FOOD CORPORATION OF INDIA & ORS. versus ABHIJIT PAUL

Citation: [2022] 8 S.C.R. 728 · Decided: 18-11-2022 · Supreme Court of India · Bench: A.S. BOPANNA · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 8 S.C.R.
   [2022] 8 S.C.R. 728
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FOOD CORPORATION OF INDIA & ORS.
v.
ABHIJIT PAUL
(Civil Appeal Nos. 8572-8573/2022)
NOVEMBER 18, 2022
[A. S. BOPANNA AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Contract – Demurrage – Food Corporation of India
(Corporation) entered into a contract with Respondent (Contractor)
for transporting food grains – Subsequently, corporation called
upon contractor to reimburse the amount of demurrages imposed
on it by the railways – As contractor incurred heavy losses on
account of demurrages due to the contractor’s inability to provide
trucks – This unilateral action of corporation was challenged –
Whether the contractual clause enabling the Corporation to recover
“charges” includes the recovery of demurrages – Held: The scope
of the expression “charges” must be understood as intended by the
parties to the contract – The expression charges has to be examined
in the context of its related words in the contract, which are costs,
damages, registeration fees, and expenses – The preamble of the
contract, i.e., the Work Order, reads that the contractor is engaged
for “transportation of foodgrains fromdepots, mandis, rail heads
of Churaibari to various destinations” –It is evident from the
contractual provisions and also the admissions of the Corporation
that the task of loading or unloading of food grains from the railway
wagons was not a part of the contract – Thus, based on interpretation
of the expression “charges” in the contractual context, it did not
include liability on account of demurrages – Hence, the Corporation
cannot impose and collect demurrages from the contractors – Even
by referring to other similar contracts entered by the corporation
in 2010 and 2018, it is ascertained that responsibility of loading
and unloading of foodgrains wagons is absent in the present
contract – Thus the expression “charges” cannot be interpreted to
include demurrages.
Disposing of the appeals, the Court
HELD: 1. The preamble of the contract, i.e., the Work
Order, reads that the contractor is engaged for “transportation of
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foodgrains from depots, mandis, rail heads of Churaibari to various
destinations as per appendix 1”. This Court scanned the entire
contract, in addition to scrutinising the provisions extracted
above, and seen that there is no contractual provision requiring
the contractors to undertake the task of loading and unloading of
foodgrains from the railway wagons. [Paras 23 and 24][739-C-D;
G-H]
2. The real question is whether the contractors had any
obligation towards loading and unloading of foodgrains from the
railway wagons. It is evident from the contractual provisions and
also the admissions of the Corporation in written submissions,
that the task of loading or unloading of foodgrains from the railway
wagons was not a part of the contract. Thus, based on
interpretation of the expression “charges” in the contractual
context, we are of the opinion that it did not include liability on
account of demurrages. Consequently, the Corporation cannot
impose and collect demurrages from the contractors. [Para
26][740-E-F]
3. Interpretation of contracts concerns the discernment of
the true and correct intention of the parties to it. Words and
expressions used in the contract are principal tools to ascertain
such intention. While interpreting the words, courts look at the
expressions falling for interpretation in the context of other
provisions of the contract and also in the context of the contract
as a whole. These are intrinsic tools for interpreting a contract.
As a principle of interpretation, courts do not resort to materials
external to the contract for construing the intention of the parties.
There are, however, certain exceptions to the rule excluding
reference or reliance on external sources to interpret a contract.
One such exception is in the case of a latent ambiguity, which
cannot be resolved without reference to extrinsic evidence.
Latent ambiguity exists when words in a contract appear to be
free from ambiguity; however, when they are sought to be applied
to a particular context or question, they are amenable to multiple
outcomes. [Para 27][740-G-H; 741-A-B]
Bihar State Electricity Board, Patna and Ors. v. M/s
Green Rubber Industries and Ors. (1990) 1 SCC 731 :
[1989] 2 Suppl. SCR 275; Union of India v. Raman
Iron Foundry (1974) 2 SCC 231 : [1974 ] 3 SCR 556;
Provash Chandra Dalui and Anr. v. Biswanath Banerjee
FOOD CORPO

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