Holding

The Supreme Court held that the High Court erred; the Port Trust must be given notice and a bank guarantee for demurrage charges, and the orders directing issuance of detention certificates without such safeguards are not binding on the Port Trust.

Summary

The Board of Trustees of the Port of Bombay (the Port Trust) sought recovery of demurrage charges from Jai Hind Oil Mills Company, which had imported propylene consignments that were detained by Customs pending duty disputes. The Bombay High Court, in writ proceedings where the Port Trust was not a party, directed Customs to issue detention certificates and allowed clearance of the goods without requiring the respondent to furnish a bank guarantee for demurrage, only for customs duty. The Port Trust appealed, arguing that it was denied a hearing in violation of natural justice and that the High Court should have conditioned clearance on a bank guarantee covering the demurrage liability. The Supreme Court held that the High Court erred by not giving notice to the Port Trust and by failing to secure a guarantee for demurrage, noting that the Port Trust, as a statutory body under the Major Port Trusts Act, is entitled to be heard before any order affecting its financial interests. Consequently, the Court modified the High Court orders, directing the respondent to furnish a bank guarantee for the balance of wharfage and demurrage charges and to pay the amount on demand if the guarantee was not furnished. The appeals were disposed of with the High Court orders altered to protect the Port Trust’s rights.

Issues considered

The High Court's authority to direct issuance of detention certificates without the Port Trust being a party to the proceedings.
Whether the Port Trust must be given a hearing under principles of natural justice before orders affecting its financial interests are made.
The necessity of a bank guarantee for demurrage charges payable to the Port Trust, in addition to customs duty.
The binding effect of High Court orders on a statutory body not joined as a party.
The applicability of the Major Port Trusts Act provisions on exemption and remission of demurrage.

Legislation cited

Major Port Trusts Act, 1963s. 48, s. 5, s. 53, s. 59

Subjects

demurragedetention certificatenatural justiceport trustbank guaranteeMajor Port Trusts Actcustoms dutywrit petitionexemptionremission

Judgment

BOARD OF TRUSTEES OF THE PORT OF BOMBAY
A
v. \

JAi HIND OIL MILLS COMPANY AND OTHERS A

JANUARY 9, 1987

B [E.S. VENKATARAMIAH AND K.N. SINGH, JJ.]
~
Major Port Trusts Act, 1963: Sections 5,48 to 65. Bombay
Customs House Public Notice No. 111 dated July 29, 1985; Paragraph
2(a).

Goods detained by Customs House at Port-Clearance of-
c Demurrage charges levied by Port Trust-Necessity for Court to en-
sure payment. .
Y'
r
'f
The Major Port Trusts Act, 1963 empowers by cl.(d) of s.48 the
Board of Trustees, constituted under that Act, to impose rates in res-
D pect of wharfage, storage or demurrage or goods at the port. Sectioo 53
of the Act empowers and Board in spttial cases to exempt either wholly
or partially any goods from payment of any rate or of any charge
leviable in respect thereof or remit the whole or any portion of such rate
or charge so levied. The Port Trust had in consultation with the
Customs authorities provided for grant of coocession in the matter of
E payment of demurrage charges oo the issue of detention certificate by ~
the latter.

Paragraph 2(a) of the Bombay Customs House Public Notice No.
111 dated 29th July, 1985 provides for a regular detentioo certificate to ~

he issued where the goods are detained by the Customs House for the
F bona fide operatioo of import cootrol formalities. ·..;
A dispute arose between the !st respondent and the Customs
authorities with regard to the basic customs duty payable 00 the goods
imported by the former. By an interim order passed in a writ petition
i
filed by the respoodent, the High Court directed the Customs autho-
G rities to allow clearance of the consignments oo respondent furnishing a
bank guarantee in respect of the disputed amount of duty payable, in
favour of the Collector of Customs. The respoodent, however, failed to
clear the goods from the Port. __,__

Since the consignments were incurring demurrage the respoodent
H filed another writ petition seeking a direction to the Customs authorities

932
TRUSTEES PORT v. JAi HIND OIL MILLS 933

to issue detention certificates, which was allowed by the Court on the 1st A
respondent giving an undertaking that it would pay the demurrage
amount if it failed in the earlier writ petition. The Customs authorities
were, thus, obliged to issue the detention certificates. ,,.-

The Port Trust was not made party to any of the writ petitions. It
i refused to honour the detention certificates and to grant remission of B
demurrage unless the respondent gave a bank guarantee to the extent of
80 per cent of the fees claimed. The High Court, however, by an interim
order, in the writ petition filed against the Port Trust, directed the
-y clearance of goods without payment of demurrage and without insisting
• on the bank guarantee. The appeals filed against the aforesaid orders
were summarily dismissed by the High Court.
c
In the appeals by special leave, it was contended for the appellant-
Port Trust, that the High Court should not have directed the Customs
authorities to issue detention certificates without the Port Trust being
made a party to the writ petition and in any event without passing an
order duly providing for the payment of the wharfage and demurrage D
charges due to the Port Trust in the event of the first respondent failing
in its cont~ntion, and that the Hi~ Court had committed an error in
directing the first respondent to give a bank guarantee only in respect of
the customs duty payable and not malting a similar order with regard to
wharfage and demurrage charges payable to the Port Trust.
E
Disposing of the appeals, the Court,

HELD: l. The power of the Port Trust to fix rates of demurrage
and to recover the same from an importer and to show concession as
regards demurrage charges in certain specified cases bas been re-
cognised. [942F-G] F

Trustees of the Port of Madras v. M/s. Aminchand Pyare/al &
Others, [1976] I SCR 721 and The Board of Trustees of the Port of
Bombay v. Indian Goods Supplying Co., [1977] 3 SCR 343, referred
to.
G
2.1 The orders passed by the High Court in the proceedings to
which the Port Trust was not a party, were not binding on the Port
Trust in view of the violation of the pi inclples of natural justice. [943G-H]

2.2 The Port Trust being a body corporate constituted under
Major Port Trusts Act, 1963 was entitled to be heard by the Court H
934 SUPREME COURT REPORTS (1987] 1 S.C.R.

A before any order which affected its interests prejudicially was passed.
The High Court, therefore, before compelling the Customs authorities
to issue a detention certificate should have issued notice to the Port
Trust. This was necessary because on the production of that certificate
the Port -Trust was nuder an obligation to permit the clearance of the
goods without payment of full demurrage charges. If ultimately the
B party concerned was found to be at fault and became liable to pay the
full demurrage charges the Port Trust in the absence of a bank
guarantee would not be in a position to recover full demurrage charges
from the party concerned since it would have no longer any lien as provi-
ded by s.59 ofthe Act on the goods which were already cleared. [9430-F] y-
C 3. The orders of the High Court in the proceedings to which the
Port Trust was a party were contrary to the public notice issued by the
Customs au.thorities~ well as the rules of the Port Trust. It erred in not
..
imposing any condition on the first respondent for protecting the in·
terests of the Port Trust. It should have directed the first respondent to
furnish bank guarantee in respect of the demurrage charges payable to
D the Port Trust in the event or the first respondent being held to be in
default ultimately, rather than merely directing an undertaking to be
given in favour of the High Court. [9438-D]

4. The goods having already been cleared, to protect the interests
of the Port Trust the order passed on December 16, 1986 dii-ecting the
E first respondent to _furnish bank guarantee in favour or the appellant
with regard to the balance of wharfage and demurrage charges and in
default thereof to pay the amount in cash would be the final order in the
matter. The customs authorities to complete the adjudication proceed·
ings expeditiously and within March 16, 1987. [9448-E]
-
F CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4483
& 4484 of 1986.

From the Judgment and Order dated 26.6.86 of the Bombay
High Court in Notice of Motion No. 1418/86 in Appeal No. 512/86 in
W.P. 1007/86.
G
F.S. Nariman, 0. Chenoy, A.K. Verma, D.N. Mishra and D.N. ~
Bhansaria for the Appellant.

Soli J. Sorabjee, M.M. Jayakar and- B.R. Aggarwala for the
Respondents.
H
TRUS'l'EES PORT v. JAi HIND Oil.MILLS (VENKATARAMIAH,J.] 935
A The Judgment of the Court was delivered by
A
VENKAT ARAMIAH, J. These appeals by special leave are filed
against the Order dated 26.6. 1986 passed in Appeal No. 512. of 1986 in
Writ Petition No. 1007 of 1986 and the Order dated 26.6.1986 in
Appeal No. 535 of 1986 in Writ Petition No. 1424 of 1986 of the Higli
i Court of Bombay. Since these two are connected matters, they are B
disposed of by this common ju~gment.

-.'1. The facts of these two cases are these. The appellant in both
these appeals is the Board of Trustees of the Port of Bombay (here-
inafter referred to as 'the Port Trust') and the 1st Respondent in both
these appeals is a partnership firm by name M/s. Jai Hind Oil Mills
~- Company. The Ist Respondent imported 5 consignments of Propylene c
of 10 metric tons each in January, 1986 by S.S. Maribor. The general
landing date of the said consignments was 20th January, 1986 and the
last free date in respect of them was 23rd January, 1986. Thereafter
the said consignments were incurring demurrage. The bills of entry
were submitted by the Ist Respondent to the Customs authorities in D
the same month. Disputes arose between the !st Respondent and the
Customs authorities with regard to the basic customs duty payable in
excess of 32.50% (as goods were imported from the Republic of Korea
} which was a developing country), with regard to loading the assessable
value with customs duty for calculation of the additional duty and with
regard to loading the CIF value with the landing charges. Not being E

-y satisfied with the contentions of the Customs authorities the !st
Respondent filed a writ petition in Writ Petition No. 122 of 1986 for
the issue of certain directions to the Customs authorities with regard to
the levy of customs duty. In that Writ Petition on January 21, 1986 the
High Court passed an interim order which directed the Customs
authorities not to insist on payment of the customs duty in dispute
I
i pending hearing and disposal of the Writ Petition on the Ist Respon-
F
dent furnishing a Bank Guarantee to the extent of the 90 per cent of
the disputed amount of duty in respect of one item and 100 per cent of
the disputed amount of duty in respect of two other items in favour of
the Collector of Customs. Thereafter some correspondence ensued
between the Ist Respondent and the Customs authorities in connection G
with the description of the above goods. It would appear that while the
-+ Bill of Lading and the Invoice described the goods as 'Propylene' the
marks on the consignments indicated that they contained 'Polypropy-
lene'. The Ist Respondent was asked to explain the discrepancy by the
Customs authorities. There was also some dispute raised as regards the
invoice price. The Ist Respondent could not, however, clear the goods H
936 SUPREME COURT REPORTS [1987] 1 S.C.R.
A
from the Port of Bombay. Thereafter the !st Respondent filed another
A
Writ Petition No. 519 of 1986 for the issue of a direction to the
Customs authorities to permit it to clear the consignments. On April 2,
1986 the learned Single Judge of the l:figh Court of Bombay who heard
the said Writ Petition passed an order allowing the !st Respondent to
clear the consignments on furnishing an Import Trade Control bond
B for the value of the consignments calculated at the rate of Us$ 735 per
metric ton and furnishing a Bank Guarantee of a nationalised bank in
favour of the Collector of Customs, Bombay to the satisfaction of the
Prothonotary & Senior Master, High Court, Bombay, for a sum equiva-
lent to the difference in the value between US $ 715 and US $ 735 per
metric ton without prejudice to the rights and contentions of the !st
C Respondent. The said order provided that the Customs authorities
could continue their investigation and adjudicate upon the duty pay-
able by the !st Respondent. On the basis of the above order the !st
Respondent was allowed to withdraw the Writ Petition with liberty to
file a fresh petition, if required. Since there was a delay in the clear-
ance of the consignments in question and the !st Respondent had
D become liable to pay demurrage to the Port Trust, the !st Respondent
addressed a letter to the Collector of Customs, Bombay asking him to
issue a Detention Certificate stating that the goods had been detained
for bona fide Import Trade Control formalities so that it could claim
the remission of demurrage payable to the Port Trust. The !st Respon-
dent followed up the above letter by another Writ Petition No. 1007 of
E 1986 which was filed on or about the 17th April, 1986 against the
Customs authorities for the issue of a writ directing lhem to issue a
Detention Certificate in respect of all the 5 consignments. On the 24th
April, 1986 the learned Single Judge passed a final order directing the
Customs authorities to issue a Detention Certificate to the !st Respon-
dent on the 1st Respondent giving an undertaking to rile Court that it
F would pay the amount, if it failed in Writ Petition 122 of 1986.
Pursuant to the Order datd 24th April, 1986 passed in Writ Petition
No. 1007 of 1986 the Isl Respondent gave an undertaking to the Court
that it would pay the amount upon its not succeeding in Writ Petition
No. 122 of 1986. On the 21st May, 1986 the Port Trust received a letter
dated 19th May, 1986 from the Assistant Collector of Customs in
G which it had been stated inter alia that five Detention Certificates had
been sent along with the said letter.. Acutally no enclosures were re- -f.
ceived along with the said letter. But later on they received two Deten-
tion Certificates in respect of two out of the five consignments on that
day. They related to two bills of entry bearing Nos. 3133/219 and
3133/220. On the same day the Docks Manager of the Port Trust
H received a letter from the clearing agent of the !st Re.spondent asking
.. ). 1RUS1EES PORTv.JAIHINDOILMILLS,IVENKATARAMIAH,J.I 937

the Port Trust to grant the remission of demurrage in view of the
Dete.ntion Certificates issued by the Customs authorities. Since the A
Port Trust was not a party to any of the Writ Petitions, referred to
above; and no Bank Guarantee or Demand Draft had been furnished
by the Ist Respondent covering the 80% amount of the demurrage fees,
the Port Trust wrote a letter dated 30th May, 1986 to the Isl Respon-
--{ dent asking the Ist Respondent to give a Bank Guarantee to the effect B
that in the event of the Ist Respondent losing Writ Petition No. 122 of
1986 it would pay to the Port Trust, Bombay the entire amount of
remission along with interest at 15% per annum. When the aforesaid
-) letter was sent, the Port Trust was not aware of the Order dated 2nd
April, 1986 passed in Writ Petition No. 519 of 1986. Thereupon, on

--·· """ June 12, 1986 the Isl Respondent and its partner Sham Lal Kishnani,
who is 2nd Respondent herein filed another Writ Petition No. 1424 of c
1986 in the High Court against the Port Trust for quashing the com-
munication dated 30th May, 1986, referred to above, under which the
Port Trust had asked the Ist Respondent to furnish the Bank
Guarantee or a Demand Draft to the extent of 80% of the demurrage
fees claimed by the Port Trust and for compelling the Port. Trust to
D
honour the Detention Certificates issued by the Customs authorities
pursuant to the Order dated 24th April, 1986 and to permit the clear-
ance of the goods without payment of demurrage and without insisting
~ upon the furnishing of a Bank Guarantee or a Demand Draft, as stated
above. They also asked for an interim order of the effect that pending
hearing and final disposal of the said Writ Petition, the Port Trust

--1·
E
should forthwith honour the Detention Certificates issued by the
Customs authorities and allow the clearance of the goods without pay-
ment of demurrage and without insisting on the Bank Guarantee or
the Demand Draft. In that Writ Petition an interim order was passed
on the 17th June, 1986 as prayed for by the Isl Respondent. Thereafter
the Port Trust was advised to file an appeal before the Division Bench
} against the Order dated 2nd April, 1986 passed in Writ Petition No.
F
519 of 1986 and the Order dated 17th June, 1986 passed in Writ Peti-
tion No. ·f424 of 1986. While the Port Trust was in the process of
getting the said appeals made ready for filing by their advocates, the
Isl Respondent threaten~d the Port Trust with contempt proceedings
by its letter dated 20th J\Ine, 1986. Immediately after the receipt of the
G
said letter, the Port Trust lodged the Appeal no. 512 of 1986. By an
-t order dated 26th June, 1986 the appeal filed against the Order dated
2nd April, 1986 passed in the Writ Petition No. 1007 of 1986 was
summarily dismissed. The said order, however, stated as under:

"It is, however, clarified that it is clear from the impugned H
938 SUPREME COURT REPORTS [1987] 1 S. C.R.
',,'
A
order dated 2.\A. 1986 that the undertaking pertains to the
demurrage charges payable to the Port Trust. if the
Respondents Nos. l and 2 (Petitioners) failed in Writ Peti-
.l tion No. 122 of [986 on the footing that no valid detention
certificate could have been issued in that event.
B
Mr. Chinoy contentds that the detention certificate
could not be issued, if in the adjudication proceedings the
Petitioners are found at fault and the question of the
Petitioners giving an undertaking to provide for this does
not appear to have been present in the mind of the learned y ....
!
c Judge when the order was passed.

Liberty to the Appellants to seek further clarification ...,.
and/or orders on this question from the learned Single
Judge."

D The appeal filed aginst the Order dated 17th June, 1986 in Writ
Petition No. 1424 of 1986 was numbered as Appeal No. 535 of 1986.
The said appeal was also summarily dismissed on 26th June, 1986. As
the Port Trust was advised to file an appeal in this Court by special
leave, the Port Trust did not apply to the learned Single Judge for
clarification as suggested in the Order passed in Appeal No. 512 of
E 1986.

It may be mentioned at this stage that the remaining three
Detention Certificates relating to Bills of Entry Nos. 3133/22 l, 222 and
223 were received by the Port Trust from the Customs authorities on
3rd July, 1986. Two out of the five consignments were cleared by the !st
F Respondent on 3rd July, 1986 and the remaining three consi!lllments
were cleared by the !st Respondent on 5th July, 1986 on payment of an
aggregate amount of Rs.49,510/50 paise for the charges of the Port
Trust in accordance with the Order dated 17th June, 1986 passed in
Writ Petition No. 1424 of 1986 as against a total amount of
Rs.3,53,514.75 paise due to the Port Trust for wharfage and demur-
G rage charges upto the dates of the clearance of goods. Thus a sum of
Rs.3,04,004.25 in respect of wharfage and demurrage charges of the
said five consignments remains unpaid to the Port Trust. Aggrieved by
the two orders passed on 26th June, 1986 in Appeal No. 512 of 1986
and Appeal No. 535 of 1986 the Port Trust has filed these two appeals
by special leave.
H
TRUSTEES PORT v. JAi HIND OIL MILLS (VENKATARAMIAH, J.I 939
)..
The principal contention urged in both these appeals is that the
A
High Court should not have directed the Customs authorities to issue
Detention Certificates without the Port Trust being made a party to
the Writ Petition and in any event without passing an order duly pro-
viding for the payment of the wharfage and demurrage charges due to
the Port Trust in the event of the !st Respondent failing in its conten-
1 tion in Writ Petition No. 122 of 1986. It is urged that a mere undertak- B
ing given in favour of the High Court agreeing to pay the amount was
. not sufficient security for the amount due to the Port Trust in the event
of the !st Respondent being held to be the party in default. It is further
. .'f contended that the High Court committed an error in directing the !st
Respondent to give a Bank Guarantee only in respect of the Customs
duty payable by the !st Respondent in the event of its Writ Petition
--;- being dismissed and in not making a similar order directing the !st
c
Respondent to furnish a Bank Guarantee in respect of the wharfage
and demurrage charges payable to the Port Trust in the event of the !st
Respondent being ultimately held as the party in default.

The Port Trust is constituted under the Major Port Trusts Act, D
1963 (hereinafter referred to as the Act). Under Section 5 of the Act
every Board constituted under it is declared to be a body corporate
having perpetual succession and a common seal with power, ·subject to
~ the provisions of the Act, to acquire, hold or dispose of property and it
may be the name by which it is constituted, sue or be sued. The affairs
of the Port Trust are managed by the Board of Trustees and commit- E

- tees appointed by it in accordance with the provisions of the Act. It is
thus an independent statutory body and not just a department of
Government. Under Chapter VJ of the Act the Board of Trustees of a
Port Trust is empowered to impose and recover rates at Ports, for

\ services rendered by the Port Trust or other persons at the port under
its jurisdiction. Sections 48 to 65 of the Act which are in Chapter VI of F
the Act deal with the said power of the Board of Trustees. Section 48
authorises a Board from time to time to frame a scale of rates at which
and a statement of the conditions under which, any of the services
specified thereunder shall be performed by itself or any person
authorised by it at the port or port approaches. Clause (d) of section 48
specifically empowers the Board to impose rates in respect of whar- G

+ fage, storage or demurrage of goods on any such place. Every scale of
rates and every statement of conditions framed by the Bo.ard under the
foregoing provisions are required to be submitted to the Central
Government for sanction and will have effect when so sanctioned and
published by the Board in the Official Gazette. It is, however, pro-
vided in section 53 of the Act that the Board of Trustees in special H
940 SUPREME COURT REPORTS [ 1987] 1 S.C.R.

A cases and for reasons to be recorded in writing, may exempt either
wholly or partially any goods or vessels or class of goods or vessels
from the payment of any rate or of any charge leviable in respect
thereof according to any scale in force under the Act or remit the
whole or any portion of such rate or charge so levied. The Port Trust
has fixed the scale of rates charged at the docks. A booklet containing
B the said rates which are revised upto IO. I. 1985 is produced before the
Court. Section IJI of the said booklet which commences ~t page 14
thereof contains the 'Docks scale of rates' fixed by the Port Trust. In
consultation with the Customs authorities, the Port Trust has provided
for the grant of concession in the matter of payment of demurrage
charges on the issue of Detention Certificate by the Customs autho-
C rities. Section Ill-A(c) of the said booket deals with the demurrage
fees chargeable by the Port Trust. Proviso (d) to the said clause (c)
states that the goods detained by the Customs Department for special
examination 'involving analytical or technical tests other than the ordi-
nary processes of appraisemenf will be exempt from demurrage fees
during such period of detention as may be certified by the Collector of
[) Customs to be not attributable to fault or negligence on the part of
importers or exporters plus two working days and that the Certifica-
tion by the Customs will be given by endorsement on relative duplicate
copies of Bills of Entry or Shipping Bills. On the suggestion of the
Customs Department the Port Trust has accepted to allow concession
in the matter of demurrage charges to the extent· indicated in Para-
E graph 4. IO of the note which is enclosed as Ext. 'B' to the Special
Leave Petition (Civil) No. 8466 of 1986. It reads thus:

"4. IO The best course seems to be to charge a rate per day
which corresponds to our minimum charge for handling,
storage, care and custody or the goods after the expiry of
F the free days. Wharfage constitutes handling costs plus
storage charges for a period of four days. Deducting hand-
ling costs, the balance represents storage charges for a
period of four days. It is estimated that, excluding the
handling costs, storage charges per day are equal to 20% of
total wharfage. It is, therefore, suggested that for the entire
G period of certified detention we may retain per day 20% of
the wharfage to cover the services referred to herein."

The above concession is extended by the Port Trust m
appropriate cases where Detention Certificates are issued by the
Customs authorities. The Customs authorities have laid down the pro-
H cedure for issue of Detention Certificates and the current procedure in
TRUSTEES PORTv.JAIHINDOILMILLS(VENKATARAMIAH,J.] 941

> regard to the issue of Detention Certificates is embodied in the
Bombay Custom House Public Notice No. 111 dated 29th July, 1985.
A
Paragraph 2 of the said notice sets out the circumstances under which a
regular Detention Certificate could be issued by the Customs House
for facilitating the importers to get remission of demurrage charges.
They are as under:-
i "(a) Where the goods are detained by Custom House for
B

bona fide operation of Import Control Formalities
without any default on the part of the importers.

•'( (b) Where the goods have been released on caution (a
regular Detention Certificate and not a Recommenda-
tory Jetter).
c
--"
-,,.,
(c) Where, the goods are detained the Custom House
pending test report and the facility of clearance against
provisional assessment has not been allowed. Such
Detention Certificates will be issued on merits for the D
period for which the goods were detained for the
purpose.

(d) Where, the goods are detained for PHO formalities,
>- the certificate· will cover the period stretching between
the date of drawal of the sample by the PHO and the
:J E
date of hi• test results, and

'""" (e) In cases where samples have been drawn from the im-
ported consignments by the Asstt. Drug/Controller for

\
ensuring compliance with the provisions of Drugs and
Cosmetics Act, 1940 and where the Assistant Drugs F
Controller is of the opinion that release cannot be
allowed against a Letter of Guarantee pending test."

The said Public Notice also states that Detention Certificates will
not be issued in the following types of cases:
G
(a) ':Time taken by the Custom House Laboratory for
analytical/chemical testing of smaples drawn from the
consignments, since the facility of clearing the goods
on bond in terms of Section 18 already exists.

(b) Samples drawn from the imported consignments by the H
942 SUPREME COURT REPORTS (1987] 1 S.C.R.

A Assistant Drugs Controller for ensuring compliance
with the provisions of Drugs and Cosmetics Act, 1940
and for being forwarded to the Central Drugs Labo-
ratory, Calcutta, as the importers can avail of the faci-
lity of clearing the goods against Letters of Guarantee
and need not wait till the receipt of the test report.
B
The facility of allowing clearance of goods against
letters of Guarantee is extended only on the specific recom-
mendations of the Assistant Drugs-Controller on the Bill of
Entry in each case.

(c) The period taken for mutilation of woollen rags in the
c Docks.

( d) Cases where goods are detained in the ordinary course
of appraisement such as for determination of the Tariff
classification of goods or their assessable value in terms
D of Section 14 of the Customs Act."

It is agreed between the Customs authorities and the Port Trust
that no Detention Certificate would, however, be issued by the
Customs Department if there has been any default on the part of the ··~
importer or exporter. It is thus clear that in the event of the importer
E or exporter being at fault, he would not be entitled to any concession
in the matter of demurrage charges. He has to pay whatever is payable
in accordance with the 'scale of rates· charged at the docks as fixed by
the Port Trust.

The power of a Port Trust to fix rates of demurrage and to
F recover the same froni an importer or exporter (although the question
of an exporter paying demurrage arises rarely) under law and to show
concession as regards demurrage charges in certain specified cases is
recognised by this Court in the Trustees of the Port of Madras v. M /s.
Aminchand Pyarelal & Others, (1976] l SCR 721 and in the Board of
Trustees of the Port of Bombay versus Indian Goods Supplying Co.,
G [ 1977] 3 SCR 343. These decisions are no doubt based on the relevant
laws which were in force at the material time. But the decisions are still
relevant insofar as cases arising under the Act because the Act also
contains provisions more or less similar to the statutory provisions
considered in the said decisions. Demurrage charges are levied in
order to ensure quick clearance of the cargo from the harbour. They
H are always fixed in such a way that they would make it unprofitable for
TRUSIBES PORT v. JAi HIND OIL MILLS [VENKATARAMIAH, J.) 943

,).., importers to use the port premises as a warehouse. It is necessary to do
so because congestion in the ports affects the free movement of ships A
and the loading and unloading operations. As stated earlier, the Port
Trust shows concession to the party concerned in certain types of
cases.

i In the instant case the High Court by the order passed in the writ B
petition to which the Port Trust was not a party directed the Customs
authorities to issue Detention Certificates in respect of the consigQ-
ments in question. Jn doing so while the High Court had safeguarded
• ' ( the interest~ of the Customs authorities by.its earlier orders by direct-
ing the Ist Respondent to furnish a Bank Guarantee in respect of the
duty payable· to them, in respect of the demurrage charges payable to
' -.,._.the Port Trust the High Court merely directed an undertaking to be C
given in favour of the High Court. In the ordinary course, the High
Court should have directed the !st Respondent to furnish Bank
Guarantee in respect of the demurrage charges payable to the Port
Trust in the event of the !st Responden\ being held to be in default
ultimately. b
It is, however, to be observed that before compelling the
Customs authorities to issue a Detention Certificate, the High Court
) should have issued notice to the Port Trust which was vitally interested
· in securing its own interests as regards the demurrage charges recover-
able by it under law. This was necessary because on the production of E
the Detention Certificate issued by the Customs authorities the Port
Trust was under an obligation to permit the clearance of the goods
without payment of full demurrage charges. If ultimately the party
concerned is found to be at fault and becomes liable to pay the full
demurrage charges the Port Trust may not be in a position to recover
such full demurrage charges from the party concerned, since it wouid F
. have no longer any lien as provided by section 59 of the Act on the
goods which are already cleared The Port Trust being a body corpo-
rate constituted under the Act is entitled to be heard by the Court
before any order which affects its interests prejudicially is passed. This
case serves as an illustration to what is stated above. The Port Trust
has been asked to permit the clearance of goods in respect of which G

+ demurrage charges of Rs.3,53,514. 75 paise are payable in the event of
the !st Respondent being held liable in law to pay the full demurrage
charges. The orders passed by the High Court in the proceedings to
which the Port Trust was not a party which had the effect of prejudi-
cially affecting the interests of the Port Trust would not be binding on
it in view of the violation of the principles of natural justice. The High J-1
'
944 SUPREME COURT REPORTS [1987] 1 S.C.R.

A Court erred in not imposing any condition on the Ist· Respondent for ..!..
protecting the interests of the Port Trust even in the Writ Petition to
which it was a party. The impugned orders are contrary to the public
notice issued by the Customs authorities as well as the rules of the Port
Trust.
B
Having regard to the peculiar circumstances of this case in which 'r
the goods have already been cleared, the orders of the High Court of
B~mbay against which these appeals are filed are, therefore, to be
modified appropriately in order to protect the interests of the Port
Trust. Accordingly, at the conclusion of the hearing of these appeals
we passed an order on 16.12. 1986 before reserving the appeals for
C judgment directing the Ist Respondent to furnish within eight weeks a
Bank Guarantee of a Nationalised Bank in favour of the appellant for
'I'
due payment of Rs.3,04,004.25 paise to the appellant on demand,
without any demur, being the balance of wharfage and demurrage
charges in the event of the 1st Respondent not succeeding ultimately in
Writ Petition No. 12~ of 1986 and on failure to furnish such Bank
D
Guarantee within eight weeks ·to pay in cash Rs.3,04,004.25 paise to
the appellant forthwith. This shall be the final order in these appeals.

These appeals are disposed of in the above terms. The Customs
authorities shall complete the adjudication proceedings as expediti- ~
E ously as possible and in any event within 16.3.1987.

P.S.S. Appeals disposed of.