11 May 2010

Airlines liable for loss in transit: Supreme Court

Setting aside the decision of the National Consumer Disputes Redressal Commission the Supreme Court in a recent decision has held that an airlines is bound by an act of a shipping agent who has been authorized to enter into agreement for carriage of goods on behalf of the airlines. The airlines had succeed before the National Commission on the ground that since the agreement for carriage was entered into between the consignor and the shipping agent, there was no privity with the airlines and thus airlines could not be held responsible for the loss. The Supreme Court, however, disagreed. 

The Bench in M/S DILAWARI EXPORTERS v. M/S ALITALIA CARGO & ORS. declared the position of law as under;
9.There is no quarrel with the proposition that as per Section 4 of the Carriage Act, Rules contained in the Second Schedule govern the rights and liabilities of carriers, consignors, consignees, etc. Rules contained in the Second Schedule apply to all international carriage of persons, baggage or cargo performed by aircraft for reward. Chapter II of the said Schedule enumerates the documents of carriage. Rule 5 of Part III of the said Chapter stipulates that every carrier of cargo has the right to require the consignor to make out and hand over to him a document called as “air waybill”; every consignor has the right to require the carrier to accept this document. Rule 6 provides that the air waybill shall be made out by the consignor in three original parts and be handed over with the cargo in the manner prescribed therein. Rule 10 makes the consignor responsible for the correctness of the particulars and statements relating to the cargo which he inserts in the air waybill. As per Rule 11, the air waybill is prima facie evidence of the conclusion of the contract, of the receipt of the cargo and of the conditions of carriage. In the light of these provisions, we agree with the Commission that the “air waybill” is prima facie evidence of the conclusion of the contract; of the receipt of the cargo and of the conditions of carriage.
10.However, the question which, in our view, the Commission has failed to examine is in regard to the capacity in which respondent No.3 was operating and had collected the cargo from the appellant for being shipped to New York. In other words, what was the nature of relationship between respondent No.3 and respondent No.1?
11.Section 186 of the Indian Contract Act, 1872 (for short “the Contract Act”) lays down that the authority of an agent may be expressed or implied. As per Section 187 of the Contract Act, an authority is said to be express when it is given by words spoken or written, and an authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, which may be accounted circumstances of the case. Section 188 of the Contract Act prescribes that an agent having an authority to do an act has authority to do every lawful thing which is necessary in order to do such act. Section 237 of the Contract Act provides that when an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such acts and obligations were within the scope of the agent’s authority. There is no gainsaying that onus to show that the act done by an agent was within the scope of his authority or ostensible authority held or exercised by him is on the person claiming against the principal. This, of course, can be shown by practice as well as by a written instrument.
12.Thus, the question for consideration is whether on the evidence obtaining in the instant case, can it be said that respondent No.3 had an express or implied authority to act on behalf of respondent No.1 as their agent? If respondent No.3 had such an authority, then obviously respondent No.1 was bound by the commitment respondent No.3 had made to the appellant.
13.Having examined the question in the light of the two afore-extracted “air waybills”, which, according to both the contesting parties, are determinative of terms and conditions of contract between them, we are of the opinion that respondent No.3 had an express authority to receive the cargo for and on behalf of respondent No.1. This is manifest from the Master Air Waybill No.055 – 2342 9276 issued and signed by respondent No.3 on the Air Waybill printed by respondent No.1. But for the said authority, respondent No.3 could not use the Air Waybill proforma printed by respondent No.1. Though it is true that in the said Air Waybill the name of the Shipper has been mentioned as that of respondent No.3 but the said Air Waybill has also been signed by respondent No.3 as the agent of the carter – respondent No.1. The other relevant particulars like, the name of the consignee, the number of the House Air Waybill (0841), etc. tally with the House Air Waybill issued by respondent No.3 to the appellant clearly showing the name of the consignor as that of the appellant. From the said documents, it would, appear that respondent No.3 was, in fact, acting in dual capacity – one as a Shipper on behalf of the appellant and the other as an agent of respondent No.1. That being so, respondent No.1 was bound by the acts of their agent, viz. respondent No.3, with all its results. We are of the opinion that while holding that there was no privity of contract between the appellant and respondent No.1 this vital aspect of the matter escaped the attention of the Commission thus, vitiating its order.

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