British India Steam Navigation Co. Ltd. v. Shanmugha Vilas Industries

Facts of the Case

The case involves two identical disputes where the British India Steam Navigation Co. Ltd. (incorporated in England, hereafter referred to as the appellant) shipped cashew nuts for Shanmugha Vilas Cashew Industries and Hindustan Cashew Products Ltd. (hereafter referred to as the respondents).

The shipment was done through chartered vessels as per contracts of affreightment evidenced by Bills of Lading.

• The respondents alleged short-landing of bags containing cashew nuts and sued the appellant.

• The lower courts decreed the suits in favor of the respondents.

• The appellant appealed to the Kerala High Court, which upheld the lower courts' decisions.

• The appellants contested this decision in the Supreme Court, arguing they were mere charterers and not owners of the vessels, thus not liable, and that the court at Cochin had no jurisdiction per the bill of lading.

Issues

1. Whether the court at Cochin had jurisdiction given the clause in the Bill of Lading specifying disputes to be determined under English law.

2. What constitutes the proper law of the contract and the effect of the jurisdiction clause in the Bill of Lading.

3. Whether the appellant, as a mere charterer and not the owner of the vessel, was liable for the short-landing of cargo. (This issue was remanded back to the trial court to decide.)

Rule

• Bills of Lading: They are quasi-negotiable instruments symbolizing the goods and transferring the right to possess and sue for the goods as per the terms agreed in the bill.

• Choice of Law and Forum: Parties to a contract can choose the law and forum for dispute resolution. This chosen law is typically the "proper law" of the contract, governing its terms and disputes.

• Jurisdiction Clause: If a Bill of Lading specifies a jurisdiction, disputes should generally be resolved in that jurisdiction, unless there are strong reasons to override this choice.

Held

The Supreme Court:

• Noted that Bills of Lading are symbolic of goods, transferring the right to possession and the accompanying liabilities under the contract.

• Observed that Clause 3 of the Bills of Lading specified that disputes should be determined according to English law, either in England or at the port of destination.

• Referred to principles of private international law, emphasizing the parties' autonomy to choose the forum and applicable law.

• Clarified that the Indian Carriage of Goods by Sea Act, 1923, did not apply since the goods were shipped from Africa to Cochin, not from an Indian port.

• Rejected the appellants' submission that the Cochin court lacked jurisdiction, finding that the appellants had effectively submitted to the jurisdiction of Indian courts.

• Espoused that where the law of contract was foreign law, such law may be applied even for the purpose of deciding the legality of jurisdiction.

• Applying the foreign law stipulated in the contract, the Court held that Indian courts would have jurisdiction to entertain disputes arising out of the said contract.

• The court remanded the case back to the trial court for determination according to the proper law of the contract, acknowledging the stipulations in the Bills of Lading.

• The court upheld that the disputes should be governed by English law as chosen by the parties in their contract.

• A similar ruling was made in the Hindustan Products Ltd. case.

Commentary

Determining Jurisdiction

This case highlights the importance of the parties' contractual choice of law. However, a later ruling provides a practical challenge:

In Harishankar Jain v Sonia Gandhi, the Supreme Court held that parties would have to adduce evidence of foreign law, as a fact in issue, and that courts in India will not take judicial notice of foreign laws on par with municipal laws of India.

Hence, whilst the Supreme Court has upheld the right to choose jurisdiction or choice of law, the same would have to be proven as a matter of fact, which is likely to complicate proceedings further. This case, therefore, highlights the importance of exercising choice in contracts judiciously.

Consensual Choice

The principle of contractual autonomy is key, as captured by legal scholars:

Cheshire and North’s Private International Law, succinctly capture the essence of consensual choice of law and jurisdiction in contracts, by stating that: “The express choice of law made by parties obviates need for interpretation.”

Similarly, when a certain jurisdiction is specified in a contract, an intention to exclude all others from its operation may in such cases be inferred (Swatch Ltd v Priya Exhibitors Pvt Ltd, (2008) 101 DRJ 99).