# Union of India v. M/s Indian Oil Corporation Ltd

- **Citation:** 2024 INSC 243
- **Court:** Supreme Court of India
- **Decided:** 2024-03-21
- **Case number:** Civil Appeal Nos. 1891-1966 of 2024
- **Bench:** J.B. Pardiwala, Sandeep Mehta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-m-s-indian-oil-corporation-ltd-37687
- **Pages:** 90

## Headnote

It is the case of the respondent company herein that at the time
of booking the consignments, from Baad to Hisar via Palwal,
the notified chargeable distance for calculating freight as per the
Local Distance Table was 444 km, and accordingly the respondent
company paid the same from time to time. However, subsequently,
the appellant railways vide its letter dated 05.07.2005 changed
the chargeable distance to 334 km in the revised Local Distance
Table and the said revised table was to apply prospectively. The
respondent's case is that the very chargeable distance of 444
km as per the old local distance table was wrong and demanded
refund of the difference of 110 km in the freight charges. The High
Court directed the railway administration to refund the difference
of approx. 110 km that was illegally levied towards the freight
charges. The following questions arise for consideration: (i) What
is the scope of Section 106 sub-section (3) of the Railways Act,
1989; In other words, what constitutes an "overcharge" within the
meaning of Section 106 sub-section (3) of the Railways Act, 1989;
What is the difference between an "Overcharge" and an "Illegal
Charge"; (ii) Whether, the claim towards the refund of difference of
110 km in freight charges is covered by Section 106 sub-section
(3) of the Railways Act, 1989; In other words, whether the claim
is for a refund of an 'overcharge'; (iii) Whether, the difference of
110 km in freight is liable to be refunded; In other words, whether
the notified chargeable distance of '444 km' was an Illegal Charge
or not?
Headnotes
Railways Act, 1989 - s. 106 - Scope of:
Held: Section 106 deals with notice for claim of compensation and
refund of overcharge - Section 106 of the Act, 1989 is in two-parts
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and deals with and encompasses two distinct types of claims that
may be made or sought against the railway administration by way
of a notice: - (i) First ̧ the claims towards the 'compensation' from
the railway administration which has been provided u/s.106 subsection (1) - The compensation may be sought in respect of any
loss or damage or destruction caused to the goods which were
being carried by the railway - (ii) Secondly, the claims towards the
refund of any 'overcharge' that has been levied in respect of any
goods which were being carried by the railways, and this has been
provided u/s. 106 sub-section (3) - Thus, Section 106 of Act, 1989
contains the statutory provisions that enables any person to make
a claim from the railway administration, either for (i) compensation
OR for (ii) refund of overcharge, in respect of any goods which
were being carried by the railway by sending a notice of claim - A
statutory time-period of 6-months has been provided for making a
notice of claim u/s. 106 of the Act, 1989, and if the notice of claim
is not made within the stipulated period, then the claim becomes
time-barred.[Paras 34, 35, 36, 39]
Railways Act, 1989 - s. 106 (3) - Meaning of Overcharge -
Notice for Claim for Refund of Overcharge - Conditions:
Held: The term "overcharge" has neither been defined in the Act,
1989 nor the erstwhile Act, 1890 - The term "overcharge" is derived
from the word 'charge' prefixed by the word 'over' and means
"something more than the correct amount or more than a certain
limit" - The Supreme Court in Union of India & Ors. v. West Coast
Paper Mills Ltd. & Anr. explained that an overcharge is something
in excess of what is due according to law, an overcharge must be
of the same genus or class as a charge, and it does not include
a sum that was collected but was not due - The Supreme Court
as-well as various High Courts have consistently held that the
rigours of Section 106(3) of the Act, 1989 will only be applicable
where the claim is for a refund of an 'overcharge' - Where the
claim for refund is for anything but an 'overcharge', Section 106(3)
of the Act, 1989 will not apply, and no notice of claim is required
- When it com

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* Author
[2024] 3 S.C.R. 1051 : 2024 INSC 243
Union of India
v.
M/s Indian Oil Corporation Ltd.
(Civil Appeal Nos. 1891-1966 of 2024)
21 March 2024
[J.B. Pardiwala* and Sandeep Mehta, JJ.]
Issue for Consideration
It is the case of the respondent company herein that at the time
of booking the consignments, from Baad to Hisar via Palwal,
the notified chargeable distance for calculating freight as per the
Local Distance Table was 444 km, and accordingly the respondent
company paid the same from time to time. However, subsequently,
the appellant railways vide its letter dated 05.07.2005 changed
the chargeable distance to 334 km in the revised Local Distance
Table and the said revised table was to apply prospectively. The
respondent's case is that the very chargeable distance of 444
km as per the old local distance table was wrong and demanded
refund of the difference of 110 km in the freight charges. The High
Court directed the railway administration to refund the difference
of approx. 110 km that was illegally levied towards the freight
charges. The following questions arise for consideration: (i) What
is the scope of Section 106 sub-section (3) of the Railways Act,
1989; In other words, what constitutes an "overcharge" within the
meaning of Section 106 sub-section (3) of the Railways Act, 1989;
What is the difference between an "Overcharge" and an "Illegal
Charge"; (ii) Whether, the claim towards the refund of difference of
110 km in freight charges is covered by Section 106 sub-section
(3) of the Railways Act, 1989; In other words, whether the claim
is for a refund of an 'overcharge'; (iii) Whether, the difference of
110 km in freight is liable to be refunded; In other words, whether
the notified chargeable distance of '444 km' was an Illegal Charge
or not?
Headnotes
Railways Act, 1989 - s. 106 - Scope of:
Held: Section 106 deals with notice for claim of compensation and
refund of overcharge - Section 106 of the Act, 1989 is in two-parts
1052
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and deals with and encompasses two distinct types of claims that
may be made or sought against the railway administration by way
of a notice: - (i) First ̧ the claims towards the 'compensation' from
the railway administration which has been provided u/s.106 subsection (1) - The compensation may be sought in respect of any
loss or damage or destruction caused to the goods which were
being carried by the railway - (ii) Secondly, the claims towards the
refund of any 'overcharge' that has been levied in respect of any
goods which were being carried by the railways, and this has been
provided u/s. 106 sub-section (3) - Thus, Section 106 of Act, 1989
contains the statutory provisions that enables any person to make
a claim from the railway administration, either for (i) compensation
OR for (ii) refund of overcharge, in respect of any goods which
were being carried by the railway by sending a notice of claim - A
statutory time-period of 6-months has been provided for making a
notice of claim u/s. 106 of the Act, 1989, and if the notice of claim
is not made within the stipulated period, then the claim becomes
time-barred.[Paras 34, 35, 36, 39]
Railways Act, 1989 - s. 106 (3) - Meaning of Overcharge -
Notice for Claim for Refund of Overcharge - Conditions:
Held: The term "overcharge" has neither been defined in the Act,
1989 nor the erstwhile Act, 1890 - The term "overcharge" is derived
from the word 'charge' prefixed by the word 'over' and means
"something more than the correct amount or more than a certain
limit" - The Supreme Court in Union of India & Ors. v. West Coast
Paper Mills Ltd. & Anr. explained that an overcharge is something
in excess of what is due according to law, an overcharge must be
of the same genus or class as a charge, and it does not include
a sum that was collected but was not due - The Supreme Court
as-well as various High Courts have consistently held that the
rigours of Section 106(3) of the Act, 1989 will only be applicable
where the claim is for a refund of an 'overcharge' - Where the
claim for refund is for anything but an 'overcharge', Section 106(3)
of the Act, 1989 will not apply, and no notice of claim is required
- When it comes to a Notice for Claim for Refund of Overcharge
under Section 106(3) of the Act, 1989 the following conditions must
be fulfilled: - a) Claim must be for refund of an 'Overcharge'; b)
Overcharge must have been paid to the Railway Administration
in respect of the goods carried by the railway; c) Notice must be
issued within 6-months from the date of payment or delivery of
[2024] 3 S.C.R.
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Union of India v. M/s Indian Oil Corporation Ltd.
goods for which overcharge was paid; d) Notice must be served
to the concerned railway administration to whom the overcharge
was paid - Thus, the rigours of Section 106 sub-section (3) i.e., the
6-month time period for making a notice of claim, is only attracted,
when the refund is for an overcharge. [Paras 43, 44, 45, 53, 59]
Railways Act, 1989 - What is the difference between an
"Overcharge" and an "Illegal Charge":
Held: As to what would be an 'overcharge', the Supreme Court and
the various High Courts have consistently held that an 'overcharge'
is any sum charged in excess or more than what was payable as per
law - Whereas an illegal charge is any sum which is impermissible
in law - For an excess sum to be an "overcharge" the sum paid
must partake the same character as the basic charge, or must
belong to the same genus of charge which was payable or required
to be paid by law - Whereas, for an illegal charge, the sum must
not have been payable by law - Another very fine but pertinent
distinction between an 'overcharge' and an 'illegal charge' is that,
an 'overcharge' is generally inter-se the specific parties involved
and in its peculiar facts - Whereas an 'illegal charge' is illegal for
everyone irrespective of the parties or facts. [Paras 60, 70, 71]
Railways Act, 1989 - Whether, the claim towards the refund of
difference of 110 km in freight charges is covered by Section
106 sub-section (3) of the Railways Act, 1989; In other words,
whether the claim is for a refund of an 'overcharge':
Held: The respondent company has undisputedly paid the freight
charges as per the notified chargeable distance, and nothing more
has been charged than what was at the time of booking of the
consignment required to be charged as per the law prevailing i.e.,
as per the old local distance table - The case of the respondent
company is not that it has paid anything in excess of what was
at the time of booking of the consignment required by law, rather,
the respondent's case is that the charge which was required to
be paid by the law as prevailing at the time of booking of the
consignment was wrong - In other words, the respondent's case
is that the very chargeable distance of 444 km as per the old local
distance table was wrong, and not that the distance for which the
respondent has been charged is incorrect in terms of the chargeable
distance that was notified at that time - Since admittedly, what
was charged from the respondent was as per the chargeable
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distance notified and required to be payable by law at that time
with nothing in excess, and since the respondent has challenged
the very basis or genus of the charge i.e., primary challenge is to
the chargeable distance of 444 km in itself and not the incidental
quantum of freight levied on the distance of 444 km, and because
the same was admittedly charged as per the prevailing law and
not due to any misapplication or mistake i.e., as per the old local
distance table, this clearly is not a case of overcharge and would
not fall within the four corners of Section 106(3) of the Act, 1989.
[Paras 104, 105, 107]
Railways Act, 1989 - Whether the notified chargeable distance
of '444 km' was an Illegal Charge or not?
Held: In the instant case, prima-facie it appears that under both;
the Old Distance Table and the New Distance Table, the actual
engineering difference was being taken into consideration, and the
only difference between the two methodologies lies in the roundingoff - The effect of the change in methodology on the chargeable
distance would not have resulted in a huge difference of 110
km - There had been neither any change in the route by way of
addition of new station nor change in the physical track length of
the said route - The letter dated 05.07.2005 itself indicates that
the change in the chargeable distance of 444 km was due to an
error, and has no bearing with the Ministry of Railway's letter dated
07.04.2004 introducing the new methodology - There was failure
of the appellant in establishing that the chargeable distance of 444
km was the correct chargeable distance as per the law - There
is a concurrent findings of both, the Railway Claims Tribunal and
the High Court on the limited aspect of the actual distance being
333.18 km - Thus, the said chargeable distance of 444 km was
illegal - No infirmity in the judgment and order passed by the High
Court. [Paras 126, 136, 137, 138]
Words and Phrases - Charge, Over, Illegal - discussed. [Para
61]
Interpretation of Statutes - Reasonableness or unreasonableness
of any provision:
Held: It is a settled law that in interpreting a statute or a rule, the
court must bear in mind that the legislature does not intend what
is unreasonable or impossible - If a rule leads to an absurdity or
manifest injustice from any adherence to it, the court can step
[2024] 3 S.C.R.
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Union of India v. M/s Indian Oil Corporation Ltd.
in - A statute or a rule ordinarily should be most agreeable to
convenience, reason and as far as possible to do justice to all - A
law/rule should be beneficial in the sense that it should suppress
the mischief and advance the remedy - In interpreting a rule,
it is legitimate to take into consideration the reasonableness or
unreasonableness of any provision - Gross absurdity must always
be avoided in a statute/rule - The expression reasonable means
rational, according to the dictate of reason and not excessive or
immoderate. [Para 82]
Railways Act, 1989 - s. 106 (3) - Hohfeld's scheme of jural
relations:
Held: As per Hohfeld's scheme of jural relations conferring of a
right on one entity must entail vesting of a corresponding duty
in another - Under Section 106(3) of the Act, 1989, the right of
consignee to seek a refund of an overcharge arises only when
there is a corresponding duty on the railway administration to
grant such refund i.e., when the notice of claim is made to it
within the statutory period - To seek a refund, certain condition
precedents need to be satisfied by the consignee before the right
can be said to accrue, namely, a) An overcharge has been paid
by the consignor to the Railway administration; b) A notice has
been served by the consignor to the Railway administration to
which overcharge has been paid; c) The consignor has served
the said notice within six months from the date of such payment
or the date of delivery of such goods at the destination station,
whichever is later - Thus, once the aforesaid conditions are
satisfied, the consignee's "right to get a refund" can be said
to have as its jural correlative the "duty to grant refund" of the
Railway administration. [Paras 84, 84.1]
Railways Act, 1989 - Claim of refunds - Cautioning the courts
and the railway claims tribunal:
Held: Where the court or tribunal whilst examining a claim for
refund finds that a particular charge for which refund is sought
is not an overcharge, they must not jump to the conclusion
that the said charge then is an illegal charge - There may be
situations, where a charge for which refund is sought may not
be an overcharge or even an illegal charge and rather would be
a lawful charge perfectly valid in the eyes of law, or a charge
though valid but in the extant of equity may be refundable, the
same has to be determined upon appraisal of the entire facts of
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the case - The courts and tribunal must be mindful of the fact that,
the question as to what is the nature of a particular charge, be it
overcharge or illegal charge or valid charge etc. is for ultimately
determining whether it is liable for refund or not, without jumping
to any conclusion. [Paras 95 and 96]
Case Law Cited
Mafatlal Industries Ltd. & Ors. v. Union of India [1996]
Suppl. 10 SCR 585 : (1997) 5 SCC 536 - followed.
Union of India & Ors. v. West Coast Paper Mills Ltd. &
Anr. [2004] 2 SCR 642 : (2004) 3 SCC 458 - relied on.
Hindustan Petroleum Corp. Ltd. v. Union of India
(2018) 17 SCC 729; Birla Cement Works v. G.M.
Western Railways & Anr. [1995] 1 SCR 5 : (1995) 2
SCC 493; Rajasthan State Electricity Board v. Union
of India [2008] 7 SCR 1025 : (2008) 5 SCC 632 -
referred to.
Shah Raichand Amulakh v. Union of India & Ors.
reported in (1971) 12 GLR 93; Union of India & Ors.
v. Steel Authority of India Ltd. (1996) SCC OnLine Ori
60; Union of India v. Mansukhlal Jethalal (1974) SCC
OnLine Guj 12; Rajasthan State Electricity Board v.
Union of India AIR (2001) Bom 310; J.K. Lakshmi
Cement Ltd. v. General Manager & Anr. (2014) SCC
OnLine Raj 2340; Union of India v. Mineral Enterprises
(2019) SCC OnLine Kar 1971; M/s National Aluminium
Co. Ltd. v. Union of India, FAO No. 306 of 2022 (Orissa
High Court); Suresh Kumar v. Board of Trustees for
the Port of Calcutta (1988) SCC OnLine Cal 420 -
referred to.
Books and Periodicals Cited
Black's Law Dictionary', 4th Edn., 1968 at Pg. 1610;
P. Ramanatha Aiyar on 'The Law Lexicon', 2nd Edn.,
1997 at Pg. 1389; P Ramanatha Aiyar's 'The Law
Lexicon' (Vol I, 6th Edn., 2019 at pg. 886); L.P. Singh
and P.K. Majumdar's 'Judicial Dictionary' (2nd Edn.,
2005 at pg. 460); Henry Campbell Black in 'Black's Law
Dictionary' (4th Edn., 1968 at pg. 295); L.P. Singh and
[2024] 3 S.C.R.
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Union of India v. M/s Indian Oil Corporation Ltd.
P.K. Majumdar's 'Judicial Dictionary' (2nd Edn., 2005
at pg. 996); P Ramanatha Aiyar's 'The Law Lexicon'
(Vol III, 6th Edn., 2019 at pg. 3990); Henry Campbell
Black on 'Black's Law Dictionary' (4th Edn., 1968 at pg.
1256); Henry Campbell Black in 'Black's Law Dictionary'
(4th Edn., 1968 at pg. 882); P Ramanatha Aiyar's 'The
Law Lexicon' (Vol II, 6th Edn., 2019 at pg. 2605); L.P.
Singh and P.K. Majumdar's 'Judicial Dictionary' (2nd
Edn., 2005 at pg. 749) - referred to.
List of Acts
Railway Act, 1890; Railway Act, 1989.
List of Keywords
Freight; Notified chargeable distance; Revised Local Distance Table;
Refund of the difference in the freight charges; Overcharge; Illegal
charge; Refund of overcharge; Claim of compensation; Change
in methodology on the chargeable distance; Reasonableness or
unreasonableness of any provision; Hohfeld's scheme of jural
relations; Right to get a refund; Duty to grant refund; Charge;
Over; Illegal.
Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1891-1966
of 2024
From the Judgment and Order dated 23.02.2018 of the High Court of
Judicature at Allahabad in FAFO Nos.726, 730, 731, 732, 733, 734,
735, 736, 737, 738, 739, 765, 772, 773, 774, 775, 776, 777, 778, 779,
780, 781, 782, 783, 784, 785, 786, 787, 788, 789, 790, 791 792, 793,
798, 799, 800, 801, 802, 803, 804, 805, 806, 807, 808, 809, 810, 811,
812, 813, 814, 825, 826, 829, 830, 833, 834, 835, 836, 837, 838, 839,
840, 841, 842, 844, 845, 846, 847, 848, 850, 851, 852, 853, 854 and
855 of 2014
Appearances for Parties
Amrish Kumar, Nachiketa Joshi, Raghav Sharma, Mrs. Rukhmini
Bobde, Varun Chugh, Advs. for the Appellant.
Ms. Meenakshi Arora, Sr. Adv., Ms. Mala Narayan, Shashwat Goel,
Ms. Nanakey Kalra, Ms. Isha Ray, Advs. for the Respondent
1058
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Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
For the convenience of the exposition, this judgement is divided in
the following parts: -
INDEX*
A.
FACTUAL MATRIX ..........................................................
2
B.
PROCEEDINGS BEFORE THE RAILWAY CLAIMS
TRIBUNAL.........................................................................
8
C.
IMPUGNED ORDER.........................................................
11
D.
SUBMISSIONS ON BEHALF OF THE APPELLANT......
13
E.
SUBMISSIONS ON BEHALF OF THE RESPONDENT...
16
F.
ANALYSIS........................................................................
22
i.
Relevant Statutory Scheme and Provisions .......
22
ii.
Scope of Section 106 of the Railways
Act, 1989 .................................................................
29
a.
What is meant by an "Overcharge"? ...............
35
b.
Concept of an 'Overcharge' and an 'Illegal
Charge' ............................................................
53
iii.
Whether the present case is one of
'Overcharge' or 'Illegal Charge'? ..........................
76
a.
Applicability of Section 106(3) of the Railways
Act, 1989 ..........................................................
76
b.
Whether the chargeable distance of 444 km
was correct or not? ..........................................
82
G. CONCLUSION .................................................................
94
1.
This batch of 76 appeals is at the instance of the Union of India
being the unsuccessful respondent before the High Court and is
directed against the common set of judgements and orders dated
23.02.2018 passed by the High Court of Allahabad in FAO Nos.
726, 730-739, 765, 772-793, 798-814, 825-826, 829-830, 833-842,
* Ed. Note: Pagination as per the original Judgment.
[2024] 3 S.C.R.
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Union of India v. M/s Indian Oil Corporation Ltd.
844-848, and 850-855 respectively of 2014, by which the High Court
allowed all the abovementioned appeals filed by the respondent
herein (original appellant) and directed the railway administration
to refund the difference of approx.. 110 km that was illegally levied
towards the freight charges.
A.
FACTUAL MATRIX
2.
The respondent company herein had booked various consignments
of furnace oil between the years 2002 & 2005 via railway from Baad
to Hisar route. Indisputably the freight for the same was calculated
by the appellant on the basis of a total chargeable distance of 444
km. as per the then prevailing distance table plying for the said route.
3.
On 07.04.2004, the Ministry of Railways vide its Letter No.
TCR/2043/2002/2, decided to rationalize the method of calculating
the 'chargeable distance' between the pairs of station routes by way
of rounding off the aggregate of the 'actual engineering distance' to
the next higher kilometre only once at the end. The said letter is
reproduced below: -
"Rates Circular No. 14 of 2004
GOVERNMENT OF INDIA (BHARAT SARKAR)
MINISTRY OF RAILWAYS (RAIL MANTRALAYA)
RAILWAY BOARD
No. TCR/2043/2000/2
New Delhi, Dt. 07.04.2004
To,
The General Managers (Comml.).
All Indian Railways, NCR
SUB:
Rounding off of Chargeable Distance:
Rationalization of fares and freight.
REF:
Board's letter no. TCR/2043/2002/4 dated
05.02.2003
Reference is invited to Board's above cited letter wherein
Zonal Railways were asked to print their new Local Distance
Tables (LD1) and Junction Distance Tables (JDT) effective
from April 1, 2003, indicating the actual engineering
1060
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distances of the various sections upto two decimal places.
Board desire confirmation in this regard and that these books
have been printed and circulated to other railways also.
It was also indicated in the letter under reference that
the method of "rounding off" to be adopted for arriving
at the 'chargeable distance' shall be communicated in
due course. The Ministry of Railways have now decided
in rationalize the method for arriving at the 'chargeable
distance' between a specific pair of originating and
destination points. The actual engineering distances
upto two decimal places of the various sections from
originating station to destination station will be added
up and the distance so aggregated would be finally
rounded off to the next higher kilometre for deriving the
chargeable distance. It may be ensured that for deriving
the "chargeable distance", the summation of individual
sectional distances be "rounded off" only once at the
end. This rationalization is aimed at ensuring uniformity
in the method of deriving the distance of charging fares
and freight for all customers across the Indian Railways.
In order to have a uniform date of implementation, all
railways shall change over to the rationalized procedure
with effect from 01.06.2004. As these instructions have
prospective effect and may result in variation in fares
and freights when compared with the existing fares
and freight, neither would any undercharges be raised
by the railways nor would the railways refund charges
collected in past cases. Rail users may be intimated
of the proposed changes well in advance and staff
may also be made well conversant with the changes
contemplated.
This issues in consultation with C&IS Directorate and with
the concurrence of Finance Directorate in the Ministry of
Railways.
Sd/-
(L. Venkataraman)
Director, Traffic Comml. (Rates)
Railway Board"
[2024] 3 S.C.R.
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Union of India v. M/s Indian Oil Corporation Ltd.
4.
This new methodology was being adopted in order to ensure uniformity
in deriving the chargeable distance for fares and freight across the
Indian Railways, and pursuant to it, the various zonal railways were
required to revise their respective distance tables accordingly.
5.
The letter as referred to above specifically stipulated that, the change
over to the new 'rationalized procedure' shall take place w.e.f. 01.06.2004
and further that as the aforementioned change might result in variation
in the fares and freights in comparison to the then existing charges
/ rates, the said change would not entitle either the Railways or the
end-users to recover or seek any under-charge or excess charge that
was already paid prior to the implementation of the said policy.
6.
However, since many zonal railways were yet to print and make
available their revised local distance tables and junction tables at
their respective stations by the scheduled date of implementation,
the Ministry of Railways vide its letter dated 24.09.2004 changed and
moved the date of implementation of the aforesaid new methodology
to 01.01.2005. It was further clarified that till the revised guidelines
were implemented, the chargeable distance would continue to be
calculated as per the earlier prevailing methodology and procedure
as applicable. The said letter reads as under: -
"Rates Circular No. 14 of 2004
GOVERNMENT OF INDIA (BHARAT SARKAR)
MINISTRY OF RAILWAYS (RAIL MANTRALAYA)
RAILWAY BOARD
No. TCR/2043/2000/2
New Delhi, Dt. 24.09.2004
To,
The General Managers (Comml.)
Al Indian Railways, NCR
Managing Director,
Konkan Railway Corporation,
Belapur Bhavan, Sector-11, CBD Belapur,
New Mumbai - 400614
The Chief Administrative Officer/ FOIS
Camp: CRIS, Chanakyapuri,
New Delhi - 21
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SUB:
Rounding off of Chargeable Distance:
Rationalization of fares and freight.
Please refer to Board's message dated 25.06.2006 wherein
it was communicated that the revised procedure of charging
fares and freight by rounding off the actual engineering
distance only once at the end shall come into force from
01.10.2004. As all the Zonal Railways have not printed
their local distance tables and junction distance tables
by the target time, it has been decided that the revised
procedure of charging fares and freight by rounding off
the actual engineering distance only once at the end shall
come into force from 01.01.2005 i.e., First January two
thousand five.
It has also been decided that till the implementation of
revised guidelines, the earlier procedure for calculating the
chargeable distance on the basis of old distance tables
should be followed by Zonal Railways. Moreover, the receipt
of LDTs/JDTs prepared on the basis of Board's guidelines
by concerned Railways should be intimated to this office.
Sd/-
(PURAN CHAND)
Deputy Director, Traffic Comml. (R)
Railway Board"
7.
On 05.07.2005, the Chief Commercial Manager of the North Central
Railway Zone addressed a letter bearing No. DRM/CLAOG/RAD/
Distance Table/2004/20 to the Chief Goods Supervisor (CGS), Baad
inter-alia stating that the earlier chargeable distance of 444 km from
the Refinery Baad to Hisar as per the old distance table should
be changed to 334 km as per the new junction table, and that the
"correct distance should be charged". The said letter reads as under:
"NORTH CENTRAL RAILWAY
Dated: 05.07.2005
No. DRM/CLAOG RAD/Distance Table/2004/20
Chief Commercial Manager (M&R)
North Central Rail
Allahabad
[2024] 3 S.C.R.
1063
Union of India v. M/s Indian Oil Corporation Ltd.
SUB:
Charging of FO HPS Book from IOC BAAD to
Hissar (HSR):
As per old distance table prior to formation of Zone and
Division, the distance, Refinery to HSR via TKD was being
charged as under: -
1.
Refinery BAAD to BAAD station
04 Km
2.
BAAD to TKD
145 Km
3.
TKD to HSR
295 Km
Total
444 Km
As revised distance table of NCR, NR were not received,
hence the charging was as per the earlier practice of 444
Km. These all the distance tables were critically reviewed
from revised distance tables of NCR and the distance from
IOC BAAD to HSR should be as under: -
(A) The distance from IOC BAAD to HSR via PWL
is as under:
1.
Refinery BAAD to BAAD station
04 Km
2.
BAAD to TKD
93.62 Km
3.
TKD to HSR
235.56 Km
Total
333.18 Km
(B) The distance from HSR via AWR is as under:
1.
Refinery BAAD to BAAD station
04 Km
2.
BAAD to MTJ
10.22 Km
3.
AWR to RE
74.21 Km
4.
RE to HSR
142.56 Km
Total
354.17 Km
As the traffic of FO and HPS is moving via PWL, hence
the chargeable distance should be 334 Km.
CGS has been instructed to change the distance of HSR
according to the new junction distance table i.e., 334 Km.
1064
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CGS BAAD has been instructed that the other disputed
distance should also be corrected as per the new junction
distance table and the correct distance should be charged.
Sd/-
(P.K. PANDEY)
Sr. Divl. Comml. Manager
Agra"
8.
The respondent upon learning about the aforesaid letter dated
05.07.2005 changing the chargeable distance from 444 km to 334
km for the route from Refinery Baad to Hisar, made further inquiries
with the concerned Railway office & came to learn that, although
there had been no change in the physical track length for the said
route and that the actual distance from Baad to Hissar via Palwal
was in fact 333.18 km, yet the appellant was charging freight at a
wrong chargeable distance of 444 km for the same route.
9.
In view of the aforesaid, the respondent company sent a notice of
claim dated 07.11.2005 under Section 78B of the erstwhile Railways
Act, 1890 (for short, the "Act, 1890") to the appellant demanding
refund of the difference of 110 km in the freight charges that had
been erroneously charged on the basis of the wrong chargeable
distance which was subsequently changed.
10. The respondent vide the aforesaid notice of claim had demanded
refund for a total of 122 consignments for which freight had been
levied on the basis of a chargeable distance of '444 km'. However,
the appellant herein rejected all of the claims and declined to refund
the 110 km difference in freight charges.
B.
PROCEEDINGS BEFORE THE RAILWAY CLAIMS TRIBUNAL
11. Aggrieved by the same, the respondent in all filed 122 claim
applications under Section(s) 13(1)(b) r.w. 16(1) of the Railway Claims
Tribunal Act, 1987 (for short, the "RCT Act") for refund towards the
difference of 110 km in freight charges, with the lead application
being the OA/(III)/229/20006/Mathura before the Railway Claims
Tribunal, Ghaziabad ("RCT").
12. During the pendency of the aforesaid claim applications, the
respondent company held meetings with the appellant more
particularly the General Manager, North Central Railway, Allahabad,
who upon scrutinizing the matter allowed refund for inasmuch as
[2024] 3 S.C.R.
1065
Union of India v. M/s Indian Oil Corporation Ltd.
45 (sic) claims (approx..), which had been made within the statutory
time period of 6-months under Section 78B of the Act, 1890 - now
Section 106 of the Railways Act, 1989 (for short, the "Act, 1989").
13. The Railway Claims Tribunal, Ghaziabad vide its common final
judgement and order dated 26.12.2013, dismissed the remaining
77 claim applications of the respondent as being time-barred. The
said decision of the RCT is in two parts: -
(i)
First, the RCT observed that though the chargeable distance
was only 334 km still the freight charges had been levied for
a distance of 444 km. This according to the Tribunal was a
case of excess payment of freight, and thus the refund that
was sought was for an 'overcharge'. The relevant observations
read as under: -
"18. [...] In this case, the goods were booked from 'A'
to 'B', showing the chargeable distance as 444 Kms.
and payment was given by the applicant company for
the same distance, but later on, Railways reworked
the chargeable distance as only 333.18 Kms. The
consignment in question was carried through the
same route. So, it is clear that the payment was to
be made for 333.18 Kms., whereas it was made for
444 Kms. In this way, the applicant company had
to pay for 444 Kms, instead of 333.18 Kms. Hence,
the present case is for the refund of this excess
payment of freight, which can only be termed as
refund of overcharge and nothing else and so, the
notice under Section 106(3) of the Railways Act,
1989 is necessary."
(Emphasis supplied)
(ii)
Secondly, since the case at hand was one for refund of an
overcharge and the notice of claim had not been sent within the
prescribed time-period of 6-months as required under Section
106(3) of the Act, 1989, the claim application was time-barred.
The relevant observations read as under: -
"24. [...] Furthermore, perusal of the record shows
that the applicant company had served a notice on
07.11.2005 upon the Respondent Railway, but the
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date of booking of the consignment in question was
25.08.2002. Hence, it has been revealed that the
said notice was time barred as per the provisions
of the aforesaid Section 106(3) of the Railways Act,
1989, which had been well within the knowledge of
the applicant company also as per the aforesaid letter
dated 28.01.2009. In this context, Ld. Counsel for the
Respondent has placed reliance on the case law, titled
as Birla Cement Works v. G.M., Western Railways &
Anr., 1995 SCC (2) 493. We have carefully perused
the said case law and it supports the contention of
the Respondent Railway.
xxx

 xxx

xxx
26. In view of the above, it has been held the applicant
company has not served a valid and legal notice on
the Respondent Railway within the statutory period
under the provisions of Section 106(3) of the Railways
Act, 1989. As such, the applicant company is not
entitled for any compensation. [...]"
(Emphasis supplied)
14. Thus, the RCT, whilst dismissing the respondent's claim applications
held that, the respondent's claim was for a refund of an overcharge
and since the notice of claim was not served in terms of Section
106(3) of the Act, 1989, the claim was time-barred.
C.
IMPUGNED ORDER
15. Aggrieved with the aforesaid, the respondent went in appeal under
Section 23 of the RCT Act before the High Court of judicature at
Allahabad. In all 76 First Appeals from Order were filed, with the
lead appeal being the FAO No. 843 of 2014 wherein the High
Court vide its judgement & order dated 23.02.2018 allowed the
aforesaid appeal, by placing reliance on the decision of this Court
in Hindustan Petroleum Corp. Ltd. v. Union of India reported
in (2018) 17 SCC 729. The High Court took the view that since
in the case at hand the freight had been paid as per the notified
chargeable distance which was later found to be incorrect, it was a
case of "illegal charge" and not that of "overcharge". The relevant
observations read as under: -
[2024] 3 S.C.R.
1067
Union of India v. M/s Indian Oil Corporation Ltd.
"[...] In this case, the freight was paid by the appellant as
per the notified distance and freight charges were paid
accordingly. However, later on it was revealed that the
distance was less and that is how the appellants had
claimed the amount. This was one of the facts on which
the Apex Court held in favour of the appellant (Hindustan
Petroleum) and this was a question of illegal realisation
of freight and not of over charging as submitted by the
counsel for the respondent. [...]
The finding of fact by the Tribunal dismissing the claim of
the claimant is bad in the eye of law as held by the Apex
Court in Hindustan Petroleum (Supra), there was no need
for issuance of notice. I am fortified in my view by both
the decisions of the Apex Court in Hindustan Petroleum
(Supra) and West Coast Paper Mills (Supra). Hence,
this is not a case of over charge at all as the freight was
paid as per the rates notified for certain distance. No other
view can be taken in this matter.
The judgment in Hindustan Petroleum (Supra) will enure
for the benefit of the appellant in this case also.
In view of the above, the appeal is allowed. The respondents
to calculate the difference within 12 weeks from today and
pay the appellant."
(Emphasis supplied)
16. Accordingly, the High Court vide the aforesaid judgement & order
dated 23.02.2018 disposed of the lead appeal of FAO No. 843 of
2014, and thereafter by a batch of common orders disposed of
the other 75 appeals in terms of its findings recorded in the final
judgement and order passed in the lead appeal.
17. The aforesaid order dated 23.02.2018 as passed in FAO No. 843 of
2014 i.e., the lead appeal was challenged and carried upto this Court
by way of the special leave petition being SLP (C) No. 3987 of 2021.
This Court vide its order dated 04.03.2021 refused to interfere with
the order dated 23.02.2018 passed in FAO No. 843 of 2014 as the
claim amount was very low. Thus, the said Special Leave Petition
came to be dismissed by this Court, however the question of law
was kept open. The relevant portion reads as under: -
1068
[2024] 3 S.C.R.
Digital Supreme Court Reports
"O R D E R
We decline to interfere in this Special Leave Petition, as
we find that the claimed amount is very low. The Special
Leave Petition is dismissed accordingly, leaving the
question of law open."
18. In view of the aforesaid, the appellant herein being aggrieved, has
challenged the final orders passed by the High Court in the other 75
appeals involving a total sum of Rs. 1,55,03,652/- (approx.).
D.
SUBMISSIONS ON BEHALF OF THE APPELLANT
19. Mrs. Rukhmini Bobde, the learned counsel appearing for the appellant
in her written submissions has stated thus: -
"WRITTEN SUBMISSIONS ON BEHALF OF THE
APPELLANT
1.
The present Appeal has been filed against the final
judgement of the Hon'ble High Court of Allahabad
a batch of First Appeals, whereby the Hon'ble High
Court has allowed all the abovementioned appeals
filed by the Respondent-IOCL while relying upon the
judgment dated 23.02.2018 passed in First Appeal
from Order No. 843 of 2014 (@pg. 79 of the present
Appeal) which is illegal and perverse as the Hon'ble
High Court has ignored to answer the questions of law.
It is submitted that the order dated 23.02.2018 in First
Appeal from Order No. 843 of 2014 was challenged
by the Appellant-Union before this Hon'ble Court and
the said petition bearing SLP(C) No. 3987 of 2021
was dismissed by this Hon'ble Court on 04.03.2021
on the ground that claim amount was very low. It is
however submitted that the claim amount of all the
batch matters herein comes to approximately Rs.
1,55,03,652/-.
2.
The facts of the lead case herein are that the
Respondent-IOCL had sent a legal notice dated
07.11.2005 under Section 106 of the Railway Act,
1989 to the Appellant-Union for refund of excess
freight charges with respect to a consignment dated
25.08.2022, due to change in methodology, having
[2024] 3 S.C.R.
1069
Union of India v. M/s Indian Oil Corporation Ltd.
been applied prospectively from 01.01.2005 which
resulted in variation in fares and freights when
compared with the then existing fares and freight. It
is submitted that the present Appeal is not a case of
error in the existing notified freight change.
3.
The case of the Appellant-Union is that Section 106 of
the Railway Act, 1989 does not apply to the present
case at all since as per the circulars dated 07.04.2004
and 24.09.2004 (@page 141 and 144 of the Appeal
respectively) issued by the Appellant-Union, the
change in distance happened due to rationalization
of the distances, aimed at ensuring uniformity in the
method of deriving the distance of charging fates
and freight for all customers across Indian Railways.
The rationalization was also directed to be applied
prospectively (from 01.01.2005 onwards) and the date
of transport of consignment was on 25.08.2002 i.e.
more than 2 years before application of the circular.
It is further submitted that the Appellant-Union in its
circular dated 07.04.2004 had specifically stated that
the Appellant-Union would not be raising any issue
of undercharges due to the variation nor was the
Petitioner going to refund the charges collected in
past cases, thus ensuring balance of convenience.
Therefore, the question of overcharging does not arise
at all as the Respondent-IOCL has been charged the
freight charges as per the then prevailing existing
fares and freights of the time and consequently,
the Respondent-IOCL cannot raise any claim for
compensation under Section 106 of the Railway
Act, 1989.
4.
Even assuming and without admitting to the case
of the Respondent-IOCL, if the Respondent-IOCL
is able to present a case for being overcharged
and thus Section 106 of the Railways Act, 1989 to
be applicable, the case of the Respondent-IOCL is
barred from raising any claim as per the provisions
of Section 106 of the Railways Act, 1989 on the
ground of delay.
1070
[2024] 3 S.C.R.
Digital Supreme Court Reports
5.
It is also pertinent to take a close look at the facts
of the following case laws:
a. In Birla Cement Works v. G.M., Western
Railways and Another', the Petitioner earlier
used to transport through metre-gauge from
the railway siding at Chanderia. However, after
conversion into broad-gauge the railway siding
was at Difthkola Chittor Broad-Gauge Rail Link,
which lead to an increase of 34 km, which was
added to the freight charges. The Petitioner had
belatedly raised its claim under Section 78-B of
the Railway Act, 1890 (pari materia to Section
106 of the Railways Act, 1989) and were thus
barred by limitation.
The principal contention raised by the Petitioner
was that it had discovered the mistake when
the railway authorities confirmed by their letter
that they had committed a mistake in charging
excess freight on wrong calculation of distance.
The limitation started running from the date of
discovery and therefore stands excluded and
that Section 78-B of the Railway Act, 1890 had
no application to the facts. However, this Hon'ble
Court held that since admittedly the claims of the
Petitioner were made under Section 78-B of the
Railway Act, 1890 beyond a period of six months,
the claim had become barred by limitation.
It should be mentioned that the facts of Birla
Cement would have only been applicable in
the present Petition if there was a case of
overcharging. However, as the Respondent
had booked according to the prevailing freight
charges at that time, the facts of Birla Cement
does not arise at all.
b. In Union of India and Others v. West
Coast Paper Mills Ltd and Another (III), the
Respondents were being charged a flat rate
irrespective of the commodity carried and were
[2024] 3 S.C.R.
1071
Union of India v.