M/S. RASIKLAL KANTILAL & CO. versus BOARD OF TRUSTEE OF PORT OF BOMBAY & OTHERS

Written submissions filed by the appellant present a reasonably concise and sufficiently reliable statement of facts for adjudication of this appeal. Insofar as relevant they are: "During the period November 1991 to January 1992, 78 shipments of zinc ingots and copper iron bars were imported by 5 different consignees from one Mis Metal Distributors (UK) Ltd.; these consignments were landed at the Bombay Port. The consignees filed bills of entry for 37 out of the 78 consignments, but subsequently failed to lift the consignments and thus, they came to be stored at by the Port of Bombay. The distinguishing factor of the above consignments was that they were shipped on "CAD Basis" i.e. cash against documents, in which the title to the goods would remain with the exporter till such a time the importer would retire the documents against payments. Facing a grave loss M/s Metal Distributors (UK) Ltd., requested the present petitioner, if they were interested in purchasing the goods. It is pertin~nt 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 3 7 consignments for which the original consignees had filed Bills of Entry, and also applielto file Bills of Entry for the remaining 41 consignments lying unclaimed. The formal agreement between the Ml 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. Mis 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 pertinentto 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 3 7 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 18.11.1993and01.12.1993 for the 41 consignments and specifically 'read for "bonafide operation ofITC Formalities". In the meantime the Government of India was pleased notify the "Statement of Guidelines for Remission of Demurrage Charges", 1992, vide which in certain cases where goods/consignments detained by Customs for "ITC Facilities" were to be considered for grant of remission from payment of demurrage for the period the goods were being so processed by Customs Authorities. In the meantime the Port of Bombay levied a total of Rs.2,81,67 ,333 as demurrage charges, the total remission granted by the Port of Bombay was Rs.90,52,535, and therefore demanded a balance ofRs.1,91,14,798 on the ground that the petitioner was liable to pay demurrage for the period of 23 .03 .1992 till 09 .09 .1992, on the ground that no remission could be granted prior to date of noting. Thus, on 16.09.1995, the Port of Bombay rejected the request of the petitioner for grant of remission of demurrage."

pp. 599–600, margin B

Aggrieved by the order of the Ist respondent, the appellant, filed WP No.2012/1996 The appellant however cleared the goods after making payment of the amount (claimed by the 1" respondent towards demurrage ), under protest.

p. 601, margin A

By the judgment underappeal dated 12.4.2010, the High Court dismissed the writ petition. Hence the appeal.

p. 601, margin A

The only issue pleaded and argued before the High Court in the above-mentioned writ petition was the correctness of the decision of the 1" respondent to decline grant of remission of the entire demand towards demurrage on account of non-clearance of the goods.

p. 601, margin B

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 of of of of of of of of of of of of of of of of 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 1 ''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 respondent in declining remission to the appellant is discriminatory.

pp. 601–602, margin C

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.

p. 602, margin D

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 of the Customs Act, 1962, the person-in-charge of a vessel entering India from any place outside India is prohibited from causing or permitting the entry of such vessel at any place other than a customs port, subject to certain Section Arrival of vessels aircrafts India.-( l) person-in-charge of a vessel ... entering India place outside India shall not cause permit ... or first after arrival or it carrying passengers or cargo brought in that or aircraft, any place other a port a customs airport, unless permitted x x exceptions. The expression "customs port" is defined under Section 2( 12) of the Customs Act, 1962. Section 7 thereof authorises the Centl'.al Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 to appoint by a notification in the official gazette, the ports which alone shall be customs ports for the unloading of imported goods and the loading of export goods etc. IndianPortsActs, 1855, 1875, 1889and 1908regulatedtheactivities of the ports in India. The Port Trust Acts of 1879, 1890 and 1905 of Bombay, Calcutta and Madras respectively regulated the activities of the said ports in India through Port Trusts (bodies corporate).

pp. 602–603, margin D

Some of these are repealed and others modified by the Major Port Trusts Act, 1963 (hereinafter referred to as 'THE ACT") which is a law made by the Parliament "to make provision for the constitution of port autaorities for certain major ports in India and to vest the administration, control and management of such ports in those authorities''. Section:; of THE ACT authorises the Central Government to constitute a Board of Trustees in respect of any major port. Qua the definition under Section 2(b )5, the Board of Trustees so constituted is called BOARD Section 5 of the ACT declares each of the BOARDS to be a body corporate to administer, control and manage the port of Bombay. Different BOARDS came to be constituted for different major poi ts in the country. The 1st respondent is admittedly one of the BOARDS constitut~d under Section 3( I) ?fTHE ACT.

p. 603, margin C

We shall now examine the provisions of THE ACT insofar as it is relevant for the purpose of this case.

p. 603, margin D

Section 35(1)7 of the Act obligates BOARDS to execute Section 2(12f "customs port" port appointed under clause ofsection.7 to a customs port, and includes a place appointed under clause (aa) of that section be inland container depot. A complete analysis of the evolution of the this regard requires elaborate study and would beyond the scope of judgment. 'Section 2(b) "Board", relation a port, Board ofTmstees constituted under this for that port; . Section Constitution of Board ofTmstees.-{ I) With effect from such date specified by notification the Official Gazette, the Central Government shall-cause to constituted respect ofany major port a Board ofTmstees called the Board ofTmstees of that port, which shall consist of the following Tmstees, namely ... Section (I) A Board execute such within without the limits of the port provide such appliances deem necessary or expedient. A various works, within or even without the limits of the ports being administered by each of the BOARDS, of the nature indicated under Section 35(2)(a) to(!). An examination of the tenor of the various clauses indic<>tes that such works are intended to facilitate creation pf ports which can be conveniently used by (vessels for loading and unloading of cargo etc.

pp. 603–604, margin D

Section 3 7 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.

p. 604

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 F - yards of the ordinary low-water mark."

p. 604, margin C

Section 42(2) authorises BOARDS to take charge of the goods for performing such services. - • expression "Port" defined under Section 2(q) follows:- G "Section 2 "port" major port which this applies within such limits time defined the Central Government the purposes of this notification the Official Gazette, until a notification issued, within limits defined the Central Government under the provisions of Indian Ports Act;" Section 2(z) "vessel" includes anything the conveyance, mainly water, of beings or of goods a caisson;" A ·Board may, if so requested by the owner, take charge of the goods for the purpose of performing the service or services and shall give a receipt in such form as the Board may specify. Sub-section (7) declares that when the charge bf the goods is taken and receipt given, the recipient is discharged of any liability for the damage or loss occurring to the goods thereafter

pp. 604–605, margin D

Section 43 stipulates the nature and extent of the responsibility of BOARDS for any loss or destruction or deterioration in the goods which were taken charge of by BOARD - details of which are not necessary for the present purpose.

p. 605, margin B

Chapter VI of the Act deals with imposition and recovery of rates at ports. The expression "rate" is defined under Section 2(v)

p. 605, margin C

Various services which BOARDS are obliged to perforr:i are specified under various provisions of THE ACT. Those services fall into thre.: categories - (I) services rendered to the vessel entering the Port; (2) services rendered to goods either imported by vessels or to exported through vessel, and (3) services rendered to passengers arriving or departing from vessels in the Port.

p. 605, margin C

Sections 49A, 49B, 50A and SOB deal ~ith services to rendered by a BOARD exclusively to vessels using the Port administered by BOARDS and authorise the collection of various rates specified under each of those sections for services referred to therein, as and when rendered.

p. 605, margin D

Section 48 prior to its amendment (by Act 15 of 1997) authorised every BOARD administering each of the major ports prescribe a scale ofrates for various services rendered by that BOARD. Section 48 (pre 1997 Amendment) "Section 48. Scales of rates for services performed by Board other person.-(!) Every Board shall from time to time frame Section 42(7). any of a receipt under this section, liability for any or damage which occur them shall attach person a receipt or master owner of the vessel from which the goods have been landed or transshipped. Section 2(v)- "rate" includes or charge Post 1997, a common authority all major ports brought into existence under Section 4 7 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 of goods and vessels." Section 48( I)(a) and (b) indicate the nature of services to be rendered by BOARDS. Section 48( I)( c) and ( d) indicate the nature of the rate payable for such services. ·Clause ( d) inter alia provi:les 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.

pp. 605–606, margin E

It is apparent from the language of Section 48 that though it autho:ises BOARDS to stipulate and collect rates for various services to be rendered, the Act is silent regarding persons from whom such rates could be collected. It is pertinent to note that since services contemplated under Sections 49A, 49B, 50A and SOB are services exclusively to be rendered to the vessel (ship). It is reasonable to interpret that only the ship and its agents are liable to pay the rates for those services. We are fortified in our conclusion by the language of Sections 50A1 and 50B which make it express when they say "she would otherwise be chargeable".

pp. 606–607, margin F

Section 64 authorises BOARDS to "distrain or arrest" a vessel when the master of that vessd refuses or neglects to pay any rate or penalty payable under this Act and to "detain" the vessel until the amount due to the BOARD is paid.

p. 607, margin A

On the other hand, with reference to services rendered to goods, a lien is created under Section 59( 1 ) on the goods, in favour of BOARDS, and BOARDS are also entitled to seize and detain the goods until the rates and rents are fully paid.

p. 607, margin B

It appears to us that in view of the fact Section 42(2) only contemplates "taking charge" of the goods but not "taking possession" of goods, Parliament conferred on BOARDS the authority to "seize and detain" the goods of which charge is taken of. The purpose behind the twin declarations contained in Section 59 is a little intriguing. However, we do not wish to express any final opinion in this regard as no submission in this regard is made and such an examination is not necessary for deciding the case on hand.

p. 607, margin B

Under Sections 61 and 62 of the Act, such detained goods could be sold by the BOARD either by public auction or otherwise, subject to conditions stipulated in those Sections and following the procedure specified thereunder without the need to file a suit for the recovery of the amounts due to the BOARDS. . aut~ority

p. 607, margin D

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 stipulated or reasonable time for loading or unloading, generally referred to as the lay-days or lay-time. Where the sum is only 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 "derr..urrage" is sometimes loosely used to cover both these meanings." The circumstances in which and the nature of demurrage payable in given circumstance has been the subject matter of considerable legal literature However, in India, the expression "demurrage" appears 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 undtr 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".

p. 608, margin A

In Trustees of the Port of Madras Aminc/1and Pyare/a/ & Others, (l 976) 3 SCC 167, this Court had an occasion to consider true meaning of"demurrage" occurring in the above mentioned context and opined that the "Board has used the expression "demurrage" in the strict mercantile sense but merely to signify a charge which may be levied on goods after the expiration of free days".

p. 608, margin E

Regulation 2(g) of the International Airports Authority (Storage and Processing of Goods) Regulation, 1980 made under the provisions "Scrutton Charterparties Bills of Third Edition, p.380 Halsbuiy's ofEngland, Edition. a seminal titled Tiberg covering of various countries subject. 31. Court dictionaries of"demurrage" being a not a service, of Board of demurrage. Besides, plain that used expression "demurrage" strict mercantile sense signify a levied goods after expiration of I 3(b) itself furnishes a sense of the International Airports Authority Act, 1971, defined the expression 'demurrage' to mean, the rate or amount payable to the airport by a shipper or consignee or carrier, for not removing the cargo within the time allowed.

pp. 608–609, margin F

By virtue of Section 59 of THE ACT, the !st respondent had a lien on goods placed on or in the property of the !st respondent "for the amount of all rates leviable under the Act" and also the authority/ right to seize and detain goods placed on or in any premises belonging to the I respondent until the amount due towards the rent or any rate for any services rendered by the respondent with respect tu such goods is fully paid. Further, the I respondent is also entitled under Sections 61 and 62 to sell the goods in question so seized and detained without the need to file a suit for the recovery of the amounts due to it.

p. 609, margin A

We shall now deal with submissions by the appellant.

p. 609, margin C

The first submission is that the amounts due for providing the various c~ervices to the imported goods) until the title in the goods passed to the appellant would be a services rendered to the stea!ller agent. The appellant cannot be compelled to pay for services not rendered to him. Such an argument is based on- (i) that the goods in question were shipped by the exporter on Cash against Document Basis (CAD), therefore the title of the goods would remain with the exporter till such time, the importer "retires the documents against payments"; (ii) The owner of the vessel is a bailee of the shipper. The I 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.

p. 609, margin C

The I 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 of of of ll sec and, therefore, the appellant may not be permitted to make ~he said submission.

pp. 609–610, margin F

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 oflaw. 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 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 1 ''respondent to collect demurrage from the appellant. We, therefore, proceed to examine the correctness of the submission.

p. 610, margin A

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-1"), Trustees of the Port Madras, Through its Chairman K.P.V. Sheikh Mohd. Rowther Co. Pvt. Ltd. & Another, (1997) 10 SCC 285 (hereafter "ROWTHER- 11") and Forbes Forbes Campbell & Company Limited v. Board Trustees, Port of Bombay, (2015) 1 SCC 228. ROWTHER-1 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 made certain scale of rates. One .the items in the scales stipulated charges to be paid by "masters, owners jlr agents of vessels" in respect of port trust labour requisitioned and supplied by it but not fully or properly utilized. A writ petition came to be filed in the Madras High Court for direction to the Board not to enforce the said rates. It was argued that under provisions of the Madras Port Trust Act, certain services are to be rendered to the vessel and certain services the goods carried by the vessel. The service such as the one for which of of "l. the rate :iad been demanded was a service rendered to the consignee and not to the steamer agent. Therefore steamer agents could not be compelled to pay the rate for the said service. The Madras High Court dismissed the writ petition. An intra court appeal thereon was allowed by the Division Bench holding that the service in question "must be deemed to be service rendered to the consignee". On a further appeal, this Court recorded the issue in para 30:- "30. The question for determination, in the case then is whether the law making the steamer-agent liable to pay these charges is good Iaw

pp. 610–611, margin C

The entire argument in the case revolved around the question whether the Madras Port Trust was acting as an agent of the consignee or the steamer agent when it took charge of goods discharged from the vessel. The case of the steamer agent was that the Madras Port Trust acted as the agent of the consignee. This submission was rejected. This Court held: "57. If the Board was an agent of the consignee, it was bound to deliver the goods to the consignee and should not have any rights of retaining the goods till the payment of the rates and other dues for which it had a lien on the goods. The provision of there teing 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.

p. 611, margin C

This Court held that BOARD receives goods as a sub-b:iilee from the bailee (ship owner) through the bailee's agent (See para 49 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 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.

pp. 611–612, margin F

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 from the steamer agent or the consignee was in issue. High Court held that the steamer agent's responsibility ceases "once the goods are handed over to the Port Trust" and the bill oflading is endorsed The High Court further held that upon the endorsement of the Bill oflading, "the property in the goods vests" in the consignee and therefore the steamer agent's responsibility for the custody of the goods ceases The High Court, therefore, concluded that only the consignee was liable. This Court approved the conclusion of the High Court.

pp. 612–613, margin C

In Forbes Forbes Campbell & Company Limited Board of Trustees, Port of Bombay, (2015) 1 SCC 228, this Court examined the liability of the steamer agent to pay demurrage and port charges to the BOARD of Bombay Port in respect of goods brought into the Port and warehoused by the said authority. The question arose in the context of the BOARD'S resolution to recover the rent (on cargo transported in containers) from the steamer agent. The steamer agent contended that neither THE ACT nor the subordinate legislation made thereunder created such liability either on the ship owner or his agent (steamer agent). Rejecting such submission, this Court held that "in the absence of any specific bar in the statute, such liability can reasonably fall o:i the steamer agent'', if on a proper construction of the provisions of the Act such a conclusion can be reached. "Para 10. While it is correct that the liability to pay demurrage charges and port rent is statutory, in the absence of any specific bar under the statute, such liability can reasonably fall on a steamer agent if on a construction of the provisions of the Act such a conclusion can be reached. Determination of the aforesaid question really does not hinge on the meaning of the expression "owner" as appearing in Section 2( 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 shipo'vner or his agent. Otherwise it is difficult to reconcile how custody of the goods for the purpose of rendering services under Sectivn 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 ofbailment between the steamer agent and the Port Trust Authority can be held to come into existence under Section 42(2) read with Section 43(l)(ii) of the 1963 Act." On examination of the provisions of THE ACT and two earlier judgments !, 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 bail or 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 that once the bill of lading is endorsed or the delivery order issued, it is the consignee or endorsee who would be liable to pay the demurrage and other dues of the Port Trust Authority. It further held that in all other situations the contract of bailment is one between the agent of the bail or and the BOARD (Bailee) fastening the liability on the (steamer) agent for such rates till such time the bill oflading is endorsed or delivery order is issued by the steamer agent.

pp. 613–614, margin A

With respect, we agree with the conclusi.ons recorded by this Court in the cases ofROWTHER-11 and Forbes that a BOARD could recover the rates due, either from the steamer agent or the consignee but we are of the humble opinion that enquiry into the question as to when the property in the goods passes to the consignee is not relevant. "ROWTHER-1 and Port of Bombay Sriyanesh Knitter~·. (1999) 7 359 Para From the above, the position oflaw appears emerge that once the bill oflading endorsed or the delivery order issued the consignee or endorsee would be liable to pay demurrage charges and other dues of the Port Trust Authority. other situations contract of bailment between the steamer agent (bailor) and the Port Authority (bailee) giving rise the liability of the steamer agent for such charges time that bill of lading endorsed or delivery order issued by steamer We have already noticed the submission of the appellant that the appellant is not liable to make payment of any demurrage incurred prior to the acquisition of title in the goods by the appellant. Enquiry into the title of the goods and the point of time at which the title passes to the consignee is equally irrelevant for determining the authority of a BOARD to recover the amounts due to it under THE ACT. The authority and right of a BOARD to recover its dues either from the steamer agent or the consignee flows from two different sources: (i) Section 158 of the Indian Contract Act, 1872 read with Section 1 of the Indian Bills of Lading Act, 1856. (ii) Section 59( 1) of THE ACT.

pp. 614–615, margin E

The essence ofbailment is possession and the consent of the owner of the goods is not necessary.Jo The distinction between possession and custody of goods is also noted by jurists.J In this context, the language of Section 49(2) is significant - "A Board may ...... take charge of the goods ....... ". But we do not propose to examine the significance as the same is neither argued nor necessary. In our opinion, for the purpose of the present, we must also mention here that Section 63 of THE ACT authorises the BOARD to sell the goods "placed in their CUSTODY". "I of of of of ""d 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 increase or diminish the burdens imposed upon the bailee by th<: 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 bail or 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 respondent) and the consignee (the appellant); either voluntarily or statutorily compelled but such a relationship exists between the 1st respondent and the owner of the ship (through the steamer agent). It is possible in a given case where the · G consignee or any other person (such as the appellant herein) claiming through the consignor, eventually may not come forward to take delivery of the goods for a variety of reasons - considerations of economy or supervening disability imposed by law etc. Therefore, in such cases to say that merely because the bill of lading is endorsed or the delivery order is issued, the consignor or his agent is absolved of the responsibility for payment (of rates or rent for services rendered w.r.t goods) would result in a situation that the BOARD would incur expenses withom any legal right to recover such amount from the consignor and be driven to litigation for recovering the same from the consignee who did not take delivery of the goods with whom the BOARD had no contract ofbailment and consequently no contractual obligation to pay the 'rates or rent'.

pp. 615–617, margin C

Enquiry into the relationship between either the BOARD, the consignor of goods, the owner of the vessel and the steamer agent on one hand or the consignee and the BOARD on the other, in our opinion, is wholly irrelevant in examining the right of the BOARD to recover the amounts due towards the rates or rent for services rendered with respect to the goods. The right of the BOARD is unquestionable. The only question is: from whom can the BOARD recover - we emphasise · the question is not who is liable. Depending on the nature or' the relationship between the consignor and consignee, the liability may befall either of them.

p. 617, margin B

On the other hand, in the light of the legal position declared by the Constitution Bench in ROWTHER-1, the 1" respondent is a subbailee 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 1" respondent.

p. 617, margin D

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 ancther 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 ofbailment." It can be seen from the above that bailment is a contractual relationship and bailment can be created by any person who is in possessionhustody of goods but not necessarily the owner of the goods. When the purpose ofbailment is accomplished the goods are to be returned or otherwise disposed of according to the directions of the person (bail or) delivering them.

pp. 617–618, margin E

Section 158 of the Contract Act stipulates the obl.!gations of the bailor to pay the necessary expenses incurred by the bailee "for the purpose ofbailment". Section 158 of the Contract Act reads as under: "Section 158. Repayment by bailor of necessary expt:nses. - Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bail or shall repay to the bailee the necessary expenses incurred by him for the purpose ofbailment." The obligation of the bailee to return the bailed goods when the purpose ofbailment is accomplished and the obligation of the bailor to pay t~e bailee "the necessary expenses incurred by him for the purpose of the bailment" in our opinion would attend not only a bailment by contract but every kind ofbailment.

p. 618, margin B

If the bailor has such an obligation to pay the bailee, ani' person claiming through the bailor must necessarily be bound by such an obligation unless the bailee releases such person from such an obiigation. A consignee is a person claiming through the consignor (bailor). In the context of import of goods into India by ship, the consignees' rights are governed inter alia by Section I of the Bills of Lading Act, 1856. 1. Rights under bills of lading to vest in consignee or endorsee - Every consignee of goods named in a bill of lading and every endorsee of a bill oflading to whom the property in the goods herein mentioned shall pass, upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.

p. 618, margin E

It can be seen from the above that the 1856 Act enacts a fiction that the consignee to whom the property in the goods shall pass shall be "subject to the same liabilities in respect of such goods as ifthe contract contained in the bill oflading had been made with himself'. Bill of lading is evidence of a contract 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 oflading is a 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.

p. 619, margin A

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 l" respondent. Nothing is brought to our notice to hold otherwise. At this juncture, we must point out that the declaration under Section 42(7) absolving the owner cf the ship and his agents is limited only to the obligations owed by the bailor to the consignee not to the sub baifor like the 1 ' respondent.

p. 619, margin D

Section 59 ofTHEACT, creates lien in favour of l ' respondent in respect of any goods and also authorises the 1st respondent to seize Called contract of affreightment Section (7) After any goods taken charge of a receipt given for under this section, liability for loss or damagewhich occur them shall attach to any person whom a receipt given or to the master or owner of the vessel from which the goods been landed or transhipped. and detain the goods, it clearly makes a special provision. Under the Contracts Act, every bailee has no lien on the goods delivered to him. Such a lien is available only to limited classes of bailees specified under Section 171 They are - bankers, factors, wharfingers attorneys of a High Court and policy-brokers. It can be seen from Section i 71 that only those specific categories of bailees have a right to retain goods bailed to them as security for the amounts due to them.No other category of bailee has such a right unless there is an express contract creating such a lien.

pp. 619–620, margin G

Section 59 of THE ACT, also expressly authorises the l'' respondent to seize and detain goods taken charge of by it. Parliament also invested the 1" respondent with the authority to sell the goods and appropriate the proceeds of sale under Section 63 of the ACT towards Application of f~r various heads indicated thereunder without the need to file a suit which are taken charge of by it in certain circumstances, details of which we have noticed earlier.

pp. 620–621, margin B

If the ACT authorises the I respondent to recover its dues by bailing the goods under bailment, in those cases where the consignee does not turn up to take the delivery of the goods within the time stipulated under Sections 61 or 62 of the ACT, to deny the right to demand and recover the amounts due from the consignee when he seeks delive::y of the goods under bailment would be illogical and inconsistent with the scheme of the ACT. Such right, in our view, undoubtedly enables the I" 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 1" respondent would result in driving the I" 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 ofthis country (by resorting to a cumbersome procedure oflitigation). The I submission is, therefore, rejected. of of of of of of of of of of of If 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 1" 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 dated 24.1.1992 which structure the discretion of the Port Trust in the matter of granting remission.

pp. 621–622, margin A

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 of80 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 Rs.90,52,535.00 (approximately) out of the total claim towards demurrage ofRs.2,81,67,333.00. (ii) The liability tci pay demurrage arose because of the nonclearance ·of the goods from the 1 '' respondent's property for a considerable period of time. (iii) The pe.riod could be divided into two phases: Phase I before the point of time when appellant started claiming the right to take delivery; lt not very clear the record whether these guidelines were issued by Government of India or guidelines framed by the I st r.espondent. the written submissions, the appellant describes guidelines the Government oflndia whereas the judgment under appeal 24, appears that the appellant's case before High Court that they guidelines the I st respondent. " .... would submit that guidelines the BPT itself provides for remission asked the petitioners the detention of the goods by the Custom bonafide operation of!TC formalities." Per contra the case of lst respondent before the High Court regarding the guidelines appears " ..... remission granted ex-gratia basis, that too, exercising discretion basis of guidelines issued Union oflndia and adopted resolution passed respondent 1 along Custom Department." The High Court did not record any categorical finding this regard except stating "47. exercise of statutory powers under section of the Major Port Trust guidelines remission of d~,nurrage charges are framed." Delay in taking delivery is attributable purely to the failure of the original consignee. The appellant clearly knew or at least ought to have kn0wn, when he purchased the goods that the 1st respondent would demand demurrage. The appellant as a person claiming through the consignor is not entitled in law to claim any right ofremission on the ground that he. did not have any interest or title in the goods for such period. · AND Phase II after the present appellant's right to take delivery of goods came into existence. Such delay occurred because of the time taken in ensuring that the appellant complied with the various statutory obligations to import goods such as amendment of the IGM etc.

pp. 622–623, margin B

The fact that the appellant was not permitted to clea~ 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 ifthe 1" respondent so chooses as a matter of policy. As a matter of fact, remission of a part of the demurrage was granted by the 1" respondent.

p. 623, margin C

Now, we come to the submission that the respondent's decision to decline remission to the appellant is discriminatory because remission was granted in the case of a similarly situated consignee calle.d Gilt Pack. Unfortunately, though the High Court noted the rival submission in the context of the allegation of discrimination, it did not record any conclusion on that count.

p. 623, margin D

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 goods It is in the said circumstances Gilt Pack was grartled remission. We are not concerned with the question whether the discretion was of sec A 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.

pp. 623–624, margin F

However, we must make it clear that the authority of the 1st respondent to grant or decline remission of any amount due tow:::rds 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 . C 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.

p. 624

The appeal is accordingly allowed in part. The impugned judgment is set aside. There shall be no order as to costs. Trip~thy

p. 624, margin B