Orissa High Court holds that a statutory port trust cannot enforce demurrage charges against a party who is not privy to its contract with the State, reaffirming the doctrine of privity of contract; liability for demurrage rests with the State where so acknowledged in prior proceedings. The judgment follows established precedent and is binding on subordinate courts within Odisha, offering clear guidance for public sector and shipping/port law disputes.
Summary
| Category | Data |
|---|---|
| Case Name | OJC/128/1999 of Swastik Stevedores Vs State |
| CNR | ODHC010007071999 |
| Date of Registration | 05-01-1999 |
| Decision Date | 15-10-2025 |
| Disposal Nature | Disposed Off |
| Judgment Author | MR. JUSTICE DIXIT K.S. |
| Court | Orissa High Court |
| Precedent Value | Binding on subordinate courts within Orissa |
| Type of Law |
|
| Questions of Law | Whether, in the absence of privity of contract, a port trust can enforce demurrage liability against a party who is not privy to the relevant contract? |
| Ratio Decidendi |
The Court reaffirmed that, in the absence of privity of contract, no third party can be made liable to a statutory authority such as a port trust for demurrage charges unless the obligation is expressly created in their favour. Since the port trust was not a party to the contract between the Petitioner and the State, it could not enforce demurrage against the Petitioner. The earlier admission by the State in other judicial proceedings, where it accepted liability for demurrage, estopped the State from shifting liability to the Petitioner. Moreover, the Port Trust had itself granted an 80% waiver of demurrage liability on the State’s request, further demonstrating where the liability lay. Thus, the demand for demurrage from the Petitioner was quashed. The port trust is at liberty to proceed against the State according to law. |
| Judgments Relied Upon | Order dated 08.07.1998 in OJC No.6881 of 1998 & M.C. No.8274 of 1998 |
| Logic / Jurisprudence / Authorities Relied Upon by the Court | Doctrine of privity of contract (Chitty on Contracts cited); principle of estoppel from prior judicial admissions. |
| Facts as Summarised by the Court | The Petitioner challenged the demand for demurrage charges levied by the port authority for cargo not cleared within 45 days, asserting no contractual relationship with the Port Trust and noting that the cargo belonged to the State. The State, in prior litigation, accepted liability for any demurrage and had secured an 80% waiver from the Port Trust. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts in Orissa |
| Persuasive For | Other High Courts and possibly the Supreme Court in similar fact situations |
| Follows |
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What’s New / What Lawyers Should Note
- Reaffirms that statutory authorities, including port trusts, cannot claim contractual dues from non-contracting third parties based merely on operational arrangements.
- Express judicial admission by a party (here, the State) in earlier proceedings can estop that party from adopting a contrary position later.
- Demurrage liability may only be enforced as per the actual contract’s privity; operational logic or separate arrangements cannot override privity.
- Lawyers should ensure demurrage or similar liabilities are expressly provided for in the tripartite (or multi-party) contracts if enforcement against a contractor is intended.
- This precedent provides clear relief for contractors/service providers facing extra-contractual demands from statutory authorities.
Summary of Legal Reasoning
- The Court began by identifying privity of contract as a foundational principle: a contract binds only its parties, and an obligation cannot be enforced by or against a non-party unless the instrument expressly provides otherwise.
- It was emphasized that the port trust (OP No.2) was not party to the contract between the State and the Petitioner. Therefore, the port trust could not directly claim demurrage from the Petitioner owing to absence of contractual privity or any obligation created in favour of the port trust within the contract instrument.
- The Court cited Chitty on Contracts to reinforce the doctrine that statutory bodies may not enforce private arrangements to which they were not party.
- The Court relied upon a prior order in OJC No.6881/1998, in which the State had represented to the Court that it would bear any demurrage charged due to the cargo’s late clearance. Such a representation, made in judicial proceedings, created an estoppel (estoppel in pais) against the State from later denying its liability or shifting it to the Petitioner.
- Additionally, the fact that the State requested and obtained an 80% demurrage waiver from the port trust further reinforced the State’s acceptance of liability.
- The Court therefore held the demand notice for demurrage against the Petitioner as unsustainable, quashed it, and clarified that the port trust may pursue its remedy against the State as per law, and the State may, after paying, take action against the Petitioner according to their inter se contractual arrangement.
Arguments by the Parties
Petitioner
- Argued that there was no privity of contract between itself and the Port Trust.
- Submitted that the cargo belonged to the State; as such, any demurrage liability regarding delayed clearance was the State’s, not the contractor’s.
- Contended that, under admiralty law, only the cargo owner bears demurrage liability.
- Highlighted that State had previously admitted to bearing the liability for demurrage charges in earlier legal proceedings.
- Cited Chitty on Contracts for proposition that a liability cannot be enforced by the Port Trust absent contractual privity.
Respondents
OP No.1 – State of Odisha
- Asserted that the agreement between the State and the Petitioner fastened liability for demurrage on the Petitioner.
- Contended that the State could enforce such liability through the Port Trust.
OP No.2 – Paradip Port Trust
- Supported the demand for demurrage from the Petitioner.
- Argued that as per records and the arrangement between State and Petitioner, responsibility for timely clearance—and hence demurrage—rested with the Petitioner.
Factual Background
The Petitioner, a contractor, was engaged by the State of Odisha for logistics relating to CARE FOOD materials intended for poor beneficiaries. The cargo, belonging to the State, remained uncleared at Paradip Port for over 45 days, leading the Port Trust to raise a demand for demurrage charges against the Petitioner. The Petitioner contested liability, asserting that only the cargo owner (the State) was liable and there was no direct contractual relationship between the Petitioner and the Port Trust. In prior proceedings, the State had accepted liability for such demurrage. The State had also sought and received a significant waiver of demurrage from the Port Trust.
Statutory Analysis
- The Court discussed the doctrine of privity of contract as applied under Indian Contract law and referenced it with authority from Chitty on Contracts.
- Reflected on principles of admiralty law regarding demurrage: liability for demurrage rests on the party in control or ownership of the cargo unless otherwise specified.
- Considered the statutory framework under the Major Port Trusts Act, 1963, affirming that statutory authorities must pursue remedies as per law and contracts in force.
- No constitutional “reading in” or “reading down” applied, but Articles 226 & 227 were invoked for writ jurisdiction.
Dissenting / Concurring Opinion Summary
No dissenting or concurring opinions are recorded in the judgment.
Procedural Innovations
- All contentions of the parties were expressly kept open to be pursued in appropriate fora, preserving procedural rights.
- The judgment clarified that refunds (if any) in respect of interim order deposits must be processed promptly.
Alert Indicators
- Precedent Followed – The Court reaffirmed the doctrine of privity of contract and estoppel as established in contract law. No new law was created, but established principles were applied with binding authority.