http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

PETITIONER: LUGA BAY SHIPPING CORPORATION & ANOTHERSOUTH INDIA CORPORATI

       Vs.

RESPONDENT: THE BOARD OF TRUSTEES OF THE PORT OF COCHIN & ANOTHER

DATE OF JUDGMENT:       22/11/1996

BENCH: S.C. AGRAWAL, SUJATA V. MANOHAR,CJI

ACT:

HEADNOTE:

JUDGMENT:                             WITH                 CIVIL APPEAL NO.2427 OF 1994                       J U D G M E N T Ahmadi, CJI.      These two  appeals arise  from a common judgment of the Division Bench  of the  High Court  of Kerala on a reference made to it by a learned single Judge of that Court. The High Court found  itself confronted with the question whether the Cochin Port  Trust is  entitled, under the Major Port Trusts Act, 1963,  (hereinafter referred  to  as  ’the  Major  Port Trusts  Act’)   the  Indian  Ports  Act,  1908  (hereinafter referred to  as ‘the  Indian Ports Act’) and the Regulations made thereunder,  to demand  an unconditional  cash  deposit from the owner of a ship which caused damage to the property of the Port Trust.      The appellants  in Civil Appeal No.2427/94, South India Corporation (Agencies)  Ltd., are  the agents of the vessel, M.T. Larnaca.  The appellants  in Civil  Appeal No. 2426/94, M/s Luga  Bay Shipping  Corporation, are  the owners  of the said vessel.  The respondents  are the  Board of Trustees of the Port  of Cochin,  (hereinafter referred  to as ‘the Port Trust’), and  its Deputy Conservator. The vessel entered the Port of  Cochin on June 6, 1984 and was berthed at Berth No. 2. On  June 14,  1984, the  vessel, while being shifted from Berth No.  2 to  the North  Tanker Berth, dashed against the northern side  of the  RCC platform  on  which  the  gravity fenders were  suspended, causing  damage  to  the  platform. Notice of  damage to  the platform  was served  on June  20, 1984. The  appellants do  not dispute  that the  vessel  was berthed in the North Tanker Berth on June 14, 1984. However, they deny  that any  damage was  caused by the vessel to any property of  the Port  Trust during  such birthing. The Port Trust, on the other hand, claims that the damage assessed by the Port  Chief Engineer  was of  Rs.33.82 lakhs. The second respondent, the  Deputy Conservator of Port Trust, requested the local  agents of  the vessel, by a notice dated June 29, 1984, to  deposit that  amount. They were also informed that the vessel would be allowed to sail from the Port only after the amount was deposited.      The Shipping  Corporation, the  petitioner  before  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

Court, filed  a writ  petition  under  Article  226  of  the Constitution of  India  which  was  registered  as  Original Petition No.5822  of 1984.  It prayed  for  calling  of  the records leading  to the  issue of notice (Exhibit P.6) dated June 29,  1984 and to quash the same by an appropriate writ; to declare  condition No.6 of the Notification dated January 8,  1980   fixing  the  scale  of  rates  and  statement  of conditions for  levy of  charges by  the  Port  Trust  under Sections 48,  49 and  50 of  the Major Port Trusts Act ultra vires the  Act and  the Constitution; to declare Regulations No.3 and  43 of  Cochin Port  Trust Regulation,  1975  ultra vires the  provisions of  the Indian Ports Act and the Major Port  Trusts  Act  and  to  restrain  the  respondents  from enforcing the  aforesaid two  regulations. We  will  shortly advert to  the impugned provisions of the Notification dated January 8,  1980 and  the Cochin  Port and  Dock Regulation, 1975. The  learned single  Judge of  the High Court referred the case  of a  Division Bench. The Division Bench posed the question whether  the Cochin  Port Trust  is entitled, under the  Major  Port  Trusts  Act,  the  Indian  Ports  Act  and Regulations made thereunder, to demand an unconditional cash deposit from  the owner  of the  ship which allegedly caused damage to the property of the Port Trust. The Division Bench examined the  provisions of  Section 116  of the  Major Port Trusts Act,  and came to the conclusion that, in a situation like  the  one  on  hand,  the  amount  of  damage  must  be determined by the Board and that the liability of the Master and owner  of the  vessel was  absolute. Section  116 can be reproduced for ready reference:      116. Recovery of value of damage to      property of  Board. --  If, through      the negligence of any person having      the  guidance  or  command  of  any      vessel, or  of any  of the mariners      or persons employed on such vessel,      any damage  is caused  to any dock,      wharf, quay, mooring, stage, jetty,      pier   or   other   work   in   the      possession of  any Board,  [or  any      movable property  belonging to  any      Board,] the  amount of  such damage      shall, on  the application  of  the      Board be recoverable, together with      the  cost   of  such  recovery,  by      distress   and    sale,   under   a      Magistrate’s    warrant,    of    a      sufficient portion  of  the  boats,      masts,   spares,   ropes,   cables,      anchors or stores belonging to such      vessel:      Provided that  no Magistrates shall      issue  such  a  warrant  until  the      master of  the vessel has been duly      summoned to  appear before him and,      if he  appears, until  he has  been      heard; and  provided also  that  no      such warrant  shall  issue  if  the      vessel was  at the  time under  the      orders   of   a   duly   authorised      employee  of   the  Board  and  the      damage caused  was attributable  to      the order, act or improper omission      of such employee."      The High  Court held  that the Board needed to approach the Magistrate only for effecting the recovery of the amount

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

and that  the Magistrate  is required  to hear the Master of the vessel  before issuing  a warrant  for recovery, but not for quantification  of the damage. The High Court went on to examine the  provisions of  the English Law, as contained in Section 74  of the  Harbours Docks  and Piers Clauses Act ad the ratio  of certain  cases decided thereunder, and came to the conclusion  that the liability of the Master or owner of the vessel  with regard  to damage  caused to  dock,  wharf, quay, mooring,  stage, jetty,  pier, etc.,  is absolute. The High Court also made a reference to Section 131 of the Major Port Trusts Act and held that the provision for a civil suit made therein  was without prejudice to any other action that can be  taken under  that Act  and was  meant to be employed when the proceeds of sale of the property of the vessel were insufficient to meet the penalties payable or recoverable by the Board.  The High  Court also  examined the provisions of Clause (6)  of the  Notification dated January 8, 1990 which requires the Conservator of Ports to take necessary steps to ascertain the  amount of  damages, and  to  serve  a  notice specifying the  amount wherefor he was entitled to seize the vessel which  caused the  damage and to detain the same till the amount  was paid.  That clause further provided that the Conservator could  sell the  vessel  and  out  of  the  sale proceeds, recover  the  damages  as  well  as  the  cost  of seizure, detention  and sale. The High Court opined that the Master of  the vessel could get the dispute over the quantum of damages resolved by a competent civil court. According to the High  Court, in view of the provisions of the Major Port Trusts Act  and the  Rules framed  thereunder, there  was no force in  the argument  of the appellants that assessment of damages done unilaterally by the respondents was against the rules of natural justice and, therefore, void.      Before this Court, the appellants disputed the absolute nature of  liability as held by the High Court. The vires of Clause (6) of the Notification mentioned above has also been challenged. Regulation  No.43 of  the Cochin  Port and  Dock Regulation, 1975 is also challenged as arbitrary.      We can  now refer  to Clause  (6) of  the  Notification dated January 8, 1980 which is issued "in exercise of powers conferred by  Sections 48,  49 and  50 of  Major Port Trusts Act, 1963  and in  suppression  of  the  Cochin  Port  Trust Notification dated August 10, 1974."      "Clause  (6)   -   Assessment   and      recovery of compensation for damage      - If  any vessel or drift fouls any      pier, wharf,  jetty or  quay in the      Port of  Cochin and  thereby causes      damage thereto  the Conservator  of      the Port  shall forthwith  take the      necessary steps  to  ascertain  the      amount  of   damage  so  caused.  A      notice  specifying  the  amount  of      damage so ascertained and demanding      its payment  shall be served drift.      If the  damage is caused by a draft      and the  owner  of  such  drift  is      unknown or  cannot be  ascertained,      the notice  of the  demand shall be      posted upon  a conspicuous place in      the  Cochin   Port  Trust,   Deputy      Conservator’s  Office   or   Custom      House.  Within  a  week  after  the      serving or  of the  posting of  the      notice of  the demand,  as the case      may be,  the said  amount shall  be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

    paid. It  shall be  lawful for  the      Conservator to  seize the vessel or      drift    which     caused    damage      immediately  the  damage  has  been      caused together  with  the  tackle,      apparel or  furniture belonging  to      the vessel,  and  detain  the  same      till the  amount together  with the      cost of seizure or detention is not      paid, the  Conservator may sell the      vessel or  the tackle,  apparel  or      furniture or  the drift  and out of      such  sale   proceeds  pay  to  the      Cochin Port  Trust  the  amount  of      damage and  the  cost  of  seizure,      detention and sale rendering to the      master or  owner, the  surplus,  if      any, on  demand, provided  that the      demand is  made within  three years      from the date of the sale."      Section 48,  49 and  50 of  the Major  Port Trusts  Act empower every  Board to  frame certain  scales of  rates and Section 52  of the  Act provides that the date so fixed will have effect  only when  sanction in  this behalf is given by the Central  Government. We  may now  notice Sections 48, 50 and 52 which read as under:      "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 authorised  under Section 42      at or  in relation  to the  port or      port approaches --      (a) transhipping  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) carnage or portrage 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."      "49. Scale  of rates  and statement      of conditions  for use  of property      belonging  to  Board.--  (1)  Every

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

    Board shall,  from  time  to  time,      also frame  a  scale  of  rates  on      payment of  which, and  a statement      of  conditions   under  which,  any      property belonging  to, or  in  the      possession or  occupation  of,  the      Board,  or  any  place  within  the      limits of  the  port  or  the  port      approaches  may  be  used  for  the      purposes specified hereunder:-      (a)  approaching  or  lying  at  or      alongside any buoy, mooring, wharf,      quay, pier, dock, land, building or      place as aforesaid by vessels;      (b) entering  upon or  playing  for      hire at  or  on  any  wharf,  quay,      pier, dock,  land, building,  road,      bridge or  place  as  aforesaid  by      animals   or    vehicles   carrying      passengers or goods;      (c) leasing  of land  or  sheds  by      owners   of   goods   imported   or      intended for  export or  by steamer      agents;      (d) any  other  use  of  any  land,      building,   works,    vessels    or      appliances belonging to or provided      by the Board.      (2) Different scales and conditions      may be framed for different classes      of goods and vessels.      (3)    Notwithstanding     anything      contained in  sub-section (1),  the      Board  may,   by  auction   or   by      inviting tenders, lease any land or      shed belonging   to  it  or  in  it      possession or  occupation at a rate      higher  than  that  provided  under      sub-section (1)."      "50.   Consolidated    rates    for      combination of  services.-- A Board      may, from  time to  time,  frame  a      consolidated scale of rates for any      combination   of    the    services      specified in  section 48 or for any      combination  of   such  service  or      services   with    any   user    or      permission  to   use  any  property      belonging to  or in  the possession      or  occupation  of  the  Board,  as      specified in Section 49."      "52.  Prior   sanction  of  Central      Government to rates and conditions.      -- Every  scale of  rates and every      statement of conditions framed by a      Board    under     the    foregoing      provisions of this Chapter shall be      submitted to the Central Government      for sanction  and shall have effect      when so sanctioned and published by      the Board in the Official Gazette."      As  can   be  seen   from  a  plain  reading  of  these provisions. Section 48 empowers the Board to frame the scale of rates  for providing  certain services  while Section  49 empowers the  Board to frame the scale of rates for allowing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

the use  of its  property. Section  50 further  empowers the Board  to   frame  consolidated   scale  of  rates  for  any combination of  services specified  in Section 48 or for any combination of  service or  services with  the user  of  any property belonging  to the  Board.  In  none  of  the  three Sections is  there any  direct mention  of recovery  of  any damage caused  by a vessel to any property of the Port or of the Board.      The  Notification  dated  January  8,  1980  issued  in exercise of power conferred by Sections 48, 49 and 50 of the Major Port  Trusts Act  in suppression  of the  Cochin  Port Trust Notification  dated  August  10,  1974  must  be  read alongside another  Notification dated January 1, 1975 issued in suppression  of all  previous Notifications  issued under Section 6(1) of the Indian Ports Act ad Section 29(1) of the Petroleum Act,  1934 by the Cochin Port Trust in exercise of powers conferred  by sub-sections  (f) to (o) of Section 123 of the  Major Port  Trusts Act, which inter alia provides by regulation 43  that the "Masters and Owners of vessels shall he held  liable for  any damage  whatsoever that  shall have been caused by their vessels or servants to any of the works or property  to the  Board and  the Board  may detain  their vessels until  compensation claimed  by the Board is paid or security has  been given  for the  amount of damage caused." The plain  language of  this regulation therefore shows that the Master  or Owner  of a  vessel can  be  held  liable  in damages for  any harm caused to the works or property of the Board and  empowers the  Board to  detain a  vessel  if  the compensation/security  is   not  paid   or   furnished.   In substance, the  same is  the effect  of clause  (6)  of  the Notification dated  January 8,  1980 extracted  earlier.  At this stage,  reference may  be made to Section 65(ii) of the Major Port Trusts Act which reads as under:      "Section   65.   Grant   of   port-      clearance after  payment  of  rates      and realisation  of damages, etc. -      If a  Board gives to the officer of      the Central  Government whose  duty      it is  to grant  the port-clearance      to any vessel at the port, a notice      stating, -      (i) xxx xxx xxx      (ii)  than   an  amount   specified      therein is  due in  respect of  any      damage referred  to in  section 116      and such  amount together  with the      cost of  the  proceedings  for  the      recovery    thereof     before    a      Magistrate under  that section  has      not been realised.      such officer  shall not  grant such      port-clearance until  the amount so      chargeable or due has been paid or,      as the  case may be, the damage and      cost have been realised."      This provision,  read in  conjunction with Section 116, reveals the  anxiety of  Parliament to ensure that, before a vessel   leaves    the   Indian    port,   the   amount   of damages/compensation should  be secured. This anxiety is for the obvious  reason that  once the  vassal leaves the Indian shores, it would be well-high impossible to realise the dues of the  Board. To  complete the  narration, we  may refer to Section 131  which provides, albeit without prejudice to any other action  that may  be taken under the Act, that a Board may recover  by a  suit its  dues including damages when the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

proceeds of  sale are  insufficient or any penalties payable to, or  recoverable by  the  Board  under  the  Act  or  the regulations made  in pursuance  thereof,  are  insufficient. This provision  grants a  remedy in  addition to  the remedy granted to  the Board under the provisions of the Act or the regulations to recover the shortfall through a suit.      Section 123  of the  Major Port  Trusts Act  confers  a general  power  on  the  Board  to  make  regulations.  This provision is  enacted without prejudice to any power to make regulations contained elsewhere in the Major Port Trusts Act and empowers  the Board  to make regulations consistent with the provisions  of the  Act for  all or  any of  the matters enumerated in  clauses (a)  to (o)  thereof which inter alia include:      "(f) for  the safe,  efficient  and      convenient  use,   management   and      control  of   the  docks,  wharves,      quays, jetties,  railways tramways,      buildings    and     other    works      constructed  or   acquired  by,  or      vested in,  the Board,  or  of  any      land or  foreshore acquired  by, or      vested in,  the  Board  under  this      Act;      (n) for  ensuring the safety of the      port;      (o) generally,  for  the  efficient      and proper  administration  of  the      port."      The learned  counsel for  the appellants submitted that the scope  of sections  48, 49 and 50 being limited, and not embracing the  imposition or recovery of damages, clause (6) of the  Notification of  January  8,  1980  clearly  travels beyond the  scope of  these provisions  and was,  therefore, ultra vires.  Nor could  the said  clause  be  protected  by virtue of  the regulations  for the  simple reason that even clauses (f),  (n) and  (o) of  Section 123  do not  speak of imposition of  damages/compensation for damage caused to the property of  the Board. And, in any event, the conferment of power  to   fix  the  quantum  of  damages  or  compensation unilaterally, without  affording the  Master or Owner of the vessel  an  opportunity  of  being  heard,  was  clearly  an infraction of the rule of natural justice.      Section 116  extracted earlier,  in unmistakable  terms states that  if, through the negligence of any person having the guidance  or command of any vessel, any damage is caused to any  dock  or  other  property  of  the  Board  mentioned therein, the  amount of  such damage  as is  claimed by  the Board  shall  be  recoverable  by  distress  or  sale  of  a sufficient portion of the property on board the vessel under a Magistrate’s  warrant. This  provision therefore  entitles the Board  to quantify  the damage and lay a claim therefor. In the  present case,  as soon  as the damage was noticed on 15th June, 1984 while the vessel was still in the berth, the Agent and  Master of the vessel were informed and thereafter the damage  was assessed  by the  Board and  claim was made. This action was clearly in terms of the afore-quoted Section 116. If  the amount so quantified is not paid, the Board can invoke Section  65(ii) to  ensure that port-clearance is not granted   to    the   vessel    until    the    amount    of damages/compensation due  to the  Board  has  been  paid  or realised. This is the scheme of the Major Port Trusts Act.      Now, we come to the scheme of Sections 48, 49 and 50 of the said Act. Section 48 empowers the Board to frame a scale of rates  and a  statement of  conditions under which any of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

the services  shall be  performed by  it and  these  include services to  be provided inter alia for landing and shipping of goods  from or to vessels in the port, dock, etc. Besides prescribing the  rates to  be charged for such services, the Board is  expected to  frame a statement of conditions under which the services would be performed and this could provide for the remedy in case of damage to the Board’s property. So also, under  Section 49,  the Board  can frame the rates and statement of  conditions for performing the services set out therein. Under  these provisions,  therefore, it  is left to the Board  not only  to  frame  the  rates  of  charges  for services  rendered,   but  also   to  make  a  statement  of conditions under which the services would be performed.      Next,  Section   123  empowers   the  Board   to   make regulations, albeit  consistent with the Act, for all or any of the  purposes set  out therein,  which inter alia include the safe, efficient and convenient use, management of docks, etc. This  would certainly include consequential remedies in the event of damage to the Board’s property. Regulations can be made  to ensure  the safety  of  the  port  and  for  its efficient and  proper administration  which would  naturally include providing  for the  eventuality of  damage caused to the  Board’s   property  while  providing  services  to  the vessels, etc.,  making use  of the port, dock, etc. Any such provision, if  made, would  not be inconsistent with Section 48, 49  and 50  and would  certainly be  within the scope of Section 123(f),  (n) and  (o)  extracted  earlier.  We  are, therefore,  unable   to  hold   that  clause   (6)  of   the Notification dated  January 8,  1980 is ultra vires Sections 48, 49  and 50  or Section  123 and is quite consistent with the scheme  of Section  116 read  with Section 65(ii) of the Major Port  Trusts Act  S also,  we see  no inconsistency in Regulation 43 of the Notification dated January 1, 1975.      That takes  us to  the next  contention namely, whether the unilateral  action taken  by the  Board in assessing the damages  is  in  violation  of  the  principles  of  natural justice. At  first blush,  the argument  made appears  to be attractive but, on closer scrutiny, and having regard to the purpose and  object of  making the  said provision entitling the Board  to determine  the quantum  of damages,  it  would appear that  the urgency  of the  situation demands that the Board should be allowed to determine the liability and claim payment or  security for  the same  before the vessel leaves the shores  of the  country. We  have  already  pointed  out earlier the  anxiety  of  the  legislature  to  provide  for immediate action  to be  taken before  the vessel leaves the shore. Once  it has  left the  shore, it would be impossible for the  Board to recover the damage caused by the vessel to its property. In order to protect international trade and at the same  time ensure that the damage caused to the property of the  port is recovered before the vessel leaves the port, it seems  essential that  the Board  should be  empowered to determine the  quantum of damages and ensure that the vessel does not  leave the port before depositing cash or providing security for  the same.  Besides, to  avoid  dislocation  of traffic, it  is essential that the damage caused to the port or property  of the  Board is repaired without loss of time, for which  funds would  be required. In the circumstances,it is therefore  inevitable that  the power  to  determine  the damage must vest in the Board for, otherwise, the vessel may leave the  port and  the Board  would be  left to suffer the damage without  recovering it  from  the  offending  vessel. Therefore, while conceding that the right to be heard before the quantum  of damage  is determined is an important right, in the  very nature  of things  and  having  regard  to  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

urgency of  the matter,  public interest demands that before the vessel  leaves the  shores of the country, the estimated damage is  paid to or secured by the Board. The interests of justice, insofar  as the  Board is  concerned, would  not be safeguarded is  this power  is not  vested in  the Board and consequently the  vessel is permitted to leave the shores of the country  without securing  the damage.  Besides, if  the Master or  Owner of  the  vessel  desires  to  question  the quantum of damages determined by the Board, the law does not preclude the  filing of  a civil suit in that behalf. In the civil suit,  the basis  on which  the quantum of damages was worked out  by the  Board would  be fully  reviewed and that would provide  a post-decisional  hearing to  the Master  or Owner of  the vessel. We are, therefore, of the opinion that in the very nature of things, it is not possible that a pre- decisional hearing should be accorded to the Master or Owner of the  vessel before  the Board  determines the  amount  of compensation. Even  if the  Board can  ensure  that  a  port clearance is not granted to the vessel, that would not serve the objective as the continued presence of the vessel at the dock or  port would block up traffic as urgent repairs would not be  possible and  the presence  of the  vessel would not permit other  vessels to  enter that  area. In  our opinion, therefore, the  High  Court  was  right  in  coming  to  the conclusion that  in the  very nature  of things,  a  hearing before the  quantification of  damages by  the Board  is not possible. We,  therefore, do  not  see  any  merit  in  this contention either.      In the  result, we  see no  merit in these appeals. The appeals are dismissed with costs.