RAISING DEMAND NOTE BY RAILWAYS AFTER THE DELIVERY OF GOODS - VALID

In ‘Union of India v. Kamakhya Transport Private Limited and others’ – 2025 (6) TMI 677 - SUPREME COURT, decided on 05.06.2025, the respondents in this appeal sent goods through Railways. Railways issued demand notices on various dates to the respondents. The respondents duly made the payments of the said demand notices. After that the respondents claimed refund of the amount paid by them to Railways before the Railway Claims Tribunal (‘Tribunal’ for reference), Guwahati Bench under Section 16 of the Railway Claims Tribunal Act, 1987. The details of refund sought by the respondents in the four original applications, are as below-

• Kamakhya Transport Private Limited – Rs.307902/- and Rs.1512959/-;
• Vinayak Logistics – Rs. 497342/-; and
• C.M. Traders – Rs.447965/-.

The abovesaid claimants contended before the Tribunal that the demand notices were issued after the delivery of goods which is illegal in view of Sections 73 and 74 of Railways Act, 1989 (‘Act’ for short).

Section 73 of the Act provides for the levy of punitive charges for overloading a wagon. The said section provides that where a person loads goods in a wagon beyond its permissible carrying capacity a railway administration may, in addition to the freight and other charges, recover from the consignor, the consignee or the endorsee, as the case may be, charges by way of penalty at such rates, as may be prescribed, before the delivery of the goods. It shall be lawful for the railway administration to unload the goods loaded beyond the capacity of the wagon, if detected at the forwarding station or at any place before the destination station and to recover the cost of such unloading and any charge for the detention of any wagon on this account.

Section 74 of the Act provides that the property in the consignment covered by a railway receipt shall pass to the consignee or the endorsee, as the case may be, on the delivery of such railway receipt to him and he shall have all the rights and liabilities of the consignor.

The Tribunal held that a demand under section 83 of the Act has to be raised before the delivery of goods and allowed the claim petitions on 19.01.2016. The Tribunal directed the Department to refund the entire amount along with interest @ 6% from the date of due to the date of payment. For this purpose, the Tribunal relied on the judgment of Guwahati High Court in ‘Union of India v. Megha Technical and Engineers Private Limited’ – 2013 (3) TMI 895 - GAUHATI HIGH COURT. The High Court, in this case, held that the Department could not have imposed punitive charges after delivery of goods to the consignor. If such action was required the principles of Natural Justice have to observed.

Being aggrieved against the order of the Tribunal the Department filed an appeal before the High Court. The Department contended before the High Court, that the High Court failed to consider that the Tribunal failed to consider that the consignments were booked by declaring the items to be one category, however, the loaded items were found to be different from the category declared. The High Court dismissed the appeal filed by the Department. The High Court, in their order, observed that-

• Both Section 74 of the Act and Rule 1820 of the Railway Commercial Manual II, 1991, permit recovery of dues before the delivery of goods.

• Rule 1820 provides that Before delivery of goods, it should be seen that all railway dues and other charges have been paid. Wharfage and demurrage charges should be levied under tariff rules and recovered, from the consignees endorsee before the removal of goods from railway premises. Similarly, all undercharges noticed as a result of check of invoices, weighment of goods, etc, should be recovered from consignees/endorsee before delivery of goods. As regards overcharges claimed at the time of delivery, the procedure indicated in Chapter XXI should be followed.
• The punitive charges are required to be raised by the Railway authorities before delivery is caused.
• From a perusal of Sections 73 and 78 of the Act, it is revealed that penal charges can be claimed prior to the delivery of goods, but not thereafter.

Being dissatisfied with the order of High Court, the Railway Department filed the present civil appeals before the Supreme Court. The appellant submitted the following before the Supreme Court-

• The Courts below have erroneously treated the dispute at hand, as one dealing with overloading of the wagon which is governed by Section 73 of the Act.
• The consignments were found to be different, from what had been declared, and, consequently, the appellant imposed a penalty under Section 66 of the Act.
• The High Court has failed to take into consideration, the plain language of Section 83, which permits detainment of goods after delivery.

The respondents contended that since the demand notices were raised after the delivery of goods, Section 66 of the Act would not be applicable, and the Courts below have rightly held in favour of the Respondents.

The Supreme Court heard the submissions of both the parties. The Supreme Court considered the question to be decided in this case is as to whether the Courts below have rightly held that the Railway authorities could not have raised the demand notice after the delivery of goods.

The Supreme Court analysed the provisions of Section 66 (regulating the carriage of goods). According to Section 66 of the Act a consignee/owner of goods/person having charge of goods who has brought goods for the purpose of carriage has to give the Railway authorities a written statement regarding the description of the goods, to enable them to charge the appropriate rate of carriage. if the statement is found to be materially false, the Railway authority is empowered to charge the goods at the required rate.

The Supreme Court also perused the demand notices raised by the Railways to the respondents. The demands were raised for misdeclaration by the respondents. The Supreme Court did not accept the contentions of the respondents that the demand notices are not genuine. The Supreme Court held that the demand notices are genuine in the absence of evidence to be contrary. The High Court held that the penal charges can only be applied prior to the delivery of goods.

The Supreme Court analysed the provisions of Section 54 of the Act and further relied on the judgment in Jagjit Cotton Textile Mills v. Chief Commercial Superintendent Northern Railway and Others’ – 1998 (4) TMI 538 - SUPREME COURT. In this case it was held that the Railway Administration may impose conditions not inconsistent with the Act or with any general rules made thereunder, ‘with respect to the receiving, forwarding or delivery of any animal or goods’. In the view of the Court, one such ‘condition’ could be by directing that penal charges could be collected before delivering the goods. The Supreme Court observed that one such ‘condition’ could be by directing that penal charges could be collected before delivering the goods.

In view of the above the Supreme Court set aside the order of High Court and allowed the appeal filed by the Department.