M/S Puneet Expo vs Union Of India & Ors
2010 Latest Caselaw 4811 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI

                                 W.P. (C) No. 5457 of 2001

                                            Reserved on: September 29, 2010
                                            Decision on: October 19, 2010

       M/S PUNEET EXPO                           ..... Petitioner
                     Through: Mr. G.L. Rawal, Senior Advocate with
                     Mr. Rajesh Rawal, Advocate.

                        versus

       UNION OF INDIA & ORS.              ..... Respondents
                     Through: Mr. Aruneshwar Gupta with
                     Mr. Manish Raghav, Advocate for AAI.


                 CORAM: JUSTICE S.MURALIDHAR

         1. Whether reporters of the local news papers
            be allowed to see the judgment?                              No
         2. To be referred to the Reporter or not?                       Yes
         3. Whether the judgment should be reported in the Digest? Yes

                                  JUDGMENT

19.10.2010

1. The prayers in this writ petition filed by M/s Puneet Expo, a

proprietorship concern of which Shri Dinesh Kapoor is the proprietor, are

for a direction to the Airports Authority of India („AAI‟) Respondent No.

3 herein, not to charge any demurrage charges or in the alternative direct

the Customs Department, Respondent No. 2 herein, to pay the demurrage

charges accrued on the goods of the Petitioner to the AAI. A further

prayer is for a direction to the AAI to realise the demurrage charges

accrued on the consignment in question kept in the custody of the AAI

from the Customs Department.

2. The Petitioner sought to export readymade garments to Russia by way

of four shipping bills through M/s SAM Aviation Pvt. Ltd. on 6th June

2001. It is stated that the shipping bills were cleared on the same date.

While the said consignments were lying for shipment on, 11th June 2001

the officers of the Department of Revenue Intelligence („DRI‟) detained

the consignments for some investigation. On 4th July 2001, the DRI

referred the investigation to the Commissioner of Customs (Preventive).

On 6th July 2001 SAM Aviation requested the AAI for waiver of

demurrage charges. On 11th July 2001 the Petitioner was summoned by

the Commissioner of Customs (Air Cargo Preventive) for giving evidence

and producing documents in respect of the enquiry being conducted with

regard to the consignments.

3. By a letter dated 20th July 2001 the AAI directed SAM Aviation to

produce certain documents for considering their request for waiver of

demurrage charges. In the meanwhile, the DRI completed its investigation

and referred the matter again to the Customs (Preventive). Subsequently

the investigation with regard to the market value was also completed by

the Customs (Preventive).

4. On 14th August 2001 SAM Aviation submitted relevant documents and

requested for consideration of their case on a priority basis as the export

had been held up since 11th June 2001. It is stated that the Petitioner by a

letter dated 18th August 2001 requested the Customs Department to assess

and finalise the consignment for issuance of the detention certificate.

5. On 21st August 2001 the Deputy Commissioner (Preventive) of the

Customs Department wrote to the Deputy Commissioner (Export/DBK),

Air Cargo Unit, New Delhi stating as under:

"Sir,

Subject: Detention Of The Goods By Dri On 11.6.2001 In Respect Of Exporters/M/S National Cargo Service-Cha Please refer to the detention order of the DRI in respect of the following exporters

1. M/s Puneet Exports

2. M/s Sherwood Overseas

3. M/s Nam Global

4. M/s AVG Enterprises

The case was referred back by DRI vide their letter dated 4.7.2001. After conducting investigations/market inquiry and permission from DRI dated 6.8.2001; the consignment in respect of the above said exporters are released for further necessary action subject to the condition that FOB value for the DBK/DEPB benefit should be restricted to 30% above the market value as determined by the cargo R&I. Copy of the notesheet Page No. 10 of this office file giving market value of the goods ascertained by this office is enclosed.

No case is being made out after due consultation with the D.R.T.

Yours faithfully,

Sd/-

Encl. As above Deputy Commissioner (Preventive)"

6. On 22nd August 2001 the AAI directed SAM Aviation to forward the

detention certificate issued by the Customs for individual shipment and

further directed that in order to avoid further accrual of demurrage charges

they should pay the applicable demurrage charges and clear the cargo. On

the same date, the Deputy Commissioner (Preventive) informed the

Deputy Manager (Export) of the AAI that the consignments were being

allowed for shipment when the said letter was enclosed with the detention

certificate.

7. On 27th August 2001 the Petitioner wrote to the General Manager

(Cargo) AAI to the following effect:

"Sir,

This is with reference to letter No. VIII {2} Aircus/Cru/Detention/1279/01/816 Dated 22 August 2001 from Dy. Commissioner {Preventive} Air Cargo Unit Authorizing shipment of detained cargo.

As no penalty/fine has been imposed on our cargo we request that the cargo be released and demurrage charges waived off as the cargo is being lying here since a long time your humble and kind initiative will be highly obliging to us for upliftment of cargo from here at the earliest.

Awaiting for an early response from your side." (emphasis supplied)

8. It is stated that by this time, the goods in question had accrued a

demurrage of ` 46 lakhs. In these circumstances, the present petition was

filed on 4th September 2001 seeking the reliefs mentioned hereinbefore.

9. By an interim order dated 20th December 2001, this Court permitted the

Petitioner to shift the goods to the Customs Department Bonded

Warehouse but further directed that the goods will not be removed

without the permission of the Court. It was clarified that the AAI will

continue to have a lien over the goods for the amount which may be due

to it towards demurrage. The Petitioner was asked to pay the required

charges to the Customs Department for storage of the goods in the bonded

warehouse.

10. Two principal contentions were advanced by Mr. G.L. Rawal, learned

Senior counsel appearing for the Petitioner. The first is that to justify

retaining lien over the goods AAI has relied upon Regulation 3 of the

International Airports Authority (Storage and Processing of Goods)

Regulations, 1993 („1993 Regulations‟) framed under Section 37 of the

International Airports Authority Act, 1971 (IAAI Act) which has since

been repealed, and replaced by the Airports Authority of India Act, 1994

(„AAI Act‟). With the repeal of the IAAI Act, the 1993 Regulations also

stood repealed and could not be invoked to justify the retention of lien.

Section 42 of the AAI Act makes it obligatory for regulations to be

framed afresh with the prior approval of the Central Government. Such

Regulations were ultimately framed only in 2003. Therefore, at the time

of their detention, AAI‟s retention of lien was without the authority of

law. Mr. Rawal submitted that Section 24 of the General Clauses Act,

1897 (`GCA‟) is available only when there is no savings clause in the

repealing AAI Act. He relied upon the decisions in State of Madhya

Pradesh v. A.K. Jain AIR 1958 MP 162; Utkal Contractors & Joinery

Pvt. Ltd. v. State of Orissa AIR 1987 SC 1454; Harish Chandra v. State

of Madhya Pradesh AIR 1965 SC 932 and Air India v. Union of India

JT 1995 (5) SC 578.

11. The second contention is that it was incumbent on the Customs

Department to have issued a detention certificate at the earliest

particularly after they were informed that there was no case made out for

further detention of the goods for investigation. For the unconscionable

delay in the Customs Department issuing a detention certificate, the

Petitioner should not be held responsible and therefore for no fault of its

the Petitioner should not be required to pay AAI the demurrage charge.

Reliance is placed on the decision of this Court in Gaurisons v.

International Airport Authority of India 1988 (34) ELT 550 (Del). In

addition, Mr. Rawal placed reliance on certain circulars of the AAI which

make it incumbent on the AAI to give the Petitioner 80% waiver of the

demurrage charges, which according to him was not done in the present

case. He submitted that it was the insistence of the AAI on the payment of

the complete demurrage charges that compelled the Petitioner to approach

this Court. Alternatively it is submitted that the Petitioner cannot be made

to bear the burden of the laxity on the part of the Department of Customs

to clear the consignment. Therefore it is the Customs Department which

should bear the liability of the paying demurrage charges. Reliance is

placed on the decisions of the Supreme Court in Priyanka Overseas Pvt.

Ltd. v. Union of India 1991 (51) ELT 185 (SC); Kuil Fireworks

Industries v. Collector of Central Excise 1997 (95) ELT 3 (SC) and the

decision of a Division Bench of Andhra Pradesh High Court in Sujana

Steels Ltd. v. Commissioner of Customs & Central Excise 2002 (141)

ELT 51 (AP).

12. Appearing for the AAI, Mr. Aruneshwar Gupta, learned counsel points

out that the Customs Department has no powers and cannot regulate the

activities of the AAI. The AAI acts as bailee vis-à-vis the consignee, and

is governed by the provisions of Sections 152 and 161 of the Contract Act,

1872 („CA‟). The power of the AAI to levy demurrage charges flows from

the IAAI Act read with the 1993 Regulations. He placed reliance on the

decisions of the Supreme Court in Shipping Corporation of India v. C.L.

Jain Woolen Mills (2001) 5 SCC 345, International Airport Authority v.

Grand Slam International (1995) 3 SCC 151 and P.V. Mohd. Barmay

Sons v. Director of Enforcement (1993) Supp. 2 SCC 724. As regards the

repeal of the IAAI Act, it is submitted that it did not result in the

automatic repeal of the 1993 Regulations. According to Mr. Gupta,

Section 24 of the GCA is a complete answer. He placed reliance on the

judgments in Poonjabhai Varmalidas v. Commissioner of Income Tax

AIR 1991 SC 1; Neel @ Niranjan Majumdar v. State of West Bengal

AIR 1972 SC 2066; Jayantilal Amaratlal v. Union of India AIR 1971 SC

1193 and T. Barai v. Henery AH Hoe AIR 1983 SC 150. Since the 1993

Regulations were not inconsistent with the provisions of the AAI Act,

they must be held to be enacted under Section 42 of the AAI Act by

reading Section 46(1) of the 1994 Act with Section 24 of the GCA. Till

new regulations were framed in the year 2003, the 1993 Regulations must

be deemed to have been enacted under Section 42(d) read with Section

12(3)(g) of the AAI Act.

13. It is submitted by Mr. Gupta that demurrage charges have to be paid

by the consignee to the AAI and not the Customs Department. Reliance

was placed on the decisions in Tej Kiran Jain v. N. Sanjiva Reddy AIR

1970 SC 1573 and Om Shankar Biyani v. Board of Trustees, Port of

Calcutta (2002) 3 SCC 168 to contend that the payment of demurrage was

a separate liability which could not be linked up with any default

committed by the Customs Department. It would be open to the exporter

to seek to recover such demurrage charges which it has to pay mandatorily

to the AAI by filing separate proceedings against the Customs

Department, if so permissible in law.

14. The above submissions have been considered. As regards the plea of

the Petitioner that it was incumbent on the AAI to have offered 80%

waiver of the demurrage charges, the narration of facts shows that on 27th

August 2001, the Petitioner wrote to the AAI claiming complete waiver of

the demurrage charges. There was no demand even at that stage that the

Petitioner should be given a 80% waiver. Although it is urged that it was

incumbent on the AAI to have indicated to the Petitioner what demurrage

charges were, the normal practice as explained by Mr. Gupta, learned

counsel for the AAI, is that since the exporters are fully aware what the

prevailing demurrage charges are, they usually go to the office of the AAI

to ascertain what demurrage charges are and pay them. Even if an

exporter is aggrieved by having to pay demurrage charges which it feels is

unjustified, the course available is to make payment under protest and

later seek appropriate remedies. In the instant case, there is nothing to

show that the Petitioner ever offered to the AAI that it would pay the

demurrage charges, or for that matter even 20 per cent of the demurrage

charges. In the circumstances, the Petitioner was not justified in waiting

for the AAI to communicate the demurrage charges. On the other hand it

does appear that the Petitioner was never prepared to pay any demurrage

charges as is evident from its letter dated 27 th August 2001. One possible

reason may have been that since the demurrage charges had already

accumulated to ` 46 lakhs, the Petitioner decided to contest the demand

and therefore, filed this petition in early September 2001. In the

circumstances this Court is unable to conclude that AAI was under an

obligation to communicate to the Petitioner the exact demurrage charges

and that the failure to do so would exempt the Petitioner from paying the

demurrage charges.

15. As regards the applicability of the 1993 Regulations, this Court is

inclined to accept the submission of the learned counsel for the AAI that

in view of Section 24 of the GCA, the 1993 Regulations continued to be

applicable and ought to be treated as having been enacted under Section

42 of the 1994 Act read with Section 46(1) thereof till such time the 2003

Regulations came into force. In Chief Inspector of Mines v. K.C. Thapar

AIR 1961 SC 838, a more or less similar situation arose. In para 20 it was

explained as under (AIR @ p. 845):

"20. The true position appears to be that the Rules and regulations do not lose their character as rules and regulations, even though they are to be of the same effect as if contained in the Act. They continue to be rules subordinate to the Act, and though for certain purposes, including the purpose of construction, they are to be treated as if contained in the Act, their true nature as subordinate rule is not lost. Therefore, with regard to the effect of a repeal of the Act, they continue to be subject to the operation of Section 24 of the General Clauses Act."

16. As regards the submission that it is the Customs Department that

should be asked to pay the demurrage charges, this Court finds that each

of the decisions relied upon by the learned Senior counsel for the

Petitioner turned on their own peculiar facts. In none of them was there a

situation where the Petitioner had completely refused to pay any

demurrage charges and the Court directed the Department of Customs to

pay the demurrage charges. On the contrary, the decisions in Shipping

Corporation of India v. C.L. Jain Woolen Mills and International

Airport Authority v. Grand Slam International answer the question

against the Petitioner. The decision in Union of India v. R.C. Fabrics (P)

Ltd.(2002) 1 SCC 718 reiterates that the liability of the importer or

exporter, as the case may be, of the goods to pay the demurrage charges

does not get shifted to any other authority whatever may be the reasons

for the accumulation of such demurrage charges. In Om Shankar Biyani

v. Board of Trustees, Port of Calcutta (2002) 3 SCC 168, the Supreme

Court explained the position with reference to the Major Port Trusts Act.

The reasoning in the decision applies on all fours to the case on hand. In

para 18 it was held:

"18. In our view the proposition that the bailee, who exercises a lien, is not entitled to charge rent for storage of goods can never apply to a case where the lien is exercised for non-payment of rent or storage charges. If such a proposition were to be accepted it would lead to catastrophic results. It is well known that in most cities, particularly port cities like Calcutta and Bombay, storage space is at a premium. If such a proposition were accepted then all that a person need to do is to make a demand for removal of the goods without offering to pay the storage charges. If the bailee were to refuse to allow clearance

and exercise his right of lien, as he is bound to do, the bailor's purpose would be served. He would thereafter have rent free storage space. He could then continue to store the goods free of rent. On the other hand, if the bailee were to permit clearance, in almost all cases, his charges would not be subsequently paid and he would have to then pursue the bailor for recovery of his charges. This could never be the law."

17. In the circumstances, it is not possible for this Court to grant the

reliefs prayed for in the writ petition. It is for the Petitioner to pay the

demurrage charges to the AAI. It is clarified that if the Petitioner, within a

period of two weeks from today, requests the AAI for waiver of 80% of

the demurrage charges in terms of any applicable rules, regulations or

circulars, such request should be considered by the AAI on merits and a

decision thereon communicated to the Petitioner within two weeks

thereafter. If the Petitioner‟s grievance is that the demurrage charges

accrued only on account of the failure of the Customs department, it

would be open to the Petitioner thereafter to seek appropriate remedies as

may be available to it in accordance with law.

18. The writ petition is dismissed in the above terms.

S. MURALIDHAR, J OCTOBER 19, 2010 akg