Food Corporation of India v. Abhijit Paul 2022 SCC OnLine SC 1605

In this case Demurrage was not held to be a part of the ‘Charge’ a clause in the contract between the parties.

In this case the Food Corporation of India (FCI) entered into a contract with the respondent for the delivery of food grains for a period of 2 years.
The contract between the parties was discharged in the year 2014.
In 2015, FCI asked the respondent to pay demurrage imposed by railways on FCI.
FCI contented that due to the respondent’s inability to provide trucks at the railway sidings FCI was prevented from timely unloading of food grains and resulted in demurrage which shall now be payable by the respondent.
Respondent filed a writ petition before the High Court of Tripura where the court held that FCI can only claim damages for which the respondent is responsible under breach of duty and not otherwise as provided under Section 73 of the Indian Contract Act, 1872.
It was also observed that demurrage cannot be unilaterally determined by the FCI, and a civil suit must be filed for its claim.
Aggrieved by the decision of the High Court both the parties filed an appeal to the divisional bench of the High Court which dismissed their appeal.
This dismissal led to an appeal to the Supreme Court by the appellant.

Whether the clause enabling FCI to recover ‘charges’ includes recovery of ‘demurrage’ as per the contract?

The Supreme Court after analyzing and referring to the different clauses of the contract observed that charges does not explicitly inclusive of demurrage.
It was further said that when there is any ambiguity related to the interpretation of any of the clauses of the contract between the parties the intent behind framing of such clause must be determined.
The Supreme Court clearly defined and explained latent ambiguity as in contract there is a possibility that a contract appears to be free from any ambiguity but when it is interpreted it may have many outcomes.

The Supreme Court held that the clause “charges” does not include “demurrage” and therefore FCI cannot claim the same from the respondent.