The Bills of Lading Act 2025 replaced the Indian Bills of Lading Act 1856 — legislation that had governed the transfer of rights under bills of lading in India for nearly 170 years. The 1856 Act was one of the oldest pieces of commercial legislation still in force in India when it was finally replaced, and while it had served its purpose, it was drafted for a world of sailing ships and paper-only documentation. The 2025 Act modernises this framework for contemporary trade.
Why the 1856 Act Needed Replacing
The 1856 Act was modelled on the English Bills of Lading Act 1855, which England itself replaced with the Carriage of Goods by Sea Act 1992. By the time the Indian legislation was replaced, Indian shippers and banks were operating under a framework that was significantly behind international standards.
The primary gap in the old Act was its treatment of third party rights. The 1856 Act transferred contractual rights and liabilities to a third party who took a bill of lading by endorsement and delivery, but its application to modern forms of documentation — straight bills, sea waybills, and electronic documents — was uncertain.
Trade finance institutions in particular faced uncertainty about the rights they acquired when they took security over bills of lading under Indian law, particularly in cases involving containers that changed hands multiple times during transit.
Third Party Rights Under the 2025 Act
The 2025 Act addresses the transfer of contractual rights under bills of lading more clearly and comprehensively than the old legislation. A person who becomes the lawful holder of a bill of lading acquires the same rights of suit that the original shipper had against the carrier under the contract of carriage.
The Act also clarifies when liabilities as well as rights transfer to a third party holder. Under the old Act, accepting delivery or making a claim against the carrier could trigger a transfer of liability for freight and other contractual obligations. The 2025 Act provides a clearer framework for when this transfer of liability occurs, reducing the risk that a bank or buyer who acquires a bill of lading for security purposes inadvertently takes on liability for freight payments.
Trade finance banks in India that use bills of lading as security for letters of credit and other documentary credit facilities should review the 2025 Act and consider whether any changes to their standard documentation or procedures are needed to take advantage of the clearer framework for third party rights.
Electronic Bills of Lading
The 2025 Act provides explicit legislative recognition of electronic bills of lading issued through approved electronic systems. An electronic bill of lading that satisfies the requirements of the Act has the same legal effect as a paper bill, including its function as a document of title.
The approved systems through which electronic bills can be issued are to be prescribed by the central government. Several electronic bill of lading platforms already operate globally — including BOLERO, essDOCS, and more recently platforms operating on distributed ledger technology. The legislative recognition under the 2025 Act removes the uncertainty that had previously existed about whether these platforms could be used effectively for Indian trade.
Straight Bills and Sea Waybills
The 2025 Act also addresses the position of straight bills of lading and sea waybills, which are non-negotiable documents. The old 1856 Act applied primarily to order bills of lading and its application to non-negotiable documents was uncertain. The new Act provides a clearer framework for the rights of parties under non-negotiable shipping documents, reflecting the fact that sea waybills are now commonly used for certain trade lanes where the cargo moves quickly and the risk of the documents being in transit when the cargo arrives is low.
Implications for the Trade Finance Industry
The changes under the 2025 Act are particularly significant for the trade finance industry. Letters of credit and documentary collection transactions rely on the bill of lading functioning as a negotiable document of title. The clearer framework for third party rights and the legislative recognition of electronic bills remove barriers to the use of modern documentation in Indian trade finance.
Banks, shippers, and their legal advisers should familiarise themselves with the changes under the 2025 Act and ensure that their standard terms, documentation, and procedures reflect the updated legal framework.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. It does not create a lawyer-client relationship. For advice specific to your situation, please consult a qualified legal professional. LawCite Advocates is a law firm registered in India.