Safiya Malik

The High Court of Jammu and Kashmir and Ladakh Single Bench of Justice Moksha Khajuria Kazmi directed the Food Corporation of India (FCI) to refund Rs. 7,93,456 to a transport contractor, holding that the recoveries made prior to the actual remeasurement of distances were contrary to the decisions of the Grievance Redressal Committee (GRC) and applicable policy guidelines. The Court concluded that these deductions, which were executed retrospectively, lacked legal justification and violated the principles established in the contract.

The directive emerged in response to a writ petition challenging FCI’s deductions from freight bills and security deposits under road transport contracts. The petitioner alleged that FCI unilaterally revised route distances during the validity of existing contracts, resulting in significant financial deductions. Upon examining the contractual provisions and communications between the parties, the Court found that revised distances were applied retroactively, a practice unsupported by the terms of the agreement. The Court ordered FCI to refund the wrongly deducted amount within six weeks from the date of judgment. In case of non-compliance, interest at 6% per annum would apply from the date of the judgment until the refund is fully paid.

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The petitioner, one of the partners of a registered partnership firm operating under the name M/s Durga Enterprises, entered into three separate transport contracts with the Food Corporation of India (FCI). These contracts were awarded following e-tender notices issued on 26.12.2016, 13.11.2017, and 22.06.2018 for transportation routes from FSD New Godown Jammu to PEG Ramban, FSD New Godown Jammu to FSD Mir Bazar, and Rail Head Udhampur to PEG Doda.

The terms included distance-based freight charges calculated on a Rs./MT/KM basis. Upon successful bidding, the petitioner commenced the work. The respondents, up until July 2019, accepted and paid invoices based on distances originally stated in the tender documents. However, from July 2019 onwards, FCI initiated recoveries against these contracts on the basis of revised, reduced distances.

The petitioner alleged that no clause in the Model Tender Form (MTF) permitted unilateral remeasurement of distances during the subsistence of a contract. Further, they contended that neither prior notice nor an opportunity to be heard was provided. They raised objections via representations dated 23.12.2019 and 13.06.2020. A collective representation from transport contractors also supported the petitioner’s claim.

In response, the Regional Office of FCI on 05.06.2020 stated that distance variations were not to be applied during contract periods, except in cases involving infrastructural developments significantly altering routes. Despite this, FCI revised distances retrospectively and made deductions totalling Rs. 76,92,578 from the petitioner’s freight bills and security deposits.

The petitioner approached the Grievance Redressal Committee (GRC) and later submitted a representation to review the GRC’s June 2022 decision. However, the deductions remained largely unaltered. FCI justified its actions by citing Clause XVIII(a)(v) of the MTF, which allows distance verification by authorized officers. It also referenced FCI circulars calling for biannual remeasurements in March and September.

The petitioner continued to assert that such clauses were not applicable retroactively and that deductions for past services based on future assessments were unjustified. Notably, the petitioner had accepted a previous reduction in distance (from 170 km to 139 km) without dispute, which was later used by FCI to argue implied consent.

Ultimately, the recoveries made were itemized as follows:

• Rs. 4,78,177 from FSD Jammu to PEG Ramban for the period 12.09.2018 to 15.03.2019;

• Rs. 2,87,477 from FSD Jammu to FSD Mir Bazar for the period 01.04.2019 to 18.05.2019;

• Rs. 27,802 from Rail Head Udhampur to PEG Doda for the period 01.04.2019 to 25.04.2019.

The total disputed recovery stood at Rs. 7,93,456, which the petitioner sought to be refunded.

Justice Moksha Khajuria Kazmi examined the terms of the Model Tender Form, communications between FCI offices, decisions of the Grievance Redressal Committee, and legal precedents cited by both parties.

"The petitioner’s case rests heavily on the contention that there is no express clause in the Model Tender Form (MTF) permitting unilateral remeasurement of distances during the subsistence of a contract."

However, the Court observed that: "Clause XVIII(a)(v) of the MTF stipulates that the distance shall be reckoned as fixed by the Chief Engineer, PWD, or an officer nominated by him, or by the General Manager or an officer acting on his behalf, and that such measurement, once verified and rounded off to the nearest kilometer, shall be final and binding on the contractor."

Further, the Court noted that: "The GRC, vide its decisions dated 09.06.2022 and 25.05.2023, has upheld the authority of FCI to periodically reassess distances in view of infrastructural developments and relevant policy circulars."

Still, the Court drew a distinction regarding retrospective application. It stated: "The revised distances should be applied only from the date of actual remeasurement, unless there is concrete evidence of earlier structural changes."

Regarding earlier conduct, the Court held: "The petitioner accepted the revised distance from 170 km to 139 km without protest. This amounts to acceptance of FCI’s authority to remeasure distances."

However, this did not justify applying remeasurements to periods prior to the date of reassessment. On this aspect, the Court cited the Supreme Court’s judgements in State of Maharashtra v. Digambar and Rajasthan State Industrial Development and Investment Corporation v. Diamond & Gem Development Corporation Ltd., stating that parties cannot accept benefits under a contract and later dispute its terms, but must also be protected from unilateral modifications contrary to agreed procedures.

Responding to the petitioner’s reliance on Suresh Kumar Wadhwa v. State of Madhya Pradesh, the Court stated: "There is no alteration of the terms and conditions of the contract. Clause XVIII (a)(v) clearly authorizes distance assessment."

Nonetheless, the retrospective recovery lacked justification. The Court found that FCI’s own affidavits and communications supported the petitioner’s grievance on the issue of timing.

"The revised distances must be applied from the date of remeasurement and not from earlier dates. Accordingly, the petitioner is entitled to a refund of Rs. 7,93,456."

The Court concluded that while FCI was within its rights to reassess distances under Clause XVIII(a)(v) of the MTF, the retrospective application of such assessments for recovery purposes was unlawful.

Accordingly, the Court issued the following directions: "Since the recoveries made prior to the actual remeasurement dates are contrary to the GRC’s findings and policy guidelines, as such the petitioner is entitled to refund of Rs. 7,93,456."

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It further directed: "This Court deems it appropriate to dispose of the writ petition by directing the respondent-FCI to refund to the petitioner a sum of Rs. 7,93,456/- (Rupees Seven Lakh Ninety-Three Thousand Four Hundred Fifty-Six only), being the excess amount recovered. Ordered accordingly."

The Court stipulated a timeline for compliance: "The said amount shall be paid to the petitioner within a period of six (6) weeks from the date of this judgment. In case of failure, the amount shall carry interest at the rate of 6% per annum from the date of this judgment until actual payment."

Advocates Representing the Parties:

For the Petitioners: Mr. P.N. Raina, Senior Advocate with Mr. J. Hamal, Advocate

For the Respondents: Mr. R.K. Gupta, Senior Advocate with Mr. Ravi Abrol, Advocate

Case Title: M/S Durga Enterprises v. Food Corporation of India and Others

Case Number: WP(C) No. 1109/2023

Bench: Justice Moksha Khajuria Kazmi