Penal Charges Can Be Levied Even After Delivery— Supreme Court Clarifies Scope of Section 66 in Railway Misdeclaration Cases

Case Summary:

• Case Title: Union of India v. M/s Kamakhya Transport Pvt. Ltd. & Others

• Citation: 2025 INSC 805

• Date of Judgment: 5th June 2025

• Coram: Hon’ble Mr. Justice Sanjay Karol and Hon’ble Mr. Justice Prashant Kumar Mishra

• Appellant: Union of India

• Respondents: Kamakhya Transport Pvt. Ltd., C.M. Traders, Vinayak Logistics

• Acts & Sections Involved:

  • Railways Act, 1989: Sections 66, 73, 74, 78, 83

  • Railway Claims Tribunal Act, 1987: Section 16

• Counsel:

  • For the Appellant: Learned Additional Solicitor General

  • For the Respondents: Learned Counsel on Record

• Judgments Cited:

  • Union of India v. Megha Technical & Engineers Pvt. Ltd. (Gauhati High Court)

  • Jagjit Cotton Textile Mills v. Chief Commercial Superintendent N.R. & Ors. [(1998) 5 SCC 126]

Introduction

In a significant pronouncement that delineates the boundaries of the Indian Railways’ authority under the Railways Act, 1989, the Supreme Court in Union of India v. Kamakhya Transport Pvt. Ltd. & Others (2025 INSC 805) upheld the Railways’ power to impose penal charges for misdeclaration of goods, even after the goods have been delivered.

The judgment, delivered by Hon’ble Mr. Justice Sanjay Karol and concurred by Hon’ble Mr. Justice Prashant Kumar Mishra, reverses the decision of the Gauhati High Court and reaffirms the interpretation of Section 66 of the Railways Act, with wider implications for transport litigation.

Background of the Dispute

The genesis of the matter lay in a series of demand notices issued by the Indian Railways against the respondents—M/s Kamakhya Transport Pvt. Ltd., C.M. Traders, and Vinayak Logistics—for misdeclaration of goods transported by rail. These notices, dated between October 2011 and April 2012, were raised after the consignments had already been delivered.

Although the respondents complied with the demands under protest, they approached the Railway Claims Tribunal, Guwahati, seeking refunds under Section 16 of the Railway Claims Tribunal Act, 1987. They contended that raising punitive demands post-delivery violated Sections 73 and 74 of the Railways Act, 1989.

The Tribunal allowed the claims, directing the refund of over ₹27 lakhs in total, along with 6% interest per annum. This decision was later affirmed by the Gauhati High Court, prompting the Union of India to approach the Supreme Court.

Key Legal Issue

Whether the Indian Railways is empowered under Section 66 of the Railways Act, 1989, to raise penal charges for misdeclared goods even after the goods have been delivered?

Appellant’s Arguments

The Union of India, through its Additional Solicitor General, contended that:

• The impugned decisions erroneously treated the case as one of overloading governed by Section 73, rather than misdeclaration, which falls squarely under Section 66.

• Section 66 does not prescribe that punitive charges must be raised prior to delivery.

• The demand notices were legitimately based on misdeclaration—an independent ground under the Railways Act.

• The High Court wrongly relied on Jagjit Cotton Textile Mills which involved different factual circumstances related to overloading and right of lien.

Respondents’ Arguments

The respondents argued:

• That once delivery is made, no penal charges could be legally imposed, drawing strength from Sections 73, 74, and 78 of the Act.

• That Jagjit Cotton Textile Mills had set a precedent limiting punitive charges to the pre-delivery stage.

• That Section 66 must also be read in that light, limiting the power to penalise only before delivery.

Court’s Analysis

On the Applicability of Section 66

The Court clarified that the Tribunal and the High Court incorrectly analysed the matter through the lens of Sections 73 and 74 (dealing with overloading), whereas this case was clearly one of misdeclaration—the appropriate provision being Section 66.

“No reference is made to the stage at which such a charge can be made, i.e., either before or after delivery… it can be seen that the legislative intent had to be, to permit levy of charge under this Section, at either stage and not at a specific one.”

Section 66(4) expressly permits penal charges for materially false statements regarding goods’ description, and does not confine the Railway’s power to any particular stage of transit.

On Misplaced Reliance on Jagjit Cotton Textile Mills

The Court carefully dissected the reliance on Jagjit Cotton Textile Mills, clarifying that:

“The respondents have also placed reliance on the same judgment… We find such an approach to be erroneous and not in furtherance of the exposition… It was a suggestion, not a prescription.”

Thus, the supposed limitation that penal charges must be imposed prior to delivery was not a binding legal requirement but an illustrative condition mentioned in the context of Section 54 of the Act.

On the Authenticity of the Demand Notices

The Court rejected the argument that the demand notices were not genuine:

“In the absence of evidence to the contrary, we are inclined to find the demand notices to be genuine.”

The respondents had not led any evidence disputing the genuineness of the notices, and their claim petitions were also silent on this point.

Final Verdict

The Supreme Court set aside the Gauhati High Court’s decision dated 20th December 2021 and allowed the civil appeals filed by the Union of India. The refunds ordered by the Tribunal and upheld by the High Court were effectively reversed.

“In view of the above, the impugned order... is hereby set aside. In the attending facts and circumstances of this case, the civil appeals are allowed.”

Key Takeaways

1. Expanded Scope of Section 66: The judgment definitively holds that the power to impose penal charges under Section 66 for misdeclaration of goods is not restricted to the pre-delivery stage.

2. Judicial Restraint on Precedent Application: It underscores the importance of distinguishing factual matrices before relying on prior rulings such as Jagjit Cotton Textile Mills.

3. Misdeclaration v. Overloading: This case draws a vital jurisprudential distinction between different classes of violations under the Railways Act and the corresponding procedural requirements.

4. Documentary Authenticity: Absence of challenge through evidence can affirm the validity of key documents like demand notices.

Conclusion

This judgment reinforces the regulatory authority of the Indian Railways in ensuring honest disclosures by consignors and highlights the judiciary’s role in interpreting statutes in light of their text and purpose, rather than implied constraints.

For transporters, logistics companies, and legal professionals engaged in transport law, Union of India v. Kamakhya Transport Pvt. Ltd. serves as a precedent of enduring relevance—resolving a long-standing ambiguity and restoring balance between consignment accountability and procedural fairness.

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