Corporation of India & Ors Vs. Vikas Majdoor Kamdar Sahkari Mandli Ltd
 Insc 1125 (12
Arijit Pasayat & Lokeshwar Singh Panta
APPEAL NO. 7440 OF 2000 With CIVIL APPEAL NO. 2540 OF 2002 Dr. ARIJIT PASAYAT,
These two appeals have a common matrix. The Food Corporation of India and Others are the appellants in
Civil Appeal No. 7440 of 2000 while the respondent in the said appeal is the
appellant in the other appeal i.e. Civil appeal No. 2540 of 2002. Parties in
this judgment are described as per Civil Appeal No.7440 of 2000.
Challenge in these appeals is to the judgment of a Division Bench of the
Gujarat High Court holding that the suit filed by plaintiff (respondent) was to
be partly decreed for recovery of Rs.68,02,973/- from the defendants i.e.
present appellants together with pendente lite and future interest at the rate
of 6% per annum with appropriate cost throughout. It is to be noted that the
respondent had filed a suit (Civil Suit No. 6040 of 1994) before learned City
Civil Judge Ahmedabad for injunction restraining the appellant No.1-
Corporation and its functionaries from recovering and/or withholding any amount
from the bills of the respondent herein and also for a declaration that action
of appellant No.1- Corporation in recovering various amounts without deciding
the rates for extra work was bad in law and for directing the
appellant-Corporation to make payment for the extra work at the rates demanded
by the respondent. It was averred that as per the tender notice the respondent
herein was required to handle 750 MT per day as per the charter party and for
handling for which rate was fixed at Rs.108 per MT. It was further stated that
the appellant-Corporation by the letters dated 30.9.1994, 14.10.1994 directed
the respondent herein to handle more cargo than what was prescribed above and
consequently the respondent herein started handling cargo to the tune of 1200
to 1300 MT per day against the contracted rate of 750 M.T. In view of the
accelerated discharge, the respondent had to incur additional expenses towards
enhanced rate of wages, payment to the workers and demurrage to wagons. The
respondent claimed that its entitlement for enhanced transportation charges was
Rs.45 per MT in place of Rs.15 per MT which was stipulated in the contract. The
appellant No.1-Corporation in its written statement took the stand that it had
no intention of withholding any payment demand as per the terms of the contract
and that whatever bill was raised as per the terms of the contract had been
paid and the final bill had not been settled as yet. On the claim towards
additional expenses due to the accelerated discharge, the Corporation contented
that as per the terms of the contract the respondent herein was bound to carry
out discharge so as to avoid any demurrage being incurred and it was bound to
follow the rules and regulations of the Port authorities under which it had to
discharge at a faster rate. The Corporation also denied that the respondent had
incurred any extra expenses because of the accelerated discharge. The
appellant-Corporation also denied the claim towards enhanced rate for
transportation charges. Subsequently the respondent herein amended the claim to
an amount of Rs.68,07,113.20 with interest at the rate of 18% per annum from
the due date. Towards stevedoring charges the respondents herein claimed
Rs.215/- per MT instead of agreed rate of Rs.108/- per MT. A sum of Rs.51,20,263.70
was claimed as the difference. The respondent further claimed the enhanced
transportation charges and on that account claimed an additional sum of Rs.12,84,847.50.
The appellant-Corporation filed its additional written statement denying the
claim for enhanced compensation.
Civil Judge (Court No.14), Ahmedabad framed the following issues for
Whether the Court has jurisdiction to entertain the suit?
Whether the Plaintiff proves that the Plaintiff appointed as contractor for
stevedoring, clearance for transportation at Kandla Port pursuant to the tender?
Whether the Plaintiff proves that the plaintiff was carrying out a work of
transport and handling the cargo as per the terms and conditions of the tender?
Whether the plaintiff is entitled to the enhancement rate from Rs.108/- per
M.T. to Rs.215/- per M.T. as alleged?
Whether the plaintiff proves that the plaintiff was unloading the quantity of
the goods more than stipulated in the tender?
Whether the plaintiff is entitled to recover the amount from the defendant as
prayed in para 12(A) and (B) of the plaint?
What order and decree?
learned trial Judge decided issues (i), (ii), (iii) and and (v) in favour of
the Respondent/Plaintiff. However, the learned Judge dismissed the suit on the
basis of findings in issue Nos. (iv) and (vi).
following findings inter alia were recorded by learned trial judge.
Clause XX (1)(i) of the contract provided for a minimum discharge rate of 750
M.T. per day as provided in the Charter Party, so that the vessel would not
suffer any demurrage. Thus, the Respondent herein (Plaintiff) had carried out
the work of handling cargo as per the terms of the contract.
The Appellant Corporation (Defendant) had insisted for discharge of cargo at
higher rate with a view to comply with the direction of the port authorities.
The Respondent Plaintiff had discharged additional quantities. Clause 41 of the
contract provides that the contractor shall comply with the rules and
regulation of the Port Authorities, and since the Port Authorities had demanded
discharge at faster rate the Respondent herein (Plaintiff) was under obligation
to discharge at faster rate.
In any event, the Respondent (plaintiff) had not established by evidence any
additional cost incrred by him for such additional discharge.
The Respondent (Plaintiff) was entitled to only contractual rate of Rs.108/-
per M.T. and not at higher rate of Rs.215/ per M.T.
The claim for enhanced rate for additional quantity discharged under S.70 of
the Contract Act on the principle of quantum meruit would not be applicable
since there was a stipulation under the contract for payment at the rate of
Rs.108/- M.T only.
the basis of the aforesaid findings the suit was dismissed. Aggrieved by the
above judgment respondent herein filed First Appeal No. 2678 of 1999 before the
Gujarat High Court. A Division Bench of the Gujarat High Court reversed the
judgment of the trial court and decreed the suit for a sum of Rs.68,02,973/-
with interest at the rate of 6% from the date of suit.
Following findings were recorded by the High Court:
combined reading of Clause XX Part I (i) along with Clause 19 of the Charter
Party would show that the Respondent herein (Plaintiff) was bound to handle
only an average quantity of 750/- per M.T. per day, but not at the minimum
quantity of 750/- per M.T. per day.
The Respondent/Plaintiff had done extra-work than what was agreed to in the
contract. The extra-work was not done gratuitously.
Since it was an extra-work as stated in clause XVI of the contract, but no
negotiation took place as required under this clause, despite written request
of the Respondent (Plaintiff) and no mutual settlement was arrived at despite
the request of the Respondent in various letters, there was no rejection of the
Plaintiffs request for higher remuneration.
The Plaintiff is entitled to extra remuneration for extra work.
Since no negotiation took place in spite of written request by the Plaintiff,
the principle of quantum meruit applied for awarding compensation.
Since no reply was sent by the Appellant Corporation to the letter of
Respondent dated 9.11.1994, refusing the demand the Respondent (Plaintiff) had
proved his claim for compensation at Rs.215/M.T.
Even though the trial Court did not frame any issue on the claim of
transportation charges at the rate of Rs.45/- per tonne instead of Rs.15/- per tonne,
the High Court decided the issue holding that the respondent herein had
substantiated the said claim by the letter dated 9.11.1994.
In letter dated 14.11.1994 sent by the Assistant Manager of the
appellant-Corporation he had recommended for the enhanced rate of payment that
would constitute an admission of the enhanced rate as claimed by the
support of Civil Appeal No.7440 of 2000, learned counsel for the appellants
submitted that the contracts stipulated remuneration at the rate of Rs.100/-
per MT for discharge at the charter party rate for a period from 16.8.1994 to
15.8.1995. It does not preclude any higher discharge rate since its discharge
rate is not pre-determined and it varies from ship to ship. The stipulation of
the charter party rate is only for the purpose of ensuring that the appellant-
Corporation does not suffer any demurrage on account of slow discharge. Since
the rate of discharge is a variable factor from ship to ship, the remuneration
in the present contract is not dependant on the daily discharge rate. Actual
figures also show that the discharge rate has been varying daily.
the request of the appellant Corporation for a faster discharge was as per the
terms of the contract and in view of the specific order from the port
authorities in terms of Clause 41 of the contract. It was, therefore submitted
that the respondent is not entitled to claim remuneration at a higher rate but
only the contractual rate.
Secondly, it was submitted that in the absence of any specific contract between
the parties or the acceptance of the appellant of the demand of the respondent
for higher rate of remuneration, the respondent is entitled to claim
remuneration only as per the terms of the contract. Finally, it is submitted
that principles of quantum meruit under Section 70 of the Indian Contract Act,
1872 (in short the 'Contract Act') has no application in view of the specific
contractual provisions. Alternatively, it was pleaded that the claim for
enhanced rate is highly exorbitant and not substantial by any evidence of
actual expenses. Though the High Court had relied on the letter dated 9.11.1994
(Ext.67), the same has no relevance because the respondent had claimed Rs.215/-
per MT for a minimum discharge of 1200 MT per day. This was even much higher
than the actual discharge rate achieved by the respondent. Therefore, the
decree at the rate of Rs.215 per MT is unsustainable. The letter dated
15.11.1994 (Exh. 90) written by the Assistant Manager of the
appellant-Corporation has also no relevance because he was not competent to
decide the issue and the same could not have been the basis of a decree when he
was not examined as a witness. Even otherwise, it was only a unilateral
recommendation to higher authorities. The letter does not in any way
substantiate the claim of the respondent and the same was not accepted by the
appellant. The decree for enhanced transportation charges at the rate of
Rs.45/- per MT for transporting the cargo from the wharf to the appellant godown
is unsustainable since the contractual rate has no connection with the
the principle of quantum meruit does not apply and the respondent is entitled
to claim at the contractual rate only.
Respondent supported judgment and its appeal prayed for enhanced rate of
With reference to Clause XX of tender notice, it is submitted that the
contractor was only obliged to ensure discharge the cargo at the rate provided
for in the Charter Party agreement. Clauses 22 and 23 are relevant. It is
pointed out that the contractor was bound to discharge the articles at an
average rate of 750/- per MT. In the event of failure to do so, the corporation
was liable to pay demurrage at the rate of US$ 4000 per day. In case the rate
was achieved, the Corporation was entitled to receive discharge money for
working time saved at the rate of US$2000 per day. In the present appeal, the
Corporation has withheld the information from the trial court as well as the
High Court. Since the respondent-Society had started the execution of the work
it had received a letter dated 30th September, 1994 from the Corporation
"to rise to the occasion and to come forward with all the machinery geared
up to ensure maintaining four gangs/cranes in each shift to achieve the target
of not less than 2000 M.Ts. per day without fail". Another letter dated 14th October, 1994 was to similar effect. It is
unconceivable as contended by the appellant-Corporation that no extra
expenditure would be involved in getting a higher rate of discharge. The
Customs authorities were delaying the clearance. There was delay even at the
time of unloading. At the depot of the Corporation, the arrangements were very
poor. Therefore, the Corporation was requested to provide extra money. A fax
was sent in this regard. When the respondent-Society did not get any response,
it sent another letter dated 9.11.1994 reiterating its demand for payment of a
higher rate. A copy of the letter was endorsed to Senior Regional Manager, FCI,
Ahmedabad, the basis on which the extra remuneration was demanded was
indicated. It appears that the matter was examined in the office of the Corporation
and therefore the letter dated 14th November, 1994 was issued, giving details and pointing out that the respondent-Society
was incurring extra expenditure and was paying excess money for speedy work to
each and every DLB gangs, shore cranes, Trucks, Short labourers, and other
organizations. Various difficulties faced by the respondent Society were also
listed. It was found that the worksheet is in order. He recommended that the
request of the respondent society was to be accepted and accordingly recommended
that the request may be forwarded to the concerned authority. Despite these
specific recommendations, there was no response. The respondent completed the
work. Not only the appellant-Corporation saved demurrage at the rate of US$
4000 per day, it also earned discharge money for speedy work done. The demand
for the higher remuneration was in accordance with the terms of Clause XVI.
There is no dispute that there was a request made by the appellant-Corporation
to discharge more than what was stipulated in terms of the Charter party
Corporation was insisting that the respondent-Society should increase the
discharge. That being so Clause XVI(b) is clearly attracted. The respondent
Society was entitled to extra remuneration. Since the appellant-Corporation had
failed to respond to the request, the High Court had rightly invoked the
principle of quantum meruit and accepted the claim. Reasons for extra
expenditure have been clearly stated in the statement of Sh. Jayantibhai.
The principle of quantum meruit is often applied where for some technical
reason a contract is held to be invalid. Under such circumstances an implied
contract is assumed, by which the person for whom the work is to be done
contracts to pay reasonably for the work done, to the person who does the work.
The provisions of this section are based on the doctrine of quantum meruit, but
the provisions of the Contract Act admit of a more liberal interpretation; the
principle of the section being wider than the principle of quantum meruit.' The
principle has no application where there is a specific agreement in operation.
A person who does work or who supplies goods under a contract, if no price is
fixed, is entitled to be paid a reasonable sum for his labour and the goods
supplied. If the work is outside the contract, the terms of the contract can
have no application; and the contractor is entitled to be paid a reasonable
price for such work as was done by him.
a party to a contract has done additional construction for another not
intending to do it gratuitously and such other has obtained benefit, the former
is entitled to compensation for the additional work not covered by the
contract. If an oral agreement is pleaded, which is not proved, he will be
entitled to compensation under Section 70. Payment under this section can also
be claimed for work done beyond the terms of the contract, when the benefit of
the work has been availed of by the defendant.
The term 'extra' is generally used in relation to the works, which are not
expressly or impliedly included in the original contract price, provided the
work is within the framework of the original contract. The question whether a
particular work is extra will depend upon the terms and conditions of the
contract, and other documents connected therewith.
The relevant clauses of the contract read as follows :
The Contractors shall be paid the remuneration in respect of the services
described in para XX and performed by them at the contracted rates.
the Contractors are required to perform any services in addition to those
specifically provided for in the Contract and the annexed schedule, the
Contractors remuneration for the same will be paid at the rate as negotiated
and fixed by mutual agreement.
The question whether a particular service is or is not covered by any of the
services described and provided for in the contract, or is not auxiliary or
incidental to any of such services, shall be decided by the Sr. Regional
Manager whose decision shall be final and binding on the Contractor.
The Contractor will have the right to represent in writing to the Sr. Regional
manager that a particular service which he is being called upon to perform is
not covered by any of the services specifically provided for in the contract or
as the case may be, is not auxillary or incidental to such services, provided
that such representation in writing must be made within 15 days of the
commencement of actual performance of such services. If no such representation
in writing is received within the said time, the Contractor's right in this
regard will be deemed to have been waived."
Services to be Performed by the Contractors:
For Stevedoring "The contractor shall render all the services, which are
usually performed by the stevedors. These will generally include services given
The Contractors shall discharge the Sugar in bags (including sweeping and
spilling) from the ship to the wharf/roof of the transit shed carefully and expeditiously
and arrange to complete discharge in the minimum period possible and shall take
all necessary steps to avoid ships going under demurrage and to earn maximum
amount of dispatch money. No additional remuneration will be paid for
discharging on roof of transit shed.
contractors shall ensure the discharge of cargo in a vessel handled by him at
the rate not less than what is provided for in the charter party of the
concerned vessel and ultimately if there has been any short fall in discharge
of the vessel at the stipulated rate and consequential demurrage charges, the
contractor will be responsible for the same and will make good whatever losses
and expenses incurred by the Corporation, the Corporation shall have the right
to deduct these losses from the admitted bills of the contractors".
Clause XXII - Ship to discharge at the average rate of 750 M.T. calculated on
gross weight provided vessel can deliver at this rate per working day of 24
consecutive hours time from noon Saturday to 8 a.m. Monday (for local
equivalent ) and from 5 p.m. day preceding holiday until 8 a.m, next working
day excepted, even used, time employed in shifting anchorages or discharging
places within the same port or its jurisdiction not to count as laytime, and
shifting expenses to be for owners account".
XXIII of the charter party agreement provided as under:
longer detained in loading and/or discharging ports, demurrage to be paid at
the rate of $4000.00 per day, or in proportion for any part of 1 day. Ship to
pay $2000.00 per day or in proportion, dispatch money for all working time
saved at both ends.
time lost is to be calculated in accordance with the custom of port. Lay time
to be non- reversible between loading and discharging ports, but may be reversible
between the ports of loading at the ports of discharging.
or dispatch to be settled directly between owners and Charters at discharging
From various documents exhibited more particularly the letters dated 30.9.1994
to 14.10.1994 it is clear that the functionaries of the appellant-Corporation
recommended higher payment rate for higher discharge. The letters written by
the respondent society also clearly indicate that the demand was for higher
charges in respect of the extra work.
a stand has been taken that the signatories of the letters by the Corporation
were not authorized, it is not disputed that on the basis of these letters
extra work was undertaken. There is also material on record to show that extra
expenditure had to be incurred for doing the extra work.
quoted rates in terms of the contract was Rs.108 per M.T.
claiming Rs.215 per M.T. the following details were given:
NAME OF OPERATION PMT NO. PREVAILING RATE (RS.)
Stevedoring Charges 75-00
'Tally clerks, Gears, foreman private Labourers inside 10-00 hatches
Loading of trucks 10-00
Shifting T. Sheds by trucks at Kandla 17.00
Wagon loading from T. Sheds by trucks at Kandla 40.00
Wharf clearing, Wagon cleaning security and for Casual Labourers in T. Sheds.
Custom clearance Documentation 10.00
Administration charges, warehousing. 10.00
Various liabilities like Wagon Demurrage, shed Demurrage etc. 15.00
Contingency over and above costing 20.00 Grand Total 215. 00
has been rightly contented by learned counsel for the appellant, sufficient
evidence has not been placed on record to justify the claim at the rate of
Rs.215; for example, the serial No.10 i.e. "contingency over and above
costing", and for custom clearance, documentation or administration
charges and warehousing. It is, however, clear that no issue was framed
relating to the claim of enhanced rate for transportation at the rate of
Rs.45/- per M.T. and even no ground was urged accordingly.
view of the above, we direct that the respondent- society shall be paid at the
rate of Rs.108 per M.T. in terms of the contract up to 750 M.T. and at the rate
of Rs.215 per MT for quantum beyond that. The interest rate shall be 6% as
fixed by the High Court. The respondent-Society shall not be entitled to any
amount beyond the agreed amount of Rs.15 per M.T. for transportation. Civil
Appeal No.7440 of 2000 is allowed to the aforesaid extent.
The Society's appeal (Civil Appeal No.2540 of 2002) is sans merit and deserves
dismissal, which we direct.
There shall be no order as to costs in both the appeals.