JUDGMENT:

This Civil Miscellaneous Appeal is filed by the appellant - applicant aggrieved by the order dated 21.01.2010 passed in O.A.No.25 of 2001 by the Railway Claims Tribunal, Secunderabad Bench at Secunderabad.

2. The appellant - applicant is the Food Corporation of India for short "FCI"). The FCI entered into an agreement with the respondent - Railways on 17.06.1996 for carriage of goods belonging to the FCI by the Railways under credit note cum cheque system. The applicants also furnished bank guarantee bond for Rs.7,31,28,000/- for the period from 04.07.1996 to 30.09.1997. The South Central Railway vide letter dated 03.10.1997 adjusted an amount of Rs.12,55,614/- against penal interest charges and surcharge on freight on delayed realization of freight charges notes (for short “FCNs”). The applicant - Corporation addressed a letter dated 20.11.1997 denying the liability categorically stating that the CC limits available with the State Bank of India were not fully utilized by the Railways even on few days in a month and made suggestions for avoiding bunching of Full Corporate Offers (for short "FCOs") with their bank. The respondent No.2 vide letter dated 11.12.1997 informed the applicants that an amount of Rs.22,89,419/- was adjusted from the account of the applicants towards penal interest and surcharge on freight for non- realization of FCNs for the period from 01.03.1997 to 05.06.1997. Protesting the said adjustment, the applicant submitted representations dated 09.02.1998, 11.03.1998, 25.04.1998, 08.06.1998, 14.08.1998, 09.10.1998 and 20.11.1998. As there was no response, the applicant got issued a legal notice dated 28.05.1999 asking for refund of the adjusted amount. As there was no response to the said representations and legal notice, the applicant filed the OA claiming refund of the amount with interest.

3. The respondent - Railways filed written statement admitting that they entered into an agreement with the applicant for grant of credit note facility for payment of freight and other allied charges towards carriage of goods under credit note and cheque system by furnishing bank guarantee bond for R.7,31,28,000/- as Security Deposit. The amount of Rs.22,89,419/- was adjusted towards penal interest @ 18 % per annum and surcharge on freight from the firm on account of the delay in realization of firm's credit notes tendered by the firm for the period from 01.03.1997 to 05.06.1997. The above amount was recoverable from the dues payable to the firm. The statement consisting details of funds utilization during the period from March, 1997 to June, 1997 issued by the applicant’s bankers was contradictory, as it was pertaining to September and November, 1997. The same was informed vide letter dated 11.12.1997. The terms and conditions of the agreement would state that in the event of the delay in realization of amount due as per the credit note cum cheque facility, it would be open to the respondent - Railways to resort to charge a penalty in the form of interest @ 18 % per annum for the period exceeding 15 days from the date of presentation of credit note cum cheque to the bankers as indicated:

(a) Above 15 days and up to 1 month - Penal interest for one month.

(b) More than one month - Penal interest is to be charged for the whole period rounded off to next month.

As there was delay in realization of credit notes, the penal interest was charged. There was no delay in presentation of credit notes by the Railways as alleged by the applicants. The matter was examined by the respondent - Railways. It was observed that there was no delay in the issue of the credit notes after booking the consignment and in submitting the same to the Cash Office for realization through cash remittance notes. Immediately on receipt of FCNs, the same were submitted to the bank on the following day. But due to exceeding the limit of arrangement between FCI and their catering bank of SBI, the FCNs could not be realized as and when they were prese