REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5277 OF 2010

MAHESHWARY HANDLING AGENCY PRIVATE LIMITED ….. APPELLANT(S)

VERSUS

BOARD  OF  TRUSTEES  OF  KANDLA PORT TRUST AND OTHERS ….. RESPONDENT(S)

J U D G M E N T

SANJIV KHANNA, J.

The  appellant,  Maheshwary  Handling  Agency  Private

Limited, is a private limited company engaged in the business

of clearing, forwarding and transporting of cargo for import and

export as a steamer agent.  

2.    During the course of  their  business,  the appellant  had used

facilities  at  the  Kandla  Port,  Gujarat  for  storing  imported/

exported cargo, for which it was liable to pay charges as per

schedule/scales of rates framed by the Board of Trustees of

Kandla Port Trust, the first respondent before us (“the Board”,

for short) published in the Official Gazette in terms of Section

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52 of the Major Port Trusts Act,  1963 (“Port Trusts Act”,  for

short), which prior to its omission in 1997 read as under:

“52.  Prior  sanction  of  Central  Government  to rates  and  conditions:- Every  scale  of  rates  and every  statement  of  conditions  framed  by  a  Board under the foregoing provision of this Chapter shall be submitted  to  the  Central  Government  for  sanction and  shall  have  effect  when  so  sanctioned  and published by the Board in the Official Gazette.”  

3. Notification dated 4th November, 1993 published under Section

52 of the Port Trusts Act had fixed a schedule/scales of rates

payable  for  storage  of  goods/cargo  at  the  Kandla  Port.

Relevant portion of the Notification dated 4th November,1993,

read as under:  

“SCALE “G” SCHEDULE OF STORAGE / RENTAL CHARGES

A) For: Open Space

How Charged. Kutchha Plots

(uncemented/ unasphalted)

(Rs.)

Pukka Plots (cemented

& asphalted)

(Rs.)

Bins & raised (Rs.)

Open  space of 10 sq. Mtrs. or part thereof per  month  or part  thereof for  first  three months.

35-00 60-00 70-00

Beyond  3 months

58-00 90-200 105-00

B) For covered space

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How Charged Ground Floor (Rs.)

First Floor (Rs.)

Covered space of 10 sq. mts.  or  part  thereof  per month or part thereof for first 3 months.

150-00 130-00

Beyond 3 months 225-00 195-00

C) For the containers stored in the storage (Exports & Imports)

How Charged Empty (US Cents.)

Loaded (US Cents.)

Per Teu per day or part thereof

First 07 days Free Free

Next 07 days to 15 days 45 90

16 to 30 days 90 150

31 to 90 days 115 190

above 90 days 145 240

D) For Refer points

How Charged US

Per TEU per day or part thereof:

First 15 days 12.85

16 to 30 days 15.17

31 to 90 days 18.09

above 90 days 20.71.

E) For office accommodation (inside Port area)

Per Sq. Mt. per month Rs. 40-00

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Notes:

1. Application for rental space should be made before storage  of  goods  to  the  Traffic  Manager.  Any unauthorised  occupation  of  rented  space  shall  be liable for payment of double the rent as a penalty.

2. Storage charges should be paid in advance. Penal interest at the rate of 18% of the amount due but not paid from the date of which the amount becomes due to  the  date  of  actual  payment  shall  be  levied  for genuine  reasons  and  with  permissions  of  Port Authorities which shall in no case exceed 7 days.  If by any reason, payment is delayed beyond 7 days from the date of the amount becoming due, otherwise occupation will be treated as unauthorised.

xx xx xx

4. Space  allotted  cannot  be  subject  (sic –  allotted) without the permission of the Traffic Manager.

 5.  The space allotted should be vacated on notice from

the  Traffic  Manager  or  other  officer  on  his  behalf failing  which  it  will  be  treated  as  unauthorised occupation liable for penalty rent under Note-1.

6.  The Traffic Manager shall have the right to take over the  spaces,  allotted  on  rental  basis,  which  are unoccupied/empty  without  any  prior  notice  in  the interest  of  the  port  operation,  in  such  cases, proportionate reduction in rent shall be allowed at the discretion of the T.M.”

4. The  Port  Trusts  Act  was  amended  by  the  Port  Laws

(Amendment) Act, 1997 (Act 15 of 1997) whereby Section 52

was omitted and Section 47A was inserted to constitute Tariff

Authority for Major Ports (‘Tariff  Authority’,  for short), a body

corporate having perpetual  succession and a common seal,

consisting of Chairman and members with stipulations as to

their term of office, conditions of service, etc contained under

Civil Appeal No. 5277 of 2010 Page 4 of 17

Sections 47B to 47H of the Port Trusts Act.  In terms of the

amended Section 49 of the Port Trusts Act, the Tariff Authority

was  empowered  to  fix  different  scales  and  conditions  for

different classes of goods and vessels and for use of any land,

building,  place,  etc.  belonging  to  or  in  possession  or

occupation of the Board.  

5. The amended provisions came into force with effect from 9 th

January, 1997. The Tariff Authority, however, had notified the

new scale of rates for the Kandla Port vide notification dated

22nd June, 2001 which was applicable retrospectively and with

effect  from  29th January,  2001.  The  appellant  and  the  first

respondent, viz. Board of Trustees of Kandla Port Trust, are ad

idem  that  the  appellant  and  others  who  had  used  storage

facility  at  the  Kandla  Port  were  liable  to  pay  the  rates

stipulated in the Notification dated 4th November, 1993 till the

new tariff fixed by the Tariff Authority was made applicable with

effect from 29th January, 2001.

6.    The issue raised by the appellant relates to validity of circular

dated 31st August,  1998 issued by the  Traffic  Manager,  the

second respondent, made effective from 1st October, 1998 and

read as under:

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“KNDLA (sic – KANDLA) PORT TRUST  PORT & CUSTOMS BUILDING

NEW KANDLA (KUTCH)  PIN – 370210

DATE: 31.08.1998 NO. TF/GB/3201/452

CIRCULAR

SUB: Past  Clearance  of  import  cargoes  from Kandla Port

Due  to  over-style  (sic  –  overstay)  of  Cargoes inside  the  port,  the  port  is  congested  causing inconvenience to both import/export cargoes moving through  the  port  which  ultimately  may  result  in diversion of traffic from our port.  Due to congestion, port  is  facing  problems  with  regard  to  accounting, stacking  and  delivery  of  cargoes,  etc.  and  non- availability  of  adequate  storage  space  for  export cargoes.

To overcome all the above problems now it has been  decided  not  to  allow  storage  of  cargoes  for more  than  two  months  and  auction  such  cargoes under the provisions of Customs Act as well as Major Port  Trust  Act.   Further,  no  renewals  will  be considered  for  the  areas  allotted  on rental/warehousing  terms  if  the  staya  stayal  (sic  – stay) is more than 60 days.

This will come into force w.e.f. 1st October, 1998.

Sd/- Traffic Manager

Kandla Port Trust”  

The impugned circular stated that due to congestion and

over stacking at  the Kandla Port,  problems had cropped up

with regard to accounting,  stacking and delivery of  cargoes

etc. and non-availability of adequate storage space for export

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cargoes.  To overcome this problem, storage of cargoes would

not be allowed for more than two months and auction of such

cargoes would be made under the Customs Act, 1962 and the

Port Trusts Act.  Further, no renewals would be considered for

the areas allotted on rental/warehousing terms if the cargo had

remained stored for more than sixty days.

7. The effect of the above circular can be understood if we refer

to Notes 1, 4, 5 and 6 of the Notification dated 4th November,

1993, which have been quoted above. The said circular read

with  the  aforesaid  Notes  meant  that  any  person  using  the

storage  facility  for  more  than  sixty  days  would  be  in

unauthorised occupation and thereby liable to pay penalty rent

under Note 1, which was double the rent otherwise payable.  

8. Aggrieved  and  challenging  the  circular  dated  31st August,

1998, the appellant had approached the High Court of Gujarat

by filing Special Civil Application No. 12954 of 2000 with the

prayer  that  the  first  respondent  should  refund  the  amount

collected as penalty rent in terms of the impugned circular. The

Civil  Application  was  dismissed  by  the  Single  Judge  vide

judgment dated 14th June, 2007 and the appellant also did not

succeed before the Division Bench which had dismissed the

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Letters Patent Appeal vide impugned judgment dated 15th July,

2008.

9. The  contentions  raised  by  the  appellant  are  that  after  the

amendment vide Act 15 of 1997, applicable with effect from 9 th

January, 1997, in terms of Section 47A read with Sections 48

and 49 of the Port Trusts Act,  only the Tariff  Authority could

have  fixed  the  tariff/rent  and  the  Traffic  Manager  could  not

have directly or indirectly fixed the said tariff, which the latter

did  by way of  issuance of  the impugned circular  dated 31st

August,  1998.  Secondly,  the  circular  issued  by  the  Traffic

Manager  in  garb  of  regulating  traffic  had  the  effect  of

interfering with the scales of rates prescribed vide Notification

dated 4th November, 1993 which had not only fixed the rates

but  had  also  prescribed  an  escalating  schedule  of  rates

depending upon the period for which the space, whether open

or covered or as containers, was used. The schedule of rates,

reproduced  above,  were  applicable  for  the  period  of

storage/use  beyond  sixty  days  and,  therefore,  the  Traffic

Manager had directly interfered with the notified scales of rates

by prescribing that any storage beyond a period of sixty days

would  be  treated  as  unauthorised.  Thirdly,  there  could  be

Civil Appeal No. 5277 of 2010 Page 8 of 17

several reasons for storage of goods at the Port for a period

over sixty days, which could be well beyond the control of the

person storing the goods.  The impugned circular did not give

any  concessions  in  this  regard  and  did  not  consider  that

delays could be on account of customs clearance, inability to

load or unload due to external factors or refusal of the shipping

company, etc. Therefore, the circular was an attempt by the

first respondent to collect higher monetary charges or rentals

for use of the port area/facilities. Fourthly, it was submitted that

there was not a shred of data or evidence to show that the

restriction with regard to duration of storage was justified and

necessary for the object and reasons stated. The Port Trust,

having monopoly, was required to act in a reasonable manner.

Hence, there was a violation of Article 14 of the Constitution of

India.  Our  attention  was  drawn  to  the  withdrawal  of  the

impugned circular after the issuance of higher rate of scales in

2001 by the Tariff Authority. Fifthly, and lastly, it was submitted

that  the  power  of  Traffic  Manager  to  issue  the  impugned

circular could not be traced to Regulation 64, which specifically

dealt  with  controlling  the  goods  at  the  time  of  loading  and

unloading of vessels.  Regulation 64 reads as under:

“64.  Work  in  port  under  the  control  of  Traffic Manager.— The  loading  and  unloading  of  vessels

Civil Appeal No. 5277 of 2010 Page 9 of 17

shall be subject to the control of the Traffic Manager, who may at his discretion, prohibit the discharge of such goods which in his opinion are likely to obstruct traffic or cause congestion or hinder the convenient use of the berths.

Notwithstanding  the  provisions  of  Regulation  No. 113, the Traffic Manager may at his discretion also remove to the other areas as under his jurisdiction, any  goods  upon  landing  in  the  port  or  soon thereafter, the storage of which on port premises is likely  to  obstruct  traffic  or  cause  congestion.   The apportionment of Quay space to be occupied by each vessel  shall  similarly  be  determined  by  the  Traffic Manager.”

This power under  Regulation 64 was regarding goods

that were likely to cause traffic congestion and not regarding

the  rate  of  storage  for  a  particular  period.  Therefore,  the

impugned  circular  was  beyond  the  powers  available  and

entrusted to the Traffic Manager under Regulation 64.   The

Traffic Manager, in this manner, had illegally extracted huge

amount of over Rs. 52 lakhs for over-stay of cargo without any

justification and reason.

10.  We have already quoted the scales fixed by the Notification

dated  4th November,  1993  as  well  as  the  Notes  in  the

Notification.  This Notification was not under challenge in the

Special  Civil  Application  or  in  appeal  filed  before  the  High

Court.  The Notification is not under challenge before us.  The

appellant also accepts that they were liable to pay the scales

Civil Appeal No. 5277 of 2010 Page 10 of 17

specified  in  the  Notification  till  the  new  tariff  was  notified

pursuant to the constitution of the Tariff  Authority, which it  is

accepted  was  notified  and  applicable  with  effect  from  29 th

January, 2001.  Therefore, for the period prior to 29 th January,

2001,  the appellant  would  be liable  to  pay tariff  as  per  the

scales and terms of the Notification dated 4th November, 1993.

The  issue  that  arises  for  consideration  is  whether  the

impugned circular dated 31st August, 1998 was in conformity

with the terms of the Notification or had the effect of modifying

or amending the Notification dated 4th November, 1993.

11.  In our opinion, the answer to the question would be in favour

of the first and second respondents.   The Notification dated 4 th

November,  1993 had specified rent/usage charges for  open

space, covered space, containers, office accommodation, etc.,

which charges were payable dependent upon the space and

the length of time used for storage. Note 1 to the Notification

stated  that  a  person  wanting  to  use  the  rental  space  was

required to make an application for  storage of goods to the

Traffic Manager.  It was also specified that any unauthorised

occupation of rented space shall make the person liable to pay

double the rent as penalty.  Note 1 did not specify when and in

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what circumstances occupation of the rented space would be

treated as unauthorised occupation. Note 2 had specified that

storage charges would be paid in advance and penal interest

@ 18% would be payable on the amount due and not paid

from the date when the amount had become due till the date of

actual payment.  Note 4 had specified that the space cannot

be allotted without permission of  the Traffic  Manager  of  the

Port.  Note 5 had stipulated that the space allotted would be

vacated on notice from the Traffic Manager or any other officer

on his behalf, failing which the occupation would be treated as

unauthorised  and  the  person  in  unauthorised  occupation

would  be  liable  for  penalty  rent  under  Note  1.  Thus,  for

authorised occupation and usage of  space/area,  permission

from  the  Traffic  Manager  was  required.  Further,  the  Traffic

Manager  or  an  officer  appointed  on  his  behalf,  was

empowered to issue notice for vacation of space allotted to a

user, failing which the use of the space was to be treated as

unauthorised  and  the  person  in  violation  was  liable  to  pay

double the rent as penalty.  

12. Regulation 128 reads as follows:

“128.  Quays,  etc.  to be under the authority of the Traffic Manager:

Civil Appeal No. 5277 of 2010 Page 12 of 17

The quays,  sheds,  gates and the land within the Port boundaries shall be in the charge of the Traffic Manager  who  shall  direct  and  manage  all operations connected with the landing and shipping of goods, and with their storage in the shed and in the  open.   He  shall  have  proper  custody  of  all goods lying in the Port and taken whatever steps he  may  consider  necessary  for  the  proper maintenance of order.”

The Traffic Manager of the Port is obligated to control

and manage the port operations, check obstructions to traffic

movement and remove hinderance for efficient and proper use

of berths, landing and shipping of goods and storage in the

sheds and open area.  Regulation 64 quoted in paragraph 9

above stipulates that  loading and unloading of  vessels was

subject  to  control  of  the  Traffic  Manager  who  had  the

discretion to prohibit  discharge of  goods which are likely  to

obstruct  traffic,  cause  congestion  or  hinder  convenient

movement at the Port.  

13. It is clear from the Notes that the Notification had empowered

and left it to the Traffic Manager to deal with the question of

unauthorised occupation,  including the time limits  or  period

during which the goods could be authorised to be stored. The

Notification had not specified when and in what circumstances

use of the storage area would be treated as unauthorised as

Civil Appeal No. 5277 of 2010 Page 13 of 17

this was left to the wisdom of the Traffic Manager who was the

person  in-charge  and  responsible  for  efficient  and  proper

functioning of the port operations and mandated to take the

need  based  decisions  on  the  basis  of  prevalent  facts  and

circumstances. This latitude was necessary as the schedule of

rates fixed vide Notification dated 4th November, 1993 were

applicable till a new Notification or amendment was made by

following the procedure prescribed vide Section 52 of the Port

Trusts  Act,  which  would  require  approval  from  the  Central

Government.

14. Prescribing  different  slabs  or  rates  for  storage  of  cargo  for

different periods was meant to fix rates for the rent payable

and not to deny or curtail the power of the Traffic Manager to

authorise and permit use of sheds and space for storage of

cargo/containers. As per the Notes, the Traffic Manager, on an

application  by  the  owners  or  their  agents  was  to  grant

permission  for  authorised  storage.  Storage  without  the

permission or contrary to the permission was unauthorised.

Further, the space allotted was to be vacated on notice from

the  Traffic  Manager.  On  failure  to  comply,  and  vacate  the

space, the use was treated as unauthorised occupation and

Civil Appeal No. 5277 of 2010 Page 14 of 17

the person in  default  was liable  to  pay double  the rent  for

unauthorised use.  

15. It is obvious that the first portion of the Notification prescribing

escalating rates for use of open area and sheds did not vest

any right to occupy such space for unlimited period of time.

This, we hold, is the exact purport of the Notes, which have

been  read  harmoniously  with  the  first  portion  of  the

Notification. The Traffic Manager had authority and discretion

for  allotment  of  space for  storage on  rent  and to  withdraw

allotment of space depending on the availability and to ensure

that the port operations were not hindered and obstructed due

to congestion and shortage of  space.  We,  therefore,  would

reject  the  contention  that  the  Traffic  Manager  was  not

competent  to  fix  time  limit  for  storage.  The  contention  is

unacceptable  and  would  be  contrary  to  the  Notes  and  the

powers vested and given under the Regulations to the Traffic

Manager.

16. We  are  in  this  case  not  required  to  examine  whether

delegation of powers to the Traffic Manager in the Notification

was excess  or  invalid,  for  this  issue  or  contention has not

been raised. As noted earlier, validity of the Notification is not

Civil Appeal No. 5277 of 2010 Page 15 of 17

questioned and under challenge.  Read in this manner, we do

not think levy of  penalty for  unauthorised occupation of  the

space for period beyond sixty days of storage as fixed vide the

impugned circular would be illegal and invalid.  In fact, it would

be in conformity and in consonance with the Notification and

in  particular  Notes  1,  4  and  5  thereof.   The  circular  had

brought about uniformity, clarity and transparency in the use of

storage  facilities  at  the  Kandla  Port.  The  circular  though

issued  on  31st August,  1998  was  made  effective  and

applicable from 1st October, 1998.  Therefore, the parties were

given time to take steps to avoid the usage of  the storage

facility from being declared as unauthorised.  

17. Other  contention  of  the  appellant  as  to  absence  of  data

indicating the details of congestion is an afterthought as this

contention was not raised and argued before the High Court.

The  impugned  circular  specifically  recorded  that  there  was

congestion at the Port which had necessitated issuance of the

circular stipulating that storage of goods beyond the period of

sixty days would be treated as unauthorised occupation. The

said circular ensured uniformity and equal treatment without

discretion as upper time limit of sixty days was prescribed for

storage of goods failing which penalty was payable. Period of

Civil Appeal No. 5277 of 2010 Page 16 of 17

sixty  days  is  sufficient  and  long  and  cannot  be  termed  as

unreasonable and violating Article 14 of the Constitution. The

aforesaid reasoning would take care of the other arguments

raised by the appellants, which we would reiterate were not

argued before the High Court.   

18. For  all  the  foregoing  reasons,  the  appeal  fails  and  is

dismissed. There would be no order as to costs.  

           .................................J. (INDU MALHOTRA)

...............................J. (SANJIV KHANNA)

NEW DELHI; SEPTEMBER 17, 2019.

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