Shipping
Corpn. of India Ltd. Vs. C.L. Jain Woolen Mills & Ors [2001] Insc 204 (10 April 2001)
G.B.
Pattanaik S.N. Phukan & B.N. Agrawal Pattanaik,J.
WITH Civil
Appeal Nos. 2682-2684 of 2001. (@ S.L.P.(c) Nos. 5001, 9021/99 and SLP (c) No.
3063/2001 respectively)
L.I.T.J
Leave
Granted.
In
this batch of appeals, a common question of law having arisen, they were heard
together and are being disposed of by this common judgment. The question for
consideration is whether the appellant, who under the terms of the contract
between him and the owner of the goods, having a lien over the goods, until the
dues are paid can be forced to release the goods, without charging any
demurrage, merely because the customs authorities issued a detention order for
a specified period ? We would discuss the question in relation to the facts in
the case between the Shipping Corporation of India vs. C.L. Jain Woolen Mills.
The
respondent C.L. Jain Woolen Mills, imported the consignment of polyester
filament yarn from Korea to India.
The
port of load was Busan in Korea and the
port of discharge was Bombay in India, but the place of delivery of goods was ICD, Delhi. The goods thus being brought to
the port of Bombay were discharged but there had been no customs clearance at Bombay and the sealed container was transhipped
to ICD, Delhi, where it remained with the
Container Corporation of India. The Shipping Corporation of India is engaged in the business of
carriage of goods. On the terms and conditions contained in the Bill of Lading,
in respect of the goods consigned to it, the corporation claims that the goods
cannot be released unless demurrage charges are paid. After the goods arrived
in Delhi and remained in the custody of the
appellant, the customs authorities being of the opinion that import of
polyester filament yarn weighing 5,376 kgs. was unauthorised and directed
confiscation of the same, valued at Rs.11.5 lakhs under Section 111(d) of the
Customs Act, 1962. The said customs authorities however permitted the owner to
redeem the goods on payment of Rs. 7 lakhs. That apart, a penalty of Rs. 1 lakh
was also levied under Section 112(a) of the Customs Act. The owner of the goods
assailed the order before the Customs, Excise & Gold (Control) Appellate
Tribunal [for short CEGAT]. The tribunal instead of deciding the objections
raised by the owner to the validity of the order of the Additional Collector of
Customs, ordered that the advance licence and DEEC Book be amended and
adjourned the appeal for a period of three months. The owner, therefore,
approached the Delhi High Court by filing a writ petition, which was registered
as Writ Petition No. 1604/91, praying quashing of the order of the customs
authorities, confiscating the goods and imposing the penalty and that of the
Import Trade Control Authority enhancing the export obligation from 14,497.5 kgs.
to
22,330 kgs. of polyester fabric. It was the contention of the owner before the
High Court that in accordance with the export policy and the Duty Exemption
Scheme, raw materials could be cleared for home consumption without payment of
import duty. To avail of the facility, the importer is required to apply for
grant of licence called the Advance Licence and on the basis of the same, raw
materials could be imported without payment of any duty.
According
to the owner, under the licence, thus issued by the Controller of Imports and
Exports, entitling import of raw materials without payment of duty, the customs
authorities committed error in proceeding with the confiscation proceedings and
ordering confiscation as well as levying penalty. The customs authorities as
well as the Controller of Imports and Exports had been arrayed as party
respondents in the writ petition. Both of them as well as Union of India
resisted the claim of the owner, who had imported the goods in question. The
High Court disposed of the writ petition by judgment dated 9th September, 1994,
quashing the order of the Additional Collector of Customs dated 10th August,
1990 as well as the order of the Customs Excise and Gold (Control) Appellate
Tribunal dated 21st March, 1991 and directed the Collector of Customs to
release the goods forthwith. The High Court also further held that since the
action of the customs authorities is illegal, the goods in question will have
to be released to the owner without payment of any detention or demurrage
charges by the owner. Needless to mention, the Shipping Corporation of India,
the appellant in the present appeal, who was the carrier and who under the
Bills of Lading had a lien over the goods, until the dues are paid had not been
made a party to the aforesaid writ petition. At this stage it may also be
noticed that during pendency of the writ petition in the High Court, an interim
order had been passed, entitling the owner to take release of the goods on
payment of Rs. 5 lakhs to the customs authorities and a bank guarantee of Rs. 5
lakhs but the owner had not taken advantage of the said interim order and the
goods continued to remain in the custody of the present appellant and demurrage
charges went on accruing. The order of Delhi High Court was assailed in this
Court by filing a Special Leave Petition by the Customs Authorities but that
Special Leave Petition however stood dismissed on 13.11.95 in SLP No. 5671/95.
The owner of the goods having failed in his attempt to get the goods released,
notwithstanding the orders of the High Court in CWP No. 1604/91, filed an
application for initiating a contempt proceeding, which was registered as CCP
No. 120/95. The High Court however came to hold that the authorities cannot be
held to be guilty of disobeying the orders of the Court and accordingly,
dismissed the contempt petition. While dismissing the contempt petition, the
learned Judge, granted liberty to the owner to move the Division Bench of the
High Court for appropriate directions regarding payment of demurrage/detention
charges. Pursuant to the aforesaid observations in the contempt proceedings, an
application being filed by the owner, the same was registered as CM 4829/96.
That application was disposed of by the Division Bench of Delhi High Court by
order dated 18th
January, 1999. The
Division Bench, while disposing of the petition, came to hold that the
entitlement of the carrier of the goods to charge demurrage charges and if so,
whether the customs authorities would be liable to pay the same or not is not
required to be answered and is a matter, which should be sorted out between
those two corporations and the customs authorities. But so far as the owner of
the goods are concerned, he having been absolved of any liability to pay the
demurrage charges by virtue of the judgment of Delhi High Court dated 9.9.94 in
CWP No.1604/91, he would be entitled to get the goods released without payment of
the detention and demurrage charges. The High Court, therefore called upon the
customs department as well as the two corporations, who are the carriers to
sort out the matter within a specified period and further held that if any
detention or demurrages charges are payable, the same shall be paid by the
customs department within three weeks. It further directed the carrier of the
goods, including the appellant to release the goods after the customs
department pays the detention/demurrage charges.
Notwithstanding
the aforesaid order, the goods not being released, when a fresh contempt
petition was filed, registered as CCP No. 89/99, the High Court issued notice
on 25.2.99, calling upon the alleged contemnor to file their reply by 11th
March, 1999. Against the initiation of the aforesaid contempt proceeding, the
Shipping Corporation of India filed SLP No. 3391/99. The order dated 18.1.99
was also assailed by the Shipping Corporation, which was registered as SLP No.
5001/99. The container Corporation of India filed a special leave petition on
identical circumstances and raising identical question, which is SLP No.
9021/99. The Union of India also assails the order dated 18.1.99 by filing
Special Leave Petition No.3063/2001 along with the application for condonation
of delay. This batch of cases were listed before a Bench of two learned Judges
on 11th February, 2001 and after hearing the matters for sometime, the Bench
felt that there appears to be some inconsistency between the decision of this
Court in Union of India vs. Sanjeev Woolen Mills, 1998(9) SCC 647 and the Grand
Slam Internationals case reported in 1995(3) SCC 151 and as such observed that
the cases should be placed before a Three Judge Bench and that is how, this
batch of cases are before this three Judge Bench. When these appeals by grant
of special leave were placed before the Three Judge Bench on 1st March, 2001,
we had directed the goods be released to the owner without any conditions but
such release will be subject to the ultimate decision in these appeals.
The
stand of the carriers in this Court is that in view of the provisions of the
Bills of Lading Act as well as the terms and conditions under which the goods
have been imported the corporation-carrier retains a lien over the goods until
all the dues including the demurrage charges are paid and the order of the
Delhi High Court in the writ petition to which these carriers were not parties,
will not obliterate that right. The further contention of these corporations is
that the order of the High Court dated 18.1.99 without determining the rights
of the carrier and directing to sort out the matter with the customs
authorities is unsustainable and as such the same should be set aside. The
stand of the customs authorities and the Union of India on the other hand is
that the customs authorities cannot be required to pay the demurrage charges
merely because the action of the customs authorities in detaining the goods was
found to be illegal by the Court of law. According to the Union of India in
such a case when a detention certificate is issued by the customs authorities,
the carrier of goods will not be entitled to claim any demurrage charges
notwithstanding the terms and conditions of the contract under which the goods
had been carried and on this score, the order of the High Court dated 18.1.99
is erroneous. The contention of the importer of the goods on the other hand is
that in view of the findings of the High Court in CWP No. 1604/91, specifically
holding that the goods in questions be released without payment of demurrage or
detention charges and the further finding to the effect that the order of the
customs authorities in confiscating and levying penalty is illegal and invalid,
the importer cannot be made liable to pay the demurrage and detention charges.
It is the further submission of the importer that notwithstanding the clear
directions of the High Court, non- release of goods was a gross violation of
the Courts order and, therefore, the appropriate authorities should be suitably
dealt with.
In
view of the submissions made at the Bar appearing for different parties,
referred to earlier, the first question that arises for consideration is
whether in the case in hand, the importer of the goods can be made liable to
pay any demurrage/detention charges? It is undisputed that under the terms and
conditions of Bills of Lading, the carrier had a lien over the goods until all
the dues are paid and the goods having been kept, not being released, the
corporation-carrier was entitled to charge demurrage charges. But in view of
the specific directions of the Delhi High Court in the writ petition filed by
the importer of the goods, challenging the legality of the order of the customs
authorities in confiscating the goods and levying penalty and that order having
reached finality by dismissal of the special leave petition against the same
filed by the Union of India, the liability of the importer to pay the demurrage
charges ceases and that question cannot be re-opened.
The
next question that arises for consideration which is a larger issue, namely if
the customs authorities do not release the goods and initiates proceedings and
finally passes order of confiscation but that order is ultimately set aside in
appeal and it is held by Court of law that the detention of the goods was
illegal, then in such circumstances whether the carrier of the goods who had
lien over the goods for non- payment of duty, can enforce the terms and
conditions of the contract against the customs authorities, making the said
authorities liable to pay the demurrage charges. Needless to mention, demurrage
charges are levied for the place the goods occupy and for the period it remains
not being released, on account of lack of customs clearance. It may be noticed
at this stage that the customs authorities exercise its power under the
provisions of the Customs Act whereas the claim of the Corporation who acts as
a carrier is based upon the terms and conditions of the contract between the
importer and the carrier. So far as the powers of the customs authorities are
concerned, the same are circumscribed by the provisions of the Customs Act,
1962. Section 8 of the Customs Act empowers the Collector of Customs to approve
proper places in any customs port or customs airport or coastal port for unloading
and loading of goods and specify the limits of the customs area. Section 33
prohibits unloading of imported goods at any place other than the place
approved under Section 8(a) of the Act.
Section
34 provides that the imported goods shall not be unloaded from any conveyance
except under the supervision of the proper officer. Section 45 provides for
clearance of imported goods. The same provision may be extracted herein below
in extenso:
Sec.45
Restrictions on custody and removal of imported goods:
(1)
Save as otherwise provided in any law for the time being in force, all imported
goods, unloaded in a customs area shall remain in the custody of such person as
may be approved by the [Commissioner of Customs] until they are cleared for
home consumption or are warehoused or are transhipped in accordance with the
provisions of Chapter VIII.
(2)
The person having custody of any imported goods in a customs area, whether
under the provisions of sub-section (1) or under any law for the time being in
force
(a)shall
keep a record of such goods and send a copy thereof to the proper officer;
(b) shall
not permit such goods to be removed from the customs area or otherwise dealt
with, except under and in accordance with the permission in writing of the
proper officer.
(3)
Notwithstanding anything contained in any law for the time being in force, if
any imported goods are pilferred after unloading thereof in a customs area
while in the custody of a person referred to in sub- section (1), that person
shall be liable to pay duty on such goods at the rate prevailing on the date of
delivery of an import manifest or, as the case may be, an import report to the
proper officer under section 30 for the arrival of the conveyance in which the
said goods were carried.
Under
the aforesaid provision, the imported goods would remain in the custody of the
person approved by the Customs Commissioner, until they are cleared for home
consumption or are warehoused or are transhipped in accordance with the
provisions of Chapter VIII. Section 47 of the Act is the provision to obtain
clearance of goods for home consumption.
Section
49 provides for storage of imported goods in public warehouse, or in a private
warehouse, if permitted by the Deputy Commissioner of Customs or Assistant
Commissioner of Customs. Under Chapter IX of the Act, the Deputy Commissioner
or Assistant Commissioner of Customs may appoint public warehouses wherein
dutiable goods may be deposited, as provided in Section 57 of the Act. Under
Section 58, the Deputy Commissioner or Assistant Commissioner may even license
private warehouses wherein dutiable imported goods could be deposited. But all
warehoused goods would be subject to the control of the proper officer of the
customs department, as provided in Section 62 and the owner of the goods is
required to pay the rent and warehouse charges to be fixed by the Commissioner
of Customs, as provided in Section 63. No warehoused goods could be taken out
of the warehouse except for clearance of home consumption or for removal to
another warehouse, as stipulated in Section 67 of the Act. Section 68 provides
the procedure which an importer would follow for clearing the warehoused goods
for home consumption. The expression warehouse has been defined in Section
2(43) to mean a public warehouse appointed under Section 57 or a private
warehouse licensed under Section 58. It is thus apparent from different
provisions mentioned above that the customs authorities have full power and
control over the imported goods and without the permission of the customs
authorities, the goods cannot be cleared. But at the same time, there is no
provision in the Customs Act, conferring power on the Customs Authorities to
prohibit or injunct any other authority where the imported goods are stored
from charging the demurrage charges for the services rendered for storing the
imported goods. We are not concerned in the present case with the provisions of
either the Major Ports Trust Act or International Airport Authorities Act, as
the imported goods had not been stored either in any Major Port or in the
international air cargo. It may however be necessary to examine some of the
provisions of the Bills of Lading Act as well as the Contract Act, since the
claim of both, the Shipping Corporation and Container Corporation, charging
demurrage for the space occupied for the goods, not being released, is on
account of the contract between them. Under the Indian Bills of Lading Act,
1956, every consignee of goods, named in a Bill of Lading and every endorsee of
a Bill of Lading, is vested with absolute right over the goods. The Bill of
Lading is a well known mercantile document of title, which is transferred in
the business world by endorsement passing to the endorsee, the title of the
goods covered by such Bill of Lading. Clause (18) provides for payment of
demurrage charges in case of non-clearance of goods within the free time
available. The said clause is extracted herein below in extenso:
Clause
18 Delivery of goods in Container: If receipt of goods in container(s) is not
taken by the merchant within 48 hours after discharge from the vessel (or after
the arrival of the goods at place of delivery if named herein) the carrier
shall be at liberty at his discretion either to unpack the container(s) and to
put the goods in safe on behalf of the merchant and at the merchants risk and
expense or to charge demurrage in accordance with the carriers tariff
applicable to the route over which the goods are carried. If unpacking the
goods of container(s) is required for whatever reason and the contents cannot
be identified as to the marks and numbers, cargo sweepings liquid residue and
any unclaimed contents not otherwise accounted for shall be allocated for
completing delivery to the merchant. The carrier shall not be required to
separate or deliver goods in accordance with the brand, marks, numbers, size or
types of packages as stated by the merchant in his particulars but only to
deliver total number of containers (if same loaded by the merchant or packages
or units) (if container(s) loaded by the carrier) shown on the face of this
Bill of Lading.
Clause
(2) of the Bill of Lading defines Carriers Tariff as follows:
Clause
(2)- Carriers Tariff:
The
terms of the carriers applicable tariff are incorporated herein and copies of
the relevant provisions of the applicable tariff are obtainable from the
carrier or the agents upon request. In the case of inconsistency between this
Bill of Lading and the applicable tariff, this Bill of Lading shall prevail.
Clause
(14) confers a lien on the goods for all sums payable under the contract. The
said clause is quoted below in extenso:
Clause
(14). FREIGHT ETC. EARNED ........All unpaid charges shall be paid in full and
without any offset, counterclaim or deduction. Any error in freight or other
charges or in the classification of Goods is subject to correction and if on
correction the freight or charges are higher the Carrier may collect the
additional amount from shipper or consignees. The Carrier shall have a lien on
the Goods and any documents relating thereto for all sums payable to the
Carrier under the contract (including without limitation unpaid freight and
dead freight upon any portion of the Goods covered by the Shipping Order
granted in respect hereof which may not have been shipped) and the General
Average contribution to whomsoever due and for the cost of recovering the same
and for that purpose shall have the right to sell the Goods by public auction
or private treaty without notice to the Merchant. The Merchant shall indemnify
the Carrier against all and any costs incurred by the Carrier in exercising his
rights under this clause.
The
expression Carrier under the definition clause in the Bill of Lading means the
Shipping Corporation of India Limited and/or associated company on whose behalf
the Bill of Lading has been signed.
The
two provisions of the Contract Act, on which Mr. Dave, appearing for the
appellant, strongly relied upon, may now be noticed. Section 170 is the right
of lien of the bailee for the services rendered in respect of the goods and the
bailee has right to retain the goods until he receives due remuneration for the
services he has rendered. Section 171 is the General lien of bankers, factors, wharfingers,
attorneys and policy brokers, who also retain as a security, the goods bailed
to them. The contention of Mr. Dave, for the appellant is the right of the
appellant to claim demurrage charges in respect of the goods, which is in his
custody, the said goods not being released, within a specified period, flows
from the terms and conditions of the contract between the importer and the
corporation and that right cannot be taken away by issuance of a detention
certificate by the Customs authorities under the provisions of the Customs Act
and as such even if a Court directs that the importer is not liable to pay the
demurrage charges, because of the illegal detention of the goods by the customs
authorities, the appellant would not be bound by the same, particularly, when
the appellant was not a party to the proceedings between the customs authorities
and the importer. Learned Additional Solicitor General, Mr. Mukul Rohtagi
however, on the other hand contends that Section 45(2)(b) of the Customs Act
prohibits release of imported goods from the customs area, except in accordance
with the permission in writing of the proper officer. The expression otherwise
dealt with in the aforesaid provision is also a restriction placed on the
custodian and that is a complete embargo for the goods being released. The
prohibition in question is in relation to removal of goods as well as dealing
with the goods in any manner. This being the manner of restrictions imposed for
removal of the goods and at the same time, conferring power on the customs
authorities, if after initiation of adjudication proceedings, a Court of law
nullifies the same and the customs authorities then issues a detention
certificate, then the importer would not be liable for paying any demurrage
charges, notwithstanding the contract between the importer and the appellant,
and at any rate, the customs authorities cannot be fastened with the liability
of paying the demurrage charges. In this view of the matter, the order of the
Delhi High Court dated 18.1.99 must be held to be erroneous. The rival
contentions require careful examination of the different provisions of the
Customs Act, the Contract Act as well as the Bills of lading.
Before
examining the correctness of the rival submissions, one thing is crystal clear
that the relationship between the importer and the carrier of goods in whose favour
the Bill of lading has been consigned and who has stored the goods in his
custody, the relationship is governed by the contract between the parties.
Section 170 of the Indian Contract Act engraft the principle of Bailees lien,
namely if somebody has received the articles on being delivered to him and is
required to store the same until cleared for which he might have borne the
expenses, he has a right to detain it until his dues are paid. But it is not
necessary in the case in hand to examine the common law principle and the bailees
lien inasmuch as the very terms of the contract and the provisions of the Bills
of Lading,, unequivocally conferred power on the appellant to retain the goods,
until the dues are paid. Such rights accruing in favour of the appellant cannot
be nullified by issuance of a certificate of detention by the customs
authorities unless for such issuance of detention certificate any provisions of
the Customs Act authorises. We had not been shown any provisions of the Customs
Act, which would enable the customs authorities to compel the carrier, not to
charge demurrage charges, the moment a detention certificate is issued. It may
be undoubtedly true that the customs authorities might have bona fide initiated
the proceedings for confiscation of the goods which however, ultimately turned
out to be unsuccessful and the Court held the same to be illegal. But that by
itself, would not clothe the customs authorities with the power to direct the
carrier who continues to retain a lien over the imported goods, so long as his
dues are not paid, not to charge any demurrage charges nor the so- called
issuance of detention certificate would also prohibit the carrier from raising
any demand towards demurrage charges, for the occupation of the imported goods
of the space, which the proprietor of the space is entitled to charge from the
importer. The importer also will not be entitled to remove his goods from the
premises unless customs clearance is given. But that would not mean that
demurrage charges could not be levied on importer for the space his goods have
occupied, since the contract between the importer and the proprietor of the
space is in no way altered because of the orders issued by the customs
authorities. The learned Additional Solicitor General, vehemently argued and
pressed sub-section 2(b) of Section 45 in support of his contention that the
imported goods have to be dealt with in accordance with the permission in
writing of the proper officer of the customs department and in exercise of such
power when customs authorities initiate adjudication proceeding and ultimately
confiscate and levy penalty, when such order is struck down and a detention
certificate is issued, the said issuance of detention certificate would come
within the expression otherwise dealt with used in Section 45(2)(b), and
therefore, the proprietor of the space would be bound not to charge any
demurrage charges. We are unable to accept this contention inasmuch as the
expression otherwise dealt with used in Section 45(2)(b), in the context in
which it has been used, cannot be construed to mean, it authorises the customs
officer to issue a detention certificate in respect of the imported goods,
which would absolve the importer from paying the demurrage charges and which
would prevent the proprietor of the space from levying any demurrage charges.
Having
scrutinized the provisions of the Customs Act, we are unable to find out any
provision which can be remotely construed to have conferred power on the
customs authorities to prevent the proprietor of the space from levying the
demurrage charges and, thereby absolving the importer of the goods from payment
of the same. In fact the majority decision in Grand Slam Internationals case,
1995(3) SCC 151, clearly comes to the aforesaid conclusion with which we
respectfully agree.
We
have also examined the decision of this Court in Union of India vs. Sanjeev
Woolen Mills, 1998(9) SCC 647 and we do not find any apparent inconsistency
between the decision of this Court in Grand Slam and that of the Sanjeev Woolen
Mills. In Sanjeev Woolen Mills, the imported goods were synthetic waste (soft
quality), though the customs authorities detained the same, being of the
opinion that they were prime fibre of higher value and not soft waste.
On
account of non-release, the imported goods incurred heavy demurrage charges but
the customs authorities themselves gave an undertaking before the High Court
that in the event the goods are found to be synthetic waste, then the Revenue
itself would bear the entire demurrage and container charges. Further the Chief
Commissioner of Customs, later had ordered unconditional release of goods and
yet the goods had not been released. It is under these circumstances and in
view of the specific undertaking given by the customs authorities, this Court
held that from the date of detention of the goods till the customs authorities
intimated the importer, the importer would not be required to pay the demurrage
charges. But in that case even subsequent to the orders of the customs authorities
on a suit being filed by one of the partners of the importer-firm, an order of
injunction was issued and, therefore it was held that for that period, the
importer would be liable for paying the demurrage and container charges. The
judgment of this Court in Sanjeev Woolen Mills, therefore, was in relation to
the peculiar facts and circumstances of the case and the Court had clearly
observed that the order in question is meant to do justice to the importer,
looking to the totality of the circumstances and the conduct of customs
authorities. Thus, we see no inconsistency between the ratio in Sanjeev Wollen
Mills and the Judgment of this Court in Grand Slam.
That
apart, the judgment in Grnd Slam was a three judge bench judgment. In the case
in hand, as has already been stated earlier, the earlier judgment of Delhi High
Court dated 9.9.94 in C.W.P. No. 1604/91, has become final, which entitles the
importer to get the goods released without payment of the detention and
demurrage charges. In the contextual facts, notwithstanding the judgment of the
High Court, the goods not having been released, the impugned order and
direction dated 18.1.99, cannot be held to be infirm in any manner. In the
absence of any provision in the Customs Act, entitling the customs officer to
prohibit the owner of the space, where the imported goods have been stored from
levying the demurrage charges, levy of demurrage charges for non-release of the
goods is in accordance with the terms and conditions of the contract and as
such would be a valid levy. The conclusion of the High Court to the effect that
the detention of the goods by the customs authorities was illegal and such
illegal detention prevented the importer from releasing the goods, the customs
authorities would be bound to bear the demurrage charges in the absence of any
provision in the Customs Act, absolving the customs authorities from that
liability. Section 45(2)(b) of the Customs Act cannot be construed to have
clothed the customs authorities with the necessary powers, so as to absolve
them of the liability of paying the demurrage charges. In the aforesaid
premises, we see no infirmity with the directions given by the Delhi High Court
on 18.1.99. The goods in question, having already been directed to be released,
without the payment of the demurrage charges, the importer must have got the
goods released. Having regard to the fact situation of the present case, it
would be meet and proper for us to direct the Shipping Corporation and
Container Corporation, if an application is filed by the customs authorities to
waive the demurrage charges. The appeal is disposed of accordingly.
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