Agent cannot retain client’s tank containers for unrelated dues without a contractual or statutory lien, Bombay High Court rules

The Petitioner owned 138 T-11 ISO tank containers and handed them to Respondent No.1 under an Agency Agreement dated 4 March 2021 for handling, booking and storage in India.

Clause 3.5.1 required Respondent No.1 to return the tanks to the Petitioner upon instruction.

Respondent No.1 did not oppose return of the tanks in principle but claimed a lien over them for alleged dues of USD 389,576.07 arising from separate contractual dealings.

Respondent No.4 stated that four tanks were in its custody and claimed Rs.57,297.02 towards terminal and other service charges relating to those tanks.

Whether Respondent No.1 could exercise a lien or retain the Petitioner’s tanks, handed over under the 4 March 2021 Agency Agreement, to secure monetary claims arising under separate agreements.

Whether the Petitioner could restrict the composite Section 9 petition to claims under the 4 March 2021 Agency Agreement and pursue claims under the other agreements separately.

Whether relief under Section 9 could be granted against Respondent Nos.2 to 4, who were not parties to the arbitration agreement but allegedly possessed the tanks, including respondents situated outside the territorial jurisdiction of the Court.

Whether Respondent Nos.2 and 4 could retain the Petitioner’s tanks for their respective claims against Respondent No.1.

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, particularly the power to grant interim protection concerning the subject matter of arbitration, including property in the possession of a non-signatory.

Under Section 221 of the Indian Contract Act, 1872, an agent’s lien extends only to amounts due for commission, disbursements and services “in respect of the same”; it does not create an unlimited right to retain every property of the principal for every debt.

Section 170 concerns a particular lien for services performed in respect of the goods retained, while Section 171 grants a general lien only to specified classes such as bankers, factors, wharfingers, High Court attorneys and policy brokers.

In Ram Prasad v. State of Madhya Pradesh, (1969) 3 SCC 24, the Supreme Court held that an agent’s lien is a mixed question of law and fact and requires a contractual and factual foundation.

Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729, establishes that separate contracts having independent existence and separate arbitration clauses ordinarily cannot be combined into one arbitral reference.

The principles underlying Order XXIII Rule 1(3), CPC, may guide a Section 9 proceeding, although the CPC does not apply mechanically, permitting withdrawal or non-pressing of claims with liberty to pursue them separately where they have not been adjudicated.

The Court held that the objection based on Duro Felguera did not require dismissal of the entire petition because the Petitioner had, before adjudication on merits, confined the proceeding to the 4 March 2021 Agency Agreement and expressly kept the other claims open for separate proceedings.

On the lien issue, the tanks were handed over under the 4 March 2021 Agreement for agency-related purposes and were required to be returned under Clause 3.5.1.

Respondent No.1 failed to show that its alleged dues related to services performed in respect of those 138 tanks or that the Agreement expressly authorised retention for debts arising under the other agreements.

Section 221 therefore did not establish a prima facie right to retain the tanks for general or cross-contractual dues.

The Court further held that Respondent Nos.2 to 4 could be directed to release identified tanks in their actual custody because the relief was directed at protecting and delivering the subject matter of arbitration, not at imposing contractual liability upon non-signatories.

Respondent No.4’s claim was different because it related to services concerning the four tanks in its custody; accordingly, release was made conditional upon the Petitioner furnishing security for Rs.57,297.02, without finally deciding the existence of a lien.

The Court permitted the Petitioner to confine the proceedings to the 4 March 2021 Agency Agreement and granted liberty to pursue claims under the 8 December 2020 and 20 November 2023 agreements separately.

Respondent No.1 was held not entitled, at that stage, to retain the 138 tanks as security for its alleged USD 389,576.07 dues arising from separate contractual dealings.

Respondent Nos.2 to 4 were directed to release and hand over the Petitioner’s tanks in their custody, subject to Respondent No.4 receiving adequate security for Rs.57,297.02.

Respondent No.2 was directed not to withhold the tanks for its claim against Respondent No.1 and was ordered to disclose, within two weeks, the whereabouts and custodians of tanks KUKU2500296 and SWIU2260102.

Respondent No.1 was directed to cooperate in securing their delivery, and Respondent Nos.2 to 4 were restrained from transferring, encumbering, disposing of or creating third-party rights in the tanks in their custody.

The Petitioner was directed to take steps to commence arbitration under the 4 March 2021 Agreement.

All monetary claims and lien claims were left open for determination in appropriate proceedings; the petition was disposed of without costs, and the request for stay was rejected.