2020 (8) TMI 300 - SC - Customs

Port Trust's Ground Rent limited to 75 days per TAMP Orders. Liability for demurrage charges shifts upon goods' transfer.

The court held that the Port Trust could demand 'Ground Rent' only up to a maximum of 75 days as specified by TAMP Orders. The definition of 'owner' under ... Liability for storage/demurrage after Port Trust takes custody - statutory bailment under section 42 and bailee liability of Board - distinction between endorsement for delivery and endorsement passing title under bills of lading - liability of steamer agent versus owner/consignee/importer for Port Trust dues - Port Trust's duty to destuff containers and return empty containers - discretionary power to sell under sections 61 and 62 and Article 14 restraint - Board's lien and priority in recovery of rates and application of sale proceedsLiability for storage/demurrage after Port Trust takes custody - liability of steamer agent versus owner/consignee/importer for Port Trust dues - Allocation of liability for storage/demurrage once the Port Trust takes charge of goods - HELD THAT: - The Court held that the point of time at which title to the goods passes to the consignee is not relevant for determining who is liable to pay Port Trust charges. The statutory scheme of the MPT Act distinguishes services rendered to the vessel at or prior to landing from services rendered in relation to goods after the Board takes custody. Until the Port Trust takes charge and issues a receipt, liabilities in respect of services rendered in connection with unloading may fall on the steamer agent or vessel; once the Board has taken custody and given a receipt, storage/demurrage and related charges are payable by the importer, owner, consignee or their agent (including beneficial owners), and not by the vessel or its agent. The Court explained this allocation by reference to the combined operation of sections 42, 43, 59, 60, 61, 62 and 63 and the distinct remedies available against vessels (sections 64-65) and goods in custody. [Paras 24, 82]After the Board takes charge of goods and issues a receipt, storage/demurrage is payable by the importer/owner/consignee or their agent; prior to that point steamer agents may be liable in respect of services rendered to the vessel.Distinction between endorsement for delivery and endorsement passing title under bills of lading - Rights under bills of lading to vest in consignee or endorsee - Legal effect of different kinds of endorsement on a bill of lading and its relevance to liability for Port Trust charges - HELD THAT: - The Court clarified that an endorsement by a steamer agent indicating delivery is conceptually different from an endorsement by the owner/consignor that effects transfer of title under the Indian Bills of Lading Act, 1856. The former relates to delivery and does not automatically effect passage of property; the latter transfers rights and liabilities under the bill of lading. Mixing these two endorsements has led to confusion in earlier decisions. Notwithstanding the distinction, the Court held that these stages (endorsement/delivery-order and passing of title) are irrelevant to the central allocation rule: liability for storage/demurrage after the Board takes custody rests with the owner/consignee/importer or their agent. [Paras 62, 82]Endorsement by a steamer agent (delivery) is different from consignor's endorsement (passing title); neither alters the rule that post-custody storage/demurrage lies on owner/importer/consignee or their agent.Port Trust's duty to destuff containers and return empty containers - containers as receptacles distinct from imported goods - Whether carriage in containers affects liability for demurrage and the Port Trust's obligation regarding destuffing and return of containers - HELD THAT: - The Court held that containers which must be returned are receptacles used to transport imported goods and, on the facts of these cases, are not to be treated as the imported 'goods' that become part of the mass of goods in India. The Board should destuff containers entrusted to it and return empty containers to the owner or person entitled thereto within as short a period as is feasible, the precise period to be determined by port-specific facts (volume of traffic, space constraints etc.). Where a container is imported along with the goods (i.e., treated as imported for customs purposes and not returned), demurrage may attach to the container together with the goods, and liability would then lie on the importer/owner as appropriate. [Paras 39, 82]Containers that are to be returned are receptacles and do not alter the allocation rule; the Port Trust has a duty to destuff and return such containers within a reasonably short period determined by facts of each case.Discretionary power to sell under sections 61 and 62 and Article 14 restraint - Board's lien and priority in recovery of rates and application of sale proceeds - Whether the words 'may' in sections 61 and 62 of the MPT Act must be read as 'shall' and the constitutional limits on continuing detention of goods - HELD THAT: - The Court rejected the High Court's reading that 'may' must be read as 'shall'. Sections 61 and 62 confer a discretion on the Board to sell goods in custody in specified circumstances. However, because a Port Trust is a State instrumentality for Article 14 purposes, that discretion must be exercised reasonably and not arbitrarily. Ordinarily, the outer limit for putting goods up for sale should be the four month period mentioned in section 63(1)(c); if the Board does not sell within that period it must record and justify the reasons, which will be subject to judicial review. The statutory scheme (including lien, sale procedures and application of sale proceeds) and available remedies must be read together with constitutional constraints. [Paras 74, 75]'May' in sections 61 and 62 remains discretionary; nonetheless the Board must act reasonably and, ordinarily, seek to sell goods within a period not exceeding the four months referred to in section 63(1)(c), subject to justifiable exceptions.Final Conclusion: The appeals are disposed of. The reference questions are answered: (i) timing of passage of title is irrelevant to allocation of liability for Port Trust charges; (ii) endorsement by a steamer agent (delivery) is distinct from endorsement passing title and does not alter the allocation rule; (iii) after the Board takes custody and issues a receipt, storage/demurrage falls on the importer/owner/consignee or their agent, not on the vessel or its agent; (iv) containers to be returned are receptacles and the Board must destuff and return them within a reasonably short period; and (v) the Board's power to sell under sections 61 and 62 is discretionary and cannot be exercised arbitrarily, ordinarily requiring sale within the four month outer limit indicated in section 63(1)(c). The impugned High Court judgment is set aside only insofar as it construed 'may' as 'shall', subject to the constitutional duty of reasonableness; no further relief is directed in view of the parties' conduct and payments already made. Issues Involved:1. Liability to pay 'ground rent' on containers beyond 75 days.2. Interpretation of Section 2(o) of the Major Port Trusts Act (MPT Act).3. Responsibility of the consignee or steamer agent for charges due to the Port Trust.4. Principles determining the Port Trust's entitlement to recover dues.5. Obligation of the Port Trust to destuff containers and return them to the shipping agent.Detailed Analysis:1. Liability to Pay 'Ground Rent' Beyond 75 Days:The core issue was whether the liability to pay 'ground rent' on containers unloaded at Cochin Port, but not cleared by consignees/importers, can be imposed on the vessel owners/steamer agents beyond the 75 days fixed by the Tariff Authority of Major Ports (TAMP). The court held that the Port Trust could demand 'Ground Rent' only up to a maximum of 75 days as specified by TAMP Orders. The High Court's judgment was based on the lapse of the consignee in not lifting the goods and the Port Trust in not destuffing the containers due to inadequate space.2. Interpretation of Section 2(o) of the MPT Act:The definition of 'owner' under Section 2(o) was scrutinized to determine whether it includes steamer agents. The court concluded that the definition is inclusive and can encompass agents for loading or unloading goods, including steamer agents. The doctrine of noscitur a sociis was deemed inapplicable due to the clear and wide scope of the definition.3. Responsibility of the Consignee or Steamer Agent:The court examined whether a steamer agent can be held liable for storage charges/demurrage if the consignee fails to clear the goods. It was held that once the Port Trust takes charge of the goods and issues a receipt, the vessel or its agent is absolved from liability for loss or damage to the goods. The responsibility for demurrage charges falls on the importer, owner, consignee, or their agent after the Port Trust takes custody of the goods.4. Principles Determining the Port Trust's Entitlement to Recover Dues:The court analyzed various judgments and statutory provisions to establish that the Port Trust can recover dues from the owner or person entitled to the goods, but not from the steamer agent after the goods have been landed and taken charge of by the Port Trust. The statutory scheme of the MPT Act was clarified, emphasizing that storage charges are payable by the owner or person entitled to the goods, not the steamer agent.5. Obligation to Destuff Containers:The court addressed whether the Port Trust is obliged to destuff every container and return the empty containers to the shipping agent. It was held that containers are merely receptacles for transporting goods and must be returned to the shipping agent or owner after destuffing. The Port Trust has a duty to destuff containers within a reasonable period, considering practical difficulties and the volume of goods handled by the port.Conclusion:The court provided a comprehensive interpretation of the MPT Act, clarifying the liabilities and responsibilities of steamer agents, consignees, and the Port Trust. The judgment emphasized the need for the Port Trust to act reasonably and within a reasonable period when handling and destuffing containers. The appeals were disposed of, and the High Court's judgment was set aside only on the point that the word 'may' in sections 61 and 62 of the MPT Act cannot be read as 'shall,' subject to the requirement for the Port Trust to act reasonably.