Supreme Court Upholds Kandla Port’s Storage Regulations: Maheshwary Handling Agency vs. Board of Trustees (2019)

Date of the Judgment: 17 September 2019

Citation: (2019) INSC 933

Judges: Justice Indu Malhotra and Justice Sanjiv Khanna

Can a port authority impose time limits on cargo storage and levy penalties for exceeding those limits? The Supreme Court of India recently addressed this question in a case involving the Kandla Port Trust. The core issue was whether a circular issued by the Traffic Manager, imposing a 60-day limit on cargo storage, was valid. The Supreme Court, in this judgment, upheld the port’s authority to regulate storage and levy penalties for unauthorized overstay. The judgment was authored by Justice Sanjiv Khanna, with Justice Indu Malhotra concurring.

Case Background

Maheshwary Handling Agency Private Limited, a company involved in cargo handling, used storage facilities at Kandla Port. The port’s Board of Trustees had set rates for storage, as per the Major Port Trusts Act, 1963. A notification on November 4, 1993, detailed these rates for different types of storage. The Port Trusts Act was amended in 1997, establishing a Tariff Authority for Major Ports to fix tariffs. However, the 1993 rates remained applicable until the new tariff came into effect on January 29, 2001. The dispute arose from a circular issued on August 31, 1998, by the Traffic Manager of Kandla Port, effective from October 1, 1998, which stipulated that storage of cargo beyond 60 days would be considered unauthorized, attracting penalty.

Timeline

Course of Proceedings

The appellant, Maheshwary Handling Agency, challenged the circular of August 31, 1998, before the High Court of Gujarat, seeking a refund of the penalty rent collected. A Single Judge of the High Court dismissed the application on June 14, 2007. The appellant’s appeal before the Division Bench was also dismissed on July 15, 2008. The appellant then approached the Supreme Court.

Legal Framework

The case revolves around the interpretation of the Major Port Trusts Act, 1963, specifically:

• Section 52 (prior to its omission in 1997): This section required prior sanction of the Central Government for rates and conditions framed by a Board. It stated, “Every scale of rates and every statement of conditions framed by a Board under the foregoing provision of this Chapter shall be submitted to the Central Government for sanction and shall have effect when so sanctioned and published by the Board in the Official Gazette.”
• Section 47A (inserted in 1997): This section constituted the Tariff Authority for Major Ports.
• Section 49 (amended in 1997): This section empowered the Tariff Authority to fix different scales and conditions for different classes of goods and vessels.
• Regulation 64: This regulation deals with the Traffic Manager’s control over loading and unloading of vessels. It states, “The loading and unloading of vessels shall be subject to the control of the Traffic Manager, who may at his discretion, prohibit the discharge of such goods which in his opinion are likely to obstruct traffic or cause congestion or hinder the convenient use of the berths. Notwithstanding the provisions of Regulation No. 113, the Traffic Manager may at his discretion also remove to the other areas as under his jurisdiction, any goods upon landing in the port or soon thereafter, the storage of which on port premises is likely to obstruct traffic or cause congestion. The apportionment of Quay space to be occupied by each vessel shall similarly be determined by the Traffic Manager.”
• Regulation 128: This regulation places the quays, sheds, gates, and land within the port boundaries under the charge of the Traffic Manager. It states, “The quays, sheds, gates and the land within the Port boundaries shall be in the charge of the Traffic Manager who shall direct and manage all operations connected with the landing and shipping of goods, and with their storage in the shed and in the open. He shall have proper custody of all goods lying in the Port and taken whatever steps he may consider necessary for the proper maintenance of order.”

Arguments

Appellant’s Arguments:

• The Traffic Manager lacked the authority to fix tariffs after the 1997 amendment to the Port Trusts Act; only the Tariff Authority could do so. The circular of August 31, 1998, indirectly fixed a tariff by penalizing storage beyond 60 days.
• The circular interfered with the notified scales of rates of November 4, 1993, which already provided for escalating rates for longer storage periods. By declaring storage beyond 60 days as unauthorized, the Traffic Manager effectively altered these rates.
• There could be multiple reasons for delays in cargo storage, which are beyond the control of the person storing the goods. The circular did not account for delays due to customs clearance, shipping issues, etc.
• There was no evidence to justify the restriction on storage duration. The Port Trust, being a monopoly, was required to act reasonably, and the circular violated Article 14 of the Constitution.
• The Traffic Manager’s power under Regulation 64 pertained only to controlling goods during loading and unloading, not to regulating storage rates.

Respondent’s Arguments:

• The circular was issued to manage port congestion and ensure smooth operations. The Traffic Manager was authorized to take such measures.
• The notification of November 4, 1993, did not grant an unlimited right to storage. The Traffic Manager had the authority to decide what constituted unauthorized occupation of storage space.
• The circular was in line with the notes of the notification of November 4, 1993, which empowered the Traffic Manager to manage the use of storage space.
• The circular was not a tariff fixation but a measure to regulate port operations.
• The circular was a reasonable measure to ensure efficient port operations and prevent congestion.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the impugned circular dated 31st August, 1998 was in conformity with the terms of the Notification dated 4th November, 1993 or had the effect of modifying or amending the Notification dated 4th November, 1993.

Treatment of the Issue by the Court

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

Authorities

The Court considered the following legal provisions:

• Section 52 of the Major Port Trusts Act, 1963 (prior to its omission in 1997): This section required prior sanction of the Central Government for rates and conditions framed by a Board.
• Section 47A of the Major Port Trusts Act, 1963 (inserted in 1997): This section constituted the Tariff Authority for Major Ports.
• Section 49 of the Major Port Trusts Act, 1963 (amended in 1997): This section empowered the Tariff Authority to fix different scales and conditions for different classes of goods and vessels.
• Regulation 64 of the Kandla Port Trust Regulations: This regulation deals with the Traffic Manager’s control over loading and unloading of vessels.
• Regulation 128 of the Kandla Port Trust Regulations: This regulation places the quays, sheds, gates, and land within the port boundaries under the charge of the Traffic Manager.

Judgment

The Supreme Court held that the circular issued by the Traffic Manager was valid and in line with the existing regulations. The Court reasoned that the notification of November 4, 1993, did not grant an unlimited right to occupy storage space. The Traffic Manager was authorized to manage port operations and prevent congestion. The 60-day limit was a reasonable measure to ensure smooth functioning of the port.

How each authority was viewed by the Court?

• The Court viewed the Section 52 of the Major Port Trusts Act, 1963* as the provision that initially governed the setting of rates, which required Central Government approval.
• The Court viewed the Section 47A of the Major Port Trusts Act, 1963* as the provision that established the Tariff Authority, which was empowered to fix tariffs after the 1997 amendment.
• The Court viewed the Section 49 of the Major Port Trusts Act, 1963* as the provision that empowered the Tariff Authority to fix different scales and conditions for different classes of goods and vessels.
• The Court viewed the Regulation 64 of the Kandla Port Trust Regulations* as the provision that gave the Traffic Manager control over loading and unloading of vessels.
• The Court viewed the Regulation 128 of the Kandla Port Trust Regulations* as the provision that placed the port’s operational areas under the charge of the Traffic Manager.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure the efficient functioning of the Kandla Port and prevent congestion. The Court emphasized the Traffic Manager’s responsibility to manage port operations effectively. The court also took into consideration that the notification of November 4, 1993, did not grant an unlimited right to storage. The court, therefore, reasoned that the circular was a necessary and reasonable measure to regulate storage and prevent congestion.

The court considered the arguments against the circular, including the lack of data on congestion and the potential for delays beyond the control of the storage users. However, the court found that the circular was a reasonable measure to ensure the smooth functioning of the port. The court also noted that the circular was issued with sufficient notice.

The Supreme Court’s decision was unanimous, with both Justice Indu Malhotra and Justice Sanjiv Khanna agreeing on the judgment. There were no dissenting opinions.

The Court quoted the following from the judgment:

• “The Traffic Manager of the Port is obligated to control and manage the port operations, check obstructions to traffic movement and remove hinderance for efficient and proper use of berths, landing and shipping of goods and storage in the sheds and open area.”
• “Prescribing different slabs or rates for storage of cargo for different periods was meant to fix rates for the rent payable and not to deny or curtail the power of the Traffic Manager to authorise and permit use of sheds and space for storage of cargo/containers.”
• “The circular had brought about uniformity, clarity and transparency in the use of storage facilities at the Kandla Port.”

Key Takeaways

• Port authorities have the power to regulate storage of goods within their premises to ensure efficient operations.
• Time limits on storage can be imposed to prevent congestion and ensure smooth functioning of port activities.
• Penalty charges for unauthorized overstay of cargo are permissible if they are in line with the regulations and are meant to manage port operations.
• The Traffic Manager of a port has the authority to take necessary steps to ensure the efficient functioning of the port, including the power to regulate storage.

Directions

No specific directions were given by the Supreme Court in this case.

Development of Law

The ratio decidendi of this case is that a port authority can impose reasonable time limits on cargo storage and levy penalties for overstay to manage port operations efficiently. This judgment clarifies that the Traffic Manager of a port has the authority to take necessary steps to ensure the efficient functioning of the port, including the power to regulate storage, and the previous position of law remains unchanged.

Conclusion

In conclusion, the Supreme Court dismissed the appeal, upholding the validity of the circular issued by the Traffic Manager of Kandla Port. The Court affirmed that the port authorities have the power to regulate storage of goods and impose reasonable time limits to ensure efficient port operations.