Sunday, April 9, 2017

Jurisdiction clause in the bill of lading has primacy: Court uphold Carriers preliminary defense.

(V.M. Syam Kumar LL.M., Advocate, Kochi)
The parties are bound by the terms of the bill of lading and also the forum which they have chosen for entertaining any case in connection with the dispute relating to the transaction between them. Holding thus the Subordinate Judge, Kochi has vide Order dtd. 24.01.2017 directed return of the plaint to the plaintiff for presentation before proper court having jurisdiction. The Learned Sub- Judge had been following the judgment of the Hon’ble Supreme Court of India reported in 1990 (3) SCC 481 and AIR 2003 SC 1177.
Plaint was filed before the Subordinate Judge, Kochi by a purported owner of the goods seeking recovery of certain amounts from the carrier for alleged breach of contract of carriage evidenced by a Bill of lading issued at Kochi. The port of loading was Kochi, India and the port of discharge was Valencia.
Since the defendant carrier in its written statement raised the preliminary objection of jurisdiction, the learned sub-judge proceeded to consider the said question at the threshold before proceeding to trial.
The relevant clause (Clause 26) in the Bill of lading pertaining to jurisdiction read as follows:
Whenever clause 6.2(d) and /or whenever USCOGSA applies whether by virtue of Carriage of Goods to and from the United States of America or otherwise, that stage of the Carriage is to be governed by United States law and the United States Federal Court of the Southern District of New York is to have the exclusive jurisdiction to hear all disputes in respect thereof. In all other cases, this bill of lading shall be governed by and construed in accordance with English law and all disputes arising hereunder shall be determined by the English High Court of Justice in London to the exclusion of the jurisdiction of the courts of another country.
The Hon’ble Supreme Court has unequivocally laid down the law with respect to the transfer of rights under a bill of lading by holding in British India Steam Navigation Co. Ltd. V. Shanmughavilas Cashew Industries (1990) 3 SCC 481 as follows: “A bill of lading is intended to provide for the rights and liabilities of the parties arising out of the contract of affreightment. If the consignee claims the goods under a bill of lading he is bound by its terms. The bill of lading is the symbol of goods and the right to possess those passes to the transferee of the bill of lading. In other words, its transfer is symbolic of the transfer of the goods themselves and until the goods have been delivered, the delivery of the duly endorsed bill of lading operates as between the transferor or transferee, and all who claim through them as a physical delivery of the goods would do. The bill of lading is a negotiable instrument in the sense of carrying with it the right to demand and have possession of the goods described in it. It also carries with it the rights and liabilities under the contract where the property in the goods is also transferred.”
The question of jurisdiction was squarely covered in favour of these defendants by the dictum laid down by the Hon’ble Supreme Court in British India Steam Navigation Co. Ltd. V. Shanmughavilas Cashew Industries (1990) 3 SCC 481. The said case also has a jurisdiction clause in a bill of lading which is similar to the case at hand. It is pertinent to point out that the said Supreme Court decision arose out of a suit for damages based on a bill of lading filed before the Hon’ble Subordinate Judge’s Court, Cochin.
The Hon’ble Supreme Court after detailed consideration of the matter has laid down the law regarding jurisdiction in a suit based on bill of lading as follows: “The jurisdiction of the Court in actions in personam may be decided upon by the parties themselves based on various connecting factors. The parties to a contract in international trade or commerce may agree in advance on the forum which is to have jurisdiction to determine disputes which may arise between them. The express choice of law made by the parties obviates the need for interpretation. The chosen court may be a court in the country of one or both the parties, or it may be a neutral forum. The jurisdiction clause may provide for a submission to the courts of a particular country, or to a court identified by a formula in a printed standard form such as a bill of lading referring disputes to the carrier’ principal place of business.”
The Hon’ble Supreme Court further held as follows: “Clause 3 of the Bill of lading also contains the selection of law made by the parties. The contract is governed by English law and disputes are to be determined according to English law. Is the selection of law binding? In Cheshire and North’s Private International Law (11 th Edition, page 495) while discussing about the interpretation of contracts the authors say: “When the stage has been reached where an obligation, formally and essentially valid and binding on the parties of full capacity, has been created, then in the further matters that may require the intervention of the court, there I, speaking generally, no reason in principle why the parties should not be free to select the governing law.” The express choice of law made by the parties obviates need for interpretation.
In the absence of express choice the question of the proper law of contract would arise. The parties to a contract should be bound by the jurisdiction clause to which they have agreed unless there is some strong reason to the contrary.
The Hon’ble Supreme Court in Modi Entertainment Network & Another V. WSG Criket Pvt. Ltd. AIR 2003 SC 1177 held that
“But then the jurisdiction clause indicates that the intention of the parties is to have the disputes resolved in accordance with the principles of English law by English Court. Unless good and sufficient reasons are shown by the appellants, the intention of the parties as evidenced by their contract must be given effect to.”
The recent Order rendered by the learned Subordinate Judge Smt. A.S. Mallika, thus abides by the well settled law as laid down by the Hon’ble Supreme Court in various decisions and is an important mile stone in the adjudication of carriage of goods by sea cases in Kochi. (Read the full text of the Order at