Bombay High Court
The Board Of Trustees Of The Port Of ... vs Idbi Bank Limited And 2 Ors on 2 August, 2022
Author: N.J.Jamadar
Bench: N.J.Jamadar
Digitally signed by
SWAROOP SWAROOP
SHARAD SHARAD PHADKE
PHADKE Date: 2022.08.04
20:16:29 +0530 ial 13321 of 2021.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO.13321 OF 2021
IN
COMM. ADMIRALTY SUIT NO.46 OF 2021
The Board of Trustees of the Port of Mormugao ... Applicant
and
IDBI Bank Ltd. ... Plaintiff
Versus
Sale Proceeds of MV Tag 20 and Anr. ... Defendants
Mr. Nandkishore i/by DSK Legal, for Applicant.
Mr. Zarir Bharucha with Mr. Rishi Thakur, Ms. Dhwani Gala i/by ZBA, for Plaintiff.
CORAM: N.J.JAMADAR, J.
DATE: 2nd AUGUST, 2022
P.C.:
1. The Board of Trustees of the Port of Mormugao, a statutory authority
constituted under the Major Port Trust Act, 1963, has taken out this Application
seeking the following reliefs :
"(a) that this Hon'ble Court may be pleased to allow the present
Interim Application granting leave to the Applicant to intervene in the
present Suit being Commercial Admiralty Suit (L) No.9024 of 2020 and
thereby allow the Applicant to be impleaded as a defendant in the present
Suit being Commercial Admiralty Suit (L) No.9024 of 2020.
(b) For an order and decree in the sum of Rs.25,40,15,870 (Twenty Five
Crores Forty Lakh Fifteen Thousand Eight Hundred Seventy only) as per the
Particulars of Claim, being Exhibit - Y hereto, together with interest on the
principal claim of Rs.21,58,49,287 (Rupees Twenty One Crore Fifty Eight
Lakh Forty Nine Thousand Two Hundred Eighty Seven only) at the rate of 1
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per cent per month from the date of filing of this Suit till payment/realization,
in favour of the Applicant;
(c) for an order directing that the balance of the sale proceeds of Defendant
No.1 Vessel, which is deposited with the Prothonotary and Senior Master of
this Hon'ble Court be paid to the Applicant since the maritime lien of the
Applicant has priority over all other claims against the Defendant No.1
Vessel;"
2. The Application arises in the backdrop of the following facts :
2.1 MV Tag 20, prior to its sale, was owned by Tag Offshore Limited
(Company in liquidation) - Defendant No.2. The erstwhile registered owner of the
MV Tag 20, had evinced interest in availing berth facilities for its Vessels at Port of
Mormugao and accepted the charges to be paid for the said facility.
2.2 MV Tag 20 arrived at the Applicant's port in November, 2018 and was
anchored in sea. On 24th November, 2018 the Defendant No.1 was piloted by the
Applicant's pilot from the sea anchorage from Berth No.9 at the port. In the
intervening period on 24th April, 2019 NCLT Mumbai initiated Corporate Insolvency
Resolution Process (CIRP) against Defendant No.2 Company.
2.3 At the instance of the Insolvency Resolution Professional, appointed in
respect of the Defendant No.2 Company, the Applicant provided/extended port
services to the Defendant No.1 Vessel. Eventually, the Defendant No.1 was arrested
by the Sheriff of Mumbai pursuant to an order dated 18 th December, 2020 passed by
this Court in the instant suit.
2.4 Pursuant to an order dated 31st March, 2021 the Defendant No.1 Vessel
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was sold in an auction held on 27 th April, 2021 to M/s. Last Voyage DMCC, Dubai for
a sum of Rs.8,35,00,000/-. The sale proceeds have been deposited with the
Prothonotary and Senior Master of this Court.
2.5 The Applicant claims that till the date of sale of the Defendant No.1
Vessel, the Applicant had provided/extended various facilities to the Defendant No.1
Vessel, which, in turn, thus, owes the port dues, pilotage, berth hire charges, minus
the amounts already paid by the Defendant No.2, to the tune of Rs.21,52,51,801.40
and interest thereon. In addition, the Applicant is entitled to recover a sum of
Rs.5,97,486/- towards manning services provided to the Defendant No.1. Hence, this
Application.
3. The Plaintiff Bank has instituted Admiralty Suit to recover the amount
advanced to the Defendant No.2, the registered owner of M.V.Tag 20, inter alia, on
the security of the vessel M.V.Tag 20 by way of mortgage of the vessel. The Plaintiff
claims that it has a maritime claim under Section 4(1)(c) of the Admiralty
( Jurisdiction and Settlement of Maritime Claims) Act, 2017.
4. The Plaintiff has resisted the Application by filing an Affidavit in Reply.
The Plaintiff asserts that the Applicant Port Trust has no right to intervene in the
Plaintiff's Suit as the Applicant has failed to establish any interest in the res i.e. the
sale proceeds of the Vessel; the Applicant can prove its claim against the sale
proceeds of the Vessel only by way of a substantive admiralty suit, which the Applicant
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has admittedly yet not instituted, and that the Applicant's purported maritime lien
stood extinguished as the period of one year elapsed. The Plaintiff further asserts that
the reliefs in prayer clauses (b) and (c) of the Application, extracted above, cannot be
granted as they are in teeth of the provisions contained in Rules 1086 and 1087 of the
Bombay High Court Original Side Rules.
5. I have heard Mr. Nandkishor, learned Counsel for the Applicant and Mr.
Bharucha, learned Counsel for the Plaintiff at some length. With the assistance of the
learned Counsel, I have perused the averments in the application, reply thereto,
averments in the Plaint and the documents annexed thereto.
6. At the outset, Mr. Bharucha, learned Counsel for the Plaintiff submitted
that, under no circumstances, the reliefs sought in prayer clauses (b) and (c) extracted
above, namely pass a decree in favour of the Applicant and further to pay out the said
amount in preference to all other claims against the sale proceeds of the M.V.Tag 20,
can be entertained as the Applicant has yet not instituted the Suit.
7. Without controverting the submissions on facts, that the Applicant has
yet not instituted the Suit, the learned Counsel for the Applicant made an endeavour
to join the issue by canvassing a submission that in the case at hand, the Application
contains all the requisite averments and is also supported by all the necessary
documents and, therefore, there is no impediment in considering the prayer clauses
(b) and (c), post impleadment of the Applicant as party Defendant to the Suit.
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8. In order to properly appreciate the aforesaid submissions, it may be
apposite to note few provisions contained in Rules for Regulating the Procedure and
Practice in cases brought before the High Court under the Admiralty ( Jurisdiction and
Settlement of Maritime Claims) Act, 2017. Under clause (h) of sub Rule (1) of Rule
1063, "Suit" means any suit, action or other proceeding instituted in the court in its
admiralty jurisdiction. Rule 1064 provides that a Suit shall be commenced by a plaint
signed and verified according to the provisions of the Code of Civil Procedure, 1908
and by these rules.
9. Rule 1066 reads as under :
"1066 Application to arrest ship in a suit in rem. - If the suit is in redm,
an application for arrest any ship proceeded against shall be made to the
Court and shall be supported by an affidavit. The affidavit shall state the
nature of the claim and that it has not been satisfied. It shall also state the
nationality of the ship to be arrested and the port at which it is to be
arrested and whether a valid caveat against arrest has been filed."
10. Rule 1086 provides for Intervention in an Admiralty Suit and reads as
under :
"(a) Where a ship against which a suit in rem is brought is under arrest
or money representing the proceeds of sale of that ship is in court, a person
who has interest in that ship or money but who is not a defendant to the suit
may, with the leave of the Judge, intervene in the suit.
(b) An application for grant of leave under this rule may be made ex-
parte by an affidavit showing the interest of the applicant in the ship against
which the suit is brought or in the money held in court.
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(c) A person to whom leave is granted to intervene shall thereupon become a
party to the suit and shall file an appearance in person or by vakalatnama
within the period specified in the order granting leave. On filing such
appearance or vakalatnama, the intervener shall be treated as if he were a
defendant in the suit.
(d) The Judge may order that a person to whom he grants leave to intervene
in a suit, shall within such period as may be specified in the order, serve on
every other party to the suit such pleading as may be specified."
11. Rule 1087 provides for order for sale of ship and determination of
priority of claims. It reads as under :
"1087. Order for sale of ship and determination of priority of claims -
(a) Where in a suit in rem the ship proceeded against is sold and the sale
proceeds are paid into court, any party who has obtained nor obtains a decree
or judgment against such ship or proceeds of sale may apply to the Court by
interim application for an order determining the order of priority of claims
against the proceeds of sale of such ship.
(b) All persons who have filed caveats against payment out of sale proceeds
of the ship shall be joined in the interim application and he heard.
(c) The order of priorities shall be in accordance with the provisions of
Sections 9 and 10 of the Admiralty ( Jurisdiction and Settlement of Maritime
Claims) Act, 2017 read with these rules.
(d) When an application is made under sub-rule (a), the Sheriff shall send for
publication in such newspapers as the Court may direct, a notice complying
with the provisions of sub-rule (e).
(e) The notice referred to in sub-rule (d) shall state -
(i) that the ship (particulars to be specified) has been sold by an
order of the High Court in a suit in rem giving the number of the suit and the
names of the parties to the suit;
(ii) that the gross proceeds of the sale, specifying the amount thereof,
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have been paid into Court;
(iii) that the order of priority of claims against the sale proceeds will
not be determined until after the expiration of the period (specifying it)
specified in the order;
(iv) that any person having a claim against the ship or the proceeds of
sale thereof, should file a suit to prove his claim before the expiration of that
period.
(f ) The Sheriff shall lodge in the registry a copy of each newspaper in which
the notice referred to in sub-rule (e) has appeared.
(g) The expenses incurred by the Sheriff in complying with an order of the
court under this rule shall be included in his expenses relating to the sale of
the ship. Any expense incurred by the Sheriff, shall, at the first instance, be
paid by the party at whose request the order under sub-rule (a) is made. The
party shall be entitled to be reimbursed such expenses incurred from the sale
proceeds paid into court after taxation by the Taxing Master of the Court or
as directed by the Court.
(h)An Application to extend the period referred to in sub-rule (e) (iii) shall
be made by interim application in the suit in which any order for
determination of priorities is sought, with notice to all persons who have filed
a suit against the ship or its sale proceeds or have filed a caveat against
payment of sale proceeds of the ship.
(i) If upon determination of the order of priorities it appears to the court that
any party who has obtained a decree is entitled to be paid in priority over all
other claims then such party shall be at liberty to file an interim application
for payment out of the sale proceeds."
12. In the light of the aforesaid rules, the submission on behalf of the
Applicant that institution of a suit is an auxiliary, and not peremptory, exercise, cannot
be acceded to unreservedly. Section 5 of the Admiralty Act, empowers the High
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Court to order arrest of the Vessel in rem, for the purpose of providing security
against the maritime claim, which is the subject of an admiralty proceeding, where the
Court has reason to believe that any of the circumstances envisaged by clauses (a) to
(e) thereof exist. In this context, Rule 1066 of the High Court Rules envisages
pendency of a suit in rem wherein an application for arrest of the ship can be made.
Undoubtedly, Rule 1086 provides for intervention by a person who has interest in the
ship or the sale proceeds of the ship, which is arrested or sold in a suit in rem.
13. In the Board of Trustees of the Port of Mumbai V/s. M.V.Karnika 1 ), I
had an occasion to consider the import of the aforesaid Rules. It was, inter alia,
observed as under :
"15. Sub-clause (a) of Rule 1086 provides that where an action in rem
is brought against a ship, which is under arrest, or the sale proceeds of the
ship, (which is in deposit with the Court), a person, who has interest in that
ship or sale proceeds may intervene in the suit, with the leave of the Judge, if
he is not party defendant to the suit. On a plain reading, four postulates
emerges. One, an action in rem must have been brought against the vessel.
Two, the vessel must be either under arrest or, post its sale, the Court holds
seisin over the sale proceeds of the ship. Three, the person who seeks to
intervene must have an interest in the said vessel or its sale proceeds. From
the point of view of the intervener, what has to be established is the existence
of an interest in the vessel or the sale proceeds. Four, it is in the discretion of
the Court to allow a party to intervene."
14. In appreciating the necessity of institution of the suit for enforcement of
a maritime claim, what is of critical significance is the action which is to be initiated in
1 IA No.895 of 2021 in COMAS 11 of 2021
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the matter of determination of priorities in claims. Sub-Rule (e) of Rule 1087, inter
alia, provides that the notice referred to in sub-Rule (d) shall state that any person
having a claim against the ship or the proceeds of sale thereof, shall file a suit to prove
his claim before the expiration of the period specified therein. The claim for priority,
thus, hinges upon the question as to whether a party has obtained a decree or
judgment against the Vessel or proceeds of the vessel.
15. In view of the above, if the rules are considered as a whole, then it would
be difficult to agree with the proposition that the institution of a suit to substantiate a
maritime claim is not necessary as it would lead to anomalous consequences. I,
therefore, find substance in the submission of Mr. Bharucha that the prayer clauses (b)
and (c) of the Application cannot be considered, at this stage.
16. Mr. Bharucha would further urge that even the prayer for intervention
cannot be entertained till the applicant institutes a suit. I am afraid to accede to this
broad proposition. On a plain reading of Rule 1086, such a construction does not
commend itself. Under Rule 1086, the qualifying factor to seek intervention is
existence of an 'interest' either in the vessel or the sale proceeds of the vessel. Sub-
rule (c) of Rule 1086 makes the position beyond the cavil. It provides that upon being
allowed to intervene, the intervener becomes a party to the suit and is enjoined to
enter appearance. Thereupon, the Intervener shall be treated as if he were the
defendant in the suit. Sub-rule (b) of Rule 1086 provides that an Application for
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intervention can even be made ex-parte. This sub-rule also fortifies an inference that
institution of a suit is not peremptory to seek intervention as, at that stage, what
matters is existence of 'interest' in the subject matter of the admiralty suit. Once that
condition is satisfied, the Court would be justified in granting intervention.
17. Undoubtedly, sub-Rule (e) read with sub-Rule (d) of Rule 1087 envisages
that a person who lays claim against the vessel or the sale proceeds of the vessel should
file a suit to prove his claim. However, the said requirement cannot be read de hors the
context of stage of the proceeding. At the stage of determination of priorities, the
aspect of institution of a suit and crystallization of the claim into a judgment or decree
becomes relevant. However, the requirement of institution of a suit cannot be
considered as a precondition for intervention. The course, which however, appears
more pragmatic and conducive to the orderly conduct of the proceedings, in
conformity with the Rules, is to put the intervener to a condition that the intervener
shall institute a suit within a reasonable time of being allowed to intervene.
18. In the case at hand, on facts, the claim of the Applicant seems to be
covered by clause (n) of sub-section (1) of Section 4 of the Admiralty Act, 2017 and
also commands the status of maritime lien under clause (d) of Section (1) of Section 9
of the Admiralty Act, 2017, in respect of certain claims. The existence of the interest
of the Applicant in the sale proceeds of MV Tag 20 can, thus, hardly be questioned.
19. I am, therefore, inclined to allow the Application in terms of prayer
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clause (a) only, extracted above. Hence, the following order :
ORDER
(i) The Application stands allowed in terms of prayer clause (a), subject to the Applicant instituting a suit in proof of its claim within a period of one month from today.
(ii) The Plaintiff shall implead the Applicant as party Defendant to this Suit.
(iii) Necessary amendment be carried out within a period of two weeks and copy of the amended plaint be served on the defendants as well as newly added defendant within a week thereafter.
(iv) The newly added defendant shall file Written Statement within a period of one month of being served with a copy of the amended plaint.
The Application stands disposed.
( N.J.JAMADAR, J. ) SSP 11/11