MANU/SC/0467/1990

Equivalent/Neutral Citation: 1990 (2) C C C 159 , (1990)2C ompLJ1(SC ), (1990)2C ompLJ1(SC ), 1990(48)ELT481(S.C .), JT1990(1)SC 528,
1990(1)SC ALE462, (1990)3SC C 481, [1990]1SC R884a, 1990(2)UJ47

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 764(N) of 1975
Decided On: 13.03.1990
British India Steam Navigation Co. Ltd. Vs. Shanmughavilas Cashew Industries and Ors.
Hon'ble Judges/Coram:
K.N. Saikia and P.B. Sawant, JJ.
JUDGMENT
K.N. Saikia, J.
1. The first respondent M/s. Shanmughavilas Cashew Industries, Quilon purchased from
East Africa 350 tons of raw cashew nuts which were shipped in the vessel SS Steliosm
chartered by the appellant M/s. British India Steam Navigation Co. Ltd., incorporated in
England, pursuant to a contract of affreightment evidenced by 3 bills of lading issued to
the shipper for the 3 loads of cashewnuts. Out of 4445 bags containing the nuts carried
in the said vessel only 3712 bags were delivered at Cochin, there being thus short
landing of 733 bags.
2. The first respondent sued the appellant in suit No. O.S. 18/1965 in the Court of the
Subordinate Judge, Cochin seeking damages for the shortage of 733 bags of raw
cashewnuts amounting to Rs.44,438.03. The suit having been decreed with interest @
6% per annum from 17.7.1964, for the sum total of Rs.46,659.93, the appellant
preferred therefrom appeal A.S. No. 365 of 1969 in the High Court of Kerala which was
pleased by its Judgments and decree dated 16.8.1973 and 30.11.1973, to dismiss the
appeal and affirm that of the Subordinate Judge. Aggrieved, the appellant has preferred
this appeal by special leave.
3. In the courts below the main contentions of the appellant, inter alia, were that it was
a mere charterer of the vessel which was owned by Section Matas & Company c/o Lucas
Matas & Sons, Piraeus, Greece; that there was a charterparty executed between the first
respondent and M/s. Victorial Steamship Company as agents of the said owner of the
vessel in London on 27.1.1964; that as per Clause 3 of the bill of lading the court at
Cochin had no jurisdiction and only English courts had jurisdiction; and that as per the
charterparty and Clause 4 of the bill of lading the remedy of the first respondent, if any,
was against the owner who alone was liable and not against the appellant charterer of
the vessel. Exhibit D1 is the photostat copy of the charterparty concluded in London on
27.1.1964 and Exhibit P1 to P3 are the 3 bills of lading in the transaction. The first
respondent denied that the appellant was only a charterer and not liable for the
shortage. It also denied that only English Courts had jurisdiction in the matter.
4 . Mr. R.F. Nariman the learned Counsel for the appellant first submits that the
appellant is an English company registered in England carrying on business in England,
and it does not carry on any business in India. It is submitted, as the carrier under
Clause 3 of the bill of lading, only the appellant has an option either to sue or be sued
in England, or in Cochin, which is a port of destination but the shipper had no option to

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sue at Cochin. In its written statement it was clearly stated that it had appeared under
protest and without prejudice to the contention regarding jurisdiction which contention
it had also pressed at the time of the argument, and, therefore, it could not be said to
have submitted to the jurisdiction of Cochin court; and it never made any submission or
raised any objection as to the fact of short landing. According to counsel the High Court
has held Clause 3 of the bill of lading to be bad on two erroneous grounds, namely, that
it offends Section 28 of the Contract Act and that it gives an unfair advantage to the
carrier which advantage is not given to the consignee. Section 28, according to counsel,
is not applicable and Clause 3 was not bad on the ground of having given an unfair
advantage to the carrier in giving him the option to sue or be sued either in England or
at the port of destination and that even if it was bad, only the offending portion could
be struck off, the rest of the clause would still be applicable and only the English court
would have jurisdiction.
5 . Records show that in the written statement the appellant as defendant in para B
stated that the contract evidenced by the bills of lading was governed by English law
and the parties had agreed that the disputes were to be determined in England
according to English law to the exclusion of the jurisdiction of the courts of any other
country and that the institution of the suit at Cochin was in violation of that agreement,
and hence the Court had no jurisdiction to try the suit and the plaint should be returned
for presentation to proper court.
6. In the Replication filed by the plaintiff it was said:
The objection regarding jurisdiction raised in Clause B of written statement is
not tenable. The cause of action for the suit has arisen within the local limits of
the jurisdiction of this Court. The defendant is also residing and carrying on
business within this Court's jurisdiction. It is now well settled that the parties
cannot by consent confer or oust the jurisdiction of a Court. The plaintiffs deny
the agreement mentioned in Clause B and no agreement can oust the
jurisdiction of the Court when the Court possesses the jurisdiction.
7. Issue No. 1 was: "Whether the suit is properly filed in tis Court?" The trial court in
its judgment dated 29.3.1968 held:
This issue has been considered by this Court on 28.2.1966 and it has been
found that this Court has jurisdiction to try the suit. The said finding has been
confirmed by the Hon'ble High Court on 6.4.1967 in C.R.P. 977/66.
That judgment is not before us. In the memo of appeal to the High Court apart from the
general grounds that the judgment and decree of the Court below were wrong in law
and fact; that the Court below should have held that the suit was not maintainable in
law and should have finally dismissed the suit as the owners of the vessel 'Steliosm' a
necessary party, as he alone was liable, was not impleaded and proceeded against, no
specific ground about jurisdiction was taken and consequently we do not find any direct
discussion on the point in the High Court judgments.
8 . Even so, this being a question of jurisdiction going to the root of the matter we
allowed the appellant to make his submissions. The appellant's submission that the
courts at Cochin had no jurisdiction is based on Clause 3 of the Bills of Lading which
reads as follows:
3. JURISDICTION: The contract evidenced by this bill of lading shall be
governed by English law and disputes determined in England or, at the option

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 of the Carrier, at the port of destination according to English law to the
exclusion of the jurisdiction of the Courts of any other country.
If the above Clause was binding on the first respondent, without anything more, there
could be no doubt that the suit claim arising out of the contract of affreightment
evidenced by the bills of lading will have to be determined in England or, at the option
of the carrier, that is the appellant, at the port of destination, that is, Cochin, to the
exclusion of the jurisdiction of the courts of any other country. Is the first respondent
bound by this clause of the Bill of Lading?
9. Clause 29 of both the bills of lading Exhibit P1 and P2 runs as follows:
FINALLY IN ACCEPTING THIS BILL OF LADING. The Shipper, Consignee, and
Owner of the goods, and the Holders of this Bill of Lading, expressly accept and
agree to all its stipulations, exceptions, and conditions whether written, printed
stamped or incorporated, as fully as if they were all signed by such Shipper,
Consignee, Owner or Holder.
10. The first respondent is the consignee and holder of the bills of lading and ex fade
should be bound by this clause. No doubt the bills of lading were issued to the shipper
from whom it was received by the first respondent. There is no evidence to show that
the shipper has repudiated the stipulations in the bills of lading in any manner. Under
these circumstances would it be open to the first respondent to repudiate Clause 3 of
the bills of lading?
11. It is a settled principle of Private International Law governing bills of lading that the
consignee or an endorsee thereof derives the same rights and title in respect of the
goods covered by the bill of lading as the shipper thereof had. For the purpose of
jurisdiction the action of the first respondent is an action in personam in Private
International Law. An action in personam is an action brought against a person to
compel him to do a particular thing. If Clause 3 of the bills of lading is held to be
binding on the first respondent the choice of law by the parties would also be binding.
English courts would perhaps use their own Private International Law to decide the
dispute. In the event of the English Court alone having the jurisdiction, the application
of Indian statutes and the jurisdiction of the Indian courts would be, to that extent,
inapplicable.
12. Until the Bills of Lading Act, 1855 was passed in England the endorsement of a Bill
of Lading would not affect the contract evidenced in it, and the endorsee could not sue
or be sued on such contract, though he was the person really interested in goods, the
subject of the contract. By Section 1 of the Bills of Lading Act, 1855, in England "every
consignee of goods named in a Bill of Lading, and every endorsee of a Bill of Lading to
whom the property of goods shall pass, upon or by reason of such consignment or
endorsement shall have transferred to and vested in him all rights of suit and be subject
to the same liabilities in respect of such goods as if the contract contained in the Bills of
Lading had been made with himself." In Swell v. Burdick (1884) 10 AC 74 it is held that
Section 1 is to be given effect in any proceeding in the English Court regardless of the
proper law governing the transfer of the Bill of Lading. The property passes by reason
of consignment or endorsement and the right to sue passes with it. The consignee or
endorsee may lose his right or liability under the Act by such further endorsement of the
bill of lading as divests him of the property. Such a vesting of rights and liabilities on
endorsement of a bill of lading does not in any way affect the ship-owners' rights
against the original shippers or owners of the goods for the freight or the shipper's

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rights under the bill of lading or the liability of the consignee or indorsee by reason of
his being such consignee or indorsee, or of his receiving the goods in consequence of
such consignment or indorsement, or any right of stoppage in transitu.
13. The Indian Bill of Lading Act, 1856 was based on the English Bills of Lading Act,
1855 (18 and 19 Vict. C. III) (Act IX of 1856). Under Section 1 of the Indian Bills of
Lading Act, 1856 also every consignee of goods named in a bill of lading and every
endorsee of a bill of lading to whom the property in goods therein mentioned shall
pass, upon or by reason of such consignment or endorsement, shall have transferred to
and vested in him all rights of suit, and be subject to the same liabilities in respect of
such goods as if the contract contained in the bill of lading had been made with himself.
14. The bill of lading is the symbol of the goods, and the right to possess those passes
to the transferee of the bill of lading. In other words, its transfer is symbolic of the
transfer of the goods themselves and until the goods have been delivered, the delivery
of the duly indorsed bill of lading operates as between the transferor or transferee, and
all who claim through them, as a physical delivery of the goods would do. The bill of
lading is a negotiable instrument in the sense of carrying with it the right to demand
and have possession of the goods described in it. It also carries with it the rights and
liabilities under the contract, where the property in the goods also is transferred.
However, a bill of lading is not a negotiable instrument in the strict sense of the
transferee deriving better title than the transferor. The transferee of a bill of lading gets
no better title than the transferor himself had. Mere possession of the bill of lading does
not enable the holder to sue a person at a place where the transferor himself could not
have done. Where the negotiation of a bill of lading is by the person who had a right to
sue on it, mere possession of it does not enable the holder to sue any person who was
not liable under it and not to sue another who was liable under it to make good the
claim. He cannot also sue at a place not intended by the parties when intention has
been expressed.
15. It would also be relevant to consider whether English courts would be likely to
entertain the instant suit if instituted in England in terms of the bills of lading so that
the first respondent is not likely to be without a remedy.
16. Dicey & Morris in the Conflict of Laws 11th Ed. have given the following general
principles as to jurisdiction in actions in personam:
"Rule 28, Sub-rule 4; The court may assume jurisdiction if, in the action begun
by the Writ, the claim is brought to enforce, rescind, dissolve, annul or
otherwise affect a contract, or to recover damages or obtain other relief in
respect of the breach of a contract, being (in either case) a contract which
(i) was made in England, or
(ii) was made by or through an agent trading or residing in England on behalf
of a principal trading or residing out of England, or
(iii) is by its terms or by implication governed by English law, or
(iv) contains a term to the effect that the court shall have jurisdiction to hear
and determine any action in respect of the contract."
Rule 34 deals with jurisdiction clauses and it says:

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 (1) Where a contract provides that all disputes between the parties are
to be referred to the jurisdiction of the English courts, the court
normally has jurisdiction to hear and determine any action in respect
thereof.
(2) Subject to Clause (3) of this Rule, where a contract provides that
all disputes between the parties are to be referred to the exclusive
jurisdiction of a foreign tribunal, the English court will stay proceedings
(or, as the case may be, refuse to give leave to serve the writ out of
the jurisdiction) instituted in England in breach of such agreement,
unless the plaintiff proves that it is just and proper to allow them to
continue.
(3) Where the case falls within the scope of the 1968 Convention,
unless the defendant submits to the jurisdiction, the court has no
jurisdiction to determine a dispute.
(a) if one or more of the parties is domiciled in a Contracting State and
the parties have agreed in accordance with Article 17 of the 1968
Convention that the courts of a Contracting State other than the United
Kingdom are to have jurisdiction to settle any such dispute; or
(b) if none of the parties is domiciled in a Contracting State and the
parties have agreed in accordance with Article 17 of the 1968
Convention that the courts of a Contracting State other than the United
Kingdom are to have jurisdiction to settle any such dispute and the
courts chosen have not declined jurisdiction.
1 7 . According to the authors the parties to a contract in international trade or
commerce may agree in advance on the forum which is to have jurisdiction to determine
disputes which may arise between them. The chosen court may be a court in the
country of one or both the parties, or it may be a neutral forum. The jurisdiction clause
may provide for a submission to the courts of a particular country, or to a court
identified by a formula in a printed standard form, such as a bill of lading referring
disputes to the courts of the carrier's principal place of business. It is a question of
interpretation, governed by the proper law of the contract, whether a jurisdiction clause
is exclusive or non-exclusive, or whether the claim which is the subject matter of the
action falls within its terms. If there is no express choice of the proper law of the
contract, the law of the country of the chosen court will usually, but not invariably, be
the proper law.
18. It is accordingly unlikely that the first respondent would be without any remedy if
the terms of Clause 3 of the bills of lading are faithfully observed.
19. The question of jurisdiction in this case ought not to be determined by the High
Court on the basis of the provisions of s. 28 of the Indian Contract Act in the absence of
a specific provision making it applicable to transactions in international trade. The
effective operation of a statutes of country in relation to foreigners and foreign
property, including ships, is subject to limitations. In general, a statute extends
territorially, unless the contrary is stated, throughout the country and will extend to the
territorial waters, and such places as intention to that effect is shown. A statute extends
to all persons within the country if that intention is shown. The Indian Parliament
therefore has no authority to legislate for foreign vessels or foreigners in them on the
high sees. Thus a foreign ship on the high seas, or her foreign owners or their agents in

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a foreign country, are not deprived of rights by our statutory enactment expressed in
general terms unless it provides that a foreign ship entering an Indian port or territorial
waters and thus coming within the territorial jurisdiction is to be covered. If the
Parliament legislates in terms, which extend to foreign ships or foreigners beyond the
territorial limits of its jurisdiction, the Indian court is of course bound go give effect to
such enactment. However, no such provision has been referred to in the impugned
judgments. Without anything more Indian statutes are ineffective against foreign
property and foreigners outside the jurisdiction.
20. The Privy Council in Sardar Gurdyal Singh v. Rajah of Faridkote (1894) AC 670
decided that no territorial legislation can give jurisdiction in a personal action which any
foreign court should recognise against absent foreigners owing no allegiance or
obedience to the power which so legislates. Lord Selborne said: "In a personal action to
which none of these causes of jurisdiction apply, a decree pronounced in absentem by a
foreign court, to the jurisdiction of which the defendant has not in any way submitted
himself, is by international law an absolute nullity. He is under no obligation of any
kind to obey it; and it must be regarded as a mere nullity by the courts of every nation
except (when authorised by special local legislation) in the country of the forum by
which it was pronounced." There may however be submission to the jurisdiction of an
Indian court by litigating in India. The question then is what would amount to
submission to jurisdiction,
21. Cheshire & North's Private International Law 11th Ed., on submission to jurisdiction
says: "Despite the fundamental principle that the court cannot entertain an action
against a defendant who is absent from England, it has long been recognised that an
absent defendant may confer jurisdiction on the court by submitting to it. This may be
done in a variety of ways, such as by the defendant acknowledging service before actual
service of the writ, or instructing a solicitor to accept service on his behalf.
Commencing an action as a plaintiff will give the court jurisdiction over a counter claim.
Although a defendant who appears and contests the case on its merits will be held to
have submitted to the jurisdiction, an appearance merely to protest that the court does
not have jurisdiction will not constitute submission, even if the defendant also seeks a
stay of proceedings pending the outcome of proceedings abroad." The authors go on to
say that any person may contract, either expressly or impliedly, to submit to the
jurisdiction of a court to which he would not otherwise be subject. In case of an
international contract it is common practice for the parties, to agree that any dispute
arising between them shall be settled by the courts of another country even though both
the parties are not resident of that country. In such a case having consented to the
jurisdiction one cannot afterwards contest the binding effect of the judgment. The
defendant out of the jurisdiction of the country may be deemed to have been served by
the service on his agent within the jurisdiction, However, parties cannot by submission
confer jurisdiction on the court to entertain proceedings beyond its authority.
22. The jurisdiction of the court may be decided upon by the parties themselves on
basis of various connecting factors.
23. Westlake says in his Treatise on Private International Law, at page 5: "The principal
grounds for selecting a particular national jurisdiction in which to bring an action are
that the subject of the action, if a thing, is situate, if a contract, was made, or was to be
performed, if a delict, was committed, within the territory: hence the forum situs, or rei
sitae, contractus, delicti, the two latter of which are classed together as the forum
special obligationis. Or that the jurisdiction is that in which all the claims relating to a
certain thing or group of things ought to be adjudicated on together, the forum

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concursus; or that to which the defendant is personally subject, the forum rei."
24. In the instant case the appellant submits that as defendant it appeared before the
Indian court to protest its jurisdiction and put forth its defences subject to that protest.
The appellant, it has been stated in para 2 of the judgment under appeal, dated
30.4.1973, had not filed any objection to the findings as to damages. Did it then
amount to submitting to the jurisdiction of the Indian court in which the shipper or the
first respondent had no right to sue?
25. In Williams & Glyn's Bank PLC v. Astro Dinamico Compania Naviera SA. and Anr.,
The Weekly Law Reports Vol. (1) 1984-438, where he plaintiff-bank sought to enforce
its securities against the defendants by instituting proceedings in England in reliance of
Clause 7 of the guarantees, whereby each of the defendants were expressed to submit
irrevocably to the jurisdiction of the English courts. The respondents (defendants) made
and application disputing the jurisdiction of the English courts and had also
simultaneously applied for stay of the action. It was contended on behalf of the
appellants (plaintiffs) that the respondents (defendants) either had waived any
objection to the jurisdiction because they had taken a step in the action by applying for
a stay or that they would waive any objection if they persisted with their application in
priority to disputing the jurisdiction. Lord Fraser observed that it would surely be quite
unrealistic to say that the respondents had waived their objection to the jurisdiction by
applying for a stay as an alternative in the very summons in which they applied for an
order giving effect to their objection to the jurisdiction. That the summons made it
abundantly clear that they were objecting and the fact that they asked for a decision
upon their objection to be postponed until the outcome of the Greek proceedings was
known, was not in any way inconsistent with maintaining their objection. There was no
reason in principle or in common sense why the respondents should not be entitled to
say: "We object to the jurisdiction of the English courts, but we ask for the proceedings
necessary to decide that and the other issues to be stayed pending the decision of the
proceedings in Greece." Reference was made to Rein v. Stein (1892) 66 LT 469, where
it was said at page 471: "It seems to me that, in order to establish a waiver, you must
show that the party alleged to have waived his objection has taken some step which is
only necessary or only useful if the objection has been actually waived, or if the
objection has never been entertained at all." In Dulles' Settlement (No. 2) (1951) Ch.
842; the question was whether a father, who was an American resident outside
England, had submitted to the jurisdiction of the English courts in a dispute about
payment of maintenance to his child in England. He had been represented by counsel in
the English court, who argued that he was not subject to their jurisdiction. Denning L J
(as he than was) said at page 850:
I cannot see how anyone can fairly say that a man has voluntarily submitted to
the jurisdiction of a court, when he has all the time been vigorously protesting
that it has no jurisdiction. If he does nothing and lets judgment go against him
in default of appearance, he clearly does not submit to the jurisdiction. What
difference in principle does it make, if he does not merely do nothing, but
actually goes to the court and protests that it has no jurisdiction? I can see no
distinction at all.
2 6 . The judgment of the court of appeal which held that the application for a stay
involved assumption that the court had jurisdiction to entertain the action and therefore
the question of jurisdiction must be decided first, was set aside in appeal, and the
appeal therefrom was dismissed by the House of Lords.

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27. In the instant case the question is of initial jurisdiction on the basis of Clause 3 of
the bills of lading. We have to ask the question whether the shipper could or could not
have the right to sue at Cochin under the bills of lading. If he could not have done so,
the appellant's appearance to protest about jurisdiction would not cure that defect of
jurisdiction. However, we find that in the Memo, of appeal before the lower appellate
court no specific ground as to jurisdiction was taken though there were grounds on
non-maintainability of the suit. Even in the Special Leave Petition before this Court no
ground of lack of jurisdiction of the courts below has been taken. We are, therefore, of
the view that the appellant has to be held to have either waived the objection as to
jurisdiction or to have submitted Jo the jurisdiction in the facts and circumstances of
the case. The defence that the suit was not maintainable in the absence of the owner of
the ship could in a sense be said to have been on the merits of the case. The
submission as to lack of jurisdiction is, therefore, rejected.
2 8 . Clause 3 of the bills of lading also contains the selection of law made by the
parties. The contract is governed by English law and disputes are to be determined
according to English law. Is the selection of law binding? In Cheshire & North's Private
International Law 11th Ed., page 495, while discussing about the interpretation of
contracts the authors say: "When the stage has been reached where an obligation,
formally and essentially valid and binding on parties of full capacity, has been created,
then in the further matters that may require the intervention of the Court, there is,
speaking generally, no reason in principle why the parties should not be free to select
the governing law." The express choice of law made by parties obviates need for
interpretation.
29. In the absence of an express choice the question of the proper law of contract
would arise. The parties to a contract should be bound by the jurisdiction clause to
which they have agreed unless there is some strong reason to the contrary.
30. Dicey & Morris in the Conflict of Laws formulate the following rule on proper law of
contract as Rule 180:
The term "proper law of a contract" means the system of law by which the
parties intended the contract to be governed, or, where their intention is neither
expressed nor to be inferred from the circumstances, the system of law with
which the transaction has its closest and most real connection.
Sub-rule 1:
When the intention of the parties to a contract, as to the law governing the
contract, is expressed in words, this expressed intention, in general, determines
the proper law of the contract.
Sub-rule 2:
When the intention of the parties to a contract with regard to the law governing
the contract is not expressed in words, their intention is to be inferred from the
terms and nature of the contract, and from the general circumstances of the
case, and such inferred intention determines the proper law of the contract
There can, therefore, be no doubt that the instant contract of affreightment evidenced
by the bills of lading will be governed by English law. As the law has been chosen, the
proper law will be the domestic law of England and the proper law must be the law at
the time when the contract is made throughout the life of the contract and there cannot

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be a "floating" proper law. It has been recognised since Gienar v. Meyer (1796) 2 Hy BI
608, that at the time of making the contract the parties may expressly select the law by
which it is to be governed and they may declare their common intention by a simple
statement that the contract shall be governed by the law of a particular country. This
has been settled by a long line of decisions, as Rex v. International Trustee for the
Protection of Bondholders AG (1937) A.C. 500; Vita Food Products Inc. v. Unus
Shipping Co. Ltd. (1939) A.C. 277; James Miller and Partners Ltd. v. Whitworth Street
Estates (Manchester) Ltd. (1970) A.C. 583; Mackender v. Feldia AG (1966) 3 All ER
847; Compagnie d' Armement Maritime SA v. Compagnie Tunisienne de Navigation SA
(1971) A.C. 572: (1970) 3 All E.R. 71, Acrow (Automation) Ltd. v. Rex Chainbelt Inc.
(1971) 3 All E.R. 1175.
31. It is true that in English law there are certain limitations on freedom to choose the
governing law. The choice must be bona fide and legal, and not against public policy. It
may not be permissible to choose a wholly unconnected law which is not otherwise a
proper law of contract. English courts, it has been said, should, and do, have a residual
power to strike down for good reasons, choice of law clauses, totally unconnected with
the contract. Where there is no express choice of the proper law, it is open to Court to
determine whether there is an implied or inferred choice of law in the parties contract.
32. The next question to be decided is whether the appellant would be liable for the
suit claim. This would naturally depend on the contract of affreightment. It is an
accepted principle that the bill of lading is not the contract of affreightment, for that has
been made before the bill of lading was signed and delivered, but it evidences the terms
of that contract. The bill of lading serves as a receipt and also as a document of title
and may be transferred by endorsement and delivery. Article 111(3) of the Hague Rules
says that a bill of lading is prima facie evidence of the receipt by the carrier of the
goods described therein. The Hamburg Rules define a bill of lading under Article 1 (7)
as follows :
Bill of lading" means a document which evidences a contract of carriage by sea
and the taking over or loading of the goods by the carrier, and by which the
carrier undertakes to deliver the goods against surrender of the document. A
provision in the document that the goods are to be delivered to the order of a
named person, or to order, or to bearer, constitutes such an undertaking.
33. The Hague Rules say that after the goods are taken into his charge, the carrier or
his agent shall issue to the shipper, if he so demands, a bill of lading, showing among
other things the particulars of the goods.
34. The contract of affreightment need not necessarily be expressed in writing. The bill
of lading is evidence of the terms of the contract which can also be ascertained from the
charterparty where one exists. Dr. Justice T. Kochu Thommen in his book of Bills of
Lading in International Law and Practice at page 25 writes:
As between the shipowner and the shipper, the bill of lading is not conclusive
evidence of the terms of the contract and parties to the contract are entitled to
prove that the stipulations in the bill of lading are at variance with the agreed
terms of the contract, as expressed or evidenced in other documents. In
practice, however, the terms of the bill of lading govern the contractual
relations between the shipowner and the shipper, and the booking note
generally states that the carrier's regular forms of bill of lading shall be used
and all the terms thereof shall form part of the contract The bill of lading

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 assumes the character of conclusive evidence once it has passed into the hands
of a consignee or indorsee and evidence may not be given which varies or
contradicts it. The position is, however, different when the ship is under charter
and stipulations in the charterparty are expressly and clearly incorporated in the
bill of lading. In such a case the bill of lading, even after it has passed into the
hands of a consignee or indorsee, has to be read subject to the charterparty
stipulations. In the hands of a charterer, the bill of lading is only a receipt and
the charterparty is the governing document as far as the shipowner and the
charterer are concerned.
35. Apart from the question of the charterparty having been proved or not according to
law the question in the instant case is whether Clause 4 of the charterparty as to
responsibility of the shipowner in respect of the goods carried would form part of or be
incorporated in the bills of lading. How far the charterparty clauses laying down the
responsibility and liabilities between the charterer and the shipowner can be attributed
to the consignee under the bill of lading? It is an accepted principle that if certain
clauses of the charterparty are referred to in the bill of lading those should be referred
to in specific terms so as to bind the shipper and the consignee. A general reference
may not be sufficient under all circumstances. Thus in T.W. Thomas & Co. Ltd. v.
Portsea Steamship Co, Ltd. 1912 A.C. 1 in the bill of lading there was also a marginal
clause in writing as follows:
Deck load at shipper's risk, and all other terms and conditions and exceptions
of charter to be as per charterparty, including negligence clause.
3 6 . The question was whether the arbitration clause in the charterparty was
incorporated by the reference in the bill of lading. Lord Loreburn L.C. answering this
question whether an arbitration clause found in the charterparty was applicable to the
contract evidenced by the bill of lading, and to disputes arising between the shipowners
and the holders of the bill of lading under that document, replied in the negative. Lord
Atkinson observed that when it was sought to introduce into a document like a bill of
lading- a negotiable instrument- a clause such as the arbitration clause, not germane to
the receipt, carriage, or delivery of the cargo or the payment of freight, the proper
subject matter with which the bill of lading is conversant, that should be done by
distinct and specific words, and not by such general words as those written in the
margin of the bill of lading in that case.
37. In Vita Food Products, Incorporated v. Unus Shipping Co. Ltd. 1939 A.C. 277, the
bill of lading set out in detail the terms and conditions of the contract "which are hereby
mutually agreed upon as follows". Clause 7 contained a general exemption in respect of
the goods carried from liability for all damage capable of being covered by insurance
and from liability above a certain value per package unless a special declaration was
made. The same clause also provided that "these contracts have been governed by
English Law." While determining what was the proper law of the contract the Privy
Council held that the expressed words of the bill of lading must receive effect with the
result that the contract was governed by English Law. It was said: "It is now well
settled that by English Law (and the law of Nova Scotia is the same) the proper law of
the contract is the law which the parties intended to apply. That intention is objectively
ascertained, and, if not expressed, will be presumed from the terms of the contract and
the relevant surrounding circumstances." In that case the goods were shipped in
Newfoundland under bills of lading which did not contain the statement required by
Section 3 of the Carriage of Goods by Sea Act, 1932 which incorporated the Hague rules
subject to certain modifications but the bill of lading contained a general clause that the

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contracts "shall be governed by English Law" and applying that law the shipowner was
held to be within the exceptions which exempted him from liability. In Rex v.
International Trustee for the Protection of Bondholders 1937 A.C. 500. it was held that
the intention of the parties would be ascertained from what is expressed in the contract,
which will be conclusive. Repelling the contention that the transaction which was one
relating to the carriage on a Nova Scotian ship of goods from Newfoundland to New
York between residents in those countries, contained nothing to connect if in any way
with English law. and that choice could not be seriously taken, their Lordships held that
connection with English law was not as a matter of principle essential.
38. The Indian Bills of Lading Act, 1856, which is based on the Bills of Lading Act of
1855 of England in its preamble says :
Whereas by the custom of merchants a bill of lading of goods being
transferable by endorsement, the property in the goods may thereby pass to the
endorsee, but nevertheless all rights in respect of the contract contained in the
bill of lading continue in the original shipper or owner, and it is expedient that
such rights should pass with the property.
3 9 . Section 1 of the Act provides that rights under bills of lading are to vest in
consignee or endorsee. It says: "Every consignee of goods named in a bill of lading and
every endorsee of a bill of lading to whom the property in the goods therein mentioned
shall pass, upon or by reason of such consignment or endorsement, shall have
transferred to and vested in him all rights of suit, and be subject to the same liabilities
in respect of such goods as if the contract contained in the bill of lading had been made
with himself." Thus a bill of lading is intended to provide for the rights and liabilities of
the parties arising out of the contract of affreightment. If the consignee claims the
goods under a bill of lading he is bound by its terms. The property in the cargo passes
to the consignee or the endorsee of the bill of lading but the contract whereunder the
consignment or endorsement is made has always to be taken into consideration. Thus
the consignee or an endorsee gets only such rights as its consigner or endorser had in
respect of the goods mentioned in the bill of lading. This is in conformity with Private
International law applicable to the case.
40. The Indian Carriage of Goods by Sea Act, 1925 (Act XXVI of 1925) is an Act to
amend the law with respect to carriage of goods by sea. It was passed after accepting
the recommendations of the International Conference on Maritime Law held at Brussels
in October, 1922 and accepting the rules contained in the Draft Convention held at
Brussels meeting in October, 1923 amending the rules to give the rules the force of law
with a view to establish the responsibilities, liabilities, rights and amenities attaching to
carriers on the bills of lading. But the Rules of the Act are not applicable to this case.
41. The High Court rejected the contention of the appellant that it could not be made
personally liable for claim on the grounds that the bills of lading were issued in the
printed forms of the appellant company bearing its name at the top and that beyond
what appeared at the bottom over the signature and seal, there was nothing at all to
indicate that the appellant company was issuing the bills of lading for and on behalf of
any owners of the vessel. However, the conditions printed in the reverse of the bills of
lading itself could not have been avoided. Clause 4 - Agency Clause said :
If the vessel is not owned by or chartered by demise to the company or Line by
whom this bill of lading is issued (as may be the case notwithstanding anything
that appears 10 the contrary) this bill of lading shall take effect only as a

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 contract with the owner or demise charterers as the case may be as principal
made through the agency of the said company or Line who act solely as agents
and shall be under no personal liability whatsoever in respect thereof.
42. This clause ex facie establishes a privity of contract between the owner or demise
charterer of the vessel on the one hand and the shipper to whom the bill of lading has
been issued by the appellant company as the charterer otherwise than by demise. The
High Court construed this clause to be one relieving or lessening the earner's liability
without considering whether it was otherwise than as provided in the Rules under the
Carriage of Goods Act, 1924 of England.
43. In Halsbury's Laws of England 4th edn. Vol.43, para 401, it is said:
A contract for the carriage of goods in a ship is called in law a contract of
affreightment. In practice these contracts are usually written and most
frequently are expressed in one or other of two types of document called
respectively a charterparty and a bill of lading." In para 402 we read that a
contract by charterparty is a contract by which an entire ship or some principal
part of her is let to a merchant, called 'the charterer', for the conveyance of
goods on a determined voyage to one or more places, or until the expiration of
a specified period. In the first case it is called a "voyage charterparty", and in
the second a "time charterparty". Such a contract may operate as a demise of
the ship herself, to which the services of the master and the crew may or may
not be added, or it may confer on the charter nothing more than the right to
have his goods conveyed by a particular ship, and, as subsidiary to it, to have
the use of the ship and the services of the master and crew.
44. Thus for the purposes of ascertaining the responsibility of a charterer in respect of
the cargo shipped and landed, it would be necessary to know not only the stipulations
between the shipper i.e. the owner of the cargo and the charterer, evidenced by the bill
of lading and also those between the charterer, evidenced by the bill of lading and also
those between the charterer and the owner of the ship. If the charter is by way of
demise the problem would be simple inasmuch as the bill of lading will be purely
between the shipper and the charterer. In cases of a 'voyage charter' or a 'time charter'
one has to find out the actual terms of the charter to ascertain whether they operated as
charter by demise or made the charterer only as an agent of the shipowner and if so to
what extent so as to ascertain the extent of privity established between the shipper and
the shipowner as stipulated in the bill of lading.
45. Charterparties by way of demise, says Halsbury, at para 403, are of two kinds: "(1)
charter without master or crew, or "bareboat charter", where the hull is the subject
matter of the charterparty, and (2). charter with master and crew, under which the ship
passes to the charterer in a state fit for the purposes of mercantile adventure. In both
cases the charterer becomes for the time being the owner of the ship; the master and
crew are, or become to all intents and purposes, his employees, and through them the
possession of the ship is in him. The owner, on the other hand, has divested himself of
all control either over the ship or over the master and crew, his sole right being to
receive the stipulated hire an to lake back the ship when the charterparty comes to an
end. During the currency of the charterparty, therefore, the owner is under no liability
to third persons whose goods may have been conveyed upon the demised ship or who
may have done work or supplied stores for her, and those persons must look only to the
charterer who has taken his place."

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In para 404 Halsbury said:
Although a charterparty which does not operate as a demise confers on the
charterer the temporary right to have his goods loaded and conveyed in the
ship, the ownership remains in the original owner, and through the master and
crew, who continue to be his employees, the possession of the ship also
remains in him. Therefore, the existence of the charterparty does not
necessarily divest the owner of liability to third persons whose goods may have
been conveyed on the ship, nor does it deprive him of his rights as owners.
46. Whether a charterparty operates as a demise or not depends on the stipulations of
the charterparty. The principal test is whether the master is the employee of the owner
or of the charterer. In other words where the master becomes the employee of the
charterer or continues to be the owner's employee. Where the charterparty is by way of
demise, the charterer may employ the ship in carrying either his own goods or those of
others. Where the charterparty does not operate as a demise, the charterer's right vis-a-
vis the owner depends upon the terms of the contract, "The contract of carriage is
personal to the charterer, and he cannot call upon the shipowner to undertake liabilities
to third persons or transfer to third persons his own liabilities to the shipowner unless
the contract so provides." A charterparty has to be construed so as to give effect, as far
as possible to the intention of the panics as expressed in the written contract.
The stipulations of charterparty may be incorporated in a bill of lading so that they are
thereby binding on the parties. It is an accepted principle that when stipulations of the
charterparty are expressly incorporated, they become terms of the contract contained in
the bill of lading, and they can be enforced by or against the shipper, consignee or
endorsee. The effect of a bill of lading depends upon the circumstances of the particular
case, of which the most important is the position of the shipper and of the holder.
Where there is a bill of lading relating to the goods, the terms of the contract on which
the goods are carried are prima facie to be ascertained from the bill of lading. However,
if a shipper chose to receive a bill of lading in a certain form without protest he should
ordinarily be bound by it. Thus, it cannot be said that the bill of lading is not conclusive
evidence of its terms and the person executing it is not necessarily bound by all its
stipulations, unless he repudiates them on the ground that, as he did not know, and
could not reasonably be expected to know, of their existence, his assent to them is not
to be inferred from his acceptance of the bill of lading without objection. Where there is
a charterparty, the bill of lading is prima facie, as between the shipowner and an
indorsee, the contract on which the goods are carried. This is so when the indorsee is
ignorant of the terms of the charterparty, and may be so even if he knows of them. As
between the shipowner and the charterer the bill of lading may in some cases have the
effect of modifying the contract as contained in the charterparty, although, in general,
the charterparty will prevail and the bill of lading will operate solely as an
acknowledgement of receipt.
4 7 . In the instant case we find from Exts. P1 to P3 that the following has been
prominently printed just below the signature 'For the Master and Owners' in the bills of
lading. SEE CONDITIONS OF CARRIAGE AND OTHER CONDITIONS ON REVERSE. It can
not therefore be said that the shipper, whose knowledge will be attributed to the first
respondent did not know of the conditions of carriage printed on the reverse there being
no other conditions printed elsewhere in the bills of lading.
48. None of the parties having repudiated the bills of lading in this case, the High Court
ought not to have accepted the submission of the first respondent that Clause 4 of the

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bills of lading offended the provisions of the Carriage of Goods by Sea Act, 1924 and
therefore bad. The Carriage of Goods by Sea Act of 1924 and therefore bad. The
Carriage of Goods by Sea Act of 1924 of England was on the Hague Rules which were
amended by Brussels protocol 1968 which is now embodied in the Carriage of Goods by
Sea Act, 1971 which came into force in 1977. The Indian Carriage of Goods by Sea Act,
1925 (Act XXVI of 1925) which is an Act to amend the law with respect to the carriage
of goods by sea was passed after the International Conference on Maritime Law held at
Brussels in October 1922 and Brussels meeting in October 1923. Under Section 2 of that
Act which deals with application of rules it is provided: "Subject to the provisions of
this Act, the rules set out in the Schedule (hereinafter referred to as "the Rules") shall
have the effect in relation to and in connection with the carriage of goods by sea in
ships carrying goods from any port in India to any other port whether in or outside
India." To apply the Rules to a case, the port of origin has to be an Indian port. Unless
the starting point or the port of loading is a port in India the Rules are inapplicable.
These Rules have no application when goods are not carried from any Indian port, As in
the instant case goods were shipped in Africa and carried to Cochin, this Act obviously
was not applicable.
49. There is nothing to show that the charterparty was by way of demise. Pacta dant
legem contractui the stipulations of parties constitute the law of the contract.
Agreements give the law to the contract. Clause 4 having been a stipulation in the
contract evidenced by the bills of lading the parties could not resile therefrom. It is not
clear whether the English Carriage of Goods by Sea Act, 1924 or the Indian Carriage of
Goods Act, 1925 was applied by the High Court. The Articles and the Rules referred to
are to be found in the Schedule to the Indian Act the Rules whereunder were not
applicable to the facts of the case. The dispute could not have been decided partly
according to municipal law and partly according to English law. The English law was not
proved before the court according to law.
50. The result is that this appeal must succeed. We accordingly allow this appeal, set
aside the impugned judgments and remand the case to the trial court for disposal
according to law after giving opportunity to the parties to amend their pleadings and
adduce additional evidence, if they are so advised, in light of the observations made
hereinabove. In the facts and circumstances of the case we make no order as to costs.
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