DELHI CLOTH & GENERAL MILLS LTD. versus UNION OF INDIA

Citation: [1988] 1 S.C.R. 383 · Decided: 08-10-1987 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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DELHI CLOTH & GENERAL MILLS LTD. 
A 
v. 
UNION OF INDIA 
OCTOBER 8, 1987 
[SABY ASACHI MUKHARJI AND 
B 
K. JAGANNATHA SHETTY, JJ.] 
-
Refusal of permission by the Railway Board to charge conces-
-
sional station to station freight rate for the carriage of Naptha for a 
fertilizer factory-complaint under section 41(1)( a) and (b) of the Rail-
ways Act, 1980, against. 
c 
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The appellant, a company, set up a fertilizer factory at Kota in 
Rajasthan. The factory manufactures urea for which the main raw 
material is Naptha, which has to be transported from the Koyali Refin· 
ery of the Indian Oil Corporation. 
D 
Before the actual setting up of the factory, the appellant requested 
the Railway Board by letter for a concessional frieght rate for the 
carriage of Naptha to the factory. The Railway Board by its letter EX C 
S dated November 5, 1966, quoted station to station rate equal to 85-B 
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(special) as against the rate equivalent to classification 62.S·B requested 
for by the appellant, and also stated that as the special rate was being E 
quoted ahead of the actual setting up of the factory, the frieght rate 
would be reviewed when the traffic actually began to move. 
-
When the factory was almost ready for operation, the appellant 
again requested the Railway Board by letter for charging the rate under 
classification 62-S·B instead of 85-B (special) quoted by it. The Railway F 
• ...i, 
Board refused to oblige. The appellant wrote another letter to the 
Board, requesting it to permit charging the rate equivalent to 85-B 
(special) pending its final decision, as the movement of naptha was to 
commence from June/July, 1968. The Railway Board refused to grant 
that request also, saying that it could reconsider the question if on the 
basis of the facts and figures of the cost of production vis-a-vis the sale G 
price of the fertilizers, it could be established that the production of the 
'i- ~ 
fertilisers at Kota was uneconomical unless freight concession on the 
movement of naptha was granted. 
The appellant filed a complaint under section 41(1)(a) and (b) of 
the Railways Act, 1890, before the Railway Rates Tribunal. The Tri· H 
383 
384 
SUPREME COURT REPORTS 
[1988] 1 S.C.R. 
A 
bunal decided against the appellant. Aggrieved, the appellant appealed 
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to this Court by special leave for relief against the order and judgment 
of the Tribunal. 
Dismissing the appeal, the Court 
B 
HELD: Three questions arise for consideration of the Court: (1) 
whether the Railway Board was bound to allow the concessional rate 
offered to the appellant, that is, 85-B (special) quoted in its letter Ex. C 
5 dt. November 5, 1966, to the appellant, (2) whether the rate charged 
for the carriage of the naptha between the stations concerned was un-
reasonable, and (3) whether the Railways were showing undue prefer-
ence or advantage in respect of other traffic in contravention of the 
C provisions of section 28 of the Railways Act. [389E-Fl 
Dealing with the third question first, which relates to the contra-
vention of section 28 of the Railways Act, the scope of the section was 
considered by this Court in Rajgarh Jute Mills Ltd v. Eastern Railway 
D and another, [1959] SCR 236 at 241, and the Railway Rates Tribunal, 
considering the material on record in the light of the decision of the 
Court in case, held that there was no evidence produced by the appel-
lant to justify any grievance under section 28. This conclusions ts per· 
fectly justified. [390E; 391Cl 
E 
The second question above-said relates to the rate charged by the 
Railway Administration being per se unreasonable. Even assuming, as 
argued by appellant's counsel, that the Railways are earning some surp-
lus income, that by itself is no ground to hold that the frieght charged is 
per se unreasonable. In the case of commodities of national needs such 
F as foodgrains, crude oil etc., it may be necessary for the Railways to 
charge below the operation cost, and to offset the loss, the Railways 
may charge higher freight for some other classified commodities. The 
cost of operation cannot by itself be the basis for judging the reason-
ableness of the rate charged. Counsel for the appellant also argued that 
crude oil and naptha were comparable commodities for the purpose of 
G carriage but there was disparity in the rates charged in respect of the 
two, naptha being charged at a much higher rate. The Tribunal re-
jected the demand of the appellant for parity in fri

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