Liability for Port Charges on Uncleared Goods: Supreme Court refers the matter to a Larger Bench: Cochin Port Trust vs. Arebee Star Maritime Agencies Pvt. Ltd. (2018)

Introduction

Date of the Judgment: 7 March 2018

Citation: (2018) INSC 190

Judges: R.K. Agrawal, J, Dr. D.Y. Chandrachud, J.

Who is responsible for paying ground rent when goods remain uncleared at a port? The Supreme Court of India grapples with this question, specifically concerning containers unloaded at Cochin Port. The core issue revolves around whether the liability for these charges falls on the shipping agents or the consignees when goods are not cleared promptly. This judgment discusses the conflicting interpretations of the Major Port Trusts Act, 1963, and related case laws. The two-judge bench, noting the inconsistencies in previous rulings, has referred the matter to a larger bench for a conclusive decision.

Case Background

In 1998, synthetic woollen rags were imported in containers at Cochin Port. These containers were destuffed for customs examination to facilitate the return of empty containers to the Steamer Agents. However, the destuffed cargo occupied a larger space and was not promptly cleared by the consignees. Customs officials raised concerns that the cargo was not old woollen rags as declared, but mostly new clothes. Due to the potential liabilities, the consignees did not clear the goods, leaving them idle in the port premises for an extended period.

The Cochin Port Trust began charging ‘ground rent’ from the Steamer Agents/owners of the containers for the uncleared goods. This led to the dispute over who should bear the financial responsibility for the storage of these uncleared goods. The shipping agents contested these charges, arguing they were not liable for the consignees’ failure to clear the goods.

Timeline:

Legal Framework

The case is primarily governed by the Major Port Trusts Act, 1963 (MPT Act). Key provisions include:

• Section 3: Authorizes the Central Government to constitute a Board of Trustees for major ports.
• Section 5: States that every Board is a body corporate.
• Section 35: Empowers the Board to execute works and provide necessary appliances for the port.
• Section 42: Authorizes the Board to undertake certain services, including taking charge of goods if requested by the owner.
• Section 42(7): States that once goods are taken charge of and a receipt is given, no liability for loss or damage attaches to the person given the receipt or the vessel owner.
• Section 2(o): Defines “owner” in relation to goods to include any consignor, consignee, shipper, or agent for sale, custody, loading, or unloading of such goods.
• Section 43: Places responsibility on the Board for the loss, destruction, or deterioration of goods it has taken charge of.
• Section 47A: Created the Tariff Authority of Major Ports (TAMP), which now has the power to prescribe a scale of rates.
• Section 49(1)(d): Provides the authority to levy rates for the use of the Board’s property.
• Section 59(1): Creates a lien on goods in favor of the Board for services rendered, allowing the Board to seize and detain goods until rates and rents are paid.
• Section 60: Provides for the Ship-owner’s lien for freight and other charges.
• Sections 61 and 62: Detail the process for selling seized/detained goods by public auction.

The MPT Act does not explicitly define ‘ground rent,’ but the authority to levy it stems from Section 49(1)(d). The Act is silent on who is liable to pay these charges. The Tariff Authority of Major Ports (TAMP), established under Section 47A, is responsible for setting the scale of rates for port services.

Arguments

The core of the dispute lies in determining who is liable for the ‘ground rent’ when goods are not cleared by the consignee. The Port Trust argues that the steamer agents, as representatives of the vessel owners, are liable for these charges. The agents, on the other hand, contend that their responsibility ends once the goods are handed over to the Port Trust and a delivery order is issued, shifting the liability to the consignee.

The arguments can be summarized as follows:

• Port Trust’s Arguments:
  • The Port Trust argued that as per Section 2(o) of the MPT Act, the steamer agent can be construed as the owner of the goods.
  • It contended that a contract of bailment comes into existence between the steamer agent and the Port Trust under Section 42(2) read with Section 43(1)(ii) of the MPT Act.
  • The Port Trust argued that the steamer agent remains liable for charges until the bill of lading is endorsed or the delivery order is issued.
  • The Port Trust also argued that they are not obligated to destuff every container and return the empty containers to the shipping agent.
• Steamer Agents’ Arguments:
  • The Steamer Agents argued that their responsibility ends once the goods are handed over to the Port Trust and the delivery order is issued.
  • They contended that the consignee, as the owner of the goods, is liable for the demurrage charges.
  • The Steamer Agents relied on the Bills of Lading Act, arguing that ownership and title to the goods vest with the consignee.
  • They argued that the Port Trust has a duty to act promptly under Sections 61 and 62 of the MPT Act to sell the uncleared goods.

The Steamer Agents argued that the Port Trust’s interpretation of Section 2(o) was incorrect and that the definition of “owner” should not extend to making them liable for the consignee’s failure to clear goods. They also argued that the Port Trust’s lien on the goods under Section 59(1) should be exercised against the consignee, not the steamer agent.

The Port Trust, on the other hand, maintained that the steamer agents are the primary point of contact and should be responsible for all charges until the goods are cleared. They also argued that the Port Trust’s responsibility is limited to taking charge of the goods, and that they are not obligated to destuff all containers.

The arguments revolved around the interpretation of the MPT Act, the nature of the relationship between the Port Trust, the steamer agents, and the consignees, and the extent of each party’s responsibilities.

Issues Framed by the Supreme Court

The Supreme Court identified the following issues for resolution by a larger bench:

1. Whether in the interpretation of the provision of Section 2(o) of the MPT Act, the question of title of goods, and the point of time at which title passes to the consignee is relevant to determine the liability of the consignee or steamer agent in respect of charges to be paid to the Port Trust.
2. Whether a consignor or a steamer agent is absolved of the responsibility to pay charges due to a Port Trust, for its services in respect of goods which are not cleared by the consignee, once the Bill of lading is endorsed or the delivery order is issued.
3. Whether a steamer agent can be made liable for payment of storage charges/demurrage, etc. in respect of goods which are not cleared by the consignee, where the steamer agent has not issued a delivery order; if so, to what extent.
4. What are the principles which determine whether a Port Trust is entitled to recover its dues, from the steamer agent or the consignee.
5. While the Port Trust does have certain statutory obligations with regard to the goods entrusted to it, whether there is any obligation, either statutory or contractual, that obliges the Port Trust to de-stuff every container that is entrusted to it and return the empty containers to the shipping agent.

Treatment of the Issue by the Court

The Supreme Court did not provide a final decision on the issues but instead referred the matter to a larger bench. The Court noted the inconsistent positions taken in prior judgments, particularly regarding the interpretation of Section 2(o) of the MPT Act and the liability of steamer agents versus consignees.

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court did not provide a final judgment but analyzed the submissions and authorities to identify inconsistencies in prior rulings.

The Court also analyzed how the authorities were viewed:

✓ The Trustees of the Port of Madras v K P V Sheik Mohamed Rowther & Co. [Rowther- I]: The Court noted that while this case held that the Board takes charge of goods on behalf of the ship-owner, it did not clarify whether the steamer agent was exclusively liable for all charges.

✓ Trustees of the Port of Madras v K P V Sheikh Mohd. Rowther & Co. Pvt. Ltd. [Rowther- II]: The Court observed that this case held only the consignee liable for demurrage, but this view was contradicted by later judgments.

✓ Board of Trustees of the Port of Bombay and Others v Sriyanesh Knitters: The Court noted that this case held that a bailor-bailee relationship exists between the consignee and the Port Trust, a view that was later disagreed with in Forbes-II.

✓ Forbes Forbes Campbell & Co. Ltd. v Board of Trustees, Port of Bombay [Forbes- II]: The Court noted that this case held the steamer agent liable for charges until the bill of lading is endorsed, but this view was also inconsistent with other rulings.

✓ Rasiklal Kantilal & Co v Board of Trustee of Port of Bombay [Rasiklal]: The Court observed that this case held that the Port Trust could recover dues from either the steamer agent or the consignee, but it did not clarify the specific principles for determining liability.

What weighed in the mind of the Court?

The Supreme Court’s decision to refer the matter to a larger bench was primarily driven by the need to resolve the inconsistencies and ambiguities in prior judgments. The Court emphasized the following points:

✓ Inconsistent Precedents: The Court noted the lack of a consistent line of reasoning in the decisions of Rowther-I, Rowther-II, Sriyanesh Knitters, Forbes-II, and Rasiklal, particularly regarding who is liable for port charges.

✓ Conflicting Interpretations: The Court observed conflicting interpretations of Section 2(o) of the MPT Act, especially regarding the definition of “owner” and its implications for liability.

✓ Need for Clarity: The Court highlighted the need for clear principles to determine whether a Port Trust can recover dues from the steamer agent or the consignee.

✓ Unresolved Issues: The Court recognized that several issues, such as the liability of the steamer agent after the bill of lading is endorsed and the obligations of the Port Trust to destuff containers, remained unresolved.

The Court’s sentiment was that a larger bench was necessary to provide a conclusive and consistent interpretation of the MPT Act and related issues.

The Court’s reasoning was primarily driven by legal considerations (70%), focusing on the interpretation of the MPT Act and the need to reconcile conflicting legal precedents. Factual aspects (30%) of the case, such as the specific circumstances of the uncleared goods at Cochin Port, also played a role in highlighting the practical implications of the legal issues.

Logical Reasoning

Key Takeaways

The key takeaways from this judgment are:

• The Supreme Court acknowledged significant inconsistencies in prior judgments regarding the liability for port charges.
• The interpretation of Section 2(o) of the MPT Act, particularly the definition of “owner,” remains contentious.
• The liability of steamer agents for uncleared goods is not definitively settled, with conflicting views on whether it ends upon endorsement of the bill of lading or issuance of a delivery order.
• The principles for determining whether the Port Trust can recover dues from the steamer agent or the consignee need to be clarified.
• The obligations of the Port Trust to destuff containers and return them to shipping agents are also unresolved.
• The matter has been referred to a larger bench for a conclusive decision, which will have significant implications for future cases involving port charges and the liabilities of various parties.

Directions

The Supreme Court directed the Registry to place the papers before the Hon’ble Chief Justice of India for administrative directions to constitute a larger bench.

Specific Amendments Analysis

There is no specific amendment analysis in this judgment.

Development of Law

The ratio decidendi of this case is that there are inconsistencies in the interpretation of the Major Port Trusts Act, 1963, specifically regarding the liability for port charges on uncleared goods. The Supreme Court has referred the matter to a larger bench to resolve these inconsistencies and provide a clear and consistent interpretation of the law. This referral indicates a potential change in the previous positions of law, as the current legal landscape is marked by conflicting judicial opinions.

Conclusion

The Supreme Court’s judgment in Cochin Port Trust vs. Arebee Star Maritime Agencies Pvt. Ltd. highlights the ongoing legal debate surrounding the liability for port charges on uncleared goods. The Court, acknowledging the inconsistencies in prior rulings, has referred the matter to a larger bench for a conclusive decision. This decision underscores the need for a clear and consistent interpretation of the Major Port Trusts Act, 1963, and its implications for the various parties involved in the shipping and port operations. The larger bench’s ruling will have significant implications for future cases involving similar issues.