2011 (10) TMI 768 - SC - Indian Laws

Court rules against Shaw Wallace for breaching duties, converting bills of lading, causing financial loss.

The court found Shaw Wallace liable for breaching statutory and legal duties by failing to issue bills of lading promptly, causing financial loss to the ... Bills of lading - delays and damages - valuable security not available for negotiation and, in the meanwhile, the validity period of the letter of credit having expired - wrongful delivery by the ship owner (first Defendant) to NHH without production of the necessary documents (bills of lading) - cause of action - breach of statutory duty - liability to pay to NFC the value of the goods by way of damages - agent and its liability - HELD THAT:- We have already noticed that the appeal is limited to the role of Shaw Wallace as the carrier's agent and its liability. The legal position has been discussed while dealing with the case of Pichit Samut. The decision of the High Court was upheld in the case of Pichit Samut solely on the ground that in view of the delay on the part of Shaw Wallace in releasing the bills of lading, NFC could not present the bills of ladings and invoices and receive payment against the letter of credit before its expiry on 15.1.1979. In the case of Pichit Samut', the mate's receipts were delivered and the demand for bills of lading was made on 17.12.1978, the cargo were delivered to the NHH on 22.12.1978 and bills of lading were issued on 25.1.1979, after the expiry of the letter of credit on 15.1.1979. We therefore held that if Shaw Wallace had delivered the bills of lading when demanded, NFC could have realized the value of the goods long prior to 15.1.1979 when the letter of credit expired and that on account of its failure to release the bills of lading before 15.1.1979, NFC was prevented from realizing the value of the rice supplied. As noticed, the goods were loaded between 5.12.1978 and 29.12.1978. The vessels sailed on 30.12.1978. The letter of credit expired on 15.1.1979. The goods were cleared at Penang between 16.1.1979 to 19.1.1979. It was only on 19.1.1979, after the expiry of letter of credit and after the goods were delivered to NHH, that the NFC tendered the mate's receipts and requested for issue of bills of lading from Shaw Wallace. Even if Shaw Wallace had delivered the bills of lading on the day of demand namely on 19.1.1979 itself, NFC could not have realized the amount against the letter of credit. Shaw Wallace could be made liable only if it had committed breach of statutory duty or breach of any other legal duty amounting to negligence causing loss to the NFC. In this case, having regard to the fact, that the letter of credit had expired on 15.1.1979 long prior to the tendering of mate's receipt and demand for bills of lading, the delay of nine days in issuing the bills of lading had no relevance. As noticed above, even if the bills of lading had been issued forthwith on 19.1.1979, it would not have been of any assistance. After referring to the oral evidence, the High Court inferred that it would be highly improbable that the holder of the mate's receipts would delay the making of a demand for blank bills of lading forms. The learned Single Judge recorded a finding that Asian Agency was demanding the blank bills of lading forms from Shaw Wallace from 30.12.1978 and that Shaw Wallace did not supply the blank forms to Asian Agency until 17.1.1979. Consequently the learned single Judge reasoned that the demand for bills of lading was being prior to 15.1.1979 and therefore, for the reasons stated in the case of Pichit Samut, Shaw Wallace was liable to pay damages equal to the value of the goods. The division bench affirmed the said findings. Conclusion In view the above, the appeals are disposed of as follows: (i) CA No. 7099/2001 (Re: Eastern Grand) is allowed and the judgment and decree of the High Court in so far as it decrees the suit against the Appellant is set aside. The decree against the second Respondent herein (first Defendant in the suit) is not disturbed, (ii) CA No. 7100/2001 (Re: Pichit Samut) is dismissed and the judgment and decree of the High Court is affirmed, Issues Involved:1. Breach of statutory duty.2. Breach of legal duty amounting to negligence.3. Conversion of bills of lading.4. Liability of the agent (Shaw Wallace) for the acts of the ship-owner.5. Calculation and validity of the damages claimed.Issue-wise Detailed Analysis:1. Breach of Statutory Duty:The court held that Shaw Wallace breached its statutory duty under Article III, Rule 3 of the Carriage of Goods by Sea Act, 1925. The agent was obligated to issue bills of lading upon demand by the shipper (NFC). Shaw Wallace's failure to issue these documents in a timely manner resulted in NFC being unable to negotiate the letter of credit before its expiry on 15.1.1979, causing financial loss.2. Breach of Legal Duty Amounting to Negligence:Shaw Wallace wrongfully refused to issue the bills of lading, which NFC was entitled to upon presenting the mate's receipts. This refusal was intended to assist the charterer (NHH) in its claim against NFC, leading to a breach of legal duty and negligence. The court emphasized that Shaw Wallace's delay in issuing the bills of lading directly caused NFC's inability to realize the value of the goods through the letter of credit.3. Conversion of Bills of Lading:The court found that Shaw Wallace's actions amounted to conversion of the bills of lading, which are considered documents of title to the goods. By withholding these documents, Shaw Wallace acted inconsistently with NFC's rights, resulting in damages equivalent to the value of the goods.4. Liability of the Agent (Shaw Wallace) for the Acts of the Ship-Owner:The court clarified that Shaw Wallace was not made liable as an agent for the ship-owner's acts but for its own breach of statutory and legal duties. The agent's liability arose from its failure to issue the bills of lading despite being the designated agent for this task, as evidenced by its conduct and communications with NFC and its agent, Asian Agency.5. Calculation and Validity of the Damages Claimed:The court rejected Shaw Wallace's contention that the damages claimed by NFC were excessive. Shaw Wallace argued that the value of the goods should be calculated based on the prevailing exchange rate, which they claimed was Rs. 8.10 per US Dollar, equating to Rs. 77,80,110 instead of Rs. 1,05,32,459/22. However, this issue was not raised in the written statement, appeal, or special leave petition, and there was no evidence provided to support the claimed exchange rate. Consequently, the court upheld the original damages awarded.Separate Judgments Delivered:- Civil Appeal No. 7099/2001 (Re: Eastern Grand): The court allowed the appeal, setting aside the judgment and decree against Shaw Wallace, as the demand for bills of lading was made only after the letter of credit had expired, and there was no evidence of earlier demands.- Civil Appeal No. 7100/2001 (Re: Pichit Samut): The court dismissed the appeal, affirming the High Court's judgment and decree, holding Shaw Wallace liable for the loss caused to NFC due to the delay in issuing the bills of lading.Conclusion:The appeals were disposed of with the following outcomes:1. CA No. 7099/2001 (Re: Eastern Grand): Allowed, setting aside the judgment and decree against Shaw Wallace.2. CA No. 7100/2001 (Re: Pichit Samut): Dismissed, affirming the High Court's judgment and decree.3. Costs: Each party to bear their respective costs.