FOOD CORPORATION OF INDIA AND ORS. v. VIKAS MAJDOOR KAMDAR SAHKARI MANDLI LTD

Citation: [2007] 11 S.C.R. 1038

Court: Supreme Court of India

Bench: ARIJIT PASAYAT, LOKESHWAR SINGH PANTA

Case summary

FOOD CORPORATION OF INDIA AND ORS. v. VIKAS MAJDOOR KAMDAR SAHKARI MANDLI LTD.pdf

Judgment text

FOOD CORPORATION OF INDIA AND ORS. v. VIKAS MAJDOOR KAMDAR SAHKARI MANDLI LTD. NOVEMBER 12, 2007 [DR. ARIJITPASAYAT ANDLOKESHWAR ~ SINGHPANTA,JJ. ] : Contract Act, 1872-s. 70-Contract for stevedoring and transportation ofCargo-Contractor asked by the secondparty to the contract to do extra work-Suit demanding higher ratefor doing extra work-Dismissed-High Court decreeing the suit invoking principle ofquantum meruit-On appeal, HELD: Contactor entitled to extra remuneration for doing extra work beyond the contract-It inc. urred extra expenditurefor doing the extra work done beyond the contract- -.. ( However, not entitled to any amount beyond the agreed amount for .. transportation-Principle ofquantum meruit. Principles-Principle of quantum meruit-Applicability- Discussed-Contract Act, 1872-s. 70. Respondent-Society was appointed as contractor by the appellant-Corporation for stevedoring, clearance for transportation at a Port, pursuant to a tender.

The Society started execution of the work as per the contract. It received two letters dated 30. 9. 1994 and 14. 10. 1994 from the Corporation asking it to do extra work. For doing extra work, extra expenditure was involved. Society requested the Corporation to provide extra money and demanded higher rate for the extra work. The demand was examined in the office of the Corporation and by a letter, it was pointed out that the Society was incurring extra expenditure and was paying excess money for speedy work. There was also recommendation to fonvard the request ofthe Society to the concerned authority, but there was no response. } KAMDAR SAHKARI MANDLI Society filed a suit claiming payment from the Corporation for A the extra work done at the higher rate. The suit was dismissed. High Court decreed the suit. Hence the present appeals, one by the Corporation and another by the Society. Partly allowing the appeal ofthe Corporation and dismissing B that ofthe Society, the Court HELD: 1. 1.

If 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 C agreement is pleaded, which is not proved, he will be entitled to compensation under Section 70 ofthe Contract Act, 1872. Payment under this Section can also be claimed for work done beyond the terms ofthe contract, when the benefitoftheworkhas been availed of by the defendant. [Para 13] ll048-G; 1049-A] D 1. 2. The term 'extra' 's 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 workis extra will depend upon the terms and conditions ofthe contract, and other documents E connected therewith. [Para 14] (1049-A, B] 1. 3.

The demand for the higher remuneration was in accordance with the terms ofClause XVI oftender notice. There is no dispute that there was a request made by the appellant-Corporation to F discharge more than what was stipulated in terms ofthe CharterParty agreement. The Corporation was insisting that the respondent- Society should increase the discharge. That being so, the respondent Society was entitled to extra remuneration. Since the appellant- Corporation had failed to respond to the request, the High Court had G ' rightly invoked the principle of quantum meruit and accepted the claim. From various documents exhibited more particularly the letters dated 30. 9. 1994 to 14. 10. 1994 it is clear thatthe functionaries ofthe appellant-Corporation recommended higher payment rate for higher discharge. The letters written by the respondent-Society also H \ -~\ clearly indicate that the demand was for higher charges in. respect of the extra work.

Though a stand has been taken that the signatories ofthe 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. )-- [Paras 11and16] (1048-A, B, C; 1051-B, C] 1. 4. With reference to Clause XX of tender notice, the contractor was only obliged to ensure discharge the cargo at the rate provided for in the Charter Party agreement. It is pointed out'that the contractor was bound to discharge the articles at an average rate of750/- per MT. In the event offailure to do so, the corporation was liable to pay demurrage at the rate ofUS$ 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. Io the present appeal, the Corporation has withheld the information from the trial court as well as the High Court.

The respondent completed the work. Not only the appellant-Corporation saved demurrage at the rate ofUS$ 4000 per day, it also earned discharge money for speedy work done. [Para 11] [1047-A, B, C; 1048-A] 1. 5. Sufficient evidence has not been placed on record to justify the claim at the rate of Rs. 215. Society shall be paid at the rate of Rs. 108 per M. T. in terms ofthe contract up to 750 M. T. and atthe rate ofRs. 215 per MT for quantum beyond that. The interest rate shall be 6% as fixed by the High Court. No issue was framed relating ~· to the claim ofenhanced rate for transportation at the rate ofRs. 45/ ) .. 1. ra remuneration for extra wor~. (v) Since no negotiation took place in spite ofwritten request by the Plaintiff, the principle ofquantum meruit applied for awarding compensation. (vi) Since no reply was sent by the Appellant Corporation to the letter ofRespondent dated 9. 11. 1994, refusing the demand the Respondent (Plaintiff) had proved his claim for compensation at Rs.

215/M. T. (vii) Even though the trial Court did not frame any issue on the . , claim of transportation charges at the rate ofRs. 45/- per tonne E 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. (vii) In letter dated 14. 11. 1994 sent by the Assistant Manager of the appellant-Corporation he had recommended for the enhanced · ~>- )\ rate ofpayment that would constitute an admission ofthe enhanced rate as claimed by the respondent. 8. In support of Civil Appeal No. 7440 of2000, learned counsel for the appellants submitted that the contracts stipulated remuneration at the rate ofRs. I00/- per MT for discharge at the charter party rate for 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 ofthe charter party rate is only for the purpose ofensuring that the appellant-Corporation does not suffer any ~ -{ ~demurrage on account ofslow discharge. Since the rate ofdischarge is a variable factor from ship to ship, the remuneration in the presentcontract is not dependant on the daily discharge rate. Actual figures also show that the discharge rate has been varying daily. Therefore, the request ofthe appellant Corporation for a faster discharge was as per the terms of the contract and in view ofthe 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. 9.

Secondly, it was submitted that in the absence ofany specific contract between the parties or the acceptance of the appellant of the demand ofthe respondent for higher rate ofremuneration, the respondent is entitled to claim remuneration only as per the terms ofthe contract. Finally, it is submitted that principles ofquantum meruit under Section 70 ofthe Indian Contract Act, 1872 (in short the 'Contract Act') has no application in view ofthe specific contractual provisions. Alternatively, it was pleaded that the claim for enhanced rate is highly exorbitant and not substantial by any evidence ofactual 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 . ,,.. r minimum discharge of1200 MT per day. This was even much higher than the·actual discharge rate achieved by the respondent. Therefore, the decree at the rate ofRs. 215 per MT is unsustainable. The letter dated 15.

11. 1994 (Exh. 90) written by the Assistant Manager ofthe 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 ofthe respondent and the same was not accepted by the appellant. The decree for enhanced transportation charges at the rate ofRs. 45/- per MT for transporting the cargo from the wharfto the appellant godown is unsustainable since the contractual rate has no connection with the discharge rate. Therefore the principle ofqua. Tltum :r' meruit does not apply and the respondent is entitled to claim at the contractual rate only. I ( ") 't 10. Respondent supported judgment and its appeal prayed for enhanced rate ofinterest. 11.

With reference to Clause XX oftender 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 -1 articles at an average rate of 750/- per MT. In the event offailure 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 ofthe work it had received a letter dated 30th St:ptember, 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 ofnot 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 ofdischarge. The Customs authorities were delaying the clearance. There was delay even at the time ofunloading. At the depot of the Corporation, the arrangements were very poor. Therefor~, 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 _. ,,. x 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, -'--(, Tmcks, 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 th~ 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 ofClause 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 agreement. The 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 ofquantum meruit and accepted the claim. Reasons for extra expenditure have been clearly stated in the statement of Sh. Jayantibhai. 12. The principle of quantum meruit is often applied where for ... ( som~ 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 ofthis section are based on the doctrine ofquantum meruit, but the provisions of the Contract Act admit ofa more liberal interpretation; the principle of the section being wider than the principle ofquantum 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 - 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.

(c) 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 ofsuch services, shall be decided by the Sr. Regional Manager whose decision shall be final and binding on the Contractor. (d) The Contractor will have the right to represent in writing to the 1 Sr. Regional manager that a particular service which he is being called upon to perfonn is not covered by any ofthe 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. Ifno such representation in writing is received within the said time, the Contractor's right in this regard will be deemed to have been waived.

" XX - Services to be Performed by the Contractors: ~ i Part I For Stevedoring "The contractor shall render all the services, which are usually performed by the stevedors. These will generally include services given below: "(i) The Contractors shall discharge the Sugar in bags (including ~ sweeping and spilling) from the ship to the whar£'roofofthe 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 maximmn amount ofdispatch money. No additional remuneration will be paid for discharging on roof oftransit shed. The 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 ofthe concerned vessel and ultimately ifthere 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 ofthe contractors". "Clause XXII - Ship to discharge at the average rate of750 M. T. calculated on gross weight provided vessel can deliver at this rate per working day of24 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 laytin1e, and shifting expenses to be for owners account". Clause XXIII ofthe charter party agreement provided as under: "Iflonger 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 1day. Ship to pay $2000.

00 per day or in proportion, dispatch money for all working time saved at both ends. Such time lost is to be calculated in accordance with the custom ofport. Lay time to be non-reversible between loading and discharging ports, · but may be reversible between the ports ofloading at the ports of discharging. Demurrage or dispatch to be settled directly between owners and , Charters at discharging port(s):" t 16. 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 Mitten by the respondent society also clearly indicate that the demand was for higher charges in respect of the extra work. Though a stand has been taken that the signatories ofthe 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. The quoted rates in terms of the contract was Rs. 108 per M. T. For claiming Rs. 215 per M. T. the following details were given: SR. NAME OF OPERATION PMT NO. PREVAILING RATE(RS. ) 1. Stevedoring Charges 75-00 2. 'Tally clerks, Gears, foreman private Labourers 10-00 inside hatches .. , . ). Loading oftrucks 10-00 4. Shifting T. Sheds by trucks at Kandla 17. 00 5. Wagon loading from T. Sheds by trucks at Kandla 40. 00 6. Wharfclearing, Wagon cleaning security and for Casual Labourers in T. Sheds. 8. 00 () 7. Custom clearance Documentation 10. 00 8. Administration charges, warehousing. 10. 00 9. Various liabilities like Wagon Demurrage, shed Demurrage etc. 15. 00 \ 1 , ' 10 Contingency over and above costing 20. 00 Grand Total 215. 00 17.

As 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 ofRs. 215; for example, the serial No. IO 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 ofenhanced rate for transportation at the rate ofRs. 45/- per M. T. and even no ground was urged accordingly. 18. In view ofthe above, we direct that the respondent-society shall be paid at the rate ofRs. 108 per M. T. in terms ofthe 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. 7440of2000 is --. <. allowed to the aforesaid extent. 19.

The Society's appeal (Civil Appeal No. 2540of2002) is sans merit and deserves dismissal, which we direct. 20. There shall be no order as to costs in both the appeals. K. K. T. CA. No. 7440 of2000 partly allowed and CA No. 2540 of 2002 dismissed.