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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 ..... 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 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of non-clearance of the goods. 5. However, before us, a twofold submission is made by the appellant: (i) 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; (ii) 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. (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 acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 ports8 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 (vessels9) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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- (a) transshipping of passengers or goods between vessels in the port or port approaches; (b) 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; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 literature19. However, in India, the expression "demurrage" appears to have acquired a different connotation. Under the Madras Port Trust Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essel 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 4925 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 judgments28, this Court rejected the submission that there comes into existence the relationship of bailor and bailee between the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iabilities 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 contract32 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailment 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 goods40. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 ... - (a) for the first time after arrival in India; or (b) 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. 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonally 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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- (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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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