Exercising ‘Lien’ Without Contract Is Impermissible,”: Delhi High Court

In a groundbreaking ruling, the Delhi High Court has declared that the exercise of ‘lien’ without an express contract is impermissible under the law. The judgment was passed in the case of M/s. ABC Traders vs. Steamer Agent Ltd., where the court emphasized the importance of contractual agreements in determining the rights and liabilities between parties involved in shipping consignments.

“The purported exercise of ‘lien’ by the defendant no.3 is expropriatory, completely contrary to law, and constitutes an egregious wrong,” observed Justice Sachin Datta while delivering the judgment.

The case revolved around the plaintiff, M/s. ABC Traders, whose consignment was withheld by the defendant no.3, the Steamer Agent Ltd., resulting in significant demurrage charges. The plaintiff sought release of the consignment and claimed that the defendant no.3 had no contractual right to exercise ‘lien’ over the goods.

The court clarified that Section 171 of the Indian Contract Act, 1872, only grants lien rights to specific categories of bailees, such as bankers, factors, wharfingers, attorneys of a High Court, and policy-brokers, subject to an express contract. For any other category of bailee, lien rights can only be exercised if there is an explicit contract to that effect.

“The judgment reiterates the position that no general lien can be exercised under Section 171 of the Indian Contract Act, 1872, in the absence of an express contract creating such a lien,” the court reaffirmed.

Furthermore, the court rejected the assertion of inter-se rights and liabilities of defendant nos. 2 and 3 against the plaintiff in the absence of a principal-to-principal contract between the parties.

The judgment also highlighted that, despite a bill of lading being endorsed in favor of a specific consignee, the consignor cannot be absolved of the responsibility for payment of charges to the concerned port authorities.

“The consignor is not absolved of the responsibility for payment of requisite charges to the concerned port authorities,” the court observed.

In conclusion, the court issued a mandatory injunction in favor of the plaintiff, directing the defendant no.3 to release all original documents and bills of lading related to the plaintiff’s consignment. Additionally, the defendant no.3 was restrained from obstructing or preventing the release of the consignment at the port of discharge.

The judgment has far-reaching implications for the shipping industry and underscores the significance of contractual agreements in determining the rights and obligations of parties involved in the transportation of goods.

Date of Decision: July 28, 2023

STRIDES PHARMA SCIENCE LIMITED  vs ROUND THE CLOCK LOGISTICS PRIVATE LIMITED & ORS.