Economy

Delhi High Court order on shipping, freight station charges bites trade

P Manoj Mumbai | Updated on August 14, 2021

Court says no directive restraining shipping lines from charging penal detention charges could have been issued by any authority

The Delhi High Court has dealt a big blow to exporters reeling under skyrocketing container shipping rates by observing that the “State (government) has no direct causal connection” with the charges levied by shipping lines.

“The relationship between shipping lines and their customers was expressly contractual in nature, and the prerogative to decide on the charges leviable from the customers for continuing to retain the containers beyond the “free period” vested in the shipping lines, is governed by negotiated contract ad idem. The State has no direct causal connection with these charges,” the Delhi High Court said while disposing a batch of petitions filed by aggrieved traders seeking relief from the payment of penal charges collected by container freight stations, inland container depots, and shipping lines for holding containers beyond the free period during the pandemic-induced lockdown imposed by the government last year.

The Court ruled that the government and its agencies have no jurisdiction to issue directives to CFSs/ICDs and shipping lines restraining them from levying penal charges on ground rent and container detention charges beyond the free period from importers/exporters during the lockdown imposed last year to deal with the pandemic.

Exorbitant freight rates

The order written on August 10 assumes added significance as it comes amidst a clamour from exporters to rein in container shipping lines from levying exorbitant freight rates including a slew of surcharges in the backdrop of equipment shortages and space constraints on vessels. Exporters have been saying that skyrocketing freight rates was hampering India’s recent surge in exports.

While the Court order pertained to petitions filed against collection of penal charges on storing cargo containers beyond the free period, its observations on the absence of a law to regulate the rates charged by shipping lines gains importance in this context.

“The provisions of the Merchant Shipping Act – under which the Directorate General of Shipping (DGS) purports to have issued its three orders (in March/April last year) – do not contain any provision permitting interference with the levy, collection or recovery of penal detention charges, by shipping lines, from their customers, for failure to return containers in time,” the Court said.

“We are constrained, therefore, to hold that no directive restraining shipping lines from charging penal detention charges from their customers for failing to return containers in time could have been issued by any authority, including the MOS (Ministry of Shipping) and the DGS,” it stated.

The petitioners’ submitted that by virtue of the instructions contained in office orders and circulars issued by the MOS, the DGS and the Central Board of Indirect Taxes and Customs (CBIC), in March/April last year, they were entitled to waiver of penal charges levied by CFSs/ICDs and shipping lines, during the entire period of lockdown.

The office orders and circulars “advised” the major port trusts, CFSs/ICDs, and shipping lines to desist from collecting penal detention, demurrage, ground rent or other charges for the delay, on the part of the importers, in either releasing their containers from the ICDs/CFSs, or in returning the containers to the shipping lines during the lockdown period.

However, despite issuing these “advisories”, the MOS in written submissions to the Court noted that it does “not have any control or supervision over activities or practices or cost structures of the CFS or ICD service providers”.

Except in the case of goods which are detained, seized or confiscated, there is no other statutory control, in any Parliamentary enactment or subordinate legislation, on the levying, charging or collection of charges, penal or otherwise, by CFSs or ICDs from importers or exporters.

The direction to the “ports” to ensure implementation of the circulars was therefore “abortive and ineffective ab initio”, the Court said while disposing off the petitions.

Published on August 14, 2021

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