Penal charges can only be claimed prior to the delivery of goods when applying Section 78 of the Railway Act. – The dispute involves demand notes raised by the Railway Authorities against the respondents regarding freight charges. The respondents had consigned goods through the Indian Railways. The demand notes were issued after the delivery of the goods. The Railway Authorities issued demand notes from April 2012 onwards. The respondents paid the demands raised and then preferred separate claim petitions under Section 16 of the Railways Act, 1989, seeking a refund of the amount paid.
The Tribunal, in Common Order dated 18 January 2017, allowed the claim petitions and directed a refund of the amount paid, along with 7% per annum interest.
The High Court of Allahabad had previously dismissed the appeals of the appellant, the Union of India, through a common judgment and order dated 29 March 2021.
The Union of India (the appellant) then filed an appeal to the Supreme Court of India.
Law Involved
Railways Act, 1989:
Section 27 pertains to the power to measure, weigh, or re-weigh goods.
Section 78 deals with the description of goods. It specifies that a consignor/owner/person having charge of goods must give a written statement regarding the description of the goods to enable the railway administration to charge the appropriate rate. If this statement is materially false, the railway administration is empowered to charge the goods at the highest rate.
Section 80 states that if goods have been undervalued or misdescribed, or if a false statement has been made, the railway administration may recover the difference in charge and other charges from the consignor, consignee, or endorsee, as the case may be.
Section 106(3) specifies that if goods have been delivered, a claim for refund can only be filed within six months from the date of delivery.
Section 114 specifies that if goods have been re-weighed under Section 78 or 79, and the weight is found to be incorrect, the railway administration may charge the goods as per the correct weight. It also outlines the power of the railway administration to recover the difference in charge and additional charges from the consignor, consignee, or endorsee.
Section 16 allows for separate claim petitions seeking a refund.
Principles of Natural Justice: If an action is guided by such action, then the principles of natural justice must be followed.
Reasoning:
The High Court had erred in treating the dispute at hand as one dealing with overloading of goods, which is governed by Section 73 of the Railways Act, 1989. Instead, the case was found to concern a different category of goods.
The demand notes were raised after the delivery of goods. The key point raised by the respondents (and found in their favour by the High Court) was that since demand notices were raised after delivery, Section 114 of the Act, which permits charging based on correct weight, would not be applicable.
The High Court, in its impugned judgment, had dismissed the appeals of the appellant, stating that the Tribunal had failed to consider that the consignments were booked by declaring the items to be one category; however, the loaded items were found to be of a different category.
The High Court confirmed that penal charges could only be applied prior to the delivery of goods based on the exposition in Section 78 of the Act. Therefore, once goods have been delivered, penal charges cannot be levied.
The Supreme Court noted that the High Court had erroneously treated the case as one of overloading under Section 73, when it was actually a case of misdeclaration or wrong description of goods under Section 78 and Section 114 of the Railways Act, 1989.
It was held that penal charges can only be claimed prior to the delivery of goods when applying Section 78 of the Act.
Union Of India V. M/S Kamakhya Transport Pvt. Ltd.
Supreme Court: 2025 INSC 805: (DoJ 05-06-2025)
