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Adoni Fertilisers Manufacturers and ors. Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal No. 61 of 1973
Judge
Reported inAIR1977AP74
ActsRailways Act, 1890 - Sections 55
AppellantAdoni Fertilisers Manufacturers and ors.
RespondentUnion of India and ors.
Appellant AdvocateC.V.N. Sastry, Adv. for ;N. Ram Mohan Rao, Adv.
Respondent AdvocateP. Venkatarama Reddy, Standing Counsel for Railways
Excerpt:
.....documents showed that there was never any express or implied contract between 6 th defendant and railway administration - circumstance that 6 th defendant was allowed to unload some wagons would not e sufficient to infer contract between 6 th defendant and railway administration - 6 th defendant refused to act on railway receipts endorsed in his favour unless 5 th defendant paid railway freight - plaintiff could only look to defendants 1 to 5 for payment of freight - appeal allowed. - - colliery, air1963pat46 .3. before considering the question of the liability of defendants 6 to 13 it is just as well to know the correct position in law. ganji dosa, air 1929 pat 265, the legal position has been clearly stated by fazl ali j. they unloaded 19 wagons but failed to turn up thereafter..........14-10-1962 the 6th defendant sent a telegram ex. b.2 to the 5th defendant informing him that the coal wagons which had arrived at adoni contained 80% coal powder not useful for steam boiler. they were, therefore not interested in taking delivery. they were not responsible for any loss and demurrage. the 5th defendant in reply, sent a telegram ex. b.3 dated 15-10-1962 advising the 6th defendant that the bank had been instructed to deliver the documents free. the 6th defendant was requested to take delivery and stock the goods in their yard. the 6th defendant sent a telegram ex. b-5 dated 6-10-962 informing the 5th defendant that they were not prepared to take delivery unless the 5th defendant sent freight amount. on 30-10-1962 they sent another telegram informing the 5th defendant that.....
Judgment:

Chinnappa Reddy, J.

1. Defendants 6 to 13 in O. S. No. 31 of 1969 on the file of the Court of the Subordinate Judge, Adoni are the appellants in this appeal. The first respondent-plaintiff filed the suit to recover a sum of Rs. 17,892-05 said to be the amount due to the Railway Administration towards freight charges. The Administration of the Southern Railway was the plaintiff. The case as set out in the plaint was that defendants 1 to 4 booked 24 wagons of steam coal under 24 invoices and corresponding railway receipts on various dates between September and October, 1962. The wagons arrived at Adoni in October and November 1962. The consignee of the consignments was Messrs. V. N. Rajan and Co. Calcutta, the 5th defendant in the suit. Immediately after the arrival of the consignments the 6th defendant unloaded a part of the consignment and stocked them in the D. S. siding and long siding of the plaintiff's premises. Thereafter the 6th defendant did not unload the goods in the remaining wagons, nor did the 6th defendant remove what was already unloaded. The plaintiff wrote to the consignee, namely, Messrs. V. N. Rajan and Co., to remove the goods as lot of inconvenience was being caused to the normal working of the plaintiff. The 5th defendant replied stating that they were only acting as nominees of the Government of Andhra Pradesh and that the wagons were put in their name on account of the Director of Controlled Commodities. The Director of Controlled Commodities had asked them to endorse the railway receipts to the allottee, namely, the 6th defendant. That was done. The 6th defendant was the actual consignee who was liable to pay the freight charges. Thereupon the plaintiff wrote to the Government of Andhra Pradesh to clarify the position. The Government replied stating that they were not liable to pay the freight. Ultimately after observing all necessary formalities the plaintiff disposed of the goods by public auction. After giving credit to the sum realised by public auction the plaintiff sued to recover the balance of freight charges due. The plaintiff alleged that defendants 1 to 4 were liable as they were consignors. The 5th defendant was liable as they were the consignees. In regard to the 6th defendant it was stated, 'the 6th defendant is also liable because they are said to be the allottees to the suit consignees.' Defendants 7 to 12 were impleaded as partners of the 6th defendant and the 13th defendant was added as the successor of the 6th defendant. It is important to notice at this juncture itself that the plaintiff raised no plea that to the knowledge of the Railway Administration either the consignors, defendants 1 to 4, or the consignee, the 5th defendant, were acting as agents of the 6th defendant. Nor was there any plea that there was any special contract between the plaintiff and the 6th defendant either expressly or by implication. Defendants 1 to 5 remained ex parte. The 6th defendant filed a written statement contesting the suit. It was pleaded that there was no privity of contract between the plaintiff and the 6th defendant. High grade steam coal required by the 6th defendant for its chemical industry had been allotted to it by the Government. The 5th defendant was bound to supply it. When the 6th defendant inspected the consignments at Adoni they were found to contain coal powder. The 6th defendant, therefore, rejected the same. Whatever rights and liabilities arose out of the action of the 6th defendant were bilateral matters between the 5th defendant and the 6th defendant. There was no privity of contract between the plaintiff and the 6th defendant which could enable the plaintiff to claim railway freight against the 6th defendant. It was further stated in the written statement that the 6th defendant had obliged the 5th defendant by unloading a part of the consignment. The 6th defendant was under no obligation to unload the rest of the consignment. It was pleaded that defendants 1 to 5 alone are liable for the suit claim and not the 6th defendant. Merely because he was the allottee of coal he did not become liable to pay the freight. To a similar effect defendants 7 to 13 also filed written statements.

2. The learned Subordinate Judge decreed the suit against all the defendants. In regard to defendants 6 to 13 the learned judge took the view that they were the real consignees and, therefore, they were bound to pay the freight charges to the Railway Administration. The learned Judge relied upon a decision of the Patna High Court in D. R. L. Railway Company v. E. K. Colliery, : AIR1963Pat46 .

3. Before considering the question of the liability of defendants 6 to 13 it is just as well to know the correct position in law. The case of D.R.L. Railway Company v. E.K. Colliery ( : AIR1963Pat46 ) on which reliance was placed by the learned Subordinate Judge went to the Supreme Court in appeal. We will, therefore refer to the decision of the Supreme Court which is reported in Kuchwar Lime and Stone Co. v. M/s. Dehri Rohtas L.R. and Co. : [1969]1SCR359 . The facts of the case were as follows : Coal was a controlled commodity at that time and its supply and delivery was regulated by orders issued by the Coal Controller. The Coal Controller issued an order sanctioning the supply of steam coal by the E.K. Colliery to Kuchwar Lime and Stone Company. Priority of Wagon supply was also sanctioned. Pursuant to the allotment order the Company placed an order with colliery for supply of steam coal to the company at Banjari Railway station. The Colliery despatched coal by railway. The wagons arrived at Banjari Railway station. The company declined to take delivery. Thereafter the railway sold the consignment of coal and sued the company for demurrage. The contention of the company was that it was only a consignee of the goods booked by the colliery, there was no privity of contract between the Company and the Railway and, therefore, the Railway could not claim demurrage or freight from the Company. The Supreme Court noticed hat the colliery supplied coal and arranged to transport it to Banjari Railway station in wagons pursuant to the sanction order issued by the Coal Controller in favour of the company and the wagon priority in favour of the consignee. Under the forwarding notes the freight was made payable by the company. In the circumstances, the Supreme Court held that it would be reasonable to infer that the colliery acted as the agent of the company in entering into the contract of consignment and, therefore, the liability for payment of freight and demurrage was upon the company. The Supreme Court also observed that the party primarily liable to pay demurrage was the party for whose convenience the wagons were detained, namely, the consignee. It is clear that in the case before the Supreme Court the allottee was himself the consignee of the goods and the circumstances showed that the consignor was acting as the agent of the consignee. There was no intermediary consignee who was required to accept the coal from the colliery and distribute it to the consumers. The consignee on whose behalf the consignor acted was, therefore liable for the freight charges. In Secretary of State v. Ganji Dosa, AIR 1929 Pat 265, the legal position has been clearly stated by Fazl Ali J. as follows:

'The main question to be decided in this case is whether the consignor was or was not liable for the freight for the recovery of which the suit was instituted. In order to decide this question it will be necessary to find out as to who were the contracting parties in this case and as to what was the nature of the contract between them. If it appears that the contract was between the consignor and the railway company and the consignor had undertaken to pay freight, the consignor would be obviously liable to pay it. If, on the other hand, it appears that the consignor was merely contracting as an agent and that the railway company had sufficient notice that the consignee was the principal for the purpose of the contract and that the consignee was to pay freight, it is equally clear that in such a case the consignee would be principally liable for freight.'

Fazl Ali J. then referred to cases which held that primary liability for payment of the freight was on the consignor. The learned Judge then proceeded to say.

'The decisions of the English Courts are unanimous on the point that the person who is primarily liable for the payment of freight is the consignor, Domett v. Beekford (1833)5 B and Ad. 521: 3 LJKB 10 : 2 N and M 374; Shepard v. De Barnales (1811) 13 East 565; Fox v. Nott (1861) 6 H and N 630 : 7 Jurisdiction. (NS) 663 : 30 LJ EX 259 ; Sewell v. Burdick (1884) 10 AC 74 : 54 LJQB 156 : 5 Asp. MC 376 :33 WR 461 : 52 LT 445. It has been pointed out in some of the cases that the liability of the consignor is to be implied from the mere fact that he has made over the goods to the carrier for the purpose of being carried to their destination and that, therefore, his liability may in some cases be even independent of the question of the actual ownership of the goods: Lidgett v. Lerrin ((1862) 2F and F 763:11 CB (NS) 362). The case, however will be different, if the facts of the case show that the consignor acted to the knowledge of the carrier as agent only in which case the person on whose behalf he acted is in reality the principal and liable for the freight accordingly. Dickenson v. Lano (1860) 2 F and F 188). It follows that the consignee is not as such liable to pay freight because he is generally not to be treated as a party to the contract of carriage. Sanders v. Vanzeller ((1843) 4 QB 260): 3 G and D 580: 12 LJ Ex 497: 2 G and D 244)'.

The learned Judge again said:

'In certain cases however, the consignee has been held to be liable for freight, as for example when he has made himself liable by express contract, Kennedy v. Gouveia ((1823) 3 D and R 503), or when he is treated as the undisclosed principal of the shipper, Sewell v. Burdick ((12884) 10 AC 74). The decisions are not unanimous as to what would be the liability of the consignee of the carrier who is to deliver the goods on payment of freight makes them over to the consignee (or to the endorsee of the bill of lading) without exercising his right to withhold the delivery of the goods until freight has been paid.'

The legal position therefore is that while the consignor as the party entering into the contract with the Railway is primarily liable for freight, the consignee is liable if the consignor to the knowledge of the carrier, acted as the agent of the consignee. The consignee is also liable if there is an express or an implied contract between the consignee and the carrier.

4. From the facts alleged in that plaint it is seen that defendants 1 to 4 were the consignors and defendant 1 to 4 were the consignors and defendant No. 5 was the consignee. There was no way by which the 6th defendant could be made liable. It was not pleaded that either the consignors or the consignee acted as the agents of the 6th defendant. It was not also pleaded that there was any contract express or implied between the plaintiff and the 6th defendant. The suit was liable to be dismissed as against defendants 6 to 13 on the ground that the plaint did not disclose any cause of action against them.

5. We will examine the evidence to see of any other position emerges from the evidence. The system of distribution then prevailing is described as follows in Ex. A- 52, a letter addressed to the General Manager, Southern Railway by the Additional Director of Industries and Commerce.

'As is the practice, steam coal is allotted every month to the consumers against their requirements. The allotments are communicated to the Coal Controller, under intimation to the State nominee. The State nominee obtains consent letters from the Collieries to supply the steam coal and submit a programme to the Coal Controller for issue of sanction. Against the sanction of wagons to the given destinations to the concerned allottees after entering into financial arrangements with the allottees. The functions of the State nominee are detailed as follows:

1. To accept the periodical allotments of Steam Coal as would be made by the Director of Controlled Commodities now re-designated as Additional Director of Industries and Commerce (Rural) and State Coal Controller A.P. remit requisite funds either to the collieries or to the accredited agents on or before the dates specified by them.

2. To distribute the stocks so received in strict accordance with the instructions of the State Coal Controller, Andhra Pradesh.

3. To furnish the distribution statement after delivery of wagons to the allottees.'

At that time Messrs. V.N. Rajan and Co. were appointed as 'State Nominee'. They arranged for the despatch of 24 wagons of coal by the consignors, the owners of the colliery. The consignee mentioned in the invoices was Messrs. V.N. Rajan and Co. (5th defendant). The wagons were booked on 'To pay' basis. There is no evidence whatever to show the circumstances under which the wagons were booked by the consignors. It is however, admitted that the consignors never had anything to do with the 6th defendant. In fact, it is admitted that the consignors were probably not aware for whom the consignment was ultimately meant. It would not, therefore be said that any liability came to be fastened on the 6th defendant on account of the booking of the wagons by the consignors. Under the system of distribution it could be said that the consignors were perhaps acting as the agents of Messrs. V.N. Rajan and Co. but never as the agents of the 6th defendant. So far as the Railway Admininstration is concerned it could never be said that to the knowledge of the Railway Administration either the consignors or the consignee acted as agents of the 6th defendant.

6. Not being either the consignor or the consignee and neither the consignor nor the consignee ever having acted as agents of the 6th defendant to the knowledge of the Railway Administration, the only way in which the Railway Administration could make the 6th defendant liable was to prove a contract express or implied, between the Railway Administration and the 6th defendant. P.W. 2 the Railway Station Master at Adoni at the relevant time deposed that after the arrival of 24 wagons of coal at Adoni, the Hundekars of the 6th defendant contacted him and wanted to unload the coal. They unloaded 19 wagons but failed to turn up thereafter to unload the remaining five wagons. After waiting for a day he himself got the remaining wagons unloaded at the expenses of the Railway. The hundekars told him that they were not interested in unloading. The 6th defendant did not take delivery of the 24 wagons which were finally unloaded. The 5th defendant was the consignee. Defendants 1 to 4 were the consignors. He sent notice to them. He spoke to the subsequent correspondence which passed between the parties. He stated that the Hundekars of the 6th defendant informed him that the 24 wagons of coal were meant for the 6th defendant. Therefore, it was that he permitted them to unload the wagons. The 6th defendant was a regular customer of the Railways and was a reputed firm of Adoni. Hence the Hundekars were allowed to unload even without verification of the R. Rs. In cross examination he admitted that the Railway was bound to deliver the 24 wagons to V.N. Rajan and Co. who was the consignee. He added that V.N. Rajan and Co., had endorsed the consignment to the 6th defendant. But he admitted that Exs. A-1 to A-24, the invoices did not show that they were endorsed to the 6th defendant. He also admitted that the R.Rs. in respect of the 24 wagons were not tendered to the Railway for taking delivery. He did not see the R.Rs. He stated that the did not know whether the 6th defendant unloaded the wagons at the request of the 5th defendant and for his benefit. He stated that by unloading the 19 wagons the 6th defendant made him believe that they were taking delivery. The 8th defendant who was examined as D.W. 1 deposed that the 5th defendant sent Hundis for cost of coal and R.Rs. through the Bank at Adoni. They inspected the coal at Adoni Railway station and found that the consignment was not of coal but of coal dust and bits of coal. Therefore they refused to honour the Hundis and intimated the 5th defendant accordingly. After some correspondence the 5th defendant advised the Bank to issue the R.Rs. to the 6th defendant without payment. The 6th defendant, however, was not prepared to take delivery of the consignments unless the 5th defendant paid the Railway freight also. As that was not done, the R.Rs. were sent back to the 5th defendant by registered post. He stated in cross examination that he got some of the wagons unloaded at Adoni at the instance of the 5th defendant. D.Ws. 2 and 3, the Hundekars of the 6th defendant stated that they unloaded some of the wagons at the instance of the 6th defendant.

7. It is worthy of note that the correspondence which passed between the Railway Administration and the 5th defendant and others clearly shows that it was to be the 5th defendant that the Railway was looking for payment of the freight. The notice under Sections 55 and 56 of the Indian Railways to the 5th defendant on 19-10-1962 (Ex. A-25). In answer the 5th defendant wrote Ex. A-27 stating that they were only acting as State nominees and that the 6th defendant in whose favour the R.Rs. were directed to be endorsed by the State Coal Controller was the real consignee who was legally responsible 'for all consequences'. In this letter the 6th defendant also promised to make alternate arrangements to hand over the goods to some other buyer in the area. The 5th defendant requested the Railway Administration to allow them to have the goods cleared on a nominal ground rent. If that was done they would be able to find a buyer in the neighbourhood of Adoni and dispose of the stock. This letter reveals that it was the 5th defendant that still had and claimed title in the coal and the right to dispose it of. ON 8-1-1963 and the Railway Administration again gave a notice Ex. A- 34 to the 5th defendant under Sections 55 and 56 of the Railways Act. Once again, the 5th defendant wrote to the Railway Administration pointing out that they were making earnest efforts to find a buyer for the coal. They requested the Railway Administration to take over the coal for its local use. They stated that if the Railway itself took over the coal it would solve the problem. Subsequently the coal was sold by the Railway by auction on 6-5-1963 and a sum of Rs.2,500/- was realised. This was intimated to the 5th defendant by Ex. A-41 dated 29-6-1963. The defendant was called upon to pay the balance of Rs. 17,098-05 due to the Railway towards freight. The only letter which the Railway Administration addressed to the 6th defendant was Ex. A-28 dated 4-11-1962 in which the Station Master requested them to unload the rest of the wagons as there was considerable obstruction to operational work by piecemeal unloading and by failure to remove what was unloaded. There was no demand on the 6th defendant to pay freight. No notice under Sections 55 and 56 of the Railways Act was ever served on the 6th defendant. Even on 14-10-1962 the 6th defendant sent a telegram Ex. B.2 to the 5th defendant informing him that the coal wagons which had arrived at Adoni contained 80% coal powder not useful for steam boiler. They were, therefore not interested in taking delivery. They were not responsible for any loss and demurrage. The 5th defendant in reply, sent a telegram Ex. B.3 dated 15-10-1962 advising the 6th defendant that the Bank had been instructed to deliver the documents free. The 6th defendant was requested to take delivery and stock the goods in their yard. The 6th defendant sent a telegram Ex. B-5 dated 6-10-962 informing the 5th defendant that they were not prepared to take delivery unless the 5th defendant sent freight amount. On 30-10-1962 they sent another telegram informing the 5th defendant that they were not taking delivery and that they would not be responsible for consequences. The 5th defendant was asked to make his own arrangements for taking delivery.

8. The oral evidence and the documents referred to above clearly show that there was never any express or implied contract between the 6th defendant and the Railway Administration. That was why, throughout , the Railway Administration was looking to the 5th defendant only for payment of freight. That was why, apparently, even in the plaint nothing was said to fasten any liability upon the upon the 6th defendant. The 6th defendant no doubt unloaded some of the wagons, but he could have done that only on behalf of the 5th defendant as the 5th defendant was the consignee. The circumstances that the 6th defendant was allowed to unload some wagons would not, in our opinion, be sufficient to infer a contract between the 6th defendant and the Railway Administration. It is true that the Railway Receipts were endorsed in favour of the 6th defendant. But the 6th defendant refused to act upon them unless and until the 5th defendant paid the Railway freight. It could not, therefore be said that the 6th defendant had done anything to attract the Administration. Defendants 1 to 5 accepted and remained ex parte. On the pleadings the suit should have never proceeded to trial. How the rights and liabilities inter se between defendants 1 to 5 and the 6th defendant would be adjusted was a matter for them. The plaintiff had nothing to do with the same. The plaintiff could only look to defendants 1 to 5 for payment of freight. We therefore, allow the appeal with costs and dismiss the suit against the defendants 6 to 13 with costs.

9. Appeal allowed.


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