SHIPPING CORPORATION OF INDIA LTD. v. M-S. BHARAT EARTH MOVERS LTD. & ANR

Citation: [2007] 12 S.C.R. 923

Court: Supreme Court of India

Bench: S.B. SINHA, G.S. SINGHVI

Case summary

SHIPPING CORPORATION OF INDIA LTD. v. M-S. BHARAT EARTH MOVERS LTD. & ANR.pdf

Judgment text

SHIPPING CORPORATION OF INDIA LTD. v. MIS. BHARAT EARTH MOVERS LTD. & ANR. DECEMBER 5, 2007 [S. B. SINHA AND G. S. SINGHVI, JJ. ] Maritime Law-Contract ofcarriage ofgoods by sea-From Japan to India-Consignment of16 cases-Damage to consignment- Suit, claiming damages, filed in India in respect of2 cases only-Courts below holding that Indian Law was applicable to the case and not Japanese law; and that claimant was entitled to damages higher than the maximum liability after calculating the same taking into consideration all the 16 cases-On appeal, held: Japanese law was >( applicable and not Indian Law-Liability ofthe defendant was limited in respect oftwo cases only-Matter remittedfor fresh consideration- Carriage of Goods by Sea Act, 1925-s. 2-Japanese Carriage of Goods by Sea Act, 1992-Articles 1, 2 and 13-lnternational Conventionfor the Unification ofCertain Rules ofLaw relating to Bills ofLading (Hague Rules)-Clauses 5 and 6. Appellant was owner of a fleet of vessels.

A consignment ' ' containing 16 packages was entrusted to appellant by respondent No. 1 for carriage thereof from Japan to India. On arrival of the consignment at the Port in India, five cases thereof were found in -; damaged condition. The Respondent filed a suit for damages, against the appellant in respect of only two cases. Trial Court held the appellant liable for payment ofdamages on the ground that it was responsible for causing loss to the consignment as the same had occurred when the cargo was in its charge. It held that respondent " was entitled to damages higher than the maximum liability provided for therein as the quantum of damages was to be calculated upon taking into consideration the weight ofall 16 cases and not of2 cases alone. It further held that the contract was governed by Indian Carriage ofGoods by Sea Act, 1925 and not by Japanese Carriage of Goods by Sea Act, 1992. In intra-court appeal, the Division Bench ofHigh Court affirmed the order oftrial court.

In appeal to this Court, appellant contended that price ofthe cargo having not been disclosed in the Bill ofLading, the liability of the appellant was confined only to the amount specified therein; and that Indian law was wrongly applied in the case. Partly allowing the appeal and remitting the matter to the trial court, the Court HELD: 1. 1. A bare perusal ofSection 2 ofthe Indian Carriage ofGoods by Sea Act, 1925, would clearly demonstrate that the same applies to the carriage ofgoods by sea in ships carrying goods from any port in India to any other port whether in or outside India which would mean that the Indian Act shall apply only when the carriage ofgoods by sea in ships takes place from a port situate within India and not a port outside India. As the originating port is outside India, Section 2 ofthe Indian Act, will have no application.

The Japanese Carriage ofGoods by Sea Act, 1992 on the other hand, applies in a situation where carriage ofgoods by a ship is either from a loading Port or to a discharging Port, either of which is located outside Japan. Therefore, Japanese Act will clearly be applicable in the instant case. (Para 17] (931-D-E] ' 1. 2. The High Court, applied the provisions ofthe Indian law. Clause 6 ofthe Bill ofLading merely raises a legal fiction. It applies to a case where the place of occurrence of loss or damage is not ·known. It merely provides that in such an event the quantum ofloss shall not exceed the monetary limit provided for in any international convention or national law. No reason has been assigned in support ofits findings by the High Court. Clause 7 oflnternational Covention for the Unification ofCertain Rules ofLaw relating to Bills ofLading (Hague Rules) also should be read with Clause 6 thereof. [Para 17) [931-F-H) 2. 1.

The approach of the High Court that the plaintiff- BHARATEARTHMOVERSLTD. respondent was entitled to damages higher than the maximum liability provided for therein as the quantum of damages was to be calculated upon taking into consideration the weight of all the 16 cases and not only oftwo cases, is wrong. Ifthe plaintiff- respondent confined its claim of damages only for two cases, there was nu room for making the observation that the liability must be calculated taking into consideration the weight of16 cases. Even in support of the said conclusion, no reason has been assigned. The discussions ofthe High Court end with the said finding which apparently is contrary to the statutory provisions. [Para 18) [932-B-D] 2. 2. It cannot be said that the value of the goods had been declared in the Bill of Lading. It is based on the premise that Bill of Lading refers to the invoice. Invoice is not a part ofthe Bill ofLading.

The value of the goods is required to be stated on the Bill ofLading so as to enable the shipping concern to calculate the quantum of ~I freight. It cannot, in absence of any statutory provisions, be held to be incorporated therein by necessary implication or otherwise. Moreover, this contention has been raised before this Court for the first time. The liability of the appellant being limited and that too in respect of the two cases, the matter should be considered afresh. [Paras 19 and 20) [932-E-G] 3. The provisions of the Multimodal Transportation of Goods Act, 1993 whereto reference has been made by the parties before the High Court arc not applicable as admittedly the mode oftransport was by sea only and did not involve any multimodal transportation -\ as defined in Section 2(k) thereof. [Para 11) [928-B-C) CIVIL APPELLATE nJRISDICTION : Civil Appeal No. 5638 of 2007. From the Judgment and final Order dated 2. 12. 2004 of the High Court of Judicature at Madras in O. S. A. No.

247/2000. "'! C. A. Sundaram, P. B. Suresh and Vipin Nair (for Temple Law Firm) for the Appellant. P. R. Sikka and Chander Shekhar Ashri for the Respondents. The Judgment ofthe Court was delivered by S. B. SINHA, J . 1. Leave granted. 2. Application ofthe Indian Carriage of Goods by Sea Act, 1925 (for short "the Indian Act") vis-a-vis the Japanese Carriage of Goods by Sea Act, 1992 (for short "the Japanese Act") is in question in this appeal which arises out of a judgment and order dated 2. 12. 2004 passed by a Division Bench ofthe High Court ofJudicature at Madras in OSA No. 247 of2000 affirming the judgment and decree dated 7. 03. 2000 passed by learned Single Judge thereof in CS No. 75 of 1996. 3. Appellant is an owner ofa fleet ofvessels. A consignment ofsix sets ofSub Assemblies for PC 650 H. E. was entrusted by the respondent No. 1for carriage thereof from Kobe, Japan to Madras. It contained 16 packages. It arrived at the Port of Madras on 17. 12. 1994. 4.

Apart ofthe consignment was found in damaged condition. An inspection therefor was made. Some damage was noticed in five cases. On the premise that the damage of short delivery had been caused due to negligence on the part of the employees of the appellant, a suit was filed on the original side ofthe Madras High Court. Claim of damage, however, was therein confined to two cases only, viz. , case Nos. 00002 and 0013. In the said suit, the following reliefwas prayed for: "(a) Asum ofRs. 16,72,143. 87 with interest from the date ofplaint all the date of realization (interest of 18%) at 18% p. a as the transaction being commercial one under Section 34 CPC. " 5. In the written statement, the respondents inter alia pleaded 'limited liability' on their part. learned Single Judge of the said Court held the appellant liable for payment of damages being responsible for causing damage and loss to the consignment which had occurred at a time when the cargo was in its charge. 6.

In regard to the contention of the appellant that the contract of carriage having been concluded in Japan, the Japanese Act shall apply and not the Indian Act, it was opined: ''Another contention is raised on the side ofthe defendant that . __. ( SHIPPING CORPORATION OF INDIA LTD. v. M/S. 927 Indian Carriage of Goods by Sea Act has been amended by the Multi Model Goods Transportation Act of 1993 and the maximum liability of the carrier per package is not 100/- as contended by the plaintiffmid the maximum liability is 666. 67 Special Drawing Rights per package or two srecial drawing rights per kg of gross weight of the goods lost of damaged, whichever is higher, Calculated thus, according to the defendant, the maximum liability ofthe defendant will be only Rs. 1,31,471. 11/-. Even assuming that the liability of the defendant has to be calculated thus, the liability must be calculated taking into weight of 16 cases which are governed by Ex.

A-3 Bill oflading and in this case the liability will be more than what is claimed in the plaint. Therefore, the defendant cannot resist the claim ofthe plaintiffon this ground and the contract is governed by only InC:ian Carriage ofGoods by Sea .. Act. Therefore, on issue No. 6 & 7. I hold that the contract is governed by Indian Carriage of Goods by Sea Act and the -i defendant is liable to the extent ofthe plaintiffs claim and these two issues are therefore answered against the defendant. " 7. The Division Bench of the High Court in an intra-court appeal preferred by the appellant herein affirmed the said finding relying on or on the basis ofClause 6 ofthe Bill ofLading, stating: "On the basis of above clause 6, the submission ofthe learned counsel for the appellant/defendant, that the Japanese Carriage of Goods by Sea Act is applicable to the facts of the case, cannot . be countenanced. " -\ 8.

A notice was issued by this Court confined to the question as to whether the appellant has a limited liability to the claim ofthe respondents. 9. Mr. C. A. Sundaram, learned senior counsel appearing on behalf of the appellant, placed before us the relevant provisions ofthe Indian ' Act, Japanese Act as also the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (Hague Rules) to -, contend that as the price ofthe cargo had not been disclosed in the Bill ofLading, the liability ofthe appellant must be held to be confined only to the amount specified therein. It was urged that the High Court committed a serious error in holding that the Indian Law would be applicable. 10. Mr. P. R. Sikka, learned counsel appearing on behalf of the respondents, however, supported the impugned judgment. 11.

Before embarking on the questions raised before us, we at the outset may observe that the provisions ofthe Multimodal Transportation of Goods Act, 1993 whereto reference has been made by the parties before the High Court are not applicable as admittedly the mode of transport was by sea only and did not involve any multimodal transportation as defined in Section 2(k) thereof. 12. The scope ofthe Japanese Act is stated in Article I thereofsating: "The provision ofthis Act (except article 20bis) shall apply to the carriage ofgoods by ship from a loading port or to a discharging port, either of which is located outside Japan, and Article 20bis I· shall apply to the carrier's and his servant's liability for damage to goods caused by their tort. " Paragraph 4 ofArticle 2 defines "one unit ofaccount" to mean "the amount equivalent to one Special Drawing Right as defined in paragraph (I) ofArticle 3 ofthe International Monetary Fund Agreement".

Article 4 confers a liability upon the carrier stating that it shall not be relieved therefrom unless exercise ofdue diligence under the said Article is proved. The provision regarding limited liability is contained in Article 13 of -,, the Japanese Act, which reads as under: "(1) The carrier's liability for a package or unit ofthe goods shall be the higher ofthe following: 1. An amount equivalent to 666. 67 units ofaccount. ; ,. 2. An amount equivalent to 2 units of account per kilo of gross weight of the goods lost, damaged or delayed. (2) The unit ofaccount used in each item ofthe preceding paragraph shall be the final publicized one at the date on which the carrier pays damages in respect of the goods. , -{ SHIPPINGCORPORATIONOFINDIALTD. v. MIS. 929 -", (3) Where a container, pallet or similar article oftransport (which as referred to as "containers and etc. " in this paragraph) is used for the transportation ofthe goods, the number ofcontainers and etc.

or units shall be deemed to be the number ofthe packages or units of the goods for the purpose of the preceding paragraph unless the goods' number or volume or weight is enumerated in the bill oflading... " 13. Indian Act, however, in Section 2, provides for the application ofRules in the following terms: "Subject to the provisions ofthis Act, the Rules set out in the Schedule (hereinafter referred to as "the Rules') shall have effect in relation to and in connection with the carriage ofgoods by sea in ships carrying goods from any port in (India to any other port whether in or outside (India). " -i 14. Schedule appended thereto provides for the Rules relating to Bills ofLading. A. 'iicle IV provides for rights and immunities, the relevant portion whereofreads as under: "1. Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship ,.

-- seaworthy, and to secure that the ship is properly manned, equipped and supplied, and to make the holds, refrigerating and cool chambers and all other parts ofthe ship in which goods are carried -~ i( fit and safe for their reception, carriage and preservation in ... accordance with the provisions ofparagraph 1 ofArticle III. Whenever loss or damage has resulted from unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this section. " Paragraph 5 ofArticle IV reads, thus: '/ "5. Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 1001 per package or unit, or the equivalent of that sum in other currency, un1ess the nature and value ofsuch goods have been declared by the shipper before shipment and inserted in the bill oflading... " 15.

We may also notice that under the Special Drawing Rights as contained in the International Monetary Fund Special Drawing Rights would mean l . OOXDR as equivalent to 64. 0948 INR and 666. 67XDR as equivalent to 42,730. 20 INR. 16. Clause 5 of the Hague Rules, to which both India and Japan are parties, reads as under: "5. Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an an1ount exceeding 100 pounds sterling per package or unit, or the equivalent ofthat sum in other currency unless the nature and value ofsuch goods have been declared by the shipper before shipment and inserted in the bill oflading. This declaration if embodied in the bill of lading shall be prima facie evidence, but shall not be binding or conclusive on the carrier. " 17.

Having noticed the relevant statutory provisions, we may also notice the relevant terms and conditions of Bill of Lading which are as under: "Clause 6: Liability for loss or damage where the stage is not known: .. When in accordance with the condition 4 hereof, the CTO is liable to pay compensation in respect of loss or damage to the goods and the stage of transport where the loss or damage occurred is not known, the liability ofthe CTO in respect ofsuch loss or damage shall not exceed the monetary linUt indicated in this regard, in any international convention or national law that would have applied, ifthe contract was for the carriage ofgoods from a seaport in India and had been covered by a ocean bill of lading. However, the CTO shall not in any case be liable for an amount greater than the actual loss to the person entitled to make the claim...

Clause 7: Liability for loss or damage where the stage is known: (A) When in accordance with the condition 4 hereof, the CTO is liable to pay compensation in respect of loss or damage to the goods and the stage of transport where the loss or damage occurred is known, the liability ofthe CTO in respect ofsuch loss or damage shall be determined by the provisions contained in any International Convention or National Law, which provisions would have applied if the claimant had made a separate and direct contract with the CTO in respect ofthe particular stage oftransport where the loss or damage occurred and received as evidence thereof any particular document which may be issued in order to make such International Convention orNational Law applicable... " A bare perusal of Section 2 of the Indian Act would clearly _.

, demonstrate that the same applies to the carriage ofgoods by sea in ships carrying goods from any port in India to any other port whether in or outside India which would mean that the Indian Act shall apply only when the carriage ofgoods by sea in ships takes place from a port situate within India and not a port outside India. The Japanese Act, on the other hand, applies in a situation where carriage ofgoods by a ship is either from loading Port or to a discharging Port, either ofwhich is located outside Japan. Therefore, Japanese Act will clearly be applicable in the instant case. The High Court, as noticed hereinbefore, applied the provisions of the Indian law. We may notice that Clause 6 ofthe Bill ofLading merely raises a legal fiction. It applies to a case where the place of occurrence of loss or damage is not known. It merely provides that in such an event the quantum ofloss shall not exceed the monetary limit provided for in any international convention or national law.

No reason has been assigned in support of its findings by the High Court. Clause 7 of the Bill of Lading also should be read with Clause 6 thereof. In this case, the vessel sailed from Japan; its destination being Chennai. As the originating port is outside India, Section 2 ofthe Indian Act, as noticed hereinbefore, will have no application. The High Court, in our opinion, misread the said provision. 18. The provisions noticed hereinbefore, whether ofthe Japanese Act or the Indian Act or the Hague Rules, provide for a limited liability. Contention ofthe appellant had been rejected by the High Court inter alia on the premise that the plaintiff- respondent was entitled to damages higher than the maximum liability provided for therein as the quantum of damages was to be calculated upon taking into consideration the weight of all the 16 cases and not only oftwo cases. With respect, the approach of the High Court is wrong.

If the plaintiff- respondent confined its claim ofdamages only for two cases, there was no room for making the observation that the liability must be calculated taking into consideration the weight of 16 cases. Even in support ofthe said conclusion, no reason has been assigned. The discussions of the High Court end with the said finding which apparently is contrary to the statutory provisions. 19. A contention has been raised before us for the first time that the value ofthe goods had been declared in the Bill ofLading. It is based on the premise that Bill ofLading refers to the invoice. We cannot accept the said contention. Invoice is not a part ofthe Bill ofLading. The value ofthe goods is required to be stated on the Bill ofLading so as to enable the shipping concern to calculate the quantum of freight. It cannot, in absence of any statutory provisions, be held to be incorporated therein by necessary implication or otherwise. ,_ 20.

We, therefore, are ofthe opinion that the liability ofthe appellant being limited and that too in respect ofthe two cases, the matter should be considered afresh in the light of the observations made hereinbefore by the learned Single Judge. To the aforementioned extent, the judgments and decrees ofthe High Court are set aside. 21. The appeal is allowed to the aforementioned extent. There shall, however, be no order as to costs. K. K. T. Appeal partly allowed.