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 https://www.scribd.com/document/344570693/Os-129-Kochi-Ia-Order-Maersk1)

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Carriage by sea without any proof of contract of carriage? – Court dismisses the Carrier’s suit for freight charges.

(V.M. Syam Kumar, Advocate, Kochi)

What is the evidence required for proving contract of carriage by sea? Can a carrier prefer a claim for freight without producing any document to prove the contract of carriage by sea?

The issue was considered by the Subordinate Judge’s Court Kochi in a suit filed by the carrier. The matter pertained to transportation of goods comprising of ceramic tiles from Kandla to Kochi. Carrier alleged that the freight remained unpaid and amounts were further due towards demurrages and detention charges in Kochi port. Carrier filed the suit arraying the Shipper, the consignee and the seller of the cargo as defendants. Amounts were claimed from them jointly and severally.

During the trial, the carrier could not produce any documents evidencing the contract of carriage leading the learned Judge to conclude that “The plaintiff who claims that goods were transported as per the instruction of the defendants, has not produced any evidence to prove the entrustment of the goods.”

The Indian statute on carriage of goods by sea Carriage of Goods by Sea Act, 1925 envisages the said Act 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. Schedule to the said Act lays down the rules relating to bills of lading. No such bill of lading was produced before the Court.

The Judgment was delivered by Judge Mr. P.K. Mohandas and the conclusion arrived at by the learned judge reads as follows:

 “There is no evidence to show that it was the defendants who entrusted the goods with the plaintiff and there was contract between the plaintiff and the defendants. There is no materials to prove the claim of the plaintiff that he has paid the amount to the port operator and the plaintiff is liable to pay the amounts to the Container Corporation of India. A careful reading of the materials on record shows that there is no reliable evidence to show that the defendants are liable to pay the amount claimed in the suit to the plaintiff. The plaintiff has not succeeded in proving their claim and the suit is only to be dismissed.”

Coastal shipping along Indian coast is riddled with mysterious practices. Many a times, cargo is carried without any tangible contractual documents. The above judgment is a strong deprecation of such practice.

http://ecourts.gov.in/services/cases/display_pdf.php?filename=/orders/204701000622013_1.pdf&caseno=OS/100062/2013
 (Judgment  can be accessed from the links above)

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How to prove ocean transit delay ? Recent Judgment on the liability of the carrier for ocean transit delay rendered by the Subordinate Judge’s Court, Kochi.

http://ecourts.gov.in/services/cases/display_pdf.php?filename=/orders/204701001462005_2.pdf&caseno=OS/100146/2005

(V.M. Syam Kumar, Advocate, Kochi)

When can a shipment be termed as ‘time bound delivery shipment’? If no specific time period has been stipulated in the Bill of lading for delivery, is the carrier bound to deliver within a ‘reasonable’ time period? What would qualify as a reasonable time period and what should be the nature of the evidence to be tendered to substantiate the time period suggested as a “reasonable” one? Are the customary practises in the Liner trade relevant? Will the exemption clause in the bill of lading protect a carrier from the duty of delivering within the reasonable time period? When can such an exemption clause be invoked? In FCL/FCL cargo covered by a bill of lading with no delivery time requirement, can the carrier rely on the FCL clause to contend that the nature of the cargo being unknown to them, the time period and delay if any cannot be carriers concern?

Some of these questions came up for consideration before the Learned Subordinate Judge’s Court Kochi.  The judgment rendered thus assumes relevance.

The issue concerned a contract for supply of 100 metric tons CDJKL raw cashew crop from Mombasa to Kochi. Plaintiff alleged that the 1^st defendant supplier with whom the contract was entered into had supplied inferior goods than what was contracted for and hence they are liable to the plaintiff in damages. The 1^st defendant supplier resisted the suit on the ground that damage if any had occurred due to ocean transit delay on the part of the 5^th defendant carrier.

The Court inter alia considered the liability of the carrier for ocean transit delay and the proof required for fixing liability on a carrier for such delay if any.   

After a detailed narration of the facts borne out during trial, the Learned Judge answers the question regarding liability of the carrier as follows:

“The question now to be considered is the reason for the physical damage to the cargo and the person who is responsible to make good of the loss sustained to the plaintiff. The contention of the plaintiff is that the cargo was damaged due to moisture condensation and there was fungus germination and the nuts were sprouted. It is also stated by PW1 that bad odour was emanating from the cargo. The plaintiff has no case that water has entered into the container during transit. There is no allegation that the container was damaged during transit and the damage to the cargo was caused due to any such reason. In Ext.A16 it is stated by the 3rd defendant that the cargo was damaged due to excess moisture/condensation as a result of ocean transit delay of 42 days. It is come out in evidence that if the cashew nuts are properly dried there is no chance of any condensation due to moisture and thereby causing damage even if it is kept in the container for a period of hundred days. In this case it is admitted that the cargo was delivered within 40 days of shipment. Though it is stated that only 15-20 days will be taken for transportation of the containers from Mombasa port to Cochin port, it is admitted by the plaintiff's counsel that the transportation was not a time bound one. There is no evidence to show that the carrier had undertaken to deliver the goods within a particular period. Shipment was on FCL/FCL basis and hence the carrier may not be aware of the quality of the articles stowed in the container, apart from the declaration made by the shipper. If the cargo is properly dried and sufficient protection is taken to absorb excess moisture, there is no chance of any condensation. In this case it is stated that the first defendant had kept papers and moisture absorbing chemicals to avoid condensation. But the evidence on record shows that the cargo was damaged due to condensation. It is admitted that the damage was caused as the cargo was wet. Since none of the parties have got a contention that water entered into the container during transit, it can be seen that the damage was due to excess moisture. In Ext.A6 it is reported that the moisture content was 8%. There is no material to suggest the normal or permitted moisture content limit in dried cashew. Anyhow, it is the duty of the supplier to take all possible steps to supply cargo of the assured quality and quantity. As stated above, in Ext.A2 it is clearly stated that the buyer has the right to re-inspect the quality and weight of the cargo. So, the primary responsibility to supply the cargo of the desired quality is on the seller. As stated above, if the seller had taken sufficient precautions, there was no chance of any damage due to delay in transit. As the carrier was not aware of the quality of the cargo inside the container and there was no stipulation to deliver the cargo within a particular period, it is not possible to find that the 5th defendant is liable for the loss sustained to the plaintiff, even if it is found that there was some delay in delivering the cargo.”

The Judgement was delivered in favour of the plaintiff fixing liability on the seller. The Learned Judge dismissed the suit as against the carrier by holding as follows:

“During my discussion in the above paragraphs I have already found that the damage was caused due to excess moisture/condensation. It is the duty of the seller to supply good quality materials to the buyer. The buyer has got every right to get the goods of the assured quality and quantity. As perExt.A2 contract buyer can reinspected cargo and the same suggest that the buyer has the right to accept or reject the cargo. It is admitted that as per the terms of the contract the buyer has paid 5% of the value of the articles in advance and remaining 95% was paid on 1.3.2005, on arrival of the cargo at Cochin port. The first defendant is not disputing the payments made by the plaintiff. Once the goods is found to of inferior quality or defective, the seller is liable to make good of the loss sustained to the buyer. Though the first defendant has taken a contention that the 5th defendant is answerable to the plaint claim, in my discussion in the foregoing paragraphs I have already found that the 5th defendant is not liable to make good of the loss sustained to the plaintiff. The claim in the suit is not covered by the insurance policy also. So the first defendant is liable to make good of the loss sustained to the plaintiff.”

The judgment rendered by Judge P.K. Mohandas assumes relevance in so far as the nature of evidence required to fix liability on the ocean carrier for transit delay has been a grey area. The Judgement rendered in this case inter alia sheds much needed light on the legal requirements in the said respect.

(Judgment  can be accessed from the links above) 
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