1991 (12) TMI 74 - HC - Customs

Issues Involved:
1. Import License and Contractual Obligations
2. Rejection of Goods by Port Health Authorities
3. Privity of Contract and Ownership of Goods
4. Legal Duty of the State Trading Corporation
5. Jurisdiction and Appropriate Forum for Dispute Resolution

Issue-wise Detailed Analysis:

1. Import License and Contractual Obligations:
The petitioner-Devasthanam obtained an import license for dried grapes (raisins) for a value of Rs. 40 lakhs. The import had to be routed through the State Trading Corporation (second respondent). The petitioner-Devasthanam placed an order for two containers of raisins from a Turkish supplier through the second respondent. The consignment arrived at Madras Harbour on 24-12-1990. The sale of the consignment was made on the high seas by endorsing the shipping documents to the petitioner-Devasthanam.

2. Rejection of Goods by Port Health Authorities:
The Port Health Authorities did not clear the consignment as it did not conform to the standards under the Prevention of Food Adulteration Act, 1954. The petitioner was informed that the final report from C.F.T.R.I., Mysore was awaited. On 31-1-1991, it was confirmed that the consignment did not meet the required standards. Consequently, the petitioner requested the second respondent to reship the goods back to Turkey. A show cause notice under Section 124 of the Customs Act, 1962 was issued, stating that the goods were liable for confiscation under Section 111(d) of the Customs Act, 1962.

3. Privity of Contract and Ownership of Goods:
The petitioner alleged that the second respondent, being the importer on record, should take action against the foreign supplier. The petitioner argued that there was no privity of contract between it and the foreign supplier. The second respondent contended that after endorsing the shipping documents, it lost control over the goods, and the title passed to the petitioner. The court noted that the import license and insurance were in the name of the second respondent but to the account of the petitioner-Devasthanam.

4. Legal Duty of the State Trading Corporation:
The petitioner argued that the second respondent had a legal duty to reship the goods, especially since the goods were not merchantable and unfit for human consumption. The court referred to the principles laid down in various judgments, including Muthukrishna v. Madhavji Devichand and Company and In Re: Firm Beharilal Baldeoprasad, which established that in a c.i.f. contract, the purchaser is entitled to reject goods that do not conform to the contract terms, and the ownership reverts to the seller upon rejection.

5. Jurisdiction and Appropriate Forum for Dispute Resolution:
The second respondent argued that the matter was of a civil nature based on contract and should be resolved in a civil court. The court, however, found that the second respondent, being a public authority, could not evade its duties. The court directed the second respondent to face proceedings before the Customs Authorities and the Port Trust Authorities, and it was open to the second respondent to take appropriate action for reshipment or claim damages in a civil court.

Conclusion:
The court concluded that the State Trading Corporation (second respondent) had to take steps to reship the goods or face the proceedings initiated by the Customs and Port Trust Authorities. The petitioner-Devasthanam could not be compelled to answer to these authorities. The writ petition was allowed to the extent of directing the second respondent to handle the proceedings and potential reshipment, with no order as to costs.

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