Gujarat High Court
Food Corporation Of India vs Heirs Of Kanabhai Somabhai (Decd.) on 25 September, 2025
NEUTRAL CITATION
C/FA/795/2002 JUDGMENT DATED: 25/09/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 795 of 2002
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
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Approved for Reporting Yes No
YES
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FOOD CORPORATION OF INDIA
Versus
HEIRS OF KANABHAI SOMABHAI (DECD.) & ORS.
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Appearance:
MS ARCHANA U AMIN(2462) for the Appellant(s) No. 1
MR HASIT H JOSHI(2480) for the Defendant(s) No. 1.2,1.3,1.4,1.5,1.6,1.7
RULE SERVED for the Defendant(s) No. 1.1,1.2,1.3,1.4,1.5,1.6,1.7
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CORAM:HONOURABLE MR. JUSTICE HEMANT M.
PRACHCHHAK
Date : 25/09/2025
ORAL JUDGMENT
1. Present appeal is filed by the appellant - Food Corporation of India (original defendant) under Section 96 of the Civil Procedure Code, 1908 against the judgment and decree dated 23.07.2001 passed by the learned 6 th Joint Civil Judge (S.D.), at Jamnagar (hereinafter be referred to as "the trial Court") in Special Civil Suit No. 98 of 1985, whereby, the learned Judge has partly allowed the suit filed by the original plaintiffs - respondents herein for recovery of damages and directed the appellant - Corporation to pay Rs.4,46,100/- to the respondents and also rejected the counter claim filed by the appellant.
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2. The brief facts leading to present appeal in nut-shell are as under :
2.1 One Kanabhai Somabhai (Plaintiff-respondent, since deceased) was appointed as a stevedore clearing, handling and Transport contractor at Bedi/Rozi port for the period from 04.09.1982 to 03.09.1984 by the appellant after negotiating and telegram of acceptances was sent by the appellant to the deceased respondent which was received by him at Jamnagar.
It was alleged by the deceased respondent that on several occasions, the appellant-Corporation had withheld the amount and was kept as deposit. That, the amount withheld from the various bills was illegal. That, the appellant, if liable, to reimburse all the amounts to the plaintiff. It was further alleged by the deceased respondent that the respondent was not responsible for the destination shortage of the goods being carried and loaded in railway wagons under the supervision and verification of the appellant staff. That, each wagon load was verified in the presence of appellant's staff and a certificate was issued to that effect and Railway receipt was obtained in that case that if any shortage is found then appellant and its carrier would be liable for the goods. That, the appellant was bound to reimburse the amount of Rs.1,30,966/- which was deducted as the shortage and was kept as deposit. It is further averred that the appellant's levies withheld various bills amounting to a total amount of Rs.1,96,128/ as per their letter dated 23.08.1984 as deduction towards security, without assigning any reasons. That, the appellant had also withheld Rs.25,500/- from the respondent's Page 2 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined bills and had illegally tried to forfeit the said amount as wagon registration charges.
2.2 In short, the appellant had withheld the amounts to the following effect as stated in para 16 of plaint, as under:-
[1] Payment made on behalf of the appellant
as large detention charges. Rs.20,920/-
[2] Non Tender extra item at Minimum rates Rs.60,915/-
[3] Non-liability of alleged destination shortage
deduction made 10% of bill amount and
kept as deposit. Rs.1,30,965/-
[4] Amounts of various bills as per appellant's
letter dated 23.08.1984 withheld as security deposit. Rs.1,96,128/-
[5] Payment deducted as Railway Registration charges. Rs.25,500/-
[6] Central Bank of India guarantee furnished
as initial security deposit. Rs.62,500/-
2.3 That, the above stated amount was due against the
appellant. That, the deceased respondent had repeatedly demanded to pay up the dues but there was no response from the appellant and hence, a legal notice was served upon the appellant, inspite of that the appellant had not paid the said amount to the deceased respondent and therefore, the respondent had to file the suit being Special Civil Suit No. 98 of 1985 to recover Rs.4,96,930/- from the appellant.
2.4 That, the appellant had also filed Counter-claim for Rs.6,02,490.20ps., being the balance recoverable from the deceased respondent against the adjudged liability of Rs.11,04,572.54ps., under terms and conditions of the Tender Page 3 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined Agreement.
2.5 That, the trial Court had issued summons which was served upon the appellant and therefore, the appellant had filed its written statement alongwith counter claim at Exh.-19 and denied all the contentions and averments made in the plaint and had claimed Rs.6,02,490/- to be recovered from the respondent. The respondents had also filed written statement at Exh.-28 against the counter claim of the appellant. On perusal of the pleadings, the trial Court framed the issues at Exh.-88, as under :
1. Whether the plaintiffs are entitled to get declaration and payment injunction ?
1B. Whether the plaintiff proves that he is entitled to recover Rs.4,46,930/- from the defendant ?
2. Whether the plaintiffs are entitled to get any interest, if Yes, at what rate ?
3. Whether this Court has jurisdiction to try present suit ?
4. Whether the defendant proves that the plaintiff is bound to pay to the defendant balances recoverable amount of Rs.6,02,490.34ps. ?
5. What order and decree ?
2.6 To prove the case, plaintiffs - original claimants had produced oral evidence, whereby, the plaintiff, Shri Naranbhai Kannabhai had deposed at Exh.-40 whereas, the defendant - appellant herein had produced oral evidence viz., (i) Shree Page 4 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined Manharlal Shantibhai Parmar had deposed at Exh.-57; (ii) Shree Mahendrabhai Maganbhai had deposed at Exh.-133; and
(iii) Shree Rameshchandra Hirjibhai had deposed at Exh.-134. The parties had also led several documentary evidence before the trial Court.
2.7 After considering the oral as well as documentary evidence led by both the sides and after considering the decisions referred and relied upon by both the sides, the trial Court has partly allowed the suit and passed the decree in favour of the respondents - original plaintiffs and directed the defendant - appellant herein to pay Rs.4,46,100/- to the respondents and rejected the counter claim filed by the appellant vide its judgment and decree dated 23.07.2001.
3. Being aggrieved and dissatisfied with the aforesaid judgment and decree dated 23.07.2001 passed by the learned 6th Joint Civil Judge (S.D.), at Jamnagar in Special Civil Suit No. 98 of 1985, the appellant has preferred this appeal under Section 96 of the Civil Procedure Code, 1908.
4. Heard Ms. Archana Acharya, learned counsel appearing for the appellant - Food Corporation of India and Mr. Hasit Joshi, learned counsel appearing for the respondents.
5. Learned counsel Ms. Acharya has submitted that the trial Court has not appreciated the facts involved in the case and has not considered the submissions made on behalf of the appellant. She has submitted that the trial Court has failed to Page 5 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined appreciate the over-all counter-claim of the appellant, the prayers contained therein, and the gravity of the evidence adduced in support of the counter claim. She has submitted that the trial Court has failed to appreciate the impact of the evidence referred to in the preceding sub-paragraph, as a result of which the prayer for interest is adversely prejudiced. She has further submitted that the trial Court has not properly applied its mind to the points of destination shortage liability, barges detention charges, shipping liability etc., and has failed to appreciate the fact that as per contract terms for destination charges, the responsibility was of the contractor, because the goods were always in possession of the contractor or its staff or labourers till its final handing over. She has submitted that the trial Court has erred in appreciating that the plaintiff contractor was liable for the said shortages etc. She has submitted that the trial Court has failed to appreciate the fact that the contractor did not care to obtain Railway Receipt each time and did not appreciate the terms and conditions of tender, and in the process, allowed and awarded barge detention charges where the respondent-plaintiff was responsible and liable. She has submitted that since the trial Court has not appreciated the tender terms, made application of mind properly thereto, has incorrectly passed the impugned Judgment on all counts in favour of the respondent-plaintiff for the decreed amount, and has also consequently fallaciously rejected the Counter-claim of Rs.6,02,490.34 ps. with cost. She has also submitted that the trial Court has not appreciated the facts involved in the case and did not consider the submissions made on behalf of the appellant and also did not consider the Page 6 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined contentions of the appellant raised at the time of hearing of the matter and thus, the reasonings adopted, findings recorded and conclusions arrived at by the trial Court are erroneous, illegal and without any evidence on record. Over and above the grounds agitated in the memo of appeal, learned counsel Ms. Acharya has urged that the present appeal be allowed and the impugned judgment and decree passed by the trial Court be quashed and set aside.
5.1 Learned counsel Ms. Acharya has referred and relied upon the following authorities, which are cited before the trial Court :
[1] 1990 (1) SCC 731, Bihar State Electricity Board Patna and Others vs. M/s. Green Rubber Industries and Others; [2] AIR 1963 SC 1405 (V 50 C. 204) (From Punjab) 13 th January, 1963, Fulchand vs. Balkishandas;
[3] AIR 1984 SC 29, M/s. H.M. Kamalluddin Ansari and Co. vs. Union of India & Ors.;
[4] AIR 1977 SC 734 Timblo Irmasus Ltd. vs. J.A.M. Sequiera; [5] 1969 (2) SCC 554, Maula Bux vs. Union of India; [6] AIR 1962 SC 366, M/s. Murlidhar Chiranjilal vs. M/s. Harishchandra Dwarkadas;
[7] AIR 1971 SC 1481, Mohd. Salamatullah & Ors. vs. Government of Andhra Pradesh;
[8] AIR 1955 SC 468, Thawardas Perumal vs. Union of India; [9] AIR 1959 SC 1362, Union of India vs. Kishorilal Gupta.
6. Per contra, learned counsel Mr. Hasit Joshi, appearing for the respondents has submitted that the deceased Kana Soma Page 7 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined filed the suit for recovery of Rs.4,96,930/- against the appellant
- Food Corporation of India (FCI for short), however, pending the suit, the original plaintiff Kana Soma died on 13.09.1992 and his legal heirs were brought on record as plaintiffs on 19.02.1996 at Exh.-28. He has submitted that in the suit, the written statement was not filed by the appellant FCI for sufficiently long time and hence, right of the appellant to file the written statement was closed. He has submitted that as per Exh.-18, the advocate for the appellant prayed that they could not file the reply in time and therefore, they had filed the written statement with counter claim alongwith DE List and sought permission to file the written statement. He has submitted that as per the order below Exh.-18, the learned 2 nd Joint Civil Judge, Jamnagar allowed the application and permitted to file the written statement along with the counter claim on payment of the cost of Rs.150.00 to the other side and thereafter, the written statement was filed at Exh.-19. He has submitted that the alleged counter claim was not separately filed by the appellant FCI but, in the written statement itself, the FCI claimed the amount of Rs. 11,04,572.54 as counter claim and denied that the respondent is entitled to any amount from the appellant. He has submitted that the trial Court decided the suit and rejected the counter claim and decreed the suit of the respondent for Rs.4,46,100/- without any interest on the decretal amount from the date of filing of the suit i.e. 02.07.1985. He has submitted that considering the impugned judgment and award passed by the trial Court and the reasonings given by the trial Court for non- grant of any interest from the date of the suit, the same is not Page 8 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined required to be interfered with by this Court. He has submitted that the counter claim filed by the appellant on 17.12.1990 in the suit, which was filed on 02.07.1985, was barred by the law of limitation or not and that aspect was rightly considered and decided by the trial Court. He has submitted that just to see that the question of limitation does not arise in counter claim, the appellant FCI had not filed the counter claim separately but, added that claim in the written statement and such conduct of the appellant FCI is required to be deprecated.
6.1 Learned counsel Mr. Joshi has submitted that as per Exh.- 40, Naranbhai Kanabhai has deposed before the trial Court on 31.01.1997, for the respondent. He has submitted that as per Exh.-57, on 29.09.1998, on behalf of the appellant, one Manharlal B. Parmar Asstt. Gr. I, has deposed before the trial Court and has stated in his cross-examination that the persons at the Railway from FCI would be of the cadre of A-G-I, AG2- AG3 whereas on the Port, there would be persons from FCI like Assistant Manager AG 1-2-3 and admitted that when the goods would come on the port, then, over and above contractor, there would also be presence of our FCI Personnel. He has also admitted that when the goods were sent in railway or through other mode, then, their officer would also be present with contractor. He has also deposed that before giving deposition in this matter, he had not discussed with his staff at the railway and port and had also not discussed with the other officer at the relevant time. He has also stated that he was having no personal knowledge of the matter as to how notices were sent by Rajkot office. He has stated that he had not Page 9 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined produced the RPAD Receipts of the notices sent in this matter. He has also admitted that he had not produced any written evidence to show that Naranbhai was doing the business in the capacity of Kanabhai and he had no evidence to show that Naranbhai and Kanabhai were doing the business jointly. Learned counsel Mr. Joshi has submitted that as per terms and conditions at Exh.-73, 16.02.1994, security deposit of Rs.62,500/- was made by the contractor and nothing was provided for counter claim. He has submitted that there are total 79 documents appreciated by the trial Court and has rightly decided the issues, without prejudice to the rights of the appellant to claim for interest from the date of the suit. He has submitted that if the appellant can submit counter claim in the written statement, then, the present respondents also can challenge the part of the judgment where the trial Court has not granted any interest. He has submitted that the trial Court has observed that the witness for the appellant has admitted that though there was no clear RR, they took the delivery and had not stopped the delivery and not verified the facts of destination shortage as there was no such procedure at their level and no panchanama in presence of independent witness was prepared at that destination regarding shortage. He has submitted that the trial Court has further observed that the witness for the appellant has admitted that whatever facts he has deposed was from the record and he had no personal knowledge. He has also admitted that the District Manager, Rajkot had signed the counter claim as well as the Vakalatnama whereas, the Chief Executive Engineer was at Delhi. He has submitted that considering such factual aspects Page 10 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined on the basis of the evidence on record and also considering the decision in case of State of Karnataka vs. Shri Rameshwar Rice Mills, reported in AIR 1987 SC 1359, the trial Court had come to the conclusion that a party to the agreement cannot be an arbitrator in his own case. He has submitted that after appreciation of the condition No. (XVIII) page 20 of the contract, the trial Court has rightly observed that as such, considering this condition along with the certificate of port evidence at Exh.-127 and the admission of the appellant, it is clear on the face that so called detention of barge cannot be termed as negligence on the part of the plaintiffs. He has submitted that the trial Court has also observed that it is also found from the report of the committee of the appellant at Exh.-227 that the committee held that the point as regards barge detention charges required depth study and scrutiny. He has submitted that the trial Court has observed that no further reports regarding such scrutiny has been produced on behalf of the appellant and, therefore, it seems that the amount as claimed by the appellant towards this head was without any proof and based on such considerations, the trial Court has rightly rejected the counter claim and after appreciating the evidence on record, rightly decreed the suit in favour of the respondents. He has submitted that the trial Court has also considered the aspect of liability of counter claim and rightly observed that it is an admitted position of fact that at the destination station, nobody on behalf of the respondents was called for to remain present. He has submitted that the trial Court has rightly observed that there was no single evidence showing the fact that there was actually destination shortage Page 11 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined and no documentary evidence from that party who might have complained as to the shortage of goods at destination was produced and also considered admission of the witness for the appellant that no panchanama in presence of independent witnesses was prepared at the destination moreover, it is also clear from the record that generally in case of shortage, the FCI complains to the Railway Authority in this regard but, nothing in this regard has been produced by the appellant to support its allegation of destination shortage. He has submitted that considering the voluminous evidence on record, the trial Court has partly allowed the suit and ordered the appellant to pay Rs.4,46,100/- to the respondents along with proportionate costs of the suit and rightly rejected the counter claim of the appellant and therefore, the appeal is required to be dismissed.
6.2 Learned counsel Mr. Joshi has further submitted that, on 27.09.2002, appeal was filed by the FCI wherein this Court ordered to withdraw 30 per cent of the amount deposited on furnishing bank guarantee which the respondents were unable to give because of their poverty for the amount of Rs.63,728/- and hence, they could not withdraw a single pie. He has submitted that the respondents are too poor to even furnish that amount. It is submitted that considering the non grant of interest from date of 1985, this Court may be pleased to consider this aspect and direct some fixed lumpsum amount or 6% interest from the date of the suit, till the deposit was made by the appellant before the trial Court. He has further submitted that pending the present appeal, legal heirs of Page 12 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined deceased respondent No.1/1 Naranbhai Kanabhai expired on 18.10.2018 and respondent No.1/3 Hemiben Kanabhai expired on 05.07.2021 and notice for declaration was given to the Food Corporation of India advocate Mr. Nilesh Pandya on 15.09.2023 but, no action has been taken to bring their heirs on the cause title of the appeal.
7. I have heard the learned advocates appearing for the respective parties and perused the material placed on record. I have also gone through the impugned judgment and decree passed by the trial Court. On perusal of the Record & Proceedings and on close scrutiny and examining the evidence on record, it appears that the issue involved in the present appeal is, as to whether the trial Court while passing the impugned judgment and decree has committed any error or not, whether the trial Court has appreciated the evidence led by both the sides while rejecting the counter claim or not, whether the reasons stated by the trial Court is erroneous, illegal or can it be said as perverse, while interpreting the conditions stipulated in the impugned agreement upon which the suit was filed whether the plaintiffs proved that they are entitled for the damages as claimed in the plaint.
8. On perusal of the facts and the submissions canvassed by both the sides, one thing is certain that the deceased respondent was the clearing and forwarding agent and was appointed as stevedoring, clearing, handling and Transport Contractor by the appellant Corporation at Bedi/Rozy Port, Jamnagar with effect from 04.09.1982 to 03.09.1984 i.e. for a Page 13 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined period of 2 years after negotiation, and telegram of acceptance was sent by the appellant to the respondent, which was received by the appellant at Jamnagar. Even the bank guarantee was also furnished by the deceased respondent in respect of the above contract. The deceased respondent had made different claims and claimed an amount of Rs.4,96,930/- as stated in para 16 of plaint, which is as under :-
[1] Payment made on behalf of the appellant
as large detention charges. Rs.20,920/-
[2] Non Tender extra item at Minimum rates Rs.60,915/-
[3] Non-liability of alleged destination shortage
deduction made 10% of bill amount and
kept as deposit. Rs.1,30,965/-
[4] Amounts of various bills as per appellant's
letter dated 23.08.1984 withheld as security deposit. Rs.1,96,128/-
[5] Payment deducted as Railway Registration charges. Rs.25,500/-
[6] Central Bank of India guarantee furnished
as initial security deposit. Rs.62,500/-
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Rs.4,96,930/-
8.1 On perusal of the oral evidence at Exh.-40 and 57 and on
perusal of the documentary evidence Tender at Exh.-73, it appears that the appellant had accepted the same and there are communications between the appellant and the deceased respondent which are placed on record and on perusal of the same, it appears that the trial Court has closely examined all the documents and discussed in detail in issue no.1B and 4. The trial Court has recorded the contention raised on behalf of the appellant Corporation that it is the liability of the Page 14 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined Contractor but, on perusal of the agreement, the trial Court has come to the conclusion that the appellant Corporation is liable to pay the damages and the over weighing charges paid by the deceased respondent on behalf of the appellant and thus, the trial Court, after considering the documentary as well as the oral evidence and the conditions stipulated in the agreement, has observed that the breach of conditions was not on the part of the deceased respondent but, it was on the part of the appellant Corporation and thus, the said contention was rightly turned down by the trial Court. On perusal of Clause (X) of part-I of contract at Exh.-73, it was further clarified that on consideration of the same, the trial Court has rightly passed the impugned judgment and decree and I do not find any infirmity in the impugned judgment and decree while appreciating the documentary as well as the oral evidence led before the trial Court. On bare perusal of the contents of the correspondence between the appellant and the respondents, it is prima facie proved that the trial Court was justified in passing the impugned judgment and decree in favour of the respondents. So far as the destination shortage liability which was noted and which was claimed by the respondents is concerned, there was no cogent and material evidence produced before the trial Court that it was at the behest of the respondents, as in presence of the representatives of the appellant Corporation, the goods were unloaded at the port and from there, the same were transported to the place of the appellant Corporation. The trial Court has recorded this fact after considering the oral as well as the documentary evidence and while evaluating the document Tender at Exh.-73, the trial Page 15 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined Court has rightly considered the contentions and the averments made in the plaint and after considering the said documentary evidence, the trial Court has rightly passed the impugned judgment and decree in favour of the respondents. While discussing the issue no.2, the trial Court has recorded that on perusal of the contract agreement at Exh.-73, it appears that there is a Clause no.9 in the agreement regarding non-payment of interest and after considering the same, the trial Court has rejected the counter claim relating to the interest claimed by the appellant Corporation as it was clearly mandated in the contract agreement and thus, while interpreting the said clause of the contract agreement, wherein it was clearly mentioned that in wake of any breach of conditions stipulated in the contract, either parties are not liable to charge any interest.
8.2 The contention at the behest of the appellant with regard to the fact that, the goods were not transported in time from the port to the destination, was also rightly considered by the trial Court after appreciating the oral evidence of the witnesses namely, Manharlal Shantibhai Parmar at Exh.-57, who in his cross-examination has admitted the presence of the FCI staff at the port as well as Railway Station and they had made notes of bags which were loaded in the Railway wagon. He has also admitted that the work of unloading of goods from steamers to the barge are carried by the contractor and from the barge the goods are unloaded at sea shore by I.B.O.C. who are port loading contractor and they are appointed by the port authority and thus, it was not in the hands of the respondents.
Page 16 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined The trial Court has also considered the evidence of witness namely, Mahendrabhai Maganlal Shukla at Exh.-133, who has also admitted the presence of staff of FCI on the port at the time of loading and unloading as well as at the Railway Station at the time of unloading from truck and loading onto the wagon. He has also admitted that no supporting evidence to show that less number of bags were loaded in the container then the number shown in Railway Receipt. The witness Rameshchandra Hirjibhai at Exh.-134, who had clearly admitted that they had not called the respondent plaintiff for negotiation and conciliation with regard to destination shortage. He has also admitted that whatever fact he has deposed was from the records and he had no personal knowledge and thus, without there being any opportunity given to the respondents, the damages were assessed by the appellant and the appellant had demanded the amount from the respondents. It was also admitted by the defendant witnesses that no Panchnama in presence of independent witness was prepared at the destination station. It also appears from the record that generally in case of shortage, the FCI complains to the Railway Authority, however, in the present case, nothing in this regard has been produced by the appellant to support its allegations of destination shortage and the appellant has put forward its counter claim of destination shortage as a counter blast to the suit filed by the respondent plaintiff. It is also to be noted herein that from the cross- examination of those witnesses, it clearly reveals that the claim of the respondents is as per the terms and conditions stipulated in the contract and there was no any illegality or any Page 17 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined infirmity found in the findings recorded by the trial Court and the trial Court, after evaluating the oral as well as the documentary evidence, has rightly passed the impugned judgment and decree in favour of the respondents. Even the son of the deceased respondent namely, Naranbhai Kanabhai had deposed at Exh.-40 that he had no personal knowledge regarding the suit transaction but, at the time of death, his father Kanabhai had instructed him orally that Rs.4,96,930/- is due against the appellant, who was cross-examined by the appellant but, nothing useful had come out from it. Thus, the trial Court has discussed all the relevant aspects while passing the impugned judgment and decree and from the reasonings recorded by the trial Court, I am of the opinion that the trial Court was right in passing the impugned judgment and decree and there was no material error committed by the trial Court while passing the impugned judgment and decree. So far as the issue no.3 relating to the jurisdiction is concerned, the trial Court has considered that it was having the jurisdiction, whereby both the parties had nothing to say over this issue.
8.3 At this juncture, it would be appropriate to refer to the decision of the Hon'ble Apex Court rendered in case of Maula Bux vs. Union of India, reported in AIR 1970 SC 1955, wherein, it has been observed and held as under :
"4. Under the terms of the agreements the amounts deposited by the plaintiff as security for due performance of the contracts were to stand forfeited in case the plaintiff neglected to perform his part of the contract. The High Court observed that the deposits so made may be regarded as earnest money. But that view cannot be accepted. According to Earl Jowitt in "The Dictionary of English Law"
at p. 689: "Giving an earnest or earnest-money is a mode of signifying assent to a contract of sale or the like, by giving to the vendor a nominal sum (e.g. a shilling) as a token that the parties Page 18 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined are in earnest or have made up their minds." As observed by the Judicial Committee in Kunwar Chiranjit Singh v. Har Swarup(1):
"Earnest money is part of the purchase price when the transaction goes forward: it is forfeited when the transaction falls through, by reason of the fault or failure of the vandee."
In the present case the deposit was made not of a sum of money by the purchaser to be applied towards part payment of the price when the contract was completed and till then as evidencing an intention on the part of the purchaser to buy property or goods. Here the plaintiff had deposited the amounts claimed as security for guaranteeing due performance of the contracts.Such deposits cannot be regarded as earnest money.
5. Section 74 of the Contract Act provides:
"When a contract has been broken, if a sum is named in the contract as the amount to be paid in case (1) A.I.R. 1926 P.C. 1 of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."
There is authority, no doubt coloured by the view which was taken in English cases, that s. 74 of the Contract Act has no application to cases of deposit for due performance of a contract which is stipulated to be forfeited for breach: Natesa Aiyar v. Appavu Padayachi(1); Singer Manufacturing Company v. Raja Prosad(2); Manian Patter v. The Madras Railway Company(a). But this view is no longer good law in view of the judgment of this Court in Fateh Chand's case(4). This Court observed at p. 526 (of SCR):
"Section 74 of the Indian Contract Act deals with the measure of damages in two classes of cases (i) where the contract names a sum to be paid in case of breach, and (ii) where the contract contains any other stipulation by way of penalty. The measure of damages in the case of breach of 'a stipulation by Way of penalty is by s. 74 reasonable compensation not exceeding the penalty stipulated for."
6. The Court also observed:
"It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however no warrant for the assumption made by some of the Page 19 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined High Courts in India, that s. 74 applies only to cases where the aggrieved party is seeking to receive some amount on breach of contract and not to cases whereupon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression "the contract contains any other stipulation by way of penalty"
comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by s. 74. In all cases,. there fore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable but not exceeding the amount specified in the contract as liable to. forfeiture.", and that, "There is no ground for holding that the expression "contract contains any other stipulation by way of penalty" is limited to cases of stipulation in the nature of an agreement to. pay money or deliver property on breach and does not comprehend covenants under which amounts paid or property delivered under the contract, which by the terms of the contract expressly or by clear implication are liable to be forfeited."
7. Forfeiture of earnest money under a contract for sale of property- movable or immovable--if the amount is reasonable, does not fall within s. 74. That has been decided in several cases: Kunwar Chiranjit Singh v. Hat Swarup (t); Roshan Lal v. The Delhi Cloth and General Mills Company Ltd., Delhi(2); Muhammad Habibullah v. Muhammad Shafi(3); Bishan Chand v. Radha Kishan Das(4); These cases are easily explained, for forfeiture of a reasonable amount paid as earnest money does not amount to. imposing a penalty. But if forfeiture is of the nature of penalty, s. 74 applies. Where under the terms of the contract the party in breach has undertaken to pay a sum of money or to forfeit a sum of money which he has already paid to the party complaining of a breach of contract, the undertaking is of the nature of a penalty.
8. Counsel for the Union, however, urged that in the present case Rs. 10,000/- in respect of the potato contract and Rs. 8,500 in respect of the poultry contract were genuine pre-estimates of damages which the Union was likely to suffer as a result of breach of contract, and the plaintiff was not entitled to any relief against forfeiture. Reliance in support of this contention was placed upon the expression (used in s. 74 of the Contract Act), "the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused there by, to receive from the Page 20 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined party who has broken the contract reasonable compensation". It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree, and the Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby" is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him.
9. In the present case, it was possible for the Government of India to lead evidence to prove the rates at which potatoes, poultry, eggs and fish were purchased by them when the plaintiff failed to deliver "regularly and fully" the quantities stipulated under the terms of the contracts and after the contracts were terminated. They could have proved the rates at which they had to be purchased and also the other incidental charges incurred by them in procuring the goods contracted for. But no such attempt was made.
10. Counsel for the Union, however, contended that in the Trial Court the true position in law was not appreciated and the parties proceeded to trial on the question whether the Government was entitled in the circumstances of the case to forfeit under cl. 8 the terms of the contracts the deposits made for securing due performance of the contracts. Since there was no pleading and no issue on the question of reasonable compensation, an opportunity should be given to the parties to lead evidence on this point. But with the suit out of which this appeal arises was tried another suit filed by the plaintiff Maula Bux against the Union for a decree for Rs. 53,000 odd being the price of goods supplied under the terms of another contract with the Government of India. In that suit the Union claimed that it had set off the amount due to the plaintiff, amounts which the plaintiff was liable to pay as compensation to the Union for loss suffered because of the plaintiff's failure to carry out the terms of the contracts C/74 and C/120. The Trial Court held in that case that the Union failed to prove that any loss was suffered by it in consequence of the default by Maula Bux to supply potatoes, poultry, eggs and fish as stipulated by him. Against the judgment of that Court Appeal No. 2001 of 1966 is filed in this Court and is decided today. The High Court of Allahabad having confirmed the decree passed by the Trial Court, no useful purpose will be Page 21 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined served by directing a fresh enquiry into the question whether the Union of India is entitled to recover from the plaintiff any reasonable compensation for breach of contracts and whether that compensation is equal to or exceeds the amounts deposited. Evidence on that question has already been led and findings have been recorded. In dealing with the Appeal No. 2001 of 1966 we have held that the Union has failed to establish by evidence that any damage or loss was suffered by them which arose out of the default committed by the plaintiff. We decline therefore to afford another opportunity for leading the evidence as to the loss suffered by the Union on account of the failure on the part of the plaintiff to carry out the contracts."
8.4 It is also fruitful to refer to the decisions rendered in case of M/s. Hind Construction Contractor vs. State of Maharashtra, reported in AIR 1979 SC 720, relevant paragraphs-7, 8, 9 and 10 and in case of A.T. Brij Paul Singh vs. State of Gujarat, reported in AIR 1984 SC 1703 relevant paragraphs-8, 9, 10 and 11. Considering the submissions and considering the oral as well as the documentary evidence discussed by the trial Court in detail and in view of the ratio laid down by the Hon'ble Apex Court as aforesaid, I am of the opinion that the present appeal is required to be dismissed and the impugned judgment and decree passed by the trial Court is required to be upheld.
9. In the result, the present appeal fails and is hereby dismissed. The impugned judgment and decree dated 23.07.2001 passed by the learned 6 th Joint Civil Judge (S.D.), at Jamnagar in Special Civil Suit No. 98 of 1985 is hereby confirmed. If the appellant - Corporation has not deposited the amount as decreed by the trial Court, the same shall be deposited before the trial Court concerned within a period of eight weeks from the date of receipt of copy of this order and if Page 22 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025 NEUTRAL CITATION C/FA/795/2002 JUDGMENT DATED: 25/09/2025 undefined the appellant has deposited the amount, the same shall be disbursed in favour of the respondents - original claimants, after proper verification and after following due procedure through RTGS/NEFT, within a period of eight weeks from the date of receipt of copy of present order. Decree be drawn accordingly. No order as to costs.
10. Record and Proceedings, if any, be sent back to the concerned trial Court forthwith.
(HEMANT M. PRACHCHHAK,J) Dolly Page 23 of 23 Uploaded by DOLLY CHETAN VADUKAR(HC01392) on Thu Sep 25 2025 Downloaded on : Thu Sep 25 23:25:01 IST 2025