British India Steam Navigation Co. Ltd. Vs Shanmughavilas Cashew Industries & Ors

Author: Muskaan Bangani, 4th Year student at Mody University of Science and Technology.

Citation: AIR 3 SCC 481

Date of decision: 1990

Bench: SAIKIA, K.N and SAWANT, P.B.

Original copy: N/A

Background of the case:

• The first respondent, M/s Shanmughavilas Cashew Industries, a company established in East Africa, sent out a total of 4445 bags of raw cashew nuts through a vessel chartered by the appellant, M/s British India Steam Navigation Co. Ltd., incorporated in England. However, just 3712 bags were delivered at Cochin, and 733 were left on the beach, making for a beach landing of little under 37%.
• The plaintiff sued the defendant in the Cochin Subordinate Court. The subordinate judge ruled in favour of the plaintiff, awarding the plaintiff with interest. The appellant’s appeal was denied.
• These arguments brought forth by the appellant included the claims that it was a mere charterer of the vessel, that there was a charterparty executed between the first respondent and the agent of the owner in London, that as per clause 3 of the bill of lading the Cochin Court had no jurisdiction, and that only English courts had jurisdiction.
• Respondent No. 1 claimed that the appellant had never acted as a charterer, and thus could not be held responsible for the shortfall. Furthermore, the corporation has consistently and categorically disputed that only English courts have jurisdiction over the issue. It is the position of the appellant that it is an English company registered in England and doing business in England, and does not carry on any business in India. 
• According to clause 3 of the bill of lading, only the appellant has the option to sue or be sued in England, or in Cochin, which is a port of destination. The consignee, however, has no option to sue at Cochin.
• The matter was remanded to the trial court in the first instance

Issues:

• It was a mere charterer of the vessel; that there was a charterpar? executed between the first respondent and the agent of the owner in London; that as per clause 3 of the bill of lading the Court at Cochin had no jurisdiction and only English Courts had jurisdiction; and that as per the charterparty and clause 4 of the bill of lading the remedy of the first respondent, if any, was against the’ owner who alone was liable and not against the appellant charterer of the vessel.

Decision:

• Accordingly, the High Court should not rule on the question of jurisdiction in this case based solely on the provisions of Section 28, of The Indian Contract Act.  In the lack of a specific provision making it relevant to transactions in foreign trade, Section 28 of the Indian Contract Act is applied. The effective operation of a country’s statutes in relation to foreigners and foreign property, including ships, is subject to certain limitations. In general, a statute extends territorially throughout the country, unless the contrary is stated, and will extend to territorial waters and such other places as the legislature has indicated an intention to do so. 
• In Sirdar Gurdyal Singh v. Rajah of Faridkote, the Privy Council held that no territorial legislation can grant jurisdiction in personal actions that any foreign court should recognise against absent foreigners who owe no allegiance or obedience to the power that legislates against them. According to Lore Selborne, “In a personal action in which none of these causes of jurisdiction apply, a decree issued in absentia by a foreign court to which the defendant has not in any way submitted himself is by international law an absolute nullity. He is under no obligation of any kind to obey it, and it must be regarded as a mere nullity by the courts of every nation except the United States.” The question therefore becomes, what constitutes submission to the jurisdiction of a court of law.
• Parties, on the other hand, cannot by submission confer jurisdiction on the court to entertain actions that are outside of its jurisdiction.
• The parties themselves may decide whether or not the court has jurisdiction over them based on a variety of interconnected considerations.
• The products in the instant instance were sent from Africa and transported to Cochin, it is clear that this Act did not apply.
• There is no evidence to suggest that the charterparty was on its road to extinction. “Pacta dant legem contractui” (Pact on the basis of contract law) means “contract on the basis of the law of the contract.” Agreements establish the legal framework for a contract. Clause 4 was a stipulation in the contract, as demonstrated by the bills of lading, and hence the parties were unable to withdraw their consent. It is unclear whether the High Court relied on the English Carriage of Goods by Sea Act, 1924, or the Indian Carriage of Goods Act, 1925, in reaching its conclusion.
• This case dealt with provisions of the Indian Contract Act and the Rules contained therein were not applicable to the facts of the case at hand. It was not possible for the dispute to be resolved in part according to local law and in part according to English law at the same time. According to the rules of evidence, the English law was not proven before the court.
• As a result, this appeal will very certainly be successful. In light of the foregoing observations, we grant the appeal, set aside the impugned judgments, and remand the case to the trial court for disposition in accordance with the law, after providing the parties with an opportunity to amend their pleadings and introduce additional evidence, if they are so advised. We make no ruling on expenses based on the facts and circumstances of this case.

Critical analysis:

• Pacta dant legem contractui – the contract is governed by the terms and conditions agreed upon by the parties. Agreements establish the legal framework for a contract. As a result of clause 4 being a contractual term, as indicated by the bills of lading, the parties could not withdraw their consent from it. It is unclear whether the High Court relied on the English Carriage of Goods by Sea Act, 1924, or the Indian Carriage of Goods Act, 1925, in reaching its conclusion. 
• The Articles and Rules in question can be found in the Schedule to the Indian Act, however the Rules thereunder were deemed to be inapplicable in the circumstances of this particular case. It was not possible for the dispute to be resolved in part according to local law and in part according to English law at the same time. According to the rules of evidence, the English law was not proven before the court.