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Petitioner: THE PREMIER INSURANCE Co. LTD., KARACHI VS Respondent: THE TRANSOCEANIC STEAMSHIP JUDGMENT
Court Name: Sindh High Court Judge(s): Ghulam Rasool K. Shaikh Title:THE PREMIER INSURANCE Co. LTD., KARACHI vs THE TRANSOCEANIC STEAMSHIP
JUDGMENT
Reported As: PLD 1980 Karachi 54 Result: Order accordingly Judgment JUDGMENT ' This is a suit for the recovery of Rs, 5,96,252.78 on account of nondelivery of the cotton shipped from Karachi for Chittagong. ' Messrs Mohomed Amin Mohomed Bashir Ltd. Despatched 100 bales (fully pressed) of raw cotton for carriage by sea per vessel s. s. Ocean Energy, belonging to defendant No, 1 Company, from Karachi to Chittagong. The defendant No, 2, are the agents of defendant No, 1 having their head office at Chittagong, and branch office at Karachi. The defendant No, 1. Issued the Bill of Lading No, 406 dated 3-3-1965. The aforesaid bills were insured with the plaintiff insurance company as per Insurance Policy No, HM/10396/ 3/65 dated 6-3-1965. The vessel reached Chittagong on or about 17th March, 1965 but the defendants failed to deliver the aforesaid cotton bales to the consignee and, therefore, Chittagong Port Trust authorities issued a short lading certificate dated 29th September, 1965. Subsequently, the plaintiff paid a sum of Rs, 53,895 as the price of the aforesaid bills to Messrs Mohomed Amin & Mohomed Bashir Ltd. And thereby subrogating all the rights. ' The plaintiff and defendants are members of the Gold Clause Agreement and under that agreement and at the request of the plaintiffs the defendants by their telegram dated 6-3-1966 and letters dated 8-3-1966 and 10-3-1966 extended the time for delivery of the consignment and/or for filing suit by another year expiring on or about 10th March, 1967. Since the defendants failed either to deliver the cotton bales or pay the price the suit was filed claiming the amount which was paid to Messrs Muhammad Amin Muhammad Bashir Ltd. ' The defendants contested the suit and filed written statements. The defendant No, 2 inter alia pleaded that they had acted as agent for defendant No, 1, and, therefore, the suit against them was
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not maintainable. They also claimed special costs under section 35 of the C. P. C. They further adopted the written statement filed by defendant No, 1, ' So far the written statement filed by defendant No, 1, is concerned it was admitted that 100 bales had been shipped but they were not aware of the contents of the bales, their condition, quality, quantity, weight and value. It was denied that all the bales clearly and legibly bore shipping marks or the marks were permanent enough to remain legible until the end of the voyage. It was also denied that the goods had been shipped in good order and condition. On the contrary there was a note in the Bill of Lading that the bales were tied with hoops and the whip was not responsible for the damage arising from rusty hoops. It was pleaded that on surrender of the original bill of lading the delivery order for the bales in question was issued to Messrs Asian Shipping Lines, being the final endorsee holder and presenters of the bill of lading and, therefore, the plaintiffs had no right to sue. They had no knowledge about the goods having been insured. It was admitted that the ship had reached Chittagong on 17th March, 1965 and had discharged the entire cargo including the full quantity belonging to the consignees Messrs Asian Shipping Lines but the bales were discharged partly under marks and partly under nil and/or wrong marks in custody of the Chittagong Port Trust and, therefore, they were not responsible or liable if any number of bales were short delivered to the consignees by the Chittaging Port Trust which was a necessary party had not been impleaded. It was further pleaded that they had offered delivery of the bales under nil/wrong marks but the consignees persons acting on their behalf refused to take delivery of the bales for ulterior motive. It was also maintained that their responsibility ceased since the bales in question were free from ship tackle and thereafter the goods remained deposited in the custody of the Chittagong Port Trust at the request of goods owners. The alleged short landing certificate issued by the Chittagong Port Trust was denied and in any event the certificate was not conclusive evidence of short landing of the bales. It was not admitted that the plaintiffs had paid the sum of Rs, 53,895 being the value of 100 bales to Messrs Muhammad Amin Ltd. And the plaintiffs were put to strict proof. It was admitted that a notice of claim was received from the plaintiffs and they had rightly declined to make the payment. The suit was barred under Article 3 clause (6) of the Carriage of Goods by Sea Act of 1925. It was further contended that the extended time was solely to be utilised for referring the dispute to arbitration in London and the said extention did not amount to acknowledgement of the liability and, therefore, the suit was barred by limitation. The plaintiffs were not entitled to claim interest and, furthermore, the claim was exaggerated, speculative and extortionate. The defendant No, 2. Was wrongly impleaded. On the basis of these pleadings the following consent issues were framed : "(1) What were the goods shipped by Messrs Muhammad Amin Muhammad Bashir Limited per s. s. Ocean Energy from Karachi to Chittagong ? (2) Whether the bales in question were accepted under the condition "Bales tied with hoops". Ship not responsible for damage arising from rusty hoops ? If so to what effect ? (3) Whether Messrs Asian Shipping Lines were owners of the cargo in question and as such the plaintiffs have no right to sue in respect thereof ? (4) Whether the entire cargo in question was discharged by the defendants ? If so, whether this cargo was discharged in marks and under Nil and/or wrong Marks ? (5) Whether the defendants offered delivery of bales under Nil/Wrong Marks and the persons acting on behalf of Messrs Mohomed Amin Muhammad Bashir Ltd. And/or their clearing agents refused to take delivery of the Bales for ulterior motives ? (6) Whether Messrs Muhammad Amin Muhammad Bashir Ltd. Were bound to take delivery of the goods under Nil and/or Wrong Marks ? (7) Whether the Chittagong Port Trust Authorities is necessary party to the suit ? (8) Whether the suit is barred under Article 3, clause 6 of the Carriage of Goods by Sea Act, 1925 ?
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(9) Whether the suit is time barred and the extension granted by the defendants was only for referring the dispute to Arbitration in London ? (10) Whether the suit against the defendant No, 2 is not maintainable and is liable to be dismissed ? (11) To what amount the plaintiff is entitled to 7" ' The plaintiffs examined two witnesses, namely, Shariful Hassan and Mohomed Kafiluddin Bhuyia at Chittagong on commission and three witnesses, namely, Muhammad Arshad, Syed Najmul Hassan and Syed Rashid Ahmed in this Court while the defendants examined two witnesses, namely Dilawar Hussain and Zainul Abdin Arif at Chittagong on commission. Several documents were also produced. ' FINDINGS AND REASONS ' Issues Nos, 1 and 2.-At the time of arguments these issues were not pressed. ' Issue No, 3.-In order to deal with this issue it is necessary to refer to the bill of lading Exh. D/1. According to this the goods had been shipped by Messrs Muhammad Amin Muhammad Bashir Ltd. By vessel s.s. Asian Energy to Chittagong to the order of the United Bank Ltd., Karachi, the freight was payable by the shipper with an endorsement "Notify Pakistan Commodities Ltd., Dacca" on the first page and another endorsement "please deliver to the order of Messrs Asian Shipping Lines" made by the United Bank Ltd. On the second page of the bill of lading. The goods had been sold to Pakistan Commodities Ltd., Dacca and the documents had to be delivered to the purchaser on payment of the price. Messrs Asian Shipping Lines were operating as clearing agents at Chittagong. From Karachi to Chittagong the goods were carried by the aforesaid vessel and from there the same had to be despatched to Dacca by railway. The goods had never reached Dacca as the short landing certificate was issued by the Chittagong Port Trust authorities. It is an admitted position that there was no trace of 50 bales. So far the remaining 50 bales are concerned it has been revealed by the evidence that some cotton in bags was discharged from the ship and some bales pertaining to some other consignment of other persons landed under Nil or defaced marks. There were in all about 238 bales which were discharged in such condition. Subsequently connection procedure was adopted by the Custom authorities on the application of defendant No, 1, and the cotton contained in the bags was connected with 50 bales out of 100 bales despatched by Messrs Muhammad Amin Muhammad Bashir Ltd. Other tales landed in Nil or defaced marks were connected with the consignments of other persons. ' It was urged by the learned counsel for the defendants that since the bill of lading was endorsed in favour of Messrs Asian Shipping Lines they had become the owners by virtue of section 1 of the Bill of Lading Act, 1856 and, therefore, the plaintiff had no right to file the suit. According to this section every consignee of the goods named in the bill of lading and every endorsee of bill of lading to whom the property in the goods were mentioned shall pass, upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of Suit. ' On the other hand, it has been contended by the learned counsel for the plaintiff that Messrs Asian Shipping Lines were simply the clearing agents and merely because they had been authorised to receive the goods, thereby, neither the property in the goods was transferred to them nor they had been vested with the rights of filing the suit. ' On consideration of the contentions raised by the learned counsel for the parties I am of the opinion that there is no force in the plea taken on behalf of the defendants. It has been established by the evidence that Messrs Asian Shipping Lines were operating as clearing agents and they had been authorised to take the delivery of the goods as such. The appointment of the clearing agents is for the convenience of the parties and it becomes necessary when the goods are despatched to far off places by steamers. They are statutory agents as they are required by section 202 of the Customs Act and Custom House Agents (Licensing) Rules, 1965 to obtain a licence to act as agent for the transaction of any business relating to the insurance or clearance of any vessel or the
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import or export of any good or baggage in any Custom House. Section 203 requires that when any person applies to an officer of Customs for permission to transact any specific busines with him on behalf of any person he is required to produce a written authorit of that person and in default the permission can be refused. Thus, Messr Asian Shipping Lines acted as agents for the clearance of the goods and the question of the transfer of the property in the goods does not arise. Consequently, section 1 of the Bill of Lading Act is not applicable. In this connection I may refer to the observation made by my learned brother Dorab Patel, in the case of Messrs Ameejee Waleeji & Sons vMessr American President Lines and others (1) to the effect that the names of the clearing agents are sometimes put on the bill of lading for the convenience of the parties to facilitate the clearance but it is a settled law that this does not make them the owner of the disputed goods shipped in the bill of lading. It was further observed that turning to the Sea Customs Act it is true that a clearing agent is empowered under the Statute to act on behalf of a owner of a cargo but this is only for the purpose of the statute and the clearing agent does not thereby become the owner of the cargo entrusted to him for clearance. ' In the alternative the learned counsel for the defendants raised two pleas during the course of arguments, in case it was held that. Messrs Asian Shipping Lines acted as agents in clearing the goods from the custom. The first plea taken by him is that the moment the goods were delivered to the defendant No, 1 for being shipped to Chittagong, the property in the goods must be deemed to have passed to Pakistan Commodities Ltd. To which the goods had been sold. It may be pointed out that the issue, as it reads, does not cover this plea. Of course this plea was raised in the written statement but no issue to that effect was framed. Issues had been framed by consent and, therefore, it must be presumed that at the time of framing the issues the learned counsel did not intend to press this plea. Even otherwise this plea has no force. ' In support of the plea reliance was placed upon section 23 of the Sale of Goods Act which roads as under :- "(1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) Where, in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract." (1) PLD 1973 Kar. 49 ' This is divided into two subsections. Subsection (1) requires unconditional appropriation by assent of either the seller or the buyer, either express or implied and may be given before or after the appropriation. Subsection (2) requires the delivery of the goods to any of the persons shown therein without reserving the rights of disposal and, thereby, it is deemed that the goods have been conditionally appropriated to the contract. The scope of this section has been fully explained in the case of Ramnivas v. Commissioner of Taxes (1). The relevant portion reads as under : "Subsection (1) of section 23 is wholly independent of subsection (2). Subsection (1) does not contemplate unconditional appropriation in pursuance of a contract ; it refers to unconditional appropriation with the assent of the parties, whereas in subsection (2), it is the delivery to a carrier in pursuance of a contract which operates as an unconditional appropriation, and is therefore, deemed to be unconditional appropriation, where, therefore, a party relies upon what must be deemed to be an unconditional appropriation within the meaning of subsection (2), he cannot be
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allowed to say that it was also without more, an unconditional appropriation within the meaning of subsection (1)." ' Another section which is relevant for the purpose of this case is section 25 of the Sale of Goods Act and it reads as under :- "(1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract of appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. (2) Where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal. (3) Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer together, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange, and if he wrongfully retains the bill of lading the property in the goods does not pass to him." ' This section deals with the case of conditional sale and conditional appropriation. Subsection (1) is of general application and applies to contracts for the sale of specific goods as well as to the subsequent appropriation of goods to contracts for sale of unascertained goods, and to contracts which do not involve sea transit as well as those which do, while subsections (2) and (3) relate to the Carriage by Sea. ' Reading the two sections together, it is clear that mere delivery to the shipping company does not transfer the property in the goods to the buyer but there must be unconditional appropriation to the contract and the right of the disposal has not been reserved. The reservation of the right is indicated by the fact that the bill of lading lays down. The condition that the (1) AIR 1962 All. 178 goods which have been shipped are deliverable to the order of the seller or his agent. These two sections were also dealt with in the case of Commissioner of Income-tax v. Mysore Choomite Ltd. (1). The relevant observation reads as under :- "Section 23 of the Sale of Goods Act lays down that where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. The requirement of the section is not only that there shall be appropriation of the goods to the contract but that such appropriation must be made unconditionally. This is further elaborated by section 25 of that Act which provides that where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such a case, notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled." ' Applying the aforesaid test to the present case it is clear that the contention raised by the learned counsel has no force. In the present case, the bill o lading was neither addressed to the buyer nor endorsed in their favour, but it was addressed to the order of the United Bank Ltd., Karachi, which acted as agent of the sellers. The bank was simply to notify Pakistan Commoditie Ltd. And after the full price was paid to the bank the documents had to b delivered to the buyers. The payment of full price by the buyers was a condition precedent and unless that amount was paid the property could not be said to have passed to the buyers. The observation made in to above Supreme Court
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case is a complete answer to the contention raised by the learned counsel. In that case the assessee-Company carrying on its business in India shipped the goods to American and European buyers etc. Under bill of lading issued in its own name and under the contract it was not obliged to part with the bill of lading until the bill of exchange drawn by it on the buyers Bank in London where the irrevokable letter of credit was opened, was honoured. It was held that till the bill of exchange was expired by the buyers bank in Landon and the documents were delivered by the assessee- Company's agent, the Eastern Bank Ltd. London, to the buyer bank, the property in the goods did not pass to the buyers. ' It may be further stated that in the present case it was C. I. F. Contract which means contract for sale of goods upon cost, insurance and freight. This type of contract has certain peculiar features which distinguish it from ordinary contract for sale of goods. Although C. I. F. Contract does not fall outside the scope of Sales of Goods Act but there are certain provisions in the Act which are either wholly inapplicable to this class of contracts or when applied to it must be read subject to certain qualifications. Under this contract the property in the goods does not pass to the buyers until the documents are handed over to them. This type of contract was dealt with in the case of Arnbold Karberg & Co. v. Blythe Green Jourdein & Co. And (1) AIR 1955 SC 98 #TBS (9) AIR 1959 Ker. 29 #TBE Theodor Shneeder & Co. v. Burgett & Newsam (1). The relevant observation appearing at page 388 reads as under :- "But I.Am strongly of opinion that the key to many of the difficulties arising in c. i. f. Contracts is to keep firmly in mind the cardinal distinction that a c. i. f. Sale is not a sale of goods, but a sale of documents relating to goods. It is not a contract that goods shall arrive, but a contract to ship goods complying with the contract of sale, to obtain, unless the contract otherwise provides, the ordinary contract of carriage to the place of destination, and the ordinary contract of insurance of the goods on that voyage, and to tender these documents against payment of the contract price. The buyer then has the right to claim the fulfilment of the contract of carriage, or, if the goods are lost or damaged, such indemnity for the loss as he can claim under the contract of insurance. He buys the documents, not the goods and it may be that under the terms of the contracts of insurance and affreightment he buys no indemnity for the damage that has happened to the goods. This depends on what documents he is entitled to under the contract of sale." - ' There are several other authorities supporting the view that the property in the goods does not pass to the buyers until the full price has been paid and the documents are delivered. I would like to confine myself to some of them. One of them is the case of Ramnivas Satyanarayan and others v. Commissioner of Taxes (2), as already referred while others are Ford Automobiles India Ltd. v. Delhi Motors & Engineering Company (3), Bank of Morvi Ltd. v. Baerkin Brothers (4), Gulab Rai Sagarmal v. Nirbal Ram Nagarmal (5), Sundarsingh Jagatsingh v. Gulab Singh Kalyan Singh (6), Balkishan Bisheshar Nath v. Fazal Illahi (7), N. S. Bilimoria v. Gauri Malnaraindas (8) and Haji P. K. Moidoo Brothers v. State of Madras (9). ' The second plea which was taken is that when the plaintiffs entered into correspondence with the defendants they did not pay anything to the sellers, namely, Muhammad Amin Muhammad Bashir Ltd. And, therefore, there was as no subrogation, with the result that the plaintiffs were not entitled t claim the amount. Again it may be pointe out that no such plea was taken in the written statement nor any issue was framed. Consequently, this plea cannot be entertained when raised for the first time during the course of arguments. ' Even considering on merits it has no force. Section 135-A, Transfer of Property Act deals with the assignment of rights under the Policy of Marine Insurance with the consequence of subrogation., It reads as under
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"(1) Where a Policy of Marine Insurance has been assigned so as to pass the beneficial interest therein. The assignee of the policy is entitled to sue thereon in his own name and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected. (1) (1915) 2 K B 379 (2) AIR 1952 Assam 178 (3) AIR 1923 Born. 128 (4) AIR 1924 Bona. 325 (5) AIR 1924 Lah. 739 (6) AIR 1927 Lah. 269 (7) AIR 1927 Lah. 391 (8) AIR 1928 Lah. 481 (2) Where the insurer pays for a total loss, either of the whole, or in the case of goods, of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the insured person in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the insured person in and in respect of the subject-matter as from the time of the casualty causing the loss. (3) Where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the insured person as from the time of the casualty causing the loss, in so far as the insured person has been indemnified by such payment for the loss. (4) Nothing in clause (e) of section 6 shall affect the provisions of this section." ' In the present case subsection (2) will apply. In this connection reference may be made to the evidence. Firstly, the subrogation letter Exh. 11 is dated 14-2-1966 and although it was stated in this letter that an amount…
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