Food Corporation of India and Ors. Vs. Abhijit Paul, decided on 18/11/2022
CIVIL APPEAL NOS. 8572-8573/2022 ARISING OUT OF SLP (C) NOS. 16009-16010 OF 2019

Food Corporation of India, the Appellant herein, procures and distributes foodgrains across the length and breadth of the country as a part of its statutory duties. In the process, it enters into many contracts with transport contractors. In one such contract, the subject matter of present appeals, the Corporation empowered itself (Under Clause XII (a)) to recover damages, losses, charges, costs and other expenses suffered due to the contractors’ negligence from the sums payable to them.

The short question arising for consideration is whether the demurrages imposed on the Corporation by the Railways can be, in turn, recovered by the Corporation from the contractors as “charges” recoverable Under Clause XII (a) of the contract. In other words, does contractors’ liability for “charges”, if any, include demurrages?

Contract extract is given under:

Recovery of losses suffered by the Corporation

👉The Corporation shall be at liberty to reimburse themselves for any damages, losses, charges, costs or expenses suffered or incurred by them, or any amount payable by the Contractor as liquidated damages as provided in Clauses X above. The total sum claimed shall be deducted from any sum then due, or which at any time thereafter may become due, to the Contractors under this, or any other, Contract with the Corporation.

👉In the event of the sum which may be due from the Contractor as aforesaid being insufficient, the balance of the total sum claimed and recoverable from the Contractors as aforesaid shall be deducted from the Security Deposit, furnished by the contractor as specified in Clause IX..   (emphasis supplied)

👉 The Corporation seeks to recover demurrages as a part of “charges” provided Under Clause XII(a) as extracted hereinabove.

👉 Irrespective of the disputed fact, the real question is whether the contractors had any obligation towards loading and unloading of foodgrains from the railway wagons. It is evident from the contractual provisions and also the admissions of the Corporation in written submissions, that the task of loading or unloading of foodgrains from the railway wagons was not a part of the contract.

👉The Court observed that the intention of the parties must be discerned from the context of the contract.

👉Thus, based on interpretation of the expression “charges” in the contractual context, we are of the opinion that it did not include liability on account of demurrages. Consequently, the Corporation cannot impose and collect demurrages from the contractors.