Holding

The chargeable distance of 444 km was illegal, the claim does not fall within Section 106(3) as it is not an over‑charge, and the railway’s appeals are dismissed.

Summary

The Union of India (railways) charged Indian Oil Corporation (IOC) freight on the Baad‑Hisar route based on a chargeable distance of 444 km as per the old local distance table. In 2005 the railways revised the distance to 334 km, claiming the earlier figure was erroneous, and IOC sought a refund of the 110 km difference, filing a notice under Section 78B of the Railways Act, 1890 (now Section 106(3) of the Railways Act, 1989). The Railway Claims Tribunal held the claim to be an over‑charge and time‑barred, a view affirmed by the High Court, which ordered a refund on the basis that the original charge was an illegal charge. On appeal, the Supreme Court examined the scope of Section 106(3), clarified the distinction between an over‑charge and an illegal charge, and determined that the 444 km charge was not an over‑charge but an illegal charge, thus outside the ambit of Section 106(3). Consequently, the Court held the chargeable distance of 444 km to be illegal and dismissed the railway’s appeals, leaving the High Court’s refund order intact.

Issues considered

What is the scope of Section 106(3) of the Railways Act, 1989 and what constitutes an ‘overcharge’?
How does an ‘overcharge’ differ from an ‘illegal charge’ under the Act?
Whether the claim for refund of the 110 km freight difference falls within Section 106(3) as a claim for an over‑charge?
Is the notified chargeable distance of 444 km an illegal charge requiring refund?

Legislation cited

Limitation Act, 1963s. 17(i)(c)
Railway Claims Tribunal Act, 1987s. 13, s. 16, s. 17, s. 23
Railways Act, 1890s. 78B
Railways Act, 1989s. 106(1), s. 106(2), s. 106(3)

Subjects

FreightNotified chargeable distanceRevised Local Distance TableRefund of the difference in the freight chargesOverchargeIllegal chargeRefund of overchargeClaim of compensationChange in methodology on the chargeable distanceReasonableness or unreasonableness of any provisionHohfeld’s scheme of jural relationsRight to get a refundDuty to grant refundChargeOverIllegal

Judgment

[2024] 3 S.C.R. 1051 : 2024 INSC 243

Union of India
v.
M/s Indian Oil Corporation Ltd.
(Civil Appeal Nos. 1891-1966 of 2024)
21 March 2024
[J.B. Pardiwala* and Sandeep Mehta, JJ.]

Issue for Consideration
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. 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. The
respondent’s case is that the very chargeable distance of 444
km as per the old local distance table was wrong and demanded
refund of the difference of 110 km in the freight charges. The High
Court directed the railway administration to refund the difference
of approx. 110 km that was illegally levied towards the freight
charges. The following questions arise for consideration: (i) What
is the scope of Section 106 sub-section (3) of the Railways Act,
1989; In other words, what constitutes an “overcharge” within the
meaning of Section 106 sub-section (3) of the Railways Act, 1989;
What is the difference between an “Overcharge” and an “Illegal
Charge”; (ii) Whether, the claim towards the refund of difference of
110 km in freight charges is covered by Section 106 sub-section
(3) of the Railways Act, 1989; In other words, whether the claim
is for a refund of an ‘overcharge’; (iii) Whether, the difference of
110 km in freight is liable to be refunded; In other words, whether
the notified chargeable distance of ‘444 km’ was an Illegal Charge
or not?

Headnotes
Railways Act, 1989 – s. 106 – Scope of:
Held: Section 106 deals with notice for claim of compensation and
refund of overcharge – Section 106 of the Act, 1989 is in two-parts

* Author
1052 [2024] 3 S.C.R.

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and deals with and encompasses two distinct types of claims that
may be made or sought against the railway administration by way
of a notice: - (i) First¸ the claims towards the ‘compensation’ from
the railway administration which has been provided u/s.106 sub-
section (1) – The compensation may be sought in respect of any
loss or damage or destruction caused to the goods which were
being carried by the railway – (ii) Secondly, the claims towards the
refund of any ‘overcharge’ that has been levied in respect of any
goods which were being carried by the railways, and this has been
provided u/s. 106 sub-section (3) – Thus, Section 106 of Act, 1989
contains the statutory provisions that enables any person to make
a claim from the railway administration, either for (i) compensation
OR for (ii) refund of overcharge, in respect of any goods which
were being carried by the railway by sending a notice of claim – A
statutory time-period of 6-months has been provided for making a
notice of claim u/s. 106 of the Act, 1989, and if the notice of claim
is not made within the stipulated period, then the claim becomes
time-barred.[Paras 34, 35, 36, 39]
Railways Act, 1989 – s. 106 (3) – Meaning of Overcharge –
Notice for Claim for Refund of Overcharge – Conditions:
Held: The term “overcharge” has neither been defined in the Act,
1989 nor the erstwhile Act, 1890 – The term “overcharge” is derived
from the word ‘charge’ prefixed by the word ‘over’ and means
“something more than the correct amount or more than a certain
limit” – The Supreme Court in Union of India & Ors. v. West Coast
Paper Mills Ltd. & Anr. 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 Supreme 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
– When it comes to a Notice for Claim for Refund of Overcharge
under Section 106(3) of the Act, 1989 the following conditions must
be fulfilled: - a) Claim must be for refund of an ‘Overcharge’; b)
Overcharge must have been paid to the Railway Administration
in respect of the goods carried by the railway; c) Notice must be
issued within 6-months from the date of payment or delivery of
[2024] 3 S.C.R. 1053

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

goods for which overcharge was paid; d) Notice must be served
to the concerned railway administration to whom the overcharge
was paid – Thus, the rigours of Section 106 sub-section (3) i.e., the
6-month time period for making a notice of claim, is only attracted,
when the refund is for an overcharge. [Paras 43, 44, 45, 53, 59]
Railways Act, 1989 – What is the difference between an
“Overcharge” and an “Illegal Charge”:
Held: As to what would be an ‘overcharge’, the Supreme 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 – 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 – 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. [Paras 60, 70, 71]
Railways Act, 1989 – Whether, the claim towards the refund of
difference of 110 km in freight charges is covered by Section
106 sub-section (3) of the Railways Act, 1989; In other words,
whether the claim is for a refund of an ‘overcharge’:
Held: The respondent company has 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 – 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 – Since admittedly, what
was charged from the respondent was as per the chargeable
1054 [2024] 3 S.C.R.

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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.
[Paras 104, 105, 107]
Railways Act, 1989 – Whether the notified chargeable distance
of ‘444 km’ was an Illegal Charge or not?
Held: In the instant case, 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 – The effect of the change in methodology on the chargeable
distance would not have resulted in a huge difference of 110
km – 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 – 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 – There was failure
of the appellant in establishing that the chargeable distance of 444
km was the correct chargeable distance as per the law – There
is a concurrent findings of both, the Railway Claims Tribunal and
the High Court on the limited aspect of the actual distance being
333.18 km – Thus, the said chargeable distance of 444 km was
illegal – No infirmity in the judgment and order passed by the High
Court. [Paras 126, 136, 137, 138]
Words and Phrases – Charge, Over, Illegal – discussed. [Para
61]
Interpretation of Statutes – Reasonableness or unreasonableness
of any provision:
Held: 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 or impossible – If a rule leads to an absurdity or
manifest injustice from any adherence to it, the court can step
[2024] 3 S.C.R. 1055

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

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. [Para 82]
Railways Act, 1989 – s. 106 (3) – Hohfeld’s scheme of jural
relations:
Held: 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 – 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. [Paras 84, 84.1]
Railways Act, 1989 – Claim of refunds – Cautioning the courts
and the railway claims tribunal:
Held: 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 – There may be
situations, where a charge for which refund is sought may not
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
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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 illegal charge or valid charge etc. is for ultimately
determining whether it is liable for refund or not, without jumping
to any conclusion. [Paras 95 and 96]

Case Law Cited
Mafatlal Industries Ltd. & Ors. v. Union of India [1996]
Suppl. 10 SCR 585 : (1997) 5 SCC 536 – followed.
Union of India & Ors. v. West Coast Paper Mills Ltd. &
Anr. [2004] 2 SCR 642 : (2004) 3 SCC 458 – relied on.
Hindustan Petroleum Corp. Ltd. v. Union of India
(2018) 17 SCC 729; Birla Cement Works v. G.M.
Western Railways & Anr. [1995] 1 SCR 5 : (1995) 2
SCC 493; Rajasthan State Electricity Board v. Union
of India [2008] 7 SCR 1025 : (2008) 5 SCC 632 –
referred to.
Shah Raichand Amulakh v. Union of India & Ors.
reported in (1971) 12 GLR 93; Union of India & Ors.
v. Steel Authority of India Ltd. (1996) SCC OnLine Ori
60; Union of India v. Mansukhlal Jethalal (1974) SCC
OnLine Guj 12; Rajasthan State Electricity Board v.
Union of India AIR (2001) Bom 310; J.K. Lakshmi
Cement Ltd. v. General Manager & Anr. (2014) SCC
OnLine Raj 2340; Union of India v. Mineral Enterprises
(2019) SCC OnLine Kar 1971; M/s National Aluminium
Co. Ltd. v. Union of India, FAO No. 306 of 2022 (Orissa
High Court); Suresh Kumar v. Board of Trustees for
the Port of Calcutta (1988) SCC OnLine Cal 420 –
referred to.

Books and Periodicals Cited
Black’s Law Dictionary’, 4th Edn., 1968 at Pg. 1610;
P. Ramanatha Aiyar on ‘The Law Lexicon’, 2nd Edn.,
1997 at Pg. 1389; P Ramanatha Aiyar’s ‘The Law
Lexicon’ (Vol I, 6th Edn., 2019 at pg. 886); L.P. Singh
and P.K. Majumdar’s ‘Judicial Dictionary’ (2nd Edn.,
2005 at pg. 460); Henry Campbell Black in ‘Black’s Law
Dictionary’ (4th Edn., 1968 at pg. 295); L.P. Singh and
[2024] 3 S.C.R. 1057

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

P.K. Majumdar’s ‘Judicial Dictionary’ (2nd Edn., 2005
at pg. 996); P Ramanatha Aiyar’s ‘The Law Lexicon’
(Vol III, 6th Edn., 2019 at pg. 3990); Henry Campbell
Black on ‘Black’s Law Dictionary’ (4th Edn., 1968 at pg.
1256); Henry Campbell Black in ‘Black’s Law Dictionary’
(4th Edn., 1968 at pg. 882); P Ramanatha Aiyar’s ‘The
Law Lexicon’ (Vol II, 6th Edn., 2019 at pg. 2605); L.P.
Singh and P.K. Majumdar’s ‘Judicial Dictionary’ (2nd
Edn., 2005 at pg. 749) – referred to.

List of Acts
Railway Act, 1890; Railway Act, 1989.

List of Keywords
Freight; Notified chargeable distance; Revised Local Distance Table;
Refund of the difference in the freight charges; Overcharge; Illegal
charge; Refund of overcharge; Claim of compensation; Change
in methodology on the chargeable distance; Reasonableness or
unreasonableness of any provision; Hohfeld’s scheme of jural
relations; Right to get a refund; Duty to grant refund; Charge;
Over; Illegal.

Case Arising From
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1891-1966
of 2024
From the Judgment and Order dated 23.02.2018 of the High Court of
Judicature at Allahabad in FAFO Nos.726, 730, 731, 732, 733, 734,
735, 736, 737, 738, 739, 765, 772, 773, 774, 775, 776, 777, 778, 779,
780, 781, 782, 783, 784, 785, 786, 787, 788, 789, 790, 791 792, 793,
798, 799, 800, 801, 802, 803, 804, 805, 806, 807, 808, 809, 810, 811,
812, 813, 814, 825, 826, 829, 830, 833, 834, 835, 836, 837, 838, 839,
840, 841, 842, 844, 845, 846, 847, 848, 850, 851, 852, 853, 854 and
855 of 2014
Appearances for Parties
Amrish Kumar, Nachiketa Joshi, Raghav Sharma, Mrs. Rukhmini
Bobde, Varun Chugh, Advs. for the Appellant.
Ms. Meenakshi Arora, Sr. Adv., Ms. Mala Narayan, Shashwat Goel,
Ms. Nanakey Kalra, Ms. Isha Ray, Advs. for the Respondent
1058 [2024] 3 S.C.R.

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Judgment / Order of the Supreme Court

Judgment
J.B. Pardiwala, J.
For the convenience of the exposition, this judgement is divided in
the following parts: -
INDEX*
A. FACTUAL MATRIX .......................................................... 2
B. PROCEEDINGS BEFORE THE RAILWAY CLAIMS
TRIBUNAL......................................................................... 8
C. IMPUGNED ORDER......................................................... 11
D. SUBMISSIONS ON BEHALF OF THE APPELLANT...... 13
E. SUBMISSIONS ON BEHALF OF THE RESPONDENT... 16
F. ANALYSIS........................................................................ 22
i. Relevant Statutory Scheme and Provisions ....... 22
ii. Scope of Section 106 of the Railways
Act, 1989 ................................................................. 29
a. What is meant by an “Overcharge”? ............... 35
b.
Concept of an ‘Overcharge’ and an ‘Illegal
Charge’ ............................................................ 53
iii. Whether the present case is one of
‘Overcharge’ or ‘Illegal Charge’? .......................... 76
a. Applicability of Section 106(3) of the Railways
Act, 1989 .......................................................... 76
b. Whether the chargeable distance of 444 km
was correct or not? .......................................... 82
G. CONCLUSION ................................................................. 94

1. This batch of 76 appeals is at the instance of the Union of India
being the unsuccessful respondent before the High Court and is
directed against the common set of judgements and orders dated
23.02.2018 passed by the High Court of Allahabad in FAO Nos.
726, 730-739, 765, 772-793, 798-814, 825-826, 829-830, 833-842,

* Ed. Note: Pagination as per the original Judgment.
[2024] 3 S.C.R. 1059

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

844-848, and 850-855 respectively of 2014, by which the High Court
allowed all the abovementioned appeals filed by the respondent
herein (original appellant) and directed the railway administration
to refund the difference of approx.. 110 km that was illegally levied
towards the freight charges.
A. FACTUAL MATRIX
2. The respondent company herein had booked various consignments
of furnace oil between the years 2002 & 2005 via railway from Baad
to Hisar route. Indisputably the freight for the same was calculated
by the appellant on the basis of a total chargeable distance of 444
km. as per the then prevailing distance table plying for the said route.
3. On 07.04.2004, the Ministry of Railways vide its Letter No.
TCR/2043/2002/2, decided to rationalize the method of calculating
the ‘chargeable distance’ between the pairs of station routes by way
of rounding off the aggregate of the ‘actual engineering distance’ to
the next higher kilometre only once at the end. The said letter is
reproduced below: -
“Rates Circular No. 14 of 2004
GOVERNMENT OF INDIA (BHARAT SARKAR)
MINISTRY OF RAILWAYS (RAIL MANTRALAYA)
RAILWAY BOARD
No. TCR/2043/2000/2
New Delhi, Dt. 07.04.2004
To,
The General Managers (Comml.).
All Indian Railways, NCR
SUB: ounding off of Chargeable Distance:
R
Rationalization of fares and freight.
REF: oard’s letter no. TCR/2043/2002/4 dated
B
05.02.2003
Reference is invited to Board’s above cited letter wherein
Zonal Railways were asked to print their new Local Distance
Tables (LD1) and Junction Distance Tables (JDT) effective
from April 1, 2003, indicating the actual engineering
1060 [2024] 3 S.C.R.

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distances of the various sections upto two decimal places.
Board desire confirmation in this regard and that these books
have been printed and circulated to other railways also.
It was also indicated in the letter under reference that
the method of “rounding off” to be adopted for arriving
at the ‘chargeable distance’ shall be communicated in
due course. The Ministry of Railways have now decided
in rationalize the method for arriving at the ‘chargeable
distance’ between a specific pair of originating and
destination points. The actual engineering distances
upto two decimal places of the various sections from
originating station to destination station will be added
up and the distance so aggregated would be finally
rounded off to the next higher kilometre for deriving the
chargeable distance. It may be ensured that for deriving
the “chargeable distance”, the summation of individual
sectional distances be “rounded off” only once at the
end. This rationalization is aimed at ensuring uniformity
in the method of deriving the distance of charging fares
and freight for all customers across the Indian Railways.
In order to have a uniform date of implementation, all
railways shall change over to the rationalized procedure
with effect from 01.06.2004. As these instructions have
prospective effect and may result in variation in fares
and freights when compared with the existing fares
and freight, neither would any undercharges be raised
by the railways nor would the railways refund charges
collected in past cases. Rail users may be intimated
of the proposed changes well in advance and staff
may also be made well conversant with the changes
contemplated.
This issues in consultation with C&IS Directorate and with
the concurrence of Finance Directorate in the Ministry of
Railways.
Sd/-
(L. Venkataraman)
Director, Traffic Comml. (Rates)
Railway Board”
[2024] 3 S.C.R. 1061

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

4. This new methodology was being adopted in order to ensure uniformity
in deriving the chargeable distance for fares and freight across the
Indian Railways, and pursuant to it, the various zonal railways were
required to revise their respective distance tables accordingly.
5. The letter as referred to above specifically stipulated that, the change
over to the new ‘rationalized procedure’ shall take place w.e.f. 01.06.2004
and further that as the aforementioned change might result in variation
in the fares and freights in comparison to the then existing charges
/ rates, the said change would not entitle either the Railways or the
end-users to recover or seek any under-charge or excess charge that
was already paid prior to the implementation of the said policy.
6. However, since many zonal railways were yet to print and make
available their revised local distance tables and junction tables at
their respective stations by the scheduled date of implementation,
the Ministry of Railways vide its letter dated 24.09.2004 changed and
moved the date of implementation of the aforesaid new methodology
to 01.01.2005. It was further clarified that till the revised guidelines
were implemented, the chargeable distance would continue to be
calculated as per the earlier prevailing methodology and procedure
as applicable. The said letter reads as under: -
“Rates Circular No. 14 of 2004
GOVERNMENT OF INDIA (BHARAT SARKAR)
MINISTRY OF RAILWAYS (RAIL MANTRALAYA)
RAILWAY BOARD
No. TCR/2043/2000/2
New Delhi, Dt. 24.09.2004
To,
The General Managers (Comml.)
Al Indian Railways, NCR
Managing Director,
Konkan Railway Corporation,
Belapur Bhavan, Sector-11, CBD Belapur,
New Mumbai – 400614
The Chief Administrative Officer/ FOIS
Camp: CRIS, Chanakyapuri,
New Delhi – 21
1062 [2024] 3 S.C.R.

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SUB: ounding off of Chargeable Distance:
R
Rationalization of fares and freight.

Please refer to Board’s message dated 25.06.2006 wherein
it was communicated that the revised procedure of charging
fares and freight by rounding off the actual engineering
distance only once at the end shall come into force from
01.10.2004. As all the Zonal Railways have not printed
their local distance tables and junction distance tables
by the target time, it has been decided that the revised
procedure of charging fares and freight by rounding off
the actual engineering distance only once at the end shall
come into force from 01.01.2005 i.e., First January two
thousand five.

It has also been decided that till the implementation of
revised guidelines, the earlier procedure for calculating the
chargeable distance on the basis of old distance tables
should be followed by Zonal Railways. Moreover, the receipt
of LDTs/JDTs prepared on the basis of Board’s guidelines
by concerned Railways should be intimated to this office.

Sd/-
(PURAN CHAND)
Deputy Director, Traffic Comml. (R)
Railway Board”

7. On 05.07.2005, the Chief Commercial Manager of the North Central
Railway Zone addressed a letter bearing No. DRM/CLAOG/RAD/
Distance Table/2004/20 to the Chief Goods Supervisor (CGS), Baad
inter-alia stating that the earlier chargeable distance of 444 km from
the Refinery Baad to Hisar as per the old distance table should
be changed to 334 km as per the new junction table, and that the
“correct distance should be charged”. The said letter reads as under:

“NORTH CENTRAL RAILWAY
Dated: 05.07.2005
No. DRM/CLAOG RAD/Distance Table/2004/20
Chief Commercial Manager (M&R)
North Central Rail
Allahabad
[2024] 3 S.C.R. 1063

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

SUB: harging of FO HPS Book from IOC BAAD to
C
Hissar (HSR):
As per old distance table prior to formation of Zone and
Division, the distance, Refinery to HSR via TKD was being
charged as under: -

1. Refinery BAAD to BAAD station 04 Km
2. BAAD to TKD 145 Km
3. TKD to HSR 295 Km
Total 444 Km
As revised distance table of NCR, NR were not received,
hence the charging was as per the earlier practice of 444
Km. These all the distance tables were critically reviewed
from revised distance tables of NCR and the distance from
IOC BAAD to HSR should be as under: -

(A) The distance from IOC BAAD to HSR via PWL
is as under:
1. Refinery BAAD to BAAD station 04 Km
2. BAAD to TKD 93.62 Km
3. TKD to HSR 235.56 Km
Total 333.18 Km

(B) The distance from HSR via AWR is as under:
1. Refinery BAAD to BAAD station 04 Km
2. BAAD to MTJ 10.22 Km
3. AWR to RE 74.21 Km
4. RE to HSR 142.56 Km
Total 354.17 Km

As the traffic of FO and HPS is moving via PWL, hence
the chargeable distance should be 334 Km.
CGS has been instructed to change the distance of HSR
according to the new junction distance table i.e., 334 Km.
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CGS BAAD has been instructed that the other disputed
distance should also be corrected as per the new junction
distance table and the correct distance should be charged.
Sd/-
(P.K. PANDEY)
Sr. Divl. Comml. Manager
Agra”
8. The respondent upon learning about the aforesaid letter dated
05.07.2005 changing the chargeable distance from 444 km to 334
km for the route from Refinery Baad to Hisar, made further inquiries
with the concerned Railway office & came to learn that, although
there had been no change in the physical track length for the said
route and that the actual distance from Baad to Hissar via Palwal
was in fact 333.18 km, yet the appellant was charging freight at a
wrong chargeable distance of 444 km for the same route.
9. In view of the aforesaid, the respondent company sent a notice of
claim dated 07.11.2005 under Section 78B of the erstwhile Railways
Act, 1890 (for short, the “Act, 1890”) to the appellant demanding
refund of the difference of 110 km in the freight charges that had
been erroneously charged on the basis of the wrong chargeable
distance which was subsequently changed.
10. The respondent vide the aforesaid notice of claim had demanded
refund for a total of 122 consignments for which freight had been
levied on the basis of a chargeable distance of ‘444 km’. However,
the appellant herein rejected all of the claims and declined to refund
the 110 km difference in freight charges.
B. PROCEEDINGS BEFORE THE RAILWAY CLAIMS TRIBUNAL
11. Aggrieved by the same, the respondent in all filed 122 claim
applications under Section(s) 13(1)(b) r.w. 16(1) of the Railway Claims
Tribunal Act, 1987 (for short, the “RCT Act”) for refund towards the
difference of 110 km in freight charges, with the lead application
being the OA/(III)/229/20006/Mathura before the Railway Claims
Tribunal, Ghaziabad (“RCT”).
12. During the pendency of the aforesaid claim applications, the
respondent company held meetings with the appellant more
particularly the General Manager, North Central Railway, Allahabad,
who upon scrutinizing the matter allowed refund for inasmuch as
[2024] 3 S.C.R. 1065

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

45 (sic) claims (approx..), which had been made within the statutory
time period of 6-months under Section 78B of the Act, 1890 – now
Section 106 of the Railways Act, 1989 (for short, the “Act, 1989”).
13. The Railway Claims Tribunal, Ghaziabad vide its common final
judgement and order dated 26.12.2013, dismissed the remaining
77 claim applications of the respondent as being time-barred. The
said decision of the RCT is in two parts: -
(i) First, the RCT observed that though the chargeable distance
was only 334 km still the freight charges had been levied for
a distance of 444 km. This according to the Tribunal was a
case of excess payment of freight, and thus the refund that
was sought was for an ‘overcharge’. 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 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. In this way, the applicant company had
to pay for 444 Kms, instead of 333.18 Kms. Hence,
the present case is for the refund of this excess
payment of freight, which can only be termed as
refund of overcharge and nothing else and so, the
notice under Section 106(3) of the Railways Act,
1989 is necessary.”
(Emphasis supplied)
(ii) Secondly, since the case at hand was one for refund of an
overcharge and the notice of claim had not been sent within the
prescribed time-period of 6-months as required under Section
106(3) of the Act, 1989, the claim application was time-barred.
The relevant observations read as under: -
“24. [...] Furthermore, perusal of the record shows
that the applicant company had served a notice on
07.11.2005 upon the Respondent Railway, but the
1066 [2024] 3 S.C.R.

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date of booking of the consignment in question was
25.08.2002. Hence, it has been revealed that the
said notice was time barred as per the provisions
of the aforesaid Section 106(3) of the Railways Act,
1989, which had been well within the knowledge of
the applicant company also as per the aforesaid letter
dated 28.01.2009. In this context, Ld. Counsel for the
Respondent has placed reliance on the case law, titled
as Birla Cement Works v. G.M., Western Railways &
Anr., 1995 SCC (2) 493. We have carefully perused
the said case law and it supports the contention of
the Respondent Railway.
xxx xxx xxx
26. In view of the above, it has been held the applicant
company has not served a valid and legal notice on
the Respondent Railway within the statutory period
under the provisions of Section 106(3) of the Railways
Act, 1989. As such, the applicant company is not
entitled for any compensation. [...]”
(Emphasis supplied)
14. Thus, the RCT, whilst dismissing the respondent’s claim applications
held that, the respondent’s claim was for a refund of an overcharge
and since the notice of claim was not served in terms of Section
106(3) of the Act, 1989, the claim was time-barred.
C. IMPUGNED ORDER
15. Aggrieved with the aforesaid, the respondent went in appeal under
Section 23 of the RCT Act before the High Court of judicature at
Allahabad. In all 76 First Appeals from Order were filed, with the
lead appeal being the FAO No. 843 of 2014 wherein the High
Court vide its judgement & order dated 23.02.2018 allowed the
aforesaid appeal, by placing reliance on the decision of this Court
in Hindustan Petroleum Corp. Ltd. v. Union of India reported
in (2018) 17 SCC 729. The High Court took the view that since
in the case at hand 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 that of “overcharge”. The relevant
observations read as under: -
[2024] 3 S.C.R. 1067

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

“[...] In this case, the freight was paid by the appellant as
per the notified distance and freight charges were paid
accordingly. However, later on it was revealed that the
distance was less and that is how the appellants had
claimed the amount. This was one of the facts on which
the Apex Court held in favour of the appellant (Hindustan
Petroleum) and this was a question of illegal realisation
of freight and not of over charging as submitted by the
counsel for the respondent. [...]
The finding of fact by the Tribunal dismissing the claim of
the claimant is bad in the eye of law as held by the Apex
Court in Hindustan Petroleum (Supra), there was no need
for issuance of notice. I am fortified in my view by both
the decisions of the Apex Court in Hindustan Petroleum
(Supra) and West Coast Paper Mills (Supra). Hence,
this is not a case of over charge at all as the freight was
paid as per the rates notified for certain distance. No other
view can be taken in this matter.
The judgment in Hindustan Petroleum (Supra) will enure
for the benefit of the appellant in this case also.
In view of the above, the appeal is allowed. The respondents
to calculate the difference within 12 weeks from today and
pay the appellant.”
(Emphasis supplied)
16. Accordingly, the High Court vide the aforesaid judgement & order
dated 23.02.2018 disposed of the lead appeal of FAO No. 843 of
2014, and thereafter by a batch of common orders disposed of
the other 75 appeals in terms of its findings recorded in the final
judgement and order passed in the lead appeal.
17. The aforesaid order dated 23.02.2018 as passed in FAO No. 843 of
2014 i.e., the lead appeal was challenged and carried upto this Court
by way of the special leave petition being SLP (C) No. 3987 of 2021.
This Court vide its order dated 04.03.2021 refused to interfere with
the order dated 23.02.2018 passed in FAO No. 843 of 2014 as the
claim amount was very low. Thus, the said Special Leave Petition
came to be dismissed by this Court, however the question of law
was kept open. The relevant portion reads as under: -
1068 [2024] 3 S.C.R.

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“O R D E R
We decline to interfere in this Special Leave Petition, as
we find that the claimed amount is very low. The Special
Leave Petition is dismissed accordingly, leaving the
question of law open.”
18. In view of the aforesaid, the appellant herein being aggrieved, has
challenged the final orders passed by the High Court in the other 75
appeals involving a total sum of Rs. 1,55,03,652/- (approx.).
D. SUBMISSIONS ON BEHALF OF THE APPELLANT
19. Mrs. Rukhmini Bobde, the learned counsel appearing for the appellant
in her written submissions has stated thus: -
“WRITTEN SUBMISSIONS ON BEHALF OF THE
APPELLANT
1. The present Appeal has been filed against the final
judgement of the Hon’ble High Court of Allahabad
a batch of First Appeals, whereby the Hon’ble High
Court has allowed all the abovementioned appeals
filed by the Respondent-IOCL while relying upon the
judgment dated 23.02.2018 passed in First Appeal
from Order No. 843 of 2014 (@pg. 79 of the present
Appeal) which is illegal and perverse as the Hon’ble
High Court has ignored to answer the questions of law.
It is submitted that the order dated 23.02.2018 in First
Appeal from Order No. 843 of 2014 was challenged
by the Appellant-Union before this Hon’ble Court and
the said petition bearing SLP(C) No. 3987 of 2021
was dismissed by this Hon’ble Court on 04.03.2021
on the ground that claim amount was very low. It is
however submitted that the claim amount of all the
batch matters herein comes to approximately Rs.
1,55,03,652/-.
2. The facts of the lead case herein are that the
Respondent-IOCL had sent a legal notice dated
07.11.2005 under Section 106 of the Railway Act,
1989 to the Appellant-Union for refund of excess
freight charges with respect to a consignment dated
25.08.2022, due to change in methodology, having
[2024] 3 S.C.R. 1069

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

been applied prospectively from 01.01.2005 which
resulted in variation in fares and freights when
compared with the then existing fares and freight. It
is submitted that the present Appeal is not a case of
error in the existing notified freight change.
3. The case of the Appellant-Union is that Section 106 of
the Railway Act, 1989 does not apply to the present
case at all since as per the circulars dated 07.04.2004
and 24.09.2004 (@page 141 and 144 of the Appeal
respectively) issued by the Appellant-Union, the
change in distance happened due to rationalization
of the distances, aimed at ensuring uniformity in the
method of deriving the distance of charging fates
and freight for all customers across Indian Railways.
The rationalization was also directed to be applied
prospectively (from 01.01.2005 onwards) and the date
of transport of consignment was on 25.08.2002 i.e.
more than 2 years before application of the circular.
It is further submitted that the Appellant-Union in its
circular dated 07.04.2004 had specifically stated that
the Appellant-Union would not be raising any issue
of undercharges due to the variation nor was the
Petitioner going to refund the charges collected in
past cases, thus ensuring balance of convenience.
Therefore, the question of overcharging does not arise
at all as the Respondent-IOCL has been charged the
freight charges as per the then prevailing existing
fares and freights of the time and consequently,
the Respondent-IOCL cannot raise any claim for
compensation under Section 106 of the Railway
Act, 1989.
4. Even assuming and without admitting to the case
of the Respondent-IOCL, if the Respondent-IOCL
is able to present a case for being overcharged
and thus Section 106 of the Railways Act, 1989 to
be applicable, the case of the Respondent-IOCL is
barred from raising any claim as per the provisions
of Section 106 of the Railways Act, 1989 on the
ground of delay.
1070 [2024] 3 S.C.R.

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5. It is also pertinent to take a close look at the facts
of the following case laws:
a. In Birla Cement Works v. G.M., Western
Railways and Another’, the Petitioner earlier
used to transport through metre-gauge from
the railway siding at Chanderia. However, after
conversion into broad-gauge the railway siding
was at Difthkola Chittor Broad-Gauge Rail Link,
which lead to an increase of 34 km, which was
added to the freight charges. The Petitioner had
belatedly raised its claim under Section 78-B of
the Railway Act, 1890 (pari materia to Section
106 of the Railways Act, 1989) and were thus
barred by limitation.
The principal contention raised by the Petitioner
was that it 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.
The limitation started running from the date of
discovery and therefore stands excluded and
that Section 78-B of the Railway Act, 1890 had
no application to the facts. However, this Hon’ble
Court held that since admittedly the claims of the
Petitioner were made under Section 78-B of the
Railway Act, 1890 beyond a period of six months,
the claim had become barred by limitation.
It should be mentioned that the facts of Birla
Cement would have only been applicable in
the present Petition if there was a case of
overcharging. However, as the Respondent
had booked according to the prevailing freight
charges at that time, the facts of Birla Cement
does not arise at all.
b. In Union of India and Others v. West
Coast Paper Mills Ltd and Another (III), the
Respondents were being charged a flat rate
irrespective of the commodity carried and were
[2024] 3 S.C.R. 1071

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

not given the benefit of telescopic system of rates
which was allowed by the Railways to others.
This led to a scenario wherein the Respondents
had to pay freight on certain goods at three times
compared to what would have been payable in
case the benefit of telescopic system of rates
was allowed to them. This was construed to be
an illegal and unreasonable charge. Reference
is made to paragraph 20 of the Judgement:
“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.”
The facts are different from the present case
as the Respondent-IOCL in the present case
was only being charged the notified rates as
per the prevailing rules at the time of booking.
The Respondent-IOCL was aware of the freight
charges at the time of booking.
1072 [2024] 3 S.C.R.

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c. In Hindustan Petroleum Corporation
Limited v. Union of India’, the facts were
different from the present case as the Railways
had migrated to a computerized railway freight
charges system from a manual system, which
lead to decrease in the distance notified between
Asaudah Railway Station, District Rohtak,
Haryana and Partapur, District Meerut, Uttar
Pradesh.
It is submitted that this Hon’ble Court had
correctly held that there was no overcharge and
therefore Section 106 of the Railways Act, 1989
is not applicable. However, it is most humbly and
respectfully submitted that as on merits there is
no discussion in law as to whether any refund
is payable dehors Section 106 of the Railways
Act, 1989.
In the present case, the Appellant-Union had
stated as per the circulars dated 07.04.2004
and 24.09.2004 that it would not be raising any
issue of undercharging nor would be providing
any refund and that the charges are prospective.
6. Therefore, it is requested to allow the present Appeal
and reverse the judgement of the Hon’ble High Court.”
E. SUBMISSIONS ON BEHALF OF THE RESPONDENT
20. Mr. Shashwat Goel, the learned counsel appearing for the respondent
in his written submissions has stated thus: -
“WRITTEN SUBMISSIONS ON BEHALF OF THE
RESPONDENT - M/S INDIAN OIL CORPORATION LTD
A. RESPONDENT’S CASE/ ARGUMENTS IN BRIEF
1. It is respectfully submitted that the present matter
pertains to ‘illegal charge’ / ‘illegal realization’ of the
freight amount by the Petitioner (i.e. the Railways)
from the Respondent oil company. Admittedly, the
Petitioner herein has charged the freight amount from
the Respondent for a distance of 444 km, instead of
[2024] 3 S.C.R. 1073

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

333.18 km between ‘Baad’ (BAD) station to ‘Hissar’
(HSR) station. This is nothing but ‘illegal realization’
of freight from the Respondent and it cannot be
termed as ‘overcharge’. It is submitted that there is a
difference between ‘illegal realization’/ ‘illegal charge’
and ‘overcharge’ of freight amount. An ‘overcharge’
is something which is in excess of that what is due
according to law and is paid by a party on account
of mistake of fact. Whereas, ‘illegal realization’ /
‘illegal charge’ is excess realization of charges due
to change in ‘notified’ distance or rates.
2. It is submitted that the Petitioner has been calculating
the freight amount for a distance of 444 km as it
was ‘notified’ in the old distance table. Therefore,
this cannot be termed as overcharge. Admittedly,
upon realizing that the said distance was wrongly
calculated, the appropriate authority of the Petitioner
‘critically reviewed’ the old distance tables and
thereafter notified the corrected distance/ rate
between BAD to HSR as 333.18 km on 05.07.2005
(i.e. Annexure P-3 @ Pg. 146 of SLP). This notification
of corrected distance made the earlier realization of
freight for 444 km under the erstwhile notified rates,
illegal. Further, the cause of action for recovery of
such illegal realization’ of freight arose on 05.07.2005,
when the corrected distance was notified by the
Petitioner. Immediately, the Respondent filed its claim
petitions on 07.11.2005 for recovery of excess amount
for the extra distance which was illegally realized by
the Petitioner.
3. The present case is squarely covered by a judgment
of this Hon’ble Court passed in the matter of Hindustan
Petroleum Corporation Limited v. Union of India,
(2018) 17 SCC 729 (attached herewith). In the said
case, the Petitioner therein (i.e. Hindustan Petroleum
Corpn.) paid freight to the Railways (i.e. Petitioner
herein) for the notified distance of 125 km, between
the period 01.04.2008 to 30.09.2010. Subsequently,
the said distance of 125 km was corrected by the
1074 [2024] 3 S.C.R.

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Railway to 100 km on 27.02.2011. Immediately,
HPCL filed its claim petitions on 30.03.2011, which
were rejected as being time barred U/s 106(3) of the
Railways Act, 1989 by the Railways; Railways Tribunal
& the High Court. When the said matter reached this
Hon’ble Court, the Railways (i.e. the Petitioner herein)
placed reliance on the judgment of this Hon’ble Court
in Birla Cement Works, (1995) 2 SCC 493 to buttress
its argument that the claims filed by HPCL were
barred U/s 106(3) of the Railways Act. It is submitted
that the said judgment of Birla Cement Works was
distinguished by this Hon’ble Court and it was held
that excess realization of freight by the Railways
from HPCL was ‘illegal’ and therefore HPCL’s claims
were allowed. It was further held that there was no
requirement of giving any notice under Section 106
of the Railways Act as there was no overcharge by
the Railways. The findings of this Hon’ble Court in
HPCL’s case are as follows:
“8. Birla Cement Works [Birla Cement
Works v. Western Railways, (1995) 2
SCC 493] 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.
[Union of India v. West Coast Paper Mills Ltd., (2004) 3
SCC 458] this Court in para 20 of the said Report took the
view that as the freight paid was as per the rates notified
[2024] 3 S.C.R. 1075

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

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 the 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 which are largely identical, we
should be taking any other view in the matter.
10. Consequently and in the light of the above, we allow
the present appeals, set aside the order of the High Court
as well as that of the Railway Claims Tribunal, Chandigarh
and allow the claims of the appellant which will be paid
forthwith on due and proper calculation.”
B. SUBMISSIONS ON THE ISSUES FRAMED BY THIS
HON’BLE COURT
Issue No.1 - What is the scope of Section 106 of the
Railway Act, 1989, and if the said provision is applicable
to the present case at hand?
(i) It is submitted that Section 106 of the Railways
Act, 1989 stipulates that a ‘Notice has to be sent
to the Railways within six months for : (a) ‘claim for
compensation’ (under sub-section (1) & (2)); & (b)
for ‘refund of overcharge’ (under sub-section (3)).
It is clear from a bare reading of this section that a
notice cannot be sent to the Railways for any other
purpose/ for raising a claim under any other head
which is not mentioned in the said section. The
term(s) ‘illegal charge’ / ‘illegal realization of freight’
is not mentioned in S.106. Therefore, there is no
legal requirement of sending a notice under S.106
for raising a claim on account of ‘illegal charge’ /
‘illegal realization’ of freight. It is pertinent to mention
here that a claim of illegal charge’ will not fall under
the category of overcharge as undisputedly, there is
a difference between the terms - ‘overcharge’ and
‘illegal charge’.
(ii) In this regard, reliance is placed upon a judgment of
this Hon’ble Court passed in the matter of Union of
India & Ors. v. West Coast Paper Mills Ltd. & Anr. (IlI),
1076 [2024] 3 S.C.R.

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(2004) 3 SCC 458 (attached herewith). In the said
case, an interpretation of the pari materia provision
(like S.106) in the erstwhile Act i.e. the Railway Act,
1890 (i.e. Section 78-B) was done by this Hon’ble
Court. While considering the distinction between an
‘overcharge’ and ‘illegal charge’ for the purposes of
Section 78-B of the Railways Act, 1890 (i.e. same as
Section 106 of the Railways Act, 1989), it was held
by this Hon’ble Court that :
“20. ........ 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.”
It is pertinent to mention here that this Hon’ble Court
has also analysed in detail the meaning of the term
‘overcharge’ in Para 19 of the above-mentioned
judgment.
(iii) It is reiterated that the present matter pertains
to ‘illegal charge’ / ‘illegal realization’ and not of
overcharge’ of the freight amount. Therefore, in view
of the aforesaid submissions, it is submitted that the
provision of Section 106 of the Railways Act, 1989
is not applicable upon the present case. In this
regard, reliance is also placed upon paras 8-10 of the
judgment of this Hon’ble Court passed in Hindustan
Petroleum Corporation Limited’s case (supra).
Issue No.2 - Whether the decision of this Court in Birla
Cement Works vs. G.M. Western Railways (1995) is
applicable to the case at hand?
(i) It is respectfully submitted that the decision of this
Hon’ble Court in Birla Cement Works is not applicable
upon the present case. Pertinently, the said decision
has already been distinguished by this Hon’ble Court
in the subsequent case of Hindustan Petroleum
Corporation Limited (supra), which is identical to the
present case.
(ii) The case of Birla Cement Works pertains to refund
of ‘overcharge’ which was made by the Railways.
[2024] 3 S.C.R. 1077

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

Whereas, the present case is that of recovery of
‘illegally realized’ freight from the Railways.
(iii) In the case of Birla Cement Works, the Railways had
charged excess freight from the Petitioner therein (i.e.
Birla Cement), than what was stipulated in distance
table (i.e. overcharge). Whereas, in the present case,
the Railways (i.e. the Petitioner) had realized the
freight amount from the Respondent on the basis
of the distance, i.e. 444 km, that was notified in the
erstwhile distance table which subsequently got
corrected & was notified by the Railways as 333.18
km (i.e. illegal realization of freight).
(iv) In the case of Birla Cement Works, the Petitioner
therein (i.e. Birla Cement) came to know of the
alleged excess amount of freight on account of
wrong calculation of distance through the letter
issued by the Railways. It was not the case where
the distance was corrected and re-notified by the
Railway authorities. In Birla Cement Works, there
was a mistake by the Railways in calculating the
freight amount by wrongly taking into account the
distance that was stipulated in the distance table
in that case. It is submitted that the said mistake/
error was of such a nature that even the Petitioner
therein (i.e. Birla Cement) could have also found,
had it been diligent. Instead, it kept paying the
freight charges to the Railways and filed its claim
only when the Railways informed it that the same
was wrongly calculated. Whereas, in the present
case, the Respondent has paid the freight charges
as per the distance of 444km notified in the erstwhile
distance table, which later on stood corrected;
notifying the distance as 333.18 km. In the present
case, Respondent was not sleeping over its rights.
The Respondent filed its claims soon after the
corrected distance was notified by the Petitioner
herein and the Respondent came to know about the
illegal charge. There is no sort of lack of vigilance or
bona fides of the Respondent in the present case.
1078 [2024] 3 S.C.R.

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Issue No.3 - What was the reason for revising the freight
charges? In other words, whether the revision of freight
charges was done pursuant to a new methodology being
adopted or due to an error in the existing notified freight
charges?
(i) It is submitted that the freight charges/ the distance
between BAD station to HSR station was revised
/ corrected by the Petitioner vide its notification
dt.05.07.2005 (Annexure P-3 @Pg.146 of the SLP).
The said revision/ correction was carried out after
‘critically reviewing’ the old distance tables with the
revised distance tables of the North Central Railways
(NCR). It is clearly stated in the said notification that
the earlier notified distance of 444 km was used for
calculating the freight as the revised distance table
of NCR, despite being available, was not received
earlier. This clearly shows lapses on part of the
Petitioner. Despite being aware that the revised
distance tables had come for the NCR, the same
were not considered and the Petitioner continued
calculating the freight as per the old distance, which
is illegal.
(ii) It is further submitted that there is no change in the
tracks or route from BAD to HSR. It appears that the
wrong distance was notified in the old table, that is
why there was a need to critically review the same
before notifying the corrected distance.
4. It is pertinent to mention here that the Petitioner has
made a subtle attempt to mislead this Hon’ble Court
by introducing circulars dt.07.04.2004 & 24.09.2004 in
its SLP. The Petitioner has used the said circulars to
erroneously allege that the change of distance was to
be applied prospectively from date mentioned in the
said circulars. In this regard it is submitted that the
said circulars do not pertain to change of distance.
The said circulars stipulate the guidelines for rounding
off the chargeable distance upto two decimal places.
Even the file no. of the said circulars is completely
[2024] 3 S.C.R. 1079

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

different from the notification issued on 05.07.2005,
whereby the corrected rates were notified between
BAD & HSR. The file no. of the circulars dt. 07.04.2004
& 24.09.2004 is TCR/2043/2000/2, whereas, for the
notification dt.05.07.2005, it is DRM/CLAOG RAD/
Distance Table/2004/20. It is submitted that this fact
in itself makes it clear that the subject matter of the
circulars dt. 07.04.2004 & 24.09.2004 and notification
dt.05.07.2005 are totally distinct and separate and the
said circulars have no bearing upon the present case.
5. It is also pertinent to mention here that there is an
unexplained delay of 661 days in filing the SLP by
the Petitioner.
In the light of the aforementioned submissions, it
is humbly prayed that the present SLP filed by the
Petitioner be dismissed.”
F. ANALYSIS
21. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the following pivotal
questions fall for our consideration: -
I. What is the scope of Section 106 sub-section (3) of the
Railways Act, 1989? In other words, what constitutes an
“overcharge” within the meaning of Section 106 sub-section
(3) of the Railways Act, 1989? What is the difference
between an “Overcharge” and an “Illegal Charge”?
II. Whether, the claim towards the refund of difference of 110
km in freight charges is covered by Section 106 sub-section
(3) of the Railways Act, 1989? In other words, Whether
the claim is for a refund of an ‘overcharge’?
III. Whether, the difference of 110 km in freight is liable to be
refunded? In other words, whether the notified chargeable
distance of ‘444 km’ was an Illegal Charge or not?
i. Relevant Statutory Scheme and Provisions
22. Earlier, in India the law pertaining to the railways was scattered into
several enactments and executive orders, each regulating different
aspects of the railways throughout the country. The reason behind
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the multiple different legislations on the railways was the number of
changes that were rapidly taking place due to the expansion and
establishment of various railway corridors across the country.
23. The Indian Railways Act, 1890 was the first prominent legislation to
be passed to consolidate the law and embody all important provisions
relating to the railways. The Act, 1890 since its enactment remained
the sole substantive legislation for regulating railways in India for
nearly half a century.
24. Despite being amended several times, the Act, 1890 was not able
to keep pace with the changes that were rapidly taking place in the
Indian railway infrastructure and network. Over the course of time,
several committees were constituted with a view to streamline the
functioning of Indian Railways and meet the challenges of changing
times. Various recommendations were made to the Government by
these committees, with the most significant one being the complete
reorganization of the railway into several operational zones.
25. Due to large and sweeping nature of the changes recommended, the
Act, 1890 required an extensive revision, something which could not
be done by amendment, and thus, a new exhaustive Act was required
for the consolidation and nationalization of the Indian Railways.
26. Accordingly, the Railways Act 1989 came to be enacted with a view
to amend and consolidate the legislation relating to the Railways and
to replace the erstwhile Indian Railways Act, 1890. The statement of
objects and reasons of the Act, 1989 reads as under: -
“STATEMENT OF OBJECTS AND REASONS
The Indian Railways, Act, 1890 was enacted at a time
when the railways in India were mostly managed by
private companies. The Government of India primarily
played the role of a coordinating and regulating authority
in various matters, such as inter-railway movement of
traffic, fixation of rates, sharing of revenue, earnings of
through traffic, apportionment of claims liability amongst
the railways, providing reasonable facilities to passenger
and goods traffic, etc. This role was accordingly reflected
in the Act. But now, except for a very small portion of the
railways, the entire railway system has become part of
the Government of India. To give effect to the changes
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in the railway system from time to time, the Act had also
undergone changes number of times since its enactment
in 1890. In addition, as some of the original provisions
enacted in 1890 had continued without any change, a need
for their replacement by new provisions more responsive
to the needs of the present day was felt and some other
provisions have become redundant. There has also been
a demand, both within and outside Parliament, for the
re-enactment of the Act so as to reflect the large number
of changes that have occurred in the railways. It has,
therefore, become necessary to consolidate and amend
the law relating to railways by a new act.
2. The Bill, while giving effect to the changes that are
necessary due to the change of circumstances, provides,
among other things, for the following matters, namely: -
(i) The railways are being administered by zonal
railways. This position had not been given effect to in
the Act. The Bill provides for the constitution of railway
zones, abolition of existing zones and appointment
of General Managers as heads of these railways
administrations.
(ii) Power has been given to the Central Government to
fix the rates for the carriage of passengers and goods
over the railways instead of the existing provisions
to fix only the maximum and minimum rates for such
carriage and leaving the fixation of specific rates to
the railway administrations. In addition, the railway
administrations are also being authorised to specify
lump sum rates for the carriage of goods.
(iii) In accordance with certain judicial pronouncements,
the Bill provides for statutory recognition of the railway
receipt as a negotiable instrument.
(iv) The Bill specifically provides for limiting the monetary
liability of railway administrations in respect of
payment of compensation of loss, damage, etc. of
goods. Provision has, however been made for full
liability subject to the condition that the consignor
while entrusting the goods to a railway administration
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for carriage, should declare the value of the goods
and pay a percentage charge on such value.
(v) The offences included in the Act have been rationalised
and a few new offences have also been included in
the Bill. Punishment for some of the offences had
not been changed since the enactment of the Act.
Penalties provided for the offences under the Act
have been made more stringent which would include,
among other things, a minimum punishment for many
of the offences.
3. The Bill seeks to achieve the aforesaid objects.”
(Emphasis supplied)
27. The Act, 1989 is a consolidating and amending legislation relating
to the Railways which received assent and came into force on
03.06.1989 replacing the erstwhile Act, 1890 by virtue of the repealing
provision contained in Section 200 of the Act, 1989. The Act, 1989
is divided into 16 Chapters and 200 Sections. Chapter XI of the Act,
1989 sets out the provisions (Section(s) 93 to 112) relating to the
Responsibilities of Railway Administration as Carriers, and it deals
with claims for refund and compensation in respect of the goods
carried by railway.
28. In addition to the aforesaid statute, the Railway Claims Tribunal Act,
1987 was also enacted for the establishment of the Railway Claims
Tribunal with a view to provide the procedural framework and forum
for inquiry, determination and adjudication of claims against the
railway administration. The statement of objects and reasons of the
RCT Act reads as under: -
“STATEMENT OF OBJECTS AND REASONS
An Act to provide for the establishment of a Railway
Claims Tribunal for inquiring into and determining claims
against a railway administration for loss, destruction,
damage, deterioration or non-delivery of animals or goods
entrusted to it to be carried by railway or for the refund of
fares or freight or for compensation for death or injury to
passengers occurring as a result of railway accidents or
untoward incidents] and for matters connected therewith
or incidental thereto.”
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29. Section 13 of the RCT Act provides that the Railway Claims Tribunal
shall inter-alia exercise powers and jurisdiction under Chapter VII of
the erstwhile Act, 1890 (now Chapter XI of the Act, 1989) pertaining
to inquiry and determination of claims for compensation for loss,
destruction, damage etc. and claims for refund of freight etc. in
respect of goods carried by railway. The said provision reads as
under: -
“13. Jurisdiction, powers and authority of Claims
Tribunal. –
(1) The Claims Tribunal shall exercise, on and from the
appointed day, all such jurisdiction, powers and authority
as were exercisable immediately before that day by any
civil court or a Claims Commissioner appointed under the
provisions of the Railways Act, —
(a) relating to the responsibility of the railway
administrations as carriers under Chapter VII
of the Railways Act in respect of claims for —
(i) compensation for loss, destruction,
damage, deterioration or non-delivery of
animals or goods entrusted to a railway
administration for carriage by railway;
(ii) compensation payable under section 82A
of the Railways Act or the rules made
thereunder; and
(b) in respect of the claims for refund of fares or
part thereof or for refund of any freight paid
in respect of animals or goods entrusted to a
railway administration to be carried by railway.
(1A) The Claims Tribunal shall also exercise, on and from
the date of commencement of the provisions of section
124A of the Railways Act, 1989 (24 of 1989), all such
jurisdiction, powers and authority as were exercisable
immediately before that date by any civil court in respect
of claims for compensation now payable by the railway
administration under section 124A of the said Act or the
rules made thereunder.
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(1B) The Claims Tribunal shall also exercise, on and
from the commencement of Part XIV of Chapter VI of the
Finance Act, 2017 (7 of 2017), the jurisdiction, powers and
authority conferred on the Tribunal under Chapter VII of
the Railways Act,1989 (24 of 1989).
(2) The provisions of the Railways Act, 1989 (24 of 1989)
and the rules made thereunder shall, so far as may be, be
applicable to the inquiring into or determining, any claims
by the Claims Tribunal under this Act.”
(Emphasis supplied)
30. Section 15 of the RCT Act bars the jurisdiction of courts and other
authorities from entertaining or exercising any power in respect of
matters referred to in Section 13 of the RCT Act. The said provision
reads as under: -
“15. Bar of jurisdiction. —
On and from the appointed day, no court or other authority
shall have, or be entitled to, exercise any jurisdiction,
powers or authority in relation to the matters referred to
in sub-sections (1), (1A) and (1B) of section 13.”
31. Section 16 of the RCT Act provides that an application may be made
to the Railway Claims Tribunal for any claim of compensation or
refund from the railway administration as provided under Section
13 of the said Act. The said provision reads as under: -
“16. Application to Claims Tribunal. —
(1) A person seeking any relief in respect of the matters
referred to in sub-section (1) or sub-section (1A) of
section 13 may make an application to the Claims
Tribunal.
(2) Every application under sub-section (1) shall be in
such form and be accompanied by such documents
or other evidence and by such fee in respect of the
filing of such application and by such other fees for
the service or execution of processes as may be
prescribed:
Provided that no such fee shall be payable in respect of
an application under sub-clause (ii) of clause (a) of sub-
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section (1) or, as the case may be, sub-section (1A)] of
section 13.”
32. Section 23 of the RCT provides for a statutory appeal on both a
question of fact and law, to the High Court against any order passed
by the Railway Claims Tribunal. The said provision reads as under: -
“23. Appeals. —
(1) Save as provided in sub-section (2) and notwithstanding
anything contained in the Code of Civil Procedure,
1908 (5 of 1908) or in any other law, an appeal shall
lie from every order, not being an interlocutory order,
of the Claims Tribunal, to the High Court having
jurisdiction over the place where the Bench is located.
(2) No appeal shall lie from an order passed by the
Claims Tribunal with the consent of the parties. (3)
Every appeal under this section shall be preferred
within a period of ninety days from the date of the
order appealed against.”
33. Section 17 sub-section (2) of the RCT Act inter-alia provides that
no application for claim of compensation or refund from the railway
administration shall be entertained by the tribunal, until the expiry of
three-months from the date on which the notice of claim was made
in accordance with Section 78B of the erstwhile Act, 1890 (now
Section 106 of the Act, 1989). The said provision reads as under: -
“17. Limitation. —
(1) The Claims Tribunal shall not admit an application
for any claim—
(a) under sub-clause (i) of clause (a) of sub-section
(1) of section 13 unless the application is made
within three years from the date on which the
goods in question were entrusted to the railway
administration for carriage by railway;
(b) under sub-clause (ii) of clause (a) of sub-section
(1) 3[or, as the case may be, sub-section (1A)]
of section 13 unless the application is made
within one year of occurrence of the accident;
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(c) under clause (b) of sub-section (1) of section
13 unless the application is made within three
years from the date on which the fare or freight
is paid to the railway administration:
Provided that no application for any claim referred
to in sub-clause (i) of clause (a) of sub-section (1) of
section 13 shall be preferred to the Claims Tribunal
until the expiration of three months next after the
date on which the intimation of the claim has been
preferred under section 78B of the Railways Act.
(2) Notwithstanding anything contained in sub-section (1),
an application may be entertained after the period
specified in sub-section (1) if the applicant satisfies
the Claims Tribunal that he had sufficient cause for
not making the application within such period.”
ii. Scope of Section 106 of the Railways Act, 1989
34. In the present lis, we are concerned with Section 106 of the Act,
1989, which is pari-materia to Section 78B of the erstwhile Act, 1890.
Section 106 deals with notice for claim of compensation and refund
of overcharge. The said provision reads as under: -
“106. Notice of claim for compensation and refund of
overcharge. –
(1) A person shall not be entitled to claim compensation
against a railway administration for the loss,
destruction, damage, deterioration or non-delivery
of goods carried by railway, unless a notice thereof
is served by him or on his behalf,—
(a) to the railway administration to which the goods
are entrusted for carriage; or
(b) to the railway administration on whose railway the
destination station lies, or the loss, destruction,
damage or deterioration occurs.
within a period of six-months from the date of
entrustment of the goods.
(2) Any information demanded or enquiry made in writing
from, or any complaint made in writing to, any of the
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Union of India v. M/s Indian Oil Corporation Ltd.

railway administrations mentioned in sub-section (1)
by or on behalf of the person within the said period
of six months regarding the non-delivery or delayed
delivery of the goods with particulars sufficient to
identify the goods shall, for the purpose of this section,
be deemed to be a notice of claim for compensation.
(3) A person shall not be entitled to a refund of an
overcharge in respect of goods carried by railway
unless a notice therefor has been served by him or
on his behalf to the railway administration to which the
overcharge has been paid within six months from the
date of such payment or the date of delivery of such
goods at the destination station, whichever is later.”
35. A close reading of the aforesaid provision would indicate that Section
106 of the Act, 1989 is in two-parts and deals with and encompasses
two distinct types of claims that may be made or sought against the
railway administration by way of a notice: -
(i) First¸ the claims towards the ‘compensation’ from the railway
administration which has been provided under Section 106
sub-section (1). The compensation may be sought in respect of
any loss or damage or destruction caused to the goods which
were being carried by the railway.
(ii) Secondly, the claims towards the refund of any ‘overcharge’
that has been levied in respect of any goods which were being
carried by the railways, and this has been provided under
Section 106 sub-section (3).
36. Thus, Section 106 of Act, 1989 contains the statutory provisions that
enables any person to make a claim from the railway administration,
either for (i) compensation OR for (ii) refund of overcharge, in respect
of any goods which were being carried by the railway by sending
a notice of claim.
37. Apart from containing the enabling provision for making a claim,
Section 106 further provides when such a claim may be made.
Section 106 sub-section (1) provides that a claim for compensation
may be made where there has been a loss or damage or destruction
or deterioration or non-delivery of the goods that were being carried
by the railway. Whereas, Section 106 sub-section (2) provides that a
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claim for refund may be made where there has been an overcharge
in respect of the goods carried and the said overcharge was paid to
the railway administration.
38. Lastly, Section 106 also provides how a claim may be made and the
mode & manner in which the notice must be made by stipulating a
pre-condition in the form of a prescribed time-limit for making any
claim thereunder: -
(i) Section 106 sub-section (1) prescribes twin-conditions for a
Notice of Claim for Compensation and provides that such notice
must be made within a period of 6-months from the date of
entrustment of goods AND the notice must be served to the
Railway Administration to whom the goods were entrusted.
(ii) Similarly, Section 106 sub-section (3) also stipulates twin-
conditions for making a Notice of Claim for Refund of Overcharge
and provides that such notice must be made within a period of
6-months from either the date of payment of such overcharge
or the date of delivery of the goods in respect of which the
overcharge was paid AND that the notice must be served to
the railway administration to whom the overcharge was paid.
39. Thus, a statutory time-period of 6-months has been provided for
making a notice of claim under Section 106 of the Act, 1989, and
if the notice of claim is not made within the stipulated period, then
the claim becomes time-barred.
40. The High Court of Gujarat in its decision in Shah Raichand Amulakh
v. Union of India & Ors. reported in (1971) 12 GLR 93 had observed
that the object behind the time-limit prescribed under Section 78B of
the 1890 Act (now Section 106 of the Act, 1989) is to prevent stale
or dishonest claims from being made, which if otherwise allowed
would make it difficult to enquire into their merits due to lapse of
time. The relevant observations read as under: -
“3. [...] the object of service of notice under this provision
clearly is to enable the railway administration to make an
inquiry and investigation as to whether the loss, destruction
or deterioration was due to the consignor’s laches or to the
wilful neglect of the railway administration and its servants
and further to prevent stale and possibly dishonest claims
being made when, owing to delay, it may be practically
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Union of India v. M/s Indian Oil Corporation Ltd.

impossible to trace the transaction or check the allegations
made by the consignor or the consignee. It is, therefore,
apparent that the provision requiring that notice of claim
must be given within six months even where the claim
is for refund of an overcharge in respect of animals or
goods carried by railway is intended to prevent stale and
perhaps dishonest claims being made when, by reason
of lapse of time, it may not be possible to inquire and find
out whether the claim made is well-founded or not. [...]”
(Emphasis supplied)
41. Shah Raichand Amulakh (supra), further held that the term
“overcharge in respect of carriage of goods” used in Section 78B of
the 1890 Act (now Section 106 of the Act, 1989) means and includes
all such charges that are related to the railway’s carrier business and
those which are incidental to the carriage of the goods by railway
irrespective of whether they are incurred prior to or subsequent to
the railway transit, and thus would include loading and unloading of
goods. The relevant observations read as under: -
“3. [...] To bring the claim for refund within the mischief
of the section, the overcharge must be in respect of
goods carried by railway. The words “carried by railway”
qualify goods and if any overcharge is recovered in
respect of goods which satisfy this description, it would
be “overcharge” by the railway administration in respect
of demurrage and wharfage charges, it is according to the
plain and natural meaning of the words, an overcharge in
respect of goods which are carried by railway. 1 do not
think it is possible to limit the ambit and coverage of the
section by reading the words “overcharge in respect of
goods carried by railway” as indicating that the overcharge
must be in respect of carriage of the goods. To read these
words in such a manner would be to refuse to give effect
to their plain natural meaning and to rewrite the section by
substituting some such words as “overcharge in respect
of carriage of goods.” That would be clearly impermissible
under any cannon of construction.
4. [...] Demurrage and wharfage charges are thus
clearly terminal charges and though it is true that they
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are charges in respect of the period subsequent to
the completion of the transit, all the same, they are
incidental to the business of the railway administration
as a carrier. These charges are, therefore, not unrelated
to the business of a carrier carried on by the railway
administration. The railway administration makes these
charges because there is delay in unloading the wagon or
removing the goods from the platform. These are clearly
charges in respect of the goods carried by railway as
much as freight and other charges. If, therefore, there
is any overcharge made by the railway administration
in respect of demurrage and wharfage charges, a claim
for its refund would clearly come within the scope and
ambit of Section 77. It would be a claim for refund of an
overcharge in respect of goods carried by railway within
the meaning of that section.”
(Emphasis supplied)
42. The Orissa High Court in Union of India & Ors. v. Steel Authority
of India Ltd. reported in (1996) SCC OnLine Ori 60, while examining
Section 78B of the Act, 1890, made the following pertinent
observations which are reproduced as under: -
“12. [...] What this section provides for is, apart from
claim for compensation for the loss, a claim for refund of
overcharge to a person in respect of animals or goods
carried by the Railways. The condition precedent for making
such a refund is that the person should have preferred
a claim in writing for such overcharge or compensation
within six months of the date of delivery of the animals or
goods for being carried by the Railway.”
(Emphasis supplied)
43. Thus, it can be seen from above that when it comes to a Notice for
Claim for Refund of Overcharge under Section 106(3) of the Act,
1989 the following conditions must be fulfilled: -
a. Claim must be for refund of an ‘Overcharge’,
b. Overcharge must have been paid to the Railway Administration
in respect of the goods carried by the railway
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Union of India v. M/s Indian Oil Corporation Ltd.

c. Notice must be issued within 6-months from the date of payment
or delivery of goods for which overcharge was paid, and
d. Notice must be served to the concerned railway administration
to whom the overcharge was paid.
44. Thus, the rigours of Section 106 sub-section (3) i.e., the 6-month time-
period for making a notice of claim, is only attracted, when the refund
is for an overcharge. Whenever, an application is made under Section
16 of the RCT Act for refund, what needs to be seen is whether the
same is for a refund of an overcharge or not? If the claim is for an
overcharge, Section 106 sub-section (3) would be applicable.
a. What is meant by an “Overcharge”?
45. At this stage, it would be apposite to understand what is meant by
the term “overcharge” used in Section 106 of the Act, 1989. The
term “overcharge” has neither been defined in the Act, 1989 nor the
erstwhile Act, 1890. The term “overcharge” is derived from the word
‘charge’ prefixed by the word ‘over’ and means “something more than
the correct amount or more than a certain limit”. The Black’s Law
Dictionary has defined “overcharge” as follows [See: Henry Campbell
Black on ‘Black’s Law Dictionary’, 4th Edn., 1968 at Pg. 1610]: -
“an exaction, impost, or incumbrance beyond what is just
and right or beyond one’s authority or power.”
46. The Law Lexicon has defined the term “overcharge” as “a charge
of a sum, more than is permitted by law”. [See, P. Ramanatha Aiyar
on ‘The Law Lexicon’, 2nd Edn., 1997 at Pg. 1389].
47. The term “overcharge” as used in Section 78B of the Act, 1890 (now
Section 106 of the Act, 1989) was first interpreted by the Gujarat
High Court in Shah Raichand Amulakh (supra) to mean any charge
in excess of what is prescribed or permitted or due by law. It was
further held, that for a sum to be an overcharge, it must be of the
same character as the charge itself or of the same genus of charge.
Accordingly, the High Court held that the demurrage and wharfage
charges that had been levied on a consignment in excess of what
was permissible under the law was an overcharge under Section
78B. The relevant observations read as under: -
“2. [...] “Overcharge” is not a term of Article It is an
ordinary word of the English language which according
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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 of 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.”
(Emphasis supplied)
48. In yet another decision of the Gujarat High Court in Union of India
v. Mansukhlal Jethalal reported in (1974) SCC OnLine Guj 12 the
scope of Section 78B of the Act, 1890 (now Section 106 of the Act,
1989) came to be examined. In the said case, the Railway besides
the freight was levying new charge in the form of shunting charges
etc. It was contended that since, the freight encompassed the
terminal charges for shunting, the additional charges being levied
was arbitrary and illegal. The High Court held that since the additional
charges were not being levied in excess of the prescribed charges,
but were an altogether a different charge, the same could not be
termed as an overcharge and thus, Section 78B of the Act, 1890
was not attracted and no notice of claim was required. The relevant
observations read as under: -
“2. The trial Court has held that it has got jurisdiction to
entertain this suit. It is also held that no claim notice as
contemplated under Section 78-B of the Indian Railways
Act, 1890 (which will be hereinafter referred to as “the Act”),
was necessary as it was not a case of recovery of over
charges. Non-giving of such a notice, therefore, was not
fatal to the suit. The material averments made in the plaint
are, that the plaintiff booked salt from Kuda Salt Siding
Station, on the line of Western Railway Administration,
owned and represented by the Union of India (original
defendant), to salt merchants at Dhrangadhra and at
various other stations. That the said salt consignments
are booked in wagon loads from Kuda Salt Siding Station.
In para 12 it is averred that since 1-6-1961 the Western
Railway Administration, in addition to charging usual
freight on goods, traffic from and to Kuda Salt Siding
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Station, wrongly, illegally, arbitrarily and unreasonably
levied an additional new charge by- way of siding charges
or shunting charges or placement of wagon charges or
removal of wagon charges. In paras 13 to 18, reference is
made regarding the increases made, in those charges from
time to time and such collections made. In para 26, it is
averred that the, defendant Western Railway Administration
charged freight on the wagon load salt consignment of the
plaintiff from Kuda Salt Siding Station to destination and
the said freight includes terminal charges for shunting,
placement and removal of wagons at the place where, the
salt, to be loaded, is stacked and hence the defendant-
Western Railway Administration, in addition to freight, is not
entitled to levy new charge with effect from 1-6-61 either
as siding charges or as shunting charges or as placement
charges or as removal charges or under the pretext of any
other charge and the levy of the said new charge from the
plaintiff with effect from 1-6-61 is wrong all the arbitrary,
unauthorised and unreasonable and excessive and the
plaintiff is entitled to the refund of this new charge paid by
him to the defendant-Western Railway Administration. This
also amounts to double taxation. In para 28 of the plaint,
plaintiff actually refers to the total amount recovered in that
manner. In the relief clause 33 prayer made is to recover
the suit amount which includes the amount it paid by way
of new charges as said earlier, and the notice charges,
and it is in terms stated that it is a claim for refund of
new charger by way of siding charges, shunting charges,
placement charges received by the defendant Western
Railway Administration from the plaintiff.
xxx xxx xxx
27. In the instant case, it is not the opponent’s case that
charges in excess of the prescribed charges were recovered
from him and he wants refund of such charges. What he
claims is that the railway administration had collected
such charges illegally, arbitrarily and unreasonably. These
charges referred to as ‘new charges’ were levied by the
railway administration from time to time and such collections
made in the past are challenged on the aforesaid grounds.
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In my opinion, they cannot be termed ‘overcharges’, so as
to attract the provisions of Section 78-B [...]”
(Emphasis supplied)
49. In Birla Cement Works v. G.M. Westerm Railways & Anr. reported
in (1995) 2 SCC 493, this Court held that the excess freight charged
by mistake due to a wrong calculation of distance was an overcharge
and thus, was covered by Section 78B of the 1890 Act (now Section
106 of the Act, 1989). The relevant observations read as under: -
“2. The principal contention raised by the petitioner is that
it had discovered the mistake when the railway authorities
confirmed by their letter dated 12-10-1990 that they had
committed a mistake in charging excess freight on wrong
calculation of distance. The limitation starts running from the
date of discovery of mistake and, therefore, stands excluded,
by operation of Section 17(1)(c) of the Limitation Act, 1963
(Act 21 of 1963) and that Section 78-B has no application
to the facts in this case. In consequence, the High Court
and the Tribunal have committed error of law in rejecting
the claim for refund. We find no force in the contention.
xxx xxx 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 animals 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 facts 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 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.”
(Emphasis supplied)
[2024] 3 S.C.R. 1095

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

50. In Steel Authority of India Ltd. (supra), the goods were booked to
be carried through a longer-route and the freight was accordingly
charged for the long route. However, the goods instead were
dispatched through the shorter route. The Orissa High Court held
that overcharge is anything charged in excess of what is actually to
be charged for a particular thing. The High Court observed that as
the goods had been booked for the longer route, the freight was also
payable for the longer route. Since, no freight in excess of what was
payable was realized, the High Court held that the claim for refund
of the difference in freight charges was not one of overcharge. The
relevant observations read as under: -
“4. [...] the coal imported at Visakhapatnam Port for carriage
to Rourkela Steel Plant was required to be booked and
carried by the longer route covering 1082 kilometres instead
of by the shorter route of 667 kilometres. According to
the plaintiff, in view of the rationalisation scheme and the
general order, it had no choice but to pay freight for the
longer route, as booking could not be for carriage over
the shorter route.
5. It is the further case of the plaintiff that in or about
April, 1987, an officer came to know that some of the
rakes booked were despatched to Rourkela by the shorter
route (covering a distance of 667 kilometres) though
weight charges were recovered for carriage by the longer
rationalised route (covering a distance of 1082 kilometres).
On further enquiry made at different junctions, it was
gathered that during the period 15-4-1986 to 28-11-1986
and 5-1-1987 to 28-2-1987, a large quantity of imported
coal booked from Visakhapatnam to Bondamunda had
in fact been carried, not by the rationalised route but by
the shorter route. On coming to know about the aforesaid
fact, alleges the plaintiff, it lodged a demand for refund of
the differential amount of Rs. 1,32,87,749/-, but the same
was turned down. [...]
xxx xxx xxx
13-A. The word “overcharge” has not been defined in the
Act. Therefore, the common parlance meaning has to be
taken to explain its meaning. In common parlance, the
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simple meaning of “overcharge” is anything charged in
excess of what is actually to be charged for a particular
thing. Taking this to be the meaning of “overcharge”, it has
to be seen as to whether the claim of the respondent is
or is not for refund of overcharge. Admittedly, the goods
were booked for being carried over the rationalised route
which covers a distance of 1082 kilometres. It is neither
the respondent’s case nor the appellants’ case that what
was charged towards freight was in excess of what was
payable for the distance of 1082 kilometres. In other words,
the respondent was not “overcharged” because no freight
in excess of what was payable for 1082 kilometres was
realised.
14. To appreciate the meaning of “overcharge”, as
illustration from the facts of the present case would, I feel,
be appropriate. Say for example, ‘A’ had booked the coal
for being carried by the shorter route covering a distance
of 667 kilometres but freight was charged from him for the
longer route covering a distance of 1082 kilometres. Here,
since the coal was booked to be carried by the shorter
route, freight ought to have been determined accordingly.
So, any amount recovered from ‘A’ towards freight in
excess of what was legally payable for the distance of
667 kilometres would be an ‘overcharge’ because what
was recovered from him was over and above what was
actually payable for the distance of 667 kilometres over
which goods were booked. Alternatively, if ‘A’ had booked
the goods over the longer route covering a distance of 1082
kilometres and freight was charged for such distance but
carriage was over the shorter route covering distance of
667 kilometres, in such a situation, if ‘A’, on coming to know
that though he had booked the goods to be carried over
the longer route and had paid the freight accordingly yet
as the goods were carried over the shorter route, claims
for a refund, this claim would not be one for “overcharge”
for the simple reason that he had booked the goods by
a particular route and paid the freight that was payable
for that distance. The claim of the respondent in the
present case is of a like nature. Thus, under no stretch
[2024] 3 S.C.R. 1097

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

of imagination can it be said that its claim is for refund of
over-charge. The contention of the learned counsel for
the appellants that the claim made by the respondent for
refund of overcharge, therefore, must fail.”
(Emphasis supplied)
51. In Rajasthan State Electricity Board v. Union of India reported
in AIR 2001 Bom 310, the freight was initially being charged on an
inflated distance rate as fixed by the Central Government. Later the
freight was fixed to be charged on the actual distance, however, the
railway continued charging freight as per the old inflated distance
under a mistaken belief that the same was still applicable. The High
Court prima-facie was of the view that the refund of the difference in
freight was an overcharge and thus barred by Section 106(3) of the
Act, 1989. However, the High Court relegated the petitioners therein
to avail the statutory remedy and dismissed the writ petition leaving
all issues open for determination by the Railway Claims Tribunal.
The relevant observations read as under: -
“2. The facts of the case, which are not in dispute, are:—
Petitioners, Rajasthan State Electricity Board, are an
autonomous public body, wholly owned and controlled by
the State Government of Rajasthan. For the generation
of electricity at their Thermal Power Station at Kota
(Rajasthan), coal is transported from collieries situate in
areas covered by the Eastern and South Eastern Railways
to a station called Gurla, situate in Kota Division of the
Western Railway. Between the 4th March, 1992 and 31st
December, 1992, the Petitioners booked 248 rakes for
carrying coal to Gurla. The routes on which these wagons
were transported include a section of Central Railway, viz.,
Katni-Singrauli. In exercise of powers under section 71
of the Railways Act, 1989, the Central Government had
imposed, for movement of coal wagons over this section
“inflated distance rate” of freight. Consequently, for the coal
wagons moved by the petitioners, the freight included the
inflated distance rate for this particular section of Katni-
Singrauli. For the wagons booked by the petitioners, freight
was paid at Gurla Station of Kota Division of the Western
Railway. The Railway Authorities charged the petitioners
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freight on the basis of inflated distance rate over Katni-
Singrauli section upto 31st December, 1992, but from the
1st January, 1993, the Railways started charging freight
on the basis of actual distance for Katni-Singrauli section,
instead of inflated distance rate, and the petitioners paid
the charges on that basis.
xxx xxx xxx
9. It was submitted on behalf of the Petitioners that sub-
section (3) of section 106 of the Railways Act, 1989 is
not attracted in the facts of this case-inasmuch as there
was no dispute regarding the over-charge. The instant
case was a case of collection of inflated distance charge
without authority of law. It was submitted that there is a
distinction between over-charge and a wrong charge. It
was, therefore, submitted that the Petitioners were not
required to give notice as contemplated by sub-section
(3) of section 106 of the Railways Act, 1989, since the
claim was not a claim for refund of an overcharge in
respect of goods carried by railway. On the other hand,
the respondents contend that this clearly a case where
the Petitioners claim refund of an over-charge in respect
of goods carried by railway, and, therefore, admittedly, the
Petitioners claim that they have been charged more than
what they should have been charged because the circular
under which inflated distance charge was levied had been
withdrawn, and was not operative during the period in
question. Despite this, the Petitioners were compelled to
pay the inflated distance charge.
10. In our view, the submission urged on behalf of
the respondents must prevail, and the same is clearly
supported by the principles laid down by the Apex Court
in Birla Cement Works v. G.M., Western Railways, (1995)
2 SCC 493 : AIR 1995 SC 1111. The petitioner therein
manufacturer of Cement at Chittorgarh in Rajasthan, had
transported cement to various destinations through railway
carriages. Prior to 3rd May, 1989, the Petitioner got the
cement transported through meter gauge from the railway
siding at Chanderia. After conversion into broad gauge the
railway siding was at Difthkola Chittor Broad Gauge Rail
[2024] 3 S.C.R. 1099

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

Link. Consequently, 34 kilometres’ distance was added
to levy freight charges. Thereafter, between May-June,
1989 and March, 1990 the Petitioner had booked various
consignments of cement and transported them to diverse
destinations and paid the freight charges. Later, on January
21, 1991, the Petitioner had sent a notice to the Western
Railway under section 78-B of the Indian Railway Act,
1890, claiming refund of different amounts. Since it was
rejected, the Petitioner laid a claim under section 16 of the
Act before the Railway Claims Tribunal, which dismissed
the petition holding the same to be barred under section
78-B of the Indian Railway Act, 1890.
xxx xxx xxx
16. [...] Having regard to the scheme of the Act, we
are satisfied that it provides a complete mechanism for
correcting any error, whether of fact or law, and that
not only a remedy is provided by way of claim before a
Tribunal, but also a further appeal to this Court, which is
a Civil Court. It would, therefore, not be appropriate for
this Court, in exercise of its writ jurisdiction, to give relief,
which authority, in law, has been vested in the Claims
Tribunal under section 13 of the Railway Claims Tribunal
Act, 1987.
xxx xxx xxx
18. We, therefore, find no merit in this Writ Petition, and
the same is accordingly dismissed, and Rule discharged,
but without prejudice to the right of the petitioners to seek
remedy before the appropriate forum, if so advised.”
(Emphasis supplied)
52. The aforesaid decision of the Bombay High Court came to be
challenged before this Court. A 2-Judge Bench of this Court in
Rajasthan State Electricity Board v. Union of India reported in
(2008) 5 SCC 632, set-aside the High Court’s order and held the
appellant therein to be entitled to refund of the freight charges. The
relevant observations read as under: -
“4. In the present case between 4-3-1992 and 31-12-1992
the appellant had booked rakes for carrying coal to Gurla.
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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)
53. 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: -
[2024] 3 S.C.R. 1101

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

“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)
54. 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
[2024] 3 S.C.R. 1103

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

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)
55. 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)
56. 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
[2024] 3 S.C.R. 1105

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

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)
57. 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
[2024] 3 S.C.R. 1107

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

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)
[2024] 3 S.C.R. 1109

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

58. 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)
59. 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’
60. 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.
61. 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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62. 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.
63. 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)
64. 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.
65. 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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66. 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”.
67. 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.
68. 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’.
69. 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.
70. 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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71. 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.
72. 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.
73. 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.
74. 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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75. 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.
76. 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.
77. 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.
78. 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).
79. 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)
80. 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.
81. 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.
82. 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.
83. 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.
84. 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.
85. 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.
86. 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.
87. 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.
88. 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.
89. 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)
90. 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).
91. 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.
92. 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
[2024] 3 S.C.R. 1125

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

to bring quietus to stale and false claims of refunds made belatedly
due to the laches & lack of vigilance on part of the claimant.
93. 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’.
94. 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.
95. 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.
96. 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.
97. 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.
98. 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.
99. 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.
100. 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.
101. 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
[2024] 3 S.C.R. 1127

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

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).
102. 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.
103. 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.
104. 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.
105. 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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106. 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
[2024] 3 S.C.R. 1129

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

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,
[2024] 3 S.C.R. 1131

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

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.
107. 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?
108. 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.
109. 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.
110. 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.
111. 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.
112. 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.
113. 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.
[2024] 3 S.C.R. 1133

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

114. 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.
115. 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.
116. 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.
117. 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.
118. 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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119. 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.
120. 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.
121. 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.
122. 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.
123. The respondents have more than sufficiently showcased, how and why
the chargeable distance of 444 km appears to be illegal. However,
[2024] 3 S.C.R. 1135

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

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.
124. 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
125. 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.
[2024] 3 S.C.R. 1137

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

126. 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.
127. 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.
128. 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.
129. 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.
130. 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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131. 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.
132. 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.
133. 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.
134. 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.
135. 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
[2024] 3 S.C.R. 1139

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

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)
136. 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
137. 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.
1140 [2024] 3 S.C.R.

Digital Supreme Court Reports

(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.
138. 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.
139. In the result, the appeals filed by the appellant railway fails, and are
hereby dismissed.
140. The parties shall bear their own costs.
141. Pending application(s), if any, also stand disposed of.

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