CHAPTER 22
MINISTRY OF SURFACE TRANSPORT

Central Inland Water Transport Corporation Limited

The Company sustained a loss of Rs.1.29 crore in sub-letting of unutilised godown space, which could be avoided by surrendering the space back to godown owner.

Central Inland Water Transport Corporation Limited (CIWTC) had a rented godown (measuring 177122.56 sq.ft.) at Jagannath Ghat, from Calcutta Port Trust (CPT) since 1967. The Company could not utilise the space fully for a long period (7 to 8 years) for want of specific cargo and hence it decided (February 1993) to sub-let the unutilised space of the godown.

After floating an advertisement for the sub-letting, CIWTC allocated (May 1994) the godown space at first floor (76900 sq.ft.) to M/s. Hind Sugar & Company Limited (HSC, presently named as Inland Vikas Limited) on rent @ Rs.4.00 per sq.ft. per month. As per agreement, the rent was to be enhanced as and when CPT would enhance the rent rates for the Company. In September 1996, CPT enhanced the rent rate by Rs.3.44 per sq.ft. per month. Thereafter, CPT enhanced the rent rate every year by about 5.1 per cent. The Company initially forwarded a wrong claim to HSC for rent escalation @ Rs.1.70 per sq.ft., which was subsequently rectified in August 1998. However, HSC disputed the claim and refused to pay the same. CIWTC neither took any legal action for recovery of the rent at enhanced rate nor did it rescind the contract. The outstanding dues on account of increase in rent rate accumulated to Rs.1.29 crore for the period upto March 2000. As per extant rules of CPT, the sub-letting was prohibited. Hence the agreement with HSC was void ab initio and the case was not enforceable in the court of law.

Thus, CIWTC sustained a loss of Rs.1.29 crore by sub-letting the unutilised godown space, which could be avoided by surrendering the space back to CPT.

The Management stated (June 2001) that the enhancement of rent was being discussed with HSC for a mutual settlement.

The Management’s contention is not tenable because, considering unrealisability of the outstanding dues, the Company had made a provision of Rs.97.82 lakh in the accounts of 1998-99 for the doubtful recovery of the dues.

The matter was referred to the Ministry in June 2001; their reply was awaited (October 2001).

CIWTC was in possession of a self-propelled carrier (SPC), a vessel for survey docking repair at its Rajabagan Dockyard since February 1994. In January 1995, it decided to convert the SPC to an oil tanker to increase the capacity of its carriers plying between Haldia and Budge Budge for transportation of petroleum, oil and lubricant (POL) products of Indian Oil Corporation Limited (IOCL). The Company estimated that it would earn Rs. 4.5 lakh per month from operation of the oil tanker against capital expenditure of Rs. 60 lakh on the conversion job that was scheduled for completion within 6 months.

The vessel was converted to oil tanker and delivered for operation in March 1999, after a delay of 3 years and 9 months from the scheduled date of delivery. Total cost of conversion worked out to Rs. 1.05 crore. In the meanwhile, IOC constructed and commissioned (September 1999) a pipeline for transportation of POL products from Haldia to Budge Budge. Therefore, the Company could not use the oil tanker for desired purpose and it remained idle for a long period. It was finally used for transportation of molasses whereby the Company earned revenue of only Rs. 4.48 lakh during 1999-2001, although transportation of molasses did not require such quality of vessel.

Thus, due to delay in completion of the conversion, the very purpose for which SPC was converted to POL carrier was frustrated and the entire expenditure of Rs.1.05 crore turned infructuous.

The Management stated (June 2001) that the exact timing when IOC actively planned laying of pipeline between Haldia and Budge Budge was not know to them. The Management further stated that the test of holding the investment infructuous would depend on whether CIWTC would be able to use the vessel in alternative routes for movement of POL or other cargo. The Ministry endorsed (July 2001) the views of the Management.

The Management’s contention is not tenable on the following grounds:

1. had they completed the conversion job within the scheduled time (i.e. by December 1995) they could have placed the vessel on desired route and generated revenue of Rs. 1.98 crore, as projected, before commissioning of the pipeline;
2. IOC is Company’s major client for movement of POL products. However, the Company appeared unaware of sanction of the pipeline project that would affect the future of its operations, not just the present investment; and
3. the Company had been unable to achieve any specific arrangement for use of the tanker on alternate routes.

Thus, delay of almost four years in conversion of the SPC into an oil tanker turned the Company’s investment of Rs. 1.05 crore infructuous.