Chairman, Board Of Trustees, … vs M/S Arebee Star Maritime … on 5 August, 2020


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Supreme Court of India

Chairman, Board Of Trustees, … vs M/S Arebee Star Maritime … on 5 August, 2020

Author: Rohinton Fali Nariman

Bench: Rohinton Fali Nariman, Navin Sinha

                                                                            REPORTABLE

                                            IN THE SUPREME COURT OF INDIA

                                            CIVIL APPELLATE JURISDICTION

                                             CIVIL APPEAL NO. 2525 OF 2018



                           THE CHAIRMAN, BOARD OF TRUSTEES,
                           COCHIN PORT TRUST                              …APPELLANT

                                                         VERSUS

                           M/S AREBEE STAR MARITIME AGENCIES
                           PVT. LTD. & ORS.                               …RESPONDENTS

                                                        WITH
                                             CIVIL APPEAL NO. 2526 OF 2018
                                             CIVIL APPEAL NO. 2527 OF 2018
                                             CIVIL APPEAL NO. 2528 OF 2018
                                             CIVIL APPEAL NO. 2529 OF 2018
                                             CIVIL APPEAL NO. 2530 OF 2018
                                             CIVIL APPEAL NO. 2531 OF 2018
                                             CIVIL APPEAL NO. 2532 OF 2018
                                             CIVIL APPEAL NO. 2533 OF 2018
                                             CIVIL APPEAL NO. 2534 OF 2018
                                             CIVIL APPEAL NO. 2535 OF 2018

                                                     JUDGMENT

R.F. Nariman, J.

1. This batch of appeals arises out of a reference order made by a
Signature Not Verified

Digitally signed by
INDU MARWAH
Division Bench of this Court dated 07.03.2018 reported as (2018) 4
Date: 2020.08.05
18:46:39 IST
Reason:

1
SCC 592. The learned Division Bench stated as to how these

proceedings arose before it as follows:

“1. These proceedings have arisen from a judgment dated
27-9-2011 [Arebee Star Maritime Agencies (P)
Ltd. v. Cochin Port Trust, Original Petition No. 21041 of
1999, decided on 27-9-2011 (Ker)] of a Division Bench of the
Kerala High Court in a batch of writ appeals and original
petitions, preferred by various shipping agents.

2. The question before the High Court was whether the
liability to pay “ground rent” on containers unloaded at
Cochin Port, but not cleared by the consignees/importers
and refused to be destuffed by the Port, on the ground of
inadequate storage space, can be imposed on the owners
of the vessel/steamer agents beyond the period of 75 days,
fixed by the Tariff Authority of Major Ports [TAMP], a
statutory body constituted under Section 47-A of the Major
Port Trusts Act [MPT Act], 1963.

3. The facts of the case are summarised in the following
extract of the judgment of the High Court:

“The sequence of events that led to the stalemate refers to
the incidents which happened in 1998 when there (sic)
imports synthetic woollen rags (in containers) in the Cochin
Port Trust premises. The said containers were destuffed to
facilitate Customs examination and to return the empty
containers to the steamer agents. The destuffed cargo
occupied much larger space and was not promptly cleared
by the consignees in view of the hurdles placed by the
Customs stating that the cargo actually did not constitute old
woollen rags as declared, but mostly were brand new
clothes which could not have been cleared. The “modus
operandi” of the consignees/importers attracted wide
attention of all concerned and taking note of the probable
extent of liability to be imposed by the Customs Department,
and the liability to be satisfied to the Port and others
concerned, the consignees did not turn up to clear the goods
and they were lying idle in the Port premises for quite long.”

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The Port Trust charged “ground rent” from the steamer
agents/owners of the containers.”

2. After then setting out the relevant provisions of the Major Port Trusts

Act, 1963 [“MPT Act”] and the relevant portions of five decisions of this

Court, namely, Port of Madras v. K.P.V. Sheik Mohamed Rowther

& Co. 1963 Supp. (2) SCR 915 [“Rowther-I”]; Port of Madras v.

K.P.V. Sheik Mohd. Rowther & Co. P. Ltd. (1997) 10 SCC 285

[“Rowther-II”]; Port of Bombay v. Sriyanesh Knitters (1999) 7 SCC

228; Forbes Forbes Campbell & Co. v. Port of Bombay (2015) 1

SCC 228 [“Forbes-II”] and Rasiklal Kantilal & Co. v. Port of Bombay

(2017) 11 SCC 1, the Division Bench then stated:

“23. Analysing the above judgments, the following position
emerges:

23.1. The decisions in Rowther-I, Rowther-II, Sriyanesh
Knitters, Forbes-II and Rasiklal do not seem to follow a
consistent line about whom the Port Trust has to fasten the
liability for payment of its charges;

23.2. The Constitution Bench judgment in Rowther-I holds
that when Port Trust takes charge of the goods from the
shipowner, the shipowner is the bailor and the Port Trust is
the bailee. While the Bench of two Judges in Sriyanesh
Knitters holds that there comes into existence the
relationship of bailor and bailee between the consignee and
the Port Trust, the decision in Forbes-II disagrees with this
view of Sriyanesh Knitters. Rasiklal opines that enquiry into
such relationship is irrelevant in determining the right of a
Port Trust to recover its dues;

23.3. While the decision in Sriyanesh Knitters was based on
the interpretation of the term “owner” under Section 2(o) of
the MPT Act, the judgments in Forbes-II and Rasiklal do not

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find the question of interpretation of the term “owner” to be
relevant;

23.4. While Forbes-II relies upon the Constitution Bench
decision in Rowther-I to come to its
conclusions, Rasiklal does not find Rowther-I to be an
authority for the proposition that until the title in goods is
passed to the consignee, the liability to pay various charges
payable to a Port Trust, for its services in respect of goods,
falls exclusively on the steamer agent;

23.5. In Rowther-II, it was held that once the goods are
handed over to the Port Trust by the steamer and the
steamer agents have duly endorsed the bill of lading or
issued the delivery order, their obligation to deliver the
goods personally to the owner or the endorsee comes to an
end. The decision in Rasiklal, which has been delivered after
the reference of Forbes-I was disposed of, takes a contrary
view that in cases where the consignee does not come to
take delivery of goods, the position of law laid down
by Rowther-II would result in a situation that the Port Trust
would incur expenses without any legal right to recover such
amount from the consignor, with whom there was no
contractual obligation; and

23.6. The Bench of two Judges in Rasiklal opined that it
agrees with the conclusions recorded in Rowther-
II and Forbes-II that a Port Trust could recover the rates
due, either from the steamer agent or the consignee.
However, the holding in Rowther-II finds only the consignee
to be liable.

24. Taking note of the above inconsistencies in the
judgments which have been delivered after the
pronouncement by the Constitution Bench in Rowther-I, we
are inclined to the view that the following issues need to be
resolved by a larger Bench:

24.1. Whether in the interpretation of the provision of
Section 2(o) of the MPT Act, the question of title of goods,
and the point of time at which title passes to the consignee
is relevant to determine the liability of the consignee or

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steamer agent in respect of charges to be paid to the Port
Trust;

24.2. Whether a consignor or a steamer agent is absolved
of the responsibility to pay charges due to a Port Trust, for
its services in respect of goods which are not cleared by the
consignee, once the bill of lading is endorsed or the delivery
order is issued;

24.3. Whether a steamer agent can be made liable for
payment of storage charges/demurrage, etc. in respect of
goods which are not cleared by the consignee, where the
steamer agent has not issued a delivery order; if so, to what
extent;

24.4. What are the principles which determine whether a
Port Trust is entitled to recover its dues, from the steamer
agent or the consignee; and

24.5. While the Port Trust does have certain statutory
obligations with regard to the goods entrusted to it, whether
there is any obligation, either statutory or contractual, that
obliges the Port Trust to destuff every container that is
entrusted to it and return the empty containers to the
shipping agent.

25. The larger Bench may deal with any additional issues
relevant to the context, as it deems necessary.”

3. The impugned judgment dated 27.09.2011 of a Division Bench of the

Kerala High Court decided a limited question that was argued before

it, namely:

“Whether liability to pay ‘Ground Rent’ in respect of the
containers unloaded in the Cochin Port, lying uncleared by
the Consignees/Importers and refused to be destuffed by
the port, for inadequate storage space, can be mulcted on
the owners of the Vessel/Steamer Agents beyond 75 days,
in view of the Scheme of the Statute (Major Port Trusts Act
1963 – in short ‘MPT Act’) and the contents of the TAMP

5
(Tariff Authority for Major Ports) Orders dated 10.11.1999,
19.07.2000, and 13.09.2005, is the point.”

4. The impugned judgment came to be passed as a number of writ

appeals had been preferred by shipping agents, the Port Trust, and

one consignee against the judgment dated 16.09.2002 of a single

Judge of the Kerala High Court. A writ petition, namely, W.P. (C) No.

32191 of 2004, was also disposed of by the impugned judgment, as it

raised a similar question of law. The facts involved in these appeals

and writ petition were briefly stated in paragraphs 4 and 5 of the

impugned High Court judgment as follows:

“4. Goods involved in all the cases, imported as ‘FCL’ (Full
Container Loads) mainly consist of ‘synthetic woollen rags’,
except in W.P. (C) No. 32191 of 2004, where it is VCD
players. The period of import is during August 1998 to March
1999. All the Containers now stand returned after destuffing,
pursuant to common judgment in the Original Petitions and
the interim orders passed in the Appeals.

5. Some of the goods imported earlier in the Cochin Port,
titled as “woollen rags” were actually found to be “brand new
clothes” on inspection by the Customs Department, which
attracted heavy duty, penalty and such other charges. The
dispute between the Consignees and the Customs went on

for an indefinite period and in the said circumstances, the
consignees did not turn up to clear the goods in respect of
the subsequent transactions as well, presumably knowing
the probable outcome and the huge liability to be satisfied
under different heads including the Port charges and other
dues because of the delay. So also, no action was taken by
the Port Trust to destuff the goods and they retained the
containers for their own reasons.”

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5. The learned Senior Advocate who led the arguments on behalf of the

shipping agents before the High Court made one important

concession, namely, that the shipping agents do not propose to press

the contention as to their liability in satisfying ground rent, except that

they ought not to be mulcted with any such liability beyond the period

of 75 days, which was set out in the relevant Tariff Authority for Major

Ports (“TAMP”) Orders. At the point of time that the Division Bench

delivered its judgment, a Division Bench of this Hon’ble Court in

Forbes Forbes Campbell & Co. Ltd. v Board of Trustees, Port of

Bombay (2008) 4 SCC 87 [“Forbes-I”], had referred the following

three questions to a larger Bench:

“9. The questions of law of public importance in this appeal
are as follows:

1. Whether a steamer agent can be construed as owner of
the goods carried in his principal’s vessel within the definition
of “owner” in relation to goods under Section 2(o) of the
Major Port Trusts Act, 1963?

2. Whether a steamer agent at all can be made liable for
payment of storage charges/demurrage, which are
uncleared by the consignee, even where steamer agent has
not issued delivery order?

3. In the event a steamer agent is held liable, to what extent
he is liable and whether it absolves the respondent from
acting promptly under Sections 61 or 62 of the Act?

6. Since this reference had not yet been answered by the larger Bench

at the time the impugned proceedings were ongoing, the learned

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Senior Advocate representing the shipping agents before the High

Court clarified that the High Court may go on to decide only the

question as to the extent of liability of the shipping agents, i.e. whether

liability could extend beyond the 75 days mentioned in the relevant

TAMP Orders.

7. In answering the question raised before it, the impugned judgment

referred to the fact that the shipping agents repeatedly requested the

Port Trust to destuff the containers which were lying at the port, but

that the Port Trust stated that they cannot do so for inadequacy of

space. The impugned judgment therefore held that because of the

lapse on the part of the consignee on the one hand in not lifting the

goods, and the Port Trust on the other in not destuffing containers, the

shipping agents were caught in between, and were being made “to pay

through their nose”. This being the case, the impugned judgment went

on to construe sections 61 and 62 of the MPT Act, by which a Board

“may”, after the expiry of two months from the time when any goods

passed into its custody, sell such goods under certain circumstances.

The impugned judgment went on to hold that the expression “may” in

the said provisions must be read as “shall”, as a duty is cast on the

Port Trust to get rid of the goods as soon as possible in a fact situation

8
where the consignee does not lift such goods. Ultimately, the

impugned judgment concluded:

“44. In the above facts and circumstances, this Court finds
that, there is no rationale on the part of the Port Trust in
contending that they are entitled to collect ‘Ground Rent’
charges in respect of containers indefinitely. The course
pursued by them without causing the goods to be destuffed,
despite the specific request, on the failure of the
Consignee/Importer to have it cleared and by proceeding
against such goods for causing the same to be sold in the
public auction, realising the funds, to be apportioned in the
manner specified under Section 63, cannot but be
deprecated. This Court holds that the respondent Port Trust
can demand ‘Ground Rent’ only to a maximum period of ‘75
days’ as specified by the Tariff Authority for Major Ports as
per the relevant TAMP Orders discussed above.”

8. Shri Ritin Rai, learned Senior Advocate appearing on behalf of the

Appellant Port Trust, referred to various provisions of the Customs Act,

1962 and the MPT Act, and argued that once responsibility for the

goods is taken over by the Port Trust, the Port Trust becomes a bailee

of the goods delivered to it by the ship-owner, who in turn is relieved

of its liability for loss or damage to the goods during the period when

the goods are in the custody of the Port Trust. Thus, the Port Trust is

entitled to recover, from the shipping agents, demurrage and other

dues for the period until a delivery order is issued by the shipping agent

to the consignee, and for this purpose is entitled to exercise a lien over

the goods for realisation of such demurrage. He added that where a

delivery order is withheld or withdrawn, disabling the consignee from

9
getting delivery of the goods, the position remains as if no delivery

order was issued at all. In such a case, the liability for payment of

demurrage and other dues of the Port Trust will continue to be with the

shipping agent. According to the learned Senior Advocate, the different

strands of the judgments of this Court can all be reconciled to reach

the conclusion canvassed for by the learned Senior Advocate. He

argued that the submission that upon landing and discharge of the

goods from the vessel, the Port Trust becomes a sub-bailee of the

shippers/consignors, and that the Port Trust can therefore recover its

dues only from the consignors, or the consignee who steps into the

consignor’s shoes upon endorsement of the bill of lading pursuant to

section 1 of the Indian Bills of Lading Act, 1856, is wholly incorrect. He

dealt with the decision of the Privy Council in “The K.H. Enterprise”

[1994] 1 Lloyd’s Law Reports 593, and distinguished the said decision

from the present case, stating that the decision nowhere relates to the

obligations of the bailee to the sub-bailee for services undertaken by it

at the bailee’s request. He went on to argue that in any case, the sub-

bailee in K.H. Enterprise (supra) was entitled to payment for its

services from the bailee pursuant to the agreement between them, and

not from the bailor/shipper. Analogously, therefore, the Port Trust (sub-

bailee) would be entitled to payment for its services from the shipping

10
agent (bailee). He was at pains to argue that the passing of title to the

goods is immaterial when it comes to the Port Trust collecting its dues,

as the Port Trust has no means of ascertaining when such title has

passed. In any event, Shri Rai contended that the correct reading of

the MPT Act leads to the conclusion that the passing of title is in any

case wholly irrelevant. He stressed the fact that containers belonging

to the shipping agents are required to be returned to them upon

destuffing, as a result of which they are liable for ground rent. He

strongly supported the decision in Rasiklal (supra) which laid this

proposition down as a matter of law. He also strongly deprecated the

impugned judgment of the Kerala High Court, stating that the discretion

that has been given under sections 61 and 62 of the MPT Act to the

Port Trust cannot be converted into a mandatory obligation, and that

“may” must be read as “may”, and not “shall”.

9. Shri Prashant S. Pratap, learned Senior Advocate appearing on behalf

of Respondent No.1, a shipping/steamer agent, was at pains to point

out that endorsement on the bill of lading by the shipping agent, and a

delivery order being given by the shipping agent, does not pass title to

the goods. The endorsement on the bill of lading by the consignor in

favour of a notified party or a consignee, when read with section 1 of

the Indian Bills of Lading Act, 1856, is the endorsement that passes

11
title to goods, and must not be confused with his client’s endorsement

on the bill of lading. He relied heavily on the Privy Council judgment in

K.H. Enterprise (supra), stating that the decision applied on all fours

to the present case, and that therefore the Port Trust as a sub-bailee

of the goods steps into the shoes of the bailee, i.e. the ship-owner/ship-

owner’s agent, and must therefore sue the bailor i.e. the

consignor/shipper, and not the original bailee. This was also because

implied consent has been given by the consignor to handover the

goods to the Port Trust at the port of despatch for delivery to the

consignee, the Port Trust being fully aware that the goods are not the

property of the carrier, namely the vessel, who is the bailee. He argued

that on a conjoint reading of the provisions of the MPT Act, and on a

reading of section 158 of the Indian Contract Act, 1872, the bailor must

repay to the bailee “necessary expenses” incurred by it for the

purposes of the bailment. This would, therefore, enable the Port Trust

to recover storage charges from the bailor who is always the owner of

the goods, whether consignor or consignee, but never from the ship-

owner, who is never the bailor. Shri Pratap argued that the MPT Act

itself makes a clear distinction between the steamer agent, who is the

agent of the vessel, and other agents, namely those of the

consignor/consignee, under section 62 of the MPT Act. Further, upon

12
sale of goods under section 63, the excess must be returned only to

the owner. Such excess can never be paid to the ship-owner or the

steamer’s agent. He further went on to argue that a clear distinction is

made in section 2(o) of the MPT Act between “owner” in relation to the

goods, and “owner” in relation to the vessel, and that the steamer

agent – who is the agent of the vessel – can never be said to be the

“owner” of goods. He relied strongly on the judgment in Sriyanesh

Knitters (supra), stating that the Port Trust is a bailee on behalf of the

consignee who is the bailor, on a consideration of section 1 of the

Indian Bills of Lading Act, 1856, and submitted that Forbes-II (supra)

is wholly incorrect and deserves to be overruled. He dealt with the

judgment in Rowther-I (supra) in great detail, and distinguished it from

the present case, stating that the judgment does not concern

demurrage or storage charges post landing of the goods, and after the

Port Trust takes custody of the goods and issues the receipt, and is

thus not applicable to the facts of the present case. Further, according

to him, Rasiklal (supra), insofar as it agrees with Forbes-II (supra) is

incorrect. Insofar as Rasiklal (supra) notes the legal position that the

Port Trust is a sub-bailee of the goods bailed by the consignor (bailor)

to the ship-owner (bailee), it is absolutely correct and must be followed.

So far as Rowther-II (supra) is concerned, the learned Senior

13
Advocate stated that the portion of Rowther-II (supra), which mixes up

endorsement by the steamer agent with the endorsement by the

consignor, cannot be said to be good law. He also contended that the

issuance of a delivery order to the consignee is irrelevant, and has no

bearing on the liability to pay storage charges. He further argued that

to the extent that the judgment states that the vessel and its agent

cannot be mulcted with the charges, the judgment is absolutely correct

and must be followed. Insofar as goods carried by containers is

concerned, Shri Pratap contends that the Port Trust itself states that

the charges claimed by the Port Trust are in respect of goods, and not

in respect of the container in which the goods are stuffed. Thus, the

container cannot be said to be “goods” as defined which would incur

storage charges. He also relied upon the counter affidavit filed by the

Port Trust before the High Court, in which the Port Trust admitted that

if the goods were imported as bulk cargo, the liability to satisfy

demurrage would not be on the steamer agent but on the consignee.

The mere fact that they are carried in a container can therefore make

no difference. He argued that since all questions were now open before

this Court, he was not constrained by the predecessor counsel

(including himself) in the High Court, stating that as a reference was

then pending to a larger Bench of this Court, they did not argue the

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larger question as to whether the steamer agent is at all liable. There

is no estoppel in any case in law, and the correct position has to be

determined by this Court.

10. Shri Rahul Narichania, learned Senior Advocate appearing on behalf

of Respondent No.6 (The Container Shipping Lines Association), who

is an Intervenor in these proceedings, argued that the definition of

“owner” in section 2(o) of the MPT Act differentiates between owner of

the “vessel”, and owner of the “goods”, and that a steamer agent does

not come within the first part of section 2(o) if the doctrine of noscitur a

sociis is applied. He argued that a steamer agent is an agent of a

disclosed principal, i.e. the ship-owner, and therefore cannot be made

liable for demurrage charges. It is only an agent for loading and

unloading of cargo, i.e. an agent of the consignor or consignee who

can be made so liable. He went on to argue that a steamer agent must

be distinguished from a stevedoring agent, and is not involved in

loading and unloading cargo. He referred to various provisions of the

MPT Act, and argued that section 48(1)(d) therein does not

contemplate any liability on a steamer agent. This section has to be

contrasted with section 49(1)(c), which expressly contemplates liability

on a steamer agent, but only with respect to land that is taken on lease

from the Port Trust by the steamer agent. He relied heavily upon

15
sections 61 to 63 of the MPT Act to argue that when the goods are sold

by the public auction, a steamer agent has to be notified only because

the vessel owner may have a lien on such goods, which can be

enforced in its favour under section 60 of the MPT Act. Further, he

argued that it is made clear that if there is a surplus from the sale

proceeds, such surplus shall be paid only to the importer, owner or

consignee of the goods or their agent, from which list of persons the

ship-owner and its agent are conspicuously absent, making it clear that

it is the owner of the goods alone, or persons entitled to the goods, that

the Port Trust must chase for demurrage charges incurred after

landing. He then argued that the passing of title under section 1 of the

Indian Bills of Lading Act, 1856 makes it clear that it is either the

consignor (before title passes) or the consignee (after title passes) that

can alone be made liable for payment of such charges. He also argued

that the obligation to clear goods imported which have been stored in

a warehouse are that of the importer, and for this he relied heavily on

section 49 of the Customs Act, 1962. He argued that this would also

make it clear that the steamer agent therefore does not come into the

picture. He further argued that the steamer agent has no bailor-bailee

relationship with the Port Trust, and joined Shri Pratap in relying upon

Sriyanesh Knitters (supra) and overruling of Forbes-II (supra). To the

16
extent that Rasiklal (supra) has made observations against steamer

agents, it is incorrect in law and should be overruled to this extent.

11. Shri Kavin Gulati, learned Senior Advocate appearing on behalf of

Hapag-Lloyd India Pvt. Ltd., a shipping agent and also an Intervenor

in these proceedings, reiterated the submissions made by the

predecessor counsel, and further stressed on sections 29, 30, 33, 45,

48 and 150 of the Customs Act. He also argued that once goods have

been landed, a ship-owner’s agent can never be made liable for

demurrage charges, which should be to the account of the owner or

the beneficial owner of the goods.

12. Having heard the learned Senior Counsel on behalf of all parties, it is

necessary to first set out the relevant provisions of the MPT Act.

“Section 2. Definitions.-In this Act, unless the context
otherwise requires,-

(f) “dock” includes all basins, locks, cuts, entrances, graving
docks, graving blocks, inclined planes, slipways, gridirons,
moorings, transit-sheds, warehouses, tramways, railways
and other works and things appertaining to any dock, and
also the portion of the sea enclosed or protected by the arms
or groynes of a harbour;

xxx xxx xxx

(h) “goods” includes livestock and every kind of movable
property;

xxx xxx xxx

(n) “master”, in relation to any vessel or any aircraft making
use of any port, means any person having for the time being

17
the charge or control of such vessel or such aircraft, as the
case may be, except a pilot, harbour master, assistant
harbour master, dock master or berthing master of the port;

(o) “owner”,

(i) in relation to goods, includes any consignor, consignee,
shipper or agent for the sale, custody, loading or unloading
of such goods; and

(ii) in relation to any vessel or any aircraft making use of any
port, includes any part-owner, charterer, consignee, or
mortgagee in possession thereof;

xxx xxx xxx

(v) “rate” includes any toll, due, rent, rate, fee, or charge
leviable under this Act;

xxx xxx xxx

(z) “vessel” includes anything made for the conveyance,
mainly by water, of human beings or of goods and a
caisson;”

“42. Performance of services by Board or other
person.—(1) A Board shall have power to undertake the
following services:—

(a) landing, shipping or transhipping passengers and goods
between vessels in the port and the wharves, piers, quays
or docks belonging to or in the possession of the Board;

(b) receiving, removing, shifting, transporting, storing or
delivering goods brought within the Board’s premises;

(c) carrying passengers by rail or by other means within the
limits of the port or port approaches, subject to such
restrictions and conditions as the Central Government may
think fit to impose;

(d) receiving and delivering, transporting and booking and
despatching goods originating in the vessels in the port and
intended for carriage by the neighbouring railways, or vice

18
versa, as a railway administration under the Indian Railways
Act
, 1890 ( 9 of 1890);

(e) piloting, hauling, mooring, remooring, hooking, or
measuring of vessels or any other service in respect of
vessels; and

(f) developing and providing, subject to the previous
approval of the Central Government, infrastructure facilities
for ports.

(2) A Board may, if so requested by the owner, take charge
of the goods for the purpose of performing the service or
services and shall give a receipt in such form as the Board
may specify.

(3) Notwithstanding anything contained in this section, the
Board may, with the previous sanction of the Central
Government, authorise any person to perform any of the
services mentioned in sub-section (1) on such terms and
conditions as may be agreed upon.

(3A) Without prejudice to the provisions of sub-section (3), a
Board may, with the previous approval of the Central
Government, enter into any agreement or other
arrangement (whether by way of partnership, joint venture
or in any other manner) with, any body corporate or any
other person to perform any of the services and functions
assigned to the Board under this Act on such terms and
conditions as may be agreed upon.

(4) No person authorised under sub-section (3) shall charge
or recover for such service any sum in excess of the amount
specified by the Authority, by notification in the Official
Gazette.

(5) Any such person shall, if so required by the owner,
perform in respect of goods any of the said services and for
that purpose take charge of the goods and give a receipt in
such form as the Board may specify.

(6) The responsibility of any such person for the loss,
destruction or deterioration of goods of which he has taken
charge shall, subject to the other provisions of this Act, be

19
that of a bailee under sections 151, 152 and 161 of the
Indian Contract Act, 1872 (9 of 1872).

(7) After any goods have been taken charge of and a receipt
given for them 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
transhipped.

43. Responsibility of Board for loss, etc., of goods.—(1)
Subject to the provisions of this Act, the responsibility of any
Board for the loss, destruction or deterioration of goods of
which it has taken charge shall,—

(i) in the case of goods received for carriage by railway, be
governed by the provisions of the Indian Railways Act, 1890
(9 of 1890); and

(ii) in other cases, be that of a bailee under sections 151,
152 and 161 of the Indian Contract Act, 1872 (9 of 1872),
omitting the words “in the absence of any special contract”
in section 152 of that Act:

Provided that no responsibility under this section shall attach
to the Board—

(a) until a receipt mentioned in sub-section (2) of section 42
is given by the Board; and

(b) after the expiry of such period as may be prescribed by
regulations from the date of taking charge of such goods by
the Board.

(2) A Board shall not be in any way responsible for the loss,
destruction or deterioration of, or damage to, goods of which
it has taken charge, unless notice of such loss or damage
has been given within such period as may be prescribed by
regulations made in this behalf from the date of taking
charge of such goods by the Board under sub-section (2) of
section 42.”

“48. Scales of rates for services performed by Board or
other person.—(1) The Authority shall from time to time, by

20
notification in the Official Gazette, frame a scale of rates at
which, and a statement of conditions under which, any of the
services specified hereunder shall be performed by a Board
or any other person authorised under section 42 at or in
relation to the port or port approaches—

(a) transhipping 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;

(e) any other service in respect of vessels, passengers or
goods.

(2) Different scales and conditions may be framed for
different classes of goods and vessels.”

“59. Board’s lien for rates.—(1) 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.

(2) Such lien shall have priority over all other liens and
claims, except for general average and for the ship-owner’s
lien upon the said goods for freight and other charges where
such lien exists and has been preserved in the manner
provided in sub-section (1) of section 60, and for money
payable to the Central Government under any law for the
time being in force relating to customs, other than by way of
penalty or fine.

21

60. Ship-owner’s lien for freight and other charges.—(1)
If the master or owner of any vessel or his agent, at or before
the time of landing from such vessel any goods at any dock,
wharf, quay, stage, jetty, berth, mooring or pier belonging to
or in the occupation of a Board, gives to the Board a notice
in writing that such goods are to remain subject to a lien for
freight or other charges payable to the ship-owner, to an
amount to be mentioned in such notice, such goods shall
continue to be liable to such lien to such amount.

(2) The goods shall be retained in the custody of the Board
at the risk and expense of the owners of the goods until such
lien is discharged as hereinafter mentioned; and godown or
storage rent shall be payable by the party entitled to such
goods for the time during which they may be so retained.

(3) Upon the production before any officer appointed by the
Board in that behalf of a document purporting to be a receipt
for, or release from, the amount of such lien, executed by
the person by whom or on whose behalf such notice has
been given, the Board may permit such goods to be
removed without regard to such lien, provided that the Board
shall have used reasonable care in respect to the
authenticity of such document.

61. Sale of goods after two months if rates or rent are
not paid or lien for freight is not discharged.—(1) A
Board may, after the expiry of two months from the time
when any goods have passed into its custody, or in the case
of animals and perishable or hazardous goods after the
expiry of such shorter period not being less than twenty-four
hours after the landing of the animals or goods as the Board
may think fit, sell by public auction or in such cases as the
Board considers it necessary so to do, for reasons to be
recorded in writing, sell by tender, private agreement or in
any other manner such goods or so much thereof as, in the
opinion of the Board, may be necessary—

(a) if any rates payable to the Board in respect of such goods
have not been paid, or

22

(b) if any rent payable to the Board in respect of any place
on or in which such goods have been stored has not been
paid, or

(c) if any lien of any ship-owner for freight or other charge of
which notice has been given has not been discharged and if
the person claiming such lien for freight or other Charges
has made to the Board an application for such sale.

(2) Before making such sale, the Board shall give ten days’
notice of the same by publication thereof in the Port Gazette,
or where there is no Port Gazette, in the Official Gazette and
also in at least one of the principal local daily newspapers:

Provided that in the case of animals and perishable or
hazardous goods, the Board may give such shorter notice
and in such manner as, in the opinion of the Board, the
urgency of the case admits of.

(3) If the address of the owner of the goods has been stated
on the manifest of the goods or in any of the documents
which have come into the hands of the Board, or is otherwise
known notice shall also be given to him by letter delivered at
such address, or sent by post, but the title of a bona fide
purchaser of such goods shall not be invalidated by a reason
of the omission to send such notice, nor shall any such
purchaser be bound to inquire whether such notice has been
sent.

(4) Notwithstanding anything contained in this section, arms
and ammunition and controlled goods may be sold at such
time and in such manner as the Central Government may
direct.

Explanation.—In this section and section 62—

(a) “arms and ammunition” have the meanings respectively
assigned to them in the Arms Act, 1959 (54 of 1959);

(b) “controlled goods” means goods the price or disposal of
which is regulated under any law for the time being in force.

62. Disposal of goods not removed from premises of
Board within time limit.—(1) Notwithstanding anything

23
contained in this Act, where any goods placed in the custody
of the Board upon the landing thereof are not removed by
the owner or other person entitled thereto from the premises
of the Board within one month from the date on which such
goods were placed in their custody, the Board may, if the
address of such owner or person is known, cause a notice
to be served upon him by letter delivered at such address or
sent by post, or if the notice cannot be so served upon him
or his address is not known, cause a notice to be published
in the Port Gazette or where there is no Port Gazette, in the
Official Gazette and also in at least one of the principal local
daily newspapers, requiring him to remove the goods
forthwith and stating that in default of compliance therewith
the goods are liable to be sold by public auction or by tender,
private agreement or in any other manner:

Provided that where all the rates and charges payable under
this Act in respect of any such goods have been paid, no
notice of removal shall be so served or published under this
sub-section unless two months have expired from the date
on which the goods were placed in the custody of the Board.

(2) The notice referred to in sub-section (1) may also be
served on the agents of the vessel by which such goods
were landed.

(3) If such owner or person does not comply with the
requisition in the notice served upon him or published under
sub-section (1), the Board may, at any time after the
expiration of two months from the date on which such goods
were placed in its custody, sell the goods by public auction
or in such cases as the Board considers it necessary so to
do, for reason to be recorded in writing sell by tender, private
agreement or in any other manner after giving notice of the
sale in the manner specified in sub-sections (2) and (3) of
section 61.

(4) Notwithstanding anything contained in sub-section (1) or
sub-section (3)—

(a) the Board may, in the case of animals and perishable or
hazardous goods, give notice of removal of such goods
although the period of one month or, as the case may be, of

24
two months specified in sub-section (1) has not expired or
give such shorter notice of sale and in such manner as, in
the opinion of the Board, the urgency of the case requires;

(b) arms and ammunition and controlled goods may be sold
in accordance with the provisions of sub-section (4) of
section 61.

(5) The Central Government may, if it deems necessary so
to do in the public interest, by notification in the Official
Gazette, exempt any goods or classes of goods from the
operation of this section.

63. Application of sale proceeds.—(1) The proceeds of
every sale under section 61 or section 62 shall be applied in
the following order—

(a) in payment of the expenses of the sale;

(b) in payment, according to their respective priorities, of the
liens and claims excepted in sub-section (2) of section 59
from the priority of the lien of the Board;

(c) in payment of the rates and expenses of landing,
removing, storing or warehousing the same, and of all other
charges due to the Board in respect thereof, including
demurrage (other than penal demurrage) payable in respect
of such goods for a period of four months from the date of
landing;

(d) in payment of any penalty or fine due to the Central
Government under any law for the time being in force
relating to customs;

(e) in payment of any other sum due to the Board.

(2) The surplus, if any, shall be paid to the importer, owner
or consignee of the goods or to his agent, on an application
made by him in this behalf within six months from the date
of the sale of the goods.

(3) Where no application has been made under sub-section
(2), the surplus shall be applied by the Board for the
purposes of this Act.

25

64. Recovery of rates and charges by distraint of
vessel.—(1) If the master of any vessel in respect of which
any rates or penalties are payable under this Act, or under
any regulations or orders made in pursuance thereof,
refuses or neglects to pay the same or any part thereof on
demand, the Board may distrain or arrest such vessel and
the tackle, apparel and furniture belonging thereto, or any
part thereof, and detain the same until the amount so due to
the Board, together with such further amount as may accrue
for any period during which the vessel is under distraint or
arrest, is paid.

(2) In case any part of the said rates or penalties, or of the
cost of the distress or arrest, or of the keeping of the same,
remains unpaid for the space of five days next after any such
distress or arrest has been so made, the Board may cause
the vessel or other things so distrained or arrested to be
sold, and, with the proceeds of such sale, shall satisfy such
rates or penalties and costs, including the costs of sale
remaining unpaid, rendering the surplus (if any) to the
master of such vessel on demand.

65. Grant of port-clearance after payment of rates and
realisation of damages, etc.—If a Board gives to the officer
of the Central Government whose duty it is to grant the port-
clearance to any vessel at the port, a notice stating,—

(i) that an amount specified therein is due in respect of rates,
fines, penalties or expenses chargeable under this Act or
under any regulations or orders made in pursuance thereof,
against such vessel, or by the owner or master of such
vessel in respect thereof, or against or in respect of any
goods on board such vessel; or

(ii) that an amount specified therein is due in respect of any
damage referred to in section 116 and such amount together
with the cost of the proceedings for the recovery thereof
before a Magistrate under that section has not been
realised,

such officer shall not grant such port-clearance until the
amount so chargeable or due has been paid or, as the case
may be, the damage and cost have been realised.”

26
“123. General power of Board to make regulations.—
Without prejudice to any power to make regulations
contained elsewhere in this Act, a Board may make
regulations consistent with this Act for all or any of the
following purposes, namely:—

xxx xxx xxx

(c) for the form of receipt to be given under sub-section (2)
of section 42;

(d) for the period within which notice may be given under
sub-section (2) of section 43;

xxx xxx xxx

(i) for the mode of payment of rates leviable by the Board
under this Act;”

“131. Alternative remedy by suit.—Without prejudice to
any other action that may be taken under this Act, a Board
may recover by suit any rates, damages, expenses, costs,
or in the case of sale the balance thereof, when the proceeds
of sale are insufficient, or any penalties payable to, or
recoverable by, the Board under this Act or under any
regulations made in pursuance thereof.”

13. Since certain provisions of the Customs Act, 1962 were relied upon

during the course of arguments, they are also set out as follows:

“2. Definitions.—In this Act, unless the context otherwise
requires,—

xxx xxx xxx

(26) ―“importer”, in relation to any goods at any time
between their importation and the time when they are
cleared for home consumption, includes any owner,
beneficial owner or any person holding himself out to be the
importer;”

“29. Arrival of vessels and aircrafts in India.—(1) The
person-in-charge of a vessel or an aircraft entering India

27
from any place outside India shall not cause or permit the
vessel or aircraft to call or land—

(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.

30. Delivery of arrival manifest or import manifest or
import report.—(1) The person-in-charge of —

(i) a vessel; or

(ii) an aircraft; or

(iii) a vehicle,

carrying imported goods or export goods or any other person
as may be specified by the Central Government, by
notification in the Official Gazette, in this behalf shall, in the
case of a vessel or an aircraft, deliver to the proper officer
an arrival manifest or import manifest by presenting
electronically prior to the arrival of the vessel or the aircraft,
as the case may be, and in the case of a vehicle, an import
report within twelve hours after its arrival in the customs
station, in such form and manner as may be prescribed and
if the arrival manifest or import manifest or the import report
or any part thereof, is not delivered to the proper officer
within the time specified in this sub-section and if the proper
officer is satisfied that there was no sufficient cause for such
delay, the person-in-charge or any other person referred to
in this sub-section, who caused such delay, shall be liable to
a penalty not exceeding fifty thousand rupees:

Provided that the Principal Commissioner of Customs or
Commissioner of Customs may, in cases where it is not
feasible to deliver arrival manifest or import manifest by
presenting electronically, allow the same to be delivered in
any other manner.

28
(2) The person delivering the arrival manifest or import
manifest or import report shall at the foot thereof make and
subscribe to a declaration as to the truth of its contents.

(3) If the proper officer is satisfied that the arrival manifest or
import manifest or import report is in any way incorrect or
incomplete, and that there was no fraudulent intention, he
may permit it to be amended or supplemented.”

“33. Unloading and loading of goods at approved places
only.—Except with the permission of the proper officer, no
imported goods shall be unloaded, and no export goods
shall be loaded, at any place other than a place approved
under clause (a) of section 8 for the unloading or loading of
such goods.”

“45. Restrictions on custody and removal of imported
goods.—(1) Save as otherwise provided in any law for the
time being in force, all imported goods unloaded in a
customs area shall remain in the custody of such person as
may be approved by the Principal Commissioner of Customs
or Commissioner of Customs until they are cleared for home
consumption or are warehoused or are transhipped in
accordance with the provisions of Chapter VIII.

46. Entry of goods on importation.—(1) The importer of
any goods, other than goods intended for transit or
transhipment, shall make entry thereof by presenting
electronically on the customs automated system to the
proper officer a bill of entry for home consumption or
warehousing in such form and manner as may be
prescribed:

Provided that the Principal Commissioner of Customs or
Commissioner of Customs may, in cases where it is not
feasible to make entry by presenting electronically on the
customs automated system, allow an entry to be presented
in any other manner:

Provided further that if the importer makes and subscribes
to a declaration before the proper officer, to the effect that
he is unable for want of full information to furnish all the
particulars of the goods required under this sub-section, the

29
proper officer may, pending the production of such
information, permit him, previous to the entry thereof (a) to
examine the goods in the presence of an officer of customs,
or (b) to deposit the goods in a public warehouse appointed
under section 57 without warehousing the same.

(2) Save as otherwise permitted by the proper officer, a bill
of entry shall include all the goods mentioned in the bill of
lading or other receipt given by the carrier to the consignor.

(3) The importer shall present the bill of entry under sub-
section (1) before the end of the next day following the day
(excluding holidays) on which the aircraft or vessel or vehicle
carrying the goods arrives at a customs station at which such
goods are to be cleared for home consumption or
warehousing:

Provided that a bill of entry may be presented at any time
not exceeding thirty days prior to the expected arrival of the
aircraft or vessel or vehicle by which the goods have been
shipped for importation into India:

Provided further that where the bill of entry is not presented
within the time so specified and the proper officer is satisfied
that there was no sufficient cause for such delay, the
importer shall pay such charges for late presentation of the
bill of entry as may be prescribed.

(4) The importer while presenting a bill of entry shall make
and subscribe to a declaration as to the truth of the contents
of such bill of entry and shall, in support of such declaration,
produce to the proper officer the invoice, if any, and such
other documents relating to the imported goods as may be
prescribed.

(4A) The importer who presents a bill of entry shall ensure
the following, namely:—

(a) the accuracy and completeness of the information given
therein;

(b) the authenticity and validity of any document supporting
it; and

30

(c) compliance with the restriction or prohibition, if any,
relating to the goods under this Act or under any other law
for the time being in force.

(5) If the proper officer is satisfied that the interests of
revenue are not prejudicially affected and that there was no
fraudulent intention, he may permit substitution of a bill of
entry for home consumption for a bill of entry for
warehousing or vice versa.”

“48. Procedure in case of goods not cleared,
warehoused, or transhipped within thirty days after
unloading.—If any goods brought into India from a place
outside India are not cleared for home consumption or
warehoused or transhipped within thirty days from the date
of the unloading thereof at a customs station or within such
further time as the proper officer may allow or if the title to
any imported goods is relinquished, such goods may, after
notice to the importer and with the permission of the proper
officer be sold by the person having the custody thereof:
Provided that —

(a) animals, perishable goods and hazardous goods, may,
with the permission of the proper officer, be sold at any time;

(b) arms and ammunition may be sold at such time and place
and in such manner as the Central Government may direct.

Explanation.— In this section, ― “arms” and “ammunition”
have the meanings respectively assigned to them in the
Arms Act, 1959 (54 of 1959).

49. Storage of imported goods in warehouse pending
clearance or removal.—Where,––

(a) in the case of any imported goods, whether dutiable or
not, entered for home consumption, the Assistant
Commissioner of Customs or Deputy Commissioner of
Customs is satisfied on the application of the importer that
the goods cannot be cleared within a reasonable time;

(b) in the case of any imported dutiable goods, entered for
warehousing, the Assistant Commissioner of Customs or
Deputy Commissioner of Customs is satisfied on the

31
application of the importer that the goods cannot be
removed for deposit in a warehouse within a reasonable
time,

the goods may pending clearance or removal, as the case
may be, be permitted to be stored in a public warehouse for
a period not exceeding thirty days:

Provided that the provisions of Chapter IX shall not apply to
goods permitted to be stored in a public warehouse under
this section:

Provided further that the Principal Commissioner of
Customs or Commissioner of Customs may extend the
period of storage for a further period not exceeding thirty
days at a time.”

“150. Procedure for sale of goods and application of sale
proceeds.—(1) Where any goods not being confiscated
goods are to be sold under any provisions of this Act, they
shall, after notice to the owner thereof, be sold by public
auction or by tender or with the consent of the owner in any
other manner.

(2) The proceeds of any such sale shall be applied—

(a) firstly to the payment of the expenses of the sale,

(b) next to the payment of the freight and other charges, if
any, payable in respect of the goods sold, to the carrier, if
notice of such charges has been given to the person having
custody of the goods,

(c) next to the payment of the duty, if any, on the goods sold,

(d) next to the payment of the charges in respect of the
goods sold due to the person having the custody of the
goods,

(e) next to the payment of any amount due from the owner
of the goods to the Central Government under the provisions
of this Act or any other law relating to customs, and the
balance, if any, shall be paid to the owner of the goods.

32
Provided that where it is not possible to pay the balance of
sale proceeds, if any, to the owner of the goods within a
period of six months from the date of sale of such goods or
such further period as the Commissioner of Customs may
allow, such balance of sale proceeds shall be paid to the
Central Government.”

14. A perusal of the relevant provisions of the MPT Act would show that

when section 2(o) defines “owner”, it defines owner in relation to goods

separately from owner in relation to any vessel. In sub-clause (i) of

section 2(o), when owner is defined in relation to “goods”, the definition

is an inclusive one. Secondly, it includes persons who are owners of

the goods, or persons beneficially entitled to the goods, such as the

consignor, consignee and the shipper and then also includes agents

for sale, custody, loading or unloading of such goods. Ordinarily,

agents for the sale or custody of goods would relate only to agents of

the owner or persons beneficially entitled to such goods, which would

certainly exclude the ship-owner and the ship-owner’s agent.

However, considering the fact that the definition is an inclusive

definition, and that loading or unloading of goods can take place by the

steamer’s agent, as was held in Rowther-I (supra), it is difficult to

accept the contention on behalf of the steamer’s agent that such

persons would not be included within the definition of “owner” under

the MPT Act.

33

15. For these reasons, it is not possible to apply the doctrine of noscitur a

sociis to the definition of “owner” under section 2(o), as was contended

by the learned Senior Advocates appearing on behalf of the steamer

agents. In Brindavan Bangle Stores and Ors. v. Asst.

Commissioner of Commercial Taxes and Anr. (2000) 1 SCC 674,

this Court held:

“7. The second contention raised on behalf of the appellants
related to the clarity and ambiguity of Entry 30 and Entry 54
and application of such construction of noscitur à sociis. In
our opinion the learned Division Bench of the Karnataka
High Court has rightly held that the said rule of construction
has no application to the facts and circumstances of the
case. This Court in State of Bombay v. Hospital Mazdoor
Sabha
[AIR 1960 SC 610] has considered in detail the rule
of construction noscitur à sociis and in para 9, it is observed
thus:

“We are not impressed by this argument. It must be borne in
mind that noscitur à sociis is merely a rule of construction
and it cannot prevail in cases where it is clear that the wider
words have been deliberately used in order to make the
scope of the defined word correspondingly wider. It is only
where the intention of the legislature in associating wider
words with words of narrower significance is doubtful, or
otherwise not clear that the present rule of construction can
be usefully applied. It can also be applied where the
meaning of the words of wider import is doubtful; but, where
the object of the legislature in using wider words is clear and
free of ambiguity, the rule of construction in question cannot
be pressed into service.”

8. As stated earlier on reading Entry 30 and Entry 54, we
have no manner of doubt that there is neither any ambiguity
nor do they lack any clarity. The legislature intended to levy
and collect entry tax on the articles mentioned in both these
entries. The words used therein are of wider import and
clearly indicate that all articles made of glass or made from

34
all kinds of all forms of plastic including articles made of
polypropylene, polystyrene and like materials are subjected
to payment of entry tax. It cannot be disputed that the articles
in question, namely, bangles are made of glass and/or made
of plastic etc. The impugned judgment has very succinctly
dealt with the contentions raised on behalf of both the parties
and also dealt with the various reported decisions of this
Court and other High Courts in great length. We are in
complete agreement with the view taken by the Division
Bench.”

16. In the present case, we find no lack of clarity in the expression “agent

for the…loading or unloading of such goods”, as including persons who

may be the vessel’s agent involved in unloading goods. As the

definition of “owner” is inclusive, as stated hereinabove, the non-

mention of the ship-owner in the first part of the definition makes no

difference, as it would be incongruous to hold that the shipowner’s

agent is included in the latter part of the definition, but not the ship-

owner itself, which would indicate that the maxim noscitur a sociis

cannot apply.

17. This becomes even clearer when section 42 is perused. Under section

42(1), a Board shall have power to undertake services insofar as

landing, shipping or transhipping goods between vessels in the port

and the wharves, piers, quays or docks belonging to or in the

possession of the Board, referring clearly, therefore, to services

rendered to the vessel (see section 42(1)(a)). Insofar as receiving,

removing, shifting, or transporting goods is concerned, these could be

35
services to both the vessel as well as the owner/person entitled to the

goods. The moot question is, when it comes to “storing” goods brought

within the Board’s premises, whether such service could be said to be

a service rendered to the vessel or its agent (see section 42(1)(b)).

Some of the pivotal provisions of the MPT Act, insofar as the present

questions are involved, are contained in sections 42(2), 42(7) and 43

of the Act. Under section 42(2), a Board may, if so requested by the

“owner”, take charge of the goods for the purpose of performing

services, and shall give a receipt in such form as the Board may

specify. It is obvious that if the ship-owner or its agent are not “owners”,

the Board cannot take the charge of the goods from the ship-owner or

its agent for the purpose of performing services, a result which would

lead to startling consequences. Secondly, under sub-section (7), once

goods have been taken charge of and a receipt given for them, no

liability for any loss or damage which may occur to them shall attach to

any person to whom a receipt has been given (this would include any

of the persons mentioned in section 2(o)(i), including the vessel’s

agents), or to the master or owner of the vessel from which the goods

have been landed or transhipped. This would again make it clear that

the master or owner of the vessel and their agents, from this point on,

have been absolved from liability for loss or damage to the goods, as

36
the Board has now taken over the custody of the goods from such

master or owner of the vessel. From this point on, therefore, the master

or owner of the vessel and their agents cease to have any liability qua

the goods, inasmuch as the Port Trust has now taken them over.

Concomitantly, under section 43(1)(ii), the responsibility of the Port

Trust for loss, destruction or deterioration of goods of which it has

taken charge from this point of time onwards now becomes that of a

bailee under sections 151, 152 and 161 of the Indian Contract Act,

1872, omitting the words “in the absence of any special contract” in

section 152 of the Contract Act. This responsibility attaches only after

a receipt is given by the Board, and notice of loss or damage has been

given, after expiry of such period (as may be prescribed) from the

crucial date on which the Port Trust takes charge of the goods.

18. At this juncture, it is important to state that arguments have been made

based on observations contained in various judgments in which

sections 42 (5) and (6) of the MPT Act have been referred. Sections

42(5) and (6) have no application to the Board, as they apply only to

the “person” authorised under section 42(3) by the Board to perform

services mentioned in sub-section (1).

19. Again, under section 48, a distinction is made between landing of

goods from a vessel, and storage or demurrage charges in respect of

37
goods – see section 48(1)(b), as contrasted with section 48(1)(d).

When it comes to services performed on vessels, sections 49A, 49B,

50, 50A and 50B make it clear that the services rendered to vessels

for which dues have to be paid by vessels are entirely separate and

distinct from services rendered insofar as goods that are landed are

concerned.

20. Coming to section 59, it becomes clear that for all rates leviable under

the MPT Act, which includes rates leviable for storage of goods, the

Board shall have a lien on such goods, and may, after custody of such

goods is taken by the Port Trust, then seize and detain the same until

such rates are fully paid.

21. Section 60 is also important, in that the ship-owner’s lien for freight and

other charges is recognised if, at or before the time of landing of any

goods from such vessel, such freight or other charges have not been

paid. Under section 60(2), the goods shall be retained in the custody

of the Board at the risk and expense of the owners of the goods until

such lien is discharged. Most importantly, godown or storage rent shall

be payable by “the party entitled to such goods” for the time during

which they may be so retained. This section is of crucial importance,

as it makes it clear that godown or storage rent is payable only by the

party entitled to such goods, which can never be the ship-owner or the

38
ship-owner’s agent after the goods have been landed, and the vessel

has sailed away from the port. Further, under section 61, after two

months from the time goods have passed into the Board’s custody, the

Board may, if it thinks fit, sell – by the modalities laid down – such

goods or so much thereof as may be necessary to recover the rates

payable to the Board which remain unpaid. Sub-section (3) of section

61 is very important, in that before making such sale, if the address of

the “owner of the goods” which has been stated on the manifest, or in

other documents that have come into the hands of the Board, or is

otherwise known, notice of such sale must be given to such owner.

22. Section 62 speaks of the disposal of goods that have not been

removed from the premises of the Board within time, and speaks of

their removal by the “owner or other person entitled thereto”. Under

sub-section (2) of section 62, where such goods are proposed to be

removed or sold, a notice may also be served on the “agents of the

vessel by which such goods were landed”. This is for the reason that

the vessel’s agents may have indicated that the ship-owner has a lien

for freight and other charges, which must be satisfied out of the sale of

such goods. The important point to be noted is that a clear distinction

is made between an “owner or other person entitled” to goods, and

agents of the vessel. Further, under sub-section (3) of section 62, it is

39
only if the owner or person entitled to goods does not comply with the

requisition in the notice, that the Board may, at any time after the

expiration of two months from the date on which such goods were

placed in its custody, then sell the goods in the manner indicated. The

scheme of section 62, therefore, is that when it comes to sale of goods

which are lying stored in the premises of the Board, notice is to be

given only to the owner, or other persons who are beneficially entitled

to the goods, who must then comply with the requisition given and

remove the goods. At this juncture, the ship-owner or its agents are not

persons who have to comply with such requisition, as they are neither

persons who are the owner, or other persons entitled to the goods. The

notice issued to the agent of the vessel is only for the limited purpose

as aforesaid. This again indicates that goods that are stored on the

premises of the Board have a nexus only with the owner or other

persons entitled to those goods, and not with the agent of the vessel

or the vessel itself.

23. Section 63 is again very important. When goods have been sold and a

surplus exists, the surplus shall be paid to only three persons or their

agents, namely, the “importer”, “owner” or “consignee” of the goods.

In this sub-section, namely, 63(2), as in the case of “owner’ under

section 61(3), the owner of the goods is obviously not the “owner” as

40
defined under section 2(o), as the context of section 63(2) indicates

otherwise. There would have been no need to add “importer” or

“consignee” in this sub-section, as they are already subsumed within

the wider definition of “owner” in relation to goods under section 2(o).

Secondly, what is conspicuous by its absence is mention of the vessel

or any agent for loading or unloading goods. As a matter of fact, when

it comes to recovery of rates and charges against the vessel, a

separate remedy is provided for in sections 64 and 65 of the MPT Act.

24. The statutory scheme of the MPT Act now becomes crystal clear. Until

the stage of landing and removal to a place of storage, the steamer’s

agent or the vessel itself may be made liable for rates payable by the

vessel for services performed to the vessel. Post landing and removal

to a place of storage, detention charges for goods that are stored, and

demurrage payable thereon from this point on, i.e. when the Port Trust

takes charge of the goods from the vessel, or from any other person

who can be said to be owner as defined under section 2(o), it is only

the owner of the goods or other persons entitled to the goods (who

may be beneficially entitled as well) that the Port Trust has to look to

for payment of storage or demurrage charges.

25. At this juncture, the Customs Act, 1962 also becomes relevant. Under

section 2(26), “importer” is defined as including any owner, beneficial

41
owner or any person holding himself out to be the importer. Though

this definition does not ipso facto apply to the MPT Act, it is important

that the two Acts be read together, as both Acts deal with goods that

are imported into the country from abroad, and their storage and

disposal thereafter. In any event, the expression “importer” that occurs

in section 63(2) of the MPT Act would certainly include a beneficial

owner of the goods.

26. Under section 29 of the Customs Act, the person-in-charge of a vessel

when it carries cargo can land only at a “customs port” (as defined),

unless otherwise permitted by the Central Board of Excise. Under

section 30, the person-in-charge of a vessel carrying imported goods

shall deliver to the “proper officer”, i.e. a customs officer, an import

manifest of the vessel within the time prescribed, which would indicate

the nature of the goods carried by the vessel, and the consignee or

other owner of the goods. Under section 33, no such imported goods

can be unloaded at any place other than the place approved for

unloading of such goods in the customs port, customs airport or coastal

port. Under section 45(1), all imported goods unloaded in a customs

area shall remain in the custody of such person as approved by the

Principal Commissioner of Customs or Commissioner of Customs until

they are cleared for home consumption or are warehoused or

42
transhipped. Section 46(1) is extremely important in that it speaks of a

bill of entry for home consumption or warehousing in such form and

manner as may be prescribed. Section 46(2) then states that a bill of

entry shall include all the goods mentioned in the bill of lading or other

receipt given by the carrier to the consignor. Under section 48, if any

goods brought into India from a place outside India are not cleared for

home consumption or warehoused or transhipped within 30 days from

the date of the unloading, such goods may, after notice to the

“importer” and with permission of the proper officer, be sold by the

person having the custody thereof.

27. Under section 49, imported goods may, pending clearance or removal,

be permitted to be stored in a public warehouse for a period not

exceeding 30 days, or such other extended period that the Principal

Commissioner or Commissioner of Customs may permit. The Customs

Act, therefore, also contains parallel provisions for authorities under

that Act to take charge of, store, and sell imported goods, in the

circumstances mentioned therein.

28. It was argued that carrying goods in a container would, in any case,

make a difference to the position that only the owner of the goods or

person entitled to the goods is liable to pay for demurrage. According

to the Port Trust, when goods are imported in a container, and the

43
container is then landed without the goods being destuffed, and the

container belongs to the ship-owner’s agent and has to be returned to

the ship-owner’s agent, for the duration that the container takes up

storage space, storage charges will have to be paid by the ship-

owner’s agent. Let us examine whether this argument is sound in law.

29. Under the Customs Act, 1962, customs duties are levied on goods

imported into India. “Import” has been defined in section 2(23) of the

Customs Act as the “bringing into India from a place outside India”.

Thus, import of goods can only be said to be complete after they cross

into the territorial waters of India, and become part of the mass of

goods within India. This is the law laid down by this Court in Garden

Silk Mills Ltd. and Anr v. Union of India and Ors. (1999) 8 SCC 744,

as follows:

“17. It was further submitted that in the case of Apar (P)
Ltd. [(1999) 6 SCC 117] this Court was concerned with
Sections 14 and 15 but here we have to construe the word
“imported” occurring in Section 12 and this can only mean
that the moment goods have entered the territorial waters
the import is complete. We do not agree with the submission.
This Court in its opinion in Bill to Amend Section 20 of the
Sea Customs Act, 1878 and Section 3 of the Central Excises
and Salt Act, 1944, Re observed as follows:

“Truly speaking, the imposition of an import duty, by and
large, results in a condition which must be fulfilled before the
goods can be brought inside the customs barriers, i.e.,
before they form part of the mass of goods within the
country.”

44

18. It would appear to us that the import of goods into India
would commence when the same cross into the territorial
waters but continues and is completed when the goods
become part of the mass of goods within the country; the
taxable event being reached at the time when the goods
reach the customs barriers and the bill of entry for home
consumption is filed.”

30. Likewise, in Mangalore Refinery & Petrochemicals Ltd. v.

Commissioner of Customs (2016) 14 SCC 709, this Court dealt with

when an import could be said to be complete under the Customs Act.

After referring to various provisions of the Customs Act, this Court held:

“9. On a reading of the aforesaid provisions, it is clear that
the levy of customs duty under Section 12 is only on goods
imported into India. Goods are said to be imported into India
when they are brought into India from a place outside India.
Unless such goods are brought into India, the act of
importation which triggers the levy does not take place. If the
goods are pilfered after they are unloaded or lost or
destroyed at any time before clearance for home
consumption or deposit in a warehouse, the importer is not
liable to pay the duty leviable on such goods. This is for the
reason that the import of goods does not take place until they
become part of the land mass of India and until the act of
importation is complete which under Sections 13 and 23
happens only after an order for clearance for home
consumption is made and/or an order permitting the deposit
of goods in a warehouse is made. Under Section 23(2) the
owner of the imported goods may also at any time before
such orders have been made relinquish his title to the goods
and shall not be liable to pay any duty thereon. In short, he
may abandon the said goods even after they have physically
landed at any port in India but before any of the aforesaid
orders have been made. This again is for the good reason
that the act of importation is only complete when goods are
in the hands of the importer after they have been cleared
either for home consumption or for deposit in a warehouse.

Further, as per Section 47 of the Customs Act, the importer
has to pay import duty only on goods that are entered for

45
home consumption. Obviously, the quantity of goods
imported will be the quantity of goods at the time they are
entered for home consumption.

xxx xxx xxx

14. We are afraid that each one of the reasons given by the
Tribunal is incorrect in law. The Tribunal has lost sight of the
following first principles when it arrived at the aforesaid
conclusion. First, it has lost sight of the fact that a levy in the
context of import duty can only be on imported goods, that
is, on goods brought into India from a place outside of India.
Till that is done, there is no charge to tax. This Court
in Garden Silk Mills Ltd. v. Union of India, stated that this
takes place, as follows:

“17. It was further submitted that in Apar (P) Ltd. [Union of
India v. Apar (P) Ltd., (1999) 6 SCC 117] this Court was
concerned with Sections 14 and 15 but here we have to
construe the word “imported” occurring in Section 12 and
this can only mean that the moment goods have entered the
territorial waters the import is complete. We do not agree
with the submission. This Court in its opinion in Sea
Customs Act, 1878, S. 20(2), In re [Sea Customs Act, 1878,
S. 20(2), In re, AIR 1963 SC 1760] SCR at p. 823 observed
as follows:

‘26. … Truly speaking, the imposition of an import duty, by
and large, results in a condition which must be fulfilled before
the goods can be brought inside the customs barriers i.e.
before they form part of the mass of goods within the
country.’

18. It would appear to us that the import of goods into India
would commence when the same cross into the territorial
waters but continues and is completed when the goods
become part of the mass of goods within the country; the
taxable event being reached at the time when the goods
reach the customs barriers and the bill of entry for home
consumption is filed.”

46

31. However, another line of judgments deals with what was called the

“original package” doctrine laid down by Chief Justice Marshall of the

US Supreme Court in Brown v. State of Maryland 25 U.S. 419 (1827).

This judgment laid down that while the goods imported remained the

property of the importer in the original form of packaging in which it

was imported, a tax upon it would be “imposts or duties on imports”

without the consent of the Congress, violating section 10(2) of Article I

of the US Constitution. In addition, any such “impost or duty” would

also violate the Commerce clause under section 8(3) of Article I of the

said Constitution, which grants power to the Congress to regulate

commerce with foreign nations. Thus, a State legislature has no power

to impose an “impost or duty” upon the first sale of the commodity so

long as it remained in the importer’s hands1.

32. This doctrine has been the subject-matter of comment in a variety of

different situations. Thus, in the Province of Madras v. Boddu

Paidanna & sons, A.I.R. (29) 1942 Federal Court 33 (at page 37), in

the context of sales tax legislation by the States, the Federal Court

1 In two later judgments of the US Supreme Court, Michelin Tire Corporation v.
Wages 423 U.S. 276 (1976) and Limbach v. Hoover & Allison Company 466 U.S.
353 (1984), judgments following Brown (supra) enunciating the “original package”
doctrine were reversed, stating that non-discriminatory taxes which did not fall on
imports as such, or interfere with the free flow of imported goods amongst the States,
could not be said to be contrary to the Commerce clause or contrary to Section 10(2)
of Article I of the US Constitution. A different approach was adopted to Section 10(2)
of Article I, ignoring the question whether the goods were imported, and instead
analysing the nature of the tax to determine whether it was an “impost or duty”.

47
referred to Chief Justice Marshall’s judgment, and distinguished the

same, saying that it would apply to the Commerce clause in the US

Constitution, and would not apply by analogy to the legislative entries

under the Seventh Schedule of the Government of India Act (1935).

Likewise, in State of Bombay and Anr. v. F.N. Balsara 1951 SCR

682, in the context of a law passed by the Legislature of the Province

of Bombay relating to prohibition of intoxicating liquors, an argument

based on Chief Justice Marshall’s dictum in Brown (supra) was made,

stating that in pith and substance such law would relate to import and

export of intoxicating liquors, and therefore be void. This was turned

down, referring to Boddu Paidanna (supra), stating that in the

American judgment the widest meaning could be given to the

Commerce clause as there was no question of reconciling that clause

with another clause containing the legislative power of the State – see

pages 696 to 700.

33. In Central India Spinning and Weaving and Manufacturing

Company, Ltd. v. The Municipal Committee, Wardha 1958 SCR

1102, this Court, in the context of a terminal tax, relied upon the dictum

of Chief Justice Marshall in Brown (supra) in order to answer the

question before it, namely, whether a terminal tax can be levied on

48
goods which are in transit. The question was answered in the negative

– see pages 1114 and 1121.

34. In Gramophone Company of India Ltd. v. Birendra Bahadur

Pandey & Ors. (1984) 2 SCR 664, Central India Spinning and

Weaving (supra) was distinguished, and Boddu Paidanna (supra)

and F.N. Balsara (supra) were relied upon, to interpret the word

“import” as found in the Copyright Act, 1957. Cases under the Customs

Act were expressly distinguished by this judgment as follows:

“The learned counsel for the appellant invited our attention
to Radhakishan v. Union of India [1965 2 SCR
213]; Shawhney v. Sylvania and Laxman [77 Bom LR
380]; Bernado v. Collector of Customs [AIR 1960 Ker 170],
to urge that importation was complete so soon as the
customs barrier was crossed. They are cases under the
Customs Act and it is needless for us to seek aid from there
when there is enough direct light under the Copyright Act
and the various conventions and treaties which have with
the subject “copyright” from different angles. We do not also
desire to crow our judgment with reference to the history of
the copyright and the customs legislations in the United
Kingdom and India as we do not think it necessary to do so
in this case.”2

35. A recent judgment of this Court in State of Kerala & Ors. v. Fr.

William Fernandez Etc. 2017 SCC OnLine SC 1291, was concerned

with the validity of various State legislations relating to entry tax. As

many as eight issues were raised by this Court, in which issue (iv)

reads as follows:

2 Page 691.

49
“44(iv). Whether the importation of goods, imported from a
territory outside the India continues till the goods reach in
the premises/factory of the importer, during which period
State at no point of time is legislative competence to impose
any tax.”

36. The discussion in answering this question raised in paragraph 44(iv)

begins in paragraph 86. After referring to various definitions of the term

“import” in different legal situations, this Court noticed various

judgments relating to customs in paragraphs 97 to 103. As a matter of

fact in paragraph 103, the law laid down in Garden Silk Mills Ltd.

(supra) was extracted with approval as follows:

103. Similar view was expressed in the case of Garden Silk
Mills Ltd. v. Union of India
, (1999) 8 SCC 744, in paragraph
18, which is to the following effect:—

“18. It would appear to us that the import of goods into India
would commence when the same cross into the territorial
waters but continues and is completed when the goods
become part of the mass of goods within the country; the
taxable event being reached at the time when the goods
reach the customs barriers and the bill of entry for home
consumption is filed.”

37. These judgments were then distinguished by the Court as follows:

“104. The law relating to customs has been consolidated by
the Customs Act, 1962. The definitions of “import”, “imported
goods” and “importer” have already been noticed above.

The definition of imported goods as given in Section 2(25)
is-any goods brought into India from the place outside
India but does not include goods, which have been cleared
for home consumption. The provision clearly contemplates
that once the goods are released for home consumption, the
character of imported goods is lost and thereafter no longer
the goods could be called as imported goods. The import
transit is only till the goods are released for home

50
consumption. The taxing event for entry tax under Entry 52
List II is entirely different and has nothing to do with the
customs duty. The State by imposing entry tax in any
manner is not entrenching in the power of the Parliament to
impose customs duty. The goods are released for home
consumption only after payment of the customs duty due to
the Central Government. The goods which are imported
cannot be held to be insulated so as to not subject to any
State tax, any such insulation of the imported goods shall be
a protectionist measure which will be discriminatory and
invalid. When all normal goods are subjected to State tax no
exemption can be claimed by goods, which have been
imported from payment of entry tax. To take a common
example, all goods, which pass through a toll bridge are
liable to pay toll tax, can it be said that the imported goods
which after having been released from customs barriers and
are passing through a toll bridge, are not liable to pay the toll
tax, the answer has to be in No. Thus, the event for levy of
customs duty, which is in the domain of the Parliament, is
entirely different from that of event of entry tax. The liability
to pay State entry tax arises only when goods enter into a
local area for consumption, use and sale, which event is
entirely different and separate from the levy of a customs
duty, which is on import.”
(emphasis in original)

38. The judgment went on to discuss the “original package” doctrine of

Chief Justice Marshall in paragraphs 108 to 120, finding that recent US

Supreme Court judgments had abandoned this doctrine, and that

therefore, the Federal Court in Boddu Paidanna (supra) and the two

judgments of this Court in F.N. Balsara (supra) and Gramophone

Company of India Ltd. (supra) were correct in not relying on this

doctrine in the context of the cases before them. This doctrine has no

place in the customs law of India, the judgments of this Court

51
concentrating on when an import can be said to be complete on an

analysis of the Customs Act.

39. Given the aforesaid judgments under the Customs Act, a container,

being a receptacle in which goods are imported, cannot be said to be

“goods” that are imported as it does not become part of the mass of

goods within the country on the facts of these cases. Thus, once

destuffing takes place, the container has to be returned either to the

ship-owner’s agent, or to the person who owns such container.

40. In fact, the Bill of Entry (Forms) Regulations, 1976 (as amended up to

date) contain forms in which a Bill of Entry is to be presented by an

importer of goods for home consumption, or for warehousing, or for ex-

bond clearance for home consumption. Regulation 3 of the aforesaid

Regulations reads as follows:

“3. Form of Bill of Entry.- The Bill of Entry to be presented
by an importer of any goods for home consumption or for
warehousing or for ex-bond clearance for home
consumption shall be in Form I or Form II or Form III as the
case may be.

Explanation – In this regulation, “goods” does not include
those goods which are intended for transit or
transshipment.”

41. Form I, which speaks of a Bill of Entry for home consumption, contains

a declaration to be signed by an importer, clause 6(b) of which is

important and is set out hereunder:

52
“6(b) I/We declare that there are the following payments
actually paid or payable for the imported goods by way of
cost and services other than those declared in the invoice^
[^please refer to Rule 10 (1) (a) & (b) of the Customs
Valuation Rules, 2007]

Sl. Particulars Amount or
No. expressed as % of
the unit price

i. Brokerage and
Commissions, except
buying commission
[Rule 10(1)(a)(i) of the
Customs Valuation
Rules, 2007]:

           ii.          Cost of containers
                        [Rule 10(1)(a)(ii)]:

           iii.         Packing cost        [Rule
                        10(1)(a)(iii)]:

          iv.           Cost of goods and
                        services supplied by
                        the    buyer    [Rule
                        10(1)(b)]:

                                                                        ”

42. The same declaration is contained in Forms II and III. A perusal of the

aforesaid Forms prescribed under the said Regulations would show

the difference between “goods” that are imported, which have

reference to the bill of lading/invoice presented by the importer which

contains the number and value of the goods imported, and payments

by way of costs and services other than those declared in the invoice,

which includes costs of containers under Rule 10(1)(a)(ii) of the

53
Customs Valuation (Determination of Value of Imported Goods) Rules,

2007, and packing costs under Rule 10(1)(a)(iii) of these Rules. This

leads to an examination of the aforesaid Rules.

43. Rules 2(1)(d) and (f) of these Rules are relevant, and are set out

hereinbelow:

“2. Definitions.-

(1) In these rules, unless the context otherwise requires,-

xxx xxx xxx

(d) “identical goods” means imported goods-

(i) which are same in all respects, including physical
characteristics, quality and reputation as the goods being
valued except for minor differences in appearance that do
not affect the value of the goods;

(ii) produced in the country in which the goods being
valued were produced; and

(iii) produced by the same person who produced the
goods, or where no such goods are available, goods
produced by a different person, but shall not include
imported goods where engineering, development work,
art work, design work, plan or sketch undertaken in India
were completed directly or indirectly by the buyer on
these imported goods free of charge or at a reduced cost
for use in connection with the production and sale for
export of these imported goods;

xxx xxx xxx

(f) “similar goods” means imported goods –

(i) which although not alike in all respects, have like
characteristics and like component materials which
enable them to perform the same functions and to be
commercially interchangeable with the goods being

54
valued having regard to the quality, reputation and the
existence of trade mark;

(ii) produced in the country in which the goods being
valued were produced; and

(iii) produced by the same person who produced the
goods being valued, or where no such goods are
available, goods produced by a different person, but shall
not include imported goods where engineering,
development work, art work, design work, plan or sketch
undertaken in India were completed directly or indirectly
by the buyer on these imported goods free of charge or
at a reduced cost for use in connection with the
production and sale for export of these imported goods;”

44. Rule 4 deals with the transaction value of “identical goods”, and Rule

5 deals with the transaction value of “similar goods”, and are set out

hereinbelow:

“4. Transaction value of identical goods.–

(1)(a) Subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of identical
goods sold for export to India and imported at or about
the same time as the goods being valued;

Provided that such transaction value shall not be the
value of the goods provisionally assessed under section
18
of the Customs Act, 1962.

(b) In applying this rule, the transaction value of identical
goods in a sale at the same commercial level and in
substantially the same quantity as the goods being
valued shall be used to determine the value of imported
goods.

(c) Where no sale referred to in clause (b) of sub-rule (1),
is found, the transaction value of identical goods sold at
a different commercial level or in different quantities or
both, adjusted to take account of the difference

55
attributable to commercial level or to the quantity or both,
shall be used, provided that such adjustments shall be
made on the basis of demonstrated evidence which
clearly establishes the reasonableness and accuracy of
the adjustments, whether such adjustment leads to an
increase or decrease in the value.

(2) Where the costs and charges referred to in sub-rule
(2) of rule 10 of these rules are included in the transaction
value of identical goods, an adjustment shall be made, if
there are significant differences in such costs and
charges between the goods being valued and the
identical goods in question arising from differences in
distances and means of transport.

(3) In applying this rule, if more than one transaction
value of identical goods is found, the lowest such value
shall be used to determine the value of imported goods.

5. Transaction value of similar goods.-

(1) Subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of similar
goods sold for export to India and imported at or about
the same time as the goods being valued:

Provided that such transaction value shall not be the
value of the goods provisionally assessed under section
18
of the Customs Act, 1962.

(2) The provisions of clauses (b) and (c) of sub-rule (1),
sub-rule (2) and sub-rule (3), of rule 4 shall, mutatis
mutandis, also apply in respect of similar goods.”

45. A perusal of these Rules would show that the value of imported goods

shall be the transaction value of identical goods, as defined, or similar

goods, as defined – whichever rule applies to the facts of each

particular case. It is clear that whether identical goods or similar goods

are taken into account, the price of the container never enters, as the

56
only “goods” that are to be looked at are the goods that are “imported”,

i.e. goods that are stuffed in the containers. Likewise, when it comes

to “computed value”, Rule 8 states as follows:

“8. Computed value.- Subject to the provisions of rule 3,
the value of imported goods shall be based on a
computed value, which shall consist of the sum of:-

(a) the cost or value of materials and fabrication or other
processing employed in producing the imported goods;

(b) an amount for profit and general expenses equal to
that usually reflected in sales of goods of the same class
or kind as the goods being valued which are made by
producers in the country of exportation for export to India;

(c) the cost or value of all other expenses under sub-rule
(2) of rule 10.”

46. Rule 10, which deals with “costs and services” then states:

“10. Costs and services.-

(1) In determining the transaction value, there shall be
added to the price actually paid or payable for the
imported goods, –

(a) the following to the extent they are incurred by the
buyer but are not included in the price actually paid or
payable for the imported goods, namely:-

xxx xxx xxx

(ii) the cost of containers which are treated as being one
for customs purposes with the goods in question;”

47. A reading of Rule 10(1)(a)(ii) would lead to the same result, as

“imported goods” are differentiated from “containers”. Further, for the

purposes of customs valuation, addition to the transaction value of the

57
imported goods is made only when the cost of containers is treated as

being one with the goods in question. Even in such a situation, what is

then imported is the “goods” and the container – the container not

having to be destuffed, and therefore being cleared along with the

goods contained therein for home consumption. In such a case, where

containers do not have to be returned, but are imported along with the

goods contained within it, after the Board takes custody of such

container and the goods within it, the vessel or steamer agent is no

longer liable – even containers that do not need to be destuffed will

then incur demurrage along with the goods contained within it, which

are then payable by the importer, owner, consignor or agent thereof.

48. Further, to make matters clear beyond doubt, General Exemption No.

170, which speaks of ‘Exemption to containers of durable nature’ 3 ,

states as follows:

“In exercise of the powers conferred by sub-section (1) of
Section 25 of the Customs Act, 1962 (52 of 1962), the
Central Government, being satisfied that it is necessary
in the public interest so to do, hereby exempts containers
which are of durable nature, falling within the First
Schedule to the Customs Tariff Act, 1975 (51 of 1975),
when imported into India, from, –

(a) the whole of the duty of customs leviable thereon
under the said First Schedule; and

3Notification No. 104/94 dated 16.03.1994 as amended by Notification No. 101/95
and 43/17.

58

(b) the whole of the integrated tax leviable thereon under
sub-section (7) of section 3 of the said Customs Tariff Act:

Provided that the importer, by execution of a bond in such
form and for such sum as may be specified by the
Assistant Commissioner of Customs or Dy.

Commissioner of Customs binds himself to re-export the
said containers within six months from the date of their
importation and to furnish documentary evidence thereof
of the satisfaction of the said Assistant Commissioner
and to pay the duty leviable thereon in the event of the
importer’s failure to do so:

Provided further that in any particular case, the aforesaid
period of six months may, on sufficient cause being
shown, be extended by the said Assistant Commissioner
for such further period, as he may deem fit.”

A clarification by the Central Board of Indirect Taxes and Customs dated

25th October, 20024, clarified as to what is meant by “containers of durable

nature” as follows:

“Notification No.104/94-Cus., exempts containers which
are of durable nature from the whole of the duty of
customs and additional duty subject to the condition that
such containers are re-exported within 6 months from the
date of importation and documentary evidence is
furnished to the satisfaction of the Assistant
Commissioner. As per the meanings assigned to the
words “durable” and “container” in various Dictionaries, it
would appear that any goods (containers) used for
packaging or transporting other goods, and capable of
being used several times, would fall in the category of
“containers of durable nature”.

A reading of the aforesaid also goes to buttress the conclusion reached

in the previous paragraph of this judgment.

4 Circular No.69/2002-Customs.

59

49. The Customs Tariff Act, 1975 also throws considerable light on

containers fit for repetitive use. Section 2 of the said Act states as

follows:

“2. Duties specified in the Schedules to be levied.—
The rates at which duties of customs shall be levied under
the Customs Act, 1962 (52 of 1962), are specified in the
First and Second Schedules.”

50. The First Schedule deals with general rules for interpretation of “this

Schedule”, and states:

“5. In addition to the foregoing provisions, the following
rules shall apply in respect of the goods referred to
therein:

(a) camera cases, musical instrument cases, gun cases,
drawing instrument cases, necklace cases and similar
containers, specially shaped or fitted to contain a specific
article or set of articles, suitable for long-term use and
presented with the articles for which they are intended,
shall be classified with such articles when of a kind
normally sold therewith. This rule does not, however,
apply to containers which give the whole its essential
character;

(b)subject to the provisions of (a) above, packing
materials and packing containers presented with the
goods therein shall be classified with the goods if they are
of a kind normally used for packing such goods. However,
this provision does not apply when such packing
materials or packing containers are clearly suitable for
repetitive use.”

51. This paragraph again clearly differentiates between containers which

go along with the goods contained therein “suitable for long-term use”,

from containers “suitable for repetitive use”, thus making it clear that

60
the containers of the latter type cannot be classified with the goods

contained therein for payment of customs duty.

52. At this juncture, it is important to examine the judgments of this Court.

In Rowther-I (supra), the question before five honourable Judges of

this Court arose out of the enforcement of the Scale ‘E’ rate that was

added to the Madras Port Trust Scale of Rates in 1958. The question

arose under the pari materia provisions of the Madras Port Trust Act,

1905 (“Madras Act”), which has since been repealed by the MPT Act

by section 133(2C) thereof. The respondents in this case were steamer

agents. Scale ‘E’ laid down charges to be paid by Masters, Owners or

Agents of vessels in respect of Port Trust labour requisitioned and

supplied, but not fully or properly utilised, for unloading goods from the

vessel. These rates are set out at pages 923 and 924 of the Supreme

Court Report, and indicate that a certain amount has to be paid to

labour which is rendered idle either on account of the vessel’s fault, or

on account of force majeure conditions such as rain. This is further

fleshed out by a Circular dated 25.02.1958, referred to at pages 925

and 926. After setting out the relevant sections of the Madras Act, the

by-laws, and the Manual of Instructions framed and issued by the

Board, the first proposition of law laid down in the said judgment is that

it is not obligatory on behalf of the Board to undertake the various

61
services mentioned in section 39 of the Madras Act (which is pari

materia with section 42 of the MPT Act). It is only if such services are

required by the “owner” as defined that such services are undertaken

by the Board. It was then held that it was the steamer agent who was

in a position to require the Board to undertake such services in respect

of the cargo that the ship is to unload (see pages 935 to 936). The

question for determination was then set out as follows:

“The question for determination, in the case, then is whether
the law making the steamer-agent liable to pay these
charges is good law.”5

53. “These charges”, as has been stated earlier, were on account of

payment of labour dues for labour remaining idle, such labour being of

the Port Trust which was used in the unloading of goods from the

vessel. It was then mentioned that these charges were for the benefit

of the vessel so that it completes its task of landing the goods as soon

as possible. It was also pointed out that the steamer agent, and not the

consignee, was liable to pay these charges as the goods are not

unloaded “consignee-wise” (see page 938-939). It was then laid down

that the ship-owner is the bailee of the consignor, and that he is

responsible for delivery of goods to the consignee or transferee

according to the terms of the bill of lading. However, the Court held that

5 Page 937.

62
delivery of goods by the ship-owner to the Board cannot be said to be

delivery to the consignee, as the Board cannot be said to be an agent

of the consignee for the purpose of taking delivery of goods (see page

939). Also, the Court observed that the provision of lien which the

Board can exercise on the goods for non-payment of dues of the Board

makes it clear that it does not act as an agent of the consignee (see

page 947). The Court also held that when section 39(3) of the Madras

Act speaks of taking of charge of the goods by the Board and giving a

receipt to a ship-owner, and the master or owner of the vessel being

absolved from liability for any loss or damage which may occur to the

goods which had been landed, also does not lead to the conclusion

that the Board takes delivery of those goods on behalf of the

consignee. The Court then held:

“It is clear therefore that when the Board takes charge of the
goods from the ship-owner, the ship-owner is the bailor and
the Board is the bailee, and the Board’s responsibility for the
goods thereafter is that of a bailee. The Board does not get
the goods from the consignee. It cannot be the bailee of the
consignee. It can be the agent of the consignee only if so
appointed, which is not alleged to be the case, and even if
the Board be an agent, then its liability would be as an agent
and not as a bailee. The provisions of ss.39 and 40,
therefore, further support the contention that the Board takes
charge of the goods on behalf of the ship-owner and not on
behalf of the consignee, and whatever services it performs
at the time of the landing of the goods or on their removal
thereafter, are services rendered to the ship.”6

6 Page 940.

63

54. This passage clearly states that since the Board does not get the

goods directly from the consignee, but only from the ship-owners, it

cannot possibly be said to be the bailee of the consignee. The

observation that whatever services the Board performs at the time of

landing of the goods, or “on their removal thereafter” are services

rendered to the ship, must be understood in the context of the facts of

that case. A perusal of the Board’s counter affidavit, which is reflected

at page no.921, would show that the Harbour dues on the import of

cargo speaks, inter alia, of charges involved in moving the goods from

the landing point to the storage point. The expression “on their removal

thereafter”, on the facts of this case, would therefore only mean

services performed by the Board from landing point to storage point,

and not thereafter. This is in fact made even clearer by the following

passage in the said judgment:

“The charges for labour rendered idle and for labour working
more hooks simultaneously, are not charges for services
rendered subsequent to the landing of the goods. These are
charges which are incurred at the last stage of the process
of landing of the goods and therefore prior to the actual
landing of the goods. They are, even under the general law,
for services rendered to the master of the ship whose liability
for loss or of damage to the goods continues up to the
placing of the goods on the quay and their receipt by the
Board.”7

7 Page 942.

64

55. While dealing with the case of Peterson v. Freebody & Co. [1895] 2

Q.B.D. 294, which related to a suit between the ship-owner and the

consignee, the observations of Lord Esher that the ship-owner must

do something more than merely put his goods over the rail of his ship,

namely, that he must put the goods in such position that the consignee

can take delivery of them, were limited only to goods which are to be

delivered to the consignee alongside the ship, and not when they are

handed over to a statutory body like the Board, as a sub-bailee. The

delivery therefore contemplated by these observations was held to be

not equivalent to landing of the goods at the quay and placing them in

charge of the Board. The observations as to the Board being a sub-

bailee were therefore made to counter an argument based on an

English judgment, that delivery of the goods to the Board amounts to

delivery to the consignee, which would therefore make the consignee

liable to pay the aforesaid unloading charges.

56. The second judgment with which we are concerned is Rowther-II

(supra). The question that arose before a three-Judge Bench of this

Court was whether demurrage charges payable to the Port Trust of

Madras were to be recovered from the consignee of the goods, or from

the steamer agent. The judgment of this Court, in essence, extracted

65
the judgment of the High Court that was impugned therein, and then

agreed with the same. The High Court had held:

“It cannot be disputed that neither the shipowner or the
steamer agent whose duty it is to deliver the cargo to the
consignee as per the contract with the shipper, cannot lay
any claim of ownership to the goods. The obligation to
deliver the goods to the consignee has been taken over by
the Port Trust under the provisions of the statute and the
shipowner is relieved of the liability for loss or damage to the
goods from the moment the goods are taken charge of by
the Port Trust as per Section 39 of the Act. Once the goods
are handed over to the Port Trust by the steamer and the
steamer agents have duly endorsed the bill of lading or
issued the delivery order, their obligation to deliver the
goods personally to the owner or the endorsee comes to an
end. The subsequent detention of the goods by the Port
Trust as a result of the intervention by the Customs
authorities cannot be said to be on behalf of or for the benefit
of the steamer agents. Generally, if there is a delay in taking
delivery of the goods by the consignee within a reasonable
time, the steamer or its agent can warehouse the goods. In
such an event the warehouseman has an independent claim
against the consignee or endorsee for the demurrage
charges. The position cannot be different merely because
the Customs authorities have intervened. The position of the
Port Trust is the same as that of a warehouseman whose
responsibility to the goods is also said to be a bailee. It
cannot be said that the steamer or its agents have
undertaken any responsibility for the custody of the goods
after the transit has come to an end and after the bill of lading
has been duly endorsed or a delivery order issued. By the
endorsement of the bill of lading or the issue of a delivery
order by the steamer agents, the property in the goods vests
on such consignee or endorsee, and thus it appears to be
clear that the steamer or the steamer agents are not
responsible for the custody of the goods after the property in
the goods passes to the consignee or endorsee till the
Customs authorities actually give a clearance. It should also
be remembered that the steamer which had entered into a
contract of carriage of goods for a reward cannot be said to

66
have undertaken the responsibility of safeguarding the
goods or keeping them at their risk till the goods are actually
cleared from the Customs and taken delivery of by the
consignee. That will be imposing a too onerous and
unexpected responsibility on the steamer which is only a
carrier. If they are submitted to such a responsibility, in most
cases where the goods are detained without delivery in the
hands of the Port Trust at the instance of the Customs the
steamer or steamer agents have to pay towards a storage
or demurrage charges amounts quite disproportionate to the
freight they collect for the carriage of the goods. No carrier
will undertake such a risk and responsibility. We are of the
view that the provisions of the Port Trust Act cannot be so
construed as imposing an additional liability or obligation on
the carrier which was not contemplated by the contract it had
entered with the shipper. It is only the customs of or the
statutory provisions applicable to the port of discharge that
can be taken to be an implied condition of the contract
between the shipper and the shipowner. Therefore, the
provisions of the Port Trust Act cannot add to the liability of
the steamer or its agents which was not contemplated by the
shipper or the shipowner at the time of entering into the
contract. Having regard to the functions and the obligations
which a steamer has undertaken with the shipper under the
contract, we cannot say that the steamer has undertaken the
responsibility for the safety of the goods till the goods are
cleared by the Customs and taken delivery of by the
consignee. As earlier referred to, the duty of the steamer is
normally to deliver the goods to the consignee on the quay
side but that place of delivery has been shifted by the
provisions of the Port Trust Act to the warehouse where the
Port Trust had stored the goods.”8

57. The High Court then distinguished Rowther-I (supra) as follows:

“But as already stated, the charges in that case related to
the services rendered by the Port Trust at the time of the
landing of the goods and their removal thereafter to its
custody, and those charges were taken to be for the benefit
of the steamer. It is for this reason that the Court took the
view that the Port Trust is entitled to collect the service

8 Page 286-287.

67

charges from the steamer or its agent. We are, however,
satisfied that the above decision cannot be taken to lay down
that the Port Trust can at no time proceed against the
consignee for demurrage charges and can only look to the
steamer agent. We are, here, concerned with the demurrage
charges after the goods have been landed and taken charge
of by the Board and after the steamer agent had endorsed
the bill of lading or issued a delivery order for effecting
delivery to the consignee that is after the property in the
goods had passed to him. As already stated, the goods have
remained in the custody of the Port Trust on the default of
the consignee to satisfy the Customs authorities that the
import was authorised. “Even though the consignee is not a
party to the contract of carriage once the property in the
goods had passed to him, he becomes liable to pay the
storage or demurrage charges as owner of the goods to the
shipowner.”9

58. Rowther-II (supra) has made it clear that Rowther-I (supra) concerned

itself with Port Trust dues at the time of landing of the goods, and their

removal thereafter to custody of the Port Trust. These were charges

wholly distinct from demurrage charges, which are incurred only after

the goods have been landed and have been taken charge of by the

Board. To the extent that the High Court lays this down as a proposition

of law, there can be no exception. However, it goes on to state that

when the steamer agent endorses the bill of lading or issues a delivery

order for effecting delivery to the consignee, it is at this stage that the

property in the goods passes to the consignee. This part of Rowther-

II (supra) is clearly contrary to Rowther-I (supra), which had stated:

9 Page 287.

68
“In the present case, it was further contended that as
between the master of the ship and the consignee, the Act
made it obligatory that the consignee gets his goods from
the Board and not direct from the master of the ship, and
that therefore the Board acts as the agent of the consignee.
We have not been referred to any provision in the Act which
supports this contention. Assuming, however, that the
consignee cannot take delivery of the goods at the quay from
the ship direct, it does not follow that the Board receives the
goods as the agent of the consignee. The only reasonable
conclusion in the circumstances can be that the place of
delivery is shifted from the side of the ship to the warehouses
where the Board stores the goods till the consignee appears
to take delivery on the basis of the delivery order by the
steamer agent which is usually an endorsement on the bill
of lading, and the quay be considered a part of the ship.”10

59. Rowther-I (supra) clearly lays down that the endorsement of the bill of

lading by a steamer agent is for the purpose of delivery of the goods,

and, accordingly, cannot be for the transfer of title to the goods.

Rowther-II (supra) cannot, therefore, be said to be good in law when

it speaks of endorsement on the bill of lading and issuance of delivery

order by the steamer agent passing title of the goods to the consignee.

Once this is made clear, the ratio of Rowther-II (supra) is to be

understood thus: since charges for storage or demurrage are after

goods are removed and placed in the custody of the Board, the

steamer agent cannot be made to pay the same, as it would impose “a

too onerous and unexpected responsibility on the steamer”, which is

only a carrier, and not owner, of the goods.

10 Page 946.

69

60. At this juncture, it is important to understand the legal effect of a bill of

lading. This has been set out by a five Judge Bench of this Court in

J.V. Gokal and Co. (Pvt.) Ltd. v. Asst. Collector of Sales-Tax

(Inspection) and Ors. (1960) 2 SCR 852, as follows:

“A bill of lading is “a writing, signed on behalf of the owner of
the ship in which goods are embarked, acknowledging the
receipt of the goods, and undertaking to deliver them at the
end of the voyage subject to such conditions as may be
mentioned in the bill of lading”. It is well-settled in
commercial world that a bill of lading represents the goods
and the transfer of it operates as a transfer of the goods. The
legal effect of the transfer of a bill of lading has been
enunciated by Bowen, L.J., in Sanders Brothers v. Maclean
& Co. [(1883) II QBD 327] thus at p. 341:

“The law as to the indorsement of bills of lading is as clear
as in my opinion the practice of all European merchants is
thoroughly understood. A cargo at sea while in the hands of
the carrier is necessarily incapable of physical delivery.
During this period of transit and voyage, the bill of lading by
the law merchant is universally recognised as its symbol,
and the indorsement and delivery of the bill of lading
operates as a symbolical delivery of cargo. Property in the
goods passes by such indorsement and delivery of the bill
of lading, whenever it is the intention of the parties that the
property should pass just as under similar circumstances the
property would pass by an actual delivery of the goods. And
for the purpose of passing such property in the goods and
completing the title of the indorsee to full possession thereof,
the bill of lading, until complete delivery of the cargo has
been made on shore to someone rightfully claiming under it,
remains in force as a symbol, and carries with it not only the
full ownership of the goods, but also all rights created by the
contract of carriage between the shipper and the shipowner.

It is a key which in the hands of a rightful owner is intended

70
to unlock the door of the warehouse, floating or fixed, in
which the goods may chance to be.”11

61. Section 1 of the Indian Bills of Lading Act, 1856 is also important, which

states:

“Rights under bills of lading to vest in consignee or
endorsee.—Every consignee of goods named in a bill of
lading, and every endorsee of a bill of lading to whom the
property in the goods therein mentioned shall pass, upon or
by reason of such consignment or endorsement shall have
transferred to and vested in him all rights of suit, and 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.”

62. Under this section, the “endorsement” referred to is the endorsement

made by the consignor or owner of the goods in favour of such

endorsee on the bill of lading, so that title to property is then transferred

to the endorsee. This endorsement is very far removed, as has been

correctly stated in Rowther-I (supra), from the endorsement on the bill

of lading by a steamer agent indicating that the goods have been

delivered. Therefore, shorn of the confusion that has arisen as a result

of mixing-up the two types of endorsement, the ratio of Rowther-II

(supra) that, after goods are taken charge of by the Port Trust and

stored in its premises incurring demurrage charges thereon, the vessel

or its agent cannot be made responsible, is unexceptionable.

11 Page 861-862.

71

63. After extracting passages of the judgment of the High Court, this Court

in Rowther-II (supra) then went on to extract a passage from

International Airport Authority of India v. Grand Slam

International (1995) 3 SCC 151, by which it was made clear that

demurrage charges are to be paid by the importer or consignee liable

for the same (and not the vessel or the steamer agent thereof).

64. Sriyanesh Knitters (supra) is the next judgment that has to be dealt

with in chronological sequence. This was a judgment of two learned

judges of this Court, in which the question that arose before the Court

was stated thus:

“1. The common question involved in these appeals is
whether the appellant Board of Trustees of the Port Trust
constituted under the Major Port Trusts Act, 1963 (for short
“the MPT Act”) have a general lien for their dues over the
present or future consignments imported by the importers at
the Bombay Port when the said dues are in respect of the
past imports made by the said importers.”

65. The Court first found that a reading of sections 59 and 61(1) of the

MPT Act made it clear that the lien spoken of is a lien qua the particular

goods that are imported, and cannot extend to previous imports of

similar goods made by the same party. The Court then went on to hold

that the MPT Act is not a comprehensive code, and has to be read

together with other Acts wherever the MPT Act is silent. It was then

held that section 171 of the Indian Contract Act, 1872 speaks of a

general lien which may be exercised by the Port Trust as it is a

72
“wharfinger” within the meaning of said section. This being so, the Port

Trust may continue to retain the goods bailed as security for past dues,

but would have to have recourse to proceedings in accordance with

law for securing an order, which would then enable the Port Trust to

sell the goods to realise the amounts due to it. This could be done by

filing a suit for recovery of the amount due to it under section 131 of

the MPT Act.

66. However, the judgment goes on to make certain observations, in

particular in paragraph 23, stating that a relationship of bailor and

bailee comes into existence, when the Board is required to store goods

that have been imported, between the Board and the consignee of

those goods. Apart from the fact that this is directly contrary to

Rowther-I (see page 940), the consignee cannot be considered to be

a bailor if the definition of bailor under the Indian Contract Act, 1872 is

read. Under section 148 of the Contract Act, a bailor is defined as a

person who delivers the goods to the bailee. In this case, the person

who delivers the goods to the bailee is the vessel and not the

consignee, as has been correctly stated in Rowther-I (supra).

Therefore, the observations that the consignee is the bailor of the

goods, with the Port Trust being the bailee thereof, made in paragraphs

23 and 25 of Sriyanesh Knitters (supra) cannot be said to state the

73
law correctly, and are accordingly overruled. However, since we are

not going into the point of sub-bailment as argued by Shri Pratap, we

leave open the question as to whether the Port Trust, as sub-bailee, is

entitled to recover its dues from the original bailor – the consignor, and

persons claiming through it, given the statutory scheme of the MPT

Act.

67. However, Rowther-I (supra) was correctly distinguished by the Court

in Sriyanesh Knitters (supra) in paragraph 24 thereof, and its ratio

qua the MPT Act not being an exhaustive code has our concurrence.

68. In Forbes-I (supra), two learned Judges of this Court doubted the

correctness of Rowther-II (supra) and framed three questions

(referred to earlier in this judgment) to be answered by a larger Bench.

On 13.08.2014, the larger Bench of three Judges held:

“We have gone through the order whereby the matter has
been referred to this Bench. We have noted the fact that no
reason for not agreeing with the Judgment delivered by a
three-Judge Bench has been assigned in the said order.
Moreover, upon going through the Judgment delivered in
1997 (10) SCC 285, we see no reason to disagree with the
ratio laid down in the said Judgment. In these
circumstances, we refer the matter back to the regular bench
for further hearing as we do not see any inconsistency in the
said Judgment.”

69. The matter then came back to a Bench of two Hon’ble Judges of this

Court, which delivered the judgment in Forbes-II (supra). In Forbes-II,

the Court set out the question of law that arose before it as follows:

74
“1…The common question of law that arises in these
appeals, though in different facts and circumstances, is with
regard to the liability of the agent of a shipowner (hereinafter
referred to as the “steamer agent”) to pay demurrage and
port charges to the Board of Trustees of a Port (hereinafter
referred to as “the Port Trust Authority”) in respect of goods
brought into the port and warehoused by the said authority.
Before proceeding to answer the aforesaid question it will be
convenient to take note of the core facts in each of the
appeals under consideration.”

70. Agreeing with the High Courts of Bombay and Calcutta that the

steamer agent cannot be made liable for demurrage, the Court went

on to hold:

“10. While it is correct that the liability to pay demurrage
charges and port rent is statutory, in the absence of any
specific bar under the statute, such liability can reasonably
fall on a steamer agent if on a construction of the provisions
of the Act such a conclusion can be reached. Determination
of the aforesaid question really does not hinge on the
meaning of the expression “owner” as appearing in Section
2(o)
of the 1963 Act, as has been sought to be urged on
behalf of the appellant though going by the language of
Section 2(o) and the other provisions of the Act especially
Section 42, an owner would include a shipowner or his
agent. Otherwise it is difficult to reconcile how custody of the
goods for the purpose of rendering services under Section
42
can be entrusted to the Port Trust Authority by the owner
as provided therein under Section 42(2). At that stage the
goods may still be in the custody of the shipowner under a
separate bailment with the shipper or the consignor, as may
be. Even dehors the above question the liability to pay
demurrage charges and port rent would accrue to the
account of the steamer agent if a contract of bailment
between the steamer agent and the Port Trust Authority can
be held to come into existence under Section 42(2) read with
Section 43(1)(ii) of the 1963 Act.

11. For the reasons already indicated the decision
in Sriyanesh Knitters with regard to existence of a

75
relationship of bailor and bailee between the consignee and
the Port Trust Authority instead of the steamer agent and the
Port Trust Authority cannot be understood to be a
restatement of a general principle of law but a mere
conclusion reached in the facts of the case where the
consignee had already appeared in the scene. In all other
situations where the bill of lading has not been endorsed or
delivery orders have not been issued and therefore the
consignee is yet to surface, the following observations of the
Constitution Bench in K.P.V. Sheik Mohamed Rowther &
Co. [Port of Madras v. K.P.V. Sheik Mohamed Rowther &
Co., 1963 Supp (2) SCR 915] will have to prevail: (SCR p.

940)

“Section 40 speaks of the responsibility of the Board for the
loss, destruction or deterioration of the goods of which it has
taken charge as a bailee under Sections 151, 152 and 161
of the Contract Act, 1872. Section 148 of the Contract Act
states that a bailment is the delivery of goods by one person
to another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person
delivering them. The person delivering the goods is called
the bailor and the person to whom they are delivered is
called the bailee. It is clear therefore that when the Board
takes charge of the goods from the shipowner, the
shipowner is the bailor and the Board is the bailee, and the
Board’s responsibility for the goods thereafter is that of a
bailee. The Board does not get the goods from the
consignee. It cannot be the bailee of the consignee. It can
be the agent of the consignee only if so appointed, which is
not alleged to be the case, and even if the Board be an
agent, then its liability would be as an agent and not as a
bailee. The provisions of Sections 39 and 40, therefore,
further support the contention that the Board takes charge
of the goods on behalf of the shipowner and not on behalf of
the consignee, and whatever services it performs at the time
of the landing of the goods or on their removal thereafter,
are services rendered to the ship.”

12. From the above, the position of law which appears to
emerge is that once the bill of lading is endorsed or the
delivery order is issued it is the consignee or endorsee who

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would be liable to pay the demurrage charges and other
dues of the Port Trust Authority. In all other situations the
contract of bailment is one between the steamer agent
(bailor) and the Port Trust Authority (bailee) giving rise to the
liability of the steamer agent for such charges till such time
that the bill of lading is endorsed or delivery order is issued
by the steamer agent.

13. In the orders of the Calcutta High Court under challenge,
it is mentioned that Section 60 of the Act provides a remedy
to the steamer agent to recover the dues from the
consignee. Section 60 of the 1963 Act confers a limited lien
on the shipowner “for freight and other charges payable to
the shipowner” which expression does not extend to
demurrage and other port charges. The High Court,
therefore, does not appear to be correct in its conclusions.
However, the said error would not be fundamental to the final
conclusion reached by the High Court. In this regard we
cannot help noticing the special provisions of Sections 61
and 62 of the Act which enable the Port Trust Authority to
proceed against the goods within its custody to recover the
charges which may be payable to the Port Trust Authority.
Ordinarily and in the normal course if resort is made to the
enabling provisions in the 1963 Act to proceed against the
goods for recovery of the charges payable to the Port Trust
Authority there may not be any occasion for the said
authority to sustain any loss or even suffer any shortfall of
the dues payable to it so as to initiate recovery proceedings
against the shipowners.”

71. Paragraph 10 of the judgment does hold that the language of section

2(o) read with other provisions of the MPT Act, especially section 42,

would include a ship-owner or his agent. We have already pointed out

that the principle of noscitur a sociis cannot be applied to this definition

clause, both on its plain language, as also the fact that it is an inclusive

definition clause, which shows that this statement of the law is correct.

However, the statement in this paragraph that even de hors the above

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question, the liability to pay demurrage charges and port rent would

accrue to the account of the steamer agent because of the statutory

bailment that comes into existence under section 42(2) read with

section 43(1)(ii), is plainly incorrect, in view of our finding that after the

Port Trust takes charge of the goods and issues a receipt therefor (at

which point of time the statutory bailment comes into force), the vessel

or the steamer agent cannot be held liable.

72. Insofar as paragraph 11 is concerned, we have already made it clear

that Sriyanesh Knitters (supra) cannot be said to reflect the correct

position in law, insofar as a bailment between the consignee and the

Port Trust is concerned, and thus Sriyanesh Knitters (supra) has

been overruled by us to this extent.

73. Paragraph 12 of the said judgment contains the same confusion that

is contained in Rowther-II (supra), and cannot therefore be said to lay

down the law correctly. The correct position in law is, as has been

stated hereinabove, that after the Port Trust takes charge of the goods,

and issues a receipt therefor, and thereafter stores the goods in a place

belonging to it, such storage charge cannot be to the account of the

vessel or an agent of the vessel.

74. Paragraph 13 refers to one other aspect of the case that has been

argued before us. It may be recalled that the impugned judgment of

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the Kerala High Court in the present case had held that the word “may”

occurring in sections 61 and 62 of the MPT Act must be read as “shall”.

This is not the correct position in law, as a discretion is vested in the

Board to sell the goods in the circumstances mentioned in sections 61

and 62. However, such discretion cannot be exercised arbitrarily, as

the Board is “State” within the meaning of Article 12 of the Constitution,

and is therefore bound by the constraints of Article 14 of the

Constitution of India (see Dwarkadas Marfatia and Sons v. Board of

Trustees of the Port of Bombay (1989) 3 SCC 293 at paragraph 22).

Therefore while it may not be correct to say that “may” has to be read

as “shall” in sections 61 and 62 of the MPT Act, yet in all future cases

the Board is under a constitutional duty to sell the goods in its custody

within a reasonable time from which it takes custody of those goods.

Ordinarily, the time of four months from the date of landing of the goods

mentioned in section 63(1)(c) of the MPT Act should be the outer-limit

within which such goods should be put up for sale. If not put up for sale

within such time, the Board must explain as to why, in its opinion, this

could not be done, which explanation can then be tested by the Courts.

If the explanation is found to be reasonable, and the owner or person

entitled to the goods does not remove the goods thereafter, penal

demurrage may then be levied and collected by the Board. To this

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extent, therefore, while overruling the impugned judgment of the Kerala

High Court on the aspect of “may” being read as “shall” in sections 61

and 62 of the MPT Act, yet the hovering omnipresence of Article 14

over the Board must always be given effect to, and there must be a

very good reason to continue detention of goods beyond the period of

four months as mentioned hereinabove before they are sold.

75. We now come to a judgment of two honourable Judges of this Court in

Rasiklal (supra). The question that arose in this case was as to

whether the Appellant ‘Rasiklal Kantilal and Company’, who was a

person interested in purchasing goods, and did not at the time have

title to the goods, would be liable to pay demurrage charges for a

period of roughly six months, which began with the date on which he

applied to the customs authorities to have bills of entries substituted in

his name. On the facts in that case, during the period from November,

1991 to January, 1992, 78 shipments of goods were imported by 5

different consignees from a UK company, one M/s Metal Distributors

(UK) Ltd; these consignments were landed at Bombay Port. The

consignees filed bills of entry for 37 out of 78 consignments, but

subsequently failed to lift the consignments, as a result of which they

came to be stored at the Port of Bombay. The consignments were

shipped on a “CAD basis”, i.e. cash against documents, in which title

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would remain with the UK company till such time that an importer would

retire the documents against payment.

76. This Court held that despite Rasiklal not being an owner of the goods,

he was liable to pay demurrage for the aforesaid period. Strictly

speaking, this judgment does not apply to the facts of the cases before

us, in that Rasiklal was neither the owner of a vessel or its agent. It

was an importer of goods who had beneficial title to the said goods, as

a formal agreement between the UK company and Rasiklal to

purchase the said goods was made in April, 1992. Given our reading

of the MPT Act, and section 63(2) in particular, this judgment could

have been supported on the basis that Rasiklal was an importer (within

the meaning of section 63(2)) of the goods, and as beneficial owner of

the goods would therefore be liable to pay storage charges of the

aforesaid goods. However, this Court did not choose this route in order

to arrive at its conclusion. On the other hand, it went on to consider

Rowther-I (supra), Rowther-II (supra), and Forbes-II (supra), and

arrived at the following conclusion in paragraph 47:

“47. With respect, we agree with the conclusions recorded
by this Court in Rowther-2 and Forbes that a Board could
recover the rates due, either from the steamer agent or the
consignee but we are of the humble opinion that enquiry into
the question as to when the property in the goods passes to
the consignee is not relevant.”

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77. The Court then went on to examine various provisions with regard to

bailment, and stated that passing of title in goods is irrelevant

conceptually to bailment, which concerns itself with delivery and not

title of goods. It then framed the question in paragraph 51, thus:

“The only question is: from whom can the board recover –
we emphasise the question is not who is liable.”

78. From paragraphs 52 to 60, the Court then went on to consider the

observations made in Rowther-I (supra) that the first respondent, i.e.

the Port Trust, is a sub-bailee of the goods bailed by the consignor to

the ship-owner. This being so, it is the consignor to whom the Port

Trust has to look for payment of these charges, and since in this case

Rasiklal is a consignee claiming through the consignor, Rasiklal would

be liable. Section 158 of the Indian Contract Act, 1872 and section 1

of the Indian Bills of Lading Act, 1856 were relied upon to reach this

conclusion.

79. First and foremost, Rowther-I (supra) did hold that the Port Trust is a

sub-bailee of goods bailed by the consignor to the ship-owner, but so

held in order to distinguish an English judgment – as has been pointed

out hereinabove – which would then lead to the proposition that once

the goods are placed in the charge of the Board, it would amount to

delivery to the consignee, which proposition was turned down by the

Court. The question whether section 158 of the Contract Act can apply

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to a statutory bailment under the MPT Act is left open, given that the

Port Trust is not limited only to recovering “necessary expenses” to be

payable by the bailor, but is statutorily is entitled to recover, by way of

levy of rates and expenses incurred for storage of the goods, together

with something more – the something more being rates of storage

higher than warehousing rates as a deterrent against keeping these

goods in the Port Trust premises. This Court in Board of Trustees of

the Port of Bombay v. Jai Hind Oil Mills Co. and Ors. (1987) 1 SCC

648 has observed:

“10. The power of a Port Trust to fix rates of demurrage and
to recover the same from an importer or exporter (although
the question of an exporter paying demurrage arises rarely)
under law and to show concession as regards demurrage
charges in certain specified cases is recognised by this
Court in the Trustees of the Port of Madras v. Aminchand
Pyarelal
[(1976) 3 SCC 167] and in the Board of Trustees of
the Port of Bombay v. Indian Goods Supplying Co
. [(1977) 2
SCC 649]. These decisions are no doubt based on the
relevant laws which were in force at the material time. But
the decisions are still relevant insofar as cases arising under
the Act because the Act also contains provisions more or
less similar to the statutory provisions considered in the said
decisions. Demurrage charges are levied in order to ensure
quick clearance of the cargo from the harbour. They are
always fixed in such a way that they would make it
unprofitable for importers to use the port premises as a
warehouse. It is necessary to do so because congestion in
the ports affects the free movement of ships and the loading
and unloading operations. As stated earlier, the Port Trust
shows concession to the party concerned in certain types of
cases.”

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80. As a matter of fact, the Division Bench in Rasiklal (supra) seems to

have put the cart before the horse, on a ground based in equity. The

Court stated:

“60…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 the first respondent would result in driving the first
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). The first submission is,
therefore, rejected.”

81. As has been pointed out by us, no such right has been denied on a

correct reading of the MPT Act. The importer, the consignee and the

consignor, or their agents, can all be held liable to pay demurrage

charges. However, since Rasiklal (supra) does not involve either the

owner of the vessel or its agent, we leave open the question as to

whether the Port Trust, as sub-bailee, is entitled to recover its dues

from the original bailor – the consignor, and persons claiming through

it, given the statutory scheme of the MPT Act, as has already been

indicated in paragraph 66 above.

82. Based on the above discussion, our answers to the questions framed

in the reference order are as follows:

1. The point of time at which title to the goods passes to the

consignee is not relevant to determine the liability of the

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consignee or steamer agent in respect of charges to be paid

to the Port Trust;

2. and 3. The bill of lading being endorsed by the steamer

agent is different from the bill of lading being endorsed by the

owner of the goods. In the first case, the endorsement leads to

delivery; in the second case, the endorsement leads to passing

of title. For the reasons mentioned in the judgment, both stages

are irrelevant in determining who is to pay storage charges –

we have held that upto the point that the Port Trust takes

charge of the goods, and gives receipt therefor, the steamer

agent may be held liable for Port Trust dues in connection with

services rendered qua unloading of goods, but that thereafter,

the importer, owner, consignee or their agent is liable to pay

demurrage charges for storage of goods;

4. As per paragraph 24 of our judgment;

5. The answer to question number 5 is really in two parts: first,

as to whether carrying goods in a container would make any

difference to the position that only the owner of the goods or

person entitled to the goods is liable to pay for demurrage; and

second, as to whether the Port Trust is obliged to destuff

containers that are entrusted to it and return empty containers

85
to the shipping agent. The answer to the first question is

contained in paragraphs 45 to 51 of our judgment. The answer

to the second question is that a container which has to be

returned is only a receptacle by which goods that are imported

into India are transported. Considering that the container may

belong either to the consignor, shipping agent, ship-owner, or

to some person who has leased out the same, it would be the

duty of the Port Trust to destuff every container that is

entrusted to it, and return destuffed containers to any such

person within as short a period as is feasible in cases where

the owner/person entitled to the goods does not come forward

to take delivery of the goods and destuff such containers. What

should be this period is to be determined on the facts of each

case, given the activities of the port, the number of vessels

which berth at it, together with the volume of goods that are

imported. While it does not lie in the mouth of the Port Trust to

state that it has no place in which to keep goods after they are

destuffed – as in the facts in the present case – yet a court

may, in the facts of an individual case, look into practical

difficulties faced by the Port Trust. This may lead to the “short

period” in the facts of a particular case being slightly longer

86
than in a case where a port is less frequented, and goods that

are stored are lesser in number, given the amount of space in

which the goods can be stored.

83. Having answered the questions that have been posed before this

Court, we do not, on the facts of this case, think that the justice of the

case demands that we should interfere with the impugned High Court

judgment. The steamer agents themselves did not dispute liability to

pay ground rent upto 75 days before the High Court, and have

admittedly paid the said charges long ago. As a matter of fact, the

steamer agents paid ground rent even beyond the period of 75 days –

the High Court having ordered the Appellant Port Trust to recompute

the liability of the steamer agents, and return the balance to the parties

concerned within two months from the date of receipt of a copy of the

impugned judgment. To order a refund of ground rent paid for 75 days

to the steamer agent, and direct the Board to then recover the same

from the importer, consignor and/or the owner of the goods at this late

stage of the proceedings would not be in the interest of justice.

84. Accordingly, we dispose of the appeals that have been filed against

the impugned High Court judgment. The impugned judgment is set

aside on one question of law, namely, that the expression “may” in

sections 61 and 62 of the MPT Act cannot be read as “shall”, subject

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to the caveat that as the “State” under Article 12 of the Constitution, a

Port Trust must act reasonably, and attempt to sell the goods within a

reasonable period from the date on which it has assumed custody of

them.

…………..………………J.

(R. F. Nariman)

……..……………………J.

(Navin Sinha)

……..……………………J.

(Indira Banerjee)

New Delhi.

5th August, 2020.

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