Saturday, December 1, 2007

V.M. Syam Kumar BAL, LL.M. (Maritime Law)
[Faculty Member for Maritime law, National University for Advanced Legal Studies, Cochin]
Can a steamer agent be made personally liable for the damage caused to port property by a foreign vessel? To the innumerable steamer agents who function across India this is a question of no less importance. Since many of them do not have deep pockets their very existence might hang on the answer to the said question.
The question is of no less importance to the Port authorities also. The damage ensuing from the mischief committed by a foreign vessel while it is within the port waters may some time run to crores of Rupees. It becomes imperative that the said amount is realized from the vessel or its owners before she is permitted to leave the jurisdiction of Indian courts, may be never to return again. Hence it is in public interest to ensure that the port trust is empowered by law to proceed against the vessel to ensure that the damage caused is duly recovered from the vessel before she leaves the Indian territorial waters. Sec.116 of the Major Port Trusts Act, 1956 had been incorporated with the said objective.
Every statutory power is capable of misuse. Hence certain restrictions are found in every empowering provision. Sec. 116 also contains some such built - in restrictions. How far have the said restrictions been able to achieved its purpose is being examined here.Section 116 after its amendment in 2002 reads as follows: If, through the negligence of any person having the guidance or command of any vessel, or of any of the mariners or persons employed on such vessel, any damage is caused to any dock, wharf, quay, mooring, stage, jetty, pier, or other work in the possession of any Board [or any movable property belonging to any Board] the amount of such damage shall, on the application of the Board be recoverable, together with the cost of such recovery in accordance with the provisions of Part XA of the Merchant Shipping Act, 1958 (44 of 1958).
The power of the board under this section in relation to a foreign vessel was considered by the Supreme Court of India in the case of Luga Bay Shipping Corporation v. Board of Trustees, Port of Cochin reported in AIR 1997 SC 544. In that case the owners M.T.Larnaca had challenged the power of the Port Trust to demand unconditional cash deposit from the owner of a ship which caused damage to the property of the Port Trust. Interpreting the scope and ambit of Section 116 of the Major Port Trusts Act, 1963 the Hon’ble Supreme Court held that unilateral action taken by the Port Trust in assessing damages is not in violation of the principles of natural justice. It was inter alia held by the Hon’ble Court that in order to protect international trade and at the same time ensure that the damage caused to the property of the port is recovered before the vessel leaves the port, the port trust should be empowered to determine the quantum of damages and ensure that the vessel does not leave the port before depositing cash or providing security for the same.As per the decision in Luga Bay, when a foreign vessel causes damage to port property, the Port would be justified in doing a unilateral assessment of damages in view of the urgency of the situation. Though the said dictum laid down by the Hon’ble Supreme Court is reasonable and justifiable from the view of public interest, the same cannot be read to mean that the port trust also have the power to realize the amounts thus unilaterally assessed from the steamer agent of the concerned foreign vessel.
What if the port trust invokes its powers under Sec. 116 after the foreign vessel has left the territorial waters of India? Can the steamer agent still be made personally liable for the damages occasioned to the port property due to the mischief of the foreign vessel? Can a steamer agent’s running account with the port be deducted towards covering the said damages? These questions still loom large. Across India, number of incidents has been reported wherein days after the sailing away of the foreign vessel from the territorial waters of India, notices are served on the steamer agents informing them that their accounts would be deducted towards the purported damages caused by the foreign vessel to the port properties while she was within the port waters. Can such claims/deductions made by the port trusts from the steamer agents be justified in law?
Towards empowering the port trust to compel a vessel that has caused damage to port property to pay up the outstanding dues before it leaves Indian Territorial waters, it has been stipulated in the Major Port Trusts Act that no vessel can leave the Port unless and until clearance under section 65(ii) is granted by the Cochin Port Trust. Section 65(ii) of the Major Port Trust Act reads as follows:Grant of Port clearance after payment of rates and realization of damages: If a Board gives to the officer of the Central Government whose duty it is to grant the port-clearance to any vessel at the port, a notice stating,- (…)(ii) that an amount specified therein is due in respect of any damage referred to in section 116 and such amount together with the cost of the proceedings for the recovery thereof before a Magistrate under that section has not been realized.
The port trust thus can refrain from granting clearance to a vessel which has occasioned damage to port property and compel its owners to deposit the amount claimed. The power as envisaged under Sec. 116 has to be taken at the time a vessel is at berth. The power of the Board cannot be used against a steamer agent after the port trust having permitted the vessel to sail off by granting it port clearance. After thus invoking the power under Sec.116 and securing the interest, the Board ought to move an application as envisaged in Sec. 116 and the same ought to be decided as envisaged in the Merchant Shipping Act after hearing all disputing parties.
Moreover, the steamer agent is only an agent of a disclosed principal as envisaged in Sec. 230 of the Indian Contract Act. The principal viz., the foreign vessel since it is very well available within the jurisdiction of the Port Trust and is all along bound by the orders and directions of the Port Trust during her berthing at the Port, the Port trust ought to invoke its statutory powers and secure the amounts if any due to them for the personal default of the principal (foreign vessel).After having failed to take necessary action to secure its interest, the Port Trust cannot proceed against the steamer agent for realizing the personal claims against the principal.
Even though a plausible legal contention could thus be put forward on behalf of the steamer agents, the standard terms and conditions governing the opening of deposit account with the port trust, subject to which the steamer agents are permitted to operate the deposit account, creates a hurdle. Invariably it contains a clause authorizing the port trust to proceed against the steamer agent ‘for recovery of the damages’. Being a standard form contract the steamer agent might just be signing on the dotted lines, unawares of the consequences, thus binding themselves to the terms and conditions therein, almost all of which, however inequitable they might be, are in favor of the port trust. It is a moot point whether ‘damages’ mentioned therein for which the steamer agent undertakes to be answerable is the damage caused by a foreign vessel for which they were acting as the agent. It could be argued, with a fair chance of acceptance, that the damages thus mentioned are only the personal liabilities that could be incurred by the steamer agent in the course of his operations.
It is in the interests of the steamer agents that the inequity inherent in the matter is removed at the earliest and the legal position be clarified by carrying out appropriate amendments to the statute. The legal status of a steamer agent as an agent of a disclosed principal confers on them certain benefits and privileges which ought not be denied to them because of the lacunae in the law. Though as per Luga Bay the port trust can make a unilateral assessment of damages, the said decision does not empower them to realize the purported amounts from the steamer agent unilaterally by deducting the running account maintained by them with the port trust. The procedure as envisaged under the statute of applying the procedure under the Merchant Shipping Act has to be necessarily complied with before any amount is thus deducted.Since a vessel is under compulsory pilotage while it maneuvers within the port waters, the question of damage if any caused by the vessel going unnoticed by the port authorities should not practically arise. Hence in genuine cases of damage caused to port property by foreign vessels, the interests of the port trust can be protected by invoking the powers under sec. 65 (ii). There is no justification at all for unilaterally proceedings against and realizing damages from the steamer agents after letting go the foreign vessel which caused the damage.
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