Calcutta High Court (Appellete Side)
Reshmi Metaliks Limited & Anr vs Union Of India & Ors on 24 December, 2014
Author: Jyotirmay Bhattacharya
Bench: Jyotirmay Bhattacharya
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
Appellate Side
Present:
The Hon'ble Justice Jyotirmay Bhattacharya
And
The Hon'ble Justice Tapash Mookherjee
MAT 1970 of 2014
With
CAN 10686 of 2014
Reshmi Metaliks Limited & Anr.
-Vs-
Union of India & Ors.
For the Appellant : Mr. Saktinath Mukherjee, Snr. Adv.
: Mr. Abhijit Chatterjee, Adv.
: Mr. S.N. Mookherjee, Adv.
: Mr. Kishore Dutta, Adv.
: Mr. Ajay Choudhury, Adv.
: Mr. Gourav Khaitan, Adv.
: Ms. Pritha Basu, Adv
For the Respondent : Mr. Saptarshi Roy,Adv.
(S.E. Railway)
Heard On : 26.11.2014, 10.12.2014, 17.12.2014 &
18.12.2014
Judgment On : 24th December, 2014 .
Jyotirmay Bhattacharya, J:
This Mandamus Appeal is directed against the judgment and/or order passed by a lea
Single Judge of this Court on 29th September, 2014 in W.P No.14656(W) of 2011, at the ins
of the writ petitioner/appellant herein.
Let us now consider the merit of this present appeal in the facts of the instant case.
appellant No.1 carries on business of manufacture and sale of iron ore related products. I
usual course of its business the said appellant transports iron ore through railway wagons.
railways have fixed different tariffs for carriage of different goods. For carriage of iron ore, hi
tariff i.e., Class 180 is charged when iron ore is transported for domestic consumption b
consignee. However, in respect of iron ore which is meant for non-domestic consumption sa
example for export, the railways imposed an additional Distance Based Charge in additi
Class 180 tariff. The appellant has availed of railway services from time to time for carria
iron ore from Odisha and Jharkhand to West Bengal through wagons by paying tariff at th
as mentioned in Class 180.
On 16th August, 2011 the railways issued a demand notice followed by demand-cum-
cause notice by corrigendum dated 8th August, 2011, inter alia, alleging that the appellan
availed of railway services by paying concessional tariff at Class 180 by declaring that the iro
transported by the appellant was meant for domestic consumption but in fact the appellan
exported iron ore without utilizing the same for its domestic consumption. By the said dem
cum-show cause notice, the railways claimed a sum of Rs.1,32,00,01,758/- towards ev
freight charges and a further sum of Rs.5,28,00,07,032.00 towards penalty and additionally
railway services were suspended. The said demand-cum-show cause notice dated 16th Au
2011 is under challenge in the writ petition. Affidavits were exchanged between the parties i
said proceeding. In the said proceeding the following issues were raised:-
1. Whether the railway administration has any power or authority of making direct recove
evaded freight charges through any coercive means?
2. Whether the Rates Circular No.36 of 2009 issued by the railway board on 1st June, 20
legal and enforceable?
3. Whether the railway administration is entitled to impose penal charges in the ma
prescribed in clause or para 6 of the Rates Circular No.36 of 2009?
4. Whether the railway administration is empowered to black list the appellant and th
prevent it from enjoying the railway services for transshipment of iron ore from one stati
the other on the ground of alleged evasion of railway freights?
The said writ petition was disposed of by the learned Trial Judge in the following terms.
48. "This writ petition is thus disposed of in the following terms:-
a) Clause 6 of the Rates Circular No. 36 of 2009 is valid and
enforceable.
b) The Railway Administration is entitled to impose penal charges
in the manner prescribed in aforesaid Clause or para 6.
c) The Central Government shall be entitled to issue direction on
Railway Administration for blacklisting the petitioner if there is
any false, inaccurate or misleading statement in the
endorsement of the forwarding note and/or affidavit furnished
under the provisions of para/clause 3 of the said Rates
Circular, but the authorities will have to give fresh notice of
show cause in such a situation, and give opportunity of hearing
to the petitioners.
d) The Railway Administration shall also be empowered to
suspend the operation of the petitioners in relation to their
loading activities for a limited period of time after issue of a
fresh notice to show cause and upon giving opportunity of
hearing to the petitioners, if breach of conditions in availing
lower freight rate is established during such administrative
proceeding.
e) In the event the petitioners have transported any goods paying
the lower freight rate specified for domestic use of iron ore
without filing proper indemnity note or affidavit from an
authorized person as per the prescribed form, then the
petitioners shall be charged as per the regular rate fixed for
transporting iron ore and the Railway Administration in such a
situation shall raise demand on the petitioners within a period
of eight weeks. A statement shall be given to the petitioners as
part of the demand notice showing the manner of computation
of the differential rates. The petitioners shall be liable pay the
differential rates within a period of four weeks from the date of
receipt of the demand.
f) The entire transportation of goods, being iron ore by the
petitioners which have been carried on without furnishing of
affidavits by an authorized person as admitted in paragraph
44 of the writ petition, shall be charged at the regular rate for
transportation of iron ore and the petitioners shall not be
entitled to claim lower freight rate meant for domestic use for
such goods. But recovery for the same would have to be by
institution of a civil suit.
g) The Railway Authorities shall otherwise be entitled to proceed
with adjudication at the administrative level in terms of Section-
B of the demand notice.
h) As agreed by Mr. Pathak, for recovery of the sum specified in
the demand notice, the respondents shall be entitled to proceed
with the civil action".
On perusal of the pleadings of the parties and after hearing the learned Counsel appea
for the parties, we feel that the dispute involved in the said writ petition can be re-classi
under two broad heads which are as follows:-
i.e, (i) Whether the railway administration has the jurisdiction and/or competence eithe
determine and/or realize the alleged evaded freight charges through coercive measure
And
(ii) Whether the railway administration being a common carrier as distinguished f
private carrier can refuse to render its services by black listing the appellant
thereby preclude the appellant from availing of railway services for trans-shipmen
iron ore from one station to the other by wagons, even if the Appellant is agreeabl
pay freight charges as per the Rates Circular issued by the Railway Board?
These are the two broad issues which are now before us for consideration.
With regard to the first issue, that is, the authority and/or jurisdiction of the rail
administration to undertake an adjudication proceeding for determining the alleged eva
freight charges and/or realization thereof by coercive measure without following due cours
law, we find from the judgment of the learned Single Judge that even the learned Solic
General appearing for the railway administration conceded that the railway administration d
not have any power or authority of making direct recovery of evaded freight charges through
coercive measure and the appropriate course for the railway administration for realizatio
such alleged evaded freight charges would be by institution of a proceeding of civil natur
accordance with law. Such concession of the learned Solicitor General was recorded in
impugned order. In view of such concession given by the learned Solicitor General, we do
find any necessity of considering the first issue as indicated above. Suffice it to say that e
without taking note of such concession of the learned Solicitor General, we have no hesitatio
hold that since the Railways Act, 1989 has not empowered the railway authority to determ
the alleged evaded freight charges by itself, the railway administration, in our view, can
undertake any adjudication proceeding for determining the freight charges allegedly evaded
the appellant during the relevant period from 2008-2011 and for the same reason the rail
authorities are also not entitled to realise its self-estimated evaded freight charges from
appellant through coercive measure.
Even in course of hearing of this appeal, Mr. Roy, learned Counsel appearing for
railway administration clearly submitted that the Railways Act, 1989 has not vested
jurisdiction upon the railway administration either to undertake any adjudication proceeding
determining the freight amount allegedly evaded by the appellant or for realization thereof f
the appellant by any coercive measure. He also conceded before us that the Civil Court is
appropriate forum for determining the evaded freight amount and for realization thereof from
appellant. Mr. Roy further informs us that his client has already filed a suit before the C
Court for realization of the evaded freight Charges during the period from 2008-2011 toge
with penalty and the said suit is now pending before the Civil Court. In view of the facts
circumstances as stated above we hold that the first issue as indicated above is decided
favour of the appellants.
Let us now concentrate on the other issue on which the parties are fighting with e
other.
Ref: Legality of Rates Circular No.36 of 2009.
The said circular was issued by the Railway Board on the subject of classification of iron
The railways have fixed different tariffs for carriage of different goods. For carriage of iron
for domestic consumption, highest tariff i.e., class 180 is charged as per the said Rates Circu
However, in respect of iron ore which is meant for non-domestic consumption, that is, for exp
the railways imposed an additional Distance Based Charge in addition to Class 180 ta
Issuance of such Rates Circular by the Railway Board cannot be held to be invalid for wan
jurisdiction as Section 30 and 31 of the Railways Act, 1989 vested such jurisdiction with
Central Government to issue Rates Circular for fixation of different rates for different classe
goods and to lay down the conditions subject to which such rates shall apply with powe
classify or re-classify any commodity for the purpose of determining the rates to be charged
the carriage of such commodities and/or increase or reduce the class rates and other charges
Though jurisdiction for fixation of rates and classification of commodities was given to
Central Government by the Railways Act, 1989 but the said jurisdiction can also be exercised
the Railway Board in view of the provisions contained in Section 2 of the Indian Railways Bo
Act, 1905. Thus, we cannot declare that the Rates Circular No.36 of 2009 is invalid
inoperative for want of jurisdiction as it was issued by the Railway Board having jurisdictio
issue such circular.
Ref: Legality of the demand-cum-show cause notice.
We are now required to consider the legality and/or validity of the demand-cum-show ca
notice so far as part B thereof is concerned in the light of the Rates Circular No.36 of 2009
the other relevant provisions of the Railways Act of 1989. Since two freight rates are prescri
depending upon different circumstances, we feel it necessary to set out hereunder s
paragraphs of the said Rates Circular which according to us are relevant for our pres
purpose:-
" III Submission of Affidavit by consignee before taking
delivery
After arrival of the consignment at the destination terminal,
consignee will be given delivery of the consignment only after
he furnishes an affidavit on non-judicial stamp paper (for each
rake) which should inter alia include the following averments.
"It is certified under oath that the consignments of iron ore
received on date...... with RR no ..... in wagon nos .... at .....
Goods shed/siding is meant for domestic consumption at the
manufacturing unit ..... located at ..... with Factory registration
no ----- and Cenvat no ... It is also certified this consignment is
not meant for export out of India and this consignment will not
be exported out of India under any circumstances."
IV Issue of Railway Receipt
Railway receipt will be issued only in the name the
consignee in respect of whom the prescribed documents have
been submitted by the consignor to Railways under provisions
of Para 3(B). Delivery of such consignments will only be made
to the consignee mentioned on the railway receipt. Non
conformity with these conditions will result in charging freight
at Class 180 plus Distances Based Charge and recovery of
undercharges will be made.
V Furnishing of Indemnity Note by Consignee
The consignee must also furnish a stamped indemnity note to
indemnify the railway against mis-declaration of export iron ore
as domestic iron ore for non payment of Distance Based Charge
or any other misuse of rules prescribed by Railways from time to
time.
4. Other conditions
a) Under provisions of Para 3, railway receipt will be
issued only in the name of the consignee in respect of whom the
prescribed documents have been submitted by the consignor to
Railways.
b) Delivery of such consignments will only be made to
the consignee mentioned on the railway receipt.
c) If conditions at 4(a) and (b) above are not complied
with, freight will be realized at Class 180 plus Distance Based
Charge, by raising undercharges wherever necessary. CGS of
destination terminal must keep a close watch on compliance of
these instructions.
6 If at any stage, it is detected that the endorsement of
Forwarding Note and/or the affidavit furnished under the
provisions of Para 3 was false, inaccurate or misleading, penalty
for mis-declaration shall be imposed as per extant instructions. In
addition, such consignors and consignees will be blacklisted for a
period of three years for transport of iron ore from any terminal of
Indian Railways. Railway may also take recourse to further legal
action in such cases.
8. Some of Iron & Steel manufacturing units get iron ore lumps from the
mining area to their units and dispatch the left over/residual iron ore
fines for export. In this case, the incoming material will be charged at
Class 180n subject to fulfillment of conditions mentioned in para 3
above. The outward movement of iron ore fines from such units will
be charged at Class 180 along with levy of Distance Based Charge".
It is alleged by the railway administration that during the relevant period of 2008-2011,
appellant company being an investor in Wagon Investment Scheme enjoyed the benefits of
said scheme for availing of rakes for transportation of iron ore from different stations of
States of Odisha and Jharkhand to its factory in West Bengal on payment of normal freight
as per Class 180 on submission of affidavit and/or indemnity note in the prescribed form
declaring on oath that all assignments of iron ore are meant for domestic consumption at
manufacturing unit of the appellant company at West Bengal. Relying upon the statements
oath made by the representatives of the appellant company about the enduse of s
transported iron ore through rakes of wagons, the railway authorities delivered the transpo
iron ore through rakes to the appellant company at the delivery station by accepting the fre
rates as per Class 180 without recovering additional payment of Distance Based Charges as
the said Rates Circular. The Rates Circular No.36 of 2009 provides for charging of freight
on iron ore at the rate mentioned in class 180 provided the iron ore transported through rail
wagons are used for domestic consumption by the consignee. The said circular thus, make
amply clear that if the iron ore transported through wagons are not utilized by the consignee
domestic consumption then the consignee is liable to pay the freight charges at Class 180 p
Distance Based Charges. Here is the case where it is alleged by the railway administration
though the appellant company received the delivery of such consignments by submitting
affidavit and indemnity note with railway administration stating therein that the transpo
iron ore under such consignments will be used for domestic consumption by the appellant a
factory but, in fact, large quantity of such transported iron ore was exported to diffe
countries without consuming the same for domestic purpose. Since large quantity of s
transported iron ore was not used for domestic consumption by the appellant, the rail
administration held the appellant company not only liable to pay Distance Based Charge
addition to the freight charges paid as per Class 180 but also penalty for evading paymen
such Distance Based Charges. We have already mentioned above that a suit has already b
filed by the railway administration for realization of such claim on account of evasion of rail
freight charges by the appellant company.
We have considered the plaint of the said suit. We find that the very foundation of the cl
of the railway administration in the said suit rests on identical allegation made by the rail
administration against the appellant company in its demand-cum- show cause notice. The C
Court has not yet decided the said suit. The claim of the railway administration is still
liquid shape which will be transformed into a solid state only when the Civil Court a
adjudication of the dispute involved in the said suit, declares the entitlement of the rail
administration to realise its claim as a debt of the company. Until a decree is passed in favou
the railway administration in the said suit by fixing the liability of the appellant company to
any amount on account of such alleged evaded freight charges, the appellant company canno
saddled with any penalty by the railway administration on the basis of its self-determinatio
the alleged evaded amount, inasmuch as the Railways Act, 1989 does not vest any autho
with the railway administration either to make any self-assessment in this regard or to imp
penalty upon it for non-compliance of the railway's demand on account of its self-assessm
towards evasion of railway freight charges. In this regard, reference may be made to the deci
of the Hon'ble Supreme Court in the case of Satwant Singh Sawhney V. D Ramarath
Assistant Passport Officer, New Delhi & Ors. reported in AIR 1967 (SC)1836, wherein it was h
that as per Article 14 of the Constitution of India the State shall not deny to any person equa
before the law or the equal protection of the laws within the territory of India and this doctrin
equality before the law is a necessary corollary to the high concept of rule of law accepted by
Constitution and one of the aspects of rule of law is that every executive action, if it is to ope
to the prejudice of any person, must be supported by legislative authority. The said decisio
the Hon'ble Supreme Court makes it clear that unless the executive action is supported by s
legislative authority, such executive action cannot be supported. Here is the case where we
that the Railways Act, 1989 has not vested any authority with the Central Government and
the Railway Board either to make any self-assessment of such evaded tariff or for realizatio
the same by coercive measure or for imposition of any penalty by way of blacklisting
consignee for non-payment of alleged evaded tariff. Since the railway administration has iss
the show cause notice calling upon the appellant company to reply as to whether the appel
company should be blacklisted for non-payment of the alleged evaded amount of tariff or not
such action of the executive having not been supported by legislative sanction, this Court ha
hesitation to hold that the railway administration issued the show cause notice with
jurisdiction, particularly when the very issue which was raised in part B of the said show c
notice is now sub-judice before the Civil Court.
In this regard, we also find support from another decision of this Court in the case of
Surendra Kumar Roy Chowdhury V. Collector of Calcutta reported in 1985(1) CLJ 332 where
was held that the Government cannot unilaterally enforce the contract by self-determinat
regarding violation of contract of indemnity as none can be the judge of his own case. It
further held therein that the Government can enforce the contract of indemnity only w
factum of breach of contract and the extent of loss is determined by Civil Court and/or by
authority which has been vested with the jurisdiction of such determination under provisio
any statute.
Identically it was also held by the Hon'ble Supreme Court in another case reported in
1974 SC 1265 (Union of India V. Raman Iron Foundry) that no pecuniary liability arises till
Court has determined that the party complaining of the breach is entitled to damages. But
that determination, there is no liability at all upon the defendant.
Mr. Mukherjee, learned Senior Counsel, appearing for the appellant thus submitted
since the Railways Act, 1989 does not give any authority to the Railway Board to impose
penalty by way of blacklisting the consignor and/or the consignee for a period of three years,
provision contained in para 6 of the said Rates Circular cannot be implemented.
Mr. Mukherjee, learned Senior Counsel, thus invited us to interfere with the impugned o
which according to him was passed by the learned Trial Judge without properly appreciating
scheme of the Railway Act of 1989 which does not authorize the Railway authority to issue s
show cause notice for
holding any enquiry into the subject under reference in the said show cause notice
Mr.Roy, learned Counsel appearing for the railway authority, the respondent herein, subm
that though it is true that the monetary claim for realization of the evaded freight charges
the penalty arising therefrom can only be enforced by instituting a suit before the Civil Court
it cannot be said that the railway authority has no jurisdiction to blacklist the appel
company on detection of evasion of railway freight charges on the basis of fraudu
misrepresentation made before the authority regarding the enduse of the transported iron
on affidavit. In this regard, he has relied upon the provision contained in paragraph 6 of
Rates Circular No.36 of 2009 which provides as follows :-
Para 6:If at any stage, it is detected that the endorsement of
Forwarding Note and/or the affidavit furnished under the
provisions of Para 3 was false, inaccurate or misleading,
penalty for mis-declaration shall be imposed as per extant
instructions. In addition, such consignors and consignees will
be blacklisted for a period of three years for transport of iron
ore from any terminal of Indian Railways. Railway may also
take recourse to further legal action in such cases.
By referring to the said provision, Mr. Roy contended that when the declaration given by
the appellant company in the affidavit under provision of para 3 for utilization of th
transported iron ore through wagons for domestic consumption was found to be false and
inaccurate and/or misleading, the railway authority instead of imposing penalty by way o
blacklisting the appellant company, issued the said show cause notice as the Railway
authority thought that penalty for giving such false and inaccurate declaration on affidavi
should not be imposed without giving reasonable opportunity of hearing to the appellan
company. He thus, tried to trace out the authority of the railways administration to blacklis
the consignor and/or the consignee for a period of three years from para 6 of the said Rate
Circular.
Mr. Roy, cited the following decisions of the Hon'ble Supreme Court to support hi
contention that the railway administration has the jurisdiction to blacklist the appellan
company which defrauded the railways administration by evading payment of actual freigh
rate applicable to the consignment under Rates Circular 36 of 2009 by giving false and/o
misleading and/or incorrect declaration on affidavit and/or by furnishing an identica
indemnity note regarding the end use of the transported iron ore:-
(1) Unreported decision of the Hon'ble Supreme Court in the case of M/S Kulja Industrie
Ltd. V. Chief General Manager W.T Project BSNL & Ors. delivered in Civil appeal No.8944
of 2013
(2) In the case of Mahabir Auto Store & Ors. V. Indian Oil Corporation & Ors. reported in
AIR 1990 (SC) 1031
(3) In the case of Patel Engineering Ltd. V. Union of India reported in AIR 2012 SC 2342.
We have considered those decisions. In those decisions the Hon'ble Supreme court no doub
held that blacklisting is permissible but those are the cases where a question arose as t
whether jurisdiction of blacklisting can be exercised in the realm of contractual field. It wa
also held by the Hon'ble Apex Court therein that blacklisting is permissible where such
exercise is supported by legislative approval. The said decision is not applicable in th
present case as the rights of the parties in the present case are not governed by contract
Here the appellant's right to avail of railway service flows from the statute viz, the Railway
Act, 1989, which renders such service to its customers as a common carrier, as held by thi
Hon'ble Court in the case of Chogemul & Ors. V. The Commissioners for the Improvement o
the Port of Calcutta reported in ILR 18 Cal 428. It was held therein that as a common carrie
the railway administration has no jurisdiction and/or authority to refuse acceptance of any
consignment if the consignor pays the freight charges for such consignment. Thus i
necessarily follows that even though the consignor and/or the consignee was found to hav
defaulted and/or evaded any freight rate earlier for transportation of any goods by railways
the railways administration, being a common carrier, cannot refuse to accept th
consignment from the consignor when he is agreeable to pay freight charges as per the Rate
Circular.
Mr. Roy further contended that when Paragraph 6 of the said Rates Circulars gives th
Railway authority to blacklist its service recipient under certain circumstances as maintained
therein, the jurisdiction to hold an enquiry to ascertain as to whether in any given
circumstances, blacklisting will be justified or not is implied even if such power to hold such
enquiry is not explicitly mentioned in the said provision. In support of such contention he ha
relied upon the decision of the Hon'ble Supreme Court in the case of Sakari Vasu V. State o
U.P & Ors. reported in 2008(13) SCALE 693.
Apart from citing this decisions, Mr. Roy has also referred to various provisions contained
in the said Act such as Section 30(2), Section 31, Section 66, Section 71 and Section 78 o
the said Act to show that the jurisdiction of the Railways authority to blacklist the dishones
customers under Para 6 of the Rates Circular is not without legislative support. The learned
Single Judge has also relied upon those provisions for coming to the conclusion that th
provisions contained in para 6 of the said Rates Circular has legal sanction and the railway
authority is competent to impose penalty by way of blacklisting the consignor and/o
consignee who evaded payment of appropriate freight charges on the basis of a fals
declaration given by the consignor and/or the consignee regarding the enduse of the iron or
under the relevant consignments either at the time of booking the consignment or at the tim
of receiving delivery of the consignment. As such we feel it necessary to set out thos
provisions herein which will help us to decide the present issue before us.
30. Power to fix rates.
(2) The Central Government may, by a like order, fix the
rates of any other charges incidental to or connected with
such carriage including demurrage and wharfage for the
whole or any part of the railway and specify in the order
the conditions subject to which such rates shall apply.
31. Power to classify commodities or alter rates.- The
Central Government shall have power to--
(a) classify or reclassify any commodity for the purpose
of determining the rates to be charged for the carriage of
such commodities; and
(b) increase or reduce the class rates and other charges.
66. Power to require statement relating to the description of
goods.- (1) The owner or a person having charge of any goods
which are brought upon a railway for the purposes of
carriage by railway, and the consignee or the endorsee of
any consignment shall, on the request of any railway servant
authorized in this behalf, deliver to such railway servant a
statement in writing signed by such owner or person or by
such consignee or endorsee, as the case may be, containing
such description of the goods as would enable the railway
servant to determine the rate for such carriage.
(2) If such owner or person refuses or neglects to give the
statement as required under sub-section (1) and refuses to open
the package containing the goods, if so required by the railway
servant, it shall be open to the railway administration to refuse
to accept such goods for carriage unless such owner or person
pays for such carriage the highest rate for any class of goods.
(3) If the consignee or endorsee refuses or neglects to give the
statement as required under sub-section (1) and refuses to open
the package containing the goods, if so required by the railway
servant, it shall be 270 open to the railway administration to
charge in respect of the carriage of the goods the highest rate
for any class of goods.
(4) If the statement delivered under sub-section (1) is materially
false with respect to the description of any goods to which it
purports to relate, the railway administration may charge in
respect of the carriage of such goods such rate, not exceeding
double the highest rate for any class of goods as may be
specified by the Central Government.
(5) If any difference arises between a railway servant and such
owner or person, the consignee or the endorsee, as the case may
be, in respect of the description of the goods for which a
statement has been delivered under sub-section (1), the railway
servant may detain and examine the goods.
(6) Where any goods have been detained under sub-section (5) for
examination and upon such examination it is found that the
description of the goods is different from that given in the
statement delivered under sub-section (1), the cost of such
detention and examination shall be borne by such owner or
person, the consignee or the endorsee, as the case may be, and
the railway administration shall not be liable for any loss,
damage or deterioration which may be caused by such detention
or examination.
71. Power to give direction in regard to carriage of certain goods.-
(1) The Central Government may, if it is of the opinion that it is
necessary in the public interest so to do, by general or special
order, direct any railway administration--
(a) to give special facilities for, or preference to, the carriage of
such goods or class of goods consigned by or to the Central
Government or the Government of any State or of such other
goods or class of goods;
(b) to carry any goods or class of goods by such route or routes
and at such rates;
(c) to restrict or refuse acceptance of such goods or class of goods
at or to such station for carriage, as may be specified in the order.
(2) Any order made under sub-section (1) shall cease to have
effect after the expiration of a period of one year from the date of
such order, but may, by a like order, be renewed from time to time
for such period not exceeding one year at a time as may be
specified in
the order.
(3) Notwithstanding anything contained in this Act, every
railway administration shall be bound to comply with any order
given under sub-section (1) and any action taken by a railway
administration in pursuance of any such order shall not be
deemed to be a contravention of section 70.
78. Power to measure, weigh, etc. Notwithstanding anything
contained in the railway receipt, the railway administration may,
before the delivery of the consignment, have the right to--
(i) re-measure, re-weigh or re-classify any
consignment,
(ii) re-calculate the freight and other charges; and
(iii) correct any other error or collect any amount that may have been
omitted to be charged.
Let us now consider the respective contentions of the learned Advocates of the partie
to find out the legality of the show cause notice in the light of the provision of the Railway
Act, 1989 and the concerned Rates Circular issued by the Railways Board.
We have considered those provisions very carefully but we are unable to trace out any
provision which authorizes the railway administration to undertake any adjudication
proceeding for ascertaining the enduse of the iron ore after its delivery to the consignee by th
railway administration. Section 30 sub-section (2) of the said Act authorizes the Centra
Government and/or Railway Board to fix the rate or any other charges incidentally to o
connected with such carriage including demurrage and wharfage for the whole or any part o
the railway and specify in the order, the condition subject to which such rate shall apply. W
cannot trace out any provision in the said Section which authorizes the railway authority to
undertake an adjudication for finding out the enduse of the iron ore under the consignment.
Similarly, Section 66 of the said Act gives jurisdiction to the railway authorities to cal
for a statement from the consignor and the consignee relating to the description of the good
under a consignment and to fix the freight rate accordingly and if before delivery of the
goods under the said consignment it appears to the railway administration that th
statement delivered under sub-Section (1) by the consignor and the consignee is materially
false with respect to the description of any goods to which it purports to relate, the railway
may charge in respect of carriage of such goods such rate, not exceeding double the highes
rate for any class of goods as may be specified by the Central Government.
Sub-Section 5 of Section 66 of the said Act provides that if any difference arises between a
railway servant and such owner or the person , the consignee or the endorsee, as the cas
may be, in respect of the description of the goods for which a statement has been delivered
under sub-Section (1), the railway servant may detain and examine the goods.
The said provision thus, makes it amply clear that this jurisdiction can be exercised by th
railway authority until the goods are delivered to the consignee. Once the goods are delivered
the railway authority is divested of its jurisdiction to hold any further enquiry under th
provision of Section 66 of the said Act.
Similarly, Section 71 of the said Act authorizes the railway administration to give direction in
regard to carriage of certain goods. Section 71(1)(c) is relevant for the present purpose. It i
provided therein that the Central Government may, if it is of the opinion that it is necessary
in the public interest so to do, by general or special order, direct any railway administration
to restrict or refuse acceptance of such goods or class of goods at or to such station as may
be specified in the order. The said provision thus, makes it clear that under the said
provision the railway authority is authorized to restrict or refuse acceptance of such goods o
class of goods at or to such station for carriage. Under the said provision movement of good
or class of goods from one station to the other may be controlled by the Railway authorities
But the said provision does not authorize the railway administration to blacklist any person
and/or any other concern from availing of the railway services for transportation of any typ
of goods under a consignment when transportation of such goods or class of goods through a
particular zone is not restricted by the Railway authority under Section 71 of the said Act. In
our considered view, by invoking jurisdiction under section 71 of the said Act, the railway
authority, being a public carrier, cannot refuse to book any consignment of a particula
consignor by black listing it on any ground as mentioned in para 6 of the Rates Circular. I
necessarily follows that when restriction on acceptance of goods and/or class of goods on a
particular railway line is specified by the Railway Board in its order passed under Section 7
of the said Act then such goods and/or class of goods will not be accepted by the Railway
authority from any person whosoever he may be, under the provision contained in Section 7
of the said Act. This provision, in our view, is not a provision which authorizes the railway
authority to blacklist any consignor/consignee on any of the grounds as mentioned in para 6
of the said Rates Circular.
Similarly, Section 78 of the said Act does not authorize the railway administration to
blacklist any consignor and/or consignee on any of the grounds as mentioned in para 6 o
the said Rates Circular. Section 78 of the said Act simply authorizes the railway
administration to re-measure, re-weigh or reclassify any consignment and/or calculate th
freight and other charges and correct any other error or collect any amount that may hav
been omitted to be charged and such exercise can only be done by the railway authoritie
before delivery of consignment. Thus, once the consignment is delivered, the railway
administration loses its jurisdiction to exercise any of its powers as enumerated unde
Section 78 of the said Act.
As a matter of fact, we have checked up all the relevant provisions of the said Act and
found that there is not a single provision in the said Act which authorizes the railway
administration to impose penalty by way of blacklisting any consignor and/or consignee on
any ground, be it on the ground as mentioned in para 6 of the said Rates Circular or on any
other grounds not contemplated under Para 6 of the Rates Circular. As a matter of fac
Chapter XV of the Railways Act 1989, deals with penalty provisions. The circumstance
under which penalty can be imposed have been specified in the said chapter. The nature o
and/or extent of penalty which can be imposed against the specified offences under the said
chapter, is also specified therein. None of the provision contained in the said chapte
authorizes the Railway authority to impose penalty by way of blacklisting its service recipient
Imposition of penalty by way of blacklisting is unknown to the Act. This was not provided in
the Act, presumably for the reason that being a common carrier, it is impossible for th
Railway authority to refuse acceptance of any consignment for transportation of any good
from any consignor, if he pays appropriate freight charges, provided however movement o
such goods is not otherwise restricted in terms of Railways Act.
Thus, we have no hesitation to hold that penalty as per the provision contained in para
6 of the said Rates Circular by way of blacklisting for giving misdeclaration cannot b
imposed upon the consignor and/or the consignee as it is not supported by any legislativ
sanction. Even assuming that the railway administration is authorized to impose penalty by
way of blacklisting for giving false declaration under provision of para 3 of the Rates Circula
either by consignor or by the consignee, still then, we are of the considered view but such
jurisdiction to impose such penalty by way of blacklisting cannot be exercised by the railway
authority on the basis of its self-assessment and/or determination of the falsity and/or th
inaccuracy of the declaration given by the consignor and/or the consignee, so long as th
falsity and/or inaccuracy in the declaration submitted by the consignor and/or consigne
under the provision of para 3 of the said Rates Circular is not found and/or declared by th
Civil Court in the pending litigation.
When the Civil court is in seisin over the identical cause of action, the railway
administration cannot be held to be justified in proposing to conduct a parallel adjudication
proceeding on its own over the self-same issues.
Thus, the jurisdiction to impose penalty by way of blacklisting if at all can be exercised
by the railway authority; such jurisdiction can only be exercised after the adjudication of th
dispute in the pending suit is concluded before the Civil Court.
Re: Meaning of "at any state"
Before parting with this part of our consideration, we also like to discuss here abou
the meaning of the expression "at any stage" which is mentioned in part 6 of the said Rate
Circular. Though we find that none of the provision contained in the Railway Act authorize
the railway administration to hold any enquiry after delivery of the consignment, but at th
same time we cannot be unmindful of the provision contained in para 3 of the Rates Circula
which prescribes for charging of two different types of freight rates under two differen
circumstances. If iron ore is transported by wagon through a consignment for the domesti
consumption of the consignee then freight rate prescribed under Class 180 will be charged
On the contrary, if such transportation is not for domestic consumption, then th
consignor/consignee is liable to pay distance based charges in addition to the charges as pe
Class 180. But in order to avail of the concessional rate, the consignor and/or consignee i
required to declare that the iron ore under the said consignment will be utilized for domesti
consumption of the consignee at its factory on affidavit to be submitted by the consigne
before the railways administration. Even an indemnity is also required to be submitted by th
consignee in this regard. Thus, the applicability of the freight rate on such consignmen
depends upon the ultimate enduse of the iron ore under such consignment. Though availin
of concessional rates depends upon the ultimate enduse of the transported iron ore, but no
mechanism has been worked out for ascertaining the actual use of such transported iron or
by the consignee after the consignment is delivered. However taking advantage of such flaw
in the legislation, no one should defraud the railway administration for avoiding payment o
freight rate prescribed for Distance Based Charge for transportation of iron ore in addition t
the freight rates under Class 180, when iron ore is transported for non domestic purpose.
Thus, we find that charging of freight rate for transportation of iron ore depends upon
the enduse of the iron ore under consignment. If it is found that iron ore under th
consignment is utilized for domestic consumption by the consignee, certainly the freight rat
prescribed under Class 180 will be applied. On the contrary, if it is found that the iron or
under consignment is not utilized ultimately for domestic consumption, then freight rat
under class 180 plus Distance Based Charge will be charged from the consignee. Thus, th
charging provision is applied on the basis of declaration given by the consignee about endus
of the iron ore under consignment at the delivery point but if ultimately it is found that th
iron ore under consignment is not utilized for domestic consumption and the consigne
submitted a false, incorrect and misleading declaration on affidavit under para 3 of the Rate
Circular about the enduse of the iron ore under consignment then certainly the consignee wil
be liable to pay not only the same rate under Class 180 but also the Distance Based Charg
and penalty. Unfortunately we find that no mechanism has been formulated by th
legislature to ascertain the ultimate enduse of such iron ore after its delivery. In this contex
we cannot give a restricted meaning to the expression "at any stage" appearing at para 6 o
the Rates Circular by holding that no enquiry can be made by the railway authority to
ascertain the enduse of the iron ore as in our view, such enquiry is absolutely necessary fo
ascertaining the truthfulness of the declaration given by the consignee on oath, which in fac
is the decisive factor for availing of the concessional rate for carriage of iron ore by rakes and
the gap in the legislation as indicated above should be filled up, to give legislative support to
the said expression appearing in paragraph 6 of the said Rate Circular.
Even then we can neither permit a dishonest businessman to enjoy any concessiona
rates by giving false, incorrect, misleading declaration on affidavit regarding the enduse o
such iron ore nor allow such dishonest business concern to be unduly enriched by givin
false declaration about the enduse of the iron ore under consignment at its factory by giving a
false declaration and/or incorrect declaration for avoiding payment of Distance Based Charg
in addition to the rate prescribed under Class 180.
In our view until such lacuna in the legislation is filled up by appropriate legislation by
the Parliament, the interest of the railway authority can only be protected if we work out th
following modality for transportation of the iron ore by the appellant company withou
suspending it by way of blacklisting.
We thus, direct that at the time of booking each consignment for carriage of iron or
from one railway terminal to the other by rakes of wagons, the railway administration wil
realise the freight rate at class 180 plus Distance Base Charges as per para 1 of the Rate
Circular No.36 of 2009 from the consignor and will ultimately decide the actual freight rat
payable by the consignor/consignee, on being satisfied about the actual enduse of the iron
ore to be transported under the consignment through railway rakes of wagons.
Thus, if the appellant company after receiving delivery of iron ore under any
consignment on submission of the declaration regarding its domestic consumption of the iron
ore at its factory as per para 3 of the said Rates, can satisfy the railway authority about th
enduse of such iron ore as per its own declaration, the railway authority will refund th
amount which the railway authority realized on account of Distance Based Charges fo
transportation of iron ore under the relevant consignment
It is further clarified that for recording such satisfaction about enduse of the iron ore a
per the declaration given by the consignor/consignee, the railway authority may not only
verify the documents to be submitted by the consignor/consignee in support of their claim fo
refund of the Distance Based Charge realized by the railway authority at the time of bookin
the consignment, but also may take inspection at the factory site for ascertaining the actua
enduse of such iron ore by the consignee.
We thus, clarify that this modality will be applicable henceforth so far as the appellan
is concerned.
The appeal is thus, disposed of. The impugned order passed by the learned Singl
Judge is, thus, modified accordingly.
Urgent photostat certified copy of this order, if applied for, be given to the parties a
expeditiously as possible.
(Jyotirmay Bhattacharya, J.
I agree (Tapash Mookherjee, J.)