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TMI Blog2017 (3) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... that the steamer agent’s responsibility ceases “once the goods are handed over to the Port Trust” and the bill of lading is endorsed. 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 - High Court, concluded that only the consignee was liable. 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. 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. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant a substantial portion of the delay occurred because of the non-clearance of the goods by the customs department. (iii) 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 perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : (i) 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 (ii) while within such limits, to anchor, fasten or lie within fifty yards of the ordinary low-water mark. 13. Section 42(2) authorises BOARDS t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board or at any place within the limits of the port or port approaches; (c) cranage or porterage of goods on any such place; (d) wharfage, storage or demurrage of goods on any such place; (e) 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 rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thatthe Board has used the expression demurrage not in thestrict mercantile sense but merely to signify a charge whichmay be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 ₹ 90,52,535.00 (approximately) out of the total claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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. 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 Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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- (d) in payment of the expenses of the sale; (e) 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; (f) 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. (g) in payment of any penalty or fine due to Central Government under any law for the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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