FOOD CORPORATION OF INDIA & ORS.versusABHIJIT PAUL

728                       [2022]
               SUPREME COURT     8 S.C.R. 728
                              REPORTS                     [2022] 8 S.C.R.


A                  FOOD CORPORATION OF INDIA & ORS.
                                         v.
                                  ABHIJIT PAUL
                         (Civil Appeal Nos. 8572-8573/2022)
                                NOVEMBER 18, 2022
B
                              [A. S. BOPANNA AND
                 PAMIDIGHANTAM SRI NARASIMHA, JJ.]
             Contract – Demurrage – Food Corporation of India
      (Corporation) entered into a contract with Respondent (Contractor)
      for transporting food grains – Subsequently, corporation called
C
      upon contractor to reimburse the amount of demurrages imposed
      on it by the railways – As contractor incurred heavy losses on
      account of demurrages due to the contractor’s inability to provide
      trucks – This unilateral action of corporation was challenged –
      Whether the contractual clause enabling the Corporation to recover
D     “charges” includes the recovery of demurrages – Held: The scope
      of the expression “charges” must be understood as intended by the
      parties to the contract – The expression charges has to be examined
      in the context of its related words in the contract, which are costs,
      damages, registeration fees, and expenses – The preamble of the
      contract, i.e., the Work Order, reads that the contractor is engaged
E
      for “transportation of foodgrains fromdepots, mandis, rail heads
      of Churaibari to various destinations” –It is evident from the
      contractual provisions and also the admissions of the Corporation
      that the task of loading or unloading of food grains from the railway
      wagons was not a part of the contract – Thus, based on interpretation
F     of the expression “charges” in the contractual context, it did not
      include liability on account of demurrages – Hence, the Corporation
      cannot impose and collect demurrages from the contractors – Even
      by referring to other similar contracts entered by the corporation
      in 2010 and 2018, it is ascertained that responsibility of loading
      and unloading of foodgrains wagons is absent in the present
G
      contract – Thus the expression “charges” cannot be interpreted to
      include demurrages.
             Disposing of the appeals, the Court
             HELD: 1. The preamble of the contract, i.e., the Work
      Order, reads that the contractor is engaged for “transportation of
H
                                      728
 FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                       729


foodgrains from depots, mandis, rail heads of Churaibari to various     A
destinations as per appendix 1”. This Court scanned the entire
contract, in addition to scrutinising the provisions extracted
above, and seen that there is no contractual provision requiring
the contractors to undertake the task of loading and unloading of
foodgrains from the railway wagons. [Paras 23 and 24][739-C-D;
G-H]                                                                    B
       2. The real question is whether the contractors had any
obligation towards loading and unloading of foodgrains from the
railway wagons. It is evident from the contractual provisions and
also the admissions of the Corporation in written submissions,
that the task of loading or unloading of foodgrains from the railway    C
wagons was not a part of the contract. Thus, based on
interpretation of the expression “charges” in the contractual
context, we are of the opinion that it did not include liability on
account of demurrages. Consequently, the Corporation cannot
impose and collect demurrages from the contractors. [Para
26][740-E-F]                                                            D
       3. Interpretation of contracts concerns the discernment of
the true and correct intention of the parties to it. Words and
expressions used in the contract are principal tools to ascertain
such intention. While interpreting the words, courts look at the
expressions falling for interpretation in the context of other
                                                                        E
provisions of the contract and also in the context of the contract
as a whole. These are intrinsic tools for interpreting a contract.
As a principle of interpretation, courts do not resort to materials
external to the contract for construing the intention of the parties.
There are, however, certain exceptions to the rule excluding
reference or reliance on external sources to interpret a contract.      F
One such exception is in the case of a latent ambiguity, which
cannot be resolved without reference to extrinsic evidence.
Latent ambiguity exists when words in a contract appear to be
free from ambiguity; however, when they are sought to be applied
to a particular context or question, they are amenable to multiple
outcomes. [Para 27][740-G-H; 741-A-B]                                   G
       Bihar State Electricity Board, Patna and Ors. v. M/s
       Green Rubber Industries and Ors. (1990) 1 SCC 731 :
       [1989] 2 Suppl. SCR 275; Union of India v. Raman
       Iron Foundry (1974) 2 SCC 231 : [1974 ] 3 SCR 556;
       Provash Chandra Dalui and Anr. v. Biswanath Banerjee             H
730            SUPREME COURT REPORTS                      [2022] 8 S.C.R.


A           and Anr. 1989 Supp (1) SCC 487 : [1989] 2 SCR 401;
            BESCOM v. E.S. Solar Power Pvt Ltd and Ors (2021) 6
            SCC 718 : 2021 (5) JT 33 – relied on.
            Raich and Amulakh Shah and Anr. v. Union of India
            (1964) 5 SCR 148; Trustees of the Port of Madras v.
B           Aminchand Pyarelal &Ors. (1976) 3 SCC 167 : [1976]
            1 SCR 721 – held inapplicable.
            State of Maharashtra v.Digambar (1995) 4 SCC 683:
            [1995] 1 Suppl. SCR 492; Agmatel India Pvt Ltd
            v.Resoursys Telecom & Ors (2022) 5 SCC 362; State of
C           Karnataka v. Shree Rameshwara Rice Mills (1987) 2
            SCC 160 : [1987] 2 SCR 398.; BSNL and Anr. v.
            Motorola India (P) Ltd (2009) 2 SCC 337 : [2008] 13
            SCR 445; J.G. Engineers (P) Ltd v. Union of India (2011)
            5 SCC 758 : [2011] 8 SCR 486 – referred to.

D           Halsbury’s Laws of England (5th edn, 2012) vol 32,
            para 409, 394.
                             Case Law Reference
      [1995] 1 Suppl. SCR 492        relied on               Para 10
      [1964] 5 SCR 148                held inapplicable      Para 12
E
      [1976] 1 SCR 721                held inapplicable      Para 12
      [1987] 2 SCR 398                referred to            Para 15
      [2008] 13 SCR 445               referred to            Para 15

F     [2011] 8 SCR 486                referred to            Para 15
      [1989] 2 Suppl. SCR 275        relied on               Para 18
      [1974] 3 SCR 556                relied on              Para 19
      [1989] 2 SCR 401                relied on              Para 20
G           CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.8572-
      8573 of 2022.
             From the Judgment and Order dated 07.09.2018 of the High Court
      of Tripura at Agartala in Writ Appeal No.56 of 2018 and Order dated
      02.01.2019 in Review Pet. No.02 of 2019.
H
     FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                          731


          With                                                                 A
          Civil Appeal Nos.8574-8579 And 8580-8581 of 2022.
      Sanjay Parikh, Sr. Adv., Ajit Pudussery, Vijay A. K., Shoeb Alam,
Ujjwal Singh, Prashant Shukla, Piyush Dwivedi, Suyash Srivastava, Ms.
Shreya Mishra, Shanker Singh, Ms. Aaina Walia, Satyajeet Kumar, Abhay
Kumar, Shagum Ruhil, Saurabh Mishra, Advs. for the appearing parties.          B

          The Judgment of the Court was delivered by
          PAMIDIGHANTAM SRI NARASIMHA, J.
          1. Leave granted.
                                                                               C
       2. Food Corporation of India1, the Appellant herein, procures and
distributes foodgrains across the length and breadth of the country as a
part of its statutory duties. In the process, it enters into many contracts
with transport contractors. In one such contract, the subject matter of
present appeals, the Corporation empowered itself (under clause XII
(a)) to recover damages, losses, charges, costs and other expenses             D
suffered due to the contractors’ negligence from the sums payable to
them. The short question arising for consideration is whether the
demurrages imposed on the Corporation by the Railways can be, in turn,
recovered by the Corporation from the contractors as “charges”
recoverable under clause XII (a) of the contract. In other words, does
                                                                               E
contractors’ liability for “charges”, if any, include demurrages?
        3. The Single Judge and the Division Bench of the High Court of
Tripura have held that demurrages cannot be recovered as a charge by
the Corporation. After examining the contract in its entirety, including its
nature and scope, we conclude that the parties did not intend to include
                                                                               F
liability on account of demurrages as part and parcel of the expression
“charges”. The liability of the contractors in the present contracts is
clearly distinguishable from other contracts entered into by the FCI in
2010 and 2018, having a different scope and objective. Because of our
conclusions, we have upheld the judgments of the High Court and
dismissed the appeals filed by the Corporation. Before considering the         G
submissions, analysis and the conclusions, we will refer to the necessary
facts and contractual provisions.
      4. There are three appeals. In the first set of appeals arising out
of Special Leave Petition Nos. 16009-16010 of 2019, the Corporation
1
    hereinafter referred to as ‘Corporation’.                                  H
732             SUPREME COURT REPORTS                               [2022] 8 S.C.R.


A     notified a Tender inviting a bid from road transport contractors for
      transporting foodgrains from railway siding, Churaibari in Assam, to Food
      Security Depot Chandrapur in Tripura, on a regular basis for a period of
      two years. The Respondent – Mr. Abhijit Paul, was selected as the
      successful tenderer2. He deposited an amount of Rs. 44,95,000/- towards
      the security deposit, leading to the execution of the contract3. The
B
      Corporation awarded several such Work Orders to the Respondent and
      also to other contractors for transportation of foodgrains between its
      multiple Food Security Depots.
              5. The contract was discharged by performance by July 2014.
      More than a year thereafter, by a letter dated 22.12.2015 followed by a
C     Notice dated 29.11.2016, the Corporation called upon the contractor to
      reimburse the amount of demurrages imposed on it by the Railways. As
      this demand was bereft of any reason and rightly objected to, it was
      followed by another letter dated 27.06.2017 by the Corporation. In this
      letter, the Corporation explained that it had incurred heavy losses on
D     account of demurrages due to the contractor’s inability to readily provide
      trucks at railway sidings, inhibiting the Corporation from unloading
      foodgrains from railway wagons within the “free time” specified by the
      Railways. The Corporation sought to recover the demurrages from the
      contractor by withholding the security deposit tendered under the Work
      Order.
E
             6. The contractor objected to this unilateral action, contending
      that there was no power to recover demurrages under the Work Order.
      Being unsuccessful in pursuing the Corporation to withdraw the letters,
      demand and the unilateral action, the contractor filed a writ petition4
      before the High Court of Tripura for quashing the illegal and arbitrary
F     action.
            7. This writ petition was allowed by the Single Judge of High
      Court. It clarified that the Corporation was only entitled to recover losses
      that were incurred due to the contractor’s dereliction of duties under the
      contract, as permissible under Section 73 of the Indian Contract Act
G     1872, which provides for recovery of damages for the breach of a
      contract. This would not permit the recovery of losses that were causally
      2
        hereinafter referred to as ‘contractor’.
      3
        Contract No. Cont.9/NEFR/TC/CBZ-CDR/2011 dated 25.04.2012, hereinafter referred
      to as ‘Work Order’ or the ‘contract’.
      4
H       WP No. 1351 of 2016.
    FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                                 733
          [PAMIDIGHANTAM SRI NARASIMHA, J.]

distant from the contractor’s actions. Further, it held that the Corporation         A
had unilaterally determined and imposed demurrages on the contractor,
and directed it to settle its claims through a civil suit of recovery. The
Corporation filed a writ appeal5 and the Division Bench of the High
Court by its order dated 07.09.2018 dismissed the same on the ground of
delay. A Review Petition6 filed by the Corporation was also dismissed
                                                                                     B
by the Division Bench of the High Court on 22.01.2019. The present
appeals are against the orders in the writ appeal as well as in the review.
        8. The second set of civil appeals are also filed by the Corporation.
It arises out of Special Leave Petition Nos. 16063-16068 of 2019 and it
impugns the decision of the Division Bench of the High Court of Tripura
dated 15.05.2019. Therein, the High Court similarly dismissed the writ               C
appeals on the ground that the Corporation had no power to recover
demurrages from contractors under the clauses of the contract therein.
       9. The third set of civil appeals, arising out of Special Leave
Petition Nos. 4045-4046 of 2021, are filed by the contractors. They have
challenged the orders of the Division Bench of the High Court of Tripura             D
dismissing their writ appeals7 and upholding the decision of the Single
Judge of the High Court dated 25.11.2019, directing the contractors to
avail alternative remedies.
       10. Submission of Parties : Shri Neeraj Kishan Kaul, learned
Senior Counsel appearing on behalf of the Appellant started his                      E
submissions preempting a preliminary objection about the dismissal of a
Special Leave Petition against an adverse order of the High Court on
the same issue8, and relatedly, aboutnot appealing another adverse decision
of the High Court of Tripura on identical issues9. Relying on State of
Maharashtra v. Digambar10, he submitted that the dismissal of a Special              F
Leave Petition at the admission stage did not operate as res judicata.
He also explained that the Corporation refrained from appealing against
the aforementioned judgment of the High Court because the amount
recoverable therein was low. Moreover, in those cases, the Corporation
had already issued No Dues Certificates to the contractors.
                                                                                     G
5
  Writ Appeal No. 56 of 2018.
6
  Review Petition No. 02 of 2019.
7
  Writ Appeals Nos. 186 of 2020 dated 04.01.2021 and 187 of 2020 dated 18.01.2021.
8
  SLP No 3391 of 2018, dismissed in limine on 26.03.2018.
9
  Writ Appeal Nos. 25-27 of 2016 (Tripura High Court)
10
   (1995) 4 SCC 683.                                                                 H
734             SUPREME COURT REPORTS                              [2022] 8 S.C.R.


A            11. Before proceeding any further, we make it clear here itself
      that we do not propose to dismiss the Corporation’s appeals on preliminary
      objections. We will therefore consider Shri Kaul’s submission on the
      merits of the case.
             12. Referring to and relying on the contractual clauses, Shri Kaul
B     submitted that the expression “charges” in clause XII (a) of the Work
      Order clearly includes demurrages, and the Corporation is empowered
      to recover the same. He relied on the decision of this Court in Raichand
      Amulakh Shahand Anr. v. Union of India11 and Trustees of the Port
      of Madras v. Aminchand Pyarelal & Ors12 to say that demurrages
      constitute a charge. He also submitted that the Handbook used by
C     Corporation 13 would demonstrate that “charges” certainly include
      “demurrage”.
               13. Supplementing the above submissions, Shri Ajit Puduserry,
      AOR submitted that in the construction of contractual terms, the
      interpretation proposed by the author of the tender document must be
D     relied on. He referred to Agmatel India Pvt Ltd v. Resoursys Telecom
      & Ors14 for this purpose. He further submitted that the action of the
      Corporation is unexceptionable as it merely followed the directions of
      the High Court in an earlier round of litigation where the court directed
      it to issue notice before taking a decision on the contractors’ liability. It is
E     his contention that notices were accordingly issued before recoveries
      were made. Appearing on behalf of the Corporation in the third appeal,
      Shri Abhay Kumar, AOR, supported the arguments of the Appellant
      Corporation on the same grounds.
             14. Shri Sanjay Parikh, learned Senior Counsel appearing on behalf
F     of the Respondents submitted that the Corporation acted arbitrarily. It
      failed to follow due process of law to determine the liability of the
      contractors, despite specific instructions in a previous round of litigation.
      He also submitted that contractors were not responsible for loading and
      unloading of foodgrains from railway wagons. Hence, the event which
      leads to the incurrence of demurrages, i.e., delayed unloading of
G     foodgrains from railway wagons, was not within the scope of contractor’s
      responsibilities. He took us through the contracts that were executed in

      11
         (1964) 5 SCR 148.
      12
         (1976) 3 SCC 167.
      13
         Movement Operations in Food Corporation of India (FCI Handbook 2020).
H     14
         (2022) 5 SCC 362.
     FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                         735
           [PAMIDIGHANTAM SRI NARASIMHA, J.]

2010 and 2018 by the Corporation, which delegated the task of loading         A
and unloading the foodgrains to contractors, and therefore the relevant
expression “demurrages” was present in the liability clauses in those
contracts.
       15. Supplementing the above submissions, Shri Shoeb Alam,
Advocate, submitted that the Corporation was not entitled to be a judge       B
in their own cause and to unilaterally determine the liability with respect
to demurrages. He placed reliance on State of Karnataka v. Shree
Rameshwara Rice Mills15,BSNL and Anr. v. Motorola India (P) Ltd16
and J.G. Engineers (P) Ltd v. Union of India17.
        Analysis:                                                             C
       16. The core question arising for our consideration is whether the
contractual clause enabling the Corporation to recover “charges” includes
the recovery of demurrages. It is pertinent to extract the relevant clauses
of the road transport contract, i.e., Work Order. The clauses detailing
the description of work, liability of the contractors, and the power to
                                                                              D
recover losses, which are identical in the three appeals before us, read
as under:
        “(B) Brief description of work:
        i) Transportation of foodgrains from Depots/Mandis/Rail
        Heads of Churaibari to various destinations as per Appendix-
                                                                              E
        I...
        ...
        X. Liability of Contractor for losses suffered by Corporation
        a) The Contractor shall be liable for all costs, damages,
        registration fees, charges and expenses suffered or incurred          F
        by the Corporation due to the Contractor’s negligence and
        unworkmanlike performance of any services under this
        Contract, or breach of any terms of the Contract, or failure
        to carry out the work under the Contract, and for all damages
        or losses occasioned to the Corporation, or in particular to
                                                                              G
        any property or plant belonging to the Corporation, due to
        any act whether negligent or otherwise, of the Contractor or
        his employees. ...
15
   (1987) 2 SCC 160.
16
   (2009) 2 SCC 337.
17
   (2011) 5 SCC 758.                                                          H
736                SUPREME COURT REPORTS                       [2022] 8 S.C.R.


A            ...
             XII. Recovery of losses suffered by the Corporation
             (a) The Corporation shall be at liberty to reimburse themselves
             for any damages, losses, charges, costs or expenses suffered
             or incurred by them, or any amount payable by the Contractor
B            as Liquidated Damages as provided in Clauses X above. The
             total sum claimed shall be deducted from any sum then due,
             or which at any time thereafter may become due, to the
             Contractors under this, or any other, Contract with the
             Corporation. In the event of the sum which may be due from
             the Contractor as aforesaid being insufficient, the balance
C            of the total sum claimed and recoverable from the Contractors
             as aforesaid shall be deducted from the Security Deposit,
             furnished by the contractor as specified in Clause IX...”
                                                            (emphasis supplied)
             17. The Corporation seeks to recover demurrages as a part of
D     “charges” provided under clause XII(a) as extracted hereinabove. The
      expression “charges”, stand alone, is not amenable to a precise meaning.
      Its dictionary meaning is open textured, defining “charges” as “any
      consideration that one must pay for goods and services provided”.
      Therefore, the scope of the expression “charges” must be understood
E     as intended by the parties to the contract. The process of interpretation,
      though the exclusive domain of the Court, inheres the duty to decipher
      the meaning attributed to contractual terms by the parties to the contract.
      It is with this purpose that we shall now proceed to understand the
      meaning of the expression “charges”.
             18. There are certain basic principles evolved by courts of law
F
      for deciphering the true and correct meaning of expressions in a contract.
      In Bihar State Electricity Board, Patna and Ors. v. M/sGreen Rubber
      Industries and Ors.18, this Court observed that, “Every contract is to
      be considered with reference to its object and the whole of its terms
      and accordingly the whole context must be considered in
G     endeavouring to collect the intention of the parties, even though
      the immediate object of enquiry is the meaning of an isolated clause.”
             19. In Union of India v. Raman Iron Foundry19, this Court held
      that contractual terms cannot be interpreted in isolation, following strict
      18
           (1990) 1 SCC 731, ¶23.
      19
H          (1974) 2 SCC 231.
     FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                           737
           [PAMIDIGHANTAM SRI NARASIMHA, J.]

etymological rules or be guided by popular connotation of terms, at             A
variance with the contractual context. It observed:
          “8. It is true that the words “any claim for the payment of a
          sum of money” occurring in the opening part of Clause 18
          are words of great amplitude, wide enough to cover even a
          claim for damages, but it is a well settled rule of interpretation    B
          applicable alike to instruments as to statutes that the meaning
          of ordinary words is to be found not so much in strict
          etymological propriety of language nor even in popular use
          as in the subject or occasion on which they are used and the
          object which is intended to be attained. The context and
          collocation of a particular expression may show that it was           C
          not intended to be used in the sense which it ordinarily bears.
          Language is at best an imperfect medium of expression and a
          variety of meanings may often lie in a word or expression.
          The exact colour and shape of the meaning of any word or
          expression should not be ascertained by reading it in isolation,      D
          but it should be read structurally and in its context, for its
          meaning may vary with its contractual setting. We must,
          therefore, read the words ‘any claim for the payment of a sum
          of money’ occurring in the opening part of Clause 18 not in
          isolation but in the context of the whole clause, for the intention
          of the parties is to be gathered not from one part of the clause      E
          or the other but from the clause taken as a whole. It is in the
          light of this principle of interpretation that we must determine
          whether the words ‘any claim for the payment of a sum of
          money’ refer only to a claim for a sum due and payable which
          is admitted or in case of dispute, established in a Court of          F
          law or by arbitration or they also include a claim for damages
          which is disputed by the contractor.”
                                                        (emphasis supplied)
      20. In Provash Chandra Dalui and Anr. v. Biswanath Banerjee
and Anr.20, noting that the intention of the parties must be discerned          G
from the context of the contract, this Court observed:
          “10. ‘Ex praecedentibus et consequentibus optima fit
          interpretatio.’ The best interpretation is made from the context.
20
     1989 Supp (1) SCC 487.
                                                                                H
738                   SUPREME COURT REPORTS                     [2022] 8 S.C.R.


A               Every contract is to be construed with reference to its object
                and the whole of its terms. The whole context must be
                considered to ascertain the intention of the parties. It is an
                accepted principle of construction that the sense and meaning
                of the parties in any particular part of instrument may be
                collected ‘ex antecedentibus et consequentibus;’ every part
B
                of it may be brought into action in order to collect from the
                whole one uniform and consistent sense, if that is possible.
                ...
                In construing a contract the court must look at the words
C               used in the contract unless they are such that one may suspect
                that they do not convey the intention correctly. If the words
                are clear, there is very little the court can do about it. In the
                construction of a written instrument it is legitimate in order to
                ascertain the true meaning of the words used and if that be
                doubtful it is legitimate to have regard to the circumstances
D               surrounding their creation and the subject matter to which it
                was designed and intended they should apply.”
                                                             (emphasis supplied)
             21. In BESCOM v. E.S. Solar Power Pvt Ltd and Ors21, this
      Court held that in case of two possible interpretations of a contractual
E     term, the court must accord primacy to the one that is consistent with
      the underlying purpose of the contract. It noted:
                “17. ... In seeking to construe a clause in a contract, there is
                no scope for adopting either a liberal or a narrow approach,
                whatever that may mean. The exercise which has to be
F               undertaken is to determine what the words used mean. It can
                happen that in doing so one is driven to the conclusion that
                clause is ambiguous, and that it has two possible meanings.
                In those circumstances, the court has to prefer one above the
                other in accordance with the settled principles. If one meaning
                is more in accord with what the court considers to be the
G
                underlined purpose and intent of the contract, or part of it,
                than the other, then the court will choose the former or rather
                than the latter...”
                                                            (emphasis supplied)
      21
H          (2021) 6 SCC 718.
  FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                             739
        [PAMIDIGHANTAM SRI NARASIMHA, J.]

      22. Keeping in mind the above referred principles we have to             A
examine the expression “charges” in the context of its related words in
the contract, which are costs, damages, registration fees, and expenses.
These expressions indicate the different heads under which losses are
recoverable from the contractors for acts of negligence, unworkmanlike
performance of any service, breach of terms and failure to carry out the
                                                                               B
work in the context of the working of the contract. These expressions
are equally wide and do not aid us in understanding the meaning of the
expression “charges”. Under these circumstances, we have to understand
the meaning of the expression “charges” in the larger context of the
contract.
      23. The preamble of the contract, i.e., the Work Order, reads that       C
the contractor is engaged for “transportation of foodgrains from
depots, mandis, rail heads of Churaibari to various destinations as
per appendix 1”. Further, clause XIII of the Work Order detailing the
responsibilities of the contractor, to the extent relevant for our purposes,
reads as under:-                                                               D
      XIII. Responsibilities of the Contractor
      (a) The Contractor shall be responsible to supply adequate
      and sufficient number of trucks for transportation of food
      grains and carrying out any other services under the Contract
      in accordance with the instructions issued by the General                E
      Manager or an officer acting on his behalf.
      ...
      (f) The Contractor shall be responsible for the safety of the
      goods from the time they are loaded on their truck from                  F
      godowns/mandis/rail heads until they have been unloaded
      from the trucks at godowns or at other destinations as specified
      in the Contract or as directed by the General Manager/Area
      Manager or any other officer acting on his behalf...”
                                                      (emphasis supplied)
                                                                               G
       24. We have scanned the entire contract, in addition to scrutinising
the provisions extracted above, and seen that there is no contractual
provision requiring the contractors to undertake the task of loading and
unloading of foodgrains from the railway wagons.This is confirmed by
the written submissions on behalf of the Corporation, where the imposition
                                                                               H
740             SUPREME COURT REPORTS                            [2022] 8 S.C.R.


A     of demurrages is justified only for the reason that the contractor did not
      provide adequate number of trucks near the railway sidings, to enable
      the Corporation to promptly hand over the foodgrains to them to
      commence transportation. The relevant portion is extracted as under:-
             “10.The reason why demurrage charges get levied during the
B            performance of an RTC contract is on account of the failure
             of the contractor to supply required number of trucks even
             after prior intimation about the placing of the railway rakes
             due to which the Petitioner is unable to empty the wagons as
             the foodgrains are liable to get spoiled if they are unloaded
             onto the siding due to rain etc. Even after unloading unless
C            they are removed from the railway premises within the free
             time available wharfage is charged by the Railways. The
             failure to prove trucks leads to detention of wagons beyond
             the free time allowed by the Railways...”
             25. We may note that there is a dispute about the availability of
D     trucks for the transportation of foodgrains by the contractor. While the
      Corporation asserts that trucks were not made available in numbers as
      well as in time, the contractor denies the same stating that their trucks
      were kept waiting at the Corporation’s Food Security Depots.
              26. Irrespective of the disputed fact, the real question is whether
E     the contractors had any obligation towards loading and unloading of
      foodgrains from the railway wagons. It is evident from the contractual
      provisions and also the admissions of the Corporation in written
      submissions, that the task of loading or unloading of foodgrains from the
      railway wagons was not a part of the contract. Thus, based on
F     interpretation of the expression “charges” in the contractual context, we
      are of the opinion that it did not include liability on account of demurrages.
      Consequently, the Corporation cannot impose and collect demurrages
      from the contractors.
             27. Interpretation of contracts concerns the discernment of the
G     true and correct intention of the parties to it. Words and expressions
      used in the contract are principal tools to ascertain such intention. While
      interpreting the words, courts look at the expressions falling for
      interpretation in the context of other provisions of the contract and also
      in the context of the contract as a whole. These are intrinsic tools for
      interpreting a contract. As a principle of interpretation, courts do not
H     resort to materials external to the contract for construing the intention of
     FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                         741
           [PAMIDIGHANTAM SRI NARASIMHA, J.]

the parties. There are, however, certain exceptions to the rule excluding     A
reference or reliance on external sources to interpret a contract. One
such exception is in the case of a latent ambiguity, which cannot be
resolved without reference to extrinsic evidence. Latent ambiguity exists
when words in a contract appear to be free from ambiguity; however,
when they are sought to be applied to a particular context or question,
                                                                              B
they are amenable to multiple outcomes.This position is well-explained
in the following passage of Halsbury’s22:
          “Latent ambiguity: When the instrument appears on its face
          to be free from ambiguity but, upon the endeavour being made
          to apply it to persons or things indicated, it appears that the
          words are equally applicable to two or more persons, or two         C
          or more things, either without any inaccuracy or with a
          common inaccuracy...”
       Extrinsic evidence, in cases of latent ambiguity, is admissible both
to ascertain where necessary, the meaning of the words used, and to
identify the objects to which they are to be applied.23                       D

       28. Applying the above-referred principles to the present case,
we will juxtapose the present contracts with similar but not identical
contracts entered into by the Corporation, to confirm our interpretation
that the word “charges” in the contract is exclusive of liability for
demurrages. Pursuantly, we will examine certain contracts entered into        E
by the Corporation with other transporters. For example, we will refer
to a contract entered into by the Corporation in 2010, which is prior in
time to the present contract. The relevant clauses read as under:-
          “B. Brief description of work
                                                                              F
          I.Unloading/Loading of foodgrain bags from/into railway
          wagons, trucks etc. stacking...and transporting of foodgrains
          from Railway Station to Corporation’s Godown or vice-
          versa...”
          XII. Liability of Contractors for losses etc. suffered by
                                                                              G
          Corporation
          a) The contractor shall be liable for all costs, damages,
          demurrages, wharfage, forfeiture of wagon, registration fees,
22
     Halsbury’s Laws of England (5th edn, 2012) vol 32, para 409.
23
     Halsbury’s Laws of England (5th edn, 2012) vol 32, para 394.             H
742             SUPREME COURT REPORTS                            [2022] 8 S.C.R.


A           charges and expenses...due to...their failure to carry out the
            work with a view to avoid incurrence of demurrage etc...
            b) The Corporation shall be at liberty to reimburse themselves
            of any damages, losses, charges, costs, or expenses suffered
            or incurred by them due to contractors negligence and un-
B           workmanlike performance of service under the contract or
            breach of any terms thereof...”
                                                             (emphasis supplied)
             29. It is evident from the above that the contracts delegating the
      responsibility of loading and unloading of foodgrains from railway wagons,
C     as an integral part of the contract, include a clear and distinctive clause
      for the imposition of liability, inter alia, on account of demurrages.
      Evidently, the liability clause in these contracts, termed the Handling and
      Transport Contracts, is starkly distinct from the present Road Transport
      Contracts.
D            30. We have every reason to believe that the Corporation,
      statutorily obligated to procure and distribute foodgrains across the nation,
      enters into contracts depending on the services it requires. These
      contracts naturally vary depending on the needs and purposes of the
      Corporation. With the aid of the provisions in the Handling and Transport
E     Contract from 2010, we are able to understand the intention of the parties
      while entering into the present Road Transport Contracts. As the present
      contracts do not involve the task of loading and unloading of foodgrains
      from the railway wagons as a part of the contractors’ responsibility,
      there is no clause enabling the recovery of demurrages from them by
      the Corporation. Thus, our interpretation of the expression “charges”,
F     as exclusive of liability for demurrages, stands confirmed.
              31. We will proceed to examine yet another Handling and Transport
      Contract which was executed seven years after the present contract,
      i.e., in 2018. The relevant clauses of the contract are as under:-
            “B. Brief description of work
G
            I.Unloading/Loading of foodgrain bags from /into railway
            wagons, trucks etc. stacking the foodgrains in bags, bagging,
            weighment, standardization, cleaning of foodgrains, etc., and
            transporting of foodgrains from Railway Good Shed/siding
            to Corporation Godown or vice-versa or transporting them
H
  FOOD CORPORATION OF INDIA & ORS. v. ABHIJIT PAUL                           743
        [PAMIDIGHANTAM SRI NARASIMHA, J.]

      from any place to any other place in and around Railhead               A
      KUMARGHAT/FSD KUMARGHAT...
      ...
      X. Liability of Contractors for losses etc. suffered by
      Corporation
                                                                             B
      a) The contractor shall be liable for all costs, damages,
      demurrages, wharfage, forfeiture of wagon, registration fees,
      charges and expenses suffered or incurred by the Corporation
      due to the contractor’s negligence and un workmanlike
      performance of any services under this contract, or breach
      of any terms thereof or his failure to carry out the work with         C
      a view to avoid incurrence of demurrage etc. under this
      contract or breach of any terms thereof or his failure to carry
      out the work with a view to avoid incurrence of demmurage;
      etc. and for all damages or losses occasioned to the
      Corporation due to any act whether negligent or otherwise              D
      of the contractor themselves or his employees. The decision
      of the General Manager regarding such failure of the
      contractor and their liability for the losses, etc. suffered by
      the Corporation, and the quantification of such losses, shall
      be final and binding on the contractor...”
                                                                             E
                                                     (emphasis supplied)
        32. It is evident from the above that the Handling and Transport
Contract from 2018, similarly involved loading and unloading of foodgrains
from the railway wagons within the scope of contractors’ duties, thereby
necessitating the inclusion of demurrages as a penalty for non-              F
performance of contractual duties. Thus, the present Road Transport
Contract is distinct from the Handling and Transport Contract from 2018,
as the responsibility of loading and unloading of foodgrains from railway
wagons is absent in the present contract. For this reason, the Corporation
in the present contract has chosen not to include the power to recover
demurrages and as such the expression “charges” cannot be interpreted        G
to include demurrages.
      33. In light of the foregoing conclusions, we are not inclined to
adopt a textual approach for the interpretation of the contractual term
“charges”, and hence, the decisions of this Court in Raichand Amulakh
                                                                             H
744                SUPREME COURT REPORTS                      [2022] 8 S.C.R.


A     Shah24and Trustees of the Port of Madras25 are of no aid, as they
      simply describe demurrages as a charge. Demurrage is undoubtedly a
      charge, however, such a textual understanding would not help us decipher
      the true and correct intention of the parties to the present contract.
             34. For these reasons, Civil Appeals arising out of SLP Nos. 16009-
B     16010 of 2019 and SLP Nos. 16063-16068 of 2019, filed by the
      Corporation are dismissed. The decisions of the High Court of Tripura in
      Writ Appeal No. 56 of 2018 dated 07.09.2018 and Review Petition No.
      02 of 2019 dated 22.01.2019 are upheld. The decision of the High Court
      of Tripura in Writ Appeal Nos. 53-58 of 2017 dated 15.05.2019 is also
      upheld. We may clarify that our decision has no bearing on any other
C     remedy available to the Corporation, like the institution of a suit for
      recovery, if law enables them to do so.
            35. In so far as Civil Appeals arising out of SLP Nos. 4045-4046
      of 2021 filed by the contractors are concerned, they are allowed for the
      same reasons as indicated above. The judgments of High Court of Tripura
D     in Writ Appeal Nos. 186 of 2020 and 187 of 2020 dated 04.01.2021 and
      18.01.2021 respectively are set-aside and the Civil Appeals stand allowed.
                36. The parties shall bear their own costs.


E     Ankit Gyan                                               Appeals disposed of.
      (Assisted by : Shevali Monga, LCRA)




F




G




      24
           Supra note 11.
      25
H          Supra note 12.