c::iuc;ed by destruction, damage or deterioration and not
loss of profit.
f512F-H]
( c) The word .. deterioration" is ui:.ed in its ordinarv parlance, so as to
include within its ambit the actual phrsicaT act of deterioration. namely, the
change for the worse in the thing itself., [514E-F]
\
i
\
UNION V. STEEL STOCK SYNDICATE
505
B./. Railway Co. Ltd. v. Piana Mal Guiab Singh A.I.R. 1925 Lah. 255,
A
approved.
1
G./.P. Railway Co. & Others v. luRal Kishore
Mukat
Loi A.l.R. 1930
•
All. 132 and Union of India and others v.
Messrs. Sheobux Satya11arayan,
A.J.R. 1963 Orissa 68, not approved.
(d) The words "loss, destruction, damage or deterioration" occurring in
s. 76 must be read ejusdem generis to indicate the actual and physical loss or
change in the JZ:Oods contemplated by that section. In the instant case, since
there was no physical deterioration of the goods at all which were delivered
in the same condition in which they were booked. the case of the respondent
tloes not fall within the four corners of the section. Nor can the respondent
take advantage of s. 76 relying on the word "deterioration" because of the
finding of negligence entered by the courts below.
[514G]
H s. 76 does not apply then s. 78 would have no application because that
B
section starts with a non-obstante clause. [513E-F]
C
(2) Section 78(d). which flows out of s. 76, provides that the railway
administration shall nOt be responsible for any indirect or consequential damages
or for loss of particular market. 1t merely incorporates·the measure of damages
ao contemplated by s. 73. [513B]
In the instant case as the respondent had not claimed loss of n1arket or
remote damages the question of application of s. 78(d) did not aric:e.
3(a) The case of the respondent is clearly taken out_of the ambit of ss. 76
D
and 78.
Hence its suit for damages could not be defeated on the ground that
it was barred by s. 76 or s. 78 of the Act. [515A-B]
(b) It is difficult to accept the contention of the appellant th:it, by virtue
of ss. 72 and 73. any contract entered into between the parties and the liability
of the railway was governed purely by the provisions of the Railway Act and
not by the terms of the contract between the parties. [5JOG]
The Indian Contract Act provides certain elementary conditions for a binding
i;ontract but does not provide any particular form of contract. The fact that
where the Government is a party to a contract, the particular form in which
the contract is to be executed has been provided for by the Constitution, did
not mean that the provisions of the Contract Act stand superseded by the
Constitution or in this case by the Railway Act. Section 72 does nothing
more than provide for a particular form in which the contract is to be executed
and it enioins that such a form will be prescribed by the railway administration
and approved by the Central Government. [510H-511-A]
(c) Section 73 lays down that the Railway administration shall be respoJ;I~
sible for the loss, destruction, damage, deterioration or non-delivery except in
certain cases Which amount to vis ma;or in which case also the Act places
responsibility on the railways if it did not prove that it had used reasonable
foresight Rnd care in the carriage of goods. The section, while converting the
liability of the railway administration from that of a carrier to that of an
insurer, has imposed heavier responsibility on the railway administration.
[511F-G]
4(a) There is no auestion of s. 73 of the Contract Act over-riding the
provisions of the Interest Act because in the instant case the Interest Act has no
application at all inasmuch as no interest is ,clai_med by the plaintiff; but interest
has been used as a measure to determine the compensation which the respondent
could seek against the appellant for its negligence in causing inordinate delay
in the deliverv of the
~oods. The respandent had only claimed nominal
dama~es for the loss because of the amount of money locked up for more
than six months due to late delivery. [5 l 7B]
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(b) The courts below rightly found that the railway, was guilty of gross
H
:ae~htence. As a common carrier the railway is resPonsible for breach of
contract. There was absolutely no reason for the railway t" ";"ert the consign.
men! to a place which did not fall on the route at all. [5170]
506
SUPREME COUR;T REPORTS
(1976] 3 S.C.R.
A
( c) The trial court was fully entitlecl to scale down the amount of jnte\est
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from 12% to 6%. [517Fl
Union of India
v.
Watkins Mayore & Company A.LR. 1966 S.C. 275
distinguished.
\
Digbijai Nath v. Tirbeni Nath Tewari A.I.R. 1946 All. 12 and The Official
Receiver, Calcutta High Court & Anr. v. Baneshwar Prasad Singh & Anr. A.LR.
1962 Pat. 155 approved.
5. The present appeal was concluded by findings <>f fact.
But onJhe proved
facts some clear questions of law arose! for decision and, therefore, this was
not a case in which the High Court should have dismissed the appeal in /imine.
[507Fl
CIVIL APPELLATE JURISDICTION: Civil Appeal No. !237 of 1968.
From the Judgment and Order dated the 24th August, 1967 of
the High Court of Judicature at Bombay in Second Appeal No. 798 of
1967.
Lal Narain Sinha, Solicitor Gen¢ral for India, S. N. Prasad, and
Girish Chander, (Not present), for the appellant.
M. N. Phadke, P. C. Bhartari, J. B. Dadachanji, 0. C. :Wathur and
Ravinder Narain, (Not Present), for the respondent.
The Judgment of the Court was delivered by
FAZAL ALI, J .-This is a defendant's appeal by special leave against
the judgment and decree of the High Court of Bombay dismissing its
second appeal in limine by its order I dated August 24, 1967.
Tue appeal raises important and lnteresting 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
furn 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 defendenf 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 notice of claim
and of suit dated May 9, 1962 oh the Railway Administration. Soon
after the service of the notice the consignment was delivered on July
21, 1962.
According to the plaintiif 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.
Tue plaintiff, however, calculated the damages by way of interest at the rate of 12% per annum
on the Jocked 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 g?ocls direct from Bhillai to Poona
•
UNION v. STEEL STOCK SYNDICATE (Fazal Ali,!.) -
507
diverted them to Aurangabad where the consignment had to be loaded
A
in a meter-gauge tram and then t0 a broad-gauge lmo and it was _only
after tile
acrendant
received
the
nonce from
the plamtitl
that it expedi.ed the delivery of the goods. The derendant Ra1hvuys
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
"
<lays. lt 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 deB
'
fondant further alleged that the plaintiff was not en.titled to claim interest
•
as damages. The Trial Court accepted the plaintiff's case in toto and
found-
(1) that 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, alc
though 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 devialion in carrying the goods.
The Trial Court, however, found that the figure of Rs. 27,332-44 the
D
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 caiculating 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 the plaintiff.
The defendant then filed an appeal before the District Judge,, Poona
E
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.
F
In support of the appeal the learned Solicitor-General submitted
thre~ points before us :
( 1) that as the cause of action of the plaintiff is based on
the delayed delivery which arose at the most on January 1,
1962, the c~se of the plaintiff is covered by the provisions of
.G
the new Railways Act as amended by Act 39 of 1961, which
is an exhaustive Code in itself providing a self-contained
machinery in order to dete~mine .the Jiability of the Railways
;.
and as the cond1t10ns menl!oned m s. 76 of the Railways Act
have not been fulfilled the plaintiff is not entitled to any
decree;
•
( 2) that at any rate since the plaintiff has claimed interest
H
as damages, in the absence of any agreement providing for
such an interest, the plaintiff's claim is not actionable at law;
and
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508
SUPREME COURT REPORTS
[1976] 3 S.C.R.
(3) that the plaintiff cou!d
1 not claim for loss of profit or
loss of market as the same is expressly barred by s. 78( d) of
the new Railways Act.
As an alternative argument it was ! also pleaded that the plaintiff has;
not averred in his plainu that t!te~e was any rise in the prices ~ecause
the goods belonging to the plamtiff were a controlled commodity an~
could not be sold without a permit. Before claiming loss of profits 1t
was the bounden duty of the plaintift to allege that he had been granted
the permit to sell the goods.
Mr. Phadke appearing for the respondent has repelled the contentions e>f the appellant on the ground that the new Railways Act does
not reduce or diminish the liability !of the railway administration for
breach of contract but in fact the Act seeks to increase the liability.
Secondly it was submitted that even if the case of the plaintiff does not
fall within the four corners of s. 76 of the new Railways Act, the common law right of the plaintiff to claim damages against the appellant
has not been barred by the Act. Lastly it was submitted that the plaintiff ha; not claimed interest on any specified amount of money but has
merely calculated the same as a measure of damages which it suffered
due to the breach of contract and gross negligence on the part of the
Railways which has been found by the Courts below. Finally it was
contended that as the contract was entered into between the parties on
Decembe1' 15, 1961, when the goods were booked at Bhillai, the liability for damages arose on that day and the case of the plaintiff would
be covered by the provisions of the Railways Act before it was amended by Act 39 of 1961.
In order to answer the contentions raised by the parties it may be
necessary for us to trace briefly the history of the circumstances in
which the Railways Act of 1890 was amended by Act 39 of 1961. We
would, for short, refer to the Railways Act of 1890 as the "old Act"
and the Act as amended by Act 39 of 1961 as the "new Act". It would
appear that under s. 72 of the old Act the responsibjlity of railway administration as a carrier of animals and goods was clearly that of a
bailee under ss. 151, 152 and 161 of the Indian Contract Act. Jn other
words, the railway administration was impressed with the duty to carry
the goods with the same care and caution which a prudent owner would
apply in the case of his own goods. If there was any viola•ion or breach
of the said care and caution expected of the Railway it would have been
liable to damages. Section 72 (1) of the old Act ran thus :
" ( 1) The responsibility of a railway administration for the
loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway shall, suhiect
to the other provisions of this Act, be that of a bailee unner
sections 151, 152 and 161 of the Indian Contract Act, 1872
(9 of 1872)."
It may be pertinent to note that su!Hection (3) of s. 72 of the old Act
expressly excluded the principles of the common law of En~land or in
the Carriers Act of 1865 regarding the responsibility of common carriers. After onr country became free and the Railways entered the commercial field as one of the important wings of the Government, there
"
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)
UNION v. STEEL STOCK SYNDICATE (Fazal Ali, !.)
509
appears to be a public dernan~ for making the Railway ~d~i~istration
A
as a public body to take upon itself more onerous responst?!hues where
the nghts of the free citizens were mvolved. Under the Bnttsh GovernI
rncnt most of the Railways were owned by private companies whoso
ownership was to be extinguished after lapse of a particular period. Soon
after the freedom all the Railways were taken over by the Central Gov1
ernrnent and run by it. In view of the new problems facing the GovernB
rnent and the public demand for a change in the Jaw, the Government
appears to have decided to convert the responsibility of the railway
•
from that of a carrier to that of an insurer. But before doing this, the
Government appointed a Committee called the Railway Freight Struclure Enquiry Committee (1956-57) which recommended that the responsibility of the Railways in India should be changed to that of a cornman earner instead of a bailee. The Committee which had been asked
to cx[1 mine the statutory provisions dealing with the responsibility of
railways as common carriers was of the opinion that the public would
c
derive much satisfaction from a radical change from bailee's responsi-
'f
bility to that of a common carrier, and that this change was bound to
tone up the administrative machinery of the railways in respect of effec-
••
tive prevention of transit losses. In view of the recommendations of the
ili
said Committee the Government introduced a bill in the ·Lok Sabha for
amending some of the provisions of the Railway Act in order to irnplcD
ment those recommendations.
From a perusal of the debates of the
Lok Sabha when this Bill was introduced it would appear that the Deputy
Minister of Railways explaining the objectives of the Bill observed as
follows :
"Taking into account all aspe<:ts of the problem, it is proposed that railways should assume the responsibility of a cornE
rnon carrier instead of that of a bailee. As bailees, the railt-
ways are required to take as much care of the goods entrusted
to them for carriage as a man of ordinary prudence would
under similar circumstances, take of his own goods of the sarn~
bulk, quality and value.
However, closely following
the legal position in the
F
United Kingdom, it is proposed that the basic responsibility of
our railways for loss, destruction or deterioration etc. of anirnals or goods be as set out in the proposed section 73.
W.hen the railways assume this responsibility, broadly
speakmg, they will be liable for loss of or injury to aoods while
in transit by rail, arising from any cause whatso.;'ver, unless
G
such loss or injury is proved by the railways to have been
caused by an act of God, or by an act of war, or by an act of
l'
p_ubli~ enemies or is proved to be consequence of inherent
;
vice m the thing carried or is attributable to the consignor's
own fault.
Even where the loss is proved by the railways to have been
•
caused by the excepted perils, just referred to by me, the railH
ways will not be absolved of their responsibility unless they
further prove that they had nsed reasonable forethought and
I
care in the carriage of animals or goods.
-
18-L522SCl/76
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510
SUPREME COURT REPORTS
[1976) 3 S.C.R.
The result of the changes proposed will be that the railways will be paying claims for compensation in many cases
where they are not paid at present, for example, in cases of
losses due to running train thefts, damage by wet in transit in
spite of bailee's care having been taken etc."
This was the clear background against which the new Act was passed.
Even the statement of objects and reasons, the relevant parts of which
may be extracted as under,, shows the main object of the new Act :
"The Railway Freight Structure Enquiry Committee
( 1956-57) has recommended that the responsibility of the
railways in India as carriers of animals and goods, which is at
present that of a bailee, should be changed to that of a common carrier. There is also a public demand for such a
change. After a careful and detailed examination of the question, the Government have decided to accept the Committee's
recommendation.
x
x
x
x
(a) The Bill seeks to make it clear that in the case of
through booking of consignments over an Indian Railway and
a Foreign Railway, the responsibility of the Indian Railway
as a common carrier would extend only over that portion of
the carriage which is over the Indian Railway;
x
x
x
x
( c) Other amendments included in the Bill are intended
to rectify certain defects or ambiguities in the existing prcwisions of the Act which were revealed by experience in its
working.·•
It appears that the old s. 72 was completely deleted including sub-s. ( 3)
which expressly prohibited the principks of the common law of England
for determining the liability of the Railways as common carriers. In·
stead the new s. 72 laid down the form in which a contract was to be
executed between a consignor and the Railway and a risk note was pro·
vided for by clause (b). It may be necessary to note an argument put
forward by the learned Solicitor-General on this point. It was submitted that by virtue of the provisions of ss. 72 and 73 of the new Act
the statut·o superseded any contract entered into between the parties and
the liability of the Railways was governed purely under the provisions of
the Railways Act and not under the tcrn1s of contract which may have
been entered into between the consignor and the Railway.
\V~ are,
however, unable to accept this argument. It is well settled that while
the Jndian 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 Governn1ent enters into a contract with a person or vice versa
a particular form in which the contract is to be executed has been proviH
ded for even by the Constitution and the contract has to be in that form.
I
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UNION v. STEEL STOCK SYNDICATE (Fazal Ali, I.)
511
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 fotm 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 administraction and approved by the Central Government. The provisions of
s. 72 of the new Act run thus :
"72. ·Any person delivering to a railway administration
any animals or goods to be carried by railway shall-
( a) if the animals or goods are to be carried by a train intended solely for the carriage of goods, or
(b) if the goods are to be carried by any other train and
consist of articles of any of the following categories,
namely:-
( i) articles carried at owner's risk rates.
(iil articles ol a perishable nature.
A
B
c
(iii) articles mentioned in the Second Schedule.
D
(iv) articles in a defective condition or defectively
packed.
(v) explosives and other dangerous goods.
execute a note (in this Act referred to as
the forwarding
note) in such form as may be prescribed by the railway administration and approved by the Central Government, in
which the sender or his agent shall give such particulars in
respect of the animals or goods so
delivered as
may be
required".
It is not possible from the provisions of s. 72 to spell out th~ principle that the new Act completely supersedes the provisions of the
Contract Act both in respect of the conditions and the
liability.
Section 73 of the new Act lays down that the railway administration
shall be responsible for the loss, destruction, damage, deterioration
or non-delivery except in certain cases which amount to vis major.
But there also the proviso confers responsibility on the Railways for
loss etc., if the railway administration does not prove that it has used
reasonable foresight and care in the carriage of the goods.
The Solicitor-General contended that s. 76 of the new Act is the
provision which deals with delay in the delivery and the plaintiff
can succeed only if his case falls within the four corners of
the
section.
Be~ore answering this question, it may be necessary to dispose of a pomt on which the counsel for the parties have joined issue.
According to the Solicitor-Gene.ral the liability of the Railway would
be governed by the new Act masmuch as the cause of action has
arisen after coming into force of the new Act.
Counsel for the
respondent, however, submits that the matter will be governed by
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the old Act because the liability of the Railway. a_rose when ~he. gaod~
were booked in December 1961.
In our opm1on, there 1s a very
short answer to this question. The plaintiff has clearly and categorically pleaded in paragraph-2 of the plaint that the cause of act10n
arose at Poona when the complete consignment was delivered to the
plaintiff on July 21, 1962 i.e. after the new Act had already come
into force.
Further more, it is also allegea that the reasonable and
normal transit period expired on January 1, 1962. In these circumstances, therefore, according to the plaintiff itself, the breach occurred
only after the new Act had come into force-whether it was January
I, 1962 or thereafter.
There can be no question of the liabilify
arising when the goods were booked and the contract was entered
into between the plaintiff and the Railway, because ther~ is no presumption that the contract would result in breach. The plaintiff would
be entitled to damages only when there 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 new Act. Section 76 runs thus :
"76. A railway administration shall be responsible for
loss, destruction, damage or deterioration of
animals or
goods proved by the owner to have been caused by delay
or detention in their carriage unless the railway administration proves that the delay or detention arose without negligence or misconduct on the part of the railway administration or of any of its servants."
It is submitted that although there was delay in the delivery of the
goods on the part of the railway administration, but the railway administration would be responsible only if !he plaintiff further proves
that there has beeu loss, destruction, damage or deterioration of the
goods by virtue of the delay.
It is true that the plaintiff has. not
alleged that there was any physical loss, destruction, damage or dete.rioration of the goods, but that, in our opinion, does not put the plaintiff out of court.
Section 76 appears to have a wry limited scope :
it contemplates clearly those cases which fall within the contingencies
contemplated by s. 76. These contingencies refer to certain physical
factors, viz., actual and physical loss, destruction, damage or deterioration of goods. For instance, where the goods worth Rs. 10,000/-
due to delayed delivery have sustained deterioration as a result of
which their value has gone down to Rs. 5,000/- then once this fact
is proved the railway administration shall be liable for such a loss
or the value of such deterioration. We are of the opinion that s. 73
of the new Act, while converting the liability of the railway administration from that of a carrier to that of an insurer, has
imposed
heavier responsibility on the railway administration.
The history and the object with which the radical provisions of
the new Act were introduced bear testimony to change of the nature
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UNION v. STEEL STOCK SYNDICATE (Fazal Ali,!.)
513
<lf the ·liability of the railway administration. But in order to avoid
the payment of double damages, ss. 76 and 78 have been inserted.
'
In other words, where due to delay on the part of the Railway there
is physical deterioration or diminishing of the value of tiie goods,
the plaintiff cannot claim damages by way of loss of profits or loss
of market pfos damages sustained by the actual loss or deterioration
of the goods.
In such a case the plaintiff can claim only the actual
Joss in the value of the goods .caused by destruction, damage or deterioration and not)oss of profit. Section 78(d) which flows out of s. 76
clearly provides that the rai·lway administration shall not be. respon-
•
sible for any indirect or consequential damages or for loss of particular market.
The Solicitor-General, therefore, rightly
contended
that in cases falling squarely within the four corners of s. 7 6 of the
new Act, s. 78(d) will apply.
In facts. 78(d) merely incorporates
the measure of damages as contemplated by s. 73 itself. It is well
settled that the liability of an ordinary carrier even in the English
'f common law does not extend to a damage which is indirect or remote.
Loss of profit or loss of a particular market has been held
by a number of decisions to be a remote damage and can be awarded
only if it is proved that the party which is guilty o! committing the
breach was aware or had knowledge that such a loss would be caused.
Section 78 ( d), however, seeks to bar the remedy of this kind of
damage.
In the instant case, however, as the plaintiff itself has not
claimed .Joss of market or remote damages, the question of application
of s. 78(d) does not arise. Moreover, in the instant case, it is conceded that there was no physical deterioration of the goods at all
which were delivered to the consignee at Poona in the same condition
as they were booked from Bhillai by the plaintiff.
In these circumstances, the case of the plaintiff does not fall within the four corners
of s. 76, nor does it fulfil any of the categories mentioned therein.
If s. 76 does not apply to the facts of the present case, then s. 78
V.·'ill also have no application,, because s. 78 starts with a non obstru1te
olause "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 th_e liability of the Railway has been
increased so as to take upon itself the responsibility of a common
carrier.
I
Counsel for the respondent submitted that even if s. 76 barred the
remedy of the plaintiff, the fact that due to delay in delivery there
was loss of profil or loss of market would amount to "deterioration
as ~ontemplated by s. 76 of the new Act. In support of this content10n, the learned counsel relied on a decision of the Allahabad
High Court in G.l.P. Railway Co. & others v. Jugul Kishore Mukai
Lal(l) where Sulaiman, Ag. CJ., as he then was, observed as follows:
•
"Tt is clear to us that the meaning of the word "deterioration" in s. 161 which imposes the liability on the rililway
company must be the same as in risk-note form B which lays
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down the special conditions under ~hich. the . rai!;-vay co.mpany is protected.
In both these detenorallon
resultmg
from a delay in tendering the good is contemplated: x x. x
We therefore accept the view expressed by Mukeri1, J., in
the unreported case and hold that the word "deterioration"
is wide enough to include depreciation in value on account
of a fall in the price of the goods."
The same view appears to have been taken by the Orisa High Court
in Unioh of India and orthers v. Messrs. Sheobux Satyanarayan (')
where Misra, J., as he then was, observed as follows :
"Though there was some difference of opinion as to the
import of the word
"deterioration" used in section 72
of the Indian Railways Act and in section 161 of the Indian
Contract Act, the position is now well settled that it is wid0
enough to include depreciation in value on account of a
fall in the price of the goods."
As against this a Division Bench of the Lahore High Court in
R. I. Railway Co. Ltd. v. Diana Ma! Guiab Singh(2)
observed as
follows :
"The 'deterioration' of a thing, whether it be in quality
or in value, implies in ordinary parlance a change for the
worse in the thing itself.
If a thing is worth less than it was
before only because the market rate has gone down it would
be correct to say that it has depreciated in value, but not
that it has deteriorated."
Having regard to the background and the setting in which the word
"deterioration" occurs in s. 76 of the new Act it seems to us that
the parliament intended that the word should be used in the ordinary
parlance and in a restricted sense so as to inculde--within its ambit
the actual physic&) act of deterioration, i.e. the physical P.art of it,
namely, the change for the worse in the thing itself as very aptly
F
put by Martineau, J., in the Lahore High Court judgment referred
to above.
We must seek to draw a clear distinction between a physical deterioration of a thing and depreciation in its value according
to market price.
These are two separate concepts having separate
ingredients. The words used in s. 76 of the new Act, namely, "loss,
destruction, damage or deterioration" must be read as ejusdem generis
so as to indicate the actual and physical loss or change in the goods
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contemplated by s. 76. In these 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 Labore 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 refererd to the physical
and actual deterioraH
tion of the goods which has admittedly not taken place in the present
case.
The plaintiff cannot take advantage of s. 76 relying on the
(I) A.LR. 1963 Orissa 60.
(2) A.LR. '1925· Lah. 255.
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UNION v. STEEL STOCK SYNDICATE (Fazal Ali, J.)
515
word "deterioration" because of the finding of neglience 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 view 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 SolicitorGeneral, namely, that the plaintiff is not entitled to interest as .da~ages
for breach of the contract. It was submitted that what the plamttff 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 Ba~k
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 bdore 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 of contract.
The Solicitor-General relied on a decision of
this Court in Union of India v. Watkins Mayore & Company (')
where this Court observed as follows :
"Under the Interest Act, 1839, the Court may allow
interest of the plaintiff if the amount claimed is a sum certain
which is payable at a certain time by virtue of a written
instrument. But it is conceded that the amount claimed in
this case is not a sum certain but compensation for unliquidated amount. On hehalf of the respondent it was submitted
by Mr. Aggarwala that interest may be awarded under the
foterest Act which contains a provision that "interest shall
be payable in all cases in which it is now payable by law''.
But this provision only applies to cases in which the Court
of Equity exercises jurisdiction to allow interest.
In the above case the plaintiff had brought a suit for damages claiming
a particular quantified amount of Rs. 1,07,700/- as compensation for
storage of over 600 tons of iron sheets for a particular period.
This
quantified amount included a sum of Rs. 2,974/2/- as interest on the
various sums claimed by the
plaintiff
as
compensation,
namely,
godown rent, chowkidar's salary, cartage from
Railway station to
godown etc.
The High Court, however, granted a decree only for
R,. 27 "o?.5./"o /- including the amount of ir"erest daimed by the plaintiff.
Thus this Court in that case was dealing with interest claimed by
the plaintiff not as a yardstick for assessing damages but as pure and
simple interest on the quant;fied amount of comoensation or damages
claimed bv the plaintiff.
This Court held that the interest to
the
extent of Rs. 2,974/2/- as claimed by the plaintiff could not be
allowed in the ahsence of there be;ng anv contract iustifving the charging of such interest. This Court was not at all concerned with a case
like the present one where the plaintiff has merely claimed damages
pure and simple and in order to assess the same had applied the
(I) A.LR. 1966 S.C. 275.
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yardstick of charging interest at a particular rate on the locked up
capital. for a period of more than six months. In these circumstances,
therefore the ratio of the aforesaid decision in
Watkins Mayore &
Company (suprn) is not applicable to the facts of the present case,
Similarly in Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji( 1 )
which was relied upon by this Court in Watkins Mayore & Company
(supra) the amount claimed by the plaintiff was a specified amount
on the basis of which interest was charged which had the effect of
increasing the damages sought for.
That was a case of a contractor
who had brought a suit for recovery of the amount due from
the
Government Department and had added interest to the total claim
made by the plaintiff..