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TMI Blog2011 (10) TMI 768X X X X Extracts X X X X X X X X Extracts X X X X ..... ned single Judge of that court decreeing the suit filed by the first Respondent in part. For convenience we will also refer to the parties by their ranks in the suit. 2. NFC entered into a contract dated 7.12.1977 with Ngoh Hong Hang Pvt. Ltd., Singapore (for short 'NHH' or the 'buyer') for sale of 10000 MT of parboiled rice-1978 crop, (as also other quantities of rice). As per the contract, the payment was to be made by the buyer by establishing an irrecoverable confirmed and transferable letter of credit confirmed by Rashtriya Banijya Bank, Kathmandu in US dollars in favour of the seller allowing part payment. The contract provided that the payment 100% invoice value shall be made at sight at the seller's bank on presentation of 'on board Bills of Lading' (or charter party Bills of Lading) supported by seller's commercial invoice. In pursuance of it, Bangkok Bank Ltd., Hong Kong who were the buyer's bankers, issued an irrecoverable letter of credit dated 25.4.1978 (amended/ extended on 25.5.1978 and 31.8.1978) for US $ 21,60,000, in regard to the price of 10000 MT of Nepal paraboiled rice. The validity period of the said letter of credit was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Shaw Wallace by telex message dated 5.12.1978, not to issue Bills of Lading to NFC until advised, in view of the dispute between the charterer and the shipper in regard to the lay days . At this juncture it is necessary to refer to the background facts relating to the said dispute. When the vessel arrived at Garden Reach Anchorage on 9.11.1978, the vessel was passed as fit for loading, by the surveyors. On 9.11.1978, NFC did not have sufficient goods to load and therefore the vessel was birthed at 28 KPD. The vessel was programmed to shift from 28 KPD to 23 KPD on 16.11.1978, but could not be shifted on account of Port Workers strike. After the strike was called off, the vessel moved from 28 KPD to 23 KPD on 28.11.1978. Asian Agency therefore accepted the notice of readiness dated 8.11.1978, only on 28.11.1978. According to Shaw Wallace, Asian Agency ought to have accepted the notice of readiness as soon as the ship berthed at the port on 9.11.1978. According to Asian Agency, the vessel could be said to be ready only when it berthed at 23 KPD which was on 28.11.1978 and therefore there was no delay on its part. The dispute was as to whether the shipper should bear the demurrage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d possible and we will be responsible for all possible legal action. It should be noted that by then NHH had taken delivery of the cargo from Pichit Samut. Shaw Wallace sent a telex message dated 3.1.1979 informing Asian Agency that the Carrier had advised not to issue the bills of lading until NFC furnished a bank guarantee towards demurrage and that the ship-owner would not be responsible for the delay in issuing bills of lading, in view of delay on the part of NFC in furnishing a bank guarantee for the demurrage. The validity period of the letter of credit issued at the instance of NHH expired on 15.1.1979. Shaw Wallace by communication dated 15.1.1979 informed NFC's agent that the demurrage due in respect of M.V. Pichit Samut was US$ 30,000 and a bank guarantee for the said amount should be furnished by the NFC or its agents so that the bills of lading could be issued. On 19.1.1979, NFC issued a notice to Shaw Wallace calling upon them to issue bills of lading and take steps to see that NHH extends the validity of the letters of credit to enable NFC to negotiate the same and realize the value of goods failing which Shaw Wallace would be held liable for all consequences. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit filed by NFC against the owner of the vessel and the agent (appellant), it was contended that as the bills of lading were not issued in time, the valuable security was not available for negotiation and, in the meanwhile, the validity period of the letter of credit having expired on 15.1.1979, loss was caused to NFC in respect of the value of the goods. The basis of the claim was two-fold. The first was wrongful delivery by the ship owner (first Defendant) to NHH without production of the necessary documents (bills of lading). The second was wrongful failure on the part of the ship-owner and Shaw Wallace to furnish the bills of lading within the validity period of letter of credit, thereby preventing the NFC from negotiating and recovering the amount due. While the first was a cause of action against the ship-owner, the second was a cause of action against both the ship-owner and Shaw Wallace. 10. The first Defendant (owner of the vessel) did not defend the suit claim. The second Defendant (Shaw Wallace) in its written statement claimed that it had merely acted as the agent of the ship-owner in regard to that particular voyage undertaken by M. v. Pichit Samut; and that it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utta High Court by impugned judgment dated 14.9.2001 dismissed the said appeal. The division bench affirmed the finding that the Appellant was guilty of breach of a statutory duty and breach of a legal duty which amounted to negligence. It however clarified that Shaw Wallace was guilty of conversion of bills of lading which constituted title to the goods and not conversion of goods. The division bench rejected the contention of the Appellant that it was the duty of the master of the ship who took charge of the goods to issue the bill of lading and not that of the agent. It held that Shaw Wallace had an obligation to issue the bills of lading within the validity period of the letter of credit. It also held that by the Appellant's failure to issue the bills of lading, NFC was unable to negotiate the letter of credit and consequently lost the value of the goods. 13. The said judgment and decree of the appellate bench of the High Court is challenged in this appeal. At the outset, it should be noticed that in this appeal, we are neither concerned with the liability of the buyer/ charterer (NHH) nor with the liability of the owner of the vessel (UPT Imports Exports). The decree ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle III deals with the Responsibilities and Liabilities of Carriers by Sea. Rule 3 thereof which is relevant for our purpose, is extracted below: 3. After receiving the goods into his charge, the carrier or the master or agent of the carrier, shall, on demand of the shipper issue to the shipper a bill of lading showing among other things. (a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage; (b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper; (c) The apparent order and condition of the goods: Provided that no carrier, master or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of lading are usually procured by the shipper, and filled by him with statements of the kinds and quantities of the goods, and the marks upon them. These are checked on behalf of the ship, and documents are signed on behalf of the master, by the ship's agent, and delivered to the shipper. 16. NFC did not engage the vessel Pichit Samut. It was chartered by the buyer NHH to carry the goods purchased by it from NFC. The contract of carriage was governed by the terms of the charter party agreement dated 11.10.1978. As per the said charter party agreement, if the ship was delayed, the Charterer (NHH) was responsible to pay the demurrage and the agreement provided that the demurrage should be settled at Singapore, twenty days after discharge of the cargo at Penang. Thus NFC did not have any obligation towards the owner of the vessel to pay either the freight or any demurrage charges. If there was any delay for which NFC was liable, that was a matter to be sorted out by NHH making a claim against NFC. As per the sale contract dated 7.12.1977 between NFC as seller/ shipper and NHH as the buyer, the seller (NFC) was entitled to payment of the entire invoice value, at sight at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1979. Having regard to Rule 3 of Article III of the Schedule to the Act, there was a statutory duty cast upon Shaw Wallace as agent of the carrier, to issue the bills of lading, without delay. Shaw Wallace was aware of the relevance and importance of bills of lading. By deliberately delaying the issue of the bills of lading from 17.12.1978 to 25.1.1979, Shaw Wallace committed a breach of statutory duty cast under Article III (3) of the Schedule to the Act. It also acted negligently in performance of its legal duty in common law to issue the bills of lading on delivery of the mate's receipt, as the agent of the ship-owner. Thus it became liable to pay damages to make good the loss, namely the value of the goods covered by the bills of lading. For this purpose it is immaterial whether Shaw Wallace was aware or unaware of the fact that the Letter of Credit was expiring on 15.1.1979. The contention of Shaw Wallace that it was acting merely on the instructions of the ship owner in refusing to issue the bills of lading till furnishing of a bank guarantee and therefore not liable, is rejected. 18. the Appellant made a belated attempt to avoid liability by contending that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the ship left the port that it was the carrier's agent and it will issue the bills of lading in lieu of the mate's receipt. It did not express any reservation or objection when it issued the blank forms of bills of lading to Asian Agency for being filled or even when the mate's receipts and filled forms of bills of lading were delivered to it on 17.12.1978. Even in the letter dated 28.12.1978 addressed to the Asian Agency, it merely stated that readiness of the ship to receive goods would commence from 9.11.1978 and not 26.12.1978. More than 15 days after receiving the mate's receipts and filled form of bills of lading, on 3.1.1979, for the first time, Shaw Wallace raised the issue of furnishing a bank guarantee for payment of demurrage amount before releasing the bills of lading. Even in this letter, it did not mention the amount of demurrage for which the bank guarantee was to be issued. The demurrage amount was mentioned for the first time by letter dated 15.1.1979. Therefore, even if NFC wanted to give a bank guarantee, it could not have given a bank guarantee before 15.1.1979 as the amount for which bank guarantee was required, was not notified. On 15.1.1979 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge rate when the loss occurred, the rupee equivalent of US$ 960,507 was ₹ 77,80,110/- (at the rate of? 8.10 per US Dollar) and therefore, the claim of ₹ 1,05,32,459/22 was excessive, erroneous and even if the Plaintiff should succeed, the decree should be only for ₹ 77,80,110/-. We have carefully considered the said contention. It is seen that the Appellant in its written statement did not raise the contention that the exchange rate was ₹ 8.10 per US Dollars at the relevant time and the Indian rupee equivalent of the value of the rice in US Dollar would be only ₹ 77,80,110/-. Significantly, even when the learned Single Judge decreed the suit for ₹ 1,05,32,459.22, the Appellant did not raise this contention in the memorandum of appeal in the intra-court appeal. Again, when the appeal by the Appellant was dismissed by a division bench of the High Court and the special leave petition was filed before this Court, the Appellant did not raise this contention in the special leave petition. Apart from the absence of pleadings, there is no material on record to show the date with reference to which the exchange rate was calculated, (that is, whether it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an irrecoverable letter of credit dated 25.4.1978 for US $ 21,60,000, in regard to the price of 10000 MT of Nepal parboiled rice. The validity period of the said letter of credit was originally up to 30.6.1978, the date of shipment latest by 20.6.1978. This was extended from time to time and the validity of the letter of credit was extended up to 15.1.1979 and the date of shipment was extended to 31.12.1978. (vide communication dated 26.10.1978 of Rashtriya Banijya Bank). 24. Thye Shipping Parma SA, the first Defendant was the disponent owner (main charterer) of the vessel - M.V. Eastern Grand under a charter arrangement with the owner of the vessel -- M/s Eastern Steamship Enterprises (S) Ltd., the second Defendant. The said vessel 'Eastern Grand' was sub-chartered by NHH (buyer of the rice) from Thye Shipping under a charter party agreement dated 14.11.1978 for carrying 4500 MT of rice supplied by NFC, from Calcutta to Penang, Malaysia. Khemka Company (Agencies) Pvt. Ltd., the fourth Defendant was the Owner's Protective Agent. Shaw Wallace was the agent of the owner of the vessel, at Calcutta. M/s Asian Agency was the agent of the seller (NFC) who was the shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be furnished by the NFC or its agents so that the bills of lading could be issued. 28. As per the standard practice, Shaw Wallace supplied the blank forms of bills of lading to Asian Agency for being filled and returned. Asian Agency delivered the mate's receipts and the duly filled bills of lading to Shaw Wallace on 18.1.1979 with a request to sign and issue the bills of ladings as owner's agent. Asian Agency sent a notice dated 19.1.1979 to Shaw Wallace demanding the immediate release of the bills of lading and requiring it to ensure extension of the letter of credit to enable NFC to negotiate the same, failing which Shaw Wallace would be held liable for all consequences. Shaw Wallace received a telex dated 24.1.1979 from the ship owner, giving clearance to release the bills of lading. On 29.1.1979, Shaw Wallace delivered three signed bills of lading dated 28.12.1978 and 29.12.1978 to NFC's agent (Asian Agency) in regard to 3366.170 MT of rice entrusted to the master of the vessel 'Eastern Grand' for transshipment from Calcutta to Penang. NFC issued its final invoice in regard to the consignments on 2.2.1979. 29. NHH issued a notice dated 3.2.1979 to N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Samut. Both parties (plaintiffs and second Defendant) led evidence - both oral and documentary. 32. As already mentioned (vide para 8 above), during the pendency of the said suit, NFC also filed a suit against NHH in the High Court of Singapore for the value of the goods supplied, but could not recover any amount as NIIH was ordered to be wound up in the year 1985. 33. After considering the evidence, a learned Single Judge, by judgment dated 9.9.1987, decreed the suit for ₹ 95,67,537/31 against Thye Shipping (second Respondent) and Shaw Wallace (appellant) with interest at 9% per annum from the date of suit (24.12.1979). The learned Single Judge held that the suit was maintainable. He also held that Shaw Wallace was liable to pay damages to NFC as claimed. Feeling aggrieved, Shaw Wallace filed an intra court appeal. The division bench of the Calcutta High Court, by impugned order dated 14.9.2001 dismissed the said appeal. The reasonings of the learned Single Judge and the Division Bench are broadly the same as the reasoning in the case of 'Pichit Samut'. The said judgment and decree of the High Court is challenged in this appeal by special leave. 34. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred that it would be highly improbable that the holder of the mate's receipts would delay the making of a demand for blank bills of lading forms. The learned Single Judge recorded a finding that Asian Agency was demanding the blank bills of lading forms from Shaw Wallace from 30.12.1978 and that Shaw Wallace did not supply the blank forms to Asian Agency until 17.1.1979. Consequently the learned single Judge reasoned that the demand for bills of lading was being prior to 15.1.1979 and therefore, for the reasons stated in the case of Pichit Samut, Shaw Wallace was liable to pay damages equal to the value of the goods. The division bench affirmed the said findings. 37. There is no reference in the plaint, to the demand for the blank forms of lading on and from 30.12.1978 by Asian Agency. Asian Agency did not send either any letter or telex to Shaw Wallace demanding the issue of bills of lading or the blank forms of bill of lading for purposes of filling up at any time prior to 17.1.1979. Asian Agency did not tender the mate's receipts prior to 17.1.1979. The first communication in writing from Asian Agency to Shaw Wallace after the ship left on 30.12.1978 was when it se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the duly filled forms of bill of lading in regard to Eastern Grand on 18.1.1979 (the date should be 19.1.1979). It does not refer to any earlier demand by Asian Agency for issue of blank forms of bills of lading from 30.12.1978 or any other date. It does not refer to any earlier demand for issue of bills of lading. Similarly in the notice dated 10.12.1979 issued by NFC through counsel to Shaw Wallace, there is no reference to any demand earlier to 19.1.1979. If really NFC and Asian Agency were seriously pursuing the matter, we fail to understand why no letter or telex was sent either by NFC or by Asian Agency making a demand for issue of blank bill of lading forms or insisting upon the issue of bills of lading by tendering the mate's receipts. Even assuming that there was any oral demand for bill of lading forms on 30.12.1978 as found by the High Court, it was evident NFC and its agent had taken the matter in a casual manner presumably expecting a further extension of letter of credit. In the circumstances, it cannot be said that there was any default, negligence or delay on the part of Shaw Wallace in issuing the bills of lading prior to 17.1.1979. The learned Single Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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