M/s Rasiklal Kantilal & Co. Vs Board of Trustee of Port of Bombay

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5968 OF 2011

M/S. RASIKLAL KANTILAL & CO. … Appellant

Versus

BOARD OF TRUSTEE OF PORT OF BOMBAY & OTHERS … Respondents

J U D G M E N T

Chelameswar, J.

1. Written submissions filed by the appellant present a

reasonably concise and sufficiently reliable statement of facts

for adjudication of this appeal. Insofar as relevant they are:

“During the period November 1991 to January 1992, 78 shipments of

zinc ingots and copper iron bars were imported by 5 different consignees

from one M/s Metal Distributors (UK) Ltd.; these consignments were landed

at the Bombay Port. The consignees filed bills of entry for 37 out of the 78

consignments, but subsequently failed to lift the consignments and thus, they

came to be stored at by the Port of Bombay.

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The distinguishing factor of the above consignments was that they

were shipped on “CAD Basis” i.e. cash against documents, in which the title

to the goods would remain with the exporter till such a time the importer

would retire the documents against payments.

Facing a grave loss M/s Metal Distributors (UK) Ltd., requested the

present petitioner, if they were interested in purchasing the goods. It is

pertinent to mention that the present petitioner and the original consignees

are no where related, and the present petitioner is a third party to the sales.

On 23.03.1992, the petitioner through his agent applied to the

Customs Authorities to have the Bills of Entry substituted in their name for

the 37 consignments for which the original consignees had filed Bills of

Entry, and also applied to file Bills of Entry for the remaining 41

consignments lying unclaimed. The formal agreement between the M/s

Metal Distributors (UK) Ltd. and the petitioner was entered subsequently, in

April of 1992.

That on 05.05.1992 the Clearing Agent of the petitioner wrote to the

Customs Authorities seeking an amendment of the IGM so that the goods

could be cleared. This was followed by a communication dated 03.06.1992

from the original exporter i.e. M/s Metal Distributors UK that the petitioner

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had agreed to buy the aforesaid consignments since the original importers

had failed to clear the goods.

It is pertinent to mention that on 04.09.1992 the Customs Authority

wrote to the petitioner stating that would be granting permission to amend

the IGM for only 41 consignments and that the balance 37 consignments on

the ground that Bills of Entry for those consignments stood filed.

On 09.09.1992 the petitioner was granted a detention certificate by the

Customs Authority for the aforesaid 41 consignments signifying the period

of detention as from 09.06.1992 to 09.09.1992. Since the said period was

incorrect, the petitioner requested the Customs Authority to correct the

Detention Certificate and the same was subsequently corrected to reflect the

date as 23.03.1992 to 09.09.1992. It is pertinent to mention that the

Detention Certificate initially read “for procedural formalities for amending

the IGM” however subsequently the aforesaid detention certificates were

amended by the Detention Certificates dated 18.11.1993 and 01.12.1993 for

the 41 consignments and specifically read for “bonafide operation of ITC

Formalities”.

In the meantime the Government of India was pleased to notify the

“Statement of Guidelines for Remission of Demurrage Charges”, 1992, vide

which in certain cases were goods/consignments detained by Customs for

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“ITC Facilities” were to be considered for grant of remission from payment

of demurrage for the period the goods were being so processed by Customs

Authorities.

In the meantime the Port of Bombay levied a total of Rs.2,81,67,333

as demurrage charges, the total remission granted by the Port of Bombay

was Rs.90,52,535, and therefore demanded a balance of Rs.1,91,14,798 on

the ground that the petitioner was liable to pay demurrage for the period of

23.03.1992 till 09.09.1992, on the ground that no remission could be granted

prior to date of noting.

Thus, on 16.09.1995, the Port of Bombay rejected the request of the

petitioner for grant of remission of demurrage.”

2. Aggrieved by the order of the Ist respondent, the

appellant, filed WP No.2012/19961. The appellant however 1 Prayer in Writ Petition No.2012 of 1996:

(a) The this Hon’ble Court be pleased to declare that the impugned action on the part of the Respondents 1 to 3 in not granting the remission of demurrage charges in respect of the said consignments since inception and restricting granting of remission of demurrage charges only from the date of filing of the bills of entry in the name of the petitioners were and are unlawful, illegal and null and void.

(b) That this Hon’ble Court be pleased to issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate writ, order or direction calling for the record and proceedings in the matter of the application of the petitioners for review and reconsideration of the grant of remission/refund of demurrage charges of various consignments set out in the petition hereabove as also in relation to the said communication dated 24.5.1996 and after considering the validity, legality and propriety thereof, be pleased to quash and set aside the said action and/or decision on the part of the Respondents 1 to 3 in not granting further remission of demurrage charges in favour of the petitioners;

(c) That this Hon’ble Court be pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction ordering and directing the Respondents 1 to 3 to forthwith grant remission and/or refund of the amount of Rs. alongwith interest thereon at the rate of 18% per annum from the date of payment of the respective amounts as per the statement annexed hereto and marked as Exhibit in favour of the petitioners;

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cleared the goods after making payment of the amount

(claimed by the 1st respondent towards demurrage), under

protest.

3. By the judgment under appeal dated 12.4.2010, the High

Court dismissed the writ petition. Hence the appeal.

4. The only issue pleaded and argued before the High Court

in the above-mentioned writ petition was the correctness of

the decision of the 1st respondent to decline grant of remission

of the entire demand towards demurrage on account of

non-clearance of the goods.

5. However, before us, a twofold submission is made by the

appellant:

(i) that the appellant acquired title to the goods long after

they arrived in the 1st respondent’s port and

discharged from the vessel which carried the goods.

Therefore, demurrage payable for the period anterior

to appellant’s acquisition of title to the goods is to

(d) In the alternative and without prejudice to the above;

This Hon’ble Court be pleased to order the Respondents 4 and 5 to pay to the petitioners the deficit amount after considering the remission that has already been granted and that will be granted by the Respondent 1 to 3 along with interest thereon at 18% per annum from such date as this Hon’ble Court may deem fit;

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be collected from the steamer agent of the vessel;

and the appellant incurs no liability in law to pay

the demurrage - since the 1st respondent rendered

no service to the appellant during that period;

(ii)In the alternative, it is argued that in view of the facts

and circumstances of the case, the appellant is

entitled for complete remission of the amount

claimed towards demurrage on account of delayed

clearance of the goods. According to the appellant –

a substantial portion of the delay occurred because

of the non-clearance of the goods by the customs

department.

(iii) An ancillary submission in this regard is that the 1st

respondent granted complete remission of the

amount payable towards demurrage in the case of

another importer i.e. M/s. Gilt Pack who was

similarly situated. Therefore, the action of the 1st

respondent in declining remission to the appellant

is discriminatory.

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6. To decide the correctness of the various submissions

noted above, an examination of the rights and obligations of

the 1st respondent and its authority to collect demurrage is

required.

7. Import and export of goods into any country has always

been the subject matter of regulation. This has been a

potential source for raising revenue. Import or export of goods

could be either by land, sea or air; by use of vehicles, vessels

or aircrafts. Since we are concerned in this case with import

of goods by sea, we confine our examination to the law dealing

with it.

Without going into the historical details of the import

export trade and regulations thereon, suffice it to state that

under Section 292 of the Customs Act, 1962, the

person-in-charge of a vessel entering India from any place

outside India is prohibited from causing or permitting the

entry of such vessel at any place other than a customs port,

2 Section 29. Arrival of vessels and aircrafts in India.—(1) The person-in-charge of a vessel … entering India from any place outside India shall not cause or permit the vessel … to call or ... —

(a) for the first time after arrival in India; or (b) at any time while it is carrying passengers or cargo brought in that vessel or

aircraft, at any place other than a customs port or a customs airport, as the case may be unless permitted by

the Board. x x x”

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subject to certain exceptions. The expression “customs port”

is defined under Section 2(12)3 of the Customs Act, 1962.

Section 7 thereof authorises the Central Board of Excise and

Customs constituted under the Central Boards of Revenue

Act, 1963 to appoint by a notification in the official gazette, the

ports which alone shall be customs ports for the unloading of

imported goods and the loading of export goods etc.

Indian Ports Acts, 1855, 1875, 1889 and 1908 regulated

the activities of the ports in India. The Port Trust Acts of

1879, 1890 and 1905 of Bombay, Calcutta and Madras

respectively regulated the activities of the said ports in India

through Port Trusts (bodies corporate).

8. Some of these are repealed and others modified4 by the

Major Port Trusts Act, 1963 (hereinafter referred to as “THE

ACT”) which is a law made by the Parliament “to make provision

for the constitution of port authorities for certain major ports in India

and to vest the administration, control and management of such ports in

those authorities”. Section 3 of THE ACT authorises the Central

Government to constitute a Board of Trustees in respect of any

3 Section 2(12). “customs port” means any port appointed under clause (a) of section 7 to be a customs port, and includes a place appointed under clause (aa) of that section to be an inland container depot. 4 A complete analysis of the evolution of the law in this regard requires an elaborate study and would be beyond the scope of any judgment.

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major port. Qua the definition under Section 2(b)5, the Board

of Trustees so constituted is called BOARD6. Section 5 of the

ACT declares each of the BOARDS to be a body corporate to

administer, control and manage the port of Bombay. Different

BOARDS came to be constituted for different major ports in

the country. The 1st respondent is admittedly one of the

BOARDS constituted under Section 3(1) of THE ACT.

9. We shall now examine the provisions of THE ACT insofar

as it is relevant for the purpose of this case.

10. Section 35(1)7 of the Act obligates BOARDS to execute

various works, within or even without the limits of the ports8

being administered by each of the BOARDS, of the nature

indicated under Section 35(2)(a) to (l). An examination of the

tenor of the various clauses indicates that such works are

intended to facilitate creation of ports which can be

5 Section 2(b) “Board”, in relation to a port, means the Board of Trustees constituted under this Act for that port; 6 Section 3. Constitution of Board of Trustees.—(1) With effect from such date as may be specified by notification in the Official Gazette, the Central Government shall cause to be constituted in respect of any major port a Board of Trustees to be called the Board of Trustees of that port, which shall consist of the following Trustees, namely … 7 Section 35 (1) A Board may execute such works within or without the limits of the port and provide such appliances as it may deem necessary or expedient. 8 The expression “Port” is defined under Section 2(q) as follows:-

“Section 2 (q) “port” means any major port to which this Act applies within such limits as may, from time to time, be defined by the Central Government for the purposes of this Act by notification in the Official Gazette, and, until a notification is so issued, within such limits as may have been defined by the Central Government under the provisions of the Indian Ports Act;”

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conveniently used by (vessels9) for loading and unloading of

cargo etc.

11. Section 37 to 42 of the Act authorise BOARDS to compel

sea going vessels to use the works executed by BOARDS for

landing or shipping of any goods or passengers, subject to

various conditions specified under the said provisions.

12. Section 41(1) contemplates the publication of a notified

order. By such an order, BOARD may “(i) declare that such dock,

berth, wharf, quay, stage, jetty or pier is ready for receiving, landing or

shipment of goods or passengers from or on vessels, not being sea-going

vessels, and, (ii) direct that within certain limits to be specified therein it

shall not be lawful, without the express sanction of the Board, to land or

ship any goods or passengers out of, or into, any vessel, not being a

sea-going vessel, of any class specified in such order, except at such

dock, berth, wharf, quay, stage, jetty or pier”. Section 41(2) declares

that once such a notified order is published, “it shall not be

lawful without the consent of the Board for any vessel”:

(i)to land or ship any goods or passengers at any place within the limits so specified, except at such dock, berth, wharf, quay, stage, jetty or pier; or

(ii) while within such limits, to anchor, fasten or lie within fifty yards of the ordinary low-water mark.”

9 Section 2(z) “vessel” includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson;”

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13. Section 42(2) authorises BOARDS to take charge of the

goods for performing such services.

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.

Sub-section (7) declares that when the charge of the goods is

taken and receipt given, the recipient is discharged of any

liability for the damage or loss occurring to the goods

thereafter10.

14. Section 43 stipulates the nature and extent of the

responsibility of BOARDS for any loss or destruction or

deterioration in the goods which were taken charge of by

BOARD - details of which are not necessary for the present

purpose.

15. Chapter VI of the Act deals with imposition and recovery

of rates at ports. The expression “rate” is defined under

Section 2(v)11.

10 Section 42(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 transshipped. 11 Section 2(v) - "rate" includes any toll, due, rent, rate, fee, or charge leviable under this Act;

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16. Various services which BOARDS are obliged to perform

are specified under various provisions of THE ACT. Those

services fall into three categories – (1) services rendered to the

vessel entering the Port; (2) services rendered to goods either

imported by vessels or to be exported through vessel, and (3)

services rendered to passengers arriving or departing from

vessels in the Port.

17. Sections 49A, 49B, 50A and 50B deal with services to be

rendered by a BOARD exclusively to vessels using the Port

administered by BOARDS and authorise the collection of

various rates specified under each of those sections for

services referred to therein, as and when rendered.

18. Section 48 prior to its amendment (by Act 15 of 1997)

authorised every BOARD administering each of the major

ports to prescribe a scale of rates for various services rendered

by that BOARD.

Section 48 (pre 1997 Amendment)12

“Section 48. Scales of rates for services performed by Board or other person.—(1) Every Board shall from time to time frame a scale of rates at which and a statement of the conditions under which, any of the services specified hereunder shall be performed by itself or any person

12 Post 1997, a common authority (TARIFF AUTHORITY) for all major ports is brought into existence under Section 47A to frame scales.

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authorised under section 42 at or in relation to the port or port approaches—

(a) transshipping of passengers or goods between vessels in the port or port approaches;

(b) landing and shipping of passengers or goods from or to such vessels to or from any wharf, quay, jetty, pier, dock, berth, mooring, stage or erection, land or building in the possession or occupation of the Board or at any place within the limits of the port or port approaches;

(c) cranage or porterage of goods on any such place;

(d) wharfage, storage or demurrage of goods on any such place;

(e) any other service in respect of vessels, passengers or goods, excepting the services in respect of vessels for which fees are chargeable under the Indian Ports Act.

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

Section 48(1)(a) and (b) indicate the nature of services to

be rendered by BOARDS. Section 48(1)(c) and (d) indicate the

nature of the rate payable for such services. Clause (d) inter

alia provides that BOARDS can frame scale of rates for storage

or demurrage of goods on any such place. The expression

“such place” occurring under clause (d) must necessarily refer

to the places mentioned in Section 48(1)(b) i.e. wharf, quay,

jetty, pier, dock, berth etc executed by, and land or building

either in “possession or occupation” of BOARDS.

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19. It is apparent from the language of Section 48 that

though it authorises BOARDS to stipulate and collect rates for

various services to be rendered, the Act is silent

regarding persons from whom such rates could be

collected. It is pertinent to note that since services

contemplated under Sections 49A, 49B, 50A and 50B are

services exclusively to be rendered to the vessel (ship). It is

reasonable to interpret that only the ship and its agents are

liable to pay the rates for those services. We are fortified in

our conclusion by the language of Sections 50A13 and 50B14

which make it express when they say “she15 would otherwise be

chargeable”.

20. Section 64 authorises BOARDS to “distrain or arrest” a

vessel when the master of that vessel refuses or neglects to

pay any rate or penalty payable under this Act and to “detain”

the vessel until the amount due to the BOARD is paid.

13 Section 50A. Port-due on vessels in ballast.— A vessel entering any port in ballast and not carrying passengers shall be charged with a port-due at a rate to be determined by the Authority and not exceeding three-fourths of the rate with which she would otherwise be chargeable. 14 Section 50B. Port-due on vessels not discharging or taking in cargo.— When a vessel enters a port but does not discharge or take in any cargo or passengers therein, (within the exception of such unshipment and reshipment as may be necessary for purposes of repair), she shall be charged with a port-due at a rate to be determined by the authority and not exceeding half the rate with which she would otherwise be chargeable. 15 In Maritime Law by a long established practice a vessel is always referred to as “she”.

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21. On the other hand, with reference to services rendered to

goods, a lien16 is created under Section 59(1)17 on the goods, in

favour of BOARDS, and BOARDS are also entitled to seize and

detain the goods until the rates and rents are fully paid.

22. It appears to us that in view of the fact Section 42(2) only

contemplates “taking charge” of the goods but not “taking

possession” of goods, Parliament conferred on BOARDS the

authority to “seize and detain” the goods of which charge is

taken of. The purpose behind the twin declarations contained

in Section 59 is a little intriguing. However, we do not wish to

express any final opinion in this regard as no submission in

this regard is made and such an examination is not necessary

for deciding the case on hand.

23. Under Sections 61 and 62 of the Act, such detained

goods could be sold by the BOARD either by public auction or

otherwise, subject to conditions stipulated in those Sections

and following the procedure specified thereunder without the

16 Lien is defined in Halsbury’s Laws of England (4th Edition, Volume 28 at page 221, para 502) as “In its primary or legal sense “lien” means a right at common law in one man to retain that which is rightfully and continuously in his possession belonging to another until the present and accrued claims are satisfied.” 17 Section 59. Board’s lien for rates.—(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.

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need to file a suit for the recovery of the amounts due to the

BOARDS.

24. The dispute in this case centres around demurrage.

Therefore, we deem it appropriate to examine the meaning of

the expression “demurrage”. The expression “demurrage” is

not defined under the Act. Strictly speaking, the expression

demurrage in the world of shipping meant-

“DEMURRAGE in its strict meaning, is a sum agreed by the charterer to be paid as liquidated damages for delay beyond a stipulated or reasonable time for loading or unloading, generally referred to as the lay-days or lay-time. Where the sum is only to be paid for a fixed number of days, and a further delay takes place, the shipowner’s remedy is to recover unliquidated “damages for detention” for the period of the delay. The phrase “demurrage” is sometimes loosely used to cover both these meanings.”18

The circumstances in which and the nature of demurrage

payable in a given circumstance has been the subject matter

of considerable legal literature19. However, in India, the

expression “demurrage” appears to have acquired a different

connotation.

18 Scrutton on Charterparties and Bills of Lading, Twenty Third Edition, p.380 19 Useful reference can be made to Halsbury’s Laws of England, Fourth Edition. Similarly, a seminal work titled “Law on Demurrage” by Hugo Tiberg covering laws of various countries on the subject.

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Under the Madras Port Trust Act, 1905, certain bye-laws

were framed by the Port Trust in exercise of the statutory

powers under which “Scale of Rates” payable at the Port of

Madras were framed. Chapter IV thereof was headed

“Demurrage”. Under the said Chapter, it was stipulated that

“demurrage is chargeable on all goods left in Board’s transit sheds or

yards beyond the expiry of the free days”.

25. In Trustees of the Port of Madras v. Aminchand

Pyarelal & Others, (1976) 3 SCC 167, this Court had an

occasion to consider the true meaning of “demurrage”

occurring in the above mentioned context and opined20 that

the “Board has used the expression “demurrage” not in the

strict mercantile sense but merely to signify a charge which

may be levied on goods after the expiration of free days”.

26. Regulation 2(g) of the International Airports Authority

(Storage and Processing of Goods) Regulation, 1980 made

under the provisions of the International Airports Authority

20 Para 31. The High Court has cited many texts and dictionaries bearing on the meaning of “demurrage” but these have no relevance for the reason that demurrage being a charge and not a service, the power of the Board is not limited to fixing rates of demurrage. Besides, it is plain that the Board has used the expression “demurrage” not in the strict mercantile sense but merely to signify a charge which may be levied on goods after the expiration of free days. Rule 13(b) itself furnishes a clue to the sense in which the expression “demurrage” is used by the Board. It provides, inter alia, that “demurrage” shall be recovered at a concessional rate for a period of thirty days plus one working day where the goods are detained for compliance with certain formalities and where the Collector of Customs certifies that the detention of goods is “not attributable to any fault or negligence on the part of importers”.

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Act, 1971, defined the expression ‘demurrage’ to mean, the

rate or amount payable to the airport by a shipper or

consignee or carrier, for not removing the cargo within the

time allowed.21

27. By virtue of Section 5922 of THE ACT, the 1st respondent

had a lien on goods placed on or in the property of the 1st

respondent “for the amount of all rates leviable under the Act”

and also the authority/right to seize and detain goods placed

on or in any premises belonging to the 1st respondent until the

amount due towards the rent or any rate for any services

rendered by the 1st respondent with respect to such goods is

fully paid. Further, the 1st respondent is also entitled under

Sections 61 and 62 to sell the goods in question so seized and

detained without the need to file a suit for the recovery of the

amounts due to it.

28. We shall now deal with submissions by the appellant.

29. The first submission is that the amounts due for

providing the various (services to the imported goods) until the

title in the goods passed to the appellant would be a services

21 See International Airport Authority of India v. Ashok Dhawan & Others, (1997) 11 SCC 343 22 See F/N 17

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rendered to the steamer agent. The appellant cannot be

compelled to pay for services not rendered to him. Such an

argument is based on-

(i) that the goods in question were shipped by the

exporter on Cash against Document Basis

(CAD), therefore the title of the goods would

remain with the exporter till such time, the

importer “retires the documents against payments”;

(ii) The owner of the vessel is a bailee of the

shipper. The 1st respondent is sub-bailee of

the owner of the vessel through his steamer

agent for the vessel from the point of their

discharge from the vessel till the point when

title in the goods passed to the appellant.

30. The 1st respondent, on the other hand, argued that the

question regarding the liability of the appellant to pay the

demurrage was never raised before the High Court nor did the

High Court consider that question and, therefore, the

appellant may not be permitted to make the said submission.23

23 See also para 1 of the written submissions of the respondent; “1. The entire claim of the Appellants before the Respondents and in the

Writ Petition was for remission. (Ref pg @79 (Request for Remission) and page 143 (Writ Prayers). Having sought “remission” of the accrued demurrage, it is obvious that the appellants had admitted their liability to pay the demurrage. If the appellants have not been so liable, there was no question of them claiming remission. Hence, today, it is not open to the Appellants to dispute the liability.”

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31. In our opinion, though the question was not raised before

the High Court, the appellant need not be barred from raising

this question before us because it is a pure and substantial

question of law. No enquiry into any fact is really necessary to

decide the said question of law. The only fact which is not

clearly established on record is the point of time at which the

title in the goods passed to the appellant. But, in our opinion

(for the reasons to be given later), that fact is wholly irrelevant

for determining the authority of the 1st respondent to collect

demurrage from the appellant. We, therefore, proceed to

examine the correctness of the submission.

32. In support of this submission, the appellant relied upon

three judgments of this Court in The Trustees of the Port of

Madras by its Chairman v. K.P.V. Sheik Mohamed

Rowther & Co. & Others, (1963) Supp. 2 SCR 915 (hereafter

“ROWTHER-I”), Trustees of the Port of Madras, Through

its Chairman v. K.P.V. Sheikh Mohd. Rowther & Co. Pvt.

Ltd. & Another, (1997) 10 SCC 285 (hereafter “ROWTHER-II”)

and Forbes Forbes Campbell & Company Limited v. Board

of Trustees, Port of Bombay, (2015) 1 SCC 228.

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ROWTHER-I is a case which arose under the Madras Port

Trust Act, 1905.

In exercise of the power under Section 42 of the said Act

the Board of the Madras Port Trust made certain scale of

rates. One of the items in the scales stipulated charges to be

paid by “masters, owners or agents of vessels” in respect of port

trust labour requisitioned and supplied by it but not fully or

properly utilized.

A writ petition came to be filed in the Madras High Court

for a direction to the Board not to enforce the said rates.

It was argued that under provisions of the Madras Port

Trust Act, certain services are to be rendered to the vessel and

certain services to the goods carried by the vessel. The service

such as the one for which the rate had been demanded was a

service rendered to the consignee and not to the steamer

agent. Therefore steamer agents could not be compelled to

pay the rate for the said service.

The Madras High Court dismissed the writ petition. An

intra court appeal thereon was allowed by the Division Bench

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holding that the service in question “must be deemed to be service

rendered to the consignee”. On a further appeal, this Court

recorded the issue in para 30:-

“30. The question for determination, in the case then is whether the law making the steamer-agent liable to pay these charges is good law24.”

33. The entire argument in the case revolved around the

question whether the Madras Port Trust was acting as an

agent of the consignee or the steamer agent when it took

charge of goods discharged from the vessel. The case of the

steamer agent was that the Madras Port Trust acted as the

agent of the consignee. This submission was rejected. This

Court held:

“57. If the Board was an agent of the consignee, it was bound to deliver the goods to the consignee and should not have any rights of retaining the goods till the payment of the rates and other dues for which it had a lien on the goods. The provision of there being a lien on the goods for the payment of the dues of the Board or the freight, make it clear that the Board did not have the custody of the goods as an agent of the consignee.”

The appeal was allowed by this Court upholding the authority

of the port trust to collect the ‘rate’ from the steamer agent.

24 It may be mentioned that the law referred above is a piece of subordinate legislation.

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34. This Court held that BOARD receives goods as a

sub-bailee from the bailee (ship owner) through the bailee’s

agent (See para 4925 of the judgment). This Court upheld the

impugned provision which fastened the liability upon the

steamer agent. This Court opined that the goods were

delivered to the BOARD by the consignor’s bailee (the ship

owner) through the steamer agent (the bailee’s agent) making

the BOARD a sub-bailee. Therefore, the service rendered by

the BOARD is a service to the owner of the ship.

ROWTHER-I is not an authority for the proposition that a

BOARD could collect rates due for the services rendered to

goods only from the steamer agent. Nor did this Court deal

with the question whether the title in the goods is a relevant

factor for determining a BOARD’S right to collect the rates.

ROWTHER-I is no authority for the proposition that until

the title in goods passed to the consignee the liability to pay

various rates payable to a BOARD for the services rendered in

respect of the goods falls exclusively on the steamer agent. 25 Para 49. These observations apply when the goods are to be delivered to the consignee alongside the ship and not when they are handed over to the statutory body, like the Board, as a sub-bailee. How the delivery is to be made depends on the terms of the bill of lading and the custom of the Port. The case is no authority for the proposition that in all circumstances the master of the vessel is not responsible for the performance of the acts subsequent to his placing the goods in such a position that the consignee can get them, as contended for the respondents. The delivery contemplated in these observations, is not, in our opinion, equivalent to the landing of the goods at the quay as contemplated by the various provisions of the Act.

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35. In ROWTHER-II, the question was “whether demurrage

charges, harbour dues etc.” were to be recovered from the

consignee or the steamer agent.

The Madras High Court concluded that the consignee

was liable to pay the demurrage.

It was a case where the goods remained in the custody of

the Port Trust for a long time and were ultimately confiscated

by the customs authorities. Whether demurrage was to be

recovered from the steamer agent or the consignee was in

issue.

High Court held that the steamer agent’s responsibility

ceases “once the goods are handed over to the Port Trust” and

the bill of lading is endorsed26. The High Court further held

that upon the endorsement of the Bill of lading, “the property in

the goods vests” in the consignee and therefore the steamer

agent’s responsibility for the custody of the goods ceases27.

26 “……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.” 27 …..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.

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The High Court, therefore, concluded that only the consignee

was liable.

This Court approved the conclusion of the High Court.

36. In Forbes Forbes Campbell & Company Limited v.

Board of Trustees, Port of Bombay, (2015) 1 SCC 228, this

Court examined the liability of the steamer agent to pay

demurrage and port charges to the BOARD of Bombay Port in

respect of goods brought into the Port and warehoused by the

said authority.

The question arose in the context of the BOARD’S

resolution to recover the rent (on cargo transported in

containers) from the steamer agent. The steamer agent

contended that neither THE ACT nor the subordinate

legislation made thereunder created such liability either on the

ship owner or his agent (steamer agent).

Rejecting such submission, this Court held that “in the

absence of any specific bar in the statute, such liability can

reasonably fall on the steamer agent”, if on a proper

construction of the provisions of the Act such a conclusion can

be reached.

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“Para 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.”

On examination of the provisions of THE ACT and two

earlier judgments28, this Court rejected the submission that

there comes into existence the relationship of bailor and

bailee between the consignee and the BOARD as was held

earlier by this Court in Sriyanesh Knitters.

“11. For the reasons already indicated the decision in Sriyanesh Knitters with regard to the existence of a 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.”

28 ROWTHER-I and Port of Bombay v. Sriyanesh Knitters, (1999) 7 SCC 359

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and concluded29 that once the bill of lading is endorsed or the

delivery order issued, it is the consignee or endorsee who

would be liable to pay the demurrage and other dues of the

Port Trust Authority. It further held that in all other situations

the contract of bailment is one between the agent of the bailor

and the BOARD (Bailee) fastening the liability on the (steamer)

agent for such rates till such time the bill of lading is

endorsed or delivery order is issued by the steamer agent.

37. With respect, we agree with the conclusions recorded by

this Court in the cases of ROWTHER-II 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.

We have already noticed the submission of the

appellant that the appellant is not liable to make payment

of any demurrage incurred prior to the acquisition of title

in the goods by the appellant. Enquiry into the title of the

29 Para 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 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.

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goods and the point of time at which the title passes to

the consignee is equally irrelevant for determining the

authority of a BOARD to recover the amounts due to it under

THE ACT. The authority and right of a BOARD to recover its

dues either from the steamer agent or the consignee flows

from two different sources:

(i) Section 158 of the Indian Contract Act, 1872

read with Section 1 of the Indian Bills of

Lading Act, 1856.

(ii) Section 59(1) of THE ACT.

38. The essence of bailment is possession and the consent of

the owner of the goods is not necessary.30 The distinction

between possession and custody of goods is also noted by

jurists.31 In this context, the language of Section 49(2) is

30 Trustees of the Port of Bombay Vs. Premier Automobiles Ltd. (1981) 1 SCC 228, para 11. “11. It is well settled that the essence of bailment is possession. It is equally well

settled that a bailment may arise, as in this case, even when the owner of the goods has not consented to their possession by the bailee at all : PALMER ON BAILMENT, 1979 edition, page 2. There may thus be bailment when a wharfinger takes possession of goods unloaded at the quay side. A bailment is not therefore technically and essentially subject to the limitations of an agreement, and the notion of privity need not be introduced in an area where it is unnecessary, for bailment, as we have said, arises out of possession, and essentially connotes the relationship between a person and the thing in his charge. It is sufficient if that possession is within the knowledge of the person concerned. It follows that a bailment may very well exist without the creation of a contract between the parties and it essentially gives rise to remedies which, in truth and substance, cannot be said to be contractual. That is why Palmer has made the assertion that “bailment is predominantly a tortuous relation” (page 36), and the two are fundamentally similar.

31 ‘Bailment’ is a technical term of the common law, though etymologically it might mean any kind of handing over. It involves change of possession. One who has custody without possession, like a servant, or a guest using his host’s goods, is not a bailee. [See: Pollock & Mulla, The Indian Contract and Specific Relief Acts, 13th Ed. Page 1931]

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significant - “A Board may…… take charge of the goods…….”. But

we do not propose to examine the significance as the same is

neither argued nor necessary. In our opinion, for the purpose

of the present, we must also mention here Section 63 of THE

ACT authorises the BOARD to sell the goods “placed in their

CUSTODY”. This Court also recognised that bailment can

come into existence even otherwise than by a contract.

“The State of Gujarat Vs. Memon Mahomed Haji Hasam (Dead) by LRs, AIR 1967 SC 1885, paras 5 and 6

“5. ……Bailment is dealt with by the Contract Act only in cases where it arises from a contract but it is not correct to say that there cannot be a bailment without an enforceable contract. As stated in “Possession in the Common Law” by Pollock and Wright, p. 163.

“Upon the whole, it is conceived that in general any person is to be considered as a bailee who otherwise than as a servant either receives possession of a thing from another or consents to receive or hold possession of a thing for another upon an undertaking with the other person either to keep and return or deliver to him the specific thing or to (convey and) apply the specific thing according to the directions antecedent or future of the other person.” “Bailment is a relationship sui generis and unless it is sought to increase or diminish the burdens imposed upon the bailee by the very fact of the bailment, it is not necessary to incorporate it into the law of contract and to prove a consideration”

6. There can, therefore, be bailment and the relationship of a bailor and a bailee in respect of specific property without there being an enforceable contract. Nor is consent indispensible for such a relationship to arise. A finder of goods of another has been held to be a bailee in certain circumstances.”

As rightly opined in FORBES’ case, there is no bailor and

bailee relationship between the BOARD (the 1st respondent)

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and the consignee (the appellant); either voluntarily or

statutorily compelled but such a relationship exists between

the 1st respondent and the owner of the ship (through the

steamer agent). It is possible in a given case where the

consignee or any other person (such as the appellant herein)

claiming through the consignor, eventually may not come

forward to take delivery of the goods for a variety of reasons -

considerations of economy or supervening disability imposed

by law etc. Therefore, in such cases to say that merely

because the bill of lading is endorsed or the delivery order is

issued, the consignor or his agent is absolved of the

responsibility for payment (of rates or rent for services

rendered w.r.t goods) would result in a situation that the

BOARD would incur expenses without any legal right to

recover such amount from the consignor and be driven to

litigation for recovering the same from the consignee who did

not take delivery of the goods with whom the BOARD had no

contract of bailment and consequently no contractual

obligation to pay the ‘rates or rent’.

39. Enquiry into the relationship between either the BOARD,

the consignor of goods, the owner of the vessel and the

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steamer agent on one hand or the consignee and the BOARD

on the other, in our opinion, is wholly irrelevant in examining

the right of the BOARD to recover the amounts due towards

the rates or rent for services rendered with respect to the

goods. The right of the BOARD is unquestionable. The only

question is: from whom can the BOARD recover – we

emphasise the question is not who is liable. Depending

on the nature of the relationship between the consignor and

consignee, the liability may befall either of them.

40. On the other hand, in the light of the legal position

declared by the Constitution Bench in ROWTHER-I, the 1st

respondent is a sub-bailee of the goods bailed by consignor

(bailor) to the ship-owner (bailee). The goods are bailed

through the agent (steamer agent) of the bailee. The appellant

is only a person claiming through the bailor, without any

direct contractual relationship with the 1st respondent.

41. Title to the goods is irrelevant even in the cases of a

bailment arising under a contract. Any person who is capable

of giving physical possession of goods can enter into a contract

of bailment and create bailment. Under Section 148 of the

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Contract Act, ‘bailment’, ‘bailor’ and ‘bailee’ are defined as

under:

“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’. The person to whom they are delivered is called the ‘bailee’.

Explanation.- If a person is already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.”

It can be seen from the above that bailment is a contractual

relationship and bailment can be created by any person who is

in possession/custody of goods but not necessarily the owner

of the goods. When the purpose of bailment is accomplished

the goods are to be returned or otherwise disposed of

according to the directions of the person (bailor) delivering

them.

42. Section 158 of the Contract Act stipulates the obligations

of the bailor to pay the necessary expenses incurred by the

bailee “for the purpose of bailment”. Section 158 of the

Contract Act reads as under:

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“Section 158. Repayment by bailor of necessary expenses. – Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of bailment.”

The obligation of the bailee to return the bailed goods

when the purpose of bailment is accomplished and the

obligation of the bailor to pay the bailee “the necessary expenses

incurred by him for the purpose of the bailment” in our opinion

would attend not only a bailment by contract but every kind of

bailment.

43. If the bailor has such an obligation to pay the bailee, any

person claiming through the bailor must necessarily be bound

by such an obligation unless the bailee releases such person

from such an obligation. A consignee is a person claiming

through the consignor (bailor). In the context of import of

goods into India by ship, the consignees’ rights are governed

inter alia by Section 1 of the Bills of Lading Act, 1856.

1. 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 herein 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.

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44. It can be seen from the above that the 1856 Act enacts a

fiction that the consignee to whom the property in the goods

shall pass shall be “subject to the same liabilities in respect of

such goods as if the contract contained in the bill of lading had

been made with himself”. Bill of lading is evidence of a

contract32 between the shipper (consignor) and the owner of

the ship by which the owner of the ship agrees to transport the

goods delivered by the consignor to a specified destination and

deliver it to the consignee. Delivery of goods pursuant to a bill

of lading creates a bailment between the shipper and the

owner of the ship. Obviously the legislature knew that a

consignee under a bill of lading is a 3rd party to the contract

but intrinsically connected with the transaction and thought it

necessary to specify the rights and obligations of the

consignee. Hence, the fiction under the 1856 Act, that the

moment the property in goods passes to the consignee, the

liabilities of the consignee in respect of such goods would be

the same as those of the consignor, as if the contract

contained in the bill of lading had been made with the

consignee.

32 Called contract of affreightment

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45. The consequence is that the 1st respondent (sub-bailee)

would be entitled to enforce its rights flowing from the

Bailment between the ship owner and the 1st respondent

against the consignee and recover expenses incurred by it in

connection with the bailment from the consignee. The terms

and conditions of the contract between the consignor or

person claiming delivery of the goods are irrelevant for

determining the right of the 1st respondent to recover its dues.

The obligations/liability of the consignee is determined by the

statute. But the said obligation is not exclusive to the

consignee. The consignor (bailor) is not relieved of the

obligation to pay by virtue of Section 158 of the Contract Act

the expenses incurred by the 1st respondent. Nothing is

brought to our notice to hold otherwise. At this juncture, we

must point out that the declaration under Section 42(7)33

absolving the owner of the ship and his agents is limited only

to the obligations owed by the bailor to the consignee not to

the sub bailor like the 1st respondent.

33 Section 42 (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.

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46. Section 59 of THE ACT, creates lien in favour of 1st

respondent in respect of any goods and also authorises the 1st

respondent to seize and detain the goods, it clearly makes a

special provision. Under the Contracts Act, every bailee has no

lien on the goods delivered to him. Such a lien is available

only to limited classes of bailees specified under Section 17134.

They are – bankers, factors, wharfingers35, attorneys of a High

Court and policy-brokers. It can be seen from Section 171

that only those specific categories of bailees have a right to

retain goods bailed to them as security for the amounts due to

them. No other category of bailee has such a right unless there

is an express contract creating such a lien.

47. Section 59 of THE ACT, also expressly authorises the 1st

respondent to seize and detain goods taken charge of by it.

Parliament also invested the 1st respondent with the authority

to sell the goods and appropriate the proceeds of sale under

34 Board of Trustees of the Port of Bombay & Ors. v. Sriyanesh Knitters, (1999) 7 SCC 359. Para 17. … This section is in two parts. The first part gives statutory right of lien to four

categories only, namely, bankers, factors, wharfingers and attorneys of High Court and policy-brokers subject to their contracting out of Section 171. The second part of Section 171 applies to persons other than the aforesaid five categories and to them Section 171 does not give a statutory right of lien. It provides, that they will have no right to retain as securities goods bailed to them unless there is an express contract to that effect. Whereas in respect of the first category of persons mentioned in Section 171 the section itself enables them to retain the goods as security in the absence of a contract to the contrary but in respect of any other person to whom goods are bailed the right of retaining them as securities can be exercised only if there is an express contract to that effect. 35 For the sake of completeness in the narration it must also be mentioned that this Court held in (1999) 7 SCC 359 (at para 22) that a Board constituted under THE ACT is a wharfinger.

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Section 6336 of the ACT towards various heads indicated

thereunder without the need to file a suit37 which are taken

charge of by it in certain circumstances, details of which we

have noticed earlier.

48. If the ACT authorises the 1st respondent to recover its

dues by bailing the goods under bailment, in those cases

where the consignee does not turn up to take the delivery of

the goods within the time stipulated under Sections 61 or 62

36 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 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.

37 Board of Trustees of the Port of Bombay & Others v. Sriyanesh Knitters, (1999) 7 SCC 359. “16. There is another aspect which is relevant. Section 171 of the Contract Act only enables

the retention of goods as security. On the other hand in respect of current dues in respect of existing goods in their possession the Board not only has a lien under Section 59 of the MPT Act but it also has the power to sell the said goods and realise its dues by virtue of Section 61 of the MPT Act. The procedure for exercising this power of sale of the goods in respect of which the Board has lien is contained in the said section. Before selling the goods no order of any court or other judicial authority is required. On the other hand the general lien contemplated by Section 171 of the Contract Act only enables the retention of the bailed goods as a security. Their retention does not give any power to sell the goods, unlike the power contained in Section 61 of the MPT Act. If payment is not made by the consignee to the wharfinger, in a case where Section 171 of the Contract Act applies, the wharfinger can only retain the goods bailed as security and will have to take recourse to other proceedings in accordance with law for securing an order which would then enable the goods to be sold for realisation of the amounts due to it. It may in this connection, be necessary for the wharfinger to file a suit for the recovery of the amount due to it and Section 131 of the MPT Act clearly provides that such a remedy of filing a suit is available to the Board.”

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of the ACT, to deny the right to demand and recover the

amounts due from the consignee when he seeks delivery of the

goods under bailment would be illogical and inconsistent with

the scheme of the ACT.

Such right, in our view, undoubtedly enables the 1st

respondent to claim various amounts due to it, from any

person claiming delivery of the goods either the bailor or a

person claiming through the bailor for the services rendered

w.r.t. the goods. 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 1st respondent would result in driving the 1st

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 1st submission is, therefore, rejected.

48A. Now, we deal with the second submission. The appellant

claims that he is entitled to complete remission of the

demurrage. According to the appellant, the facts of the case

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not only justify but also demand the exercise of the discretion

conferred upon the 1st respondent under Section 53 of the Act

to grant a complete remission of the demurrage in question.

According to the appellant, the Government of India issued

certain guidelines38 dated 24.1.1992 which structure the

discretion of the Port Trust in the matter of granting

remission.

49. We notice that the text of the guidelines permit granting

of remission upto 80 per cent of demurrage in appropriate

cases. We also notice that the cap of 80 per cent is not

absolute. The 1st respondent can even grant complete

remission in appropriate cases.

(i) Admittedly, the 1st respondent granted remission to an

extent of Rs.90,52,535.00 (approximately) out of the total

claim towards demurrage of Rs.2,81,67,333.00. 38 It is not very clear from the record whether these guidelines were issued by the Government of India or guidelines framed by the 1st respondent. In the written submissions, the appellant describes the guidelines framed by the Government of India whereas under the judgment under appeal at para 24, it appears that the appellant’s case before the High Court was that they were guidelines framed by the 1st respondent.

“….He would submit that the guidelines framed by the BPT itself provides for remission asked for by the petitioners when the detention of the goods by the Custom was for bonafide operation of ITC formalities.”

Per contra the case of the 1st respondent before the High Court regarding the guidelines appears to be

“…..remission is granted on ex-gratia basis, that too, by exercising discretion on the basis of guidelines issued by the Union of India and adopted by resolution passed by respondent No. 1 along with Custom Department.”

The High Court did not record any categorical finding in this regard except stating “47. In exercise of statutory powers under section 101 of the Major Port Trust Act

guidelines for remission of demurrage charges are framed.”

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(ii) The liability to pay demurrage arose because of the

non-clearance of the goods from the 1st respondent’s property

for a considerable period of time.

(iii) The period could be divided into two phases:

Phase I before the point of time when appellant started claiming the right to take delivery;

Delay in taking delivery is attributable purely to the failure of

the original consignee. The appellant clearly knew or at least

ought to have known, when he purchased the goods that the

1st respondent would demand demurrage. The appellant as a

person claiming through the consignor is not entitled in law to

claim any right of remission on the ground that he did not

have any interest or title in the goods for such period.

AND

Phase II after the present appellant’s right to take delivery of goods came into existence.

Such delay occurred because of the time taken in ensuring

that the appellant complied with the various statutory

obligations to import goods such as amendment of the IGM

etc.

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50. The fact that the appellant was not permitted to clear the

goods because of the pendency of some proceedings initiated

by the customs authorities by itself does not create a right of

remission in favour of the appellant.39 Though it may

constitute a relevant circumstance for considering granting

remission if the 1st respondent so chooses as a matter of

policy. As a matter of fact, remission of a part of the

demurrage was granted by the 1st respondent.

51. Now, we come to the submission that the respondent’s

decision to decline remission to the appellant is discriminatory

because remission was granted in the case of a similarly

situated consignee called Gilt Pack. Unfortunately, though the

High Court noted the rival submission in the context of the

allegation of discrimination, it did not record any conclusion

on that count.

52. From the facts available on record, we are of the opinion

that firstly, the cases of Gilt Pack and appellant are not

identical. Gilt Pack was the case where the original consignee

sold the goods to a third party on high seas even before their

arrival into India. It so transpired that the purchaser did not

39 See International Airports Authority of India v. Grand Slam International, (1995) 3 SCC 151

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have an appropriate license under the relevant law to import

the goods. In view of the said problem, the goods were

detained for some time and eventually the original consignee

himself cleared the goods40. It is in the said circumstances

Gilt Pack was granted remission. We are not concerned with

the question whether the discretion was appropriately

exercised in the case of Gilt Pack. We are only on the

question whether the facts of Gilt Pack and the appellant

herein are identical.

53. However, we must make it clear that the authority of the

1st respondent to grant or decline remission of any amount

due towards any rate payable under THE ACT must be based

on rational consideration and a sound policy. Such a

requirement is inherent in the fact that 1st respondent is a

statutory body discharging important statutory obligations. 1st

respondent could not bring anything on record to our notice

which demonstrates the reasons for declining remission as

claimed by the appellant nor any clear policy of the respondent

which regulates the discretion. In the circumstances, we deem

it appropriate to set aside the decision of 1st respondent dated

40 The full factual background as to how it all happened is not relevant for our purpose.

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16.09.1995 in declining the remission and leave it open to the

respondent to take appropriate decision on the application

duly recording the reasons for such decision.

54. The appeal is accordingly allowed in part. The impugned

judgment is set aside. There shall be no order as to costs.

….....................................J. (J. CHELAMESWAR)

……. ………….....................J. (ABHAY MANOHAR SAPRE)

New Delhi February 28, 2017

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