SC answers reference on liabilities of Owner/Port Trust under MPT Act with respect to storage of goods & payment of charges

Supreme Court: The 3-judge bench of RF Nariman, Navin Sinha and Indira Banerjee, JJ has held that the expression “may” in sections 61 and 62 of the Major Ports Trust Act, 1963 (MPT Act) cannot be read as “shall”, subject  to the caveat that as the “State” under Article 12 of the Constitution, a Port Trust must act reasonably, and attempt to sell the goods within a reasonable period from the date on which it has assumed custody of them.

The Court was dealing with a reference made in Chairman, Board of Trustees Cochin v. Arebee Star Maritime Agencies Private Ltd., (2018) 4 SCC 592 wherein five issues were framed for larger bench’s consideration.

Issues referred:

  1. Whether in the interpretation of the provision of Section 2(o) of the MPT Act, the question of title of goods, and the point of time at which title passes to the consignee is relevant to determine the liability of the consignee or steamer agent in respect of charges to be paid to the Port Trust;
  2. Whether a consignor or a steamer agent is absolved of the responsibility to pay charges due to a Port Trust, for its services in respect of goods which are not cleared by the consignee, once the bill of lading is endorsed or the delivery order is issued;
  3. Whether a steamer agent can be made liable for payment of storage charges/demurrage, etc. in respect of goods which are not cleared by the consignee, where the steamer agent has not issued a delivery order; if so, to what extent;
  4. What are the principles which determine whether a Port Trust is entitled to recover its dues, from the steamer agent or the consignee;
  5. While the Port Trust does have certain statutory obligations with regard to the goods entrusted to it, whether there is any obligation, either statutory or contractual, that obliges the Port Trust to destuff every container that is entrusted to it and return the empty containers to the shipping agent.

Larger Bench’s answer to reference

The Court explained that when section 2(o) defines “owner”, it defines owner in relation to goods separately from owner in relation to any vessel. In sub-clause (i) of section 2(o), when owner is defined in relation to “goods”, the definition is an inclusive one. Secondly, it includes persons who are owners of the goods, or persons beneficially entitled to the goods, such as the consignor, consignee and the shipper and then also includes agents for sale, custody, loading or unloading of such goods.

Further, under section 42(2), a Board may, if so requested by the “owner”, take charge of the goods for the purpose of performing services, and shall give a receipt in such form as the Board may specify. It is obvious that if the ship-owner or its agent are not “owners”, the Board cannot take the charge of the goods from the ship-owner or its agent for the purpose of performing services, a result which would lead to startling consequences. Once goods have been taken charge of and a receipt given for them, no liability for any loss or damage which may occur to them shall attach to any person to whom a receipt has been given (this would include any of the persons mentioned in section 2(o)(i), including the vessel’s agents), or to the master or owner of the vessel from which the goods have been landed or transhipped.

“This would again make it clear that the master or owner of the vessel and their agents, from this point on, have been absolved from liability for loss or damage to the goods, as  the Board has now taken over the custody of the goods from such master or owner of the vessel.”

Answering the question number 1 in negative, the Court held that

“the point of time at which title to the goods passes to the consignee is not relevant to determine the liability of the consignee or steamer agent in respect of charges to be paid to the Port Trust.”

On question number 2 and 3 that dealt with the responsibility/liability of the consignor/streamer agents to pay charges/demurrage, the Court answered the questions together and said that the bill of lading being endorsed by the steamer agent is different from the bill of lading being endorsed by the owner of the goods. In the first case, the endorsement leads to delivery; in the second case, the endorsement leads to passing of title.

“… both stages are irrelevant in determining who is to pay storage charges – we have held that upto the point that the Port Trust takes charge of the goods, and gives receipt therefor, the steamer agent may be held liable for Port Trust dues in connection with services rendered qua unloading of goods, but that thereafter, the importer, owner, consignee or their agent is liable to pay demurrage charges for storage of goods.”

On question number 4 dealing with Port Trusts right to recover its dues, from the steamer agent or the consignee, the Court said that

Until the stage of landing and removal to a place of storage, the steamer’s agent or the vessel itself may be made liable for rates payable by the vessel for services performed to the vessel. Post landing and removal to a place of storage, detention charges for goods that are stored, and demurrage payable thereon from this point on, i.e. when the Port Trust takes charge of the goods from the vessel, or from any other person who can be said to be owner as defined under section 2(o), it is only the owner of the goods or other persons entitled to the goods (who may be beneficially entitled as well) that the Port Trust has to look to for payment of storage or demurrage charges.

The Court divided question number 5 into two parts:

whether carrying goods in a container would make any difference to the position that only the owner of the goods or person entitled to the goods is liable to pay for demurrage:

After referring to the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, the Court noticed that the value of imported goods shall be the transaction value of identical goods, as defined, or similar goods, as defined – whichever rule applies to the facts of each particular case. It is clear that whether identical goods or similar goods are taken into account, the price of the container never enters, as the only “goods” that are to be looked at are the goods that are “imported”, i.e. goods that are stuffed in the containers.

It further explained that for the purposes of customs valuation, addition to the transaction value of the imported goods is made only when the cost of containers is treated as being one with the goods in question. Even in such a situation, what is then imported is the “goods” and the container – the container not having to be destuffed, and therefore being cleared along with the goods contained therein for home consumption.

“In such a case, where containers do not have to be returned, but are imported along with the goods contained within it, after the Board takes custody of such container and the goods within it, the vessel or steamer agent is no longer liable – even containers that do not need to be destuffed will then incur demurrage along with the goods contained within it, which are then payable by the importer, owner, consignor or agent thereof.”

The Court also noticed that there is a difference between containers which go along with the goods contained therein “suitable for long-term use”, from containers “suitable for repetitive use”, hence, the containers of the latter type cannot be classified with the goods contained therein for payment of customs duty.

whether the Port Trust is obliged to destuff containers that are entrusted to it and return empty containers to the shipping agent:

a container which has to be returned is only a receptacle by which goods that are imported into India are transported. Considering that the container may belong either to the consignor, shipping agent, ship-owner, or to some person who has leased out the same, it would be the duty of the Port Trust to destuff every container that is entrusted to it, and return destuffed containers to any such person within as short a period as is feasible in cases where the owner/person entitled to the goods does not come forward to take delivery of the goods and destuff such containers. What should be this period is to be determined on the facts of each case, given the activities of the port, the number of vessels which berth at it, together with the volume of goods that are imported. This may lead to the “short period” in the facts of a particular case being slightly longer than in a case where a port is less frequented, and goods that are stored are lesser in number, given the amount of space in which the goods can be stored.

“While it does not lie in the mouth of the Port Trust to state that it has no place in which to keep goods after they are destuffed – as in the facts in the present case – yet a court may, in the facts of an individual case, look into practical difficulties faced by the Port Trust.”

[Chairman, Board of Trustees Cochin v. Arebee Star Maritime Agencies Private Ltd , 2020 SCC OnLine SC 622 , decided on 05.08.2020]

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