# UNION OF INDIA v. M/S. MODI INDUSTRIES LTD

- **Citation:** [1973] 3 S.C.R. 835
- **Court:** Supreme Court of India
- **Decided:** 1973-03-30
- **Case number:** Civil Appeal No. 1616 of 1967
- **Bench:** N. G!lOVBll, Mathew
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-m-s-modi-industries-ltd-5956
- **Pages:** 9

## Headnote

/mlian Rai/wC<ys Act, 1890 Ss. 26 and 41-Compku'nt In rtsptct of past·
dues cannot be made under s. 41 before Railway Rates Trlbuna!-In •uch
cases s. 26 of Act is not a bar to a suit In civil court and question of
reasonableness of charges can be gone Into by civil court.
By agreement dated July 4, 1933 the respondent company was liable.
to pay charges for a railway siding at agreed rates. Clause 23 of the
agreement laid down that it shall be open to the Railway Administration
on giving six months notice of sum. ihtent, to revise the said charges.
Clause 24 related to t\?rmination of the agreement in the event of nonpaxment of dues within one month Cl[ demand. On March 26, 1949 the
railway authorities informed the respondent that the rates were proposed
to be increased with effect from April l, 1949. The respondent objected
to the increase as being against clause 23 of the agreement.
By a subsequent letter in September 1951 the Divisional Superintendent of the Railway asked the respondent to pay the charges at much higher rates. There
was prolonged correspondence between the parties without the respondent.
agreeing to pay the higher rates demanded. On September 29, 1955 theDivisional Engineer addressed a letter to the respondent proposing revision
of the siding charges with effect from April l, 1956 after the expiry of
six months according to clause 23 of the agreement.
These proposed
charges were much lower than the charges demanded by the earlier letters.
On May 17, 1957 the General Manager of the Railway sent a letter to the
plaintiff for payment of Rs. 93,981-8-0 in respect of the period December I
19'49 to March 31, 1956. It was intimated that on failure to make the
said payment within one month the supply of wagons would be stooped
and steps to determine the agreement would be taken. In May 1957 the
respondent served a notice under s. 80 Of the Code of Civil Procedure and·
thereafter filed a suit.
The trial .court partly decreed the suit. The High
Court. decreed it in toto.
In the appeal by certificate to this Court, filed
on behalf of the lJnion of India, the· questions that fell for. consideration
were : (i) whether the civil court had jurisdiction in view of Ss. 26 and
41 of the Indian Railways Act, 1890, to detennine the reasonableness
of the charges: (ii) whether the courts below if they had jurisdiction were
justified in holding the charges to be unreasonable.
Dismissing the appeal,
HELD : (i) From the facts it appeared that the rates are being rev is-·
ed and actually enhanced, but then the matter was kept pending and there
was exchange of correspondence and discussion between the parties from
time to time.
No effort was made to enforce the demand made in the
various letters and the· plaintiff was allowed to make payments according
to the rates originally a~reed. It was only in May 1957 that the respondent wa. really threatened to mak<: payment of the outstanding amount
calculated at the revised rates on pain of the supply elf wagons being
stopped and the agreement being determined.
According to the decisions of this Court it was hardly open to the
respondent to file a complaint under s. 41 of the Act with regard to the
836
SUPREME COURT REPORTS
(1973] 3 s.c.R.
nasonableness or otherwise of the rates and charges which had already
llecome due and payable. The plaintiff had no grievance whatsoe\·er with
·regard to the charges which had been fixed with effect from April 1, 1956.
By means of the letter dated September 29, 1955, and therefore there
·was no question of its filing a complaint with regard to those charges. Its
grievance was confined only to the amount which was being demanded
·On the basis of the revised enhanced rates between the period December t,
1949 and March 1, 1956. If that amount had actually been realised by
·the railway authorities the plaintiff could only file a suit for its refund
and could not have laid a complaint under s. 4 J of the Act before the
Railway Tribunal. By analogy the plaintiff

## Text

B
c
D
E
F
G
H
8311
UNION OF INDIA
v.
M/S. MODI INDUSTRIES LTD.
March 30, 1973
(A, N. G!lOVBll AND K. K, MATHEW, JJ,)
/mlian Rai/wC<ys Act, 1890 Ss. 26 and 41-Compku'nt In rtsptct of past·
dues cannot be made under s. 41 before Railway Rates Trlbuna!-In •uch
cases s. 26 of Act is not a bar to a suit In civil court and question of
reasonableness of charges can be gone Into by civil court.
By agreement dated July 4, 1933 the respondent company was liable.
to pay charges for a railway siding at agreed rates. Clause 23 of the
agreement laid down that it shall be open to the Railway Administration
on giving six months notice of sum. ihtent, to revise the said charges.
Clause 24 related to t\?rmination of the agreement in the event of nonpaxment of dues within one month Cl[ demand. On March 26, 1949 the
railway authorities informed the respondent that the rates were proposed
to be increased with effect from April l, 1949. The respondent objected
to the increase as being against clause 23 of the agreement.
By a subsequent letter in September 1951 the Divisional Superintendent of the Railway asked the respondent to pay the charges at much higher rates. There
was prolonged correspondence between the parties without the respondent.
agreeing to pay the higher rates demanded. On September 29, 1955 theDivisional Engineer addressed a letter to the respondent proposing revision
of the siding charges with effect from April l, 1956 after the expiry of
six months according to clause 23 of the agreement.
These proposed
charges were much lower than the charges demanded by the earlier letters.
On May 17, 1957 the General Manager of the Railway sent a letter to the
plaintiff for payment of Rs. 93,981-8-0 in respect of the period December I
19'49 to March 31, 1956. It was intimated that on failure to make the
said payment within one month the supply of wagons would be stooped
and steps to determine the agreement would be taken. In May 1957 the
respondent served a notice under s. 80 Of the Code of Civil Procedure and·
thereafter filed a suit.
The trial .court partly decreed the suit. The High
Court. decreed it in toto.
In the appeal by certificate to this Court, filed
on behalf of the lJnion of India, the· questions that fell for. consideration
were : (i) whether the civil court had jurisdiction in view of Ss. 26 and
41 of the Indian Railways Act, 1890, to detennine the reasonableness
of the charges: (ii) whether the courts below if they had jurisdiction were
justified in holding the charges to be unreasonable.
Dismissing the appeal,
HELD : (i) From the facts it appeared that the rates are being rev is-·
ed and actually enhanced, but then the matter was kept pending and there
was exchange of correspondence and discussion between the parties from
time to time.
No effort was made to enforce the demand made in the
various letters and the· plaintiff was allowed to make payments according
to the rates originally a~reed. It was only in May 1957 that the respondent wa. really threatened to mak<: payment of the outstanding amount
calculated at the revised rates on pain of the supply elf wagons being
stopped and the agreement being determined.
According to the decisions of this Court it was hardly open to the
respondent to file a complaint under s. 41 of the Act with regard to the
836
SUPREME COURT REPORTS
(1973] 3 s.c.R.
nasonableness or otherwise of the rates and charges which had already
llecome due and payable. The plaintiff had no grievance whatsoe\·er with
·regard to the charges which had been fixed with effect from April 1, 1956.
By means of the letter dated September 29, 1955, and therefore there
·was no question of its filing a complaint with regard to those charges. Its
grievance was confined only to the amount which was being demanded
·On the basis of the revised enhanced rates between the period December t,
1949 and March 1, 1956. If that amount had actually been realised by
·the railway authorities the plaintiff could only file a suit for its refund
and could not have laid a complaint under s. 4 J of the Act before the
Railway Tribunal. By analogy the plaintiff could not have filed a com-
·plaint with regard to the past dues as the Railway Tribunal could not have
given any relief in respect thereof 'following the law laid down by this
Court. In this view of the matter apart from other questions involving
the validity of clause 23 of the agreement as also of the notice or intimation of rates on the ground on non-compliance \vith its terms the suit
cou1d not be held barred under s. 26 of the Act and the civil court could
·grant the relief claimed.
[842H-843PJ
Union of India v. The Indian Sugar Mills Association, Calcutta . . f1967]
3 S.C.R. 219, Raichand Amulakh Shah v. Union of India, [1964] 5 S.C.R148 and Upper Doab Sugar Mills Ltd. v. Slwhdara (Delhi) Salwranpur
.Light Railway Company Ltd., [1963] 2 S.C.R. 333 at p. 342, referred to.
(ii) There was no serious infirn1ity in the reasoning of the High Court
·by which it arrived at the conclusion that the question of reason~bleness
of the charges, keeping
in mind the 'facts of this case, was justiciable.
Nor had any justification been shown 'for rconening the concurrent finding
of the two Courts below that the rates which
were demanded for the
period in question were unreasonable.
The suit \\'as thus rightly de.:reed.
f843EJ
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1616 of
1967.
Appeal by cevtificate from the
judgment and
order da•ted
September 30, 1966 of the Allahabad High Court in First Apoeal
No. 198 of 1960.
Gobind Das and B. D. Sharma, for the appellant.
C. B. Agarwala, Uma Mehta, S. K. Bagga, Swreshta Bagga and
Rani Arora, for the respondent.
The Judgment of the Court was delivered by
GROVER, J .-This is an appeal by certificate from a judgment
of the Allahabad High Court in a suit filed by the plaintiff-respondent for an injunction against the defendant-appellant restraining
it from realizing the sum ol Rs. 93,981-8-0 on account of the
alleged siding charges for the period December 1, 1949 10 March
31, 1956 and from stopping 'the supply of wagons in the railway
siding of the plaintiff and further from cancelling the agreement
dated July 4, 1933 for the aforementioned reason.
The facts necessary for deciding the appeal may be stated. By
means ol an agreement dated. July 4, 1933 the plaintiff entered
into an agreement with the Secretary of State for India-in-Council
through the agent of the North Western Railway (now represented
A
B
c
D
E
F
G
H
A
B
c
UNION v. MODI INDUSTRIES (Grover, !.)
83T
by the Union of India) whereby it was agreed that the former
shall Jay a railway siding from Begamabad Station Yard of that
railway for enabling the plaintiff to carry on its business at its.
premises.
Clause 13 of the agreement was as follows:-
"Freight for all classes al goods will be charged upto
and from Begumabad Station. Railway Receipts and
invoices shall be issued to and from the station only
and in accordance with the rates from time to time published in the Goods Traffic Books of this Railway Administration will make the following charges in each direction from every wagon loaded or empty in or removed
from the lines A and a mentioned in clause 15 below :--
(J) Per 4 wheeled wagon
(2) Per 6 wheeled wagon
(3) Per 8 wheeled wagon
Re. One.
Re. One and annas
eiaht
Re. two."
D
·Clause 23 of the agreement provided :-
E
F
G
H
"Notwithstanding anything laid down in the foregoing clauses of this Agreement, it shall be open to the
Railway Administration on giving six months notice ot
such intent, to revise the charges laid down in clauses
8, 12, 13 and 19 of this Agreement".
Clause 24 related to termination of the agreement in the event of
non payment of duc:S within one month of demand.
On March
26, 1949 the Divisional Superintendent of the E.P. Railway
(successor in interest of the North Western Railway) informed
the plaintiff that the rates were proposed to be increased with
effect from April 1, 1949, the increased charges being mentioned
in that letter. As this intimation was not in accordance with
clause 23 of the agreement the plaintiff refused to agree to the
increase. Other objections were also raised, one al the objections
being that the charges were excessive. The Divisional Superintendent addressed another letter on May 18, 1949 informing the
plaintiff that with effect from December 1, 1949 the charges
mentioned therein would be made. A good deal of correspondence and discussions between the representatives of the plaintiff
and the railway authorities took place and by a letter dated July
20, 1951 the Divisional Superintendent intimated that the revised·
siding charges in force from December 1, 1949 were purely provisional and were subliect to revision. Meanwhile and subsequent
to the above date the required tests were made to <!!:'!ermine the
charges. In Septelllber 1951 the Divisional Superintendent wrote
to the plaintiff that the siding charges should be paid with effect ·
838
SUPREME COURT REPORTS
[1973] 3 s.c,:a..
from December 1, 1949 to September 30, 1951 at the following
rates :-
(I) Per 4 wheeled waaon
(II) Per 6 wheeled waaon
(Ill) Per 8 wheeled wagon
Rs.
S/·
Rs. 7/8/-
Rs. 10/·
The plaintiff protested against what was called the
exorbitant
nature of the charges and made it clear that the letter of September
1951 did not comply with clause 23 of the llireement and that
the charges were unreasonable and could not be legitimately made.
Another letter dated October 26/November 6, 1951 was sent
by the Divisional Supetintenden1 saying that the siding charges
to b\e .levied with effect from first October 1951 were being assessed
and would be intimated to the plaintiff and meanwhile it should
continue to pay the charges demanded in the letter of September
1951 provisionally.
The Divisional
Superintendent
addressed
another letter dated November 27, 1951 explaining the result of
the test and the actual cost of the shunting etc. A demand was
made that the revised siding charges should be paid from December
1949 to September 30, 1951 at Rs. 4/- per 4 wheeler, Rs. 6/-
per 6 wheeler and Rs. 8/- per 8 wheeler. The plaintiff, however,
did not pay the increased rates demanded. On September 29, 1955
the Divisional Superintendent addressed a letter to the plaintiff
proposing revision of the siding charges with effect from April 1,
1956 after the expiry of six months according to clause 23 of the
agreement.
The charges as demanded were as follows :-
4 wheeled wagon
6 wheeled wagon
8 wheeled wagon
- Rs. 1 ·20/·
Rs. 2 ·10/-
Rs J. 50/·
On May 17, 1957 the General Manager of the Railway sent
a letter to the plaintiff for payment of the amount of Rs. 93,981-8-0
representing the difference between the amounts due from
December 1, 1949 to March 31, 1956. It was intimated that on
failure to make the said payment within one month ihe supply of
wagons would be stopped ancl steps to determine the agreement
would be taken.
In May 1957. the plaintifi served a notice under
s. ·so of the Civil Procedure Code to be defendant and thereafter in
October 1958 the suit out of which the appeal has 'arisen was
filed.
Out of the issues framed by the trial court on the pleadings of
the parties the following need be mentioned :
( 1 ) "Whether the enhancement of the siding charges
by the defendant is unjustified, exorbitant and
illegal ?
-
A
B
c
D
E
F
G
H
'
A
8
c
D
E
F
G
H
UNION v. MODI INDUSTRIES (Grover, J.)
839
(2) Whether the demand of Rs. 93,981-8·0 by the
defendant is illegal ?
(3) Whethe; the court has no .jurisdiction to try the
suit ?"
On issue No. 1 'the trial court held that the charges demanded
were uniustified and
exorbitant.
It was held that out of the
demand of Rs. 93,981-8-0 the demand for Rs. 22,111-3-0 was
illegal. On issue No. 4 the trial court expressed the view that it
had jurisdiction to try the suit in respect of that portion o[ the
claim whereby the legality of the enhanced siding charges had
been challenged on account of being in violation of clause 23 of
the agreement but it had no jurisdiction to try the suit in respect
of the second ground whereby the enhanced siding charges had
been challenged as unjustified and exorbitant.
The plaintiff appealed to the High Court and the defendant
filed cross · ot~ections. The High Court affirmed the finding of
the courts below thirt the enhancement made by the Railway Administration was highly unjustified and exorbitant. But it did not
accept i1s finding about the legali'ty of the enhancement and also
on the question of the jurisdiction of the civil court. The appeal
was consequently allowed in toto and the cross objections were
dismissed.
The principal question which has been -ai:itated
before us
relates to the jurisdiction of the civil court to determine the reasonableness of the charges. A subsidiary question has be~n raised
that assuming the civil court had the
jurisdiction, whether the
courts below were justified in holding ·that to be unreasonable.
For the purpose of determining the question of jurisdiction we shall
have to examine ilie relevant provisions of the Indian Railways
Act, 1890, hereinafter called the 'Act'.
Section 3 contains the
definitions. Clauses 11 and 13 defining the words "traffic" and
"rates" are as follows :-
" ( 11) "trafic" includes rolling stock of every description as well as passengers; animals and goods;
( 13) "rate" includes any fare, charge or other payment for the carriage ·of any passenger, animal
or goods";
Chapter V headed "traffic facilities" commences with s. 26. Ac·
cording to that section except as provided in the Act no suit shall
be instit\lted or proceedings taken for anything
d<?ne or any
omission made by the Railway Administration in violll;llon or con·
travention of any provision of that Chapter.
Section
27 ( 1)
places a duty on every Railway Administration to afford a!I rea·
sonable facilities for the receiving, forwarding and delivermg of
traffic upon and from the several railways belonging to or worked
840
SUPREME COURT REPORTS
[1973] 3 S.C.R,
by it and for the return of the rolling stock.
Section 29 is ay
follows :-
S.29 ( 1) "The Central Government may by general or
special order fix maximum and minimum rates
for the whole or any part of a railway and prescribe the conditions in which such rates
will
apply.
(2) The Central Government may, by a like order,
fix the rates of any other charges for 'the whole
or any part of a railway and prescribe the conditions in which such rates of charges shall apply.
B
(3) Any complaint that a railway administration is
C
contravening any order issued by the Central
Government under sub-section ( 1) shall be determined by the Central Government".
Section 34 relates to the constitution of the Railway Rates Tribunal
for the purpose of discharging functions specified in Chapter V.
Sections 39 ai:d 40 give the jurisdiction and powers of the Tribunal.
I>
Sectfon 41 to the extent it is material may be reproduced :-
S.41 (l) "Any complaint that a railway administration-
( a) is contravening the provisions of s. 28 or
( b) is charging for tile carriage or any commodity
between two stations a rate which is unreasonE
able c~
( c) is levying any other charge which is unreasoncble,
may be made to the Tribunal, and the Tribunal shall hear and
decide any such complaint in accordance with the provisions of
this Chapter".
'2) ......................... .
( 3) In the case of a complaint under clause (b) or
clause ( c) of sulj-section (1), the Tribunal may
fix such rate or charge as it considers reasonable :
Provided that ............................. .
(4) ...........................•.. ,,
On behalf of the appellant the bar created by the s. 26 to the
jurisdiction of ordinary courts has been .invoked.
It has been
argued that s. 29 (2) postulates the fixation of rates of charges
other than those contemplated by sub-s. (l). II there is any
grievance that the railway
administration is levying a
charge
which is unreasonable it will be covered bys. 4l(l)(c) and thereF
G
n
A
D
c
D
E
F
H
UNION v. MODI INDUSTRIES (Grover, J.)
s 41
fore, only a complaint can be made to the railway-administration
in tha't matter. The jurisdiction of the civil court will be barred
because exclusive jurisdiction has been conferred on 'the Railway
!-lates Tribunal for determining whether the charge being levied
is unreasonable.
. According to the High Court Chapter V has nothing to do
with charges which are payable under a contract.
The validity
and interpretation:of clause 23 of the agreement between the parties
was a matter for the interpretation of the civil cour't and could
not possibly be brarred by s. 26 of the Act. Section 41 (1) ( c)
has no application to an enhancement already made in the purported exercise of the right under a contract.
Now section 26 only bars the institution of a suit or proceedings for anything done or any omission made in violation or contravention of any provision of Chapter V. Section 29(2)
empowers the Central
Government to fix the
rates cf any other
charges by a general or special order. In view of 1he language
of s. 41 (1 )(c) if it is assumed that the rates cannot be unreasonable and if the Central Government fixes unreasonable
rates it
may be possible to say that there Iias been a tontravention hr
violation of s. 29(2). But such fixation of rates under that provision has to be ~ a general or special order. It has been suggested that a communication made under a contract cannot fall
within the meaning of the word "order" as contemplated by s. 29.
Prima facie, there may be some difficulty in acceding to the contention of the learned counsel for the appellant that any part c.f
s. 29 will cover a revision of rates made by the railway authority
in terms of a contract but the matter seems to s1and concluded by
the decision of this Court in Union of India v. The Indian Sugar
Mills Association, Calcutta(') according to which it is immaterial
that the charges being levied by the railway administration arise
as a result of a voluntary agreement. The real difficulties in th~
way of the appellant are two fold; firstly, if any question arises
about the validity of a clause oi. a contract that will be entertainable by a civil court. As laid down in Raichiznd Amulakh Shah
v. Union of India( 2 ) the Railways Tribunal has no jurisdiction to
decide whether the rules empowering the railway administration
to levy a particular charge are ultra vires or whether the railway
administration collected amounts in excess of the charges which it
can legally levy
under a rule.
In Upper Doab Sugar Mills
Ltd. v. Shahadara (Delhi) Saharanpur Light
Railway
Company Ltd.(') two main points arose; one was whether the Railway
Tribunal had jurisdiction to entertain the complaint as regards the
reasonableness of the rates prior to the institution of the complaint
) [t957] 3 S. C.R. 219.
(2\ [t9641 5 S, c: R. 148.
(3\ [t963] 2 S. C. R. 333 at p. 342.
6-L797SuPCl/73
842
SUPREME COURT REPORTS
[1973] 3 s.c.R.
and the other was whether it had jurisdiction to 2rant refund for
the aforesaid period. This is what was said by Das Gupta J. :
'
"The words "charging" in cl. (b) and "levying" in
cl. ( c) were used in the one and the same sense. We
find it impos3ible to agree however that they were used
to include "collecting".
It appears to be clear that if
the intention of the legislature was to give the Tribunal
j urisdiC"tion over complaints in connection with charges
already made the legislature would have used the words
"has charged and is charging" and would not merely say
"is charging". Special jurisdiction of such a nature would
be given clearly and the very fact that the words "has
charged" have not been .used is sufficient ground for
thinking that it was not the legislature's intention to
give the Tribunal jurisdiction over complaints in connec!ion with charges made in the past. In our opinion,
the words "is charging" in cl. (b) and "is levying" in
cl. ( c) must be construed to mean "is_ demanding a
price at the present time for services to be rendered".
Coming to the facts of the present case it· is apparent that one
of the main questions involved was whether clause 23 of the
contract between the parties was not void because it contravened
s. 29 of the Indian Contract Aot. Another question which had
to be investigated was whether a proper notice regarding the enhancement of rates had been given in accordance with the terms
of the said agreement.
From the facts which have been stated
it appears that the rates were being revised and actually enhanced,
but then the matter was kept pending and there was exchange of
correspondence and discussion between- the. parties from time to
time.
No effort was made to enforce the demand made in the
various letters and the plaintiff was allowed to make payments
according to the rates originally agreed. It was only in May 1957
that the plaintiff was really threatened to make payment of the
outstanding amount calculated at the revised rates on pain of the
supply of wagons being stopped and the agreement being determined. H is somewhat surprisin.e; that in September 1955 the
rates which were revised were very much less. than those which
were demanded for the prior period. The position thus remained
in a ftexib)e state and there is a good deal of substance in the submission on behalf of the plaintiff-respondent that a complaint was
not filed under s. 41 of the Act because the rates which were
being-paid and actually accepted were the S311\e as the contractual
rates and not the revised or enh~ rates.
According to the
decisions of this Court referred to before it was hardly open to the
plaintiff to file a complaint with regard to the reasonabJeness or
otherwise of the rates and charges which had already become due
I
A
B
c
D
E
F
G
H
JI
c
D
E
UNION v. MODI INDUSTRIES (Grover, J.)
843
and payable.
The plaintiff had no grievance whatsoever
with
regard to the charges which had been fixed with effect from April
l, 1956 by means of the letter dated September 29, 1955 aqd
therefore there was no question of its filing a complaint with
regard to those charges.
Its grievance was confined only to the
amount which was being demanded on !he basis of the revised
enhanced rales between the period Derember _1, 1949 and March
I, 1956. If that amount had actually been realised by the railway
authorities the plaintiff could orily file a suit for its refund and
could not have laid a compaint under s. 41 of the Apt be.fore the
Railway Tribunal. By analogy the plaintiff could not have filed
a complaint with regard to past dues as the Railway Tribunal
could not have given any relief in respect thereof following the
law laid down by this Court. In this view of the matter appart from
other questions involving the validity of clause 23 of the agreement
as also cl the notice or inlimation of enhancemeilt of rates on the
ground of non-compliance . with its terms the suit could not be
held barred under s. 26 of the Act and the civil court could grant
the relief claimed.
We have not been shown any serious infirmity in the reason-
:ing of the High Court by which it arrived at the conclusion that
the qu~stion of reasonableness of. the charges, keeping in mind
the facts of this case, was justiciable. Nor has any justification
been shown for reopening the concurrent finding o.f the two. courts
below that the rates which were demanded for t]le period in question were unreasonable. The suit was thus rightly decreed.
The appeal fails .and it is dismissed; but we make no order as
to costs.
F
G.C.
Appeal dismissed.