# LTD.) v. NEPAL FOOD CORPORATION & OTHERS

- **Citation:** [2011] 15 S.C.R. 1181
- **Court:** Supreme Court of India
- **Decided:** 2011-10-13
- **Case number:** Civil Appeal No. 7100 of 2001
- **Bench:** R.V. Raveendran, H.L. Gokhale
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ltd-v-nepal-food-corporation-others-27590
- **Pages:** 38

## Headnote

Carriage of Goods by Sea Act, 1925 - ss.2 and 4; and
Article I, clause (b) and Article Ill, r.3 - Role of carrier's agent c
and its liability - Contract for sale of parboiled rice between
NFC and NHH - Vessel 'Pichit Samut' chartered by NHH for
carrying rice to be shipped by NFC to NHH, from Calcutta to
Penang, Malaysia - NFC filed suit against the owner of the
vessel and its agent Shaw Wallace for recovery of damages 0
on ground of wrongful delivery by the ship-owner to NHH without
production of the necessary documents (bills of lading) and
wrongful failure on part of the ship-owner and Shaw Wallace to
furnish the bills of lading within the validity period of letter of
credit, thereby preventing NFC from negotiating and
recovering the amount due - Suit decreed by the High Court E
- Held: As per the sale contract, the seller (NFC) was entitled
to payment of the entire invoice value, at sight at the seller's
bank, on presentation of the "on board Bills of Lading"
supported by its commercial invoice - Mere fact that delivery
was taken by the buyer (NHH) at Penang even without the bills
F
of Jading would not have caused any loss to the seller, if it had
been issued the bills of lading to which it was entitled, without
delay so that it could have realized the amount against the
Jetter of credit which was valid and in force till 15. 1. 1979- NFC
lost the value of goods on account of Shaw Wallace not
G
releasing the bills of lading before 15.1.1979, even though it
was liable to issue the bills of lading on 17. 12. 1978 - The bills
of lading were ultimately issued on 25.1.1979- By deliberately
delaying the issue of the bills of Jading from 17.12.1978 to
1181
H
1182 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.
A 25. 1. 1979, Shaw Wallace committed a breach of statutory duty
cast under Article Ill (3) of the Schedule to the Act - It also
acted negligently in performance of its legal duty in common
law to issue the bills of lading on delivery of the mate's receipt,
as the agent of the ship-owner - Thus it became liable to pay
8 damages to make good the loss, namely the value of the
goods covered by the bills of lading - If the issue of bill of
lading is denied or delayed as a consequence of which the
shipper suffers loss, the owner of the vessel and its agent will
jointly and severally be liable to make good the loss by way
of damages - Shaw Wallace alongwith the ship-owner was
C jointly and severally responsible for the Joss caused to NFC
- Judgment and decree of High Court affirmed.
Carriage of Goods by Sea Act, 1925 - ss.2 and 4; and
Article I, clause (b) and Article 1/1, r.3 - Role of carrier's agent
0 and its liability - Contract for sale of rice between NFC and
NHH - Vessel 'Eastern Grand' sub-chartered by NHH for
carrying rice to be shipped by NFC to NHH, from Calcutta to
Penang, Malaysia - Shaw Wallace was the agent of the owner
of the vessel, at Calcutta - NFC filed suit against the disponent
owner of the vessel (main charterer), the owner of the vessel,
E Shaw Wallace and Owner's Protective Agent, for recovery of
damages on ground of wrongful delivery by the disponent
owner to the buyers and wrongful failure to furnish the bills of
lading thereby preventing NFC from negotiating and
recovering the amount due - High Court decreed the suit
F against the disponent owner and Shaw Wallace - Held: In the
instant case, the letter of credit expired on 15. 1. 1979 while the
goods were cleared at Penang between 16. 1. 1979 to 19. 1. 1979
- It was only on 19.1.1979, after the expiry of Jetter of credit
and after the goods were delivered to NHH, that NFC tendered
G the mate's receipts and requested for issue of bills of lading
from Shaw Wallace - Even if Shaw Wallace had delivered the
bills of lading on the day of de~and namely on 19. 1. 1979 itself,
NFC could not have _realized the amount against the letter of
credit - Shaw Wallace could be made liable only if it had
committed breach of statutory duty or breach of any other legal
H dut

## Text

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[20>11] 15 (ADDL.) S.C.R. 1181
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS
A
LTD.)
v.
NEPAL FOOD CORPORATION & OTHERS
(CIVIL APPEAL N0.7100 OF 2001)
OCTOBER 13, 2011
B
[R.V. RAVEENDRAN AND H.L. GOKHALE, JJ.]
Carriage of Goods by Sea Act, 1925 - ss.2 and 4; and
Article I, clause (b) and Article Ill, r.3 - Role of carrier's agent c
and its liability - Contract for sale of parboiled rice between
NFC and NHH - Vessel 'Pichit Samut' chartered by NHH for
carrying rice to be shipped by NFC to NHH, from Calcutta to
Penang, Malaysia - NFC filed suit against the owner of the
vessel and its agent Shaw Wallace for recovery of damages 0
on ground of wrongful delivery by the ship-owner to NHH without
production of the necessary documents (bills of lading) and
wrongful failure on part of the ship-owner and Shaw Wallace to
furnish the bills of lading within the validity period of letter of
credit, thereby preventing NFC from negotiating and
recovering the amount due - Suit decreed by the High Court E
- Held: As per the sale contract, the seller (NFC) was entitled
to payment of the entire invoice value, at sight at the seller's
bank, on presentation of the "on board Bills of Lading"
supported by its commercial invoice - Mere fact that delivery
was taken by the buyer (NHH) at Penang even without the bills
F
of Jading would not have caused any loss to the seller, if it had
been issued the bills of lading to which it was entitled, without
delay so that it could have realized the amount against the
Jetter of credit which was valid and in force till 15. 1. 1979- NFC
lost the value of goods on account of Shaw Wallace not
G
releasing the bills of lading before 15.1.1979, even though it
was liable to issue the bills of lading on 17. 12. 1978 - The bills
of lading were ultimately issued on 25.1.1979- By deliberately
delaying the issue of the bills of Jading from 17.12.1978 to
1181
H
1182 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.
A 25. 1. 1979, Shaw Wallace committed a breach of statutory duty
cast under Article Ill (3) of the Schedule to the Act - It also
acted negligently in performance of its legal duty in common
law to issue the bills of lading on delivery of the mate's receipt,
as the agent of the ship-owner - Thus it became liable to pay
8 damages to make good the loss, namely the value of the
goods covered by the bills of lading - If the issue of bill of
lading is denied or delayed as a consequence of which the
shipper suffers loss, the owner of the vessel and its agent will
jointly and severally be liable to make good the loss by way
of damages - Shaw Wallace alongwith the ship-owner was
C jointly and severally responsible for the Joss caused to NFC
- Judgment and decree of High Court affirmed.
Carriage of Goods by Sea Act, 1925 - ss.2 and 4; and
Article I, clause (b) and Article 1/1, r.3 - Role of carrier's agent
0 and its liability - Contract for sale of rice between NFC and
NHH - Vessel 'Eastern Grand' sub-chartered by NHH for
carrying rice to be shipped by NFC to NHH, from Calcutta to
Penang, Malaysia - Shaw Wallace was the agent of the owner
of the vessel, at Calcutta - NFC filed suit against the disponent
owner of the vessel (main charterer), the owner of the vessel,
E Shaw Wallace and Owner's Protective Agent, for recovery of
damages on ground of wrongful delivery by the disponent
owner to the buyers and wrongful failure to furnish the bills of
lading thereby preventing NFC from negotiating and
recovering the amount due - High Court decreed the suit
F against the disponent owner and Shaw Wallace - Held: In the
instant case, the letter of credit expired on 15. 1. 1979 while the
goods were cleared at Penang between 16. 1. 1979 to 19. 1. 1979
- It was only on 19.1.1979, after the expiry of Jetter of credit
and after the goods were delivered to NHH, that NFC tendered
G the mate's receipts and requested for issue of bills of lading
from Shaw Wallace - Even if Shaw Wallace had delivered the
bills of lading on the day of de~and namely on 19. 1. 1979 itself,
NFC could not have _realized the amount against the letter of
credit - Shaw Wallace could be made liable only if it had
committed breach of statutory duty or breach of any other legal
H duty amounting to negligence causing loss to NFC - Having
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1183
LTD.) v. NEPAL FOOD CORPN.
regard to the fact, that the letter of credit had expired on A
15.1.1979 long prior to the tendering of mate's receipt and
demand for bills of lading, the delay of nine days in issuing
the bills of lading had no relevance - Evidently NFC and its
agent had taken the matter in a casual manner presumably
expecting a further extension of letter of credit - No finding
8
that the mate's receipts were tendered or delivered with a
demand for issue of bills of lading prior to 19.1.1979 - The
High Court failed to consider this important aspect and wrongly
assumed thatbreach, default, delay could be attributed to Shaw
Wallace, in issuing the bills of Jading, even before the mate's
receipts were tendered on 19.1.1979 - Judgment and decree C
of the High Court insofar as it decreed the suit against Shaw
Wallace set aside - Decree against the disponent owner not
disturbed.
In the instant appeals viz. Civil Appeal No.7100/2001
and Civil Appeal No.7099/2011, the issue relating to the
D
role played by the carrier's agent and its statutory duty
and also its legal duty in common law arose for
consideration.
Civil Appeal No.710012001
Nepal Food Corporation (NFC)-first respondent
entered into a contract with Ngoh Hong Hang Pvt. Ltd.,
Singapore ('NHH'l'buyer') for sale of parboiled rice. UPT
Imports Exports Ltd.-second respondent was the owner
E
of the vessel - 'M. V. Pichit Samut'. Shaw Wallace-appellant
F
represented itself to be the agent of the owner of the
vessel. The said vessel 'Pichit Samur was chartered by
NHH from the owner of the vessel under charterparty
agreement for carrying rice to be shipped by NFC to NHH,
from Calcutta to Penang, Malaysia. Shaw Wallace was
appointed as the 'Owner's Protective Agent'. Shaw G
Wallace was also acting as the charterer's agent as per
charterer's request. M/s Asian Agency was the agent of
the seller (NFC) who was the shipper of the goods.
NFC filed suit in the High Court against the owner of H
1184 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A the vessel and its agent Shaw Wallace for recovery of
damages. The basis of the claim was two-fold. The first
was wrongful delivery by the ship-owner to NHH without
production of the necessary documents (bills of lading).
The second was wrongful failure on the part of the shipB owner and Shaw Wallace to furnish the bills of lading
within the validity period of letter of credit, thereby
preventing the NFC from negotiating and recovering the
amount due.
The owner of the vessel did not defend the suit claim.
c Shaw Wallace in its written statement claimed that it had
merely acted as the agent of the ship-owner in regard to
that particular voyage undertaken by M.V. Pichit Samut;
and that it could issue the bills of lading only on the
instructions of and under the authority of the second
0 respondent and that as it merely acted on the instructions
of the ship-owner, as its agent, it could not be held liable
for the acts or omissions of the ship-owner. A Single Judge
of the High Court decreed the suit with interest at 9% per
annum from the date of suit. The Single Judge held that
Shaw Wallace was liable to pay damages to NFC on three
E counts: (i) Breach of statutory duty: The act of withholding
the bills of lading by Shaw Wallace was wrongful and in
violation of the statutory duty imposed by Article Ill, Rule
3 of the Carriage of Goods by Sea Act, 1925. (ii) Breach of
legal duty amounting to a wrongful act and negligence:
F The appellant wrongfully refused to make over to NFC,
the bills of lading (which were documents of title to goods),
though NFC was entitled to it on demand, in an attempt to
assist the charterer (NHH) in realizing its purported claim
and as a result of this wrongful act of Shaw Wallace, NFC
suffered loss and damages to the extent of the value of
G the said goods. (iii) Conversion: Both ship-owner as well
as Shaw Wallace acted inconsistently with the rights of
NFC,in respect of the said bills of lading and such
wrongful acts amounted to conversion of the said bills of
lading which were documents of title to the goods, and
H thereby caused damages and injury to the plaintiff to the
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1185
LTD.) v. NEPAL FOOD CORPN.
extent of the value of the said goods.
Feeling aggrieved, Shaw Wallace filed an intra-court
appeal which was dismissed by the Division Bench of the
High Court. Aggrieved, Shaw Wallace came up before this
Court.
Civil Appeal No.7099/2001
A
B
The first respondent-NFC entered into a contract with
Ngoh Hong Hang Pvt. Ltd., Singapore ('NHH'/ 'buyer') for
sale of certain quantities of Nepal parboiled rice. Thye
Shipping Parma SA, the second respondent was the c
disponent owner (main charterer) of the vessel - 'M. V.
Eastern Grand under a charter arrangement with the
owner of the vessel - M/s Eastern Steamship & Enterprises
(S) Ltd.- third respondent. The said vessel 'Eastern Grand'
was sub-chartered by NHH (buyer of the rice) from Thye
Shipping under a charterparty agreement for carrying rice
D
supplied by NFC, from Calcutta to Penang, Malaysia.
Khemka & Co. (Agencies) Pvt. Ltd., the fourth respondent
was the Owner's Protective Agent. Shaw Wallace was the
agent of the owner of the vessel, at Calcutta. M/s Asian
Agency was the agent of the seller (NFC) who was the
E
shipper of the goods.
NFC-the first respondent filed suit in the High Court
against the disponent owner of the vessel (charterer), the
owner of the vessel, Shaw Wallace and Owner's Protective
Agent, for recovery of damages. The basis of the claim
F
was two-fold. The first was wrongful delivery by the
second respondent to the buyers. Second was wrongful
failure to furnish the bills of lading thereby preventing the
NFC from negotiating and recovering the amount due.
While the first was the cause of action against the Thye
G
Shipping; the second was a cause of action against both
Thye Shipping and Shaw Wallace.
Respondent nos. 2, 3 and 4 did not contest the suit.
.Shaw Wallace-appellant in its written statement
contended that (a) it did not issue the bills of lading to H
1186 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.
A NFC because it was bound by the instructions of its
principal; (b) a suit against an agent of a disclosed principal
was not maintainable; (c) it was in no way concerned with
the delivery of the cargo since its role was limited to that
of an agent with the responsibility of getting the goods
8 loaded; (d) it had no knowledge of the opening of the letter
of credit or the expiry date thereof; and (e) it was in no
way concerned with the main contract of sale of rice
between NFC and NHH. A Single Judge decreed the suit
against Thye Shipping (second respondent) and Shaw
Wallace (appellant) with interest at 9% per annum from
C the date of suit. Feeling aggrieved, Shaw Wallace filed an
intra court appeal, which was dismissed. The said
judgment was also challenged before this Court.
Disposing of the appeals, the Court
D
HELD:
Civil Appeal No.7100/2001
1.1. NFC did not engage the vessel Pichit Samut. It
was chartered by the buyer NHH to carry the goods
E purchased by it from NFC. The contract of carriage was
governed by the terms of the charterparty agreement dated
11.10.1978. As per the said charterparty agreement, if the
ship was delayed, the Charterer (NHH) was responsible
to pay the demurrage and the agreement provided that
the demurrage should be settled at Singapore, twenty days
F after discharge of the cargo at Penang. Thus NFC did not
have any obligation towards the owner of the vessel to
pay either the freight or any demurrage charges. If there
was any delay for which NFC was liable, that was a matter
to be sorted out by NHH making a claim against NFC. As
G per the sale contract dated 7.12.1977 betw<!en NFC as
seller/shipper and NHH as the buyer, the seller (NFC) was
entitled to payment of the entire invoice value, at sight at
the seller's bank, on presentation of the "on board Bills of
Lading" supported by its commercial invoice. NFC had
H secured its interest by ensuring that the buyer opens an
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1187
LTD.) v. NEPAL FOOD CORPN.
irrevocable letter of credit and by making the supply during
A
the currency of the letter of credit. The shipper (NFC) was
certain of obtaining payment from the Bank under the
buyer's letter of credit, by merely producing before the
bank, the bills of lading and the invoice. The shipper was
entitled to the bills of lading from the agent of the
8
shipowner, immediately on production of the mate's
receipt. Therefore, the mere fact that delivery was taken
by the buyer (NHH) at Penang even without the bills of
lading would not have caused any loss to the seller, if it
had been issued the bills of lading to which it was entitled,
without delay so that it could have realized the amount C
against the letter of credit which was valid and in force till
15.1.1979. NFC lost the value of goods on account of Shaw
Wallace not releasing the bills of lading before 15.1.1979,
even though it was liable to issue the bills of lading on
17 .12.1978. [Para 16] [1205-B-G]
D
1.2. The delivery of the goods on board the ship was
completed on 4.12.1978. On 17.12.1978, Asian Agency
presented the mate's receipt along with the filled forms of
bills of lading to Shaw Wallace and demanded the issue
of signed bills of lading. Issue of mate's receipt on behalf E
of the master of the ship was the authority and instruction
to the agent of the ship-owner to issue the bills of lading
to the shipper. The likelihood of a dispute between the
charterer/buyer and shipper/seller regarding demurrage
for lay days was not sufficient to suspend the
F
authorization given by issue of the mate's receipt. But
Shaw Wallace did not issue the bills of lading inspite of
Asian Agency furnishing the mate's receipts and duly filled
forms of bills of lading. Thereafter, Asian Agency made a
further demand by telex on 1.1.1979. Shaw Wallace replied
G
that the ship-owner wanted a bank guarantee towards
payment of demurrage before the release of bills of lading,
without indicating the amount for which the bank
guarantee was to be given. By this process, issue of the
bills of lading which was legitimately due on 17.12.1978
H
was postponed beyond 15.1.1979, on which date the letter
1188 SUPREME COURT REPORTS (2011] 15 (ADDL.) S.C.R.
A of credit ceased to be operative. The bills of lading were
ultimately issued on 25.1.1979. Having regard to Rule 3 of
Article Ill of the Schedule to the Act, there was a statutory
duty cast upon Shaw Wallace as agent of the carrier, to
issue the bills of lading, without delay. Shaw Wallace was
8 aware of the relevance and importance of bills of lading.
By deliberately delaying the issue of the bills of lading
from 17.12.1978 to 25.1.1979, Shaw Wallace committed a
breach of statutory duty cast under Article Ill (3) of the
Schedule to the Act. It also acted negligently in
performance of its legal duty in common law to issue the
C bills of lading on delivery of the mate's receipt, as the agent
of the ship-owner. Thus it became liable to pay damages
to make good the loss, namely the value of the goods
covered by the bills of lading. For this purpose it is
immaterial whether Shaw Wallace was aware or unaware
D of the fact that the Letter of Credit was expiring on
15.1.1979. The contention of Shaw Wallace that it was
acting merely on the instructions of the shipowner in
refusing to issue the bills of lading till furnishing of a bank
guarantee and therefore not liable, is rejected. [Para 17]
E [1205-H; 1206-A-G]
,
1.3. The appellant made a belated attempt to avoid
liability by contending that it was not responsible or liable
for the issue of bills of lading, that only the master of the
ship who received the goods, had to issue the bills of
F lading, and that NFC having permitted the ship to leave
the port without obtaining the bills of lading, could not
require the agent to issue the bills of lading. The well
recognized practice relating to carriage of goods by sea
is that where a consignment is loaded/received on board
G on different dates, the person in charge of the vessel
issues mate's receipts acknowledging the quantity
received, as and when the goods are received. On
completion of delivery of goods by the shipper, on
production of the mate's receipts, the bills of lading would
be issued to the shipper either by the master of the vessel
H or by the agent of the shipowner. In this case, at the
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1189
LTD.) v. NEPAL FOOD CORPN.
relevant time, Shaw Wallace represented to NFC and its A
agent (Asian Agency) that it was the agent of the carrier
and did all acts expected to be carried out by the carrier's
agents, that is informing the shipper's agents about the
arrival of the ship by issuing notice of readiness and by
calling upon the shipper's agent to load the cargo. It B
issued to the master of the vessel, the mate's receipt book,
bearing printed caption of 'Shaw Wallace & Co. Ltd.,'
thereby making it clear that it was acting as an agent of
the carrier. The mate's receipt forms issued by Shaw
Wallace for use by the master of the ship clearly contained
a printed provision that the bills of lading could be obtained C
at the agent's office. Shaw Wallace corresponded and
dealt with the shipper's agent in all matters with reference
to the shipment and furnished the blank forms of bills of
lading to the shipper's agent. Shaw Wallace also received
the mate's receipt and duly filled forms of bills of lading D
from Asian Agency on 17 .12.1978 without any protest.
Ultimately, the Shaw Wallace did issue the bills of lading.
Therefore, it is too late in the day for Shaw Wallace to
contend that it was not liable to issue the bills of lading.
It is also significant that Shaw Wallace never informed
E
NFC or Asian Agency before the vessel left Calcutta on
4.12.1978 or even thereafter, that it did not have the
authority to issue the bills of lading or that it would not
issue bills of lading in view of any default on the part of
NFC. On the other hand, it held out till the ship left the port
F
that it was the carrier's agent and it will issue the bills of
lading in lieu of the mate's receipt. It did not express any
reservation or objection when it issued the blank forms
of bills of lading to Asian Agency for being filled or even
when the mate's receipts and filled forms of bills of lading
were delivered to it on 17.12.1978. Even in the letter dated G
28.12.1978 addressed to the Asian Agency, it merely stated
that readiness of the ship to receive goods would
commence from 9.11.1978 and not 26.12.1978. More than
15 days after receiving the mate's receipts and filled form
of bills of lading, on 3.1.1979, for the first time, Shaw H
1190 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A Wallace raised the issue of furnishing a bank guarantee
for payment of demurrage amount before releasing the
bills of lading. Even in this letter, it did not mention the
amount of demurrage for which the bank guarantee was
to be issued. The demurrage amount was mentioned for
B the first time by letter dated 15.1.1979. Therefore, even if
NFC wanted to give a bank guarantee, it could not have
given a bank guarantee before 15.1.1979 as the amount
for which bank guarantee was required, was not notified.
On 15.1.1979, the letter of credit expired. Therefore, it is
clear that the Shaw Wallace alongwith the ship-owner was
C jointly and severally responsible for the loss caused to
the NFC. The liability of Shaw Wallace arises by reason of
breach of a statutory duty and by reason of its negligence
in performing its legal duty to release the bills of lading
when demanded. Whether the delay on the part of the
D Shaw Wallace in issuing the bills of lading was on account
of negligence or on account of mala tides, makes no
difference, in so far as its liability is concerned. [Para 18]
(1206-H; 1207-A-H; 1208-A-E]
1.4. Once a mate's receipt is issued to the shipper on
E delivery of the goods to the ship, issue of bill of lading in
respect of such goods cannot be postponed on any
ground except where the person claiming the bill of lading
is not the shipper. Once the mate's receipt is issued to the
shipper {or its agent) and the demand for issue of a bill of
F lading in terms of the mate's receipts is made by the
shipper (or its agent), the owner of the vessel is bound to
issue the bill of lading and cannot deny or delay the issue
of the bill of lading. If the arrangement was that the agent
of the owner of the vessel will issue the bill of lading, or
G if the owners' agent had held out that it will issue the bill
of lading, the agent cannot withhold the bills of lading
once the mate's receipt is issued, irrespective of any
instructions to the contrary, issued by the owner of the
vessel subsequent to the issue of mate's ·receipt and
departure of the vessel with the goods from the port. If
H the issue of bill of lading is denied or delayed as a
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1191
LTD.) v. NEPAL FOOD CORPN.
consequence of which the shipper suffers loss, the owner A
of the vessel and its agent will jointly and severally be
liable to make good the loss by way of damages. [Para
19] [1208-F-H; 1209-A]
1.5. The decision of the High Court that the appellant
is jointly and severally liable along with the owner of the
B
vessel does not call for any interference. [Para 21] [121 OB]
Ha/sbury's Laws of England (4th Edition, Vol. 43(2)
Shipping & Navigation : Pages 1042 and 1043); Scrutton
on Charterparties and Bills of Lading (Twentyfirst (2008)
C
Edition] and CARVER's Carriage by Sea (Thirteenth
Edition, vol. 1, Page 41 Para 54) - referred to.
Civil Appeal No.7099/2001
2.1. In the instant case, the goods were loaded
D
between 5.12.1978 and 29.12.1978. The vessels sailed on
30.12.1978. The letter of credit expired on 15.1.1979. The
goods were cleared at Penang between 16.1.1979 to
19.1.1979.lt was only on 19.1.1979, after the expiry of letter
of credit and after the goods were delivered to NHH, that
E
the NFC tendered the mate's receipts and requested for
issue of bills of lading from Shaw Wallace. Even if Shaw
Wallace had delivered the bills of lading on the day of
demand namely on 19.1.1979 itself, NFC could not have
realized the amount against the letter of credit. Shaw
F
Wallace could be made liable only if it had committed
breach of statutory duty or breach of any other legal duty
amounting to negligence causing loss to the NFC. In this
case, having regard to the fact, that the letter of credit had
expired on 15.1.1979 long prior to the tendering of mate's
receipt and demand for bills of lading, the delay of nine G
days in issuing the bills of lading had no relevance. Even
if the bills of lading had been issued forthwith on
19.1.1979, it would not have been of any assistance. [Para
35] [1215-D-F]
2.2. The High Court inferred that it would be highly
H
1192'SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
A improbable that the holder of the mate's receipts would
'delay the making of a demand for blank bills of lading
forms. The Single Judge recorded a finding that Asian
Agency was demanding the blank bills of lading forms
from Shaw Wallace from 30.12.1978 and that Shaw
8 Wallace did not supply the blank forms to Asian Agency
until 17.1.1979. Consequently the single Judge reasoned
that the demand for bills of lading was being prior to
15.1.1979 and therefore, Shaw Wallace was liable to pay
damages equal to the value of the goods. The division
bench affirmed the said findings. However, there is no
C reference in the plaint, to the demand for the blank forms
of lading on and from 30.12.1978 by Asian Agency. Asian
Agency did not send either any letter or telex to Shaw
Wallace demanding the issue of bills of lading or the blank
forms of bill of lading for purposes of filling up at any time
D prior to 17.1.1979. Asian Agency did nottender the mate's
receipts prior to 17.1.1979. The first communication in
writing from Asian Agency to Shaw Wallace after the ship
left on 30.12.1978 was when it sent the mate's receipts
and the filled forms of bill of lading to Shaw Wallace for
E issuing bills of lading, under cover of letter dated
19.1.1979. On the same day, that is on 19.1.1979, Asian
Agency also sent a notice through counsel to Shaw
Wallace demanding that immediate steps be taken for
release of bills of lading and for extension of validity of
F the letters of credit from the buyers so as to enable NFC
to negotiate the same and realise the proceeds.
Significantly, the above notice refers to forwarding of the
duly filled forms of bill of lading in regard to Eastern Grand
on 18.1.1979 (the date should be 19.1.1979). It does not
refer to any earlier demand by Asian Agency for issue of
G blank forms of bills of lading from 30.12.1978 or any other
date. It does not refer to any earlier demand for Issue of
bills of lading. Similarly in the notice dated 10.12.1979
issued by NFC through counsel to Shaw Wallace, there la
no reference to any demand earlier to 19.1.1979. If really
H NFC and Asian Agency were seriously pursuing the
SHAW WALLACE &,co. LTD. (NOW UNITED SPIRITS 1193
LTD.) v. NEPAL FOOD CORPN.
matter, one fails to understand why no letter or telex was
A
sent either by NFC or by Asian Agency making a demand
for issue of blank bill of lading forms or insisting upon the
issue of bills of lading by tendering the mate's receipts.
[Paras 36, 37, 38, 39] [1215-G-H; 1216-A-D, F-G]
2.3. Even assuming that there was any oral demand
B
for bill of lading forms on 30.12.1978 as found by the High
Court, it was evident NFC and its agent had taken the
matter in a casual manner presumably expecting a further
extension of letter of credit. In the circumstances, it cannot
be said that there was any default, negligence or delay on c
the part of Shaw Wallace in issuing the bills of lading prior
to 17.1.1979.The Single Judge and division bench found
that there was a demand for blank forms of bill of lading
from 30.12.1978. Accepting the said finding will not help
NFC as there is no finding that the mate's receipts were
tendered or delivered with a demand for issue of bills of D
lading prior to 19.1.1979. The High Court failed to consider
this important aspect and wrongly assumed that breach,
default, delay could be attributed to Shaw Wallace, in
issuing the bills of lading, even before the mate's receipts
were tendered on 19.1.1979. The decisions of the Single
E
Judge and division bench of the High Court cannot
therefore be sustained. [Para 38] [1217-G-H; 1218-A-C]
Conclusion
3. CA No. 7099/2001 (Re: Eastern Grand) is allowed
F
and the judgment and decree of the High Court in so far
as it decrees the suit against the appellant is set aside.
The decree against the second respondent is not
disturbed. CA No. 7100/2001 (Re: Pichit Samut) is
dismissed and the judgment and decree of the High Co•.1rt
G
is affirmed. [Para 39] [1218-D-F]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7100
of 2001.
From the Judgment & Order dated 14.9.2001 of the High
Court at Calcutta in Appeal No. 322 of 1988.
H
A
1194 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R.
WITH
C.A. No. 7099 of 2001.
Amar Dave, Radhika Gautam, Gaurav Goel, Mahesh
Agarwal, Abhishek Gupta, Zafar lnayat, Anandh Kannan, E.C.
B Agrawala for the Appellant.
c
Jaideep Gupta, Rajshekhar Roa, P.C. Sharma, N.P.
Agarwalla, Richa Maken, Oebajyoti Basu for the Respondent.
The Judgment of the Court was delivered by
R.V. RAVEENDRAN, J.
Civil Appeal No.7100/2001
Shaw Wallace & Co. Ltd., the appellant herein, was the
second defendant in suit No. 922/1979 filed by Nepal Food
Corporation ('NFC' for short, plaintiff in the suit and first
D respondent herein) for recovery of Rs. 1,26,38,951/06. UPT
Imports Exports Ltd., the second respondent herein, was the
first defendant in the said suit. The appellant filed this appeal by
special leave, aggrieved by the judgment dated 14.9.2001 of a
division bench of the Calcutta High Court dismissing its appeal
E (Ap.No.323 of 1988) against judgment and decree dated
9.9.1987 passed by a learned single Judge of that court
decreeing the suit filed by the first respondent in part. For
convenience we will also refer to the parties by their ranks in the
suit.
F
2. NFC entered into a contract dated 7.12.1977 with Ngoh
Hong Hang Pvt. Ltd., Singapore (for short 'NHH' or the 'buyer')
for sale of 10000 MT of parboiled rice-1978 crop, (as also other
quantities of rice). As per the contract, the payment was to be
made by the buyer by establishing an irrecoverable confirmed
G and transferable letter of credit confirmed by Rashtriya Banijya
Bank, Kathmandu in US dollars in favour of the seller allowing
part payment. The contract provided that the payment 100%
invoice value shall be made at sight at the seller's bank on
presentation of 'on board Bills of Lading' (or charterparty Bills
of Lading) supported by seller's commercial invoice. In
H p'ursuance of it, Bangkok Bank Ltd., Hong Kong who were the
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1195
LTD.) v. NEPAL FOOD CORPN. [RV. RAVEENDRAN, J.)
buyer's bankers, issued an irrecoverable letter of credit dated
A
25.4.1978 (amended/extended on 25.5.1978 and· 31.8.1978)
for US$ 21,60,000, in regard to the price of 10000 MT of Nepal
paraboiled rice. The validity period of the said letter of credit
was originally upto 30.6.1978, the last date for shipment being
20.6.1978. This was extended from time to time and the validity
8
period of the letter of credit was extended from time to time,
finally up to 15.1.1979, with the last date for shipment being
extended to 31.12.1978.
3. UPT Imports Exports Ltd. was the owner of the vessel -
'M. V. Pichit Samut'. Shaw Wallace represented itself to be the
C
agent of the owner of the vessel. The said vessel 'Pichit Samuf
was chartered by NHH (buyer of rice from NFC) from the owner
of the vessel under charterparty agreement dated 11.10.1978
for carrying 5000 MT of rice to be shipped by NFC to NHH, from
Calcutta to Penang, Malaysia. Mis Grand Fortune Singapore
Private Ltd., (for short 'Grand Fortune') was the general agent
D
of the owner of the vessel. In accordance with Charterer's request
to assign the said vessel under the agency of appellant for the
said fixture, the said general agent acting on behalf of the owners,
appointed Shaw Wallace (second defendant) as the 'Owner's
Protective Agent' on 16.10.1978. Shaw Wallace was also acting
E
as the charterer's agent as per charterer's request dated
3.1.1979. M/s Asian Agency was the agent of the seller (NFC)
who was the shipper of the goods.
4. Shaw Wallace addressed a letter dated 6.11.1978 to
Asian Agency (NFC's agent) informing that the vessel Pichit
F
Samutwas due to arrive at Sandheads, Calcutta on 8.11.1978,
that there was insufficient cargo at the Port and that all expenses
for delays, if any, would be to the shipper's (seller's) account.
Shaw Wallace informed Asian Agency by letter dated 8.11.1978
that the vessel Pichit Samut had arrived at Sand heads, Calcutta
G
and served a notice of readiness (that the vessel was ready to
receive cargo). The said notice of readiness was accepted by
Asian Agency on 28.11.1978 when the vessel arrived at berth
(23 K P 0) after it was certified to be fit for loading by the surveyor.
The loading of rice in the ship was commenced on 29.11.1978
H
1196 SUPREME COURT REPORTS [2011] 15 (ADDL.) S.C.R
A and completed on 4.12.1978. Several mate's receipts were
issued between 29.11.1978 to 4.12.1978 to Asian Agency on
behalf of the master of the ship acknowledging the receipt of
goods as and when received. The ship sailed from the Port of
Calcutta to Penang on 4.12.1978.
B
5. The general agent of the shipowner - Grand Fortune,
advised Shaw Wallace by telex message dated 5.12.1978, not
to issue Bills of Lading to NFC until advised, in view of the
dispute between the charterer and the shipper in regard to the
"lay days". At this juncture it is necessary to refer to the
c background facts relating to the said dispute. When the vessel
arrived at Garden Reach Anchorage on 9.11.1978, the vessel
was passed as fit for loading, by the surveyors. On 9.11.1978,
NFC did not have sufficient goods to load and therefore the
vessel was birthed at 28 KPD. The vessel was programmed to
shift from 28 KPD to 23 KPD on 16.11.1978, but could not be
D shifted on account of Port Workers strike. After the strike was
called off, the vessel moved from 28 KPD to 23 KPD on
28.11.1978. Asian Agency therefore accepted the notice of
readiness dated 8.11.1978, only on 28.11.1978. According to
Shaw Wallace, Asian Agency ought to have accepted the notice
E of readiness as soon as the ship berthed at the port on
9.11.1978. According to Asian Agency, the vessel could be said
to be ready only when it berthed at 23 KPD' which was on
28.11.1978 and therefore there was no delay on its part. The
dispute was as to whether the shipper should bear the
F demurrage charges if any for the lay days between 9.11.1978
to 28.11.1978. It is in this background the said telex dated
5.12.1978 was issued by Grand Fortune. This was followed by
another telex dated 12.12.1978 from Grand Fortune, forwarding
a telex communication from NHH requiring the ship-owner to
G advise its agent Shaw Wallace to obtain a bank guarantee from
NFC regarding demurrage before issuing the Bills of Lading, to
avoid disputes over payment of demurrage and stating that if it
was not done, it (NHH) will not be responsible for any demurrage
incurred. In view of it, Grand Fortune instructed Shaw Wallace
to require NFC to furnish a bank guarantee for issuing and
H releasing the bills of lading. On 13.12.1978, Shaw Wallace sent
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1197
LTD.) v. NEPAL FOOD CORPN. [R.V. RAVEENDRAN, J.]
a statement of facts pertaining to the arrival and loading of Pichit A
Samut. As per the standard practice, Shaw Wallace supplied
the blank forms of bills of lading to NFC for being filled and
returned. NFC's agent delivered the mate's receipts and the
duly filled forms of bills of lading to Shaw Wallace on 17.12.1978
with a request to sign and issue the bills of ladings as the agent
8
of the owner of the vessel. Shaw Wallace's statement of facts
was returned by NFC's agents with remarks on 19.12.1978.
6. Pichit Samut arrived at Penang on 18.12.1978. NHH
took delivery of the goods from the vessel at Penang on
22.12.1978 without possessing any document of title and c
apparently without the knowledge of the NFC. Asian Agency -
NFC's agent, addressed a telex message dated 1.1.1979 to
Shaw Wallace regretting that bills of lading had not been
delivered to them, despite delivering the mate's receipts and
that therefore, Shaw Wallace would be responsible for all delays
D
and damages, as NFC was unable to negotiate the letter of credit
in the absence of bills of lading. NHH sent the following telex
. dated 3.1.1979 to Shaw Wallace:
"As you are aware, we wish to counter claim demurrage
from shipper ...... Since the owner requires charterers/
E
shippers to provide first class international prime bank
guarantee to pay freight, dead freight and demurrage
before issuing bills of lading, it is proper for us to request
shipper to submit first class international prime Bank
Guarantee to pay the demurrage prior to releasing of bills
of lading and subject to our telex confirmation before. Kindly
F
act as an agent on our behalf to do the needful and possible
and we will be responsible for all possible legal action."
It should be noted that by then NHH had taken delivery of the
cargo from Pichit Samut. Shaw Wallace sent a telex message
dated 3.1.1979 informing Asian Agency that the Carrier had
G
advised not to issue the bills of lading until NFC furnished a
bank guarantee towards demurrage and that the ship-owner
would not be responsible for the delay in issuing bills of lading,
in view of delay on the part of NFC in furnishing a bank guarantee
H
1198 SUPREME COURT REPORTS (2011) 15 (ADDL.) S.C.R.
A for the demurrage. The validity period of the letter of credit issued
at the instance of NHH expired on 15.1.1979. Shaw Wallace by
communication dated 15.1.1979 informed NFC's agent that the
demurrage due in respect of M. V. Pichit Samutwas US$ 30,000
and a bank guarantee for the said amount should be furnished
8 by the NFC or its agents so that the bills of lading could be
issued. On 19.1.1979, NFC issued a notice to Shaw Wallace
calling upon them to issue bills of lading and take steps to see
that NHH extends the validity of the letters of credit to enable
NFC to negotiate the same and realize the value of goods failing
whfch Shaw Wallace would be held liable for all consequences.
C On 25.1.1979, three signed bills of lading dated 4.12.1978 were
delivered by Shaw Wallace to NFC's agent (Asian Agency) in
regard to 1522.727 MT, 1022.860 MT and 1901.207 MT of rice
entrusted to the master of the vessel 'Pichit Samu!' for
transshipment to Penang. NFC issued its final invoice in regard
D to the consignments on 1.2.1979 and 2.2.1979.
7. NHH issued a notice dated 3.2.1979 to NFC alleging
that NFC was liable in damages in a sum of US$ 13,41,242.38
for several breaches, that is short-supply of 1521.52 MT of
parboiled rice and non-supply 11573 MT of white rice and
E demurrage in regard to delaying three vessels. NFC issued a
notice dated 25.9.1979 to NHH claiming US$ 59, 12, 191.07
towards the value of rice supplied. NFC also issued a legal
notice dated 29.11.1979 to UPT Imports Exports and Shaw
Wallace claiming the value of the goods as damages, by reason
F of the delay in issuing the bills of lading and the wrongful delivery
of the cargo to NHH without the production of bills of lading.
NFC filed Suit No.922/1979 in the Calcutta High Court against
the owner of the vessel (first defendant) and its agent Shaw
Wallace (second defendant) for recovery of ' 1,26,38,951/06
G made up of the following amounts :
(a) Damages equivalent to the value of
Rs. 1,05,32,459/22
4446.794 MT of rice covered by the three Bills of Lading
H (1522. 727 MT + 1022.860 MT + 1901.207 MT) loaded on the
SHAW WALLACE & CO. LTD. (NOW UNITED SPIRITS 1199
LTD.) v. NEPAL FOOD CORPN. [RV. RAVEENDRAN, J.]
Vessel Pichit Samut.
(b) Interest thereon at the rate of 20% per annum R s
21,06,491/84
from 4.12.1978 (date of Bills of Lading) to
3.12.1979 (date of suit).
8. During the pendency of the said suit, NFC also filed a
suit against NHH in the High Court of Singapore for recovery of
US$ 28,57,009.75 being the value of the goods supplied,
(including the rice shipped through M. V.Pichit Samut and
A
B
M. V.Eastern Grand). NHH raised a counter claim for US
C
$13,41,242/38. The said suit (Suit No.5809/1983) was decreed
(by the High Court of Singapore on 22.8.1984) on admission
for US$11,54,575/37 for which there was no defence or dispute.
NFC filed Civil Appeal No.56/1984 before the appellate court
at Singapore regarding non-grant of decree on admission for
D
the balance. However, NHH was wound up by the Singapore
High Court in the year 1985, on an application by a Malaysian
creditor and consequently, NFC could not recover any amount
from its buyer NHH.
9. In the suit filed by NFC against the owner of the vessel
E
and the agent (appellant), it was contended that as the bills of
lading were not issued in time, the valuable security was not
available for negotiation and, in the meanwhile, the validity period
of the letter of credit having expired on 15.1.1979, loss was
caused to NFC in respect of the value of the goods. The basis
F
of the claim was two-fold.