ITIC circular: Indian ship agents no longer liable for any deficit or short-fall in the sale proceeds of un-cleared or abandoned cargo

Date: Monday 17th August 2020

To Indian ship agents and their insurance brokers

Ship agents no longer liable for any deficit or short-fall in the sale proceeds of un-cleared or abandoned cargo.

ITIC has been insuring many ship agents in India since 1985.

One of the issues that consistently arose was the ‘sale deficit suits’ filed by the major ports against, amongst others, ship/steamer agents for the recovery of the deficit or short-fall in the sale proceeds of un-cleared or abandoned cargo.

In these lawsuits, it was the Port Authority’s contention that the ship agent falls within the definition of “owners” as defined by section 2(o) of the Major Port Trusts Act, 1963. Alternatively, they contended that the ship agents were the bailors of the cargo.

These law suits have been on-going for many years and a few have even gone to the Supreme Court of India for judgment. There have been conflicting judgments by the Indian Supreme Court on this issue.

The issue was referred to the Supreme Court Larger Bench for final hearing in the last week of July 2020, where the matter was argued at length.

On 5th August 2020, the Supreme Court of India handed down its final judgment on the issue. The operating part of the order/judgment which was read out by the Court, said that ‘steamer agents are not liable’, and all the five (5) past Supreme Court judgments have been reconciled.

It is a long judgment and covered a number of issues but the salient features, and what comes out of that judgment, is as follows:

The endorsement on the bill of lading by the consignor (shipper) is different from the endorsement by the ship agent. The endorsement by the shipper transfers the title of goods to the endorsee i.e. the consignee. The endorsement by the ship agent, as recorded in the Sheikh Mohd. Rowther I judgement (1963), under the Madras Port Trust Regulations, advises the Port to deliver the cargo to the endorsee. This endorsement by a ship agent on a bill of lading stems from the Rowther 1 case, which follows Madras Port Trust Regulations, which this judgment clarifies.

Once the cargo is discharged and receipt is given by the Port, the Port is required to deliver the cargo to the consignee or their agents and the Port has to look to the consignee or its agent for the collection of wharfage, demurrage and any cargo related expenses including the deficit in sale proceeds when the cargo is auctioned. These are to be recovered from the consignee and not from the vessel’s agent irrespective of the fact that the delivery order is given or not.

The Port is duty bound to de-stuff the container and deliver the empty containers to the ship agent or lease owner to whom they belong within a reasonable time. The Port cannot take the position that they had no space to de-stuff the containers. The Ports are supposed to account for unreasonable delays, although the court did not define what was a 'reasonable period’. 

This is good news for ship agents in India. A copy of the judgment is available here.

Yours faithfully,

For International Transport Intermediaries Management Co Ltd.
Managers of International Transport Intermediaries Club Ltd