Board of Trustees of The Port of Bombay vs Sun Export Corpn.

Pendse, J.—The respondent No. 1 is a sole proprietary concern of respondent No. 2 and imported 10 cases of stainless steel tubes in July, 1974. The import was manifested at Item No. 98 of the Import General Manifest dated July 20, 1974 of vessel s.s. "JALA VEERA". The consignment was landed by the ship on July 26/27, 1974 at Indira Docks. The outturn of the consignment was drawn on January 27, 1975 and the consignment remained at warehouse at Indira Docks. In respect of the consignment, the Collector of Customs issued order dated February 28, 1976 confiscating the goods in exercise of powers u/s 111(d) of the Customs Act, 1962 but gave option to clear on payment of penalty. On April 19, 1976, the Bombay Port Trust authorities served notice on respondent No. 1 informing about the fact of confiscation and pointing out that respondent No. 1 is liable for Port Trust charges. On May 24, 1976, respondent No. 1 informed the Port Trust that the bill of entry is being completed and the goods would be cleared and at that time charges will be paid. On October 6, 1976, Port Trust addressed letter to respondent No. 1 pointing out that the Port Trust charges amounting to Rs. 1,58,545.10 are due upto the date of confiscation and respondent No. 1 should remit the same at an early date. The demand was reiterated on November 10, 1976 and in reply on December 3, 1976, the respondents stated that respondent No. 1 had merely opened letter of credit and the license holder was liable to pay all the advances, costs and charges but had failed to do so. The respondent No. 1 sought 45 days'' time to arrange necessary finance for payment of duty and fine. The respondent No. 1 failed to clear the charges and ultimately Port Trust instituted Suit No. 394 of 1979 on the Original Side of this Court on November 26, 1979 for recovery of Rs. 1,58,345.10 with interest thereon at the rate of 12% per annum from the date of suit till realisation.

The suit was resisted by the respondents, inter alia, claiming that suit was barred by law of limitation. The principal contention raised by the respondents was that the defendants were not the importers or owners of the goods and consequently are not liable for the wharfage and demurrage charges. The learned trial Judge, on the strength of these pleadings, raised requisite issues. The plaintiffs did not lead any oral evidence, while on behalf of the defendants Badriprasad Chaudhari, constituted attorney of defendant No. 2, was examined. The parties produced documents in respect of their claim and on consideration of the evidence, the trial Judge concluded that the suit was not barred by limitation but as the defendants were not the importers and/or owners of the goods covered by the consignment, the plaintiffs cannot recover the amount. The trial Judge noted that there was no dispute about the quantum of the plaintiffs'' claim. The decision of the trial Judge is under challenge in this appeal filed by Port Trust Authorities.

Shri Makhija, learned counsel appearing on behalf of the appellant, submitted that the finding of the trial Judge that the defendants were not the importers or owners of the consignment is erroneous. The learned counsel urged that the expression ''owner'' as defined under the Bombay Port Trust Act, 1879 and the Major Port Trusts Act, 1963 clearly establishes that the defendants were the owners of the consignment and are liable for the charges. Shri Makhija submitted that there is no dispute about the quantum sought by the plaintiffs and once the conclusion is reached that the defendants were the owners of the consignment, decree must follow as a matter of course. Shri Patel, learned counsel appearing on behalf of the respondents, on the other hand, submitted that the defendants do not fall within any of the categories set out in the expression ''owner'' defined under the Act and, in any event, the liability to pay charges is not of the owner or the consignee but that of the shippers. In view of the rival contentions, the first question which falls for determination is whether the defendants can be treated as owners under expression defined u/s 3(5) of the Bombay Port Trusts Act and Section 2(o) of the Major Port Trusts Act. It is not in dispute that the provisions of the Bombay Port Trusts Act were applicable till February 1, 1975 when the provisions of the Major Port Trusts Act, 1963 came into operation.

Before adverting to the examination of the question as to whether the defendants fall within the definition of ''owner'', it is necessary to set out few more facts. The respondents claim that M/s. Laxmi Engineering Company of Haryana held two licences authorised to import stainless steel tubes and Laxmi Engineering Company had imported the consignment. The respondents claimed that as the goods were to be imported at Bombay, M/s. Laxmi Engineering Company obtained from Joint Chief Controller of Imports and Exports two letters of authority dated February 26, 1974 in respect of the said licences and the letters of authority were issued in favour of defendant No. 1. The defendants claimed that under the letters of authority, the defendant No. 1 became an agent of M/s. Laxmi Engineering Company for the limited purpose of import policy and the goods imported always remained the property of Laxmi Engineering Company till the date of clearance and subsequent thereto. The defendants, therefore, claimed that they were never owners of the goods and are not liable for the charges demanded by the Port Trust. That clearly brings into consideration the question as to whether the defendants fall within the definition of expression ''owner''. Section 3(5) of the Bombay Port Trusts Act defines expression ''owner'' as :-

"''Owner'', when used in relation to goods, includes any consignor, consignee, shipper or agent for the sale or custody of such goods; and, when used in relation to any vessel or any aircraft making use of the port includes any part-owner, charterer, consignee or mortgagee in possession thereof."

Section 2(o) of the Major Port Trusts Act defines expression ''owner'' as :-

"''Owner'', (i) in relation to goods, includes any consignor, consignee, shipper or 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 in possession thereof."

Shri Makhija urged that when the expression ''owner'' is used in relation to the goods, then the expression includes consignee and an agent for the custody of such goods. The learned counsel urged that the defendants were the consignees or the agents for the custody of the goods and, therefore, falls within the definition of expression ''owner''. It was contended that the definition ''owner'' is inclusive one and also an artificial one and it is wholly irrelevant as to who holds the title to the goods in question. In support of the submission that defendant No. 1 is a consignee, strong reliance was placed on bill of lading (Ex. ''B''). The perusal of the document, sets out that the Atlantic Metal Engineering Company Limited, London were the shippers. The column of "consignees (if order state Notify party)" sets out that order of the Indian Overseas Bank and the party to be notified is defendant No. 1. The plain reading of this document leaves no manner of doubt that Indian Overseas Bank was the consignee. Shri Makhija submitted that the Indian Overseas Bank had made an endorsement in favour of defendant No. 1 and the endorsement provides that the consignment should be delivered to defendant No. 1. Shri Makhija submits and, in our judgment, with considerable merit that in view of the endorsement, defendant No. 1 became the consignee and as such would squarely fall within the definition of expression ''owner''. It is not in dispute that after the endorsement was made in favour of defendant No. 1. C. C. Shah & Sons who were the clearing agents were appointed by defendant No. 1 to secure customs clearance. Shri Patel submitted that defendant No. 1 cannot be considered as consignee because the consignee was the Indian Overseas Bank and the endorsement merely transfers the bill in favour of the defendants and the transferee can never be treated as consignee. In support of the submission, reference was made to Paragraph 490 of Halsbury''s Laws of England, Fourth Edition. The relevant portion reads as follows :-

"A bill of lading is a document signed by the shipowner, or by the master or other agent of the shipowner, which states that certain specified goods have been shipped in a particular ship, and which purports to set out the terms on which the goods have been delivered to and received by the ship. After signature, it is handed to the shipper, who may either retain it or transfer it to a third person. This person may be named in the bill of lading as the person to whom delivery of the goods is to be made on arrival at their destination, in which case he is known as the consignee."

It was contended that the above quotation clearly makes out that an endorsement cannot make transferee a consignee. We are unable to find any merit in the submission. The learned counsel could not dispute that on transfer by endorsement the rights vesting in the original consignee stands transferred in favour of the endorsee and the original consignee cannot exercise any right, while the endorse can exercise all rights which the original consignee had. It is, therefore, futile to claim that the transferee or endorsee is not the consignee.

Wednesday, the 10th February, 1993.

A reference can be usefully made in this connection to Paragraph 514 of Halsbury''s Laws of England, Fourth Edition, which sets out that a bill of lading which contains the name of the consignee, and further provides for delivery to his order or to his assigns, is transferred by endorsement and delivery. Paragraph 516 provides that the transfer of a bill of lading may be intended to operate as a transfer of the goods specified in it, in which case the property which passes to the transferee is that which the parties intended to pass. It further recites that the transfer is intended to pass the whole or only a qualified property is a question of fact depending on the circumstances of each particular case. The issue or transfer to the buyer of a bill of lading operates prima facie as a delivery to the buyer of the goods shipped. In our judgment, on endorsement on the bill of lading (Ex. B), defendant No. 1 became the consignee and squarely falls within the definition of ''owner'' u/s 2(o) of the Major Port Trusts Act.

To ascertain what the parties intended by the Bank making an endorsement can be well gathered from the testimony of Badriprasad Chaudhari, Constituted Attorney and husband of defendant No. 2. The witness stated that defendant No. 1 had opened letter of credit and had incurred expenses and liability to the Bank. The witness further stated that payments were made when the steamer arrived in Bombay and in July 1974, the Bank debited about Rs. 2 to 2 1/2 lakhs to the account of defendant No. 1. Badriprasad Choudhari further stated that upto December 1976, the amounts were not paid by M/s. Laxmi Engineering Company. The witness further stated that in addition to sum of Rs. 2 to 2 1/2 lakhs, defendant No. 1 had invested about Rs. 6 Lakhs in respect of the suit consignment between year 1974 and 1976. The witness also admitted that the consignment had borne the mark containing the initials of defendant No. 1. The witness then stated that M/s. C. C. Shah & Sons were appointed as Clearing Agents by defendant No. 1 but could not remember whether the charges of the clearing agents were paid. It was accepted that defendant No. 1 had filed bill of entry for clearance of the goods and were also served with show cause notice by the Customs authorities. The order of confiscation was also addressed to defendant No. 1. These admissions on the part of the defendants leave no manner of doubt that defendant No. 1 was the consignee or the owner of the goods, even though defendant No. 1 was holding letter of authority from Laxmi Engineering Company. The manner in which defendant No. 1 spent amount and in absence of any evidence to indicate that defendant No. 1 was reimbursed by M/s. Laxmi Engineering Company, an impression is left that the transaction was that of defendant No. 1 and, in any event, defendant No. 1 was the owner of the consignment as contemplated by Section 2(o) of the Major Port Trusts Act. It is, therefore, obvious that the defendants are liable for the charges payable to Port Trust in respect of storage of the consignments.

Shri Makhija submitted that even assuming that the defendants are not treated as consignee of the shipment u/s 2(o) of the Act, still the defendants could be held as agents for the custody of the goods. Shri Makhija submitted that the claim of the defendants is that M/s. Laxmi Engineering Company had issued letter of authority and defendant No. 1 was acting merely as an agent for the principal. Accepting the claim, it is obvious that defendant No. 1 had secured an endorsement on the bill of lading to obtain custody of the consignment and, therefore, can be well described as agent for the custody of the consignment. There is considerable merit in the contention. Shri Patel, on the other hand, submitted that agent for the custody of the goods must be one who is appointed as an agent before the clearance of the goods from the Customs authorities. The learned counsel urged that the agent for custody of the goods after the clearance do not attract the sweep of definition of ''owner'' u/s 2(o) of the Major Port Trusts Act. It was contended that after unloading of the goods on many occasions, the goods are held back either by the Port Trust or by the Agent of the shippers and those may be the cases where the custody can be said to be of the agent. In our judgment, it is not necessary to examine this aspect in greater detail in view of the fact that the defendants clearly falls within the expression consignee u/s 2(o) of the Major Port Trusts Act.

Shri Patel then submitted that even assuming that defendant No. 1 is a consignee as contemplated by Section 2(o) of the Major Port Trusts Act, still it is not permissible for the Port Trust authorities to recover the charges from the consignee. In support of the submission, strong reliance is placed upon the decision of the Supreme Court in the case of the Trustees of the Port of Madras by its Chairman v. K. P. V. Sheik Mohamed Rowther & Co. and others reported in 1963 Supp (2) SCR 915 . It was contended that the Port Trust authorities are the bailees in respect of consignment as per Section 40 of the Act as well as Sections 151, 152 and 161 of the Indian Contract Act. The Supreme Court observed that when the Board takes charge of the goods from the ship-owner, the ship-owner is the bailor and the Board is the bailee and the Board''s responsibility for the goods thereafter is that of the bailee. It was further observed that the Board does not get the goods from the consignee and, therefore, cannot be the bailee of the consignee and consequently the Board can recover the charges from the ship-owner and not from the consignee. It was also contended by Shri Patel that in respect of service performed to the vessel, the charges can be realised only from the steamer-agent and not from the consignee. The entire submission proceeds on a mis-conception. The Port Trust authorities hold the goods before clearance and renders service to the goods as well as to the owner of the goods. In respect of the service rendered, the Port Trust authority is entitled to levy charges in accordance with provisions of Chapter VI of the Major Port Trusts Act. Section 42 of the Act sets out the services to be performed by the Board and Section 48 onwards enables the Board to charge rates for any of the services specified in Section 48 or for any of the services with any user or permission to use any property belonging to or in occupation of the Board. The claim of Shri Patel that the steamer-agents are the bailors and the Board being the bailee can recover the rates only from the steamer-agents and not from the consignee cannot be accepted. The steamer-agent ultimately hands over the consignment to the Board as bailee for the benefit of the consignee and the owner of the goods is responsible for all charges incurred in respect of the consignment. The fact that the Port Trust authority is entitled to recover the charges from the vessel or the steamer-agent cannot wipe out the liability of the owner of the consignment. Shri Patel submitted that the decision of the Supreme Court was considered by Division Bench of this Court in judgment reported in Board of Trustees of the Post of Bombay and Others Vs. Sriyansh Knitters, . After perusing the decision of the Division Bench to which one of us (Pendse, J.) was a party, we find that the question as to the liability of the owner to pay the charges did not directly come up for consideration. A reference was also made to the decision of the Supreme Court reported in The Trustees of the Port of Madras Vs. Aminchand Pyarelal and Others, , but Shri Patel very fairly stated that the issue as to the liability of the owner for payment of the charges was not examined by the Supreme Court. In our judgment, the liability of the owner in respect of the consignment cannot be defeated by pointing finger at the vessel or the steamer-agent.

Shri Patel then submitted that Section 2(o) of the Act which defines expression ''owner'' is not a charging Section and though the Port Trust authority is entitled to file a suit for recovery of charges, the Section nowhere provides as to against whom suit can be filed. The contention is that the Act nowhere provides that the owner is liable to pay the charges of the Port Trust. The submission is of no merit. The liability of the owner to pay charges for the services rendered to the consignment flows from the general law. The liability can also be gathered from the provisions of Major Port Trust Act. Section 59 prescribes that for the amount of all rates leviable by a Board in respect of any goods, the Board shall have a lien on such goods and may seize and detain the same until such rates are fully paid. Section 61 sets out the mode for sale of the goods detained and sub-section (3) provides for service of notice on the owner to give an opportunity to make the payment and avoid the auction sale. Section 62 also permits the Board to sell the goods by auction, if the goods are not removed from the Port Trust area within the permitted duration. Section 62 also demands service of notice upon the owner before the sale takes place. Section 63 of the Act provides for application and sale proceeds and sub-section (2) provides that the surplus, if any, shall be paid to the owner or the consignee. The scheme of the Act leaves no manner of doubt that the liability is of the owner of the consignment to pay the charges and, therefore, in case Port Trust authorities are required to sell the goods, then prior notice is required to be served on the owner. The sale proceeds also, if, in excess of the dues of the Port Trust authorities are to be refunded to the owner. It is, therefore, obvious that the contention of Shri Patel that the Act does not provided for liability of the owner to pay the charges is without any substance. In our judgment, the trial Judge was in error in concluding that the defendants are not liable to pay the charges demanded by the Port Trust. As the defendants did not dispute about the quantum of amount demanded by the Port Trust, the appellants are entitled to the decree as sought.

Accordingly, appeal is allowed and the impugned judgment and decree dated December 12, 1989 passed by learned Single Judge in Short Cause Suit No. 394 of 1979 is set aside and the following decree is passed :-

"The defendants are ordered and decreed to pay to the plaintiffs a sum of Rs. 1,58,345.10 with interest thereon at the rate of 12% per annum from the date of the suit till realisation. The defendants shall also pay the costs of the suit. The respondents shall pay the costs of the appellants."