Indian Ports Cannot Impose Storage Fees and Demurrage says Supreme Court

Law on Goods and Indian Ports and Demurrage

Supreme Court of India: Indian ports have no right to impose storage fees and demurrage on abandoned goods


According to media, the P&I Club Gard has recently received many reports of abandoned or uncollected containers at ports in India, Pakistan and Bangladesh.


In view of this, the Supreme Court of India ruled that the port has no right to charge the shipowner or its agent for storage fees and “demurrage” for abandoned goods.


The ruling originated from a container of “old” acrylic clothes. When the goods were taken out of the container for customs inspection, the customs department discovered that the goods actually contained “new clothes.” This has led to high tariffs, fines and other charges.


The wrong declaration of the goods caused a serious delay in customs clearance of the goods, and the consignee refused to accept the goods.


Therefore, the port levies storage fees on the goods and containers, and requires these fees from the shipping agent and the owner of the container during the entire period of the goods stay in the port.


The shipping agent and shipowner of the container therefore filed a lawsuit with the Kerala High Court, claiming that according to the MPT Act and the main port customs office on November 10, 1999, July 19, 2000 and September 13, 2005 ( TAMP) order that the shipowner does not have to pay storage fees when the abandoned cargo has landed for more than 75 days.


The Kerala High Court pointed out in the first-instance judgment that shipping agents have repeatedly asked the port to fill discarded containers with cargo. However, the port refused to do so on the grounds of limited space.

At the same time, the high storage fees charged to shipowners and their agents are caused by the consignee’s failure to take the goods and the port’s failure to pack the containers.


High Court Ruling on Port Charges

The Kerala High Court ruled that the term “may” in Articles 61 and 62 of the MPT Act obliged the port to sell or otherwise dispose of the goods as soon as possible without the consignee taking the goods. At the same time, according to the TAMP order, the Port Trust has the right to request storage for up to 75 days.


The judgment of the Kerala High Court was appealed to the Supreme Court by the port authorities. Taking into account the precedent on this issue, the Supreme Court Chamber transferred the case to a larger chamber for final judgment.


According to Gard, the Supreme Court judge conducted a comprehensive analysis of the MPT Act and the 1962 Customs Act before making a judgment. This makes the issue of shipowners and agents’ liability for storage fees at the port clarified. The main problem in this case is


Who is the legal owner of cargo according to the MPT Act?

The “MPT Act” separately defines the “owner” of the cargo and the “owner” of the ship, and clearly stipulates that the cost of the shipowner/ship agent is related to the port’s service to the ship and is completely independent; at the same time, the ship The service of goods should be distinguished from the service of goods.


The definition of “owner” of goods includes the beneficiary, that is, the person entitled to obtain the goods, such as the shipper, the consignor, the consignee, and the agent who sells, keeps, or loads and unloads the goods. The court held that the term “agent for the… loading or unloading of such goods” is very clear, and the “owner” of the goods includes the ship’s agent involved in the loading or unloading of the goods.


The court also found that the agent of the ship can also arrange the loading and unloading of the cargo. In this case, such agent also belongs to the “owner” of the cargo as referred to in the MPT Act. Although the “MPT Act” does not explicitly refer to the shipowner as the “owner” of the goods, the court held that the agent of the shipowner is included in the definition of the “owner” of the goods, and the shipowner itself is not included Inside, this is not coordinated.


In addition, it is obvious that if the shipowner or its agent is not a “cargo owner,” the port will have no basis to manage the shipowner or its agent’s cargo.


After the goods are handed over to the port, the owner/ship agent is no longer responsible.


The court further pointed out that according to the “MPT Act”, once the port receives the goods and provides them with a receipt, anyone (including shipowners and agents) who has received the receipt will no longer be liable for any cargo damage.


On the other hand, from the time the receipt is officially issued, the port has become the trustee of the goods, responsible for the loss, damage or deterioration of the goods.


Who should pay the storage fee for goods kept at port?

The court reviewed the MPT Act and pointed out:


1) The storage fee for goods kept by the port to release the owner’s lien shall only be paid by the party entitled to obtain such goods. After the goods have landed and the ship has left the port, the party will never be a ship The owner or the agent of the shipowner.


2) The auction notice of the goods kept in the port only needs to be handed over to the consignee or other persons who have the real right to obtain the goods, and then these people will be obliged to remove the goods.


3) The court further pointed out that if it intends to remove or auction the goods kept in the port, it can also give notice of “agents of the vessel by which such goods were landed”.

However, it is only necessary to notify the shipping agent when the shipping agent indicates that the shipowner has a lien on the freight and other expenses of the goods, and the right must be exercised by auctioning the goods.

Therefore, shipowners or their agents are not persons who must accept port notifications, because they are neither the owner of the goods nor other persons who have the right to obtain the goods.


This affirms the position that once the shipowner/ship agent delivers the cargo to the port for safekeeping and obtains a receipt from the port, the port cannot seek any cargo-related expenses from it.


Therefore, the goods stored in the port are only in contact with the owner or other persons who own the goods, and have nothing to do with the agent of the ship or the ship itself.


Is the port obligated to dispose of the goods in its custody within a certain period of time?

The Supreme Court did not agree with the opinion of the court of first instance that the word “may” in Articles 61 and 62 of the MPT Act must be read as “shall”. The Supreme Court ruled that in certain circumstances described in Article 61 and Article 62, the port has the right to sell goods at its discretion.

However, the port has no right to exercise its discretion arbitrarily because it is also restricted by the Indian Constitution as a national institution.


Having said that, the Supreme Court held that the port has a constitutional obligation to sell the goods in its custody within a reasonable time from the time the goods are accepted. Article 63(1)(c) of the “MPT Act” stipulates that the maximum period of four months from the day the goods landed.

If the port did not sell the goods during this period, it must provide a reasonable explanation why it did not do so. If the explanation is reasonable and the owner or the person entitled to obtain the goods does not remove the goods thereafter, the port has the right to impose demurrage on the goods owner.


Does the container of imported goods also form part of the goods?

The Supreme Court pointed out that both the “Customs Law” and the “MPT Act” contain parallel provisions. The competent authority under each relevant law is responsible for the storage and sale of imported goods. Therefore, these provisions should be read together. The Supreme Court reviewed various judgments and ruled that, according to the “Customs Law”, containers used as containers for imported goods cannot be considered imported “goods.”

After the cargo is full, the container must be returned to the shipowner’s agent or the owner of the container.


The court further pointed out that regardless of the type of goods imported, the value of the import did not take into account the value of the container, because according to the law, only goods packed in containers are considered imported goods.


The legal effect of the bill of lading endorsement is different from the legal effect of the shipping agent’s endorsement of the bill of lading

The “endorsement” mentioned in Section 1 of the Indian Bill of Lading Act 1856 refers to the endorsement by the consignor or owner of the goods to the endorsed on the bill of lading, so that the property ownership can be transferred to the endorsed.



The court confirmed that, according to the Bill of Lading Act of 1856, the endorsement of the shipping agent on the bill of lading to indicate that the goods have been delivered is not within the meaning of “endorsement.”



Author’s Bio

Name: Ajay Rastogi

Educational Qualification: LLB

Profession: Advocate / Lawyer

Work Experience: 20 Years of Legal Practice

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