O. O. C. J v. Messrs Rainbow Products & Anr.

Judgment

The Board of Trustees of the Port of Mumbai has instituted the suit which forms the subject matter of these proceedings for the recovery of Port Trust charges prior to the date on which an order of confiscation came to be passed by the Customs Authorities.

2. In July 1976, the Defendants imported a consignment of 229 bags said to contain Moulding Powder which was manifested at Item 19 of the Import General Manifest No.850, dated 27th July 1976 of a vessel s.s. “Stonewell Jackson”. The General Landing 2 date and the last free day of the cargo of the vessel were 13th August 1976 and 20th August 1976 respectively. Out of the 229 bags, 228 bags were landed by the ship onto the docks at Mumbai. The consignment was shown as lying at 5 Prince's Docks. The

Defendants who were importers and/or owners of the consignment failed to clear the cargo. The Customs authorities in the course of import trade control formalities detained the cargo. An order of confiscation was passed on 8th September 1977 by the Deputy Collector of Customs under Section 111(d) of the Customs Act, 1962 read with Section 3 of the Imports and Exports (Control) Act,

1947. The order of confiscation was served on the Plaintiff on 12th September 1977. On 29th July 1978, the Plaintiff called upon the Defendants to pay a sum of Rs.1,91,827.20, being the Port Trust Charges that had accrued from the last free day upto the date on which an order of confiscation was passed by the Customs authorities. This was followed by letters dated 16th October 1978, 4th May 1979 and 11th December 1979. The charges not having been paid, the present suit came to be instituted for the recovery of a sum of Rs.1,90,968.20 with interest at the rate of 12% per annum from the date of the suit until payment or realisation and for the costs of the suit. The claim of the Plaintiff is for wharfage 3 and/or demurrage computed from the last free day until the date immediately prior to the order of confiscation.

3. The suit has been contested by the Defendants who have filed their Written Statement.

4. The following issues were framed in the suit by an order dated 10th December 2001: “1. Whether the suit is barred by the law of Limitation as alleged in paragraph 12 of the Written Statement? Whether Union of India are necessary parties 2. to the suit as alleged in paragraph 4 of the Written Statement?

3. If the answer to issue No.2 is in the affirmative, if the suit is not maintainable for nonjoinder of Union of India and therefore liable to be dismissed as alleged in paragraph 4 of the Written Statement? Whether the Plaintiff is entitled to recover a 4. sum of Rs.1,90,968.20 paise or any other sum as Port Trust charges?

5. To what relief, if any, are the Plaintiffs entitled? Whether the Defendants prove that a legal 6. obligation is cast upon the Plaintiffs to auction the consignment on Defendants failure to clear the consignment as stated by him in para 2(a) of Written Statement and effect thereof? 4

7. Whether the Defendants prove that they have obtained amount from Union of India before making a demand on the Defendants for wharfage charges as stated by Defendants in para 3(b) of Written Statement?

8. What order?”

5. On behalf of the Plaintiff, an affidavit in lieu of the Examination-in-Chief came to be filed of Shri Sanjeev Kumar, Assistant Docks Manager. The witness was cross-examined. No evidence has been adduced on the part of the Defendants.

6. The witness for the Plaintiff explained the basis on which the charges of the Port Trust have been assessed. A copy of the working sheet was annexed to the Plaintiff's letter dated 29th July

1978. The defence to the claim in the suit is that the suit is barred by limitation. The defence in the Written Statement is that the cause of action arose on 21st August 1976, namely, after the expiry of the last free day when the obligation to pay demurrage and wharfage arose. The goods should have been sold in realisation of Port trust charges. Hence, it is urged that the the suit which was instituted on 2nd August 1980 is beyond the period of three years prescribed by Article 113 of the Schedule to the 5 Limitation Act, 1963. At this stage it would be necessary to record that no defence has been urged on the merits of the claim. The only issue, therefore, which falls for consideration is as to whether the suit was instituted within the period of limitation. The issue of limitation, namely, the first issue can be taken up for consideration. Issue No.1 :

7. Article 113 of the Schedule to the Limitation Act, 1963 provides a period of limitation of three years in respect of any suit for which no period of limitation is prescribed in the Schedule. Time begins to run when the right to sue accrues. The short question that arises before the Court is when the right to sue can be regarded as having accrued. The defence that has been urged on behalf of the Defendants in these proceedings is that under the provisions of Section 61 of the Major Port Trusts Act, 1963, the Board is at liberty upon the expiry of two months from the time when any goods have passed into its custody to sell by public auction or by private agreement or tender such goods or such part thereof as may be necessary if any rates payable to the Board in respect of the goods have not been paid, or if any rent payable to the Board in respect of any place on or in which such goods have 6 been stored has not been paid. Similarly, under Section 62, which begins with a non-obstante provision, where any goods placed in the custody of the Board upon the landing thereof are not removed by the owner or other person entitled thereto from the premises of the Board within one month from the date on which such goods were placed in their custody, the Board may, after notice published as provided therein sell the goods by public auction or, as the case may be, by tender or private agreement. The submission, therefore, has been that upon the default of the Defendants to clear the goods immediately after the expiry of the last free day, the Port Trust was duly empowered in law to sell the goods and the right to sue for demurrage must be regarded as having accrued thereupon.

8. On the other hand, on behalf of the Port Trust reliance has been placed on judgments of this Court and of the Supreme Court which explain the powers of the Port Trust with reference to goods which are placed in its custody. The Plaintiff has submitted before the Court that the goods were under detention for import trade control formalities and it was only after the order of confiscation was passed by the Customs Authorities that the demurrage came to be crystallized. Hence, the right to sue must 7 be regarded as having accrued on the order of confiscation. Counsel submitted that acceptance of the submission of the Defendant would lead to the absurd consequence where the Plaintiff would be compelled to institute a suit for failure to pay every day's demurrage, a consequence which is not envisaged in law.

9. Section 42 of the Major Port Trusts Act, 1963, empowers the Board of Trustees to undertake certain services. Among them are landing, shipping or transshipping of passengers and goods between vessels in the port and the wharves, piers, quays or docks belonging to or in the possession of the Board. The Board is empowered to receive, remove, shift, transport, store and deliver goods which are brought within the Board's premises (Section 42 (1)(b). Under Clause (ii) of Sub-section (1) of Section 43, the responsibility of the Board for loss, destruction or deterioration of goods of which it has taken charge is that of a bailee under Sections 151, 152 and 161 of the Indian Contract Act, 1872. Section 48 lays down the procedure for determining the scale of rates and the conditions under which the services that are to be provided under Section 42 shall be performed by the Board or a 8 person authorised by it. Section 58 provides for the time for payment of rates on goods and enunciates that the rates in respect of goods to be landed shall be payable immediately on the landing of the goods and rates in respect of goods to be removed from the premises of a Board shall be payable before the goods are so removed, shipped or transshipped. Under Sub- section (1) of Section 59 the Board has a lien on goods which are placed in its custody, for the amount of all rates leviable under the Act in respect of any goods and for the rent due to the Board. The Board is empowered to seize and detain the goods until such rates and rents are fully paid. Under Sections 61 and 62 to which reference has already been made in the earlier part of this judgment, the Board is empowered to sell the goods if rates or, as the case may be, rent is not paid within the period that is stipulated.

10. Under Section 131 the Board is empowered, without prejudice to any other action that may be taken under the Act, to file a suit for the recovery of any rates, damages, expenses, costs or in the case of sale the balance thereof, when the proceeds of sale are insufficient, or any penalties payable to, or recoverable by, the Board under the Act or under any regulations made in pursuance thereof. 9

11. Under Section 45 of the Customs Act, 1962 all imported goods unloaded in a customs area are to remain in the custody of such person as may be approved by the Collector of Customs until they are cleared for home consumption. The person having custody of the imported goods in a customs area, is under Sub- section (2) of Section 45, under a mandate not to permit such goods to be removed from the customs area or to be otherwise dealt with, except under and in accordance with the permission in writing of the proper officer. In International Airports Authority of India vs. Grand Slam International,1 the Supreme Court held that an importer must land the imported goods at a seaport or airport and can clear them only after completion of Customs formalities. For the occupation by the imported goods of space in the seaport or airport, the Board or the Authority which is its proprietor is entitled to charge the importer. The fact that until customs clearance, the Board or the Authority may not permit an importer to remove his goods does not imply that charges cannot be levied on the importer for the space that the goods have 1 (1995) 3 SCC 151 10 occupied until their clearance. The Supreme Court held that while it is true that by reason of an unjustified detention of goods by the Customs Authorities the importer is put to loss by having to pay demurrage charges for the period of detention, the Central Government is empowered inter alia by Section 111 of the Major Port Trusts Act, 1963 to issue directions to the Board of Trustees on questions of policy.

12. In the exercise of the power conferred by Section 48 of the Act, a scale of rates is prescribed for services which the Board performs under Section 42. Section 53 empowers the Board in special cases and for reasons to be recorded in writing, to exempt either wholly or partially, any goods or vessels or class of goods or vessels from the payment of any rate or of any charge leviable in respect thereof according to any scale in force under the Act or remit the whole or any portion of such rate or charge so levied. Exemption or, as the case may be, remission is governed by the policy which has been framed by the Board.

13. The liability to pay demurrage or, as the case may be, wharfage continues to subsist notwithstanding the circumstance 11 that the goods may be subject to Import Trade Control formalities or are detained at the instance of the Customs Authorities. The Board as the bailee is entitled to levy and demand charges for the use of its premises. Until clearance is granted by the Customs Department, an importer is not entitled to clear the goods nor, for that matter, is the Board entitled in law to deliver custody of the goods without the consent of the Customs Authorities. It is to obviate the hardship that is occasioned as a result of the pendency of Import Control proceedings that the Board has while framing the scale of rates provided for a remission in demurrage in exercise of powers conferred by Section 53 of the Act. The Supreme Court took note of this position in The Board of Trustees of the Port of Bombay vs. Indian Goods Supplying Co,2 where the Court held as follows : 2 AIR 1977 SC 1622 12 “The contention 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 Import 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 permitted. The Port Trust has prescribed the reduced demurrage levy ........”

14. Under Article 113 of the Limitation Act, 1963, the period of limitation commences at the point of time when the right to sue accrues. In Mt. Bolo vs. Mt. Koklan,3 the Privy Council while construing the expression “right to sue” in the context of Article 120, the residuary article under the earlier legislation on the subject, formulated the principle of law as follows : “There can be no “right to sue” until there is an accrual of the right asserted in the suit and its infringement or at least clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted.” This principle was reiterated in a judgment of the Supreme Court in Rukhmabai Vs. Lala Laxminarayan,4 where the Court held thus: 3 AIR 1930 Privy Council 270 4 AIR 1960 SC 335 13 “The right to sue under Art. 120 of the Limitation Act accrues when the defendant has clearly and unequivocally threatened to infringe the right asserted by the plaintiff in the suit. Every threat by a party to such a right, however ineffective and innocuous it may be, cannot be considered to be a clear and unequivocal threat so as to compel him to file a suit. Whether a particular threat gives rise to a compulsory cause of action depends upon the question whether that threat effectively invades or jeopardizes the said right.” In Gannon Dunkerley and Co. vs. Union of India,5 a Bench of two Learned Judges of the Supreme Court followed the same principle and observed thus: “... there is no right to sue until there is an accrual of the right asserted in the suit, and its infringement, or at least a clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted; ...'' In a suit arising out of a contract of bailment, the Supreme Court held that the High Court was justified in taking the view that the suit was governed by Article 120 of the Limitation Act and that the suit was not barred under that article. In State of Punjab vs. Gurdev Singh,6 the Supreme Court held that the right to sue ordinarily means the right to seek relief by means of legal proceedings and the right to sue would accrue when the cause of action had arisen: