Om Shankar Biyani Vs. Board of
Trustees, Port of Calcutta & Ors  Insc 91 (22 February 2002)
Shah Mohammed Quadri & S.N. Variava S. N. Variava, J.
the learned counsel for the parties.
Appeal is against an Order dated 27th July, 2000.
stated the facts are as follows:
Appellant had imported into India, from Singapore, a consignment of bearings. The
said consignment landed at the Port of Calcutta on 13th July, 1989. The Appellant submitted a Bill of Entry for home
consumption for clearance of the said goods. The said goods were assessed by
the Customs and valued at Rs. 1,24,691/-. However, on 1st August, 1989 before the goods could be cleared
by the Appellant the Customs Authorities passed a seizure order under Section
110 of the Customs Act. The Appellant then filed a Writ Petition in the High
Court of Calcutta. To this Writ Petition the 1st Respondent was not a party.
On 27th September, 1989 an interim order was passed, whereunder
the Appellant was permitted to clear the goods on payment of duty as assessed
on the basis of the CIF value as appearing in the invoice. However, the
Appellant had to furnish to the Customs Authorities a bank guarantee to pay the
difference between the duty found payable on a proper assessment and the duty
being then paid by the Appellant. The Customs Authorities were also allowed to
take a sample of the goods for necessary testing. This interim order did not
provide that the Appellant could clear the goods without payment of the charges
due to the 1st Respondents. Thus the Appellant could have cleared the goods
only after payment of the charges payable to 1st Respondent.
Customs Authorities then applied to the Calcutta High Court for modification of
the earlier order. The Customs Authorities opposed clearance of the goods. On 15th December, 1989 the earlier order was modified. It
was directed that the goods could be stored in a bonded warehouse of the
Customs Authorities. To be noted that at this sage also the 1st Respondents are
not a party to the Writ Petition.
the goods could be cleared from custody of the 1st Respondent only on payment
of all charges payable to the 1st Respondent.
advantage of the order dated 15th December, 1989 the Appellant sought to remove the goods and put them into the bonded
warehouse without payment of the charges due to the 1st Respondent.
was not allowed by the 1st Respondent. The Appellant then joined the 1st
Respondent as a party to the Writ Petition. On 2nd February, 1990 the High Court passed an Order, in the presence of the 1st
Respondent, permitting the Appellant to remove the goods to the bonded
warehouse without payment of the port charges. The 1st Respondent was directed
not to raise any objection. The High Court merely accepted an undertaking from
the Appellants to pay all charges as well as the custom duty upon an effective
adjudication of the matter.
this stage it would be appropriate to note certain provisions of the Major Port
Trusts Act. Section 58 of the said Act reads as follows:
Time for payment of rates on goods.- 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, or to be shipped for
export, or to be transhipped, shall be payable before the goods are so removed
or shipped or transhipped.
supplied)" Thus the charges of the 1st Respondent are to be paid before
the goods are removed. The High Court seriously erred in permitting removal of
the goods without payment of the port charges. To be noted that it was never
disputed that the charges were payable. The 1st Respondent was not concerned
with the dispute as to who had to pay the charges. It was the Appellant who was
interested in clearance of the goods. It was for him to have paid the charges
and cleared the goods. Even if it was the Appellants' case that the Customs
Authority had to pay the charges, the Appellant should have first cleared the
goods by paying charges due to the 1st Respondent and then claimed
reimbursement from the Customs Authority.
Section 59 of the Major Port Trusts Act may be noted. It reads as follows:
Board's lien for rates.-
For the amount of all rates leviable by a Board under this Act in respect of any
goods, and for the rent due to the Board for any building, plinths, stacking
areas, or other premises on or in which any goods may have been placed, the
Board shall have a lien on such goods, any may seize and detain the same until
such rates and rents are fully paid.
Such lien shall have priority over all other liens and claims, except for
general average and for the ship- owner's lien upon the said goods for freight
and other charges where such lien exists and has been preserved in the manner
provided in sub-section (1) of section 60, and for money payable to the Central
Government under any law for the time being in force relating to customs, other
than by way of penalty or fine." Thus, 1st Respondent has a statutory
lien. It is entitled to retain the goods until all amounts payable to it are
paid. By directing removal of goods from the custody of the 1st Respondent
without payment of their charges, the High Court was also setting at naught the
aggrieved the 1st Respondents field an Appeal against the Order dated 2nd February, 1990. The Appellate Court rightly stayed
the Order dated 2nd
Customs Authority withdrew the seizure Order on 19th December, 1989. Now the Appellant was free to clear the goods by
payment of all charges to the 1st Respondent. The Appellant made no efforts to
clear the goods by payment of the charges. Thus the Appellant allowed the goods
to remain with the 1st Respondent knowing full well that further demurrage
charges would be incurred.
On 16th September, 1991 a single Judge of the Calcutta High
Court disposed of the Writ Petition filed by the Appellant. By this Order the
Customs Authorities were directed to complete adjudication proceedings within a
particular time. It was directed that if the adjudication proceedings were
decided in favour of the Appellant, then the Customs Authorities would pay the
demurrage charges for the period of detention. It was held that as the 1st
Respondent had opposed removal of the goods into the bonded warehouse, they had
exercised their right of lien. It was held that once they exercised their right
of lien they were not entitled to claim any demurrage charges.
held that the 1st Respondent could claim demurrage charges only up to 2nd February, 1990. It was further held that if the
Appellant had, by that time, paid the demurrage charges upto 2nd February, 1990 the Customs Authorities would
reimburse the Appellant for the same. Mr. Nageshwar Rao, produces letters dated
25th September, 1991 and 11th October, 1991 and submits that the Appellants had offered to pay charges
till 2nd February, 1990.
1st Respondent filed an Appeal. By an interim Order dated 16th November, 1991
the Appellants were permitted to clear the goods on payment of demurrage up to
2nd February, 1990 and on furnishing a Bank Guarantee in the name of the
Chairman of the 1st Respondent.
Bank Guarantee was to be for the charges of the 1st Respondent from 3rd February, 1990 till the date of Bank Guarantee.
The Appellants now did not pay the charges up to 2nd February, 1990 nor furnished the Bank Guarantee. They allowed the goods to
remain with the 1st Respondent knowing full well that further demurrage charges
were being incurred.
Appeal of the 1st Respondents was disposed of by the impugned Order dated 27th July, 2000. The directions of the learned
single Judge directing the 1st Respondent to recover only till 2nd February, 1990 has been set aside. It is held that
the 1st Respondent can recover charges for the entire period the goods remain
Rao submits that the order of the learned single Judge was absolutely correct.
He submits that the right of lien under Section 59 of the Major Port Trusts Act
is similar to a lien exercised by a bailee under Section 171 of the Indian
Contract Act. He submits that once a right of lien has been exercised the bailee
cannot charge rent for storage of goods.
Rao relies upon the case of Board of Trustees of the Port of Bombay v. Sriyanesh
Knitters reported in (1999) 7 SCC 359. In this case the Port Trust Authorities
were claiming lien not under Section 59 of the Major Port Trusts Act but under
Section 171 of the Indian Contract Act. The question before the Court was
whether the Port Trust Authorities could claim a lien both under Section 59 of
the Major Port Trusts Act and under Section 171 of the Indian Contract Act.
This Court held that when the Port Trust Authorities stored the goods a
relationship of bailer and bailee came into existence. It was held that the
Port Trust Authorities could claim a lien under Section 171 of the Indian
Contract Act also. In our view, this authority does not support the proposition
that principles which apply to a lien under Section 171 would also apply to the
statutory lien under Section 59.
the 1st Respondent is entitled to claim payment of all demurrage charges before
the goods were cleared. The Appellants never offered to pay the demurrage
charges. They sought to misuse the Order of the Court and take the goods out of
the custody of the 1st Respondent without payment of their charges. The 1st
Respondent was fully justified in refusing to allow such clearance. The
Appellate Court was right in concluding that the 1st Respondent was entitled to
recover all charges till the date the goods remained with it.
view the proposition that the bailee, who exercises a lien, is not entitled to
charge rent for storage of goods can never apply to a case where the lien is
exercised for non-payment of rent or storage charges. If such a proposition
were to be accepted it would lead to catastrophic results. It is well known
that in most cities, particularly port cities like Calcutta and Mumbai, storage
space is at a premium. If such a proposition were accepted then all that a
person need to do is to make a demand for removal of the goods without offering
to pay the storage charges. If the bailee were to refuse to allow clearance and
exercise his right of lien, as he is bound to do, the bailor's purpose would be
served. He would thereafter have rent free storage space.
could then continue to store the goods free of rent. On the other hand, if the bailee
were to permit clearance, in almost all cases, his charges would not be
subsequently paid and he would have to then pursue the bailor for recovery of
his charges. This could never be the law.
with this situation, Mr. Nageshwar Rao submits that the 1st Respondent should
have exercised their power of sale under Section 62 of the Major Port Trusts
Act. He submits that it was the duty of the 1st Respondent to sell off the
goods. He submits that the 1st Respondent cannot be permitted to continue to
levy demurrage charges when they themselves do not sell off the goods. He
submits that after they obtained a stay on 11th May, 1990 the 1st Respondent
should have sold off the goods. He submits that the 1st Respondent should not
be allowed to claim demurrage charges after 111th May, 1990. We are unable to
accept this submission. Till 19th December, 1989 the goods were under a seizure
Order. Thus they could not have been sold. Before 19th December, 1989 the
Appellant had already obtained Orders dated 27th September, 1989 and 15th
December, 1989. These Orders permitted clearance of the goods.
the 1st Respondent could not sell the goods. The 1st Respondents were further
directed by Order dated 2nd February, 1990 not to raise any objection to the
goods being cleared. Even though they obtained an Order of stay of clearance
they could not have sold off the goods when the subject matter of clearance of
goods was before the Court. Thereafter by Order dated 16th September, 1991 the
High Court again permitted clearance of goods. The interim Order dated 16th
November, 1991, in the Appeal filed by the 1st Respondents, also permitted
clearance on furnishing a Bank Guarantee. At no stage did the Appellant inform
the 1st Respondent that they were not going to furnish a Bank Guarantee. Thus
the 1st Respondent could not have sold the goods.
Rao then submits that the 1st Respondent had applied to the Appellate Court for
permission to sell the goods. He points out that by Order dated 10th January,
1992 it was held as follows :- ".After hearing the Counsel for the
parties, it is not possible for this Court to specify as to what consequential
action the Board of Trustees for the Port of Calcutta is entitled to take in
view of non-furnishing of the Bank Guarantee by the writ
petitioner/respondents. That course of action has to be decided by the
we direct that the appeal shall appear in the list for hearing on 31.1.1992 at
the top of the list subject to part-heard" Mr. Nageshwar Rao submits that
now the 1st Respondents could have sold the goods. He submits that it was the
duty of the 1st Respondent to have sold the goods so that further demurrage
charges are not incurred. Mr. Jaideep Gupta does not deny that such an
application was made by the 1st Respondent. He admits that in the Order dated
10th January, 1992 it was held that the 1st Respondent could decide what course
of action they should adopt. He submits that as, on 10th January 1992, the Court directed the matter to be listed on 31st January 1992, the 1st Respondent could not have
sold the goods.
view, the 1st Respondent should have sold off the goods at that stage. They are
a statutory body. Merely because there is no obligation to sell does not mean
that they can allow the goods to lie around. By this time the 1st Respondent
well knew that the Appellant was not paying the charges. Now the Court had
permitted them to take recourse to such action as was available in law. Sale is contemplated in the Major Port Trusts Act itself.
In our view the 1st Respondent should have now sold the goods. Apart from the
fact that demurrage charges would have stopped running, valuable godown space
would also have become available to them. On facts of this case, we feel that
it would be just and proper that the 1st Respondent not be allowed to charge
demurrage charges after 10th
Rao next submits that the adjudication proceedings have ended in favour of the
Appellant. He submits that under the Order of the learned single Judge the
Customs Authorities have to pay the demurrage charges. As against this Ms. Bagchi
submits that under the Order of the learned single Judge the Customs
Authorities have to pay demurrage only for the period of detention.
are not matters with which we are concerned in this Appeal.
does not form part of the subject matter of the impugned Judgment. We,
therefore, express no opinion on this aspect.
clarify that if the Appellant wants clearance of the goods he has to pay all
charges of the 1st Respondent till 10th January, 1992.
event of the Appellant not clearing the goods after paying all charges within
30 days from today the 1st Respondent will be at liberty to take action under
Section 62 of the Major Port Trusts Act and also, if permissible in law to do
so, to make a claim against the Appellant for recovery of the balance amount
due after sale of the goods.
Appeal stands disposed of accordingly. There will be no order as to costs.
SHAH MOHAMMED QUADRI) J.