http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: UNION OF INDIA AND ORS.

       Vs.

RESPONDENT: SUGAULI SUGAR WORKS (P) LTD.

DATE OF JUDGMENT11/03/1976

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) BEG, M. HAMEEDULLAH SINGH, JASWANT

CITATION:  1976 AIR 1414            1976 SCR  (3) 614  1976 SCC  (3)  32

ACT:      Indian Railway’s  Act as  it stood amended by Act 46 of 1959 and  prior to 1961 amendment Ss. 72 and 74-Liability of the Railway in respect of goods sent at Railways risk is the same as  that of a bailee under the Indian Contract Act 1872 Ss. 151,  152, 161-Enquiry  under Sections  83 and 84 of the Railways Act read with s. 2 of the Indian Railways Board Act (4 of  1905) and  rule 18  of the  Railway Board  Rules is a Joint Enquiry,  admissible  under  Ss.  5,7  and  9  of  the Evidence Act-Not  covered, for claim of privileges, under s. 123  of   the  Evidence  Act  read  with  Art.  298  of  the Constitution-Correct measure  of  damages  for  purposes  of awarding damages  for negligence under the Railways Act-What is.

HEADNOTE:      The non-delivery  of the goods booked by the respondent on September  5, 1955 to several destinations under "Railway Risk" due  to the  sinking of  "Barge No.  6,  carrying  the wagons containing the goods" led to the filing of four suits which were  dismissed by  the Trial  Court holding  that the accident was  not due  to  the  negligence  of  the  Railway employees. The  High Court,  accepting  the  appeal  of  the respondent by  its judgment  dated April  13, 1966 held that the sinking  of Barge  was not  due to "inevitable accident" but due  to the  serious negligence of the Railway employees and their  failure of  duty to  take due  care which  it was required to  take as  a bailee  as  revealed  by  their  own Enquiry Committee  held with  reference to  Ss. 83 and 84 of the Railways  Act read with section 2 of the Indian Railways Board Act  (4 of  1905) and  rule 18  of the  Railway  Board Rules. The  High Court  remanded the suits for determination of the quantum of the decretal amount due to the respondent. The trial  court after  remand gave decrees in favour of the respondent on  10th September, 1966 without interest claimed up to  the date of filing of the suit and interest "pendent- lite". The  High Court,  on appeal  by the respondent by its judgment dated  3-9-1968 allowed interest "pendent-lite" and future interest at the rate of 4 1/2% per annum.      Dismissing the  two sets of appeal by the Union, one by Special Leave  against the order dated 13-4-1966 determining

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

the  liability   and  another  by  certificate  against  the judgment dated 3-9-1968 awarding interest the High Court. ^      HELD: (1)  The liability  of the  Railway was that of a bailee. The  consignments were  booked at  Railway risk. The onus  of   proving  that  the  Railway  employees  took  the necessary amount  of  care  and  they  were  not  guilty  of negligence rested  on the  Railway Authorities. The question of onus  is not important when the entire evidence is before the court.  In the  instant case there was no legal evidence to prove  "inevitable accident" but suppression of important documents and  non  production  of  important  witnesses  in charge of  the Barge.  The Barge sank because of the serious and gross  negligence  of  the  railway  employees  and  the railways did not take due care which it was required to take as a bailee. [617B-D; 618F-G]      (II) The  Enquiry Committee,  in the instant case, is a Joint Enquiry,  under the rules and the report is admissible under Ss.  5, 7  and 9  of the  Evidence Act.  The claim for privilege is  not admissible  because no such claim was made before the  Courts below  and there  was no affidavit of the Minister incharge  or the  Secretary of  the  Department  to support a claim for privilege. [616G-H]      (III) One  of the  principles for  award of  damages is that so  far as  possible he  who has  proved a  breach of a bargain to  supply what  he has  contracted to  get is to be placed as  far as money can do it, in as good a situation as if the  contract had  been performed.  The fundamental basis thus is  compensation for the pecuniary loss which naturally flows from the breach. Therefore, 615 the principle  is that  as far as possible the injured party should be  placed in as good a situation if the contract has been  performed.   In  other   words,  it   is  to   provide compensation for  the loss  which naturally  flows from  the breach. The  market rate is a presumptive test because it is the general  intention of  law that  in giving  damages  for breach of  contract, the party complaining should, so far as it can  be by  money, be  placed in  the same position as he would have  been in  if the contract had been performed. The rule as  to market  price is  intended  to  secure  only  an indemnity to  the  purchaser.  The  market  value  is  taken because it  is presumed to be the true value of the goods to the purchaser. In the instant case, the High Court correctly applied these  principles and  adopted the contract price in the facts and circumstances of the case as the correct basis of compensation. [619-D]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1562 to 1573 of 1971.      From the Judgment and Decree dated the 13-4-1966 and 3- 9-1968 of  the Patna  High Court  in Appeals  from  Original Decree Nos. 127-130, 246 and 247 of 1958.      S. P. Nayar for the Appellants.      P. K.  Chatterjee and Rathin Dass for Respondents in C. As. 1566. 1567, 1572 and 1573 of 1971.      A. N.  Sinha and  P. K.  Mukherjee for  Respondents  in C.As. 1562-65 and 1568-71 of 1971.      The Judgment of the Court was delivered by      RAY, C.J.-These  appeals are  by certificate  from  the judgment and  decree of  the High  Court at  Patna dated  13 April, 1966 and 3 September, 1968.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

    Four suits  were filed  by Sugauli  Sugar Works Limited for  recovery  of  money  on  account  of  non  delivery  of consignments. Two  suits were filed by Majhaulia Sugar Works for recovery  of money  on account  of non  delivery of  two consignments. The  suits were  filed in  the  Court  of  the Subordinate Judge, Motihari in Bihar.      The  plaintiffs   are  respondent.   The  case  of  the respondents was  that goods were booked on 5 September, 1955 to several  destinations under  railway risk.  The goods did not reach the destinations. The respondents alleged that non delivery was  on account  of gross negligence and misconduct on the part of the Railways.      The defence was that the wagons containing the goods in suit along  with other wagons were taken on Barge No. 6 from Samaria Ghat to Mokamah Ghat on 7 September, 1955. There was an accident. The Barge with all the wagons sank in the river Ganges. The  Railways contended  that the employees were not guilty of any negligence or misconduct.      The Subordinate  Judge dismissed all the suits and held that the  accident was  not because of the negligence of the railway employees.      The High  Court  accepted  the  appeals  filed  by  the respondent. The  High Court  held that the consignments were booked at  railway risk  and there  was no explanation given for the sinking of the Barge. 616 The High  Court held  that the Barge sank because of serious negligence of the railway employees and it was not a case of inevitable accident.  The High  Court  also  held  that  the railway did  not take the care which it was required to take as a  bailee. The  High Court  delivered the  judgment on 13 April, 1966 and sent to the trial court for determination of the issue:  "What is the amount for which the plaintiffs are entitled to a decree in this case?"      One group  of appeals  is against  the judgment  of the High  Court  dated  13  April,  1966  which  determined  the liability.      The Additional  Subordinate Judge,  Motihari, who tried the issue  on remand  by an  order dated  10 September, 1966 gave decrees  in favour of the respondent. The High Court by judgment dated  3 September, 1968 set aside the judgment and decree of  the trial court on remand. The High Court awarded decrees in favour of the respondents.      The second  group of  appeals is by certificate against the judgment of the High Court dated 3 September, 1968.      One of the contentions raised before the High Court and repeated here  is that the High Court should not have relied on an  enquiry report into the accident. The High Court held that there was an enquiry under Rule 18 of the Rules made by the Railway  Board. The  High Court  referred to sections 83 and 84  of the  Railways Act.  Section 83  provides that  if there is  any accident  attended with  loss of human life or grievous hurt  or with  serious injury  to property,  notice shall be  given to various persons. Section 84 confers power on the Central Government to make Rules for several purposes including the  purpose of  prescribing the duties of railway servants, police officers, inspectors and Magistrates on the occurrence of  an accident.  Section 2 of the Indian Railway Board Act  authorises the  Central Government  to invest the Railway Board  with all or any of the powers or functions of the Central  Government under  the Railways Act. The Central Government authorised  the Railway  Board to  make rules  in pursuance of  section 84 of the Railways Act. Rule 18 of the Railway Board  Rules provides  that whenever an accident has occurred in  the course  of working  a Railway, the Agent or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

Manager shall  cause an  enquiry to  be promptly  made by  a committee of railway officers (to be called a joint enquiry) for the thorough investigation of the cases which led to the accident. It  is also  provided in  the rule that an enquiry may be dispensed with in certain cases.      In the  present case  the enquiry  was  held  by  three officers. The  enquiry report  which is  marked as Exhibit 9 was contended  by the  respondent  to  be  admissible  under sections 5,  7, 9  and 35  of the  Evidence Act. The Railway contended that  the report  was a  privileged  document  and further claimed  that the enquiry was a private enquiry. The High Court rightly rejected both the contentions. First, the High Court held that no privilege had been claimed and there was no  affidavit of the Minister in charge or the Secretary of the department to support a claim for privilege. The High Court 617 also referred  to the fact that the report was called for by the Court  of the Subordinate Judge at Gaya and the Railways did not  claim any  privilege there.  Second, the High Court also rightly  held that  the enquiry  report was  admissible under sections  5, 7  and 9  of the  Evidence Act.  The High Court did not go into the question whether it was admissible under section 35 of the Evidence Act.      The High  Court further  held that the Railways did not examine important  witness, viz., the Commander of the ferry who was  on the spot when the Barge was in trouble. The High Court held  that the Railways suppressed important documents like the  marine certificate  and the  stock register  which would have  given the  life history  and the capacity of the Barge. The  High  Court  correctly  drew  adverse  inference against the  appellants  for  non  production  of  important witness and important documents.      The liability  of the railway was that of a bailee. The consignments were  booked  at  railway  risk.  The  onus  of proving that the railway employees took the necessary amount of care  and that  they were not guilty of negligence rested on the  Railway Authorities. The High Court held that it was not a  case of  unavoidable accident and that the Barge sank because of  gross negligence  of railway  employees and  the railways did  not take  the amount  of  care  which  it  was required to take as a bailee.      The question  of onus  is not important when the entire evidence is  before the  Court. The  High Court  found  that Rasul  the  Sarang  of  ’Chapra’  was  responsible  for  the accident because  he had  failed to exercise proper judgment while manoeuvring  his own vessel for the purpose of heaving up the  anchor of  Barge No.  6 and  he failed  to  exercise initiative to  save the barge by breaching it on the nearest char, instead  of taking  it to the Simariaghat goods jetty. The High  Court also  held that  the Commander  of the ferry found that he visited the steamer ’Samastipur’ and Barge No. 6 when  there was  difficulty in  heaving the  anchor of the barge and  thereafter went away, leaving the matter entirely in the  hands of  the sarang. The High Court held that these officers were responsible for not staying on board until the barge was out of trouble.      The High  Court found that Barge No. 6 was very old. It was built  in 1897.  It underwent heavy repairs in 1953. The time of  the accident was at about 2-20 p.m. on 7 September, 1955. "Samastipur"  started towing  the barge,  went about a mile when  the radius  rod of  Samastipur broke down. Radius rod is  a part  of the  paddle by which a steamer is driven. The radius  rod of Samastipur was repaired in due course. It then heaved up its anchor. The anchor of the barge could not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

be lifted.  There was a danger whistle. Rasul, the Sarang of "Chapra" came with his steamer to the aid of Samastipur. Two officers Lall  and Devia  herein before  mentioned left  the matter  in  the  hands  of  the  three  sarangs.  Lall,  the Commander of  the Ferry  was  not  examined.  The  Assistant Mechanical Engineer  was examined. The High Court found that Rasul did  not take  the steamer  and the barge to the Diara but took them to Simarighat. The steamer and the 618 barge reached jetty at Simariaghat. When the barge was about to be attached to the jetty, it sank.      The High  Court found  that the strength of the current in the  month of  September was  a known factor. The railway employees were used to ply the steamer and the barge between the two  ghats during  the month  of September.  The railway employees were  found to  equip themselves  with appropriate appliances and  necessary skill  for the  job of  taking the barge across.  The  High  Court  found  that  there  was  no satisfactory explanation  for the  sinking of the barge. The High Court  also found that there was no explanation why the anchor of  the barge  could not  be lifted. According to the High Court,  this  might  have  been  due  to  defective  or insufficient appliance  for haulage  of the anchor. The High Court also  found that  there was  no evidence  to show that there was  any unforeseen difficulty, by reason of which the anchor could  not be  heaved up.  The fact  that the  anchor could not  be lifted  was held  by the  High Court  to be on account of the negligence of the railway employees.      The High Court also referred to the fact that the barge developed a  big hole  and there was no explanation how this happened. The  High Court  felt that this could be explained by assuming that Chapra pulled the barge in such a way as to make the  anchor chain  rub against the bottom plates of the barge so  as to  create the  hole. The  High Court  found no other reasons  because there is no suggestion that there was any submerged tree or stone, and the hole was caused because the barge  accidentally struck  against any  such substance. Since the  creation of  the hole  could not  be  attributed, according to  the High  Court to anything unforeseen, it was due to the negligence of the railway employees.      The High Court further found that if the barge had been towed to  the Diara,  it could  not sink. The water near the Diara must  have been  shallow so  that the  wagons upon the barge could  not be  submerged in  the water near it. On the other hand,  Rasul took  the steamer and the barge to a much longer  distance   and  the   passage  must   have  taken  a considerable time.  Besides, the  water near  the jetty  was undoubtedly deep and the wagons were also submerged.      The High  Court on these findings correctly came to the conclusion that  the  barge  sank  because  of  the  serious negligence of the railway employees and the railways did not take the care which it was required to take as a bailee.      The High  Court passed decrees awarding the respondents price of  sugar and  costs of  damages and interest pendente lite and future interest.      The appellant  contended that the contract price should not have been awarded. The High Court said that the evidence of plaintiff’s  witness Gaya  Prasad showed the selling rate of sugar  and there  was no  challenge to that evidence. The High Court  found  that  the  goods  were  despatched  on  4 September, 1955. The barge sank on 7th September, 1955, and, therefore, the contract price would be the correct 619 measure  of  damages.  The  High  Court  on  the  facts  and circumstances of  the case  found that  the  contract  price

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

would also be the same as the market price at that time.      The market rate is a presumptive test because it is the general intention  of the  law that,  in giving  damage  for breach of  contract, the party complaining should, so far as it can  be done  by money, be placed in the same position as he would  have been  in if  the contract had been performed. The rule  as to  market price  is intended to secure only an indemnity to  the  purchaser.  The  market  value  is  taken because it  is presumed to be the true value of the goods to the purchaser. One of the principles for award of damages is that as  far as  possible he  who has  proved a  breach of a bargain to  supply what  he has  contracted to  get is to be placed as  far as money can do it, in as good a situation as if the  contract had  been performed.  The fundamental basis thus is  compensation for the pecuniary loss which naturally flows from  the breach.  Therefore, the principle is that as far as  possible the  injured party  should be  placed in as good a  situation as  if the contract had been performed. In other words,  it is  to provide  Compensation for  pecuniary loss which  naturally flows  from the breach. The High Court correctly applied  these principles and adopted the contract price in  the facts  and circumstances  of the  case as  the correct basis for compensation.      For these  reasons, the  judgment of  the High Court is affirmed. The appeals are dismissed with one set of costs. S.R.                                      Appeals dismissed. 620