Delhi High Court grants reprieve for shipping lines and container freight stations

Gautam Bhatikar
Phoenix Legal, Mumbai
​​​​​​​Gautam.bhatikar@phoenixlegal.in

At the inception of the pandemic in 2020, governments around the world initiated stern actions and precautions to combat the spread of the deadly virus. The Indian Ministry of Shipping (MoS) issued various regulations and guidelines to ease the economic impact. The MoS issued guidelines to the Major Ports in the exercise of powers under the Major Ports Trust Act, 1963 (the 'Major Ports Act') to ensure that no penalties, demurrage, charge-fee or rentals were levied on any port user for any delay in berthing, loading/unloading operations or evacuation/arrival of cargo caused by the reasons attributable to the nationwide lockdown. In view of the notifications issued by the MoS, the Director-General of Shipping (the 'DG Shipping') issued an advisory, which was extended to container freight stations as well.

A writ petition was filed by several traders seeking the release of their goods without payment of penal charges levied by shipping lines, inland container depots and container freight stations in view of the notifications and the advisories issued by the MoS and DG Shipping.

The petitioner traders before the court argued their inability to clear the goods from inland container depots and container freight stations, and return the shipping lines' containers was a direct outcome of the nationwide lockdown. They relied primarily on the following notifications/advisories issued by the authorities:

1. circulars dated 31 March 2020 and 21 April 2020 issued by the MoS (the 'MoS Circulars');
2. advisories dated 29 March 2020, 31 March 2020 and 22 April 2020 issued by the DG Shipping (the 'DGS Advisories'); and
3. a letter dated 23 April 2020 issued by the Central Board of Indirect Taxes and Customs (the 'CBIC Letter').

The petitioners primarily contended that the MoS Circulars, DGS Advisories and CBIC Letter were in the nature of directions, and therefore mandatory and binding on inland container depots, container freight stations and shipping lines; and hence, they must waive the penalties levied.

It was the petitioners' case that the power of the circulars and advisories was derived under the respective parent statutes, namely the Merchant Shipping Act 1958, Major Port Trusts Act 1963, Customs Act and so on. The petitioners also relied on the provisions of the Disaster Management Act 2005.

On the other hand, the respondents, represented by the Container Shipping Lines Association (CSLA), Container Freight Stations Association of India (CFSAI) and National Association of Container Freight Stations (NACFS), contended that the MoS Circulars were applicable only to Major Ports and not to shipping lines.

The respondents vehemently challenged the DG Shipping's authority to issue advisories to regulate the contractually agreed charges of shipping lines without being privy to any such contract, and therefore argued that such private contracts cannot be regulated by any statutory authority. It was further argued that the CBIC Letter that relied on the MoS Circulars was addressed to the Commissioner of Customs and had no relation to the shipping lines.

The MoS, DG Shipping and Indian Ports Association confirmed before the honourable court that the MoS Circulars had been issued under the Major Port Trusts Act and not under the Disaster Management Act, and confirmed that the respondents' submission that the scale of rates issued by the Tariffs Authority for Major Ports (TAMP) are not binding on inland container depots and container freight stations located outside Major Ports. The Union of India and CBIC issued a clarification that the CBIC Circulars and Letter were only advisory in nature and not issued with the intention of making the MoS Circulars mandatory and/or binding on any party.

In a nutshell, therefore, the issue before the court was whether the petitioners could seek a writ of mandamus under Article 226 of the Constitution of India in a situation involving contractual rights between private individuals and the regulation thereof, by statutory/governmental authorities, in the public interest. The permissible extent, if at all, of such regulation, fell for consideration.

The petitioners sought across-the-board amnesty from paying penal charges to inland container depots, container freight stations and shipping lines during the entire period of lockdown enforced by the government consequent to the Covid-19 pandemic. An inability to move or transport their export/import goods, during the said period, was pleaded as the justification. It is a matter of record that some importers did, in fact, clear their consignments, even during this period. An assessment of the extent to which any particular importer or exporter was impacted would, by its very nature, involve inherently disputed questions of fact.

The Delhi High Court held the following, on the advisories issued by the MoS:

• They were not mandatory or directive in nature. Shipping lines, container depots and container freight stations, through the said advisories, were merely advised to adopt a sympathetic and humanitarian approach while levying the container detention charges/ground rent charges on import cargo for the lockdown period. Thus, the above circulars are advisory and not directive in nature and accordingly do not require container depots, container freight stations and Major Ports to charge any penalties at all.
• The letters/circulars issued by MoS only apply to Major Ports, and because the cargo of the petitioners is not lying at a Major Port, the petitioner cannot derive any benefit on the basis of the same.
• The petitioner's contention that the circulars were issued under the Disaster Management Act was rejected, as MoS itself clarified before the court that the circulars were issued under the Major Port Trusts Act. The Supreme Court in a recent ruling held that the central government or disaster management authorities cannot issue directions 'in respect of economic issues in relation to legitimate subsisting contracts or transactions between two private individuals with which the State has no direct causal relationship'.
• No directives can be issued by any authority, including the MoS and DG Shipping, restraining shipping lines from levying penalties under their respective contracts. It was held that the relationship between the shipping lines and their customers are contractual, and the government is not privy to any such contracts and therefore cannot issue directions.

This is a major relief for shipping lines, container depots and container freight stations in settling the controversy. The Delhi High Court, in its recent decision, held that the Merchant Shipping Act, 1958, under which the office of the DS Shipping is established, does not have the power, nor is it permitted, to interfere with the levy, collection or recovery of detention charges by shipping lines from their customers.