Consumer Dispute in Freight Services: Supreme Court Restores Compensation to Exporter

The Supreme Court of India recently delivered a significant ruling in the case of M/s Bawa Paulins Pvt. Ltd. vs. UPS Freight Services (India) Pvt. Ltd. & Anr. The case revolved around a dispute concerning deficiency in service by a freight forwarding company, which led to financial losses for an exporter. The key issue before the Court was whether the National Consumer Disputes Redressal Commission (NCDRC) erred in drastically reducing the compensation awarded by the State Consumer Commission.

The Supreme Court set aside the order of the NCDRC and restored the compensation originally granted by the State Commission, reinforcing the protection of consumer rights under the Consumer Protection Act, 1986.

Background of the Case

The dispute arose when M/s Bawa Paulins Pvt. Ltd., an exporter, engaged UPS Freight Services (India) Pvt. Ltd. (formerly known as M/s Fritz Freight Forwarding India Pvt. Ltd.) to transport a consignment of 234 packages of messenger bags to Baltimore, USA. The agreed mode of payment was through a Letter of Credit (LC) against a Forwarder Cargo Receipt (FCR). However, due to a mistake in the FCR, the bank refused to honor the LC, leading to financial losses for the exporter.

The primary facts of the case are:

The consignment was worth USD 31,920 (approximately Rs. 13.79 lakhs).
The contract specified that the goods would be shipped Free on Board (FOB), New Delhi.
UPS Freight Services mistakenly recorded the port of loading as Jawaharlal Nehru Port Trust (JNPT), Bombay, instead of New Delhi.
Due to this error, the consignee’s bank refused to honor the LC, leading to non-payment for the shipment.
The goods were allegedly delivered to the consignee without payment, resulting in losses for the exporter.

Arguments by the Parties

Appellant (M/s Bawa Paulins Pvt. Ltd.)

Argued that they fulfilled all obligations under the FOB contract and were entitled to the sale consideration.
Claimed that the incorrect FCR caused the consignee’s bank to reject the LC, leading to financial losses.
Alleged collusion between the freight forwarder, consignee, and the consignee’s bank to clear the goods without making payment.
Sought compensation for the lost consignment value, interest, and damages for mental harassment.

Respondent (UPS Freight Services & Ors.)

Admitted to the error in the FCR but argued that the exporter should have noticed and corrected it before submitting the documents to the bank.
Claimed that the refusal to honor the LC was due to other reasons, including late shipment.
Stated that the goods were seized and auctioned by U.S. Customs after the consignee filed for bankruptcy.
Argued that the exporter did not take timely action against the consignee for non-payment.

Observations by the Supreme Court

The Supreme Court analyzed the facts and observed:

The contract was clearly an FOB contract, meaning the exporter’s obligation ended once the goods were delivered to the freight forwarder.
The incorrect port of loading in the FCR constituted a serious deficiency in service, leading to financial losses for the exporter.
The freight forwarder’s correction of the error after the LC was refused did not remedy the damage already caused.
The National Commission erred in reducing the compensation, as the liability of the freight forwarder for negligence was established.

The Court quoted:

“The National Commission has categorically held that there was deficiency in rendering services by the respondent No.1, therefore, the National Commission ought not have reduced the compensation payable to the appellant herein.”

Final Verdict

The Supreme Court allowed the appeal and ruled as follows:

The judgment of the National Commission was quashed.
The compensation awarded by the State Consumer Commission was restored.
The freight forwarder was directed to pay:

Rs. 13,79,901/- towards the value of the lost consignment.
Rs. 50,000/- as compensation for mental harassment.
Rs. 10,000/- towards litigation costs.

The respondents were given two months to make the payment, failing which the appellant could seek further legal remedies.

Conclusion

This ruling reinforces the principle that freight service providers are accountable for ensuring accuracy in documentation, as errors can lead to severe financial losses. The judgment underscores the importance of consumer protection in commercial transactions and sets a precedent for similar cases involving negligence in service delivery.

Petitioner Name: M/s Bawa Paulins Pvt. Ltd..
Respondent Name: UPS Freight Services (India) Pvt. Ltd..
Judgment By: Justice B.R. Gavai, Justice B.V. Nagarathna.
Place Of Incident: New Delhi, India.
Judgment Date: 10-11-2022.

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