# TRUSTEES OF THE PORT OF MADRAS v. MIS. AMINCHAND PYARELAL & ORS

- **Citation:** [1976] 1 S.C.R. 721
- **Court:** Supreme Court of India
- **Decided:** 1975-09-09
- **Case number:** Civil Appeal No. 707 of 1973
- **Bench:** A. N. Ray, K. K. Mathew Andy. V. Chandrachud
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/trustees-of-the-port-of-madras-v-mis-aminchand-pyarelal-ors-6666
- **Pages:** 18

## Headnote

Madras Port Trust Act 1905-Sec. 42, 43, 43A-Port Trust
Rules 13Bye-law-Nature of--:-De1nurrage-Unreasona]Jle-Cusio111s Act Secs.
17(3) &
17(4).
On 10-4-1968, a steamer arrived at the Madras port and landed inter alia a
consignment of 202 bundles of black plain sheets of various sizes. The appellanls received the goods and stored them in the transit sheds. The goods were
imported by- the, first respondent. under an authorisation issued by the State
Trading Corporation of India which held a licence to import the goods from
IIungary. The. clearing agents of the first respondent filed a bill of entry with
the Collector of Customs. But, the Customs authorities detained the goods
as the spe1;ifications in the import licence did not tally with the description of
the imported goods. The
Customs
Authorities then issued a show cause
notice ro 1he 1st respondent and afer considering his explanation passed an
order confiscating the goods.
The first respondent preferred an appeal against that order to the Board·
which allowed the appeal.
On; an application of respondent No. 1 the CustGms
Autborities issued a certificate stating that the goods were detained by the
Customs. Authorities from 24~4-1%3 to 21-8-1964 for examination under sections
170) and 17(4) of the Customs Act, 1962 other than in the ordinary pro·
cess. of appraisement and that the detention was due to no fault or negligence
on the part of the respondent. Acting on this certificate, the appellants waivedthe demurrage for the period covered by the certificate. As a result of the
said certificate, the appellant charged respondent No. 1, Rs. 1963/ - instead of
Rs.. 3,20,951/- by way of demurrag_e.
Thereafter, the respondent No. 1 cleared the consignment.
In January, 1965, the appellants wrote a letter to the Customs Authorities
stating that the certificate was issued erroneously and that the C'ustorns Authoritie~ should reconsider the· matter. -In April, 1965, the Customs Authorities
owned the mistake that the certificate was incorrect as the goods were detained
in order to ascertain whether the Import Trade Control formalities were cOm.1
plied with and not for examination and assessment of duty under
Sections
17(3) and 17(4) of the Customs Act.
The appellants brought thei present suit against respondent No. J, and the
Union of India and Customs Authorities to recover the balance of demurrage
amounting to1 about Rs. 3 La95. The· first respondent disputed its liability
to,
pay the demurrage on the ground that it could not be penalised either for the
delay caused by the Customs Authorities in clearing the goods or in the issuance
by them of a wrong certificate.
The first respondent also contended that the
~cale of charges in the Port Trust Regulati'ons under the heading Demurrage
was void and ultra vires both for the reason that it was unreas-onab!e and because the scale· of charges was not within the authority of the appellants.
The High Court dismissed the suit for the following reasons :-
( 1) The Scale of rates fixed by the Board is in the nature of byelaws.
(2) v·iewed as a bye-law Rule 13(b) under which the Board can chargedemurrage for the period during which the goods are detained for
no fault or negligence or the importer or his agent, is unreasonable·
and therefore void.
(3) In princ.iple, there can be no distinction between cases falling under
clause (a) and those falling under clause (b) of Rule
13~ and if
722
SUPREME COURT REPORTS
(1976] 1 S.C.R.
no demurrage is leviable in respect of cases falling ·within clause
(a) no den1urrage could be charged in respect of cases fallinrr within
clause (b). The distinction made by the Board between fhe two
kinds of cases was therefore arbitrary and unreasonable.
( 4) 'Demurrage', being a charge for wilful f'ailure to remove the goods,
can be levied only if the failure to remove the goods is due to the
fault or negligence of the importer or his agent.
(5) Having regard to this well accepted meaning of the worJ \iernurrage', the au

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721
TRUSTEES OF THE PORT OF MADRAS
v.
MIS. AMINCHAND PYARELAL & ORS .
September 9, 1975
[A. N. RAY, C.J., K. K. MATHEW ANDY. V. CHANDRACHUD, JJ.]
Madras Port Trust Act 1905-Sec. 42, 43, 43A-Port Trust
Rules 13Bye-law-Nature of--:-De1nurrage-Unreasona]Jle-Cusio111s Act Secs.
17(3) &
17(4).
On 10-4-1968, a steamer arrived at the Madras port and landed inter alia a
consignment of 202 bundles of black plain sheets of various sizes. The appellanls received the goods and stored them in the transit sheds. The goods were
imported by- the, first respondent. under an authorisation issued by the State
Trading Corporation of India which held a licence to import the goods from
IIungary. The. clearing agents of the first respondent filed a bill of entry with
the Collector of Customs. But, the Customs authorities detained the goods
as the spe1;ifications in the import licence did not tally with the description of
the imported goods. The
Customs
Authorities then issued a show cause
notice ro 1he 1st respondent and afer considering his explanation passed an
order confiscating the goods.
The first respondent preferred an appeal against that order to the Board·
which allowed the appeal.
On; an application of respondent No. 1 the CustGms
Autborities issued a certificate stating that the goods were detained by the
Customs. Authorities from 24~4-1%3 to 21-8-1964 for examination under sections
170) and 17(4) of the Customs Act, 1962 other than in the ordinary pro·
cess. of appraisement and that the detention was due to no fault or negligence
on the part of the respondent. Acting on this certificate, the appellants waivedthe demurrage for the period covered by the certificate. As a result of the
said certificate, the appellant charged respondent No. 1, Rs. 1963/ - instead of
Rs.. 3,20,951/- by way of demurrag_e.
Thereafter, the respondent No. 1 cleared the consignment.
In January, 1965, the appellants wrote a letter to the Customs Authorities
stating that the certificate was issued erroneously and that the C'ustorns Authoritie~ should reconsider the· matter. -In April, 1965, the Customs Authorities
owned the mistake that the certificate was incorrect as the goods were detained
in order to ascertain whether the Import Trade Control formalities were cOm.1
plied with and not for examination and assessment of duty under
Sections
17(3) and 17(4) of the Customs Act.
The appellants brought thei present suit against respondent No. J, and the
Union of India and Customs Authorities to recover the balance of demurrage
amounting to1 about Rs. 3 La95. The· first respondent disputed its liability
to,
pay the demurrage on the ground that it could not be penalised either for the
delay caused by the Customs Authorities in clearing the goods or in the issuance
by them of a wrong certificate.
The first respondent also contended that the
~cale of charges in the Port Trust Regulati'ons under the heading Demurrage
was void and ultra vires both for the reason that it was unreas-onab!e and because the scale· of charges was not within the authority of the appellants.
The High Court dismissed the suit for the following reasons :-
( 1) The Scale of rates fixed by the Board is in the nature of byelaws.
(2) v·iewed as a bye-law Rule 13(b) under which the Board can chargedemurrage for the period during which the goods are detained for
no fault or negligence or the importer or his agent, is unreasonable·
and therefore void.
(3) In princ.iple, there can be no distinction between cases falling under
clause (a) and those falling under clause (b) of Rule
13~ and if
722
SUPREME COURT REPORTS
(1976] 1 S.C.R.
no demurrage is leviable in respect of cases falling ·within clause
(a) no den1urrage could be charged in respect of cases fallinrr within
clause (b). The distinction made by the Board between fhe two
kinds of cases was therefore arbitrary and unreasonable.
( 4) 'Demurrage', being a charge for wilful f'ailure to remove the goods,
can be levied only if the failure to remove the goods is due to the
fault or negligence of the importer or his agent.
(5) Having regard to this well accepted meaning of the worJ \iernurrage', the authority given to the Board by section 42. of the Act
to fran1e the scale of rates can be exercised only for the purpojf·
of lev,ying charges where the. importer was not prevented by any
lawful authority from clearing. the. goods from the transit art::i. and
he had defaulted or was negligent in clearing the goods.
(6) Since Rule 13(b) empowers the Board to charge demurrag~ even
when the goods are detained for
no fault or negligence of the·
importer or his a~nt, it is beyond the authority conferred by secti.on
42 and is therefore, void.
/\llowing the appeal,
J-IELD: (1) The High Court erred in holding that thoe. scale of rates· and
·statements of condition iran1ed by the appellant under sections 42, 43, arr,i 43A
are by-Jaws.
Thos~ sections confer authority on the Board to frame :::. seal~~
·of rates at which and a statement of con<litions undoe!" which
any
of
the
·services specified therein shall be performed. [732-C, 731-F]
2. A bye-law has been said to be an Ordinance affecting the puiJLic, or
·some portion of the public, impose.d by some authority clothed with statutory
powers, ordering something to be done or not to be done artd accompanied
"by some sanction or penalty for its non-observance.
The Board's power to
frame a 3cale of rates and statement of conditions is not a regulatory po'o\ier
to order that something must be done or something may not be done. 'The
rat.es and conditions govern the basis on which the Board performs the servicies.
Those who desire to avail of the services of the Board are liable to pay for
those services at prescribed rates and to perform the conditions framed by the
Board. In· fact some of the services which the: Board renders. are optional.
Where services are offered by a public authority on payment of' a pri~, conditions governing the, offer and acceptance of services are not in the nature of
'bye-laws. They reflect or represent an agreement between the parties; one
offering his services at the prescribed rates and the other acceptini the ~rv\ce!I
at those rates. [732-D-H]
3. Bye-laws may be i:reated as ultra vires on the grounds, among::>t othe.rs
that they are repugnant to the statute under which they are made or that they
are unreasonable. But even a bye-law cannot be declared ultra vires on tfu.e
ground of unreasonableness merely because the court thinks that it goes further
than is necessary or that it does not contain the necessary qualification~ or ex ..
ceptions.
I<rrrsc v. Johnson [1898] 2 Q.B. 9·1, relied on.
1731-F, 733 Bl
4. Port Trusts are bodies of a public representative ch":racter who are entrusted by the Legislature with authority to frame a scale of rates and ?-
state~ent
of conditions subject to which they shall or may perforn1 certain
serv1c~'·
Port Trusts are nor commercial organis-atiorn which carry on business for their
own profit.
Th~ Board . of Trustees is bro~d-based bod}' r~presenting a .. cross
sec1ion of a vanetv of interests. The. requirement of sanction by the central
Government is a iestraint on unwise, excessive, or arbitrary fixation of' rates.
section of a variety of inter:-sts.
ThP. requirement of sanction bv the Central
whole or any portion of rates or char,!!e& Ieyiable according to any scale· in
force und~r section 44.
Thus the Statute provides for the necessary safeguards,
checkS and counter checks as an insurance against fixation and levy of harsh
or unjust rates.
Section 49 of the A.ct confers power on 1he Assistant Coltec-
-tor of Customs if he is satisfied that the good~ cannot be cleared v•i!hin a
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PORT TRUSTEES MADRAS v. AMJNCHAND (Chandrac/ntd, J.)723
reasonable time to permit that the· goods might pending clearance be stored
in a public warehouse or in a private warehouse.
In face of these considerations
it is impossible to characterise the scheme for the levy of rates. a5 arbitrary
or unreasonable.
[734 B & G-H, 735 A<C]
5. The High Court erred in equating cases falling under clause (b) with
th011e falling under clause (a) of Rule 13.
Th~ two classes d,al with. different
sets of cases. Oause (a) deals with cases where goods are detained for examination under sections 17(3) and 17(4) or for chemical test under section 144
whereas clause. (b) deals with cases where the goods are detained on account
of Import Trade Control formalities or for compliance of formalities prescribed under the Drugs Act. There is no warrant for the cotut substituting
its own view as to the allowance of i'ree days in a technical matter like the
fixation of rates which has been considered by an export Board of Trustees
and whose decision has been confirmed by the Central Government. Equating
the two clauses of cases dealt with by clauses (a) and (b) of Rule 13 might
seem to the court a more prudent or reasonable way of fixing scales· of rate5
but that is not a correct test for deciding thd validity of the impugned provi~
sion. [735-D-F]
6. The· High Court overlooked a fundamental aspect of fixation of rate5.
The Board is under a statutory obligation to render 9.::rvices of various kinds
and those services have not to be rendered for the personal benefit of this or
that importer but in the larger national interest. Congestion in the port:ii
affects the free movement of ships and of essentia.t goods.
The scale of rates
has, therefore, to be framed in a manner which will act both as an incentive
and as a compulsion for the expeditious removal of' the goods from the transit
area. Ships, like wagons, have to be kept moving and that can happen only
if there is pressure on the importer to remove the goods from the· Board's
permises with the utmost expedition. [735-F-H; 736 A]
7. As regards the appellants' claim against the first respondent, facts. mmt
came before the law because legal principles cannot be appli"ed in a. vacuum.
No oral evidence was let by the parties and documents do not prove themselves nor indeed is the admissibility of' a document proof by itself of the truth
of its contents. The lmpon Licence stood in the name· of the State Trading
Corporation. It issued an authorisation in favour of the first respondent. The
first respondent was only entitled to charge a commission for the work done
by it in pursuance of the ;iuthorisation issued by the Corporation. If
the
appellants were· to enforce the statutory lien. the incidence of the demurrage
wouJd have fallen on the Corporation in whom the title to the goods was
vested. The appellants permitted the goods to be cleared without demanding
the demurrage which they claimed later, thereby depriving the respondent of
the opportunity and the right to reject the goods as against the supplier. In
th•e. absence of any more facts, it is impossible on the rer.-0rd. as it stands, to
accept the :}ppellants~ claim against the first respondent. l737 F-H. 738 A-B]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 707 of 1973~
From the Judgment and Decree dated the 23rd December 1971
of the Madras High Court in Civil Suit No. 158 of 1966.
K. S. Ramamurthi, S. Balakrishnan, N. M. Ghatate for the appellant.
A. K. Sen, !. S. Arora and H. K. Puri for respondent No. 1.
G. L. Sanghi and Gidsh Chandra for respondents Nos. 2 anti 3.
The Judgment of the Court' was delivered by
CHANDRACHUD, J.-The Trustees of the Port of Madras, appellants herein, filed suit No. 158 of 1966 in the High Court of Madras
for recovering a sum of Rs. 3, 18,968.04 from the respondents by way
724
SUPREME COURT REPORTS
[1976] 1 S.C.R.
of demurrage.
The !st respondent is a firm called M/s. Aminchand
Pyarelal, the 2nd respondent is the Union
of India and the 3rd
respondent is the Collector of Gustoms, Madras.
A learned single
Judge referred the suit to a Division Bench which dismissed it by a
judgment dated December 23, 1971. This is an appeal by certificate
granted by the High Court under Article 133(1) (a) of the Constitution.
On April 10, 1963 a Steamer "AP.J. AK.ASH" arrived at the
Madras Port and landed, among other goods, a consignment of 202
bundles of black plain sheets of various sizes. The appellants. received the goods and stored them in transit sheds.
The goods were
imported by the 1st respondent under an authorisation issued by the
State Trading Corporation of India which held a licence dated June
16, 1962 to import the goods from Hungary.
The Clearing Agents
of the 1st respondent filed. a Bill of Entry with the 3rd respondent
but the Customs authorities detained the goods as the specifications
in the import licence did not tally with the description of the imported goods.
The Customs ruuthorities then issued a show cause notice
to the 1st respondent and after considering its explanation the 3rd
respondent passed an order on November 12, 1963 confiscating the
goods under section 111 (a) of the Customs Act, 1962.
The 1st
respondent preferred an appeal against that order to the Central
Board of Excise and Customs, New Delhi, which was allowed by the
Board on July 27, 1964. On August 21, 1964 the Clearing Agents
of the 1st respondent requested the Customs authorities to issue a
certifiwte for the remission of the transit dues for the period during
which the goods were detained. A certificate was accordingly issued
by the 3rd respondent stating that the goods were detained by the
Customs Authoritks from April 24, 1963 to August 21, 1964 for
examination under section 17 ( 3) and section 17 ( 4) of the Customs
Act 1962, other than in the ordinary process of appraisement and
that the detention was due to no fault or negligence on the part of
the ls! respondent.
Acting on this certificate, appellants waived
the demurrage for the period covered by the certificate, whereupon
the 1st respondent cleared the consignment ou August 25 and August
27, 1964 on payment of the Harbour dues, Cranage charges and
Demurrage charges f0r the period not covered by the certificate.
Thinking that thei certificate was issued erronequsly, appellants
wrote a letter dated January 27, 1965 to the 3rd respondent requesting him to reconsider the matter.
By his letter of April 12, 1965
the 3rd respondent owned up the mistake and stated that the certi-
!icate was incorrect as the goods were detained in order to ascertain
whether the Import Trade Control formalities were complied with
and not for examination and assessment 0£ duty under section 17(3)
and ( 4) of the Customs Act.
The case of the appellants is that due to the negligent mistake
committed by the 3rd !respondent in issuing the certificate,
they
charged to the 1st responde,nt a sum of Rs. 1963.60 only whereas
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PORT TRUSTEES MADRAS v. AMJNCHAND (Chandrachud, J.) 725
it was liable to pay a sum of Rs. 3,20,951.64 by way of demurrage.
The appellants called upon the 3rd respondent to pay up the balanC4
but the latter, by his reply dated July 6, 1965 repudiated all liability,
contending that the Union of lndia could not be held liable for the
negligent or tortious acts of its officers done in good faith during the
course of their official duties and that the appellants should seek
their remedy against the 1st respondent.
Later, the appellants brought the present suit against the three
respondents to rec()ver the demurrage.
The case of the appellants
as made out in the plaint is that the liability of respondents 2 and 3
was in! the region of contract or quasi-contract, that the appellants
were put to a Joss due to the wrong certificate •ssued by the 3rd
respondent and therefore respondents 2 and 3 could not repudiate
their liability to pay the demurrage. As regards the 1st respondent,
the case of the appellants is that it had contravened the Import Trade
Control regulations,. that it was fully aware of the true facts that
it was not open to it to take advantage of the wrong certificate issued
by respondent 3 and that therefore it was also liable to pay the
demurrage.
The 1st respondent disputed its liability to pay the demurrage
contending that it could not be penalised either for the delay caused
by the Customs authorities in clearing the goods or for the issuance
by them of a wrong certificate.
According to the 1st respondent,
the consignment imported in April, 1963 was one of a series of
consignments which the 1st respondent had imported under a contract with the State Trading Corporation for a fixed remuneration.
The 1st respondent had not authority to deal with he imported goods
but was bound to hand them over at the agreed price to the State
Trading CorporatiQn or its nominee. , The !st respondent further
stated that the only controversy raised by the Customs authorities
related to a difference in the size of the sheets imported under the
import licence and that if the appellants had called upon it to pay by
way of demurrage a sum as large as over rupees 3 Jakhs, the 1st
respondent would have rejected the goods as against the supplier
unless the State Trading Corporation was willing to accept the goods.
The inJport clearance orders
were granted on the recommendation
of the Corporation which held the import licence and which arranged
for the grant of import clearance permits to persons like the 1st
respondent on the basis that the goods were imported on behalf of
the Corporation.
Finally, the 1st respondent contended that the
scale of oharges in the Port Trnst Regulations nnder the heading
"Chapter IV-Demurrage" was void and ultra vires both for the reason
that it was unreasonable and because the scale of charoes was not
within the authority of the aopellants. The unreasonableness of the
demurraoe ch•r•es. according to1 the 1st resoondent, was obvious
from the fact that whereas the goods were of the value of Rs. 1.31.501
annell ants were claiming a sum of over rnpees 3 lakhs by way of
demurrage.
SUPREAfE COURT REPORTS
[1976] J S.C,R.
The 2nd respondent, the Union of India set out the various tacts
attendant upon the import of the goods ~nd contended that the
appellants had no qrnse of action against it or the 3rd respondent.
The 3rd respondent adopted the written statement of the 2nd respondent.
The High Court held that the levy of demurrage in cases where
the goods were detained by the Customs authorities for no fault or
negligence on the p~rt of the importer, was unreasonable and also
beyond the powers of the appellants and that the appellants were
not entitled to recover demurrage from any of the respondents.
Two questions, mainly, arise for consideration in this appeal :
firstly, whether the scale of fees under which the appellants charge
demurrage is void as being unreasotjable and as being beyond their
powers; and, if the answer to the first question is in the negative,
whether the 1st respondent is liable to pay the demurrage claimed
by the appellants. Counsel for the appellants did not press the claim
against respondents 2 and 3. The decision of the first question turns
on the relevant statutory provisions but before considering the validity
of the levy, it would be necessary to know the procedure which ~
adopted in the Madras Port during the process of importation and
clearance of goods.
The local agents of the ship Worm the Traffic Manager of the
Port Trust of the probable date of arrival of the ship and submit to
the Customs House the "Import General Manifest" which contains
a description of tile goods which are at board for landing at the Port.
The Dock Labour Board supplies the labour to the Master of the
ship for unloading the goods and for putting them o_Il the quay-side
so as to enable the Port Trust authorities to take charge of the goods.
The Port Trust Jabour handles the goods on the shore and when the
Port TiiUst takes charge of the same, it is obliged under section 39(3)
of the Madras Port Trust Act, 1905, to give a receipt to the Master
of the Ship.
With few exceptions, all goods received by the Port
Trust are kept in. the transit sheds. The Port Trust charges Harbour
Dues for receiving the goods, handling them and keeping them in
the transit sheds.
The importer then files the Import Application
and the Steamer Agent's Delivery Order which is in the nature of
an authority from the Ste&mer as bailor, to the Port Trust as the
bailee, to deliver the goods to the importer or his agent.
Section
45 of the Customs Act, 1962 forbids the person having the custody
of any imported goods in
the customs area from permitting their
removal except under and in accordance with the written permission
of the Customs authorities.
The goods are cleared by the Customs
authorities if the importation is not cot1trary to any law and if the
importer pays the import duty assessed on the goods and the other
charges payable under the Customs Act. If the customs officer is
of the opinion that the goods have been imported contrary to any
prohibition imposed bv the Customs Act or the Imports and Exports
(Control) Act, .or by the orders issued or the rules framed, thereunder,
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PORT TRUSTEES MADRAS v. AMINCHAND (Chandrachud, J.) 727
a notice is issued under section 111 or section 112 of the Customs.
Act calling upon the importer to show cause why the goods should
not be con:hscated. If the importer shows good cause,, the goods
are released and thereupon the_ Customs ~uhorities issue a Detention
Certificate stating, if that be true, that the goods were detained for
exanupation uncter sections 17(3) and (4) of the Customs Act and
that the detention w~ due to no fault or neitigence on the part of
the importer.
The Port Trusts are under a statutory
obligation to
perform
ceJt<1in duties and equally so they have statutory powers to fix scales
of fees and rates.
The statute with which we are here concerned
directly is the Madras Port Trust Act, 2 of 1905, (hereinafter called
-·the Act")_
It is necessary to notice the relevant provisions thereof
in order to understand the controversy in this appeal.
Section 5 (!) defines the "Board" to mean the Tmstees of the
Port of Madras appointed under the Act.
Section 5 (12) defines
"Rate•- as including any toll, due, rent, rate or charge kviable under
the Act.
By se-.:tion 7 the Board consists of 21 Trustees including
the Chairman.
Section 8 provides that the Chairman of the Board
shall be appointed by the Central Government and the remainin&
Trustees shall be (I) the C-0llector of Customs, Madras, (2)
the
Municipal Commissioner for the Oty of Madras, (3) the General
Manager, M. & S. M, Railway, (4) the General Manager, South
Jndian Railway; (5) one representative of the Mercantile Marine Department chosen by the Central Government; ( 6)
one representative
of the Defence Services ch~en by the Central Government;
(7)
one representative of the
State Government chosen by the
State
Government; (8) two representatives of labour chosen by the Central
Government after consultation with the registered trade unions, if
any, composed of persons employed in the port; and (9)
eleven
elected trustees.
By section 8(2), of the eleven elected trustees one
H
is elected by the Madras Municipal_. Corporation and the remaivingten by ~uch provincial or local bodies representing commercial interests as the Central yovernment may, from time to time, by notification in the official Gazette, specify.
Such notification may also
specify the number -of trustees that each of such bodies may elect.
Sectio11J 10 which lays down disqualifications for the trustee's office
provides, inter alia, that a person shall be disqualified to be a trustee
if. inter alia, he holds any office or place of profit under the Board .
This provision does not, however. apply to the Cha;rman. ex-officio
Trustees and Trustees appointed by virtue of office.
Section 22 (1)
lays down the procedure governing the proceedings of the Board while
section 23(2) provides that
the Board may, from
time to time,
appoint committees consisting of not less than five of its members
for carrying into effect any part of the provisions of the Act with
sooh powers and under such instructions, directions or limitations as
shall be defined by the Board .
By section 39 the Board is under an obligation, according to its
powers, to provide all reasonable facilities for, and has the power to
728
SUPREME COURT REPORTS
[1976] l S.C.R.
undertake the services of the description mentioned in the sub-section.
Among those services are landmg of goods from vesse1s in the Port,
and receiving, storing. or delivermg goods brought within the Board's
premises.
Secti.on 39(2) imposes upon the Board the obliga\ion, if so
required by any owner, to perform in respect of goods all or any of
the services iffientioned in clauses (a), (b)
and (d) of
section
39 ( 1).
Under section 39 ( 3) the Board shall, if requir~d. take
charge of the goods for the purpose of performing the service and
shall give a receipt in the prescribed form.
After the g00ds have
been taken charge of and the receipt given by the Board, no liability
for any loss or damage which may occur to the goods can attach to
any person to whom a receipt shall have been given by the Board
or to the master :or the owner of the vessel from which t':le goods
have been landed. Under section 40 the responsibility of the Board
for the loss, destruction or deterioration of goods of which it ha~
taken charge is, subject to cerain provisions, that of a bailee under
sections 151, 152 and 161 of the Indian Contract Act subject to
certain modifications.
Chapter VI of the Act which appears under _the heading "Imposition and Recovery of Rates" contains provisions which have direct
impact on the contentions raised in this appeal. Section 42 empowers
the Board to frame a scale of rates at which and a statement of the
conditions under which any of the services specified in clauses (a)
to (e) of the section shall be performed by the Board. Clause (b)
refers to landing of goods from any vessel upon any land er building
in the possession or occupation of the Board or at any place within
the limits of the Board.
Clause ( d) refers to "wharfagc, stOTage
or demurrage of go1ods on any such place".
Sections 43 and 43-A
also coufer on the Board power similar to that conferred by section
42.
By Section 44 every scale and every statement of conditions
framed by the Board under sections 42, 43 and 43-A shall be submitted to the Central Government for sanction and, when so sanctioned and published in the official Gazette, such scale and statement
of conditions have the force of law. The Central Govermnent has
power under section 44(1a) at any time to cancel any of the scales
framed by the Board or to call upon the Board to modify any portion
of such scales whereupon the Board shall modifv the scales according
to the directions of the Central Government. Section 44(2) confers
power on the Board, in special cases, for reasons to be recorded in
writing, to. remit the ;ovhole or any portion of the rates or of any
charge levrnble accordmg to any scale.
Unrler section 50 rates in
respect of goods to be landed are payable immediately on the landing of the goods; rates in respect of goods to be removed from the
premises o! the Board are pavable before the goods are removed.
Under section 51 the Board has a lien on the goods for the amount
of all rates leviable under the Act on the goods and it may seize
an~ detain th.e ~oods until the rotes are fullv n"id.
This Hen h"s hv
section 52 Prtontv over all other liens and claims except for general
average and the ship-owner's lien for freight and other ~harges where
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PORT TRUSTEES MADRAS v. AMINCHAND (Chandrachud, !.) 729
such lien exists and has been preseiyed in the manner provided in
section 53.
Under section 5&, if the rates payable lo the Board
remain unpaid, it is competent ,tq the Board to sell the goods by
public aucticm after expiry of two. months from the time tliat the goods
have passed into its custody and in the case of perishable goods after
the expiry of a shorter period not being less than 24 hours. Section
57 requires that the notice of sale must be published in the Official
Gazette.
By section 58 notice is also required to be given to the
owner of the goods, if the address of the owner is known.
Uudrr
section 58-A, notwithstanding anything contained in the Act, where
any goods placed in the custody of the Board are net removed by
the owner or other person entitled thereto from the .premises of the
Board within one moμth, the Board may, after due notice, required
that the goods be removed forthwith or that in default of compliance
the goods would be liable to be sold by public auction.
In cases
where all the rates and charges payable _under the Act have been
paid, such a notice for removal. of the goods cannot be given before
the expiry of two months from the date on which the goods were
placed in the custody of the Board. If the notice is not complied
with, the Board may ait any time after the expiration of one month
from the date on which the notice was served or published. sell the
goods by public auction. Section 62 preserves the right of the Board
to recover the rates by a suit.
Section 95 .of the Act which appears in Chapter XI called "ByeLaws" empowers the Board to make bye-laws not inconsistent with
the provisions of the Act, inter, aUa, for the safe and convenient use
of sheds, for the reception and storage of goods brought within the
premises of the Board, for the mode of, the payment of the rates
leviable under the Act and generally for carrying out the purposes
of the Act.
Section 109 of the Act which has afl important be~ring on these
proceedings provides that nothing contained in the Act shall affect
any power vested in. the Chief Officer of Custom~ under any law
for the time being in force.
Section· 49 of the Customs Act, 52 of
1962, provides that where in the case of any import~d goods,
the
Assistant Collector of Customs, is satisfied on the application of the
impo-ter . that the goods cannot be cleared within a reasonable time,
the goods may, pending clearance, be permitted to be stored in a
public w -ehouse or in a private warehouse if facilities for deposit
i.n a public warehouse are not available.
Acting in pursuance of the power conferred by sections 42, 43
and 43-A, the appellants have framed a "Scale of Rates" payab:e
at the Port of Madras, which has been duly sanctioned by the Central
Government under section 44 of the Act.
We are concerned with
the rates framed under section 42 which are contained in Chapter IV
of the Scale of Rates. The various scales of rates are divided into
three parts: Book I, Book II arid Book III. Chapter IV is headed
"Demurrage" and it occurs in Book I called "CT1arges for certain
l &-L925SupC! n 5
730
SUPREME COURT REPORTS
[1976] I S.C.P..
service_s which the Board is prepared to render to the public". The
introductory part of Chapter IV says :
"Demurrage is _ chargeable on all
goods
left in the
Board's transit sheds or yards beyond the expiry of the free
days.
After demurrage begins to accrue no allowance is
made for Sundays or Board's holidays.
The free days are
fixed by the Board from time to time."
Scale 'A' of Chapter IV prescribes conditions governing "Free
Days", the normal rule ~ing that two working days in the case of
coast cargo a,nd three working days in the case of foreign cargo excluding Sundays and the Board's holidays are treated as free after complete discharge of a vessel's cargo, or the date when the last package
was put overside.
Rule 13 (b) is the focus of controversy between
the parties and it would be useful to read along with it clause (a)
as well :
"13. The following free periods are allowed in addition
to the free periods applicable as per description of goods :-
(a) Periods during which goods are detained by the Collector of Customs for examination under Section
17(3) and (4) for chemical test under Section 144
of the Customs Act, 1962 other han the
ordinary
processes of appraisement and certified by the Collector of Customs to be not attn'butable to any fault
or negligence on the part of the Importers plus one
working day. The Customs holidays will also be
treated as free days in addition.
(b) Where goods are detained by the Collector of Custams, on account of Import Trade Control formalities
or for compliance of foromlities prescribed under
the Drug's Act and certified by the Collector of Customs fo be not attributable to any fault or negligence
on the part of Importers, dcmurrage shall be recovered for this period at the rate of 30 per cent of the
normal rate, i.e. the rate at which the goods would incur demurrage had there been no detention by the
Customs.
This concession in demurrage
>hall be
limited to a period of 30 days plus one working day
and demurrage shall be recovered at the full rate (i.e.,
third slab) for detention beyond the above
said
period.n
Under clauses
(c) and (d) of Rule 13,
period during which the
goods are detained by the Port Health Authority and· the periods during which the Board is unable to trace packages owing•to congestion
of accommodation, wrong sorting or incorrect tallying are also treated
as Free Days.
The High Court dismissed the appellants' suit for the following
reasons : (I) The Scale of Rates fixed by the Board is in the nature
-0f Bye-Laws; (2) Bye-Laws may be treated as ultra vires for the
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PORT TRUSTEES MADRAS v. AMINCHAND (Chandrachud, J.) 7 31
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reasons, inter alia, that they are repugnant to the statute under which
-·
they are made or that they are unreasonable; (3) Viewed as a bye-law,
Rule 13 (b) under whioh the Board can charge demurrage f<?r the
)
period during which the goods are detained for no fault or ne~tgence
of the importer or his agent, is unreasonable and therefore yo1d; ( 4 J
In principle, there can be no distinction between cases falling ~der
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clause (a) and those falling under clause (jb) of Rule 13, and if no
<I
demurrage is leviable in respect of cases falling within clause (a) , no
demurrage could be chiy:~ed in respect of cases falling within. clause
~ ,,
(b).
The distinction made by the Board between the two kinds of
cases is therefore arbitrary and unreasonable; ( 5) 'Demurrage', being
a charge for wilful failure to remove the goods within the free period,
can be levied only if the f1\ilure to remove the goods is due to the fault
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or negligence of the importer or his agent; (6) Having regard to this
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well accepted meaning of the word 'demurrage', the authority given
to the Board by section ,42 of the Act to frame the scale of rates can
be. exercised only for the purpose of levying chargeS where the importer was not prevented by any lawful authority from clearing the goods
J
from the transit area and he had defaulted or was negligent in clearing
the goods; (7) Since Rule 13tb) empowers the Board to charge de-
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murrage even when the goods are detained for no fault or negligence
of the importer or his agent, it is beyond the auhority conferred by
section 42 and is therefore void; (:8) All the same, if two views are
reasonably possible,. a construction which favours the validity of a
rule or statute should be preferred to that which renders it void.
Therefore, under the scale of charges for demurrage provided
in
Chapter IV, the appellants can levy demurrage only in cases where
E
the delay in clearing the goods is due to the fault or negligence of the
importer or his agent.
The first four of these reasons relate to the invalidity of Rule 13 (b)
viewed as a bye-law while the last four relate to its invalidity on the
ground that it is in excess of the power conferred by section 42 of the
Act.
Both of these sets of reasons appear to us unsustainable.
F
As stated in "Craies on Statute Law" (7th Ed., pp. 325-326),
bye-laws may be treated as ultra vires on the grounds, amongst others,
that they are repugnant to the statute under which they are made or
that they are unreasonable.
But the error of the High Court's judg-
'I
men! lies in the assumption that the "Scale of Rates and Statement of
Condition~" framed by the appellants under sections 42, 43 and 43-A
are bye-laws.
Section 42 with wl1ich we are concerned confers autho-
,.
rity on the Board to "frame a scale of rates at which and a statement
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of the conditions under which any of the services specified" in the"
section shall be perfom1ed.
Section 43 confers an identical power on
;
the Board in regard to certain other matters while section 43-A authorises the Board to prescribe consolidated rates.
Provision for framing
'-;,.,
bye-laws is made in Chapter XI called "Bye-Laws" and section 95
which occurs in that Chapter mentions the various subjects on which
the Board may frame bye-laws.
Under Chapter XI, the Board has no
H
power to frame bye-laws for fixing scales of rates or a statement of
the conditions under which any of the services specified in sections
42, 43 and 43-A shall be performed. The nearest that section 95
touches the subject of rates is by clause ( 6) which refers to "tke-
732
SUPREME COURT REPORTS
[1976] 1 s.c.R.
mode of the payment of the rates leviable under this Act".
The
Board having expressly empowered by section 42 to frame a scale
of rates and a statement of the conditions under which it shall perform
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the services specified in the section and the Board having in terms
exercised that power under the aforesaid section, there is no justification for supposing that in framing the scale of rates and the statement of conditions, the Board has purported to frame
a bye-law.
What the High Court has done is to assume, in the first place, that the
Board has not exercised the power which it undoubtedly possesses and
which in fact and in terms it did exercise. The High Court then
assumed th~t the Board had exercised the power which it did not possess,, a power which the Board has not even purported to exercise.
Making these unfounded assumptions, the High Court invalidated Rule
13(b) on the basis that it was a bye-law and a bye-law could be declared c
ultra vires on the ground that it is unreasonable. We are unable to
accept the High Court's view that the scale of rates prescribed by the
Board under sections 42, 43 and 43-A consists, as it were, of so many
bye-laws or that Rule 13 is in the nature of a bye-law.
A bye-law has been said to be an ordinance affecting the public. or;
some po.rtion of the public, impose by some authority clothed with statutory p0wers, ordering somethin!J to be done or not to be done,. and
accompanied by some sanction or penalty for its non-observance.(')
The Board's power to frame the scale of rates and statement of conditions is not a regulatory power to order that something must be done
or something may not be done.
The rates and conditions govern
the basis o>,1 which the Board performs the services mentioned in sections 42, 43 and 43-A. Those who desire to avail of the services of the
Board are liable to pay for those services at prescribed rates and to
perform the conditions framed in that behalf by the Board.
Indeed,
some of the services which the Board may perform are optional and if
the importer desires to have the benefit of those services, he has to pay
the charges prescribed therefor in the Scale of Rates.