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CASE NO.: Appeal (civil)  7440 of 2000

PETITIONER: Food Corporation of India & Ors

RESPONDENT: Vikas Majdoor Kamdar Sahkari Mandli Ltd

DATE OF JUDGMENT: 12/11/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 7440 OF 2000 With CIVIL APPEAL NO. 2540 OF 2002

Dr. ARIJIT PASAYAT, J.

1.      These two appeals have a common matrix.  The Food  Corporation of India and Others are the appellants in Civil  Appeal No. 7440 of 2000 while the respondent in the said  appeal is the appellant in the other appeal i.e. Civil appeal No.  2540 of 2002. Parties in this judgment are described as per  Civil Appeal No.7440 of 2000.  

2.      Challenge in these appeals is to the judgment of a  Division Bench of the Gujarat High Court holding that the suit  filed by plaintiff (respondent)  was to be partly decreed for  recovery of Rs.68,02,973/- from the defendants i.e. present  appellants together with pendente lite and future interest at  the rate of 6% per annum with appropriate cost throughout.  It  is to be noted that the respondent had filed a suit (Civil Suit  No. 6040 of 1994)       before learned City Civil Judge  Ahmedabad for injunction restraining the appellant No.1- Corporation and its functionaries from recovering and/or  withholding any amount from the bills  of the respondent  herein and also for a declaration that action of appellant No.1- Corporation in recovering  various amounts without deciding  the rates for extra work was bad in law and for directing the  appellant-Corporation to make payment for the extra work at  the rates demanded by the respondent.  It was averred that as  per the tender notice the respondent herein was required to  handle 750 MT per day as per the charter party and for  handling for which rate was fixed at Rs.108 per MT.  It was  further stated that the appellant-Corporation by the letters  dated 30.9.1994, 14.10.1994 directed the respondent herein  to handle more cargo than what was prescribed above and  consequently the respondent herein started handling cargo to  the tune of 1200 to 1300 MT per day against the contracted  rate of 750 M.T. In view of the accelerated discharge, the  respondent had to incur additional expenses towards  enhanced rate of wages, payment to the workers and  demurrage to wagons.  The respondent claimed that its  entitlement for enhanced transportation charges was Rs.45  per MT in place of Rs.15 per MT which was stipulated in the

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contract. The appellant No.1-Corporation in its written  statement took the stand that it had no intention of  withholding any payment demand as per the terms of the  contract and that whatever bill was raised as per the terms of  the contract had been paid and the final bill had not been  settled as yet.  On the claim towards additional expenses due  to the accelerated discharge, the Corporation contented that  as per the terms of the contract the respondent herein was  bound to carry out discharge so as to avoid any demurrage  being incurred and it was bound to follow the rules and  regulations of the Port authorities under which it had to  discharge at a faster rate.  The Corporation also denied that  the respondent had incurred any extra expenses because of  the accelerated discharge. The appellant-Corporation also  denied the claim towards enhanced rate for transportation    charges. Subsequently the respondent herein amended the  claim to an amount of Rs.68,07,113.20 with interest at the  rate of 18% per annum from the due date. Towards  stevedoring charges the respondents herein claimed Rs.215/-  per MT instead of agreed rate of Rs.108/- per MT.  A sum of  Rs.51,20,263.70 was claimed as the difference. The  respondent further claimed the enhanced transportation  charges and on that account claimed an additional sum of  Rs.12,84,847.50. The appellant-Corporation filed its additional  written statement denying the claim for enhanced  compensation. 3.      Learned Civil Judge (Court No.14), Ahmedabad framed  the following issues for determination.  (i)     Whether the Court has jurisdiction to entertain  the suit?

(ii)    Whether the Plaintiff proves that the Plaintiff  appointed as contractor for stevedoring,  clearance for transportation at Kandla Port  pursuant to the tender? (iii)   Whether the Plaintiff proves that the plaintiff  was carrying out a work of transport and  handling the cargo as per the terms and  conditions of the tender? (iv)    Whether the plaintiff is entitled to the  enhancement rate from Rs.108/- per M.T. to  Rs.215/- per M.T. as alleged? (v)     Whether the plaintiff proves that the plaintiff  was unloading the quantity of the goods more  than stipulated in the tender? (vi)    Whether the plaintiff is entitled to recover the  amount from the defendant as prayed in para  12(A) and (B) of the plaint? (vii)   What order and decree?

4.      The learned trial Judge decided issues (i), (ii), (iii) and  and (v) in favour of the Respondent/Plaintiff. However, the  learned Judge dismissed the suit on the basis of findings in  issue Nos. (iv) and (vi).

5.      The following findings inter alia were recorded by learned  trial judge.

(i)     Clause XX (1)(i)  of the contract provided for a  minimum discharge rate of 750 M.T. per day  as provided in the Charter Party, so that the  vessel would not suffer any demurrage. Thus,  the Respondent herein (Plaintiff) had carried  out the work of handling cargo as per the  terms of the contract.

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(ii)    The Appellant Corporation (Defendant) had  insisted for discharge of cargo at higher rate  with a view to comply with the direction of the  port authorities. The Respondent Plaintiff had  discharged additional quantities.  Clause 41 of  the contract provides that the contractor shall  comply with the rules and regulation of the  Port Authorities, and since the Port Authorities  had demanded discharge at faster rate the  Respondent herein (Plaintiff) was under  obligation to discharge at faster rate.  (iii)   In any event, the Respondent (plaintiff) had not  established by evidence any additional cost  incrred by him for such additional discharge. (iv)    The Respondent (Plaintiff) was entitled to only  contractual rate of Rs.108/- per M.T. and not  at higher rate of Rs.215/ per M.T. (v)     The claim for enhanced rate for additional  quantity discharged under S.70 of the  Contract Act on the principle of quantum  meruit would not be applicable since there was  a stipulation under the contract for payment at  the rate of Rs.108/- M.T only.

6.      On the basis of the aforesaid findings the suit was  dismissed. Aggrieved by the above judgment respondent  herein filed First Appeal No. 2678 of 1999 before the Gujarat  High Court.  A Division Bench of the Gujarat High Court  reversed the judgment of the trial court and decreed the suit  for a sum of Rs.68,02,973/- with interest at the rate of 6%  from the date of suit.    7.      Following findings were recorded by the High Court:

(i)     A combined reading of Clause XX Part I (i)       along  with Clause 19 of the Charter Party would show that the  Respondent herein (Plaintiff) was bound to handle only  an average quantity of 750/- per M.T. per day, but not at  the minimum quantity of 750/- per M.T. per day.  (ii)    The Respondent/Plaintiff had done extra-work than  what was agreed to in the contract. The extra-work was  not done gratuitously.  (iii)   Since it was an extra-work as stated in clause XVI  of the contract, but no negotiation took place as  required under this clause, despite written request of  the Respondent (Plaintiff) and no mutual settlement was  arrived at despite the request of the Respondent in  various letters, there was no rejection of the Plaintiffs  request for higher remuneration.  

(iv)    The Plaintiff is entitled to extra remuneration for  extra work.

(v)     Since no negotiation took place in spite of written  request by the Plaintiff, the principle of quantum meruit  applied for awarding compensation.  

(vi)    Since no reply was sent by the Appellant  Corporation to the letter of Respondent dated 9.11.1994,  refusing the demand the Respondent (Plaintiff) had  proved his claim for compensation at Rs.215/M.T.   (vii)   Even though the trial Court did not frame any issue  on the claim of transportation charges at the rate of  Rs.45/- per tonne instead of Rs.15/- per tonne, the High

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Court decided the issue holding that the respondent  herein had substantiated the said claim by the letter  dated 9.11.1994. (vii)   In letter dated 14.11.1994 sent by the Assistant  Manager of the appellant-Corporation he had  recommended for the enhanced rate of payment that  would constitute an admission of the enhanced rate as  claimed by the respondent.

8.      In support of Civil Appeal No.7440 of 2000, learned  counsel for the appellants submitted that the contracts  stipulated remuneration at the rate of Rs.100/- per MT for  discharge at the charter party rate for a period from 16.8.1994  to 15.8.1995.  It does not preclude any higher discharge rate  since its discharge rate is not pre-determined and it varies  from ship to ship.  The stipulation of the charter party rate is  only for the purpose of ensuring that the appellant- Corporation does not suffer any demurrage on account of slow  discharge.  Since the rate of discharge is a variable factor from  ship to ship, the remuneration in the present contract is not   dependant on the daily discharge rate. Actual figures also  show that the discharge rate has been varying daily.   Therefore, the request of the appellant Corporation for a faster  discharge was as per the terms of the contract and in view of  the specific order from the port authorities in terms of Clause  41 of the contract.  It was, therefore submitted that the  respondent is not entitled to claim remuneration at a higher  rate but only the contractual rate.

9.      Secondly, it was submitted that in the absence of any  specific contract between the parties or the acceptance of the  appellant of the demand of the respondent for higher rate of  remuneration, the respondent is entitled to claim  remuneration only as per the terms of the contract.  Finally, it  is submitted that principles of quantum meruit under Section  70 of the Indian Contract Act, 1872 (in short the ’Contract  Act’) has no application in view of the specific contractual  provisions. Alternatively, it was pleaded that the claim for  enhanced rate is highly exorbitant and not substantial by any  evidence of actual expenses. Though the High Court had relied  on the letter dated 9.11.1994 (Ext.67), the same has no  relevance because the respondent had claimed Rs.215/- per  MT for a minimum discharge of 1200 MT per day.  This was  even much higher than the actual discharge rate achieved by  the respondent.  Therefore, the decree at the rate of Rs.215 per  MT is unsustainable. The letter dated 15.11.1994 (Exh. 90)  written by the Assistant Manager of the appellant-Corporation  has also no relevance because he was not competent to decide  the issue and the same could not have been the basis of a  decree when he was not examined as a witness. Even  otherwise, it was only a unilateral recommendation to higher  authorities.  The letter does not in any way substantiate the  claim of the respondent and the same was not accepted by the  appellant.  The decree for enhanced transportation charges at  the rate of Rs.45/- per MT for transporting the cargo from the  wharf to the appellant godown is unsustainable since the  contractual rate has no connection with the discharge rate.   Therefore the principle of quantum meruit does not apply and  the respondent is entitled to claim at the contractual rate only.

10.     Respondent supported judgment and its appeal prayed  for enhanced rate of interest.  

11.     With reference to Clause XX of tender notice, it is  submitted that the contractor was only obliged to ensure

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discharge the cargo at the rate provided for in the Charter  Party agreement. Clauses 22 and 23 are relevant.  It is pointed  out that the contractor was bound to discharge the articles at  an average rate of 750/- per MT.  In the event of failure to do  so, the corporation was liable to pay demurrage at the rate of  US$ 4000 per day.  In case the rate was achieved, the  Corporation was entitled to receive discharge money for  working time saved at the rate of US$2000 per day.  In the  present appeal, the Corporation has withheld the information  from the trial court as well as the High Court.  Since the  respondent-Society had started the execution of the work it  had received a letter dated 30th September, 1994 from the  Corporation "to rise to the occasion and to come forward with  all the machinery  geared up to ensure maintaining four  gangs/cranes in each shift to achieve the target of not less  than 2000  M.Ts. per day without fail". Another letter dated  14th October, 1994 was to similar effect.  It is unconceivable as  contended by the appellant-Corporation that no extra  expenditure would be involved in getting a higher rate of  discharge.  The Customs authorities were delaying the  clearance.  There was delay even at the time of unloading.  At  the depot of the Corporation, the arrangements were very  poor. Therefore, the Corporation was requested to provide  extra money. A fax was sent in this regard.  When the  respondent-Society did not get any response, it sent another  letter dated 9.11.1994 reiterating its demand for payment of a  higher rate.  A copy of the letter was endorsed to Senior  Regional Manager, FCI, Ahmedabad, the basis on which the  extra remuneration was demanded was indicated.  It appears  that the matter was examined in the office of the Corporation  and therefore the letter dated 14th November, 1994 was issued,  giving details and pointing out that the respondent-Society  was incurring extra expenditure and was paying excess money  for speedy work to each and every DLB gangs, shore cranes,  Trucks, Short labourers, and other organizations.  Various  difficulties faced by the respondent Society were also listed. It  was found that the worksheet is in order.  He recommended  that the request of the respondent society was to be accepted  and accordingly recommended that the request may be  forwarded to the concerned authority.  Despite these specific  recommendations, there was no response.  The respondent  completed the work.  Not only the appellant-Corporation saved  demurrage at the rate of US$ 4000 per day, it also earned  discharge money for speedy work done.  The demand for the  higher remuneration was in accordance with the terms of  Clause XVI.  There is no dispute that there was a request  made by the appellant-Corporation to discharge more than  what was stipulated in terms of the Charter party agreement.   The Corporation was insisting that the respondent-Society  should increase the discharge.  That being so Clause XVI(b) is  clearly attracted.  The respondent Society was entitled to extra  remuneration.  Since the appellant-Corporation had failed to  respond to the request, the High Court had rightly invoked the  principle of quantum meruit and accepted the claim.  Reasons  for extra expenditure have been clearly stated in the statement  of Sh. Jayantibhai. 12.     The principle of quantum meruit is often applied where for  some technical reason a contract is held to be invalid. Under  such circumstances an implied contract is assumed, by which  the person for whom the work is to be done contracts to pay  reasonably for the work done, to the person who does the  work. The provisions of this section are based on the doctrine  of quantum meruit, but the provisions of the Contract Act  admit of a more liberal interpretation; the principle of the  section being wider than the principle of quantum meruit.’ The

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principle has no application where there is a specific  agreement in operation. A person who does work or who  supplies goods under a contract, if no price is fixed, is entitled  to be paid a reasonable sum for his labour and the goods  supplied. If the work is outside the contract, the terms of the  contract can have no application; and the contractor is  entitled to be paid a reasonable price for such work as was  done by him.  

13.     If a party to a contract has done additional construction  for another not intending to do it gratuitously and such other  has obtained benefit, the former is entitled to compensation  for the additional work not covered by the contract. If an oral  agreement is pleaded, which is not proved, he will be entitled  to compensation under Section 70. Payment under this  section can also be claimed for work done beyond the terms of  the contract, when the benefit of the work has been availed of  by the defendant.

14.     The term ’extra’ is generally used in relation to the works,  which are not expressly or impliedly included in the original  contract price, provided the work is within the framework of  the original contract. The question whether a particular work  is extra will depend upon the terms and conditions of the  contract, and other documents connected therewith.  

15.     The relevant clauses of the contract read as follows :

"XVI- REMUNERATION :

(a)     The Contractors shall be paid the remuneration in  respect of the services described in para XX and performed  by them at the contracted rates.

(b)     If the Contractors are required to perform any services  in addition to those specifically provided for in the Contract  and the annexed schedule, the Contractors remuneration for  the same will be paid at the rate as negotiated and fixed by  mutual agreement. (c)     The question whether a particular service is or is not  covered by any of the services described and provided for in  the contract, or is not auxiliary or incidental to any of such  services, shall be decided by the Sr. Regional Manager  whose decision shall be final and binding on the Contractor.

(d)     The Contractor will have the right to represent in  writing to the Sr. Regional manager that a particular service  which he is being called upon to perform is not covered by  any of the services specifically provided for in the contract or  as the case may be, is not auxillary or incidental to such  services, provided that such representation in writing must  be made within 15 days of the commencement of actual  performance of such services. If no such representation in  writing is received within the said time, the Contractor’s  right in this regard will be deemed to have been waived."  XX - Services to be Performed by the Contractors: Part I For Stevedoring

"The contractor shall render all the services, which are  usually performed by the stevedors. These will generally  include services given below:

"(i) The Contractors shall discharge the  Sugar in bags (including sweeping and

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spilling) from the ship to the wharf/roof of  the transit shed carefully and  expeditiously and arrange to complete  discharge in the minimum period possible  and shall take all necessary steps to avoid  ships going under demurrage and to earn  maximum amount of dispatch money. No  additional remuneration will be paid for  discharging on roof of transit shed.

The contractors shall ensure the discharge of cargo  in a vessel handled by him at the rate not less than  what is provided for in the charter party of the  concerned vessel and ultimately if there has been any  short fall in discharge of the vessel at the stipulated rate  and consequential demurrage charges, the contractor  will be responsible for the same and will make good  whatever losses and expenses incurred by the  Corporation, the Corporation shall have the right to  deduct these losses from the admitted bills of the  contractors".

" Clause XXII - Ship to discharge at the average  rate of 750 M.T. calculated on gross weight  provided vessel can deliver at this rate per working  day of 24 consecutive hours time from noon  Saturday to 8 a.m. Monday (for local equivalent )  and from 5 p.m. day preceding holiday until 8 a.m,  next working day excepted, even used, time  employed in shifting anchorages or discharging  places within the same port or its jurisdiction not  to count as laytime, and shifting expenses to be for  owners account". Clause XXIII of the charter party agreement provided as  under:

"If longer detained in loading and/or discharging  ports, demurrage to be paid at the rate of $4000.00  per day, or in proportion for any part of 1 day. Ship  to pay $2000.00 per day or in proportion, dispatch  money for all working time saved at both ends.  Such time lost is to be calculated in accordance  with the custom of port. Lay time to be non- reversible between loading and discharging ports,  but may be reversible between the ports of loading  at the ports of discharging.

Demurrage or dispatch to be settled directly  between owners and Charters at discharging  port(s):"

16.     From various documents exhibited more particularly the  letters dated 30.9.1994 to 14.10.1994 it is clear that the  functionaries of the appellant-Corporation recommended   higher payment rate for higher discharge.  The letters written  by the respondent society also clearly indicate that the  demand was for higher charges in respect of the extra work.  Though a stand has been taken that the signatories of the  letters by the Corporation were not authorized, it is not  disputed that on the basis of these letters extra work was  undertaken.  There is also material on record to show that  extra expenditure had to be incurred for doing the extra work.   The quoted rates in terms of the contract was Rs.108 per M.T.  

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For claiming Rs.215 per M.T. the following details were given:

SR.     NAME OF OPERATION       PMT NO.     PREVAILING RATE (RS.) 1.                                Stevedoring Charges   75-00 2.                ’Tally clerks, Gears, foreman private Labourers inside                       10-00                hatches 3.              Loading of trucks                                                     10-00

4.              Shifting T. Sheds by trucks at Kandla                        17.00                5.              Wagon loading from T. Sheds by trucks at Kandla                 40.00             6.              Wharf clearing, Wagon cleaning security and for Casual  Labourers in T. Sheds.                                         8.00 7.              Custom clearance Documentation                               10.00       8.              Administration charges, warehousing.                         10.00       

9.              Various liabilities like Wagon Demurrage, shed  Demurrage etc.                                              15.00 1.0             Contingency over and above costing                                    20.00                         Grand Total                                      215.   00 17.     As has been rightly contented by learned counsel for the  appellant, sufficient evidence has not been placed on record to  justify the claim at the rate of Rs.215; for example, the serial  No.10 i.e. "contingency over and above costing", and for  custom clearance, documentation or administration charges  and warehousing. It is, however, clear that no issue was  framed relating to the claim of enhanced rate for  transportation at the rate of Rs.45/- per M.T.  and even no  ground was urged accordingly.   

18.     In view of the above, we direct that the respondent- society shall be paid at the rate of Rs.108 per M.T. in terms of  the contract up to 750 M.T. and at the rate of Rs.215 per MT  for quantum beyond that. The interest rate shall be 6% as  fixed by the High Court. The respondent-Society shall not be  entitled to any amount beyond the agreed amount of Rs.15  per M.T. for transportation. Civil Appeal No.7440 of 2000 is  allowed to the aforesaid extent.

19.     The Society’s appeal (Civil Appeal No.2540 of 2002) is  sans merit and deserves dismissal, which we direct.  

20.     There shall be no order as to costs in both the appeals.