THE CHAIRMAN, BOARD OF TRUSTEES, COCHIN PORT TRUST versus M/S AREBEE STAR MARITIME AGENCIES PVT. LTD. & ORS. on 5 August 2020

(1) Whether in the interpretation of the provision of Section2(o) of the MPT Act, the question of title of goods, and the pointof time at which title passes to the consignee is relevant toCdetermine the liability of the consignee or steamer agent in respectof charges to be paid to the Port Trust;

(2) Whether a consignor or a steamer agent is absolved ofthe responsibility to pay charges due to a Port Trust, for itsservices in respect of goods which are not cleared by theDconsignee, once the bill of lading is endorsed or the deliveryorder is issued;

(3) Whether a steamer agent can be made liable for paymentof storage charges/demurrage, etc. in respect of goods which arenot cleared by the consignee, where the steamer agent has notEissued a delivery order; if so, to what extent;

(4) What are the principles which determine whether a PortTrust is entitled to recover its dues, from the steamer agent orthe consignee; and

(5) While the Port Trust does have certain statutoryFobligations with regard to the goods entrusted to it, whether thereis any obligation, either statutory or contractual, that obliges thePort Trust to destuff every container that is entrusted to it andreturn the empty containers to the shipping agent. [Para 2]726-F-H; 727-A-C]G

2.1 A perusal of the relevant provisions of the MPT Actwould show that when section 2(o) defines “owner”, it definesowner in relation to goods separately from owner in relation toany vessel. In sub-clause (i) of section 2(o), when owner is definedin relation to “goods”, the definition is an inclusive one. Secondly,Hit includes persons who are owners of the goods, or persons

beneficially entitled to the goods, such as the consignor, consigneeand the shipper and then also includes agents for sale, custody,loading or unloading of such goods. Ordinarily, agents for thesale or custody of goods would relate only to agents of the owneror persons beneficially entitled to such goods, which wouldcertainly exclude the ship-owner and the ship-owner’s agent.However, considering the fact that the definition is an inclusivedefinition, and that loading or unloading of goods can take placeby the steamer’s agent, as was held in Rowther-I (supra), it isdifficult to accept the contention on behalf of the steamer’s agentthat such persons would not be included within the definition of“owner” under the MPT Act. the definition of “owner” underthe MPT Act. In the present case, there is no lack of clarity inthe expression “agent for the…loading or unloading of suchgoods”, as including persons who may be the vessel’s agentinvolved in unloading goods. As the definition of “owner” isinclusive, the non-mention of the ship-owner in the first part ofthe definition makes no difference, as it would be incongruous tohold that the ship owner’s agent is included in the latter part ofthe definition, but not the ship-owner itself, which would indicatethat the maxim noscitur a sociis cannot apply. This becomes evenclearer when section 42 is perused. Under section 42(1), a Boardshall have power to undertake services insofar as landing, shippingor transhipping goods between vessels in the port and thewharves, piers, quays or docks belonging to or in the possessionof the Board, referring clearly, therefore, to services renderedto the vessel (see section 42(1)(a)). Insofar as receiving, removing,shifting, or transporting goods is concerned, these could beservices to both the vessel as well as the owner/person entitledto the goods. The moot question is, when it comes to “storing”goods brought within the Board’s premises, whether such servicecould be said to be a service rendered to the vessel or its agent(see section 42(1)(b)). Some of the pivotal provisions of the MPTAct, insofar as the present questions are involved, are containedin sections 42(2), 42(7) and 43 of the Act. Under section 42(2), aBoard may, if so requested by the “owner”, take charge of thegoods for the purpose of performing services, and shall give areceipt in such form as the Board may specify. It is obvious thatif the ship-owner or its agent are not “owners”, the Board cannot AB

C

D

EF

G

H

AB

C

D

EF

G

H

Atake the charge of the goods from the ship-owner or its agent forthe purpose of performing services, a result which would lead tostartling consequences. Secondly, under sub-section (7), oncegoods have been taken charge of and a receipt given for them,no liability for any loss or damage which may occur to them shallattach to any person to whom a receipt has been given (this wouldBinclude any of the persons mentioned in section 2(o)(i), includingthe vessel’s agents), or to the master or owner of the vesselfrom which the goods have been landed or transhipped. This wouldagain make it clear that the master or owner of the vessel andtheir agents, from this point on, have been absolved from liabilityCfor loss or damage to the goods, as the Board has now takenover the custody of the goods from such master or owner of thevessel. From this point on, therefore, the master or owner of thevessel and their agents cease to have any liability qua the goods,inasmuch as the Port Trust has now taken them over.Concomitantly, under section 43(1)(ii), the responsibility of theDPort Trust for loss, destruction or deterioration of goods of whichit has taken charge from this point of time onwards now becomesthat of a bailee under sections 151, 152 and 161 of the IndianContract Act, 1872, omitting the words “in the absence of anyspecial contract” in section 152 of the Contract Act. ThisEresponsibility attaches only after a receipt is given by the Board,and notice of loss or damage has been given, after expiry of suchperiod (as may be prescribed) from the crucial date on which thePort Trust takes charge of the goods. [Paras 14, 16 and 17][748-C-E; 749-G; 750-A-H]F2.2 At this juncture, it is important to state that argumentshave been made based on observations contained in variousjudgments in which sections 42 (5) and (6) of the MPT Act havebeen referred. Sections 42(5) and (6) have no application to theBoard, as they apply only to the “person” authorised undersection 42(3) by the Board to perform services mentioned in sub-Gsection (1). Again, under section 48, a distinction is made betweenlanding of goods from a vessel, and storage or demurrage chargesin respect of goods – see section 48(1)(b), as contrasted withsection 48(1)(d). When it comes to services performed on vessels,sections 49A, 49B, 50, 50A and 50B make it clear that the servicesHrendered to vessels for which dues have to be paid by vessels are entirely separate and distinct from services rendered insofaras goods that are landed are concerned. Coming to section 59, itbecomes clear that for all rates leviable under the MPT Act, whichincludes rates leviable for storage of goods, the Board shall havea lien on such goods, and may, after custody of such goods istaken by the Port Trust, then seize and detain the same untilsuch rates are fully paid. [Paras 18- 20][751-A-D]

2.3 Section 60 is also important, in that the ship-owner’slien for freight and other charges is recognised if, at or beforethe time of landing of any goods from such vessel, such freight orother charges have not been paid. Under section 60(2), the goodsshall be retained in the custody of the Board at the risk andexpense of the owners of the goods until such lien is discharged.Most importantly, godown or storage rent shall be payable by“the party entitled to such goods” for the time during which theymay be so retained. This section is of crucial importance, as itmakes it clear that godown or storage rent is payable only by theparty entitled to such goods, which can never be the ship-owneror the ship-owner’s agent after the goods have been landed, andthe vessel has sailed away from the port. Further, under section61, after two months from the time goods have passed into theBoard’s custody, the Board may, if it thinks fit, sell – by themodalities laid down – such goods or so much thereof as may benecessary to recover the rates payable to the Board which remainunpaid. Sub-section (3) of section 61 is very important, in thatbefore making such sale, if the address of the “owner of thegoods” which has been stated on the manifest, or in otherdocuments that have come into the hands of the Board, or isotherwise known, notice of such sale must be given to such owner.

Section 62 speaks of the disposal of goods that have notbeen removed from the premises of the Board within time, andspeaks of their removal by the “owner or other person entitledthereto”. Under sub-section (2) of section 62, where such goodsare proposed to be removed or sold, a notice may also be servedon the “agents of the vessel by which such goods were landed”.This is for the reason that the vessel’s agents may have indicatedthat the ship-owner has a lien for freight and other charges, which AB

C

D

E

F

G

H

AB

C

D

E

F

G

H

Amust be satisfied out of the sale of such goods. The importantpoint to be noted is that a clear distinction is made between an“owner or other person entitled” to goods, and agents of thevessel. Further, under sub-section (3) of section 62, it is only ifthe owner or person entitled to goods does not comply with therequisition in the notice, that the Board may, at any time after theBexpiration of two months from the date on which such goods wereplaced in its custody, then sell the goods in the manner indicated.The scheme of section 62, therefore, is that when it comes tosale of goods which are lying stored in the premises of the Board,notice is to be given only to the owner, or other persons who areCbeneficially entitled to the goods, who must then comply with therequisition given and remove the goods. At this juncture, theship-owner or its agents are not persons who have to complywith such requisition, as they are neither persons who are theowner, or other persons entitled to the goods. The notice issuedto the agent of the vessel is only for the limited purpose asDaforesaid. This again indicates that goods that are stored on thepremises of the Board have a nexus only with the owner or otherpersons entitled to those goods, and not with the agent of thevessel or the vessel itself. Section 63 is again very important.When goods have been sold and a surplus exists, the surplusEshall be paid to only three persons or their agents, namely, the“importer”, “owner” or “consignee” of the goods. In this sub-section, namely, 63(2), as in the case of “owner’ under section61(3), the owner of the goods is obviously not the “owner” asdefined under section 2(o), as the context of section 63(2)indicates otherwise. There would have been no need to addF“importer” or “consignee” in this sub-section, as they are alreadysubsumed within the wider definition of “owner” in relation togoods under section 2(o). Secondly, what is conspicuous by itsabsence is mention of the vessel or any agent for loading orunloading goods. As a matter of fact, when it comes to recoveryGof rates and charges against the vessel, a separate remedy isprovided for in sections 64 and 65 of the MPT Act. [Paras 21-23][751-D-H; 752-A-H]

2.4 The statutory scheme of the MPT Act now becomescrystal clear. Until the stage of landing and removal to a place ofHstorage, the steamer’s agent or the vessel itself may be made liable for rates payable by the vessel for services performed tothe vessel. Post landing and removal to a place of storage,detention charges for goods that are stored, and demurragepayable thereon from this point on, i.e. when the Port Trust takescharge of the goods from the vessel, or from any other personwho can be said to be owner as defined under section 2(o), it isonly the owner of the goods or other persons entitled to the goods(who may be beneficially entitled as well) that the Port Trust hasto look to for payment of storage or demurrage charges.[Para 24][753-A-C]

3. At this juncture, the Customs Act, 1962 also becomesrelevant. Under section 2(26), “importer” is defined as includingany owner, beneficial owner or any person holding himself out tobe the importer. Though this definition does not ipso facto applyto the MPT Act, it is important that the two Acts be read together,as both Acts deal with goods that are imported into the countryfrom abroad, and their storage and disposal thereafter. In anyevent, the expression “importer” that occurs in section 63(2) ofthe MPT Act would certainly include a beneficial owner of thegoods. Under section 29 of the Customs Act, the person-in-chargeof a vessel when it carries cargo can land only at a “customsport” (as defined), unless otherwise permitted by the CentralBoard of Excise. Under section 30, the person-in-charge of avessel carrying imported goods shall deliver to the “properofficer”, i.e. a customs officer, an import manifest of the vesselwithin the time prescribed, which would indicate the nature ofthe goods carried by the vessel, and the consignee or other ownerof the goods. Under section 33, no such imported goods can beunloaded at any place other than the place approved for unloadingof such goods in the customs port, customs airport or coastalport. Under section 45(1), all imported goods unloaded in acustoms area shall remain in the custody of such person asapproved by the Principal Commissioner of Customs orCommissioner of Customs until they are cleared for homeconsumption or are warehoused or transhipped. Section 46(1) isextremely important in that it speaks of a bill of entry for homeconsumption or warehousing in such form and manner as may beprescribed. Section 46(2) then states that a bill of entry shallinclude all the goods mentioned in the bill of lading or other receipt AB

C

D

E

F

GH

Agiven by the carrier to the consignor. Under section 48, if anygoods brought into India from a place outside India are not clearedfor home consumption or warehoused or transhipped within 30days from the date of the unloading, such goods may, after noticeto the “importer” and with permission of the proper officer, besold by the person having the custody thereof. Under section 49,Bimported goods may, pending clearance or removal, be permittedto be stored in a public warehouse for a period not exceeding 30days, or such other extended period that the PrincipalCommissioner or Commissioner of Customs may permit. TheCustoms Act, therefore, also contains parallel provisions forCauthorities under that Act to take charge of, store, and sellimported goods, in the circumstances mentioned therein. Underthe Customs Act, 1962, customs duties are levied on goodsimported into India. “Import” has been defined in section 2(23)of the Customs Act as the “bringing into India from a place outsideIndia”. Thus, import of goods can only be said to be completeDafter they cross into the territorial waters of India, and becomepart of the mass of goods within India. A container, being areceptacle in which goods are imported, cannot be said to be“goods” that are imported as it does not become part of the massof goods within the country on the facts of these cases. Thus,Eonce destuffing takes place, the container has to be returnedeither to the ship-owner’s agent, or to the person who owns suchcontainer. [Paras 25-27, 29 and 39][753-C-H; 754-A-C; 754-E-F; 760-D-E]

Garden Silk Mills Ltd. and Anr v. Union of India andFOrs. (1999) 8 SCC 744 : [1999] 3 Suppl. SCR 295 –relied on.

4. In fact, the Bill of Entry (Forms) Regulations, 1976 (asamended up to date) contain forms in which a Bill of Entry is tobe presented by an importer of goods for home consumption, orGfor warehousing, or for ex-bond clearance for home consumption.Form I, which speaks of a Bill of Entry for home consumption,contains a declaration to be signed by an importer, clause 6(b) ofwhich is important. The same declaration is contained in FormsII and III. A perusal of the aforesaid Forms prescribed under thesaid Regulations would show the difference between “goods”H

that are imported, which have reference to the bill of lading/invoicepresented by the importer which contains the number and valueof the goods imported, and payments by way of costs and servicesother than those declared in the invoice, which includes costs ofcontainers under Rule 10(1)(a)(ii) of the Customs Valuation(Determination of Value of Imported Goods) Rules, 2007, andpacking costs under Rule 10(1)(a)(iii) of these Rules. Rules 2(1)(d)and (f) of these Rules are relevant. Rule 4 deals with thetransaction value of “identical goods”, and Rule 5 deals with thetransaction value of “similar goods”. A perusal of these Ruleswould show that the value of imported goods shall be thetransaction value of identical goods, as defined, or similar goods,as defined – whichever rule applies to the facts of each particularcase. It is clear that whether identical goods or similar goods aretaken into account, the price of the container never enters, asthe only “goods” that are to be looked at are the goods that are“imported”, i.e. goods that are stuffed in the containers. Likewise,when it comes to “computed value”.Rule 10 deals with “costsand services. A reading of Rule 10(1)(a)(ii) would lead to the sameresult, as “imported goods” are differentiated from “containers”.Further, for the purposes of customs valuation, addition to thetransaction value of the imported goods is made only when thecost of containers is treated as being one with the goods inquestion. Even in such a situation, what is then imported is the“goods” andthe container – the container not having to bedestuffed, and therefore being cleared along with the goodscontained therein for home consumption. In such a case, wherecontainers do not have to be returned, but are imported alongwith the goods contained within it, after the Board takes custodyof such container and the goods within it, the vessel or steameragent is no longer liable – even containers that do not need to bedestuffed will then incur demurrage along with the goodscontained within it, which are then payable by the importer, owner,consignor or agent thereof. Further, to make matters clear beyonddoubt, General Exemption No. 170, speaks of ‘Exemption tocontainers of durable nature. A clarification by the Central Boardof Indirect Taxes and Customs dated 25[th] October, 2002, clarifiedas to what is meant by “containers of durable nature”. A readingof the aforesaid also goes to buttress the conclusion reached in AB

C

DEF

GH

Athe previous paragraph of this judgment. The Customs Tariff Act,1975 also throws considerable light on containers fit for repetitiveuse. The First Schedule deals with general rules for interpretationof “this Schedule”. This again clearly differentiates betweencontainers which go along with the goods contained therein“suitable for long-term use”, from containers “suitable forBrepetitive use”, thus making it clear that the containers of thelatter type cannot be classified with the goods contained thereinfor payment of customs duty. [Paras 40-51][760-E-F, G-H; 761-D-F; 762-F-G; 764-A-B, G-H; 765-A-C; 766-D; 767-B-C]

5.1 Rowther-II has made it clear that Rowther-I concernedCitself with Port Trust dues at the time of landing of the goods, andtheir removal thereafter to custody of the Port Trust. These werecharges wholly distinct from demurrage charges, which areincurred only after the goods have been landed and have beentaken charge of by the Board. To the extent that the High CourtDlays this down as a proposition of law, there can be no exception.However, it goes on to state that when the steamer agent endorsesthe bill of lading or issues a delivery order for effecting deliveryto the consignee, it is at this stage that the property in the goodspasses to the consignee. This part of Rowther-II is clearly contraryto Rowther-I. Rowther-I clearly lays down that the endorsementEof the bill of lading by a steamer agent is for the purpose of deliveryof the goods, and, accordingly, cannot be for the transfer of titleto the goods. Rowther-II cannot, therefore, be said to be good inlaw when it speaks of endorsement on the bill of lading and issuanceof delivery order by the steamer agent passing title of the goods Fto the consignee. Once this is made clear, the ratio of Rowther-IIis to be understood thus: since charges for storage or demurrageare after goods are removed and placed in the custody of theBoard, the steamer agent cannot be made to pay the same, as itwould impose “a too onerous and unexpected responsibility on the steamer”, which is only a carrier, and not owner, of the goods.GSection 1 of the Indian Bills of Lading Act, 1856 is also important.Under this section, the “endorsement” referred to is theendorsement made by the consignor or owner of the goods infavour of such endorsee on the bill of lading, so that title toproperty is then transferred to the endorsee. This endorsementHis very far removed, as has been correctly stated in Rowther-I, from the endorsement on the bill of lading by a steamer agentindicating that the goods have been delivered. Therefore, shornof the confusion that has arisen as a result of mixing-up the twotypes of endorsement, the ratio of Rowther-II that, after goodsare taken charge of by the Port Trust and stored in its premisesincurring demurrage charges thereon, the vessel or its agentcannot be made responsible, is unexceptionable. [Paras 58, 59,61, 62][772-E-G; 773-C-F; 774-E-F, G-H; 775-A-B]

Port of Madras v. K.P.V. Sheik Mohamed Rowther &Co. [Rowther-I] [1963] 2 Suppl. SCR 915 – followed.

Port of Madras v. K.P.V. Sheik Mohd. Rowther & Co. P.Ltd. [Rowther-II] (1997) 10 SCC 285 – explained.

5.2 The judgment in Sriyanesh Knitters goes on to makecertain observations, in particular in paragraph 23, stating that arelationship of bailor and bailee comes into existence, when theBoard is required to store goods that have been imported,between the Board and the consignee of those goods. Apart fromthe fact that this is directly contrary to Rowther-I, the consigneecannot be considered to be a bailor if the definition of bailor underthe Indian Contract Act, 1872 is read. Under section 148 of theContract Act, a bailor is defined as a person who delivers thegoods to the bailee. In this case, the person who delivers thegoods to the bailee is the vessel and not the consignee, as hasbeen correctly stated in Rowther-I. Therefore, the observationsthat the consignee is the bailor of the goods, with the Port Trustbeing the bailee thereof, made in paragraphs 23 and 25 ofSriyanesh Knitters cannot be said to state the law correctly, andare accordingly overruled. However, since this Court is not goinginto the point of sub-bailment, the question is left open as towhether the Port Trust, as sub-bailee, is entitled to recover itsdues from the original bailor – the consignor, and persons claimingthrough it, given the statutory scheme of the MPT Act. [Para66][776-A-D]

Port of Bombay v. Sriyanesh Knitters (1999) 7 SCC228 – partly overruled.

5.3 However, Rowther-I was correctly distinguished by theCourt in Sriyanesh Knitters in paragraph 24 thereof, and its ratio A

B

C

DE

F

G

H

[2020] 11 S.C.R.

Aqua the MPT Act not being an exhaustive code has this Court’sconcurrence. [Para 67][776-E]

Port of Bombay v. Sriyanesh Knitters (1999) 7 SCC228 – partly concurred.

5.4 Paragraph 10 of the judgment in Forbes II does holdBthat the language of section 2(o) read with other provisions ofthe MPT Act, especially section 42, would include a ship-owneror his agent. This Court has already pointed out that the principleof noscitur a sociis cannot be applied to this definition clause,both on its plain language, as also the fact that it is an inclusiveCdefinition clause, which shows that this statement of the law iscorrect. However, the statement in this paragraph that even dehors the above question, the liability to pay demurrage chargesand port rent would accrue to the account of the steamer agentbecause of the statutory bailment that comes into existence undersection 42(2) read with section 43(1)(ii), is plainly incorrect, inDview of this Court’s finding that after the Port Trust takes chargeof the goods and issues a receipt therefor (at which point of timethe statutory bailment comes into force), the vessel or the steameragent cannot be held liable. Insofar as paragraph 11 is concerned,this Court has already made it clear that Sriyanesh Knitters cannotEbe said to reflect the correct position in law, insofar as a bailmentbetween the consignee and the Port Trust is concerned, and thusSriyanesh Knitters has been overruled to this extent. Paragraph12 of the said judgment contains the same confusion that iscontained in Rowther-II, and cannot therefore be said to lay downthe law correctly. The correct position in law is, as has been stated,Fthat after the Port Trust takes charge of the goods, and issues areceipt therefor, and thereafter stores the goods in a placebelonging to it, such storage charge cannot be to the account ofthe vessel or an agent of the vessel. Paragraph 13 refers to oneother aspect of the case that has been argued. The impugnedGjudgment of the Kerala High Court in the present case had heldthat the word “may” occurring in sections 61 and 62 of the MPTAct must be read as “shall”. This is not the correct position inlaw, as a discretion is vested in the Board to sell the goods in thecircumstances mentioned in sections 61 and 62. However, suchdiscretion cannot be exercised arbitrarily, as the Board is “State”H

within the meaning of Article 12 of the Constitution, and istherefore bound by the constraints of Article 14 of the Constitutionof India. Therefore while it may not be correct to say that “may”has to be read as “shall” in sections 61 and 62 of the MPT Act,yet in all future cases the Board is under a constitutional duty tosell the goods in its custody within a reasonable time from whichit takes custody of those goods. Ordinarily, the time of four monthsfrom the date of landing of the goods mentioned in section 63(1)(c)of the MPT Act should be the outer-limit within which such goodsshould be put up for sale. If not put up for sale within such time,the Board must explain as to why, in its opinion, this could not bedone, which explanation can then be tested by the Courts. If theexplanation is found to be reasonable, and the owner or personentitled to the goods does not remove the goods thereafter, penaldemurrage may then be levied and collected by the Board. Tothis extent, therefore, while overruling the impugned judgmentof the Kerala High Court on the aspect of “may” being read as“shall” in sections 61 and 62 of the MPT Act, yet the hoveringomnipresence of Article 14 over the Board must always be giveneffect to, and there must be a very good reason to continuedetention of goods beyond the period of four months before theyare sold. [Paras71-74][779-E-H; 780-A-H]

Forbes Forbes Campbell & Co. v. Port of Bombay(Forbes-II) (2015) 1 SCC 228 : [2014] 12 SCR 337 –held not correct law.

Dwarkadas Marfatia and Sons v. Board of Trustees ofthe Port of Bombay (1989) 3 SCC 293 : [1989] 2 SCR751 – relied on.

5.5 Rowther-I did hold that the Port Trust is a sub-bailee ofgoods bailed by the consignor to the ship-owner, but so held inorder to distinguish an English judgment – as has been pointedout – which would then lead to the proposition that once the goodsare placed in the charge of the Board, it would amount to deliveryto the consignee, which proposition was turned down by the Court.The question whether section 158 of the Contract Act can applyto a statutory bailment under the MPT Act is left open, giventhat the Port Trust is not limited only to recovering “necessaryexpenses” to be payable by the bailor, but is statutorily is entitled AB

C

D

E

F

G

H

Ato recover, by way of levy of rates and expenses incurred forstorage of the goods, together with something more – thesomething more being rates of storage higher than warehousingrates as a deterrent against keeping these goods in the Port Trustpremises. The importer, the consignee and the consignor, or theiragents, can all be held liable to pay demurrage charges. However,Bsince Rasiklal does not involve either the owner of the vessel orits agent, the question is left open as to whether the Port Trust,as sub-bailee, is entitled to recover its dues from the originalbailor – the consignor, and persons claiming through it, giventhe statutory scheme of the MPT Act, as has already beenCindicated in paragraph 66. [Paras 79, 81][782-D-F; 783-E-G]

Rasiklal Kantilal & Co. v. Port of Bombay (2017) 11SCC 1 : [2017] 4 SCR 591 – held inapplicable.

Board of Trustees of the Port of Bombay v. Jai Hind OilMills Co. and Ors. (1987) 1 SCC 648 : [1987] 1 SCRD932 – referred to.

6. Anwers to the questions framed in the reference order are:

1. The point of time at which title to the goods passes toEthe consignee is not relevant to determine the liability of theconsignee or steamer agent in respect of charges to be paid tothe Port Trust;

2. and 3.The bill of lading being endorsed by the steameragent is different from the bill of lading being endorsed by theFowner of the goods. In the first case, the endorsement leads todelivery; in the second case, the endorsement leads to passingof title. For the reasons mentioned in the judgment, both stagesare irrelevant in determining who is to pay storage charges – it isheld that upto the point that the Port Trust takes charge of thegoods, and gives receipt therefor, the steamer agent may be heldGliable for Port Trust dues in connection with services renderedqua unloading of goods, but that thereafter, the importer, owner,consignee or their agent is liable to pay demurrage charges forstorage of goods; H

4. As per paragraph 24 of this judgment;

H

4. As per paragraph 24 of this judgment;

5. The answer to question number 5 is really in two parts:first, as to whether carrying goods in a container would make anydifference to the position that only the owner of the goods orperson entitled to the goods is liable to pay for demurrage; andsecond, as to whether the Port Trust is obliged to destuffcontainers that are entrusted to it and return empty containersto the shipping agent. The answer to the first question is containedin paragraphs 45 to 51 of this judgment. The answer to the secondquestion is that a container which has to be returned is only areceptacle by which goods that are imported into India aretransported. Considering that the container may belong eitherto the consignor, shipping agent, ship-owner, or to some personwho has leased out the same, it would be the duty of the PortTrust to destuff every container that is entrusted to it, and returndestuffed containers to any such person within as short a periodas is feasible in cases where the owner/person entitled to thegoods does not come forward to take delivery of the goods anddestuff such containers. What should be this period is to bedetermined on the facts of each case, given the activities of theport, the number of vessels which berth at it, together with thevolume of goods that are imported. While it does not lie in themouth of the Port Trust to state that it has no place in which tokeep goods after they are destuffed – as in the facts in the presentcase – yet a court may, in the facts of an individual case, look intopractical difficulties faced by the Port Trust. This may lead to the“short period” in the facts of a particular case being slightly longerthan in a case where a port is less frequented, and goods that arestored are lesser in number, given the amount of space in whichthe goods can be stored. [Para 82][783-G-H; 784-A-H]

7. This Court, does not, on the facts of this case, think thatthe justice of the case demands that the impugned High Courtjudgment should be interfered with. The steamer agentsthemselves did not dispute liability to pay ground rent upto 75days before the High Court, and have admittedly paid the saidcharges long ago. As a matter of fact, the steamer agents paidground rent even beyond the period of 75 days – the High Courthaving ordered the Appellant Port Trust to recompute the liability AB

C

D

E

F

G

H

Aof the steamer agents, and return the balance to the partiesconcerned within two months from the date of receipt of a copy ofthe impugned judgment. The impugned judgment is set aside onone question of law, namely, that the expression “may” in sections61 and 62 of the MPT Act cannot be read as “shall”, subject tothe caveat that as the “State” under Article 12 of the Constitution,Ba Port Trust must act reasonably, and attempt to sell the goodswithin a reasonable period from the date on which it has assumedcustody of them. [Paras 83, 84][785-A-D]

J.V. Gokal and Co. (Pvt.) Ltd. v. Asst. Collector of Sales-Tax (Inspection) and Ors. [1960] 2 SCR 852 – followed.CForbes Forbes Campbell & Co. Ltd. v. Board of Trustees,Port of Bombay [Forbes-I] (2008) 4 SCC 87; BrindavanBangle Stores and Ors. v. Asst. Commissioner ofCommercial Taxes and Anr. (2000) 1 SCC 674 : [2000]1 SCR 97; Mangalore Refinery & Petrochemicals Ltd.v.DCommissioner of Customs (2016) 14 SCC 709 : [2015]9 SCR 620; State of Bombay and Anr. v. F.N. Balsara[1951] SCR 682; Central India Spinning and Weavingand Manufacturing Company, Ltd. v. The MunicipalCommittee, Wardha [1958] SCR 1102; GramophoneECompany of India Ltd. v. Birendra Bahadur Pandey &Ors. [1984] 2 SCR 664; State of Kerala & Ors. v. Fr.William Fernandez Etc. (2017) SCC OnLine SC 1291;International Airport Authority of India v. Grand SlamInternational (1995) 3 SCC 151 : [1995] 2 SCR 149 –referred to.F

The K.H. Enterprise [1994] 1 Lloyd’s Law Reports 593;Brown v. State of Maryland 25 U.S. 419 (1827);Province of Madras v. Boddu Paidanna & sons, A.I.R.(29) 1942; Peterson v. Freebody & Co. [1895] 2 Q.B.D.294 – referred to.G

THE CHAIRMAN, BOARD OF TRUSTEES, COCHIN PORT TRUST v. M/SAREBEE STAR MARITIME AGENCIES PVT. LTD.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2525of 2018.

E

From the Judgment and Order dated 27.09.2011 of the DivisionBench of High Court of Kerala at Ernakulam in Original Petition No.21041 of 1999(E).

With

C.A. Nos. 2526, 2527, 2528, 2529, 2530, 2531, 2532, 2533, 2534,2535 of 2018.

F

Ritin Rai, Rahul Narichania, Prashant S. Pratap, Kavin Gulati,Siddhartha Dave, Sr. Advs, Ms. Kritika Bhardwaj, V. K. Monga,S. Priya, Ms. Anushree Menon, Vikas Mehta, M. T. George, ArvindKumar Sharma, M. P. Vinod, Anish Agarwal, Yogesh Adhia, PratikKothari, Ms. Vanshika Gupta, Prathamesh Kamat, Ankur Kashyap, ShivIyer, Ms. Ankita Sen, Rohit Rajershi, Ms. Shirin Khajuria, Ms. SunitaRani Singh, Ms. Anandita Barman, B. Krishna Prasad, O. P. Gaggar,Aditya Gaggar, Jemtiben Ao, Senthil Jagadeesan, Advs. for the appearingparties.

G

H

AThe Judgment of the Court was delivered by

R. F. NARIMAN, J.

1. This batch of appeals arises out of a reference order made bya Division Bench of this Court dated 07.03.2018 reported as (2018) 4SCC 592.The learned Division Bench stated as to how these proceedingsBarose before it as follows:

“1. These proceedings have arisen from a judgment dated27-9-2011 [Arebee Star Maritime Agencies (P) Ltd. v. CochinPort Trust, Original Petition No. 21041 of 1999, decided on27-9-2011 (Ker)] of a Division Bench of the Kerala High Court ina batch of writ appeals and original petitions, preferred by variousshipping agents.

C

2. The question before the High Court was whether the liabilityto pay “ground rent” on containers unloaded at Cochin Port, butnot cleared by the consignees/importers and refused to be destuffedby the Port, on the ground of inadequate storage space, can beimposed on the owners of the vessel/steamer agents beyond theperiod of 75 days, fixed by the Tariff Authority of Major Ports[TAMP], a statutory body constituted under Section 47-A of theMajor Port Trusts Act [MPT Act], 1963.

D

E

3. The facts of the case are summarised in the following extractof the judgment of the High Court:

“The sequence of events that led to the stalemate refers to theincidents which happened in 1998 when there (sic) importssynthetic woollen rags (in containers) in the Cochin Port Trustpremises. The said containers were destuffed to facilitate Customsexamination and to return the empty containers to the steameragents. The destuffed cargo occupied much larger space and wasnot promptly cleared by the consignees in view of the hurdlesplaced by the Customs stating that the cargo actually did notconstitute old woollen rags as declared, but mostly were brandnew clothes which could not have been cleared. The “modusoperandi” of the consignees/importers attracted wide attention ofall concerned and taking note of the probable extent of liability tobe imposed by the Customs Department, and the liability to besatisfied to the Port and others concerned, the consignees did not F

G

H

turn up to clear the goods and they were lying idle in the Portpremises for quite long.”

The Port Trust charged “ground rent” from the steamer agents/owners of the containers.”

2. After then setting out the relevant provisions of the Major PortTrusts Act, 1963 [“MPT Act”] and the relevant portions of five decisionsof this Court, namely,Port of Madras v. K.P.V. Sheik MohamedRowther & Co. 1963 Supp. (2) SCR 915 [“Rowther-I”]; Port ofMadras v. K.P.V. Sheik Mohd. Rowther & Co. P. Ltd. (1997) 10SCC 285 [“Rowther-II”]; Port of Bombay v. Sriyanesh Knitters(1999) 7 SCC 228; Forbes Forbes Campbell & Co. v. Port ofBombay (2015) 1 SCC 228 [“Forbes-II”] and Rasiklal Kantilal &Co. v. Port of Bombay (2017) 11 SCC 1,the Division Bench then stated:

“23. Analysing the above judgments, the following positionemerges:

23.1. The decisions in Rowther-I, Rowther-II, SriyaneshKnitters, Forbes-II and Rasiklal do not seem to follow aconsistent line about whom the Port Trust has to fasten the liabilityfor payment of its charges; 23.2. The Constitution Bench judgment in Rowther-I holds thatwhen Port Trust takes charge of the goods from the shipowner,the shipowner is the bailor and the Port Trust is the bailee. Whilethe Bench of two Judges in Sriyanesh Knitters holds that therecomes into existence the relationship of bailor and bailee betweenthe consignee and the Port Trust, the decision in Forbes-II disagrees with this view of Sriyanesh Knitters. Rasiklal opinesthat enquiry into such relationship is irrelevant in determining theright of a Port Trust to recover its dues; 23.3. While the decision in Sriyanesh Knitters was based on theinterpretation of the term “owner” under Section 2(o) of the MPTAct, the judgments in Forbes-II and Rasiklal do not find thequestion of interpretation of the term “owner” to be relevant; 23.4. While Forbes-II reliesupon the Constitution Bench decisionin Rowther-I to come to its conclusions, Rasiklal does notfind Rowther-I to be an authority for the proposition that until thetitle in goods is passed to the consignee, the liability to pay various A

BC

D

EF

G

H

A

charges payable to a Port Trust, for its services in respect ofgoods, falls exclusively on the steamer agent; 23.5. In Rowther-II, it was held that once the goods are handedover to the Port Trust by the steamer and the steamer agentshave duly endorsed the bill of lading or issued the delivery order,their obligation to deliver the goods personally to the owner or theendorsee comes to an end. The decision in Rasiklal, which hasbeen delivered after the reference of Forbes-I was disposed of,takes a contrary view that in cases where the consignee does notcome to take delivery of goods, the position of law laid downby Rowther-II would result in a situation that the Port Trust wouldincur expenses without any legal right to recover such amountfrom the consignor, with whom there was no contractual obligation;and B

C

23.6. The Bench of two Judges in Rasiklal opined that it agreeswith the conclusions recorded in Rowther-II and Forbes-II thata Port Trust could recover the rates due, either from the steameragent or the consignee. However, the holding in Rowther-II findsonly the consignee to be liable.

D

24. Taking note of the above inconsistencies in the judgmentswhich have been delivered after the pronouncement by theConstitution Bench in Rowther-I, we are inclined to the view thatthe following issues need to be resolved by a larger Bench:

E

24.1. Whether in the interpretation of the provision of Section2(o) of the MPT Act, the question of title of goods, and the pointof time at which title passes to the consignee is relevant todetermine the liability of the consignee or steamer agent in respectof charges to be paid to the Port Trust; F

24.2. Whether a consignor or a steamer agent is absolved of theresponsibility to pay charges due to a Port Trust, for its services inrespect of goods which are not cleared by the consignee, onceGthe bill of lading is endorsed or the delivery order is issued; 24.3. Whether a steamer agent can be made liable for paymentof storage charges/demurrage, etc. in respect of goods which arenot cleared by the consignee, where the steamer agent has notissued a delivery order; if so, to what extent; H

24.4. What are the principles which determine whether a PortTrust is entitled to recover its dues, from the steamer agent or theconsignee; and 24.5. While the Port Trust does have certain statutory obligationswith regard to the goods entrusted to it, whether there is anyobligation, either statutory or contractual, that obliges the PortTrust to destuff every container that is entrusted to it and returnthe empty containers to the shipping agent.

25. The larger Bench may deal with any additional issues relevantto the context, as it deems necessary.”

3. The impugned judgment dated 27.09.2011 of a Division Benchof the Kerala High Court decided a limited question that was arguedbefore it, namely:

“Whether liability to pay ‘Ground Rent’ in respect of the containersunloaded in the Cochin Port, lying uncleared by the Consignees/Importers and refused to be destuffed by the port, for inadequatestorage space, can be mulcted on the owners of the Vessel/SteamerAgents beyond 75 days, in view of the Scheme of the Statute(Major Port Trusts Act 1963 – in short ‘MPT Act’) and thecontents of the TAMP (Tariff Authority for Major Ports) Ordersdated 10.11.1999, 19.07.2000, and 13.09.2005, is the point.”

4. The impugned judgment came to be passed as a number ofwrit appeals had been preferred by shipping agents, the Port Trust, andone consignee against the judgment dated 16.09.2002 of a single Judgeof the Kerala High Court. A writ petition, namely, W.P. (C) No. 32191 of2004, was also disposed of by the impugned judgment, as it raised asimilar question of law. The facts involved in these appeals and writpetition were briefly stated in paragraphs 4 and 5 of the impugned HighCourt judgment as follows:

“4. Goods involved in all the cases, imported as ‘FCL’ (FullContainer Loads) mainly consist of ‘synthetic woollen rags’, exceptin W.P. (C) No. 32191 of 2004, where it is VCD players. Theperiod of import is during August 1998 to March 1999. All theContainers now stand returned after destuffing, pursuant tocommon judgment in the Original Petitions and the interim orderspassed in the Appeals.

A

B

C

D

E

F

G

H

A

A5. Some of the goods imported earlier in the Cochin Port, titled as“woollen rags” were actually found to be “brand new clothes” oninspection by the Customs Department, which attracted heavyduty, penalty and such other charges. The dispute between theConsignees and the Customs went on for an indefinite period andin the said circumstances, the consignees did not turn up to clearBthe goods in respect of the subsequent transactions as well,presumably knowing the probable outcome and the huge liabilityto be satisfied under different heads including the Port chargesand other dues because of the delay. So also, no action was takenby the Port Trust to destuff the goods and they retained theCcontainers for their own reasons.”

5. The learned Senior Advocate who led the arguments on behalfof the shipping agents before the High Court made one importantconcession, namely, that the shipping agents do not propose to press thecontention as to their liability in satisfying ground rent, except that theyDought not to be mulcted with any such liability beyond the period of 75days, which was set out in the relevant Tariff Authority for Major Ports(“TAMP”) Orders. At the point of time that the Division Bench deliveredits judgment, a Division Bench of this Hon’ble Court in Forbes ForbesCampbell & Co. Ltd. v Board of Trustees, Port of Bombay (2008)4 SCC 87 [“Forbes-I”], had referred the following three questions to aElarger Bench:

“9. The questions of law of public importance in this appeal areas follows:

1. Whether a steamer agent can be construed as owner of theFgoods carried in his principal’s vessel within the definition of“owner” in relation to goods under Section 2(o) of the Major PortTrusts Act, 1963?

2. Whether a steamer agent at all can be made liable for paymentof storage charges/demurrage, which are uncleared by theGconsignee, even where steamer agent has not issued deliveryorder?

3. In the event a steamer agent is held liable, to what extent he isliable and whether it absolves the respondent from acting promptlyunder Sections 61 or 62 of the Act?

H

6. Since this reference had not yet been answered by the largerBench at the time the impugned proceedings were ongoing, the learnedSenior Advocate representing the shipping agents before the High Courtclarified that the High Court may go on to decide only the question as tothe extent of liability of the shipping agents,i.e. whether liability couldextend beyond the 75 days mentioned in the relevant TAMP Orders.

7. In answering the question raised before it, the impugnedjudgment referred to the fact that the shipping agents repeatedly requestedthe Port Trust to destuff the containers which were lying at the port, butthat the Port Trust stated that they cannot do so for inadequacy ofspace.The impugned judgment therefore held that because of the lapseon the part of the consignee on the one hand in not lifting the goods, andthe Port Trust on the other in not destuffing containers, the shippingagents were caught in between, and were being made “to pay throughtheir nose”. This being the case, the impugned judgment went on toconstrue sections 61 and 62 of the MPT Act, by which aBoard “may”,after the expiry of two months from the time when any goods passedinto its custody, sell such goods under certain circumstances. Theimpugned judgment went on to hold that the expression “may” in thesaid provisions must be read as “shall”, as a duty is cast on the PortTrust to get rid of the goods as soon as possible in a fact situation wherethe consignee does not lift such goods.Ultimately, the impugned judgmentconcluded:

“44. In the above facts and circumstances, this Court finds that,there is no rationale on the part of the Port Trust in contendingthat they are entitled to collect ‘Ground Rent’ charges in respectof containers indefinitely. The course pursued by them withoutcausing the goods to be destuffed, despite the specific request, onthe failure of the Consignee/Importer to have it cleared and byproceeding against such goods for causing the same to be sold inthe public auction, realising the funds, to be apportioned in themanner specified under Section 63, cannot but be deprecated.This Court holds that the respondent Port Trust can demand‘Ground Rent’ only to a maximum period of ‘75 days’ as specifiedby the Tariff Authority for Major Ports as per the relevant TAMPOrders discussed above.”

8. Shri Ritin Rai, learned Senior Advocate appearingon behalf ofthe Appellant Port Trust, referred to various provisions of the Customs A

B

C

D

E

F

G

H

AAct, 1962 and the MPT Act, and argued that once responsibility for thegoods is taken over by the Port Trust, the Port Trust becomes a bailee ofthe goods delivered to it by the ship-owner, who in turn is relieved of itsliability for loss or damage to the goods during the period when the goodsare in the custody of the Port Trust. Thus, the Port Trust is entitled torecover, from the shipping agents, demurrage and other dues for theBperiod until a delivery order is issued by the shipping agent to theconsignee, and for this purpose is entitled to exercise a lien over thegoods for realisation of such demurrage. He added that where a deliveryorder is withheld or withdrawn, disabling the consignee from gettingdelivery of the goods, the position remains as if no delivery order wasCissued at all.In such a case, the liability for payment of demurrage andother dues of the Port Trust will continue to be with the shipping agent.According to the learned Senior Advocate, the different strands of thejudgments of this Court can all be reconciled to reach the conclusioncanvassed for by the learned Senior Advocate. He argued that thesubmission that upon landing and discharge of the goods from the vessel,Dthe Port Trust becomes a sub-bailee of the shippers/consignors, and thatthe Port Trust can therefore recover its dues only from the consignors,or the consignee who steps into the consignor’s shoes upon endorsementof the bill of lading pursuant to section 1 of the Indian Bills of LadingAct, 1856, is wholly incorrect. He dealt with the decision of the PrivyECouncil in “The K.H. Enterprise” [1994] 1 Lloyd’s Law Reports 593,and distinguished the said decision from the present case, stating thatthe decision nowhere relates to the obligations of the bailee to the sub-bailee for services undertaken by it at the bailee’s request. He went onto argue that in any case, the sub-bailee in K.H. Enterprise (supra)was entitled to payment for its services from the bailee pursuant to theFagreement between them, and not from the bailor/shipper. Analogously,therefore, the Port Trust (sub-bailee) would be entitled to payment forits services from the shipping agent (bailee). He was at pains to arguethat the passing of title to the goods is immaterial when it comes to thePort Trust collecting its dues, as the Port Trust has no means ofGascertaining when such title has passed. In any event, Shri Rai contendedthat the correct reading of the MPT Act leads to the conclusion that thepassing of title is in any case wholly irrelevant. He stressed the fact thatcontainers belonging to the shipping agents are required to be returnedto them upon destuffing, as a result of which they are liable for groundrent. He strongly supported the decision in Rasiklal (supra) which laidH

this proposition down as a matter of law. He also strongly deprecatedthe impugned judgment of the Kerala High Court, stating that thediscretion that has been given under sections 61 and 62 of the MPT Actto the Port Trust cannot be converted into a mandatory obligation, andthat “may” must be read as “may”, and not “shall”.

9. Shri Prashant S. Pratap, learned Senior Advocate appearing onbehalf of Respondent No.1, a shipping/steamer agent, was at pains topoint out that endorsement on the bill of lading by the shipping agent, anda delivery order being given by the shipping agent, does not pass title tothe goods. The endorsement on the bill of lading by the consignor infavour of a notified party or a consignee, when read with section 1 ofthe Indian Bills of Lading Act, 1856, is the endorsement that passes titleto goods, and must not be confused with his client’s endorsement on thebill of lading. He relied heavily on the Privy Council judgment in K.H.Enterprise (supra), stating that the decision applied on all fours to thepresent case, and that therefore the Port Trust as a sub-bailee of thegoods steps into the shoes of the bailee,i.e. the ship-owner/ship-owner’sagent, and must therefore sue the bailor i.e. the consignor/shipper, andnot the original bailee. This was also because implied consent has beengiven by the consignor to handover the goods to the Port Trust at theport of despatch for delivery to the consignee, the Port Trust being fullyaware that the goods are not the property of the carrier, namely thevessel, who is the bailee. He argued that on a conjoint reading of theprovisions of the MPT Act, and on a reading of section 158 of the IndianContract Act, 1872, the bailor must repay to the bailee “necessaryexpenses” incurred by it for the purposes of the bailment. This would,therefore, enable the Port Trust to recover storage charges from thebailor who is always the owner of the goods, whether consignor orconsignee, but never from the ship-owner, who is never the bailor. ShriPratap argued that the MPT Act itself makes a clear distinction betweenthe steamer agent, who is the agent of the vessel, and other agents,namely those of the consignor/consignee, under section 62 of the MPTAct. Further, upon sale of goods under section 63, the excess must bereturned only to the owner.Such excess can never be paid to the ship-owner or the steamer’s agent. He further went on to argue that a cleardistinction is made in section 2(o) of the MPT Act between “owner” inrelation to the goods, and “owner” in relation to the vessel, and that thesteamer agent – who is the agent of the vessel – can never be said to bethe ‘‘owner” of goods. He relied strongly on the judgment in Sriyanesh A

BC

D

E

F

G

H

A

BC

D

E

F

G

H

AKnitters (supra), stating that the Port Trust is a bailee on behalf of theconsignee who is the bailor, on a consideration of section 1 of the IndianBills of Lading Act, 1856, and submitted that Forbes-II (supra) is whollyincorrect and deserves to be overruled. He dealt with the judgment inRowther-I (supra) in great detail, and distinguished it from the presentcase, stating that the judgment does not concern demurrage or storageBcharges post landing of the goods, and after the Port Trust takes custodyof the goods and issues the receipt, and is thus not applicable to the factsof the present case. Further, according to him, Rasiklal (supra), insofaras it agrees with Forbes-II (supra) is incorrect. Insofar as Rasiklal(supra) notes the legal position that the Port Trust is a sub-bailee of theCgoods bailed by the consignor (bailor) to the ship-owner (bailee), it isabsolutely correct and must be followed. So far as Rowther-II (supra)is concerned, the learned Senior Advocate stated that the portion ofRowther-II (supra), which mixes up endorsement by the steamer agentwith the endorsement by the consignor, cannot be said to be good law.He also contended that the issuance of a delivery order to the consigneeDis irrelevant, and has no bearing on the liability to pay storage charges.Hefurther argued that to the extent that the judgment states that the vesseland its agent cannot be mulcted with the charges, the judgment isabsolutely correct and must be followed. Insofar as goods carried bycontainers is concerned, Shri Pratap contends that the Port Trust itselfEstates that the charges claimed by the Port Trustare in respect of goods,and not in respect of the container in which the goods are stuffed.Thus,the container cannot be said to be “goods” as defined which would incurstorage charges. He also relied upon the counter affidavit filed by thePort Trust before the High Court, in which the Port Trust admitted thatif the goods were imported as bulk cargo, the liability to satisfy demurrageFwould not be on the steamer agent but on the consignee. The mere factthat they are carried in a container can therefore make no difference.He argued that since all questions were now open before this Court, hewas not constrained by the predecessor counsel (including himself) inthe High Court, stating that as a reference was then pending to a largerGBench of this Court, they did not argue the larger question as to whetherthe steamer agent is at all liable. There is no estoppel in any case in law,and the correct position has to be determined by this Court.

10. Shri Rahul Narichania, learned Senior Advocate appearing onbehalf of Respondent No.6 (The Container Shipping Lines Association),Hwho is an Intervenor in these proceedings, argued that the definition of

‘‘owner” in section 2(o) of the MPT Act differentiates between ownerof the “vessel”, and owner of the “goods”, and that a steamer agentdoes not come within the first part of section 2(o) if the doctrine ofnoscitur a sociis is applied. He argued that a steamer agent is an agentof a disclosed principal, i.e. the ship-owner, and therefore cannot bemade liable for demurrage charges.It is only an agent for loading andunloading of cargo, i.e. an agent of the consignor or consignee who canbe made so liable. He went on to argue that a steamer agent must bedistinguished from a stevedoring agent, and is not involved in loading andunloading cargo. He referred to various provisions of the MPT Act, andargued that section 48(1)(d) therein does not contemplate any liability ona steamer agent. This section has to be contrasted with section 49(1)(c),which expressly contemplates liability on a steamer agent, but only withrespect to land that is taken on lease from the Port Trust by the steameragent. He relied heavily upon sections 61 to 63 of the MPT Act to arguethat when the goods are sold by the public auction, a steamer agent hasto be notified only because the vessel owner may have a lien on suchgoods, which can be enforced in its favour under section 60 of the MPTAct. Further, he argued that it is made clear that if there is a surplusfrom the sale proceeds, such surplus shall be paid only to the importer,owner or consignee of the goods or their agent, from which list of personsthe ship-owner and its agent are conspicuously absent, making it clearthat it is the owner of the goods alone, or persons entitled to the goods,that the Port Trust must chase for demurrage charges incurred afterlanding. He then argued that the passing of title under section 1 of theIndian Bills of Lading Act, 1856 makes it clear that it is either theconsignor (before title passes) or the consignee (after title passes) thatcan alone be made liable for payment of such charges. He also arguedthat the obligation to clear goods imported which have been stored in awarehouse are that of the importer, and for this he relied heavily onsection 49 of the Customs Act, 1962. He argued that this would alsomake it clear that the steamer agent therefore does not come into thepicture. He further argued that the steamer agent has no bailor-baileerelationship with the Port Trust, and joined Shri Pratap in relying uponSriyanesh Knitters (supra) and overruling of Forbes-II (supra).Tothe extent that Rasiklal (supra) has made observations against steameragents, it is incorrect in law and should be overruled to this extent.

11. Shri Kavin Gulati, learned Senior Advocate appearing on behalfof Hapag-Lloyd India Pvt. Ltd., a shipping agent and also an Intervenor A

B

C

D

E

F

G

H

Ain these proceedings, reiterated the submissions made by the predecessorcounsel, and further stressed on sections 29, 30, 33, 45, 48 and 150 ofthe Customs Act. He also argued that once goods have been landed, aship-owner’s agent can never be made liable for demurrage charges,which should be to the account of the owner or the beneficial owner ofthe goods.B

12. Having heard the learned Senior Counsel on behalf of all parties,it is necessary to first set out the relevant provisions of the MPT Act.

“Section 2. Definitions.-In this Act, unless the context otherwiserequires,- C

(f) “dock” includes all basins, locks, cuts, entrances, graving docks,graving blocks, inclined planes, slipways, gridirons, moorings,transit-sheds, warehouses, tramways, railways and other worksand things appertaining to any dock, and also the portion of thesea enclosed or protected by the arms or groynes of a harbour; Dxxx xxxxxx (h) “goods” includes livestock and every kind of movable property; xxx xxxxxx

(n) “master”, in relation to any vessel or any aircraft making useEof any port, means any person having for the time being the chargeor control of such vessel or such aircraft, as the case may be,except a pilot, harbour master, assistant harbour master, dockmaster or berthing master of the port; (o) “owner”, F

(i) in relation to goods, includes any consignor, consignee, shipperor agent for the sale, custody, loading or unloading of such goods;and

(ii) in relation to any vessel or any aircraft making use of any port,includes any part-owner, charterer, consignee, or mortgagee inGpossession thereof; xxx xxxxxx

(v) “rate” includes any toll, due, rent, rate, fee, or charge leviableunder this Act; Hxxx xxxxxx (z) “vessel” includes anything made for the conveyance, mainlyby water, of human beings or of goods and a caisson;”

“42. Performance of services by Board or other person.—(1) A Board shall have power to undertake the followingservices:—

(a) landing, shipping or transhipping passengers and goods betweenvessels in the port and the wharves, piers, quays or docks belongingto or in the possession of the Board; (b) receiving, removing, shifting, transporting, storing or deliveringgoods brought within the Board’s premises;

(c) carrying passengers by rail or by other means within the limitsof the port or port approaches, subject to such restrictions andconditions as the Central Government may think fit to impose; (d) receiving and delivering, transporting and booking anddespatching goods originating in the vessels in the port and intendedfor carriage by the neighbouring railways, or vice versa, as arailway administration under the Indian Railways Act, 1890 ( 9 of1890); (e) piloting, hauling, mooring, remooring, hooking, or measuring ofvessels or any other service in respect of vessels; and (f) developing and providing, subject to the previous approval ofthe Central Government, infrastructure facilities for ports.

(2) A Board may, if so requested by the owner, take charge of thegoods for the purpose of performing the service or services andshall give a receipt in such form as the Board may specify.

(3) Notwithstanding anything contained in this section, the Boardmay, with the previous sanction of the Central Government,authorise any person to perform any of the services mentioned insub-section (1) on such terms and conditions as may be agreedupon.

(3A) Without prejudice to the provisions of sub-section (3), a Boardmay, with the previous approval of the Central Government, enterinto any agreement or other arrangement (whether by way ofpartnership, joint venture or in any other manner) with, any bodycorporate or any other person to perform any of the services and A

B

C

D

E

F

G

H

Afunctions assigned to the Board under this Act on such terms andconditions as may be agreed upon.

(4) No person authorised under sub-section (3) shall charge orrecover for such service any sum in excess of the amount specifiedby the Authority, by notification in the Official Gazette.

B

(5) Any such person shall, if so required by the owner, perform inrespect of goods any of the said services and for that purposetake charge of the goods and give a receipt in such form as theBoard may specify.

(6) The responsibility of any such person for the loss, destructionCor deterioration of goods of which he has taken charge shall,subject to the other provisions of this Act, be that of a baileeunder sections 151, 152 and 161 of the Indian Contract Act, 1872(9 of 1872).

(7) After any goods have been taken charge of and a receiptDgiven for them under this section, no liability for any loss or damagewhich may occur to them shall attach to any person to whom areceipt has been given or to the master or owner of the vesselfrom which the goods have been landed or transhipped.

43. Responsibility of Board for loss, etc., of goods.—(1)ESubject to the provisions of this Act, the responsibility of any Boardfor the loss, destruction or deterioration of goods of which it hastaken charge shall,—

(i) in the case of goods received for carriage by railway, begoverned by the provisions of the Indian Railways Act, 1890 (9 ofF1890); and

(ii) in other cases, be that of a bailee under sections 151, 152 and161 of the Indian Contract Act, 1872 (9 of 1872), omitting thewords “in the absence of any special contract” in section 152 ofthat Act:

G

Provided that no responsibility under this section shall attach tothe Board—

(a) until a receipt mentioned in sub-section (2) of section 42 isgiven by the Board; and H

THE CHAIRMAN, BOARD OF TRUSTEES, COCHIN PORT TRUST v. M/SAREBEE STAR MARITIME AGENCIES PVT. LTD. [R. F. NARIMAN, J.]

(b) after the expiry of such period as may be prescribed byregulations from the date of taking charge of such goods by theBoard.

(2) A Board shall not be in any way responsible for the loss,destruction or deterioration of, or damage to, goods of which ithas taken charge, unless notice of such loss or damage has beengiven within such period as may be prescribed by regulations madein this behalf from the date of taking charge of such goods by theBoard under sub-section (2) of section 42.”

“48. Scales of rates for services performed by Board orother person.—(1) The Authority shall from time to time, bynotification in the Official Gazette, frame a scale of rates at which,and a statement of conditions under which, any of the servicesspecified hereunder shall be performed by a Board or any otherperson authorised under section 42 at or in relation to the port orport approaches—

(a) transhipping of passengers or goods between vessels in theport or port approaches; (b) landing and shipping of passengers or goods from or to suchvessels to or from any wharf, quay, jetty, pier, dock, berth, mooring,stage or erection, land or building in the possession or occupationof the Board or at any place within the limits of the port or portapproaches;

(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.

(2) Different scales and conditions may be framed for differentclasses of goods and vessels.”

“59. Board’s lien for rates.—(1) For the amount of all ratesleviable under this Act in respect of any goods, and for the rentdue to the Board for any buildings, plinths, stacking areas, or otherpremises on or in which any goods may have been placed, theBoard shall have a lien on such goods, and may seize and detainthe same until such rates and rents are fully paid.

A

B

C

D

E

F

G

H

A

(2) Such lien shall have priority over all other liens and claims,except for general average and for the ship-owner’s lien upon thesaid goods for freight and other charges where such lien existsand has been preserved in the manner provided in sub-section (1)of section 60, and for money payable to the Central Governmentunder any law for the time being in force relating to customs,other than by way of penalty or fine.

B

60. Ship-owner’s lien for freight and other charges.—(1) Ifthe master or owner of any vessel or his agent, at or before thetime of landing from such vessel any goods at any dock, wharf,quay, stage, jetty, berth, mooring or pier belonging to or in theoccupation of a Board, gives to the Board a notice in writing thatsuch goods are to remain subject to a lien for freight or othercharges payable to the ship-owner, to an amount to be mentionedin such notice, such goods shall continue to be liable to such lien tosuch amount.

C

D

(2) The goods shall be retained in the custody of the Board at therisk and expense of the owners of the goods until such lien isdischarged as hereinafter mentioned; and godown or storage rentshall be payable by the party entitled to such goods for the timeduring which they may be so retained.

E

(3) Upon the production before any officer appointed by the Boardin that behalf of a document purporting to be a receipt for, orrelease from, the amount of such lien, executed by the person bywhom or on whose behalf such notice has been given, the Boardmay permit such goods to be removed without regard to such lien,Fprovided that the Board shall have used reasonable care in respectto the authenticity of such document.

61. Sale of goods after two months if rates or rent are notpaid or lien for freight is not discharged.—(1) A Board may,after the expiry of two months from the time when any goodshave passed into its custody, or in the case of animals andperishable or hazardous goods after the expiry of such shorterperiod not being less than twenty-four hours after the landing ofthe animals or goods as the Board may think fit, sell by publicauction or in such cases as the Board considers it necessary so todo, for reasons to be recorded in writing, sell by tender, private G

H

agreement or in any other manner such goods or so much thereofas, in the opinion of the Board, may be necessary—

(a) if any rates payable to the Board in respect of such goodshave not been paid, or (b) if any rent payable to the Board in respect of any place on orin which such goods have been stored has not been paid, or

(c) if any lien of any ship-owner for freight or other charge ofwhich notice has been given has not been discharged and if theperson claiming such lien for freight or other Charges has madeto the Board an application for such sale.

(2) Before making such sale, the Board shall give ten days’ noticeof the same by publication thereof in the Port Gazette, or wherethere is no Port Gazette, in the Official Gazette and also in at leastone of the principal local daily newspapers:

Provided that in the case of animals and perishable or hazardousgoods, the Board may give such shorter notice and in such manneras, in the opinion of the Board, the urgency of the case admits of.

(3) If the address of the owner of the goods has been stated onthe manifest of the goods or in any of the documents which havecome into the hands of the Board, or is otherwise known noticeshall also be given to him by letter delivered at such address, orsent by post, but the title of a bona fide purchaser of such goodsshall not be invalidated by a reason of the omission to send suchnotice, nor shall any such purchaser be bound to inquire whethersuch notice has been sent.

(4) Notwithstanding anything contained in this section, arms andammunition and controlled goods may be sold at such time and insuch manner as the Central Government may direct.

Explanation.—In this section and section 62—

(a) “arms and ammunition” have the meanings respectivelyassigned to them in the Arms Act, 1959 (54 of 1959); (b) “controlled goods” means goods the price or disposal of whichis regulated under any law for the time being in force.

62. Disposal of goods not removed from premises of Boardwithin time limit.—(1) Notwithstanding anything contained in A

B

C

D

E

F

G

H

A

Athis Act, where any goods placed in the custody of the Boardupon the landing thereof are not removed by the owner or otherperson entitled thereto from the premises of the Board within onemonth from the date on which such goods were placed in theircustody, the Board may, if the address of such owner or person isknown, cause a notice to be served upon him by letter deliveredBat such address or sent by post, or if the notice cannot be soserved upon him or his address is not known, cause a notice to bepublished in the Port Gazette or where there is no Port Gazette, inthe Official Gazette and also in at least one of the principal localdaily newspapers, requiring him to remove the goods forthwithCand stating that in default of compliance therewith the goods areliable to be sold by public auction or by tender, private agreementor in any other manner:

Provided that where all the rates and charges payable under thisAct in respect of any such goods have been paid, no notice ofDremoval shall be so served or published under this sub-sectionunless two months have expired from the date on which the goodswere placed in the custody of the Board.

(2) The notice referred to in sub-section (1) may also be servedon the agents of the vessel by which such goods were landed.

E

(3) If such owner or person does not comply with the requisitionin the notice served upon him or published under sub-section (1),the Board may, at any time after the expiration of two monthsfrom the date on which such goods were placed in its custody, sellthe goods by public auction or in such cases as the Board considersFit necessary so to do, for reason to be recorded in writing sell bytender, private agreement or in any other manner after giving noticeof the sale in the manner specified in sub-sections (2) and (3) ofsection 61.

(4) Notwithstanding anything contained in sub-section (1) or sub-section (3)—

G

(a) the Board may, in the case of animals and perishable orhazardous goods, give notice of removal of such goods althoughthe period of one month or, as the case may be, of two monthsspecified in sub-section (1) has not expired or give such shorternotice of sale and in such manner as, in the opinion of the Board,Hthe urgency of the case requires; (b) arms and ammunition and controlled goods may be sold inaccordance with the provisions of sub-section (4) of section 61.

(5) The Central Government may, if it deems necessary so to doin the public interest, by notification in the Official Gazette, exemptany goods or classes of goods from the operation of this section.

63. Application of sale proceeds.—(1) The proceeds of everysale under section 61 or section 62 shall be applied in the followingorder—

(a) in payment of the expenses of the sale; (b) in payment, according to their respective priorities, of the liensand claims excepted in sub-section (2) of section 59 from thepriority of the lien of the Board;

(c) in payment of the rates and expenses of landing, removing,storing or warehousing the same, and of all other charges due tothe Board in respect thereof, including demurrage (other than penaldemurrage) payable in respect of such goods for a period of fourmonths from the date of landing; (d) in payment of any penalty or fine due to the CentralGovernment under any law for the time being in force relating tocustoms; (e) in payment of any other sum due to the Board.

(2) The surplus, if any, shall be paid to the importer, owner orconsignee of the goods or to his agent, on an application made byhim in this behalf within six months from the date of the sale ofthe goods.

(3) Where no application has been made under sub-section (2),the surplus shall be applied by the Board for the purposes of thisAct.

64. Recovery of rates and charges by distraint of vessel.—(1) If the master of any vessel in respect of which any rates orpenalties are payable under this Act, or under any regulations ororders made in pursuance thereof, refuses or neglects to pay thesame or any part thereof on demand, the Board may distrain orarrest such vessel and the tackle, apparel and furniture belongingthereto, or any part thereof, and detain the same until the amount A

B

C

D

E

F

G

H

A

so due to the Board, together with such further amount as mayaccrue for any period during which the vessel is under distraint orarrest, is paid.

(2) In case any part of the said rates or penalties, or of the cost ofthe distress or arrest, or of the keeping of the same, remains unpaidfor the space of five days next after any such distress or arresthas been so made, the Board may cause the vessel or other thingsso distrained or arrested to be sold, and, with the proceeds ofsuch sale, shall satisfy such rates or penalties and costs, includingthe costs of sale remaining unpaid, rendering the surplus (if any)to the master of such vessel on demand.

B

C

65. Grant of port-clearance after payment of rates andrealisation of damages, etc.—If a Board gives to the officer ofthe Central Government whose duty it is to grant the port-clearanceto any vessel at the port, a notice stating,—

(i) that an amount specified therein is due in respect of rates,fines, penalties or expenses chargeable under this Act or underany regulations or orders made in pursuance thereof, against suchvessel, or by the owner or master of such vessel in respect thereof,or against or in respect of any goods on board such vessel; or D

E(ii) that an amount specified therein is due in respect of any damagereferred to in section 116 and such amount together with the costof the proceedings for the recovery thereof before a Magistrateunder that section has not been realised, such officer shall notgrant such port-clearance until the amount so chargeable or duehas been paid or, as the case may be, the damage and cost haveFbeen realised.”

“123. General power of Board to make regulations.—Withoutprejudice to any power to make regulations contained elsewherein this Act, a Board may make regulations consistent with this Actfor all or any of the following purposes, namely:—

G

xxx xxxxxx

(c) for the form of receipt to be given under sub-section (2) ofsection 42; (d) for the period within which notice may be given under sub-Hsection (2) of section 43; xxx xxxxxx

(i) for the mode of payment of rates leviable by the Board underthis Act;”

“131. Alternative remedy by suit.—Without prejudice to anyother action that may be taken under this Act, a Board may recoverby suit any rates, damages, expenses, costs, or in the case of salethe balance thereof, when the proceeds of sale are insufficient, orany penalties payable to, or recoverable by, the Board under thisAct or under any regulations made in pursuance thereof.”

13. Since certain provisions of the Customs Act, 1962 were reliedupon during the course of arguments, they are also set out as follows:

“2. Definitions.—In this Act, unless the context otherwiserequires,—

xxx xxxxxx

(26) ‘‘importer”, in relation to any goods at any time betweentheir importation and the time when they are cleared for homeconsumption, includes any owner, beneficial owner or any personholding himself out to be the importer;”

“29. Arrival of vessels and aircrafts in India.—(1) The person-in-charge of a vessel or an aircraft entering India from any placeoutside India shall not cause or permit the vessel or aircraft to callor land—

(a) for the first time after arrival in India; or (b) at any time while it is carrying passengers or cargo brought inthat vessel or aircraft, at any place other than a customs port or a customs airport, as thecase may be unless permitted by the Board.

30. Delivery of arrival manifest or import manifest or importreport.—(1) The person-in-charge of —

(i) a vessel; or

(ii) an aircraft; or

(iii) a vehicle,

carrying imported goods or export goods or any other person asmay be specified by the Central Government, by notification in A

B

C

DE

F

G

H

A

the Official Gazette, in this behalf shall, in the case of a vessel oran aircraft, deliver to the proper officer an arrival manifest orimport manifest by presenting electronically prior to the arrival ofthe vessel or the aircraft, as the case may be, and in the case of avehicle, an import report within twelve hours after its arrival inthe customs station, in such form and manner as may be prescribedand if the arrival manifest or import manifest or the import reportor any part thereof, is not delivered to the proper officer withinthe time specified in this sub-section and if the proper officer issatisfied that there was no sufficient cause for such delay, theperson-in-charge or any other person referred to in this sub-section,who caused such delay, shall be liable to a penalty not exceedingfifty thousand rupees:

B

C

Provided that the Principal Commissioner of Customs orCommissioner of Customs may, in cases where it is not feasibleto deliver arrival manifest or import manifest by presentingDelectronically, allow the same to be delivered in any other manner.

(2) The person delivering the arrival manifest or import manifestor import report shall at the foot thereof make and subscribe to adeclaration as to the truth of its contents.

(3) If the proper officer is satisfied that the arrival manifest orimport manifest or import report is in any way incorrect orincomplete, and that there was no fraudulent intention, he maypermit it to be amended or supplemented.”

E

“33. Unloading and loading of goods at approved placesonly.—Except with the permission of the proper officer, noFimported goods shall be unloaded, and no export goods shall beloaded, at any place other than a place approved under clause (a)of section 8 for the unloading or loading of such goods.”

“45. Restrictions on custody and removal of importedgoods.—(1) Save as otherwise provided in any law for the timeGbeing in force, all imported goods unloaded in a customs areashall remain in the custody of such person as may be approved bythe Principal Commissioner of Customs or Commissioner ofCustoms until they are cleared for home consumption or arewarehoused or are transhipped in accordance with the provisionsof Chapter VIII.

H

46. Entry of goods on importation.—(1) The importer of anygoods, other than goods intended for transit or transhipment, shallmake entry thereof by presenting electronicallyon the customsautomated system to the proper officer a bill of entry for homeconsumption or warehousing in such form and manner as may beprescribed:

Provided that the Principal Commissioner of Customs orCommissioner of Customs may, in cases where it is not feasibleto make entry by presenting electronically on the customsautomated system, allow an entry to be presented in any othermanner:

Provided further that if the importer makes and subscribes to adeclaration before the proper officer, to the effect that he is unablefor want of full information to furnish all the particulars of thegoods required under this sub-section, the proper officer may,pending the production of such information, permit him, previousto the entry thereof (a) to examine the goods in the presence ofan officer of customs, or (b) to deposit the goods in a publicwarehouse appointed under section 57 without warehousing thesame.

(2) Save as otherwise permitted by the proper officer, a bill ofentry shall include all the goods mentioned in the bill of lading orother receipt given by the carrier to the consignor.

(3) The importer shall present the bill of entry under sub-section(1) before the end of the next day following the day (excludingholidays) on which the aircraft or vessel or vehicle carrying thegoods arrives at a customs station at which such goods are to becleared for home consumption or warehousing:

Provided that a bill of entry may be presented at any time notexceeding thirty days prior to the expected arrival of the aircraftor vessel or vehicle by which the goods have been shipped forimportation into India:

Provided further that where the bill of entry is not presented withinthe time so specified and the proper officer is satisfied that therewas no sufficient cause for such delay, the importer shall paysuch charges for late presentation of the bill of entry as may beprescribed.

A

B

C

D

EF

G

H

(4) The importer while presenting a bill of entry shall make andsubscribe to a declaration as to the truth of the contents of suchbill of entry and shall, in support of such declaration, produce tothe proper officer the invoice, if any, and such other documentsrelating to the imported goods as may be prescribed.

A

B(4A) The importer who presents a bill of entry shall ensure thefollowing, namely:—

(a) the accuracy and completeness of the information given therein; (b) the authenticity and validity of any document supporting it;and C

(c) compliance with the restriction or prohibition, if any, relating tothe goods under this Act or under any other law for the time beingin force.

(5) If the proper officer is satisfied that the interests of revenueDare not prejudicially affected and that there was no fraudulentintention, he may permit substitution of a bill of entry for homeconsumption for a bill of entry for warehousing or vice versa.”

“48. Procedure in case of goods not cleared, warehoused,or transhipped within thirty days after unloading.—If anygoods brought into India from a place outside India are not clearedEfor home consumption or warehoused or transhipped within thirtydays from the date of the unloading thereof at a customs stationor within such further time as the proper officer may allow or ifthe title to any imported goods is relinquished, such goods may,after notice to the importer and with the permission of the properFofficer be sold by the person having the custody thereof: Providedthat —

(a) animals, perishable goods and hazardous goods, may, with thepermission of the proper officer, be sold at any time; (b) arms and ammunition may be sold at such time and place andGin such manner as the Central Government may direct.

Explanation.— In this section, ¯ “arms” and “ammunition” havethe meanings respectively assigned to them in the Arms Act, 1959(54 of 1959).

H

49. Storage of imported goods in warehouse pendingclearance or removal.—Where,––

(a) in the case of any imported goods, whether dutiable or not,entered for home consumption, the Assistant Commissioner ofCustoms or Deputy Commissioner of Customs is satisfied on theapplication of the importer that the goods cannot be cleared withina reasonable time;

(b) in the case of any imported dutiable goods, entered forwarehousing, the Assistant Commissioner of Customs or DeputyCommissioner of Customs is satisfied on the application of theimporter that the goods cannot be removed for deposit in awarehouse within a reasonable time, the goods may pending clearance or removal, as the case may be,be permitted to be stored in a public warehouse for a period notexceeding thirty days:

Provided that the provisions of Chapter IX shall not apply to goodspermitted to be stored in a public warehouse under this section:

Provided further that the Principal Commissioner of Customs orCommissioner of Customs may extend the period of storage for afurther period not exceeding thirty days at a time.”

“150. Procedure for sale of goods and application of saleproceeds.—(1) Where any goods not being confiscated goodsare to be sold under any provisions of this Act, they shall, afternotice to the owner thereof, be sold by public auction or by tenderor with the consent of the owner in any other manner.

(2) The proceeds of any such sale shall be applied—

(a) firstly to the payment of the expenses of the sale, (b) next to the payment of the freight and other charges, if any,payable in respect of the goods sold, to the carrier, if notice ofsuch charges has been given to the person having custody of thegoods,

(c) next to the payment of the duty, if any, on the goods sold, (d) next to the payment of the charges in respect of the goodssold due to the person having the custody of the goods, A

B

C

D

E

F

G

H

A(e) next to the payment of any amount due from the owner of thegoods to the Central Government under the provisions of this Actor any other law relating to customs, and the balance, if any, shallbe paid to the ownerof the goods.

Provided that where it is not possible to pay the balance of saleBproceeds, if any, to the owner of the goods within a period of sixmonths from the date of sale of such goods or such further periodas the Commissioner of Customs may allow, such balance of saleproceeds shall be paid to the Central Government.”

14. A perusal of the relevant provisions of the MPT Act wouldCshow that when section 2(o) defines “owner”, it defines owner in relationto goods separately from owner in relation to any vessel. In sub-clause(i) of section 2(o), when owner is defined in relation to “goods”, thedefinition is an inclusive one. Secondly, it includes persons who are ownersof the goods, or persons beneficially entitled to the goods, such as theconsignor, consignee and the shipper and then also includes agents forDsale, custody, loading or unloading of such goods. Ordinarily, agents forthe sale or custody of goods would relate only to agents of the owner orpersons beneficially entitled to such goods, which would certainly excludethe ship-owner and the ship-owner’s agent. However, considering thefact that the definition is an inclusive definition, and that loading orEunloading of goods can take place by the steamer’s agent, as was heldin Rowther-I (supra), it is difficult to accept the contention on behalf ofthe steamer’s agent that such persons would not be included within thedefinition of “owner” under the MPT Act.

15. For these reasons, it is not possible to apply the doctrine ofFnoscitur a sociis to the definition of “owner” under section 2(o), as wascontended by the learned Senior Advocates appearing on behalf of thesteamer agents. In Brindavan Bangle Stores and Ors. v. Asst.Commissioner of Commercial Taxes and Anr. (2000) 1 SCC 674,this Court held:

G“7. The second contention raised on behalf of the appellantsrelated to the clarity and ambiguity of Entry 30 and Entry 54 andapplication of such construction of noscitur à sociis. In our opinionthe learned Division Bench of the Karnataka High Court has rightlyheld that the said rule of construction has no application to thefacts and circumstances of the case. This Court in State ofH

Bombay v. Hospital Mazdoor Sabha [AIR 1960 SC 610] hasconsidered in detail the rule of construction noscitur à sociis andin para 9, it is observed thus:

“We are not impressed by this argument. It must be borne in mindthat noscitur à sociis is merely a rule of construction and it cannotprevail in cases where it is clear that the wider words have beendeliberately used in order to make the scope of the defined wordcorrespondingly wider. It is only where the intention of thelegislature in associating wider words with words of narrowersignificance is doubtful, or otherwise not clear that the presentrule of construction can be usefully applied. It can also be appliedwhere the meaning of the words of wider import is doubtful; but,where the object of the legislature in using wider words is clearand free of ambiguity, the rule of construction in question cannotbe pressed into service.”

8. As stated earlier on reading Entry 30 and Entry 54, we have nomanner of doubt that there is neither any ambiguity nor do theylack any clarity. The legislature intended to levy and collect entrytax on the articles mentioned in both these entries. The wordsused therein are of wider import and clearly indicate that all articlesmade of glass or made from all kinds of all forms of plastic includingarticles made of polypropylene, polystyrene and like materials aresubjected to payment of entry tax. It cannot be disputed that thearticles in question, namely, bangles are made of glass and/or madeof plastic etc. The impugned judgment has very succinctly dealtwith the contentions raised on behalf of both the parties and alsodealt with the various reported decisions of this Court and otherHigh Courts in great length. We are in complete agreement withthe view taken by the Division Bench.”

16. In the present case, we find no lack of clarity in the expression“agent for the…loading or unloading of such goods”, as including personswho may be the vessel’s agent involved in unloading goods. As thedefinition of “owner” is inclusive, as stated hereinabove, the non-mentionof the ship-owner in the first part of the definition makes no difference,as it would be incongruous to hold that the shipowner’s agent is includedin the latter part of the definition, but not the ship-owner itself, whichwould indicate that the maxim noscitur a sociis cannot apply.

AB

C

DEF

G

H

AB

C

DEF

G

H

A17. This becomes even clearer when section 42 is perused. Undersection 42(1), a Board shall have power to undertake services insofar aslanding, shipping or transhipping goods between vessels in the port andthe wharves, piers, quays or docks belonging to or in the possession ofthe Board, referring clearly, therefore, to services rendered to the vessel(see section 42(1)(a)). Insofar as receiving, removing, shifting, orBtransporting goods is concerned, these could be services to both thevessel as well as the owner/person entitled to the goods. The mootquestion is, when it comes to “storing” goods brought within the Board’spremises, whether such service could be said to be a service renderedto the vessel or its agent (see section 42(1)(b)). Some of the pivotalCprovisions of the MPT Act, insofar as the present questions are involved,are contained in sections 42(2), 42(7) and 43 of the Act. Under section42(2), a Board may, if so requested by the “owner”, take charge of thegoods for the purpose of performing services, and shall give a receipt insuch form as the Board may specify. It is obvious that if the ship-owneror its agent are not “owners”, the Board cannot take the charge of theDgoods from the ship-owner or its agent for the purpose of performingservices, a result which would lead to startling consequences. Secondly,under sub-section (7), once goods have been taken charge of and areceipt given for them, no liability for any loss or damage which mayoccur to them shall attach to any person to whom a receipt has beenEgiven (this would include any of the persons mentioned in section 2(o)(i),including the vessel’s agents), or to the master or owner of the vesselfrom which the goods have been landed or transhipped. This would againmake it clear that the master or owner of the vessel and their agents,from this point on, have been absolved from liability for loss or damageto the goods, as the Board has now taken over the custody of the goodsFfrom such master or owner of the vessel. From this point on, therefore,the master or owner of the vessel and their agents cease to have anyliability qua the goods, inasmuch as the Port Trust has now taken themover. Concomitantly, under section 43(1)(ii), the responsibility of the PortTrust for loss, destruction or deterioration of goods of which it has takenGcharge from this point of time onwards now becomes that of a baileeunder sections 151, 152 and 161 of the Indian Contract Act, 1872, omittingthe words “in the absence of any special contract” in section 152 of theContract Act. This responsibility attaches only after a receipt is given bythe Board, and notice of loss or damage has been given,after expiry ofsuch period (as may be prescribed) from the crucial date on which theHPort Trust takes charge of the goods.

18. At this juncture, it is important to state that arguments havebeen made based on observations contained in various judgments in whichsections 42 (5) and (6) of the MPT Act have been referred. Sections42(5) and (6) have no application to the Board, as they apply only to the“person” authorised under section 42(3) by the Board to perform servicesmentioned in sub-section (1).

19. Again, under section 48, a distinction is made between landingof goods from a vessel, and storage or demurrage charges in respect ofgoods – see section 48(1)(b), as contrasted with section 48(1)(d).Whenit comes to services performed on vessels, sections 49A, 49B, 50, 50Aand 50B make it clear that the services rendered to vessels for whichdues have to be paid by vessels are entirely separate and distinct fromservices rendered insofar as goods that are landed are concerned.

20. Coming to section 59, it becomes clear that for all rates leviableunder the MPT Act, which includes rates leviable for storage of goods,the Board shall have a lien on such goods, and may, after custody ofsuch goods is taken by the Port Trust, then seize and detain the sameuntil such rates are fully paid.

21. Section 60 is also important, in that the ship-owner’s lien forfreight and other charges is recognised if, at or before the time of landingof any goods from such vessel, such freight or other charges have notbeen paid.Under section 60(2), the goods shall be retained in the custodyof the Board at the risk and expense of the owners of the goods untilsuch lien is discharged. Most importantly, godown or storage rent shallbe payable by “the party entitled to such goods” for the time duringwhich they may be so retained.This section is of crucial importance, asit makes it clear that godown or storage rent is payable only by the partyentitled to such goods, which can never be the ship-owner or the ship-owner’s agent after the goods have been landed, and the vessel hassailed away from the port.Further, under section 61, after two monthsfrom the time goods have passed into the Board’s custody, the Boardmay, if it thinks fit, sell – by the modalities laid down – such goods or somuch thereof as may be necessary to recover the rates payable to theBoard which remain unpaid. Sub-section (3) of section 61 is veryimportant, in that before making such sale, if the address of the “ownerof the goods” which has been stated on the manifest, or in other documentsthat have come into the hands of the Board, or is otherwise known,notice of such sale must be given to such owner.

A

D

E

F

G

H

A22. Section 62 speaks of the disposal of goods that have not beenremoved from the premises of the Board within time, and speaks oftheir removal by the “owner or other person entitled thereto”. Undersub-section (2) of section 62, where such goods are proposed to beremoved or sold, a notice may also be served on the “agents of thevessel by which such goods were landed”. This is for the reason that theBvessel’s agents may have indicated that the ship-owner has a lien forfreight and other charges, which must be satisfied out of the sale of suchgoods. The important point to be noted is that a clear distinction is madebetween an “owner or other person entitled” to goods, and agents of thevessel. Further, under sub-section (3) of section 62, it is only if the ownerCor person entitled to goods does not comply with the requisition in thenotice, that the Board may, at any time after the expiration of two monthsfrom the date on which such goods were placed in its custody, then sellthe goods in the manner indicated.The scheme of section 62, therefore,is that when it comes to sale of goods which are lying stored in thepremises of the Board, notice is to be given only to the owner, or otherDpersons who are beneficially entitled to the goods, who must then complywith the requisition given and remove the goods. At this juncture, theship-owner or its agents are not persons who have to comply with suchrequisition, as they are neither persons who are the owner, or otherpersons entitled to the goods. The notice issued to the agent of the vesselEis only for the limited purpose as aforesaid.This again indicates that goodsthat are stored on the premises of the Board have a nexus only with theowner or other persons entitled to those goods, and not with the agent ofthe vessel or the vessel itself.

23. Section 63 is again very important. When goods have beenFsold and a surplus exists, the surplus shall be paid to only three personsor their agents, namely, the “importer”, “owner” or “consignee” of thegoods. In this sub-section, namely, 63(2), as in the case of “owner’ undersection 61(3), the owner of the goods is obviously not the “owner” asdefined under section 2(o), as the context of section 63(2) indicates

otherwise. There would have been no need to add “importer” orG“consignee” in this sub-section, as they are already subsumed within thewider definition of “owner” in relation to goods under section 2(o).Secondly, what is conspicuous by its absence is mention of the vessel orany agent for loading or unloading goods.As a matter of fact, when itcomes to recovery of rates and charges against the vessel, a separateHremedy is provided for in sections 64 and 65 of the MPT Act.

24. The statutory scheme of the MPT Act now becomes crystalclear.Until the stage of landing and removal to a place of storage, thesteamer’s agent or the vessel itself may be made liable for rates payableby the vessel for services performed to the vessel. Post landing andremoval to a place of storage, detention charges for goods that are stored,and demurrage payable thereon from this point on,i.e. when the PortTrust takes charge of the goods from the vessel, or from any otherperson who can be said to be owner as defined under section 2(o), it isonly the owner of the goods or other persons entitled to the goods (whomay be beneficially entitled as well) that the Port Trust has to look to forpayment of storage or demurrage charges.

25. At this juncture, the Customs Act, 1962 also becomes relevant.Under section 2(26), ‘‘importer” is defined as including any owner,beneficial owner or any person holding himself out to be the importer.Though this definition does not ipso facto apply to the MPT Act, it isimportant that the two Acts be read together, as both Acts deal withgoods that are imported into the country from abroad, and their storageand disposal thereafter. In any event, the expression “importer” thatoccurs in section 63(2) of the MPT Act would certainly include abeneficial owner of the goods.

26. Under section 29 of the Customs Act, the person-in-charge ofa vessel when it carries cargo can land only at a “customs port”(asdefined), unless otherwise permitted by the Central Board of Excise.Under section 30, the person-in-charge of a vessel carrying importedgoods shall deliver to the “proper officer”, i.e. a customs officer, animport manifest of the vessel within the time prescribed, which wouldindicate the nature of the goods carried by the vessel, and the consigneeor other owner of the goods.Under section 33, no such imported goodscan be unloaded at any place other than the place approved for unloadingof such goods in the customs port, customs airport or coastal port.Undersection 45(1), all imported goods unloaded in a customs area shall remainin the custody of such person as approved by the Principal Commissionerof Customs or Commissioner of Customs until they are cleared for homeconsumption or are warehoused or transhipped.Section 46(1) is extremelyimportant in that it speaks of a bill of entry for home consumption orwarehousing in such form and manner as may be prescribed. Section46(2) then states that a bill of entry shall include all the goods mentionedin the bill of lading or other receipt given by the carrier to the AB

C

D

E

F

G

H

Aconsignor.Under section 48, if any goods brought into India from a placeoutside India are not cleared for home consumption or warehoused ortranshipped within 30 days from the date of the unloading, such goodsmay, after notice to the “importer” and with permission of the properofficer, be sold by the person having the custody thereof.

B27. Under section 49, imported goods may, pending clearance orremoval, be permitted to be stored in a public warehouse for a period notexceeding 30 days, or such other extended period that the PrincipalCommissioner or Commissioner of Customs may permit. The CustomsAct, therefore, also contains parallel provisions for authorities under thatAct to take charge of, store, and sell imported goods, in the circumstancesCmentioned therein.

28. It was argued that carrying goods in a container would, in anycase, make a difference to the position that only the owner of the goodsor person entitled to the goods is liable to pay for demurrage. Accordingto the Port Trust, when goods are imported in a container, and theDcontainer is then landed without the goods being destuffed, and thecontainer belongs to the ship-owner’s agent and has to be returned tothe ship-owner’s agent, for the duration that the container takes up storagespace, storage charges will have to be paid by the ship-owner’s agent.Let us examine whether this argument is sound in law.

E

29. Under the Customs Act, 1962, customs duties are levied ongoods imported into India. “Import” has been defined in section 2(23) ofthe Customs Act as the “bringing into India from a place outside India”.Thus, import of goods can only be said to be complete after they crossinto the territorial waters of India, and become part of the mass of goodsFwithin India. This is the law laid down by this Court in Garden SilkMills Ltd. and Anr v. Union of India and Ors. (1999) 8 SCC 744, asfollows:

“17. It was further submitted that in the case of Apar (P)Ltd. [(1999) 6 SCC 117] this Court was concerned with SectionsG14 and 15 but here we have to construe the word “imported”occurring in Section 12 and this can only mean that the momentgoods have entered the territorial waters the import is complete.We do not agree with the submission. This Court in its opinionin Bill to Amend Section 20 of the Sea Customs Act, 1878 andSection 3 of the Central Excises and Salt Act, 1944, Re observedHas follows:

“Truly speaking, the imposition of an import duty, by and large,results in a condition which must be fulfilled before the goods canbe brought inside the customs barriers, i.e., before they form partof the mass of goods within the country.”

18. It would appear to us that the import of goods into India wouldcommence when the same cross into the territorial waters butcontinues and is completed when the goods become part of themass of goods within the country; the taxable event being reachedat the time when the goods reach the customs barriers and the billof entry for home consumption is filed.”

30. Likewise, in Mangalore Refinery & Petrochemicals Ltd.v.Commissioner of Customs (2016) 14 SCC 709, this Court dealt withwhen an import could be said to be complete under the Customs Act.After referring to various provisions of the Customs Act, this Court held:

“9. On a reading of the aforesaid provisions, it is clear that thelevy of customs duty under Section 12 is only on goods importedinto India. Goods are said to be imported into India when they arebrought into India from a place outside India. Unless such goodsare brought into India, the act of importation which triggers thelevy does not take place. If the goods are pilfered after they areunloaded or lost or destroyed at any time before clearance forhome consumption or deposit in a warehouse, the importer is notliable to pay the duty leviable on such goods. This is for the reasonthat the import of goods does not take place until they becomepart of the land mass of India and until the act of importation iscomplete which under Sections 13 and 23 happens only after anorder for clearance for home consumption is made and/or an orderpermitting the deposit of goods in a warehouse is made. UnderSection 23(2) the owner of the imported goods may also at anytime before such orders have been made relinquish his title to thegoods and shall not be liable to pay any duty thereon. In short, hemay abandon the said goods even after they have physically landedat any port in India but before any of the aforesaid orders havebeen made. This again is for the good reason that the act ofimportation is only complete when goods are in the hands of theimporter after they have been cleared either for home consumptionor for deposit in a warehouse. Further, as per Section 47 of theCustoms Act, the importer has to pay import duty only on goods A

B

C

D

E

F

G

H

A

that are entered for home consumption. Obviously, the quantity ofgoods imported will be the quantity of goods at the time they areentered for home consumption.

xxx xxxxxx

14. We are afraid that each one of the reasons given by the Tribunalis incorrect in law. The Tribunal has lost sight of the following firstprinciples when it arrived at the aforesaid conclusion. First, it haslost sight of the fact that a levy in the context of import duty canonly be on imported goods, that is, on goods brought into Indiafrom a place outside of India. Till that is done, there is no chargeto tax. This Court in Garden Silk Mills Ltd. v. Union ofIndia,stated that this takes place, as follows:

B

C

“17. It was further submitted that in Apar (P) Ltd. [Union ofIndia v. Apar (P) Ltd., (1999) 6 SCC 117] this Court wasconcerned with Sections 14 and 15 but here we have toconstrue the word “imported” occurring in Section 12 andthis can only mean that the moment goods have entered theterritorial waters the import is complete. We do not agree withthe submission. This Court in its opinion in Sea Customs Act,1878, S. 20(2), In re [Sea Customs Act, 1878, S. 20(2), In re,AIR 1963 SC 1760] SCR at p. 823 observed as follows:

D

E

‘26. … Truly speaking, the imposition of an import duty, byand large, results in a condition which must be fulfilled beforethe goods can be brought inside the customs barriers i.e.before they form part of the mass of goods within the country.’

18. It would appear to us that the import of goods into Indiawould commence when the same cross into the territorial watersbut continues and is completed when the goods become partof the mass of goods within the country; the taxable eventbeing reached at the time when the goods reach the customsbarriers and the bill of entry for home consumption is filed.”

F

G

31. However, another line of judgments deals with what was calledthe “original package”doctrine laid down by Chief Justice Marshall ofthe US Supreme Court in Brown v. State of Maryland 25 U.S. 419(1827). This judgment laid down that while the goods imported remainedthe property of the importer in the original form of packaging in which itHwas imported, a tax upon it would be “imposts or duties on imports”

without the consent of the Congress, violating section 10(2) of Article Iof the US Constitution.In addition, any such “impost or duty” would alsoviolate the Commerce clause under section 8(3) of Article I of the saidConstitution,which grants power to the Congress to regulate commercewith foreign nations. Thus, a State legislature has no power to impose an“impost or duty” upon the first sale of the commodity so long as it remainedin the importer’s hands[1].

32. This doctrine has been the subject-matter of comment in avariety of different situations. Thus, in the Province of Madras v. BodduPaidanna & sons, A.I.R. (29) 1942 Federal Court 33 (at page 37), inthe context of sales tax legislation by the States, the Federal Court referredto Chief Justice Marshall’s judgment, and distinguished the same, sayingthat it would apply to the Commerce clause in the US Constitution,andwould not apply by analogy to the legislative entries under theSeventhSchedule of the Government of India Act (1935). Likewise, inState of Bombay and Anr. v. F.N. Balsara 1951 SCR 682, in thecontext of a law passed by the Legislature of the Province of Bombayrelating to prohibition of intoxicating liquors, an argument based on ChiefJustice Marshall’s dictum in Brown (supra) was made, stating that inpith and substance such law would relate to import and export ofintoxicating liquors, and therefore be void.This was turned down, referringto Boddu Paidanna (supra), stating that in the American judgment thewidest meaning could be given to the Commerce clause as there was noquestion of reconciling that clause with another clause containing thelegislative power of the State –see pages 696 to 700.

33. In Central India Spinning and Weaving andManufacturing Company, Ltd. v. The Municipal Committee,Wardha 1958 SCR 1102, this Court, in the context of a terminal tax,relied upon the dictum of Chief Justice Marshall in Brown (supra) inorder to answer the question before it, namely, whether a terminal tax 1 In two later judgments of the US Supreme Court, Michelin Tire Corporation v.Wages 423 U.S. 276 (1976) and Limbach v. Hoover & Allison Company 466 U.S.353 (1984), judgments following Brown (supra) enunciating the “original package”doctrine were reversed, stating that non-discriminatory taxes which did not fall onimports as such, or interfere with the free flow of imported goods amongst the States,could not be said to be contrary to the Commerce clause or contrary to Section 10(2) ofArticle I of the US Constitution. A different approach was adopted to Section 10(2) ofArticle I, ignoring the question whether the goods were imported, and instead analysingthe nature of the tax to determine whether it was an “impost or duty”.

A

B

C

D

E

F

G

H

Acan be levied on goods which are in transit.The question was answeredin the negative – see pages 1114 and 1121.

34. In Gramophone Company of India Ltd. v. BirendraBahadur Pandey & Ors. (1984) 2 SCR 664, Central India Spinningand Weaving (supra) was distinguished, and Boddu Paidanna (supra)Band F.N. Balsara (supra) were relied upon, to interpret the word “import”as found in the Copyright Act, 1957. Cases under the Customs Act wereexpressly distinguished by this judgment as follows:

“The learned counsel for the appellant invited our attentionto Radhakishan v. Union of India [1965 2 SCR 213];CShawhney v. Sylvania and Laxman [77 Bom LR 380];Bernado v. Collector of Customs [AIR 1960 Ker 170], to urgethat importation was complete so soon as the customs barrierwas crossed. They are cases under the Customs Act and it isneedless for us to seek aid from there when there is enough directlight under the Copyright Act and the various conventions andDtreaties which have with the subject “copyright” from differentangles. We do not also desire to crow our judgment with referenceto the history of the copyright and the customs legislations in theUnited Kingdom and India as we do not think it necessary to doso in this case.”[2]

E35. A recent judgment of this Court in State of Kerala & Ors. v.Fr. William Fernandez Etc. 2017 SCC OnLine SC 1291, was concernedwith the validity of various State legislations relating to entry tax. Asmany as eight issues were raised by this Court, in which issue (iv) readsas follows:F“44(iv). Whether the importation of goods, imported from aterritory outside the India continues till the goods reach in thepremises/factory of the importer, during which period State at nopoint of time is legislative competence to impose any tax.”

36. The discussion in answering this question raised in paragraphG44(iv) begins in paragraph 86.After referring to various definitions ofthe term “import” in different legal situations, this Court noticed variousjudgments relating to customs in paragraphs 97 to 103. As a matter offact in paragraph 103, the law laid down in Garden Silk Mills Ltd.(supra) was extracted with approval as follows:H2 Page 691.

103. Similar view was expressed in the case of Garden Silk MillsLtd. v. Union of India, (1999) 8 SCC 744, in paragraph 18, whichis to the following effect:—

“18. It would appear to us that the import of goods into Indiawould commence when the same cross into the territorial watersbut continues and is completed when the goods become partof the mass of goods within the country; the taxable eventbeing reached at the time when the goods reach the customsbarriers and the bill of entry for home consumption is filed.”

37. These judgments were then distinguished by the Court asfollows:

“104. The law relating to customs has been consolidated by theCustoms Act, 1962. The definitions of “import”, “imported goods”and “importer” have already been noticed above. The definitionof imported goods as given in Section 2(25) is-any goods broughtinto India from the place outside India but does not include goods,which have been cleared for home consumption. The provisionclearly contemplates that once the goods are released for homeconsumption, the character of imported goods is lost and thereafterno longer the goods could be called as imported goods. The importtransit is only till the goods are released for home consumption.The taxing event for entry tax under Entry 52 List II is entirelydifferent and has nothing to do with the customs duty. The Stateby imposing entry tax in any manner is not entrenching in thepower of the Parliament to impose customs duty. The goods arereleased for home consumption only after payment of the customsduty due to the Central Government. The goodswhich are importedcannot be held to be insulated so as to not subject to any State tax,any such insulation of the imported goods shall be a protectionistmeasure which will be discriminatory and invalid. When all normalgoods are subjected to State tax no exemption can be claimed bygoods, which have been imported from payment of entry tax. Totake a common example, all goods, which pass through a toll bridgeare liable to pay toll tax, can it be said that the imported goodswhich after having been released from customs barriers and arepassing through a toll bridge, are not liable to pay the toll tax, theanswer has to be in No. Thus, the event for levy of customs duty,which is in the domain of the Parliament, is entirely different from AB

C

DEFG

H

A

that of event of entry tax. The liability to pay State entry taxarises only when goods enter into a local area for consumption,use and sale, which event is entirely different and separate fromthe levy of a customs duty, which is on import.”

(emphasis in original)

B

38. The judgment went on to discuss the “original package”doctrine of Chief Justice Marshall in paragraphs 108 to 120, finding thatrecent US Supreme Court judgments had abandoned this doctrine, andthat therefore, the Federal Court in Boddu Paidanna (supra) and thetwo judgments of this Court in F.N. Balsara (supra) and GramophoneCCompany of India Ltd. (supra) were correct in not relying on thisdoctrine in the context of the cases before them. This doctrine has noplace in the customs law of India, the judgments of this Courtconcentrating on when an import can be said to be complete on an analysisof the Customs Act.

D39. Given the aforesaid judgments under the Customs Act, acontainer, being a receptacle in which goods are imported, cannot besaid to be “goods” that are imported as itdoes not become part of themass of goods within the countryon the facts of these cases. Thus, oncedestuffing takes place, the container has to be returned either to theship-owner’s agent, or to the person who owns such container.

E

40. In fact, the Bill of Entry (Forms)Regulations, 1976 (as amendedupto date) contain forms in which a Bill of Entry is to be presented by animporter of goods for home consumption, or for warehousing, or forex-bond clearance for home consumption. Regulation 3 of the aforesaidRegulations reads as follows:F

“3. Form of Bill of Entry.- The Bill of Entry to be presented byan importer of any goods for home consumption or for warehousingor for ex-bond clearance for home consumption shall be in FormI or Form II or Form III as the case may be.

Explanation - In this regulation, “goods” does not include thoseGgoods which are intended for transit or transshipment.”

41. Form I, which speaks of a Bill of Entry for home consumption,contains a declaration to be signed by an importer, clause 6(b) of whichis important and is set out hereunder:

H

“6(b) I/We declare that there are the following payments actuallypaid or payable for the imported goods by way of cost and servicesother than those declared in the invoice^

A

[^please refer to Rule 10 (1) (a) & (b) of the Customs ValuationRules, 2007]

D

42. The same declaration is contained in Forms II and III. A perusalof the aforesaid Forms prescribed under the said Regulations wouldshow the difference between “goods” that are imported, which havereference to the bill of lading/invoice presented by the importer whichcontains the number and value of the goods imported,and payments byway of costs and services other than those declared in the invoice, whichincludescosts of containers under Rule 10(1)(a)(ii) of the CustomsValuation (Determination of Value of Imported Goods) Rules, 2007, andpacking costs under Rule 10(1)(a)(iii) of these Rules. This leads to anexamination of the aforesaid Rules.

E

43. Rules 2(1)(d) and (f) of these Rules are relevant, and are setout hereinbelow:

F

“2. Definitions.-

(1) In these rules, unless the context otherwise requires,- xxx xxxxxx G

(d) “identical goods” means imported goods-

(i) which are same in all respects, including physicalcharacteristics, quality and reputation as the goods beingvalued except for minor differences in appearance that donot affect the value of the goods; H

A

(ii) produced in the country in which the goods being valuedwere produced; and

(iii) produced by the same person who produced the goods,or where no such goods are available, goods produced by adifferent person, but shall not include imported goods whereengineering, development work, art work, design work, planor sketch undertaken in India were completed directly orindirectly by the buyer on these imported goods free of chargeor at a reduced cost for use in connection with the productionand sale for export of these imported goods; B

xxx xxxxxx

C

(f) “similar goods” means imported goods –

(i) which although not alike in all respects, have likecharacteristics and like component materials which enablethem to perform the same functions and to be commerciallyinterchangeable with the goods being valued having regardto the quality, reputation and the existence of trade mark; D

(ii) produced in the country in which the goods being valuedwere produced; and

(iii) produced by the same person who produced the goodsbeing valued, or where no such goods are available, goodsproduced by a different person, but shall not include importedgoods where engineering, development work, art work, designwork, plan or sketch undertaken in India were completeddirectly or indirectly by the buyer on these imported goodsfree of charge or at a reduced cost for use in connection withthe production and sale for export of these imported goods;”

E

F

44. Rule 4 deals with the transaction value of “identical goods”,and Rule 5 deals with the transaction value of “similar goods”, and areset out hereinbelow:

G“4. Transaction value of identical goods.–

(1) (a) Subject to the provisions of rule 3, the value of importedgoods shall be the transaction value of identical goods sold forexport to India and imported at or about the same time as thegoods being valued; H

Provided that such transaction value shall not be the value of thegoods provisionally assessed under section 18 of the CustomsAct, 1962.

(b) In applying this rule, the transaction value of identical goods ina sale at the same commercial level and in substantially the samequantity as the goods being valued shall be used to determine thevalue of imported goods.

(c) Where no sale referred to in clause (b) of sub-rule (1), isfound, the transaction value of identical goods sold at a differentcommercial level or in different quantities or both, adjusted totake account of the difference attributable to commercial level orto the quantity or both, shall be used, provided that such adjustmentsshall be made on the basis of demonstrated evidence which clearlyestablishes the reasonableness and accuracy of the adjustments,whether such adjustment leads to an increase or decrease in thevalue.

(2) Where the costs and charges referred to in sub-rule (2) ofrule 10 of these rules are included in the transaction value ofidentical goods, an adjustment shall be made, if there are significantdifferences in such costs and charges between the goods beingvalued and the identical goods in question arising from differencesin distances and means of transport.

(3) In applying this rule, if more than one transaction value ofidentical goods is found, the lowest such value shall be used todetermine the value of imported goods.

5. Transaction value of similar goods.-

(1) Subject to the provisions of rule 3, the value of imported goodsshall be the transaction value of similar goods sold for export toIndia and imported at or about the same time as the goods beingvalued:

Provided that such transaction value shall not be the value of thegoods provisionally assessed under section 18 of the CustomsAct, 1962.

(2) The provisions of clauses (b) and (c) of sub-rule (1), sub-rule(2) and sub-rule (3), of rule 4 shall, mutatis mutandis, also applyin respect of similar goods.”

AB

C

D

E

F

G

H

A

A45. A perusal of these Rules would show that the value of importedgoods shall be the transaction value of identical goods, as defined, orsimilar goods, as defined – whichever rule applies to the facts of eachparticular case. It is clear that whether identical goods or similar goodsare taken into account, the price of the container never enters, as theonly “goods” that are to be looked at are the goods that are “imported”,Bi.e. goods that are stuffed in the containers. Likewise, when it comes to“computed value”, Rule 8 states as follows:

“8. Computed value.- Subject to the provisions of rule 3, thevalue of imported goods shall be based on a computed value, whichshall consist of the sum of:- C

(a) the cost or value of materials and fabrication or other processingemployed in producing the imported goods; (b) an amount for profit and general expenses equal to that usuallyreflected in sales of goods of the same class or kind as the goodsDbeing valued which are made by producers in the country ofexportation for export to India;

(c) the cost or value of all other expenses under sub-rule (2) ofrule 10.”

46. Rule 10, which deals with “costs and services” then states:E“10. Costs and services.-

(1) In determining the transaction value, there shall be added tothe price actually paid or payable for the imported goods, - (a) the following to the extent they are incurred by the buyer butFare not included in the price actually paid or payable for the importedgoods, namely:- xxx xxxxxx

(ii) the cost of containers which are treated as being one forcustoms purposes with the goods in question;”

G

47. A reading of Rule 10(1)(a)(ii) would lead to the same result,as “imported goods” are differentiated from “containers”. Further, forthe purposes of customs valuation, addition to the transaction value ofthe imported goods is made only when the cost of containers is treatedas being one with the goods in question. Even in such a situation, what isH

then imported is the “goods” andthe container – the container not havingto be destuffed, and therefore being cleared along with the goodscontained therein for home consumption. In such a case, wherecontainers do not have to be returned, but are imported along with thegoods contained within it, after the Board takes custody of such containerand the goods within it, the vessel or steamer agent is no longer liable –even containers that do not need to be destuffed will then incur demurragealong with the goods contained within it, which are then payable by theimporter, owner, consignor or agent thereof.

48. Further, to make matters clear beyond doubt, GeneralExemption No. 170, which speaks of ‘Exemption to containers of durablenature’[3], states as follows:

“In exercise of the powers conferred by sub-section (1) of Section25 of the Customs Act, 1962 (52 of 1962), the Central Government,being satisfied that it is necessary in the public interest so to do,hereby exempts containers which are of durable nature, fallingwithin the First Schedule to the Customs Tariff Act, 1975 (51 of1975), when imported into India, from, - (a) the whole of the duty of customs leviable thereon under thesaid First Schedule; and (b) the whole of the integrated tax leviable thereon under sub-section (7) of section 3 of the said Customs Tariff Act:

Provided that the importer, by execution of a bond in such formand for such sum as may be specified by the AssistantCommissioner of Customs or Dy. Commissioner of Customs bindshimself to re-export the said containers within six months fromthe date of their importation and to furnish documentary evidencethereof of the satisfaction of the said Assistant Commissionerand to pay the duty leviable thereon in the event of the importer’sfailure to do so:

Provided further that in any particular case, the aforesaid periodof six months may, on sufficient cause being shown, be extendedby the said Assistant Commissioner for such further period, as hemay deem fit.”

3 Notification No. 104/94 dated 16.03.1994 as amended by Notification No. 101/95and 43/17.

A

B

C

D

EF

G

H

AA clarification by the Central Board of Indirect Taxes and Customsdated 25[th] October, 2002[4], clarified as to what is meant by “containersof durable nature” as follows:

“Notification No.104/94-Cus., exempts containers which are ofdurable nature from the whole of the duty of customs and additionalBduty subject to the condition that such containers are re-exportedwithin 6 months from the date of importation and documentaryevidence is furnished to the satisfaction of the AssistantCommissioner. As per the meanings assigned to the words“durable” and “container” in various Dictionaries, it would appearthat any goods (containers) used for packaging or transportingCother goods, and capable of being used several times, would fall in the category of “containers of durable nature”.

A reading of the aforesaid also goes to buttress the conclusionreached in the previous paragraph of this judgment.D49. The Customs Tariff Act, 1975 also throws considerable lighton containers fit for repetitive use. Section 2 of the said Act states asfollows:

“2. Duties specified in the Schedules to be levied.—Therates at which duties of customs shall be levied under the CustomsEAct, 1962 (52 of 1962), are specified in the First and SecondSchedules.”50. The First Schedule deals with general rules for interpretationof “this Schedule”, and states:

“5. In addition to the foregoing provisions, the following rules shallFapply in respect of the goods referred to therein:

(a) camera cases, musical instrument cases, gun cases, drawinginstrument cases, necklace cases and similar containers, speciallyshaped or fitted to contain a specific article or set of articles,suitable for long-term use and presented with the articles for whichGthey are intended, shall be classified with such articles when of akind normally sold therewith. This rule does not, however, applyto containers which give the whole its essential character; H4 Circular No.69/2002-Customs.

(b) subject to the provisions of (a) above, packing materials andpacking containers presented with the goods therein shall beclassified with the goods if they are of a kind normally used forpacking such goods. However, this provision does not apply whensuch packing materials or packing containers are clearly suitablefor repetitive use.”

51. This paragraph again clearly differentiates between containerswhich go along with the goods contained therein “suitable for long-termuse”, from containers “suitable for repetitive use”, thus making it clearthat the containers of the latter type cannot be classified with the goodscontained therein for payment of customs duty.

52. At this juncture, it is important to examine the judgments ofthis Court. In Rowther-I (supra), the question before fivehonourableJudges of this Court arose out of the enforcement of the Scale ‘E’ ratethat was added to the Madras Port Trust Scale of Rates in 1958. Thequestion arose under the pari materia provisions of the Madras PortTrust Act, 1905 (“Madras Act”), which has since been repealed by theMPT Act by section 133(2C) thereof. The respondents in this case weresteamer agents. Scale ‘E’ laid down charges to be paid by Masters,Owners or Agents of vessels in respect of Port Trust labour requisitionedand supplied, but not fully or properly utilised, for unloading goods fromthe vessel. These rates are set out at pages 923 and 924 of the SupremeCourt Report, and indicate that a certain amount has to be paid to labourwhich is rendered idle either on account of the vessel’s fault, or on accountof force majeure conditions such as rain. This is further fleshed out bya Circular dated 25.02.1958, referred to at pages 925 and 926. Aftersetting out the relevant sections of the Madras Act, the by-laws, and theManual of Instructions framed and issued by the Board, the firstproposition of law laid down in the said judgment is that it is not obligatoryon behalf of the Board to undertake the various services mentioned insection 39 of the Madras Act (which is pari materia with section 42 ofthe MPT Act). It is only if such services are required by the “owner” asdefined that such services are undertaken by the Board. It was thenheld that it was the steamer agent who was in a position to require theBoard to undertake such services in respect of the cargo that the ship isto unload (see pages 935 to 936).The question for determination wasthen set out as follows:

A

B

C

E

F

G

H

A“The question for determination, in the case, then is whether thelaw making the steamer-agent liable to pay these charges is goodlaw.”[5]

53. “These charges”, as has been stated earlier, were on accountof payment of labour dues for labour remaining idle, such labour being ofBthe Port Trust which was used in the unloading of goods from the vessel.It was then mentioned that these charges were for the benefit of thevessel so that it completes its task of landing the goods as soon aspossible.It was also pointed out that the steamer agent, and not theconsignee, was liable to pay these charges as the goods are not unloaded“consignee-wise” (see page 938-939). It was then laid down that theCship-owner is the bailee of the consignor, and that he is responsible fordelivery of goods to the consignee or transferee according to the termsof the bill of lading. However, the Court held that delivery of goods bythe ship-owner to the Board cannot be said to be delivery to the consignee,as the Board cannot be said to be an agent of the consignee for theDpurpose of taking delivery of goods (see page 939). Also, the Courtobserved that the provision of lien which the Board can exercise on thegoods for non-payment of dues of the Board makes it clear that it doesnot act as an agent of the consignee (see page 947). The Court also heldthat when section 39(3) of the Madras Act speaks of taking of charge ofthe goods by the Board and giving a receipt to a ship-owner, and theEmaster or owner of the vessel being absolved from liability for any lossor damage which may occur to the goods which had been landed, alsodoes not lead to the conclusion that the Board takes delivery of thosegoods on behalf of the consignee. The Court then held:

“It is clear therefore that when the Board takes charge of theFgoods from the ship-owner, the ship-owner is the bailor and theBoard is the bailee, and the Board’s responsibility for the goodsthereafter is that of a bailee. The Board does not get the goodsfrom the consignee. It cannot be the bailee of the consignee. Itcan be the agent of the consignee only if so appointed, which isGnot alleged to be the case, and even if the Board be an agent, thenits liability would be as an agent and not as a bailee. The provisionsof ss.39 and 40, therefore, further support the contention that theBoard takes charge of the goods on behalf of the ship-owner andnot on behalf of the consignee, and whatever services it performs at the time of the landing of the goods or on their removal thereafter,are services rendered to the ship.”[6]

54. This passage clearly states that since the Board does not getthe goods directly from the consignee, but only from the ship-owners, itcannot possibly be said to be the bailee of the consignee.The observationthat whatever services the Board performs at the time of landing of thegoods, or “on their removal thereafter” are services rendered to theship, must be understood in the context of the facts of that case. Aperusal of the Board’s counter affidavit, which is reflected at page no.921,would show that the Harbour dues on the import of cargo speaks, interalia, of charges involved in moving the goods from the landing point tothe storage point.The expression “on their removal thereafter”, on thefacts of this case, would therefore only mean services performed by theBoard from landing point to storage point, and not thereafter. This is infact made even clearer by the following passage in the said judgment:

“The charges for labour rendered idle and for labour workingmore hooks simultaneously, are not charges for services renderedsubsequent to the landing of the goods. These are charges whichare incurred at the last stage of the process of landing of thegoods and therefore prior to the actual landing of the goods. Theyare, even under the general law, for services rendered to themaster of the ship whose liability for loss or of damage to thegoods continues up to the placing of the goods on the quay andtheir receipt by the Board.”[7]

55. While dealing with the case of Peterson v. Freebody &Co. [1895] 2 Q.B.D. 294, which related to a suit between the ship-owner and the consignee, the observations of Lord Esher that the ship-owner must do something more than merely put his goods over the railof his ship, namely, that he must put the goods in such position that theconsignee can take delivery of them, were limited only to goods whichare to be delivered to the consignee alongside the ship, and not whenthey are handed over to a statutory body like theBoard, as a sub-bailee.The delivery therefore contemplated by these observations was held tobe not equivalent to landing of the goods at the quay and placing them incharge of the Board. The observations as to the Board being a sub- 6 Page 940.

7 Page 942.

A

B

C

D

E

F

G

Abailee were therefore made to counter an argument based on an Englishjudgment, that delivery of the goods to the Board amounts to delivery tothe consignee, which would therefore make the consignee liable to paythe aforesaid unloading charges.

56. The second judgment with which we are concerned isBRowther-II (supra). The question that arose before a three-Judge Benchof this Court was whether demurrage charges payable to the Port Trustof Madras were to be recovered from the consignee of the goods, orfrom the steamer agent. The judgment of this Court, in essence, extractedthe judgment of the High Court that was impugned therein, and thenagreed with the same. The High Court had held:C

“It cannot be disputed that neither the shipowner or the steameragent whose duty it is to deliver the cargo to the consignee as perthe contract with the shipper, cannot lay any claim of ownershipto the goods. The obligation to deliver the goods to the consigneehas been taken over by the Port Trust under the provisions of theDstatute and the shipowner is relieved of the liability for loss ordamage to the goods from the moment the goods are taken chargeof by the Port Trust as per Section 39 of the Act. Once the goodsare handed over to the Port Trust by the steamer and the steameragents have duly endorsed the bill of lading or issued the deliveryEorder, their obligation to deliver the goods personally to the owneror the endorsee comes to an end. The subsequent detention ofthe goods by the Port Trust as a result of the intervention by theCustoms authorities cannot be said to be on behalf of or for thebenefit of the steamer agents. Generally, if there is a delay intaking delivery of the goods by the consignee within a reasonableFtime, the steamer or its agent can warehouse the goods. In suchan event the warehouseman has an independent claim against theconsignee or endorsee for the demurrage charges. The positioncannot be different merely because the Customs authorities haveintervened. The position of the Port Trust is the same as that of aGwarehouseman whose responsibility to the goods is also said tobe a bailee. It cannot be said that the steamer or its agents haveundertaken any responsibility for the custody of the goods afterthe transit has come to an end and after the bill of lading has beenduly endorsed or a delivery order issued. By the endorsement ofthe bill of lading or the issue of a delivery order by the steamer H

H

agents, the property in the goods vests on such consignee orendorsee, and thus it appears to be clear that the steamer or thesteamer agents are not responsible for the custody of the goodsafter the property in the goods passes to the consignee or endorseetill the Customs authorities actually give a clearance. It shouldalso be remembered that the steamer which had entered into acontract of carriage of goods for a reward cannot be said to haveundertaken the responsibility of safeguarding the goods or keepingthem at their risk till the goods are actually cleared from theCustoms and taken delivery of by the consignee. That will beimposing a too onerous and unexpected responsibility on thesteamer which is only a carrier. If they are submitted to such aresponsibility, in most cases where the goods are detained withoutdelivery in the hands of the Port Trust at the instance of the Customsthe steamer or steamer agents have to pay towards a storage ordemurrage charges amounts quite disproportionate to the freightthey collect for the carriage of the goods. No carrier will undertakesuch a risk and responsibility. We are of the view that the provisionsof the Port Trust Act cannot be so construed as imposing anadditional liability or obligation on the carrier which was notcontemplated by the contract it had entered with the shipper. It isonly the customs of or the statutory provisions applicable to theport of discharge that can be taken to be an implied condition ofthe contract between the shipper and the shipowner. Therefore,the provisions of the Port Trust Act cannot add to the liability ofthe steamer or its agents which was not contemplated by theshipper or the shipowner at the time of entering into the contract.Having regard to the functions and the obligations which a steamerhas undertaken with the shipper under the contract, we cannotsay that the steamer has undertaken the responsibility for the safetyof the goods till the goods are cleared by the Customs and takendelivery of by the consignee. As earlier referred to, the duty ofthe steamer is normally to deliver the goods to the consignee onthe quay side but that place of delivery has been shifted by theprovisions of the Port Trust Act to the warehouse where the PortTrust had stored the goods.”[8]

ABC

DEF

G

A57. The High Court then distinguished Rowther-I (supra) asfollows:

“But as already stated, the charges in that case related to theservices rendered by the Port Trust at the time of the landing ofthe goods and their removal thereafter to its custody, and thoseBcharges were taken to be for the benefit of the steamer. It is forthis reason that the Court took the view that the Port Trust isentitled to collect the service charges from the steamer or itsagent. We are, however, satisfied that the above decision cannotbe taken to lay down that the Port Trust can at no time proceedagainst the consignee for demurrage charges and can only look toCthe steamer agent. We are, here, concerned with the demurragecharges after the goods have been landed and taken charge of bythe Board and after the steamer agent had endorsed the bill oflading or issued a delivery order for effecting delivery to theconsignee that is after the property in the goods had passed toDhim. As already stated, the goods have remained in the custody ofthe Port Trust on the default of the consignee to satisfy the Customsauthorities that the import was authorised. “Even though theconsignee is not a party to the contract of carriage once theproperty in the goods had passed to him, he becomes liable to paythe storage or demurrage charges as owner of the goods to theEshipowner.”[9]

58. Rowther-II (supra) has made it clear that Rowther-I (supra)concerned itself with Port Trust dues at the time of landing of the goods,and their removal thereafterto custody of the Port Trust. These werecharges wholly distinct from demurrage charges, which are incurredFonly after the goods have been landed and have been taken charge of bythe Board. To the extent that the High Court lays this down as a propositionof law, there can be no exception. However,it goes on to state that whenthe steamer agent endorses the bill of lading or issues a delivery orderfor effecting delivery to the consignee, it is at this stage that the propertyGin the goods passes to the consignee. This part of Rowther-II (supra) isclearly contrary to Rowther-I (supra), which had stated:

“In the present case, it was further contended that as betweenthe master of the ship and the consignee, the Act made it obligatory that the consignee gets his goods from the Board and not directfrom the master of the ship, and that therefore the Board acts asthe agent of the consignee. We have not been referred to anyprovision in the Act which supports this contention. Assuming,however, that the consignee cannot take delivery of the goods atthe quay from the ship direct, it does not follow that the Boardreceives the goods as the agent of the consignee. The onlyreasonable conclusion in the circumstances can be that the placeof delivery is shifted from the side of the ship to the warehouseswhere the Board stores the goods till the consignee appears totake delivery on the basis of the delivery order by the steameragent which is usually an endorsement on the bill of lading, andthe quay be considered a part of the ship.”[10]

59. Rowther-I (supra) clearly lays down that the endorsement ofthe bill of lading by a steamer agent is for the purpose of delivery of thegoods, and, accordingly, cannot be for the transfer of title to the goods.Rowther-II (supra) cannot, therefore, be said to be good in law when itspeaks of endorsement on the bill of lading and issuance of deliveryorder by the steamer agent passing title of the goods to the consignee.Once this is made clear, the ratio of Rowther-II (supra) is to beunderstood thus: since charges for storage or demurrage are after goodsare removed and placed in the custody of the Board, the steamer agentcannot be made to pay the same, as it would impose “a too onerous andunexpected responsibility on the steamer”, which is only a carrier, andnot owner, of the goods.

60. At this juncture, it is important to understand the legal effectof a bill of lading. This has been set out by a five Judge Bench of thisCourt in J.V. Gokal and Co. (Pvt.) Ltd. v. Asst. Collector of Sales-Tax (Inspection) and Ors. (1960) 2 SCR 852, as follows:

“A bill of lading is “a writing, signed on behalf of the owner of theship in which goods are embarked, acknowledging the receipt ofthe goods, and undertaking to deliver them at the end of the voyagesubject to such conditions as may be mentioned in the bill of lading”.It is well-settled in commercial world that a bill of lading representsthe goods and the transfer of it operates as a transfer of the goods.The legal effect of the transfer of a bill of lading has been A

B

D

E

G

H

Aenunciated by Bowen, L.J., in Sanders Brothers v. Maclean &Co. [(1883) II QBD 327] thus at p. 341:

“The law as to the indorsement of bills of lading is as clear as inmy opinion the practice of all European merchants is thoroughlyunderstood. A cargo at sea while in the hands of the carrier isBnecessarily incapable of physical delivery. During this period oftransit and voyage, the bill of lading by the law merchant isuniversally recognised as its symbol, and the indorsement anddelivery of the bill of lading operates as a symbolical delivery ofcargo. Property in the goods passes by such indorsement anddelivery of the bill of lading, whenever it is the intention of theCparties that the property should pass just as under similarcircumstances the property would pass by an actual delivery ofthe goods. And for the purpose of passing such property in thegoods and completing the title of the indorsee to full possessionthereof, the bill of lading, until complete delivery of the cargo hasDbeen made on shore to someone rightfully claiming under it, remainsin force as a symbol, and carries with it not only the full ownershipof the goods, but also all rights created by the contract of carriagebetween the shipper and the shipowner. It is a key which in thehands of a rightful owner is intended to unlock the door of thewarehouse, floating or fixed, in which the goods may chance toEbe.”[11]61. Section 1 of the IndianBills of Lading Act, 1856 is alsoimportant, which states:

“Rights under bills of lading to vest in consignee orFendorsee.—Every consignee of goods named in a bill of lading,and every endorsee of a bill of lading to whom the property in thegoods therein mentioned shall pass, upon or by reason of suchconsignment or endorsement shall have transferred to and vestedin him all rights of suit, and be subject to the same liabilities inrespect of such goods as if the contract contained in the bill ofGlading had been made with himself.”

62. Under this section, the “endorsement” referred to is theendorsement made by the consignor or owner of the goods in favour ofsuch endorsee on the bill of lading, so that title to property is then H11 Page 861-862.

transferred to the endorsee. This endorsement is very far removed, ashas been correctly stated in Rowther-I (supra), from the endorsementon the bill of lading by a steamer agent indicating that the goods havebeen delivered. Therefore, shorn of the confusion that has arisen as aresult of mixing-up the two types of endorsement, the ratio of Rowther-II (supra) that, after goods are taken charge of by the Port Trust andstored in its premises incurring demurrage charges thereon, the vesselor its agent cannot be made responsible, is unexceptionable.

63. After extracting passages of the judgment of the High Court,this Court in Rowther-II (supra) then went on to extract a passagefrom International Airport Authority of India v. Grand SlamInternational (1995) 3 SCC 151, by which it was made clear thatdemurrage charges are to be paid by the importer or consignee liable forthe same (and not the vessel or the steamer agent thereof).

64. Sriyanesh Knitters (supra) is the next judgment that has tobe dealt with in chronological sequence. This was a judgment of twolearned judges of this Court, in which the question that arose before theCourt was stated thus:

“1.The common question involved in these appeals is whether theappellant Board of Trustees of the Port Trust constituted underthe Major Port Trusts Act, 1963 (for short “the MPT Act”) havea general lien for their dues over the present or future consignmentsimported by the importers at the Bombay Port when the said duesare in respect of the past imports made by the said importers.”

65. The Court first found that a reading of sections 59 and 61(1)of the MPT Actmade it clear that the lien spoken of is a lien qua theparticular goods that are imported, and cannot extend to previous importsof similar goods made by the same party. The Court then went on tohold that the MPT Act is not a comprehensive code, and has to be readtogether with other Acts wherever the MPT Act is silent. It was thenheld that section 171 of the Indian Contract Act, 1872 speaks of a generallien which may be exercised by the Port Trust as it is a “wharfinger”within the meaning of said section.This being so, the Port Trust maycontinue to retain the goods bailed as security for past dues, but wouldhave to have recourse to proceedings in accordance with law for securingan order, which would then enable the Port Trust to sell the goods torealise the amounts due to it. This could be done by filing a suit forrecovery of the amount due to it under section 131 of the MPT Act.

A

B

C

D

E

F

G

H

A66. However, the judgment goes on to make certain observations,in particular in paragraph 23, stating that a relationship of bailor andbailee comes into existence, when the Board is required to store goodsthat have been imported, between the Board and the consignee of thosegoods. Apart from the fact that this is directly contrary to Rowther-I(see page 940), the consignee cannot be considered to be a bailor if theBdefinition of bailor under the Indian Contract Act, 1872 is read. Undersection 148 of the Contract Act, a bailor is defined as a person whodelivers the goods to the bailee.In this case, the person who delivers thegoods to the bailee is the vessel and not the consignee, as has beencorrectly stated in Rowther-I (supra).Therefore, the observations thatCthe consignee is the bailor of the goods, with the Port Trust being thebailee thereof, made in paragraphs 23 and 25 of Sriyanesh Knitters(supra) cannot be said to state the law correctly, and are accordinglyoverruled. However, since we are not going into the point of sub-bailmentas argued by Shri Pratap, we leave open the question as to whether thePort Trust, as sub-bailee, is entitled to recover its dues from the originalDbailor– the consignor, and persons claiming through it, given the statutoryscheme of the MPT Act.

67. However, Rowther-I (supra) was correctly distinguished bythe Court in Sriyanesh Knitters (supra) in paragraph 24 thereof, andits ratio qua the MPT Act not being an exhaustive code has ourEconcurrence.

68. In Forbes-I (supra), two learned Judges of this Court doubtedthe correctness of Rowther-II (supra) and framed three questions(referred to earlier in this judgment) to be answered by a larger Bench.On 13.08.2014, the larger Bench of three Judges held:F

“We have gone through the order whereby the matter has beenreferred to this Bench. We have noted the fact that no reason fornot agreeing with the Judgment delivered by a three-Judge Benchhas been assigned in the said order. Moreover, upon going throughthe Judgment delivered in 1997 (10) SCC 285, we see no reasonGto disagree with the ratio laid down in the said Judgment. In thesecircumstances, we refer the matter back to the regular bench forfurther hearing as we do not see any inconsistency in the saidJudgment.”

69. The matter then came back to a Bench of two Hon’ble JudgesHof this Court, which delivered the judgment in Forbes-II (supra). In THE CHAIRMAN, BOARD OF TRUSTEES, COCHIN PORT TRUST v. M/SAREBEE STAR MARITIME AGENCIES PVT. LTD. [R. F. NARIMAN, J.]

Forbes-II, the Court set out the question of law that arose before it asfollows:

“1…The common question of law that arises in these appeals,though in different facts and circumstances, is with regard to theliability of the agent of a shipowner (hereinafter referred to as the“steamer agent”) to pay demurrage and port charges to the Boardof Trustees of a Port (hereinafter referred to as “the Port TrustAuthority”) in respect of goods brought into the port andwarehoused by the said authority. Before proceeding to answerthe aforesaid question it will be convenient to take note of thecore facts in each of the appeals under consideration.”

70. Agreeing with the High Courts of Bombay and Calcutta thatthe steamer agent cannot be made liable for demurrage, the Court wenton to hold:

“10. While it is correct that the liability to pay demurrage chargesand port rent is statutory, in the absence of any specific bar underthe statute, such liability can reasonably fall on a steamer agent ifon a construction of the provisions of the Act such a conclusioncan be reached. Determination of the aforesaid question reallydoes not hinge on the meaning of the expression “owner” asappearing in Section 2(o) of the 1963 Act, as has been sought tobe urged on behalf of the appellant though going by the languageof Section 2(o) and the other provisions of the Act especiallySection 42, an owner would include a shipowner or his agent.Otherwise it is difficult to reconcile how custody of the goods forthe purpose of rendering services under Section 42 can beentrusted to the Port Trust Authority by the owner as providedtherein under Section 42(2). At that stage the goods may still be inthe custody of the shipowner under a separate bailment with theshipper or the consignor, as may be. Even dehors the abovequestion the liability to pay demurrage charges and port rent wouldaccrue to the account of the steamer agent if a contract of bailmentbetween the steamer agent and the Port Trust Authority can beheld to come into existence under Section 42(2) read with Section43(1)(ii) of the 1963 Act.

11. For the reasons already indicated the decision in SriyaneshKnitters with regard to existence of a relationship of bailor andbailee between the consignee and the Port Trust Authority instead AB

C

DE

F

G

H

A

B

C

D

E

F

G

H

of the steamer agent and the Port Trust Authority cannot beunderstood to be a restatement of a general principle of law but amere conclusion reached in the facts of the case where theconsignee had already appeared in the scene. In all other situationswhere the bill of lading has not been endorsed or delivery ordershave not been issued and therefore the consignee is yet to surface,the following observations of the Constitution Bench in K.P.V.Sheik Mohamed Rowther & Co. [Port of Madras v. K.P.V.Sheik Mohamed Rowther & Co., 1963 Supp (2) SCR 915] willhave to prevail: (SCR p. 940)

“Section 40 speaks of the responsibility of the Board for the loss,destruction or deterioration of the goods of which it has takencharge as a bailee under Sections 151, 152 and 161 of the ContractAct, 1872. Section 148 of the Contract Act states that a bailmentis 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 directionsof the person delivering them. The person delivering the goods iscalled the bailor and the person to whom they are delivered iscalled the bailee. It is clear therefore that when the Board takescharge of the goods from the shipowner, the shipowner is thebailor and the Board is the bailee, and the Board’s responsibilityfor the goods thereafter is that of a bailee. The Board does notget the goods from the consignee. It cannot be the bailee of theconsignee. It can be the agent of the consignee only if so appointed,which is not alleged to be the case, and even if the Board be anagent, then its liability would be as an agent and not as a bailee.The provisions of Sections 39 and 40, therefore, further supportthe contention that the Board takes charge of the goods on behalfof the shipowner and not on behalf of the consignee, and whateverservices it performs at the time of the landing of the goods or ontheir removal thereafter, are services rendered to the ship.”

12. From the above, the position of law which appears to emergeis that once the bill of lading is endorsed or the delivery order isissued it is the consignee or endorsee who would be liable to paythe demurrage charges and other dues of the Port Trust Authority.In all other situations the contract of bailment is one between thesteamer agent (bailor) and the Port Trust Authority (bailee) giving rise to the liability of the steamer agent for such charges till suchtime that the bill of lading is endorsed or delivery order is issuedby the steamer agent.

13. In the orders of the Calcutta High Court under challenge, it ismentioned that Section 60 of the Act provides a remedy to thesteamer agent to recover the dues from the consignee. Section60 of the 1963 Act confers a limited lien on the shipowner “forfreight and other charges payable to the shipowner” whichexpression does not extend to demurrage and other port charges.The High Court, therefore, does not appear to be correct in itsconclusions. However, the said error would not be fundamentalto the final conclusion reached by the High Court. In this regardwe cannot help noticing the special provisions of Sections 61 and62 of the Act which enable the Port Trust Authority to proceedagainst the goods within its custody to recover the charges whichmay be payable to the Port Trust Authority. Ordinarily and in thenormal course if resort is made to the enabling provisions in the1963 Act to proceed against the goods for recovery of the chargespayable to the Port Trust Authority there may not be any occasionfor the said authority to sustain any loss or even suffer any shortfallof the dues payable to it so as to initiate recovery proceedingsagainst the shipowners.”

71. Paragraph 10 of the judgment does hold that the language ofsection 2(o) read with other provisions of the MPT Act, especially section42, would include a ship-owner or his agent. We have already pointedout that the principle of noscitur a sociis cannot be applied to thisdefinition clause, both on its plain language, as also the fact that it is aninclusive definition clause, which shows that this statement of the law iscorrect. However, the statement in this paragraph that even de hors theabove question, the liability to pay demurrage charges and port rent wouldaccrue to the account of the steamer agent because of the statutorybailment that comes into existence under section 42(2) read with section43(1)(ii), is plainly incorrect, in view of our finding that after the PortTrust takes charge of the goods and issues a receipt therefor (at whichpoint of time the statutory bailment comes into force), the vessel or thesteamer agent cannot be held liable.

72. Insofar as paragraph 11 is concerned, we have already madeit clear that Sriyanesh Knitters (supra) cannot be said to reflect the A

B

C

D

E

F

G

H

Acorrect position in law, insofar as a bailment between the consignee andthe Port Trust is concerned, and thus Sriyanesh Knitters (supra) hasbeen overruled by us to this extent.

73. Paragraph 12 of the said judgment contains the same confusionthat is contained in Rowther-II (supra), and cannot therefore be said toBlay down the law correctly. The correct position in law is, as has beenstated hereinabove, that after the Port Trust takes charge of the goods,and issues a receipt therefor, and thereafter stores the goods in a placebelonging to it, such storage charge cannot be to the account of thevessel or an agent of the vessel.C74. Paragraph 13 refers to one other aspect of the case that hasbeen argued before us. It may be recalled that the impugned judgmentof the Kerala High Court in the present case had held that the word“may” occurring in sections 61 and 62 of the MPT Act must be read as“shall”. This is not the correct position in law, as a discretion is vested inthe Board to sell the goods in the circumstances mentioned in sectionsD61 and 62. However, such discretion cannot be exercised arbitrarily, asthe Board is “State” within the meaning of Article 12 of the Constitution,and is therefore bound by the constraints of Article 14 of the Constitutionof India (see Dwarkadas Marfatia and Sons v. Board of Trusteesof the Port of Bombay (1989) 3 SCC 293 at paragraph 22). ThereforeEwhile it may not be correct to say that “may” has to be read as “shall” insections 61 and 62 of the MPT Act, yet in all future cases the Board isunder a constitutional duty to sell the goods in its custody within areasonable time from which it takes custody of those goods. Ordinarily,the time of four months from the date of landing of the goods mentionedin section 63(1)(c) of the MPT Act should be the outer-limit within whichFsuch goods should be put up for sale. If not put up for sale within suchtime, the Board must explain as to why, in its opinion, this could not bedone, which explanation can then be tested by the Courts. If theexplanation is found to be reasonable, and the owner or person entitledto the goods does not remove the goods thereafter, penal demurrageGmay then be levied and collected by the Board. To this extent, therefore,while overruling the impugned judgment of the Kerala High Court on theaspect of “may” being read as “shall” in sections 61 and 62 of the MPTAct, yet the hovering omnipresence of Article 14 over the Board mustalways be given effect to, and there must be a very good reason tocontinue detention of goods beyond the period of four months as mentionedHhereinabove before they are sold.

75. We now come to a judgment of two honourableJudges of thisCourt in Rasiklal (supra). The question that arose in this case was as towhether the Appellant ‘Rasiklal Kantilal and Company’, who was aperson interested in purchasing goods, and did not at the time have titleto the goods, would be liable to pay demurrage charges for a period ofroughly six months, which began with the date on which he applied tothe customs authorities to have bills of entries substituted in his name.On the facts in that case, during the period from November, 1991 toJanuary, 1992, 78 shipments of goods were imported by 5 differentconsignees from a UK company, one M/s Metal Distributors (UK)Ltd;these consignments were landed at Bombay Port. The consigneesfiled bills of entry for 37 out of 78 consignments, but subsequently failedto lift the consignments, as a result of which they came to be stored atthe Port of Bombay. The consignments were shipped on a “CAD basis”,i.e. cash against documents, in which title would remain with the UKcompany till such time that an importer would retire the documentsagainst payment.

76. This Court held that despite Rasiklal not being an owner ofthe goods, he was liable to pay demurrage for the aforesaid period.Strictlyspeaking, this judgment does not apply to the facts of the cases beforeus, in that Rasiklal was neither the owner of a vessel or its agent. It wasan importer of goods who had beneficial title to the said goods, as aformal agreement between the UK company and Rasiklal to purchasethe said goods was made in April, 1992. Given our reading of the MPTAct, and section 63(2) in particular, this judgment could have beensupported on the basis that Rasiklal was an importer (within the meaningof section 63(2))of the goods, and as beneficial owner of the goodswould therefore be liable to pay storage charges of the aforesaid goods.However, this Court did not choose this route in order to arrive at itsconclusion. On the other hand, it went on to consider Rowther-I (supra),Rowther-II (supra), and Forbes-II (supra), and arrived at the followingconclusion in paragraph 47:

“47. With respect, we agree with the conclusions recorded bythis Court in Rowther-2 and Forbes that a Board could recoverthe rates due, either from the steamer agent or the consignee butwe are of the humble opinion that enquiry into the question as towhen the property in the goods passes to the consignee is notrelevant.”

A

B

C

D

E

F

G

H

A77. The Court then went on to examine various provisions withregard to bailment, and stated that passing of title in goods is irrelevantconceptually to bailment, which concerns itself with delivery and nottitle of goods. It then framed the question in paragraph 51, thus:

“The only question is: from whom can the board recover – weBemphasise the question is not who is liable.”

78. From paragraphs 52 to 60, the Court then went on to considerthe observations made in Rowther-I (supra) that the first respondent,i.e. the Port Trust, is a sub-bailee of the goods bailed by the consignor tothe ship-owner.This being so, it is the consignor to whom the Port TrustChas to look for payment of these charges, and since in this case Rasiklalis a consignee claiming through the consignor, Rasiklal would be liable.Section 158 of the Indian Contract Act, 1872 and section 1 of theIndianBills of Lading Act, 1856 were relied upon to reach this conclusion.

79. First and foremost, Rowther-I (supra) did hold that the PortDTrust is a sub-bailee of goods bailed by the consignor to the ship-owner,but so held in order to distinguish an English judgment – as has beenpointed out hereinabove – which would then lead to the proposition thatonce the goods are placed in the charge of the Board, it would amount todelivery to the consignee, which proposition was turned down by theCourt. The question whether section 158 of the Contract Act can applyEto a statutory bailment under the MPT Act is left open,given that thePort Trust is not limited only to recovering”necessary expenses” to bepayable by the bailor, but is statutorily is entitled to recover, by way oflevy of rates and expenses incurred for storage of the goods, togetherwith something more – the something more being rates of storage higherFthan warehousing rates as a deterrent against keeping these goods inthe Port Trust premises. This Court in Board of Trustees of the Portof Bombay v. Jai Hind Oil Mills Co. and Ors.(1987) 1 SCC 648 hasobserved:

“10. The power of a Port Trust to fix rates of demurrage and toGrecover the same from an importer or exporter (although thequestion of an exporter paying demurrage arises rarely) underlaw and to show concession as regards demurrage charges incertain specified cases is recognised by this Court in the Trusteesof the Port of Madras v. Aminchand Pyarelal [(1976) 3 SCC167] and in the Board of Trustees of the Port of BombayHv. Indian Goods Supplying Co. [(1977) 2 SCC 649]. These decisions are no doubt based on the relevant laws which were inforce at the material time. But the decisions are still relevant insofaras cases arising under the Act because the Act also containsprovisions more or less similar to the statutory provisions consideredin the said decisions. Demurrage charges are levied in order toensure quick clearance of the cargo from the harbour. They arealways fixed in such a way that they would make it unprofitablefor importers to use the port premises as a warehouse. It isnecessary to do so because congestion in the ports affects thefree movement of ships and the loading and unloading operations.As stated earlier, the Port Trust shows concession to the partyconcerned in certain types of cases.”

80. As a matter of fact, the Division Bench in Rasiklal (supra)seems to have put the cart before the horse, on a ground based in equity.The Court stated:

“60…Denying such a right on the ground that the person claimingdelivery of the goods acquired title to the goods only towards theend of the period of the bailment of the goods with the firstrespondent would result in driving the first respondent to recoverthe amount due to it from the bailor or his agent who may or maynot be within the jurisdiction of the municipal courts of this country(by resorting to a cumbersome procedure of litigation). The firstsubmission is, therefore, rejected.”

81. As has been pointed out by us, no such right has been deniedon a correct reading of the MPTAct. The importer, the consignee andthe consignor, or their agents, can all be held liable to pay demurragecharges. However, since Rasiklal (supra) does not involve either theowner of the vessel or its agent, we leave open the question as to whetherthe Port Trust, as sub-bailee, is entitled to recover its dues from theoriginal bailor– the consignor, and persons claiming through it, given thestatutory scheme of the MPT Act, as has already been indicated inparagraph 66 above.

82. Based on the above discussion, our answers to the questionsframed in the reference order areas follows:

1. The point of time at which title to the goods passes to theconsignee is not relevant to determine the liability of the consignee orsteamer agent in respect of charges to be paid to the Port Trust; AB

C

DE

F

G

H

A

A2. and 3.The bill of lading being endorsed by the steamer agentis different from the bill of lading being endorsed by the owner of thegoods.In the first case, the endorsement leads to delivery; in the secondcase, the endorsement leads to passing of title. For the reasons mentionedin the judgment, both stages are irrelevant in determining who is to paystorage charges – we have held that upto the point that the Port TrustBtakes charge of the goods, and gives receipt therefor, the steamer agentmay be held liable for Port Trust dues in connection with services renderedqua unloading of goods, but that thereafter, the importer,owner, consigneeor their agent is liable to pay demurrage charges for storage of goods;4.As per paragraph 24 of our judgment;C

5. The answer to question number 5 is really in two parts:first, asto whether carrying goods in a container would make any difference tothe position that only the owner of the goods or person entitled to thegoods is liable to pay for demurrage; and second, as to whether the PortTrust is obliged to destuff containers that are entrusted to it and returnDempty containers to the shipping agent.The answer to the first questionis contained in paragraphs 45 to 51 of our judgment. The answer to thesecond question is that a container which has to be returned is only areceptacle by which goods that are imported into India aretransported.Considering that the container may belong either to theEconsignor, shipping agent, ship-owner, or to some person who has leasedout the same, it would be the duty of the Port Trust to destuff everycontainer that is entrusted to it, and return destuffed containers toanysuch person within as short a period as is feasible in cases where theowner/person entitled to the goods does not come forward to take deliveryof the goods and destuff such containers.What should be this period is toFbe determined on the facts of each case, given the activities of the port,the number of vessels which berth at it, together with the volume ofgoods that are imported. While it does not lie in the mouth of the PortTrust to state that it has no place in which to keep goods after they aredestuffed – as in the facts in the present case – yet a court may, in theGfacts of an individual case, look into practical difficulties faced by thePort Trust.This may lead to the “short period” in the facts of a particularcase being slightly longerthan in a case where a port is less frequented,and goods that are stored are lesser in number, given the amount ofspace in which the goods can be stored.

H

83. Having answered the questions that have been posed beforethis Court, we do not, on the facts of this case, think that the justice ofthe case demands that we should interfere with the impugnedHigh Courtjudgment. The steamer agents themselves did not dispute liability to payground rent upto 75 days before the High Court, and have admittedlypaid the said charges long ago. As a matter of fact, the steamer agentspaidground rent even beyond the period of 75 days – the High Courthaving ordered the Appellant Port Trust to recompute the liability of thesteamer agents, and return the balance to the parties concerned withintwo months from the date of receipt of a copy of the impugned judgment.To order a refund of ground rent paid for 75 days to the steamer agent,and direct the Board to then recover the same from the importer, consignorand/or the owner of the goods at this late stage of the proceedings wouldnot be in the interest of justice.

84. Accordingly, we dispose of the appeals that have been filedagainst the impugned High Court judgment. The impugned judgment isset aside on one question of law, namely, that the expression “may” insections 61 and 62 of the MPT Act cannot be read as “shall”, subject tothe caveat that as the ‘‘State” under Article 12 of the Constitution, aPort Trust must act reasonably, and attempt to sell the goods within areasonable period from the date on which it has assumed custody ofthem.

Divya Pandey

Reference answered.

A

B

C

DE

F

G

H