2015 (5) TMI 403 - SC - Indian Laws

Liability of the agent of a ship owner to pay demurrage and port charges to the Board of Trustees of a Port - Held that - 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. - 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 ship owner under a separate bailment with the shipper or the consignor, as may be. Even de hors 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 Act of 1963. - 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. - Ordinarily and in the normal course if resort is made to the enabling provisions in the Act of 1963 to proceed against the goods for recovery of the charges payable to the Port Trust authority there may not be any occasion for the said authority to sustain any loss or even suffer any shortfall of the dues payable to it so as to initiate recovery proceedings against the ship owners. - Decided against appellant.

Issues Involved:
1. Liability of the Steamer Agent to pay demurrage and port charges.
2. Interpretation and application of the Major Port Trust Act, 1963.
3. Relationship of bailor and bailee between the Steamer Agent and the Port Trust Authority.
4. Applicability of the 1997 judgment and the Constitution Bench decision.
5. Remedies available to the Steamer Agent under Section 60 of the Act.

Detailed Analysis:

1. Liability of the Steamer Agent to pay demurrage and port charges:
The core issue in these appeals is the liability of the Steamer Agent to pay demurrage and port charges to the Port Trust Authority for goods brought into the port and warehoused. The consignee did not clear the goods, leading to their auction by the Port Trust Authority. The auction proceeds were insufficient to cover the charges, prompting the Port Trust Authority to seek the balance from the Steamer Agent. The High Court held the Steamer Agent liable, distinguishing the case from the 1997 judgment where the bill of lading had been endorsed to the consignee.

2. Interpretation and application of the Major Port Trust Act, 1963:
The appellants argued that under the Major Port Trust Act, 1963, and the byelaws of the Port Trust Authority, no liability is imposed on the ship owner or his agent for demurrage and port charges. They contended that the definition of "Owner" in Section 2(o) does not include the ship owner or his agent, and the relationship of bailor and bailee exists between the consignee and the Port Trust Authority, not between the ship owner or his agent and the Port Trust Authority.

3. Relationship of bailor and bailee between the Steamer Agent and the Port Trust Authority:
The Court held that a contract of bailment exists between the Steamer Agent (bailor) and the Port Trust Authority (bailee) under Section 42(2) read with Section 43(1)(ii) of the Act. This relationship gives rise to the liability of the Steamer Agent for demurrage charges and port rent until the bill of lading is endorsed or a delivery order is issued. The Court distinguished the decision in Sriyanesh Knitters, noting that the relationship of bailor and bailee between the consignee and the Port Trust Authority was specific to the facts of that case where the consignee had already taken delivery of the goods.

4. Applicability of the 1997 judgment and the Constitution Bench decision:
The appellants relied on the 1997 judgment to argue that there is no liability for the Steamer Agent to pay demurrage charges and port rent. However, the Court clarified that the 1997 judgment applies only when the bill of lading is endorsed or a delivery order is issued. In all other situations, the Constitution Bench decision prevails, establishing the Steamer Agent's liability for demurrage charges and port rent.

5. Remedies available to the Steamer Agent under Section 60 of the Act:
The High Court's reference to Section 60 of the Act, which provides a limited lien for the ship owner for freight and other charges, was found to be incorrect as it does not extend to demurrage and port charges. However, this error was not fundamental to the final conclusion. Sections 61 and 62 of the Act enable the Port Trust Authority to proceed against the goods in its custody to recover charges, potentially avoiding the need to seek recovery from the ship owner or Steamer Agent.

Conclusion:
The Supreme Court dismissed all the appeals and affirmed the High Court's orders, holding that the Steamer Agent is liable for demurrage charges and port rent until the bill of lading is endorsed or a delivery order is issued. The Court emphasized the statutory framework and the relationship of bailor and bailee established under the Major Port Trust Act, 1963.

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