Friday, 5 May 2017

Leading Judgment on bailment

 The essence of bailment is possession and the consent of
the owner of the goods is not necessary.30 The distinction
between possession and custody of goods is also noted by
jurists.31 In this context, the language of Section 49(2) is
30 Trustees of the Port of Bombay Vs. Premier Automobiles Ltd. (1981) 1 SCC 228, para 11.
“11. It is well settled that the essence of bailment is possession. It is equally well
settled that a bailment may arise, as in this case, even when the owner of the goods has not
consented to their possession by the bailee at all : PALMER ON BAILMENT, 1979 edition,
page 2. There may thus be bailment when a wharfinger takes possession of goods
unloaded at the quay side. A bailment is not therefore technically and essentially subject to
the limitations of an agreement, and the notion of privity need not be introduced in an area
where it is unnecessary, for bailment, as we have said, arises out of possession, and
essentially connotes the relationship between a person and the thing in his charge. It is
sufficient if that possession is within the knowledge of the person concerned. It follows
that a bailment may very well exist without the creation of a contract between the parties
and it essentially gives rise to remedies which, in truth and substance, cannot be said to be
contractual. That is why Palmer has made the assertion that “bailment is predominantly a
tortuous relation” (page 36), and the two are fundamentally similar.
31 ‘Bailment’ is a technical term of the common law, though etymologically it might mean any kind of
handing over. It involves change of possession. One who has custody without possession, like a servant,
or a guest using his host’s goods, is not a bailee. [See: Pollock & Mulla, The Indian Contract
and Specific Relief Acts, 13th Ed. Page 1931]

significant - “A Board may…… take charge of the goods…….”. But
we do not propose to examine the significance as the same is
neither argued nor necessary. In our opinion, for the purpose
of the present, we must also mention here Section 63 of THE
ACT authorises the BOARD to sell the goods “placed in their
CUSTODY”. This Court also recognised that bailment can
come into existence even otherwise than by a contract.
“The State of Gujarat Vs. Memon Mahomed Haji Hasam
(Dead) by LRs, AIR 1967 SC 1885, paras 5 and 6
“5. ……Bailment is dealt with by the Contract Act only in
cases where it arises from a contract but it is not correct to
say that there cannot be a bailment without an enforceable
contract. As stated in “Possession in the Common Law” by
Pollock and Wright, p. 163.
“Upon the whole, it is conceived that in general any person is
to be considered as a bailee who otherwise than as a servant
either receives possession of a thing from another or
consents to receive or hold possession of a thing for another
upon an undertaking with the other person either to keep
and return or deliver to him the specific thing or to (convey
and) apply the specific thing according to the directions
antecedent or future of the other person.” “Bailment is a
relationship sui generis and unless it is sought to increase or
diminish the burdens imposed upon the bailee by the very
fact of the bailment, it is not necessary to incorporate it into
the law of contract and to prove a consideration”
6. There can, therefore, be bailment and the relationship of
a bailor and a bailee in respect of specific property without
there being an enforceable contract. Nor is consent
indispensible for such a relationship to arise. A finder of
goods of another has been held to be a bailee in certain
circumstances.”
As rightly opined in FORBES’ case, there is no bailor and
bailee relationship between the BOARD (the 1st respondent)

and the consignee (the appellant); either voluntarily or
statutorily compelled but such a relationship exists between
the 1st respondent and the owner of the ship (through the
steamer agent). It is possible in a given case where the
consignee or any other person (such as the appellant herein)
claiming through the consignor, eventually may not come
forward to take delivery of the goods for a variety of reasons -
considerations of economy or supervening disability imposed
by law etc. Therefore, in such cases to say that merely
because the bill of lading is endorsed or the delivery order is
issued, the consignor or his agent is absolved of the
responsibility for payment (of rates or rent for services
rendered w.r.t goods) would result in a situation that the
BOARD would incur expenses without any legal right to
recover such amount from the consignor and be driven to
litigation for recovering the same from the consignee who did
not take delivery of the goods with whom the BOARD had no
contract of bailment and consequently no contractual
obligation to pay the ‘rates or rent’.
39. Enquiry into the relationship between either the BOARD,
the consignor of goods, the owner of the vessel and the

steamer agent on one hand or the consignee and the BOARD
on the other, in our opinion, is wholly irrelevant in examining
the right of the BOARD to recover the amounts due towards
the rates or rent for services rendered with respect to the
goods. The right of the BOARD is unquestionable. The only
question is: from whom can the BOARD recover – we
emphasise the question is not who is liable. Depending
on the nature of the relationship between the consignor and
consignee, the liability may befall either of them.
40. On the other hand, in the light of the legal position
declared by the Constitution Bench in ROWTHER-I, the 1st
respondent is a sub-bailee of the goods bailed by consignor
(bailor) to the ship-owner (bailee). The goods are bailed
through the agent (steamer agent) of the bailee. The appellant
is only a person claiming through the bailor, without any
direct contractual relationship with the 1st respondent.
41. Title to the goods is irrelevant even in the cases of a
bailment arising under a contract. Any person who is capable
of giving physical possession of goods can enter into a contract
of bailment and create bailment. Under Section 148 of the

Contract Act, ‘bailment’, ‘bailor’ and ‘bailee’ are defined as
under:
“A ‘bailment’ is the delivery of goods by one person to
another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person
delivering them. The person delivering the goods is called
the ‘bailor’. The person to whom they are delivered is called
the ‘bailee’.
Explanation.- If a person is already in possession of the
goods of another contracts to hold them as a bailee, he
thereby becomes the bailee, and the owner becomes the
bailor of such goods, although they may not have been
delivered by way of bailment.”
It can be seen from the above that bailment is a contractual
relationship and bailment can be created by any person who is
in possession/custody of goods but not necessarily the owner
of the goods. When the purpose of bailment is accomplished
the goods are to be returned or otherwise disposed of
according to the directions of the person (bailor) delivering
them.
42. Section 158 of the Contract Act stipulates the obligations
of the bailor to pay the necessary expenses incurred by the
bailee “for the purpose of bailment”. Section 158 of the
Contract Act reads as under:

“Section 158. Repayment by bailor of necessary expenses. –
Where, by the conditions of the bailment, the goods are to be
kept or to be carried, or to have work done upon them by the
bailee for the bailor, and the bailee is to receive no
remuneration, the bailor shall repay to the bailee the
necessary expenses incurred by him for the purpose of
bailment.”
The obligation of the bailee to return the bailed goods
when the purpose of bailment is accomplished and the
obligation of the bailor to pay the bailee “the necessary expenses
incurred by him for the purpose of the bailment” in our opinion
would attend not only a bailment by contract but every kind of
bailment.
43. If the bailor has such an obligation to pay the bailee, any
person claiming through the bailor must necessarily be bound
by such an obligation unless the bailee releases such person
from such an obligation. 
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5968 OF 2011
M/S. RASIKLAL KANTILAL & CO.
V
BOARD OF TRUSTEE OF PORT OF
BOMBAY & OTHERS.
Citation: AIR 2017 SC 1283

1. Written submissions filed by the appellant present a
reasonably concise and sufficiently reliable statement of facts
for adjudication of this appeal. Insofar as relevant they are:
“During the period November 1991 to January 1992, 78 shipments of
zinc ingots and copper iron bars were imported by 5 different consignees
from one M/s Metal Distributors (UK) Ltd.; these consignments were landed
at the Bombay Port. The consignees filed bills of entry for 37 out of the 78
consignments, but subsequently failed to lift the consignments and thus, they
came to be stored at by the Port of Bombay.Page 2
The distinguishing factor of the above consignments was that they
were shipped on “CAD Basis” i.e. cash against documents, in which the title
to the goods would remain with the exporter till such a time the importer
would retire the documents against payments.
Facing a grave loss M/s Metal Distributors (UK) Ltd., requested the
present petitioner, if they were interested in purchasing the goods. It is
pertinent to mention that the present petitioner and the original consignees
are no where related, and the present petitioner is a third party to the sales.
On 23.03.1992, the petitioner through his agent applied to the
Customs Authorities to have the Bills of Entry substituted in their name for
the 37 consignments for which the original consignees had filed Bills of
Entry, and also applied to file Bills of Entry for the remaining 41
consignments lying unclaimed. The formal agreement between the M/s
Metal Distributors (UK) Ltd. and the petitioner was entered subsequently, in
April of 1992.
That on 05.05.1992 the Clearing Agent of the petitioner wrote to the
Customs Authorities seeking an amendment of the IGM so that the goods
could be cleared. This was followed by a communication dated 03.06.1992
from the original exporter i.e. M/s Metal Distributors UK that the petitioner

had agreed to buy the aforesaid consignments since the original importers
had failed to clear the goods.
It is pertinent to mention that on 04.09.1992 the Customs Authority
wrote to the petitioner stating that would be granting permission to amend
the IGM for only 41 consignments and that the balance 37 consignments on
the ground that Bills of Entry for those consignments stood filed.
On 09.09.1992 the petitioner was granted a detention certificate by the
Customs Authority for the aforesaid 41 consignments signifying the period
of detention as from 09.06.1992 to 09.09.1992. Since the said period was
incorrect, the petitioner requested the Customs Authority to correct the
Detention Certificate and the same was subsequently corrected to reflect the
date as 23.03.1992 to 09.09.1992. It is pertinent to mention that the
Detention Certificate initially read “for procedural formalities for amending
the IGM” however subsequently the aforesaid detention certificates were
amended by the Detention Certificates dated 18.11.1993 and 01.12.1993 for
the 41 consignments and specifically read for “bonafide operation of ITC
Formalities”.
In the meantime the Government of India was pleased to notify the
“Statement of Guidelines for Remission of Demurrage Charges”, 1992, vide
which in certain cases were goods/consignments detained by Customs for
3Page 4
“ITC Facilities” were to be considered for grant of remission from payment
of demurrage for the period the goods were being so processed by Customs
Authorities.
In the meantime the Port of Bombay levied a total of Rs.2,81,67,333
as demurrage charges, the total remission granted by the Port of Bombay
was Rs.90,52,535, and therefore demanded a balance of Rs.1,91,14,798 on
the ground that the petitioner was liable to pay demurrage for the period of
23.03.1992 till 09.09.1992, on the ground that no remission could be granted
prior to date of noting.
Thus, on 16.09.1995, the Port of Bombay rejected the request of the
petitioner for grant of remission of demurrage.”
2. Aggrieved by the order of the Ist respondent, the
appellant, filed WP No.2012/19961
. The appellant however
1
 Prayer in Writ Petition No.2012 of 1996:
(a) The this Hon’ble Court be pleased to declare that the impugned action on the part of the
Respondents 1 to 3 in not granting the remission of demurrage charges in respect of the said consignments
since inception and restricting granting of remission of demurrage charges only from the date of filing of
the bills of entry in the name of the petitioners were and are unlawful, illegal and null and void.
(b) That this Hon’ble Court be pleased to issue a writ of Certiorari or a Writ in the nature of
Certiorari or any other appropriate writ, order or direction calling for the record and proceedings in the
matter of the application of the petitioners for review and reconsideration of the grant of remission/refund
of demurrage charges of various consignments set out in the petition hereabove as also in relation to the
said communication dated 24.5.1996 and after considering the validity, legality and propriety thereof, be
pleased to quash and set aside the said action and/or decision on the part of the Respondents 1 to 3 in not
granting further remission of demurrage charges in favour of the petitioners;
(c) That this Hon’ble Court be pleased to issue a writ of Mandamus or a writ in the nature of
Mandamus or any other appropriate writ, order or direction ordering and directing the Respondents 1 to 3
to forthwith grant remission and/or refund of the amount of Rs. alongwith interest thereon at the rate of
18% per annum from the date of payment of the respective amounts as per the statement annexed hereto
and marked as Exhibit in favour of the petitioners;
4Page 5
cleared the goods after making payment of the amount
(claimed by the 1st respondent towards demurrage), under
protest.
3. By the judgment under appeal dated 12.4.2010, the High
Court dismissed the writ petition. Hence the appeal.
4. The only issue pleaded and argued before the High Court
in the above-mentioned writ petition was the correctness of
the decision of the 1st respondent to decline grant of remission
of the entire demand towards demurrage on account of
non-clearance of the goods.
5. However, before us, a twofold submission is made by the
appellant:
(i) that the appellant acquired title to the goods long after
they arrived in the 1st respondent’s port and
discharged from the vessel which carried the goods.
Therefore, demurrage payable for the period anterior
to appellant’s acquisition of title to the goods is to
(d) In the alternative and without prejudice to the above;
 This Hon’ble Court be pleased to order the Respondents 4 and 5 to pay to the petitioners the
deficit amount after considering the remission that has already been granted and that will be granted by the
Respondent 1 to 3 along with interest thereon at 18% per annum from such date as this Hon’ble Court may
deem fit;
5Page 6
be collected from the steamer agent of the vessel;
and the appellant incurs no liability in law to pay
the demurrage - since the 1st respondent rendered
no service to the appellant during that period;
(ii)In the alternative, it is argued that in view of the facts
and circumstances of the case, the appellant is
entitled for complete remission of the amount
claimed towards demurrage on account of delayed
clearance of the goods. According to the appellant –
a substantial portion of the delay occurred because
of the non-clearance of the goods by the customs
department.
(iii) An ancillary submission in this regard is that the 1st
respondent granted complete remission of the
amount payable towards demurrage in the case of
another importer i.e. M/s. Gilt Pack who was
similarly situated. Therefore, the action of the 1st
respondent in declining remission to the appellant
is discriminatory.
6Page 7
6. To decide the correctness of the various submissions
noted above, an examination of the rights and obligations of
the 1st respondent and its authority to collect demurrage is
required.
7. Import and export of goods into any country has always
been the subject matter of regulation. This has been a
potential source for raising revenue. Import or export of goods
could be either by land, sea or air; by use of vehicles, vessels
or aircrafts. Since we are concerned in this case with import
of goods by sea, we confine our examination to the law dealing
with it.
Without going into the historical details of the import
export trade and regulations thereon, suffice it to state that
under Section 292
 of the Customs Act, 1962, the
person-in-charge of a vessel entering India from any place
outside India is prohibited from causing or permitting the
entry of such vessel at any place other than a customs port,
2
 Section 29. Arrival of vessels and aircrafts in India.—(1) The person-in-charge of a vessel … entering
India from any place outside India shall not cause or permit the vessel … to call or ... —
(a) for the first time after arrival in India; or
(b) at any time while it is carrying passengers or cargo brought in that vessel or
aircraft,
at any place other than a customs port or a customs airport, as the case may be unless permitted by
the Board.
x x x”
7Page 8
subject to certain exceptions. The expression “customs port”
is defined under Section 2(12)3
 of the Customs Act, 1962.
Section 7 thereof authorises the Central Board of Excise and
Customs constituted under the Central Boards of Revenue
Act, 1963 to appoint by a notification in the official gazette, the
ports which alone shall be customs ports for the unloading of
imported goods and the loading of export goods etc.
Indian Ports Acts, 1855, 1875, 1889 and 1908 regulated
the activities of the ports in India. The Port Trust Acts of
1879, 1890 and 1905 of Bombay, Calcutta and Madras
respectively regulated the activities of the said ports in India
through Port Trusts (bodies corporate).
8. Some of these are repealed and others modified4
 by the
Major Port Trusts Act, 1963 (hereinafter referred to as “THE
ACT”) which is a law made by the Parliament “to make provision
for the constitution of port authorities for certain major ports in India
and to vest the administration, control and management of such ports in
those authorities”. Section 3 of THE ACT authorises the Central
Government to constitute a Board of Trustees in respect of any
3
 Section 2(12). “customs port” means any port appointed under clause (a) of section 7 to be a customs port,
and includes a place appointed under clause (aa) of that section to be an inland container depot.
4
 A complete analysis of the evolution of the law in this regard requires an elaborate study and would be
beyond the scope of any judgment.
8Page 9
major port. Qua the definition under Section 2(b)5
, the Board
of Trustees so constituted is called BOARD6
. Section 5 of the
ACT declares each of the BOARDS to be a body corporate to
administer, control and manage the port of Bombay. Different
BOARDS came to be constituted for different major ports in
the country. The 1st respondent is admittedly one of the
BOARDS constituted under Section 3(1) of THE ACT.
9. We shall now examine the provisions of THE ACT insofar
as it is relevant for the purpose of this case.
10. Section 35(1)7
 of the Act obligates BOARDS to execute
various works, within or even without the limits of the ports8
being administered by each of the BOARDS, of the nature
indicated under Section 35(2)(a) to (l). An examination of the
tenor of the various clauses indicates that such works are
intended to facilitate creation of ports which can be
5
 Section 2(b) “Board”, in relation to a port, means the Board of Trustees constituted under this Act for that
port;
6
 Section 3. Constitution of Board of Trustees.—(1) With effect from such date as may be specified by
notification in the Official Gazette, the Central Government shall cause to be constituted in respect of any
major port a Board of Trustees to be called the Board of Trustees of that port, which shall consist of the
following Trustees, namely …
7
 Section 35 (1) A Board may execute such works within or without the limits of the port and provide such
appliances as it may deem necessary or expedient.
8
The expression “Port” is defined under Section 2(q) as follows:-
“Section 2 (q) “port” means any major port to which this Act applies within such limits as may,
from time to time, be defined by the Central Government for the purposes of this Act by notification
in the Official Gazette, and, until a notification is so issued, within such limits as may have been
defined by the Central Government under the provisions of the Indian Ports Act;”
9Page 10
conveniently used by (vessels9
) for loading and unloading of
cargo etc.
11. Section 37 to 42 of the Act authorise BOARDS to compel
sea going vessels to use the works executed by BOARDS for
landing or shipping of any goods or passengers, subject to
various conditions specified under the said provisions.
12. Section 41(1) contemplates the publication of a notified
order. By such an order, BOARD may “(i) declare that such dock,
berth, wharf, quay, stage, jetty or pier is ready for receiving, landing or
shipment of goods or passengers from or on vessels, not being sea-going
vessels, and, (ii) direct that within certain limits to be specified therein it
shall not be lawful, without the express sanction of the Board, to land or
ship any goods or passengers out of, or into, any vessel, not being a
sea-going vessel, of any class specified in such order, except at such
dock, berth, wharf, quay, stage, jetty or pier”. Section 41(2) declares
that once such a notified order is published, “it shall not be
lawful without the consent of the Board for any vessel”:
(i)to land or ship any goods or passengers at any place within the limits so
specified, except at such dock, berth, wharf, quay, stage, jetty or pier;
or
(ii) while within such limits, to anchor, fasten or lie within fifty yards of
the ordinary low-water mark.”
9
 Section 2(z) “vessel” includes anything made for the conveyance, mainly by water, of human beings or of
goods and a caisson;”
10Page 11
13. Section 42(2) authorises BOARDS to take charge of the
goods for performing such services.
A Board may, if so requested by the owner, take charge of
the goods for the purpose of performing the service or
services and shall give a receipt in such form as the Board
may specify.
Sub-section (7) declares that when the charge of the goods is
taken and receipt given, the recipient is discharged of any
liability for the damage or loss occurring to the goods
thereafter10
.
14. Section 43 stipulates the nature and extent of the
responsibility of BOARDS for any loss or destruction or
deterioration in the goods which were taken charge of by
BOARD - details of which are not necessary for the present
purpose.
15. Chapter VI of the Act deals with imposition and recovery
of rates at ports. The expression “rate” is defined under
Section 2(v)11
.
10 Section 42(7). After any goods have been taken charge of and a receipt given for them under this
section, no liability for any loss or damage which may occur to them shall attach to any person to whom
a receipt has been given or to the master or owner of the vessel from which the goods have been landed
or transshipped.
11 Section 2(v) - "rate" includes any toll, due, rent, rate, fee, or charge leviable under this Act;
11Page 12
16. Various services which BOARDS are obliged to perform
are specified under various provisions of THE ACT. Those
services fall into three categories – (1) services rendered to the
vessel entering the Port; (2) services rendered to goods either
imported by vessels or to be exported through vessel, and (3)
services rendered to passengers arriving or departing from
vessels in the Port.
17. Sections 49A, 49B, 50A and 50B deal with services to be
rendered by a BOARD exclusively to vessels using the Port
administered by BOARDS and authorise the collection of
various rates specified under each of those sections for
services referred to therein, as and when rendered.
18. Section 48 prior to its amendment (by Act 15 of 1997)
authorised every BOARD administering each of the major
ports to prescribe a scale of rates for various services rendered
by that BOARD.
Section 48 (pre 1997 Amendment)12
“Section 48. Scales of rates for services performed by Board
or other person.—(1) Every Board shall from time to time
frame a scale of rates at which and a statement of the
conditions under which, any of the services specified
hereunder shall be performed by itself or any person
12 Post 1997, a common authority (TARIFF AUTHORITY) for all major ports is brought into existence
under Section 47A to frame scales.
12Page 13
authorised under section 42 at or in relation to the port or
port approaches—
(a) transshipping of passengers or goods between vessels
in the port or port approaches;
(b) landing and shipping of passengers or goods from or to
such vessels to or from any wharf, quay, jetty, pier,
dock, berth, mooring, stage or erection, land or
building in the possession or occupation of the Board
or at any place within the limits of the port or port
approaches;
(c) cranage or porterage of goods on any such place;
(d) wharfage, storage or demurrage of goods on any such
place;
(e) any other service in respect of vessels, passengers or
goods, excepting the services in respect of vessels for
which fees are chargeable under the Indian Ports Act.
(2) Different scales and conditions may be framed for
different classes of goods and vessels.”
Section 48(1)(a) and (b) indicate the nature of services to
be rendered by BOARDS. Section 48(1)(c) and (d) indicate the
nature of the rate payable for such services. Clause (d) inter
alia provides that BOARDS can frame scale of rates for storage
or demurrage of goods on any such place. The expression
“such place” occurring under clause (d) must necessarily refer
to the places mentioned in Section 48(1)(b) i.e. wharf, quay,
jetty, pier, dock, berth etc executed by, and land or building
either in “possession or occupation” of BOARDS.
13Page 14
19. It is apparent from the language of Section 48 that
though it authorises BOARDS to stipulate and collect rates for
various services to be rendered, the Act is silent
regarding persons from whom such rates could be
collected. It is pertinent to note that since services
contemplated under Sections 49A, 49B, 50A and 50B are
services exclusively to be rendered to the vessel (ship). It is
reasonable to interpret that only the ship and its agents are
liable to pay the rates for those services. We are fortified in
our conclusion by the language of Sections 50A13 and 50B14
which make it express when they say “she15 would otherwise be
chargeable”.
20. Section 64 authorises BOARDS to “distrain or arrest” a
vessel when the master of that vessel refuses or neglects to
pay any rate or penalty payable under this Act and to “detain”
the vessel until the amount due to the BOARD is paid.
13 Section 50A. Port-due on vessels in ballast.— A vessel entering any port in ballast and not carrying
passengers shall be charged with a port-due at a rate to be determined by the Authority and not exceeding
three-fourths of the rate with which she would otherwise be chargeable.
14 Section 50B. Port-due on vessels not discharging or taking in cargo.— When a vessel enters a port but
does not discharge or take in any cargo or passengers therein, (within the exception of such unshipment and
reshipment as may be necessary for purposes of repair), she shall be charged with a port-due at a rate to
be determined by the authority and not exceeding half the rate with which she would otherwise be
chargeable.
15 In Maritime Law by a long established practice a vessel is always referred to as “she”.
14Page 15
21. On the other hand, with reference to services rendered to
goods, a lien16 is created under Section 59(1)17 on the goods, in
favour of BOARDS, and BOARDS are also entitled to seize and
detain the goods until the rates and rents are fully paid.
22. It appears to us that in view of the fact Section 42(2) only
contemplates “taking charge” of the goods but not “taking
possession” of goods, Parliament conferred on BOARDS the
authority to “seize and detain” the goods of which charge is
taken of. The purpose behind the twin declarations contained
in Section 59 is a little intriguing. However, we do not wish to
express any final opinion in this regard as no submission in
this regard is made and such an examination is not necessary
for deciding the case on hand.
23. Under Sections 61 and 62 of the Act, such detained
goods could be sold by the BOARD either by public auction or
otherwise, subject to conditions stipulated in those Sections
and following the procedure specified thereunder without the
16 Lien is defined in Halsbury’s Laws of England (4th Edition, Volume 28 at page 221, para 502) as “In its
primary or legal sense “lien” means a right at common law in one man to retain that which is rightfully and
continuously in his possession belonging to another until the present and accrued claims are satisfied.”
17 Section 59. Board’s lien for rates.—(1) For the amount of all rates leviable under this Act in respect of
any goods, and for the rent due to the Board for any buildings, 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, and may seize and
detain the same until such rates and rents are fully paid.
15Page 16
need to file a suit for the recovery of the amounts due to the
BOARDS.
24. The dispute in this case centres around demurrage.
Therefore, we deem it appropriate to examine the meaning of
the expression “demurrage”. The expression “demurrage” is
not defined under the Act. Strictly speaking, the expression
demurrage in the world of shipping meant-
“DEMURRAGE in its strict meaning, is a sum agreed by
the charterer to be paid as liquidated damages for delay
beyond a stipulated or reasonable time for loading or
unloading, generally referred to as the lay-days or
lay-time. Where the sum is only to be paid for a fixed
number of days, and a further delay takes place, the
shipowner’s remedy is to recover unliquidated “damages
for detention” for the period of the delay. The phrase
“demurrage” is sometimes loosely used to cover both
these meanings.”18
The circumstances in which and the nature of demurrage
payable in a given circumstance has been the subject matter
of considerable legal literature19. However, in India, the
expression “demurrage” appears to have acquired a different
connotation.
18 Scrutton on Charterparties and Bills of Lading, Twenty Third Edition, p.380
19 Useful reference can be made to Halsbury’s Laws of England, Fourth Edition. Similarly, a seminal work
titled “Law on Demurrage” by Hugo Tiberg covering laws of various countries on the subject.
16Page 17
Under the Madras Port Trust Act, 1905, certain bye-laws
were framed by the Port Trust in exercise of the statutory
powers under which “Scale of Rates” payable at the Port of
Madras were framed. Chapter IV thereof was headed
“Demurrage”. Under the said Chapter, it was stipulated that
“demurrage is chargeable on all goods left in Board’s transit sheds or
yards beyond the expiry of the free days”.
25. In Trustees of the Port of Madras v. Aminchand
Pyarelal & Others, (1976) 3 SCC 167, this Court had an
occasion to consider the true meaning of “demurrage”
occurring in the above mentioned context and opined20 that
the “Board has used the expression “demurrage” not in the
strict mercantile sense but merely to signify a charge which
may be levied on goods after the expiration of free days”.
26. Regulation 2(g) of the International Airports Authority
(Storage and Processing of Goods) Regulation, 1980 made
under the provisions of the International Airports Authority
20 Para 31. The High Court has cited many texts and dictionaries bearing on the meaning of “demurrage”
but these have no relevance for the reason that demurrage being a charge and not a service, the power of the
Board is not limited to fixing rates of demurrage. Besides, it is plain that the Board has used the expression
“demurrage” not in the strict mercantile sense but merely to signify a charge which may be levied on goods
after the expiration of free days. Rule 13(b) itself furnishes a clue to the sense in which the expression
“demurrage” is used by the Board. It provides, inter alia, that “demurrage” shall be recovered at a
concessional rate for a period of thirty days plus one working day where the goods are detained for
compliance with certain formalities and where the Collector of Customs certifies that the detention of
goods is “not attributable to any fault or negligence on the part of importers”.
17Page 18
Act, 1971, defined the expression ‘demurrage’ to mean, the
rate or amount payable to the airport by a shipper or
consignee or carrier, for not removing the cargo within the
time allowed.21
27. By virtue of Section 5922 of THE ACT, the 1st respondent
had a lien on goods placed on or in the property of the 1st
respondent “for the amount of all rates leviable under the Act”
and also the authority/right to seize and detain goods placed
on or in any premises belonging to the 1st respondent until the
amount due towards the rent or any rate for any services
rendered by the 1st respondent with respect to such goods is
fully paid. Further, the 1st respondent is also entitled under
Sections 61 and 62 to sell the goods in question so seized and
detained without the need to file a suit for the recovery of the
amounts due to it.
28. We shall now deal with submissions by the appellant.
29. The first submission is that the amounts due for
providing the various (services to the imported goods) until the
title in the goods passed to the appellant would be a services
21 See International Airport Authority of India v. Ashok Dhawan & Others, (1997) 11 SCC 343
22 See F/N 17
18Page 19
rendered to the steamer agent. The appellant cannot be
compelled to pay for services not rendered to him. Such an
argument is based on-
(i) that the goods in question were shipped by the
exporter on Cash against Document Basis
(CAD), therefore the title of the goods would
remain with the exporter till such time, the
importer “retires the documents against payments”;
(ii) The owner of the vessel is a bailee of the
shipper. The 1st respondent is sub-bailee of
the owner of the vessel through his steamer
agent for the vessel from the point of their
discharge from the vessel till the point when
title in the goods passed to the appellant.
30. The 1st respondent, on the other hand, argued that the
question regarding the liability of the appellant to pay the
demurrage was never raised before the High Court nor did the
High Court consider that question and, therefore, the
appellant may not be permitted to make the said submission.23
23 See also para 1 of the written submissions of the respondent;
“1. The entire claim of the Appellants before the Respondents and in the
Writ Petition was for remission. (Ref pg @79 (Request for Remission) and page 143
(Writ Prayers). Having sought “remission” of the accrued demurrage, it is obvious
that the appellants had admitted their liability to pay the demurrage. If the
appellants have not been so liable, there was no question of them claiming
remission. Hence, today, it is not open to the Appellants to dispute the liability.”
19Page 20
31. In our opinion, though the question was not raised before
the High Court, the appellant need not be barred from raising
this question before us because it is a pure and substantial
question of law. No enquiry into any fact is really necessary to
decide the said question of law. The only fact which is not
clearly established on record is the point of time at which the
title in the goods passed to the appellant. But, in our opinion
(for the reasons to be given later), that fact is wholly irrelevant
for determining the authority of the 1st respondent to collect
demurrage from the appellant. We, therefore, proceed to
examine the correctness of the submission.
32. In support of this submission, the appellant relied upon
three judgments of this Court in The Trustees of the Port of
Madras by its Chairman v. K.P.V. Sheik Mohamed
Rowther & Co. & Others, (1963) Supp. 2 SCR 915 (hereafter
“ROWTHER-I”), Trustees of the Port of Madras, Through
its Chairman v. K.P.V. Sheikh Mohd. Rowther & Co. Pvt.
Ltd. & Another, (1997) 10 SCC 285 (hereafter “ROWTHER-II”)
and Forbes Forbes Campbell & Company Limited v. Board
of Trustees, Port of Bombay, (2015) 1 SCC 228.
20Page 21
ROWTHER-I is a case which arose under the Madras Port
Trust Act, 1905.
In exercise of the power under Section 42 of the said Act
the Board of the Madras Port Trust made certain scale of
rates. One of the items in the scales stipulated charges to be
paid by “masters, owners or agents of vessels” in respect of port
trust labour requisitioned and supplied by it but not fully or
properly utilized.
A writ petition came to be filed in the Madras High Court
for a direction to the Board not to enforce the said rates.

It was argued that under provisions of the Madras Port
Trust Act, certain services are to be rendered to the vessel and
certain services to the goods carried by the vessel. The service
such as the one for which the rate had been demanded was a
service rendered to the consignee and not to the steamer
agent. Therefore steamer agents could not be compelled to
pay the rate for the said service.
The Madras High Court dismissed the writ petition. An
intra court appeal thereon was allowed by the Division Bench

holding that the service in question “must be deemed to be service
rendered to the consignee”. On a further appeal, this Court
recorded the issue in para 30:-
“30. The question for determination, in the case then is
whether the law making the steamer-agent liable to pay
these charges is good law24.”
33. The entire argument in the case revolved around the
question whether the Madras Port Trust was acting as an
agent of the consignee or the steamer agent when it took
charge of goods discharged from the vessel. The case of the
steamer agent was that the Madras Port Trust acted as the
agent of the consignee. This submission was rejected. This
Court held:
“57. If the Board was an agent of the consignee, it was
bound to deliver the goods to the consignee and should not
have any rights of retaining the goods till the payment of the
rates and other dues for which it had a lien on the goods.
The provision of there being a lien on the goods for the
payment of the dues of the Board or the freight, make it clear
that the Board did not have the custody of the goods as an
agent of the consignee.”
The appeal was allowed by this Court upholding the authority
of the port trust to collect the ‘rate’ from the steamer agent.
24 It may be mentioned that the law referred above is a piece of subordinate legislation.

34. This Court held that BOARD receives goods as a
sub-bailee from the bailee (ship owner) through the bailee’s
agent (See para 4925 of the judgment). This Court upheld the
impugned provision which fastened the liability upon the
steamer agent. This Court opined that the goods were
delivered to the BOARD by the consignor’s bailee (the ship
owner) through the steamer agent (the bailee’s agent) making
the BOARD a sub-bailee. Therefore, the service rendered by
the BOARD is a service to the owner of the ship.
ROWTHER-I is not an authority for the proposition that a
BOARD could collect rates due for the services rendered to
goods only from the steamer agent. Nor did this Court deal
with the question whether the title in the goods is a relevant
factor for determining a BOARD’S right to collect the rates.
ROWTHER-I is no authority for the proposition that until
the title in goods passed to the consignee the liability to pay
various rates payable to a BOARD for the services rendered in
respect of the goods falls exclusively on the steamer agent.
25 Para 49. These observations apply when the goods are to be delivered to the consignee alongside the ship
and not when they are handed over to the statutory body, like the Board, as a sub-bailee. How the delivery
is to be made depends on the terms of the bill of lading and the custom of the Port. The case is no authority
for the proposition that in all circumstances the master of the vessel is not responsible for the performance
of the acts subsequent to his placing the goods in such a position that the consignee can get them, as
contended for the respondents. The delivery contemplated in these observations, is not, in our opinion,
equivalent to the landing of the goods at the quay as contemplated by the various provisions of the Act.
23Page 24
35. In ROWTHER-II, the question was “whether demurrage
charges, harbour dues etc.” were to be recovered from the
consignee or the steamer agent.
The Madras High Court concluded that the consignee
was liable to pay the demurrage.
It was a case where the goods remained in the custody of
the Port Trust for a long time and were ultimately confiscated
by the customs authorities. Whether demurrage was to be
recovered from the steamer agent or the consignee was in
issue.
High Court held that the steamer agent’s responsibility
ceases “once the goods are handed over to the Port Trust” and
the bill of lading is endorsed26. The High Court further held
that upon the endorsement of the Bill of lading, “the property in
the goods vests” in the consignee and therefore the steamer
agent’s responsibility for the custody of the goods ceases27
.
26 “……Once the goods are handed over to the Port Trust by the steamer and the steamer agents have duly
endorsed the bill of lading or issued the delivery order, their obligation to deliver the goods personally to
the owner or the endorsee comes to an end. The subsequent detention of the goods by the Port Trust as a
result of the intervention by the Customs authorities cannot be said to be on behalf of or for the benefit of
the steamer agents.”
27 …..By the endorsement of the bill of lading or the issue of a delivery order by the steamer agents, the
property in the goods vests on such consignee or endorsee, and thus it appears to be clear that the steamer
or the steamer agents are not responsible for the custody of the goods after the property in the goods passes
to the consignee or endorsee till the Customs authorities actually give a clearance.

The High Court, therefore, concluded that only the consignee
was liable.
This Court approved the conclusion of the High Court.
36. In Forbes Forbes Campbell & Company Limited v.
Board of Trustees, Port of Bombay, (2015) 1 SCC 228, this
Court examined the liability of the steamer agent to pay
demurrage and port charges to the BOARD of Bombay Port in
respect of goods brought into the Port and warehoused by the
said authority.
The question arose in the context of the BOARD’S
resolution to recover the rent (on cargo transported in
containers) from the steamer agent. The steamer agent
contended that neither THE ACT nor the subordinate
legislation made thereunder created such liability either on the
ship owner or his agent (steamer agent).
Rejecting such submission, this Court held that “in the
absence of any specific bar in the statute, such liability can
reasonably fall on the steamer agent”, if on a proper
construction of the provisions of the Act such a conclusion can
be reached.

“Para 10. While it is correct that the liability to pay
demurrage charges and port rent is statutory, in the absence
of any specific bar under the statute, such liability can
reasonably fall on a steamer agent if on a construction of the
provisions of the Act such a conclusion can be reached.
Determination of the aforesaid question really does not hinge
on the meaning of the expression “owner” as appearing in
Section 2(o) of the 1963 Act, as has been sought to be urged
on behalf of the appellant though going by the language of
Section 2(o) and the other provisions of the Act especially
Section 42, an owner would include a shipowner or his
agent. Otherwise it is difficult to reconcile how custody of the
goods for the purpose of rendering services under Section 42
can be entrusted to the Port Trust Authority by the owner as
provided therein under Section 42(2). At that stage the goods
may still be in the custody of the shipowner under a
separate bailment with the shipper or the consignor, as may
be. Even dehors the above question the liability to pay
demurrage charges and port rent would accrue to the
account of the steamer agent if a contract of bailment
between the steamer agent and the Port Trust Authority can
be held to come into existence under Section 42(2) read with
Section 43(1)(ii) of the 1963 Act.”
On examination of the provisions of THE ACT and two
earlier judgments28, this Court rejected the submission that
there comes into existence the relationship of bailor and
bailee between the consignee and the BOARD as was held
earlier by this Court in Sriyanesh Knitters.
“11. For the reasons already indicated the decision in
Sriyanesh Knitters with regard to the existence of a
relationship of bailor and bailee between the consignee and
the Port Trust Authority instead of the steamer agent and
the Port Trust Authority cannot be understood to be a
restatement of a general principle of law but a mere
conclusion reached in the facts of the case where the
consignee had already appeared in the scene.”
28 ROWTHER-I and Port of Bombay v. Sriyanesh Knitters, (1999) 7 SCC 359

and concluded29 that once the bill of lading is endorsed or the
delivery order issued, it is the consignee or endorsee who
would be liable to pay the demurrage and other dues of the
Port Trust Authority. It further held that in all other situations
the contract of bailment is one between the agent of the bailor
and the BOARD (Bailee) fastening the liability on the (steamer)
agent for such rates till such time the bill of lading is
endorsed or delivery order is issued by the steamer agent.
37. With respect, we agree with the conclusions recorded by
this Court in the cases of ROWTHER-II and Forbes that a
BOARD could recover the rates due, either from the steamer
agent or the consignee but we are of the humble opinion that
enquiry into the question as to when the property in the goods
passes to the consignee is not relevant.
We have already noticed the submission of the
appellant that the appellant is not liable to make payment
of any demurrage incurred prior to the acquisition of title
in the goods by the appellant. Enquiry into the title of the
29 Para 12. From the above, the position of law which appears to emerge is that once the bill of lading is
endorsed or the delivery order is issued it is the consignee or endorsee who would be liable to pay the
demurrage charges and other dues of the Port Trust Authority. In all other situations the contract of bailment
is one between the steamer agent (bailor) and the Port Trust Authority (bailee) giving rise to the liability of
the steamer agent for such charges till such time that the bill of lading is endorsed or delivery order is
issued by the steamer agent.

goods and the point of time at which the title passes to
the consignee is equally irrelevant for determining the
authority of a BOARD to recover the amounts due to it under
THE ACT. The authority and right of a BOARD to recover its
dues either from the steamer agent or the consignee flows
from two different sources:
(i) Section 158 of the Indian Contract Act, 1872
read with Section 1 of the Indian Bills of
Lading Act, 1856.
(ii) Section 59(1) of THE ACT.
38. The essence of bailment is possession and the consent of
the owner of the goods is not necessary.30 The distinction
between possession and custody of goods is also noted by
jurists.31 In this context, the language of Section 49(2) is
30 Trustees of the Port of Bombay Vs. Premier Automobiles Ltd. (1981) 1 SCC 228, para 11.
“11. It is well settled that the essence of bailment is possession. It is equally well
settled that a bailment may arise, as in this case, even when the owner of the goods has not
consented to their possession by the bailee at all : PALMER ON BAILMENT, 1979 edition,
page 2. There may thus be bailment when a wharfinger takes possession of goods
unloaded at the quay side. A bailment is not therefore technically and essentially subject to
the limitations of an agreement, and the notion of privity need not be introduced in an area
where it is unnecessary, for bailment, as we have said, arises out of possession, and
essentially connotes the relationship between a person and the thing in his charge. It is
sufficient if that possession is within the knowledge of the person concerned. It follows
that a bailment may very well exist without the creation of a contract between the parties
and it essentially gives rise to remedies which, in truth and substance, cannot be said to be
contractual. That is why Palmer has made the assertion that “bailment is predominantly a
tortuous relation” (page 36), and the two are fundamentally similar.
31 ‘Bailment’ is a technical term of the common law, though etymologically it might mean any kind of
handing over. It involves change of possession. One who has custody without possession, like a servant,
or a guest using his host’s goods, is not a bailee. [See: Pollock & Mulla, The Indian Contract
and Specific Relief Acts, 13th Ed. Page 1931]

significant - “A Board may…… take charge of the goods…….”. But
we do not propose to examine the significance as the same is
neither argued nor necessary. In our opinion, for the purpose
of the present, we must also mention here Section 63 of THE
ACT authorises the BOARD to sell the goods “placed in their
CUSTODY”. This Court also recognised that bailment can
come into existence even otherwise than by a contract.
“The State of Gujarat Vs. Memon Mahomed Haji Hasam
(Dead) by LRs, AIR 1967 SC 1885, paras 5 and 6
“5. ……Bailment is dealt with by the Contract Act only in
cases where it arises from a contract but it is not correct to
say that there cannot be a bailment without an enforceable
contract. As stated in “Possession in the Common Law” by
Pollock and Wright, p. 163.
“Upon the whole, it is conceived that in general any person is
to be considered as a bailee who otherwise than as a servant
either receives possession of a thing from another or
consents to receive or hold possession of a thing for another
upon an undertaking with the other person either to keep
and return or deliver to him the specific thing or to (convey
and) apply the specific thing according to the directions
antecedent or future of the other person.” “Bailment is a
relationship sui generis and unless it is sought to increase or
diminish the burdens imposed upon the bailee by the very
fact of the bailment, it is not necessary to incorporate it into
the law of contract and to prove a consideration”
6. There can, therefore, be bailment and the relationship of
a bailor and a bailee in respect of specific property without
there being an enforceable contract. Nor is consent
indispensible for such a relationship to arise. A finder of
goods of another has been held to be a bailee in certain
circumstances.”
As rightly opined in FORBES’ case, there is no bailor and
bailee relationship between the BOARD (the 1st respondent)

and the consignee (the appellant); either voluntarily or
statutorily compelled but such a relationship exists between
the 1st respondent and the owner of the ship (through the
steamer agent). It is possible in a given case where the
consignee or any other person (such as the appellant herein)
claiming through the consignor, eventually may not come
forward to take delivery of the goods for a variety of reasons -
considerations of economy or supervening disability imposed
by law etc. Therefore, in such cases to say that merely
because the bill of lading is endorsed or the delivery order is
issued, the consignor or his agent is absolved of the
responsibility for payment (of rates or rent for services
rendered w.r.t goods) would result in a situation that the
BOARD would incur expenses without any legal right to
recover such amount from the consignor and be driven to
litigation for recovering the same from the consignee who did
not take delivery of the goods with whom the BOARD had no
contract of bailment and consequently no contractual
obligation to pay the ‘rates or rent’.
39. Enquiry into the relationship between either the BOARD,
the consignor of goods, the owner of the vessel and the
30Page 31
steamer agent on one hand or the consignee and the BOARD
on the other, in our opinion, is wholly irrelevant in examining
the right of the BOARD to recover the amounts due towards
the rates or rent for services rendered with respect to the
goods. The right of the BOARD is unquestionable. The only
question is: from whom can the BOARD recover – we
emphasise the question is not who is liable. Depending
on the nature of the relationship between the consignor and
consignee, the liability may befall either of them.
40. On the other hand, in the light of the legal position
declared by the Constitution Bench in ROWTHER-I, the 1st
respondent is a sub-bailee of the goods bailed by consignor
(bailor) to the ship-owner (bailee). The goods are bailed
through the agent (steamer agent) of the bailee. The appellant
is only a person claiming through the bailor, without any
direct contractual relationship with the 1st respondent.
41. Title to the goods is irrelevant even in the cases of a
bailment arising under a contract. Any person who is capable
of giving physical possession of goods can enter into a contract
of bailment and create bailment. Under Section 148 of the

Contract Act, ‘bailment’, ‘bailor’ and ‘bailee’ are defined as
under:
“A ‘bailment’ is the delivery of goods by one person to
another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person
delivering them. The person delivering the goods is called
the ‘bailor’. The person to whom they are delivered is called
the ‘bailee’.
Explanation.- If a person is already in possession of the
goods of another contracts to hold them as a bailee, he
thereby becomes the bailee, and the owner becomes the
bailor of such goods, although they may not have been
delivered by way of bailment.”
It can be seen from the above that bailment is a contractual
relationship and bailment can be created by any person who is
in possession/custody of goods but not necessarily the owner
of the goods. When the purpose of bailment is accomplished
the goods are to be returned or otherwise disposed of
according to the directions of the person (bailor) delivering
them.
42. Section 158 of the Contract Act stipulates the obligations
of the bailor to pay the necessary expenses incurred by the
bailee “for the purpose of bailment”. Section 158 of the
Contract Act reads as under:

“Section 158. Repayment by bailor of necessary expenses. –
Where, by the conditions of the bailment, the goods are to be
kept or to be carried, or to have work done upon them by the
bailee for the bailor, and the bailee is to receive no
remuneration, the bailor shall repay to the bailee the
necessary expenses incurred by him for the purpose of
bailment.”
The obligation of the bailee to return the bailed goods
when the purpose of bailment is accomplished and the
obligation of the bailor to pay the bailee “the necessary expenses
incurred by him for the purpose of the bailment” in our opinion
would attend not only a bailment by contract but every kind of
bailment.
43. If the bailor has such an obligation to pay the bailee, any
person claiming through the bailor must necessarily be bound
by such an obligation unless the bailee releases such person
from such an obligation. A consignee is a person claiming
through the consignor (bailor). In the context of import of
goods into India by ship, the consignees’ rights are governed
inter alia by Section 1 of the Bills of Lading Act, 1856.
1. Rights under bills of lading to vest in consignee or
endorsee – Every consignee of goods named in a bill of lading
and every endorsee of a bill of lading to whom the property in
the goods herein mentioned shall pass, upon or by reason of
such consignment or endorsement, shall have transferred to
and vested in him all rights of suit, and be subject to the
same liabilities in respect of such goods as if the contract
contained in the bill of lading had been made with himself.

44. It can be seen from the above that the 1856 Act enacts a
fiction that the consignee to whom the property in the goods
shall pass shall be “subject to the same liabilities in respect of
such goods as if the contract contained in the bill of lading had
been made with himself”. Bill of lading is evidence of a
contract32 between the shipper (consignor) and the owner of
the ship by which the owner of the ship agrees to transport the
goods delivered by the consignor to a specified destination and
deliver it to the consignee. Delivery of goods pursuant to a bill
of lading creates a bailment between the shipper and the
owner of the ship. Obviously the legislature knew that a
consignee under a bill of lading is a 3rd party to the contract
but intrinsically connected with the transaction and thought it
necessary to specify the rights and obligations of the
consignee. Hence, the fiction under the 1856 Act, that the
moment the property in goods passes to the consignee, the
liabilities of the consignee in respect of such goods would be
the same as those of the consignor, as if the contract
contained in the bill of lading had been made with the
consignee.
32 Called contract of affreightment

45. The consequence is that the 1st respondent (sub-bailee)
would be entitled to enforce its rights flowing from the
Bailment between the ship owner and the 1st respondent
against the consignee and recover expenses incurred by it in
connection with the bailment from the consignee. The terms
and conditions of the contract between the consignor or
person claiming delivery of the goods are irrelevant for
determining the right of the 1st respondent to recover its dues.
The obligations/liability of the consignee is determined by the
statute. But the said obligation is not exclusive to the
consignee. The consignor (bailor) is not relieved of the
obligation to pay by virtue of Section 158 of the Contract Act
the expenses incurred by the 1st respondent. Nothing is
brought to our notice to hold otherwise. At this juncture, we
must point out that the declaration under Section 42(7)33
absolving the owner of the ship and his agents is limited only
to the obligations owed by the bailor to the consignee not to
the sub bailor like the 1st respondent.
33 Section 42 (7) After any goods have been taken charge of and a receipt given for them under this section,
no liability for any loss or damage which may occur to them shall attach to any person to whom a receipt
has been given or to the master or owner of the vessel from which the goods have been landed or
transhipped.

46. Section 59 of THE ACT, creates lien in favour of 1st
respondent in respect of any goods and also authorises the 1st
respondent to seize and detain the goods, it clearly makes a
special provision. Under the Contracts Act, every bailee has no
lien on the goods delivered to him. Such a lien is available
only to limited classes of bailees specified under Section 17134
.
They are – bankers, factors, wharfingers35, attorneys of a High
Court and policy-brokers. It can be seen from Section 171
that only those specific categories of bailees have a right to
retain goods bailed to them as security for the amounts due to
them. No other category of bailee has such a right unless there
is an express contract creating such a lien.
47. Section 59 of THE ACT, also expressly authorises the 1st
respondent to seize and detain goods taken charge of by it.
Parliament also invested the 1st respondent with the authority
to sell the goods and appropriate the proceeds of sale under
34
 Board of Trustees of the Port of Bombay & Ors. v. Sriyanesh Knitters, (1999) 7 SCC 359.
 Para 17. … This section is in two parts. The first part gives statutory right of lien to four
categories only, namely, bankers, factors, wharfingers and attorneys of High Court and policy-brokers
subject to their contracting out of Section 171. The second part of Section 171 applies to persons other than
the aforesaid five categories and to them Section 171 does not give a statutory right of lien. It provides,
that they will have no right to retain as securities goods bailed to them unless there is an express contract to
that effect. Whereas in respect of the first category of persons mentioned in Section 171 the section itself
enables them to retain the goods as security in the absence of a contract to the contrary but in respect of any
other person to whom goods are bailed the right of retaining them as securities can be exercised only if
there is an express contract to that effect.
35 For the sake of completeness in the narration it must also be mentioned that this Court held in (1999) 7
SCC 359 (at para 22) that a Board constituted under THE ACT is a wharfinger.

Section 6336 of the ACT towards various heads indicated
thereunder without the need to file a suit37 which are taken
charge of by it in certain circumstances, details of which we
have noticed earlier.
48. If the ACT authorises the 1st respondent to recover its
dues by bailing the goods under bailment, in those cases
where the consignee does not turn up to take the delivery of
the goods within the time stipulated under Sections 61 or 62
36 63. Application of sale proceeds (1) The proceeds of every sale under section 61 or section 62 shall be
applied in the following order-
(a) in payment of the expenses of the sale;
(b) in payment, according to their respective priorities, of the liens and claims excepted in
sub-section (2) of section 59 from the priority of the lien of the Board;
(c) in payment of the rates and expenses of landing, removing, storing or warehousing the same,
and of all other charges due to the Board in respect thereof including demurrage (other than penal
demurrage) payable in respect of such goods for a period of four months from the date of landing.
(d) in payment of any penalty or fine due to Central Government under any law for the time being
in force relating to customs;
(e) in payment of any other sum due to the Board.
(2) The surplus, if any, shall be paid to the importer, owner or consignee of the goods or to his
agent, on an application made by him in this behalf within six months from the date of the sale of the
goods.
(3) Where no application has been made under sub-section (2), the surplus shall be applied by the
Board for the purposes of this Act.
37
 Board of Trustees of the Port of Bombay & Others v. Sriyanesh Knitters, (1999) 7 SCC 359.
 “16. There is another aspect which is relevant. Section 171 of the Contract Act only enables
the retention of goods as security. On the other hand in respect of current dues in respect of existing goods
in their possession the Board not only has a lien under Section 59 of the MPT Act but it also has the power
to sell the said goods and realise its dues by virtue of Section 61 of the MPT Act. The procedure for
exercising this power of sale of the goods in respect of which the Board has lien is contained in the said
section. Before selling the goods no order of any court or other judicial authority is required. On the
other hand the general lien contemplated by Section 171 of the Contract Act only enables the retention of
the bailed goods as a security. Their retention does not give any power to sell the goods, unlike the power
contained in Section 61 of the MPT Act. If payment is not made by the consignee to the wharfinger, in a
case where Section 171 of the Contract Act applies, the wharfinger can only retain the goods bailed as
security and will have to take recourse to other proceedings in accordance with law for securing an order
which would then enable the goods to be sold for realisation of the amounts due to it. It may in this
connection, be necessary for the wharfinger to file a suit for the recovery of the amount due to it and
Section 131 of the MPT Act clearly provides that such a remedy of filing a suit is available to the Board.”

of the ACT, to deny the right to demand and recover the
amounts due from the consignee when he seeks delivery of the
goods under bailment would be illogical and inconsistent with
the scheme of the ACT.
Such right, in our view, undoubtedly enables the 1st
respondent to claim various amounts due to it, from any
person claiming delivery of the goods either the bailor or a
person claiming through the bailor for the services rendered
w.r.t. the goods. Denying such a right on the ground that the
person claiming delivery of the goods acquired title to the
goods only towards the end of the period of the bailment of the
goods with the 1st respondent would result in driving the 1st
respondent to recover the amount due to it from the bailor or
his agent who may or may not be within the jurisdiction of the
municipal courts of this country (by resorting to a
cumbersome procedure of litigation).
The 1st submission is, therefore, rejected.
48A. Now, we deal with the second submission. The appellant
claims that he is entitled to complete remission of the
demurrage. According to the appellant, the facts of the case

not only justify but also demand the exercise of the discretion
conferred upon the 1st respondent under Section 53 of the Act
to grant a complete remission of the demurrage in question.
According to the appellant, the Government of India issued
certain guidelines38 dated 24.1.1992 which structure the
discretion of the Port Trust in the matter of granting
remission.
49. We notice that the text of the guidelines permit granting
of remission upto 80 per cent of demurrage in appropriate
cases. We also notice that the cap of 80 per cent is not
absolute. The 1st respondent can even grant complete
remission in appropriate cases.
(i) Admittedly, the 1st respondent granted remission to an
extent of Rs.90,52,535.00 (approximately) out of the total
claim towards demurrage of Rs.2,81,67,333.00.
38 It is not very clear from the record whether these guidelines were issued by the Government of India or
guidelines framed by the 1st respondent. In the written submissions, the appellant describes the guidelines
framed by the Government of India whereas under the judgment under appeal at para 24, it appears that the
appellant’s case before the High Court was that they were guidelines framed by the 1st respondent.
“….He would submit that the guidelines framed by the BPT itself provides for
remission asked for by the petitioners when the detention of the goods by the Custom was
for bonafide operation of ITC formalities.”
Per contra the case of the 1st respondent before the High Court regarding the guidelines appears to
be
“…..remission is granted on ex-gratia basis, that too, by exercising discretion on
the basis of guidelines issued by the Union of India and adopted by resolution passed by
respondent No. 1 along with Custom Department.”
The High Court did not record any categorical finding in this regard except stating
“47. In exercise of statutory powers under section 101 of the Major Port Trust Act
guidelines for remission of demurrage charges are framed.”
39Page 40
(ii) The liability to pay demurrage arose because of the
non-clearance of the goods from the 1st respondent’s property
for a considerable period of time.
(iii) The period could be divided into two phases:
Phase I before the point of time when appellant started
claiming the right to take delivery;
Delay in taking delivery is attributable purely to the failure of
the original consignee. The appellant clearly knew or at least
ought to have known, when he purchased the goods that the
1st respondent would demand demurrage. The appellant as a
person claiming through the consignor is not entitled in law to
claim any right of remission on the ground that he did not
have any interest or title in the goods for such period.
AND
Phase II after the present appellant’s right to take
delivery of goods came into existence.
Such delay occurred because of the time taken in ensuring
that the appellant complied with the various statutory
obligations to import goods such as amendment of the IGM
etc.

50. The fact that the appellant was not permitted to clear the
goods because of the pendency of some proceedings initiated
by the customs authorities by itself does not create a right of
remission in favour of the appellant.39 Though it may
constitute a relevant circumstance for considering granting
remission if the 1st respondent so chooses as a matter of
policy. As a matter of fact, remission of a part of the
demurrage was granted by the 1st respondent.
51. Now, we come to the submission that the respondent’s
decision to decline remission to the appellant is discriminatory
because remission was granted in the case of a similarly
situated consignee called Gilt Pack. Unfortunately, though the
High Court noted the rival submission in the context of the
allegation of discrimination, it did not record any conclusion
on that count.
52. From the facts available on record, we are of the opinion
that firstly, the cases of Gilt Pack and appellant are not
identical. Gilt Pack was the case where the original consignee
sold the goods to a third party on high seas even before their
arrival into India. It so transpired that the purchaser did not
39 See International Airports Authority of India v. Grand Slam International, (1995) 3 SCC 151
41Page 42
have an appropriate license under the relevant law to import
the goods. In view of the said problem, the goods were
detained for some time and eventually the original consignee
himself cleared the goods40. It is in the said circumstances
Gilt Pack was granted remission. We are not concerned with
the question whether the discretion was appropriately
exercised in the case of Gilt Pack. We are only on the
question whether the facts of Gilt Pack and the appellant
herein are identical.
53. However, we must make it clear that the authority of the
1
st respondent to grant or decline remission of any amount
due towards any rate payable under THE ACT must be based
on rational consideration and a sound policy. Such a
requirement is inherent in the fact that 1st respondent is a
statutory body discharging important statutory obligations. 1st
respondent could not bring anything on record to our notice
which demonstrates the reasons for declining remission as
claimed by the appellant nor any clear policy of the respondent
which regulates the discretion. In the circumstances, we deem
it appropriate to set aside the decision of 1st respondent dated
40
 The full factual background as to how it all happened is not relevant for our purpose.
42Page 43
16.09.1995 in declining the remission and leave it open to the
respondent to take appropriate decision on the application
duly recording the reasons for such decision.
54. The appeal is accordingly allowed in part. The impugned
judgment is set aside. There shall be no order as to costs.
….....................................J.
 (J. CHELAMESWAR)
……. ………….....................J.
 (ABHAY MANOHAR SAPRE)
New Delhi
February 28, 2017
43
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