British India Steam navigation Co. Ltd. v. Shanmugha Vilas Cashew Industries

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Full Case Details

Two cases British India Steam navigation Co. Ltd. v. Shanmugha Vilas Cashew Iindustries
and British Steam Navigation Co. ltd v. Hindustan Cashew Products Ltd identical on facts
involved questions concerning the choice of proper law of contract and have important bearing
upon the jurisdictional clauses in the bills of lading.
Respondents in both the cases had purchased a specified quantity of cashew nuts which were
shipped by the applicant company through chartered vessels in pursuance of contract of
affreightment evidenced by bills of lading. The applicant company is incorporated in England. The
respondents have send the appellant in both the cases for short-landing of bags containing cashew
nut. The court below havingdecreed the suits, the appellants had approachedthe Kerala high Court
which dismissed the appeals. Accordingly the appellant company has preferred these appeals
beforethe SupremeCourt. The appellantcontendedfirstly, that it was a mere chartererof the vessel
and not the owner. Secondly, as per the clause of the bill of lading, the court at Cochin had no
jurisdiction. Finally the remedy would only lie against the owner of the vessel. The concerned
clausesof billof ladingread;

3. JURISDICTION: The contract evidencedby this bill of ladingshall be governed by English
   law and disputes determined in England or, at the option of the Carrier, at the port of destination
   accordingto Englishlawto theexclusionof thejurisdictionof the Courtsof anyother country.
   Clause 29 – FINALLY IN ACCEPTINGTHIS BILL OF LADING. The Shipper, Consignee,
   and Owner of the goods, andthe Holders of this Bill of Lading, expresslyaccept and agreeto all its
   stipulations, exceptions, and conditionswhether written, printed stamped or incorporated, as fullyas
   if theywereallsignedbysuchShipper,Consignee,Owneror Holder.
   The first respondent is the consignee and holder of the bills of lading and ex fade should be
   bound by this clause. The question in the instant case was one of initial jurisdiction on the basis of
   the clause mentioned in the bill of lading. Referringto the bill of ladinggenerally, the court pointed
   out:
   “It is a settled principle of Private International Law governing bills of lading that the
   consignee or an endorsee thereof derives the same rights and title in respect of the goods
   covered by the bill of lading as the shipper thereof had.”
   The court proceeded on the premise that for the purpose of jurisdiction the action of the first
   respondent is an action in personam in Private International Law. An action in personam is an
   action brought against a person to compel him to do a particular thing.
   The court took into consideration certain significant issues in the context of international trade
   and commerce. These related to the proper law of contract chosen by the parties themselves, the
   extent to which an applicable law to a contract be inferred from the jurisdictionalclauses in the bills
   of lading and finally the role and function of the bills of lading themselves as distinguished from
   negotiableinstrumentsandotherrelatedinstrumentssuch as charterparty.
   Referring to bills of lading the court observed
   “The bill of lading is the symbol of the goods, and the right to possess those passes to the
   transferee of the bill of lading. In other words, its transfer is symbolic of the transfer of the
   goodsthemselvesand until the goods havebeen delivered, the deliveryof the dulyindorsed bill
   of lading operates as betweenthe transferoror transferee, and all who claim through them, as a
   physical delivery of the goods would do. The bill of lading is a negotiable instrument in the
   senseof carryingwith it the right to demand and have possession of the goods describedin it. It
   also carries with it the rights and liabilities under the contract, where the property in the goods
   also is transferred. However, a bill of lading is not a negotiable instrument in the strict sense of
   the transferee deriving better title than the transferor. The transferee of a bill of lading gets no
   better title than the transferor himself had. Mere possessionof the bill of ladingdocs not enable
   theholderto suea personat a placewherethetransferorhimselfcould not havedone”.
   The court also clearly stated that the negotiations of a bill of lading is by the person who has
   the right to sue on it. He cannot sue at a place not intended by the parties when intention has been
   expressed. Considering the question as to the appellant’s liability for the suit claim, the court
   referred first to Halsbury’s Laws of England where it has been mentioned. “A contract for the
   carriageof goods in a ship is called in law a contractof affreightment. In practicethese contractsare
   usuallywritten and most frequentlyare expressedin one or other of two types of documentscalled
   respectivelya charterpartyand a billof lading. [A] contractby charterpartyis a contract bywhichan
   entireship or someprincipalpart of her is let to a merchant, called ‘thecharterer’, for the conveyance
   of goods on a determined voyage to one or more places, or until the expiration of a specified
   period.”
   The court thereafter observed:
   “Thus for the purposes of ascertaining the responsibility of a charterer in respect of the cargo
   shippedand landed, it would be necessaryto know not onlythe stipulations betweenthe shipper i.e.
   the owner of the cargo ad the charterer, evidencedby the bill of lading and also those between the
   charterer, evidencedby the bill of ladingand also those between the charterer and the owner of the
   ship. If the charter is by way of demisethe problemwould be simple inasmuch as the billof lading
   willbe purelybetweenthe shipper and the charterer. In cases of a ‘voyage charter’ or a ‘timecharter’
   one has to find out the actual terms of the charter to ascertain whether they operated as charter by
   demise or made the charterer only as an agent of the shipowner ad if so to what extent so as to
   ascertainthe extent of privityestablished betweenthe shipper and the ship owner as stipulatedin the
   bill oflading.”
   The court found on bills of lading prominently printed “SEE CONDITIONS OF
   CARRIAGE AND OTHER CONDITIONS ON REVERSE”. Accordingly the court observed
   that the shipper, whose knowledge will be attributed to the first respondent did not know of the
   conditionsof carriageprintedon the reversethere being no other conditionsprintedelsewherein the
   bills of lading. On these facts it is clear that the parties have chosen English law as the governing
   law for their contract. The court having identified the respondents’ action as one in personam in
   private international law for purposes of jurisdiction, based its analysis on the leading authorities in
   private international law (on general principles as to jurisdiction in actions in personam as well as
   governing for the contract between the parties) such as Dicey. Morris and Cheshire. The court
   pointedout:-
   “Accordingto the authorsthe parties to a contractin internationaltradeor commercemay
   agree in advance on the forumwhich is to have jurisdictionto determinedisputeswhich may
   arise between them. The chosen forum may be a court in the country of one or both the
   panties or it maybe a neutral forum. The jurisdiction clause may provide for a submissionto
   the courtsof a particular countryor to a court identifiedby formula in a printedstandardform,
   such as a bill of lading referring disputes to the courts of the carrier’s principal place of
   business. It is a question of interpretation, governed by the proper law of the contract,
   whether jurisdiction clause is exclusive or non-exclusive, or whether the claim which is the
   subject matter of the action falls within its terms. If there is no express Choice of the proper
   lawof the contract, the law of the countryofthe chosencourt willusually, but not invariably
   be the proper law. The jurisdiction of the court may be decided upon by the parties
   themselves on basis of various connecting factors”.
   The courtobservedthat clause 3 of the bills of ladingreferred not onlyto the initial jurisdiction
   but also contained the selection of law made by the parties. The contract was thus governed by
   English law and disputes were to be determined according to English law, the court said., quoting
   in support Cheshire and North’s Private International Law for parties’ autonomy to not only to
   choosetheapplicablelawbuttheforumas well.
   As the law had been chosen, the proper law would be the domestic law of England and the
   proper law must be the law at the time when the contract was made and throughout the life of the
   contract and there could not be a “floatingproper law”.
   Proceeding further. the court discussed the limitation on the party’s autonomy to choose the
   applicable law and stated:
   “It is true that in English law there are certain limitations on freedom to choose the
   governing law. The choice must be bona fide and legal and not against public policy. It may
   not be permissibleto choose a whollyunconnected law which is not otherwisea proper law of
   contract. English Courts, it has been said. should, and do, have a residual power to strikedown
   for good reasons. choiceof law clause, totallyunconnectedwith the contract. Wherethere is no
   express choiceof the proper law, it is open to court to determinewhether there is an implied or
   inferredchoiceof lawin the pantiescontract”.
   The court also looked into the questions of submission to the jurisdiction to the Indian courts
   by the appellant while the chosen forum being English courts and English law as applicable law.
   The court said that litigating, in India would constitute submission to the jurisdiction. Quoting
   Cheshire and North’s Private the court observed:
   “An appearance merely to protest that the Court does not have jurisdiction will not
   constitute submission, even if the defendant also seeks a stay of proceedings pending the
   outcome of proceedings abroad.. In the instant case the appellant submits that as defendant it
   appeared before the Indian court to protest its jurisdiction and put forth its defences subject to
   that protest.. However, we find that in the memo of appeal before the lower appellants court no
   specific ground as to jurisdiction was taken though there were grounds on non-maintainability
   of the suit. Even in the special leave petition before this court no ground of lackof .jurisdiction
   of the courts below has been taken. We are therefore, of the view that the appellant has to be
   heldto haveeither waivedtheobjection as to jurisdictionor to havesubmittedto the jurisdiction
   in the facts and circumstancesof the case… The submission as to lack of jurisdiction is therefore
   rejected”.
   The court also considered the application of Indian law to the present case. In this context the
   court opined that under the jurisdictional clause of the bill of lading only the English court has
   jurisdiction and the Indian courts would not have jurisdiction and Indian law would not be
   applicable. In the facts and circumstancesof the case, the Courtobservedthat the Indian Carriageof
   Goods Act, 1923 which is an Act to amend the law with respect to the carriage of goods by “sea
   was passed after the International Conference on Maritime law held at Brussels in October, 1922
   and Brusselsmeetingin October1923. Section 2 provides:
   Subject to the provisionsof this Act, the rules set out in the Schedule.. shall have the effect in
   relationto and in connectionwith the carriageof goodsby sea in ships earninggoodsfromanyport
   in Indiato anyotherportwhetherinor outsideIndia.
   To apply the rules to a case, the port of origin has to be an Indianport . Unlessthe startingpoint
   or the port of loading is a part in India the rules are inapplicable.As in the instantcasethe goods
   were shipped in Africa and carried to Cochin. This Act obviouslywas not applicable. Accordingly,
   the court allowed the appeal and remanded the case to the trial court for disposal accordingto law.
   Similar was the ruling in the Hindustan Products Ltd. case.