# MIS. RASIKLAL KANTILAL & CO v. BOARD OF TRUSTEE OF PORT OF BOMBAY & OTHERS

- **Citation:** [2017] 4 S.C.R. 591
- **Court:** Supreme Court of India
- **Decided:** 2017-02-28
- **Case number:** Civil Appeal No. 5968 H of2011
- **Bench:** J. Chelameswar, Abhay Manohar Sapre
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-rasiklal-kantilal-co-v-board-of-trustee-of-port-of-bombay-others-32046
- **Pages:** 34

## Headnote

Bailment:
Consignments (78 in numbers) shipped on cash against
documents basis - Received at Bombay Port - Consignees filed C
bills of entry only in respect of 37 consignments, but failed to lift
the consignments - Consignments stored at the Port - Exporter/
Co11'signor sold the consigned goods to the petitioner - Petitioner
applied to Customs Authorities to file Bills of Entry for 41
consignments and to substitute Bills of Entry in respect 37 D
consignments - Customs authority issued detention certificate
specifically mentioning that detention was for "bonafide operation
of ITC formalities" - Notification of "Statement. of guideline~ for
Permission of Demurrage Charges", 1992 whereby in cases where
goods/consignments detained by Customs for 'ITC facilities' were
to be considered for grant of remission from payment of demzirrage
E
for the period the goods were being so processed by Customs
Authorities - Levy of demurrage charges giving remission of certain
amount from the demurrage charge - Whether the appellant was
liable to pay demurrage charges for the period anterior to his
acquisition of title to the goods and whether the appellant was
F
entitiled to complete remission of the demurrage charges on account
of delayed clearance for the goods by the Customs Department -
Held: The right of Board of Trustee to recover its dues (either from
the steamer agent or the consignee) flows from s.158 of Contract
Act rlw. s.1 of Bills of lading Act and from s.59(1) of the Major Port
Trusts Act, 1963 - Enquiry into the title of the goods and the point G
of time at which the title passes to the consignee is irrelevant for
determining the authority of the Board to recover its dues - The
question as to who would be liable to pay the dues would depend
on the nature of relationship between the consignor and consignee
H
591
592
SUPREME COURT REPORTS
[2017] 4 S.C.R.
A - In the present case, the Board was sub-bailee of the goods bailed
by consignor (bailor) to the ship-owner (bailee) through the agent
(steamer agent) of the bailee - Appellant is only claiming through
the bailor without any contractual relationship with the Board -
Therefore, the Board would be entitled to enforce its rights flowing
B from the bailment between the ship-owner and the Board, against
the consignee and recover expenses from him, incurred in connection
with the bailment - Since the order of the Board declining total
remission charges was not based on rational consideration and a
sound policy, the order of the Board is set aside leaving it open to
the Board to take appropriate decision duly recording the reasons
. C for such decision - Major Port Trusts Act, 1963 - ss. 59(1) and 63
- Contract Act, 1872 - s. 158 - Bills of Lading Act, 1856 - s. J.
Plea:
New plea - Raising of - Jn Supreme Court - Permissibility -
Held: A pure and substantial question of law cannot be barred from
D being raised for the first time. ·
E
.F
Words and Phrases:
'Demurrage' - Meaning of
'Bailment' - Meaning of
Partly allowing the appeal, the Court
HELD: I. Though the question as regards the liability of
the appellant to pay the demurrage was not raised before the
High Court, the appellant need not be barred from raising this
question before this Court because it is a pure and substantial
question of law. No enquiry into any fact is really necessary to
decide the said question of law. The only fact which is not clearly
established on record is the point of time at which the titlP- in the
goods passed to the appellant. [Paras 30, 31) (609-F-G; 610-B]
2.1 Enquiry into the title of the goods and the point of time
G at which the title passes to the consignee is irrelevant for
determining the authority of a Board of Trustee to recover the
amounts due to it under the Major Port Trusts Act, 1963. The
authority and right of a Board to recover its dues either from the
steamer agent or the consignee, flows from two different sources:
H
M/S. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE·
593
OF PORT OF BOMBA

## Text

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[2017] 4 S.C.R. 591
MIS. RASIKLAL KANTILAL & CO.
v.
BOARD OF TRUSTEE OF PORT OF BOMBAY & OTHERS
(Civil Appeal No. 5968 of20ll)
A
FEBRUARY 28, 2017
B
[J. CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ.)
Bailment:
Consignments (78 in numbers) shipped on cash against
documents basis - Received at Bombay Port - Consignees filed C
bills of entry only in respect of 37 consignments, but failed to lift
the consignments - Consignments stored at the Port - Exporter/
Co11'signor sold the consigned goods to the petitioner - Petitioner
applied to Customs Authorities to file Bills of Entry for 41
consignments and to substitute Bills of Entry in respect 37 D
consignments - Customs authority issued detention certificate
specifically mentioning that detention was for "bonafide operation
of ITC formalities" - Notification of "Statement. of guideline~ for
Permission of Demurrage Charges", 1992 whereby in cases where
goods/consignments detained by Customs for 'ITC facilities' were
to be considered for grant of remission from payment of demzirrage
E
for the period the goods were being so processed by Customs
Authorities - Levy of demurrage charges giving remission of certain
amount from the demurrage charge - Whether the appellant was
liable to pay demurrage charges for the period anterior to his
acquisition of title to the goods and whether the appellant was
F
entitiled to complete remission of the demurrage charges on account
of delayed clearance for the goods by the Customs Department -
Held: The right of Board of Trustee to recover its dues (either from
the steamer agent or the consignee) flows from s.158 of Contract
Act rlw. s.1 of Bills of lading Act and from s.59(1) of the Major Port
Trusts Act, 1963 - Enquiry into the title of the goods and the point G
of time at which the title passes to the consignee is irrelevant for
determining the authority of the Board to recover its dues - The
question as to who would be liable to pay the dues would depend
on the nature of relationship between the consignor and consignee
H
591
592
SUPREME COURT REPORTS
[2017] 4 S.C.R.
A - In the present case, the Board was sub-bailee of the goods bailed
by consignor (bailor) to the ship-owner (bailee) through the agent
(steamer agent) of the bailee - Appellant is only claiming through
the bailor without any contractual relationship with the Board -
Therefore, the Board would be entitled to enforce its rights flowing
B from the bailment between the ship-owner and the Board, against
the consignee and recover expenses from him, incurred in connection
with the bailment - Since the order of the Board declining total
remission charges was not based on rational consideration and a
sound policy, the order of the Board is set aside leaving it open to
the Board to take appropriate decision duly recording the reasons
. C for such decision - Major Port Trusts Act, 1963 - ss. 59(1) and 63
- Contract Act, 1872 - s. 158 - Bills of Lading Act, 1856 - s. J.
Plea:
New plea - Raising of - Jn Supreme Court - Permissibility -
Held: A pure and substantial question of law cannot be barred from
D being raised for the first time. ·
E
.F
Words and Phrases:
'Demurrage' - Meaning of
'Bailment' - Meaning of
Partly allowing the appeal, the Court
HELD: I. Though the question as regards the liability of
the appellant to pay the demurrage was not raised before the
High Court, the appellant need not be barred from raising this
question before this Court because it is a pure and substantial
question of law. No enquiry into any fact is really necessary to
decide the said question of law. The only fact which is not clearly
established on record is the point of time at which the titlP- in the
goods passed to the appellant. [Paras 30, 31) (609-F-G; 610-B]
2.1 Enquiry into the title of the goods and the point of time
G at which the title passes to the consignee is irrelevant for
determining the authority of a Board of Trustee to recover the
amounts due to it under the Major Port Trusts Act, 1963. The
authority and right of a Board to recover its dues either from the
steamer agent or the consignee, flows from two different sources:
H
M/S. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE·
593
OF PORT OF BOMBAY
(i) Section 158 of the Contract Act, 1872 read with Section 1 of A
the Bills of Lading Act, 1856. (ii) Section 59(1) of 1963 Act.
[Para 37) [615-B-C]
2.2 The essence of bailment is possession and the consent
of the owner of the goods is not necessary. There is a distinction
between possession and custody of goods. Title to the goods is
B
irrelevant even in the cases of a bailment arising under a contract.
Any person who is capable of giving physical possession of goods
can enter into a contract of bailment and create bailment. Bailment
is a contractual relationship and bailment can be created by any
person who is in possession/custody of goods but not necessarily
the owner of the goods. When the purpose of bailment is
C
accomplished, the goods are to be returned or otherwise disposed
of according to the directions of the person (bailor) delivering
them. [Paras 38 and 41] [615-C-D; 617-F-G]
Trustees of the Port of Bombay v. Premier Automobiles
Ltd. (1981) 1 SCR 532 : (1981) 1 SCC 228 - relied
on.
2.3 Section 158 of the Contract Act stipulates the obligations
D
of the bailor to pay the necessary expenses incurred by the bailee
"for the purpose of bailment". The obligation of the ·bailee to
return the bailed goods when the purpose of bailment is
E
accomplished and the obligation of the bailor to pay the bailee
"the necessary expenses incurred by him for the purpose of the
bailment" would attend not only a bailment by contract but every
kind of bailment. [Para 42) [618-C, E]
2.4 If the bailor has such an obligation to pay the bailee,
F
any person claiming through the bailor must necessarily be bound
by such an obligation unless the bailee releases such person from
such an obligation. A consignee is a person claiming through the
consignor (bailor). In the context of import of goods into India
by ship, the consignees' rights are governed inter alia by Section
G
1 of the Bills of Lading Act, 1856. The Act enacts a fiction that
the consignee to whom the property in the goods shall pass, shall
be "subject to the same liabilities in respect of such goods as if
the contract contained in the bill of lading had been made with
himself'. Bill of lading is evidence of a contract between the
H
594
SUPREME COURT REPORTS
[2017] 4 S.C.R.
A shipper (consignor) and the owner of the ship by which the owner
of the ship agrees to transport the goods delivered by the
consignor to a specified destination and deliver it to the cor-signee.
Delivery of goods pursuant to a bill of lading creates a bailment
between the shipper and the owner of the ship. Obviously the
B
c
legislature knew that a consignee under a bill of lading is a 3'd
party to the contract but intrinsically connected with the
transaction and thought it. necessary to specify the rights and
obligations of the consignee. Hence, the fiction. under the 1856
Act is that the moment the property in goods passes to the
consignee, the liabilities of the consignee in respect of such goods
would be the same as those of the consignor, as if the contract
contained in the bill of lading had been made with the consignee.
[Paras 43 and 44] [618-F; 619-A-D]
2.5 Section 63 of 1963 Act authorises the Board to sell the
goods "placed in their Custody". Bailment can come into
D existence even otherwise than by a contract. There is nl' bailor
and bailee relationship between the Board (the 1" respondent)
and the consignee (the appellant); either voluntarily or statutorily
compelled but such a relationship exists between the 1"
respondent and the owner of the ship (through the steamer agent).
E
F
It is possible in a given case where the consignee or any other
person (such as the appellant) claiming through the consignor,
eventually may not come forward to take delivery of the goods
for a variety of reasons-considerations of economy or supervening
disability imposed by law etc. Therefore, in such cases to say
that merely because the bill of lading is endorsed or the delivery
order is issued, the consignor or his agent is absolved of the
responsibility for payment (of rates or rent for services rendered
w.r.t goods) would result in a situation that the Board would. incur
·expenses without any legal right to recover such amount from
the consignor and be driven to litigation for recovering the same
from the consignee who did not take delivery of the goods with·
G whom the Board had no contract of bailment and consequently
no contractual obligation to pay the 'raies or rent'. [Para 38] [615D-E; 616-A, F-H; 617-A-B]
2.6 Enquiry into the relationship between either the Board,
the consignor of goods, the owner of the vessel and the £teamer
H
MJS: RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE
595
OF PORT OF BOMBAY
agent on one hand or the consignee and the Board on the other, A
is wholly irrelevant in examining the right of the Board to recover
the amounts due towards the rates or rent for services rendered
with respect to the goods. The right of the Board is
unquestionable. The only question is: from whom can the Board
recover and not who is liable. Depending on the nature of the B
relationship between the consignor and consignee, the liability
may befall either of them. [Para 39) [617-B-D]
2.7 On the other hand, the 1" respondent is a sub-bailee of
the goods bailed by consignor (bailor) to the ship-owner (bailee).
The goods are bailed through the agent (steamer agent) of the
bailee. The appellant is only a person claiming through the bailor,
C
without any direct contractual relationship with the 1st respon«:Ient.
[Para 40) [617-D-E]
2.8 Therefore, the 1st respondent (sub-bailee) would be
entitled to enforce its rights flowing from the bailment between
the ship-owner and the 1st respondent against the consignee and D
recover expenses incurred by it in connection w~th the bailment
from the consignee. The terms and conditions of the contract
between the consignor or person claiming delivery of the gaods
are irrelevant for determining the right of the 1" respondent to
recover its dues. The obligations/liability of the consignee is
determined by the statute. But the said obligation is not exclusive
to the consignee. The consignor (bailor) is not relieved of the
obligation to pay by virtue of Section 158 of the Contract Act the
expenses incurred by the 1st respondent. The declaration under
Section 42(7) absolving the owner of the ship and his agents is
limited only to the obligations owed by the bailor to the consignee
not to the sub-bailor like the 1" respondent. [Para 45) [619-D-G]
2.9 Section 59 f?f 1963 Act, creates lien in favour of 1 't
respondent in respect of any goods and also authorises the 1 ''
respondent to seize and detain the goods, it clearly makes a special
provision. Under the Contracts Act, every bailee has no lien on
the goods delivered to him. Such a lien is available only to limited
classes of bailees specified under Section 171. They are -
bankers, factors, wharfingers, attorneys of a High Court and
policy-brokers. It can be seen from Section 171 that only those
E
F
G .
H
596
SUPREME COURT REPORTS
[2017] 4 S.C.R.
A specific categories of bailees have a right to retain goods bailed
to them as security for the amounts due to them. No other
category of bailee has such a right unless there is an express
contract creating such a lien. Section 59 of 1963 Act, also
expressly authorises the 1" respondent to seize and detain goods
B taken charge of by it. Parliament also invested the 1" respondent
with the authority to sell the goods and appropriate the proceeds
of sale under Section 63 of the 1963 Act towards various heads
indicated thereunder without the need to file a suit·. [Paras 46
and 47) [619-H; 620-A-C; 621-AJ
C
2.10 If the 1963 Act authorises the 1'' respondent to
recover its dues by bailing the goods under bailment, in those
cases where the consignee does not turn up to take the delivery
of the goods within the time stipulated under Sections 61 or 62 of
the 1963 Act, to deny the right to demand and recover the amounts
due from the consignee when he seeks delivery of the goods
D under bailment would be illogical and inconsistent with the scheme
of the 1963 Act. [Para 48] [621-B-C]
2.11 Denying such a right on the ground that the person
claiming delivery of the goods acquired title to the goods only
towards the end of the period of the bailment of the goods with
E
the 1'' respondent would result in driving the 1'' respondent to
recover the amount due to it from the bailor or his agent who
may or may not be within the jurisdiction of the municipal courts
of this country (by resorting to a cumbersome procedure of
litigation). [Para 48) [621-DJ
F
Trustees of the Port of Madras, Through its Chairman
v. K.P. V. Sheikh Mohd. Rowther & Co. Pvt. Ltd. & Anr.
(1997) 10 SCC 285; Forbes Forbes Campbell &
Company Limited v. Board of Trustees, Port of Bombay
(2015) 1 sec 228 : [2014] 12 SCR 337 - relied on.
G
The Trustees of the Port of Madras by its Chairman v.
H
K.P. V. Sheik Mohamed Rowther & Co. & Ors. [1963)
Supp. 2 SCR 915 - held inapplicable.
Port of Bombay v. Sriyanesh Knitters (1999) 7 SCC
359 : [1999) 3 SCR 1238 - referred to.
MIS. RASIKLAL KANTII
& CO. v. BOARD OF TRUSTEE
597
OF PO!ri' OF BOMBAY
Indian Contract and Specific Relief Acts by Pollock and
A
Mu/la, J 31h Edition - referred to.
3.1 The guidelines permit granting of remission upto 80
per cent of demurrage in appropriate cases. However, the cap of
80 per cent is not absolute. The 1'1 respondent can even grant
complete remission in appropriate cases. Admittedly, the 1'1 B
respondent granted remission to an extent of Rs.90,52,535.00
(approximately) out of the total claim towards demurrage of
Rs.2,81,67,333.00. The liability to pay demurrage arose because
of the non-clearance of the goods from the l '1 respondent's
property for a considerable period of time. [Para 49) [622-C-D) c
3.2 Delay in taking delivery before the point of time when
appellant started claiming the right to take delivery, is attributable
purely to the failure of the original consignee. The appellant clearly
knew or at least ought to have known, when he purchased the
goods that the 1st respondent would demand demurrage. The D
appellant as a person claiming through the consignor is not
- entitled in law to claim any right of remission on the ground that
he did not have any interest or title in the goods for such period.
Delay after the appellant's right to take delivery of goods ume
into existence, occurred because of the time taken in ensuring
that the appellant complied with the various statutory obligations E
to import goods such as amendment of the IGM etc. The fact
that the appellant was not permitted to clear the goods because_
of the pendency of some proceedings initiated by the customs
authorities by itself does not create a right of remission in favour
of the appellant. Thougltit may constitute a relevant circumstance
for considering granting remission if the l '1 respondent so chooses
as a matter of policy. As a matter of fact, remission of a part of the
demurrage was granted by the 1 •1 respondent. [Paras 49 and 50)
[623-A-D]
,
.
International Airports Authority of India v. Grand·Slam
International (1995) 3 SCC 151 : [1995) 2 SCR 149referred to.
3.3 The respondent's decision to decline remission to the
appellant cannot be called discriminatory, on the ground that
F
G
H
598
SUPREME COURT REPORTS
[2017] 4 S.C.R.
A remission was granted in the case of a similarly situated consignee.
The cases of that consignee and that of the appellant are not
identical. [Paras 51 and 52) [623-E-F)
3.4 However, the authority of the 1 '' respondent to grant
or decline remission of any amount due towards any rate payable
B under the 1963 Act must be based on rational consideration and
a sound policy. Such a requirement is inherent in the fact that 1"
respondent is a statutory body discharging important statutory
obligations. 1" respondent could not bring anything on.record
which demonstrates the reasons for declining remission as
claimed by the appellant nor any clear policy of the respondent
c
D
E
F
G
which regulates the discretion. Therefore, the decision of 1''
respondent dated 16.09.1995 in declining the remission is set
aside and it is left open to the respondent to take appropriate
decision on the application duly recording the reasons for such
decision. [Para 53) [624-B-D)
Trustees of the Port of Madras v. Aminchand Pyarelal
& Ors. (1976) 3 SCC 167 : [1976) 1 SCR 721;
International Airport Authority of India v. Ashok
Dhawan and Ors. (1997) 11 SCC 343 - referred to.
Case Law Reference
[1976) 1 SCR 721
referred to
Para 25
(1997) 11 sec 343
referred to
Para 26
(1963) Supp. 2 SCR 915
held inapplicable
Para 32
(1997) 10 sec 285
relied on
Para 32
[2014) 12 SCR 337
relied on
Para 32
[1999) 3 SCR 1238
referred to
Para 36
[1981] 1 SCR 532
relied on
Para 38
(1995) 2 SCR 149
referred to
Para 50
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5968
H
of2011.
MIS. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE
599
OF PORT OF BOMBAY
From the Judgment and Order dated 12.04.2010 of the High Court A
of Judicature at Bombay in Writ Petition No. 2012 of 1996.
Anirudh Deshmukh, Mohit D. Ram, Advs. for the Appellant.
Ms. Pinky Anand, ASG, Parag P. Tripathi, Ashok Panda, Sr. Advs.,
A. V. Rangam, Buddy A. Ranganadhan, D. V. Raghu Vamsy, Kabir
Hathi, A&hok K. Srivastav, Shashank Dewan, B. Krishna Prasad, Advs.
B
for the Respondents.
The Judgment of the Court was delivered by
J. CHELAMESWAR, J. l. Written submissions filed by the
appellant present a reasonably concise and sufficiently reliable statement c
of facts for adjudication of this appeal. Insofar as relevant they are:
"During the period November 1991 to January 1992, 78 shipments
of zinc ingots and copper iron bars were imported by 5 different
consignees from one Mis Metal Distributors (UK) Ltd.; these
consignments were landed at the Bombay Port. The consignees filed D
bills of entry for 37 out of the 78 consignments, but subsequently failed
to lift the consignments and thus, they came to be stored at by the Port
of Bombay.
The distinguishing factor of the above consignments was that they
were shipped on "CAD Basis" i.e. cash against documents, in which
E
the title to the goods would remain with the exporter till such a time the
importer would retire the documents against payments.
Facing a grave loss M/s Metal Distributors (UK) Ltd., requested
the present petitioner, if they were interested in purchasing the goods. It
is pertin~nt to mention that the present petitioner and the original
F
consignees are no where related, and the present petitioner is a third
party to the sales.
On 23.03.1992, the petitioner through his agent applied to the
Customs Authorities to have the Bills of Entry substituted in their name
for the 3 7 consignments for which the original consignees had filed Bills
G
of Entry, and also applielto file Bills of Entry for the remaining 41
consignments lying unclaimed. The formal agreement between the Ml
s Metal Distributors (UK) Ltd. and the petitioner was entered
subsequently, in April of 1992.
H
600
SUPREME COURT REPORTS
[2017] 4 S.C.R.
A
That on 05.05.1992 the Clearing Agent of the petitioner wrote to
the Customs Authorities seeking an amendment of the IGM so that the
goods could be cleared. This was followed by a communication dated
03.06.1992 from the original exporter i.e. Mis Metal Distributors UK
that the petitioner had agreed to buy the aforesaid consignments since
B the original importers had failed to clear the goods.
c
It is pertinentto mention that on 04.09.1992 the Customs Authority
wrote to the petitioner stating that would be granting permission to amend
the IGM for only 41 consignments and that the balance 3 7 consignments
on the ground that Bills of Entry for those consignments stood filed.
On 09.09.1992 the petitioner was granted a detention certificate
by the Customs Authority for the aforesaid 41 consignments signifying
the period of detention as from 09.06.1992 to 09 .09 .1992. Since the said
period was incorrect, the petitioner requested the Customs Authority to
correct the Detention Certificate and the same was subsequently
D corrected to reflect the date as 23 .03 .1992 to 09 .09 .1992. It is pertinent
to mention that the Detention Certificate initially read "for procedural
formalities for amending the IGM" however subsequently the aforesaid
detention certificates were amended by the Detention Certificates dated
18.11.1993and01.12.1993 for the 41 consignments and specifically 'read
for "bonafide operation ofITC Formalities".
E
In the meantime the Government of India was pleased t.0 notify
the "Statement of Guidelines for Remission of Demurrage Charges",
1992, vide which in certain cases where goods/consignments detained
by Customs for "ITC Facilities" were to be considered for grant of
remission from payment of demurrage for the period the goods were
F
being so processed by Customs Authorities.
In the meantime the Port of Bombay levied a total of
Rs.2,81,67 ,333 as demurrage charges, the total remission granted by the
Port of Bombay was Rs.90,52,535, and therefore demanded a balance
G ofRs.1,91,14,798 on the ground that the petitioner was liable to pay
demurrage for the period of 23 .03 .1992 till 09 .09 .1992, on the ground
that no remission could be granted prior to date of noting.
H
Thus, on 16.09.1995, the Port of Bombay rejected the request of
the petitioner for grant of remission of demurrage."
MIS. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE
OF PORT OF BOMBAY [J. CHELAMESWAR, J.]
2. Aggrieved by the order of the Ist respondent, the appellant,
filed WP No.2012/19961• The appellant however cleared the goods after
making payment of the amount (claimed by the 1" respondent towards
demurrage ), under protest.
3. By the judgment underappeal dated 12.4.2010, the High Court
dismissed the writ petition. Hence the appeal.
4. The only issue pleaded and argued before the High Court in the
above-mentioned writ petition was the correctness of the decision of the
1" respondent to decline grant of remission of the entire demand towards
demurrage on account of non-clearance of the goods.
5. However, before us, a twofold submission is made by the
appellant:
(i) that the appellant acquired title to the goods long after they
arrived in the 1st respondent's port and discharged from the
vessel which carried the goods. Therefore, demurrage
1 Prayer in Writ Petition No.2012 of 1996:
(a) The this Hon'ble Court be pleased to declare that the impugned action on the part
of the Respondents 1 to 3 in not granting the remission of demurrage charges in respect
of the said consignments since inception and restricting granting of remission of demurrage
charges oniy from the date of tiling of the bills of entry in the name of the petitioners
were and are unlawful, illegal and null and void.
(b) That this Hon'ble Court be pleased to issue a writ of Certiorari or a Writ in the
nature of Certiorari or any other appropriate writ, order or direction calling for the
record and proceedings in the matter of the application of the petitioners for review and
reconsideration of the grant of remission/refund of demurrage charges of various
consignments set out in the petition hereabove as also in relation to the said
communication dated 24.5.1996 and after considering the validity, legality and propriety
ihereof, be pleased to quash and set aside the said action and/or decision on the pmt of
the Respondents 1 to 3 in not granting further remission of demurrage charges in favour
of the petitioners;
601
A
B
c
D
E
F
(c) That this Hon'ble Court be pleased to issue a writ of Mandamus or a writ in the
nature of Mandamus or any other appropriate writ, order or direction ordering and
directing the Respondents I to 3 to forthwith grant remission and/or refund of the
amount of Rs. alongwith interest thereon at the rate of 18% per annum from the date of
payment of the respective amounts as per the statement annexed hereto and marked as
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Exhibit in favour of the petitioners;
(d) In the alternative and without prejudice to the above;
This Hon'ble Court be pleased to order the Respondents 4 and 5 to pay to the
petitioners the deficit amount after considering the remission that has already been
granted and that will be granted by the Respondent l to 3 along with interest thereon at
18% per annum from such date as this Hon'ble Court may deem fit;
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payable for the period anterior to appellant's acquisition of
title to the goods is to be collected from the steamer agent of
the vessel; and the appellant incurs no liability in law to pay
the demurrage -since the 1st respondent rendered no service
to the appellant during that period;
(ii) In the alternative, it is argued that in view of the facts and
circumstances of the case, the appellant is entitled for complete
remission of the amount claimed towards demurrage on
account of delayed clearance of the goods. According to the
appellant-a substantial portion of the delay occurred because
of the non-clearance of the goods by the customs department.
(iii) An ancillary submission in this regard is that the 1 ''respondent
granted complete remission of the amount payable towards
demurrage in the case of another importer i.e. M/s. Gilt Pack
who was similarly situated. Therefore, the action of the 1st
respondent in declining remission to the appellant is
discriminatory.
6. To decide the correctness of the various submissions noted
above, an examination of the rights and obligations of the 1st respondent
and its authority to collect demurrage is required.
7. Import and export of goods into any country has always been
E the subject matter of regulation. This has been a potential source for
raising revenue. Import or export of goods could be either by land, sea
or air; by use of vehicles, vessels or aircrafts. Since we are concerned
in this case with import of goods by sea, we confine our examination to
the law dealing with it.
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Without going into the historical details of the import export trade
and regulations thereon, suffice it to state that under Section 292 of the
Customs Act, 1962, the person-in-charge of a vessel entering India from
any place outside India is prohibited from causing or permitting the entry
of such vessel at any place other than a customs port, subject to certain
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2 Section 29. Arrival of vessels and aircrafts in India.-( l) The person-in-charge of a
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vessel ... entering India from any place outside India shall not cause or permit the
vessel ... to call or ... -
(a) for the first time after arrival in India; or
(b) at any time while it is carrying passengers or cargo brought in that vessel or
aircraft, at any place other than a customs port or a customs airport, as the case may be
unless permitted by the Board.
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MIS. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE
603
OF PORT OF BOMBAY [J. CHELAMESWAR, J.)
exceptions. The expression "customs port" is defined under Section 2( 12)3
A
of the Customs Act, 1962. Section 7 thereof authorises the Centl'.al ·
Board of Excise and Customs constituted under the Central Boards of
Revenue Act, 1963 to appoint by a notification in the official gazette, the
ports which alone shall be customs ports for the unloading of imported
goods and the loading of export goods etc.
IndianPortsActs, 1855, 1875, 1889and 1908regulatedtheactivities
of the ports in India. The Port Trust Acts of 1879, 1890 and 1905 of
Bombay, Calcutta and Madras respectively regulated the activities of
the said ports in India through Port Trusts (bodies corporate).
8. Some of these are repealed and others modified4 by the Major
Port Trusts Act, 1963 (hereinafter referred to as 'THE ACT") which is .
a law made by the Parliament "to make provision for the constitution of
port autaorities for certain major ports in India and to vest the
administration, control and management of such ports in those authorities''.
Section:; of THE ACT authorises the Central Government to constitute
a Board of Trustees in respect of any major port. Qua the definition
under Section 2(b )5, the Board of Trustees so constituted is called
BOARD6• Section 5 of the ACT declares each of the BOARDS to be
a body corporate to administer, control and manage the port of Bombay.
Different BOARDS came to be constituted for different major poi ts in
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the country. The 1st respondent is admittedly one of the BOARDS 'E
constitut~d under Section 3( I) ?fTHE ACT.
9. We shall now examine the provisions of THE ACT insofar as it
is relevant for the purpose of this case.
10. Section 35(1)7 of the Act obligates BOARDS to execute
.3 Section 2(12f "customs port" means any port appointed under clause (a) ofsection.7
to be a customs port, and includes a place appointed under clause (aa) of that section to
be an inland container depot.
4 A complete analysis of the evolution of the law in this regard requires an elaborate
study and would be beyond the scope of any judgment.
'Section 2(b) "Board", in relation to a port, means the Board ofTmstees constituted
under this Act for that port;
.
6 Section 3. Constitution of Board ofTmstees.-{ I) With effect from such date as may
be specified by notification in the Official Gazette, the Central Government shall-cause
to be constituted in respect ofany major port a Board ofTmstees to be called the Board
ofTmstees of that port, which shall consist of the following Tmstees, namely ...
7 Section 35 (I) A Board may execute such works within or without the limits of the
port and provide such appliances as it may deem necessary or expedient.
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A various works, within or even without the limits of the ports8 being
administered by each of the BOARDS, of the nature indicated under
Section 35(2)(a) to(!). An examination of the tenor of the various clauses
indic<>tes that such works are intended to facilitate creation pf ports
which can be conveniently used by (vessels9) for loading and unloading
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of cargo etc.
11. Section 3 7 to 42 of the Act authorise BOARDS to compel sea
going vessels to use the works executed by BOARDS for landing or
shipping of any goods -or passengers, subject to various conditions
specified under the said provisions.
12. Section 41 (1) contemplates the publication of a notified order.
By such an order, BOARD may "(i) declare that such dock, berth, wharf,
quay, stage, jetty or pier is ready for receiving, landing or shipment of
goods or passengers from or on vessels, not being sea-going vessels,
and, (ii) direct that within certain limits to be specified therein it shall not
D be lawful, without the express sanction of the Board, to land or ship any
goods or passengers out of, or into, any vessel, not being a sea-going
vessel, of any class specified in such order, except at such dock, berth,
wharf, quay, stage, jetty or pier". Section 41 (2) declares that once such
a notified order is published, "it shall not be lawful without the consent of
the Board for any vessel":
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(i) to land or ship any goods or passengers at any place within
the limits so specified, except at such dock, berth, wharf,
quay, stage, jetty or pier; or
(ii) while within such limits, to anchor, fasten or lie within fifty
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- yards of the ordinary low-water mark."
13. Section 42(2) authorises BOARDS to take charge of the goods
for performing such services.
-
• The expression "Port" is defined under Section 2(q) as follows:-
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"Section 2 (q) "port" means any major port to which this Act applies within
such limits as may, from time to time, be defined by the Central Government for
the purposes of this Act by notification in the Official Gazette, and, until a
notification is so issued, within such limits as may have been defined by the
Central Government under the provisions of the Indian Ports Act;"
9 Section 2(z) "vessel" includes anything made for the conveyance, mainly by water, of
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human beings or of goods and a caisson;"
MIS. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE
605
OF PORT OF BOMBAY {J. CHELAMESWAR, J.]
A ·Board may, if so requested by the owner, take charge of the A
goods for the purpose of performing the service or services and
shall give a receipt in such form as the Board may specify.
Sub-section (7) declares that when the charge bf the goods is taken and
receipt given, the recipient is discharged of any liability for the damage
or loss occurring to the goods thereafter10•
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14. Section 43 stipulates the nature and extent of the responsibility
of BOARDS for any loss or destruction or deterioration in the goods
which were taken charge of by BOARD - details of which are not
necessary for the present purpose.
15. Chapter VI of the Act deals with imposition and recovery of C
rates at ports. The expression "rate" is defined under Section 2(v) 11 •
16. Various services which BOARDS are obliged to perforr:i are
specified under various provisions of THE ACT. Those services fall
into thre.: categories - (I) services rendered to the vessel entering the
Port; (2) services rendered to goods either imported by vessels or to be
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exported through vessel, and (3) services rendered to passengers arriving
or departing from vessels in the Port.
17. Sections 49A, 49B, 50A and SOB deal ~ith services to be
rendered by a BOARD exclusively to vessels using the Port administered
by BOARDS and authorise the collection of various rates specified E
under each of those sections for services referred to therein, as and
when rendered.
18. Section 48 prior to its amendment (by Act 15 of 1997)
authorised every BOARD administering each of the major ports to
prescribe a scale ofrates for various services rendered by that BOARD.
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Section 48 (pre 1997 Amendment)12
"Section 48. Scales of rates for services performed by Board or
other person.-(!) Every Board shall from time to time frame a
10 Section 42(7). After any goods have been taken charge of and a receipt given for them
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under this section, no liability for any loss or damage which may occur to them
shall attach to any person to whom a receipt has been given or to the master or owner
of the vessel from which the goods have been landed or transshipped.
11 Section 2(v)- "rate" includes any toll, due, rent. rate, fee, or charge leviable under this
Act;
12 Post 1997, a common authority (TARIFF AUTHORITY). for all major ports is
brought into existence under Section 4 7 A to frame scales.
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scale of rates at which and a statement of the conditions under ·
which, any of the services specified hereunder shall be performed
by itself or any person authorised under section 42 at or in-relation
to the port or port approaches-
( a) transshipping of passengers or goods between vessels in the
port or port approaches;
(b) landing and shipping of passengers or goods from or to such
vessels to or from any wharf, quay, jetty, pier, dock, berth,
mooring, stage or erection, land or building in the possession
or occupation of the Board or at any place within the limits of
the port or port approaches;
(c) cranage or porterage of goods on any such place;
(d) wharfage, storage or demurrage of goods on any such place;
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( e) any other service in respect of vessels, passengers or goods,
excepting the services in respect of vessels for which fees
are chargeable under the Indian Ports Act.
(2) Different scales and conditions may be framed for different
classes of goods and vessels."
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Section 48( I)(a) and (b) indicate the nature of services to be
rendered by BOARDS. Section 48( I)( c) and ( d) indicate the nature of
the rate payable for such services. ·Clause ( d) inter alia provi:les that
BOARDS can frame scale of rates for storage or demurrage of goods
on any such place. The expression "such place" occurring under clause
F ( d) must necessarily refer to the places mentioned in Section 48( 1 )(b)
i.e. wharf, quay, jetty, pier, dock, berth etc executed by, and land or
building either in "possession or occupation" of BOARDS.
19. It is apparent from the language of Section 48 that though it
autho:ises BOARDS to stipulate and collect rates for various services
to be rendered, the Act is silent regarding persons from whom
G such rates could be collected. It is pertinent to note that since services
contemplated under Sections 49A, 49B, 50A and SOB are services
exclusively to be rendered to the vessel (ship). It is reasonable to interpret
that only the ship and its agents are liable to pay the rates for those
services. We are fortified in our conclusion by the language of Sections
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MIS. RASIKLAL KANTILAL & CO. v. BOARD OF TRUSTEE
OF PORT OF BOMBAY [J. CHELAMESWAR, J.)
50A1 3 and 50B14 which make it express when they say "she15 would
otherwise be chargeable".
20. Section 64 authorises BOARDS to "distrain or arrest" a vessel
when the master of that vessd refuses or neglects to pay any rate or
penalty payable under this Act and to "detain" the vessel until the amount
due to the BOARD is paid.
21. On the other hand, with reference to services rendered to
goods, a lien 16 is created under Section 59( 1 )17 on the goods, in favour of
BOARDS, and BOARDS are also entitled to seize and detain the goods
until the rates and rents are fully paid.
22. It appears to us that in view of the fact Section 42(2) only
contemplates "taking charge" of the goods but not "taking possession"
of goods, Parliament conferred on BOARDS the authority to "seize and
detain" the goods of which charge is taken of. The purpose behind the
twin declarations contained in Section 59 is a little intriguing. However,
we do not wish to express any final opinion in this regard as no submission
in this regard is made and such an examination is not necessary for
deciding the case on hand.
23. Under Sections 61 and 62 of the Act, such detained goods
could be sold by the BOARD either by public auction or otherwise,
subject to conditions stipulated in those Sections and following the
procedure specified thereunder without the need to file a suit for the
recovery of the amounts due to the BOARDS. .
13 Section SOA. Port-due on vessels in ballast.- A vessel entering any port in ballast
and not carrying passengers shall be charged with a port-due at a rate to be determined
by the Authority and not exceeding three-fourths of the rate with which she would
otherwise be chargeable.
14 Section SOB. Port-due on vessels not discharging or taking in cargo.- When a
vessel enters a port but does not discharge or take in any cargo or passengers therein,
(within thL exception of such unshipment and reshipment as may be necessary for
purposes of repair), she shall be charged with a port-due at a rate to be determined
by the aut~ority and not exceeding half the rate with which she would otherw:se· be
chargeable.
"In Maritime Law by a long established practice a vessel is always referred to as "she".
"Lien is defined in Halsbury's Laws of England (4'" Edition, Volume 28 at page 221,
para 502) as "In its primary or legal sense "lien" means a right at common law in one
man to retain that which is rightfully and continuously in his possession belonging to
another until the present and accrued claims are satisfied."
17 Section 59. Board's lien for rates.-(!) For the amount of all rates leviable under this
Act in respect of any goods, and for the rent due to the Board for any buildings, plinths
stacking areas, or other premises on or in which any goods may have been placed, the
Board shall have a lien on such goods, and may seize and detain the same until such
rates and rents are fully paid.
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24. The dispute in this case centres around demurrage. Therefore,
we deem it appropriate to examine the meaning of the expression
"demurrage".