Maheshwary Handling Agency (P) Ltd. vs Kandla Port Trust

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5277 OF 2010

MAHESHWARY HANDLING AGENCY PRIVATE LIMITED ….. APPELLANT(S)

VERSUS

BOARD OF TRUSTEES OF KANDLA PORT TRUST AND OTHERS ….. RESPONDENT(S)

JUDGMENT

SANJIV KHANNA, J.

The appellant, Maheshwary Handling Agency Private

Limited, is a private limited company engaged in the business

of clearing, forwarding and transporting of cargo for import and

export as a steamer agent.

2. During the course of their business, the appellant had used

facilities at the Kandla Port, Gujarat for storing imported/

exported cargo, for which it was liable to pay charges as per

schedule/scales of rates framed by the Board of Trustees of Signature Not Verified Digitally signed by NEELAM GULATI Kandla Port Trust, the first respondent before us (“the Board”, Date: 2019.09.17 17:07:10 IST Reason:

for short) published in the Official Gazette in terms of Section

Civil Appeal No. 5277 of 2010 Page 1 of 17 52 of the Major Port Trusts Act, 1963 (“Port Trusts Act”, for

short), which prior to its omission in 1997 read as under:

“52. Prior sanction of Central Government to rates and conditions:- Every scale of rates and every statement of conditions framed by a Board under the foregoing provision of this Chapter shall be submitted to the Central Government for sanction and shall have effect when so sanctioned and published by the Board in the Official Gazette.”

3. Notification dated 4th November, 1993 published under Section

52 of the Port Trusts Act had fixed a schedule/scales of rates

payable for storage of goods/cargo at the Kandla Port.

Relevant portion of the Notification dated 4 th November,1993,

read as under:

“SCALE “G” SCHEDULE OF STORAGE / RENTAL CHARGES

A) For: Open Space

How Charged. Kutchha Pukka Plots Bins & Plots (cemented raised (uncemented/ & (Rs.) unasphalted) asphalted) (Rs.) (Rs.) Open space of 10 sq. Mtrs.

or part thereof per month or 35-00 60-00 70-00 part thereof for first three months.

Beyond 3 58-00 90-200 105-00 months

B) For covered space

Civil Appeal No. 5277 of 2010 Page 2 of 17 How Charged Ground Floor First Floor (Rs.) (Rs.)

Covered space of 10 sq. mts. or part thereof per 150-00 130-00 month or part thereof for first 3 months.

Beyond 3 months 225-00 195-00

C) For the containers stored in the storage (Exports & Imports)

How Charged Empty Loaded (US Cents.) (US Cents.) Per Teu per day or part thereof Free Free First 07 days

Next 07 days to 15 days 45 90 16 to 30 days 90 150

31 to 90 days 115 190

above 90 days 145 240

D) For Refer points

How Charged US

Per TEU per day or part thereof:

12.85 First 15 days

16 to 30 days 15.17

31 to 90 days 18.09

above 90 days 20.71.

E) For office accommodation (inside Port area)

Per Sq. Mt. per month Rs. 40-00

Civil Appeal No. 5277 of 2010 Page 3 of 17 Notes:

1. Application for rental space should be made before storage of goods to the Traffic Manager. Any unauthorised occupation of rented space shall be liable for payment of double the rent as a penalty.

2. Storage charges should be paid in advance. Penal interest at the rate of 18% of the amount due but not paid from the date of which the amount becomes due to the date of actual payment shall be levied for genuine reasons and with permissions of Port Authorities which shall in no case exceed 7 days. If by any reason, payment is delayed beyond 7 days from the date of the amount becoming due, otherwise occupation will be treated as unauthorised.

xx xx xx

4. Space allotted cannot be subject (sic – allotted) without the permission of the Traffic Manager.

5. The space allotted should be vacated on notice from the Traffic Manager or other officer on his behalf failing which it will be treated as unauthorised occupation liable for penalty rent under Note-1.

6. The Traffic Manager shall have the right to take over the spaces, allotted on rental basis, which are unoccupied/empty without any prior notice in the interest of the port operation, in such cases, proportionate reduction in rent shall be allowed at the discretion of the T.M.”

4. The Port Trusts Act was amended by the Port Laws

(Amendment) Act, 1997 (Act 15 of 1997) whereby Section 52

was omitted and Section 47A was inserted to constitute Tariff

Authority for Major Ports (‘Tariff Authority’, for short), a body

corporate having perpetual succession and a common seal,

consisting of Chairman and members with stipulations as to

their term of office, conditions of service, etc contained under

Civil Appeal No. 5277 of 2010 Page 4 of 17 Sections 47B to 47H of the Port Trusts Act. In terms of the

amended Section 49 of the Port Trusts Act, the Tariff Authority

was empowered to fix different scales and conditions for

different classes of goods and vessels and for use of any land,

building, place, etc. belonging to or in possession or

occupation of the Board.

5. The amended provisions came into force with effect from 9 th

January, 1997. The Tariff Authority, however, had notified the

new scale of rates for the Kandla Port vide notification dated

22nd June, 2001 which was applicable retrospectively and with

effect from 29th January, 2001. The appellant and the first

respondent, viz. Board of Trustees of Kandla Port Trust, are ad

idem that the appellant and others who had used storage

facility at the Kandla Port were liable to pay the rates

stipulated in the Notification dated 4 th November, 1993 till the

new tariff fixed by the Tariff Authority was made applicable with

effect from 29th January, 2001.

6. The issue raised by the appellant relates to validity of circular

dated 31st August, 1998 issued by the Traffic Manager, the

second respondent, made effective from 1 st October, 1998 and

read as under:

Civil Appeal No. 5277 of 2010 Page 5 of 17

“KNDLA (sic – KANDLA) PORT TRUST PORT & CUSTOMS BUILDING NEW KANDLA (KUTCH) PIN – 370210

DATE: 31.08.1998 NO. TF/GB/3201/452

CIRCULAR

SUB: Past Clearance of import cargoes from Kandla Port

Due to over-style (sic – overstay) of Cargoes inside the port, the port is congested causing inconvenience to both import/export cargoes moving through the port which ultimately may result in diversion of traffic from our port. Due to congestion, port is facing problems with regard to accounting, stacking and delivery of cargoes, etc. and non- availability of adequate storage space for export cargoes.

To overcome all the above problems now it has been decided not to allow storage of cargoes for more than two months and auction such cargoes under the provisions of Customs Act as well as Major Port Trust Act. Further, no renewals will be considered for the areas allotted on rental/warehousing terms if the staya stayal (sic – stay) is more than 60 days.

This will come into force w.e.f. 1st October, 1998.

Sd/-

Traffic Manager Kandla Port Trust”

The impugned circular stated that due to congestion and

over stacking at the Kandla Port, problems had cropped up

with regard to accounting, stacking and delivery of cargoes

etc. and non-availability of adequate storage space for export

Civil Appeal No. 5277 of 2010 Page 6 of 17 cargoes. To overcome this problem, storage of cargoes would

not be allowed for more than two months and auction of such

cargoes would be made under the Customs Act, 1962 and the

Port Trusts Act. Further, no renewals would be considered for

the areas allotted on rental/warehousing terms if the cargo had

remained stored for more than sixty days.

7. The effect of the above circular can be understood if we refer

to Notes 1, 4, 5 and 6 of the Notification dated 4 th November,

1993, which have been quoted above. The said circular read

with the aforesaid Notes meant that any person using the

storage facility for more than sixty days would be in

unauthorised occupation and thereby liable to pay penalty rent

under Note 1, which was double the rent otherwise payable.

8. Aggrieved and challenging the circular dated 31 st August,

1998, the appellant had approached the High Court of Gujarat

by filing Special Civil Application No. 12954 of 2000 with the

prayer that the first respondent should refund the amount

collected as penalty rent in terms of the impugned circular. The

Civil Application was dismissed by the Single Judge vide

judgment dated 14th June, 2007 and the appellant also did not

succeed before the Division Bench which had dismissed the Civil Appeal No. 5277 of 2010 Page 7 of 17 Letters Patent Appeal vide impugned judgment dated 15 th July,

2008.

9. The contentions raised by the appellant are that after the

amendment vide Act 15 of 1997, applicable with effect from 9 th

January, 1997, in terms of Section 47A read with Sections 48

and 49 of the Port Trusts Act, only the Tariff Authority could

have fixed the tariff/rent and the Traffic Manager could not

have directly or indirectly fixed the said tariff, which the latter

did by way of issuance of the impugned circular dated 31 st

August, 1998. Secondly, the circular issued by the Traffic

Manager in garb of regulating traffic had the effect of

interfering with the scales of rates prescribed vide Notification

dated 4th November, 1993 which had not only fixed the rates

but had also prescribed an escalating schedule of rates

depending upon the period for which the space, whether open

or covered or as containers, was used. The schedule of rates,

reproduced above, were applicable for the period of

storage/use beyond sixty days and, therefore, the Traffic

Manager had directly interfered with the notified scales of rates

by prescribing that any storage beyond a period of sixty days

would be treated as unauthorised. Thirdly, there could be

Civil Appeal No. 5277 of 2010 Page 8 of 17 several reasons for storage of goods at the Port for a period

over sixty days, which could be well beyond the control of the

person storing the goods. The impugned circular did not give

any concessions in this regard and did not consider that

delays could be on account of customs clearance, inability to

load or unload due to external factors or refusal of the shipping

company, etc. Therefore, the circular was an attempt by the

first respondent to collect higher monetary charges or rentals

for use of the port area/facilities. Fourthly, it was submitted that

there was not a shred of data or evidence to show that the

restriction with regard to duration of storage was justified and

necessary for the object and reasons stated. The Port Trust,

having monopoly, was required to act in a reasonable manner.

Hence, there was a violation of Article 14 of the Constitution of

India. Our attention was drawn to the withdrawal of the

impugned circular after the issuance of higher rate of scales in

2001 by the Tariff Authority. Fifthly, and lastly, it was submitted

that the power of Traffic Manager to issue the impugned

circular could not be traced to Regulation 64, which specifically

dealt with controlling the goods at the time of loading and

unloading of vessels. Regulation 64 reads as under:

“64. Work in port under the control of Traffic Manager.— The loading and unloading of vessels Civil Appeal No. 5277 of 2010 Page 9 of 17 shall be subject to the control of the Traffic Manager, who may at his discretion, prohibit the discharge of such goods which in his opinion are likely to obstruct traffic or cause congestion or hinder the convenient use of the berths.

Notwithstanding the provisions of Regulation No. 113, the Traffic Manager may at his discretion also remove to the other areas as under his jurisdiction, any goods upon landing in the port or soon thereafter, the storage of which on port premises is likely to obstruct traffic or cause congestion. The apportionment of Quay space to be occupied by each vessel shall similarly be determined by the Traffic Manager.”

This power under Regulation 64 was regarding goods

that were likely to cause traffic congestion and not regarding

the rate of storage for a particular period. Therefore, the

impugned circular was beyond the powers available and

entrusted to the Traffic Manager under Regulation 64. The

Traffic Manager, in this manner, had illegally extracted huge

amount of over Rs. 52 lakhs for over-stay of cargo without any

justification and reason.

10. We have already quoted the scales fixed by the Notification

dated 4th November, 1993 as well as the Notes in the

Notification. This Notification was not under challenge in the

Special Civil Application or in appeal filed before the High

Court. The Notification is not under challenge before us. The

appellant also accepts that they were liable to pay the scales

Civil Appeal No. 5277 of 2010 Page 10 of 17 specified in the Notification till the new tariff was notified

pursuant to the constitution of the Tariff Authority, which it is

accepted was notified and applicable with effect from 29 th

January, 2001. Therefore, for the period prior to 29 th January,

2001, the appellant would be liable to pay tariff as per the

scales and terms of the Notification dated 4 th November, 1993.

The issue that arises for consideration is whether the

impugned circular dated 31st August, 1998 was in conformity

with the terms of the Notification or had the effect of modifying

or amending the Notification dated 4th November, 1993.

11. In our opinion, the answer to the question would be in favour

of the first and second respondents. The Notification dated 4 th

November, 1993 had specified rent/usage charges for open

space, covered space, containers, office accommodation, etc.,

which charges were payable dependent upon the space and

the length of time used for storage. Note 1 to the Notification

stated that a person wanting to use the rental space was

required to make an application for storage of goods to the

Traffic Manager. It was also specified that any unauthorised

occupation of rented space shall make the person liable to pay

double the rent as penalty. Note 1 did not specify when and in

Civil Appeal No. 5277 of 2010 Page 11 of 17 what circumstances occupation of the rented space would be

treated as unauthorised occupation. Note 2 had specified that

storage charges would be paid in advance and penal interest

@ 18% would be payable on the amount due and not paid

from the date when the amount had become due till the date of

actual payment. Note 4 had specified that the space cannot

be allotted without permission of the Traffic Manager of the

Port. Note 5 had stipulated that the space allotted would be

vacated on notice from the Traffic Manager or any other officer

on his behalf, failing which the occupation would be treated as

unauthorised and the person in unauthorised occupation

would be liable for penalty rent under Note 1. Thus, for

authorised occupation and usage of space/area, permission

from the Traffic Manager was required. Further, the Traffic

Manager or an officer appointed on his behalf, was

empowered to issue notice for vacation of space allotted to a

user, failing which the use of the space was to be treated as

unauthorised and the person in violation was liable to pay

double the rent as penalty.

12. Regulation 128 reads as follows:

“128. Quays, etc. to be under the authority of the Traffic Manager:

Civil Appeal No. 5277 of 2010 Page 12 of 17

The quays, sheds, gates and the land within the Port boundaries shall be in the charge of the Traffic Manager who shall direct and manage all operations connected with the landing and shipping of goods, and with their storage in the shed and in the open. He shall have proper custody of all goods lying in the Port and taken whatever steps he may consider necessary for the proper maintenance of order.”

The Traffic Manager of the Port is obligated to control

and manage the port operations, check obstructions to traffic

movement and remove hinderance for efficient and proper use

of berths, landing and shipping of goods and storage in the

sheds and open area. Regulation 64 quoted in paragraph 9

above stipulates that loading and unloading of vessels was

subject to control of the Traffic Manager who had the

discretion to prohibit discharge of goods which are likely to

obstruct traffic, cause congestion or hinder convenient

movement at the Port.

13. It is clear from the Notes that the Notification had empowered

and left it to the Traffic Manager to deal with the question of

unauthorised occupation, including the time limits or period

during which the goods could be authorised to be stored. The

Notification had not specified when and in what circumstances

use of the storage area would be treated as unauthorised as

Civil Appeal No. 5277 of 2010 Page 13 of 17 this was left to the wisdom of the Traffic Manager who was the

person in-charge and responsible for efficient and proper

functioning of the port operations and mandated to take the

need based decisions on the basis of prevalent facts and

circumstances. This latitude was necessary as the schedule of

rates fixed vide Notification dated 4th November, 1993 were

applicable till a new Notification or amendment was made by

following the procedure prescribed vide Section 52 of the Port

Trusts Act, which would require approval from the Central

Government.

14. Prescribing different slabs or rates for storage of cargo for

different periods was meant to fix rates for the rent payable

and not to deny or curtail the power of the Traffic Manager to

authorise and permit use of sheds and space for storage of

cargo/containers. As per the Notes, the Traffic Manager, on an

application by the owners or their agents was to grant

permission for authorised storage. Storage without the

permission or contrary to the permission was unauthorised.

Further, the space allotted was to be vacated on notice from

the Traffic Manager. On failure to comply, and vacate the

space, the use was treated as unauthorised occupation and

Civil Appeal No. 5277 of 2010 Page 14 of 17 the person in default was liable to pay double the rent for

unauthorised use.

15. It is obvious that the first portion of the Notification prescribing

escalating rates for use of open area and sheds did not vest

any right to occupy such space for unlimited period of time.

This, we hold, is the exact purport of the Notes, which have

been read harmoniously with the first portion of the

Notification. The Traffic Manager had authority and discretion

for allotment of space for storage on rent and to withdraw

allotment of space depending on the availability and to ensure

that the port operations were not hindered and obstructed due

to congestion and shortage of space. We, therefore, would

reject the contention that the Traffic Manager was not

competent to fix time limit for storage. The contention is

unacceptable and would be contrary to the Notes and the

powers vested and given under the Regulations to the Traffic

Manager.

16. We are in this case not required to examine whether

delegation of powers to the Traffic Manager in the Notification

was excess or invalid, for this issue or contention has not

been raised. As noted earlier, validity of the Notification is not

Civil Appeal No. 5277 of 2010 Page 15 of 17 questioned and under challenge. Read in this manner, we do

not think levy of penalty for unauthorised occupation of the

space for period beyond sixty days of storage as fixed vide the

impugned circular would be illegal and invalid. In fact, it would

be in conformity and in consonance with the Notification and

in particular Notes 1, 4 and 5 thereof. The circular had

brought about uniformity, clarity and transparency in the use of

storage facilities at the Kandla Port. The circular though

issued on 31st August, 1998 was made effective and

applicable from 1st October, 1998. Therefore, the parties were

given time to take steps to avoid the usage of the storage

facility from being declared as unauthorised.

17. Other contention of the appellant as to absence of data

indicating the details of congestion is an afterthought as this

contention was not raised and argued before the High Court.

The impugned circular specifically recorded that there was

congestion at the Port which had necessitated issuance of the

circular stipulating that storage of goods beyond the period of

sixty days would be treated as unauthorised occupation. The

said circular ensured uniformity and equal treatment without

discretion as upper time limit of sixty days was prescribed for

storage of goods failing which penalty was payable. Period of

Civil Appeal No. 5277 of 2010 Page 16 of 17 sixty days is sufficient and long and cannot be termed as

unreasonable and violating Article 14 of the Constitution. The

aforesaid reasoning would take care of the other arguments

raised by the appellants, which we would reiterate were not

argued before the High Court.

18. For all the foregoing reasons, the appeal fails and is

dismissed. There would be no order as to costs.

.................................J. (INDU MALHOTRA)

...............................J. (SANJIV KHANNA) NEW DELHI;

SEPTEMBER 17, 2019.

Civil Appeal No. 5277 of 2010 Page 17 of 17