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TMI Blog2016 (10) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to store it at its own cost and risk. The petitioner had the first charge on the cargo to be issued by respondent No. 1 in its favour. The other condition was that in the event of failure of respondent No. 1 to pay the entire cost of import within the due date/usance period of the LC, the petitioner was at liberty to sell the goods/cargo to any third party without reference to, and at the cost and risk of respondent No. 1. A further condition was that respondent No. 1 would indemnify the petitioner in case of any loss, damage or cost which the petitioner might incur or suffer with regard to the import or in relation to the agreement. 3. The agreement contained an arbitration clause in terms of which the arbitration was to take place in accordance with the Rules of Arbitration of Indian Council of Arbitration. The venue of Arbitration was to be New Delhi and Delhi Courts were to have jurisdiction. 4. It is stated that in terms of the above agreement, the petitioner got established an LC on 8th May, 2014 with its banker, the State Bank of Travancore, Parliament Street, New Delhi in favour of supplier for a sum of USD 21,00,000. It is stated that the import was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as due from respondent No. 1. 10. It is in the above circumstances that the present petition was filed on 1st June, 2016 praying inter alia for orders injuncting respondent Nos. 1 & 2 from selling, transferring, alienating and/or creating any third party interest or parting with possession of 2002.01 MT of Heavy Aromatics pledged with the petitioner and lying in the bonded warehouse of respondent No. 2 at Mundra till such time as the entire dues of the petitioner were recovered from respondent No. 1. The further interim reliefs were for attachment of the cargo and for a direction to respondent No. 2 to allow the petitioner to have access to the cargo for initiation of the auction sale. 11. On 3rd June, 2016, this Court passed an interim order restraining respondent Nos. 1 & 2 from selling, transferring, alienating and/or creating any third party interest or parting with possession of the 2002.01 MTs of Heavy Aromatics pledged with the petitioner and lying in the bonded warehouse of respondent No. 2 at Mundra. 12. On 31st August, 2016, a further order was passed in the absence of the counsel for the respondents, permitting the petitioner to initiate the steps to au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar - (1972) 3 SCC 196 and Central Bank of India v. Siriguppa Sugars & Chemicals Ltd. and Ors. - (2007) 8 SCC 353. 16. In response to the query whether an order under Section 9 of the Act could be obtained against respondent No. 2, which was not a party to the arbitration agreement, Mr. Kumar sought to place reliance on the decision in Sagar Warehousing Corporation v. Pawan Hans Helicopters Ltd. - AIR 2009 Del. 8. 17. Countering the above submissions, Mr. Akhil Sibal, learned counsel appearing for respondent No. 2, first pointed out that no order under Section 9 of the Act can be passed against respondent No. 2, particularly since it has an independent right as regards the cargo. He relied on the decisions in Dorling Kindersley (India) Pvt. Ltd. v. Sanguine Technical Publishers - 2013 (3) Arb LR 52 (Del.) and VLS Finance Ltd. v. BMS IT Institute Private Limited & Ors. - 220 (2015) DLT 113. 18. Mr. Sibal also referred to Section 150 of the CA, which according to him set out the 'waterfall' as regards the sequence of charge on the cargo lying in the bonded warehouse of respondent No. 2. He pointed out that the storage charges could be recovered even ahead of the Cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o refer to Sections 48, 142A and 150 of the CA which read as under : "48. Procedure in case of goods not cleared, warehoused, or transshipped within thirty days after unloading. - If any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transhipped within thirty days from the date of the unloading thereof at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is relinquished, such goods may, after notice to the importer and with the permission of the proper officer be sold by the person having the custody thereof : Provided that - (a) animals, perishable goods and hazardous goods, may, with the permission of the proper officer, be sold at any time; (b) arms and ammunition may be sold at such time and place and in such manner as the Central Government may direct." "142A. Liability under Act to be first charge. - Notwithstanding anything to the contrary contained in any Central Act or State Act, any amount of duty, penalty, interest or any other sum payable by an assessee or any other person under this Act, shall, save as otherwise provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the goods are to be sold under the provisions of the CA, they should, after notice to the owner thereof, be sold by public auction or by tender. Section 150(2) of the CA provides the sequence in which proceeds of the auction should be applied. It is categorical that it has to be first applied to payment of the expenses of sale. Next, it has to be applied to the payment "of the freight and other charges, if any, payable in respect of the goods sold, to the carrier." Thirdly, it has to be applied to "the payment of the duty, if any, on the goods sold." Fourthly, it has to be applied to "the payment of the charges in respect of the goods sold due to the person having the custody of the goods." This refers to, as the case may be, the person or entity in-charge of warehouse or storage area in whose custody the goods are kept, which in this case would be respondent No. 2. Fifth in the sequence is the payment of any amount due to the Central Government under the provisions of the CA or any other law relating to Customs, and the balance, if any, "shall be paid to the owner of the goods." 25. It is, therefore, seen that the owner of the goods is last in the sequence. The petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is taking place under Section 150 of the CA and that the manner in which the sale proceeds would be applied would have to be in accordance with that provision. 29. The Court finds merit in the submission of Mr. Sibal that the sale of the goods can take place only in terms of Section 150 of the CA. The goods in question are imported and have not been cleared within a period of thirty days after such import. Sections 48 read with Sections 142A and 150 of the CA are straightway attracted. Therefore, the sale of the warehoused goods has to take place only in accordance with Section 150 of the CA and the proceeds thereof have to be applied in the manner provided therein. The dues of the Customs authorities and that of respondent No. 2 have a priority over those of the petitioner and the sale proceeds will have to be applied to settle the dues in that order. Consequently, the question of permitting the petitioner as a pledgee of the goods to bring the goods to sale by way of public auction does not arise. 30. In the matter of enforcing the pledge in favour of the petitioner, the clauses in the agreement between the petitioner and respondent No. 1 have to give way to and ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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