Union of India v. M/s Indian Oil Corporation Ltd.

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A sum of Rs. 3,56,69,671 which had been collected from the appellant over a period of time by mistake. That the mistake has been committed is admitted by the respondent herein and it is has duly been noted by the High Court. However, the High Court, in our view, erroneously rejected the claim on the ground of availability of alternative remedy. On the aforesaid premises the High Court dismissed the wirt petition with the direction to the appellant to approach the Railway Claims Tribunal for alternative remedy provided under Section 13 of the Railway Claims Tribunal Act, 1987 (hereinafter “the Act”).

5. We are clearly of the view that as the respondent Union of India has clearly admitted the liability, the High Court ought not to have relegated the appellant to its alternative remedy and should not have dismissed the writ petition on that count. There is no disputed question of fact in this case. As already noted, in the present case the respondent had admitted its liability and, therefore, the question raised before the High Court being an admitted fact the High Court ought not to have directed the appellant to resort to its alternative remedy under the Act.

6. In the aforesaid premises, we set aside the impugned order of the High Court. This appeal is allowed. No costs. The respondents are directed to pay the admitted liability along with interest at the rate of 6% p.a. with effect from 6-1-1993 till payment is made within three months from today.” (Emphasis supplied)

53Copy pinpoint53. In Union of India & Ors. v. West Coast Paper Mills Ltd. & Anr. reported in (2004) 3 SCC 458, the prescribed rate that was being charged as per law by the railways had been declared to be illegal. This Court held that any claim of refund of such charge which is illegal cannot be said to be an overcharge and thus does not attract Section 78B of the Act, 1890. This Court explained that an overcharge is something in excess of what is due according to law, an overcharge must be of the same genus or class as a charge, and it does not include a sum that was collected but was not due. The relevant observations read as under: -

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“19. The term overcharge is not defined in the Act. In its dictionary meaning “overcharge” means “a charge of a sum, more than is permitted by law” (see: Aiyar, P. Ramanatha: The Law Lexicon, 1997 Edn., p. 1389). The term came up for the consideration of the High Court of Gujarat in Shah Raichand Amulakh v. Union of India. Chief Justice P.N. Bhagwati (as His Lordship then was) interpreted the term by holding that “overcharge” is not a term of art. It is an ordinary word of the English language which according to its plain natural sense means any charge in excess of that prescribed or permitted by law. To be an overcharge, a sum of money must partake of the same character as the charge itself or must be of the same genus or class as a charge; it cannot be any other kind of money such as money recovered where nothing is due. Overcharge is simply a charge in excess of that which is due according to law.

20. In the case at hand, the freight rates notified by the Railway Administration in exercise of its statutory power to do so, so long as they were not declared illegal and unreasonable by the Tribunal under Section 41 of the Act, were legal and anyone carrying the goods by rail was liable to pay the freight in accordance with those rates. The freight paid by the respondents was as per the rates notified. Thus the present one is not a case of overcharge at all. It is a case of illegal recovery of freight on account of being unreasonable and in violation of Section 28 of the Act, consequent upon such determination by the Tribunal and the decision of the Tribunal having been upheld by this Court. A case of “illegal charge” is distinguishable from the case of “overcharge” and does not attract the applicability of Section 78-B of the Railways Act.” (Emphasis supplied)

54Copy pinpoint54. In J.K. Lakshmi Cement Ltd. v. General Manager & Anr. reported in (2014) SCC OnLine Raj 2340, the Rajasthan High Court held that the freight charged mistakenly on a wrong calculation of distance between the two stations was an overcharge and not an illegal charge. The High Court observed that an overcharge is an excess sum having

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the same character as the basic charge which otherwise is payable, and thus, any other kind of levy unrelated to the basic charge would not be an overcharge. Since the excess freight that was charged due to mistake on part of the railway booking staff related to ‘freight charges’ which otherwise was payable, the same was held to be an overcharge. The relevant observations read as under: - “[...] The facts of the case are that the appellant-Company dispatched 5 racks of 4100 M.T. levy cement from its Banas siding to be carried and delivered at Thiyat Hamira Railway Station. The distance between two stations is stated to be only 511 Kms, and the Railways alleged to had charged freight for distance of 946 Kms. Calculating the distance via Rewari. It was stated that because of this mistake in the calculation of the distance from the appellant-Company’s Banas siding to Thiyat Hamira Railway Station, railway freight was charged in excess @ Rs. 21.44 per qtl. Instead of the applicable rate of Rs. 13.11 per qtl. and paid under mistake. Consequently Rs. 3,69,775/- was overpaid. This excess realisation was according to the appellant-Company on the face of it arbitrary, unauthorized and illegal and thus refundable by the Railways with interest. xxx xxx xxx [...] Further, a bare look at the judgement of the Hon’ble Gujarat High Court in Mansukhlal Jethalal (Supra) as also the judgement of the Hon’ble Supreme Court in West Coast Paper Mills Ltd. (Supra) makes it clear that an overcharge of freight would mean “a charge of sum more than permitted in law”. Overcharge of a sum of money for a purpose partakes the same character as the underlying charge and belongs to the same genus or class the basic charge. Any other kind of levy of money unrelated to the basic charge would, as held by the Gujarat High Court and the Hon’ble Supreme Court, indeed would not take the character of an overcharge. In the Gujarat High Court case the overcharge related to a charge relating to the use of sidings of the Railways and it did not entail an excess charge on the freight as in the instant case. So to in the case before the Hon’ble Supreme Court. In my considered

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opinion, from the very enunciation of law by the Hon’ble Gujarat High Court in Mansukhlal Jethalal (Supra) and the Hon’ble Supreme Court in West Coast Paper Mills Ltd. (Supra) it is evident that the charge levied over the appellant-Company was qua the freight and movement of goods and nothing more excessive though it is alleged to be. It did not have a character different from the basic change. In fact the appellant-Company itself averred of realisation of an excess freight and specifically in para 6 of the plaint had itself averred that due to mistake in calculating of distance excess freight was realised at the rate of Rs.21.44 per qtl. instead of Rs.13.11 per qtl.. Further in the notice under Section 78B of the Act of 1890 R/w Section 80 CPC issued by the appellant-Company prior to the filing of the suit for recovery of money before the District Judge, Sirohi, it was submitted that due to mistake on the part of the booking staff of the Railways incorrect distance was computed from Banas siding to Thiyat Hamira railway station against the correct chargeable distance of 511 KMs and the distance was worked out to 946 KMs. which was the chargeable via Rewari. In para 4 of the suit it was stated that on the part of the Railway enhanced rate (emphasis mine) @ Rs.21.44 per qtl. was charged. In my considered opinion as also held by the learned Tribunal, the case set up by the appellant-Company makes it evidently clear that the refund was sought of the excess freight realized allegedly illegally and unauthorizedly. The excess freight without doubt related to freight otherwise payable for the movement / transportation of goods by the Railways and therefore was obviously an overcharge. Consequently, Section 78B of the Act of 1890 attracted to the claim petition filed. Admittedly notice with regard to the freight paid between 07.12.1985 and 11.02.1986 was issued on 17.02.1988 quite clearly beyond the period of six months as statutorily mandated. The Tribunal was right in so holding.” (Emphasis supplied)

55Copy pinpoint55. Furthermore, the contention that retainment of excess freight by the railway due to the claim applications being time-barred would amount

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to unjust enrichment of the Railway came to be negatived by the Rajasthan High Court in J.K. Lakshmi Cement (supra). The High Court observed that equity cannot defeat the statutory provision and thus, if any excess freight realized by the railway is held to be an unjust enrichment it would result in the statutory time-period under Section 78B of the Act, 1989 being rendered otiose and redundant. The relevant observations read as under: - “Mr. S.R. Joshi has finally submitted that in the event this Court were to uphold the impugned order dated 15.05.1990, passed by the Tribunal, it would entail unjust enrichment of the Railway as admittedly the distance over which its goods were transported was 511 KMs and not 946 KMs (between Banas siding and Thiyat Hamira railway station) and further that rate charged was Rs.21.44 per qtl. instead of Rs.13.11 per qtl. Limitation under Section 78B of the Act of 1989 has been statutorily provided for. A misplaced argument of unjust enrichment cannot be misapplied, removed from the context it has been developed by courts of equity and turned on its head and be agitated to circumvent the provisions of statutory limitation and for the matter, the Limitation Act. Were it to be so, the provisions of the law limitation under the Act of 1963 or otherwise would be rendered otiose and redundant. Equity to defeat pubic policy encapsulated in the statutes of limitation cannot be visualised.” (Emphasis supplied)

56Copy pinpoint56. In another decision of this Court in Hindustan Petroleum Corporation Ltd. v. Union of India, reported in (2018) 17 SCC 729, the freight had been paid as per the notified chargeable distance. Subsequently when a computerized system for generating railway receipts was introduced, the chargeable distance was reduced and re-notified. This Court relying upon West Coast Paper Mills (supra) held that since the freight had been paid as per the notified rate which was later found to be incorrect, the case would be of an illegal charge and not an overcharge. The relevant observations reads as under: - “2. The core facts that will be required to be noticed are as follows: the appellant, a public sector organisation, had dispatched various petroleum products through Railway

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Tank Wagons of the respondent from Asaudah Railway Station, District Rohtak, Haryana to Partapur, District Meerut, Uttar Pradesh and to some other destinations located in different parts of the country. The freight was paid by the appellant as per the notified distance i.e., 125 Km, so notified by the Chief Goods Supervisor, the competent authority at the relevant point of time. The dispatch of the petroleum products continued for a long period between the year 2008 and 2011 and the freight charges were paid according to the distance between the destinations as notified by the competent authority of the respondent. When the manual system of generating railway receipts was discontinued and the respondent had installed computerised railway freight charges system called Terminal mechanism System (TMS) at Asaudha Railway Station, the distance between Asaudah Railway Station, District Rohtak, Haryana and Partapur District Meerut (Uttar Pradesh was notified as 100 km instead of 125 km. This was on 27-2-2011. xxx xxx xxx

8. Birla Cement Works was a case where the petitioner therein (i.e., Birla Cement Works) came to know of the alleged excess amount of freight on wrong calculation of distance through a letter dated 12-10-1990 issued by the Railway Authorities. This primary fact is conspicuously absent in the present case. In the present case what was paid was as per the fixed rate on the basis of notified distance which subsequently was corrected by another Notification upon introduction of the Terminal Mechanism System (TMS) at Asaudah Railway Station, District Rohtak, Haryana.

9. On the other hand, in West Coast Paper Mills Ltd., this Court in para 20 of the said Report took the view as the freight paid was as per the rates notified the case would not be one of overcharge at all/ If that is the view taken by this Court on an interpretation of the pari materia provision in erstwhile Act i.e., the Railway Act, 1890 (i.e., Section 78-B) we do not see why, in the facts of the present case

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which are largely identical, we should be taking any other view in the matter.” (Emphasis supplied)

57Copy pinpoint57. In Union of India v. Mineral Enterprises reported in (2019) SCC OnLine Kar 1971, the Karnataka High Court was dealing with a matter where the actual distance between the two stations was less than what was charged by the railways. The Karnataka High Court in the said case held that the excess freight collected by the railways on a chargeable distance more than the prescribed distance was an overcharge within the meaning of Section 106 of the Act, 1989. The relevant observations read as under: - “3. [...] The facts briefly stated are that the respondent M/s Mineral Enterprises Pvt. Ltd., was transporting the minerals through the appellant railways from Ammasandra to Panamburu as per the rates fixed for transportation of the consignment. The distance from Ammasandra Railway Station to Panamburu was calculated as 365 Kms. and freight was charged as per the rate fixed by the railways. The freight charges were dependent on the distance between the place of loading and unloading of consignment. Later, on enquiry it was learnt that the actual distance between Ammasandra Railway Station to Panamburu post is only 359 Kms. and not 365 Kms. as charged by the appellant railways. Therefore, the respondent Company made correspondence with the railways through letters dated 3.10.2006, 5.5.2007 and 20.07.2007 requesting to take corrective action. [...] xxx xxx xxx

14. It is and admitted fact that the respondent Company had transported the irone ore fines / minerals through the railways for the period from 25.05.2006 to 04.01.2007 at the rates fixed by the railway. The main controversy was in respect of refund of excess freight charges said to have been collected by the railways than the prescribed rates fixed on the basis of distance. In that connection the respondent Company had sought for clarification about the actual distance for which the appellant railways gave the reply. As could be seen from the records the actual

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distance between Ammasandra to Panamburu is 358 kms., whereas the railways had calculated the distance as 365 kms., but they have collected the rates applicable for the distance above 360 Kms. It is an admitted fact that after clarification regarding actual distance, the railways had settled some of the claims of the respondent Company regarding excess charges which were within the limitation period. Some of the claims to an extent of Rs.8,85,000/- were rejected on the reason that they were barred by limitation. Under these circumstances, it is necessary to ascertain whether the repudiation of claims regarding Rs.8,85,000/- was justified. xxx xxx xxx

23. The learned counsel for the appellant railways has relied on a decision in the case of Birla Cement Works vs. G M, Western Railways and another reported in (1995) 2 SCC 493, wherein the Hon’ble Supreme Court has held under: “Railways - Railways Act, 1890 - S.78.B - Railway Claims Tribunal Act, 1987 - S 16 - Limitation - Computation of - Claim to refund of excess freight notified under S.78- B beyond the statutory time-limit on discovering the mistake from railway authorities’ letter - Rightly held by the Tribunal and the High Court to be time- barred - Further held, provision in. XXX

4. Section 78-B of the Act provides that a person shall not be entitled to refund of overcharge or excess payment in respect of animal or goods carried by Railway unless his claim to the refund has been preferred in writing by him or on his behalf to the Railway Administration to which the animals or goods were delivered to be carried by Railway etc. within six months from the date of the delivery of the animals or goods for carriage by railway the proviso has no application to the fact of this case. An overcharge is also a charge which would fall within the meaning of Section 78-B of the Act. Since the claims were admittedly made under Section 78-B itself

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but beyond six months, by operation of that provision in the section itself, the claim becomes barred by limitation. Therefore, the Tribunal and the High Court have rightly concluded that the petitioner is not entitled to the refund of the amount claimed. “

24. In the aforesaid case the principal contention raised by the petitioner was that the claimant had discovered the mistake when the railway authorities confirmed by their letter that they had committed a mistake in charging excess freight on wrong calculation of distance. As such, the limitation starts running from the date of discovery of mistake and therefore stands excluded by the operation of Section 17(i)(c) of Limitation Act and that Section 78(B) has no application to the facts in this case. But it was held that Section 17(i)(c) of Limitation Act, 1963, would apply only to a suit instituted or an application made in that behalf in the civil suit but whereas the Tribunal is the creature of statute, therefore it is not a civil court nor the limitation act has application, even though it may be held that the petitioner discovered the mistake committed in paying the over charges, the limitation is not saved by operation of Section 17(i) (c) of the Limitation Act.

25. The facts of the case on hand are exactly similar to that of the facts involved in the aforesaid decision. The Hon’ble Supreme Court in the said situation has held that the claims made under Section 78(B) are barred by limitation. As such, they cannot be entertained. The aforesaid decision was not at all referred or considered in the decisions relied on by the counsel for the claimant - respondent. The doctrine of binding precedent is of utmost importance in the administration of judicial system. It brings certainty and consistency in judicial decisions. The judicial consistency promotes confidence in the system. The ratio laid down in the aforesaid decision ((1995) 2 SCC 493) is aptly applicable to the facts of this case. As such, the claims which are barred by limitation in view of Section 106 of the Railways Act (78(B) of the Old Act) cannot be entertained.” (Emphasis supplied)

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58Copy pinpoint58. In yet another decision of the Orissa High Court in M/s National Aluminium Co. Ltd. v. Union of India FAO No. 306 of 2022, the goods were booked to be carried by a longer-route and freight was accordingly charged for the long route. However, the goods instead were dispatched by the shorter route. The High Court placing reliance on Steel Authority of India Ltd. (supra) which involved similar facts, held that since what was charged was prescribed by law, the refund was not for an overcharge, and Section 106(3) of the Act, 1989 would not be attracted. The relevant observations read as under: - “8. Mrs. Rath contends that the Tribunal has misconceived the claim for refund of additional freight charges received by the railways with the term ‘overcharges’ and in this regard she relies on a decision of this Court reported in AIR 1997 Orissa 77 (Union of India and others vrs. Steel Authority of India Limited).

9. The above referred case is involving similar issues where SAIL filed a suit before the Sub-Judge, Rourkela praying for refund of excessive charges received by the railways under the rationalization scheme relating to the old Act, i.e. Indian Railways Act, 1890. Section 78-B of the old Act is same to the present Section 106 in the Railways Act, 1989. This Court while deciding with the issue that, whether the claim for refund of overcharge is maintainable for want of notice under Section 78-B, have held that the claim is not one for ‘overcharge’ for the simple reason that the goods were booked by a particular route and paid the freight that was payable for that distance. [...]

10. In view of the above, no second opinion can be there to treat the claim of refund of additional freight charges beyond ‘overcharges’ and no prior notice under Section 106 of the Railways Act is required to be sent. Undisputedly, no such notice has been sent by NALCO as per the submissions made by Mrs. Rath in course of hearing and the admitted fact remains that several intimations seeking refund of such amount from the railways have been sent by NALCO in those letters annexed to the claim application, as seen from the copy of the claim application produced in course of hearing. So, no further discussions on the facts

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of the present case is needed here on the requirement of notice under Section 106.” (Emphasis supplied)

59Copy pinpoint59. What can be discerned from the above is that this Court as-well as various High Courts have consistently held that the rigours of Section 106(3) of the Act, 1989 will only be applicable where the claim is for a refund of an ‘overcharge’. Where the claim for refund is for anything but an ‘overcharge’, Section 106(3) of the Act, 1989 will not apply, and no notice of claim is required. b. Concept of an ‘Overcharge’ and an ‘Illegal Charge’

60Copy pinpoint60. As to what would be an ‘overcharge’, this Court and the various High Courts have consistently held that an ‘overcharge’ is any sum charged in excess or more than what was payable as per law. Whereas an illegal charge is any sum which is impermissible in law.

61Copy pinpoint61. Since the underlying difference in the dictionary meaning of both the expressions; “overcharge” and “illegal charge” is that of the prefix “over” and “illegal”, used in conjunction with the word “charge”, it would be apposite to first understand the meaning of the term “charge”. (i) “CHARGE” P Ramanatha Aiyar’s ‘The Law Lexicon’ (Vol I, 6th Edn., 2019 at pg. 886) defines “Charge” as: - “it is the price required or demanded for services rendered.” (Emphasis supplied) L.P. Singh and P.K. Majumdar’s ‘Judicial Dictionary’ (2nd Edn., 2005 at pg. 460) defines “charge” as under: - “any sum fixed by law for services of public officers or for use of a privilege under control of government” (Emphasis supplied) Henry Campbell Black in ‘Black’s Law Dictionary’ (4th Edn., 1968 at pg. 295) defines “Chargeable” as: - “something capable or liable to be charged”. (Emphasis supplied)

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(ii) “OVER” The term “over” as a prefix has been defined by L.P. Singh and P.K. Majumdar’s ‘Judicial Dictionary’ (2nd Edn., 2005 at pg. 996) as under: - “excessive or beyond a an agreed or desirable limit”. (Emphasis supplied) P Ramanatha Aiyar’s ‘The Law Lexicon’ (Vol III, 6th Edn., 2019 at pg. 3990) states that “Over” as a prefix denotes something: - “something excessive or excessively” (Emphasis supplied) Henry Campbell Black on ‘Black’s Law Dictionary’ (4th Edn., 1968 at pg. 1256) defines it as something: - “more than or in excess of” (Emphasis supplied) (iii) “ILLEGAL” Whereas the term “illegal” is defined by Henry Campbell Black in ‘Black’s Law Dictionary’ (4th Edn., 1968 at pg. 882) as something: - “not authorized by law or contrary to law or unlawful” or “something which lacks authority of or support from law” (Emphasis supplied) P Ramanatha Aiyar’s ‘The Law Lexicon’ (Vol II, 6th Edn., 2019 at pg. 2605) defines it as: - “something that is against the law” or “something which is contrary to or forbidden by law” (Emphasis supplied) L.P. Singh and P.K. Majumdar’s ‘Judicial Dictionary’ (2nd Edn., 2005 at pg. 749) defines it as: - “something which is prohibited by law” (Emphasis supplied)

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62Copy pinpoint62. Thus, in its plain meaning, the use of words “capable” and “imposed by law” shows that the term “charge” means something which in the eyes of law is permissible and payable, and therefore the term “overcharge” which is a conjunction of “over” and “charge” would mean something more than or beyond what is payable in the eyes of law. Same way, an “illegal charge” would mean a charge which is contrary to the law or lacks the authority of law or simplicter is unlawful.

63Copy pinpoint63. L.P. Singh and P.K. Majumdar’s ‘Judicial Dictionary’ (2nd Edn., 2005 at pg. 888) defines ‘over-charge’ in the context of Section 106 of the Act, 1989 as follows: – “The expressions “charge” and “over charge” are properly employed only with reference to actual quantum of liability, and they cannot be applied to relate to rates of charges. There will be an over charge if Railway applies higher rate than appropriate and there can also be an over charge where even at a rate which itself is not open to objection, there is yet an excessive liability foisted by the railway. It is not possible to restrict the expression over charge only to former kind of cases where the railway applies a higher rate than that which the law allows.” (Emphasis supplied)

64Copy pinpoint64. Thus, in the context of Section 106 sub-section (3) of the Act, 1989, an “overcharge” would be any sum which has been paid in excess or over and above or more than what was payable by law / required by law. It pertains to only the actual quantum of liability. Furthermore, merely, because an incorrect or rather higher slab-rate has been applied, will not make it an illegal charge, as long as the charge was not itself open to objection i.e., not incorrect.

65Copy pinpoint65. It is pertinent to note, that the term “payable by law” should not be conflated with the term “permissible by law”, this is because although something maybe paid in excess than what was required by law, yet the same would by no means automatically become an “overcharge”. This is further fortified from the fact that, “charge” as above-stated is defined to mean something which is either required OR demanded to be paid.

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66Copy pinpoint66. For illustration; say ‘A’ booked certain goods to be carried by railway, and the railway charged ‘A’ loading charges for the goods, even- though, there was no loading of goods involved. Here, although the law allows railway to levy loading charges i.e., the loading charges are permissible by law, and even-though the sum paid by ‘A’ towards loading charges can be said to be in excess of what was required (i.e., in excess of Nil loading charges as no loading was involved), this would not be an “overcharge” but would be an “illegal charge”.

67Copy pinpoint67. We say so because, the very basic charge or in other words the genus or basis of the charge i.e., the loading charge in itself was not required to be paid. Thus, when the very basis or genus of the charge was not payable as per law then any sum which is collected in respect of the same will not be an overcharge but would be an illegal charge. Since the very class of the charge was not required to be payable by law.

68Copy pinpoint68. Conversely, say for example, ‘A’ again booked certain goods to be carried by railway, and the railway charged ‘A’ loading charges for the goods, and this time loading of goods was involved in the consignment, but the railway mistakenly charged ‘A’ Rs. 100/- more towards the loading charges than what was required by the rate applicable. Here the basis or genus of this excess charge of Rs. 100/- i.e., the loading charges itself was payable by law. Any sum charged in excess of the loading charges as required by law would be an ‘overcharge’.

69Copy pinpoint69. For another illustration, say ‘A’ booked the carriage of iron ore by the railway, however, instead of being charged for the rate applicable for iron, the railway by mistake charged ‘A’ for steel. Now the rate which is applicable for steel is permissible by law, but here since iron was being carried, the rate applicable for steel though permissible by law is not payable by law, as the consignment was not for steel. Thus, any sum paid although is in excess of what was required, and the charge towards which it was paid was also permissible by law, the sum cannot be said to have been paid in excess of what was payable by law.

70Copy pinpoint70. Thus, for an excess sum to be an “overcharge” the sum paid must partake the same character as the basic charge, or must belong to the same genus of charge which was payable or required to be paid by law. Whereas, for an illegal charge, the sum must not have been payable by law.

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71Copy pinpoint71. Another very fine but pertinent distinction between an ‘overcharge’ and an ‘illegal charge’ is that, an ‘overcharge’ is generally inter-se the specific parties involved and in its peculiar facts. Whereas an ‘illegal charge’ is illegal for everyone irrespective of the parties or facts.

72Copy pinpoint72. For illustration, say ‘A’ booked 10 boxes to be carried by railway, however, he was erroneously charged for 12 boxes. Here the excess amount that has been charged for 12 boxes instead of 10 is an overcharge qua these specific facts for ‘A’ alone. If ‘B’ books 12 boxes to be carried by railway, the said charge which was an overcharge qua ‘A’ will not be an overcharge qua ‘B’. For that matter even if ‘A’ in a different consignment books 12 boxes and is charged for 12 boxes, it will not constitute an overcharge. This will not be an illegal charge because, it is not illegal for Railway to levy charge for 12 boxes ipso-facto (whenever a consignment is booked for 12 boxes, the Railway can levy that charge), but rather it is erroneous to levy charge for 12 boxes when in fact only 10 boxes were carried. Here whether the sum charged is an overcharge or not is largely dependent upon the peculiar facts, more particularly the number of boxes being booked for carriage. Thus, it can be safely said, that in case of an overcharge, the issue lies in the “charging” whereas in case of an illegal charge, the issue lies in the “charge” itself.

73Copy pinpoint73. Conversely for example, say for a particular route, the chargeable distance as per the law was 100 km, but the railways incorrectly showed the chargeable distance as 120 km in its local rate list. Now ‘A’ books a consignment of iron ore and ‘B’ books a consignment of steel, over the same 120 km distance. Irrespective of the type of goods or the quantity of goods being carried or by whom the consignment has been booked, any amount charged in respect of this incorrect chargeable distance of 120 km is an illegal charge. Here the sum charged as an illegal charge is not dependent upon either the peculiar facts or the parties thereof, the charge is illegal solely because the very charge itself i.e., the chargeable distance of 120 km was in contravention of the law.

74Copy pinpoint74. An Overcharge is effectively concerned with the error in the quantum of what was or should be payable, whereas an illegal charge is solely concerned with whether a particular thing was payable by the law / in conformity with the law or not.

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75Copy pinpoint75. Another aspect that distinguishes the two is that, an ‘overcharge’ often stems due to a clerical mistake or mis-interpretation or misapplication of law in a particular case, whereas an ‘illegal charge’ stems from a patent error or inherent error in the charge i.e., in contravention of the law and principles of fair play. In other words, in overcharge, the mistake is in the levying of the charge, whereas in illegal charge the error lies in the very substance of the charge itself which is in contravention of the law, even though the charge per-se is permissible by law.

76Copy pinpoint76. In West Coast Paper Mills (supra), the concerned railway zone therein was charging freight at a flat rate without giving any telescopic benefits to the consignees, which the other railway zones were providing. This denial of telescopic benefit was found to be unreasonable, arbitrary and against fair-play. Thus, the same was held to be illegal by this Court even-though the said charge was payable as per the notified rate.

77Copy pinpoint77. To illustrate, say the chargeable distance as measured by the concerned Zonal Railway Authority for a particular route is 100 km. However, the Station Master whilst making the local distance table records the said distance as 110 km due to a clerical mistake. Thus, because of an error in indicating the actual chargeable distance in the table, the freight for the said route becomes chargeable for 110 km. Although the mistake here is a clerical one, yet because of such mistake, an inherent error has crept into the local distance table. Thus, the notified rate would be an illegal charge and not an overcharge. This is because the error here lies in the very substance or genesis of the charge that was notified i.e., the charge which is sanctioned and permitted to be levied by the law, but in contravention of the law i.e., in contravention of the Zonal Authority’s calculation.

78Copy pinpoint78. We are conscious of the fact that this Court in Rajasthan State Electricity Board (supra) had directed the refund of excess freight charged by misapplication of the law despite the claim being time- barred under Section 106(3), however, a closer reading would reveal that the refund had been directed in view of the peculiar facts and circumstances of the case. Even otherwise, the court in the said decision whilst directing the refund completely missed to advert to either the bar under Section 106(3) or whether the excess freight would be an ‘overcharge’. Nevertheless, the distinction between an

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‘overcharge’ and an ‘illegal charge’ has been acknowledged by this Court in its subsequent decisions in West Coast Paper Mills (supra) and Hindustan Petroleum Corporation (supra), thus, we need not dwell any further on the decision of Rajasthan State Electricity Board (supra).

79Copy pinpoint79. Further, a sum paid in excess of what was required to be payable as per law, must assume the character of an ‘overcharge’ on the date when the payment was made or when the charge was levied. To explain this in detail we may refer to the decision of the Calcutta High Court in Suresh Kumar v. Board of Trustees for the Port of Calcutta reported in (1988) SCC OnLine Cal 420. 79.1 In the said decision, the issue pertained to the provision of Section 55 of the Major Port Trusts Act, 1963 (for short, the “Ports Act”), which is analogous to Section 106(3) of the Act, 1989, inasmuch as both the provisions provide that for a claim of refund of an ‘overcharge’ a notice of claim must be made within 6-months from the date of payment. 79.2 The facts of Suresh Kumar (supra) were as follows: there was a delay in custom clearance, because of which the goods had to be warehoused at the port. Due to this, the goods incurred heavy demurrage charges. The petitioner therein requested the custom authorities that since the delay was to no fault of its own, he may be issued an exemption certificate for the said demurrages. During this period, since the goods continued incurring demurrage charges, the petitioner therein paid the same under protest. Subsequent to the payment of the said charges, he was issued exemption certificates, whereby a portion of the demurrage charges stood abated. Accordingly, a claim for refund was made, however the same inter-alia came to be rejected in view of being time-barred as per Section 55 of the Ports Act. 79.3 The Calcutta High Court observed that, although this was in essence a refund for an overcharge, as by virtue of the exemption certificates, a sum excess than what was required by law had been paid, yet, it would not be hit by Section 55 of the Ports Act, as the excess sum only assumed a character of an overcharge, subsequent to the date of payment, when the exemption certificates were issued. The High Court held

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that the time-period under Section 55 of the Ports Act would only apply to a case where payment and overcharging would synchronize i.e., on the facts and circumstances as prevailing on the date of payment, the sum should be an overcharge. The relevant observations read as under: - “5. Because of the inordinate delay [in] the release of the said goods after completing all Customs formalities, the said goods suffered heavy demurrage charges. Accordingly the petitioner represented before the Customs authorities for allowing warehousing of the said goods, pending completion of the Customs formalities [...]

7. Due to the aforesaid delay in allowing clearance of the said goods by the Customs authorities, the said goods incurred heavy demurrage due to no fault of the petitioner. In the circumstances, the petitioner prayed before the Customs authorities for issuance of necessary wharf rent exemption certificate in order to enable the petitioner to clear the consignment without payment of demurrages from the Port authorities. After several reminders on or about March 25, 1985 the Customs authorities handed over a wharf rent exemption certificate dated March 23, 1985 to the petitioner covering part of the period of detention, that is from November 28, 1984 to March 1, 1985 in respect of consignment arrived per Vessel “Batara Dua” and from January 22, 1985 to March 1, 1985 in respect of the consignments arrived per vessel “Vishwa Yash”.

8. Thereupon the petitioner again requested the Customs authorities for issuance of wharf rent exemption certificate for the entire period of detention, that is, upto March 25, 1985. Meanwhile, however, as the goods were continuing to incur demurrage, the petitioner had no other alternative but to make payment of the demurrage charges to the Port authorities under protest and take clearance of the said goods. In respect of the said consignments, the

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petitioner paid a total sum of Rs. 8,43,995 as purported demurrage charges for the period November 28, 1984 to March 25, 1985 in respect of vessel “Batara Dua” and for the period January 15, 1985 to March 25, 1985 in respect of vessel “Vishwa Yash”.

9. Thereafter, on or about February 3, 1986 the Customs authorities issued another wharf rent exemption certificate for the uncovered period from March 2, 1985 to March 25, 1985 in respect of the said goods.

10. In the premises, by a letter dated 15th February, 1986, the petitioner filed an application before the Financial Adviser and Chief Accounts Officer, Post and Railway Audit Section, Calcutta Port Trust enclosing therewith the bills issued by the Port Trust authorities levying and realising demurrage charges as also the said wharf rent exemption certificates. By the said application the petitioner claimed refund for the sum of Rs. 8,43,995 paid by him under protest as aforesaid as purported demurrage/wharf rent charges. The petitioner drew the attention of the said Financial Adviser and Chief Accounts Officer to the fact that in view of the said Wharf Rent Exemption Certificate the petitioner was not/could not be made, liable for payment of the said demurrage/wharf rent charges.

11. In or about March 1986 the petitioner ’s representative received a purported communication dated 22nd February, 1986 issued by the Financial Adviser and Chief Accounts Officer whereby the petitioner was informed that “no refund was due” to the petitioner as all claims were “time-barred as per Section 55 of the Major Port Trusts Act, 1963”.

14. It is also contended that the petitioner could have and should have submitted the refund claim within the time limit prescribed under Section 55 of the Major Port Trust Act, 1963 but the claim for refund was submitted by the petitioner on 26th March, 1985

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and 27th March, 1985. The claim for refund of the petitioner is statutorily time-barred.

15. The contention is that while taking delivery of the said consignments the petitioner paid the port charges, that is to say, wharf rent and demurrage and did not produce any certificate from the Customs authority covering the period between the 2nd March, 1985 and 25th March, 1985 to the concerned shed of the Calcutta Port in order to enable himself to obtain the concession on any rent charges in accordance with the scale of rates. The port rent and demurrage were paid in full and the wharfage exemption certificate was produced subsequently for refund. The payment made to the Port Trust while taking delivery of the cargo from its custody was an overcharge for which a claim should have been preferred within the time prescribed in Section 55 of the said Act.

16. The first question which calls for determination is whether Section 55 of the Major Port Trusts Act, 1963 has any application on the facts and in the circumstances of this case. Section 55 provides as follows: “No person shall be entitled to a refund of an overcharge made by a Board unless his claim to the refund has been preferred in writing by him or on his behalf to the Board within six months from the date of payment duly supported by all relevant documents. Provided that a Board may of its own motion remit overcharges made in its bills at any time.”

17. It is contended by the learned counsel for the petitioner that in the instant case there is or can be no “overcharges” being made by the Port Trust Authorities. In the absence of Wharf Rent Exemption Certificate, the Port Trust Authorities had sought to realise Wharf Rent payable in respect of the subject goods. In view of the said Wharf Rent Exemption Certificate no wharf rent is payable by the petitioner and/or realisable by Port Trust Authorities from the

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petitioner. Thus the entire realisation of wharf rent in respect of the said goods is without authority of law as the said amount is not payable by the petitioner at all. Seeking of refund of such money cannot come within the purview of Section 55 of the said Act.

18. This contention has substance. Section 55 will only apply to a case where payment and overcharging would synchronise : In other words, on the facts and in the cirumstances prevailing at the date of payment, Board should have overcharged the rent. In this case, on the date payment was made by the petitioner, the payment did not and could not assume the character of overcharging. It only assumed such character when the second set of exemption certificates had been issued on 3rd February, 1986.” (Emphasis supplied)

80Copy pinpoint80. Section 106 of the Act, 1989, sub-section (3) specifically uses the words “paid” and “date of payment”. This clearly fortifies the above observations, that for a sum to be an “overcharge” within the meaning of Section 106(3) of the Act, 1989, it must be an overcharge on the date when such sum was paid. If on the date when the payment was made, the sum in question was not an overcharge, it will not become an ‘overcharge” due to intervention of subsequent events at-least in terms of Section 106 of the Act, 1989.

81Copy pinpoint81. Otherwise, the same would lead to a very chilling effect, whereby a particular sum which at the time of payment was not an overcharge but due to subsequent events (not attributable to any mistake or lack of diligence) happens to become an overcharge after the lapse of the statutory time-period under Section 106(3) of the Act, 1989 i.e., 6-months after the date of payment, even then the said sum would not be refundable because no notice was made within 6-months. Thus, the claim for refund of an “overcharge” in such case would become time-barred owing to an impossibility i.e., making the notice within the time-period which could not have been made, as at the relevant point of time it was not an overcharge.

82Copy pinpoint82. It is a settled law that in interpreting a statute or a rule, the court must bear in mind that the legislature does not intend what is unreasonable

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or impossible. If a rule leads to an absurdity or manifest injustice from any adherence to it, the court can step in. A statute or a rule ordinarily should be most agreeable to convenience, reason and as far as possible to do justice to all. A law/rule should be beneficial in the sense that it should suppress the mischief and advance the remedy. In interpreting a rule, it is legitimate to take into consideration the reasonableness or unreasonableness of any provision. Gross absurdity must always be avoided in a statute/rule. The expression reasonable means rational, according to the dictate of reason and not excessive or immoderate.

83Copy pinpoint83. Thus, keeping in mind the aforesaid view, and the specific language used in Section 106(3) of the Act, 1989 particularly the words “paid” and “date of payment”, the aspects of “payment” and “overcharging” must synchronize in order to fall within the rigours of Section 106(3) of the Act, 1989.

84Copy pinpoint84. This aforesaid aspect may be looked at from one another angle, by making use of the Hohfeld’s analysis of jural relations. As per Hohfeld’s scheme of jural relations conferring of a right on one entity must entail vesting of a corresponding duty in another. Under Section 106(3) of the Act, 1989, the right of consignee to seek a refund of an overcharge arises only when there is a corresponding duty on the railway administration to grant such refund i.e., when the notice of claim is made to it within the statutory period. To seek a refund, certain condition precedents need to be satisfied by the consignee before the right can be said to accrue, namely: - a) An overcharge has been paid by the consignor to the Railway administration b) A notice has been served by the consignor to the Railway administration to which overcharge has been paid c) The consignor has served the said notice within six months from the date of such payment or the date of delivery of such goods at the destination station, whichever is later. 84.1 Thus, once the aforesaid conditions are satisfied, the consignee’s “right to get a refund” can be said to have as its jural correlative the “duty to grant refund” of the Railway administration.

85Copy pinpoint85. Now the consignee’s duty to make the notice of claim for refund will only arise if the sum was an overcharge within the statutory time-period, if it is not, then it could not be said that there was any

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duty to make the notice of claim. Similarly, if the right of consignee to claim a refund for an overcharge, accrues when the sum was an overcharge on the date of payment, the corresponding duty of consignor to refund it will also arise when the sum was an overcharge.

86Copy pinpoint86. Thus, if on the date of payment, the sum was not an overcharge, neither is the right to claim refund emanating in terms of Section 106(3) nor is the corresponding duty i.e., neither the right nor the duty could be said to have arisen on the date of payment. Both the right to claim refund and the corresponding duty to refund must arise in synergy in terms of Section 106(3) of the Act, 1989 (emphasis). It would be too much to say that, although no overcharge was made in terms of Section 106(3), yet when the sum actually became an overcharge, the duty to seek refund will only be in terms of Section 106(3) of the Act, 1989.

87Copy pinpoint87. For illustration, say, goods were booked and freight was charged at the rate of Rs. 100 per km, and accordingly freight was paid. Subsequently, 7-months later the Railways decides as a matter of policy to reduce it to Rs 50 per km with retrospective effect. Now though the reduction is taking place retrospectively, but intimated 7-months after when the payment was made, and further even- though, this is an overcharge (because Rs. 50 has been paid in excess of what was payable), it would not mean that in order to seek refund of the excess sum, the notice ought to have been made within 6-months as per Section 106(3) of the Act, 1989, when the payment was made. Such a case, although of an overcharge, cannot be said to be one of “overcharge” within the meaning of Section 106(3) of the Act, 1989, thus no notice of claim would be required in such cases.

88Copy pinpoint88. Another peculiar aspect which must be borne in mind, is that the subsequent event which makes a particular charge an overcharge, must take place subsequent to the date of payment. For illustration, say freight on goods carried was charged by mistake at Rs. 100 instead of Rs. 50. Now this aspect comes to the knowledge of the parties 6-months after the date of payment. This would not mean that at the time when freight was being paid it was not an overcharge, as the excess sum was realized due to a mistake committed on the date of payment irrespective of subsequent knowledge. It cannot be said that due to a bona-fide mistake neither party was under the

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impression that this is an overcharge. This is reinforced from the decision of this Court in Birla Cement Works (supra). Thus, whilst deciding the applicability of Section 106(3) of the Act, 1989 what has to be seen is whether the very sum that was levied was an overcharge or not on the date of payment. Mere lack of knowledge will not postpone the accrual of cause of action to apply under Section 106(3) of the Act, 1989.

89Copy pinpoint89. This distinction drawn between a claim for refund of an ‘overcharge’ and an ‘illegal charge’ is not imaginary or superfluous, but is well- founded from the landmark decision of a 9-Judge Bench of this Court in Mafatlal Industries Ltd. & Ors. v. Union of India reported in (1997) 5 SCC 536, wherein this Court observed that a claim of refund for any excise or custom duty levied will broadly fall into three categories, and the relevant observations read as under: - “290. Broadly, the basis for the various refund claims can be classified into 3 groups or categories: - (I) The levy is unconstitutional — outside the provisions of the Act or not contemplated by the Act. (II) The levy is based on misconstruction or wrong or erroneous interpretation of the relevant provisions of the Act, Rules or Notifications; or by failure to follow the vital or fundamental provisions of the Act or by acting in violation of the fundamental principles of judicial procedure. (III) Mistake of law — the levy or imposition was unconstitutional or illegal or not exigible in law (without jurisdiction) and, so found in a proceeding initiated not by the particular assessee, but in a proceeding initiated by some other assessee either by the High Court or the Supreme Court, and as soon as the assessee came to know of the judgment (within the period of limitation), he initiated action for refund of the tax paid by him, due to mistake of law.” (Emphasis supplied)

90Copy pinpoint90. We see no reason as to why the above-mentioned distinction and categories should only be restricted to claims for refund pertaining to excise and custom levied and not extend to refund of charges

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levied by the Railway as-well. Thus, applying the aforesaid dictum, the three-categories can broadly be stated to be as follows: - (i) Category 1 – “Illegal Charge” that is a levy which is outside or beyond the law. It is a charge which though may be notified in law as a lawful charge but at its core is stricto-sensu in contravention of the law, as explained by us in the preceding paragraphs of this judgement. (ii) Category 2 – “Overcharge” that is a levy based on misconstruction or misinterpretation or failure to follow the fundamental provisions / principle. It is a charge that is in excess of beyond what was required by the law i.e., by the notified or applicable charge, as illustrated in the preceding paragraphs of our discussion. (iii) Category 3 – “Nullified Charge” a levy which has been declared or struck-down as unconstitutional or illegal by a court on principles of arbitrariness, unreasonableness or fair-play. This too would be in the nature of an “Illegal Charge” enunciated in Category 1 with the only difference being that, the courts found the law to be untenable in the eyes of law even though it may not be in contravention of the statutory provisions. Such as the charge levied by the arbitrary denial of telescopic benefits which was held to be illegal in West Coast Paper Mills (supra).

91Copy pinpoint91. Another reason, as to why this distinction assumes importance is in view of the intention behind the rigours of Section 106(3) of the Act, 1989. The purpose behind incorporating the stricter and shorter time-period envisaged under Section 106(3) of the Act, 1989 for refund of an overcharge is in view of its nature.

92Copy pinpoint92. An ‘overcharge’ as discussed by us above emanates due to a clerical or arithmetical mistake or misapplication of the law or charge prescribed or notified by the law, qua the peculiar facts of an individual case. Such mistakes are easily discoverable by exercising due-diligence; thus, a 6-month time period is stipulated to ensure that claimants are vigilant and prompt in bringing such errors to the notice of the railway. Due to the fact specific nature of such claims by way of errors at the very grass-root level, timely enquiries by railway to ascertain the mistake becomes a necessity. Thus, the intention of Section 106(3) of the Act, 1989 is to ensure that when the claim is made, a timely enquiry into such factual errors is possible AND

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to bring quietus to stale and false claims of refunds made belatedly due to the laches & lack of vigilance on part of the claimant.

93Copy pinpoint93. The true purport of Section 106(3) of the Act, 1989 is by no stretch to render even those claims of refunds as time-barred which despite the best of efforts and diligence could not have been discovered by the claimants on their own accord. ‘Illegal Charges’ are by their nature prescribed, sanctioned and notified by law as a lawful levy even- though they may be inherently wrong or in contravention of the law. Thus, despite the exercise of a reasonable degree of diligence, there could be no real reason to doubt their legality. A consignee cannot be reasonably expected to be capable of discovering such patent or perverse error in the very genesis of the charge. It is something which only the authority that calculates, determines and notifies the levy of the charge could be said to know or at the very least ought to have known. Thus, Section 106(3) of the Act, 1989 cannot be said to encompass even “Illegal Charges” which are beyond the intention and object of the said provision, and the applicability of the prescribed time-limit must be confined only to claims for an ‘overcharge’.

94Copy pinpoint94. Therefore, a distinction has been envisaged between an ‘overcharge’ and an ‘illegal charge’, where the former relates to any excess sum paid due to a mistake which was capable of being discovered by exercise of proper vigilance and thus, ought to have been claimed within a period of 6-months.

95Copy pinpoint95. Lastly, we must also caution the courts and the railway claims tribunal of one another aspect, which is that where the court or tribunal whilst examining a claim for refund finds that a particular charge for which refund is sought is not an overcharge, they must not jump to the conclusion that the said charge then is an illegal charge. The purpose of the above discussion was only to bring clarity over what would be an ‘overcharge’ for the purposes of Section 106 sub-section (3) of the Act, 1989.

96Copy pinpoint96. There may be situations, where a charge for which refund is sought may no be an overcharge or even an illegal charge and rather would be a lawful charge perfectly valid in the eyes of law, or a charge though valid but in the extant of equity may be refundable, the same has to be determined upon appraisal of the entire facts of the case. The courts and tribunal must be mindful of the fact that, the question as to what is the nature of a particular charge, be it overcharge or

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illegal charge or valid charge etc. is for ultimately determining whether it is liable for refund or not, without jumping to any conclusion.

97Copy pinpoint97. This is evinced from the decisions of Steel Authority of India Ltd. (supra) and National Aluminium Co. Ltd. (supra), where as per the mandate of the Central Government’s policy, the goods in question were required to be carried only over the longer route. Accordingly, the goods were booked and freight was also realized for the longer route, but the railways dispatched the goods by the shorter-route due to logistical issues. Even though the High Court found nothing wrong with either the policy or the freight charge realized, and held both to be lawful, yet it directed refund in view of principles of equity by taking recourse to Section 72 of the Indian Contract Act, 1872.

98Copy pinpoint98. Thus, from the above discussion, it is abundantly clear that there exists a very fine & clear distinction between an overcharge and an illegal charge, and that Section 106 sub-section (3) of the Act, 1989 only applies when the claim is for a refund of an overcharge, for all other charges, be it illegal or not, the said provision will have no application whatsoever. iii. Whether the present case is one of ‘Overcharge’ or ‘Illegal Charge’? a. Applicability of Section 106(3) of the Railways Act, 1989.

99Copy pinpoint99. Now coming to the facts of the present case at hand, it is the case of the respondent company herein that at the time of booking the consignments, from Baad to Hisar via Palwal, the notified chargeable distance for calculating freight as per the Local Distance Table was 444 km, and accordingly the respondent company paid the same from time to time.

100Copy pinpoint100. However, subsequently, the appellant railways vide its letter dated 05.07.2005 changed the chargeable distance to 334 km in the revised Local Distance Table and the said revised table was to apply prospectively. It is undisputed that, at the time when the respondent company had booked its consignment, the notified chargeable distance was 444 km for Baad to Hisar, and any consignment booked for the said route was to be charged as per the said rate.

101Copy pinpoint101. The respondent company has contended that a change in the notified chargeable distance due to a change in policy was held to be illegal by this Court in Hindustan Petroleum Corp Ltd. (supra). The High

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Court too whilst passing the impugned order has placed reliance on the said decision and held that the present case is squarely covered by the ratio of Hindustan Petroleum Corp Ltd. (supra).

102Copy pinpoint102. However, we are not in agreement with the same. In Hindustan Petroleum Corp Ltd. (supra), the notified chargeable distance was 125 km, subsequently by the introduction of the Terminal Mechanism System (TMS) which was a computerized railway receipt system, the notified chargeable distance was reduced to 100 km. A close reading of the said decision would reveal that the change in the notified distance was attributable to a computerized receipt system, which had no bearing on the actual calculation of distance, in other words a receipt system had nothing to do with determining a chargeable distance. Thus, when the chargeable distance subsequent to the introduction of the said receipt system got altered and came out to be 100 km, this Court had no hesitation to hold that the initial notified distance of 125 km was illegal, and only upon the introduction of the TMS system, the said glaring patent error came into light.

103Copy pinpoint103. However, in the instant case, the change in the policy is in respect to the change in the methodology for calculation of chargeable distance, which has a direct bearing on the chargeable distance payable as per law. Thus, a mere change in policy which results in the change of a charge payable as per law, will not render the original charge illegal, regard must be had to the nature of the policy and its effect. Thus, on this score, the High Court committed an error.

104Copy pinpoint104. The respondent company has also undisputedly paid the freight charges as per the notified chargeable distance, and nothing more has been charged than what was at the time of booking of the consignment required to be charged as per the law prevailing i.e., as per the old local distance table.

105Copy pinpoint105. The case of the respondent company is not that it has paid anything in excess of what was at the time of booking of the consignment required by law, rather, the respondent’s case is that the charge which was required to be paid by the law as prevailing at the time of booking of the consignment was wrong. In other words, the respondent’s case is that the very chargeable distance of 444 km as per the old local distance table was wrong, and not that the distance for which the respondent has been charged is incorrect in terms of the chargeable distance that was notified at that time.

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106Copy pinpoint106. We are seisin of the fact that in J.K. Lakshmi (supra) and Mineral Enterprises (supra) the freight charged due to an incorrect chargeable distance was held to be an overcharge. 106.1 However, a close reading of J.K. Lakshmi (supra) would reveal, that it was not a case where the notified chargeable distance was incorrect, but rather was a mistake of miscalculation on the part of the booking staff i.e., it was a clerical mistake and not a mistake attributable to a charge permitted and notified under the law. It does not appear that the said case was dealing with a situation where the notified or prescribed rate / chargeable distance was wrong, in fact the distance averred to be wrong is not a chargeable distance that has been notified in any manner. The relevant observations read as under: - “[...] The distance between two stations is stated to be only 511 KMs and the Railways alleged to had charged freight for distance of 946 KMs calculating the distance via Rewari. It was stated that because of this mistake in the calculation of the distance from the appellant-Company’s Banas siding to Thiyat Hamira Railway Station, railway freight was charged in excess @ Rs.21.44 per qtl. instead of the applicable rate of Rs.13.11 per qtl. and paid under mistake. Consequently Rs.3,69,775/- was overpaid. This excess realisation was according to the appellant-Company on the face of it arbitrary, unauthorized and illegal and thus refundable by the Railways with interest. xxx xxx xxx He submitted that the factum of the realisation of excess charge in an arbitrary and unauthorized manner by the Railway came to the notice of the appellant-Company only on or about 30.12.1987 when in the course of Government of India audit of the accounts of the appellant-Company with regard to supply of rakes of levy cement from its factory, it transpired that the excess freight had been unauthorizedly realized by the Railway

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in miscalculating the distance between Banas siding of the appellant-Company and place of delivery at Thiyat Hamira Railway station by wrongly measuring the distance as 946 KMs as against the actual distance of 511 KMs between the two stations. Counsel submitted that no sooner the letter dated 30.12.1987 was received by the appellant-Company requisite notice were issued to the respondent-Railway on 17.02.1988.[...] xxx xxx xxx [...] In fact the appellant-company itself averred of realisation of an excess freight and specifically in para 6 of the plaint had itself averred that due to “mistake” in calculating of distance, excess freight was realised at the rate of Rs.21.44 per qtl. instead of Rs.13.11 per qtl.. Further in the notice under Section 78B of the Act of 1890 R/w Section 80 CPC issued by the appellant- Company prior to the filing of the suit for recovery of money before the District Judge, Sirohi, it was submitted that due to mistake on the part of the booking staff of the Railways incorrect distance was computed from Banas siding to Thiyat Hamira railway station against the correct chargeable distance of 511 KMs and the distance was worked out to 946 KMs. which was the chargeable via Rewari. In para 4 of the suit it was stated that on the part of the Railway enhanced rate (emphasis mine) @ Rs.21.44 per qtl. was charged. In my considered opinion as also held by the learned Tribunal, the case set up by the appellant-Company makes it evidently clear that the refund was sought of the excess freight realizedallegedly illegally and unauthorizedly. The excess freight without doubt related to freight otherwise payable for the movement / transportation of goods by the Railways and therefore was obviously an

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overcharge. Consequently, Section 78B of the Act of 1890 attracted to the claim petition filed. Admittedly notice with regard to the freight paid between 07.12.1985 and 11.02.1986 was issued on 17.02.1988 quite clearly beyond the period of six months as statutorily mandated. The Tribunal was right in so holding.” (Emphasis supplied) 106.2 Similarly in Mineral Enterprises (supra), the wrong chargeable distance was in respect to the railway receipts which were issued that showed 365 km instead of 359 km. It was not a case of the notified rates being wrong i.e., the charge that has been made payable under law. This is further evinced by the fact that the High Court itself observed that the excess freight was charged than the “prescribed distance”. Thus, it appears that the mistake related to one in the “calculation of the distance” at the time of booking and doesn’t appear to be a mistake in the “prescribed distance”. Similarly, even in the said decision, it is nowhere mentioned that, 365 km was a “notified chargeable distance”, thus, even this decision does not come in aid of the appellants herein. “14. It is an admitted fact that the respondent Company had transported the iron ore fines/ minerals through the railways for the period from 25.05.2006 to 04.01.2007 at the rates fixed by the railways. The main controversy was in respect of refund of excess freight charges said to have been collected by the railways than the prescribed rates fixed on the basis of distance. In that connection the respondent Company had sought for clarification about the actual distance for which the appellant railways gave the reply. As could be seen from the records the actual distance between Ammasandra to Panamburu is 358 kms., whereas the railways had calculated the distance as 365 kms., but they have collected the rates applicable for the distance above 360 Kms. It is an admitted fact that after clarification regarding actual distance,

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the railways had settled some of the claims of the respondent Company regarding excess charges which were within the limitation period. Some of the claims to an extent of Rs.8,85,000/- were rejected on the reason that they were barred by limitation. Under these circumstances, it is necessary to ascertain whether the repudiation of claims regarding Rs.8,85,000/- was justified. xxx xxx xxx

24. In the aforesaid case the principal contention raised by the petitioner was that the claimant had discovered the mistake when the railway authorities confirmed by their letter that they had committed a mistake in charging excess freight on wrong calculation of distance. [...]” (Emphasis supplied) 106.3 We do not propose to dwell any further on the decisions of J.K. Lakshmi (supra) and Mineral Enterprises (supra), and leave it at rest with just one observation that, as long as there is no error or patent illegality in the very genesis or core of a charge that has been notified i.e., the charge that has been made permissible or applicable by sanction of a law, it will not be an illegal charge.

107Copy pinpoint107. In view of the above, since admittedly, what was charged from the respondent was as per the chargeable distance notified and required to be payable by law at that time with nothing in excess, and since the respondent has challenged the very basis or genus of the charge i.e., primary challenge is to the chargeable distance of 444 km in itself and not the incidental quantum of freight levied on the distance of 444 km, and because the same was admittedly charged as per the prevailing law and not due to any misapplication or mistake i.e., as per the old local distance table, this clearly is not a case of overcharge and would not fall within the four corners of Section 106(3) of the Act, 1989. b. Whether the chargeable distance of 444 km was correct or not?

108Copy pinpoint108. The respondent company herein has challenged the very validity or correctness of the notified chargeable distance of 444 km which was

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payable as per the old local distance table. At this stage, it would be apposite to understand on what basis, the respondent company has challenged the said chargeable distance of 444 km.

109Copy pinpoint109. The respondent company has contended that, initially the chargeable distance for the route from Refinery Baad to Hisar was 444 km as provided in the old local distance table. Subsequently, the appellant vide its letter dated 05.07.2005 changed and reduced the chargeable distance to 334 km. The respondent enquired and found out that, there was neither any change in the actual route nor any change in the physical track length between the Refinery Baad and Hisar stations.

110Copy pinpoint110. On such basis, the validity of the old chargeable distance of 444 km has come under cloud, and the respondent company has questioned how the chargeable distance came to be reduced by a difference of 110 km without there being any change in the actual distance in the route from Refinery Baad to Hisar.

111Copy pinpoint111. The appellant railways, submitted that pursuant to the Ministry of Railway’s letter dated 07.04.2004, a new methodology of ‘Rationalization and Rounding-off” was adopted by the railways for calculating the chargeable distance between any two pair of stations. As per the new methodology, the chargeable distance was now to be calculated on the basis of the actual engineering distance of the various stations reckoned upto two decimal points. For determining the chargeable distance, the actual entering distance (upto two decimal) of each station in the route is first added up, and then the aggregate is rounded-off to the next kilometre only once at the end.

112Copy pinpoint112. Furthermore, the new methodology had been adopted in order to bring uniformity in the procedure for determining chargeable distance throughout the railway, and the policy itself contemplated that the change in methodology would likely result in variation from the existing freights and fares being levied under the old methodology.

113Copy pinpoint113. The appellants have contended that owing to this change in policy and methodology, the earlier chargeable distance of 444 km came to be reduced to 334 km. The appellants have further submitted that the aforesaid letter dated 07.04.2004, specifically stipulates that the said change would only apply prospectively and that any variation from the old fares and freights will not be entitled to any refund.

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114Copy pinpoint114. We have gone through the aforesaid letter. Since the question before this Court pertains to the validity or correctness of the old chargeable distance of 444 km as per the old methodology and not one of refund of past freight charges solely on basis of a subsequent change in methodology. Thus, the prospective application of the change in methodology as per the letter dated 07.04.2004 has no bearing whatsoever, with the question that is before this Court.

115Copy pinpoint115. The appellant railways has contended that the old chargeable distance of 444 km was valid and correct as per the old methodology and distance table that was prevailing at that time, and thus, the respondent company is not entitled to a refund.

116Copy pinpoint116. Before, we proceed to determine the validity of the old chargeable distance of 444 km, we must try to understand the stance of the appellant railway in the present litigation, as discernible from their pleadings, which has left us quite perplexed. The argument of the appellant railways is twofold: - (i) First, that the respondent company is not entitled to any refund whatsoever, since the change in chargeable distance was due to a change in the methodology, and that the old chargeable distance was correct as per the old methodology and distance table. (ii) Alternatively, it has been contended that, in the event this Court finds that the respondent is entitled to refund of the difference in chargeable distance, the same would at best be a case of ‘overcharge’ and the claim could be said to be time-barred in terms of Section 106(3) of the Act, 1989.

117Copy pinpoint117. Thus, the primary thrust of the appellant’s contention is that this is neither a case of overcharge nor an illegal charge, as the old chargeable distance was valid as per the old methodology and distance table, thus, the respondent company is not entitled to any refund whatsoever.

118Copy pinpoint118. However, interestingly, despite maintaining the aforesaid stance that no case is made out for a refund, the appellant railway itself during the pendency of the matter before the Railway Claims Tribunal, Ghaziabad granted refund to the respondent company in approx. 45 claims that were made within the 6-month statutory time period

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119Copy pinpoint119. Prima-facie since the refund was not made by any adjudicatory authority it would have no bearing in the case of the appellant before this Court, however we should be mindful, that the appellant remarkably in its entire pleadings has nowhere explained why the refund was granted in the first place or even remotely indicated that the same had been granted due to a mistake.

120Copy pinpoint120. The appellant despite contending that the old chargeable distance of 444 km was correct and valid as per the old methodology and the old distance table, the appellant has neither provided the complete old distance table nor explained what was the old methodology being used that resulted in a 110 km difference in the chargeable distance.

121Copy pinpoint121. As discussed by us above in this judgement, when a charge is alleged to be illegal, it would be too much to expect a consignee such as the respondent herein to prove that a particular charge is illegal or not. It is only the authority who formulated and prescribed a particular charge that may be capable of establishing that a particular charge is valid or not. The threshold of the ‘burden of proof’ if we may use that term that is required to be discharged, when challenging a particular charge as an “illegal charge”, is only on the preponderance of probabilities, upon which the onus will shift on the authorities to establish how the particular charge is valid.

122Copy pinpoint122. In the instant case, the respondent whilst challenging the validity of the chargeable distance of 444 km has submitted as follows: - a. That, the notification / communication whereby the chargeable distance was reduced from 444 km to 334 km had no bearing with the change in policy in the methodology for calculating the chargeable distance as alleged by the appellants herein. b. Further, the said communication shows that the chargeable distance was a matter of “correction” made after “critically reviewing” the old distance tables, and thus, indicating that the chargeable distance of 444 km was illegal. c. The respondent, upon enquiry from the concerned railway office came to learn, that there been no change in either the physical tracks or the route to warrant a change in the chargeable distance from 444 km to 334 km.

123Copy pinpoint123. The respondents have more than sufficiently showcased, how and why the chargeable distance of 444 km appears to be illegal. However,

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in response to the same the appellants herein have stated that, the chargeable distance of 444 km was correct as per the old distance table and the old methodology as prevailing, but have not been in a position to explain nor provide any documents to substantiate how the same was correct. Thus, except for a bald assertion, no other foundation has been laid for offering such a claim.

124Copy pinpoint124. Despite the aforesaid, we ourselves have undertaken the pains of examining the validity of the chargeable distance of 444 km. A close reading of the Ministry of Railway’s letter dated 07.04.2004 regarding the new rationalization methodology and a careful analysis of a small portion of the old distance table that was prevailing vis-à-vis the current distance table would give some insight and clarity over the old methodology that was being used to calculate the chargeable distance. For the purposes of explanation, the said distance tables are reproduced below: - Figure 1: Distance Table as per the Old Methodology

In the above distance table: - ● “. .” indicates the Originating Point, i.e., the station of origin from which the goods are booked / loaded for carriage. ● Chargeable Distance from one station to another is calculated by the aggregate of the distance of all stations between the Originating Station and the Destination Station.

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● For example, the chargeable distance from Baad to Mathura is calculated by the actual engineering distance between the two pair of stations. ● “(A)” to “(B)” indicates the actual engineering distance between Baad and Mathura. ● “(C)” indicates the chargeable distance which is calculated by adding the distance between (A) & (B) and thereafter rounding off the aggregate to the next kilometre. Figure 2: Distance Table as per the New Methodology

xxx --- xxx --- xxx

125Copy pinpoint125. The striking difference between the Old Distance Table in Figure 1 and the New Distance Table in Figure 2 is that under the old methodology the distance between each station is being rounded-off, whereas in the new methodology the distance between each station is not rounded-off, and rather is indicated up-to two decimal points. Thus, in the Old Distance Table the chargeable distance between (A) Baad and (B) Mathura comes out to be (C) 11 km whereas under the New Distance Table distance between (A1) Baad and (B1) Mathura distance is indicated as 10.22 and upon rounding it off, the chargeable distance would come out to (C1) 11Km.

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126Copy pinpoint126. Thus, prima-facie it appears that under both; the Old Distance Table and the New Distance Table, the actual engineering difference was being taken into consideration, and the only difference between the two methodologies lies in the rounding-off. Under the old methodology, the actual engineering distance for every station was being rounded-off to the next kilometre, whereas under the new methodology this was done away, and only the cumulative distance is being rounded-off only once at the very end to the next kilometre.

127Copy pinpoint127. Thus, when calculating the chargeable distance for a specific route under the old methodology, each station that exists in-between the route would at best add 1 km each. Thus, the extent to which the cumulative chargeable distance for a route would get inflated will roughly correspond to the number of stations it has in its route, with each intervening station increasing the chargeable distance by a maximum of 1 km.

128Copy pinpoint128. This is further evinced from the fact that, the Ministry of Railway’s letter dated 07.04.2004 by which the new methodology was introduced, itself in the subject uses the words “Rounding off of Chargeable Distance: Rationalization of fares and freight”. This indicates that both methodologies utilized actual engineering distance with the only underlying difference between both of the them being in respect of rounding-off and nothing more.

129Copy pinpoint129. Furthermore, in the letter dated 05.07.2005 issued by the Chief Goods Supervisor (CGS), Northern Railway, whereby the chargeable distance from Refinery Baad to Hisar was reduced from 444 km to 334 km, it is nowhere mentioned that the same was done pursuant to the new methodology of “Rationalization of Rounding Off” or by virtue of the Ministry of Railway’s letter dated 07.04.2004 whereby the new methodology was introduced for the first time.

130Copy pinpoint130. The aforesaid letter dated 05.07.2005 of the CGS only goes so far as to say that the old distance tables were “critically reviewed” and that now the chargeable distance should be 334 km. In fact, the aforesaid letter further instructs CGS Baad that “the other disputed distance should also be corrected as per the new junction table and the correct distance should be charged”. The use of the words “disputed” and “corrected” used in the said letter clearly indicates that the distance of 444 km was incorrect in itself, and that the change in the chargeable distance had nothing to do with the new methodology of ‘Rounding Off’.

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131Copy pinpoint131. We are conscious of the fact that in the aforesaid letter dated 05.07.2005, it was indicated that the chargeable distance of 444 km was being levied as per the old distance table, and that the same was corrected as per the revised distance table. However, it must be borne in mind, that merely because the chargeable distance of 444 km was correct as per the old distance table will not ipso-facto make the chargeable distance of 444 km correct.

132Copy pinpoint132. The correctness of a chargeable distance is dependent upon the correct application of the methodology prescribed by law and correct calculation of the same pursuant to the methodology. A distance table, is a public document, which is available and displayed at each station, whenever a consignment is to be booked, the chargeable distance is calculated as per that distance table, had the distance table been incorrect, the respondent company would have disputed the same the very first moment when the consignment was probably being booked.

133Copy pinpoint133. We have no reason to doubt that the chargeable distance as calculated by the old distance table would have come out to 444 km, had it not, it would have been pointed out by the respondent company then and there. But merely because the calculation of the chargeable distance as per the old distance table is correct would not make the distance table correct as-well.

134Copy pinpoint134. The case of the respondent is that the calculation and application of the old methodology used for the formation of the distance table was incorrect, due to which inherent error has crept into the said distance table, thus it is the distance table which is incorrect and by its extension the chargeable distance of 444 km which is required to be payable by the law i.e., the notified distance table.

135Copy pinpoint135. Remarkably, even the Railway Claims Tribunal in its order had observed that the “actual distance” (emphasis) from Baad to Hissar was 334 km (sic 333.18 km), and the sole reason why the RCT rejected the claims of the appellant was on the ground of being time-barred by Section 106(3) of the Act, 1989, which we have already stated, is not applicable in the instant case. The relevant observations read as under: - “18. [...] In this case, the goods were booked from ’A’ to ‘B’, showing the chargeable distance as 444 Kms. and payment was given by the applicant company for the same

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distance, but later on, Railways reworked the chargeable distance as only 333.18 Kms. The consignment in question was carried through the same route. So, it is clear that the payment was to be made for 333.18 Kms, whereas it was made for 444 Kms. So, it is clear that the payment was to be made for 333.18 Kms., whereas it was made for 444 Kms. xxx xxx xxx

22. [...] from the facts of the present case in hand, as in the present case, the applicant company was well within the knowledge of the actual distance from Baad to Hisar was 333.16 Kms, instead of 444 Kms.” (Emphasis supplied)

136Copy pinpoint136. As afore-stated, since the only tangible difference between the old methodology and the new methodology is of rounding-off, the effect of change in methodology upon the chargeable distance would have at best been limited or confined to a difference of 1 km for each corresponding intervening station. The route from Refinery Baad to Hisar has about 48 stations (approx..). It is not the case of the Appellant that there was any change in either the route by way of addition of new station or any change in the physical track length of the said route. Thus, a mere change in methodology would not have resulted in a difference of 110 km in the chargeable distance. G. CONCLUSION

137Copy pinpoint137. Thus, we are of the considered opinion, that the chargeable distance of 444 km was illegal, for the following reasons: - (i) That, the effect of the change in methodology on the chargeable distance would not have resulted in a huge difference of 110 km, (ii) That, there had been neither any change in the route by way of addition of new station nor change in the physical track length of the said route, (iii) The letter dated 05.07.2005 itself indicates that the change in the chargeable distance of 444 km was due to an error, and has no bearing with the Ministry of Railway’s letter dated 07.04.2004 introducing the new methodology.

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(iv) The factum of the appellants themselves granting refund without explaining the reason for the same, despite their stance that the respondent is not entitled to any refund. (v) The failure of the appellant in establishing that the chargeable distance of 444 km was the correct chargeable distance as per the law. (vi) Concurrent findings of both, the Railway Claims Tribunal and the High Court on the limited aspect of the actual distance being 333.18 km.

138Copy pinpoint138. Thus, for all the foregoing reasons, we have reached to the conclusion that the said chargeable distance of 444 km was illegal. We find no infirmity with the impugned judgement and order passed by the High Court.

139Copy pinpoint139. In the result, the appeals filed by the appellant railway fails, and are hereby dismissed.

140Copy pinpoint140. The parties shall bear their own costs.

141Copy pinpoint141. Pending application(s), if any, also stand disposed of.

Headnotes prepared by: Ankit Gyan Result of the case: Appeals dismissed.