IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18-7-2008 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH O.S.A.No.36 of 2004 M/s.East Coast Steel Ltd., represented by their General Manager Madras Branch Flat No.4, Rams Apartments 78A, T.T.K.Salai Madras 600 018. .. Appellant vs Owners and other persons interested in the Vessel M.V.Meera, now in Madras Port and rep. By the Master c/o. Her steamer agents M/s.Hunter Shipping and Trading Room No.102, 1st Floor, No.15, Moore Street, Madras 600 001. .. Respondent Original side appeal preferred under Order XXXVI Rule 1 of O.S. Rules and Clause 15 of Letters Patent against the judgment and decree dated 20.8.2003 in C.S.No.1344 of 1995. For Appellant : Mr.K.Bijai Sundar For Respondent : Mr.A.P.S.Kasthuri Rangan for M/s.Sampathkumar Associates JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.) This appeal is directed against the judgment of the learned Single Judge dismissing a suit in C.S.No.1344 of 1995. https://hcservices.ecourts.gov.in/hcservices/ 2.The case of the appellant/plaintiff is as follows: (a) They are manufacturers of steel billets and allied products. They are regularly importing steel melting scrap as raw material. They placed a purchase order for the purchase of a consignment of 2369.40 metric tonnes of steel melting scrap on M/s.Cheval International Limited, London, through their Indian Agents M/s.V.B.Mercantile Pvt. Limited, Calcutta, on 1.3.1995. The cargo was to be loaded at the Port of Sudan. The delivery was to be effected within 45 days of the receipt of the workable letter of credit. An invoice was raised on the plaintiff on 23.7.1995 for a sum of US$ 418749.72 equivalent to Rs.1,34,00,000/-. The shipper had entrusted the cargo at the Port of Sudan, and evidencing such entrustment, the defendant issued a bill of lading dated 20.7.1995, to the plaintiff which clearly stated that the cargo was to be carried on liner terms and the freight was prepaid. It seems that the sellers had entered into a charterparty with the defendant agreeing to certain terms for which the plaintiff was not a party. The vessel after loading the cargo, sailed from the Port of Sudan and arrived at the Port of Madras on or about 27.8.1995. The plaintiff had appointed M/s.South India Corporation (Agencies) Ltd., Madras, as their clearing agents for the clearance of the cargo. They sent the original bill of lading to the local steamer agents of the defendant on 31.8.1995, calling upon them to issue a delivery order. But, they have not yet issued the delivery order and have also not made endorsements to berth the vessel. On 2.9.1995, the plaintiff called upon the local steamer agents of the defendant to issue delivery order failing which they threatened to take legal action. The steamer agents have sent a letter on 4.9.1995, enclosing a message sent to the charterers that unless the dues under the charterparty terms are settled, the cargo could not be released. On further enquiry, the plaintiff came to know that the charterers owe an alleged demurrage liability at the load port to the extent of US$ 72500/-. Under the contract of carriage, there was no liability on the plaintiff to pay any demurrage charges to the defendant or to the sellers of the cargo, and they are entitled to have delivery of cargo without any conditions. (b) On 2.9.1995, the plaintiff put on notice calling upon the defendant's steamer agents to arrange for berthing of the vessel and discharge the cargo; but, the defendant failed and neglected to arrange the berthing of the vessel and discharge the cargo. Thus, there is a breach of contract, and it amounts to conversion. In terms of the purchase order, the letter of credit opened by them, has been encashed by the sellers and thus, the title to the goods has passed on to the plaintiff to claim the cargo as their own. They apprehend that the vessel will sail away without discharging the cargo. As per the contract of carriage, the defendant has to discharge the cargo, and they have no lien on the cargo for any default committed by the charterers. The defendant has no defence to the suit as the plaintiff has a right in rem and a maritime lien on the vessel for the cargo. The vessel is now lying in the Port of Madras within the Admiralty jurisdiction of this Court. If an order of arrest is not granted, the defendant's vessel which is a foreign vessel, would sail beyond the jurisdiction of this Court, https://hcservices.ecourts.gov.in/hcservices/ and the only effective remedy available to the plaintiff to discharge the cargo would be lost. Hence, the suit. 3.The defendant filed a written statement alleging that he is not aware of the business of the plaintiff or the alleged contract dated 1.3.1995, between the plaintiff and M/s.Cheval International Ltd; that the vessel m.v.Meera was chartered by M/s.Cheval International Ltd, who is none other than a contracting party with the plaintiff; that the charterparty is dated 11.6.1995; that the terms and conditions of carriage of goods contained in the charterparty had been duly incorporated in the bill of lading dated 20.7.1995; that it is a specific term of the charterparty that the conditions contained in the charterparty shall prevail over the bill of lading in any matter of conflict; that under the circumstances, the plaintiff cannot claim any right under the bill of lading excluding the terms and conditions contained in the charterparty for carriage of goods; that on the face of the bill of lading, it is clear that it is used with charter parties; that it is also a deliberate attempt made by the plaintiff to mislead this Court for obtaining an ex-parte order of arrest of the vessel; that the cargo had to be discharged in accordance with the terms contained in the charterparty; that as per Clause 24, the defendant's agent gave a notice of readiness dated 28.8.1995, to the plaintiff's clearing agent soon after the arrival of the vessel at the post of Madras on 27.8.1995; that after receipt of notice, instead of contacting their sellers who chartered the vessel, the plaintiff was insisting upon issue of delivery order; that the plaintiff has deliberately omitted to implead M/s.Cheval International Ltd, with whom the plaintiff entered into contract for purchase of cargo and who had entered into charterparty with the defendant and issued bill of lading; that the suit is bad for non-joinder; that the defendant wrote a letter to the plaintiff dated 4.9.1995, informing that the defendant had taken up the matter with the charterer and requesting the plaintiff to contact them; that apart from that, the charterparty provides for lien; that when lien is created under the terms of carriage, the plaintiff claiming delivery of cargo cannot escape liability; and that the collusion between the charterer/shipper and the plaintiff is evidenced from the fact that the cost of discharge was met by the charterer/shipper and not the plaintiff as between them. 4.It is further alleged by the defendant that though the plaintiff undertook to discharge the cargo which is their responsibility not only as per the terms of charterparty but also as per the order of the Court dated 14.9.1995 made in Application No.4645/95, the plaintiff deliberately delayed the process of discharge and the Port Trust did not permit the vessel which lead to prolonged occupation of berth and vessel had to be shifted to outer anchorage; that though the charter party provides the rate of discharge, the plaintiff did not complete the discharge until 8.12.1995; that it is clear from the conduct of the plaintiff that the order of arrest obtained by the plaintiff, is nothing but wrongful, and delaying of vessel even after the order directing them to discharge at its cost, is nothing but vindictive; that as per the charterparty, the defendant is entitled to demurrage US$ https://hcservices.ecourts.gov.in/hcservices/ 2500 for every day's delay; that the charterparty provides for lien on cargo for freight and dead freight, demurrage and damages for detention; that the net demurrage due comes to US$ 312,500; that the plaintiff is liable to pay interest at 18% per annum from 8.12.1995; that on 18.11.1995, the plaintiff sent to the defendant's agent at Chennai by fax a draft agreement dated 17.9.1995, by which the plaintiff sought a settlement of the defendant's dues of US $ 1,75,000 to avoid even according to the plaintiff "vexatious litigation"; that in order to avoid huge ware housing cost, the cargo was sold with the permission of this Court by order dated 26.4.1996, and sale proceeds had been deposited in the Housing Development Finance Corporation (HDFC); that the suit is not maintainable in law or on facts, and hence, the same was to be dismissed. 5.On the above pleadings, the trial Court framed three issues. The parties went on trial. The plaintiff examined P.W.1 and marked Exs.A1 to A10. One witness was examined as D.W.1 on the side of the defendant, and Exs.D1 to D9 were marked. The learned trial Judge after hearing the submissions made and considering the materials available, dismissed the suit. Hence, this appeal at the instance of the plaintiff. 6.The following questions would arise for consideration in this appeal: (1) Whether this Court has got jurisdiction to entertain the suit in exercise of the admiralty jurisdiction? (2) Whether the respondent/defendant has got a right of lien on the cargo for the payment of freight and demurrage as alleged? (3) Whether the appellant is entitled to the reliefs asked for? 7.Advancing the arguments on behalf of the appellant, the learned Counsel would submit that the plaintiff has proved its claim by adducing sufficient and acceptable evidence both oral and documentary; that despite the same, the learned trial Judge has dismissed the suit; that it cannot be disputed that the plaintiff is the owner of the cargo, which was entrusted with the defendant at the Port of Sudan and which also reached the Madras Port; that in order to prove the same, the plaintiff produced Ex.A1, purchase order, and Ex.A2, bill of lading, and also documentary evidence to show that the invoice which was raised on 23.7.1995 for the entire value of the cargo namely Rs.1,34,00,000/- was encashed; that it is evident from the bill of lading Ex.A2 dated 20.7.1995, that the cargo was to be carried on liner terms and the freight was prepaid, and hence, it would be indicative of the fact that the plaintiff as the purchaser of the cargo, has performed its part and hence, the defendant was duty bound to deliver its cargo unconditionally; that it is not in controversy that the clearing agent of the plaintiff placed the bill of lading to the agents of the defendant on 31.8.1995, calling upon them to issue a delivery order; but, no arrangements were made either to berth the vessel or to deliver the cargo; that on the contrary, the defendant gave a reply on https://hcservices.ecourts.gov.in/hcservices/ 4.9.1995, stating that there was a charterparty agreement and unless the dues under the terms of the said agreement were settled, the cargo could not be released; that according to the communication, the alleged demurrage liability at the load port was to the extent of US $ 72500; that as far as the charterparty agreement was concerned, the plaintiff was not a party; that it was only in between the charterer namely M/s.Cheval International Limited, London, the seller of the cargo, and the defendant; that apart from that, under the contract of carriage, there was no liability on the appellant/plaintiff to pay any demurrage charges to the defendant or to the seller of the cargo; that as the owner of the property, the plaintiff was entitled to have the delivery of the cargo without any condition whatsoever; that as far as the charterparty agreement was concerned, the plaintiff was a stranger and hence, they were not bound by the various clauses contained therein; and that there was no privity in respect of the said contract since the appellant was neither a signatory nor a party to the same. 8.Added further the learned Counsel that that as regards the plaintiff, regarding the transportation of the cargo from the port of Sudan to Madras, the plaintiff was governed only by Ex.A2, bill of lading, which was admittedly issued by the respondent; that the learned trial Judge should have rejected the defence plea put forth by the respondent that the bill of lading issued was subject to the terms and conditions of Ex.D1, charterparty agreement and ought not to have held that the same would prevail over the bill of lading, and hence, the plaintiff was liable to pay demurrage charges, and without the said payment, the cargo could not be delivered to the plaintiff; that from the very reading of Ex.A2, bill of lading, it would be clear that the shipment was on liner-out terms C&F; that it is true that a reference was made in Ex.A2 to a charterparty agreement dated 11.6.1995; but, it did not indicate any further details thereof; that as per Ex.A2, bill of lading, the entire freight was prepaid even at the Port of Sudan; that the liner out terms referred to a freight rate which signified that it consisted of the ocean carriage and the cost of cargo handling at the loading and discharging ports according to the customs of those Ports; that since the freight charges have already been paid, it was the duty of the respondent to incur all the costs of loading and discharging of the cargo from the vessel, and hence, the contention that the respondent has got a lien which it could exercise for the freight or demurrage suffered at the Port of Sudan or at Madras should have been rejected; that the learned trial Judge should have rejected the defence plea that they have got a lien Clause incorporated in Ex.D1, charterparty, and it was also exercisable against the appellant/plaintiff; that the lien clause in the charterparty might give a contractual lien only on the cargo owned by the charterers and not on the cargo owned by the third party consignee; that unless the consignee was also a charterer, the lien cannot be exercised; that the respondent was well aware that it did not have the right of lien under the bill of lading, and hence, they were not to exercise their right as specifically provided in the provisions of the Major Port Trust Act. https://hcservices.ecourts.gov.in/hcservices/ 9.Placing reliance on Sec.60 of the Major Port Trusts Act, 1963, the learned Counsel would further add that the said provision expressly confer the right on the ship owner to exercise its lien for freight and other charges; that if that lien has got to be exercised, the said right should have been exercised prior to the discharge; that no such right has been exercised by the respondent in the instant case; that even assuming that the respondent had a right of lien, it has not exercised procedurally, the reason being that the respondent/defendant was very aware that it did not have the right of lien over the cargo in question; that the respondent had no right to exercise the right of lien on the cargo of the appellant for the dues of the charterer since the title of the cargo had already got transferred to the appellant; that the letters of credit were honored; and that the appellant as the consignee was a bonafide purchaser of the cargo for a valuable consideration. 10.Relying on the decision of the House of Lords reported in (1984) Vol.2 LLOYD'S LAW REPORTS 129 (MIRAMAR MARITIME CORPORATION V. HOLBORN OIL TRADING LTD.), the learned Counsel would further add that the consignee could not be called upon to pay the dues of the charterer, and the reference could be made only to the obligations of the charterer and not that of the consignee namely the appellant; that it cannot be disputed that the respondent as a career was the custodian of the cargo until the same was discharged into the custody of the Madras Port; that the lien could not be exercised since the title of the cargo has already passed on to the appellant, and hence, the respondent/defendant cannot in law call upon the appellant/plaintiff to pay the dues of the seller or the charterer; that since the bill of lading would clearly indicate that the entire freight was prepaid, the respondent should not be allowed to say that the freight has not been paid or it could exercise the right of lien on that ground; that the stand that was taken by the respondent was thoroughly inconsistent to the contents of the express terms in Ex.A2, bill of lading; that the trial Court while dismissing the suit, has observed that Clause 34 of Ex.D1, charterparty, provides for arbitration in case of disputes arising between the parties, and according to Clause 8 of the charterparty, there was a dispute and hence, it was a case where the matter has got to be referred to arbitration; that it is pertinent to point out that either in their reply notices or in the written statement, the defendant has nowhere whispered about the arbitration clause; that apart from that, the charterparty as found under Ex.D1, was between the defendant and the charterer namely the seller and hence, the terms found therein and in particular, the arbitration clause, would bind only those charterers and not the plaintiff; and that under such circumstances, the findings recorded by the learned trial Judge that there is a dispute between the parties, and it has got to be resolved before an arbitrator as envisaged under Clause 34 of Ex.D1 was not correct. 11.Added further the learned Counsel that the only witness examined on the side of the defendant namely D.W.1, has categorically admitted that the proof of service of the notice of https://hcservices.ecourts.gov.in/hcservices/ readiness at the Port of Sudan by the respondent on the charterer has not been filed; that Ex.D2, the statement of facts, did not contain the remarks of the respondent and the charterer; that the statement of facts if any prepared at the Port of Madras signed by the respondent and the charterers, has not been filed; that no quantification was made on the basis of the laytime calculations which should have been done; that above all, though there was an arbitration clause, the same has not been invoked; that the respondent was well aware that it could not make a claim even before the arbitrators in the absence of documents, and hence, the respondent has even committed breach of the charterparty terms; that the only document relied on by the respondent for quantification, was the invoice raised by the respondent on the charterer which was a self-serving document; that the trial Court has held that the appellant was aware of the existence of the charterparty since it was referred to in Ex.A2, bill of lading, and hence, the terms of the charterparty would be binding on the appellant; that mere knowledge of the appellant regarding the existence of the charterparty would not be sufficient enough to state that the appellant was bound by the said terms, since the appellant was neither a party to the charterparty, nor has he expressly agreed to comply with the terms anywhere; that it is pertinent to point out that Ex.A1, purchase order, was between the plaintiff purchaser and M/s.Cheval International Limited, London, the seller; that equally, Ex.D1, charter party, was between the defendant and the charterer who was the seller, in which the appellant was neither a party nor would it bind on him, and thus, it would be quite clear that there was no arbitration agreement in writing and signed by the parties; that under such circumstances, when the plaintiff has proved that they are the owner of the cargo and are not liable to answer the claim of the defendant who could not exercise the lien, and it is a case in which the parties could not be referred to arbitration, it is a fit case where a decree should have been granted, and hence, the judgment of the trial Court has got to be set aside, and the appeal be allowed. 12.Contrary to the above contentions, the learned Counsel for the respondent would submit that as far as the terms and conditions found in the contract between the seller M/s.Cheval International Limited, London, and the plaintiff were concerned, it would not be binding on the defendant; that it is not in controversy that the vessel in question was chartered by the seller, and there was a charterparty agreement which has been clearly referred to in Ex.A2, bill of lading; that the purpose of annexing a copy as one of the documents along with the bill of lading was to make it clear that the holder of the bill of lading was also bound by the terms of the charterparty agreement; that it was not the case of the plaintiff that they had no knowledge about the charterparty agreement; that even at the earliest, the plaintiff had the knowledge; that the charter party agreement was duly incorporated in the bill of lading dated 20.7.1995; that it was found in the plaint; that it has been clearly stated that "all terms and conditions, liberties and exceptions of the charter party dated over leaf are herewith incorporated" which would be indicative of the fact that the https://hcservices.ecourts.gov.in/hcservices/ plaintiff had not only the knowledge of the charterparty, but also the terms and conditions would be binding on the plaintiff; that the plaintiff has claimed the relief resting its entire case on the bill of lading; that forgetting for a while, the conditions contained in the charterparty, would prevail over the bill of lading in all matters of conflict; that the terms of the charterparty would clearly reveal that the cargo should be discharged by the charterer or the agents free from any risk, liability and expenses whatever to the owners; that it is true that the cargo was to be discharged in accordance with the terms contained in the charterparty; that the suit itself was an attempt by the plaintiff as the result of the collusion between the plaintiff and the charterer to take delivery of the cargo without settlement of the amounts by way of freight and demurrage due to the defendant as per the terms of the charterparty; and that the defendant has written a letter on 4.9.1995 itself informing the plaintiff that the defendant had taken up the matter with the charterer namely the seller of the cargo, and also requested the plaintiff to contact them; but, the plaintiff never did so and on the contrary, has filed the instant suit to take delivery of the cargo even without settling the dues. 13.Added further the learned Counsel that despite the averments were made in the written statement that the plaintiff has deliberately omitted to implead M/s.Cheval International Ltd, as a party to the suit, the plaintiff did not take any steps to implead the seller as a party in whose absence the question which arose in the suit, could not be decided; and that apart from that, the charterparty clearly provided for the lien. Pointing to Part II – 8 found in the charterparty, the learned Counsel would submit that the owners should have a lien on the cargo for freight and dead freight, demurrage and damages for the detention; that the charterer should remain responsible for dead freight and demurrage including damages for detention incurred at port of loading and also responsible for the freight and demurrage incurred at the post of discharge, but only to such extent as owners have been unable to obtain payment thereof by exercising the lien on the cargo; that the very reading of the clause would clearly indicate that the ship owners, the defendant herein, had the right over the cargo; that they have actually in exercise of their right of lien, denied the delivery which has been rightly done; that the contention put