The first respondent, Shanmughavilas Cashew Industries, purchased from East Africa 350 tons of raw cashew nuts which were shipped in the vessel SS Steliosm, which was chartered by the appellant, British India Steam Navigation Co Ltd, incorporated in England, pursuant to a contract of affreightment evidenced by 3 bills of lading issued to the shipper for the 3 loads of cashew nuts. Out of 4,445 bags only 3,712 bags were delivered at Cochin. The first respondent sued the appellant in the Court of the Subordinate Judge, Cochin, seeking damages for the short delivery. The trial Judge and the High Court of Kerala held in favour of the first respondent. The appellant appealed to the Supreme Court.

Held: The appeal is allowed, the impugned judgments are set aside and the case is remanded to the trial Court for disposal according to law after giving opportunity to the parties to amend their pleadings and adduce additional evidence, if they are so advised.

Clause 3 of the bills of lading reads as follows:

3. JURISDICTION: The contract evidenced by this bill of lading shall be governed by English law and disputes determined in England or, at the option of the Carrier, at the port of destination according to English law to the exclusion of the jurisdiction of the Courts of any other country. 

Clause 29 of the bills of lading runs as follows:

Finally in Accepting This Bill of Lading, the shipper, Consignee, and Owner of the goods, and the Holders of this Bill of Lading, expressly accept and agree to all its stipulations, exceptions, and conditions whether written, printed, stamped or incorporated, as fully as if they were all signed by such Shipper, Consignee, Owner or Holder.

The first respondent is the consignee and holder of the bills of lading and ex facie should be bound by this clause. No doubt the bills of lading were issued to the shipper from whom it was received by the first respondent. There is no evidence to show that the shipper repudiated the stipulations in the bills of lading in any manner. Under these circumstances would it be open to the first respondent to repudiate cl 3 of the bills of lading? It is a settled principle of the private international law governing bills of lading that the consignee or an endorsee derives the same rights and title in respect of the goods covered by the bill of lading as the shipper had. If cl 3 of the bills of lading is held to be binding on the first respondent, the choice of law by the parties would also be binding. English courts would perhaps use their own private international law to decide the dispute. In the event of an English court alone having jurisdiction, the application of Indian statutes and the jurisdiction of the Indian courts would be, to that extent, inapplicable.

Until the Bills of Lading Act 1855 (UK) was passed in England the endorsement of a bill of lading would not affect the contract evidenced in it, and the endorsee could not sue or be sued on such contract, though it was the person really interested in goods, the subject of the contract. By s 1 of the Bills of Lading Act 1855 (UK), in England 'every consignee of goods named in a Bill of Lading, and every endorsee of a Bill of Lading to whom the property of goods shall pass, upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the Bills of Lading had been made with himself.' The Indian Bills of Lading Act 1856 was based on the English Bills of Lading Act. Section 1 of the Indian Act is to the same effect as s 1 of the UK Act.

The question of jurisdiction in this case ought not to be determined by the High Court on the basis of the provisions of s 28 of the Indian Contract Act in the absence of a specific provision making it applicable to transactions in international trade. The effective operation of statutes of a country in relation to foreigners and foreign property, including ships, is subject to limitations. In general, a statute extends territorially, unless the contrary is stated, throughout the country and will extend to the territorial waters, and such places as intention to that effect is shown. A statute extends to all persons within the country if that intention is shown. The Indian Parliament therefore has no authority to legislate for foreign vessels or foreigners in them on the high seas. Thus a foreign ship on the high seas, or its foreign owners or their agents in a foreign country, are not deprived of rights by our statutory enactment expressed in general terms unless it provides that a foreign ship entering an Indian port or territorial waters and thus coming within the territorial jurisdiction is to be covered. If Parliament legislates in terms which extend to foreign ships or foreigners beyond the territorial limits of its jurisdiction, the Indian court is of course bound to give effect to such enactment. However, no such provision has been referred to in the impugned judgments. Without anything more Indian statutes are ineffective against foreign property and foreigners outside the jurisdiction.

The Indian Carriage of Goods by Sea Act 1925, which is an Act to amend the law with respect to the carriage of goods by sea, was passed after the International Conference on Maritime Law held at Brussels in October 1922 and the Brussels meeting in October 1923. Under s 2 of that Act which deals with application of the Rules it is provided: 'Subject to the provisions of this Act, the rules set out in the Schedule (here-inafter referred to as "the Rules") shall have the effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in India to any other port whether in or outside India.' To apply the Rules to a case, the port of origin has to be an Indian port. Unless the starting point or the port of loading is a port in India the Rules are inapplicable. These Rules have no application when goods are not carried from any Indian port. As in the instant case goods were shipped in Africa and carried to Cochin, this Act obviously was not applicable.

The Articles and the Rules referred to are to be found in the Schedule to the Indian Act were not applicable to the facts of the case. The dispute could not have been decided partly according to municipal law and partly according to English law. The English law was not proved before the court according to law.