The Aryavarth Express
Aryavarth (Bengaluru): The Supreme Court has ruled against the Indian Railways in a long-standing dispute with the Indian Oil Corporation (IOC) over the refund of excess freight charges. The apex court dismissed the appeals filed by the Railways, upholding the Allahabad High Court’s order in favor of IOC.
The case revolves around consignments of furnace oil booked by IOC between 2002 and 2005 via the Railways over a specific route. The Railways calculated the freight charges based on a ‘total chargeable distance’ of 444 km, as per the prevailing distance table. However, in April 2004, the Railways modified the method of calculating chargeable distance, which involved rounding off values and necessitated a revision of the distance tables.
Subsequently, IOC discovered that despite no change in the physical track length for the route in question, which was actually 333.18 km, the Railways continued to charge freight for a distance of 444 km. IOC sent a notice of claim to the Railways, demanding a refund of the difference in freight charges for 122 consignments. The Railways denied all claims.
IOC then approached the Railway Claims Tribunal for relief. Following some meetings between the parties, the Railways refunded about 45 claims, considering that they were made within the 6-month statutory period under Section 78B of the Railways Act, 1890 (now Section 106 of the Railways Act, 1989). The Tribunal, however, dismissed the remaining 77 applications as time-barred, noting that the claims notices were not sent within the prescribed period and the refund was sought for an ‘overcharge’.
Aggrieved by the Tribunal’s decision, IOC appealed to the Allahabad High Court, which allowed the appeals. The High Court took the view that since the freight had been paid as per the notified chargeable distance, which was later found to be incorrect, it was a case of “illegal charge” and not “overcharge”. The Railways then approached the Supreme Court, challenging the High Court’s order.
The Supreme Court, in its judgment, addressed three key issues:
1. The scope of Section 106(3) of the Railways Act, 1989, and the difference between an “overcharge” and an “illegal charge”.
2. Whether IOC’s claim for a refund of the difference in freight charges was for an ‘overcharge’ and covered by Section 106(3).
3. Whether the notified chargeable distance of ‘444 km’ was an illegal charge and liable to be refunded.
The Court observed that the rigors of Section 106(3), which prescribes a 6-month time limit for making a notice of claim, are only attracted when the refund is for an overcharge. In cases where the claim for refund is for anything other than an overcharge, no notice of claim is required.
Analyzing various precedents, the Court distinguished between an ‘overcharge’ and an ‘illegal charge’. An overcharge is any sum charged in excess of what is payable as per law, while an illegal charge is any sum that is impermissible in law. The Court clarified that merely applying an incorrect or higher slab rate does not make it an illegal charge, as long as the charge itself is not open to objection.
The Court further explained that for a sum to be an overcharge, it must partake in the same character as the basic charge and belong to the same genus of charge that was payable by law. In contrast, for an illegal charge, the sum must not have been payable by law at all.
Regarding the time-barred nature of IOC’s claims, the Court emphasized that for a sum to be an overcharge, it must be so on the date of payment. If the sum was not an overcharge when the payment was made, it will not become an overcharge due to subsequent events, at least in terms of Section 106 of the Railways Act, 1989.
The Court concluded that Section 106(3) cannot be said to encompass “illegal charges,” and the applicability of the prescribed time limit must be confined only to claims for an ‘overcharge’. It held that the true intent of Section 106(3) is not to render claims for refunds time-barred when, despite the best efforts and diligence, the claimants could not have discovered the issue on their own.
On the facts of the case, the Court opined that IOC’s objection was to the chargeable distance of 444 km and not the incidental quantum of freight levied on it. Considering that the distance was charged as per the prevailing law and not due to any misapplication or mistake, the Court held it to be a case of illegal charge.
The Court observed that a mere change in the methodology of computing chargeable distance would not have resulted in a difference of 110 km. Given that the Railways failed to establish that 444 km was the correct chargeable distance, the Court declared the computation as illegal and dismissed the Railways’ appeals.
The Supreme Court’s judgment in this case is significant as it clarifies the distinction between an ‘overcharge’ and an ‘illegal charge’ in the context of freight charges levied by the Railways. The ruling emphasizes the importance of accuracy in determining chargeable distances and the consequences of levying incorrect charges on consignees.
