Supreme Court Upholds Compensation for Delayed Delivery of Goods by Air Carrier: Rajasthan Art Emporium vs. Kuwait Airways (2023)

Date of the Judgment: 09 November 2023

Citation: 2023 INSC 996

Judges: A.S. Bopanna, J., Prashant Kumar Mishra, J.

Can an air carrier be held liable for delays in delivering goods, especially when a specific delivery schedule was provided? The Supreme Court of India recently addressed this issue in a case involving an exporter and an airline. The court examined whether the airline was responsible for the losses incurred by the exporter due to significant delays in delivering a consignment of handicraft goods. This judgment clarifies the obligations of air carriers regarding delivery timelines and the compensation they must provide for delays. The judgment was delivered by a two-judge bench of Justices A.S. Bopanna and Prashant Kumar Mishra, with the opinion authored by Justice Prashant Kumar Mishra.

Case Background

M/s. Rajasthan Art Emporium, the appellant, is an exporter of handicrafts. They received an order from M/s. Williams Sonoma Inc. in the USA. The appellant had to send three shipments of 1538 packages, weighing 26,859.5 kg, urgently. On 22 July 1996, the goods were handed over to Kuwait Airways (respondent no. 1) through their agent, Dagga Air Agents (respondent no. 2). The airline assured delivery within seven days, with a schedule indicating that the entire consignment would reach Memphis by 31 July 1996.

However, the consignments did not reach Memphis as scheduled. After inquiry, the airline expressed its inability to meet the original delivery schedule. A revised schedule was provided on 5 August 1996, with a delivery date of 6 August 1996. The consignment did not arrive even by the revised date. The consignee, M/s. Williams Sonoma Inc., sent a letter on 23 August 1996, expressing concern that the goods had not been received in full and that the airline could not locate the remaining cartons. It was later found that 69 cartons were with Lufthansa. On 30 August 1996, the airline acknowledged the short delivery. The exporter made a claim for a full freight refund on 7 September 1996, which was not addressed. A legal notice was sent on 4 August 1997, which also received no response.

Timeline:

Course of Proceedings

The appellant initially filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC). The NCDRC initially ruled on 21 May 2003, that there was a short delivery of 104 pieces, and directed the airline to pay US$ 36,440 for the loss of goods, along with 9% interest from 1 October 1996. However, the NCDRC did not find the airline liable for the delay in delivery. The appellant then appealed to the Supreme Court. The Supreme Court, on 15 March 2011, allowed the appeal and remitted the matter back to the NCDRC for fresh consideration of the delay in delivery. After the remand, the NCDRC passed the impugned order on 1 October 2012, holding that there was a delay in delivery and awarded compensation of Rs. 20 lakhs along with interest and additional compensation for harassment and mental agony.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 19 of the Carriage by Air Act, 1972:
  
  “The carrier is liable for damage occasioned by delay in the carriage by air of passengers, luggage or goods.” This section establishes the liability of the carrier for damages caused by delays in air carriage.
• Section 13(3) of the Carriage by Air Act, 1972:
  
  “If the carrier admits the loss of the goods, or if the goods have not arrived at the expiration of seven days after the date on which they ought to have arrived, the consignee is entitled to put into force against the carrier the rights which flow from the contract of carriage.” This section allows the consignee to enforce their rights against the carrier if the goods are lost or delayed beyond seven days.
• Section 186 of the Contract Act, 1872: This section states that the authority of an agent may be expressed or implied.
• Section 188 of the Contract Act, 1872: This section prescribes that an agent, having an authority to do an act, has authority to do every lawful thing which is necessary in order to do such act.

Arguments

Appellant’s Arguments:

• The appellant argued that the airline had committed to delivering the goods within seven days, making time of the essence of the contract.
• The appellant contended that the airline was negligent in its services, as the goods were delivered with a delay of more than 40 days.
• The appellant submitted that the NCDRC should have awarded just and reasonable compensation based on the contract and the Carriage by Air Act, 1972.
• The appellant argued that the compensation should have been calculated based on the total weight of the consignment multiplied by US$20 per kg, as per Rule 22(2) of Schedule III of the Carriage by Air Act, 1972, and not limited to the amount claimed in the complaint.

Respondent’s Arguments:

• The respondent argued that there was no deficiency in service and that they had taken all reasonable care in performing their duties.
• The respondent argued that no specific instructions were given regarding the time of delivery, and therefore, time was not of the essence of the contract.
• The respondent claimed that the delay was not their fault, as the appellant had chosen to send the consignment through Kuwait Airways, which had multiple stops, causing delays.
• The respondent contended that the compensation awarded by the NCDRC was excessive and based on conjecture.

Submissions of the Parties

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether there was a delay in the delivery of the consignment by the respondent.
2. Whether the respondent is liable for the delay in delivery of the consignment.
3. Whether the compensation awarded by the NCDRC was justified.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Court relied on Dilawari Exporters v. Alitalia Cargo & Ors. [2010] 5 SCC 754* to establish the principles of agency under the Contract Act, 1872, specifically stating that the principal is bound by the actions of its agent acting within the scope of their authority. The Court cited Merrrs. Trojan & Co. Vs. RM.N.N. Nagappa Chettiar AIR 1953 SC 235*, Krishna Priya Ganguly etc. etc. Vs. University of Lucknow & Ors AIR 1984 SC 186*, Om Prakash & Ors. Vs. Ram Kumar & Ors AIR 1991 SC 409*, Bharat Amratlal Kothari Vs. Dosukhan Samadkhan Sindhi & Ors AIR 2010 SC 475*, and Manohar Lal (Dead) by Lrs. Vs. Ugrasen (Dead) by Lrs. & Ors 2010 (11) SCC 557* to support the principle that a party cannot claim relief beyond what they had initially prayed for.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the following factors:

• The Delivery Schedule: The court emphasized that the agent of the airline had provided a specific delivery schedule, which made time of the essence of the contract.
• The Delay in Delivery: The court noted that there was a significant delay in the delivery of goods, which was not disputed by the airline.
• Agency Relationship: The court held that the airline was bound by the actions of its agent, who had given the delivery schedule, as the airline did not deny the agency relationship.
• Negligence: The court concluded that the delay in delivery was due to the negligence of the airline.
• Limitation of Claim: The court held that the compensation could not exceed the amount claimed by the appellant in the complaint, as a party cannot seek relief beyond what was prayed for.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

Logical Reasoning:

The Court reasoned that the airline’s agent had provided a specific delivery schedule, which made time of the essence of the contract. The airline was held liable for the delay in delivery due to negligence. The Court also emphasized that the compensation could not exceed the amount claimed by the appellant in the complaint, as a party cannot seek relief beyond what was prayed for. The court relied on legal precedents and the provisions of the Carriage by Air Act, 1972, and the Contract Act, 1872, to reach its decision.

The Court stated, “the consignee is entitled to seek damages for delay in delivering the consignment.” The Court further added, “the respondent No.1 is bound by the promise held by its agent – respondent No.2, that the goods shall be delivered within one week” and that “a party is not entitled to seek relief which he has not prayed for.”

Key Takeaways

• Air carriers are liable for delays in delivering goods, especially when a specific delivery schedule has been agreed upon.
• The actions of an agent are binding on the principal, particularly when the principal does not deny the agency relationship.
• Compensation for delays in delivery is governed by the Carriage by Air Act, 1972.
• A party cannot claim relief exceeding what was prayed for in their initial complaint.

Directions

The Supreme Court dismissed both the appeals and directed the parties to bear their own costs.

Development of Law

The ratio decidendi of this case is that an air carrier is liable for damages caused by delay in the delivery of goods, especially when a specific delivery schedule has been provided by its agent. This judgment reinforces the principle that a principal is bound by the actions of its agent within the scope of their authority. The court also reiterated that a party cannot claim relief beyond what was initially prayed for in their complaint. There is no change in the previous position of law.

Conclusion

In conclusion, the Supreme Court upheld the NCDRC’s order, affirming the liability of Kuwait Airways for the delay in delivering the handicraft goods. The court emphasized the importance of adhering to delivery schedules and the responsibility of air carriers to ensure timely delivery. The judgment also clarified that a party cannot claim relief exceeding what was initially prayed for in their complaint.

Category

Parent Category: Consumer Law

Child Category: Carriage by Air Act, 1972

Child Category: Section 19, Carriage by Air Act, 1972

Child Category: Section 13(3), Carriage by Air Act, 1972

Parent Category: Contract Act, 1872

Child Category: Section 186, Contract Act, 1872

Child Category: Section 188, Contract Act, 1872

Child Category: Agency Law

FAQ

Q: What does this judgment mean for consumers using air cargo services?

A: This judgment means that air carriers are liable for delays in delivering goods, especially when they have provided a specific delivery schedule. If your goods are delayed, you may be entitled to compensation.

Q: What should I do if my air cargo is delayed?

A: If your air cargo is delayed, you should first contact the airline to inquire about the delay. If the delay is significant, you may be able to claim compensation. Make sure to keep all records of your booking and communication with the airline.

Q: Can I claim compensation for losses beyond the value of the goods?

A: You can claim compensation for losses due to the delay, but the compensation awarded cannot exceed the amount you initially claimed in your complaint. It is essential to specify the amount of compensation you are seeking in your complaint.

Q: What is the role of an agent in air cargo?

A: An agent acts on behalf of the airline. The airline is bound by the actions of its agent, particularly when the agent provides a delivery schedule. If the agent makes a promise about delivery time, the airline is generally liable for that promise.

Q: What is the significance of ‘time is of the essence’ in a contract?

A: When ‘time is of the essence’ in a contract, it means that timely performance is a critical aspect of the agreement. If the delivery is not made within the agreed time, the party responsible for the delay may be liable for damages.