UNION OF INDIA v. JAISWAL COAL COMPANY — 1997 DIGILAW 622 (ALL)

OM PRAKASH, J. ( 1 ) -THIS appeal is filed by the defendants-appellants for setting aside the judgment dated 27. 11. 1979 and decree dated 13. 12. 1979 passed by the Civil Judge, lucknow, decreeing the original suit No. 35 of 1977 in toto. The aforesaid suit was filed by three, following registered partnership firms claiming damages to the extent of Rs. 1,01,84,000/ -. 1. M/s. Jaiswal Coal Company. 2. M/s. Chiranji Lal and sons and. 3. M/s. Ideal Coal Agency. ( 2 ) BY an order dated 1. 11. 1975 passed by the Civil Judge Lucknow (on pages 52 to 453 of the paper book) an application was allowed and then Shri Chiranji Lal Jaiswal was appointed as receiver to run the business of the firm M/s. Chiranji Lal and sons under his supervision, control and guidance and to do all acts necessary for the progress of the business. Almost similar orders (on pages 454 to 457 of the paper book) were passed by the civil Judge, Lucknow on the same date in respect of the remaining two firms on the applications made under Order 40 Rule 1, cpc appointing Shri Chiranji Lal Jaiswal as the Receiver. This is how Shri Chiranji Lal jaiswal came to be appointed as the Receiver for all the three plaintiffs by separate orders, albeit passed on a single date. Thus the suit no. 35 of 1977 was filed by the Receiver (Chiranji Lai Jaiswal) on behalf of the three partnership firms in forma pauperis after obtaining permission from the Court vide order dated 18. 1. 1977 (on pages 64 to 70 of the paper book ). ( 3 ) THE case of the plaintiffs, in brief is that the plaintiffs were nominated coal agents of Kanpur and Etah districts that they were getting their quota of one rake per month from November, 1968 to May, 1969 for kanpur district regularly that the plaintiffs came to know sometime in April,. 1969 that no allotment sponsoring was made in their favour for the month of June, 1969 that by memo dated 30. 9. 1969 that no allotment sponsoring was made in their favour for the month of June, 1969 that by memo dated 30. 9. 70 the joint Director, Transport (Coal) Railway Board, Calcutta allotted two rakes per month for January, 1971 to june, 1971 in favour of the plaintiffs as compensatory quota, because regular allotment of monthly quota of wagons for the period from June, 1969 to November, 1970 for Kanpur district was interrupted, that by a letter dated 11. 2. 1971 the authorities committed to allot three rakes per month that the dy. Secretary to U. P. Government by his memo dated 12. 5. 1971 informed the Joint director, Transport (Coal) about the sponsorship of rakes in favour of the plaintiffs in lieu of the quota, which remained suspended from may, 1969 to November, 1970 in respect of kanpur district; that by another letter dated 1. 2. 1971, the Director of Movement, Government of U. P. recommended five rakes in favour of the plaintiffs as compensatory measure in respect of quota loss for Etah district, but the railways did not allot any compensatory quota as directed by the State Government, though the rakes were allotted to others superseding the claim of the plaintiffs that the joint Director, Transport (Coal) Calcutta, all of a sudden, ordered on 26. 10. 1971 that all the rakes outstanding as on 31. 12. 1971, would lapse and they would not be carried forward for the year, 1972, that the plaintiffs like the previous occasions again approached the Calcutta High Court on. 25. 2,1972 and then an interim order was passed on 25,2. 1972 on a petition of the plaintiffs filed under article 226 of the Constitution directing the defendants to make allotment of wagons in favour of the plaintiffs immediately, subject to priority but the railways continued to neglect the claim of the plaintiffs and to allot the rakes to other parties instead that the railways failed to allot rakes to the plaintiffs in violation of the interim orders passed by the Calcutta High court time-to time though they were available and that the railways arbitrarily allotted the rakes to other parties in preference to the plaintiffs causing thereby heavy losses to the plaintiffs. ( 4 ) THE plaintiffs thus claimed damages against the railway administration to the tune of Rs. ( 4 ) THE plaintiffs thus claimed damages against the railway administration to the tune of Rs. 1,01,84,000/- the break of which is as follows : (a) Loss of profits on account of not allotting 19 rakes before 6. 3. 1972. Rs. 76,00,000. 00 (b) Loss of commission on 13 rakes 30 Boxes, 28,000 tonnes Rs. 84,000. 00 (c) Loss of Business on account of non allotment of rakes Rs. 25,00,000. 00 Total Rs. 1,01,84,000. 00 A written statement was filed on behalf of defendant Nos. 1 to 4 stating that there was statutory control on the distribution of coal that the coal controller used to allot rakes to the coal agents on the basis of recommendations of the sponsoring authorities having regard to the availability of rakes, coal and the loading target notified by the railways; that after the control on the distribution of coal was lifted, programming and allotment of coal to the coal agents was taken over by the railways; that the system of sponsorship by the State Governments was introduced with a view to avoid artificial scarcity of coal in the market by unscrupulous elements; that the railways had nothing to do with the sponsorship which was done by the concerned State government; that directions given by the calcutta High Court were applicable to the authorities of U. P. Government that the role of the railways is confined to making allotment against the programmes recommended/ sponsored by the State authorities in favour of the nominated agent/supplier, that no programmes were sponsored bythe U. P. Government in favour of the plaintiffs and, therefore, no allotment for preferential movement governed by the preferential Traffic schedule could have been made in favour, of the plaintiffs that the cause of suspension of the plaintiffs quota for the period from June, 1969 to November, 1970 would be in the knowledge of U. P. Government as sponsoring was within the domain of the State Government ; that the sponsoring authorities simply made recommendations for allotment of rakes; that allotments of rakes were made on the basis of the recommendations made by the sponsoring authorities but mere recommendation by the sponsoring authorities in favour of a coal agent supplier was no guarantee for. allotment and that depended upon the availability of rakes and the urgency of distribution of coal amongst the coal agents; that sponsorship merely determined preference to be given to a coal agent under priority c of the preferential Traffic Schedule and that did not create any contractual or legal obligation on the part of the railways to necessarily allot the rakes to the coal agent sponsored by the authorities. In para 29 of the written statement, the defendants categorically denied having committed any breach entitling the plaintiffs to claim damages. It is also denied that the plaintiffs infact, suffered any loss from an act of the railways. It is averred that the damages claimed by the plaintiffs are exorbitant and that damages claimed under the three categories are of one and the same nature. ( 5 ) ON the pleadings of the authorities, the Trial Court framed the following issues :1. Whether the defendants 1 to 4 failed to allot compensatory quota to the plaintiffs as stated in para 7 of the plaint? 2. Whether the defendants 1 to 4 made allotments of wagons in supersession of the claims of the plaintiffs as stated in para 14 of the plaint? If so, its effect? 3. Whether there are outstanding rakes as stated in para 15 and 18 of the plaint? If so, how many rakes are outstanding and with what effect? 4. Whether the defendants 1 to 4: committed any breach of obligations? If so its effect? 5. Whether the plaintiffs suffered any damage due to defendants 1 to 4? if so, to what effect? 6. Whetherthis Court has jurisdiction to try this suit? 7. Relief, to which plaintiffs are entitled 8. Whether the claim has been calculated at highly excessive time, as alleged in para 42 of the W. S. ? 9. Whether the suit is ever valued? ( 6 ) THE trial court took up issue Nos. 1 to 4 and issue Nos. 5 and 8 together for decision. Before entering into the merits of the: findings recorded by the trial court we would like to point out at the veryoutset that trial court of the suit though involving stake as high as Rs. 101,84,000/- was conducted by the trial court adopting a casual approach right from the inception. 5 and 8 together for decision. Before entering into the merits of the: findings recorded by the trial court we would like to point out at the veryoutset that trial court of the suit though involving stake as high as Rs. 101,84,000/- was conducted by the trial court adopting a casual approach right from the inception. The contention of the plaintiffs was taken on the face value and was accepted by the trial court as a gospel truth. The stake being very high, requisite attention must have been bestowed to the suit. A perusal of the judgmentshows that the trial court regrettably showed total lack of experience, inasmuch as the suit was tried without observing the basic norms of the trial. The court proceeded throughout the trial in a very slip shod manner. No efforts were made for clarifying the pleadings under Order 10, rule 2, CPC and to our dismay, the court decreed the suit in entirety without appreciating the substratum of the claim of the plaintiffs. ( 7 ) CASUAL approach of the trial court can well be demonstrated by the following reasons. The suit was filed by the three firms, separately registered. The claim of the plaintiffs is that U. P. Government sponsored the case of each plaintiffs for making allotment of rakes for transporting coal and yet the railways abrifrarily failed to allot the rakes to the plaintiffs and made illegal allotments to others. From these facts, it appears that the cause of action had arisen to each plaintiffs. There is nothing on record to indicate as to how all the plaintiffs came to be joined to file a single suit. Before allowing the plaintiffs to prosecute the suit jointly, it was the duty of the trial Court to record reasons warranting a single suit by all the plaintiffs. By these observations, we do not mean that on merits, the three plaintiffs could not have been allowed to prosecute the suit jointly, but we are making these observations from a limited angle that the trial court without highlighting the circumstances enabling the plaintiffs to join together in the suit, merrily proceeded with the trial on the assumption as if the plaintiffs are entitled to join in the suit. The plaintiffs claimed damages as under: (a) Loss of profits on account of not allotting 19 rakes before 6. 3. 1972. Rs. 76,00,. The plaintiffs claimed damages as under: (a) Loss of profits on account of not allotting 19 rakes before 6. 3. 1972. Rs. 76,00,. 000/- (b) Loss of commission on 13 rakes 30 Boxes, 28,000 tonnes Rs. 84,ooo/- (c) Loss of Business on account of non-allotment of rakes Rs. 25,00,000/- Total Rs. 1,01,84,000/- ( 8 ) LOOKING to. the nature of business being carried on by the plaintiffs it is apparent that the claims of the three types are of one and the same nature. The trial court did not take pains at all to see as to how could the plaintiffs claim for damages of the three types and whether they differ from each other. Perse it appears that by non-allotment of rakes by the railways, the plaintiffs would have suffered loss of profit. It is not made clear by the trial court as to how the plaintiffs claimed, damages under two more headings besides the heading of loss of profit Moreoever, the trial court has not at all pointed out in the judgment as to how the loss under each heading was suffered by the plaintiffs and what was the evidence from the side of the plaintiffs to prove the extent of loss, claimed under each heading. The trial court stated several reasons, merits of which will be considered later to come, to the conclusion that there was break of the obligation on the part of the railways in making allotment of the rakes and then straighway accepted the entire claim of the plaintiffs regarding damages without any discussion on the extent of damages. How the damages were worked out by the plaintiffs and what was the material in support of them on these vital aspects, there is no discussion in the judgment. Also there is no discussion in the judgment whether the railway was the only mode of transport of coal and whether that could have been transported by road as well. Before claiming damages, the plaintiffs are legally required to show as to what steps were taken by them to mitigate the loss. If transportation of coal was possible by road then on the principle of mitigation of loss,the plaintiffs could not have been entitled to claim the entire damages. But there is no discussion in this behalf. Before claiming damages, the plaintiffs are legally required to show as to what steps were taken by them to mitigate the loss. If transportation of coal was possible by road then on the principle of mitigation of loss,the plaintiffs could not have been entitled to claim the entire damages. But there is no discussion in this behalf. ( 9 ) LAST but not the least reason to show the casual approach of the court is that the re. ceiver appointed on behalf of the plaintiffs was permitted to file the suit in forma pauperis under Order 33, Rule. 1 CPC observing in the order that to judge the financial condition of the plaintiffs assets of the firm only are relevant and not the assets of the partners. The receiver had admitted that there were certain properties, belonging to the partners individually. To exclude the properties owned by the partners individually the trial court observed as follows in the order dated 18. 1. 1977 (pp. 64-70) of the paper book):"the partner of a firm can very well possess properties in his individual capacity as well as in the capacity of being a partner of a particular firm, but the properties of such partner possessed in the capacity otherwise than being a partner would not be considered with regard to the dealing and liabilities of the firm. " ( 10 ) A firm is nothing but a compendious name of the partners comprising the firm. It is trite that there is no dichotomy so far as the assets of the firm and partners are concerned. Firm is not a separate juristic, entity. The partners are jointly and severally liable to pay the dues outstanding against a firm. The position of a company incorporated under the Companies Act, is different. Unlike a firm, the company is a juristic entity absolutely distinct. from its directors. Assets of the company may be different from the assests of its directors, but this is not so in the case of a firm. Such legal position being crystalised the trial court prima facie, erred in excluding the assets, individually owned by the partners to determine the financial position of each firm for the purposes of Order 33, Rule 1 CPC, and the Receiver was casually permitted to file the suit in forma pauperis, though the plaintiffs claimed damages of huge amount of Rs. 1,01,84,000/. 1,01,84,000/. ( 11 ) REVERTING to the merits of the findings recorded by the trial court, it is worth pointing out that the trial court did not take pains and made no efforts to see the substratum of the claim of the plaintiffs. No issue was framed about the entitlement of the plaintiffs to claim damages. It was the duty of the court to frame proper issues and the issue regarding entitlement of the plaintiffs to claim damages was necessary, unless there was material to show that the railways admitted the claim of the plaintiffs. About the admission, the trial court recorded a very queer finding. In para 31 of the judgment, the trial court observed as under :"31. . . . But the argument by the learned counsel for the contesting defendants is that the recommendation of the State of U. P. was not mandatory for the rlys, and Rlys. were not bound to make allotment in favour of the plaintiffs. This argument does not stand because the defendants have agreed in para 10 of their W. S. , that 12 rakes were allotted to the plaintiffs. The same is the case of the plaintiffs also that there was sponsoring/recommendation by the state Government and then allotment by the Rlys, and did not supply rakes inspite of that allotment. Obviously the argument does not lie that the Rlys. were not bound to allot as the sponsoring was simply recommendatory and not binding. Here the question does not jernain there that whether the recommendations were binding or not because as per admission in para 10 of w. S. the allotment of 18 rakes was: done in favour of the plaintiffs-in view of the sponsoring recommendation by the State of U. P. " ( 12 ) THE question for consideration is whether there is any admission on the part of the defendant in para 10 of the written statement. In para 10 ofthe written statement, the relevant pleadings are as follows :". . . . . Thus against the compensatory-quota of 18 rakes the parry, was allotted 17. 5. rakes and they were requested to submit programmes for the balance of 0. 5 rakes vide this office letter No. CM. 57/156/5 part II of 23. 9. 1975 but the party did not submit any programme. So it was not possible for the Joint Director Trans (Coal) to implement the balance programme. 5. rakes and they were requested to submit programmes for the balance of 0. 5 rakes vide this office letter No. CM. 57/156/5 part II of 23. 9. 1975 but the party did not submit any programme. So it was not possible for the Joint Director Trans (Coal) to implement the balance programme. It was also not possible to make good the balance 0. 5 rake as the different rakes in which the partys quota were included vide director of Movement letter dated 20/21. 5. 1972 lapsed as the party concerned failed, to take fresh consent from Coal Mines Authority Ltd. after taking over of the mines by Central Government in January, 1973. "from a perusal of the above reproduced pleadings, it cannot be said that there was any clear, unambiguous and unequivocal admission on the part of the railways to allot rakes for the failure of which damages have been claimed. It was for the plaintiffs to prove that the railways was under obligation to make allotment of the rakes in their (plaintiffs) favour. There is no admission of such obligation in para 10 of the written statement. The only fact borne out from para 10 of the written statement is that 17. 5 rakes had been allotted and in that regard also no material has been pointed out by the trial court that these rakes had been allotted to the plaintiffs. What is the basis of the claim of the plaintiffs and how the right to claim damages came to be vested in the plaintiffs these were indispensable-queries in the case. What was the legal obligation on the part of the defendants for making allotment of rakes - this question has not at all been gone into. Whether the railways made a commitment to allot rakes to the plaintiffs and if so that enabled the plaintiffs to claim damages, this vital question has not been considered. Unless there was a statutory contractual obligation on the part of the railways to make allotment of the rakes in favour of the plaintiffs, no damages could be awarded to the plaintiffs even if they have suffered loss. " unequivocal case set up by the railways is that the mere fact that a programme of movement was sponsored by U. P. Government in favour of coal agents, does not create a vested right in the coal agents to secure allotment of rakes. " unequivocal case set up by the railways is that the mere fact that a programme of movement was sponsored by U. P. Government in favour of coal agents, does not create a vested right in the coal agents to secure allotment of rakes. It is pleaded by the railways that sponsorship by U. P. government or by any other State will simply determine the priority amongst the coal agents inter-se under priority (c) of the preferential Traffic Schedule. For movement of goods on priority, the railway administration published Preferential Traffic Schedule from time to time. The relevant Preferential traffic Schedule which is a part of the paper book, reveals five priorities, namely, (a), (b), (c), (d), and (e ). Coal falls in priority (c ). In the written statement it is pleaded by the railways that there were several statutory controls on coal and therefore, with a view to avoid manmade or artificial scarcity of. essential goods like coal, a scheme of sponsorship was devised and it was left to the respective states to sponsor names of coal agents to enable the railways to make allotment of rakes only in favour of those whose names are sponsored by the respective States. It is pleaded that sponsorship merely determined priority (c) of coal agent (s) and that allotment of rakes to the coal agent whose name was sponsored by the u. P. Government or any other state was not guaranteed and that allotment of rakes would depend on the availability of rakes and several other factors. There is no discussion whatsoever on these important pleadings and no proper issue has been framed in this behalf. Where there is no proper issue, the parties will be prevented from leading relevant evidence and if that is so, the judgment is bound to be vitiated. ( 13 ) IT was the duty of the court to record a clear finding as to when and by which order the names of the plaintiffs were sponsored by the U. P. Government and whether the railways failed to make allotment of rakes despite availability of the rakes and other relevant factors being existed. The important aspect of the case was completely lost sight of by the trial court which gave a complete go by to the basic requirements of a trial. The important aspect of the case was completely lost sight of by the trial court which gave a complete go by to the basic requirements of a trial. ( 14 ) IN para 38 of the judgment (p. 192 of the paper book), the trial court alleging to the letters dated 11. 2. 1971,. 17. 3. 1971, 12. 5. 197 land 1. 2. 1971 exchanged between the authorities of the U. P. Government and the railway administration, observed as under:"these all go to show that assurances were there by the defendants and in spite of these all, the railways did not supply rakes to the plaintiffs for loading due to the claims of their officers. "these letters are at page Nos. 411, 414, 776 and 927 of the paper book. A perusal of these. letters clearly go to show that they were addressed by the railways in the matter of allotment of rakes to U. P. Coal Agents Association, Kanpur and not to the plaintiffs, which are the registered firms. There is nothing on the record to indicate that the plaintiffs formed an association and they were collectively addressed by the railways as U. P. Coal Agents association. This is yet another instance to point out the casual approach of the trial court. The letters addressed to the U. P. Coal agents Association without any elucidation were taken to have been addressed to the plaintiffs by the trial court. ( 15 ) THE railways clearly set up a case that duty to sponsor the name of an agent is of the respective States and if that is cancelled, that can be explained only by the respective States and not by the railways. The case of the plaintiffs is that they were getting one rake per month for Kanpur district and to their surprise they came to know sometime in April, 1969 that no allotment/sponsorship was made in their favour for the month of June, 1969. The case of the defendants is that as power to sponsor was to be exercised by the authorities of the U. P. Government, it was for the U. P. Government to explain as to why the sponsorship was cancelled/discontinued all of a sudden in April, 69 for the month of June, 1969 and that the railways could not be. blamed for cancellation of sponsorship. blamed for cancellation of sponsorship. No proper issue was framed by the court in this regard and the trial court hastened to draw an inference that allotment was arbitrarily cancelled by the railways without appreciating that the question of making allotment would not arise if the basis of allotment, that is, sponsorship was cancelled by the U. P. Government. ( 16 ) THE trial court miserably failed to clarify the pleadings under Order 10, Rule 2 cpc to the extent necessary, to strike proper issues regarding entitlement of the plaintiffs to secure allotment of the rakes and thereby preventing the parties to lead proper evidence on the vital aspects of the case and therefore, the whole trial is vitiated and we have no option but to remand the case to the trial court for clarifying the pleadings under Order 10, Rule 2 CPC and then framing correct issues to enable the parties to lead evidence on them. For the foregoing reasons the judgment and decree both are liable to be set aside. ( 17 ) IN the result, the appeal succeeds and is allowed; the judgment and decree dated 27. 11. 1979 and 13. 12. 1979 respectively are set aside and the case is remanded to the trial court for being tried afresh in the light of the observations made by us hereinabove. The cost of the appeal will abide the ultimate result of the suit. S. L. Saraf, J.- I fully agree with the judgment just delivered by Honble Om Prakash. J. I however, would like to add a few words of my own considering gravity of the matter: ( 18 ) THE state of affairs of the pleadings with its omissions and commissions, nonraising of most relevant and material issues and raising of irrelevant issues by the Railway authorities and non-framing of most vital and important issues by the trial court, the conduct of the case by the trial court, oral and documentary evidence adduced at the time of trial and the approach of the trial court to accept the so-called damages claimed in the suit without an iota of evidence exposes a deep rooted collusion and conspiracy between the plaintiffs the Receiver, the offices of the Northern Railways with the complicity of the trial judge to defraud and deprive the Railways for a huge sum of money by passing a decree of rs. 1,01,84,000/ -. 1,01,84,000/ -. ( 19 ) THE said decree was passed without anybody providing as to how the damages and/or loss occured and what was the basis of such loss or damages. Neither the plaintiffs nor the Receiver on behalf of the plaintiffs or any witnesses appearing onbehalf of the plaintiffs had proved that the plaintiffs had purchased any quantity of coal from the coal mines or kept the same ready for despatch to its destination and the same could not be done due to non-availability of rakes, No witness case forward to prove the price of coal at pitbed freight and other incidental expenses or the prevailing market price at the place of destination No witness proved that there was any loss or such loss arose solely due to nontransportation of the coal by non-offering of the rakes by the Railways to the plaintiffs. All these important and vital issues were neither raised nor any attempt was made to prove the same. As a matter of fact on the state of pleadings and the evidence, produced even if the suit was undefended it would not have merited a decree. ( 20 ) THE court fails to comprehend the glaring ommissions in not taking the point of limitation in the written statement filed by the defendants/railways Authorities. On the face of the allegations in the plaint, the non-offering of rakes by the Railway authorities was during the year 1971-72. However, the said was filed in the year 1977, as such, the suit was prima fade-by barred by time. ( 21 ) AT the end of hearing of the matter, the court was informed that a sum of Rs. 33,94,666/- was deposited by the appellant railways to the credit of the suit in the Court of Civil Judge, Lucknow pursuant to the orders issued in C. M. P. No. 15646 of 1985 in a. No. 2441 of 1984 by the Honble Supreme Court. "the money was deposited by the Northern Railways on 1. 7. 1985. Subsequently, the said money was withdrawn by the plaintiffs from the State Bank of India Lucknow on 10. 10. 1985 without furnishing any bank guarantee as was drdered by the Honble supreme Court of India. The counsel appearing for the Railway authorities are unable to inform the court under what authority the said money was withdrawn. 7. 1985. Subsequently, the said money was withdrawn by the plaintiffs from the State Bank of India Lucknow on 10. 10. 1985 without furnishing any bank guarantee as was drdered by the Honble supreme Court of India. The counsel appearing for the Railway authorities are unable to inform the court under what authority the said money was withdrawn. ( 22 ) ALL the above facts discloses a most disturbing state of affairs. It discloses a criminal intent, criminal misappropriation and fraud particularly on the part of the officers of the railways who were responsible for preparing the pleadings on behalf of the Railways and looking after the conduct of the case. Thus court directs the General Manager, Northern railways to initiate appropriate criminal and civil Proceedings against those erring officers for gross-negligence and original conspirary and collusion in defrauding the Railway authorities. We direct the Registrar in this court to place the matter before, the Administrative committee of the High Court so that appropriate action, against the trial Judge who heard and passed the decree and the judge who ordered for withdrawal of the amount desposited without any bank guarantee in terms of the order of the Honble Supreme Court, could be taken. The Northern Railways may take appropriate steps to realise and retrieve the money withdrawn by the erstwhile Receiver. Appeal allowed. Suit remanded. .