TaxTMI 
TaxTMI 
1990 (3) TMI 171
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....dinate Judge, Cochin seeking damages for the shortage of 733 bags of raw cashewnuts amounting to Rs. 44,438.03. The suit having been decreed with interest @ 6% per annum from 17-7-1964, for the sum total of Rs. 46,659.93, the appellant preferred therefrom appeal A.S. No. 365 of 1969 in the High Court of Kerala which was pleased by its Judgments and decree dated 16-8-1973 and 30-11-1973, to dismiss the appeal and affirm that of the Subordinate Judge. Aggrieved, the appellant has preferred this appeal by special leave. 3. In the courts below the main contentions of the appellant, inter alia, were that it was a mere charterer of the vessel which was owned by S. Matas & Company c/o Lucas Matas & Sons, Piraeus, Greece; that there was a charterparty executed between the first respondent and M/s. Victorial Steamship Company as agents of the said owner of the vessel in London on 27-1-1964; that as per clause 3 of the bill of lading the court at Cochin had no jurisdiction and only English courts had jurisdiction; and that as per the charterparty and clause 4 of the bill of lading the remedy of the first respondent, if any, was against the owner who alone was liable and not against t....
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....ould be returned for presentation to proper court. In the Replication filed by the plaintiff it was said : "The objection regarding jurisdiction raised in clause B of written statement is not tenable. The cause of action for the suit has arisen within the local limits of the jurisdiction of this Court. The defendant is also residing and carrying on business within this court's jurisdiction. It is now well settled that the parties cannot by consent confer or oust the jurisdiction of a Court. The plaintiffs deny the agreement mentioned in clause B and no agreement can oust the jurisdiction of the Court when the Court possesses the jurisdiction." 6. Issue No. 1 was : "Whether the suit is properly filed in this Court?" The trial court in its judgment dated 29-3-1968 held : "This issue has been considered by this Court on 28-2-1966 and it has been found that this Court has jurisdiction to try the suit. The said finding has been confirmed by the Hon'ble High Court on 6-4-1967 in C.R.P. 977/66." That judgment is not before us. In the memo of appeal to the High Court apart from the general grounds that the judgment and decree of the Court below were wrong in la....
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....ciple of Private International Law governing bills of lading that the consignee or an endorsee thereof derives the same rights and title in respect of the goods covered by the bill of lading as the shipper thereof had. For the purpose of jurisdiction the action of the first respondent is an action in personam in Private International Law. An action in personam is an action brought against a person to compel him to do a particular thing. If clause 3 of the bills of lading is held to be binding on the first respondent the choice of law by the parties would also be binding. English courts would perhaps use their own Private International Law to decide the dispute. In the event of the English Court alone having the jurisdiction, the application of Indian statutes and the jurisdiction of the Indian courts would be, to that extent, inapplicable. 11. Until the Bills of Lading Act, 1855 was passed in England the endorsement of a Bill of Lading would not affect the contract evidenced in it, and the endorsee could not sue or be sued on such contract, though he was the person really interested in goods, the subject of the contract. By Section 1 of the Bills of Lading Act, 1855, in Eng....
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.... a negotiable instrument in the sense of carrying with it the right to demand and have possession of the goods described in it. It also carries with it the rights and liabilities under the contract, where the property in the goods also is transferred. However, a bill of lading is not a negotiable instrument in the strict sense of the transferee deriving better title than the transferor. The transferee of a bill of lading gets no better title than the transferor himself had. Mere possession of the bill of lading does not enable the holder to sue a person at a place where the transferor himself could not have done. Where the negotiation of a bill of lading is by the person who had a right to sue on it, mere possession of it does not enable the holder to sue any person who was not liable under it and not to sue another who was liable under it to make good the claim. He cannot also sue at a place not intended by the parties when intention has been expressed. 14. It would also be relevant to consider whether English courts would be likely to entertain the instant suit if instituted in England in terms of the bills of lading so that the first respondent is not likely to be withou....
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....chosen have not declined jurisdiction." 16. According to the authors the parties to a contract in international trade or commerce may agree in advance on the forum which is to have jurisdiction to determine disputes which may arise between them. The chosen court may be a court in the country of one or both the parties, or it may be neutral forum. The jurisdiction clause may provide for a submission to the courts of a particular country, or to a court identified by a formula in a printed standard form, such as a bill of lading referring disputes to the courts of the carrier's principal place of business. It is a question of interpretation, governed by the proper law of the contract, whether a jurisdiction clause is exclusive or non-exclusive, or whether the claim which is the subject matter of the action falls within its terms. If there is no express choice of the proper law of the contract, the law of the country of the chosen court will usually, but not invariably, be the proper law. 17. It is accordingly unlikely that the first respondent would be without any remedy if the terms of clause 3 of the bills of lading are faithfully observed. 18. The question o....
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.... court by litigating in India. The question then is what would amount to submission to jurisdiction. 20. Cheshire & North's Private International Law 11th Ed., on submission to jurisdiction says : "Despite the fundamental principle that the court cannot entertain an action against a defendant who is absent from England, it has long been recognised that an absent defendant may confer jurisdiction on the court by submitting to it. This may be done in a variety of ways, such as by the defendant acknowledging service before actual service of the writ, or instructing a solicitor to accept service on his behalf. Commencing an action as a plaintiff will give the court jurisdiction over a counter claim. Although a defendant who appears and contests the case on its merits will be held to have submitted to the jurisdiction, an appearance merely to protest that the court does not have jurisdiction will not constitute submission, even if the defendant also seeks a stay of proceedings pending the outcome of proceedings abroad." The authors go on to say that any person may contract, either expressly or impliedly, to submit to the jurisdiction of a court to which he would not otherwise be....
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....jurisdiction of the English courts and had also simultaneously applied for stay of the action. It was contended on behalf of the appellants (plaintiffs) that the respondents (defendants) either had waived any objection to the jurisdiction because they had taken a step in the action by applying for a stay or that they would waive any objection if they persisted with their application in priority to disputing the jurisdiction. Lord Fraser observed that it would surely be quite unrealistic to say that the respondents had waived their objection to the jurisdiction by applying for a stay as an alternative in the very summons in which they applied for an order giving effect to their objection to the jurisdiction. That the summons made it abundantly clear that they were objecting and the fact that they asked for a decision upon their objection to be postponed until the outcome of the Greek proceedings was known, was not in any way inconsistent with maintaining their objection. There was no reason in principle or in common sense why the respondents should not be entitled to say : "We object to the jurisdiction of the English courts, but we ask for the proceedings necessary to decide that a....
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....he view that the appellant has to be held to have either waived the objection as to jurisdiction or to have submitted to the jurisdiction in the facts and circumstances of the case. The defence that the suit was not maintainable in the absence of the owner of the ship could in a sense be said to have been on the merits of the case. The submission as to lack of jurisdiction is, therefore, rejected. 27. Clause 3 of the bills of lading also contains the selection of law made by the parties. The contract is governed by English law and disputes are to be determined according to English law. Is the selection of law binding? In Cheshire & North's Private International Law 11th Ed., page 495, while discussing about the interpretation of contracts the authors say : "When the stage has been reached where an obligation, formally and essentially valid and binding on parties of full capacity, has been created, then in the further matters that may require the intervention of the Court, there is, speaking generally, no reason in principle why the parties should not be free to select the governing law." The express choice of law made by parties obviates need for interpretation. 28.&emsp....
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....ow (Automation) Ltd. v. Rex Chainbelt Inc. (1971) 3 All E.R. 1175. 30. It is true that in English law there are certain limitations on freedom to choose the governing law. The choice must be bona fide and legal, and not against public policy. It may not be permissible to choose a wholly unconnected law which is not otherwise a proper law of contract. English courts, it has been said, should, and do, have a residual power to strike down for good reasons, choice of law clauses, totally unconnected with the contract. Where there is no express choice of the proper law, it is open to Court to determine whether there is an implied or inferred choice of law in the parties contract. 31. The next question to be decided is whether the appellant would be liable for the suit claim. This would naturally depend on the contract of affreightment. It is an accepted principle that the bill of lading is not the contract of affreightment, for that has been made before the bill of lading was signed and delivered, but it evidences the terms of that contract. The bill of lading serves as a receipt and also as a document of title and may be transferred by endorsement and delivery. Article ....
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....nt as far as the shipowner and the charterer are concerned." 34. Apart from the question of the charterparty having been proved or not according to law the question in the instant case is whether clause 4 of the charterparty as to responsibility of the shipowner in respect of the goods carried would form part of or be incorporated in the bills of lading. How far the charterparty clauses laying down the responsibility and liabilities between the charterer and the shipowner can be attributed to the consignee under the bill of lading? It is an accepted principle that if certain clauses of the charterparty are referred to in the bill of lading those should be referred to in specific terms so as to bind the shipper and the consignee. A general reference may not be sufficient under all circumstances. Thus in T.W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd. 1912 A.C. 1 in the bill of lading there was also a marginal clause in writing as follows : "Deck load at shipper's risk, and all other terms and conditions and exceptions of charter to be as per charterparty, including negligence clause." 35. The question was whether the arbitration clause in the charterpar....
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....tee for the protection of Bondholders 1937 A.C. 500, it was held that the intention of the parties would be ascertained from what is expressed in the contract, which will be conclusive. Repelling the contention that the transaction which was one relating to the carriage on a Nova Scotian ship of goods from Newfoundland to New York between residents in those countries, contained nothing to connect it in any way with English law, and that choice could not be seriously taken, their Lordships held that connection with English law was not as a matter of principle essential. 37. The Indian Bills of Lading Act, 1856, which is based on the Bills of Lading Act of 1855 of England in its preamble says : "Whereas by the custom of merchants a bill of lading of goods being transferable by endorsement, the property in the goods may thereby pass to the indorsee, but nevertheless all rights in respect of the contract contained in the bill of lading continue in the original shipper or owner, and it is expedient that such rights should pass with the property." 38. Section 1 of the Act provides that rights under bills of lading are to vest in consignee or endorsee. It says : "....
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....(as may be the case notwithstanding anything that appears to the contrary) this bill of lading shall take effect only as a contract with the owner or demise charterers as the case may be as principal made through the agency of the said company or Line who act solely as agents and shall be under no personal liability whatsoever in respect thereof." 41. This clause ex facie establishes a privity of contract between the owner or demise charterer of the vessel on the one hand and the shipper to whom the bill of lading has been issued by the appellant company as the charterer otherwise than by demise. The High Court construed this clause to be one relieving or lessening the carrier's liability without considering whether it was otherwise than as provided in the Rules under the Carriage of Goods Act, 1924 of England. 42. In Halsbury's Laws of England 4th edn. Vol. 43, para 401, it is said : "A contract for the carriage of goods in a ship is called in law a contract of affreightment. In practice these contracts are usually written and most frequently are expressed in one or other of two types of document called respectively a charterparty and a bill of lading." ....
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....ncy of the charterparty, therefore, the owner is under no liability to third persons whose goods may have been conveyed upon the demised ship or who may have done work or supplied stores for her, and those persons must look only to the charterer who has taken his place." 45. In para 404 Halsbury said "Although a charterparty which does not operate as a demise confers on the charterer the temporary right to have his goods loaded and conveyed in the ship, the ownership remains in the original owner, and through the master and crew, who continue to be his employees, the possession of the ship also remains in him. Therefore, the existence of the charterparty does not necessarily divest the owner of liability to third persons whose goods may have been conveyed on the ship, nor does it deprive him of his rights as owners." Whether a charterparty operates as a demise or not depends on the stipulations of the charterparty. The principal test is whether the master is the employee of the owner or of the charterer. In other words where the master becomes the employee of the charterer or continues to be the owner's employee. Where the charterparty is by way of demise, the c....
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....tant case we find from Exts. P1 to P3 that the following has been prominently printed just below the signature `For the Master and Owners' in the bills of lading. SEE CONDITIONS OF CARRIAGE AND OTHER CONDITIONS ON REVERSE. It can not therefore be said that the shipper, whose knowledge will be attributed to the first respondent did not know of the conditions of carriage printed on the reverse there being no other conditions printed elsewhere in the bills of lading. 47. None of the parties having repudiated the bills of lading in this case, the High Court ought not to have accepted the submission of the first respondent that clause 4 of the bills of lading offended the provisions of the Carriage of Goods by Sea Act, 1924 and therefore bad. The Carriage of Goods by Sea Act of 1924 of England was on the Hague Rules which were amended by Brussels protocol 1968 which is now embodied in the Carriage of Goods by Sea Act 1971 which came into force in 1977. The Indian Carriage of Goods by Sea Act, 1925 (Act XXVI of 1925) which is an Act to amend the law with respect to the carriage of goods by sea was passed after the International Conference on Maritime Law held at Brussels in Octob....