A) ABSTRACT / HEADNOTE

The judgment resolves long-standing inconsistencies in Supreme Court jurisprudence concerning liability for storage charges, demurrage, and ground rent payable to Major Port Trusts when imported goods remain uncleared by consignees. The dispute arose from the practice of Port Trusts imposing liability on shipping or steamer agents for prolonged periods, particularly beyond tariff-prescribed limits, where consignees abandoned goods. The Court undertook a comprehensive statutory interpretation of the Major Port Trusts Act, 1963, read harmoniously with the Customs Act, 1962 and principles of bailment under the Indian Contract Act, 1872.

The Constitution Bench clarified that the point of transfer of title in goods is irrelevant in determining liability for port charges. It decisively held that once goods are landed and taken charge of by the Port Trust with issuance of receipt under Section 42(2), liability for storage and demurrage shifts exclusively to the importer, owner, consignee, or person entitled to the goods, and not the vessel or its agent. The Court overruled conflicting dicta in Sriyanesh Knitters and parts of Forbes-II, reaffirming Rowther-I as authoritative.

A crucial constitutional dimension was introduced by holding that though Sections 61 and 62 employ the word “may” regarding sale of goods, Port Trusts, being State under Article 12, must act reasonably under Article 14 and cannot indefinitely detain goods to accumulate charges. The judgment also imposed a functional obligation on Port Trusts to destuff containers and return them within a reasonable period, thereby preventing unjust enrichment.

Keywords:
Major Port Trusts Act, Demurrage Charges, Steamer Agent Liability, Bailment, Customs Law, Article 14, Container Destuffing

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation emanated from disputes at the Cochin Port during 1998–1999 involving import of containers declared as synthetic woollen rags. Customs authorities found that many consignments actually consisted of new garments, attracting heavy customs duty, penalties, and confiscation proceedings. Faced with severe fiscal exposure, consignees abandoned the goods, leaving them uncleared within port premises for extended durations .

Shipping agents repeatedly sought destuffing of containers so that empty containers could be returned, but the Port Trust refused citing lack of space. The Port Trust continued to levy ground rent on containers, including beyond 75 days, despite Tariff Authority for Major Ports (TAMP) orders prescribing limits. The Kerala High Court held that Port Trust could not levy charges beyond 75 days and read “may” in Sections 61 and 62 as “shall”, imposing a mandatory duty to auction goods.

Conflicting Supreme Court precedents—Rowther-I, Rowther-II, Sriyanesh Knitters, Forbes-II, and Rasiklal—created doctrinal uncertainty regarding liability. Recognising this inconsistency, a Division Bench referred core questions to a larger Bench, culminating in the present authoritative pronouncement.

D) FACTS OF THE CASE

Imports during August 1998 to March 1999 arrived at Cochin Port as Full Container Loads. Customs investigation revealed misdeclaration, leading to seizure, prolonged adjudication, and non-clearance by consignees. Containers were destuffed for inspection, occupying larger port space. Consignees ceased engagement entirely, leaving cargo abandoned .

Shipping agents, whose containers remained stuck, repeatedly requested the Port Trust to destuff remaining containers and return empties. The Port Trust refused, citing inadequate space, yet continued levying ground rent on containers. Charges were imposed even beyond the 75-day cap under TAMP tariffs. Shipping agents conceded liability up to 75 days but challenged liability thereafter.

The High Court restricted Port Trust’s right to levy ground rent beyond 75 days and imposed a mandatory duty to auction goods. The Port Trust appealed, raising wider statutory and constitutional questions regarding ownership, bailment, liability, and discretion under the MPT Act.

E) LEGAL ISSUES RAISED

i. Whether the time of passing of title in goods is relevant for determining liability for port charges?
ii. Whether endorsement of bill of lading or issuance of delivery order absolves steamer agents of liability?
iii. Whether steamer agents can be held liable for storage or demurrage charges, and to what extent?
iv. From whom can a Port Trust lawfully recover its dues under the MPT Act?
v. Whether Port Trusts are obliged to destuff containers and return them within a reasonable time?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the Port Trust argued that under Section 2(o), steamer agents fall within the inclusive definition of “owner”. They contended that statutory bailment under Sections 42 and 43 entitled the Port Trust to recover charges from steamer agents. They relied on Rasiklal to argue that inquiry into bailment or title was irrelevant. It was further asserted that containers belong to shipping agents and therefore ground rent was justifiable. The Port Trust also argued that “may” in Sections 61 and 62 conferred discretion and could not be read as mandatory.

G) RESPONDENT’S ARGUMENTS

The counsels for shipping agents submitted that endorsement by a steamer agent does not transfer title under Indian Bills of Lading Act, 1856. They relied on Rowther-I to argue that liability ceases once Port Trust takes charge of goods. They challenged the bailor-bailee theory advanced in Sriyanesh Knitters and asserted that storage charges could only be recovered from owners or persons entitled to goods, never from vessel agents. They emphasized constitutional limits on arbitrary accumulation of demurrage.

H) JUDGEMENT

The Court harmonised the statutory scheme of the Major Port Trusts Act. It held that Section 2(o) defines “owner” in relation to goods distinctly from vessels. Being an inclusive definition, it does not fasten perpetual liability on steamer agents. The Court reaffirmed Rowther-I and clarified that once goods are taken charge of by the Port Trust under Section 42(2) and receipt is issued, liability for storage and demurrage shifts exclusively to importer, consignee, or person entitled to goods .

The Court overruled incorrect observations in Sriyanesh Knitters regarding bailment between consignee and Port Trust. It held that bailment arises between vessel and Port Trust only until landing. Thereafter, statutory responsibility attaches to Port Trust as bailee vis-à-vis goods, not containers.

On Sections 61 and 62, the Court rejected the High Court’s reading of “may” as “shall”. However, invoking Articles 12 and 14, it imposed a constitutional obligation on Port Trusts to sell goods within a reasonable time, ordinarily four months, failing which continued levy of demurrage would be arbitrary.

a) RATIO DECIDENDI

The passing of title is irrelevant. Liability for demurrage after Port Trust takes custody lies solely with owner or person entitled to goods. Steamer agents are liable only until landing and handing over of goods. Port Trusts must act reasonably in exercising statutory discretion.

b) OBITER DICTA

The Court observed that indefinite retention of goods to accumulate charges violates constitutional norms. Penal demurrage may be levied only if delay is justified and reasonable.

c) GUIDELINES

i. Port Trusts must destuff containers and return them expeditiously.
ii. Goods should ordinarily be auctioned within four months of custody.
iii. Demurrage beyond reasonable period must be justified.
iv. Containers are not “imported goods” and must be returned.

I) CONCLUSION & COMMENTS

The judgment restores doctrinal clarity by reaffirming Rowther-I and aligning maritime liability with constitutional fairness. It balances statutory discretion with Article 14 constraints and prevents unjust enrichment by Port Trusts. The ruling significantly protects shipping agents from indefinite fiscal exposure while ensuring Port Trusts retain effective remedies against actual beneficiaries of imported goods .

J) REFERENCES

a) Important Cases Referred

i. Port of Madras v. K.P.V. Sheik Mohamed Rowther & Co., [1963] 2 Supp SCR 915
ii. Port of Bombay v. Sriyanesh Knitters, (1999) 7 SCC 228
iii. Forbes Forbes Campbell & Co. v. Port of Bombay, (2015) 1 SCC 228
iv. Rasiklal Kantilal & Co. v. Port of Bombay, (2017) 11 SCC 1

b) Important Statutes Referred

i. Major Port Trusts Act, 1963
ii. Customs Act, 1962
iii. Indian Contract Act, 1872
iv. Indian Bills of Lading Act, 1856
v. Constitution of India