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Indian Shipping Industry Ltd. Vs. Dominion of India - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai High Court
Decided On
Case NumberO.C.J. Suit No. 1369 of 1947
Judge
Reported inAIR1953Bom396; (1953)55BOMLR485
ActsCarriage of Goods by Sea Act, 1925 - Sections 2, 3, 4 and 5 - Schedule - Articles 1 and 6
AppellantIndian Shipping Industry Ltd.
RespondentDominion of India
Appellant AdvocateM.P. Laud, ;K.T. Desai and ;N.A. Mody, Advs.
Respondent AdvocateJ.M. Thakore and ;S.V. Gupte, Advs.
Excerpt:
indian carriage of goods by sea act (xxiv of 1925), schedule, articles 1(b), iii; sections 2, 3, 4 - ' contract of carriage ' including (1) contract covered by bill of lading in relation to carriage of goods by sea and (2) contract covered by bill of lading issued under charter party--words in article l(b) 'from the moment' etc. qualify which of the two contracts--' covered by a bill of lading ', construction of expression.;in article 1(6) of the schedule to the indian carriage of goods by sea act, 1925, a contract of carriage, as defined in the article, may be one of two kinds : (a) a contract covered by a bill of lading or any similar document of title in so far as such document relates to the carriage of goods by sea, or (6) a contract covered by a bill of lading or any similar.....1. this is a suit filed by a, shipping company against the dominion of india arising out of 3, contract dated 20-1-1944, made between the plaintiffs and the textile commissionery bombay, acting on behalf or the governor general in council, who has now been succeeded by the dominion of india.2. under the said contract the plaintiffs agreed to transport from bombay by country crafts standard cloth to certain ports on certain terms and conditions. as one of the terms of the said contract the plaintiffs had to deposit a sum of rs. 1,00,000 as security for the due fulfilment of their obligations under the agreement. a de-posit was accordingly made on 9-3-1944, thereafter the plaintiffs from time to time received 575 bales of cloth for being carried from bombay to cochin and aileppey in the.....
Judgment:

1. This is a suit filed by a, shipping company against the Dominion of India arising out of 3, contract dated 20-1-1944, made between the plaintiffs and the Textile commissionery Bombay, acting on behalf or the Governor General in Council, who has now been succeeded by the Dominion of India.

2. Under the said contract the plaintiffs agreed to transport from Bombay by country crafts standard cloth to certain ports on certain terms and conditions. As one of the terms of the said contract the plaintiffs had to deposit a sum of Rs. 1,00,000 as security for the due fulfilment of their obligations under the agreement. A de-posit was accordingly made on 9-3-1944, Thereafter the plaintiffs from time to time received 575 bales of cloth for being carried from Bombay to Cochin and Aileppey in the country craft 'Jayant'. The said country craft left Bombay for the ports of Cochin and Alleppey on 15-3-1914. After passing Khanderi, water began to enter the said country craft and the Tindel of the country craft baled out the water. On the morning of 17-3-1944, the Tindel decided to go to Jayagad port. Owing to low tide he had to anchor the craft at some distance from the port.

However, the crew on the said craft were unable to bale out the water that was coming into the craft. The Tindel went ashore and informed the Customs Officers. As a result, 50 bales of cloth were removed to the shore in good condition. In the meantime the craft was full of water and grounded as a result. After a great deal of correspondence lost took place between the plaintiffs and the Textile Commissioner the goods which were in a damaged condition were brought back to Bombay; but as the defendants refused to take back the goods, 302 bales were lying in the open in the Port Trust docks and 218 bales in the godowns of the plaintiffs' clearing agents. The defendants claimed that the plaintiffs were under the terms of the contract liable for the damage caused and refused to return the security deposit of Rs. 1,00,000 which, was lying with the Textile commissioner. This suit has been filed by the plaintiffs to recover this sum of Rs. 1,00,000 as also a sum of Rs. 52,971-6-3 being the hire amount and expenses incurred by the plaintiffs in respect of the goods carried by the said craft 'Jayant' as well as by other country crafts.

3. It is the case of the plaintiffs that the provisions of the Indian Carriage of Goods by Sea Act (26 of 1925) apply to the contract of affreightment in this suit, and that, therefore, under this contract, of affreightment they did not give an absolute warranty of seaworthiness. The defts contend that the Carriage of Goods by Sea Act does not apply, and that, in any event, if it does apply, this case is taken out of the provisions of the Act by reason of Article 6 of the rules relating to bills of lading which are given in the schedule to that Act. As the entire case depends mainly upon the question as to whetner the liability of the plaintiffs as carriers is governed by the Indian Carriage of Goods by Sea Act, 1925. or not, I decided, on an application made in that behalf by counsel for the defendants, to try the following two issues as preliminary issues:

'1. Whether the Indian Carriage of Goods by Sea Act 1925 applies to the contract in suit?

2. If answer to Issue 1 is in the affirmative, whether the said contract is governed by Article 6 in the Schedule to the said Act?'

4. Now, in the first instance, it is necessary to consider the nature of the contract that was arrived at, for it is urged on behalf of the defendants that it is a charterparty and, as I will point out when I deal with the relevant provisions of the Act, if this contract is a charterparty, the position in law would be very different from what it would be if this is not a charterparty.

5. Now, a charterparty has been defined in Halsbury, Edn. 2., Vol. 30, para, 472, at page 273, as follows:

'A contract by charterparty is a contract by which an entire ship or some principal part thereof is let to a merchant, who is called the charterer, for the conveyance of goods on a determined voyage to one or more place, or until the expiration of a specified period,'

It will be noticed that an essential part of the definition is that the contract must be for the hiring of an entire ship or some principal part thereof. Then in the same volume in para. 481 at page 283 it is stated as follows:

'It is usual to specify the name of the ship which is to be chartered in the charterparty and to give her description in detail. The description usually includes statements as to the nature of the ship, her registered tonnage, her classification at Lloyd's, her position at the date of the charterparty, and her fitness for the purposes of the charterer; it may, in addition, specify her carrying capacity and the name of her master.'

It is clear from this passage that the name of the ship is usually specified, and the importance of doing so is to be seen from the passage that follows in Halsbury which is as follows (p. 284):

'Of these statements, those relating to the name and nature of the ship, to her position at the date of the charterparty, and to her tarrying capacity are to be regarded as conditions precedent on the non-fulfilment of which the charterer may treat the contract as repudiated.'

Therefore, before you can have a charterbarty, you must have (a) the hiring of a ship or some principal part of a ship, and (b) the ship must be specified. Reliance is, however, placed on a footnote (o) at p. 284 where it is stated as follows:

'There seems to be no direct authority for the proposition that the statement as to the name of the ship is a condition precedent. The proposition is retained from the previous edition. It is submitted that the proposition is in accordance with principle, subject to the qualification that if the parties were agreed as to the identity of the ship an incorrect statement of her name might be immaterial.'

Now, accepting the law as stated in this footnote to be correct, it amounts to this that if the identity of the ship can be established as having been agreed upon between the parties, it would not matter whether the name of the ship was given or not given in the charterparty.

6. Keeping these essential ingredients of a charterparty in mind, I will now turn to the contract in suit. Term 2 of the contract provides that the plaintiffs are to transport cloth on behalf of the Governor General in Council. Term 3 states the ports to which the goods are to be transported and mentions that they are to be transported by 'a country craft.' Term 4 mentions the rates. Term 5 casts upon the plaintiffs the obligation to provide 'the necessary country craft' within a certain period. Then term 6 provides that if the standard cloth is less than the carrying capacity of the craft, the plaintiffs may carry other cargo provided, that it is not objectionable etc. to the Textile Commissioner or the mills. It also enables the Textile Commissioner to object to the cargo other than cargo which is objectionable etc. Out in such an event the Textile Commissioner has to pay the freight for the full carrying capacity of the craft. Term 7 relates to the responsibility of the contractor for the safe transport of the cargo and provides that the plaintiffs shall be liable for any loss or damage

'unless it is proved to the satisfaction of the Textile Commissioner that the loss or damage was due to an act of God, 'force majeur', salt water damages, Jettison and such other risks 6 that it was not due to the negligence of the shipping agent or his crew.'

Term 8 provides for payment. Term 9 provides for sub-letting by the plaintiffs. Term 10 relates to security deposit. Term 11 relates to prohibiting corrupt practices. Tenn 12 states that the plaintiffs are responsible for carrying out the contract. Term 13 deals with insurance. Term 14 deals with repayment of the amount due under the contract. Term 15 deals with possible insolvency of the plaintiffs. Term 16 states that the laws governing the contract will be the laws of British India, as if they could have been any other if this term were not there, and term 17 provides for arbitration. It is obvious, therefore, that there is no contract of hire of a ship or some principal part of a ship. The plaintiffs arc to provide some ship on which they will carry such cloth as is given for transport. Then, again, it cannot by any stretch of imagination be urged that parties are agreed as to the identity of the ship on which the cargo is to be carried. Great reliance is placed on clause G which provides that, in a possible contingency the Textile Commissioner may have to pay full freight of the carrying capacity of the craft, although the cloth, carried may be far less than such capacity. But that does not, in my opinion, in any way help in saying that the parties to the contract were agreed as to the identity of the ship. It was open to the plaintiffs to produce any country craft they liked and the defendants, in my opinion, could not have objected to any country craft that was produced, subject to any liability for the seaworthiness of such ship as may be imposed upon the plaintiffs by a contract or by law. In my opinion, therefore, it is impossible to construe the contract between the parties as a contract of charterparty.

7. Turning next to the provisions of the Carriage of Goods by Sea Act, 1925, the preamble to the Act states that the Act was enacted as a result of the deliberations of an International Conference on Maritime Law held at Brussels in October 1922, and the object of the Act is 'the unification of certain rules relating to bills of lading.' Then Section 2 of the Act provides as follows:

'Subject to the provisions of this 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 of goods by sea in ships carrying goods from any port in India to any other port whether in or outside India.'

It is plain from the section that the rules given in the schedule apply in relation, to and in connection with the carriage of goods by sea, but this is 'subject to the provisions of this Act'. The important provisions with which we are concerned in this suit is the provision relating to the warranty of seaworthiness, and the provision in that regard is to be found in Section 3 which is as follows:

'There shall not be implied in any contract for the carriage of goods by sea to which the Rules apply any absolute undertaking by the carrier of the goods to provide a seaworthy ship,'

Now, this section provides that the warranty of seaworthiness shall not be absolute, only in cases of 'any contract for the carriage of goods by sea to which the Rules apply.' Now, the words 'Contract of carriage' have been denned in the rules Article l(b), and if Section 3 applies to a contract for the carriage of goods by sea to which the rules apply, the definition given in the schedule of the phrase 'Contract of carriage' must be deemed to be applicable to the same words used in Section 3 of the Act. Then Section 4 provides that every bill of lading shall contain a statement that it is subject to the provisions of the rules. The rest of the sections are not material for the purposes of the issues before me.

8. Turning next to the rules which are in the schedule, Article 1(b) defines a 'Contract of carriage' as follows:

' 'Contract of carriage' applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea including any bill of lading or any similar document as aforesaid issued under or pursuant to a charterparty from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.'

The correct interpretation of this definition is the point in dispute between the parties. It is urged on behalf of the plaintiffs that a contract as here denned may be one of two kinds: (a) a contract covered by a bill of Jading or any similar document of title in so far as such document, relates to the carriage of goods by sea, or (b) a contract covered by a bill of Jading or any similar document issued under or pursuant to a charterparty and the words 'from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same' qualify the second class of contracts only and not the first. On the other hand it is urged on behalf of the defendants that the words I have above quoted apply equally to the first class of contracts as well as the second.

But before I come to consider which of these two views is the correct one, there is yet another question of interpretation of this definition that has to be cleared. The words 'covered by a bill of lading' would prima facie appear to indicate that there is no contract of carriage until there is a bill of lading; but such a meaning does not appear to be in conformity with the provisions of Article III of the schedule which makes it obligatory on the carrier to issue to the shipper a bill of lading. Article III only applies to a contract of carriage, and if a contract of carriage does not come into existence until there is a bill of lading, quite obviously it is illogical to provide that there is an obligation on the carrier to issue a bill of lading in respect of every contract of carriage of goods. Therefore, the true interpretation to be put on the phrase 'covered by a bill of lading' is as pointed out by Scrutton on Charterparty and by Halsbury in dealing with an identical definition in the Carriage of Goods by Sea Act, 1924, in England, that these words mean that the parties intend that the shipper shall be entitled to demand at or after shipment a bill of lading. Scrutton, 15th Edn. at p. 451 states:

' 'Covered by a bill of lading.'-- These words have not yet been judicially considered in the English Courts. The Court of Sessions, however, construed this definition as meaning any contract of affreightment, however informally made in its inception, the parties to which intend that, in accordance with the custom of that trade, the shipper shall be entitled to demand at or after shipment a bill of lading setting forth the terms of the contract.'

Halsbury, Vol. 30 at p. 618 in foot-note (k) dealing with Article 6 of the schedule, to which I will have occasion to refer later, points out:

'It will be observed that Article authorises the parties to contract out of the Rules provided no bill of lading has been or shall be issued.' By 'ibid' schedule, Article I (b) (which corresponds to Article Kb) in the Schedule to our own Act)., the Rules only apply to contracts of carriage 'covered by a bill of lading or similar document of title.' The two articles can be reconciled by construing 'contracts of carriage covered by a bill of lading in Schedule, Article I (b) as meaning 'contracts of carriage under which the shipper is entitled to demand a bill of lading evidencing the contract.'

Therefore, the true construction of the words 'covered by a bill of lading' is not that the contract actually is covered by such a bill. It is sufficient if the parties intend that the shipper should be entitled to claim at or after shipping a bill of lading. It is contended in this case on behalf of the defendants that the Textile Commissioner was not entitled to demand a bill of lading at any time and therefore there is no contract of carriage of goods by sea. With that contention I will deal later after disposing of the rival contentions as to the true meaning of the definition.

9. Now, in order to appreciate the rival contentions regarding the proper construction to be put upon this definition, it is necessary to consider what part a bill of lading plays in the carriage of goods by sea. Halsbury, Vol. 30, para. 582, at p. 414, states:

'As between the shipowner and the charterer the contract of carriage is contained in the charter-party in the absence of an agreement to vary it by the bill of lading or otherwise; as regards other persons, it is to be found in the bill of lading.'

So that there may be or may not be a bill of lading when there is a charterparty; but there has to be a bill of lading in respect of goods shipped when there is no charterparty. Where there is a charterparty, you may have three different cases as is pointed out in Halsbury, Vol. 30 paras. 576 and 577. There may first be a case where the shipper is a charterer. In this case as is pointed out in para. 576, the bill of lading is, in the absence of anything to the contrary, an acknowledgment only of the receipt of the goods and the contract of carriage is to be found in the charterparty alone. You next have the case which is dealt with in para. 577 where the goods are shipped by a person other than the charterer but in a case where there is a charterparty. In this case the position of the party depends upon several circumstances into which it is unnecessary to go for the purposes of the present discussion. But it is sufficient to say that in such a case the moment at which the bill of lading becomes the repository of the rights as between the carrier and the holder is the time when the bill of lading is. given to the shipper; and the third case is where the charterer ships goods and takes a bill of lading making the goods deliverable to a named consignee; in which case the moment at which the bill of lading becomes effective as between the consignee who is the holder and the carrier is at the time of delivery to the consignee.

It is thus clear that where bills of lading are-issued, either under or in pursuance of a charterparty, there may be different periods of time from which such bills of lading may become effective as regulating the relations between the carrier and the holder. But the position is entirely different where there is no charterparty and the shipper obtains a bill of lading. A bill of lading is in that case a repository of the rights between the carrier and the shipper and it cannot be said that it becomes effective as between them at any moment other than the one when the bill of lading has been given. This background is essential for the purpose of putting a correct interpretation on the definition of 'contract of carriage' in Article 1(b) of the schedule to the Carriage of Goods by Sea Act because that Act by itself does not provide at what moment the bill of lading becomes effective to regulate the relations between the carrier and the holder and that fact is to be found from the general law relating to the carriage of goods.

10. Having regard to this background, it seems to me impossible to urge that the phrase 'from the moment at which a holder of the same', qualifies both the categories of contracts which I have set out above. It obviously qualiffes bills of lading or other similar documents issued under or pursuant to a charterparty, because in that case there are different periods of time when the bill of lading or the other document regulates the relations between a carrier and a holder. Moreover, the plain grammatical construction of the definition, in my opinion, does not warrant a construction which would make the words 'from the moment carrier and a holder of the same' qualify the first part of the definition. In my opinion, therefore, the contention of the plaintiffs with regard to the correct interpretation of this definition is right and that of the defendants is not sustainable.

11. 'December 5, 1952'. The next question that I have to consider is whether in the present case there is a contract of carriage of goods by sea within the meaning of the definition in the rules which are found in the schedule to the Carriage of Goods by Sea Act. Now, it is self-evident that in all cases in which a bill of lading is given there is antecedent to the issuing of the bill of lading a contract expressed or implied between the parties for affreightment of goods. In the present case the contract in suit dated 20-1-1944, is a contract of affreightment. Whether this is a contract of carriage of goods by sea within the meaning of the definition will depend upon whether parties to it intended that a bill of lading should be given and that the defendants would have the right to demand such a bill. This is a question of fact, and on this question of fact the only evidence before me, which is uncontradic-ted, is the evidence of Mr. Vaidya who was the Genera! Manager of the plaintiffs and who negotiated the present contract with the Textile Commissioner of Bombay. In his evidence he states that he had several interviews with Mr. Hafiz Ahmed who was the Director of Standard Cloth and who represented the Textile Commissioner. In the course of these interviews oral instructions were given to him as to how the contract was to be carried out, and those instructions were that tile Textile Commissioner would issue instructions to mills to inform the plaintiffs when goods were ready and then the plaintiffs should Issue shipping orders.

The mills would thereafter bring the goods alongside the ship, and when the goods were received on board the ship, the plaintiffs were to issue a bill of lading in favour of the mills. Subsequently, when the plaintiffs submitted their bills for freight and other charges to the Textile Commissioner, they were to annex thereto duplicate bills of lading containing certain particulars. Mr. Hafla Ahmed with whom these conversations are alleged to have taken place has not been called and therefore the testimony of Mr. Vaidya remains entirely uncontradicted. Moreover, the testimony is fully corroborated by documentary evidence in this case. A clerk of the India United Mills, which was one of the mills that supplied bales to be carried by the plaintiffs, has produced a letter addressed by the Assistant Manager of the plaintiffs to them enclosing a shipping order. He has also produced a bill of lading. This supports the evidence that shipping orders were forwarded to the mills and when goods were received bills of lading were handed over to the mills. A specimen form of the shipping order has also been produced, and what is more, all the bills, admittedly submitted to the Textile Commissioner each with two, duplicate copies of bills of lading and which were returned by the Textile Commissioner to the plaintiffs because they were not in proper form, have also been produced.

There is no doubt whatever, therefore, that the instructions given to the plaintiffs as to the carrying out of the contract were as stated by Mr. Vaidya in the witness box. Mr. Vaidya's evidence is further supported by a letter dated 26-2-1944. addressed by one Mr. Ahmadullah for the Textile Commissioner to the plaintiffs with which was sent an annexure setting out the method of submission of bills and the first clause of this annexture shows that the bills of lading in duplicate should be submitted showing certain particulars therein set out. This letter is further confirmed by another letter dated 9-3-1944, from Mr. C. K. Mehta for the Textile Commissioner to the plaintiffs in which the writer draws attention to the details contained in the previous letter and then proceeds to state:

'It was agreed with your Mr. Vaidya that this information would be supplied (to) this Office immediately after the sailing of the craft. It was also agreed that the Bills of Lading would contain all this information. It is however regretted that neither this information nor the Contract Nos. are given in quite a large number of Bills of Lading forwarded by you.'

It is perfectly plain, therefore, that not only the parties intended that the bills of lading were to be given but also that the bills of lading were in fact issued and copies of such bills were forwarded to the Textile commissioner along with the bills submitted by the defendants. Therefore, the contract in this suit dated 20-1-1944, was a contract under which the parties intended that bills of lading shall be issued. It is, therefore, a contract for carriage of goods 'covered by a bill of lading,'' and therefore the Carriage of Goods by Sea Act applies to such a contract.

12. It is. however, further urged that assuming that the Carriage of Goods by Sea Act applies, the present case is taken out of the provisions of that Act by virtue of Article 6 in the rules in the schedule. That article is in the following terms:

'Notwithstanding the provisions of the preceding Articles, a carrier, master or sgent of the carrier, and a shipper shall in regard to any particular goods be at liberty to enter into any agreement in any terms as to the responsibility and liability of the carrier for such goods, and as to the rights and immunities of the carrier in respect of such goods, or his obligation as to seaworthiness so far as this stipulation is not contrary to public policy, or the care or diligence of his servants or agents in regard to the loading, handling, stowage, carriage, custody, care, & discharge of the goods carried by sea, provided that in this case no bill of lading has been or shall be issued and that the terms agreed shall be embodied in a receipt which shall be a non-negotiable document and shall be marked as such.'

13. Now, by reason of the provisions contained in Section 5(a) of the Act since this was a contract for carriage of goods by sea in sailing ships carrying goods from any port in British India (the Provinces) to any other port in British India (the, Provinces), Article 6 shall be read as if the said article referred to goods of any class instead of to any particular goods. Therefore, this article enables two contracting parties to contract out of the rules in respect of the carriage of any class of goods provided two conditions are fulfilled: (1) that no bill of lading has been or shall be issued, and (2) that the terms agreed upon between the parties shall be embodied in a receipt which shall be a non-negotiable document and shall be marked as such. It is the case of the defendants that in this particular case no bill of lading was issued, because what is urged is that the so-called bills of lading which I have held were issued are merely receipts for goods. It seems to me wholly impossible to uphold such an extraordinary contention, because as I have held the parties definitely intended by their contract that bills of lading shall be issued and they were issued in pursuance of such intention which becomes an implied term of the contract.

But even assuming for a moment that no bills of lading were issued, the second condition has yet to be satisfied and the terms of the contract must be embodied in a receipt. That receipt, it is alleged, is the contract, of 20-1-1344, or the bills of lading. This contention of the defendants is, in my opinion, wholly unsustainable. The contract of 20-1-1944, can in no sense be a receipt for the good. It is admitted that the goods were loaded between February 25 and March 11, and there cannot be a receipt in respect of such goods on 20-1-1944. long before the goods were loaded. But even assuming that this contract was a receipt, it is further necessary that such receipt should be a non-negotiable document and should be marked as such. It is in any event abundantly plain that neither this contract, if it is to be construed as a receipt, nor the bills of lading if they are to be construed as receipts, have been marked as non-negotiable, with the result that it is impossible to uphold the contention that the parties have contracted themselves out of the rules under Article 6 of the schedule to the Act.

14. The case shall proceed on the footing of these findings of mine which would render certain evidence unnecessary and inadmissible. Certain other issues will also have to be determined in the light of these findings. The defendants shall in any event pay the costs of these two issues.

15. Order accordingly.


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