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Tuesday, February 28, 2017

In the facts and circumstances of this case, we modify the decree and judgment of the Trial Court as follows: The Respondent is entitled for reinstatement w.e.f. 01.09.2004. She would be entitled to fifty per cent of the back wages between 01.09.2004 and the date of her reinstatement. The Respondent is entitled for salary and other allowances from the date of her reinstatement till the date of her superannuation.


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                      CIVIL APPEAL No.3350   of   2017
                  (Arising out of SLP (C) No.31965 of 2015)

                                                           .... Appellant(s)

                               J U D G M E N T

      Leave granted.
       The  Suit  filed  by  the  Respondent  seeking  a  direction  to  the
Appellants to reinstate her as Social Studies Teacher in Shivalik  NAC  High
School, Naya Nangal was decreed which  was  modified  in  the  First  Appeal
filed  by  the  Appellants.   The  First  Appellate  Court  held  that   the
Respondent only had a right to be considered for  appointment  and  was  not
entitled for a direction of reinstatement.   The  High  Court  reversed  the
judgment of the First Appellate Court and restored the judgment  and  decree
of the Trial Court.   The said judgment of the High Court  is  in  challenge
before us.
2.    The Respondent was appointed as a temporary Social Studies Teacher  on
20.07.1994 against a leave vacancy.  The  vacancy  arose  due  to  the  non-
joining of Smt. Raj Verma who availed leave from  15.07.1993  to  17.07.1993
and did not report later.   By an  order  dated  03.12.1994,  the  Executive
Officer-cum-Member  Secretary,  Shivalik  NAC  High  School,   Naya   Nangal
dismissed Smt. Raj Verma w.e.f. 15.11.1994  for  her  unauthorised  absence.
Vide Resolution No.3 dated 15.11.1994 the  Respondent  was  appointed  as  a
Social Studies Teacher on a permanent basis in the  post  that  fell  vacant
due to the termination of services of Smt. Raj Verma. One of the  conditions
of the appointment of the Respondent was that she will not  be  entitled  to
claim any right if Smt. Raj Verma succeeded in the case filed by her.   Smt.
Raj Verma was reinstated on 14.07.2003 in view of the decision of the  Court
in her favour.  On  15.07.2003,  the  Executive  Officer  of  the  Municipal
Council, Nangal relieved the Respondent on  the  ground  that  her  services
were no longer required in view of the reinstatement of Smt. Raj Verma.
3.    The Respondent approached the High Court by  filing  a  Writ  Petition
challenging the termination of her  services  and  withdrew  the  same  with
liberty to approach the Labour Court.   She later filed an  application  for
modification of the order with liberty to  file  a  Civil  Suit.   The  said
application was allowed by the High Court on 03.09.2004.
4.    Pursuant to the liberty given by the High Court, the Respondent  filed
a Civil Suit for mandatory injunction directing  the  Appellants  herein  to
reinstate her as a  Social Studies Teacher in the Shivalik NAC High  School,
Naya Nangal by declaring the order dated 15.07.2003  as  illegal,  unlawful,
arbitrary  and  in  violation  of  principles  of  natural   justice.    The
Additional Civil Judge (Sr. Division), Rupnagar, Nangal by  a  judgment  and
decree dated 16.11.2004 directed the  Appellants  herein  to  reinstate  the
Respondent as Social Studies Teacher w.e.f.  01.09.2004.   The  Trial  Court
also held that  the  Respondent  was  entitled  for  all  the  consequential
benefits attached to the post of Social Studies Teacher  w.e.f.  01.09.2004.
It was further held that the Respondent was entitled for all the  dues  from
01.09.2004 with interest at the rate of nine per cent per annum.  The  Civil
Court held that the order of termination dated 15.07.2003 was  violative  of
principles of natural justice.  Taking note of the fact that Smt. Raj  Verma
attained superannuation and retired from service on 31.08.2004 and that  the
Respondent worked as a regular employee for a period of 9 years,  the  Trial
Court  directed  reinstatement  of  the  Respondent  w.e.f.  01.09.2004.  5.
The decree and judgment of the Trial Court was modified  in  favour  of  the
Appellants by the First Appellate Court.   It was held that  the  Respondent
only had a right of being considered for appointment  to  the  post  as  and
when it fell vacant.   The Respondent approached the High Court by filing  a
Regular Second Appeal assailing the judgment of the First  Appellate  Court.
The High Court restored the judgment of the Trial Court and  set  aside  the
judgment of the Lower  Appellate  Court.   The  High  Court  held  that  the
Respondent worked for a period of 9 years as a  regular  teacher.   She  was
granted annual increments and there were deductions from her salary  towards
provident fund.  The High Court held  that  the  Appellants  ought  to  have
adjusted the Respondent in an available  vacancy  taking  into  account  the
long period of service rendered by her on a regular basis.   The High  Court
found fault with the judgment of the First Appellate Court by  holding  that
fresh consideration of the  case  of  the  Respondent  would  only  lead  to
multiplication of the litigation.  The High  Court  was  informed  that  the
Respondent had two more years of service left and in view  of  the  hardship
suffered by the Respondent due to her termination, the High Court held  that
the Trial Court was right  in  directing  reinstatement  with  consequential
6.    After going  through  the  material  on  record  and  considering  the
submissions made by the parties, we are of the opinion that the judgment  of
the High Court does  not  warrant  interference.   The  termination  of  the
services of the Respondent is in clear violation of  principles  of  natural
justice as reasonable  opportunity  was  not  given  to  the  Respondent  to
furnish her explanation. Admittedly, notice of a mere 24 hours was given  to
the Respondent before the order of termination  was  passed.    Undoubtedly,
the regular appointment of the Respondent was on a condition that she  would
make way for Smt. Raj Verma in the event of her succeeding  in  the  pending
case.  The fact remains that the Respondent worked on regular  basis  for  a
period of 9 years before the termination of her services.   Thereafter,  the
Respondent made a representation to the Appellants to  appoint  her  in  the
vacancy that had arisen due to the  superannuation  of  Smt.  Raj  Verma  on
31.08.2004.  However, the Appellants did not consider such request  made  by
the Respondent.  If the termination is bad in law,  the  Respondent  in  the
normal course,  would  be  entitled  for  reinstatement  from  the  date  of
termination with all consequential benefits  as  the  termination  order  is
illegal.   But,  in  view  of  the  condition  of  the  appointment  of  the
Respondent on 20.07.1994, the Trial  Court  held  that  the  Respondent  was
entitled  for  reinstatement  only  w.e.f.   01.09.2004   i.e.   after   the
superannuation of the incumbent Smt. Raj Verma.
7.    The notice issued by this Court in the present case was  limited  only
for the payment of arrears.  Counsel for the Appellants submitted  that  the
Respondent is not entitled for payment of salary and  other  allowances  for
the period of 10 years during which she did not work and we  find  force  in
the said submission.  In the  facts  and  circumstances  of  this  case,  we
modify the decree and judgment of the Trial Court as follows:
The Respondent is entitled for reinstatement w.e.f. 01.09.2004.   She  would
be entitled to fifty per cent of the back wages between 01.09.2004  and  the
date of her reinstatement.
The Respondent is entitled for salary and other allowances from the date  of
her reinstatement till the date of her superannuation.
The Respondent will be entitled to count the service from 2004  onwards  for
the purpose of computation of her pension, if any payable.

8.    With the aforesaid modification of the  decree  and  judgment  of  the
Trial Court, the Appeal is disposed of.  No costs.

        [S. A. BOBDE]

                                                   [L. NAGESWARA RAO]

New Delhi,
February  28, 2017

whether the discretion was appropriately exercised in the case of Gilt Pack. We are only on the question whether the facts of Gilt Pack and the appellant herein are identical.- However, we must make it clear that the authority of the 1st respondent to grant or decline remission of any amount due towards any rate payable under THE ACT must be based on rational consideration and a sound policy. Such a requirement is inherent in the fact that 1st respondent is a statutory body discharging important statutory obligations. 1st respondent could not bring anything on record to our notice which demonstrates the reasons for declining remission as claimed by the appellant nor any clear policy of the respondent which regulates the discretion. In the circumstances, we deem it appropriate to set aside the decision of 1st respondent dated 16.09.1995 in declining the remission and leave it open to the respondent to take appropriate decision on the application duly recording the reasons for such decision


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 5968 OF 2011

M/S. RASIKLAL KANTILAL & CO.                 …     Appellant


BOMBAY & OTHERS                              …     Respondents

                               J U D G M E N T

Chelameswar, J.

1.    Written submissions  filed  by  the  appellant  present  a  reasonably
concise and sufficiently reliable statement of  facts  for  adjudication  of
this appeal.  Insofar as relevant they are:

“During the period November 1991 to  January  1992,  78  shipments  of  zinc
ingots and copper iron bars were imported by  5  different  consignees  from
one M/s Metal Distributors (UK) Ltd.; these consignments were landed at  the
Bombay Port.   The consignees filed bills of entry for  37  out  of  the  78
consignments, but subsequently failed to lift  the  consignments  and  thus,
they came to be stored at by the Port of Bombay.

      The distinguishing factor of the  above  consignments  was  that  they
were shipped on “CAD Basis” i.e. cash against documents, in which the  title
to the goods would remain with the exporter till such a  time  the  importer
would retire the documents against payments.

      Facing a grave loss M/s Metal Distributors (UK)  Ltd.,  requested  the
present petitioner, if they were interested in purchasing the goods.  It  is
pertinent  to  mention  that  the  present  petitioner  and   the   original
consignees are no where related, and  the  present  petitioner  is  a  third
party to the sales.

      On 23.03.1992,  the  petitioner  through  his  agent  applied  to  the
Customs Authorities to have the Bills of Entry  substituted  in  their  name
for the 37 consignments for which the original consignees  had  filed  Bills
of Entry, and also applied to file Bills  of  Entry  for  the  remaining  41
consignments lying unclaimed.  The formal agreement between  the  M/s  Metal
Distributors (UK) Ltd. and  the  petitioner  was  entered  subsequently,  in
April of 1992.

      That on 05.05.1992 the Clearing Agent of the petitioner wrote  to  the
Customs Authorities seeking an amendment of the IGM so that the goods  could
be cleared.   This was followed by a  communication  dated  03.06.1992  from
the original exporter i.e. M/s Metal Distributors  UK  that  the  petitioner
had agreed to buy the aforesaid consignments since  the  original  importers
had failed to clear the goods.

      It is pertinent to mention that on 04.09.1992  the  Customs  Authority
wrote to the petitioner stating that would be granting permission  to  amend
the IGM for only 41 consignments and that the  balance  37  consignments  on
the ground that Bills of Entry for those consignments stood filed.

      On 09.09.1992 the petitioner was granted a  detention  certificate  by
the Customs Authority for  the  aforesaid  41  consignments  signifying  the
period of detention as from  09.06.1992  to  09.09.1992.    Since  the  said
period was incorrect, the petitioner  requested  the  Customs  Authority  to
correct the Detention Certificate and the same  was  subsequently  corrected
to reflect the date  as  23.03.1992  to  09.09.1992.   It  is  pertinent  to
mention that  the  Detention  Certificate  initially  read  “for  procedural
formalities  for  amending  the  IGM”  however  subsequently  the  aforesaid
detention certificates were amended  by  the  Detention  Certificates  dated
18.11.1993 and 01.12.1993 for the 41 consignments and specifically read  for
“bonafide operation of ITC Formalities”.

In  the  meantime  the  Government  of  India  was  pleased  to  notify  the
“Statement of Guidelines for Remission of  Demurrage  Charges”,  1992,  vide
which in certain cases were goods/consignments detained by Customs for  “ITC
Facilities” were to be considered for grant of  remission  from  payment  of
demurrage for the period the  goods  were  being  so  processed  by  Customs

      In the meantime the Port of Bombay levied a  total  of  Rs.2,81,67,333
as demurrage charges, the total remission granted by the Port of Bombay  was
Rs.90,52,535, and therefore demanded a  balance  of  Rs.1,91,14,798  on  the
ground that the petitioner was liable to pay demurrage  for  the  period  of
23.03.1992 till 09.09.1992,  on  the  ground  that  no  remission  could  be
granted prior to date of noting.

      Thus, on 16.09.1995, the Port of Bombay rejected the  request  of  the
petitioner for grant of remission of demurrage.”

2.    Aggrieved by the order of the Ist respondent, the appellant, filed  WP
No.2012/1996[1]. The  appellant  however  cleared  the  goods  after  making
payment of the amount (claimed by the  1st  respondent  towards  demurrage),
under protest.

3.     By  the  judgment  under  appeal  dated  12.4.2010,  the  High  Court
dismissed the writ petition.   Hence the appeal.

4.    The only issue pleaded and argued before the High Court in the  above-
mentioned writ petition was the correctness  of  the  decision  of  the  1st
respondent to decline grant  of  remission  of  the  entire  demand  towards
demurrage on account of non-clearance of the goods.

5.    However, before us, a twofold submission is made by the appellant:
that the appellant acquired title to the goods long after  they  arrived  in
the 1st respondent’s port and discharged from the vessel which  carried  the
goods. Therefore, demurrage payable for the period anterior  to  appellant’s
acquisition of title to the goods is to be collected from the steamer  agent
of the vessel; and the appellant incurs no  liability  in  law  to  pay  the
demurrage - since the 1st respondent rendered no service  to  the  appellant
during that period;

In  the  alternative,  it  is  argued  that  in  view  of  the   facts   and
circumstances of the case, the appellant is entitled for complete  remission
of the amount claimed towards demurrage on account of delayed  clearance  of
the goods.  According to the appellant – a substantial portion of the  delay
occurred  because  of  the  non-clearance  of  the  goods  by  the   customs

An ancillary submission in this regard is that the  1st  respondent  granted
complete remission of the amount payable towards demurrage in  the  case  of
another  importer  i.e.  M/s.  Gilt  Pack  who   was   similarly   situated.
Therefore, the action of the 1st respondent in declining  remission  to  the
appellant is discriminatory.

6.    To decide the correctness of the various submissions noted  above,  an
examination of the rights and obligations of  the  1st  respondent  and  its
authority to collect demurrage is required.

7.    Import and export of goods  into  any  country  has  always  been  the
subject matter of regulation.  This has been a potential source for  raising
revenue.  Import or export of goods could be either by land, sea or air;  by
use of vehicles, vessels or aircrafts.  Since we are concerned in this  case
with import of goods by sea, we confine our examination to the  law  dealing
with it.

Without going into the historical details of the  import  export  trade  and
regulations thereon, suffice it to state that under  Section  29[2]  of  the
Customs Act, 1962, the person-in-charge of a vessel entering India from  any
place outside India is prohibited from causing or permitting  the  entry  of
such vessel at any place other than  a  customs  port,  subject  to  certain
exceptions.   The  expression  “customs  port”  is  defined  under   Section
2(12)[3] of the  Customs  Act,  1962.   Section  7  thereof  authorises  the
Central Board of Excise and Customs constituted under the Central Boards  of
Revenue Act, 1963 to appoint by a notification in the official gazette,  the
ports which alone shall be customs  ports  for  the  unloading  of  imported
goods and the loading of export goods etc.

Indian Ports Acts, 1855, 1875, 1889 and 1908  regulated  the  activities  of
the ports in India.  The Port Trust Acts of 1879, 1890 and 1905  of  Bombay,
Calcutta and Madras respectively regulated the activities of the said  ports
in India through Port Trusts (bodies corporate).

8.    Some of these are repealed and others modified[4] by  the  Major  Port
Trusts Act, 1963 (hereinafter referred to as “THE ACT”) which is a law  made
by  the  Parliament  “to  make  provision  for  the  constitution  of   port
authorities  for  certain  major  ports   in   India   and   to   vest   the
administration, control and management of such ports in those  authorities”.
Section 3 of THE ACT authorises  the  Central  Government  to  constitute  a
Board of Trustees in respect of any major port.  Qua  the  definition  under
Section 2(b)[5], the Board of Trustees so constituted  is  called  BOARD[6].
Section 5 of the ACT declares each of the BOARDS to be a body  corporate  to
administer, control and manage the port of Bombay.   Different  BOARDS  came
to be constituted for  different  major  ports  in  the  country.   The  1st
respondent is admittedly one of the BOARDS constituted  under  Section  3(1)

9.    We shall now examine the provisions  of  THE  ACT  insofar  as  it  is
relevant for the purpose of this case.

10.   Section 35(1)[7] of  the  Act  obligates  BOARDS  to  execute  various
works, within or even without the limits of the ports[8] being  administered
by each of the BOARDS, of the nature indicated  under  Section  35(2)(a)  to
(l).  An examination of the tenor of  the  various  clauses  indicates  that
such works are intended  to  facilitate  creation  of  ports  which  can  be
conveniently used by (vessels[9]) for loading and unloading  of  cargo  etc.

11.   Section 37 to 42 of the Act  authorise  BOARDS  to  compel  sea  going
vessels to use the works executed by BOARDS for landing or shipping  of  any
goods or passengers, subject to various conditions specified under the  said

12.   Section 41(1) contemplates the publication of a  notified  order.   By
such an order, BOARD may “(i) declare that such dock,  berth,  wharf,  quay,
stage, jetty or pier is ready for receiving, landing or  shipment  of  goods
or passengers from or on vessels, not being  sea-going  vessels,  and,  (ii)
direct that within certain limits to be specified therein it  shall  not  be
lawful, without the express sanction of the  Board,  to  land  or  ship  any
goods or passengers out of, or into,  any  vessel,  not  being  a  sea-going
vessel, of any class specified in such order, except at  such  dock,  berth,
wharf, quay, stage, jetty or pier”. Section 41(2) declares that once such  a
notified order is published, “it shall not be lawful without the consent  of
the Board for any vessel”:
to land or ship any goods or passengers at any place within  the  limits  so
specified, except at such dock, berth, wharf, quay, stage,  jetty  or  pier;

while within such limits, to anchor, fasten or lie  within  fifty  yards  of
the ordinary low-water mark.”
13.   Section 42(2) authorises BOARDS  to  take  charge  of  the  goods  for
performing such services.
A Board may, if so requested by the owner, take charge of the goods for  the
purpose of performing the service or services and shall give  a  receipt  in
such form as the Board may specify.

Sub-section (7) declares that when the charge of  the  goods  is  taken  and
receipt given, the recipient is discharged of any liability for  the  damage
or loss occurring to the goods thereafter[10].

14.   Section 43 stipulates the nature and extent of the  responsibility  of
BOARDS for any loss or destruction or deterioration in the goods which  were
taken charge of by BOARD - details  of  which  are  not  necessary  for  the
present purpose.

15.   Chapter VI of the Act deals with imposition and recovery of  rates  at
ports.  The expression “rate” is defined under Section 2(v)[11].

16.   Various services which BOARDS are obliged  to  perform  are  specified
under various provisions  of  THE  ACT.   Those  services  fall  into  three
categories – (1) services rendered to the  vessel  entering  the  Port;  (2)
services rendered to goods either imported by  vessels  or  to  be  exported
through  vessel,  and  (3)  services  rendered  to  passengers  arriving  or
departing from vessels in the Port.

17.   Sections 49A, 49B, 50A and 50B deal with services to be rendered by  a
BOARD exclusively to vessels using  the  Port  administered  by  BOARDS  and
authorise the collection of various rates  specified  under  each  of  those
sections for services referred to therein, as and when rendered.

18.   Section 48 prior to its amendment  (by  Act  15  of  1997)  authorised
every BOARD administering each of the major ports to prescribe  a  scale  of
rates for various services rendered by that BOARD.
Section 48 (pre 1997 Amendment)[12]

“Section 48. Scales of rates  for  services  performed  by  Board  or  other
person.—(1) Every Board shall from time to time frame a scale  of  rates  at
which and a statement of the conditions under which,  any  of  the  services
specified hereunder shall be performed by itself or  any  person  authorised
under section 42 at or in relation to the port or port approaches—

transshipping of passengers or goods between vessels in  the  port  or  port

landing and shipping of passengers or goods from or to such  vessels  to  or
from any wharf, quay, jetty, pier, dock, berth, mooring, stage or  erection,
land or building in the possession or occupation of  the  Board  or  at  any
place within the limits of the port or port approaches;

cranage or porterage of goods on any such place;

wharfage, storage or demurrage of goods on any such place;

any other service in respect of vessels, passengers or goods, excepting  the
services in respect of vessels for  which  fees  are  chargeable  under  the
Indian Ports Act.

(2)   Different scales and conditions may be framed  for  different  classes
of goods and vessels.”

Section 48(1)(a) and (b) indicate the nature of services to be  rendered  by
BOARDS.  Section 48(1)(c) and (d) indicate the nature of  the  rate  payable
for such services.  Clause (d) inter alia provides  that  BOARDS  can  frame
scale of rates for storage or demurrage of goods  on  any  such  place.  The
expression “such place” occurring under clause (d)  must  necessarily  refer
to the places mentioned in Section 48(1)(b) i.e. wharf, quay,  jetty,  pier,
dock, berth etc executed by, and land or building either in  “possession  or
occupation” of BOARDS.

19.   It is apparent  from  the  language  of  Section  48  that  though  it
authorises BOARDS to stipulate and collect rates for various   services   to
be  rendered,  the Act is silent regarding  persons  from  whom  such  rates
could  be  collected.  It  is  pertinent  to  note   that   since   services
contemplated under Sections 49A, 49B, 50A and 50B are  services  exclusively
to be rendered to the vessel (ship).  It is  reasonable  to  interpret  that
only the ship and  its  agents  are  liable  to  pay  the  rates  for  those
services.   We are fortified in our conclusion by the language  of  Sections
50A[13] and 50B[14] which make it  express  when  they  say  “she[15]  would
otherwise be chargeable”.

20.   Section 64 authorises BOARDS to “distrain or  arrest”  a  vessel  when
the master of that vessel refuses or neglects to pay  any  rate  or  penalty
payable under this Act and to “detain” the vessel until the  amount  due  to
the BOARD is paid.

21.   On the other hand, with reference to services  rendered  to  goods,  a
lien[16] is created under Section 59(1)[17]  on  the  goods,  in  favour  of
BOARDS, and BOARDS are also entitled to seize and  detain  the  goods  until
the rates and rents are fully paid.

22.   It appears to  us  that  in  view  of  the  fact  Section  42(2)  only
contemplates “taking charge” of the goods but  not  “taking  possession”  of
goods, Parliament conferred on BOARDS the authority to  “seize  and  detain”
the goods of which  charge  is  taken  of.   The  purpose  behind  the  twin
declarations contained in Section 59 is a little  intriguing.   However,  we
do not wish to express any final opinion in this regard as no submission  in
this regard is made and such an examination is not  necessary  for  deciding
the case on hand.

23.   Under Sections 61 and 62 of the Act,  such  detained  goods  could  be
sold by the  BOARD  either  by  public  auction  or  otherwise,  subject  to
conditions  stipulated  in  those  Sections  and  following  the   procedure
specified thereunder without the need to file a suit  for  the  recovery  of
the amounts due to the BOARDS.

24.   The dispute in this case  centres  around  demurrage.   Therefore,  we
deem it appropriate to examine the meaning of  the  expression  “demurrage”.
The  expression  “demurrage”  is  not  defined  under  the  Act.    Strictly
speaking, the expression demurrage in the world of shipping meant-

“DEMURRAGE in its strict meaning, is a sum agreed by  the  charterer  to  be
paid as liquidated damages for delay beyond a stipulated or reasonable  time
for loading or unloading, generally referred to  as  the  lay-days  or  lay-
time.  Where the sum is only to be paid for a fixed number of  days,  and  a
further  delay  takes  place,  the  shipowner’s   remedy   is   to   recover
unliquidated “damages for detention” for  the  period  of  the  delay.   The
phrase  “demurrage”  is  sometimes  loosely  used  to   cover   both   these

The circumstances in which and the nature of demurrage payable  in  a  given
circumstance  has  been   the   subject   matter   of   considerable   legal
literature[19].  However, in India, the expression  “demurrage”  appears  to
have acquired a different connotation.

Under the Madras Port Trust Act, 1905, certain bye-laws were framed  by  the
Port Trust in exercise of the statutory powers under which “Scale of  Rates”
payable at the Port of Madras were framed. Chapter  IV  thereof  was  headed
“Demurrage”.  Under the said Chapter, it was stipulated that  “demurrage  is
chargeable on all goods left in Board’s transit sheds or  yards  beyond  the
expiry of the free days”.

25.   In Trustees of the Port of Madras  v.  Aminchand  Pyarelal  &  Others,
(1976) 3 SCC 167, this Court had an occasion to consider  the  true  meaning
of “demurrage” occurring in the above mentioned context and opined[20]  that
the “Board has used the expression “demurrage” not in the strict  mercantile
sense but merely to signify a charge which may be levied on goods after  the
expiration of free days”.

26.   Regulation 2(g) of the International Airports Authority  (Storage  and
Processing of Goods) Regulation, 1980  made  under  the  provisions  of  the
International  Airports  Authority  Act,  1971,   defined   the   expression
‘demurrage’ to mean, the rate or amount payable to the airport by a  shipper
or consignee or  carrier,  for  not  removing  the  cargo  within  the  time

27.   By virtue of Section 59[22] of THE ACT, the 1st respondent had a  lien
on goods placed on or in the property of the 1st respondent “for the  amount
of all rates leviable under the Act” and also the authority/right  to  seize
and detain goods  placed  on  or  in  any  premises  belonging  to  the  1st
respondent until the amount due  towards  the  rent  or  any  rate  for  any
services rendered by the 1st respondent with respect to such goods is  fully
paid.  Further, the 1st respondent is also entitled under  Sections  61  and
62 to sell the goods in question so seized and detained without the need  to
file a suit for the recovery of the amounts due to it.

28.   We shall now deal with submissions by the appellant.

29.   The first submission  is  that  the  amounts  due  for  providing  the
various (services to the imported  goods)  until  the  title  in  the  goods
passed to the appellant would be a services rendered to the  steamer  agent.
The appellant cannot be compelled to pay for services not rendered  to  him.
Such an argument is based on-

(i)   that the goods in question  were  shipped  by  the  exporter  on  Cash
against Document Basis (CAD), therefore the title of the goods would  remain
with the exporter till  such  time,  the  importer  “retires  the  documents
against payments”;

(ii)  The owner of  the  vessel  is  a  bailee  of  the  shipper.   The  1st
respondent is sub-bailee of the owner of  the  vessel  through  his  steamer
agent for the vessel from the point of their discharge from the vessel  till
the point when title in the goods passed to the appellant.

30.   The 1st respondent, on  the  other  hand,  argued  that  the  question
regarding the liability of the appellant to  pay  the  demurrage  was  never
raised before the High Court nor did the High Court consider  that  question
and, therefore, the  appellant  may  not  be  permitted  to  make  the  said

31.   In our opinion, though the question was not  raised  before  the  High
Court, the appellant need not be barred from raising  this  question  before
us because it is a pure and substantial question of law.   No  enquiry  into
any fact is really necessary to decide the said question of law.   The  only
fact which is not clearly established on record is  the  point  of  time  at
which the title in the goods passed to the appellant.  But, in  our  opinion
(for the reasons to be given later), that  fact  is  wholly  irrelevant  for
determining the authority of the 1st respondent to  collect  demurrage  from
the appellant. We, therefore, proceed to  examine  the  correctness  of  the

32.   In support  of  this  submission,  the  appellant  relied  upon  three
judgments of this Court in The  Trustees  of  the  Port  of  Madras  by  its
Chairman v. K.P.V. Sheik Mohamed Rowther & Co. &  Others,  (1963)   Supp.  2
SCR 915 (hereafter  “ROWTHER-I”), Trustees of the Port  of  Madras,  Through
its Chairman v. K.P.V. Sheikh Mohd. Rowther  &  Co.  Pvt.  Ltd.  &  Another,
(1997) 10 SCC 285 (hereafter “ROWTHER-II”)  and  Forbes  Forbes  Campbell  &
Company Limited v. Board of Trustees, Port of Bombay, (2015) 1 SCC 228.

      ROWTHER-I is a case which arose  under  the  Madras  Port  Trust  Act,

      In exercise of the power under Section 42 of the said  Act  the  Board
of the Madras Port Trust made certain scale of rates.  One of the  items  in
the scales stipulated charges to be paid by “masters, owners  or  agents  of
vessels” in respect of port trust labour requisitioned and  supplied  by  it
but not fully or properly utilized.

      A writ petition came to be filed  in  the  Madras  High  Court  for  a
direction to the Board not to enforce the said rates.

      It was argued that under provisions of  the  Madras  Port  Trust  Act,
certain services are to be rendered to the vessel and  certain  services  to
the goods carried by the vessel.  The service such as the one for which  the
rate had been demanded was a service rendered to the consignee  and  not  to
the steamer agent.  Therefore steamer agents could not be compelled  to  pay
the rate for the said service.

      The Madras High Court dismissed the writ  petition.   An  intra  court
appeal thereon was allowed by the Division Bench holding  that  the  service
in question “must be deemed  to  be  service  rendered  to  the  consignee”.
On a further appeal, this Court recorded the issue in para 30:-
“30.  The question for determination, in the case then is  whether  the  law
making the steamer-agent liable to pay these charges is good law[24].”

33.   The entire argument in the case revolved around the  question  whether
the Madras Port Trust was acting  as  an  agent  of  the  consignee  or  the
steamer agent when it took charge of goods discharged from the vessel.   The
case of the steamer agent was that the Madras Port Trust acted as the  agent
of the consignee. This submission was rejected.  This Court held:
“57.  If the Board was an agent of the consignee, it was  bound  to  deliver
the goods to the consignee and should not have any rights of  retaining  the
goods till the payment of the rates and other dues for which it had  a  lien
on the goods.   The provision of there being a lien on  the  goods  for  the
payment of the dues of the Board or the freight,  make  it  clear  that  the
Board did not have the custody of the goods as an agent of the consignee.”

The appeal was allowed by this Court upholding the  authority  of  the  port
trust to collect the ‘rate’ from the steamer agent.

34.   This Court held that BOARD receives goods as  a  sub-bailee  from  the
bailee (ship owner) through the bailee’s  agent  (See  para  49[25]  of  the
judgment). This Court upheld  the  impugned  provision  which  fastened  the
liability upon the steamer agent.  This Court opined  that  the  goods  were
delivered to the BOARD by the consignor’s bailee (the  ship  owner)  through
the steamer agent (the  bailee’s  agent)  making  the  BOARD  a  sub-bailee.
Therefore, the service rendered by the BOARD is a service to  the  owner  of
the ship.

      ROWTHER-I is not an authority for the proposition that a  BOARD  could
collect rates due for the services rendered to goods only from  the  steamer
agent.  Nor did this Court deal with the question whether the title  in  the
goods is a relevant factor for determining a BOARD’S right  to  collect  the

      ROWTHER-I is no authority for the proposition that until the title  in
goods passed to the consignee the liability to pay various rates payable  to
a BOARD for the services rendered in respect of the goods falls  exclusively
on the steamer agent.

35.   In ROWTHER-II, the question was “whether  demurrage  charges,  harbour
dues etc.” were to be recovered from the consignee or the steamer agent.

      The Madras High Court concluded that the consignee was liable  to  pay
the demurrage.

It was a case where the goods remained in the custody of the Port Trust  for
a long time and were ultimately  confiscated  by  the  customs  authorities.
Whether demurrage was  to  be  recovered  from  the  steamer  agent  or  the
consignee was in issue.

High Court held that the steamer agent’s  responsibility  ceases  “once  the
goods are handed over  to  the  Port  Trust”  and  the  bill  of  lading  is
endorsed[26].  The High Court further held that upon the endorsement of  the
Bill of lading, “the property in the  goods  vests”  in  the  consignee  and
therefore the steamer agent’s responsibility for the custody  of  the  goods
ceases[27].   The High Court, therefore, concluded that only  the  consignee
was liable.

This Court approved the conclusion of the High Court.

36.   In Forbes Forbes Campbell & Company  Limited  v.  Board  of  Trustees,
Port of Bombay, (2015) 1 SCC 228, this Court examined the liability  of  the
steamer agent to pay demurrage and port charges to the BOARD of Bombay  Port
in respect of goods brought  into  the  Port  and  warehoused  by  the  said

      The question arose  in  the  context  of  the  BOARD’S  resolution  to
recover the rent (on cargo  transported  in  containers)  from  the  steamer
agent.   The  steamer  agent  contended  that  neither  THE  ACT   nor   the
subordinate legislation made thereunder created  such  liability  either  on
the ship owner or his agent (steamer agent).

      Rejecting such submission, this Court held that  “in  the  absence  of
any specific bar in the statute, such liability can reasonably fall  on  the
steamer agent”, if on a proper construction of the  provisions  of  the  Act
such a conclusion can be reached.
“Para 10. While it is correct that the liability to  pay  demurrage  charges
and port rent is statutory, in the absence of any  specific  bar  under  the
statute, such liability can reasonably fall on  a  steamer  agent  if  on  a
construction of the provisions of the Act such a conclusion can be  reached.
Determination of the  aforesaid  question  really  does  not  hinge  on  the
meaning of the expression “owner” as appearing in Section 2(o) of  the  1963
Act, as has been sought to be urged on behalf of the appellant though  going
by the language of  Section  2(o)  and  the  other  provisions  of  the  Act
especially Section 42, an owner would include  a  shipowner  or  his  agent.
Otherwise it is difficult to reconcile how custody  of  the  goods  for  the
purpose of rendering services under Section 42 can be entrusted to the  Port
Trust Authority by the owner as provided therein  under  Section  42(2).  At
that stage the goods may still be in the custody of the  shipowner  under  a
separate bailment with the shipper or the consignor, as may be. Even  dehors
the above question the liability to pay  demurrage  charges  and  port  rent
would accrue to the account of the steamer agent if a contract  of  bailment
between the steamer agent and the Port Trust Authority can be held  to  come
into existence under Section 42(2) read with Section 43(1)(ii) of  the  1963

       On  examination  of  the  provisions  of  THE  ACT  and  two  earlier
judgments[28], this Court rejected the  submission  that  there  comes  into
existence the relationship of bailor and bailee between  the  consignee  and
the BOARD as was held earlier by this Court in Sriyanesh Knitters.
“11.   For the reasons already indicated the decision in Sriyanesh  Knitters
with regard to the existence of a relationship of bailor and bailee  between
the consignee and the Port Trust Authority instead of the steamer agent  and
the Port Trust Authority cannot be understood  to  be  a  restatement  of  a
general principle of law but a mere conclusion reached in the facts  of  the
case where the consignee had already appeared in the scene.”

and concluded[29] that once the bill of lading is endorsed or  the  delivery
order issued, it is the consignee or endorsee who would  be  liable  to  pay
the demurrage and other dues of the Port Trust Authority.  It  further  held
that in all other situations the contract of bailment  is  one  between  the
agent of the bailor and the BOARD (Bailee) fastening the  liability  on  the
(steamer) agent for such  rates  till  such  time  the  bill  of  lading  is
endorsed or delivery order is issued by the steamer agent.

37.   With respect, we agree with the conclusions recorded by this Court  in
the cases of ROWTHER-II and Forbes that a  BOARD  could  recover  the  rates
due, either from the steamer agent or  the  consignee  but  we  are  of  the
humble opinion that enquiry into the question as to  when  the  property  in
the goods passes to the consignee is not relevant.

We have already noticed the submission of the appellant that  the  appellant
is not liable to make  payment  of  any  demurrage  incurred  prior  to  the
acquisition of title in the goods by the appellant.  Enquiry into the  title
of the goods and the point  of  time  at  which  the  title  passes  to  the
consignee is equally irrelevant for determining the authority of a BOARD  to
recover the amounts due to it under THE ACT.  The authority and right  of  a
BOARD to recover its dues either from the steamer  agent  or  the  consignee
flows from two different sources:
Section 158 of the Indian Contract Act, 1872 read  with  Section  1  of  the
Indian Bills of Lading Act, 1856.
(ii)        Section 59(1) of THE ACT.

38.   The essence of bailment is possession and the consent of the owner  of
the goods is not necessary.[30]   The  distinction  between  possession  and
custody of goods is  also  noted  by  jurists.[31]   In  this  context,  the
language of Section 49(2) is significant - “A Board  may……  take  charge  of
the goods…….”.  But we do not propose to examine  the  significance  as  the
same is neither argued nor necessary.  In our opinion, for  the  purpose  of
the present, we must also mention here Section 63 of THE ACT authorises  the
BOARD to sell  the  goods  “placed  in  their  CUSTODY”.   This  Court  also
recognised that bailment can come into existence even otherwise  than  by  a
“The State of Gujarat Vs. Memon Mahomed Haji Hasam (Dead) by LRs, AIR 1967
SC 1885, paras 5 and 6

“5. ……Bailment is dealt with by the Contract Act  only  in  cases  where  it
arises from a contract but it is not correct to say that there cannot  be  a
bailment without an enforceable contract.   As stated in “Possession in  the
Common Law” by Pollock and Wright, p. 163.

“Upon the whole, it is conceived  that  in  general  any  person  is  to  be
considered as a bailee who otherwise  than  as  a  servant  either  receives
possession  of  a  thing  from  another  or  consents  to  receive  or  hold
possession of a thing for another upon an undertaking with the other  person
either to keep and return or  deliver  to  him  the  specific  thing  or  to
(convey  and)  apply  the  specific  thing  according  to   the   directions
antecedent or future of the other person.”    “Bailment  is  a  relationship
sui generis and unless it is sought to  increase  or  diminish  the  burdens
imposed upon the bailee by  the  very  fact  of  the  bailment,  it  is  not
necessary to incorporate it  into  the  law  of  contract  and  to  prove  a

6.   There can, therefore, be bailment and the relationship of a bailor  and
a bailee in respect of specific property without there being an  enforceable
contract. Nor is consent indispensible for such  a  relationship  to  arise.
A finder of goods of another has  been  held  to  be  a  bailee  in  certain

As  rightly  opined  in  FORBES’  case,  there  is  no  bailor  and   bailee
relationship between the BOARD (the 1st respondent) and the  consignee  (the
appellant);  either  voluntarily  or  statutorily  compelled  but   such   a
relationship exists between the 1st respondent and the  owner  of  the  ship
(through the steamer agent).  It is possible  in  a  given  case  where  the
consignee or any other  person  (such  as  the  appellant  herein)  claiming
through the consignor, eventually may not come forward to take  delivery  of
the  goods  for  a  variety  of  reasons  -  considerations  of  economy  or
supervening disability imposed by law etc.  Therefore, in such cases to  say
that merely because the bill of lading is endorsed or the delivery order  is
issued, the consignor or his agent is absolved  of  the  responsibility  for
payment (of rates or rent for services rendered w.r.t  goods)  would  result
in a situation that the BOARD would incur expenses without any  legal  right
to recover such amount from the consignor and be driven  to  litigation  for
recovering the same from the consignee who did  not  take  delivery  of  the
goods with whom the BOARD had no contract of bailment  and  consequently  no
contractual obligation to pay the ‘rates or rent’.

39.   Enquiry into the relationship between either the BOARD, the  consignor
of goods, the owner of the vessel and the steamer agent on one hand  or  the
consignee and the BOARD on the other, in our opinion, is  wholly  irrelevant
in examining the right of the BOARD to recover the amounts due  towards  the
rates or rent for services rendered with respect to the goods. The right  of
the BOARD is unquestionable.  The only question is: from whom can the  BOARD
recover – we emphasise the question is not who is liable.  Depending on  the
nature  of  the  relationship  between  the  consignor  and  consignee,  the
liability may befall either of them.

40.   On the other hand, in the light of the legal position declared by  the
Constitution Bench in ROWTHER-I, the 1st respondent is a sub-bailee  of  the
goods bailed by consignor (bailor) to the ship-owner  (bailee).   The  goods
are bailed through the agent (steamer agent) of the bailee.   The  appellant
is  only  a  person  claiming  through  the  bailor,  without   any   direct
contractual relationship with the 1st respondent.

41.   Title to the goods is irrelevant even  in  the  cases  of  a  bailment
arising under a contract.  Any person who  is  capable  of  giving  physical
possession of goods can  enter  into  a  contract  of  bailment  and  create
bailment.  Under Section 148 of the Contract Act, ‘bailment’,  ‘bailor’  and
‘bailee’ are defined as under:
“A ‘bailment’ is the delivery of goods by one person  to  another  for  some
purpose, upon a contract that they shall, when the purpose is  accomplished,
be returned or otherwise disposed of according  to  the  directions  of  the
person delivering them.  The person  delivering  the  goods  is  called  the
‘bailor’.  The person to whom they are delivered is called the ‘bailee’.

Explanation.- If a person is already in possession of the goods  of  another
contracts to hold them as a bailee, he thereby becomes the bailee,  and  the
owner becomes the bailor of such goods, although  they  may  not  have  been
delivered by way of bailment.”

It can be seen from the above that bailment is  a  contractual  relationship
and bailment can be created by any person who is  in  possession/custody  of
goods but not necessarily the owner of  the  goods.   When  the  purpose  of
bailment is accomplished the goods are to be returned or otherwise  disposed
of according to the directions of the person (bailor) delivering them.

42.   Section 158 of the Contract Act  stipulates  the  obligations  of  the
bailor to pay the  necessary  expenses  incurred  by  the  bailee  “for  the
purpose of bailment”. Section 158 of the Contract Act reads as under:

“Section 158.  Repayment by bailor of necessary expenses. –  Where,  by  the
conditions of the bailment, the goods are to be kept or to  be  carried,  or
to have work done upon them by the bailee for the bailor, and the bailee  is
to receive no remuneration,  the  bailor  shall  repay  to  the  bailee  the
necessary expenses incurred by him for the purpose of bailment.”

The obligation of the bailee to return the bailed goods when the purpose  of
bailment is accomplished and the obligation of the bailor to pay the  bailee
“the necessary expenses incurred by him for the purpose of the bailment”  in
our opinion would attend not only a bailment by contract but every  kind  of

43.   If the bailor has such an obligation to pay  the  bailee,  any  person
claiming through the bailor must necessarily be bound by such an  obligation
unless the bailee releases  such  person  from  such  an  obligation.      A
consignee is a person claiming  through  the  consignor  (bailor).   In  the
context of import of goods into India by ship, the  consignees’  rights  are
governed inter alia by Section 1 of the Bills of Lading Act, 1856.
1. Rights under bills of lading to vest in consignee  or  endorsee  –  Every
consignee of goods named in a bill of lading and every endorsee  of  a  bill
of lading to whom the property in the goods  herein  mentioned  shall  pass,
upon  or  by  reason  of  such  consignment  or  endorsement,   shall   have
transferred to and vested in him all rights of suit, and be subject  to  the
same liabilities in respect of such goods as if the  contract  contained  in
the bill of lading had been made with himself.

44.   It can be seen from the above that the 1856 Act enacts a fiction  that
the consignee to whom  the  property  in  the  goods  shall  pass  shall  be
“subject to the same  liabilities  in  respect  of  such  goods  as  if  the
contract contained in the bill of lading had been made with himself”.   Bill
of lading is evidence of a contract[32] between the shipper (consignor)  and
the owner of the ship by which the owner of the  ship  agrees  to  transport
the goods delivered by the consignor to a specified destination and  deliver
it to the consignee.  Delivery  of  goods  pursuant  to  a  bill  of  lading
creates  a  bailment  between  the  shipper  and  the  owner  of  the  ship.
Obviously the legislature knew that a consignee under a bill of lading is  a
3rd party to the contract but intrinsically connected with  the  transaction
and thought it necessary to  specify  the  rights  and  obligations  of  the
consignee.  Hence, the fiction under the  1856  Act,  that  the  moment  the
property in goods passes to the consignee, the liabilities of the  consignee
in respect of such goods would be the same as those of the consignor, as  if
the contract contained in  the  bill  of  lading  had  been  made  with  the

45.   The consequence is that  the  1st  respondent  (sub-bailee)  would  be
entitled to enforce its rights flowing from the Bailment  between  the  ship
owner and the 1st respondent against  the  consignee  and  recover  expenses
incurred by it in connection with  the  bailment  from  the  consignee.  The
terms and conditions  of  the  contract  between  the  consignor  or  person
claiming delivery of the goods are irrelevant for determining the  right  of
the 1st respondent to recover its dues.  The  obligations/liability  of  the
consignee is determined by the statute.  But  the  said  obligation  is  not
exclusive to the consignee.  The consignor (bailor) is not relieved  of  the
obligation to pay by virtue of Section 158 of the Contract Act the  expenses
incurred by the 1st respondent.  Nothing is brought to our  notice  to  hold
otherwise.   At this juncture, we must point out that the declaration  under
Section 42(7)[33] absolving the owner of the ship and his agents is  limited
only to the obligations owed by the bailor to the consignee not to  the  sub
bailor like the 1st respondent.

46.   Section 59 of THE ACT, creates lien in favour  of  1st  respondent  in
respect of any goods and also authorises the 1st  respondent  to  seize  and
detain the goods, it clearly makes a special provision. Under the  Contracts
Act, every bailee has no lien on the goods delivered to him.   Such  a  lien
is available only to limited classes  of  bailees  specified  under  Section
171[34].  They are – bankers, factors, wharfingers[35], attorneys of a  High
Court and policy-brokers.  It can be seen from Section 171 that  only  those
specific categories of bailees have a right to retain goods bailed  to  them
as security for the amounts due to them. No other  category  of  bailee  has
such a right unless there is an express contract creating such a lien.

47.   Section 59 of THE ACT, also expressly authorises  the  1st  respondent
to seize and detain goods taken charge of by it.  Parliament  also  invested
the 1st respondent with the authority to sell the goods and appropriate  the
proceeds of sale under Section 63[36]  of  the  ACT  towards  various  heads
indicated thereunder without the need to file a  suit[37]  which  are  taken
charge of by it in certain circumstances, details of which we  have  noticed

48.   If the ACT authorises the  1st  respondent  to  recover  its  dues  by
bailing the goods under bailment, in those cases where  the  consignee  does
not turn up to take the delivery of the goods  within  the  time  stipulated
under Sections 61 or 62 of the ACT, to deny the right to demand and  recover
the amounts due from the consignee when  he  seeks  delivery  of  the  goods
under bailment would be illogical and inconsistent with the  scheme  of  the

Such right, in our view, undoubtedly enables the  1st  respondent  to  claim
various amounts due to it, from any person claiming delivery  of  the  goods
either the bailor or a person claiming through the bailor for  the  services
rendered w.r.t. the goods.  Denying such a right  on  the  ground  that  the
person claiming delivery of the goods  acquired  title  to  the  goods  only
towards the end of the period of the bailment of  the  goods  with  the  1st
respondent would result in driving the 1st respondent to recover the  amount
due to it from the bailor or his agent who may or  may  not  be  within  the
jurisdiction of the municipal courts of this  country  (by  resorting  to  a
cumbersome procedure of litigation).

The 1st submission is, therefore, rejected.

48A.  Now, we deal with the second submission.  The  appellant  claims  that
he is entitled to complete remission of  the  demurrage.  According  to  the
appellant, the facts of the case  not  only  justify  but  also  demand  the
exercise of the discretion conferred upon the 1st respondent  under  Section
53 of the Act to grant a complete remission of the  demurrage  in  question.
According  to  the  appellant,  the  Government  of  India  issued   certain
guidelines[38] dated 24.1.1992 which structure the discretion  of  the  Port
Trust in the matter of granting remission.

49.   We  notice  that  the  text  of  the  guidelines  permit  granting  of
remission upto 80 per cent of  demurrage  in  appropriate  cases.   We  also
notice that the cap of 80 per cent is not absolute. The 1st  respondent  can
even grant complete remission in appropriate cases.
(i)   Admittedly, the 1st respondent  granted  remission  to  an  extent  of
Rs.90,52,535.00 (approximately) out of the total claim towards demurrage  of

(ii)  The liability to pay demurrage arose because of the  non-clearance  of
the goods from the 1st respondent’s property for a  considerable  period  of

(iii) The period could be divided into two phases:
Phase I before the point of time when appellant started claiming  the  right
to take delivery;

Delay in taking delivery is  attributable  purely  to  the  failure  of  the
original consignee.  The appellant clearly knew or at least  ought  to  have
known, when he purchased the goods that  the  1st  respondent  would  demand
demurrage.  The appellant as a person claiming through the consignor is  not
entitled in law to claim any right of remission on the ground  that  he  did
not have any interest or title in the goods for such period.

Phase II after the present appellant’s right to take delivery of goods  came
into existence.

Such delay  occurred  because  of  the  time  taken  in  ensuring  that  the
appellant complied with the various statutory obligations  to  import  goods
such as amendment of the IGM etc.

50.   The fact that the appellant was  not  permitted  to  clear  the  goods
because of the  pendency  of  some  proceedings  initiated  by  the  customs
authorities by itself does not create a right of remission in favour of  the
appellant.[39]  Though  it  may  constitute  a  relevant  circumstance   for
considering granting remission if the 1st respondent so chooses as a  matter
of policy. As a matter of fact, remission of a part  of  the  demurrage  was
granted by the 1st respondent.

51.   Now, we come to the  submission  that  the  respondent’s  decision  to
decline remission to the appellant is discriminatory because  remission  was
granted in the case of a similarly  situated  consignee  called  Gilt  Pack.
Unfortunately, though the High Court  noted  the  rival  submission  in  the
context  of  the  allegation  of  discrimination,  it  did  not  record  any
conclusion on that count.

52.   From the facts available  on  record,  we  are  of  the  opinion  that
firstly, the cases of Gilt Pack and appellant are not identical.  Gilt  Pack
was the case where the original consignee sold the goods to  a  third  party
on high seas even before their arrival into India.   It so  transpired  that
the purchaser did not have an appropriate license under the relevant law  to
import the goods.  In view of the said problem, the goods were detained  for
some  time  and  eventually  the  original  consignee  himself  cleared  the
goods[40].    It  is  in  the  said  circumstances  Gilt  Pack  was  granted
remission.   We are not concerned with the question whether  the  discretion
was appropriately exercised in the case of Gilt Pack.   We are only  on  the
question whether the facts  of  Gilt  Pack  and  the  appellant  herein  are

53.   However, we  must  make  it  clear  that  the  authority  of  the  1st
respondent to grant or decline remission of any amount due towards any  rate
payable under THE ACT must be based on rational consideration  and  a  sound
policy.  Such a requirement is inherent in the fact that 1st  respondent  is
a  statutory  body  discharging  important   statutory   obligations.    1st
respondent  could  not  bring  anything  on  record  to  our  notice   which
demonstrates  the  reasons  for  declining  remission  as  claimed  by   the
appellant nor any  clear  policy  of  the  respondent  which  regulates  the
discretion. In the circumstances, we deem it appropriate to  set  aside  the
decision of 1st respondent dated 16.09.1995 in declining the  remission  and
leave it open  to  the  respondent  to  take  appropriate  decision  on  the
application duly recording the reasons for such decision.

54.   The appeal is accordingly allowed in part.   The impugned judgment  is
set aside.   There shall be no order as to costs.

                                       (J. CHELAMESWAR)

                                           …….   ………….....................J.
                                      (ABHAY MANOHAR SAPRE)
New Delhi
February 28, 2017

[1]    Prayer in Writ Petition No.2012 of 1996:

      (a)  The this Hon’ble Court be pleased to declare  that  the  impugned
action on the part of the Respondents 1 to 3 in not granting  the  remission
of demurrage charges in respect of the  said  consignments  since  inception
and restricting granting of remission of demurrage  charges  only  from  the
date of filing of the bills of entry in the name  of  the  petitioners  were
and are unlawful, illegal and null and void.

      (b)    That  this  Hon’ble  Court  be  pleased  to  issue  a  writ  of
Certiorari or a Writ in the nature of Certiorari or  any  other  appropriate
writ, order or direction calling for  the  record  and  proceedings  in  the
matter of the application of the petitioners for review and  reconsideration
of  the  grant  of  remission/refund  of  demurrage   charges   of   various
consignments set out in the petition hereabove as also in  relation  to  the
said communication dated  24.5.1996  and  after  considering  the  validity,
legality and propriety thereof, be pleased to quash and set aside  the  said
action and/or decision on the  part  of  the  Respondents  1  to  3  in  not
granting  further  remission  of  demurrage  charges  in   favour   of   the

      (c)    That this Hon’ble Court be pleased to issue a writ of  Mandamus
or a writ in the nature of Mandamus or any other appropriate writ, order  or
direction ordering and directing the Respondents 1 to 3 to  forthwith  grant
remission and/or refund of the amount of Rs. alongwith interest  thereon  at
the rate of 18% per annum  from  the  date  of  payment  of  the  respective
amounts as per the statement annexed hereto and marked as Exhibit in  favour
of the petitioners;

      (d)   In the alternative and without prejudice to the above;

           This Hon’ble Court be pleased to order the Respondents  4  and  5
to  pay  to  the  petitioners  the  deficit  amount  after  considering  the
remission that has already been granted and that  will  be  granted  by  the
Respondent 1 to 3 along with interest thereon at 18%  per  annum  from  such
date as this Hon’ble Court may deem fit;

[2]    Section 29. Arrival  of  vessels  and  aircrafts  in  India.—(1)  The
person-in-charge of a vessel … entering India from any place  outside  India
shall not cause or permit the vessel … to call or ... —
      for the first time after arrival in India; or
      at any time while it is carrying passengers or cargo brought  in  that
vessel or aircraft,
      at any place other than a customs port or a customs  airport,  as  the
case may be unless permitted by the Board.
                                   x     x    x”
[3]    Section 2(12). “customs port” means any port appointed  under  clause
(a) of section 7 to be a customs port, and includes a place appointed  under
clause (aa) of that section to be an inland container depot.
[4]    A complete analysis of the  evolution  of  the  law  in  this  regard
requires an elaborate study and would be beyond the scope of any judgment.
[5]    Section 2(b) “Board”, in relation to a port, means the Board of
Trustees constituted under this Act for that port;
[6]    Section 3.  Constitution of Board of Trustees.—(1) With  effect  from
such date as may be specified by notification in the Official  Gazette,  the
Central Government shall cause to be constituted in  respect  of  any  major
port a Board of Trustees to be called the Board of Trustees  of  that  port,
which shall consist of the following Trustees, namely …
[7]    Section 35 (1) A Board may execute such works within or without the
limits of the port and provide such appliances as it may deem necessary or
[8]    The expression “Port” is defined under Section 2(q) as follows:-
      “Section 2 (q) “port” means any major port to which this  Act  applies
within such limits as may, from time to time,  be  defined  by  the  Central
Government for the purposes of this Act  by  notification  in  the  Official
Gazette, and, until a notification is so issued, within such limits  as  may
have been defined by the Central Government  under  the  provisions  of  the
Indian Ports Act;”
[9]    Section 2(z) “vessel” includes  anything  made  for  the  conveyance,
mainly by water, of human beings or of goods and a caisson;”
[10]    Section 42(7).  After any goods have been  taken  charge  of  and  a
receipt given for them under this section, no  liability  for  any  loss  or
damage which may occur to them shall attach to any person to whom a  receipt
has been given or to the master or owner of the vessel from which the  goods
have been landed or transshipped.
[11]    Section 2(v) - "rate" includes any toll, due, rent,  rate,  fee,  or
charge leviable under this Act;

[12]   Post 1997, a common authority (TARIFF AUTHORITY) for all major ports
is brought into existence under Section 47A to frame scales.
[13]    Section 50A.  Port-due on vessels in  ballast.—  A  vessel  entering
any port in ballast and not carrying passengers  shall  be  charged  with  a
port-due at a rate to be determined  by  the  Authority  and  not  exceeding
three-fourths of the rate with which she would otherwise be chargeable.
[14]   Section 50B.  Port-due  on  vessels  not  discharging  or  taking  in
cargo.— When a vessel enters a port but does not discharge or  take  in  any
cargo or passengers therein, (within the exception of  such  unshipment  and
reshipment as may be  necessary  for  purposes  of  repair),  she  shall  be
charged with a port-due at a rate to be determined by the authority and  not
exceeding half the rate with which she would otherwise be chargeable.
[15]   In Maritime Law by a long established practice  a  vessel  is  always
referred to as “she”.
[16]    Lien is defined in Halsbury’s Laws of England (4th  Edition,  Volume
28 at page 221, para 502) as “In its primary or legal sense “lien”  means  a
right at common law in one man  to  retain  that  which  is  rightfully  and
continuously in his possession belonging to another until  the  present  and
accrued claims are satisfied.”
[17]   Section 59.  Board’s lien for rates.—(1) For the amount of all  rates
leviable under this Act in respect of any goods, and for  the  rent  due  to
the Board for any buildings, plinths stacking areas, or  other  premises  on
or in which any goods may have been placed, the Board shall have a  lien  on
such goods, and may seize and detain the same until  such  rates  and  rents
are fully paid.

[18]   Scrutton on Charterparties and Bills of Lading, Twenty Third
Edition, p.380
[19]   Useful reference can be made to Halsbury’s Laws of England, Fourth
Edition. Similarly, a seminal work titled “Law on Demurrage” by Hugo Tiberg
covering laws of various countries on the subject.

[20]   Para 31.  The High  Court  has  cited  many  texts  and  dictionaries
bearing on the meaning of “demurrage” but these have no  relevance  for  the
reason that demurrage being a charge and not a service,  the  power  of  the
Board is not limited to fixing rates of  demurrage.  Besides,  it  is  plain
that the Board has  used  the  expression  “demurrage”  not  in  the  strict
mercantile sense but merely to signify a  charge  which  may  be  levied  on
goods after the expiration of free days. Rule 13(b) itself furnishes a  clue
to the sense in which the expression “demurrage” is used by  the  Board.  It
provides, inter alia, that “demurrage” shall be recovered at a  concessional
rate for a period of thirty days plus one working day where  the  goods  are
detained for compliance with certain formalities and where the Collector  of
Customs certifies that the detention of goods is “not  attributable  to  any
fault or negligence on the part of importers”.
[21]   See International Airport  Authority  of  India  v.  Ashok  Dhawan  &
Others, (1997) 11 SCC 343
[22]   See F/N 17
[23]   See also para 1 of the written submissions of the respondent;
      “1.   The entire claim of the Appellants before  the  Respondents  and
in  the  Writ  Petition  was  for  remission.   (Ref  pg  @79  (Request  for
Remission) and page 143 (Writ Prayers).   Having sought “remission”  of  the
accrued demurrage, it is obvious that  the  appellants  had  admitted  their
liability to pay the  demurrage.    If  the  appellants  have  not  been  so
liable, there was no question of them claiming  remission.    Hence,  today,
it is not open to the Appellants to dispute the liability.”

[24]   It may be mentioned that  the  law  referred  above  is  a  piece  of
subordinate legislation.

[25]   Para  49.   These  observations  apply  when  the  goods  are  to  be
delivered to the consignee alongside the ship and not when they  are  handed
over to the statutory body, like  the  Board,  as  a  sub-bailee.   How  the
delivery is to be made depends on the terms of the bill of  lading  and  the
custom of the Port.  The case is no authority for the  proposition  that  in
all circumstances the master of  the  vessel  is  not  responsible  for  the
performance of the acts subsequent to  his  placing  the  goods  in  such  a
position that the consignee can get them, as contended for the  respondents.
 The delivery contemplated in these observations, is not,  in  our  opinion,
equivalent to the landing of the goods at the quay as  contemplated  by  the
various provisions of the Act.
[26]    “……Once the goods are handed over to the Port Trust by  the  steamer
and the steamer agents have duly endorsed the bill of lading or  issued  the
delivery order, their obligation to deliver  the  goods  personally  to  the
owner or the endorsee comes to an end.   The  subsequent  detention  of  the
goods by the Port Trust as a result  of  the  intervention  by  the  Customs
authorities cannot be said to be on behalf of or  for  the  benefit  of  the
steamer agents.”
[27]   …..By the endorsement of the bill of lading or the issue of a
delivery order by the steamer agents, the property in the goods vests on
such consignee or endorsee, and thus it appears to be clear that the
steamer or the steamer agents are not responsible for the custody of the
goods after the property in the goods passes to the consignee or endorsee
till the Customs authorities actually give a clearance.
[28]   ROWTHER-I and Port of Bombay v. Sriyanesh Knitters, (1999) 7 SCC 359
[29]   Para 12. From the above, the position of law which appears to  emerge
is that once the bill of lading is endorsed or the delivery order is  issued
it is the consignee or endorsee who would be liable  to  pay  the  demurrage
charges and other dues of the Port Trust Authority. In all other  situations
the contract of bailment is one between the steamer agent (bailor)  and  the
Port Trust Authority (bailee) giving rise to the liability  of  the  steamer
agent for such charges till such time that the bill of  lading  is  endorsed
or delivery order is issued by the steamer agent.
[30]   Trustees of the Port of Bombay Vs. Premier Automobiles Ltd. (1981)  1
SCC 228, para 11.
      “11. It is well settled that the essence of  bailment  is  possession.
It is equally well settled that a bailment may arise, as in this case,  even
when the owner of the goods has not consented to  their  possession  by  the
bailee at all : PALMER ON BAILMENT, 1979 edition, page 2.    There may  thus
be bailment when a wharfinger takes possession  of  goods  unloaded  at  the
quay side.    A  bailment  is  not  therefore  technically  and  essentially
subject to the limitations of an agreement, and the notion of  privity  need
not be introduced in an area where it is unnecessary, for  bailment,  as  we
have  said,  arises  out  of  possession,  and  essentially   connotes   the
relationship between  a  person  and  the  thing  in  his  charge.    It  is
sufficient if  that  possession  is  within  the  knowledge  of  the  person
concerned.   It follows that a bailment may  very  well  exist  without  the
creation of a contract between the parties and it essentially gives rise  to
remedies which, in truth and substance, cannot be said  to  be  contractual.
That is why Palmer has made the assertion that “bailment is predominantly  a
tortuous relation” (page 36), and the two are fundamentally similar.

[31]    ‘Bailment’  is  a  technical  term  of  the   common   law,   though
etymologically it might mean any kind of handing over.   It involves  change
of possession.   One who has custody without possession, like a servant,  or
a  guest  using  his  host’s  goods,  is  not  a   bailee.   [See:   Pollock
& Mulla, The Indian Contract and Specific Relief Acts, 13th Ed. Page 1931]
[32]   Called contract of  affreightment
[33]   Section 42 (7) After any goods  have  been  taken  charge  of  and  a
receipt given for them under this section, no  liability  for  any  loss  or
damage which may occur to them shall attach to any person to whom a  receipt
has been given or to the master or owner of the vessel from which the  goods
have been landed or transhipped.

[34]    Board of Trustees of the Port of Bombay & Ors. v. Sriyanesh
Knitters, (1999) 7 SCC 359.
          Para 17.  … This section is in two parts.  The  first  part  gives
statutory right of lien to four categories only, namely,  bankers,  factors,
wharfingers and attorneys of High Court and policy-brokers subject to  their
contracting out of Section 171.  The second part of Section 171  applies  to
persons other than the aforesaid five categories and  to  them  Section  171
does not give a statutory right of lien.  It provides, that they  will  have
no right to retain as securities goods bailed to them  unless  there  is  an
express contract to that effect.  Whereas in respect of the  first  category
of persons mentioned in Section 171  the  section  itself  enables  them  to
retain the goods as security in the absence of a contract  to  the  contrary
but in respect of any other person to whom goods are  bailed  the  right  of
retaining them as securities can be exercised only if there  is  an  express
contract to that effect.
[35]    For the sake of completeness  in  the  narration  it  must  also  be
mentioned that this Court held in (1999) 7 SCC  359  (at  para  22)  that  a
Board constituted under THE ACT is a wharfinger.

[36]   63. Application of sale proceeds  (1)  The  proceeds  of  every  sale
under section 61 or section 62 shall be applied in the following order-
      (a) in payment of the expenses of the sale;
      (b) in payment, according  to  their  respective  priorities,  of  the
liens and claims  excepted  in  sub-section  (2)  of  section  59  from  the
priority of the lien of the Board;

      (c) in payment  of  the  rates  and  expenses  of  landing,  removing,
storing or warehousing the same, and of all other charges due to  the  Board
in respect thereof including demurrage (other than penal demurrage)  payable
in respect of such goods for a period  of  four  months  from  the  date  of

      (d) in payment of any penalty or fine due to Central Government  under
any law for the time being in force relating to customs;

      (e) in payment of any other sum due to the Board.

      (2) The surplus, if any, shall be  paid  to  the  importer,  owner  or
consignee of the goods or to his agent, on an application  made  by  him  in
this behalf within six months from the date of the sale of the goods.

      (3) Where no application has been  made  under  sub-section  (2),  the
surplus shall be applied by the Board for the purposes of this Act.

[37]    Board of Trustees of the Port of Bombay & Others v. Sriyanesh
Knitters, (1999) 7 SCC 359.
            “16.  There is another aspect which is relevant. Section 171  of
the Contract Act only enables the retention of goods  as  security.  On  the
other hand in respect of current dues in respect of existing goods in  their
possession the Board not only has a lien under Section 59  of  the  MPT  Act
but it also has the power to sell the said goods and  realise  its  dues  by
virtue of Section 61 of the MPT  Act.  The  procedure  for  exercising  this
power of sale of the goods in  respect  of  which  the  Board  has  lien  is
contained in the said section. Before selling the  goods  no  order  of  any
court or other judicial  authority  is  required.  On  the  other  hand  the
general lien contemplated by Section 171 of the Contract  Act  only  enables
the retention of the bailed goods as a security. Their  retention  does  not
give any power to sell the goods, unlike the power contained in  Section  61
of the MPT Act. If payment is not made by the consignee to  the  wharfinger,
in a case where Section 171 of the Contract Act applies, the wharfinger  can
only retain the goods bailed as security and will have to take  recourse  to
other proceedings in accordance with law for securing an order  which  would
then enable the goods to be sold for realisation of the amounts due  to  it.
It may in this connection, be necessary for the wharfinger to  file  a  suit
for the recovery of the amount due to it and Section  131  of  the  MPT  Act
clearly provides that such a remedy of filing a suit  is  available  to  the
[38]   It is not very clear from the record whether  these  guidelines  were
issued  by  the  Government  of  India  or  guidelines  framed  by  the  1st
respondent.   In  the  written  submissions,  the  appellant  describes  the
guidelines framed by the Government of  India  whereas  under  the  judgment
under appeal at para 24, it appears that the  appellant’s  case  before  the
High Court was that they were guidelines framed by the 1st respondent.
      “….He would submit that  the  guidelines  framed  by  the  BPT  itself
provides for remission asked for by the petitioners when  the  detention  of
the goods by the Custom was for bonafide operation of ITC formalities.”

      Per contra the case of  the  1st  respondent  before  the  High  Court
regarding the guidelines appears to be
      “…..remission is granted on ex-gratia basis, that too,  by  exercising
discretion on the basis of guidelines issued  by  the  Union  of  India  and
adopted  by  resolution  passed  by  respondent  No.  1  along  with  Custom

      The High Court did not record any categorical finding in  this  regard
except stating
      “47.  In exercise of statutory powers under section 101 of  the  Major
Port Trust Act guidelines for remission of demurrage charges are framed.”
[39]   See International Airports Authority of India v. Grand Slam
International, (1995) 3 SCC 151
[40]    The full factual background as to how it all happened is not
relevant for our purpose.