Case: Board Of Trustee Of The Port Of Bombay Vs. Indian Goods Supplying Co

Three consignments of Chinese newsprint were imported by the respondents for home consumption in India. The first 2 consignments arrived on February 16, 1957. Suffice it to say that the clearance of the two consignments as well as the third consignment was considerably delayed and the Port Trust claimed demurrage for the period from March 25, 1957. The respondents disputed the right of the Port Trust to charge any demurrage for the period during which the goods were detained by the Customs authorities for analytical test. as well as for the Import Trade Control formalities. It is common ground that so far as the period for an alytical test certified by the Customs authorities is concerned the Port Trust cannot charge demurrage. But so far as the period during which the goods were detained for the Import Trade Control formalities by the Customs authorities the Port Trust claimed demurrage. Due to protracted correspondence between the parties the goods were not cleared and ultimately the suit was filed by the respondents for recovery of a sum of Rs. 24, 950 and interest thereon from the Port Trust being the aggregate loss sustained by them. The appellants denied that liability and pleaded that the Port Trust was in law entitled to collect the demurrage levied on the respondents and that as they failed to pay the demurrage the Port Trust was entitled to sell the goods by public auction.The City Civil Court, Bombay, decreed the suit for a sum of Rs. 24, 950 with interest at the rate of 6 per cent per annum from the date of the suit t ill judgment and there- after at 4 per cent per annum and costs of theappellants preferred an appeal to a Division Bench of the Bombay High Court which dismissed the appeal and confirmed the decree passed by the City Civilthe appeal was pending before the High Court the appellants deposited the decretal amount in court which was withdrawn by the respondents. Mr. Nariman, counsel for the Port Trust, stated that the Port Trust does not want to ask for the repayment of the money and that he will confine himself to the question of the correctness of the decision of the Bombay High Court holding that the Port Trust is not entitled to collect demurrage in the circumstances of this case. It is therefore sufficient for the purposes of the appeal to confine ourselves to determining the question of law which has been raised before the High Court and decided byquestion that was raised before the High Court was whether the claim of demurrage by the Port Trust for the period dur ing which the goods were detained with the Port Trust in respect of Import Trade Control formalities is maintainable. The High Court held that the importer of the goods cannot be held responsible for any delay not attributed to his own default and that the importer whose goods are detained by the Customs Department is entitled to claim the clearance of goods without demurrage during the period for which the Customs Department has detained them.

Court's reasoning:
This contention is based on a D.O. letter dated 7th September, 1952 addressed by the Government of India to the Port Trust which is typed at page 350 of the Supplement Paper Book No. 2. In the D.O. letter the Government expressed its view that it seems unreasonable to charge an importer any demurrage once it is accepted that clearance was delayed on account of the reasons beyond his control. The letter concluded by expressing an earnest hope that the Bombay Port Trust will reconsider their decision and fall in line with the practice of the Calcutta and Madras Ports. It concluded by stating "We shall be grateful if you will kindly place the matter before t he Trustees for their favourable consideration and intimate to us the result." The Board considered this letter and after taking into consideration the several circumstances, suggested that demurrage may be levied on a graded scale. The Government of India was informed of the Resolution of the Board and no further action was taken by the Government. The D.O. letter addressed by the Government of India cannot be considered as a di rection by the Central Government calling upon the Board to modify any portion of the scale framed by the Port Trust. The language of the D.O. would indicate that the Government wanted the Port Trust to consider the Governments proposal and nothing further. The Port Trust considered the proposal and made its report. We are unable to accept the plea of the learned counsel for the respondents that the D.O. letter should be construed as a direction calling upon the Board to modify the portion of the scale framed by the Board. Section 43B(1A) has there- fore no application to this case. Chapter VII of the Port Trust Act enumerates the powers and functions of the Board. It is the duty of the Board to recover the rates to have a lien on the goods and seize and detain the goods until such rates are fully paid. The Board is empowered to sell the goods if rates are not paid or lien for freight is not discharged. It can also dispose of goods not removed from the premises of the Board within the time limited. Section 65 also provides the mode of application of proceeds of the sale. Under section 66 the Board is entitled to distrain for non-payment rates. The Port clearance shall not be granted till the rates are paid. It is thus a statutory duty of the Board to collect the rates prescribed.Thecontention put forward on behalf of the respondents is that they are in no way responsible for the delay in clearing the goods as the goods had been detained under the Imp ort Trade Control Regulations.It is no doubt true that before clearance is given by the Import Trade Control authorities and the Customs Department the goods cannot be cleared by the respondents. Neither can the Port Trust deliver the goods without the consent of the Import Trade Control authorities. Taking into account the hardship caused to the importer because of the delay certain concessions in demurrage rates are per mitted. The Port Trust has prescribed the reduced demurrage levy which is 1/6th of the normal rate from the date of expiry of the free days upto the 60th day, 1/3rd of the normal rate after the expiry of the 60th day , upto the 90th day, half the normal rate after the expiry of the 90th day upto the 120th day, 2/3rd of the normal rate after the expiry of the 120th day upto the 150th day and at the full rate after the expiry of the 150th day. As the scale of rates are framed by virtue of the statutory powers conferred on the Board under section 43 and as the rates have been approved by the Central Government under section 43B the rates have the force of law and cannot be questioned. Taking into account the hardship to the import- ers certain concession has been given but the legality of the rates which are being levied according to law cannot be questioned. This view was taken by this Court in a recent decision reported in Trustees the Port of Madras v. M/s. Aminchand Pyarelal &Ors. ([1976] 1 S.C.R. 721.]) Where it had t6 consider the validity of the scale of rates fixed by the Madras Port T rust. In a suit by the Port Trust against the importer and the Union of India and the Customs authorities to recover the balance of demurrage amounting to about rupees three lakhs the question arose whether the scale of charges in the Port Trust Regulations under the heading "Demurrage" was void and ultra vires for the reason that it was unreasonable and not within the authority of the Port Trust. The relevant provisions of the Bom bay Port Trust Act with which we are concerned are in pari materia with the provisions of the Madras Act which fell for consideration by the Supreme Court. The Supreme Court held that the scale of rates an d statement of conditions flamed by the Madras Port Trust under sections 42, 43 and 43A are not by-laws and the sections confer authority on the Board to frame a scale of rates at which and a statement or conditions under which any of the services specified therein shall be performed. It observed"The Boards power to frame a scale of rates and statement of conditions is not a regulatory power to order that something must be done or something may not be done. The rates and conditions govern the basis on which the Board performs the services mentioned in sections 42, 43 and 43-A. Those w ho desire to avail of the services of the Board are liable to pay for those services at prescribed rates and to perform the conditions framed in that behalf by the Board."The Court rejected the view of the High Court that demurrage being a charge for willful failure to remove the goods within the free period can be levied only if the failure to remove the-goods is due to the fault or negligence of the importer or his agent. It also d id not agree with the view taken by the High Court that the authority given to the Board to frame the scale of rates can be exercised only for the purpose of levying charges where the importer was not prevented by any lawful authority from clearing the goods from the transit area and he had defaulted or was negligent in clearing the goods. Justice Chandrachud, who spoke for the Court, observed in his judgment at page 7 36 supra that the statute had not placed any limitation on the power of the Board to fix rates and as the Board had the power to frame a scale of rates at which and the statement of conditions under which any of the services specified in the section shall be performed and as the Board has fixed the scale of rates it was difficult to see in what manner or respect the Board has exceeded its power under section 42. The Court proceeded to observe in rejecting the view of the High Court that the Board cannot fix rates of demurrage when the failure to remove was not due to some fault or negligence of the importer, that there is no such fetter on the Boards powers to fix the rates. This decision of the Supreme Court is on all fours with the facts of the present case and concludes the question.Mr. Nariman, counsel for the appellants cited three decisions of the English Courts in support of his contention that even on the basis of a contract the right of the Port Trust to recover demurrage cannot be denied unless the person claiming the demurrage is responsible for theposition therefore is that even though the delay in clearing the goods was not due to the negligence of the importer for which he could be held responsible yet he cannot avoid the payment of demurrage as the rate s imposed are under the authority of law the validity of which cannot be questioned. The claim cannot be resisted as there is no evidence that the delay was due to any act of the Port Trust or persons for whom the Port Trust is responsible.One other contention which was raised before the High Court but was not dealt with by it may be referred to. It was submitted on behalf of the respondents that the definition of the words "free days" would not include the period of holidays or part of a holiday or Sunday in computing the number of free days during which the Customs Duty ma y not be assessed or received and therefore the period of detention of the goods during the operation of Import Trade Control formalities must be considered as free days. In the scale of rates charged at the docks framed by the Bombay Port Trust under sections 43. 43A and 43B of the Bombay Port Trust Act, 1879, in Section III reference is made to free days. Under the heading "Free Days" it is provided that all goods will be allowed storage in Docks free of rent for 5 days. It-is further provided that in computing the number of free days Sundays and holidays referred to in by-law 118 as well as any other days on which Customs Duty may not be assessed or received, will be omitted in the case of all goods liable to duty under section 20 of the Sea Customs Act. The submission was that not only Sunday and holidays should be omitted but also other days on which Customs Duty may not be assessed or received will have to be omitted and this should be understood as days during which the Import Trade Control formalities could not be completed. This contention cannot be accepted as these Rules are intended only to omit Sundays, other holidays and days on which the assessment of Customs Duty cannot be taken up and would not include the entire period during which the Import Trade Control formalities have not beenHigh Court was therefore in error in holding that the importer of the goods cannot be held responsible for any delay not attributable to his own default and that demurrage under section 43A could never be imposed as long as the goods were detained for the purpose of the operation of the Import Trade Control Regulations.