PETITIONER:
BOARD OF TRUSTEE OF THE PORT OF BOMBAY
Vs.
RESPONDENT:
INDIAN GOODS SUPPLYING CO.
DATE OF JUDGMENT21/03/1977
BENCH:
KAILASAM, P.S.
BEG, M. HAMEEDULLAH (CJ)
GUPTA, A.C.
CITATION:
1977 AIR 1622 1977 SCR (3) 343
1977 SCC (2) 649
ACT
Demurrage--Demurrage claimed as per the scale framed
under s. 43A of the Bombay Port Dust Act (Act 6 of 1879) and
approved by the Central Government--Whether the claim of
demurrage by the Port Trust for the period during which the
goods were detained with it in respect of Import Trade
Control formalities is maintainable--Whether the D.O. letter
dated 7-9-1952 from the Central Government to the Port
Trust, a direction under s. 43B (1A) of the Act.
HEADNOTE
The appellant, a statutory body framed the scales of
rates of demurrage of goods under section 43 (a) of the
Bombay’Port Trust Act 1879 which was sanctioned by the
Central Government. Later on the Central Government in its
D.O. letter dated 7th September 1952 addressed to the appel-
lant expressed its view that it seems unreasonable to charge
an importer any demurrage once it is accepted that clearance
was delayed on account of the reasons beyond his control.
It also expressed its hope that the appellant would recon-
sider its decision and fall in line with the practice of the
Calcutta and Madras Ports. The Port considered this letter
and after taking into consideration the several circum-
stances suggested that demurrage may be levied on a graded
scale and the Central Government did not take any further
action. In fact, the appellant has prescribed reduced
demurrage levy from the expiry of the free days.
In respect of the three consignments of Chinese news-
print imported by the respondent for home consumption in
India, the appellant claimed demurrage for the period from
March 25, 1957 and as the amount was not paid the goods were
sold in public auction. The respondent thereafter filed a
suit for recovery of a sum of Rs. 24,950/- and interest
thereon from the appellant being the aggregate loss sus-
tained by it. The appellant denied that liability and
pleaded that it was, in law, entitled to collect the demur-
rage levied on the respondent and as it failed to pay the
demurrage, the appellant was entitled to sell the goods by
auction. The City Civil Court, Bombay decreed the suit with
interest at 6 per cent per annum from the date of the suit
till judgment and thereafter at 4 per cent per annum and
costs of the suit. The appeal preferred by the appellant to
the High Court failed and the decree stood confirmed. The
decretal amount deposited in the High Court during the
pendency of the appeal was withdrawn by the respondent.
Allowing the appeal by Special leave the Court,
HELD: (1) The High Court was in error in holding that
the importer of the goods cannot be held responsible for any
delay not attributable to his own default and that demur-
rage under s. 43(a) could never be imposed as long as the
goods were detained for the purpose of the operation of the
Import Trade Control regulations. [350 E]
(2) The D.O. letter addressed by the Government of India
should not be construed as a direction calling upon the
Board to modify any portion of the scale framed by the Port
Trust. The language of the D.O. would indicate that the
Government wanted the Port Trust to consider the Govern-
ment’s proposal and nothing further. The Port Trust consid-
ered the proposal and made its report. Section 43B(1A)
has no application to this case. [346 F-H]
(3) It is no doubt true that before clearance is given
by the Import. Trade Control Authorities and the Customs
Authorities, the goods cannot be cleared by the importer.
Neither can the Port Trust deliver the goods without the
consent of the Import Trade Control Authorities. Taking
into account the hardship caused to the importer because of
the delay certain concessions in demurrage rates are per-
mitted. As the scales of rates are permitted by virtue of
the statutory
344
powers conferred on the Board under s. 43 and as the rates
have been approved by the Central Government under s. 43B,
the rates have the force of law and cannot be questioned.
Taking into account the hardship to the importers certain
concession has been given but the legality of the rate which
are being levied according to law cannot also be questioned.
[347 C-D; E-F]
Trustees of the Port of Madras v. M/s Aminchand Pyarelal &
Ors. [1976]. SCR 721. followed.
(4) Even though the delay in clearing the goods was not
due to the negligence of the importer for which he should
be held responsible yet he cannot avoid the payment of
demurrage as the rates imposed are under the authority of
law, the validity of which cannot be questioned, In the
instant case the claim of the appellant cannot be resisted
as there is no evidence that the delay was due to any act of
the Port Trust or persons for whom the Port Trust is respon-
sible. [349 G-H]
Aktieselskabet Reidar v. Arcos, Limited [1927] 1 K.B.
352;Budgett & Co. v. Bippington & Co. [1891] 1 Q.B.p. 35 and
Compania Crystal De Vapores of Panama v. Herman & Mohatta
(India) Ltd. [1953] 2 All. E.R. 508, quoted with approval.
(5) Section 43, 43A and 43B of the Bombay Port Trust Act
1891 which make reference to "free days" are intended only
to omit Sundays, other holidays or on which the assessment
of customs duty cannot be taken up and would not include the
entire period during which the Import Trade Control formali-
ties have not been completed. [350 C-D]
(6) Under the powers vested in the Board, it is its
statutory duty to collect the rates, to have a lien on the
goods and seize and detain the goods until such rates are
fully paid. The Board is empowered to sell the goods if
rates are not paid or lien for freight is not discharged or
when the goods are not removed from its premises within the
limited time. [347 A-B]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1353 of 1975.
(Appeal by Special Leave from the Judgment and Order
dated 1-11-1974 of the Bombay High Court in Appeal No. 493
of 1966 from original Decree.)
F.S. Nariman, B.R. Zaiawala, B.S. Bisaria, J.B. Dadac-
hanji, O.C. Mathut, K.J. John and Shri Narain, for the
appellants.
P.H. Parekh and Miss Manju Jetely, for the respondent.
The Judgment of the Court was delivered by
KAILASAM, J.--This appeal by special leave is preferred
by the Board of Trustees of the Port of Bombay against the
judgment of the Bench of the Bombay High Court in first
appeal confirming the decree passed by the City Civil Court
and dismissing the appeal with costs. The respondents,
Indian Goods Supplying Co., a partnership firm in Bombay,
filed suit No. 3304 of 1959 in the Bombay City Civil Court
at Bombay praying for a decree against the Trustees of the
Port of Bombay in the sum of Rs. 24,950 with interest.
Three consignments of Chinese newsprint were imported by
the respondents for home consumption in India. The first 2
consignments arrived on February 16, 1957. Suffice it to
say that the clearance of the two consignments as well as
the third consignment
345
was considerably delayed and the Port Trust claimed demur-
rage for the period from March 25, 1957. The respondents
disputed the right of the Port Trust to charge any demurrage
for the period during which the goods were detained by the
Customs authorities for analytical test. as well as for the
Import Trade Control formalities. It is common ground that
so far as the period for analytical test certified by the
Customs authorities is concerned the Port Trust cannot
charge demurrage. But so far as the period during which the
goods were detained for the Import Trade Control formalities
by the Customs authorities the Port Trust claimed demurrage.
Due to protracted correspondence between the parties the
goods were not cleared and ultimately the suit was filed by
the respondents for recovery of a sum of Rs. 24,950 and
interest thereon from the Port Trust being the aggregate
loss sustained by them. The appellants denied that liabili-
ty and pleaded that the Port Trust. was in law entitled to’
collect the demurrage levied on the respondents and that as
they failed to pay the demurrage the Port Trust was entitled
to sell the goods by public auction.
The City Civil Court, Bombay, decreed the suit for a
sum of Rs. 24,950 with interest at the rate of 6 per cent
per annum from the date of the suit till judgment and there-
after at 4 per cent per annum and costs of the suit.
The appellants preferred an appeal to a Division Bench
of the Bombay High Court which dismissed the appeal and
confirmed the decree passed by the City Civil Court.
When the appeal was pending before the High Court the
appellants deposited the decretal amount in court which was
withdrawn by the respondents. Mr. Nariman, counsel for the
Port Trust, stated that the Port Trust does not want to ask
for the repayment of the money and that he will confine
himself to the question of the correctness of the decision
of the Bombay High Court holding that the Port Trust is not
entitled to collect demurrage in the circumstances of this
case. It is therefore sufficient for the purposes of the
appeal to confine ourselves to determining the question of
law which has been raised before the High Court and decided
by it.
The question that was raised before the High Court was
whether the claim of demurrage by the Port Trust for the
period during which the goods were detained with the Port
Trust in respect of Import Trade Control formalities is
maintainable. The High Court held that the importer of the
goods cannot be held responsible for any delay not at-
tributed to his own default and that the importer whose
goods are detained by the Customs Department is entitled to
claim the clearance of goods without demurrage during the
period for which the Customs Department has detained them.
The appellants, the Board of Trustees of the Port of
Bombay, is a statutory body constituted by the Bombay Port
Trust Act, Act 6 of 1879, and is a body corporate. Chapter
VI of the Act relates to Revenue and Expenditure and pro-
vides for levy of rates. Section
346
43 empowers the Board to frame a scale of tolls, dues,
rents, rates and charges to be levied for each or any of the
matters enumerated in clauses (a) to (d). Sub-section (a)
enables framing of scale of rates relating to the landing,
shipping, wharfage, cranage, storage or demurrage of goods.
We are concerned with the framing of the scale of rates for
demurrage of goods. Section 43B(1) requires that every
scale framed by the Board shah be submitted to the Central-
Government for sanction and, when so sanctioned and pub-
lished in the Bombay Government Gazette, shall have the
force of law; and subject to the like sanction and publica-
tion, may from time to time be amended or added to by the
Board. It is admitted that the Board framed a scale of
rights for demurrage of goods and the scale so framed by the
Board was submitted to the Central Government and was sanc-
tioned by the Central Government and published by the
Bombay Government in the Gazette as required. The result is
that under section 43B(1 ) the scales so framed by the Board
and approved by the Central Government shall have the force
of law.
The learned counsel for the appellants as the Port Trust
in this appeal have given up its claims to refund of the
money taken by the respondents. In view of this the counsel
for the respondents confined his arguments to supporting the
view taken by the High Court regarding the question of law.
He submitted that the Central Government had taken action
under section 43B (IA) and had called upon the Board to
modify the operation of such scales and therefore the Board
was bound to modify the scales accordingly. This conten-
tion is based on a D.O. letter dated 7th September, 1952
addressed by the Government of India to the Port Trust which
is typed at page 350 of the Supplement Paper Book No. 2.
In the D.O. letter the Government expressed its view that it
seems unreasonable to charge an importer any demurrage once
it is accepted that clearance was delayed on account of
the reasons beyond his control. The letter concluded by
expressing an earnest hope that the Bombay Port Trust will
reconsider their decision and fall in line with the practice
of the Calcutta and Madras Ports. It concluded by stating
"We shall be grateful if you will kindly place the matter
before the Trustees for their favourable consideration and
intimate to us the result." The Board considered this
letter and after taking into consideration the several
circumstances, suggested that demurrage may be levied on a
graded scale. The Government of India was informed of the
Resolution of the Board and no further action was taken by
the Government. The D.O. letter addressed by the Government
of India cannot be considered as a direction by the Central
Government calling upon the Board to modify any portion of
the scale framed by the Port Trust. The language of the D.O.
would indicate that the Government wanted the Port Trust to
consider the Government’s proposal and nothing further.
The Port Trust considered the proposal and made its report.
We are unable to accept the plea of the learned counsel for
the respondents that the D.O. letter should be construed as
a direction calling upon the Board to modify the portion of
the scale framed by the Board. Section 43B(1A) has there-
fore no application to this case.
347
Chapter VII of the Port Trust Act enumerates the powers and
functions of the Board. It is the duty of the Board to
recover the rates to have a lien on the goods and
seize and detain the goods until such rates are
fully paid. The Board is empowered to sell the
goods if rates are not paid or lien for freight is not
discharged. It can also dispose of goods not removed from
the premises of the Board within the time limited. Section
65 also provides the mode of application of proceeds of the
sale. Under section 66 the Board is entitled to distrain for
non-payment rates. The Port clearance shall not be granted
till the rates are paid. It is thus a statutory duty of the
Board to collect the rates prescribed.
The contention put forward on behalf of the respondents
is that they are in no way responsible for the delay in
clearing the goods as the goods had been detained under the
Import Trade Control Regulations. It is no doubt true that
before clearance is given by the Import Trade Control
authorities and the Customs Department the goods cannot
be cleared by the respondents. Neither can the Port Trust
deliver the goods without the consent of the Import Trade
Control authorities. Taking into account the hardship
caused to the importer because of the delay certain conces-
sions in demurrage rates are permitted. The Port Trust has
prescribed the reduced demurrage levy which is 1/6th of the
normal rate from the date of expiry of the free days upto
the 60th day, 1/3rd of the normal rate after the expiry of
the 60th day, upto the 90th day, half the normal rate after
the expiry of the 90th day upto the 120th day, 2/3rd of the
normal rate after the expiry of the 120th day upto the 150th
day and at the full rate after the expiry of the 150th day.
As the scale of rates are framed by virtue of the statutory
powers conferred on the Board under section 43 and as the
rates have been approved by the Central Government under
section 43B the rates have the force of law and cannot be
questioned. Taking into account the hardship to the import-
ers certain concession has been given but the legality of
the rates which are being levied according to law cannot be
questioned. This view was taken by this Court in a recent
decision reported in Trustees the Port of Madras v. M/s.
Aminchand Pyarelal & Ors. (1) Where it had t6 consider the
validity of the scale of rates fixed by the Madras Port
Trust. In a suit by the Port Trust against the importer
and the Union of India and the Customs authorities to recov-
er the balance of demurrage amounting to about rupees three
lakhs the question arose whether the scale of charges in
the Port Trust Regulations under the heading "Demurrage"
was void and ultra vires for the reason that it was unrea-
sonable and not within the authority of the Port Trust. The
relevant provisions of the Bombay Port Trust Act with which
we are concerned are in pari materia with the provisions of
the Madras Act which fell for consideration by the Supreme
Court.The Supreme Court held that the scale of
rates and statement of conditions flamed by the
Madras Port Trust under sections 42, 43 and 43A
are not by-laws
(1) [1976] 1 S.C.R. 721.]
348
and the sections confer authority on the Board to frame a
scale of rates at which and a statement or conditions under
which any of the services specified therein shall be per-
formed. It observed "The Board’s power to frame a 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 on 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." The Court rejected the view of the High Court
that demurrage being a charge for wilful failure to remove
the goods within the free period can’ be levied only if the
failure to remove the-goods is due to the fault or negli-
gence of the importer or his agent. It also did not agree
with the view taken by the High Court that the authority
given to the Board to frame the scale of rates can be exer-
cised only for the purpose of levying charges where the
importer was not prevented by any lawful authority from
clearing the goods from the transit area and he had default-
ed or was negligent in clearing the goods. Justice Chandra-
chud, who spoke for the Court, observed in his judgment at
page 736 supra that the statute had not placed any limita-
tion on the power of the Board to fix rates and as the Board
had the power to frame a scale of rates at which and the
statement of conditions under which any of the services
specified in the section shall be performed and as the Board
has fixed the scale of rates it was difficult to see in what
manner or respect the Board has exceeded its power under
section 42. The Court proceeded to observe in rejecting
the view of the High Court that the Board cannot fix rates
of demurrage when the failure to remove was not due to some
fault or negligence of the importer, that there is no such
fetter on the Board’s powers to fix the rates. This deci-
sion of the Supreme Court is on all fours with the facts of
the present case and concludes the question.
Mr. Nariman, counsel for the appellants cited three deci-
sions of the English Courts in support of his contention
that even on the basis of a contract the right of the Port
Trust to recover demurrage cannot be denied unless the
person claiming the demurrage is responsible for the
delay. In Aktieselskabet Reidar v. Arcos, Limited (1), Lord
Justice Atkin in answering the question whether if the
chatterer has failed to complete the loading of the ship
within the lay days, and the ship during the demurrage days
becomes, without the default of the shipowner, unable to
carry as much cargo as she would have carried if loaded
within the lay days, but receives from the charterer a full
cargo for her diminished capacity, the loss falls upon the
charterer in addition to the demurrage, expressed his opin-
ion that the decision should be for the shipowner. It was
held that "The result of the authorities appears to be that
in a contract fixing a number of lay days and providing for
days at demurrage thereafter, the charterer enters into a
binding obligation to load a complete cargo within the lay
days subject to any default by the shipowner or to the
operation
(1) [1927] 1 K.B. 352.
349
of any exceptions, matters which do not arise in this
case ....If however, for reasons other than the shipown-
er’s default, the chatterer becomes unable to do that
which he contracted to do-namely, put a full and complete
cargo on board during the fixed laydays, the breach is never
repaired, the damages are not completely mitigated, and the
shipowner may recover the loss that he has incurred in
addition to his liquidated demurrage or his unliquidated
damages for detention." Thus it appears clear that claim of
demurrage cannot be resisted unless where the detention was
due to the shipowner’s default. In the present case the
Port Trust’s claim for demurrage cannot be denied unless it
is proved that the delay was due to the Port Trust itself.
In Budgett & Co. v. Binnington & Co., (1) a clause in
the charterparty fixed the number of lay-days for unloading
and allowed other days for demurrage. During the lay-days a
strike took place both among the labourers employed on
behalf of the ship and those employed by the consignees,
with the result that the unloading ceased, and could not be
resumed till some days after the expiration of the lay-days.
The Court of Appeal held that as the number of lay-days was
fixed the consignees were liable to pay demurrage, notwith-
standing the inability of the shipowners, owing to the
strike, to do their part in the unloading. The test that
was laid down by Lord Esher Master of the Rolls, was. Has
the shipowner failed in his duty through any default of
his own or of persons for whom he is responsible ? As the
non-delivery was occasioned by something which the shipowner
could not foresee or by the act of persons over whom he had
any control it was held that he was not liable.
In Compania Crystal De Vapores of Panama v. Herman &
Mohatta (India) Ltd., (2) Justice Devlin quoted with approv-
al the law laid down by Lord Esher in Budgert Co. v. Bin-
nington & Co. (supra) which is in the following terms :--
"If the shipowner by any act of his has
prevented the discharge, then, ‘though the
freighter’s contract is broken, he is ex-
cused’, he was referring to a case in which
the shinowner’s act preventing the discharge
was in breach of his obligation to give the
charterer all facilities for the discharge.
But here the act of the shipowner which de-
layed the discharge was not a breach of any
obligation of his."
The position therefore is that even though the delay in
clearing the goods was not due to the negligence of the
importer for which he could be held responsible yet he
cannot avoid the payment of demurrage as the rates imposed
are under the authority of law the validity of which
cannot be questioned. The claim cannot be resisted as there
is no evidence that the delay was due to any act of the Port
Trust or persons for whom the Port Trust is responsible.
(1) [1891] 1 Q.B.p. 35.
(2) [2953] 2 ALl. E.R. 508.
350
One other contention which was raised before the High
Court but was not dealt with by it may be referred to. It
was submitted on behalf of the respondents that the defini-
tion of the words "free days" would not include the period
of holidays or part of a holiday or Sunday in computing the
number of free days during which the Customs Duty may not be
assessed or received and therefore the period of detention
of the goods during the operation of Import Trade Control
formalities must be considered as free days. In the scale
of rates charged at the docks framed by the Bombay Port
Trust under sections 43. 43A and 43B of the Bombay Port
Trust Act, 1879, in Section III reference is made to free
days. Under the heading "Free Days" it is provided that
all goods will be allowed storage in Docks free of rent for
5 days. It-is further provided that in computing the number
of free days Sundays and holidays referred to in by-law 118
as well as any other days on which Customs Duty may not be
assessed or received, will be omitted in the case of all
goods liable to duty under section 20 of the Sea Customs
Act. The submission was that not only Sunday and holidays
should be omitted but also other days on which Customs
Duty may not be assessed or received will have to be
omitted and this should be understood as days during which
the Import Trade Control formalities could not be completed.
This contention cannot be accepted as these Rules are in-
tended only to omit Sundays, other holidays and days on
which the assessment of Customs Duty cannot be taken up and
would not include the entire period during which the Import
Trade Control formalities have not been completed.
The High Court was therefore in error in holding
that the importer of the goods cannot be held responsible
for any delay not attributable to his own default and that
demurrage under section 43A could never be imposed as long
as the goods were detained for the purpose of the operation
of the Import Trade Control Regulations. In the result the
appeal is allowed but due to the concession made by the
learned counsel for the Port Trust there will be no order
directing the refund of the money that had already been
deposited by the Port Trust and withdrawn by the respond-
ents. The appellant also does not press his counter claim.
There will be no order as to costs in this appeal.
S.R. Appeal allowed.
351