2009 (3) TMI 333 - HC - Customs

Liability for payment of any damages in case imported goods destroyed in fire, while in the Air Cargo Complex managed by custodians - the questions required to be considered by this Court in these Revision Petitions are whether the custodian alone or the Customs Authorities alone are liable to answer the claim of the plaintiffs? or whether all of them are jointly and severally liable to answer the claim of the plaintiffs? - it is clear that the imported goods should land only in customs area of the notified customs Airport and such imported goods should be unloaded only in the customs area notified in the presence of the proper officer. As per statutory provisions, the Customs Authorities would retain the complete control over the goods so stored with the custodian. The custodian is not an independent authority to deal with the imported goods and he has to act in accordance with the directions of the Proper Officer. duty liability on custodian on pilferage doesn t means that customs authority have no liability and they are not answerable for the loss. - in so far the importer is concerned, the moment imported goods lands in customs area, since statutorily it has to remain in the custody of the Customs Authorities till it is released either for home consumption or for warehousing, there will be a statutory creation of bailment and the Customs Authorities become the bailee vis- -vis the importer. Therefore, in my considered opinion, the customs authorities are principally liable for the proper return of the imported goods to the importer concerned on its clearance.

Summary

Issues Involved:
1. Liability of Custodian (MSIL) and Customs Authorities for the destruction of imported goods.
2. Privity of contract between the importer/insurer and custodian.
3. Limitation of liability of the custodian.
4. Joint and several liability of custodian and customs authorities.

Detailed Analysis:

1. Liability of Custodian (MSIL) and Customs Authorities for the Destruction of Imported Goods:
The court examined whether the custodian (MSIL) alone or the Customs Authorities alone are liable or if both are jointly and severally liable for the destruction of imported goods. The court referred to several provisions of the Customs Act, including Sections 7, 8, 29, 30, 32, 33, and 45, which outline the responsibilities and control over imported goods. The court noted that the Customs Authorities exercise complete control over the imported goods while in the possession of the custodian until they are cleared. The court concluded that both the custodian and the Customs Authorities are jointly and severally liable for the destruction of the goods.

2. Privity of Contract between the Importer/Insurer and Custodian:
MSIL contended that there was no privity of contract between it and the importer or the insurer, and thus it was not liable for the damages. The court rejected this argument, stating that the arrangement for the storage of imported goods is a statutory creation under Section 45(1) of the Customs Act, and the custodian is obligated to act under the control of the Customs Authorities. The court held that the lack of direct contractual relationship does not absolve the custodian from liability.

3. Limitation of Liability of the Custodian:
MSIL argued that its liability is limited to 20 U.S. Dollars per kilogram or the value of the goods, whichever is less, as per a public notice issued by the customs authority. The court held that this limitation of liability is an internal arrangement between the custodian and the Customs Authorities and does not bind the importer or the insurer. The court emphasized that the custodian cannot limit its liability towards the importer based on an arrangement to which the importer was not a party.

4. Joint and Several Liability of Custodian and Customs Authorities:
The court affirmed the judgment in SC No. 1087/2003, which held both the custodian and the Customs Authorities jointly and severally liable for the loss. The court found that the Customs Authorities retain control over the goods even when they are in the possession of the custodian and are responsible for the proper return of the goods to the importer. The court also noted that the custodian has a duty to take proper care of the goods as per Sections 151 and 152 of the Indian Contract Act. The court concluded that both entities are liable for the loss and must compensate the importer/insurer jointly and severally.

Conclusion:
The court dismissed the revision petitions filed by MSIL and the Customs Authorities, affirming the joint and several liability for the destruction of the imported goods. The court set aside the judgments that dismissed the suits against the Customs Authorities and modified the decrees to hold all three defendants (MSIL and Customs Authorities) jointly and severally liable for the decreetal amount with interest. The court directed the parties to bear their own costs.