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  • sections 151, 152 and 161 of the Indian Contract Act. Sub-section (2)
  • sub-section (2) of section 72 of the Indian Railways Act.
  • SECTION 72 RAILWAYS ACT
  • section 72(2) of the Railways Act
  • sub-section (2) of section 72;
  • Indian Contract Act.
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citation codes
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  • sections 151, 152 and 161 of the Indian Contract Act. Sub-section (2)
  • sub-section (2) of section 72 of the Indian Railways Act.
  • SECTION 72 RAILWAYS ACT
  • section 72(2) of the Railways Act
  • sub-section (2) of section 72;
  • Indian Contract Act.
Smart Summary

Judgment Summary — Second Appeal concerning loss/damage of consignments carried by railway

Factual and Procedural Background

Plaintiffs (proprietors of Messrs Gopal Ram Ram Das of Arrah) sued the East Indian Railway Administration (respondent) in relation to two consignments of mustard oil booked on 16 November 1943 at Jamuna Bridge station. Two railway receipts (Nos. 751151 and 751152) show the consignor as the Deputy Regional Food Controller, Agra, and the consignee as Banshidhar Premsukh Das. The consignee endorsed the receipts in favour of the Imperial Bank of India, which in turn directed delivery to the plaintiffs.

On delivery at Arrah the plaintiffs alleged substantial short delivery (detailed quantities specified in the record) and damage to tins (76 partly damaged, 23 completely damaged). Plaintiffs attributed loss and damage to negligence and misconduct by railway servants (loose shunting and pilferage) and claimed a total of Rs. 1,266-2-6 (inclusive of price of missing oil, damaged tins, profit, and incidental expenses).

The railway defended on the basis that the consignments were booked under reduced freight pursuant to special agreements embodied in Risk Notes in form B. Under those Risk Notes the consignor purportedly agreed to exempt the Railway from responsibility except upon proof of misconduct. The Railway relied on the Risk Notes to limit liability and alleged improper packing as the cause of loss.

Procedurally: original Risk Notes filed by the respondent were damaged by rats while in court custody, so the respondent produced two office-copy documents (Exts. B and B1) and the railway receipts (Exts. A and A1). The learned Munsif found the consignments were under Risk Notes in form B and also found misconduct by the railway, awarding plaintiffs Rs. 1,149-2-6 (profits and incidental expenses disallowed). On appeal the Subordinate Judge agreed Risk Notes covered consignments but found no misconduct (attributing loss to defective packing) and allowed the appeal, dismissing the suit. The plaintiffs then filed this second appeal.

Legal Issues Presented

  1. Whether the Railway Administration proved, in accordance with sub-section (2) of section 72 of the Railways Act, the existence and due execution of special agreements (Risk Notes in form B) that purported to limit the Railway's liability.
  2. If no such special agreement was proved, whether the Railway's responsibility is that of a bailee under sections 151, 152 and 161 of the Indian Contract Act.
  3. Whether the appellants had proved misconduct or negligence by the Railway or its servants that would render the Railway liable despite any attempted contractual limitation.

Arguments of the Parties

Appellants' Arguments

  • The consignments arrived short and damaged; the shortages and damaged tins were due to negligence and misconduct of the Railway or its servants (loose shunting and possible pilferage).
  • Because the respondent failed to prove a duly executed Risk Note in form B as required by sub-section (2) of section 72 of the Railways Act, the Railway's liability should be that of a bailee under the Indian Contract Act, entitling the appellants to recover their claimed loss.

Respondent's Arguments

  • The consignments were booked at a reduced freight rate under a special agreement in the Risk Notes (form B) which exempted the Railway from responsibility except on proof of misconduct; the railway receipts refer to these Risk Notes.
  • The onus of proving misconduct lies on the appellants; the shortage and damage were likely due to improper or insufficient packing rather than any railway misconduct.
  • Counsel for the respondent relied on prior case law (Calcutta and Lahore decisions) to argue that if the suit is based on the railway receipts that refer to Risk Notes, the plaintiffs cannot challenge the existence/effect of those special agreements.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
East Indian Railway Co. Ltd. v. Ram Chabila Prasad (Calcutta Single Judge decision; A.I.R. 1925 Calcutta 915 is referenced) The principle (following an English decision H.C. Smith v. G.W. Railway) that where a suit is founded upon a contract which contains an exemption clause, the plaintiff cannot sue outside that contract to avoid the contractual limitation. The court distinguished the present case: here the plaintiffs sued on the contract of carriage (of which railway receipts are evidence) rather than being constrained to the terms literally appearing in the receipt; the receipts alone do not prove the due execution of the special agreement required by s.72(2).
H.C. Smith v. G.W. Railway (English decision cited in the Calcutta case) English authority for the above principle about suing on the contract containing exemption clauses. Used in prior Calcutta authority relied upon by respondents; the present court treated that earlier reliance as not decisive here because the railway receipts in this case did not themselves contain the terms proving execution of the special agreement.
Several Lahore decisions (collectively referenced): Kundan Lal v. Secretary of State; Secretary of State v. Shib Dayal; B.B. & C.I. Ry. v. Mt. Abdul Raquib; Secretary of State for India in Council v. Deviditta Mal Reportedly follow the Calcutta decision; some go as far as holding plaintiffs estopped by railway receipt from denying existence of special agreement, others treat the matter as one of shifting burden of proof. The court noted divergence among these decisions and observed that the decisions which treat the plaintiff as estopped go beyond what was decided in the Calcutta authority; the court did not accept automatic estoppel on the facts of this case.
B.N. Ry. v. Moolji Sicka (Calcutta decision) Contains observations relevant to whether railway receipts contain the terms of the contract or are merely evidence of custody and freight paid. The court referenced these observations to support the position that a receipt may be mere evidence and does not discharge the Railway from proving due execution of a Risk Note under s.72(2).
B.N.W. Railway v. Sobrati Mia (Calcutta Single Judge consideration) Held that a railway receipt did not contain the terms of contract and was merely evidence that goods were placed in custody and a sum paid as freight; a mere notation (e.g., reference to a risk note) does not prove due execution. The present court agreed with the observations that a receipt with a mere letter/notation does not prove execution of a special agreement under s.72(2), applying that reasoning to the receipts in this case.
A.I.R. 1944 Calcutta 50 (observations by Henderson, J.) Discusses the evidentiary weight of railway receipts and notations regarding risk notes. The court expressly agreed with Henderson, J.'s observations that the receipts in this case were merely evidence and the letter 'B' did not establish execution of the special agreement required by s.72(2).
A.I.R. 1930 Calcutta 815 (earlier Calcutta decision) Fact-based decision where risk notes were found signed by the person who delivered the goods (Nathu Singh), thereby proving the special agreement. The court observed this decision was of no particular help to the respondent because in that case the facts established due execution, whereas in the present record due execution was not proved.
Ganesh Dass Bisheshwar Lal v. E.I.R. Company Jwala Prasad Held that a risk note is an exception to the ordinary responsibility of a railway company and, as such, must be proved by the railway company to have been duly executed. The court cited this authority to support the proposition that the Railway, as the party averring a limitation, must prove due execution of the Risk Note under s.72(2).
S.I. Railway v. V.M.S.P. Brothers Held that to limit liability under s.72(2) it must be shown that the person delivering the goods entered into the agreement; a clerk's notation (e.g., "O.R.H." or owner's risk) on the receipt does not suffice without proof that the deliverer authorised or was aware of that entry; charging a lower freight alone does not displace liability unless s.72(2) requirements are satisfied. The court relied on this principle to conclude that the mere notation and lower freight did not relieve the Railway of responsibility absent proof that the consignor entered into the special agreement.

Court's Reasoning and Analysis

The court proceeded in the following analytical steps, applying statutory requirements and the evidentiary record:

  1. Statutory framework: section 72 of the Railways Act makes the railway's responsibility for goods akin to that of a bailee under sections 151, 152 and 161 of the Indian Contract Act, but sub-section (2) of s.72 permits a written special agreement in a prescribed form (approved by the Central Government and signed by or on behalf of the sender) to limit that responsibility.
  2. Burden of proof: the Railway asserted the existence of Risk Notes in form B to limit liability. The court treated such an attempt as creating an exception to the ordinary bailee liability and therefore as something the Railway had to prove in accordance with s.72(2).
  3. Evaluation of evidence: original Risk Notes filed by the Railway had been damaged by rats; the Railway sought to rely on secondary evidence in the form of two office-copy documents (Exts. B and B1) and on entries in the railway receipts (Exts. A and A1) which referred to a Risk Note by letter 'B' and noted "at owners' risk". The witness who produced Exts. B and B1 gave inconsistent testimony: initially stating they were compared with originals and written by "Radha Krishna", but later admitting in cross-examination that no copy is ever prepared of Risk Notes, thereby undermining the reliability of Exts. B and B1. There was no evidence as to the identity or authority of "Ambika Prasad" whose signature appears on the purported copies, nor any positive proof that Ambika Prasad signed the original Risk Notes or that he signed on behalf of the consignor or deliverer.
  4. Legal effect of railway receipts and notations: the court emphasized that railway receipts are evidence of custody and freight paid but do not, by mere notation (the letter "B" or "O.R.H."), prove the due execution of a special agreement as required by s.72(2). The distinction between existence of a document and execution/signature of a document was highlighted: the receipts may indicate the existence of a Risk Note but do not substitute for proof of execution by the consignor or his authorised signatory.
  5. Conclusion on contractual limitation: on the evidence the Railway failed to prove the due execution of properly signed Risk Notes in form B. Secondary evidence presented was defective and insufficient to satisfy the statutory prerequisites of s.72(2).
  6. Consequence on liability: absent a proved special agreement, the Railway's liability remained that of a bailee under the Indian Contract Act. On that footing, the courts below had already found negligence; the appellate court reiterated the settled proposition that loss or damage to goods entrusted to a bailee is prima facie evidence of negligence and the bailee bears the burden to disprove negligence.
  7. Given that no special contract had been proved and that negligence had been found by both courts below (the only dispute being whether negligence rose to misconduct), the appellate court allowed the appeal and restored the decree of the Munsif adjudicating in favour of the plaintiffs.

Holding and Implications

Holding: Appeal allowed; the judgment of the learned Subordinate Judge setting aside the Munsif's decree is set aside and the decree passed by the learned Munsif is restored.

Direct consequences for the parties:

  • The Railway Administration failed to prove the due execution of Risk Notes in form B as required by sub-section (2) of section 72 of the Railways Act; therefore, the Railway was held liable on the basis of a bailee's responsibility under the Indian Contract Act.
  • The plaintiffs are entitled to the decree previously entered by the learned Munsif (the Munsif had awarded Rs. 1,149-2-6), and are awarded costs proportionate to their success throughout.

Broader implications: The opinion reiterates and applies established principles regarding the evidentiary burden on a railway (or bailee) to prove a written contractual limitation under s.72(2). The court emphasized that notations on receipts do not substitute for proof of execution by the consignor. The judgment is applied to the facts of this case; the opinion does not announce any novel legal rule beyond this application.

    Ramdas v. Dominion Of India

    Das, J.:— This second appeal is by the plaintiffs, proprietors of a firm of the name of Messrs Gopal Ram Ram Das of Arrah. The short facts put of which this appeal has arisen are the following. Two consignments of mustard oil were booked at a railway station, named Jamuna Bridge, on the railway known as the East Indian Railway Administration, now represented by the present respondent. The consignments were booked on the 16th of November 1943, and two railway receipts were given, numbered 751151 and 751152. These railway receipts show that the consignor was the Deputy Regional Food Controller, Agra and the consignee was a firm of the name of Banshidhar Premsukh Das. The consignee firm endorsed the railway receipts in favour of the Imperial Bank of India. The latter, in turn, endorsed an order on the receipts directing delivery of the goods to the plaintiffs firm. The case of the appellants was that the goods arrived at Arrah, another station within, the E.I.R Administration, in a highly damaged condition, and when delivery was taken it was found that 13 maunds, 5 seers and 3 chattaks of oil out of one consignment, and 12 maunds and 25 seers of oil in the other consignment were short. It was further found that 76 tins were partly damaged and 23 tins completely damagedr. The appellants' firm alleged that the short delivery of the two consignments and the damage to the tins were due to the negligence and want of proper and due care on the part of the Railway Administration, and furthermore, to of the misconduct on the part of the servants of the Railway Administration during the time the two consignments were in their custody. It was alleged that there was loose shunting of the wagons in which the two consignments were placed, and the shortage of oil and the damage were due to such loose shunting. On these allegations the appellants' firm claimed the price of 25 and odd maunds of mustard oil, the price of the damaged tins, profit at ten per cent and certain incidental expenses—laying their, total claim at Rs. 1,266-2-6. The defence of the respondent, so far as it is relevant at the present stage, was that the consignments were booked at a reduced rate of freight under a special agreement embodied in Risk Notes in form B, under which the consignor agreed to hold the Railway Administration, free from all responsibility for loss or damage from any cause whatever except upon proof of misconduct on the part of the Railway Administration, or their servants. The respondent pleaded that the onus of proving misconduct was on the appellants' firm, and the shortage and damage were due not to loose shunting or want of proper care on the part of the Railway Administration or their servants, but to improper packing of the mustard oil in the tins.

    It appears that the respondent did originally file some documents including the alleged Risk Notes in form B. While the documents were in the custody of the Court of the Third Munsif, they were damaged by rats. The original Risk Notes could not, therefore, be proved in the case. The respondent proved two documents (Exts. B and B1) which have been stated to be office copies of the Risk Notes in question. I may state here that the two railway receipts, to which I have already made a reference, were marked as Exts. A and A1, in the record. In these two receipts, there is a reference to a Risk Note in form B. On the top of the receipts the letter ‘B’ is written against the column “Risk Note Form”, and there is a further note on the top of the receipts to the effect “at owners' risk”.

    The learned Munsif who dealt with the suit in the first instance held that the consignments were despatched under Risk Notes in form B. This finding the learned Munsif arrived at, mainly on the aforesaid entries in the two receipts, as also on the alleged office copies (Exts. B and Bl). He found, however, that the appellants' firm had proved misconduct against the Railway Administration or their servants, inasmuch as the shortage or damage could be caused in only one of, two ways—(a) either by pilferage during transit by the employees of the Railway Administration, or. (b) on account of loose shunting or bump shunting of the wagons on the way from Jamuna Bridge to Arrah. On that finding the learned Munsif passed a decree in favour of the appellants for a sum of Rs. 1,149/2/6, disallowing the claim for profits and incidental expenses. The learned Subordinate Judge, who heard the appeal, accepted the finding of the learned Munsif that the consignments in question were covered by Risk Notes in form B, but disagreed on the question of misconduct. He held that the shortage or damage was probably caused because of insufficient or defective packing, and was not due to any misconduct. On that finding the learned Subordinate Judge allowed the appeal and dismissed the suit. Hence, this second appeal by the appellants' firm.

    The point which has been urged before us on behalf of the appellants, is that the courts below had misdirected themselves on a question of law with regard to the liability of the Railway Administration. It is pointed out that, under section 72 of the Railways Act the responsibility of a railway administration for the loss, destruction or deterioration of goods delivered to the administration to be carried by railway shall, subject to the other provisions of the Act, be that of a bailee under sections 151, 152 and 161 of the Indian Contract Act. Sub-section (2) of the said section, however, provides that an agreement purporting to limit that responsibility shall, in so far as it purports to effect such limitation, be void, unless it is in writing signed by or on behalf of the person sending or delivering to the railway administration the goods, and is otherwise in a form approved by the Central Government. It is contended by learned Counsel for the appellants that it was for the Railway Administration to prove such an agreement as is referred to in sub-section (2), and the Railway Administration had failed to do so; therefore, the responsibility of the Railway Administration in this case was that of a bailee under the Indian Contract Act. It seems clear to me on the evidence in the record, as it stands, that the Railway Administration have failed to prove the execution of Risk Notes in form B by or on behalf of the person sending or delivering the goods to the Railway Administration, so as to entitle them to say that a special agreement limiting their responsibility exists in this case. I have already stated that certain original documents, filed by the Railway Administration, were damaged by rats. Therefore, it was open to the Railway Administration to give secondary evidence of the special agreement alleged to be embodied in Risk Notes in form B. The Railway Administration produced two documents marked Exts. B and Bl, stated to be office copies of the Risk Notes. The witness, who proved these two documents, stated that the copies were written by one Radha Krishna and were compared with the original Risk Notes. He did not, however, say that they were correct copies. In cross-examination he made the admission that no copy is ever prepared of the Risk Notes, thus completely nullifying what he had stated in examination in chief about these office copies. These two documents purport to have been signed by one Ambika Prasad for the Deputy Regional Food. Controller Agra. There is no evidence as to who this Ambika Prasad was, and whether he was signing on behalf of the sender or as the person delivering the goods to the Railway Administration. Moreover, there is no evidence that Ambika Prasad did actually sign or execute the original Risk Notes. It should be noted that there is a difference between the existence of a document and the execution of a document. The rail wary receipts (Exts. A and A1), no doubt, refer to Risk Notes in form B: that would merely prove that there were such documents. But that does not relieve the Railway Administration from proving the due execution of the Risk Notes, with particular reference to the conditions which have to be fulfilled Under sub-section (2) of section 72 of the Indian Railways Act. It was open to the Railway Administration to give secondary evidence of due execution, but this they failed to do. It is unfortunate that the Railway Administration failed to do so, because, a few more questions to the witness examined on behalf of the Railway Administration with regard to the Risk Notes might have proved the due execution of the original Risk Notes.

    Mr. N.C Ghosh, appearing on behalf of the respondent, has very strenuously contended before us that the suit having been based on the two railway receipts, it was not open to the appellants to say that, the Risk Notes in form B were not duly executed. Mr. Ghosh has relied on a Single Judge decision of the Calcutta High Court in East Indian Railway Co. Ltd. v. Ram Chabila Prasad and a large number of Lahore decisions which have followed the Calcutta decision. The Lahore decisions are Kundan Lal v. Secretary of State, Secretary of State v. Shib Dayal, B.B & C.I Ry. v. Mt. Abdul Raquib and Secretary of State for India in Council v. Deviditta Mal. He has also relied on certain observations in another Calcutta, decision in B.N Ry. v. Moolji Sicka. The earlier Calcutta decision in A.I.R 1925 Calcutta 915 relied on an English decision H.C Smith v. G.W Railway. That was, however, a case in which the suit was brought on the basis of an agreement by which the railway company was held free from any liability for loss, damage, misdelivery, etc., except upon proof that such loss, damage or misdelivery, etc., arose from the wilful misconduct of the servants of the Railway Administration. Lord Buckmaster said that as the suit was based on that contract, it was not open to the plaintiff to say that the suit was based on the delivery of goods only, because then the plaintiff “would be suing outside the only contract upon which he would have been entitled to recover”. In the case before us, I do not think it would be correct to say that the appellant were suing on the railway receipts. They were suing on the contract of carriage of goods, of which the railway receipts are merely evidence. In the Calcutta decision the matter was not put on the ground of estoppel, so as to preclude the plaintiffs from showing that there was no special agreement but it was put on the footing that the plaintiffs' case was founded upon the railway receipt which referred to the risk note and embodied the contract itself. This decision was considered by another Single Judge of the Calcutta High Court in B.N.W Railway v. Sobrati Mia, and it was pointed out that the railway receipt in that case did not contain the terms of the contract and that it was merely evidence to show that certain goods were placed, in the custody of the railway and that a certain sum was paid, as freight. It was further pointed out that if the contract was contained in the railway receipt, the railway authorities would obviously not be justified in realising further money when the freight had been wrongly calculated. It was stated that even if the railway receipt did contain the terms of the contract, it did not contain anything about the risk note, and the hieroglyphic letter did not prove the execution of a special agreement. If I may say so with respect, I agree entirely with the observations made by Henderson, J. in A.I.R 1944 Calcutta 50. The railway receipts of this case stand on no better footing than the railway receipt to which Henderson, J. referred in the Calcutta case. The railway receipts are merely evidence to show that certain goods were placed in the custody of the railway and that a certain sum was paid as freight. The entry of the letter B against the column “Risk Note Form” does not, in my opinion, prove the execution of a special agreement, as contemplated by sub-section (2) of section 72 of the Railways Act. I do not propose to examine the Lahore decisions in detail: some of them go to the extent of saying that the plaintiff is estopped and concluded, and cannot show that there was no such special agreement as is contemplated in sub-section (2) of section 72; other decisions do not go to that length, but say that the onus will shift, and it will be for the plaintiff to show that there is no such agreement as is referred to in the railway receipt. Those decisions which say that the plaintiff is estopped or concluded by the railway receipt, certainly go beyond even what was decided in A.I.R 1925 Calcutta 915. If the matter is looked at from the point of view of onus only, the question presents no difficulty in this case. On the evidence, as it exists in the record, it is clear that there was no due execution of Risk Notes in form B. The observations made in A.I.R 1930 Calcutta 815 are of no particular help to the respondent, because in that case it was found as a fact that the risk notes were signed by one Nathu Singh who had delivered the goods. In Ganesh Dass Bisheshwar Lal v. E.I.R Company Jwala Prasad, A.C.J pointed out that the risk note was an exception to the ordinary responsibility of the railway company, and as an exception to the general responsibility, the risk note must be proved by the railway company to have been duly executed. The same view was again expressed in S.I Railway v. V.M.S.P Brothers where it was pointed out that to limit the liability of a railway company, it must be shown under section 72(2) of the Railways Act that the person delivering the goods entered into an agreement to that effect, and the mere fact that the Goods Clerk wrote on the receipt given to the consignor the words “O.R.H” signifying owner's risk as per form would not take away the liability of the railway company in the absence of proof that the person who delivered the goods authorised the clerk to enter the aforesaid letters on the receipt or at least he consented or was aware that such letters were written thereon. The fact of charging a lower rate of freight was also considered in that case, and it was held that mere charging of the lower rate would not take away the liability of the railway company unless the railway company brings itself within the provisions of sub-section (2) of section 72, of the Act.

    For the reasons given above, my view is that the liability of the railway company in the present case is that of a bailee under the Indian Contract Act. It is not seriously disputed that on: that footing the appellants are entitled to a decree. Both the courts below have found that there was negligence on the part of the railway company, though they differ as to whether that negligence amounted to misconduct or not, the learned Munsif holding that there was misconduct and the learned Subordinate Judge holding otherwise. It has been held in a long line of decisions of Indian Courts that loss or damage of goods entrusted to a bailee is prima facie evidence of negligence, that the burden of disproving negligence lies on the bailee, and that this burden lies also on a railway administration in the absence of a special contract to the contrary. I have already held that no special contract has been proved in this case. The railway administration as bailee was, therefore, liable for the shortage of the mustard oil and the damage caused to the tins.

    For the reasons given above, I would allow this appeal, set aside the decision of the learned Subordinate Judge and restore the decree passed by the learned Munsif. The appellants will be entitled to costs proportionate to their success throughout.

    Mahabir Prasad, J.:— I agree. I have nothing further to add.

    S.H
    Appeal allowed.

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    Comments

    Ramdas v. Dominion Of India
    (Nov 25, 1949)