2016 (8) TMI 1534 - SC - Indian Laws

Supreme Court ruling: Liability clarified for parties in non-payment case

Virender Khullar Versus American Consolidation Services Ltd. and Ors.

The Supreme Court upheld that Respondent No. 1 (American Consolidation Services Ltd.) was not liable for non-payment as it acted as an agent, not a ... Existence of contact between the parties or not - Respondent No. 3 M/s. Zip Code and Respondent No. 4 Hoegh Lines/American President Lines Limited appears to have proceeded ex parte as they failed to turn up in response to the notices sent to them - agent-principal relationship or not - Section 230 of the Indian Contract Act, 1872 - HELD THAT:- Admittedly, the goods in question were handed over by the Appellants to Respondent No. 1 as pleaded. But there is neither any pleading nor proof that the Appellants paid any sum for transportation or any other service to Respondent No. 1 at the time the goods were handed over to it or subsequent there to. It has been shown on behalf of Respondent No. 1 that Respondent No. 1 was simply an agent of the buyer with whom the Appellants had entered into contract. It is nobody's case that the goods were lost in transit. Rather it is a case where it has come on record that the consignment was received by Respondent No. 3 Zip Code Inc, a part of Coronet Group Inc. Since Respondent No. 1 was simply acting as an agent of Coronet Group Inc, as such, in view of Section 230 of the Indian Contract Act, 1872 it cannot be held personally liable to enforce the contract entered between its principal and the Appellants. This Court, in its order dated September 10, 2009, has accepted the plea of Respondent No. 1 that Respondent No. 1 is not a consignee, but only an agent of the intermediate consignee - Respondent No, 3 Zip Code Inc, which is subsidiary to Coronet Group Inc, the consignee named in the cargo slips, is the only party which can be held liable for taking delivery without depositing the price of the goods with the Bank. Appeal dismissed. Issues Involved:1. Liability of Respondent No. 1 (American Consolidation Services Ltd.)2. Liability of Respondent No. 2 (Central Fidelity Bank)3. Liability of Respondent No. 3 (Zip Code Inc.)4. Liability of Respondent No. 4 (Hoegh Lines/American President Lines Limited)5. Applicability of Section 230 of the Indian Contract Act, 18726. Deficiency in service under the Consumer Protection Act, 1986Issue-wise Detailed Analysis:1. Liability of Respondent No. 1 (American Consolidation Services Ltd.):The primary contention was whether Respondent No. 1 (ACS) was liable for the non-payment of the goods. The appellant argued that ACS changed the consignee's name to Coronet Group Inc. in the Bill of Lading, resulting in non-realization of payment. However, it was established that ACS acted merely as an agent for the consignee, not as a carrier or transporter. According to the bailment agreement and additional terms attached to the cargo slips, ACS’s role was limited to receiving and forwarding the goods as per the consignee’s instructions. The Supreme Court upheld that ACS, being an agent, was not liable under Section 230 of the Indian Contract Act, 1872, which exempts agents from personal liability in contracts made on behalf of their principals.2. Liability of Respondent No. 2 (Central Fidelity Bank):Respondent No. 2 was named as the consignee in the cargo receipts. However, no relief was sought against it by the appellants. It was clarified that Respondent No. 2’s role was limited to being the consignee on record, and the actual buyer was Respondent No. 3 (Zip Code Inc.). The bank was to release the goods upon payment by Respondent No. 3, which did not occur. Consequently, the Supreme Court agreed with NCDRC that the bank had no obligation to the appellants as it did not receive the shipment or payment.3. Liability of Respondent No. 3 (Zip Code Inc.):Respondent No. 3 was found to be the intermediary consignee who received the consignments without making payment to the bank or the appellants. The NCDRC held Respondent No. 3 liable for the payment of Rs. 20,82,902.40 to Appellant Virender Khullar and Rs. 15,27,461.76 to Appellant Girish Chander, with interest. The Supreme Court noted that Respondent No. 3 did not contest this decision, thereby affirming its liability.4. Liability of Respondent No. 4 (Hoegh Lines/American President Lines Limited):Respondent No. 4 was the carrier responsible for the transportation of the goods. The NCDRC and the Supreme Court found no contract between the appellants and Respondent No. 4, as the carrier delivered the goods as per the Bill of Lading. Therefore, Respondent No. 4 was not liable for any claims made by the appellants.5. Applicability of Section 230 of the Indian Contract Act, 1872:The Supreme Court reiterated that Section 230 of the Indian Contract Act, 1872, which protects agents from personal liability in contracts made on behalf of their principals, applied in this case. This was crucial in absolving Respondent No. 1 (ACS) from liability, as it acted solely as an agent for the consignee.6. Deficiency in Service under the Consumer Protection Act, 1986:The appellants argued that there was a deficiency in service by the respondents. However, the Supreme Court upheld the NCDRC’s finding that the only party liable for deficiency in service was Respondent No. 3 (Zip Code Inc.), as it received the goods without payment. The other respondents were not found to have provided deficient service under the Consumer Protection Act, 1986.Conclusion:The Supreme Court dismissed the appeals, affirming the NCDRC’s decision that Respondent No. 3 (Zip Code Inc.) was solely liable for the payment to the appellants. Respondent No. 1 (ACS) was not liable due to its role as an agent, protected under Section 230 of the Indian Contract Act, 1872. Respondent No. 2 (Central Fidelity Bank) and Respondent No. 4 (Hoegh Lines/American President Lines Limited) were also found not liable. The appeals were dismissed with no order as to costs.