Legal Status of Dematerialized Bills of Lading in India. (By V.M. Syam Kumar, Advocate, Cochin.

) (Lecturer for Maritime Law, National University for Advanced Legal Studies, Koch i.) Bill of lading occupies a unique position among the documents used in internatio nal commerce. It is at the same time a receipt issued by the carrier for the goo ds received for carriage by sea, an evidence of the contract of affreightment an d more importantly from the commercial point of view, it is a document of title to the goods, the assignment of which would pass the title from one person to an other. These characteristics of the bill of lading complicates the task of demat erializing the same so as to meet the requirements of international shipping and at the same time accommodating it within the rights and duties regime of a lega l system. The rapid increase in trade and commerce had necessitated faster movement of goo ds across the globe. With around eighty five percent of the international commer ce being carried out through ships plying the oceans of the world, the need to r evamp the archaic shipping practices which governed the maritime transportation since centuries was direly felt. Innovations in marine sciences and ship technol ogy provided faster and safer ships but that meant only half the job done. Docum entation processes, which are an integral part of shipping and international com merce continued to be paper intensive and hence time consuming. The reliance on traditional paper documents, it was felt, can never be completely avoided since it provided the much needed feeling of tangibility and certainty regarding the r ights and duties of the respective parties especially when it came to operations like banking, letter of credit transactions and for resolution of legal dispute s before a court of law. In India as elsewhere, law has always lagged behind soc ial developments and the courts continued to insist on the same evidentiary requ irements as laid down in the Indian Evidence Act, 1872 which is traditionally ba sed upon paper records and oral evidence. The law of evidence in India assumed t he existence of paper based records and documents which should bear signature an d authentication. Before a court of law it was easier to substantiate a fact, if the same had been written down and authenticated, but to prove the existence or non existence of a right or a duty which had not been clearly charted out in a paper document, remained an uphill task. As regards dematerializing shipping documents are concerned, efforts made and tr ials conducted abroad in the said respect have revealed that it reduces paper wo rk, speeds up the communications, improves the overall efficiency and reduces th e administration costs. It also eliminates double handling of information and al l risk of documentary transcription error. The developments made in the electronic infrastructure revealed its astounding c apacity to simplify the trade process diminishing the complications arising out of voluminous paper work. Digital technology made dramatic changes in the way we transacted business. Safeguards evolved in electronic devices also demonstrated that it was possible to ensure safety and certainty with dematerialized documen ts also. In 1990 the CMI published its Rules for Electronic Bills of Lading which provided an elaborate though complex system for overcoming the problem of provin g title to goods by electronic means. The swiftness with which transactions coul d be completed though electronic medium lead to its universal acceptance compell ing the Indian Parliament to take note of the same and enact a law facilitating electronic commerce. Taking cue from the UNCITRAL adopted Model Law on Electroni c Commerce, the Information Technology Act, 2000 was enacted in India with the s aid objective which brought into effect amendments to certain legislations inclu ding the Indian Evidence Act. By virtue of the said statute, legal recognition h as been granted to electronic records and digital signatures. By virtue of the provisions of the Information Technology Act, an electronic Bil l of lading will be admissible in any legal proceedings without further proof or production of an original in paper format, provided the requirements as laid do

wn under Sec. 65 B of the Indian Evidence Act are complied with. An electronic, dem aterialized or system generated bill of lading clearly falls within the definition of an electronic record as defined in Sec. 2 (t) of the Information Technology A ct. The said section defines an electronic record as data, record or data genera ted image or sound stored received or sent in an electronic form or micro film o r computer generated micro fiche. Under the said Act, electronic form with referen ce to information would mean any information generated, sent received or stored in media, magnetic, optical, computer memory, micro film, computer generated mic ro fiche or similar device. The Act also validates the use of digital signature to authenticate an electronic record subject to the stipulations therein. By vir tue of the said provision, legal recognition has been accorded in India to elect ronic records and digital signatures which enable the conclusion of contracts an d the creation of rights and obligations through the electronic medium. In view of Sec. 3 of the Act, a bill of lading retained as an electronic record, will be subject to further stipulations valid evidence when produced for inspection bef ore the court of law. Since the admissibility of an electronic bill of lading before a Court of Law in India would depend on the due compliance of the norms laid down in Sec. 65 B of the Evidence Act as included therein vide the amended in 2000, it would be wort h while to make a closer examination of the said provision. Sub clause 1 of sec. 65 B mandates that any information contained in an electron ic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer o utput) shall be deemed to be also a document, if the conditions mentioned in the said section are satisfied in relation to the information and computer in quest ion and shall be admissible in any proceedings, without further proof or product ion of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible. It is interesting to note the words without further proof or production of the or iginal, as evidence of any contents of the original in the said sub clause. It is a moot point whether the said words presupposes the existence of an original in the traditional paper format, in which case the section would loose whole lot o f its efficacy. Reading the same as a whole in the light of its objectives of it s parent legislation viz., the Information Technology Act, 2000 the section is n ot capable of such a narrow interpretations as to mean that the same envisages o nly the electronically retained copies of the original paper document and does n ot envisage documents which exist only on electronic form. Proceeding further with Section 65 B, Sub Clause 2 we find that safe guards have been laid down to ensure that the electronic records produced before the Court are genuine and not fabricated. And with the said objective it proceeds to enume rate the conditions which are to be satisfied with respect to the infomration and com puter as stated in Sub Clause 1. The conditions are that: (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that p eriod by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was reg ularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such a s to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said a ctivities. Though the said conditions to be satisfied appear to be effective and comprehens ive, from the practical point of view question remains as to how the genuineness of or compliance with the said conditions could be ensured and cross checked. S ince the information and the computer would in the normal course be in the exclu

sive control and custody of the party producing the same and the conditions rela te to matters earlier in point of time to the production of the electronic docum ent, in the absence of any independent agency which could vouch safe for the gen uineness of the conditions, the compliance thereof will have to be taken for gra nted. So as to care of the situation where the information is generated or retained an d is accessible through a combination or net work of computers, as is usually pr acticed in shipping companies, sub clause 3 of Sec. 65 B provides that all the c omputers used for that purpose during that period shall be treated for the purpo ses of the section as constituting a single computer, and references in the sect ion to a computer shall be construed accordingly. Another important provision form the procedural point of view is sub-clause 4 wh ich mandates that in any proceedings where an electronic document is proposed to be produced as an evidence by invoking Sec. 65B a certificate purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (w hichever is appropriate), identifying the electronic record containing the state ment and describing the manner in which it was produced or giving such particula rs of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced b y a computer or dealing with any of the matters to which the conditions mentione d in sub-section(2) relate shall be produced. Such a certificate shall be eviden ce of any matter stated therein. The party challenging the veracity of the electronic document produced would at this stage get an opportunity (apparently the only opportunity) to test the vera city of the claim for satisfactory compliance of the conditions mentioned above, by cross examining the person who issued the certificate while he appears in th e witness box to depose in respect of the certificate issued by him. Sub clause 5 is intended to bring within the ambit of the section various method s or manners by which information is supplied to a computer and the information could be retrieved there from. Thus a bill of lading being an evidence of contra ct of affreightment stating the terms and conditions subject to which the carria ge of goods by sea is to be performed will be admitted in evidence in its electr onic form in India subject to the satisfactory compliance of the mandates of sec . 65 B as stated herein above. Unlike the other shipping documents, Bill of lading in its dematerialized form t hrows up certain issues. Shipping documents like way bills which are non negotia ble can easily be dematerialized since it only requires the information to be se nt through the computerized system. In its simplest form, a way bill empowers th e carrier to deliver the cargo to the person named therein, after obtaining proo f of address. Hence the dematerialization does not materially affect the rights and duties ensuing from a way bill. But it is not the same with a bill of lading especially if it is a negotiable one. Towards better under standing the legal status of a bill of lading in India and the effects of its dematerialization, it would be necessary to examine the principal statutes governing the issuance and validity of bills of lading viz., the Carri age of Goods by sea Act, 1925, the Bills of Lading Act, 1855 and the Multimodal Transportation of Goods Act, 1993. Since Bills of Lading comes within the purvie w the Sale of Goods Act and the Indian Stamp Act, 1899 whether the provisions in the said statutes as they stand now can accommodate dematerialization will also have to be considered. The Carriage of Goods by Sea Act (COGSA) incorporates in its Schedule, the Rules relating to Bills of Lading which are in pari materia with The Hague Rules evol ved at the Brussels Convention. Certain Amendments had been carried out to the C OGSA by the Multimodal Transportation of Goods Act, which speaks of another docu ment possessing different but comparable attributes of a bill of lading namely, the Multimodal Transport Document commonly known as the Combined Transport Bill of Lading. The provisions in COGSA has been drafted keeping in mind the Bill of lading to be a tangible paper document and dematerialization had not been in the

mind of the legislature at that earlier point of time. A reading of Rule 7 of A rticle III of the COGSA dealing with shipped bill of lading clearly reveals the same. It has been opined from some quarters that a demand by the shipper for a s hipped bill of lading as envisaged in the said provision might create difficulti es when it comes to dematerialization. But the difficulties if any regarding exi stence and content of such a document has been taken care of substantially by th e enactment of the Information Technology Act. Moreover, the fear that the court s of law in common law countries as ours would not regard an electronic bill of lading as a document of title also stands alleviated by the coming into force of the said statute. The Bills of Lading Act, 1855 is the enactment that directly concerns the negoti ability, the attribute most profoundly affected by dematerialization of the bill of lading. As regards its character as receipt of the cargo and as a contract o f affreightment, the dematerialization of the Bill of lading does not create as many problems as it does generate with its nature as a negotiable document. Nego tiability being integral to a bill of lading, it cannot be removed or replaced w ithout seriously affecting the international commerce because goods are sold and resold many times during the voyage. A bill of lading being a document of title to goods, it is highly necessary that any electronic replacement should also of fer the advantages of a document of title. Doubts have been raised as to whether the vesting of rights under the bill of lading in the consignee or endorsee as provided in sec.1 of the Bills of Lading Act, 1855 would have effect in the abse nce of physical endorsement and transfer. Though due to the lack of judicial dec isions on the point it is by no means fully certain that the Indian law would ha ve recognized the electronic bill of lading as a document of title, there is not hing in the wordings of the said provision that necessitates actual physical end orsement. But the decisions on the point by the courts especially the decision o f the Honble High Court of Kerala in New India Assurance Co. Ltd. V. San Jose Mar itime Ltd. pertaining to indorsement in blank, gives a contrary impression due to the emphasis given therein for the printed form of bill of lading and the clause s type written and incorporated by rubber stamp thereupon. The Indian Stamp Act, 1899 in Schedule I stipulate the stamp duty to be paid wit h respect to a Bill of lading. A practical issue could arise as to how stamp dut y could be levied in the case of an electronic document and the though Sec.6 of the Information Technology Act speaks about payment of fee or charges, the modal ities of actual payment remains unclear. Law has approved the commercially expedient practice of preparing and issuing bi lls of lading in a set of two or more though there are no specific statutory pro visions in India mandating the same. To prevent negotiation of more than one bil l of the set, one of them is usually marked original and sent to the consignee and the others are marked duplicate or non-negotiable. It is usual for bill of lading t o contain a stipulation that one of these bills of lading being accomplished the other shall stand void. The said practice will have to be altered while using ele ctronic bills of lading. As it is common in maritime practice to transfer the co ntractual rights and liabilities arising out of a contract of affreightment evid enced by the bill of lading, any electronic replacement for the bill of lading w ill have to provide its own means for the transfer of contractual rights and lia bilities along with the documentation itself. Here too exists, as in the case of negotiability and title transfer, a gaping legal lacuna. At the port of dischar ge the carrier is bound to deliver the cargo to the person producing the origina l bill of lading who is presumed to be the bonafide purchaser. The cargo might h ave been sold and resold during the voyage. If the carrier refused to deliver to the eventual holder, he would certainly be in breach of contract. If he deliver s to the wrong party also he will be accused of breach. The legal standard of ca re expected out of a prudent carrier will have to be stated afresh when electron ic bills of lading are used. Any systems that are devised will also need to prov ide security equivalent to the document of title to goods. The Multimodal Transportation of Goods Act, 1993 under Sec.9 lays down the manda tory contents of a Multimodal Transport Document (MTD or combined transport bill of lading). As per the same, such a bill of lading has to be signed by the mult

imodal transport operator or by a person duly authorized by him. Whether the doc ument is negotiable or not has to be specifically stated on its face. The Act, a fter its amendment in 2000, provides under Sec.2 (la) that "multimodal transport document" means a negotiable or non-negotiable document evidencing a multimodal transport contract and which can be replaced by electronic data interchange mes sages permitted by applicable law. Thus at present none of the above said statutes which govern the issuance, valid ity and legal status of bills of lading in India envisages the situations arisin g out of dematerialization of the same. The amendment carried out in the Multimo dal Transportation of Goods Act, 1993 has permitted the replacement of written d ocument by an elctronic data interchange. But similar provisions are not seen in the other enacments pertaining to carriage by sea discussed above. The enactmen t of the Information Technology Act grants legal recognition to electronic docum ents and lays down broad contours for ensuring the genuineness and legal accepta bility of electronic documents. The presence and content of an electronic docume nt thus stands legally recognized and a bill of lading in electronic form which satisfactorily meets the stipulations in the statute regarding digital signature s, provisions for admissibility of electronic records etc. would be a valid piec e of evidence before a court of law in India. But that will only mean regarding its existence and content. There exists an uncertainty in law as to whether cert ain peculiar facets of the bill of lading like its negotiability and capacity to pass on title to the holder is due course, would receive the same legal recogni tion in the courts of law as it presently commands, when it is dematerialized. T here exists an urgent need to clear out the said uncertainties by incorporating specific provisions regarding electronic bills of lading in the legislations aff ecting carriage of goods by sea in India. * * *