The Supreme Court lays down clarification related to Owner/Port Trust Liabilities regarding Storage and Payment of Charges

Oct 13, 2020

During the times of economic recession, it is not uncommon for buyers or consumers to walk away from unwanted purchases which have been a constant source of the problem on the part of sellers and the parties involved in the supply chain including the container terminals, the container lines, the lines' local agents and cargo interest. The Coronavirus Pandemic has also escalated this problem. The Pressure on ports' to clear out the abandoned cargo and to return empty containers to the lines promptly has led to disputes over among other things storage, demurrage and handling charges. The Supreme Court of India has now helpfully clarified several questions of law relating to the parties' responsibilities, and hence liabilities for such charges.  

On 5 August 2020, the Supreme Court of India handed down its judgement in the case of The Chairman, Board of Trustees, Cochin Port Trust v M/S Arebee Star Maritime Agencies Pvt. Ltd. & Ors.

In 1998-99, several containers said to contain woollen rags were discharged from different Container Lines' vessels at Cochin Port. On inspection by Customs before cargo clearance, the cargoes were found not to be woollen rags as declared, but woollen garments. Consequently, the cargos became the subject of a Customs investigation, during which time the cargoes remained uncloaked. The Cochin Port Trust refused to de-stuff the containers, citing a lack of space in the port premises as the reason. Fearing that the Customs might permit the cargos to be cleared before they could collect outstanding container detention charges and ground rent from the importers, the vessel agents cancelled the delivery orders they had previously issued for the cargos.

The Port Trust levied ground rent on the containers and deducted those charges from the vessel agents' running account with the port. The vessel agents subsequently issued proceedings against the port in the Kerala High Court.

The Single Judge of the Kerala High Court did not find in favour of the vessel agents, and the agents filed an appeal. The Appellate Court observed that the Tariff Authority for Major Ports (TAMP) had in its order of July 2000, held that Port Trusts were not permitted to charge any ground rent on abandoned containers beyond 75 days.

The following questions of law were therefore referred to the Larger Bench of the Supreme Court for reconsideration:-

  • Whether in the interpretation of the provision of Section 2(o) of the Major Port Trust Act, the question of title of goods, and the point of time at which title passes to the consignee was relevant to determine the liability of the consignee or vessel agent in respect of charges to be paid to the Port Trust;
  • Whether a consignor or a vessel agent was absolved of the responsibility to pay charges due to a Port Trust for its services in respect of goods which had not been cleared by the consignee, once the bill of lading was endorsed or the delivery order was issued;
  • Whether a vessel agent could be made liable for payment of storage charges/demurrage, etc. in respect of goods which had not been cleared by the consignee, where the vessel agent had not issued a delivery order; and if so, to what extent;
  • What the principles were which determined whether a Port Trust was entitled to recover its dues, from the vessel agent or the consignee; and
  • While the Port Trust did have certain statutory obligations about goods entrusted to it, whether there was an obligation, either statutory or contractual, that obliged the Port Trust to de-stuff every container that was entrusted to it and to return the empty containers to the vessel agent.

The Supreme Court held that to determine the liability of the consignee or steamer agent to pay port dues, transfer of title of good to the consignee is irrelevant. Further, the steamer agent can only be held liable for dues in connection with services rendered to them (unloading charges etc.) and all other dues accrued after that, the liability falls on the importer, owner, consignee or its agents. The Court observed that as per the scheme of the MPT Act, post landing and removal to a place of storage, storage charges/demurrage payable thereon will be recoverable from the owner of the goods and finally held and clarified that irrespective of whether goods are carried in a container or not, the liability for demurrage would still lie on the owner of the goods, the Port Trust is under a duty to dyestuff the goods and handover the empty container to the concerned person. The period for the completion of this activity may vary depending on a case to case basis, but the Port Trust is not absolved or prevented from carrying out this act completely.

In the present era where economic recessions are a part of a cycle which is itself is kind of like a Mobius strip, it is illogical and immoral to charge anyone or any company in a case where the delay was due to no fault of their own because fining companies on the mistakes that we're helpless in is deterrent to society and would further encourage more of pseudo cases. This judgement will provide required clarity to the Port Authorities and will also come as a blessing for vessel owners who were being burdened with such liability through no fault of their own.