REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5968 OF 2011
M/S. RASIKLAL KANTILAL & CO. … Appellant
Versus
BOARD OF TRUSTEE OF PORT OF
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
Authorities.
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
department.
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)
of THE ACT.
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
provisions.
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;
or
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
approaches;
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
meanings.”[18]
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
allowed.[21]
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
submission.[23]
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
submission.
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,
1905.
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
rates.
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
authority.
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
Act.”
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
contract.
“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
consideration”
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
circumstances.”
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
bailment.
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
consignee.
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
earlier.
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
ACT.
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
Rs.2,81,67,333.00.
(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
time.
(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.
AND
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
identical.
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.
(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
petitioners;
(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
expedient.
[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
landing.
(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
Board.”
[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
Department.”
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.
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41
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5968 OF 2011
M/S. RASIKLAL KANTILAL & CO. … Appellant
Versus
BOARD OF TRUSTEE OF PORT OF
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
Authorities.
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
department.
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)
of THE ACT.
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
provisions.
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;
or
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
approaches;
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
meanings.”[18]
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
allowed.[21]
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
submission.[23]
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
submission.
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,
1905.
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
rates.
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
authority.
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
Act.”
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
contract.
“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
consideration”
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
circumstances.”
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
bailment.
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
consignee.
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
earlier.
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
ACT.
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
Rs.2,81,67,333.00.
(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
time.
(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.
AND
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
identical.
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.
(J. CHELAMESWAR)
……. ………….....................J.
(ABHAY MANOHAR SAPRE)
New Delhi
February 28, 2017
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[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
petitioners;
(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
expedient.
[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
landing.
(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
Board.”
[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
Department.”
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.
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