ivil Appeal No 764 N of 1975
From the Judgment and Decree dated 30111973 of the Kerala High Court in AS No 365 of 1969
RF Nariman Mrs AK Verma and DN Mishra for the Appellant
Ramamurthi Not Present for the Respondents
The Judgment of the Court was delivered by 889 KN SAIKIA J
The first respondent Ms Shanmughavilas Cashew Industries QuiIon purchased from East Africa 350 tons of raw cashewnuts which were shipped in the vessel SS Steliosm chartered by the appellant Ms British India Steam Navigation Co Ltd incorporated in England pursuant to a contract of affreightment evidenced by 3 bills of lading issued to the shipper for the 3 loads of cashewnuts
Out of 4445 bags containing the nuts carried in the said vessel only 37 12 bags were delivered at Cochin there being thus short landing of 733 bags
The first respondent sued the appellant in suit No OS 181965 in the Court of the Subordinate Judge Cochin seek ing damages for the shortage of 733 bags of raw cashewnuts amounting to Rs4443803
The suit having been decreed with interest  6 per annum from 177
1964 for the sum total of Rs4665993 the appellant preferred therefrom appeal AS No 365 of 1969 in the High Court of Kerala which was pleased by its Judgments and decree dated 168
1973 and 3011
1973 to dismiss the appeal and affirm that of the Subordinate Judge
Aggrieved the appellant has preferred this appeal by special leave
In the courts below the main contentions of the appel lant inter alia were that it was a mere chatterer of the vessel which was owned by section Matas  Compnay co Lucas Matas  Sons Piraeus Greece that there was a charterparty executed between the first respondent and Ms Victorial Steamship Company as agents of the said owner of the vessel in London on 271
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 char terparty and clause 4 of the bill of lading the reined of the first respondent if any was against the owner who alone was liable and not against the appellant charterer of the vessel
Exhibit D 1 is the photostate copy of the char terparty concluded in London on 271
1964 and Exhibit P 1 to P3 are the 3 bills of lading in the transaction
The first respondent denied that the appellant was only a char terer and not liable for the shortage
It also denied that only English Courts had jurisdiction in the matter
Mr RF Nariman the learned counsel for the appellant first submits that the appellant is an English company registered in England carrying on business in England and it does not carry on any business in India
It is submitted as the carrier under clause 3 of the bill of lading only the appellant has an option either to sue or be sued in England or in Cochin which is a port of destination but the shipper 890 had no option to sue at Cochin
In its written statement it was clearly stated that it had appeared under protest and without prejudice to the contention regarding jurisdiction which contention it had also pressed at the time of the argument and therefore it could not be said to have submitted to the jurisdiction of Cochin court and it never made any submission or raised any objection as to the fact of short landing
According to counsel the High Court has held clause 3 of the bill of lading to be bad on two errone ous grounds namely that it offends section 28 of the Contract Act and that it gives an unfair advantage to the carrier which advantage is not given to the consignee
Section 28 according to counsel is not applicable and clause 3 was not bad on the ground of having given an unfair advantage to the carrier in giving him the option to sue or be sued either in England or at the port of destination and that even if it was bad only the offending portion could be struck off the rest of the clause would still be applicable and only the English court would have jurisdiction
Records show that in the written statement the appellant as defendant in para B stated that the contract evidenced by the bills of lading was governed by English law and the parties had agreed that the disputes were to be determined in England according to English law to the exclusion of the jurisdiction of the courts of any other country and that the institution of the suit at Cochin was in violation of that agreement and hence the Court had no jurisdiction to try the suit and the plaint should 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 jurisdic tion 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 be 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
 Issue No 1 was Whether the suit is properly filed in this Court The trial court in its judgment dated 293
1968 held This issue has been considered by this Court on 282
1966 891 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 641967 in CRP 97766
 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 law and fact that the Court below should have held that the suit was not maintainable in law and should have finally dismissed the suit as the owners of the vessel Steliosm  a necessary party as he alone was liable was not impleaded and pro ceeded against no specific ground about jurisdiction was taken and consequently we do not find any direct discussion on the point in the High Court judgments
Even so this being a question of jurisdiction going to the root of the matter we allowed the appellant to make his submissions
The appellant s submission that the courts at Cochin had no jurisdiction is based on clause 3 of the Bills of Lading which reads as follows 3
JURISDICTION The contract evidence by this bill of lading shall be governed by English law and disputes deter mined in England or at the option of the Carrier at the port of destination according to English law to the exclu sion of the jurisdiction of the Courts of any other country
 If the above clause was binding on the first respondent without anything more there could be no doubt that the suit claim arising out of the contract of affreightment evidenced by the bills of lading will have to be determined in England or at the option of the carrier that is the appellant at the port of destination that is Cochin to the exclusion of the jurisdiction of the courts of any other country
Is the first respondent bound by this clause of the Bill of Lading Clause 29 of both the bills of lading Exhibit P 1 and P2 runs as follows Finally in Accepting This Bill of lading
The shipper Consignee and Owner of the goods and the Holders of this Bill of Lading expressly accept and agree to all its stipu lations exceptions and conditions whether written print ed stamped or incorporated as fully as if they were all signed by such Shipper Consignee Owner or Holder
 892 The first respondent is the consignee and holder of the bills of lading and ex facie should be bound by this clause
No doubt the bills of lading were issued to the shipper from whom it was received by the first respondent
There is no evidence to show that the shipper has repudiated the stipu lations in the bills of lading in any manner
Under these circumstances would it be open to the first respondent to repudiate clause 3 of the bills of lading It is a settled principle 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
Until the Bills of Lading Act 1855 was passed in Eng land 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 England every con signee of goods named in a Bill of Lading and every endor see of a Bill of Lading to whom the property of goods shall pass upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the Bills of Lading had been made with himself In Sewell vs Burdick 85 104 it is held that section 1 is to be given effect in any proceeding in the English Court regardless of the proper law governing the transfer of the bill of lading
The property passes by reason of consignment or endorsement and the right to sue passes with it
The consignee or endorsee may lose his right or liability under the Act by such further endorsement of the bill of lading as divests him of the property
Such a vesting of rights and liabilities on endorsement of a bill of lading does not in any way affect the shipowners  rights against the original shippers or owners of the goods for the freight or the shipper s rights under the bill of fading or the liability 893 Of the consignee or indorsee by reason of his being such consignee or indorsee or of his receiving the goods in consequence of such consignment or endorsement or any right of stoppage in transit
The Indian Bill of Lading Act 1856 was based on the English Bills of Lading Act 1855 18 and 19 Vict C 111 Act IX of 1856
Under section 1 of the also every consignee of goods named in a bill of lading and every endorsee of a bill of lading to whom the property in goods therein mentioned shall pass upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself
The bill of lading is the symbol of the goods and the right to possess those passes to the transferee of the bill of lading
In other words its transfer is symbolic of the transfer of the goods themselves and until the goods have been delivered the delivery of the duly endorsed bill of lading operates as between the transferor or transferee and all who claim through them as a physical delivery of the goods would do
The bill of lading is a negotiable instru ment 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 con tract 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 pos session of the bill of lading does not enable the holder to sue a person at a place where the tranferor 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
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 without a remedy
Dicey  Morris in the Conflict of Laws 1 1th Ed
have given the following general principles as to jurisdiction in actions in personam 894 Rule 28 Sub rule 4 The court may assume jurisdiction if in the action begun by the writ the claim is brought to enforce rescind dissolve annul or otherwise affect a contract or to recover damages or obtain other relief in respect of the breach of a contract being in either case a contract which i was made in England or ii was made by or through an agent trading or residing in England on behalf of a principal trading or residing out of England or iii is by its terms or by implication governed by English law or iv contains a term to the effect that the court shall have jurisdiction to hear and determine any action in respect of the contract
 Rule 34 deals with jurisdiction clauses and it says 1 Where a contract provides that all disputes between the parties are to be referred to the jurisdiction of the Eng lish courts the court normally has jurisdiction to hear and determine any action in respect thereof
2 Subject to clause 3 of this Rule where a contract provides that all disputes between the parties are to be referred to the exclusive jurisdiction of a foreign tribu nal the English court will stay proceedings or as the case may be refuse to give leave to serve the writ out of the jurisdiction instituted in England in breach of such agreement unless the plaintiff proves that it is just and proper to allow them to continue
3 Where the case falls within the scope of the 1968 Con vention unless the defendant submits to the jurisdiction the court has no jurisdiction to determine a dispute
a if one or more of the parties is domiciled in a Con tracting State and the parties have agreed in accordance with Article 17 of the 1968 Convention 895 that the courts of a Contracting State other than the United Kingdom are to have jurisdiction to settle any such dispute or b if none of the parties is domiciled in a Contracting State and the parties have agreed in accordance with Article 17 of the 1968 Convention that the courts of a Contracting State other than the United Kingdom are to have jurisdiction to settle any such dispute and the courts chosen have not declined jurisdiction 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 a 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 con tract whether a jurisdiction clause is exclusive or non exclusive or whether the claim which is the subject matter of the action fails 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 invaria bly be the proper law
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
The question of jurisdiction in this case ought not to be determined by the High Court on the basis of the provi sions of section 28 of the Indian Contract Act in the absence of a specific provision making it applicable to transactions in international trade
The effective operation of statutes of a country in relation to foreigners and foreign property including ships is subject to limitations
In general a statute extends territorially unless the contrary is stat ed throughout the country and will extend to the territori al waters and such places as intention to that effect is shown
A statute extends to all persons within the country if that intention is shown
The Indian Parliament therefore has no authority to legislate for foreign vessels or for eigners in them on the high seas
Thus a foreign ship on the high seas or her foreign owners or their agents in a for eign country are not deprived of 896 rights by our statutory enactment expressed in general terms unless it provides that a foreign ship entering an Indian port or territorial waters and thus coming within the terri torial jurisdiction is to be covered
If the Parliament legislates in terms which extend to foreign ships or for eigners beyond the territorial limits of its jurisdiction the Indian court is of course bound to give effect to such enactment
However no such provision has been referred to in the impugned judgments
Without anything more Indian statutes are ineffective against foreign property and for eigners outside the jurisdiction
The Privy Council in Sirdar Gurdyal Singh vs Rajah of Faridkote 684 decided that no territorial legislation can give jurisdiction in personal action which any foreign court should recognize against absent foreigners owing no allegiance or obedience to the power which so legislates
Lore Selborne said In a personal action to which none of these causes of jurisdiction apply a decree pronounced in absentem by a foreign court to the jurisdic tion of which the defendant has not in any way submitted himself is by international law an absolute nullity
He is under no obligation of any kind to obey it and it must be regarded as a mere nullity by the courts of every nation except when authorised by special local legislation in the country of the forum by which it was pronounced
 There may however be submission to the jurisdiction of an Indian court by litigating in India
The question then is what would amount to submission to jurisdiction
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 con tests 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 I 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 subject
In case of an international contract it is common practice for the par ties to agree that 897 any dispute arising between them shall be settled by the courts of another country even though both the parties are not resident of that country
In such a case having consent ed to the jurisdiction one cannot afterwards contest the binding effect of the judgment
The defendant out of the jurisdiction of the country may be deemed to have been served by service on his agent within the jurisdiction
However parties cannot by submission confer jurisdiction on the court to entertain proceedings beyond its authority
The jurisdiction of the court may be decided upon by the parties themselves on basis of various connecting factors
Wastlake says in his Treatise on Private International Law at page 5 The principal grounds for selecting a particular national jurisdiction in which to bring an action are that the subject of the action if a thing is situate if a contract was made or was to be performed if a de lict was committed within the territory hence the forum situs or rei sitae contractus delicti the two latter of which are classed together as the forum special obligatio nis
Or that the jurisdiction is that in which all the claims relating to a certain thing or group of things ought to be adjudicated on together the forum concursus or that to which the defendant is personally subject the forum rei
 In the instant case the appellant submits that as de fendant it appeared before the Indian court to protest its jurisdiction and put forth its defences subject to that protest
The appellant it has been stated in para 2 of the judgment under appeal dated 3041973 had not filed any objection to the findings as to damages
Did it then amount to submitting to the jurisdiction of the Indian court in which the shipper or the first respondent had no right to sue In Williams  Glyn s Bank PLC vs Astro Dinamico Compania Naviera SA  Anr The Weekly Law Reports Vol
1 1984 438 where the plaintiff bank sought to enforce its securi ties against the defendants by instituting proceedings in England in reliance of clause 7 of the guarantees whereby each of the defendants were expressed to submit irrevocably to the jurisdiction of the English courts
The respondents defendants made an application disputing the 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 898 their application in priority to disputing the jurisdiction
Lord Fraser observed that it would surely be quite unrealis tic 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 object ing 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 princi ple 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 and the other issues to be stayed pending the decision of the proceedings in Greece
 Reference was made to Rein vs Stein  where it was said at page 471 It seems to me that in order to establish a waiver you must show that the party alleged to have waived his objection has taken some step which is only necessary or only useful if the objection has been actually waived or if the objection has never been entertained at all In Dulles  Settlement No2   the question was whether a father who was an American resident outside England had submitted to the jurisdiction of the English courts in a dispute about payment of maintenance to his child in Eng land
He had been represented by counsel in the English court who argued that he was not subject to their jurisdic tion
Denning LJ as he then was said at page 850 I cannot see how anyone can fairly say that a man has voluntarily submitted to the jurisdiction of a court when he has all the time been vigorously protesting that it has no jurisdiction
If he does nothing and lets judgment go against him in default of appearance he clearly does not submit to the jurisdiction
What difference in principle does it make if he does not merely do nothing but actually goes to the court and protests that it has no jurisdiction I can see no distinction at all
 The judgment of the court of appeal which held that the application for a stay involved assumption that the court had jurisdiction to entertain the action and therefore the question of jurisdiction must be decided first was set aside in appeal and the appeal therefrom was dismissed by the House of Lords
In the instant case the question is of initial jurisdiction on the 899 basis of claues 3 of the bills of lading
We have to ask the question whether the shipper could or could not have the right to sue at Cochin under the bills of lading
If he could not have done so the appellant s appearance to pro test about jurisdiction would not cure that defect of juris diction
However we find that in the Memo
of appeal before the lower appellate court no specific ground as to jurisdic tion was taken through there were grounds on non maintain ability of the suit
Even in the Special Leave Petition before this Court no ground of lack of jurisdiction of the courts below has been taken
We are therefore of the 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
Clause 3 of the bills of lading also contains the selec tion 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 1 th 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
In the absence of an express choice the question of the proper law of contract would arise
The parties to a con tract should be bound by the jurisdiction clause to which they have agreed unless there is some strong reason to the contrary
Dicey  Morris in the Conflict of Laws formulate the following rule on proper law of contract as Rule 180 The term Proper law of a contract means the system of law by which the parties intended the contract to be governed or where their intention is neither expressed nor to be inferred from the circumstances the system of law with which the transaction has its closest and most real connec tion 900 Sub rule 1 When the intention of the parties to a contract as to the law governing the contract is expressed in words this expressed intention in general determines the proper law of the contract
 Sub rule 2 When the intention of the parties to a contract with regard to the law governing the contract is not expressed in words their intention is to be inferred from the terms and nature of the contract and from the general circumstances of the case and such inferred intention determines the proper law of the contract 
 There can therefore be no doubt that the instant contract of affreightment evidenced by the bills of lading will be governed by English law
As the law has been chosen the proper law will be the domestic law of England and the proper law must be the law at the time when the contract is made throughout the life of the contract and there cannot be a floating proper law
It has been recognised since Gienar vs Meyer 1796 2 Hy B 1608 that the the time of making the contract the parties may expressly select the law by which it is to be governed and they may declare their common intention by a simple statement that the contract shall be governed by the law of a particular country
This has been settled by a long line of decisions as Rex vs Internation al Trustee for the Protection of Bondholders AG 529 Vita Food Products Inc vs Unus Shipping Co Ltd 289 90 James Miller and Partners Ltd vs Whitworth Street Estates Manchester Ltd 603 Mackender vs Feldia AG  Com pagnie d  Armement Maritime SA vs Compagnie Tunisienne de Navigation SA and Acrow Automation Ltd vs Rex Chainbelt Inc 1971 3 All ER 1175
It is true that in English law there are certain limita tions 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 901 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
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 tittle and may be transferred by endorsement and delivery
Article III3 of the Hague Rules says that a bill of lading is prima facie evidence of the receipt by the carrier of the goods described therein
The Hamburg Rules define a bill of lading under Article 17 as follows Bill of lading means a document which evidences a contract of carriage by sea and the taking over or loading of the goods by the carrier and by which the carrier undertakes to deliver the goods against surrender of the document
A provision in the document that the goods are to be delivered to the order of a named person or to order or to bearer constitutes such an undertaking
 The Hague Rules say that after the goods are taken into his charge the carrier or his agent shall issue to the shipper if he so demands a bill of lading showing among other things the particulars of the goods
The contract of affreightment need not necessarily be expressed in writing
The bill of lading is evidence of the terms of the contract which can also be ascertained from the charterparty where one exists
Dr Justice T Kochu Thommen in his book of Bills of Lading in International Law and Practice at page 25 writes As between the shipowner and the shipper the bill of lading is not conclusive evidence of the terms of the con tract and parties to the contract are entitled to prove that the stipulations in the bill of lading are at variance with the agreed terms of the contract as expressed or evidenced in other documents
In practice however the terms of the bill of lading govern the contractual relations between the shipowner and the shipper and the booking note generally states that the carrier s regular forms of bill of lading shall 902 be used and all the terms thereof shall form part of the contract
The bill of lading assumes the character of con clusive evidence once it has passed into the hands of a consignee or indorsee and evidence may not be given which varies or contradicts it
The position is however differ ent when the ship is under charter and stipulations in the charterparty are expressly and clearly incorporated in the bill of lading
In such a case the bill of lading even after it has passed in to the hands of a consignee or indor see has to be read subject to the charterparty stipula tions
In the hands of a charterer the bill of lading is only a receipt and the charterparty is the governing docu ment as far as the shipowner  and the charterer are con cerned
 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 responsi bility of the shipowner in respect of the goods carried would form part of or be incorporated in the bills of lad ing
How far the charterparty clauses laying down the re sponsibility 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 TW Thomas  Co Ltd vs Portsea Steamship Co Ltd 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 condi tions and exceptions of charter to be as per charterparty including negligence clause
 The question was whether the arbitration clause in the charter party was incorporated by the reference in the bill of lading
Lord Loreburn LC answering this question wheth er an arbitration clause found in the charterparty was applicable to the contract evidenced by the bill of lading and to disputes arising between the shipowners and the holders of the bill of lading under that document replied in the negative
Lord Atkinson observed that when it was sought to introduce into a document like a bill of lading a negotiable instrument a clause such as the arbitration clause not germane to the receipt carriage or delivery of the cargo or the payment of freight the proper subject matters with which the bill of lading is conversant that should 903 be done by distinct and specific words and not by such general words as those written in the margin of the bill of lading in that case
In Vita Food Products Incorporated vs Unus Shipping Co Ltd  the bill of lading set out in detail the terms and conditions of the contract which are hereby mutually agreed upon as follows
Clause 7 contained a general exemption in respect of the goods carried from liability for all damage capable of being covered by insur ance and from liability above a certain value per package unless a special declaration was made
The same clause also provided that these contracts have been governed by English Law While determining what was the proper law of the contract the Privy Council held that the expressed words of the bill of lading must receive effect with the result that the contract was governed by English Law
It was said It is now well settled that by English Law and the law of Nova Scotia is the same the proper law of the contract is the law which the parties intended to apply
That intention is objectively ascertained and if not expressed will be presumed from the terms of the contract and the relevant surrounding circumstances
 In that case the goods were shipped in Newfoundland under bills of lading which did not contain the statement required by section 3 of the Carriage of Goods by Sea Act 1932 which incorporated the Hague rules subject to certain modifications but the bill of lading contained a general clause that the contracts shall be governed by English Law and applying that law the Shipowner was held to be within the exceptions which exempted him from liability
In Rex vs
International Trustee for the protection of Bondholders  it was held that the inten tion of the parties would be ascertained from what is ex pressed 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 New foundland 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 Lord ships held that connection with English law was not as a matter of principle essential
The  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 904 expedient that such rights should pass with the property
 Section 1 of the Act provides that fights under bills of lading are to vest in consignee or endorsee
It says Every consignee of goods named in a bill of lading and every endorsee of a bill of lading to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself Thus a bill of lading is intended to provide for the rights and liabilities of the parties arising out of the contract of affreightment
If the consignee claims the goods under a bill of lading he is bound by its terms
The property in the cargo passes to the consignee or the endorsee of the bill of lading but the contract whereunder the consignment or en dorsement is made has always to be taken into consideration
Thus the consignee or an endorsee gets only such rights as its consignor or endorser had in respect of the goods men tioned in the bill of lading
This is in conformity with Private International law applicable to the case
The Indian Carriage of Goods by Sea Act 1925 Act XXVI of 1925 is an Act to amend the law with respect to carriage of goods by sea
It was passed after accepting the recommen dations of the International Conference on maritime Law held at Brussels in October 1922 and accepting the rules con tained in the Draft Convention held at Brussels meeting in October 1923 amending the rules to give the rules the force of law with a view to establish the responsibilities li abilities rights and amenities attaching to carriers on the bills of lading
But the Rules of the act are not applicable to this case
The High Court rejected the contention of the appellant that it could not be made personally liable for claim on the grounds that the bills of lading were issued in the printed forms of the appellant company bearing its name at the top and that beyond what appeared at the bottom over the signa ture and seal there was nothing at all to indicate that the appellant company was issuing the bills of lading for and on behalf of any owners of the vessel
However the conditions printed on the reverse of the bills of lading itself could not have been avoided
Clause 4 Agency Clause said If the vessel is not owned by or chartered by demise to the company or Line by whom this bill of lading is issued as may be the case notwithstanding anything that appears to 905 the contrary this bill of lading shall take effect only as a contract with the owner or demise chatterers 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 thereon 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
In Halsbury s Laws of England 4th edn
43 para 401 it is said
A contract for the carnage of goods in a ship is called in law a contract of affreightment
In practice these con tracts 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 In para 402 we read that a contract by charterparty is a contract by which an entire ship or some principal part of her is let to a mer chant called the charterer  for the conveyance of goods on a determined voyage to one or more places or until the expiration of a specified period
In the first case it is called a voyage charterparty and in the second a time charterparty
Such a contract may operate as a demise of the ship herself to which the services of the master and the crew may or may not be added or it may confer on the charterer nothing more than the right to have his goods conveyed by a particular ship and as subsidiary to it to have the use of the ship and the services of the master and crew
Thus for the purposes of ascertaining the responsibili ty of a charterer in respect of the cargo shipped and land ed it would be necessary to know not only the stipulations between the shipper ie the owner of the cargo and the charterer evidenced by the bill of lading and also those between the charterer and the owner of the ship
If the charter is by way of demise the problem would be simple inasmuch as the bill of lading will be purely between the shipper and the charterer
In cases of a voyage charter  or a time charter  one has to find out the actual terms of the charter to ascertain whether they operated as charter by demise or made the charterer only as an agent 906 of the shipowner and if so to what extent so as to ascertain the extent of privity established between the shipper and the shipowner as stipulated in the bill of lading
Charterparties by way of demise says Halsbury at para 403 are of two kinds 1 charter without master or crew or bareboat charter where the hull is the subject matter of the charterparty and 2 charter with master and crew under which the ship passes to the charterer in a state fit for the purposes of mercantile adventure
In both cases the charterer becomes for the time being the owner of the ship the master and crew are or become to all intents and pur poses his employees and through them the possession of the ship is in him
The owner on the other hand has divested himself of all control either over the ship or over the master and crew his sole fight being to receive the stipu lated hire and to take back the ship when the charterparty comes to an end
During the currency 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
 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 char terparty 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 princi pal 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 charterer may employ the ship in carrying either his own goods or those of others
Where the charterparty does not operate as a demise the charterer s right vis a vis the owner depends upon the terms of the contract
The contract of carnage is personal to the 907 charterer and he cannot call upon the shipowner to under take liabilities to third persons or transfer to third persons his own liabilities to the shipowner unless the contract so provides
 A charterparty has to be construed so as to give effect as far as possible to the intention of the parties as expressed in the written contract
The stipu lations of charterparty may be incorporated in a bill of lading so that they are thereby binding on the parties
It is an accepted principle that when stipulations of the charterparty are expressly incorporated they become terms of the contract contained in the bill of lading and they can be enforced by or against the shipper consignee or endorsee
The effect of a bill of lading depends upon the circumstances of the particular case of which the most important is the position of the shipper and of the holder
Where there is a bill of lading relating to the goods the terms of the contract on which the goods are carried are prima facie to be ascertained from the bill of lading
However if a shipper chose to receive a bill of lading in a certain from without protest he should ordinarily be bound by it
Thus it cannot be said that the bill of lading is not conclusive evidence of its terms and the person execut ing it is not necessarily bound by all its stipulations unless he repudiates them on the ground that as he did not know and could not reasonably be expected to know of their existence his assent to them is not to be inferred from his acceptance of the bill of lading without objection
Where there is a charterparty the bill of lading is prima facie as between the shipowner and an indorsee the contract on which the goods are carried
This is so when the indorsee is ignorant of the terms of the charterparty and may be so even if he knows of them
As between the shipowner and the charterer the bill of lading may in some cases have the effect of modifying the contract as contained in the char terparty although in general the charterparty will pre vail and the bill of lading will operate solely as an ac knowledgement of receipt
In the instant case we find from Exts
P 1 to P3 that the following has been prominently printed just below the signature For the Master and Owners  in the bills of lad ing
SEE CONDITIONS OF CARRIAGE AND OTHER CONDITIONS OF 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
None of the parties having repudiated the bills of lading in this case the High Court ought not to have ac cepted the submission of the first respondent that clause 4 of the bills of lading offended the provisions of the Car riage of Goods by Sea Act 1924 and therefore bad
908 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 October 1922 and Brussels meeting in October 1923
Under Section 2 of that Act which deals with application of rules it is provided Subject to the provi sions of this Act the rules set out in the Schedule here inafter referred to as the Rules shall have the effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in India to any other port whether in or outside India To apply the Rules to a case the port of origin has to be an Indian Port
Unless the starting point or the port of loading is a port in India the Rules are inapplicable
These Rules have no application when goods are not carried from any Indian port
As in the instant case goods were shipped in Africa and carried to Cochin this Act obviously was not applicable
There is nothing to show that the charterparty was by way of demise
Pacta dant legem contractui the stipulations of parties constitute the law of the contract
Agreements give the law to the contract
Clause 4 having been a stipu lation in the contract evidenced by the bills of lading the parties could not resile therefrom
It is not clear whether the English Carriage of goods by Sea Act 1924 or the Indian Carriage of Goods Act 1925 was applied by the High Court
The Articles and the Rules referred to are to be found in the Schedule to the Indian Act the Rules whereunder were not applicable to the facts of the case
The dispute could not have been decided partly according to municipal law and partly according to English law
The English law was not proved before the court according to law
The result is that this appeal must succeed
We accordingly allow this appeal set aside the impugned judgments and remand the case to the trial court for disposal according to law after giving opportunity to the parties to amend their pleadings and adduce additional evidence if they are so advised in light of the observations made hereinabove
In the facts and circumstances of the case we make no order as to costs
RSS Appeal allowed


Summary:
On November 11 1968 the Petitioner was apprehended carrying contraband gold in a Maruti Car driven by him
He was taken into custody and the seized gold was confiscated
For the assessment year 1960 70 the Petitioner had filed a return declaring total income of Rs9571
In finalising the assessment the Income Tax Officer added Rs20 Lakhs being the price of the confiscated gold as income from undisclosed source
The Petitioner went in appeal before the Appellate Assistant Commissioner who reduced the income by that amount holding that the assessee was not the owner of the confis cated gold
On second appeal by the revenue the Tribunal restored the order of the ITO
The Petitioner then moved a Misc
Application under section 2541 for amendment for treating Rs20 Lakhs as business loss which was rejected by the Tribunal
The Petitioner then moved a Petition us 2561 of the Income Tax Act seeking reference to the High Court raising certain questions which was turned down by the Tribunal holding that none of the questions sought to be raised was decided by the Tribunal and  as such did not arise from its order
The High Court also declined the application to direct the Tribunal to refer the questions and to state the case to it
Hence this special leave petition directed against both the order of the Tribunal as well as the High Court
Dis missing the Special Leave Petition the Court HELD The real and substantial question posed and can vassed before the Tribunal in its appellate order and in the appeal was whether the sum of Rs20 Lakhs be considered as part of the income of the 6 assessee and as such suffer taxation
The question sought to be raised is whether in view of the decision of the Court in Piara Singh s case this amount could be treated as legiti mate business loss of the assessee
It is possible to take the view that this is substantially a different question family whether an amount is a business loss even assuming that it was he income
It is possible and conceivable to consider two different questions namely whether a certain sum of money is the income of the assessee and secondly whether even assuming that such was the income was that income liable to be deducted in view of the provisions of the Act
Considerations which go into determination whether an amount should be treated as income and considerations which are relevant to determine whether even assuming that that was the income the amount was deductible are differ ent
The question in this form was not canvassed before the Tribunal
The view taken by the Tribunal and the High Court is a possible view and they have borne in mind the princi ples of law laid down by the Court in Scindia Steam Naviga tion s case
1 lB E 12E CIT Patiala vs Piara Singh 2 and CIT Bombay Scindia Steam Navigation Co Ltd  referred to