Holding

The Board's resolution to deduct 50 % of the sale proceeds as sale expenses is valid and not open to interference under Article 136.

Summary

Gujarat CyproMet Ltd imported copper cathodes that remained unclaimed at Jawaharlal Nehru Port Trust and were sold by public auction in 2000 for Rs 52.5 lakh. The Port Trust deducted 50 % of the sale proceeds as "sale expenses" pursuant to Board Resolution No. 624 dated 23‑July‑1999. The company challenged the deduction in a writ petition before the Bombay High Court, which held that the dispute required factual adjudication and dismissed the petition, directing the company to pursue ordinary civil remedies. The matter was taken to the Supreme Court on a special leave petition under Article 136 of the Constitution. The Court examined whether the Board’s resolution was invalid and whether interference was warranted under the Major Port Trusts Act, 1963. It held that the Board was empowered by Sections 61, 62 and 63 of the Act to sell unclaimed cargo and to allocate proceeds, and that the 50 % deduction, though resulting in a loss, was not illegal. Consequently, the appeal was dismissed with costs.

Issues considered

Whether the Board of Trustees of the Jawaharlal Nehru Port Trust acted ultra vires in passing a resolution to deduct 50 % of sale proceeds as sale expenses.
Whether the deduction of 50 % of the sale proceeds exceeds the actual expenses incurred and is therefore invalid.
Whether the Supreme Court can interfere with the Board's decision under Article 136 of the Constitution.
Whether the provisions of Sections 61, 62 and 63 of the Major Port Trusts Act, 1963 permit the deduction made by the Port Trust.

Legislation cited

Constitution of Indias. Article 136, s. Article 226
Major Port Trusts Act, 1963s. 61, s. 62, s. 63

Subjects

Major Port Trusts Actpublic auctionunclaimed cargosale expenseswrit petitionArticle 136special leave petitionadministrative lawport authority

Judgment

M/S. GUJARAT CYPROMET LTD. A
v.
UNION OF INDIA AND ORS.

APRIL 7, 2005

[R.C. LAHOTI, CJ., G.P. MATHUR AND P.P. NAOLEKAR, JJ.] B

Major Port Trusts Act, 1963-Sections 61 to 63-Sale of unclaimed
cargo by public auction-Port Trust in terms of its Board Resolution deducted
50% of the sale proceeds towards sale expenses-Such deduction challenged C
by way of writ petition-High Court holding that the controversy raised involved
adjudication of facts which was not possible in a writ petition, advised
pursuance of ordinary civil remedy-On appeal, held: The Board passed
resolution to deduct 50% of the sale proceeds as sale expenses, as it was not
possible to precisely determine the sale expenses in each case-The resolution
has not been shown to be invalid on any ground-In fact, in two relevant D
years, the actual sale expenses exceeded the amount realized on basis of the
impugned resolution and the Port Trust suffered loss -Hence, no case made
out for interference under Article 136 of the Constitution-Constitution of
India, 1950-Article 136.

Appellant imported certain consignments of copper cathodes from E
Germany in August, 1998. The consignments were not cleared by the
appellant from the Port Trust and were therefore sold in public auction
in 2000. The Port Trust deducted 50 per cent of the sale proceeds towards
sale expenses. Appellant filed writ petition in High Court challenging the
deduction. It contended that the sale proceeds towards expenses of sale F.
on actual basis only should be deducted and the balance amount should
be paid to the appellant. High Court held that the controversy raised
involved adjudication of facts which was not possible in a writ petition
filed under Article 226 of the Constitution. The writ petition was
accordingly disposed of permitting the appellant to pursue ordinary civil
remedy for redressal of its grievance. Hence the present appeal. G
Dismissing the appeal, the Court

HELD : 1. Though the principal prayer made in the writ petition
was to quash Resolution No. 624 dated 23.7.1999 of the Port Trust
339 H
340 SUPREME COURT REPORTS [2005] 3 S.C.R.

A whereunder it was resolved that 50 per cent of the sale proceeds in a
consignment be appropriated towards expenses of the sale, the appellant
has not been able to point out any ground as to how the said resolution is
invalid. [343-B-q

2.1. Section 61 of the Major Port Trusts Act, 1963 empowers the
B Board, after the expiry of two months from the time when any goods have
passed into its custody (other than animals, perishable or hazardous
goods), to sell by public auction, the goods so removed. Section 62 of the
Act also empowers the Board to sell the goods by public auction which
after landing thereof are not removed by the owner or 0th.er person
C entitled thereto from the premises of the Board within one month from
the date on which such goods were placed in their custody. In view of these
statutory provisions, the Board was perfectly justified in selling the
unclaimed cargo by public auction. [344-A-B)

2.2. Since it is not possible to precisely determine the expenses of sale
D in each case on account of various factors involved, the Board has passed
a resolution to deduct 50 per cent of the.sale proceeds as expenses of sale.
It has to be borne in mind that sometimes the expenses of sale, which is
conducted through public auction after a Gazette notificatio~ and wide
publicity in newspapers, far exceed the actual amoimt recovered. In fact,
the figures supplied in the counter affidavit show that in the year 2000-·
E 2001 and 2001-2002 the total cost incurred in holding the public auction
exceeded the amount recovered on the basis of the il!'pugned resolution
i.e. 50 per cent of the sale proceeds and thus the Board has suffered a loss.
[344-C-D)

F 3. The appellant has failed to make out any case for interference
under Article 136 of the Constitution. [344-E)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2472 of2005.

From the Judgment and Order dated 16.9.2002 of the Bombay High
Court in W.P. No. 2452 of 2001.
G
Ms. Neeru Vaid for the Appellant.

R. Mohan and B. Datta, Additional Solicitor Generals, Ajay Sharma,
Hemant Sharma and P. Parmeswaran with them: for the Respondents.

H The Judgment of the Court was delivered by
GUJARAT CYPROMET LTD. v. U.0.1. [G.P. MATHUR, J.] 341

G.P. MATHUR, J. l. Leave granted. A
2. This appeal, by special leave, is directed against the judgment and
order dated 16.9.2002 of the Bombay High Court, by which the writ petition
filed by the appellant was disposed of with certain directions.

3. The appellant imported certain consignments of copper cathodes B
from Gennany in August, 1998. The consignments were not cleared by the
appellant from the Port Trust and accordingly they were sold in a public
auction on 13.1.2000 for Rs. 52,50,000. The Jawaharlal Nehru Port Trust,
Mumbai deducted 50 per cent of the sale proceeds i.e. Rs. 26,25,000 towards
sale expenses. The appellant filed a writ petition in the Bombay High Court C
challenging the deduction of 50 per cent of the sale proceeds as expenses and
prayed that the sale proceeds towards expenses of sale on actual basis only
should be .deducted and the balance amount should be paid to the appellant.
The High Court took the view that the controversy raised by the appellant
involved adjudication of facts which was not possible in a writ petition filed
under Article 226 of the Constitution. The writ petition was accordingly D
disposed of· permitting the appellant to pursue ordinary civil remedy for
redressal of its grievance.

4. In response· to the notice issued, the respondents have filed a counter
affidavit. It is averred therein that Jawaharlal Nehru Port Trust was incorporated
under the Major Port Trusts Act, 1963 and it renders services in accordance E
with the aforesaid Act. The core function of the Port is to provide storage
space for bulk and containarised cargo, which is stored in the Board premises.
Such storage facilities are to facilitate international trade and to attn; ~t
international shipping lines to the Port for promoting trade in the national
interest. Any delay in clearing or removing the cargo attracts·. demurrage F
charges. The importers/consignees are given 15 free days to take delivery of
the cargo. If the cargo is unclaimed ·ror two months, it is put for sale under
Sections 61 and 62 of the Major Port Trust Act, as the case may be. Congestion
in Ports affects the free movement of ships and all essential goods. The Port
does not do any business of warehousing and it performs statutory functions.
The scheme of the Major Port Trusts Act is to frame the scale of rates of G
penalties, rent, charges, expenses in such a manner which will act as an
incentive and compulsion for the expeditious removal of the goods/cargo
from the transit area. Ships, wagons, containers, cargo have to be kept moving
and that can happen only if there is some kind of pressure on the importer
to remove the goods from the Board's premises with the utmost expedition. H
342 SUPREME COURT REPORTS [2005] 3 S.C.R.

A The rates and charges which the Board is entitled to recover have been
framed under the Major Port Trusts Act so as to ensure that the Ports are
congestion free, both for purposes of movement of ships and movement of
cargo.

5. It is further averred that the Board of Trustees vide Item Nos.17 and
B 18 of the Agenda of the 92nd Board Meeting held on 31.1.1992 approved the
formula for fixing of reserve price. The Board thereafter started disposal of
the unclaimed cargo as per the said procedure,. but the rate of disposal was
J
not commensurate with the generation of longstanding containers, resulting I
C
in occupation of valuable space in the container yard by such longstanding
containers. In order to find a solution to the problem, the matter was placed
before the Board in its meeting held on 25.7.1997 for reconsideration of the
\
method for fixing the reserve price. A revised formula was then adopted
which also was not found to be working satisfactorily. Certain suggestions
were received from the Commissioner of Customs and finally a resolution
was passed in the meeting of the Board held on 23 .7 .1999, which reads as
D under:

"Treating 50% of sale proceeds as sale expenses which shall be
first charge on the sale proceeds and customs duty and other claims
· as per order laid down in MPT Act of 1963 and applying the formula
as approved by the Board vide TR No. 492/97 dated 25.7.1997 in all
E the previous cases where auction has already been held.

·Fixing of reserve price as the sum of Custom duty plus 4 months'
ground rent."

6. It is further averred in the counter affidavit that as it is virtually \
F impossible to ascertain the exact sale expenses in respect of each lot and,
therefore, a decision has been taken to treat 50 per cent of the s~le proceeds
as sale expenses. The sale expenses normally vary from lot to lot and are
dependent upon the amounts realized in each sale. For the purposes of auction,
an auction hall, godown of 7000 sq. meters meant for storage of uncleared
G goods to container yards for keeping longstanding cargo of uncleared goods
has to be arranged. A notification .is published in the Government Gazette
and advertisement is issued in all leading newspapers in English,· Hindi,
Marathi and Gujarati. The Port Trust has also to make available services of T
its officers and staff, such as Deputy Manager, Assistant Manager,
Superintendent, Junior Engineers, Checkers, Clerks and Peons, etc.
H
GUJARAT CYPROMET LTD. v. U.O.I. [G.P. MATHUR. J.) 343

7. In the counter affidavit details have also been given regarding the A
actual expenses incurred by the Port Tmst and the amount realized on the
basis of the current formula of charging 50 per cent of the sale proceeds
towards sale expenses, which show that the actual expenses exceeded the
amount so recovered and the Port Trust suffered a loss. It is further averred
that in most cases, the Port Trust is unable to recover its entire dues from the B
sale of cargo from longstanding containers.

8. Though the principal prayer made in the writ petition was to quash
the Resolution No. 624 dated 23. 7.1999 of the Port Trust whereunder it was
tesolved that 50 per cent of the sale proceeds in a consignment be appropriated
towards expenses of the sale, learned counsel for the appellant has not been C
able to point out any ground as to how the said resolution is invalid. Section
63 of the Major Port Trusts Act, 1963 reads as under :

"63.Application of sale proceeds - (1) The proceeds of every sale
under Section 61 or Section 62 shall be applied in the following
order- D
(a) in payment of the expenses of the sale;
(b) in payment, according to their respective priorities, of the lines
a~d claims excepted in Sub-section (2) of Section 59 from the
priority of the lien of the Board;
E
(c) in payment of the rates and expenses oflanding, removing, storing
or warehousing the same, and of all other charges due to the
Board in respect thereof, including demurrage (other thaL penal
demurrage) payable in respect of such goods for a period of four
months from the date of landing;
F
( d) in payment of any penalty or fine due to the Central Government
under any Jaw for the time being in force relating to customs;
(e) in payment of any other sum due to the Board.

(2) The surplus, if any, shall be paid to the importer, owner or
consignee of the goods or to his agent, on an application made by G·
him in this behalf within six months from the date of the sale of the
goods.

(3) Where no application has been made under Sub-section (2), the
surplus· shall be applied by the Board for the purposes of this Act."
H.
344 SU!'?.SME COURT REPORTS [2005] 3 S.C.R.

A 9. Section 61 of the Act empowers the Board, after the expiry of two
months from the time when any goods have passed into its custody (other
than animals, perishable or hazardous goods) to sell by public auction, the
goods so removed. Section 62 of the Act also empowers the Board to sell the
goods by public auction which after landing thereof are not removed by the
B owner or other person entitled thereto from the premises of the Board within
one month from the date on which such goods were placed in their custody. I
In view of these statutory provisions, the Board was perfectly justified in l
selling the unclaimed cargo by public auction. As explained in the counter
affidavit filed by the respondents, it is not possible to precisely detennine the
expenses of sale in each case on account of various factors involved. Therefore,
C the Board has passed a resolution to deduct 50 per cent of the sale proceeds
as expenses of sale. It has to be borne in mind that sometimes the expenses
of sale, which is conducted through public auction after a Gazette notification
and wide publicity in newspapers, far exceed the actual amount recovered. In
fact, the figures supplied in the counter affidavit show that in the year 2000- ,_
2001 and 2001-2002 the total cost incurred in holding the public auction
D exceeded the amount recovered on the basis of the impugned resolution i.e.
50 per cent of the sale proceeds and thus the Board has suffered a loss.

10. On overall consideration of the matter, we are of the opinion that
the appellant has failed to make out any case for interference by this Court
E in a Special Leave Petition filed under Article 136 of the Constitution. The
appeal is accordingly dismissed with costs.

B.B.B. Appeal dismissed.

T