TaxTMI 
TaxTMI 
2022 (11) TMI 1461
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....y 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? 3. The Single Judge and the Division Bench of the High Court of Tripura have held that demurrages cannot be recovered as a charge by the Corporation. After examining the contract in its entirety, including its nature and scope, we conclude that the parties did not intend to include liability on account of demurrages as part and parcel of the expression "charges". The liability of the contractors in the present contracts is clearly distinguishable from other contracts entered into by the FCI in 2010 and 2018, having a different scope and objective. Because of....
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....This writ petition was allowed by the Single Judge of High Court. It clarified that the Corporation was only entitled to recover losses that were incurred due to the contractor's dereliction of duties under the contract, as permissible Under Section 73 of the Indian Contract Act 1872, which provides for recovery of damages for the breach of a contract. This would not permit the recovery of losses that were causally distant from the contractor's actions. Further, it held that the Corporation had unilaterally determined and imposed demurrages on the contractor, and directed it to settle its claims through a civil suit of recovery. The Corporation filed a writ appeal [Writ Appeal No. 56 of 2018.] and the Division Bench of the High Court by its order dated 07.09.2018 dismissed the same on the ground of delay. A Review Petition[Review Petition No. 02 of 2019] filed by the Corporation was also dismissed by the Division Bench of the High Court on 22.01.2019. The present appeals are against the orders in the writ appeal as well as in the review. 8. The second set of civil appeals are also filed by the Corporation. It arises out of Special Leave Petition Nos. 16063-16068 of 2019 ....
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....charge. He also submitted that the Handbook used by Corporation [Movement Operations in Food Corporation of India (FCI Handbook 2020).] would demonstrate that "charges" certainly include "demurrage". 13. Supplementing the above submissions, Shri Ajit Puduserry, AOR submitted that in the construction of contractual terms, the interpretation proposed by the author of the tender document must be relied on. He referred to Agmatel India Pvt. Ltd. v. Resoursys Telecom and Ors. (2022) 5 SCC 362 for this purpose. He further submitted that the action of the Corporation is unexceptionable as it merely followed the directions of the High Court in an earlier round of litigation where the court directed it to issue notice before taking a decision on the contractors' liability. It is his contention that notices were accordingly issued before recoveries were made. Appearing on behalf of the Corporation in the third appeal, Shri Abhay Kumar, AOR, supported the arguments of the Appellant Corporation on the same grounds. 14. Shri Sanjay Parikh, learned Senior Counsel appearing on behalf of the Respondents submitted that the Corporation acted arbitrarily. It failed to follow due process of ....
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.... ... XII. Recovery of losses suffered by the Corporation (a) 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) 17. The Corporation seeks to recover demurrages as a part of "charges" provided Under Clause XII(a) as extracted hereinabove. The expression "charges", stand alone, is not amenable to a precise meaning. Its dictionary meaning is open textured, defining "charges" as "any consideration that one must pay for goods and services provided". Therefore, the scope of the expression "charges....
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....use, for the intention of the parties is to be gathered not from one part of the Clause or the other but from the Clause taken as a whole. It is in the light of this principle of interpretation that we must determine whether the words 'any claim for the payment of a sum of money' refer only to a claim for a sum due and payable which is admitted or in case of dispute, established in a Court of law or by arbitration or they also include a claim for damages which is disputed by the contractor. (emphasis supplied) 20. In Provash Chandra Dalui and Anr. v. Biswanath Banerjee and Anr. 1989 Supp (1) SCC 487, noting that the intention of the parties must be discerned from the context of the contract, this Court observed: 10. 'Ex praecedentibus et consequentibus optima fit interpretatio.' The best interpretation is made from the context. Every contract is to be construed with reference to its object and the whole of its terms. The whole context must be considered to ascertain the intention of the parties. It is an accepted principle of construction that the sense and meaning of the parties in any particular part of instrument may be collected 'ex antecedent....
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....n "charges" in the larger context of the contract. 23. The preamble of the contract, i.e., the Work Order, reads that the contractor is engaged for "transportation of foodgrains from depots, mandis, rail heads of Churaibari to various destinations as per appendix 1". Further, Clause XIII of the Work Order detailing the responsibilities of the contractor, to the extent relevant for our purposes, reads as under: XIII. Responsibilities of the Contractor (a) The Contractor shall be responsible to supply adequate and sufficient number of trucks for transportation of food grains and carrying out any other services under the Contract in accordance with the instructions issued by the General Manager or an officer acting on his behalf. ... (f) The Contractor shall be responsible for the safety of the goods from the time they are loaded on their truck from godowns/mandis/rail heads until they have been unloaded from the trucks at godowns or at other destinations as specified in the Contract or as directed by the General Manager/Area Manager or any other officer acting on his behalf... (emphasis supplied) 24. We have scanned the entire contract, in....
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....act are principal tools to ascertain such intention. While interpreting the words, courts look at the expressions falling for interpretation in the context of other provisions of the contract and also in the context of the contract as a whole. These are intrinsic tools for interpreting a contract. As a principle of interpretation, courts do not resort to materials external to the contract for construing the intention of the parties. There are, however, certain exceptions to the Rule excluding reference or reliance on external sources to interpret a contract. One such exception is in the case of a latent ambiguity, which cannot be resolved without reference to extrinsic evidence. Latent ambiguity exists when words in a contract appear to be free from ambiguity; however, when they are sought to be applied to a particular context or question, they are amenable to multiple outcomes. This position is well-explained in the following passage of Halsbury's [Halsbury's Laws of England (5th edn, 2012) vol 32, para 409.]: Latent ambiguity: When the instrument appears on its face to be free from ambiguity but, upon the endeavour being made to apply it to persons or things indi....
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....nd distribute foodgrains across the nation, enters into contracts depending on the services it requires. These contracts naturally vary depending on the needs and purposes of the Corporation. With the aid of the provisions in the Handling and Transport Contract from 2010, we are able to understand the intention of the parties while entering into the present Road Transport Contracts. As the present contracts do not involve the task of loading and unloading of foodgrains from the railway wagons as a part of the contractors' responsibility, there is no Clause enabling the recovery of demurrages from them by the Corporation. Thus, our interpretation of the expression "charges", as exclusive of liability for demurrages, stands confirmed. 31. We will proceed to examine yet another Handling and Transport Contract which was executed seven years after the present contract, i.e., in 2018. The relevant clauses of the contract are as under: B. Brief description of work I. Unloading/Loading of foodgrain bags from/into railway wagons, trucks etc. stacking the foodgrains in bags, bagging, weighment, standardization, cleaning of foodgrains, etc., and transporting of foodgr....