Legal Aspects Of Business

TERM-1

Bill Of Lading






GROUP 1

Apurba
Mukherjee
HariharanAravind Nipun Jain Praveen
Sharma
Surabhigulati VaanyaKathurai
14P189 14P200 14P187 14P214 14P233 14P225






Bill Of Lading

Concepts:
A bill of lading is used as an evidence for a contract of transportation. The need for bill of lading
is required when a ship owner, or other person authorized to act on his behalf employs his vessel
as a general ship by advertising that he is willing to accept cargo from people for a particular
voyage.
Functions of the Bill Of Lading:
The importance of the bill of lading can be understood by considering the following chain of
events of a transaction.
1. Suppose an individual wishes to ship a consignment of goods overseas approaches a shipping
line by reserving space on the ship. This can be done either directly or through an agent. The
carrier then instructs the place and time of delivery of the goods and the individual is issued
with a receipt indicating the type and quantity of the goods and the condition in which the
goods were received by the carriers agent. Then, the carrier is responsible for the goods.

2. The shipper, meanwhile, gets a copy of the carriers bill of lading form. He enters the details
regarding the type, quantity of goods shipped together with any relevant marks, the port of
destination and the name of the consignee. The carriers agent then checks the cargo details
against the tallies while loading and acknowledges them. The freight is calculated and then
the bill is signed and given to the shipper. The shipper then directly dispatches the bill to the
consignee or through a bank in the case of international sales contract.

3. The consignee may decide to sell the goods while in transit then he may endorse the bill in
favour of the purchaser. Eventually the consignee will surrender the bill at the port of
discharge in return for delivery of the goods.
4. The person in possession of bill of lading is entitled to receive, hold and dispose of the bill of
lading and the goods it represents.

5. The possession of a bill of lading is equivalent to possession of the goods. The bill of lading
enables its lawful holder to use it to obtain physical delivery of the goods at the destination,
as well as to dispose of them during transit by transferring the bill of lading. The effect of the
transfer of a bill of lading is a result of the special character of the object of sale - goods
carried by sea - such that it is impossible to make a physical delivery of the goods to the
buyer. The delivery has to be carried out through the carrier as an intermediary, who receives
the goods from the shipper (usually the seller) and is bound to deliver it to the consignee
(usually the buyer) in exchange for the bill of lading. In fact, the seller performs the delivery
of goods by transferring the bill of lading to the buyer, thereby transferring to the buyer the
right to demand the delivery of goods from the carrier at the port of destination. Hence, the
rule that the goods must be delivered only against the bill of lading serves to protect against
the risk that the goods are delivered to someone who is not entitled to receive them. This rule
thus protects both the carrier and the persons entitled to receive the goods.
It can be used as the following:-
1. As a receipt.
While the bill of lading is in the hands of the shipper, it becomes a receipt. The receipt mentions
the quantity of goods received the condition of goods received and leading marks if any on the
goods received. However, the value of the bills in all these cases is not the same in all case and it
differs depending upon the circumstances of the case such as whether the bill falls within the
Carriage of Goods by Sea Act 1971 or not.
When the bill of lading falls within the carriage of goods by sea act 1971.Under this Act, the
carrier has to include the leading marks, the number of packages or pieces or the quantity or
weight of the goods and the apparent order and condition of the goods on the bill of lading. The
statements made on the bill of lading are regarded as legitimate evidence of the receipt of the
goods.
However when the bill of lading does not fall within the carriage of goods by sea act 1971, the
statement specifying quantity received is the legitimate evidence of the quantity shipped and the
burden of proof lies on the carrier to prove that the cargo as specified has not been shipped. This
burden is an absolute one.
In the case of Smith v/s. Bedouin Steam Navigation Co [1896], the bill of lading stated that
1,000 bales of jute had been shipped, whereas only 988 bales were delivered. It was held that the
carrier could successfully discharge the burden of proof only if it can be shown that the goods
were not shipped, not merely that the goods may not possibly have been shipped.
2. Evidence of contract of carriage.
In the hands of the shipper a bill of lading serves as evidence of the contract of carriage.The
contract with the shipper is likely to have been concluded orally long before the issue of the bill
of lading. The document may vary some of the agreed terms or contains terms that have not been
agreed to by the parties. For example in the case of The Ardennes (1951) the ships agent assured
the shipper that the vessel of a consignment of oranges would sail directly to London and arrive
there before 1 December. The ship however, stopped at Antwerp on her way to London and
arrived at London on 4th December. When sued for breach of contract by the shipper, the ship
owner relied on the bill of lading, which contained a clause giving the ship liberty to deviate
during the course of her voyage. Thus the oral contract between shipper and the ship owner is of
no importance and the bill of lading is considered as evidence of carriage.

3. Contract of carriage.
Upon endorsement to a third party, the bill of lading is a contract of carriage, but if the holder of
the bill is the shipper, the bill of lading can be evidenced only as a carriage of contract. Any oral
or written agreement between the shipper and the ship owner not expressed on the bill of lading
will not affect the third party on the grounds of lack of notice. For example in the case of Leduc
v/s Ward (1888), the endorsee of a bill of lading sued the ship owner for loss to cargo due to
deviation in the course. The ship owner argued that they were not liable, since the shipper was
aware at the time of shipment that the ship would deviate. The court held that anything that took
place between the shipper and the ship owner not embodied in the bill of lading could not affect
the endorsee in any circumstances. In the case of The Ardennes (1951) the ships agent assured
the shipper that the vessel of a consignment of oranges would sail directly to London and arrive
there before 1 December. The ship however, stopped at Antwerp on her way to London and
arrived at London on 4th December. When sued for breach of contract by the shipper, the ship
owner relied on the bill of lading, which contained a clause giving the ship liberty to deviate
during the course of her voyage. It was held that the oral evidence put forward by the shipper
was admissible.



4. Document of title.
Until goods are physically delivered, the possession of the bill of lading is considered to be
possession of the goods. Transfer of the bill of lading is considered to be constructive possession
of the goods. Transfer of the bill of lading by the seller to the buyer is considered to be symbolic
delivery of the goods to the buyer and the buyer in that case could demand delivery of the goods
on the ships arrival.
In the case of Sanders v/s MacLean (1883), the bill of lading by the law merchant is universally
recognized as its symbol and the endorsement and delivery of the bill of lading operates as a
symbolic delivery of the cargo.The buyer can sell the goods on while they are at sea to the third
party by simply endorsing the bill of lading and delivering it to the third party. The third party,
by becoming the holder, can demand delivery of the goods on arrival.Not all bills of lading,
however, are transferable. To impart transferability to a bill of lading, it must be drafted as order
bills . Upon endorsement, the endorsee takes the place of the original party to the bill of lading,
and will be sue and be sued on all the terms, express and implied int eh bill of lading despite
privity of contract. This is due to operation of Section 2 and 3 of the Carriage of Goods by Sea
Act, 1992



Legal Issue:
In the case of Shipping Corporation of India vs C.L.Jain woolen Mills & Ors on 10
th
April, 2001

Facts of the case:
1. The respondent C.L. Jain Woolen Mills, imported the consignment of polyester filament yarn
from Korea to India.. The goods thus being brought to the port of Bombay were discharged but
there had been no customs clearance at Bombay and the sealed container was transhipped to
ICD, Delhi, where it remained with the Container Corporation of India.
2. According to the Bill of Lading, in respect of the goods consigned to it, the corporation claims
that the goods cannot be released unless demurrage charges are paid. The said customs
authorities however permitted the owner to redeem the goods on payment of Rs. 7 lakhs. They
also imposed a penalty of Rs. 1 lakh.
3. The owner of the goods challenged the order before the CEGAT. The tribunal instead of
deciding the objections raised by the owner to the validity of the order of the Additional
Collector of Customs, ordered that the advance licence and DEEC Book be amended and
adjourned the appeal for a period of three months..
4. The High Court also further held that since the action of the customs authorities is illegal, the
goods in question will have to be released to the owner without payment of any detention or
demurrage charges by the owner.
5. The Shipping Corporation of India, the appellant in the present appeal, who was the carrier
and who under the Bills of Lading had a lien over the goods, until the dues are paid had not been
made.
6. The High Court passed an interim order entitling the owner to take release of the goods on
payment of Rs. 5 lakhs to the customs authorities and a bank guarantee of Rs. 5 lakhs but the
owner had not taken advantage of the said interim order and the goods continued to remain in the
custody of the present appellant and demurrage charges went on accruing.
7. The High Court however came to hold that the authorities cannot be held to be guilty of
disobeying the orders of the Court and accordingly, dismissed the petition.

Issues:
The goods of the appellant C.L.Jain woolen mills were detained on grounds of no custom
clearance and he was asked to pay the penalty to get back the goods. When he filed a case, the
court directed to return the goods without charging anything from the appellant. However during
the course of the proceedings while the goods were not released, the demurrage charges kept on
accruing and the question now arised about the payment of demurrage charges to the container
corporation before the goods could be released to be done by the custom authorities or the
appellant.

Sections Applicable:
1. Indian Bills of Lading Act, 1956
2. Section 111(d) of the Customs Act, 1962
3. Section 8 of the Customs Act
4. Section 33 of the Customs Act
5. Section 34 of the Customs Act
6. Section 45 of the Customs Act
7. Section 170 of the contract act
Judgement:
In this case, the earlier judgment of Delhi High Court entitled the importer to get the goods
released without payment of the detention and demurrage charges. In the contextual facts,
notwithstanding the judgment of the High Court, the goods not having been released, the given
order and direction dated 18.1.99, cannot be held to be infirm in any manner. In the absence of
any provision in the Customs Act, entitling the customs officer to prohibit the owner of the
space, where the imported goods have been stored from levying the demurrage charges, levy of
demurrage charges for non-release of the goods is in accordance with the terms and conditions of
the contract and as such would be a valid levy. The conclusion of the High Court to the effect
that the detention of the goods by the customs authorities was illegal and such illegal detention
prevented the importer from releasing the goods, the customs authorities would be bound to bear
the demurrage charges in the absence of any provision in the Customs Act, absolving the
customs authorities from that liability.
Section 45(2)(b) of the Customs Act cannot be construed to have clothed the customs authorities
with the necessary powers, so as to absolve them of the liability of paying the demurrage
charges. In the aforesaid premises, no infirmity is seen with the directions given by the Delhi
High Court. The goods in question, having already been directed to be released, without the
payment of the demurrage charges, the importer must have got the goods released. Having regard
to the fact situation of the present case, it would be meet and proper for us to direct the Shipping
Corporation and Container Corporation, if an application is filed by the customs authorities to
waive the demurrage charges and the appeal is disposed of accordingly.