If you are stuck in such a situation, here is what to do.

An Indian export house, let’s call it “Himalayan Exports Pvt. Ltd.”, finds itself in a challenging international trade predicament. They shipped several refrigerated containers of perishable goods to a port in a North African country. The commercial terms of the shipment were Cost and Freight (CFR), a common INCOTERM. The payment for the goods was received on time from the buyer, “Euro Traders Inc.”, a company based in Europe.

The problem arose after the shipment reached the destination port. The designated consignee, “Global Imports Ltd.”, has failed to take delivery of the containers. The goods have now been lying at the port for several months, accumulating substantial demurrage, detention, and port storage charges. Himalayan Exports Pvt. Ltd. has not received any formal communication from the buyer or the shipping line holding them responsible, but they are deeply concerned. The shipping line’s contract is with them as the shipper, and they fear they could be held liable for these massive, unforeseen costs. They are seeking clarity on their legal position and potential liability in this complex situation.

Advice in such cases

Navigating such international trade disputes requires a careful and strategic approach. Here are the immediate steps you should consider:

• Review all Documentation: Scrutinise the sales contract, the bill of lading, and any correspondence with the buyer and the shipping line. The specific clauses in these documents, especially regarding the governing law and responsibilities under the chosen INCOTERMS, are critical.
• Formal Communication: Immediately send formal, written communications (preferably via email for a record) to the buyer, the consignee, and the shipping line. Inquire about the reason for the delay and put the buyer on notice that they will be held responsible for all resulting costs due to their failure to take delivery.
• Mitigate Your Losses: Explore all possible options to reduce the accumulating charges. This could include requesting the shipping line to allow you to re-export the goods, find an alternative buyer in the same or a nearby country, or have the goods disposed of if they are no longer viable. While these actions may have costs, they could be significantly less than the mounting demurrage fees.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

Applicable Sections of Law

This issue is governed by a combination of international trade customs and Indian law.

• INCOTERMS (CFR – Cost and Freight): Under CFR terms, the seller (exporter) is responsible for paying the costs and freight to bring the goods to the named port of destination. Crucially, the risk of loss or damage to the goods transfers from the seller to the buyer once the goods are on board the vessel. However, the contract of carriage (the bill of lading) is between the exporter and the shipping line. This can create a situation where, if the consignee fails to pay, the shipping line may pursue the exporter for payment of demurrage and other charges.
• The Indian Contract Act, 1872: The underlying sales agreement is a contract. The buyer’s failure to ensure the consignee takes delivery of the goods can be considered a breach of contract. The exporter can sue for damages resulting from this breach.
• The Sale of Goods Act, 1930: Section 44 of this Act is particularly relevant. It states that when the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods.

If you are the complainant

As the exporter (the complainant), your goal is to recover the losses forced upon you.

• Gather Evidence: Compile all relevant documents: the sales contract, bill of lading, proof of payment for the goods, invoices, and all communication records with all parties involved.
• Issue a Legal Notice: Your lawyer should draft and send a comprehensive legal notice to the buyer. This notice will formally state the breach, detail the accumulating charges, and demand immediate payment, holding them liable for all current and future costs.
• Initiate Legal Action: If the notice does not result in a resolution, you may need to file a civil suit for recovery of damages against the buyer. If your contract has an arbitration clause, you may need to invoke it.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

If you are the victim

As the party suffering a financial loss due to the actions or inaction of another, you are the victim in this commercial dispute.

• Quantify Your Losses: Calculate the exact financial damage. This includes the full amount of demurrage and port charges, any costs associated with trying to mitigate the loss (like legal fees or survey costs), and the value of the goods if they have perished.
• Review Contractual Remedies: Check your contract for clauses related to breach, dispute resolution, and jurisdiction. Understanding these clauses is key to planning your legal strategy.
• File for Recovery: Your primary remedy is to file a civil suit for recovery against the buyer. The buyer, having paid for the goods, had an obligation to take delivery. Their failure to do so directly caused your financial loss.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

How the police behave in such cases

It is important to understand that this is primarily a civil dispute, not a criminal one. The police in India generally do not intervene in matters of contractual breach. Their role is to investigate crime, and a failure to take delivery of goods is a commercial issue. You could attempt to file a complaint alleging a criminal offence like cheating (Section 316 of the Bharatiya Nyaya Sanhita, 2023) or criminal breach of trust (Section 314 of the BNS), but this would be very difficult to prove. You would need to provide strong evidence that the buyer had a dishonest intention from the very beginning. In most cases, the police will advise you to seek remedy in a civil court.

FAQs people normally have

Here are some frequently asked questions in such scenarios:

• My terms were CFR, so isn’t the buyer responsible for everything after shipping?
  Under CFR, the buyer is responsible for the risk and costs after the goods are on board. However, your contract with the shipping line makes you, the shipper, liable for charges if the consignee defaults. You would then have to recover these charges from the buyer.
• Can the shipping line sue my Indian company for these charges?
  Yes. Since your company is the shipper on the Bill of Lading, the shipping line has a direct contract with you. They can file a lawsuit in India to recover their dues.
• What if the goods are perishable and are now a total loss?
  You can claim the value of the lost goods as part of your damages from the buyer. Their failure to take timely delivery directly caused the goods to perish, making them liable for the loss under the Sale of Goods Act, 1930.

What evidence is required?

To build a strong case, you will need to gather and preserve all relevant documentation. This includes:

• The final Sales Contract or Purchase Order.
• The Bill of Lading.
• Commercial Invoice and Packing List.
• Proof of payment received from the buyer.
• All email and other written correspondence with the buyer, consignee, shipping line, and freight forwarder.
• Official notices or invoices from the shipping line or port authority detailing the demurrage and other charges.
• Any survey reports if the condition of the goods was assessed at the destination port.

How long will the investigation take?

This situation does not involve a police investigation. It involves a civil legal process. The timeline can vary significantly:

• A legal notice is typically sent first, giving the other party 15 to 30 days to respond or comply.
• If the matter is not resolved, filing a civil suit in an Indian court can be a lengthy process, potentially taking several years for a final judgment.
• If your contract contains an arbitration clause, the dispute resolution process is generally much faster, often concluding within 12 to 18 months.

Advocate Sudhir Rao, Supreme Court of India