Raichand Amulakh Shah vs Union Of India

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 149-154 of 1959

Decision Date: 21 October, 1963

Coram: P.B. Gajendragadkar, K.N. Wanchoo, N. Rajagopala Ayyangar, J.R. Mudholkar, Subba Rao J.

In the matter of Raichand Amulakh Shah versus the Union of India, the Supreme Court delivered its judgment on 21 October 1963. The bench that heard the case comprised Justice P. B. Gajendragadkar, Justice K. N. Wanchoo, Justice N. Rajagopala Ayyangar and Justice J. R. Mudholkar, with Justice Subbarao also participating in the proceedings. The petitioner was Raichand Amulakh Shah and the respondent was the Union of India, which was sued in its capacity as the representative of the Western Railway. The principal statutory provision in issue was Section 26 of the Indian Railway Act, 1890, and the case was reported as 1964 AIR 1268 and 1964 SCR (5) 148, with subsequent citation reference RF 1973 SC1281 (8). The dispute concerned suits filed by the petitioner against the Western Railway seeking a refund of amounts that had been collected as wharfage and demurrage charges. The plaint alleged that the railway’s notifications and rules, which imposed a charge of two to four annas per maund per day for wharfage, were illegal, ultra vires, and that the railway had no authority under those rules to levy charges for “free time” on the basis of wharfage. The respondent contended that the civil courts lacked jurisdiction to entertain the suits, argued that the rules were not ultra vires, and claimed that the money had been collected in accordance with the applicable rules. The trial court dismissed the suits on the ground that they were barred by Section 26 of the Indian Railways Act, and the subsequent revision applications were also dismissed by the High Court. The petitioner then obtained special leave to appeal before this Court. In accepting the appeals, the Court held that Section 26 does not constitute an absolute bar to the maintainability of a suit for the recovery of wharfage or demurrage that has been charged in excess. The Court explained that the bar prescribed in Section 26 is limited by the introductory words “Except as provided in the Act” and therefore applies only when two conditions are satisfied: first, the railway administration must have performed an act or omitted to act in contravention of the provisions of Chapter V of the Indian Railways Act; second, the Act must provide a specific remedy for that act or omission. The Court observed that, in the present circumstances, the Act does not furnish any remedy that would allow an aggrieved party to approach the tribunal created under Section 34 for a refund of excess amounts collected as wharfage or demurrage. Consequently, the tribunal lacks jurisdiction to determine whether the rules authorising such collections are ultra vires or whether the amounts collected exceed the limits established by those rules. The Court further clarified that wharfage and demurrage constitute charges levied on goods that have been unloaded from wagons and are kept at the station or on the station platform beyond the period of “free time” allowed for clearance under the applicable rules, and such charges are therefore subject to the statutory analysis set out above.

It was observed that the amounts identified as “149” could be described as charges relating to the railway station and that they fell within the definition of “terminals” as used in the Act. The matter came before the Civil Appellate Jurisdiction of the Supreme Court under Civil Appeals numbered 149 to 154 of 1959. These appeals were taken by special leave from a judgment and order dated 25 February 1958 delivered by the former Bombay High Court at Rajkot in Civil Revision Applications numbered 46, 49, 55, 57, 58 and 59 of 1958. Counsel for the appellants comprised three members, while counsel for the respondents comprised two members. The judgment was pronounced on 21 October 1963 and was delivered by Justice Subba Rao. The six appeals, all obtained by special leave, presented a single legal issue: whether suits instituted against the Western Railway for the return of sums collected from the appellant firm as wharfage or demurrage could be entertained by a civil court. Civil Appeals numbered 152 and 153 of 1959 concerned suits for the recovery of sums said to be demurrage, whereas the remaining appeals concerned recovery of sums alleged to be wharfage charges. The Court noted that it would be sufficient to present the particulars of the claim in one of the suits because the parties at the Bar had affirmed that the refund claims were essentially identical in all the other suits. Apart from the plaint in Civil Suit No. 109 of 1957, none of the other plaints were placed before the Court. Consequently the Court proceeded on the basis that the material allegations in each plaint were alike, especially since the contention raised by counsel for the appellants was not contested by counsel for the respondents.

Civil Suit No. 109 of 1957, which formed the basis of Civil Appeal No. 149 of 1959, was filed by the appellants to recover a sum of Rs 295 from the Union of India, which represented the Western Railway. The appellants were a firm engaged in commercial activities at Surendranagar. The firm had received a consignment consisting of 125 bags of rice that had been booked for carriage from Belanganj to the Surendranagar railway station. When the consignment was being delivered, the Station Master at Surendranagar demanded and collected from the appellant firm the sum of Rs 275‑7‑0 as wharfage charges. The plaint alleged that the railway notifications and rules authorising the levy of wharfage at a rate of two annas to four annas per maund per day were illegal and ultra vires, and further submitted that the railway possessed no authority under those rules to impose charges for “free time” within the category of wharfage. On the basis of these allegations, the suit sought the refund of the amount collected by the railway. The defendant, responding to the suit, denied that the rules were ultra vires and denied that the amount had been collected in contravention of the rules. Instead, the defendant contended that the civil court lacked jurisdiction to entertain the suit. The appellants reported that similar suits had been instituted in other instances, raising comparable contentions.

In the matter before the Court, the appellant‑firm had earlier instituted several suits that sought the recovery of other amounts in addition to the wharfage charge, and similar arguments were raised in those proceedings. The learned Civil Judge dismissed every one of those suits on the basis that they were barred by section 26 of the Indian Railways Act, 1890 (Act IX of 1890), hereinafter referred to as the Act. The appellant‑firm filed revisions of the Civil Judge’s judgments before the High Court of Bombay at Rajkot. The High Court adopted the Civil Judge’s reasoning, upheld the dismissals, and consequently the parties appealed to this Court. The sole issue that required determination was whether section 26 of the Act operated as a complete bar to the maintainability of civil suits that sought a refund of the amounts collected from the appellant‑firm in the form of wharfage and demurrage charges. To evaluate the parties’ positions, the Court examined the pertinent provisions of the Act. It was noted that the charges in question had been levied during the years 1953 to 1955; therefore, the Court elected to disregard any amendments to the Act that were made after that period for the purpose of the present inquiry. Section 3(14) defines the term “terminals” to include charges relating to stations, sidings, wharves, depots, warehouses, cranes and other similar matters, as well as any services rendered thereat. Section 26 provides that, except as expressly permitted by the Act, no suit or other proceeding may be instituted for any act or omission of a railway administration that violates or contravenes any provision of Chapter V of the Act. Section 32 empowers the Central Government, by general or special order, to fix the rates of terminal and other charges for the whole or any part of a railway and to prescribe the conditions under which those rates shall apply. Section 34(1) creates a Railway Rates Tribunal to discharge the functions specified in that Chapter. Section 41(i) authorises any aggrieved party to present a complaint before the Tribunal when a railway administration is levying charges other than the standardised terminal charges that are unreasonable, and the Tribunal is mandated to hear and determine such complaints in accordance with the provisions of the Chapter. Section 45 clarifies that nothing in the Chapter confers jurisdiction on the Tribunal over the scales of charges imposed by a railway administration for the carriage of passengers, their luggage, parcels, military traffic, railway materials and stores, or demurrage charges, except where the Central Government makes a specific reference to the Tribunal. Section 46A provides that the Tribunal’s decision shall be made by a majority of its members and shall be final, subject to a limited right of appeal to a Full Bench when a single member has decided the matter, and that such appeal, if permitted, shall likewise be final. Section 46B also deals with the appellate procedure. The Court thus set out the statutory framework that would govern its determination of whether the civil suits were barred by section 26.

The Tribunal was empowered to forward any order it issued to a civil court that possessed local jurisdiction, and such a civil court was required to enforce the order as if it were a decree, as provided by Section 46C. Within the same chapter, the term “demurrage” was defined to mean the charge imposed after the expiry of the free period allowed for loading or unloading a wagon. The legislative scheme underlying these provisions was described as straightforward. The Central Government held the authority to determine the rates of terminal and other charges for an entire railway or for any part thereof. When a railway administration imposed charges that were not amongst the standardised terminal charges and those charges were unreasonable, an aggrieved party could lodge a complaint against the railway administration before the Railway Rates Tribunal. The Tribunal’s decision on such a complaint was declared to be final. Regarding demurrage charges mentioned in section 45 of the Act, the Tribunal was held to have no jurisdiction to entertain a claim concerning those charges unless the Central Government specifically referred the matter to the Tribunal. Section 26 of the Act prohibited ordinary civil courts from entertaining any suit or proceeding relating to any act or omission by the railway administration that violated or contravened any provision of Chapter V. Consequently, an aggrieved party could pursue relief only through the procedure prescribed by the Act. The central issue, therefore, was whether claims for refund fell within the prohibition created by section 26. Because section 26 removed the jurisdiction of civil courts, its language was required to be interpreted narrowly. The prohibition applied to any act or omission by the railway administration that contravened Chapter V, but the introductory words “Except as provided in this Act” limited the scope of the bar. Those words were interpreted to mean that the bar applied only to matters for which the Act itself offered a remedial mechanism. Accordingly, before the effect of section 26 could be invoked, two conditions had to be satisfied: first, the railway administration must have performed an act or failed to perform an act in contravention of Chapter V; and second, the Act must contain a specific remedy for that particular act or omission.

It was submitted that the charges imposed by the railway administration under the headings “wharfage” and “demurrage” should be classified as “terminal” charges. The argument centered on whether those charges fell within the definition of terminals, which was provided in section 3(14) of the Act and encompassed charges relating to stations, sidings, wharves, depots, warehouses, cranes and similar facilities, as well as any services rendered at those locations. The discussion therefore required an examination of the meaning of “wharfage” and “demurrage” as understood by the Act and the regulations made thereunder, to determine if they could be treated as terminal charges and consequently fall within the ambit of the statutory scheme governing refunds and remedies.

In this matter, the Government had framed rules under section 32 of the Act, and the appellants alleged that the rates collected by the railway administration exceeded the rates prescribed in those rules; consequently, they argued that section 26 barred any suit for recovery of the amounts. The Court first examined whether the charges called “wharfage” and “demurrage” fell within the definition of “terminals”. Section 3(14) of the Act defines “terminals” to include charges relating to stations, sidings, wharves, depots, warehouses, cranes and other similar matters, as well as any services rendered at those places. Under section 32, the Central Government may, by a general or special order, fix the rates of terminal and other charges for the whole or any part of a railway and may prescribe the conditions under which such rates will apply. To determine whether wharfage and demurrage are “terminals”, it was necessary to ascertain the meaning of those words as understood by the Act and the rules made thereunder. The Act contains no definition of “wharfage”, whereas section 46C(d) defines “demurrage” as the charge levied after the expiry of the free time allowed for loading or unloading a wagon. The applicable rules, presumed to have been made under the Act, provide a clear exposition of the terms, and the relevant provision is rule 85. Rule 85 states that the actual wharfage and demurrage rules locally in force on different railways are published in each railway’s tariffs and may be ascertained by application at the stations. The rule then sets out the wharfage and demurrage rules that were in force on the Bengal and Bihar and Central India Railway, now known as the Western Railway. Clauses (A) and (B) of that rule give the rates of wharfage and demurrage, while clause (C) defines the two charges. Clause (C)(i) provides that when wagons required to be unloaded by consignees are not unloaded within the free time of six daylight‑tight hours after being placed in position for unloading, demurrage, as specified in clause (B), will be charged for the time exceeding those six daylight hours during which the goods remain in the wagon, and wharfage at the rate notified for the station will be charged if the goods are not removed from the railway premises by the end of the day following the day on which they are unloaded. Clause (C)(ii) states that when wagons are unloaded within the free time of six daylight hours after being placed for unloading, wharfage at the rate notified for the station will be charged if the goods are not removed from the railway premises by the end of the day following the expiry of that six‑hour free period. Accordingly, demurrage is the charge imposed on goods that are not unloaded from the wagons within the six daylight‑hour free time, and wharfage is the charge imposed on goods that are not removed from the railway premises after the free time allotted for their removal has expired.

In this case, the Court observed that the period of time permitted for the purpose of unloading had been prescribed, and that section 46C(d) of the Act, which was inserted by Act 65 of 1945, had essentially incorporated the definition of the term “demurrage” that appeared in the relevant rule. Consequently, the Court explained that both wharfage and demurrage were charges imposed for goods that remained in the wagons or on railway premises after the free time for clearance prescribed by the rules had expired. The Court then asked whether such charges could be classified as “terminal charges” within the meaning of the Act. It pointed out that the expression “terminal charges” had been introduced for the first time in the Indian Railways Act, 1890, and that the definition had been adopted from section 55 of the English Railway and Canal Traffic Act, 1888. The Court identified two categories of terminal charges: first, charges for services, and second, charges for accommodation and appliances that facilitate business. The “service terminals” comprised remuneration for handling goods at the terminal station, such as weighing, loading and unloading performed by railway employees. Distinct from these were “station terminals,” which were charges for providing accommodation incidental to the carrier’s business, including working charges, repairs, renewals, insurance of station buildings, sidings, sheds, platforms, warehouses, cranes, hydraulic power and other fixed appliances. The Court held that both demurrage and wharfage fell within the head of “station terminals” because they were levied for the use of the wagon, the platform or the goods‑shed after the transit or conveyance had been completed and were not incidental to the conveyance itself. Because charges related to stations were included in the definition of “terminals” under the Act, the Court concluded that wharfage and demurrage, being charges on goods unloaded from wagons and kept at the station or on the station’s platforms, could rightly be described as charges in respect of the station and therefore qualified as “terminal charges” within the meaning of the Act. The Court then examined whether the Act provided any remedy for a party who alleged that such charges had been wrongly collected. It noted that the Tribunal constituted under section 34 of the Act possessed jurisdiction to determine whether charges imposed by the railway administration that were not standardised terminal charges were unreasonable. However, the Court observed that the Act did not furnish any remedy allowing an aggrieved party to approach the Tribunal for a refund of amounts collected as wharfage or demurrage on the ground that the rules authorising the railway administration were ultra vires, or that the amounts collected exceeded the rates prescribed by the rules. The Court further explained that if the contested charges were standardised terminal charges, the dispute would fall outside section 41 of the Act. Conversely, if the charges were not standardised terminal charges, the Tribunal’s jurisdiction was limited solely to the question of the reasonableness of those charges.

The tribunal could examine only whether a charge was reasonable. It possessed no authority to determine whether the rules that empowered the railway administration to impose a particular charge were beyond the powers granted by law, nor could it decide whether the administration had collected amounts that exceeded the limits set by any valid rule. Consequently, no provision in the Act creates a remedy for an aggrieved party to seek a refund of amounts alleged to have been collected from the appellants. Therefore, section 26 of the Act cannot be invoked as a bar to the maintainability of the suits filed by the appellants. The Court declined to express a view on whether the demurrage charges in dispute fall within the definition of “demurrage charges” under section 45 of the Act, because that question had not been raised before the Court, and consequently it also refrained from deciding whether the tribunal’s jurisdiction could be invoked only in the manner prescribed in that section. For the reasons set out above, the Court held that both the High Court and the trial Court erred in dismissing the suits on the ground that section 26 of the Act barred their maintainability. The Court therefore set aside the judgment of the High Court and also the judgment of the trial Court, and remanded the suits to the trial Court for disposal in accordance with law. The Court clarified that it was not expressing any opinion on the other questions raised in the suits. The respondent was ordered to pay the costs of the appellants in these proceedings. The costs of the courts below were to follow the result. The suits were remanded.