Summary
Food Corporation of India hired road transport contractors to move foodgrains from a railway siding in Assam to depots in Tripura. After the contracts were performed, it sought to recover demurrage that the Railways had levied on it, deducting the amounts from the contractors' security deposits. FCI blamed the contractors' failure to provide trucks in time and relied on the clause allowing it to recover 'charges' caused by their negligence. The Supreme Court agreed with the Tripura High Court that 'charges' in these contracts did not include demurrage. Read in the context of the whole contract, the contractors had no duty to load or unload railway wagons. FCI's 2010 and 2018 handling-and-transport contracts, which did impose that duty, expressly listed demurrage. FCI remained free to sue for recovery if the law permitted.
Issues
- Whether 'charges' recoverable by FCI from road transport contractors under the contract's liability and recovery clauses include demurrage levied by the Railways.
Provisions considered
- Section 73, Indian Contract Act, 1872Recovery for breach is limited to losses arising from the contractor's breach; the Single Judge's view that remote losses could not be recovered and that FCI should sue was left undisturbed. (¶¶ 7, 34)
Held
- 'Charges' has no fixed meaning and must be read in the context of the whole contract and its object (Raman Iron Foundry, Provash Chandra Dalui, BESCOM); the neighbouring words costs, damages and expenses do not narrow it. (¶¶ 17, 18, 19, 20, 21, 22)
- These road transport contracts imposed no obligation on the contractors to load or unload railway wagons, the event that attracts demurrage, as FCI's own submissions confirmed; hence 'charges' does not include demurrage and FCI cannot unilaterally impose and recover it. (¶¶ 23, 24, 26)
- Where a latent ambiguity exists, extrinsic material may be consulted; FCI's 2010 and 2018 handling-and-transport contracts, which included wagon loading and expressly listed demurrage, confirm the parties' intention, and decisions describing demurrage as a charge do not help. (¶¶ 27, 28, 29, 30, 31, 32, 33)
Result
FCI's appeals (arising from SLP Nos. 16009-16010 and 16063-16068 of 2019) dismissed, upholding the Tripura High Court decisions in Writ Appeal No. 56 of 2018, Review Petition No. 02 of 2019 and Writ Appeal Nos. 53-58 of 2017; the contractors' appeals (SLP Nos. 4045-4046 of 2021) allowed and the orders in Writ Appeal Nos. 186 and 187 of 2020 set aside; FCI may pursue a recovery suit if the law permits; no costs.