By TIOL News Service

NEW DELHI, MAR 01, 2017: FACTS: During the period November 1991 to January 1992, 78 shipments of zinc ingots and copper iron bars were imported by 5 different consignees from one M/s Metal Distributors (UK) Ltd.; these consignments were landed at the Bombay Port. The consignees filed bills of entry for 37 out of the 78 consignments, but subsequently failed to lift the consignments and thus, they came to be stored at by the Port of Bombay.

The distinguishing factor of the above consignments was that they were shipped on "CAD Basis" i.e. cash against documents, in which the title to the goods would remain with the exporter till such a time the importer would retire the documents against payments.

Facing a grave loss M/s Metal Distributors (UK) Ltd., requested the present petitioner, if they were interested in purchasing the goods. It is pertinent to mention that the present petitioner and the original consignees are no where related, and the present petitioner is a third party to the sales.

On 23.03.1992, the petitioner through his agent applied to the Customs Authorities to have the Bills of Entry substituted in their name for the 37 consignments for which the original consignees had filed Bills of Entry, and also applied to file Bills of Entry for the remaining 41 consignments lying unclaimed.

The formal agreement between the M/s Metal Distributors (UK) Ltd. and the petitioner was entered subsequently, in April of 1992.

That on 05.05.1992 the Clearing Agent of the petitioner wrote to the Customs Authorities seeking an amendment of the IGM so that the goods could be cleared. This was followed by a communication dated 03.06.1992 from the original exporter i.e. M/s Metal Distributors UK that the petitioner had agreed to buy the aforesaid consignments since the original importers had failed to clear the goods.

It is pertinent to mention that on 04.09.1992 the Customs Authority wrote to the petitioner stating that would be granting permission to amend the IGM for only 41 consignments and that the balance 37 consignments on the ground that Bills of Entry for those consignments stood filed.

On 09.09.1992 the petitioner was granted a detention certificate by the Customs Authority for the aforesaid 41 consignments signifying the period of detention as from 09.06.1992 to 09.09.1992. Since the said period was incorrect, the petitioner requested the Customs Authority to correct the Detention Certificate and the same was subsequently corrected to reflect the date as 23.03.1992 to 09.09.1992. It is pertinent to mention that the Detention Certificate initially read "for procedural formalities for amending the IGM" however subsequently the aforesaid detention certificates were amended by the Detention Certificates dated 18.11.1993 and 01.12.1993 for the 41 consignments and specifically read for "bonafide operation of ITC Formalities".

In the meantime the Government of India was pleased to notify the "Statement of Guidelines for Remission of Demurrage Charges", 1992, vide which in certain cases were goods/consignments detained by Customs for "ITC Facilities" were to be considered for grant of remission from payment of demurrage for the period the goods were being so processed by Customs Authorities.

In the meantime the Port of Bombay levied a total of Rs.2,81,67,333 as demurrage charges, the total remission granted by the Port of Bombay was Rs.90,52,535, and therefore demanded a balance of Rs.1,91,14,798 on the ground that the petitioner was liable to pay demurrage for the period of 23.03.1992 till 09.09.1992, on the ground that no remission could be granted prior to date of noting.

Thus, on 16.09.1995, the Port of Bombay rejected the request of the petitioner for grant of remission of demurrage.

Aggrieved by this order, the appellant filed a Writ Petitionbut by judgment dated 12.04.2010 the same was dismissed.

The appellant, however, cleared the goods after making payment of the amount (claimed by the 1st respondent towards demurrage), under protest.

Against this judgment, an appeal came to be filed before the Supreme Court.

The submissions made are-

(i) that the appellant acquired title to the goods long after they arrived in the 1st respondent's port and discharged from the vessel which carried the goods. Therefore, demurrage payable for the period anterior to appellant's acquisition of title to the goods is to be collected from the steamer agent of the vessel; and the appellant incurs no liability in law to pay the demurrage - since the 1st respondent rendered no service to the appellant during that period;

(ii) that in view of the facts and circumstances of the case, the appellant is entitled for complete remission of the amount claimed towards demurrage on account of delayed clearance of the goods.

(iii) that the 1st respondent granted complete remission of the amount payable towards demurrage in the case of another importer i.e. M/s. Gilt Pack who was similarly situated. Therefore, the action of the 1st respondent in declining remission to the appellant is discriminatory.

The Supreme Court extracted the relevant provisions of the Major Port Trusts Act, 1963 (the ACT), the connotation to the expression "demurrage", "bailment", "bailor", "bailee" and after relying upon a host of case laws namely The Trustees of the Port of Madras by its Chairman v. K.P.V. Sheik Mohamed Rowther & Co. & Others, (1963) Supp. 2 SCR 915 , Trustees of the Port of Madras, Through its Chairman v. K.P.V. Sheikh Mohd. Rowther & Co. Pvt. Ltd. & Another, (1997) 10 SCC 285 and Forbes Forbes Campbell & Company Limited v. Board of Trustees, Port of Bombay, (2015) 1 SCC 228 , inter alia observed -

++ If the ACT authorises the 1st respondent to recover its dues by bailing the goods under bailment, in those cases where the consignee does not turn up to take the delivery of the goods within the time stipulated under Sections 61 or 62 of the ACT, to deny the right to demand and recover the amounts due from the consignee when he seeks delivery of the goods under bailment would be illogical and inconsistent with the scheme of the ACT.

++ Such right, in our view, undoubtedly enables the 1st respondent to claim various amounts due to it, from any person claiming delivery of the goods either the bailor or a person claiming through the bailor for the services rendered w.r.t. the goods. Denying such a right on the ground that the person claiming delivery of the goods acquired title to the goods only towards the end of the period of the bailment of the goods with the 1st respondent would result in driving the 1st respondent to recover the amount due to it from the bailor or his agent who may or may not be within the jurisdiction of the municipal courts of this country.

The 1st submission is, therefore, rejected.

++ The fact that the appellant was not permitted to clear the goods because of the pendency of some proceedings initiated by the customs authorities by itself does not create a right of remission in favour of the appellant.Though it may constitute a relevant circumstance for considering granting remission if the 1st respondent so chooses as a matter of policy. As a matter of fact, remission of a part of the demurrage was granted by the 1st respondent.

++ From the facts available on record, we are of the opinion that firstly, the cases of Gilt Pack and appellant are not identical. Gilt Pack was the case where the original consignee sold the goods to a third party on high seas even before their arrival into India. It so transpired that the purchaser did not have an appropriate license under the relevant law to import the goods. In view of the said problem, the goods were detained for some time and eventually the original consignee himself cleared the goods. It is in the said circumstances Gilt Pack was granted remission.

++ We must make it clear that the authority of the 1st respondent to grant or decline remission of any amount due towards any rate payable under THE ACT must be based on rational consideration and a sound policy. Such a requirement is inherent in the fact that 1st respondent is a statutory body discharging important statutory obligations. 1st respondent could not bring anything on record to our notice which demonstrates the reasons for declining remission as claimed by the appellant nor any clear policy of the respondent which regulates the discretion. In the circumstances, we deem it appropriate to set aside the decision of 1st respondent dated 16.09.1995 in declining the remission and leave it open to the respondent to take appropriate decision on the application duly recording the reasons for such decision.

The impugned judgment was set aside and the appeal was accordingly allowed in part.

(See 2017-TIOL-97-SC-CUS)