Airlines' liability limited unless consignment value declared

Rajesh Vora (name changed) had placed an order with Gems Art Factory at Jaipur for supply of four handmade silk carpets worth $8,000. The payment was made through credit card and bank draft. The carpets were to be delivered to Detroit in the US.

Gems Art Factory engaged the services of intermediaries Asia Transport Co and Lyraid Pvt Ltd, for facilitating the transportation. These agencies entrusted the shipment to British Airways.

The buyer refused to accept delivery as the carpets did not reach him in time. He also stopped payment. Gems got to know about this when Asia Transport forwarded a copy of a communication from British Airways, inquiring what should be done, since the buyer had refused delivery. Gems Art Factory had instructed to booking the goods to India at its cost, but this was not done. Alleging deficiency in service, Gems filed a complaint against British Airways and the intermediaries involved in transportation of the carpets.

The airline defended itself, saying it had promptly communicated the refusal of the buyer to accept the goods and time. Meanwhile, the consignment was seized by the US customs. The airline argued there was no negligence on its part. It contended that since the value of the consignment had not been declared, the claim would be restricted to a compensation of $20 per kg, which worked out to $60 for the three kg consignment.

The Rajasthan State Commission held the airline and the intermediaries liable for loss of the carpets and held them jointly liable to pay $11,000 or its equivalent in rupees, along with interest at nine per cent per annum. Additionally, a compensation of Rs 1 lakh and costs of Rs 5,000 were also awarded.

British Airways and Asia Transport Co filed separate appeals challenging this order. The airlines argued Gems Art Factory was not its customer, as the booking was done by Asia Transport Co. The National Commission rejected this argument as the airway bill showed Asia Transport Co was the agent of British Airways.

On merits, the National Commission found the delay in receiving instructions about what ought to be done with the goods was attributable to British Airways, which had been negligent by communicating this fact to its agent, rather than Gems, was the consignor. However, since the value of the consignment had not been declared, the liability, if any, would be restricted to $20 a kg, in accordance with the conditions stipulated on the airway bill.

The next defence was that the Rajasthan State Commission did not have the jurisdiction to entertain the dispute as British Airways did not have an office at Jaipur. The National Commission observed that the Carriage by Air Act requires a complaint to be filed where the carrier has its principal place of business or where the contract has been entered into, regardless of the place where the cause of action arose. Accordingly, it upheld the airlines contention that the complaint was not maintainable before the Rajasthan State Commission. Accordingly, the appeals were allowed and the complaint was dismissed.

So, it is necessary for businessmen to ensure the value of goods is properly declared. The case must be filed where airline has its office.

The author is a consumer activist