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CASE NO.: Appeal (civil)  5638 of 2007

PETITIONER: Shipping Corporation of India Ltd

RESPONDENT: M/s. Bharat Earth Movers Ltd. & Anr

DATE OF JUDGMENT: 05/12/2007

BENCH: S.B. Sinha & G.S. Singhvi

JUDGMENT: J U D G M E N T  

CIVIL APPEAL NO.    5638             OF 2007 [Arising out of  SLP (Civil) No. 7346 of 2005]

S.B. SINHA, J :          1.      Leave granted.

2.      Application of the Indian Carriage of Goods by Sea Act, 1925 (for  short "the Indian Act") vis-‘-vis the Japanese Carriage of Goods  by Sea  Act, 1992 (for short "the Japanese Act") is in question in this appeal which  arises out of a judgment and order dated 2.12.2004 passed by a Division  Bench of the High Court of Judicature at Madras in OSA No. 247 of 2000  affirming the judgment and decree dated 7.03.2000 passed by a learned  Single Judge thereof in CS No. 75 of 1996.   3.      Appellant is an owner of a fleet of vessels.  A consignment of six sets  of Sub Assemblies for PC 650 H.E. was entrusted by the respondent No. 1  for carriage thereof from Kobe, Japan to Madras.  It contained 16 packages.   It arrived at the Port of Madras on 17.12.1994.   

4.      A part of the consignment was found in damaged condition.  An  inspection therefor was made.  Some damage was noticed in five cases.  On  the premise that the damage of short delivery had been caused due to  negligence on the part of the employees of the appellant,  a suit was filed on  the original side of the Madras High Court.  Claim of damage, however, was  therein confined to two cases only, viz., case Nos. 00002 and 0013.  In the  said suit, the following relief was prayed for:

"(a)    A sum of Rs.16,72,143.87 with interest from  the date of plaint all the date of realization (interest  of 18%) at 18% p.a as the transaction being  commercial one under Section 34 CPC."

5.      In the written statement, the respondents inter alia pleaded ’limited  liability’ on their part.           A learned Single Judge of the said Court held the appellant liable for  payment of damages being responsible for causing damage and loss to the  consignment which had occurred at a time when the cargo was in its charge.

6.      In regard to the contention of the appellant that the contract of  carriage having been concluded in Japan, the Japanese Act shall apply and  not the Indian Act, it was opined:

       "Another  contention is raised on the side of  the defendant that Indian Carriage of Goods by Sea  Act has been amended by the Multi Model Goods  Transportation Act of 1993 and the maximum

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liability of the carrier per package is not 100/-  as  contended by the plaintiff and the  maximum  liability  is 666.67 Special Drawing Rights per  package  or two special drawing rights per kg of  gross weight of the goods lost of damaged,  whichever is higher, Calculated thus, according  to  the defendant, the maximum  liability of the  defendant will be only Rs. 1,31,471.11/- . Even   assuming that the liability of the defendant has to  be calculated thus, the liability must be calculated  taking into weight of 16 cases which are governed  by Ex.A-3 Bill of lading and in this case the  liability will be more than what is claimed in the  plaint.  Therefore, the  defendant cannot resist the  claim of the plaintiff on this ground and the  contract  is governed by only Indian Carriage of  Goods by  Sea Act.  Therefore, on  issue  No. 6 &  7.  I hold that the contract is governed by Indian  Carriage of Goods by Sea Act and the defendant is  liable to the extent of the plaintiff’s claim and  these two issues are therefore answered against the   defendant."

7.      The Division Bench of the High Court in an intra-court appeal  preferred by the appellant herein affirmed the said finding relying on or on  the basis of Clause 6 of the Bill of Lading, stating:

"On the basis of above clause 6, the submission of  the learned counsel for the appellant/defendant,  that the Japanese Carriage of Goods by Sea Act is  applicable to the facts of the case, cannot be  countenanced."

8.      A notice was issued by this Court confined to the question as to  whether the appellant has a limited liability to the claim of the respondents.

9.      Mr. C.A. Sundaram, learned senior counsel appearing on behalf of the  appellant, placed before us the relevant provisions of the Indian Act,  Japanese Act as also the International Convention for the Unification of  Certain Rules of Law relating to Bills of Lading (Hague Rules) to contend  that as the price of the cargo had not been disclosed in the Bill of Lading, the  liability of the appellant must be held to be confined only to the amount  specified therein.  It was urged that the High Court committed a serious error  in holding that the Indian Law would be applicable.

10.     Mr. P.R. Sikka, learned counsel appearing on behalf of the  respondents, however, supported the impugned judgment.

11.     Before embarking on the questions raised before us, we at the outset  may observe that the provisions of the Multimodal Transportation of Goods  Act, 1993 whereto reference has been made by the parties before the High  Court are not applicable as admittedly the mode of transport was by sea only  and did not involve any multimodal transportation as defined in Section 2(k)  thereof.

12.     The scope of the Japanese Act is stated in Article 1 thereof sating:

"The provision of this Act (except article  20bis)  shall apply  to the carriage of goods by ship from  a loading port or to a discharging port, either of  which is located outside Japan, and Article 20bis  shall apply to the carrier’s  and his servant’s  liability for damage to goods caused by their  tort."

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       Paragraph 4 of Article 2 defines "one unit of account" to mean "the  amount equivalent to one Special Drawing Right as defined in paragraph (1)  of Article 3 of the International Monetary Fund Agreement".  Article 4  confers a liability upon the carrier stating that it shall not be relieved  therefrom unless exercise of due diligence under the said Article is proved.   

       The provision regarding limited liability is contained in Article 13 of  the Japanese Act, which reads as under: "(1)    The carrier’s  liability for a package  or unit  of the goods shall be the  higher of the following: 1)      An amount equivalent to 666.67 units of  account.; 2)      An amount equivalent to 2 units of account  per kilo of gross weight of the goods lost, damaged  or delayed. (2)     The unit of account used in each item of the  preceding paragraph shall be the final publicized  one at the date on which the carrier pays damages  in respect of the goods. (3)     Where a container, pallet or similar article of  transport (which as referred to as "containers and  etc." in this paragraph) is used for the  transportation of the goods, the number of  containers and etc. or units shall be deemed to be  the number of the packages or units of the goods  for the purpose of the preceding paragraph unless  the goods’ number or volume or weight is  enumerated in the bill of lading\005"

13.     Indian Act, however, in Section 2, provides for the application of  Rules in the following terms:

       "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)."

14.     Schedule appended thereto provides for the Rules relating to Bills of  Lading.  Article IV  provides for rights and immunities, the relevant portion  whereof reads as under:

"1. Neither the carrier nor the ship shall be liable  for loss or damage arising or resulting from  unseaworthiness unless caused by want of due  diligence on the part of the carrier to make the  ship seaworthy, and to secure that the ship is  properly manned, equipped and supplied, and to  make the holds, refrigerating and cool chambers  and all other parts of the ship in which goods are  carried fit and safe for their reception, carriage  and preservation in accordance with the  provisions of paragraph 1 of Article III.  Whenever loss or damage has resulted from  unseaworthiness the burden of proving the  exercise of due diligence shall be on the carrier  or other person claiming exemption under this  section."

       Paragraph 5 of Article IV reads, thus:

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"5. Neither the carrier nor the ship shall in any  event be or become liable for any loss or damage  to or in connection with goods in an amount  exceeding 1001 per package or unit, or the  equivalent of that sum in other currency, unless  the nature and value of such goods have been  declared by the shipper before shipment and  inserted in the bill of lading\005"

15.     We may also notice that under the Special Drawing Rights as  contained in the International Monetary Fund Special Drawing Rights would  mean 1.00XDR as equivalent to 64.0948 INR and 666.67XDR as equivalent  to 42,730.20 INR.

16.     Clause 5 of the Hague Rules, to which both India and Japan are  parties, reads as under:

"5. Neither the carrier nor the ship shall in any  event be or become liable for any loss or damage  to or in connection with goods in an amount  exceeding 100 pounds sterling per package or  unit, or the equivalent of that sum in other  currency unless the nature and value of such  goods have been declared by the shipper before  shipment and inserted in the bill of lading. This declaration if embodied in the bill of lading  shall be prima facie evidence, but shall not be  binding or conclusive on the carrier."

17.     Having noticed the relevant statutory provisions, we may also notice  the relevant terms and conditions of Bill of Lading which are as under:

"Clause 6: Liability for loss or damage where the  stage is not known:         When in accordance with the condition 4  hereof, the CTO is liable  to pay compensation in  respect of loss or damage to the goods and the  stage of transport where the loss or damage  occurred  is not known, the liability of the CTO in  respect of such loss or damage shall not  exceed  the monetary limit indicated in this regard, in any  international convention or national law that would  have applied, if the contract was for the carriage of  goods from a seaport in India and had been  covered by a ocean bill of lading.  However, the  CTO shall not in any case be liable for an amount  greater than the actual loss to the person entitled to  make the claim\005

Clause 7: Liability for loss or damage where the  stage is known:         (A)     When in accordance with the   condition 4 hereof, the CTO is liable to pay  compensation in respect of loss or damage to the   goods and the stage of transport where the loss or  damage occurred is known, the liability of the  CTO  in respect of such loss  or damage shall be  determined by the provisions contained in any  International Convention or National Law, which  provisions would  have applied if the  claimant had  made a separate and direct contract with the CTO  in respect of the particular stage of transport where  the loss or damage occurred and received as  evidence thereof any particular document which

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may be issued in order to make such International  Convention or National Law applicable\005"

       A bare perusal of Section 2 of the Indian Act would clearly  demonstrate that the same applies to the carriage of goods by sea in ships  carrying goods from any port in India to any other port whether in or outside  India which would mean that the Indian Act shall apply only when the  carriage of goods by sea in ships takes place from a port situate within India  and not a port outside India.  The Japanese Act, on the other hand, applies in  a situation where carriage of goods by a ship is either from a loading Port or  from a discharging Port, either of which is located outside Japan.  Therefore,  Japanese Act will clearly be applicable in the instant case.

       The High Court, as noticed hereinbefore, applied the provisions of the  Indian law.  We may notice that Clause 6 of the Bill of Lading merely raises  a legal fiction.  It applies to a case where the place of occurrence of loss or  damage is not known.  It merely provides that in such an event the quantum  of loss shall not exceed the monetary limit provided for in any international  convention or national law.

       No reason has been assigned in support of its findings by the High  Court.  Clause 7 of the Bill of Lading also should be read with Clause 6  thereof.  In this case, the vessel sailed from Japan; its destination being  Chennai.

       As the originating port is outside India, Section 2 of the Indian Act, as  noticed hereinbefore, will have no application.  The High Court, in our  opinion, misread the said provision.

18.     The provisions noticed hereinbefore, whether of the Japanese Act or  the Indian Act or the Hague Rules, provide for a limited liability.   Contention of the appellant had been rejected by the High Court inter alia on  the premise that the plaintiff- respondent was entitled to damages higher  than the maximum liability provided for therein as the quantum of damages  was to be calculated upon taking into consideration the weight of all the 16  cases and not only of two cases.   

       With respect, the approach of the High Court is wrong.  If the plaintiff  - respondent confined its claim of damages only for two cases, there was no  room for making the observation that the liability must be calculated taking  into consideration the weight of 16 cases.  Even in support of the said  conclusion, no reason has been assigned.  The discussions of the High Court  end with the said finding which apparently is contrary to the statutory  provisions.   

19.     A contention has been raised before us for the first time that the value  of the goods had been declared in the Bill of Lading.  It is based on the  premise that Bill of Lading refers to the invoice.  We cannot accept the said  contention.  Invoice is not a part of the Bill of Lading.  The value of the  goods is required to be stated on the Bill of Lading so as to enable the  shipping concern to calculate the quantum of freight.  It cannot, in absence  of any statutory provisions, be held to be incorporated therein by necessary  implication or otherwise.

20.     We, therefore, are of the opinion that the liability of the appellant  being limited and that too in respect of the two cases, the matter should be  considered afresh in the light of the observations made hereinbefore by the  learned Single Judge.  To the aforementioned extent, the judgments and  decrees of the High Court are set aside.

21.     The appeal is allowed to the aforementioned extent.  There shall,  however, be no order as to costs.