Gujarat High Court
M V Mallinath & vs Dempo Shipbuilding And Building Pvt Ltd on 21 March, 2017
Author: R.M.Chhaya
Bench: R.M.Chhaya
O/OJCA/97/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (OJ) NO. 97 of 2017
In
ADMIRALITY SUIT NO. 18 of 2016
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M V MALLINATH & 1....Applicant(s)
Versus
DEMPO SHIPBUILDING AND BUILDING PVT LTD....Respondent(s)
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Appearance:
MR NACHIKET A DAVE, ADVOCATE for the Applicant(s) No. 1 - 2
MR SAURABH N SOPARKAR, SENIOR ADVOCATE with MR ADITYA
KRISHNAMURTY, ADVOCATE with MS RUJUTA R OZA, ADVOCATE for the
Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 21/03/2017
ORAL ORDER
1. Heard Mr. Nachiket A. Dave, learned advocate for the applicants and Mr. Saurabh Soparkar, learned Senior Advocate with Mr. Aditya Krishnamurty with Ms. Rujuta Oza, for the opponents.
2. By way of this application, the applicants have prayed as under: "(A) This Hon'ble Court may be pleased Page 1 of 34 HC-NIC Page 1 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER to modify the order dated 20th October 2016 (passed in O.J. Civil Application Nos.197 of 2016 and 216 of 2016) and to secure the alleged claim of the Opponent by imposing conditions (as contained in the order dated 20th October 2016) on the use of Applicant No.1 Vessel alone;
(B) ... ... ..."
3. That, the opponent herein filed the present suit being Admiralty Suit no. 18 of 2016 and this Court (Coram: Hon'ble Smt. Justice Abhilasha Kumari) by order dated 7.4.2016 passed the order of arrest of the defendant vessel MV MALLINATH. It is a matter of record that the applicants - defendants filed O.J. Civil Application no. 197 of 2016 for vacating the order of arrest. The said application was heard along with another application filed by the applicants - defendants being O.J. Civil Application no.216 of 2016. This Court by a common order dated 20.10.2016 was pleased to dispose of both the applications and interalia observed thus: "14. Considering the facts of both applications and nature of claims, which are raised prima facie, this Court is of the opinion that for claim Nos.1, 2, 3, 4 and 7, the defendant Vessel is required to give full proof security. For claim Nos.5 and 6, in order to secure such claims, Page 2 of 34 HC-NIC Page 2 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER appropriate conditions can be imposed upon the defendant Vessel including the conditions of manner and method of use of the defendant Vessel.
15. Considering overall circumstances arising out of these applications and on basis of the averments made in these applications as well as keeping in mind the plaint as a whole, the following order is passed :
(a) While modifying the order of arrest dated 07.04.2016, the defendant Vessel shall furnish bank guarantee of a Nationalized Bank for an amount of Rs.7,12,50,000/ which would cover the claim Nos.1, 2, 3, 4 and 7.
(b) The defendants shall file an undertaking before this Court to the effect that the defendant Vessel shall not be put to sell and shall not be alienated till final disposal of the suit.
(c) The defendants shall insure the defendant Vessel and shall renew such insurance policy regularly till final disposal of the suit and shall place on record of the suit, the insurance policy on its each renewal.
(d) the defendants shall furnish the details of its sail within territory of Indian waters on the record of the suit at every quarter of three months till final disposal of the suit.
(e) The defendant Vessel shall not create any mortgage, lien and third party interest over the defendant Vessel till final disposal of the suit and shall further undertake that it Page 3 of 34 HC-NIC Page 3 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER shall not sail outside the waters of Indian territory.
(f) The defendant Vessel shall be made available to the jurisdiction of this Court as and when ordered by this Court."
4. The present application is filed for modification of the condition imposed by this Court in Para 15(a) of the said order.
4.1 It is a matter of record that the said order is challenged by the applicants before the Hon'ble Division Bench of this Court by way of O.J. Appeal no.1 of 2017, which has been admitted and the present application is filed as per the order dated 9.2.2017 passed by Hon'ble Division Bench of this Court (Coram: Hon'ble Mr. Justice M.R. Shah and Hon'ble Mr. Justice B.N. Karia) in O.J. Civil Application no.37 of 2017.
4.2 After having mentioned the factual matrix, it is contended by the applicants in this application that the value of vessel is sufficient to protect the interest of the opponent and the applicant no.1 - vessel alone can be said to be sufficient security. It is also contended by the applicants that applicant no.1 vessel was valued at Rs.47,00,00,000/ as per valuation report dated 3.11.2015 prepared by M/s. UBA Insurance Surveyors and Loss Page 4 of 34 HC-NIC Page 4 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER Assessors. It is further contended by the applicants that the applicant no.1 vessel was originally insured i.e. hull and machinery for Rs.47 crores and as on date, the applicant no.1
- vessel (hull and machinery) stands insured upto 14.11.2017 for Rs.45,00,00,000/. It is contended that in the event of any unfortunate calamity, the insurance company is bound and liable to pay Rs.45 crores. It is further contended that the applicant no.1 - vessel is also further insured (protection and indemnity) for incurring a third party liability. On the aforesaid basis, it is contended that insurance is more than enough to cover the claim of the opponent.
4.3 It is also contended that earlier the applicant no.1 - vessel was mortgaged to L & T Finance Ltd. and now Citizen Cooperative Bank Ltd. has stepped into the shoes of L & T Finance Ltd. and the said Bank has granted a loan of Rs.33 crores on March 23, 2016. It is averred by the applicants that applicant no.1-vessel is mortgaged to the Bank as security for the loan advance. It is further contended that the applicant no.1 - vessel is mortgaged to the said Bank to secure loan of Rs.31,80,73,523/, whereas, the value of the applicant no.1 - vessel being at least Rs.45 crores, and the same is far in excess of Rs.7,12,50,000/ and Page 5 of 34 HC-NIC Page 5 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER thus, the applicant no.1 - vessel alone is proper security for the amount of alleged claim of the opponent and the same is sufficient to protect the interest of the opponent and therefore, the order of Bank guarantee be modified. It is further contended that this Court taking into consideration the aspect that the risk factor involved in running the applicant no.1 - vessel and the decrease in value of the applicant no.1 - vessel due to depreciation by use, has provided for the Bank guarantee. It is contended by the applicants that the applicant no.1 - vessel does not ply between ports and does not carry any cargo and therefore, the inherent risk is less in operating the applicant no.1 - vessel. It is further contended that the applicant no.1 - vessel is insured by a first class insurer i.e. the New India Assurance Company Ltd. under a hull and machinery policy and therefore, even the risk factor is addressed by the insurance. It is further reiterated that even the vessel is insured (protection and indemnity) for covering any third party liability and thus, it is reiterated that the insurance coverage is enough to cover the alleged claim of the opponent and the risk factor involved in running the applicant no.1 - vessel is adequately addressed by the insurance coverage. It is also contended that because of nonuse of Page 6 of 34 HC-NIC Page 6 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER the applicant no.1 - vessel, its valuation would decrease faster. It is further contended that running of the applicant no.1 - vessel would ensure that it is maintained properly and its value does not depreciate rapidly. It is also contended that the Bank liability shall also decrease and as such the applicant no.1 vessel would depreciate over a substantial period of time and therefore, the value of the applicant no.1 - vessel will always be in excess of the alleged claim of the opponent.
4.4 That the applicant no.1 - vessel is registered with Mahrasthra Maritime Board under the Inland Vessels Act, 1917 and therefore, it can exclusively ply within the Indian limits of the coast of India and it is not technically possible to cover her under Inland Vessels Act, 1917/the Merchant Shipping Act, 1958. It is also contended that the applicants do not intend to either register the same under the said Act or to reflag the applicant no.1 vessel under the flag of any other country and the applicants do not intend to even sell the applicant no.1 - vessel to any third party either Indian or foreign.
5. The opponent appeared on advance copy and has filed the affidavitinreply. It is contended Page 7 of 34 HC-NIC Page 7 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER by the opponent that the applicant is seeking to have a 'second inning' by reagitating the issues that are already being canvassed before this Court before passing of the order dated 20.10.2016. It is also contended that the documents which are now relied upon could have easily be placed on record before this Court prior to the order dated 20.10.2016. It is further contended that this Court should exercise its discretionary power in a reasonable, just and fair manner so as to protect the interest of all parties to instant litigation and such finding need not be revisited. It is further contended that it cannot be said that this Court's finding as regards the risk factor involved in running/trading the applicant no.1 - vessel or the decrease in value of the applicant no.1 - vessel tantamount to any arbitrary exercise of discretionary power. It is contended that this Court, while passing the order, has validly considered the risk factor in trading the applicant no.1 vessel in the teeth of the order of arrest. It is contended that the risk in operation of Pontoon Crane Barge is ex potentially higher in comparison to the ordinary cargo vessel. Explaining the manner in which the applicant no.1 - vessel which is Pontoon Crane Barge, it is contended by the opponent that the applicant no.1 - vessel is Page 8 of 34 HC-NIC Page 8 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER commercially deployed or to serve as a floating crane and to provide crane based assistance and services at sea in the vicinity and of port limits. It is contended that the applicant no.1
- vessel assist in ship to ship transfer of cargo of the ports limit at the outer anchorage of ports which are inherently dangerous operations. It is contented that MacGregor crane is weighing 52.50 tons having radius of 36 mtr. which is permanently mounted on the applicant no.1 - vessel which would undoubtedly affect the stability of the vessel in comparison to ordinary cargo vessel during bad weather conditions in the vicinity of the port. It is also further contended that the effect of bad weather on ship, which is in vicinity of a port, is far greater than a ship sailing in midocean. It is also further contended that in case of any unforeseen marine causality, such as, a collusion and/or bunker oil, fuel oil spill and/or any claim arising out of loss of life and destruction to the property, the applicant no.1 - vessel is likely to incur significant third party liabilities. It is also further contended that third party maritime creditors would have maritime lien which is likely to take precedence over the maritime claim of the opponent - plaintiff. It is therefore contended that thus, it cannot be said that this Court while taking into Page 9 of 34 HC-NIC Page 9 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER consideration the account of risk factor has arbitrarily exercised its discretionary power.
5.1 It is also contended that this Court has validly considered the decrease in value of the defendant vessel due to depreciation because of use of the applicant no.1 - vessel. It is contended that even the balance sheet of the applicant no.2 - defendant no.2 reveals that the value of defendant vessel diminishes in value approximately by Rs.1.85 crores a year. It is also further contended that the likely value of applicant no.1 - vessel at the time of the instant suit being decreed would entail arbitrary speculations on the basis of subjective conjectures. It is also contended that the opponent - plaintiff has made out a prima facie case of depreciation in the value of the applicant no.1 - vessel in light of the balance sheet. On the basis of the calculation made by the opponent, on basis of Profit and Loss account of the applicant no.2 of the year 2016, it is contended that the net worth is nearly Rs.1.62 crores, which would be insufficient to cover the plaintiff's liquidated debt of Rs.7.12 crores, whereas, as on date, the amount would be Rs.14.56 crores with interest.
5.2 The opponent has also denied all contentions Page 10 of 34 HC-NIC Page 10 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER raised by the applicants in the present application. It is contended by the opponent that it would be ludicrous to even suggest that the value of the defendant vessel is Rs.47 crores, whereas, in the balance sheet of applicant no.1, the value of the applicant no.1
- vessel as on 31.3.2016 is only Rs.39.84 crores. It is further contended by the opponent that as per the balance sheet of the applicant no.2, depreciation to the tune of Rs.1.85 crores has been shown and thus, as per the said balance sheet, the value of the applicant no.1
- vessel would be only Rs.37.99 crores. It is further contended that admittedly, there is a mortgaged registered over the vessel for Rs.31.8 crores and therefore, the value of the vessel free from encumbrances even if it is assumed that there are no other encumbrances or it, would only be Rs.6.18 crores which is less than the claim which is secured by this Court. It is contended that mere fact that the applicant no.1 - vessel is insured for a sum of Rs.45 crores does not and cannot imply that the value of the vessel would be Rs.45 crores. It is also denied and disputed that the insurance company is bound and liable to pay Rs.45 crores in case of any unlikely event of unfortunate calamity irrespective of the value of the applicant no.1 - vessel. It is specifically contended that even the insurance policy Page 11 of 34 HC-NIC Page 11 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER provides that the insurance under the policy is subject to hull and machinery, clauses and conditions attached herein and such conditions have not been brought on record by the applicants and in case if there is any breach, the insurance company would be well within the powers to reject such claim even when there is any breach of any of the warantees arising under the insurance policy such as duty of seaworthiness, etc. It is further contended that the applicants were unable to clear the outstanding dues to L & T Finance Ltd. and had to take another loan with the Citizen Cooperative Bank Ltd. to clear the same. It is also contended that it shows the precarious financial stage of which the applicants are at present. It is also contended that it is not even averred by the applicants that the mortgage of L & T Finance Ltd. is still in force or whether the same has been registered. It is further contended that on the date on which the order of arrest was passed by this Court, there was a mortgage over a vessel for only approximately Rs.27.64 crores. It is further contended that the applicant no.2, in the teeth of the order of arrest, has created further encumbrances on the applicant no.1 vessel and the quantum of encumbrance over the vessel is Rs.31.80 crores and thereby, the applicants have created an additional Page 12 of 34 HC-NIC Page 12 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER encumbrances of Rs.4.16 crores even without obtaining any prior relief from this Court.
5.3 It is reiterated by the opponent that the principal claim along with interest comes to Rs.14.56 crores. It is contended that if the security of Bank guarantee of Rs.7.12 crores is furnished, the order of arrest would stand automatically vacated. It is contended that thus, the applicants have made a blatantly false assertion in arriving at the value of the applicant no.1 - vessel.
5.4 It is also contended that the risk in operation of Pontoon Crane Barge is expotentially higher than the ordinary cargo vessel. It is also asserted that the legal and geographical limits varies from port to port. It is specifically contended by the opponent that as a general rule, the channel connecting the outer anchorage of the port to the birth is 3 to 4 nautical miles i.e. 5 to 7.5 kms. and thereafter, the outer anchorage of the port would generally extend to approximately 1 to 2 nautical miles i.e. 2 to 3 kms. into the ship and thus, the applicant no.1 vessel while carrying transshipment operation of the port limits is always exposed to vagaries of the weather. It is therefore contended that the applicants have made a material Page 13 of 34 HC-NIC Page 13 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER misrepresentation on the value of the applicant no.1 vessel.
5.5 It is contended that apart from making bald and sweeping assertions of the applicants having allegedly obtained P & I insurance to cover third party claims, they have not been able to place on record a scrap of paper to substantiate the same. It is denied that the purported insurance of the applicant no.1 vessel would be sufficient to cover the opponent - plaintiff's claim and/or claims arising of any unforeseen marine casualty and/or eventuality and/or incurring any third party liability arising out of collusion and/or bunker oil, fuel oil spill and/or any claim arising out of loss of life or property. It is further denied that the risk factor involved in running the applicant no.1 - vessel is adequately addressed by the insurance coverage. It is further contended that the order of arrest does not in any manner create any impediment upon the applicant no.2 from carrying out maintenance and upkeep of the vessel. It is alleged that the applicants are seeking to deploy the vessel for lucrative commercial venture under false pretext that its value would be decreased faster due to nonuse and by standing idle. It is however contended that the arrest does not prevent the applicants Page 14 of 34 HC-NIC Page 14 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER from running and maintaining the vessel properly but as such only prevents the applicant no.1 vessel from being traded commercial venture. It is denied that the value of the applicant no.1 vessel free from all encumbrances would always be in excess of the principal claim of the plaintiff.
5.6 Denying the averments made in Paragraph 20 of the application, it is contended that the order of arrest cannot be vacated on the basis of conjectures that the applicants would make the vessel available as and when directed by this Court. It is also contended that the only way an order of arrest can be vacated by the applicants - defendants is by furnishing security in form of cash deposit or bank guarantee to secure plaintiff's reasonably best arguable case.
5.7 It is also contended that if the security order is modified, grave prejudice and hardship would be caused to the plaintiff and the very efficacy of an order of arrest would be rendered nugatory when a vessel is able to commercially trade across the territorial waters of India in the teeth of the order of arrest. It is contended that thus, the applicants are not entitled for any reliefs sought for and the same is likely to open flood Page 15 of 34 HC-NIC Page 15 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER gates, wherein every vessel arrested by an Admiralty Court would have absolute immunity to commercial trade anywhere in Indian waters in the teeth of the order of arrest. It is contended that the applicants - defendants would suffer no prejudice by providing a bank guarantee of Rs.7.12 crores. It is also contended that balance of convenience is entirely in favour of not interfering with the security order.
6. The applicants have also filed a rejoinder to the affidavitinreply and denying the contentions raised in the reply. It is contended by the applicants that the opponent is trying to purposely confuse the book value of the applicant no.1 vessel with the market value of the applicant no.1 vessel. It is contended that the balance sheet dated 31.3.2016 shows the book value of the applicant no.1 vessel after depreciation. It is contended that in fact the book value of defendant no.1 vessel will reduce to around Nil after certain years, but that does not mean that the market value of applicant no.1 vessel is around Nil. Rest of the contentions raised in the reply by the opponent have been denied by the applicants and has also further submitted that the applicants have filed a written statement claiming a set off and making a counter claim Page 16 of 34 HC-NIC Page 16 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER of Rs.47,90,492/ along with interest at the rate of 15% per annum. It is as such reiterated that the vessel is sufficient security and that the applicants are ready and wiling to comply with the conditions imposed with regard to the use of the applicant no.1 - vessel. It is also contended that this Court was pleased to issue security order as the value of applicant no.1 vessel was not submitted before this Court and the same has nothing to do with commercially deploy of the applicant no.1 vessel. It is also reiterated that no port will allow any vessel to come in its limit without proper insurance and it is also denied that H & M Policy is based on fraudulent misrepresentation of the applicant no.2. It is contended that assertion that the underwriter would reject any claim under the insurance policy is based on conjectures and surmises and this Court will not countenance the same. The applicants have denied all other contentions paragraphwise as raised by the opponent.
7. The applicants have also filed an affidavit recording submission of Bank guarantee and undertaking in terms of order dated 20.10.2016. It is averred in the said affidavit that the applicants have also filed an undertaking dated 10.3.2017 in terms of the order dated 20.10.2016. It is also further averred that the Page 17 of 34 HC-NIC Page 17 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER Bank guarantee of a nationalized Bank (Canara Bank) dated 10.3.2017 for Rs.7,12,50,000/ is being filed without prejudice to the submissions of the present application, which is pending.
8. Mr. Nachiket Dave, learned advocate appearing for the applicants has raised following contentions and has also filed written submissions, which are also taken on record: 8.1 Mr. Dave has taken this Court through the facts stated in Paragraphs 14 to 20 and has contended that all other conditions have been complied with by the applicants and the present application is filed only for modification of the condition of Bank guarantee of Rs.7,12,50,000/ which is also filed without prejudice to the submissions made.
8.2 It was contended that by directing the applicants to furnish a Bank guarantee in effect, the claim of the opponent is secured twice over i.e. once by the applicant no.1 vessel and again by the Bank guarantee.
8.3 It was contended that considering the value and insurance coverage and the fact that the Citizen Cooperative Bank Ltd. has also given Page 18 of 34 HC-NIC Page 18 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER loan on mortgage to the tune of Rs.31,80,73,523/, the vessel itself is sufficient security.
8.4 It was contended that the value of the vessel being at least Rs.45 crores and mortgage to the Bank only to the tune of Rs.31,80,73,523/, the value of the applicant no.1 vessel is far in excess of Rs.7,12,50,000/. Hence, the applicant no.1 - vessel alone is proper security for the alleged amount of the opponent.
8.5 It was contended that the applicant no.1 vessel unlike other vessels does not ply between ports and does not carry any cargo and therefore, there is less risk involved in operating the applicant no.1 - vessel and there is less risky activities.
8.6 It was also contended that the applicant no.1- vessel is insured by a first class insurer, namely, the New India Assurance Co. Ltd. under hull and machinery policy for Rs.45 crores. It was contended that the applicant no.1 vessel is not exposed to marine perils normally associated with other merchant vessels. It was also contended that the applicant no.1 - vessel is further insured (protection and indemnity) Page 19 of 34 HC-NIC Page 19 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER for covering any third party liability and thus, the insurance is more than enough to cover opponent's alleged claim arising from any unforeseen marine casualty and/or incurring any third party liability arising out of collusion and/or bunker oil, fuel oil spill and/or any claim arising out of loss of life or property and the risk factor is thus adequately addressed by insurance coverage. It was also contended that the value of the applicant no.1 vessel will decrease in value faster due to nonuse and by standing idle, wheres by running of the vessel, it would be maintained properly and its value does not depreciate rapidly. It was also contended that the Bank liability would also decrease over a period of time and the value of applicant no.1 vessel will always be in excess of alleged claim of the opponent.
8.7 It was further contended that nothing turns on market value of the applicant no.1 vessel as the applicant no.1 vessel is insured for Rs.45 crores.
8.8 It was contended that the vessel operating within port limits are not exposed to vagaries of sea compared to ocean going vessels and hence, all insurance companies treat this as lesser risk and charge lesser premium. It is Page 20 of 34 HC-NIC Page 20 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER reiterated that the applicant no.1 vessel is abundantly insured (H & M and P & I) and any unforeseen marine casualty or any such eventuality or the purportedly incurring any third party liability will be covered under the insurance. It was also contended that in view of the undertaking filed on 10.3.2017 in terms of security order, the danger that the applicant no.1 vessel will sail out of jurisdiction of this Court is addressed.
8.9 It is denied that the insurance policy is based on fraudulent representation of applicant no.2 and it is also denied that applicant no.2 is in alleged breach of duty of good faith. It is reiterated that H & M policy is based on true and correct valuation submitted by the applicants. It is also denied that the applicants are in precarious financial stage. Mr. Dave specifically contended that when the Bank guarantee of nationalized Bank dated 10.3.2017 is furnished by the applicants, the said statement is incorrect.
8.10 It was contended that the contention that the applicant no.1 vessel would fetch a sum of Rs.6.18 crores which would be insufficient to cover the opponent's alleged claim is incorrect. It was contended that the applicants have filed the written statement claiming set Page 21 of 34 HC-NIC Page 21 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER off and has also made a counter claim of Rs.47,90,492/.
8.11 On the aforesaid grounds, it was submitted that the order of arrest be modified as prayed for and the Bank guarantee furnished by the applicants be returned to the applicants as the value of the applicant no.1 vessel alone is sufficient to protect the interest of the opponent.
9. Per contra, Mr. Saurabh Soparkar, learned Senior Advocate for the opponent contended that the present application is not maintainable. It was contended that it is not an application for review as provided under Order 47 Rule 1 of the Code of Civil Procedure, 1908. It was contended that even if it is considered that it is an application under Order 39 Rule 4 of the Code of Civil Procedure, 1908, no parameters as provided therein exist in the instant case and therefore, the application is not maintainable.
9.1 Mr. Soparkar, learned Senior Advocate for the opponent further contended that the opponent has sold the applicant no.1 vessel for Rs.40.45 crores and the same was delivered on 14th September. It was contended that the total claim of the opponent with principal plus interest would come to Rs.14.56 crores.
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9.2 It was further contended that the applicants have produced two documents. It was contended that the report is not reliable as the valuation of the vessel would decrease every year and as on 31.3.2016, even according to the applicants' calculation, the value would come to Rs.39.84 crores.
9.3 It was contended that the insurance coverage of Rs.45 cores depend on many factors and the contention of insurance raised by the applicants does not carry the case anywhere. Relying upon the manner in which the applicant no.1 vessel operates, it was contended by the learned Senior Advocate for the opponent that the applicant no.1 - vessel is prone to greater risk than the oceangoing vessel.
9.4 It was contended that except oral contention as regards third party risk, nothing not even a scrap of paper is produced on record. It was contended that if third party liability is incurred and if money is paid, it would further be reduced. It was contended that the applicant no.1 vessel is already mortgaged to Citizen Cooperative Bank Ltd. which has first charge over it and therefore, the calculation which is given by the opponent is correct.
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9.5 It was further contended that the value of vessel would depreciate in value which has to be considered. It was contended that this Court, in order dated 20.10.2016, has after taking into consideration all relevant factors has considered to only protect the claim nos.1, 2, 3, 4 and 7 and therefore, on the basis of only two documents, namely, the unreliable valuation report and the fact of insurance coverage, the order impugned should not be modified. Mr. Soparkar therefore contended that the application is misconceived and this Court after considering all relevant aspects has rightly exercised the discretionary power in a reasonable and fair manner and no modification is called for in the said order. It is therefore submitted that the application deserves to be dismissed.
10. Mr. Dave, learned advocate for the applicants in the rejoinder has almost reiterated the contentions which are raised and has asserted that the Bank guarantee has been furnished as per the order dated 20.10.2016, without prejudice to rights of the applicants in this application and the present application is filed in light of the order passed by the Division Bench. It was reiterated that the insurance coverage would fully secure the claim of the opponent and that the insurance is Page 24 of 34 HC-NIC Page 24 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER valued as per the value of 2017 for hull and machinery and the very fact that the Bank guarantee is given by the applicants, the applicants have capacity to pay. It was therefore submitted that the order be modified accordingly.
11. No other or further contentions and/or submissions are made by the learned advocates appearing for the respective parties.
12. Considering the submissions made by the learned counsel appearing for the respective parties and upon perusal of the order dated 20.10.2016, it would be appropriate to refer to Paragraphs 12 to 15 of the order dated 20.10.2016 passed by this Court: "12. In light of such facts, the contention that the order or arrest dated 07.04.2016 is obtained by the plaintiff on false statement deserves to be negatived. Though it is a matter of record that wrong Act as regards the registration of defendant Vessel is mentioned in the plaint, however, the same would not have any impact or effect on passing of the order of arrest, more particularly considering the ratio laid down by the Apex Court in the case of M.V.Vinalinus Fortuna (supra). However, keeping the other issue as regard the defendant Vessel being Indian Vessel open, the fact Page 25 of 34 HC-NIC Page 25 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER remains that the defendant Vessel being Pontoon Crane Barge, it can sail only within Indian territorial waters.
13. As observed hereinabove, out of 7 claims raised in the plaint aggregating to Rs.11.22 crore (in Indian Rupees), 6 claims are commercial claims, out of which in opinion of this Court, claim No.1 is of Rs.1.85 crore is claimed as 6th installment as per the contract. Claim No.2 amounting to Rs.2.81 crore is in relation to the additional work undertaken by the plaintiff as per the additional deed dated 31.10.2014. Similarly claim Nos.3 and 4 amounting to Rs.28 lacs is in relation to cost for crane hire at Mamuagoa and Rs.16.05 lacs is in relation to diesel supplied on board and similarly, claim No.7 amounting to Rs.2.02 crore relates to proposed liability of Central Sales Tax as and when title of the defendant Vessel is passed to defendant No.2, whereas claim Nos.5 and 6 relate to other aspects, total amount is Rs.4.10 crore. Thus, in opinion of this Court, out of total claim of Rs.11.22 crore, claim of Rs.4.10 (Rs.1.85 Crore + Rs.2.25 Crore), which are based on original contract, deed of additional work dated 30.10.2014 and the actual expenses incurred as per the say of the plaintiff. Even while appreciating the contentions raised by the defendants that the defendant Vessel itself is a security and its cost is much higher than the claim raised by the plaintiff in the suit, the fact remains that if the defendant Vessel is permitted to sail by modification of the order of arrest dated 07.04.2016, the same is coupled with risk factor as well as decrease in value of the defendant Page 26 of 34 HC-NIC Page 26 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER Vessel due to deprecation because of use of Vessel and therefore, only defendant Vessel cannot be termed as proper security for the claims raised by the plaintiff in the plaint. At the same time, considering the fact that the defendant Vessel is registered in India and it is in form and in fact, it cannot sail outside the territorial waters of India, though the plaintiff has prima facie case as in the facts of the case, balance is required to be struck as otherwise the defendant Vessel shall get deteriorated without it being put to use. However, at the same time, the plaintiff's claim made in the suit are required to be properly secured.
14. Considering the facts of both applications and nature of claims, which are raised prima facie, this Court is of the opinion that for claim Nos.1, 2, 3, 4 and 7, the defendant Vessel is required to give full proof security. For claim Nos.5 and 6, in order to secure such claims, appropriate conditions can be imposed upon the defendant Vessel including the conditions of manner and method of use of the defendant Vessel.
15. Considering overall circumstances arising out of these applications and on basis of the averments made in these applications as well as keeping in mind the plaint as a whole, the following order is passed :
(a) While modifying the order of arrest dated 07.04.2016, the defendant Vessel shall furnish bank guarantee of a Nationalized Bank for an amount of Rs.7,12,50,000/ which would cover the Page 27 of 34 HC-NIC Page 27 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER claim Nos.1, 2, 3, 4 and 7.
(b) The defendants shall file an undertaking before this Court to the effect that the defendant Vessel shall not be put to sell and shall not be alienated till final disposal of the suit.
(c) The defendants shall insure the defendant Vessel and shall renew such insurance policy regularly till final disposal of the suit and shall place on record of the suit, the insurance policy on its each renewal.
(d) the defendants shall furnish the details of its sail within territory of Indian waters on the record of the suit at every quarter of three months till final disposal of the suit.
(e) The defendant Vessel shall not create any mortgage, lien and third party interest over the defendant Vessel till final disposal of the suit and shall further undertake that it shall not sail outside the waters of Indian territory.
(f) The defendant Vessel shall be made available to the jurisdiction of this Court as and when ordered by this Court."
13. It is an admitted position that the documents which are now brought on record were not produced when the Civil Application was heard by this Court.
14. It is no doubt true that all other conditions Page 28 of 34 HC-NIC Page 28 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER as enumerated in Paragraph 15 of the order dated 20.10.2016 are complied with and as pointed by the learned advocate for the applicants, the same are not in dispute and the present application is filed for modification of condition no.15(a), which relates to furnishing Bank guarantee of a nationalized bank for an amount of Rs.7,12,50,000/ only.
15. Considering the contentions and the first document i.e. the valuation report, at the outset, it deserves to be noted that after the order of arrest was passed, the applicant no.1- vessel has been mortgaged as of now in favour of Citizen Cooperative Bank Ltd. On inquiry by the Court, the learned advocate for the applicants has categorically informed the Court that the applicant no.1 - vessel is mortgaged in favour of Citizen Cooperative Bank Ltd. and that the said bank has 'first charge' over the applicant no.1 - vessel. Considering the aspect that the applicant no.1 is already mortgaged, the fact remains that in case of any natural calamity or in the event of applicant no.2's inability to pay, the applicant no.1 vessel having been mortgaged, the Bank having first charge shall be entitled to receive the full amount due and payable by the applicant no.2. The contention that even if it is sold, there would be some surplus not only depends on vital Page 29 of 34 HC-NIC Page 29 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER fact like regular payment by the applicant no.2, but the same also would depend on the value of the applicant no.1 vessel on the date on which it is required to be sold for the purpose of executing the right created by mortgage in favour of the Bank which has advanced money to applicant no.2. In such an event, it would be a coercive sale which may not even fetch the correct market value. Apart from the fact that in the event of any accident/due to any unforeseen circumstances on applicant no.1 - vessel being operated by applicant no.2, the fact remains that the applicant no.1 vessel having already been mortgaged for a sum of Rs.31,80,73,523/ itself, in opinion of this Court, would be a vital factor while considering the aspect of adequate and proper security to the opponent - plaintiff. The order of security has been passed by this Court to secure only 5 claims as observed in Paragraph 14 of the order dated 20.10.2016 and such security should be clear, real and capable of being executed in the event a decree is passed in favour of the opponent - plaintiff and therefore, on this ground, the contention raised by the applicants that the value of vessel is more than the loan amount would not take the case of the applicants any further and it cannot be said that there may be surplus enough to satisfy/cover the alleged Page 30 of 34 HC-NIC Page 30 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER claim of the opponent and that the applicant no.1 vessel would be sufficient security.
16. As can be culled out from the record, the applicant no.1 - vessel is Pontoon Crane Barge and as rightly explained by the opponent, the same is a movable crane attached to the vessel itself. In the event of any bad weather, effect upon the applicant no.1 - vessel would be there and the fact that it plies only in the port area would not in any manner reduce the risk factor as expressed by this Court in the order dated 20.10.2016.
17. Similarly, the contention that the applicant no.1 - vessel is insured with an eminent insurer for a sum of Rs.45 crores would not mean that on an eventuality of any accident, the insurance company is bound to pay Rs.45 crores. This Court has not been shown and nothing is produced on record that under which conditions, the insurance of hull and machinery is provided by the said insurance company. However, the assertion by the applicants that in case of any accident or loss, the insurance company would straightway pay Rs.45 crores, out of which, the Citizen Cooperative Bank Ltd. shall be paid outstanding loan amount and rest of the amount would thus be in excess to the claims of the opponent may be arithmetically Page 31 of 34 HC-NIC Page 31 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER correct, but in reality, it may depend on various factors, more particularly, the conditions of insurance and its fulfillment and the claim that may be approved by the insurance company and therefore, on such a basis, to say that as the insurance of the applicant no.1 - vessel is for Rs.45 crores and therefore, the vessel is sufficient security is far from reality and a mere assertion without any basis. The applicants have not produced anything on record to show that third party interest is also insured by way of protection and indemnity, and same would not only be limited to liability that may arise out of eventualities which are covered by the third party insurance, that too also, would depend on the conditions of insurance and other vital factors which cover the insurance claims and the same depends upon the conditions of the insurance policy. On these two grounds therefore, it is not correct to say that the risk factor is covered and therefore, the order of security deserves to be modified. In exercise of admiralty jurisdiction, this Court has thought it fit to provide for clear security pending the Suit. As per the facts which arise even in this application, the applicant no.1 - vessel is already mortgaged and it is now mortgaged to Citizen Cooperative Bank Ltd. and is not free from all encumbrances Page 32 of 34 HC-NIC Page 32 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER and even on this count, it cannot be said that the applicant no.1 - vessel is sufficient security. It deserves to be noted that even according to the applicants, the value of the applicant no.1 - vessel which was Rs.47 crores originally as per the insurance has come down to Rs.45 crores in the year 2016, whereas, in O.J. Civil Application no.197 of 2016, the applicants have stated that the cost of vessel (rounded off) is Rs.40,45,72,777/ and it also deserves to be noted that the fact, that the applicant no.1 was originally mortgaged to L & T Finance Ltd. is not mentioned, even though the said application was filed on 16.4.2016 and as per the averments made in Paragraph 17 of this application, such loan was granted by L & T Finance Ltd. on 23.3.2016.
18. On any of the contentions/grounds raised in this application, it cannot be said that the value of applicant no.1 - defendant vessel alone is sufficient to protect the interest of the opponent. Valuation report and the fact of insurance coverage in facts and circumstances of this application would not take the case of the applicants any further. Considering the record of this application and the submissions made, no modification as provided in Paragraph 15(a) of the order dated 20.10.2016 for furnishing Bank guarantee to the tune of Page 33 of 34 HC-NIC Page 33 of 34 Created On Wed Mar 22 00:52:20 IST 2017 O/OJCA/97/2017 ORDER Rs.7,12,50,000/ deserves to be made. The application is therefore dismissed. However, there shall be no order as to costs.
(R.M.CHHAYA, J.) mrp Page 34 of 34 HC-NIC Page 34 of 34 Created On Wed Mar 22 00:52:20 IST 2017