Balakrishna Eradi, Actg. C.J.
1. This is a dispute between two statutory Corporations both of which are wholly owned by the Government of India and it is unfortunate that the matter should have been dragged to court and fought out in successive courts with all the attendant expenditure of public funds instead of its being discussed and settled at a high governmental level.
2. The appeal arises out of a suit O. S. No. 95 of 1969 instituted in the sub Court of Cochin by the Food Corporation of India against the Jayanthi Shipping Company Ltd. which has subsequently been taken over and amalgamated with the Shipping Corporation of India Ltd. The suit is for recovery of an amount of Rs. 30,590.38 by way of damages for alleged short deiivery of goods which had been shipped at Bangkok for carriage to the Port of Cochin. The lower court upheld the claim except in respect of the amount representing proportionate insurance premium over the portion of the consignment not delivered and also the price of the gunny bags. It is against the decree so passed against it that the Shipping Corporation of India has preferred this appeal.
3. The plaintiff's case is that a consignment of 1,03,500 bags of Thai white rice weighing M.T. 10318.954.521 (N) wasshipped in good order and condition on board the defendant's vessel S. S. Rama-jayanthi at Bangkok by the Department of Foreign Trade, Ministry of Economic Affairs, Government of Thailand for carriage to the Port of Cochin under thirty-six bills of lading. The goods were consigned to the Government of India, Ministry of Food and Agriculture (Department of Food), New Delhi and the bills of lading were duly endorsed to the plaintiff-Corporation. The vessel arrived at Cochin on 18-10-1968 and the discharge of cargo was commenced on 21-10-1968. The discharge was completed on 2-11-1968 and a certificate of completion was jointly signed by the Master, representatives of Stevedores and steamer agents of the vessel and by the plaintiff's representatives. As per the outturn statement dated 5-12-1968 issued by the Port Trust of Cochin there was a short landing of 563 bags of rice. Out of the 1,03,500 bags of rice shipped as per the bills of lading only 1,01,048 bags were delivered in good condition. 1,889 bags of rice were discharged in torn, cut and slack condition. It was further found out that the cargo of rice in hatches Nos. 1 and 5 in the ship were contaminated with sulphur particles. The said matter was intimated to the master of the vessel by letter dated 24-10-1968. After giving due intimation to the Master of the vessel as well as to the agents of the ship at Cochin (2nd defendant) a hatch survey was conducted by Messrs. Kamath and D'Abrao and they submitted their survey report No. 68/1083 dated 7-12-1968. Subsequently a survey of the slack, cut and torn bags was also conducted by Messrs. Kamath and D'Abrao and survey report No. 68/1085 dated 9-12-1968 was submitted by them. As per the survey report the total weight of 1889 slack, cut and torn bags was M. T. 127.672.100 (N). The weight of 152 bags of rice contaminated with sulphur particles was found to be M.T. 13.44.808. The weight of 241 bags of steamer sweepings was found to be M.T. 20.933.939 and that of 840 bags of shed sweepings M.T. 71.262.360. Towards the value of the goods short delivered and damage as well as their proportionate freight and insurance charges together with surveyors' fee the plaintiff issued to the defendant a claim bill for Rs. 30,590.38. But the defendants failed to pay the said amount or any portion thereof. The plaintiff's case is that the defendants having failed to deliver to them at Cochin the exactweight and number of bags of rice shipped at Bangkok in the same good order and condition as they were at the time of shipping, the defendants committed a breach of contract and are liable to the plaintiff for damages to the extent of the amount aforementioned.
4. As already noticed, the 1st defendant was the Jayanthi Shipping Company Ltd. and the 2nd defendant was Messrs. Mahavir & Co., Cochin who were the agents of the Jayanthi Shipping Co. The defendants contended that the consignment in question was shipped pursuant to a charter party between the 1st defendant and the President of India dated 30-8-1968 and that the plaintiff is bound by the terms and conditions of the charter party. According to the defendants the liability, if any, in respect of the consignment is only that of the charterer, namely the Government of India, and the defendants are completely indemnified in respect of all their liability. It is further contended in the written statement that the bills of lading issued in respect of the goods are mere receipts issued in proof of the shipment pursuant to the charter party and that the number of bags, weight etc. were declared by the shippers on behalf of the charterers and they had not been admitted by the defendants. The defendants denied that the rice was loaded into the ship in good condition and that there was any short delivery or damage to the goods by contamination with sulphur while the goods were in the custody of the defendants or their employees. It is stated that the shortage and/ or damage, if any, to the cargo was caused by the charterers, the plaintiff, or their employees at the time of loading, storing and stacking the cargo. The defendants do not admit the alleged short delivery of 563 bags or the truth and accuracy of the contents of the outturn statement. The representatives of the Indian Embassy in Bangkok had inspected and approved the holds on 23-9-1968 prior to loading and stowing and hence the defendants cannot be saddled with any liability on the ground of alleged sulphur contamination of the rice from the holds of the ship. The defendants question the competence of the plaintiff to institute the suit by contending firstly that the plaintiff is only a part and parcel of the Government of India who were the charterers of the ship and that Under the provisions of the charter party the defendants are indemnified by thecharterers. The second ground on which the plaintiff's competence to maintain the suit was challenged is that the bills of lading had not been validly endorsed to the plaintiff and that in any event there was no assignment for value of the absolute title in the goods in favour of the plaintiff by the consignee. The plain allegation that the shortages and contamination were caused on account of negligence, default and want of due care and caution on the part of defendants, their agents and servants while the cargo was in their custody was strongly refuted by the defendants in the written statement. The defendants contended that the rice would lose weight by evaporation to the extent of 7 1/2% and excepting for such natural and inevitable loss in weight no other kind of loss had taken place while the goods were under carriage by sea.
5. The lower court framed as many as twenty-one issues as arising for determination in the suit. Issues Nos. 1 and 2 related to the question of competence of the plaintiff to maintain the action. On these two issues the lower court found that the numerous documents produced in the case showed that the defendants had recognised the plaintiff as the endorsee of the bills of lading duly empowered by the President of India to take delivery of the goods and to do all acts consistent with the ownership of the goods. It was further held by the lower court that having regard to the fact that even in the charter party (Ext. B1) the plaintiff was expressly recognised as the person entitled to receive the goods and also the proved circumstances that the certificate of completion of discharge (Ext. A4) was signed by the Master of the ship and an officer of the plaintiff-Corporation and that it was with the plaintiff alone that the Master of the ship and the defendant's agents at Cochin as well as the authorities of the Cochin Port Trust had carried on all the correspondence and had dealings in relation to the discharge of the cargo at Cochin, it was idle for the defendants to contend that the title of the goods had not vested in the plaintiff and the plaintiff was not competent to maintain the suit. On issues Nos. 3 and 4 which related to the question as to whether there was any short landing, short delivery or damage to the goods, and if so to what extent, and whether the defendants are responsible and liable for such shortageor damage to the cargo, the lower court found that the evidence clearly established that there was a short landing of 563 bags and that 1889 bags were landed in torn, cut and slacked condition. It was further found that after taking into account the sweepings, the net shortage amounted to 22.281.082 M.T. of rice. On the question of liability of the defendants in respect of the aforesaid short delivery of cargo the lower court rejected the contention of the defendants that the delivery was given to the plaintiff in the ship's tackle and hence responsibility for any shortage or slackage could not be placed on them. It was held that the delivery was effected only when the plaintiff was put in absolute control and complete dominion over the goods after completion of the discharge operations. The defence contention that the loss of weight to the tune of 7 1/2% must be attributed to evaporation was not accepted by the court below. Similarly the plea put forward by the defendants that since the ship had been inspected by the charterers prior to the loading of the cargo the defendants could not be made liable for contamination of the rice with sulphur particles from the hold of the ship was also rejected by the lower court. The learned Subordinate Judge held that the charterers are not experts and they could not be expected to detect minute particles of sulphur on the beams and other portions of the holds and that it was the duty of the owner of the ship to disclose such latent defects. On the question as to whether the defendants could be made liable for damages unless actual negligence on their part is proved, the lower court held that bill of lading is prima facie evidence, if not conclusive evidence, that the cargo described therein was loaded on board and placed in the custody of ship owners in good and sound condition as recited in the bills of lading and that it was the duty of the carrier to deliver the goods to the consignee in the same apparent good order and condition and that in the event of there being any shortage or damage the carriers are liable irrespective of whether or not negligence is proved. In this view the lower court held that Ext. A1 series being clear bills of lading and the factum of shortage and slackage as also contamination of part of the cargo with sulphur having been proved, negligence or want of due care and diligence on the part of the defendants could be presumed by the court and there was noth-ing in the evidence adduced on the side of the defendants to dislodge this presumption. Repelling the contention put forward by the defendants that they are exonerated from liability by the immunity clause contained in the charter party evidenced by Ext. B1, the lower court held that the rights and liabilities of the parties are governed by the terms of the bills of lading and which will prevail as against any inconsistent clause contained in the charter party. Accordingly, the lower court held that the defendants are liable to compensate the plaintiff for the shortage and damage caused to the goods. The plaintiff's claim for recovery from the defendants of the amounts representing proportionate insurance premium in respect of the goods short delivered or damaged was disallowed by the lower court. The plaintiff was accordingly given a decree for recovery of a sum of Rupees 29,258.93 with interest thereon at 4% per annum from the date of suit.
6. In this appeal filed by the 1st defendant it is contended that the lower court ought to have dismissed the suit on the preliminary ground that no cause of action in the plaintiff's favour was disclosed by the pleadings inasmuch as there was not even a specific pleading to the effect that the Food Corporation of India had become the full owner of the goods on payment of consideration and the endorsement of the bills of lading were made with intent to transfer the full title over the goods in favour of the plaintiff. It is contended by the appellant that the plaintiff was not competent to maintain the suit on the strength of a mere plea that it was the endorsee of the bills of lading and that besides a total lack of proper pleadings there was also a complete absence of any reliable evidence to prove that the plaintiff had become the owner of the goods or that the absolute property in the goods had passed to the plaintiff. Another point urged on behalf of the appellant is that the lower court has not correctly appreciated or interpreted the various provisions contained in the charter party Ext. B1 as well as in the bill of lading which have the effect of exonerating the carriers from liability for short landing of the goods. According to the appellant the entries in the bills of lading ought not to have been treated by the court below as constituting conclusive evidence of the factum of shipment of goods of the specified quan-tity in sound condition. Yet anotherpoint urged in the appeal is that even if there is short delivery of the goods the right to claim damages in respect thereof is personal to the charterer and it cannot be transferred to any other holder of the bill of lading. It is further urged by the counsel for the appellant that the outturn statement Ext. A5 is not based on actual realities, that the survey reports also were not worthy of any reliance since the surveyers had not been examined in court and that the survey itself had not been made in the presence of the defendants. The appellant also contended that the delivery of the goods should in law be deemed to have commenced with the lifting of the goods from the holds of the ship and that the defendants were not therefore responsible for any loss or damage to the goods in the process of their unloading from the holds and transportation to the godowns or sheds of the Port Trust. The finding entered by the court below that there was contamination of part of the consignment by sulphur and that the defendants were liable for the resultant damage to the goods was challenged by the appellant's counsel as incorrect and illegal. It was argued on behalf of the appellant that there was no legal evidence to prove . that the goods were shipped in good order and condition and hence there was no justification for drawing any presumption in regard to the said matter from the mere fact that a clean bill of lading had been signed by the Master of the ship. According to the argument of the learned counsel no legal liability could be fixed on the carrier in the absence of a definite plea ascribing specific acts of negligence to the carrier and satisfactory proof of such a plea by convincing legal evidence. On these grounds the appellant contended that the judgment and decree of the lower court should be set aside and the suit should be dismissed with costs.
7. The first point urged on behalf of the appellant relates to the competence of the plaintiff to maintain the suit. It is contended that the plaint does not contain any specific averment to the effect that the absolute title in the goods had become transferred to and vested in, the plaintiff. We do not find it possible to uphold this contention. It is specifically stated in para. 4 of the plaint that the bills of lading were issued by the 1st defendant and were consigned to the Government of India, Ministry ofFood and Agriculture (Department of Food), New Delhi and that they 'were duly endorsed to the plaintiff.' Under Section 1 of the Indian Bills of Lading Act (9 of 1856) every endorsee of a bill of lading to whom the properties mentioned therein 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. In Ext. Bl charter party itself, the recitals in which undoubtedly bind the defendants, the plaintiff, namely the Food Corporation of India, is recognised as the person entitled to receive the goods. Clause 56 of Ext. Bl states:
'If the vessel is finally nominated for discharge at any port in the State of Kerala or at Tuticorin, from the time of vessel's arrival at the first or the sole discharging port the rights and liabilities of the Charterer in respect of this Charter, except in regard to the payment of freight,' in terms of the Charter-party for which the Charterer will continue to be liable shall stand transferred to the Food Corporation of India and it shall take them over.'
In the light of this categorical provision contained in Ext. Bl it is idle for the defendants to contend that the plaintiff in whose favour the bills of lading had been endorsed had not acquired a valid title over the goods. The original bills of lading had been surrendered to the ship owners at the time of the discharge of cargo at the Port of Cochin. Ext. Al series produced by the plaintiff are only copies retained by the plaintiff. The endorsements made by the Government of India in the plaintiff's favour would be contained in the original bills of lading which are now in the possession of the defendants. While putting forward a contention that there was no valid endorsement on the bills of lading in the plaintiff's favour, the defendants have not, however, chosen to produce in court the original bills of lading which are in their possession. If there was any substance or truth in the plea put forward by the defendants that there was no valid endorsement on the bills of lading one should have expected the defendants to produce the originals of the bills of lading in court in substantiation of the said plea. There is also ample material available before the court to show that the defendants have, by theirconduct, treated the plaintiff as the person entitled to roceive the cargo. Ext. A3 invoice in respect of the cargo has been produced by the plaintiff. The certificate of completion of discharge Ext. A4 is signed by the Master of the ship and an officer of the plaintiff-Corporation. The outturn statement Ext. A5 was issued by the Cochin Port Trust to the plaintiff. Exts. A9 and All show that the defendants were carrying on correspondence with the plaintiff in respect of the protest lodged bv the plaintiff regarding sulphur contamination of the goods without raising any question whatever regarding the competency of the plaintiff to put forward the claim. From the evidence produced in the case it is clearly established that there had been a valid endorsement on the bills of lading by the Government of India in favour of the plaintiff-Corporation and that the plaintiff-Corporation had acquired title over the goods carried by the 1st defendant-Company so as to entitle it to institute and maintain the suit. We have no hesitation to confirm the finding of the trial court rejecting the defendants' plea that the plaintiff was not competent to maintain the suit. We do not find also any substance in the argument advanced on behalf of the defendants that under the provisions of the charter party the defendants are indemnified from liability and that the carriage of the goods is free of risk to the carrier. Clause 34 of Ext. B1 is in the following terms:--
'Bills of lading to be conclusive evidence against owners as to the number of bags shipped and vessel to be responsible for the number of bags and contents short delivered of signed bill of lading quantity. Sweeping, if any, to be adjusted against such short delivery.' Again, Clause 39 indicates that the ship owners had undertaken to take all necessary steps to prevent contamination of the rice by contact with other types of cargo. Ext. A1 series are clean bills of lading issued by the 1st defendant-Company. As pointed out by the Supreme Court in Ellerman and Bucknall Steamship Co. Ltd. v. Sha Misrimal Bherajee, AIR 1966 SC 1892 at p. 1898, a clean bill of lading is one which does not contain any reservation as to the apparent good order and condition of the goods or the packing and the general statement in the bill of lading that the goods have been shipped 'in good order and condition' amounts (if it isunqualified) to an admission by the shipowner that, so far as he and his agents had the opportunity of judging, the goods were so shipped. If there is no clause or notation in the bill of lading modifying or qualifying the statement that the goods were 'shipped in good order and condition' the bill is known as a clean bill of lading. Where such a clean bill of lading has been issued, the ship owner is estopped as against an endorsee for value of the bill and against a person rightfully presenting the bill of lading and taking delivery thereunder from proving that the goods were not in apparent good order and condition when they were shipped, unless it was clearly known to the endorsee or person presenting the bill that the statement was untrue or is proved that he did not act upon the faith of the statement. In the absence of contrary evidence, the fact that the holder of a bill of lading containing such a statement has taken it without objection is sufficient to show that he relied upon it. (See Scrutton on Charterparties, Eighteenth Edition, page 114). This position has been reiterated in two rulings by two Division Benches of this court in Mugal Line Ltd. v. Food Corporation of India, 1976 Ker LT 818, and in the unreported judgment in A. S. No. 186 of 1973 dated 7th Dec. 1976 (Ker).
8. There is absolutely no evidence adduced in the case to indicate that the plaintiff had any reason to think that the statement contained in the bills of lading that the goods had been shipped on board in apparent good order and condition was not true or that the plaintiff-Corporation did not act upon the faith of the said statement. The plaintiff as the endorsee of the bills of lading has therefore a valid cause of action against the defendants for recovery of the loss sustained by it on account of any short delivery or damage to the goods. The contention to the contrary advanced by the defendants was rightly rejected by the lower court. Although it was urged on behalf of the appellant that there is no satisfactory evidence to prove that there was short delivery as alleged in the plaint or that any portion of the goods had sustained damage by contamination with sulphur, we are wholly unable to accept this contention after having carefully gone through the entireevidence adduced in the case, Ext. A-5 is the outturn statement issued by the Cochin Port Trust and it shows that therewas a short landing of 563 bags of rice. It is also seen that the sweepings from the holds have accounted for 393 bags. Immediately after the discharge of the cargo a hatch survey was conducted by Messrs. Kamath & D' Abrao. The same surveyors also conducted a survey of the goods which had been unloaded and kept in the sheds of the Port Trust. Ext. A-7 is the survey report prepared by Messrs. Kamath and D' Abrao after inspection, survey and weighment of slack, cut and torn bags, steamer sweepings and shed sweepings kept at the Q-3, Q-6 and Q-8 sheds in the Cochin Port. It is stated therein that 1889 bags of rice were in torn, cut and slack condition and that a part of the cargo was seen contaminated with sulphur. Ext. A-6 is the report of the hatch survey conducted by the same surveyors regarding the sulphur contamination. It is not disputed that the surveyors who prepared Exts. A-6 and A-7 are fully qualified, competent and in-dependant persons and that the survey was got conducted by them only after due notice about the same had been given by the plaintiff to the Master of the vessel. We see no reason why the data furnished by the independent surveyors in the survey reports evidenced by Exts. A-6 and A-7 should not be accepted as correct and reliable for the purpose of determining the question whether there was short landing of the goods and whether any portion of the goods had suffered damage during their carriage by sea. From the bills of lading evidenced by Ext. A-1 series it is seen that 1,03,500 bags of rice weighing 10,318.554.421 M. T. valued at U. S. Dollars 1,681,996.12 had been shipped in apparent good order and condition. Exts. A-6 and A-7 read along with the out-turn statement Ext. A-5 clearly show that there was a short landing of 563 bags and that after taking into account the shed sweepings and steamer sweepings the net shortage amounted to 22.281.082 M. T. of rice, Although the defendants put forward a contention that delivery was given to the plaintiff in the ship's tackle and hence the responsibility for any shortage or slackage cannot be placed on them this plea was rightly negatived by the lower court. As pointed out by the privy Council in Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. 1959 A. C. 576, the fundamental obligation of the ship owner is to carry and deliver the goods to the consignee or his agent at the port of destination and the contract can onlybe performed by giving delivery of the goods to the consignee. The bill of lading cannot be said to be spent or exhausted until the goods covered by it are placed under the absolute dominion and control of the consignee and the landing, agents are intermediaries in their duties1 to both parties, agents of the ship owners as long as the contract remains unexhausted, and agents for the consignee as soon as the bills of lading are produced with the delivery order endorsed. (See Govardhandas Kalidas v. New Dholers Steamships Ltd., 1964 Ker LT 78). The defendants therefore cannot escape liability for short landing of the goods by contending that they were bound to give delivery to the plaintiff only in the ship's tackle or that they could not be made liable as a carrier for any loss by way of spillage etc. in the course of discharge of the cargo from the ship through the instrumentality of the landing agents. It follows from the above discussion that the conclusion arrived at by the court below that the defendants are liable to make good to the plaintiff the loss caused on account of short delivery of the goods does not call for any inter ference.
9. The hatch survey report Ext. A-6 discloses that in holds Nos. 1 and 5 of the ship some sulphur particles had adhered to the beams and upper surface of the sides and bulkheads and it was in consequence thereof that some part of the cargo of rice became contaminated with sulphur. There is no merit in the contention put forward by the appellant that since the holds of the ship had been inspected by the charterers at Bangkok they must be deemed to have known about the condition of the ship and having consigned the rice in the ship with such knowledge the defendants cannot thereafter be made liable for any sulphur contamination of the rice from the ship's holds. As rightly pointed out by the lower court the defect in the holds was not such as could be noticed by the charterers on a casual inspection but, on the other hand, they were latent defects which it was the duty of the ship owner to disclose to the charterers. That, admittedly, not having done, the defendants cannot escape liability by contending that the ship's holds had been inspected by the charterers prior to the loading of the goods.
10. In the light of what is stated above we have no hesitation to confirmthe findings of the court below that the defendants are liable to make good the plaintiff the value of the short landed cargo inclusive of the quantity of rice lost in the process of reconditioning of the portion of the consignment contaminated with sulphur. But, in the claim bill Ext. A-8 submitted by the plaintiff depreciation has been claimed in respect of the steamer sweepings and shed sweepings at 7 1/2% and 12% respectively and this has also been allowed by the court below. In our opinion, the appellant is right in his contention that there is no legal basis for making the ship owners liable for such depreciation. It has also not been shown to us on what scientific basis this percentage of depreciation has been applied in respect of the sweepings. In the circumstances we consider that the claim for depreciation put forward by the plaintiff in respect of the steamer sweepings and shed sweepings cannot be allowed. The total weight of cargo in respect of which the said depreciation has been allowed by the lower court is 10.121.528 M. T. of rice. It is agreed before us by counsel appearing on both sides that the rupee equivalent of the value of the said quantity of rice calculated at U S. Dollars 163 per M. T. is Rs. 12,373.58. This sum will have to be disallowed from the aggregate amount of damages allowed to the plaintiff by the court below on account of short landing and contamination of the cargo. The appellant is also on firm ground in regard to another contention raised by him, namely that the lower court was not justified in allowing recovery of the proportionate freight in respect of the quantity of goods short landed or damaged. Neither in the charter-party agreement nor in the bills of lading is there any term or stipulation entitling the charterer or endorsee to a refund of the proportionate freight in respect of goods that may be short delivered or damaged; nor is the claim put forward by the plaintiff for recovery of proportionate freight founded on any established principle of law relating to the carriage of goods by sea. Accordingly we disallow the plaintiff a sum of Rs. 1458.28 which has been awarded by the court below by way of refund of proportionate freight.
11. In the result, the appeal is allowed to the extent indicated above and in substitution of the decree passed by the court below the plaintiff is granted a decree for recovery of only a sum of Rs. 15,427.07 from the 1st defendant withinterest at 4% from the date of suit. The plaintiff will get proportionate costs on the said amount from the 1st defendant in the lower court. The parties will bear their respective costs in this appeal.