The Trustees of the Port of Madras By its Chairman v. K. P. V. Sheik Mohamed Rowther and Co. and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 187 to 191 of 1962

Decision Date: 11 December, 1962

Coram: Raghubar Dayal

In the matter before the Supreme Court of India, the petition was filed by the Trustees of the Port of Madras, represented by their Chairman, who were the petitioners. The respondents were K. P. V. Sheik Mohamed Rowther & Co. together with other steamer‑agents. The judgment was delivered on 11 December 1962. The case concerned the administration of charges under the Madras Port Trust Act, 1905, particularly sections 39, 40 and 42, and involved the interpretation of provisions relating to port‑trust charges, the utilisation of labour supplied by the Trust, the rate of such charges, and the liability of the consignee. The appellants, acting in their capacity as trustees, had exercised the authority granted by section 42 of the Act to amend the Madras Port Trust Scale of Rates in 1958. This amendment introduced a new Schedule ‘E’ under Chapter V, which was stipulated to become effective on 1 March 1958. Schedule ‘E’ prescribed that masters, owners or agents of vessels were required to pay charges for port‑trust labour that had been requisitioned and supplied but was not fully or properly utilised. The basis for these charges included situations where labour remained idle because of a lapse on the part of the ship‑owner, as well as instances where extra payment was made for the simultaneous operation of more than one hook at a vessel’s hatch. Concurrently, the form used for requisitioning shore labour was revised; the new form incorporated an undertaking on the part of the steamer‑agents to pay, in accordance with the rates specified in the Trust’s scale as amended from time to time, any charges arising from idle or improperly utilised labour and any charges associated with the use of more than one hook at a hatch.

The steamer‑agents, who were the respondents, initiated petitions before the Madras High Court under Article 226 of the Constitution of India. They sought a directive that the Port Trust should refrain from enforcing the newly introduced Schedule ‘E’ rates and should not compel the completion of the revised requisition form. Their arguments were multifaceted. First, they contended that ship‑owners and steamer‑agents could not be held liable for charges related to short‑duration labour employed in the receipt or removal of cargo, asserting that such charges should instead be borne by the consignee. Second, they argued that the Port Trust possessed authority only to impose and recover rates for services actually rendered, and that it lacked the power to impose charges as a form of compensation for defaults or to collect charges from masters, owners or agents for operations that did not squarely fall under the statutory head of cargo discharge. Third, they maintained that the compulsory application of Schedule ‘E’ rates and the requirement that steamer‑agents sign the labour requisition form went beyond the legal authority conferred upon the Trust, rendering the measures illegal. Finally, they asserted that the imposition of these charges, whether categorized as fees for services or as compensation for the agents’ defaults, constituted an unreasonable restriction on the fundamental right of the petitioners to conduct their business as steamer‑agents, and therefore the provisions were inoperative under the law.

In the judgment, the Court considered the argument that the imposition of scale ‘E’ rates was illegal and that, whether characterized as charges for services or as compensation for the default of steamer agents, such imposition constituted an unreasonable restriction on the petitioners’ fundamental right to conduct their business as steamer‑agents and was therefore inoperative under the law. The Court then set out its holdings. First, it observed that the purpose of the scale ‘E’ rates was to speed up the discharge of cargo at the quay, enabling a larger quantity of cargo to be discharged quickly; consequently, the services rendered by the Port Trust were services to the ship, and the charges for those services could validly be recovered from the steamer‑agents. Second, the Court held that the Madras Port Trust Act, 1905, contained no provision that would make the Port Trust an agent of the consignee for the purpose of taking delivery of the goods, and that the term “receiving” in clause (b) of sub‑section (1) of section 39 of the Act did not mean receiving goods on behalf of the consignee. Third, it stated that under sections 39 and 40 the Port Trust took charge of the goods on behalf of the ship‑owner, not on behalf of the consignee, and that any services performed at the time of landing the goods or upon their subsequent removal were services rendered to the ship. Fourth, the Court concluded that the contested charges were properly levied by scale ‘F’ on the master, owner or agent of the vessels, and that the Port Trust could validly require the steamer‑agent to requisition shore labour and to execute an undertaking in the requisition form agreeing to pay the charges prescribed in the Port Trust’s scale of rates for labour that was idle, not properly utilised, or for the simultaneous working of more than one hook at a vessel’s hatch. The judgment then recorded that relevant case law had been reviewed. The decision was rendered in the Civil Appellate Jurisdiction of the Supreme Court in Civil Appeals Nos. 187‑191 of 1962, arising from the Madras High Court judgment dated 3 March 1961 in Writ Appeals Nos. 53‑57 of 1960. The Court’s opinion was authored by Justice Raghu Bar Dayal. The appellants, the Trustees of the Port of Madras (referred to as the Board), appealed against the High Court order that had allowed the writ petitions filed under Article 226 of the Constitution by each respondent and had issued a writ of mandamus directing the Board to refrain from enforcing the scale ‘E’ rates of the Madras Port Trust Scale of Rates and from requiring the steamer‑agent to sign the Shore Labour Requisition Form. The respondents, who are partnership firms or limited companies, conduct the business of steamer‑agents at Madras. The Board, with the sanction of the Central Government, had amended the Madras Port Trust Scale of Rates.

In 1958 the Board amended the Madras Port Trust Scale of Rates by adding a new category identified as scale “E” under Chapter V, and the amendment was scheduled to become effective on 1 March 1958. The purpose of scale E was to prescribe charges that masters, owners or agents of vessels would have to pay for Port Trust labour that had been requisitioned and supplied but that was not fully or properly utilised. In simple terms, the charges were to cover situations where labour provided by the Port Trust, Madras, remained idle because of some lapse on the part of the ship, or where additional payment was required for labour working more than one task simultaneously at a vessel’s hatch. At the same time the Board altered the Labour Requisition Form that steamer‑agents were required to submit. The revised form incorporated an undertaking by the steamer‑agents to pay, as and when the Board updated its scale of rates, any charges arising from labour that was rendered idle, not properly utilised, or from the operation of more than one hook at the hatch concurrently.

These modifications to the scale of rates were effected by the Board pursuant to its authority under section 42 of the Madras Port Trust Act, 1905 (Madras Act 11 of 1905), hereinafter referred to as “the Act”. Section 42 empowers the Board to formulate a scale of rates and to set out the conditions under which any of the services specified in the various clauses of that section shall be performed either by the Board itself or by a person to whom a service has been transferred under section 41‑A of the Act. Following the amendment, the steamer‑agents, who were the respondents, instituted petitions under article 226 of the Constitution before the High Court of Madras, seeking a writ of mandamus that would compel the Board to refrain from enforcing the newly prescribed rates and from requiring the completion of the revised form. In their submissions, the respondents advanced several arguments: first, that ship‑owners and steamer‑agents could not be held liable for charges relating to shore labour employed in receiving or removing cargo, and that such charges should instead be borne by the consignee; second, that section 39 of the Act distinguished between services performed for the vessel, which are payable by the carrier (master, ship‑owner or steamer‑agent), and services performed for the goods, which create a liability on the consignee; third, that the Board’s power to impose and recover rates was limited to services actually rendered, and it lacked authority to levy charges as compensation for defaults or for operations that did not properly fall within the category of cargo discharge; and fourth, that prior to 1914 the steamer‑agents had acted as landing‑agents.

In the earlier practice, a charge called a “landing charge” was levied on consignees for the service of moving cargo from the ship to the pier, and this charge was collected in addition to the freight payable for the transport of the goods. After the construction of the quays, when cargo began to be landed directly onto the quay, the Madras Port Trust assumed responsibility for the landing of the goods. Instead of collecting the earlier “landing charges,” the Trust began to levy “quay dues,” which were also fully paid by the consignees. Over time these quay dues were incorporated into the broader “harbour dues” that the Trust collected from the consignees. Typically, the steamer‑agent would advise the Trust’s Traffic Manager of the expected arrival date of the vessel under his agency, the tonnage to be landed, the hatch‑wise breakdown of the cargo, and the number of hatches that were proposed to be worked. Under a revised procedure introduced by the Trust on 1 August 1957, the steamer‑agent was required, before the ship reached its berth, to submit an application and to make a deposit into his current account. This deposit was intended to cover charges for overtime work, the supply of cranes, water and other appliances needed for the vessel. From 1 March 1958, the deposit was also required to meet contingencies covered by the newly introduced scale E. The Trust described the operational sequence at the quay as follows: after the Port Trust pilot manoeuvres the vessel to its allotted berth, the stevedore labour supplied by the Madras Dock Labour Board—a statutory body—boards the ship, prepares the slings in the holds or hatches, operates the ship’s winches and hoists the cargo onto the quayside. When the sling comes to rest on the shore, or in the barge if discharge is at moorings, the shore labour removes the sling and unloads the cargo. The Trust’s Tally Clerk records each item in a tally sheet; when a sheet is closed, a duplicate copy of the import tally sheet is handed to the steamer‑agent’s representative on the spot. This duplicate serves as the receipt prescribed under section 39(3) of the Madras Port Trust Act. The shore labour then transports the cargo from the landing point to a shed or open area for stacking, after which the Trust arranges delivery of the goods to the consignee. The consignee obtains a delivery order from the steamer‑agent and files a Harbour Import Application with the Trust for payment of the harbour dues, as well as a Bill of Entry with the Customs for the duty payable by the consignee. Upon payment of both the duty and the harbour dues, the Trust delivers the cargo to the consignee. The Board subsequently adopted a piece‑rate scheme for the dock workers, following the recommendations of the Jeejeebhoy Committee, and incorporated the new scale E rates into that scheme. Prior to 1 March 1958, the cost of shore labour was borne entirely by the Port Trust, and no distinction was made between charges for ordinary shore‑labour and charges for idle, time‑related or additional work. Under the scheme that came into force on 1 March,

In 1958, the charges for shore labour that fall within the contingencies described in scale ‘E’ were omitted from the calculation of Harbour dues. Consequently, those particular charges are now regarded as liabilities of the steamer‑agent, who must bear them. The Court observed that the requirement imposed on steamer agents to pay the scale ‘E’ rates and to sign the requisition for shore labour exceeds the authority granted by law to the trustees of the Port of Madras and is therefore unlawful. Such a demand, whether characterised as a fee for services or as compensation for any default by the steamer agents, contravenes the petitioners’ fundamental right to conduct their business as steamer agents and is therefore inoperative. The Court further noted that the Port Trust officials who receive cargo on the quay or on barges at moorings do so on behalf of the consignee. The Board, through a common counter‑affidavit filed by the Deputy Traffic Manager of the Madras Port Trust, acknowledged that direct arrangements exist between the ship‑owner, the master or the agent and the stevedores; however, the Board did not accept the allegations concerning the nature of the various rates and duties levied nor the legal position articulated in the petitions. According to the Board, the Harbour dues on imported cargo under scale A, Chapter II of the Scale of Rates, are payable on tonnage and include, besides overhead, a nominal rent for storage for a specified period and the charge for porterage involved in moving the goods from the landing point to the storage or stacking point. The Board further rejected the contention that the ship‑owner has no interest in the import cargo after it has been landed by the stevedores, explaining that the ship‑owner, by virtue of the bill of lading, remains obligated to deliver the goods to the consignee named in the bill or to the consignee’s nominee, and that the ship‑owner’s liability under the contract persists until delivery to the rightful recipient. The Court also referred to section 39 of the Act, which authorises the Port Trust to provide facilities and undertake certain services. One such service is the movement of goods from the landing point to the storage or stacking point and the subsequent delivery to the persons entitled under the bill of lading. The Board does not undertake the unloading of goods from the ship to the quay; that responsibility lies with the ship‑owner, who makes his own arrangements through the stevedores, although the Board is authorised to perform those services on behalf of the ship‑owner. The service rendered by the Board in giving the ship‑owner a receipt for the goods, keeping them in custody and delivering them to the consignee, is therefore a service to the ship‑owner. The services concerning the import cargo up to the point where the goods are moved to the storage or stacking point are services to the ship‑owner, for which the ship‑owner, the master or the steamer agent

In the judgment, it was observed that the Board gathers harbour dues from the consignee at the moment delivery is made; however, this collection is performed as an agent of the ship‑owner, the master, or the steamer agent, who are in truth the primary persons liable for those dues. Consequently, the Board is legally entitled to demand the harbour dues directly from the ship‑owner, the master, or the steamer agent. The issuance of a receipt to the master at the landing point was characterised as a mere convenience to indicate that the goods had been handed over to the Port Trust for removal, storage, and subsequent delivery. This procedural receipt does not alter the substantive fact that the services performed after the receipt—namely, moving, storing, and delivering the cargo—are facilities rendered to the ship‑owner under the carrier contract. Historically, agents had informed the Board orally about the shore labour required for each steamer; after 1956, this information was supplied on a prescribed Form that omitted the undertaking to pay the scale ‘E’ charges now present in the impugned Form. Following the introduction of the piece‑rate scheme, payment to labour ceased to be based on tonnage and instead a daily wage was fixed, together with provisions for idle time and a hook allowance when two or three hooks were operated simultaneously at a vessel’s hatch. The effective utilisation of labour time, the Court noted, depends firstly on the steamer agents providing an accurate forecast of when cargo will be ready for removal, and secondly on ensuring a continuous supply of cargo so that there are no gaps in work.

The Court further explained that the imposition of a multiple‑hook allowance on the steamer agents is intended as a facility to enable the ship to discharge cargo quickly and to sail sooner. When more than one hook is employed in a ship’s hatch, the gangs handling the cargo cannot manage additional cargo, and therefore the Board has authorised an allowance to compensate the loss in earnings of those workers. Because the use of additional hooks benefits the vessel, recovering the hook allowance from the steamer agents under scale ‘E’ is considered legitimate. The additional charge imposed under scale ‘E’ is, in the Court’s view, a charge for facilities and services provided by the Board on behalf of the ship‑owner, master, or agent in relation to cargo that is subject to a carriage contract, analogous to harbour dues. To ascertain the precise nature of the disputed charges, the Court quoted the wording of scale ‘E’ as follows: “SCALE E‑Charges Against Masters, Owners, or Agents of Vessels in respect of Port Trust Labour requisitioned and supplied but not fully or properly utilised.”

The Court set out the provisions of Scale E that governed charges relating to Port Trust labour that had been requisitioned and supplied but that had not been fully or properly utilised. Under this scale, the first item dealt with mazdoors of the Port Trust who were rendered idle because of various circumstances that were attributable to the vessel and beyond the control of the workmen. Such circumstances included breakdown of the ship’s winches, wriggling of the ship’s derricks, the shifting of cranes at the request of the steamer agents or stevedores, cargo not being ready for shipment, completion of loading or unloading before the end of the shift, late arrival of the vessel at the berth, or any other reason for which the vessel was responsible. The scale specified that idle time would be computed in a particular manner: any continuous stoppage of fifteen minutes or less would be ignored; a stoppage lasting more than fifteen minutes but not exceeding thirty minutes would be counted as thirty minutes; and any stoppage exceeding thirty minutes would be rounded up to the next fifteen‑minute quarter. For example, a continuous stoppage of thirty‑five minutes would be treated as forty‑five minutes of idle time. The charge payable for such idle mazdoors was fixed at sixty‑four nP per mazdoor per hour for eight‑hour shifts and at eighty nP per hour for six‑and‑a‑half hour shifts.

The second item addressed mazdoors who were sent away or were not required after shore work had commenced. For each half‑shift or part thereof, a charge of two rupees and fifty paise was prescribed. The third and fourth items provided for allowances when two or more hooks were employed simultaneously at a vessel’s hatch. An allowance of one rupee and twenty‑five paise per mazdoor was payable for each of two hooks used at the same time, and an allowance of one rupee and sixty‑six paise per mazdoor was payable for each additional hook beyond the first two. The scale further required that a clear written notice of one hour be given for any cancellation of labour that had been requisitioned. If such notice was not received in time, the full period for which the labour had been requisitioned would be charged at five rupees per mazdoor per shift or part thereof. The amendment containing these provisions was stipulated to take effect from the date of introduction of the Piece‑Rate Scheme, namely 1 March 1958.

In addition, the Court noted that a circular identified as Exhibit‑B had been issued by the Board to all steamer agents on 25 February 1958. The circular explained the features of the Piece‑Rate Scheme for dock and stevedore work in the Port of Madras and emphasized that the scheme was designed to increase vessel turn‑around and sought the cooperation of steamer agents and stevedores in its implementation. The salient features of the scheme, as outlined in the circular, indicated that each worker was guaranteed a minimum daily wage, while actual earnings for a day depended on the worker’s output per shift and were linked to productivity. A gang of workers consisted of a maistri and fourteen workers, and the output was measured against prescribed “datum lines” representing the standard tonnage that a gang should handle at a particular hook during a shift. The scheme provided for incremental wage increases when output exceeded the datum lines, with wages doubling at 150 % of the datum and tripling at 200 % of the datum, thereby underscoring the importance of idle time in determining workers’ earnings.

A gang under the scheme consisted of a maistri and fourteen workers who together handled cargo at a single point, referred to as a hook. For each type of cargo the Board fixed datum lines that represented the standard output expected from a gang at a particular hook during a shift. The datum lines were expressed in dead‑weight tons and served as the benchmark for calculating wages. The scheme established a daily wage rate and a wage rate for achieving the standard output for all categories of workers, which were classified into five groups, one of which was the Port Trust Shore Labour. When a gang’s actual output exceeded the datum line, the workers were entitled to a higher wage rate. The scheme provided a graduated increase in earnings: if the output reached one hundred percent of the datum tonnage, the basic daily wage applied; at one hundred and fifty percent of the datum tonnage the worker earned twice the daily wage; and at two hundred percent the piece‑rate wage rose to three times the daily wage. This structure highlighted the importance of minimizing idle time, because any period during a shift when workers were not actually engaged in work would reduce their tonnage output and consequently lower their earnings.

To compensate for loss of earnings caused by unavoidable idle periods lasting more than fifteen minutes, the scheme granted an idle allowance paid at the full daily wage rate. The circular listed several reasons for which idle allowance could be claimed: breakdown of cranes or winches; shifting of quay cranes or rigging of a ship’s derricks; cargo not being ready for shipment; late arrival of vessels at the berth; completion of loading or unloading before the shift ended; actual rain‑time during the working hours of the shift; and any other cause beyond the workers’ control, excluding slow work by the workers themselves. According to Item No. I of scale ‘E’, the idle allowances for reasons (ii) to (v) and for breakdowns of ship’s winches mentioned in reason (i) were to be charged against the masters, owners or agents of the vessels that were responsible for the circumstances giving rise to those reasons. In addition to the idle allowance, workers were entitled to a multiple‑hook allowance. When two hooks were operated simultaneously at a hatch, each gang received an allowance equal to one‑fourth of the daily wage; if more than two hooks were in use at a hatch, the allowance rose to one‑third of the daily wage. Since one gang handled goods at one hook, the employment of several gangs to work multiple hooks at a hatch meant that the output per gang was proportionately reduced, affecting the earnings of each gang accordingly.

In this case the Court explained that when more than one hook is operated at a ship’s hatch the workers’ earnings fall because the work is divided among several gangs, thereby reducing the output of each gang. If cargo is discharged during only half of a shift, the workers’ earnings may be reduced even further. To offset such loss of earnings, the piece‑rate scheme provides a “hook allowance” to the labourers. The allowance is intended to compensate the workers for the reduction in pay that results when additional hooks are used, which speeds up the discharge of cargo and enables the vessel to depart more quickly. Because the use of extra hooks benefits the ship, the Court noted that the cost of the hook allowance is charged to the master and the agents of the steamer.

The writ petitions challenging the levy of these charges were initially heard by a single judge of the High Court. That judge dismissed the petitions, holding that the liability for the charges, which were for services rendered, could be imposed only on the person to whom the service was rendered. The judge reasoned that the entrustment of the goods to the Board was made by the shipping agent, even though the ultimate purpose of that entrustment was delivery to the consignees, and therefore the service was deemed to be rendered to the shipping agent. He further stated that it was not necessary for liability that the shipping agent be the exclusive beneficiary of the service.

On appeal, the appellate bench reversed the single judge’s order, allowed the petitions and issued a writ of mandamus as prayed. The appellate court held that the Board had no authority to introduce the new Scale E rates that were payable by the master, owner or agent of the vessel. It observed that the ship‑owner’s liability ended when the goods were placed over the rail of the ship, and that from the moment the goods came within the reach of Board employees who took charge of them and the tally clerk issued a receipt on behalf of the Board, the services for which the new charges were sought could no longer be considered services rendered to the master, owner or agent. Instead, those services were deemed to be rendered to the consignee. The Court further explained that the requisition made by the steamer agent was essentially aimed at avoiding delay, congestion and facilitating the Board’s convenience, and therefore should be treated as a request on behalf of the consignees because taking delivery was not part of the steamer agent’s duty.

The Court then noted that the contentions presented before it were the same as those raised in the lower courts and would be addressed later. Before examining those arguments, the Court referred to the relevant statutory provisions. It pointed out that Clause (7) of Section 5 of the Act defines “owner” in relation to goods to include any consignor, consignee, shipper or agent involved in the sale, custody, loading or unloading of the goods. Section 39, which deals with the performance of services by the Board, was also cited, stating that the Board shall, within its powers, provide all reasonable facilities and may undertake the services specified therein.

Section 39 of the Act enumerates the services that the Board is authorized to provide. The services listed are: (a) landing, shipping, or transshipping passengers and goods between vessels in the port and the wharves, piers, quays, or docks that are under the Board’s control; (b) receiving, removing, shifting, transporting, storing, or delivering goods that have been brought within the premises of the Board; (c) carrying passengers by rail, tramway, or any other mode of conveyance within the limits of the port, subject to any restrictions and conditions that the Central Government may deem appropriate; and (d) receiving and delivering, transporting, booking, and dispatching goods that originate on vessels in the port and are intended for carriage by the neighbouring railways, or conversely, goods that arrive by railway and are to be taken on board, as a railway company or administration governed by the Indian Railways Act, 1890. Sub‑section (2) adds that, if the owner so requires, the Board shall perform any or all of the services mentioned in clauses (a), (b), and (d) of sub‑section (1), but the Board is not obligated to perform any service that it has previously relinquished under clause (a) of sub‑section (1) of section 41‑A. Sub‑section (3) further provides that, when the Board is required to take charge of goods for the purpose of performing a service, it must issue a receipt in the form and to the effect prescribed from time to time by the Central Government. Once the Board has taken charge of the goods and a receipt has been issued, no liability for loss or damage to those goods shall attach to any person who has received the receipt, nor to the master or the owner of the vessel from which the goods were landed or transshipped. Section 40 deals with the Board’s responsibility for loss, destruction, or deterioration of goods it has taken charge of. It states that, subject to the other provisions of the Act and, in the case of goods received for carriage by railway, subject to the provisions of the Indian Railways Act, 1890, the Board’s responsibility shall be that of a bailee under sections 151, 152, and 161 of the Indian Contract Act, 1872, with the words “in the absence of any special contract” omitted from section 152 of that Act. However, until the receipt required by sub‑section (3) of section 39 is given, the goods remain at the risk of the owner. Additionally, the Board shall not be liable for loss or damage to goods it has taken charge of unless notice of such loss or damage is given within one month of the date of the receipt issued under sub‑section (3) of section 39. Section 41‑A governs the relinquishment of services subject to Central Government control. Sub‑section (1) of section 41 provides that any person to whom any or all of the services under clauses (a) and (b) of sub‑section (1) of section 39 have been relinquished, shall, if so required by the owner, perform, for that purpose, any of the relinquished services, take charge of the goods, and issue a receipt in the form and to the effect prescribed by the Central Government from time to time.

In this case, the Court explained that where services have been relinquished under Section 41‑A, the person to whom those services are transferred must, if the owner so requires, take charge of the goods and issue a receipt in the form prescribed by the Central Government. Section 42, which deals with the scale of rates, directs the Board to prepare a schedule of rates and a statement of the conditions under which any of the services listed in that section may be performed either by the Board itself or by a person to whom a service has been relinquished under Section 41‑A, or by a combination of both. The schedule must cover trans‑shipping of passengers and goods between vessels in the harbour; landing and shipping of passengers or goods to or from such vessels at any wharf, quay, pier, dock, land or building owned or occupied by the Board or at any place within the port limits; cranage, porterage or handling of goods at any such place; wharfage, storage or demurrage of goods at any such place; and any other service relating to vessels, passengers or goods except for those services for which fees are chargeable under the Indian Ports Act, 1908. Section 44 requires that every rate schedule and every statement of conditions framed by the Board under Sections 42, 43 or 43‑A be submitted to the Central Government for sanction, and once sanctioned and published, those rates acquire the force of law.

The Court further noted that Sections 45 and 46 empower the Board and the Central Government respectively to enhance the rates if the Board fails to do so. Section 50 mandates that rates payable for goods to be landed must be paid immediately upon landing, while rates for goods to be removed from the Board’s premises, shipped for export, or trans‑shipped must be paid before such removal, shipment or trans‑shipment takes place. Section 51 gives the Board a lien over the goods for the amount of rates levied under the Act and for any rent due on buildings or other premises in which those goods are placed. Section 52 clarifies that the Board’s lien takes priority over certain other liens and claims. Section 53 preserves the Board’s lien for freight or other charges, including landing charges payable to the ship‑owner, after the Board’s own lien. Section 54 provides that the Board may retain the goods in its custody at the risk and expense of the owners until the lien is discharged, and that storage rent is payable by the party entitled to the goods for the period of retention. Finally, Section 56 makes provision for the sale of goods if rates or rents remain unpaid or if a freight lien is not discharged.

In the judgment, the Court referred to the provisions of the Act relating to the sale of goods held by the Board. Section 56 authorised the Board, after a lapse of two months, to sell goods when the rates or rents remained unpaid or when the lien for freight had not been discharged. Section 57 required that a notice of such a sale, when the goods were perishable, be published in the Gazette. Section 58 directed that a notice also be given to the owner of the goods, provided the owner’s address was known. Section 59 explained the manner in which the proceeds of the sale were to be applied: first to cover the expenses of the sale, then to satisfy the liens and claims except those specified in section 52, followed by the payment of rates and the expenses incurred for landing, removing, storing or warehousing the goods, and finally to settle any other charges due to the Board. The Court observed that once goods were landed, the lien for freight or other charges enjoyed priority over the Board’s lien, and that the Board exercised its regulatory powers under section 95 of the Act to frame by‑laws. By‑law number 2 regulated admission to the harbour premises by issuing permits to members of the public who had business connected with the harbour’s purposes, services or works. By‑law number 3 imposed an obligation on the master, owner or agent of a vessel carrying cargo for discharge at the Port of Madras to furnish the Traffic Manager with a true copy of the complete Import General Manifest at least six clear working days before permission to break bulk was granted; the manifest had to contain full details of each consignment, including litreage for liquids in bulk and gross weight in kilograms for other cargoes, and failure to comply could result in denial of permission to break bulk. By‑law number 4 stipulated that goods could be landed or shipped only at locations designated by the Port Trust for each class of cargo. By‑law 4‑A empowered the Traffic Manager, where any vessel discharged cargo in a rotten condition that constituted a nuisance or was injurious or dangerous to health, to require the consignee, or if the consignee disclaimed or denied responsibility, the owner, master or agent of the vessel, to remove the cargo promptly; if those persons failed to do so, the Traffic Manager could arrange for removal or destruction of the cargo in a manner he deemed appropriate and could demand reimbursement of the expenses from the consignee or the master or owner involved.

By‑law number five stipulated that whenever the Port Trust performed the reception, removal, porterage or storage of cargo under section thirty‑nine of the Act, the Trust was required to deliver the cargo or allow its shipment only after all dues had been paid. The by‑law further required that if the Trust chose not to undertake those services for a particular cargo, no steamer agent, shipper or consignee could remove any portion of that cargo from the harbour premises until the Trust authorised such removal after the appropriate dues were satisfied. By‑law number six mandated that harbour dues on landed goods, together with any other charges incurred under the Port Trust Scale of Rates, must be paid before the goods could be taken away from the harbour premises. By‑law number seven required that every application for permission to export or import goods be made on approved forms, and that such forms be completed and signed by the shipper or consignee of the goods or by that person’s agent. The Court also referred to the Manual of Instructions issued by the Board for the Traffic Department. Counsel argued that the Manual should not be considered because it was not part of the record. While that observation was technically correct, the Court noted that the instructions contained in the Manual merely amplified or explained facts already set out in the affidavit and the common counter‑affidavit filed by the parties, and therefore could be consulted for clarification. The instructions indicate that agents of vessels must inform the Traffic Manager of the probable arrival date of their steamers, after which the Traffic Manager records any requirements for a quay or a mooring berth. Instruction three provides that the authority of steamer agents, acting as bailors, to the Trust as bailee for delivery of goods may be shown by an endorsement of the bill of lading by the steamer agents, and that a bill of lading lacking such endorsement cannot be accepted. Instruction four concerns the tally sheet and specifies that the form prescribed by the Local Government under section thirty‑nine paragraph three of the Madras Port Trust Act is to be used for cargo landed into the Trust’s custody. The original copy serves as the Trust’s record, while the duplicate copy, which is the prescribed receipt, must be handed to the tenderer immediately after the form has been completed with marks, numbers, descriptions (as far as possible), other particulars such as the outward condition of each package, and the signature of a Port Trust Tally Checker. The Court emphasized that great care must be exercised in entering tally sheets because they constitute the sole records for settling claims between the tenderer and the Trust and are essential for smooth operations. Tally sheets are retained in the Traffic Section for twenty‑eight days after a vessel’s departure before being filed in the appropriate application section.

Instruction No. 5 dealt with the procedure for receipting the tally sheets. It required that each tally sheet, which was prepared in duplicate on carbon paper and fully completed, be signed by the Port Trust Tally Checker as well as by the representative of the steamer agent. The duplicate copy was then to be handed to the steamer‑agent’s representative immediately, and this duplicate was to constitute the receipt prescribed under section 39(3) of the Madras Port Trust Act. Instruction No. 26 provided that the Trust could deliver cargo only on the authority of delivery orders issued by the steamer agents, who acted as bailors. Such authority might appear either as an endorsement by the bailor on the bill of lading or as a separate delivery order issued by the Trust on behalf of the bailor.

The Court observed that the various provisions of the Act did not impose an absolute obligation on the Board of the Port Trust to perform all of the services listed in subsection (1) of section 39. Subsection (1) merely empowered the Board to provide reasonable facilities, within the scope of its powers, for the services described in clauses (a), (b) and (d) of that subsection, and it also authorized the Board to undertake those services if it chose to do so. The provision did not make the performance of those services a mandatory duty of the Board. The mandatory element was introduced only by subsection (2), which required the Board, when asked by the “owner” of the goods, to perform any or all of the services mentioned in clauses (a), (b) or (d) of subsection (1). The term “owner” was defined broadly to include the consignor, consignee, shipper or any other agent having an interest in the goods.

According to the Court’s analysis, subsection (3) further stipulated that if the Board were required to take charge of the goods in order to perform the services, it must do so and must issue a receipt in the form and manner prescribed by the Central Government. Consequently, the obligation of the Board to carry out any of the services in subsection (1) and to take charge of the goods depended entirely on a request made by the owner. In the absence of such a request, the Board was under no duty to provide those services. The Court stressed that the steamer‑agent, being the party who possessed full knowledge of the ship’s arrival time, the suitability of the berth, the quantity and nature of the consignment, and the timing of the ship’s required stay in the dock, was the only party who could appropriately require the Board to undertake the services for the cargo to be unloaded. The steamer‑agent alone could therefore direct the Board to provide the necessary shore‑labour and related facilities based on that knowledge.

In this case, the Court explained that the steamer‑agent possessed the necessary information concerning the berth allocated for a ship, the quantity and nature of the consignment, the desired docking time, and consequently the amount of shore‑labour needed to land the goods. Because of this knowledge, it was the steamer‑agent who informed the Board’s staff about the ship’s arrival, supplied the manifest that detailed the goods to be landed, and submitted a requisition specifying the shore‑labour required and the period for which it would be needed. Both parties concurred that the steamer‑agent traditionally conveyed such information about the required shore‑labour and the timing of its use. The Court noted that a new form of requisition, introduced on 1 March 1958, included an undertaking by the steamer‑agent to pay labour dues in two situations: when labour remained idle and when a labourer operated more than one hook simultaneously. This clause was added because the payments for idle labour and multiple‑hook work were newly introduced charges that would be collected in addition to the existing charges based on the tonnage handled, and because the Board anticipated possible objections from steamer‑agents to these new liabilities. However, the Court clarified that the liability to pay these charges did not arise from the undertaking itself but from the sanctioned scale of rates and the conditions under which the Board performed its services. Section 44 of the Act gave those sanctioned rates and conditions the force of law. The principal issue for determination, therefore, was whether the law that made the steamer‑agent liable to pay these charges was a valid law. The learned Attorney‑General, appearing for the appellant, argued that the purpose of the scale “E” rates was to speed up the discharge of cargo at the quay, thereby enabling a larger quantity of cargo to be unloaded quickly. He contended that the services rendered by the Board were services to the ship and that, consequently, the charges for those services should be recovered from the steamer‑agents. He further maintained that harbour dues were collected from the consignees because the Board acted as a bailee of the ship‑owner, who in turn was a bailee of the shipper and was bound by contract to deliver the goods to the consignee or his nominee upon presentation of the bill of lading. The Court observed that the Board’s taking charge of the landed goods did not amount to the Board taking delivery of the goods from the ship‑owner in fulfillment of the ship‑owner’s duty to deliver to the consignee, because the Board did not receive the goods upon presentation of the bill of lading. The Court agreed that the object of the impugned charges was precisely as described by the appellant: the charges were intended to compensate for labour that remained idle due to a default on the part of the ship‑owner or his agent, and not for any condition within the control of the workmen.

In its analysis, the Court observed that any idle allowance payable to workers arose from a failure on the part of the ship‑owner or the ship‑owner’s agent, and not from any circumstance within the workers’ control. The Court recalled that it had already examined the characteristics of the piece‑rate system and found that such a system required payment of an idle allowance when labour was rendered idle. The same reasoning, the Court said, justified the payment of that allowance when workers were sent away or were not needed after shore work had begun at the start of a shift. The Court further explained that when more than one hook was employed simultaneously, the unloading of cargo necessarily proceeded more quickly. This accelerated unloading was beneficial to the ship‑owner because the vessel completed the landing of its goods in a shorter time. Consequently, the provision allowing workers to operate more than one hook at the same time also served the ship‑owner’s interest. The Court added another rationale for charging the steamer‑agent for these payments: the cargo discharged by a ship is not necessarily destined for a single consignee, and the goods are not unloaded on a consignee‑by‑consignee basis. It would be impossible, or at best extremely inconvenient, for the Board to calculate proportionate charges for each consignee in relation to the idle‑allowance and hook‑allowance payments when cargo was discharged with multiple hooks working simultaneously at the vessel’s hatch. Therefore, it was reasonable to make the ship‑owner liable for such payments. The Court affirmed that the ship‑owner acted as bailee of the shipper, the consignor, and bore responsibility for delivering the goods to the consignee or a transferee in accordance with the bill of lading. That duty was discharged only when the ship‑owner delivered the goods to the consignee or to any person entitled to take delivery under the endorsements on the bill of lading. Delivery to the Board, the Court noted, did not constitute delivery to the consignee because delivery under the bill of lading required presentation of the bill, and the statute contained no provision making the Board an agent of the consignee for taking delivery. The Court disagreed with the respondents’ contention that the term “receiving” in clause (b) of sub‑section (1) of section 39 of the Act meant receiving the goods on behalf of the consignee. The Court held that receipt could also be on behalf of the ship‑owner, and that the steamer‑agent could not require the Board to receive the goods on the consignee’s behalf. Section 39(3) empowered the Board to take charge of goods for performing certain services, which did not include taking delivery of the goods from the ship‑owner. The Court acknowledged that when the Board took charge of the goods and issued a receipt to the ship‑owner, the master or the vessel’s owner was thereby relieved of liability for any loss or damage to the goods after they had been landed.

The Court observed that although the Board’s taking charge of the goods after they had been landed by the ship‑owner discharged the master or the owner from liability for any loss or damage that might thereafter occur, that provision by itself did not convert the Board’s receipt of the goods into delivery of those goods on behalf of the consignee. The Board simply assumed charge of the goods when the steamer‑agent required it to do so. Section 40, which deals with the Board’s responsibility for loss, destruction or deterioration of goods it has taken charge of, does so in the capacity of a bailee under sections 151, 152 and 161 of the Indian Contract Act. Section 148 of that Act defines bailment as the delivery of goods by one person to another for some purpose, on a contract that the goods will be returned or otherwise disposed of according to the directions of the person delivering them; the person delivering is the bailor and the person receiving is the bailee. Consequently, when the Board takes charge of the goods from the ship‑owner, the ship‑owner is the bailor and the Board is the bailee, and the Board’s subsequent liability is that of a bailee. The Board does not obtain the goods from the consignee and therefore cannot be the bailee of the consignee. It could act as an agent of the consignee only if expressly appointed, a circumstance that has not been alleged, and even if it were an agent, its liability would arise as an agent and not as a bailee. Thus, the provisions of sections 39 and 40 further support the contention that the Board takes charge of the goods on behalf of the ship‑owner and not on behalf of the consignee, and that any services it performs at the time of landing the goods or thereafter are services rendered to the ship. The Court then turned to the arguments advanced by counsel for the respondents, particularly those raised by Mr Desai. The principal issue raised by Mr Desai concerned the legal obligation of the master with respect to unloading the cargo. He drew attention to the Indian Carriage of Goods by Sea Act, 1925 (Act XXVI of 1925), and especially to the definition of “carriage of goods” in Article I of the Schedule to that Act. Clause (e) of that article states that “carriage of goods” includes the period from the time the goods are loaded onto the ship until the time they are discharged from the ship. The Court noted that, of course, once the goods are landed they are no longer “carried” by the ship, and the expression “carriage of goods” therefore applies only up to the point of discharge. However, the Court emphasized that this limitation does not in any way affect the consideration of the questions presently before it.

The Court observed that the matter before it required consideration of Rule 6 of Article III, which provides that a written notice of loss or damage, together with the general nature of such loss or damage, must be given to the carrier or the carrier’s agent at the port of discharge before or at the time the goods are removed into the custody of the person entitled to delivery under the contract of carriage. If the loss or damage is not apparent, the notice must be given within three days. The rule further states that such removal of the goods constitutes prima facie evidence that the carrier has delivered the goods as described in the bill of lading. This means that until the goods are placed in the custody of the entitled person, the carrier cannot be deemed to have effected delivery in accordance with the terms of the bill of lading. The Court further explained that the carrier’s responsibility for the goods does not end merely upon the technical discharge of the goods from the ship; rather, the liability continues up to the point of delivery that complies with the bill of lading. Counsel for the petitioner, Mr. Desai, argued that under general law the master’s responsibility ends once the goods have been discharged and positioned so that the consignee can take charge, and that any subsequent handling is performed on behalf of the consignee for his benefit. The Court noted that charges for idle labour and for labour operating additional hooks are not charges for services rendered after the goods have been landed; instead, they arise at the final stage of the landing process, which is still prior to the actual landing of the goods. Consequently, even under general law such charges pertain to services rendered to the master, whose liability for loss or damage persists until the goods are placed on the quay and received by the Board. The Court regarded the case of Great Eastern Shipping Co. Ltd. v. Govindasamy (1) as of limited assistance, observing that the earlier decision did not dispute that when a master lands goods and leaves them in the charge of the Port Trust, the legal effect is as if the master, representing the shipping company, has delivered the goods to the consignee, with the Port Trust acting as the consignee’s agents. The Court further noted that, given the customary practice at Madras Port, a formal requisition by the consignee to the Port Trust was not required for the consignee to assume charge of the goods. Accordingly, the Court held that the lower court had not correctly applied the precedent to the question at hand. Finally, the Court cited the commentary on page 684 of Carver’s Carriage of Goods by Sea, 10th Edition, as relevant authority.

In general, the consignee of the goods or the charterer is required to remove the cargo from the side of the ship and must supply, for that purpose, a sufficient number of men and suitable appliances of the kind ordinarily employed at the port, taking into account the manner in which the ship is to be discharged. It is observed on page 687 of Carver’s Carriage of Goods by Sea that, where the customary practice at a particular port requires that cargo be taken off the ship into lighters or onto a quay, the term “alongside” may be interpreted not as literally at the ship’s side but as a lighter positioned alongside the vessel.

The Court then turned to the authorities relied upon by the respondents. In Peterson v. Freebody & Co., the factual situation differed from the present case because the dispute concerned the liability of the consignee for demurrage that the ship‑owner had paid due to delayed discharge of the cargo. The proceeding was a suit brought by the ship‑owner against the consignee. The charter‑party in that case stipulated that discharge was to be completed within eight days, that the cargo was to be brought to and taken from alongside the ship at the merchant’s risk and expense, that the ship must deliver the cargo with such dispatch as to avoid unnecessary delay, and that the ship could discharge over the side into the river, the dock, lighters or otherwise if required by the consignees.

Lord Esher, Master of the Rolls, explained at page 297 that wherever delivery is to be made, the ship‑owner must give delivery. He held that merely placing the goods on the rail of the ship does not constitute delivery, and that a consignee who simply stands on another vessel, barge, lighter or quay without taking any action does not take delivery. According to Lord Esher, the ship‑owner has performed the principal part of his obligation when he has put the goods over the rail, but he must do more by positioning the goods so that the consignee can take them. The goods must be placed far enough over the side for the consignee to commence handling them; at the moment the goods are within the consignee’s reach, the consignee must assume his part of the operation. Thus, there is a moment when both ship‑owner and consignee are acting together—one giving delivery and the other taking delivery—and a later moment when the joint act is completed.

These observations are applicable where the goods are to be delivered to the consignee alongside the ship and are not intended for hand‑over to a statutory body such as the Board acting as a sub‑bailee. The manner in which delivery is to be effected depends upon the terms set out in the bill of lading and the customary practice of the port concerned.

In this case the Court observed that the earlier decision does not establish a rule that the master of a vessel is forever free from any responsibility after he has positioned the cargo so that the consignee is able to retrieve it, as the respondents argued. The Court explained that the type of delivery described in those earlier observations is not the same as the landing of goods on the quay which is covered by the various provisions of the Act. The Court reiterated that when the ship‑owner lands the goods on the quay and then places them under the custody of the Board, this does not constitute delivery to the consignee, even though such a step relieves the master of any further liability for loss or damage to the cargo.

The decision of British Ship‑owners’ Co. (Limited) v. Grimond was considered and held to be of no assistance. That case merely held that delivery to porters, whom the consignee was required by Harbour Regulations to engage and pay for the purpose of receiving the goods, amounted to delivery to the consignee. In the present matter there is no evidence that the consignees are under any obligation, imposed by the Board, to engage shore‑labour. Moreover, the judgment of Lord Justice Clerk at page 972 was quoted, stating that the question of delivery involves both common‑sense and technical rules, and that goods are delivered when they are completely in the consignee’s custody so that he may deal with them as he wishes. The Court noted that when the goods are handed over to the Board, the consignee does not have the freedom to act upon them, and consequently, according to Lord Justice Clerk’s view, such hand‑over does not constitute delivery to the consignee.

The Court also referred to the decision in Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., which declared that it is clear law that a ship‑owner who delivers cargo without the production of the bill of lading does so at his own risk. The contract requires delivery, upon presentation of the bill of lading, to the person entitled under that bill. The Court observed that the shipping company in that case failed to deliver the goods to any person entitled under the bill of lading, making it liable for breach of contract unless the bill contained a protective term. Because the company delivered the goods without the bill of lading to a person who was not entitled to receive them, it was also liable for conversion unless the bill protected it.

Clause 2 of the bill of lading was quoted, which provides that during the period before the goods are loaded on the ship or after they are discharged, the stated terms and conditions shall apply, subject to the exclusion of any other provisions in the bill that are inconsistent. The Court indicated that this clause did not shield the ship‑owner despite its broad wording, and its operation must be confined to give effect to the main purpose and intention of the contract, preventing the carrier from deliberately evading his delivery obligations that are conditioned upon the production of the bill of lading.

In the Bill of Lading, a clause stipulated that the carrier’s liability would continue in certain situations: (a) while the goods remained in the actual custody of the carrier or his servants; (b) while the goods were being transported to or from the ship; and (c) in other cases, the carrier’s responsibility, whether acting as carrier, custodian or bailee, would be deemed to commence only when the goods were loaded on the ship and to cease absolutely when the goods were discharged from the ship. The Court held that, despite the wide wording of this clause, it did not afford protection to the shipowner. The clause had to be interpreted narrowly and, where necessary, modified so that it gave effect to the main object and intention of the contract and, at the very least, did not permit the carrier to deliberately disregard his duty to deliver only upon production of the bill of lading. In the present dispute, it was further argued that, between the master of the ship and the consignee, the Act made it obligatory for the consignee to obtain his goods from the Board rather than directly from the master, and that consequently the Board was acting as the consignee’s agent. The Court observed that no provision of the Act had been cited that would support this contention. Assuming, however, that the consignee could not take delivery of the goods directly from the ship at the quay, the Court said that this assumption did not lead to the conclusion that the Board received the goods as the consignee’s agent. The only reasonable inference, given the surrounding circumstances, was that the place of delivery had been shifted from the side of the ship to the warehouses where the Board stored the goods until the consignee presented a delivery order, usually an endorsement on the bill of lading, and that the quay should be regarded as part of the ship. The Court referred to the German Law of Carriage of Goods by Sea, quoting a note that explained that where goods are shipped from or discharged onto a quay, the owner of the quay is generally considered the master’s agent; the act of the shipper handing the goods over to the quay owner amounts to a receipt by the master, and the goods discharged onto the quay remain in the master’s possession until the consignee receives them from the quay. Accordingly, even if the Board were treated as an agent of the consignee, it would be bound to deliver the goods to the consignee and should not have

The Board asserted that it possessed no right to retain the goods until the rates and other dues had been paid, even though it claimed a lien over the goods. The statutory provision which establishes a lien on the goods for the payment of the Board’s dues or freight demonstrates that the Board did not hold the goods in custody as an agent of the consignee. Further, it was argued that section 42 creates a distinction between services performed in respect of the vessel and services performed in respect of the goods; the former are said to be rendered to the master of the ship and the latter to the consignee, who is the owner of the goods, and that the act of receiving the goods from the ship at the quay therefore constitutes a service to the consignee. The Court did not adopt that construction of the phrase “any other service in respect of vessel, passengers or goods” found in clause (e) of section 42 of the Act. If that interpretation were accepted, the Board would be required to charge the passenger to whom the services are rendered, which is not the practice followed. Instead, any charges that arise must be recovered from the steamer‑agents, who may subsequently pass those charges on to the passengers. The Court therefore rejected the contention that charges for labour rendered idle represented compensation or damages for any loss, inconvenience or expense suffered by the Board or its shore‑labour as a result of any default attributed to the master of the ship. The Court held that there was no question of damages; the labour had been engaged and was paid for the period it remained idle, through no fault of its own. Consequently, the charges for idle labour are to be levied on the person who required that labour and is responsible for its remaining idle, and not on the ship‑owner, unless the idle time was caused by the default of the labour itself.

Accordingly, the Court was of the opinion that the charges under dispute had been properly levied in accordance with scale ‘E’ on the master, the owner or the agent of the vessels. The Board was therefore entitled to insist that the steamer‑agent, when requisitioning shore‑labour, provide an undertaking in the prescribed form that he will pay the charges specified in the Board’s scale of rates, as revised from time to time, for labour that is idle or not properly utilised, and also for the use of more than one hook simultaneously at a vessel’s hatch. On that basis, the Court allowed the appeals with costs, set aside the order of the lower Court, dismissed the writ petitions, and directed that only one hearing fee be payable. The appeals were consequently allowed.