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Union Of India v. Sheobux Satyanarayan
Factual and Procedural Background
These are second appeals by the defendants against the reversing judgment of the learned District Judge of Cuttack, which had decreed the plaintiffs' claims for Rs. 680/10/- in each suit. The appeals correspond to Second Appeal No. 240/60 (Money Suit No. 198/58) and Second Appeal No. 241/60 (Money Suit No. 197/56). The factual allegations in both suits are almost identical:
- The plaintiff booked consignments of sugar (220 bags totalling 605 maunds; each bag 2 maunds 30 seers) under two invoices dated 5-6-55. The consignments were due to reach Cuttack on 15-6-55 but were delivered on 18-7-55.
- On enquiry, the plaintiff discovered the wagon was misdirected to Kantapukur Station (Eastern Railway) and detained there for over a month.
- The plaintiff claimed loss of Rs. 1,512/8/- due to the delay, alleging the market price of sugar fell by Rs. 2/8 per maund between the due date and the actual delivery date. The defendants denied any loss due to fall in market rate and denied any special contract requiring delivery by a special date.
Procedurally, the learned Munsif found negligence by the railway servants causing delay but held the plaintiff was not entitled to damages for depreciation due to fall in price and dismissed the suits. On first appeal, the District Judge found the railway negligent and assessed damages for fall in price at Rs. ½ per maund for a 26-day delay, awarding Rs. 680/10/- in each suit. The defendants then pursued these second appeals. The appellate court ultimately dismissed the appeals with costs.
Legal Issues Presented
- Whether, under the facts of these cases, the plaintiff is entitled to damages for depreciation in value resulting from a fall in market price caused by delay in delivery attributable to the railway's negligence.
- If such damages are recoverable, what is the proper measure of damages (i.e., how to calculate compensation for late delivery)?
- Whether a claim for loss of profits (or other non‑ordinary consequences of delay) is recoverable without the carrier having been notified at or before the date of contract that such loss was likely to result from delay.
Arguments of the Parties
Appellant's (Defendants') Arguments
- Mr. B.K. Pal (for the appellant) did not dispute the factual findings that there was a 26‑day delay, that the delay was due to negligence/misconduct of the railway servants, or that the market price had fallen to the extent of Rs. ½ per maund (as assessed by the District Judge).
- The appellant's principal contention was legal: the plaintiff was not entitled to damages represented by the fall in the market price. The appellant argued that the plaintiff was only entitled to the value of the goods at which they were purchased and, since the goods were actually delivered, the plaintiff was entitled to no compensation for the delay.
Plaintiff's Arguments
- The plaintiffs alleged an extraordinary delay caused by the railway's misconduct (misdirection and detention at another station) and claimed damages of Rs. 1,512/8/- based on a fall in market price of Rs. 2/8 per maund between the due and actual delivery dates.
- The plaintiffs relied on the position under Section 72(1) of the Indian Railways Act (pre‑amendment) read with Sections 152, 161 and 73 of the Indian Contract Act to support recovery of depreciation in value due to delay caused by the railway administration.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Lalchand v. Union of India, AIR 1960 Cal 270 | Supports the proposition that where time is not expressly fixed, performance is to be within a reasonable time; reasonable time depends on circumstances. | Cited to support the view that absent an express time, the carrier must deliver within a reasonable time; the court accepted this general principle. |
| Firm Kishanlal Shrilal Patwa v. Union of India, AIR 1960 Madh Pra 289 | Interprets "deterioration" in the relevant statutory provisions as wide enough to include depreciation in value due to fall in price. | Relied upon to hold that "deterioration" includes fall in market price and thus such depreciation is recoverable where delay is the carrier's fault. |
| G.P. Railway v. Jugal Kishore, AIR 1930 All 132 | Earlier authority establishing that deterioration may include depreciation in market value. | Described as having clearly laid down the position; court applied and noted that later authorities slightly modify its scope but its core proposition supports recovery for depreciation. |
| Sally Wertheim v. Chicoutimi Pulp Co., 1911 AC 301 | Leading principle on measure of damages for late delivery: damages equal the difference between market prices on due and actual delivery dates; credit if the purchaser resold at a better price. | Adopted as the correct rule for measuring damages for late delivery; applied to assess that damages should reflect market price difference unless the plaintiff resold and obtained a different result. |
| Union of India v. Baijnath, AIR 1951 Pat 219 | Applied Sally Wertheim in a case of delay in delivery; if purchaser resold at a different price, he must account for actual sale price in damages. | Followed and treated as directly applicable to delay-in-delivery situations; used to support measure of damages principle. |
| Managing Agents Martin & Co. v. Deokinandan, AIR 1959 Madh Pra 276 | Where a railway deviates from the usual way and the deviation was not imperative, the railway forfeits protection afforded by risk notes. | Cited to show circumstances in which the railway loses contractual protections; referenced in discussing carrier liability when departure from usual conduct occurs. |
| G.A. Jolli v. The Dominion of India, AIR 1949 Cal 380 | Case of non‑delivery (not delay); held loss of profit is not ordinarily recoverable for delay/non-delivery unless carrier was informed at or before contract that such loss was likely. | Referred to distinguish non‑delivery claims from delay claims and to support the proposition that claims for profits require prior notice to carrier to be recoverable. |
| Union of India v. Ms. Natabarlal Jayshankar, ILR 1962 Cut 395 (AIR 1963 Orissa 66) | Case of non‑delivery/short delivery; followed AIR 1949 Cal 380 in repelling claims for expected profits. | Used to reinforce that profit claims are not recoverable where they are not the ordinary consequence of delay/non‑delivery unless carrier had prior knowledge. |
| AIR 1960 Cal 271 (as referenced in the opinion) | Referenced as a case relating to delay in delivery; paragraphs cited concerned giving damages to place plaintiff in position as if contract had been performed. | Referred to for the proposition that damages should place the plaintiff in the position he would have been if the contract had been performed (consistent with 1911 AC 301). |
| AIR 1960 MP 289 (same as AIR 1960 Madh Pra 289 referenced earlier) | Discussed special facts where fall in price resulted from Government control; used to distinguish claims where fall in price was not a natural consequence of delay. | Distinguished on the facts: the court held that because the fall in price there was due to price control, it did not support a general rule contrary to 1911 AC 301. |
Court's Reasoning and Analysis
The court's reasoning proceeds from statutory and contractual principles expressly cited in the opinion:
- Statutory and contractual foundation: Section 72(1) of the Indian Railways Act (as it stood prior to the 1961 amendment) makes the railway administration's responsibility for loss, destruction or deterioration of goods that are carried by railway that of a bailee under Sections 152 and 161 of the Indian Contract Act. Section 161 provides that if, by default of the bailee, goods are not delivered at the proper time, the bailee is responsible to the bailor for any loss, destruction or depreciation from that time.
- Definition of "deterioration": The court accepted the position (supported by cited cases) that "deterioration" is wide enough to include depreciation in value caused by a fall in market price. On the facts, the court found the railway failed to deliver within a reasonable time and that the delay was caused by misconduct of the railway servants; consequently, depreciation because of market price fall was actionable.
- Measure of damages: The court turned to Section 73 of the Indian Contract Act and the authorities, particularly Sally Wertheim (1911 AC 301) and Union of India v. Baijnath (AIR 1951 Pat 219), which state that the appropriate measure for late delivery is the difference between market prices on the date of due delivery and the date of actual delivery, subject to credit where the buyer has resold at a better price. The court treated these authorities as stating the correct law on measure of damages.
- Limits on recovery (loss of profits and special losses): The court acknowledged authorities (e.g., AIR 1949 Cal 380 and ILR 1962 Cut 395 / AIR 1963 Orissa 66) holding that loss of profits or special losses are not ordinarily recoverable for delay unless the circumstances that would give rise to such losses were brought to the carrier's attention at or before the date of contract. The court observed that those decisions concern non‑delivery or short delivery and upheld their approach limiting recovery of expected profits where the carrier lacked notice.
- Distinguishing exceptional facts: The court examined cases (e.g., AIR 1960 MP 289) where particular facts (such as governmental price control) produced a fall in value that was not treated as a natural consequence of delay. The court distinguished such cases on their facts and rejected any broad principle denying recovery for ordinary depreciation in market value due to delay.
- Application to present case: No evidence was presented that the plaintiff actually resold the goods; thus the fallback measure — the difference in market value between due and actual delivery — governs. The court found no merit in the appellant's contention that, because delivery ultimately occurred, no compensation for depreciation could be awarded. On this legal basis, the court dismissed the appeals.
Holding and Implications
APPEALS DISMISSED.
Direct effect on the parties:
- The defendants' second appeals were dismissed with costs, thereby leaving in force the decree in favour of the plaintiffs for Rs. 680/10/- in each suit as previously decreed by the District Judge.
Broader implications:
The opinion applies existing statutory provisions (Section 72(1) of the Indian Railways Act and Sections 161 and 73 of the Indian Contract Act) and established authorities (notably 1911 AC 301 and subsequent Indian decisions) to confirm that depreciation in market value caused by a carrier's delay is recoverable as damages. It also reiterates the well‑established limitation that claims for profits or other special losses are recoverable only where the carrier had prior notice of the likelihood of such losses. The court did not purport to lay down a novel legal principle beyond these applications of established law.
1. Defendants are the appellants against the reversing judgment of the learned District Judge of Cuttack decreeing the plaintiffs' claim for Rs. 680/10/- in each of the suits. Second appeal No. 240/60 and Second Appeal No. 241/60 correspond to money suit No. 198/58 and Money Suit No. 197/56 respectively. Facts alleged in both the cases are almost identical. In each case the facts are that the plaintiff booked a consignment of 220 bags of sugar weighing 605 mds. (each bag weighing 2 maunds 30 seers). One consignment was under Invoice No. 2 R/R No. 124163 dated 5-6-55 and the other was under Invoice No. 3 R/R No. 124154 dated 5-6-55. These consignments were delivered on 18-7-55 though they were to reach Cuttack on 15-6-55. On enquiry the plaintiff came to know that the wagon containing the consignments was misdirected to Kantapukur Station on the Eastern Railway and was detained there for more than a month. The plaintiff suffered loss of Rs. 1512/8/- due to this extraordinary delay in delivery as the market price of sugar came down by Rs. 2/8 per maund between the due date of delivery and the actual date of delivery. In both the suits defendants asserted that there was no loss due to fall in the market rate and there was no special contract for the goods to reach before a special date.
2. The learned Munsif found that there was delay in transit due to the negligence and misconduct of the servants of the Railways and that the plff. was not entitled to any damages due to depreciation in value of the goods on account of the fall of price. He accordingly dismissed both the suits.
3. Before the lower appellate Court, the finding that the railway administration was guilty of negligence and misconduct for the delay in the delivery of the goods was not challenged. The learned District Judge held that the defendants were liable to pay damages on account of the fail in price between the due date of delivery and the date of actual delivery; that there was delay of 26 days and the fall in the price was calculated at the rate of Rs. ½/- per maund and not at the rate of Rs. 2/8/- per maund as claimed. He passed a partial decree for Rs. 680/10/- in each suit with proportionate costs throughout.
4. Mr. B.K Pal for the appellant did not challenge the finding that there was delay of 26 days in the delivery of goods and that the market price had fallen to the extent of Rs. ½/- per maund and that the delay was due to the negligence and misconduct of the servants of the railway administration. He advanced the only contestation that the plaintiff was not entitled to damages represented by the fall in the market price. According to him the plaintiff is entitled to the value of the goods at which they were purchased and, in this case, the plaintiff is entitled to no compensation as the goods were in fact delivered to him.
5. As a large number of authorities has been cited in support of the respective contentions, it is necessary to refer to the various provisions of law which have bearing on this contention. Section 72(1) of the Indian Railways Act, as it stood prior to its amendment by Act XXXIX of 1961, governs the present case and is as follows:
‘The responsibility of a railway administration for the loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway shall, subject to the other provisions of this Act, be that of a bailee, under Sections 152 and 161 of the Indian Contract Act”.
6. Section 161 of the Indian Contract Act runs as follows:
“If, by default of the bailee, the goods are not returned, delivered, or tendered, at the proper time, he is responsible to the bailor for any loss, destruction, or depreciation of the goods from that time”.
7. It is now well settled that in the absence of an express contract the obligation of a carrier is to carry by the usual routes and to deliver the goods within a reasonable time. Mr. Pal argues that in contracts of this nature time is not the essence of the contract. It is true that the contract does not expressly or by necessary implication fix any time for the performance of the contractual obligation. That being so, the law implies that it shall be performed within a reasonable time, and reasonable time means what is reasonable looking at all circumstances of the case. Lalchand v. Union of India, AIR 1960 Cal 270 cited by Mr. Pal supports this view.
8. Though there was some difference of opinion as to the import of the word “deterioration” used in Section 72 of the Indian Railways Act and in Section 161 of the Indian Contract Act, the position is now well settled that it is wide enough to include depreciation in value on account of a fall in the price of the goods. Even paragraph 7 in Firm Kishanlal Shrilal Patwa v. Union of India, Rly. Administration now Northern Rly. AIR 1960 Madh Pra 289 cited by Mr. Pal supports such a contention. The position was clearly laid down in G.P Railway v. Jugal Kishore, AIR 1930 All 132. It must therefore, be held that the Railway Administration did not deliver the goods within a reasonable time and the delay was on account of the misconduct of the servants of the defendants and that there was depreciation in the value of the goods as a result of the fall in the market price.
9. The next important question is what would be the measure of damages in case of this nature. Mr. Pal relied upon Section 73 of the Indian Contract Act in support of this contention that the compensation for delay in delivery did not naturally arise in usual course of things from such breach of contract, nor did the parties know when they made the contract that the loss or damage would be the likely result from the breach of it. The relevant portion of Section 73 of the Indian Contract Act is as follows:
“When a contract has been broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach”.
10. The leading case on the point is the decision of the Privy Council in Sally Wertheim v. Chicoutimi Pulp Co., 1911 AC 301, their Lordships observed:
“The general intention of the law in giving damages for breach of contract is that the plaintiff should be placed in the same position as he would have been if the contract had been performed. In the case of late delivery the measure thereof in order to indemnify the purchaser is the difference between the market price at the respective dates of due and actual delivery of the goods purchased; but if the purchaser had resold at a price in excess of the prevailing at the date of delivery he must in estimating his damages give credit therefor”.
11. In the particular case, the action for damages was for breach of the contract dated 13-3-1900 to deliver 3000 tons of moist wood pulp between 1st September and 1st November of that year. The appellant claimed to recover 27s, 6d a ton, the difference between 70s., the market price at the port delivery on the due date, and 47s, 6d., the market price on the same place on the date of actual delivery; it however appeared that he had sold the goods at 65s a ton involving a loss to him of only 5s a ton. It was held that he was entitled to recover only 5s a ion. This decision was followed in Union of India v. Baijnath, AIR 1951 Pat 219 which was directly a case arising out of delay in delivery. In my view these two decisions state the correct law on the point and to that extent AIR 1930 All 132 needs a slight modification. In Managing Agents Martin and Co. v. Deokinandan, AIR 1959 Madh Pra 276 their Lordships observed that where a railway deviates from the usual way they profess to carry the goods and the deviation was not imperative, the railway administration forfeits the protection, afforded to them by Risk Notes A and B.
12. Mr. G.A Jolli…Plaintiff; v. The Dominion Of India…Defendant., AIR 1949 Cal 380, AIR 1960 Cal 270, AIR 1960 Madh Pra 289 and Union of India v. Ms. Natabarlal Jayshankar, ILR 1962 Cut 395 : (AIR 1963 Orissa 66) in support of a contention that the plaintiff is not entitled to loss of profits as an ordinary consequence of delay unless the circumstances are brought to the knowledge of the carrier at or before the date of the contract. AIR 1960 Cal 271 and AIR 1960 Madh Pra 289 are cases relating to delay in delivery of the goods. Mr. Pal drew my attention to paragraphs 29 and 30 in AIR 1960 Cal 270. In paragraph 29 his Lordship does not differ from the conclusion I have arrived at. His Lordship lays down that in giving damages for breach of contract the plaintiff should be placed in the same position as he would have been if the contract had been performed. That is the dictum which was laid down in 1911 AC 301.
13. But in this case, only the price paid by the plaintiff for the goods was decreed on the extraordinary ground that the railway administration was not itself responsible for the delay in delivery, but merely failed to inform the consignor or the consignee that the goods had been seized by the land Custom Officer. The ultimate conclusion in that case is not strictly justifiable on the principle discussed by me or on the principle adopted in para 29 of the judgment. At any rate it is distinguishable on the facts of the case. AIR 1960 MP 289 involves peculiar facts. There the depreciation in the value of the goods ultimately ensued as the immediate consequence of an order passed by the Central Government on 25-10-1950 controlling the price of goods and fixing Rs. 21/- per maund. In paragraph 9 Mr. Justice Krishnan observed:
“It is not a case of deterioration naturally arisen in due course from the delay or is theoretically conceivable, even apart from physical decomposition, that there was a steady downward trend……. In natural course of things such a fall in price would not have happened”.
14. His Lordship was of the view that the fall in price by itself would not be outside the scope of a claim u/s 73 of the Indian Contract Act, but the fall in price due to control by the Central Government was outside it. This case is therefore no authority in support of the general proposition contended for by Mr. Pal and is contrary to what is laid down in 1911 AC 301 and AIR 1951 Pat 219.
15. AIR 1949 Cal 380 refers to a case of non-delivery and not to delay in delivery. The plaintiff in that suit claimed compensation for loss and damage which he assessed at Rs. 1,20,000/- being the total of the value of the goods on 24-6-47 when the said goads should have been delivered to the plaintiff and the expected profit on the sale thereof. In paragraph 50 his Lordship follows the dictum laid down in 1911 AC 301. In paragraph 51 his Lordship observed that the loss or profit is not the ordinary consequence of delay or default and cannot be recovered unless the circumstances are brought to the knowledge of the carrier at or before the date of contract. This is a correct proposition of law and rightly the claim for profits was negatived. This decision was approved in ILR 1962 Cut 395 : (AIR 1963 Orissa 66) which was also case of nan-delivery and short delivery and the plaintiff based his claim on the price of the missing bales of yarn besides the frieght and the profit at 7¼ per cent following AIR 1949 Cal 380 their Lordships repelled this contention.
16. There is some confusion in the line of thought Shat the measure of damages representing the difference between the market price on the due date of delivery and an the date of actual delivery includes loss of profits. The value of the goods an the due date of delivery represents the real value to the owner without any relation. So the question of profit if by lapse of time there is a Sail to the price it necessarily means only the loss in value of the goods and that the loss in value in the compensation claimed.
17. In the present case no argument has been advanced before me by either side that in fact the goods were sold by the plaintiff. If there was evidence of actual sale of goods by the plaintiff then directly 1911 AC 301 and AIR 1951 Pat 219 would apply and the plaintiff's case would have been dismissed for not stating the actual price realised on sale. But as no such case was advanced either in the Courts below or before me, examination of such a question is not called for. There is no substance in the contention advanced by Mr. Pal. The appeals fall and are dismissed with costs.
F/N/V.B.B
18. Appeals dismissed.
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