Madras High Court
R.Subramanian.J vs Harwan Investment & Trading Pvt. Ltd
Author: R.Subramanian
Bench: R.Subramanian
IN THE HIGH COURT OF JUDICATURE AT MADRAS ORDER RESERVED ON: 22.11.2017 ORDER PRONOUNCED ON: 03.01.2018 CORAM:
THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN A.Nos.2997/2013, 2998/2013, 2899/2013, 1713/2013, 1715/2013, 1719/2013, 1723/2013, 1674/2013, 1675/2013, 1085/2013,4014/2013, 4015/2013, 3584/2013, 3585/2013, 4544/2013,4545/2013, 4204/2013, 4205/2013, 4207/2013, 4208/2013,4210/2013, 4211/2013, 4213/2013, 4215/2013, 4219/2013, 4220/2013, 5716/2013, 5717/2013, 5973/2013, 5974/2013, 93/2014, 3819/2013, 3820/2013, 3821/2013, 851/2013, 727/2014 in CS.No.89/2013
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R.SUBRAMANIAN.J., All these applications are in the nature of claim petitions made by various Maritime lien holders and claim holders who have the right to enforce their claims by seeking arrest of a ship. The Claimants are Crew members and their legal representatives, ex-crew members, shipping corporation of India, Salvage Company, Port Trust, creditors/ Maritime claim holders, bankers etc,.
2. The suit in CS.No.89 of 2013 is filed invoking the admiralty jurisdiction of this Court, seeking a decree and judgment against the defendant viz., Owners and parties interested in the vessel M.T.PRATIBHA CAUVERY for a sum of Rs.3,59,000/-, together with compensation for pain and sufferings. The suit is instituted under Order XLII of the Original Side Rules, which deals with the Admiralty jurisdiction of this Court. The plaintiff in the suit is a crew member, who claims to have been appointed as a Second Cook in the ship in question.
3. The ship was caught in the eye of cyclonic storm named Nilam around 27.10.2012, and the vessel drifted towards the shore, several crew members had jumped into the sea, the plaintiff, who was among the said crew members was rescued on 01.11.2012 by the Indian Coast Guard. Alleging that the plaintiff has not been paid his salary and that he has suffered mental agony, the plaintiff came forward with the above suit.
4. It is seen from the records that a Writ Petition in W.P.No.31942 of 2012 was filed by the plaintiff in CS.No.89 of 2013, seeking an enquiry into the incident in respect of the vessel M.T.PRATIBHA CAUVERY and to take appropriate action against the owner of the said vessel. There were also other Writ Petitions filed by various employees of the ship in question. An interim order came to be passed on 28.11.2012, wherein, the undertaking of the owner of the vessel to the effect that the Company would deposit Rs.30,00,000/- (Rupees thirty lakhs only) by 05.12.2012 was recorded by this Court.
5. On 21.12.2012, this Court had heard almost all the parties interested and after considering the entire factual aspects, had directed the owner of the ship viz., Pratibha Shipping Company Ltd., Mumbai, to pay the admitted sum of Rs.87,45,300/-,(Rupees Eighty seven lakhs forty five thousand and three hundred only) as interim measure to the legal heirs of the deceased crew members. A direction was also issued on apportionment of the money. The Registrar General of this Court was directed to disburse the amount to the legal heirs of the deceased on such deposit.
6. There was also a direction to the said owner of the ship viz., Pratibha Shipping Company Ltd., Mumbai, to deposit a further sum of Rs.5,00,00,000/- (Rupees five crores only) or provide a Bank guarantee for the said amount for a period of three years or furnish immovable property as security to the satisfaction of the Registrar General before moving the vessel from the territorial jurisdiction of this Court. The company was further directed to calculate the admitted arrears of the salary payable to the petitioners in WP.Nos.31801, 31941 to 31947 of 2012 and pay the same within a period of four weeks from the date of receipt of a copy of the order.
7. It is seen that appeals were filed by the owner of the vessel in W.A.Nos.738 to 751 of 2013, challenging the orders dated 21.12.2012, the Division Bench admitted the appeal on condition that the balance amount of Rs.57,00,000/- (Rupees fifty seven lakhs only) is to be deposited as per the directions of the learned Single Judge in para 35(a) of the order dated 21.12.2012 and the matter was adjourned to 17.04.2013 for further arguments.
8. It is at this juncture, the present suit came to be filed and since the suit was filed under Order XLII, in rem, under the Admiralty jurisdiction of this Court, several persons filed their claims before this Court. This Court by an order dated 18.04.2013, directed sale of the vessel M.T.Pratibha Cauvery which was berthed within the jurisdiction of this Court. Pursuant to the said direction, the vessel was sold for a total consideration of Rs.15,64,80,000/- (Rupees fifteen crores sixty four lakhs and eighty thousand only) and the same is now in deposit. During the course of time, several claim petitions have been filed by various claimants who became secured creditors after the arrest of the vessel.
9. Pending the above applications, it is seen that winding up proceedings were initiated against the owner of the vessel M/s.Pratibha Shipping Company ltd., in the Bombay High Court in Company Petition No.128 of 2013 and a provisional liquidator came to be appointed on 28.07.2014. The claim of the Hindustan petroleum Co. Ltd., was directed to be adjudicated by the Official Liquidator by an order dated 21.08.2014.
10. The, initiation of winding up proceedings and appointment of Official Liquidator has now raised an interesting question as to the nature and scope of the Admiralty jurisdiction exercised by this Court. While the learned counsel for the claimant would argue that once the suit under Order XLII, which is an action in rem is filed and the vessel/ ship is arrested by this Court in exercise its Admiralty jurisdiction the claimants became secured creditors. Therefore, they need not seek permission or leave of the Bombay High Court under Section 446 of the Companies Act.
11. The learned counsel appearing for the Official Liquidator, Bombay, on the other hand, would contend that once a winding up proceedings have been initiated and Official Liquidator have been appointed by the Court the proceedings cannot be continued without the leave of the Court under Section 446 of the Companies Act.
12. So, the question that arises for consideration in all these applications is as to whether the applicants in all these applications must seek leave of the Bombay High Court in the winding up proceedings or this Court can proceed independent of the winding up proceedings?
13. I have heard Mr.S.Vasudevan, Mr.S.R.Rajagopal for Mr.P.S.Amalraj, Mr.N.V.Srinivasan for M/s.N.V.S.Associates, Mr.P.Giridharan, Mr.Kumarpal R.Chopra, Mr.R.S.Mohan, Mr.R.Poongundran, Mr.Joy Tathattil Ittoop, Mr.K.Mukund Rao, Mr.R.Karthikeyan, learned counsel appearing for the applicants in various applications and Miss. Shubharanjani Ananth, learned counsel for the Official Liquidator, Mumbai.
14. The learned counsel appearing for the claimants would contend that the proceedings under the Admiralty jurisdiction are proceedings in rem against the vessel in question and once a vessel is arrested and sold in exercise of the powers of Order XLII of the Original Side Rules, the claimants, who have either Maritime Lien or a right to seek arrest of the ship for payment of monies due to them would become secured creditors, insofar as the sale proceedings of the ship are concerned. Therefore, they need not seek leave of the winding up Court to proceed with the claim. It is also contended by the learned counsel that an action in rem under Admiralty jurisdiction makes the ship / vessel a juristic person liable for certain actions de hors its owners.
15. It is also pointed out that, an arrest of the vessel can be made even for liabilities of persons who are not the owners of the ship. Therefore, the claims of the applicants, insofar as they relate to the ship in question cannot be stayed under Section 446 of the Companies Act. It is also contended that the Merchant Shipping Act which provides for the priorities, being a special enactment will prevail over the Provisions of the Companies Act.
16. The learned counsel would also rely upon the judgment of the Hon'ble Supreme Court in M.V.Elisabeth and others Vs. Harwan Investment & Trading Pvt. Ltd., and another reported in AIR 1993 SC 1014. Drawing my attention to paragraph 56 of the said judgment which reads as follows:
56. An action in rem is directed against the ship itself to satisfy the claim of the plaintiff out of the res. The ship is for this purpose treated as a person. Such an action may constitute an inducement to the owner to submit to the jurisdiction of the court, thereby making himself liable to be proceeded against by the plaintiff in personam. It is, however, imperative in an action in rem that the ship should be within jurisdiction at the time the proceedings are started. A decree of the Court in such an action binds not merely the parties to the Writ but everybody in the World who might dispute the plaintiff's claim.
57. It is by means of an action in rem that the arrest of a particular ship is secured by the plaintiff. He does not sue the owner directly and by name; but the owner or any one interested in the proceedings may appear and defend. The Writ is issued to owners and parties interested in the property proceeded against. The proceedings can be started in England or in the United States in respect of a maritime lien, and in England in respect of a statutory right in rem. A maritime lien is a privileged claim against the ship or a right to a part of the property in the ship and it travels with the ship. Because the ship has to pay for the wrong it has done it can be compelled to do so by a forced sale The Honble Supreme Court further observed as follows:
If, however, the owner submits to jurisdiction and obtains the release of the ship by depositing security, he becomes personally liable to be proceeded against in personam in execution of the judgment if the amount decreed exceeds the amount of the bail. The arrest of the foreign ship by means of an action in rem is thus a means of assuming jurisdiction by the competent court. the learned counsel would contend that an action against the ship is essentially in rem and the ship as such, becomes a juristic person answerable to all the claims against it. A Maritime lien being a privileged claim against the ship can be enforced de hors the petition for winding up, said to be pending in the Bombay High Court. My attention is also drawn to the Judgment of the Chancery Division reported in [1995] B.C.C 666, wherein after referring to the Admiralty procedure, it was concluded that once a person having maritime lien had obtained an order of sale of the ship and the sale proceeds were held by the Admiralty Court to be complied in accordance with its procedures. The claimants or the person who obtained an order of arrest becomes a secured creditor and thus there could be no possible objections to its enforcing its security by obtaining an order of sale. It was also made clear that the present applicant did not infact require leave under Section 130(2) because there are no proceedings against the Company or Company's property. It was further observed that if it is necessary so to hold, to avoid the effect of 129(2). I hold that such conversion must in the event of order for sale be deemed in law to have taken effect from the execution of the warrant of arrest when the ship entered the Admiralty marshal on behalf of the Admiralty Court.
17. My attention was drawn to various decisions of the Honble Supreme Court as well as this Court, where the question relating to the priorities between the general and special law were considered. In Damji Valji Shah and another Vs. Life Insurance Corporation of India & others reported in 1965 3 SCR 665, wherein, the Supreme Court had considered the proceedings before the Insurance Tribunal viz-a-viz proceedings for winding up under the Companies Act. The Honble Supreme Court concluded that the Life Insurance Corporation Act, 1956 being a special enactment for proceedings therein, will not be affected by initiation of winding up proceedings.
18. Mr.Giridharan, learned counsel appearing for one of the applicants would rely upon the judgment of the Hon'ble Supreme Court in Allahabad Bank Vs.Canara Bank and another reported in 2000 (4) SCC 406, where the conflicting provisions of the Companies Act and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 were considered. Taking note of the maxim Generalia Specialibus non derogant, the Honble Supreme Court had held that Recovery of Debts Due to Banks and Financial Institutions Act being a special statute would override the provisions of the Companies Act and hence the Bank or Financial Institutions do require the leave of the Company Court to proceed with the modes of recovery to prosecute the proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act.
19. The Honble Supreme Court had framed the following question for determination:
1. Whether after a winding up order is passed under Section 446(1) of the Companies Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDDB Act, transfer them to itself and also decide questions of liability, execution and priority under Section 446(2) and (3) read with Section 529, 529-A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal?
20. While answering the question Nos. 2 and 3 the Honble Supreme Court had observed as follows :
At the same time, some High Courts have rightly held that the Companies Act is a general Act and does not prevail over the RDDB Act.
21. Relying upon the above decisions Mr.P.Giridharan, learned counsel would contend that the proceedings under the Admiralty jurisdiction of this Court are essentially under the Merchant Shipping Act and clause 32 of the Letters Patent, which are special enactments relating to proceedings against vessels under Admiralty jurisdiction of the Court. Being special enactments they will override the general law viz., Companies Act, 1956.
22. Mr.Vasudevan, learned counsel appearing for some of the claimants would draw my attention to certain paragraph in Maritime jurisdiction and Admiralty law in India by Samareshwar Mahanty, wherein an action in rem is stated to be an action regarded as an action against a particular thing, namely a ship or its cargo or certain other property associated with the ship, and not against the owner of it. It will be useful to quote the following passage in the said book.
3.1.1.2 A significant peculiarity of an action in rem is that the plaintiff is allowed to commence the proceeding by going after a specific piece of property- the ship or the cargo or certain other associated property whereas in an action in personam, be it in admiralty jurisdiction or in the normal common law jurisdiction, the plaintiff is allowed to take a piece of the defendant's property to satisfy a judgment only after he has succeeded in the action. This rule is dictated by necessity of preventing a just claim from being defeated by the mere fact of the ship going out of the jurisdiction of the Court, while, as often happens in the maritime world, the wrongdoer, the wrongdoing ship, the ship-owner or other person vicariously liable may be out of jurisdiction of the Court, and being of foreign affiliation, no valid writ can be issued. And even though a valid writ can be effectually served in or out of jurisdiction and an action in personam is validly proceeded with and successfully concluded the judgment for the plaintiff would be of little or no value if there were no assets of the defendant within jurisdiction. Ex parte orders of attachment or injunction, as is known in common-law jurisdiction, may not be effectual in fact against a foreign ship-owner and, in any event, such interim order would require valid issue of process satisfying the conditions therefor. The opportunity to proceed against the property itself is a far more efficient remedy in the field of shipping and navigation than obtaining security in an action in personam which must be correctly begun and maintained. In an action in rem, if the ship is within jurisdiction, the proceeding can be initiated and, though it is not permissible to serve a writ outside jurisdiction if the ship is beyond the jurisdiction, it may, and often does, happen that the defendant or his solicitor or advocate acknowledges service, furnishes security for the claim and the proceeding goes on as in an action in personam, without the ship ever coming near the country or its territorial sea.
23. Thus the sum and substance of the contentions of the learned counsel appearing for the applicants is that
(i) An action in rem being an action against the ship is not an action against the owner of the ship viz., the Company called Pratibha shipping Co. Ltd., Therefore, the claimants need not seek the leave of the Company Court under Section 446 and that the proceeding will not be stayed by appointment of a provisional liquidator by the Company Court in Bombay.
(ii) The merchant Shipping Act being a special enactment, the provisions of it will overwrite the general enactment viz., Companies Act and therefore the proceedings under Admiralty jurisdiction being one under Merchant Shipping Act and the Letters Patent of this court can be proceeded with de hors the winding up proceedings before the Bombay High Court.
24. Per contra Miss.Shubharanjani Ananth, learned counsel appearing for the liquidator would contend that the proceedings in this Court commenced by way of Writ Petition, therefore they were not proceedings in rem they were proceedings in personam, hence, the claim that the proceedings in C.S.No. 89 of 2013, are proceedings in rem would not arise. She would further contend that once a security has been offered by the owner, proceedings in rem will become proceedings in personam and therefore upon initiation of the winding up proceedings, the proceedings in CS.No.89 of 2013 will stand stayed under sub-Section 2 of Section 446 of the Companies Act.
25. She would rely upon the judgment of this Court in Sudarsan Chits(I) Ltd., Vs. O.Sukumaran Pillai and others reported in (1984) 4 SCC 657. She also relied upon the judgment reported in volume 20 of the Equity Cases of the Australian Court wherein a master of the steam ship was directed to approach the liquidator for recovery of his dues than a claim by way of Admiralty Court. The master of the ship had applied to the liquidator for payment and upon being refused, he commenced a case of wages before the Admiralty Court. Therefore, on the facts of the case it was held that it would be proper for Mr.Baker to approach the liquidator and not to invoke the Admiralty jurisdiction. I do not find any law has been laid down but what has been held is that a sum be carried to a separate account in the winding up proceedings to answer the claim and thereupon all the proceedings in the Admiralty Court should be stayed.
26. Miss.Shubharanjani Ananth, learned counsel appearing for the liquidator would also contend that the owner of the ship had offered the security and had consented for sale of the ship, therefore, the action which was initially an action in rem had been converted into an action in personam. It is also contended by the learned counsel that the provisions of the Companies Act alone will prevail and therefore the proceedings will stand stayed under Section 446(2) of the Companies Act.
27. I have considered the rival submissions carefully. The admiralty jurisdiction is a special jurisdiction that is conferred on Court to ensure that the claims of person having maritime lien are not defeated by the ship /vessel concerned sailing out of the territorial waters before proceedings are taken up and completed.
28. It is only with a view to provide a security for those persons who have maritime lien the Merchant Shipping Act as well as Clause 32 of the Letters Patent provide for an Admiralty jurisdiction which enables the Court to arrest the vessel and it makes the vessel itself a juristic person liable for certain actions of it. Thus the action initiated under the admiralty procedure is therefore called an action in rem which is against the ship. The ship by itself is made answerable to the claims of those person who become secured creditors by arrest of the ship.
29. In M.V.Elisabeth and others Vs. Harwan Investment & Trading Pvt. Ltd., and another reported in AIR 1993 SC 1014, the Honble Supreme Court has explained as to what is action in rem and when does the liability becomes liability in personam. In fact, the Honble Supreme Court had observed that once the Admiralty jurisdiction is exercised in an action in rem and the vessel or the Ship is arrested, it may induce the owner to submit to the jurisdiction of the Court and thereby making himself liable to be proceeded against him in personam. The decree of the Admiralty Court in an action in rem binds not merely the party to the Writ but everybody in the world who might dispute the plaintiffs claims. The Honble Supreme Court also goes on to point out the effect of the Maritime lien and maritime claim is based on the principle that ship is to pay for the wrong it has done and it is also pointed out that it can be compelled to do so by a forced sale.
30. Miss.Shubharanjani Ananth, learned counsel would however draw my attention to the observation of the Hon'ble Supreme Court in para 57, which I have already extracted, and submit that inasmuch as the owner of the ship has offered to accept the sale of the ship, the action in rem would get converted into an action in personam.
31. I am unable to accept such contention because what has been pointed out by the Hon'ble Supreme Court is that when the owner submit to the jurisdiction and obtain release of the ship by depositing security he becomes personally liable. The owner of the ship in the case on hand did not offer security or did not produce security and got release of the ship. On the other hand, it is seen from the records and affidavit was filed by the owner seeking sale of the ship and deposit of proceeds with Admiralty Court. This in my considered opinion will not amount to obtaining release of the ship by depositing security which alone would make the Company personally liable and convert the action in rem into a action in personam.
32. As already pointed out the rights of persons having a maritime lien are always protected by the Merchant Shipping Act. The Sea mens right to wages is given a priority in the said Act. In O.Konavalov Vs. Commander, Coast Guard Region, reported in (2006) 4 SCC 620, the Honble Supreme Court has held that the lein enacted under Merchant Shipping Act, 1958, would prevail over the confiscation of the ship under section 115 r/w 126 of the Customs Act, therefore, the lien available to a seaman for his wages is held to be superior to the rights of the Company even after confiscation of the ship under Section 115 r/w 126 of the Customs Act.
33. Therefore, once proceedings in rem have been initiated in the Admiralty Court, the ship has been sold in exercise of the powers of the Admiralty Court and the proceeds deposited with the Admiralty Court, the initiation of proceedings for winding up before the Bombay High Court cannot have the effect of operating to stay the proceedings in this court. Once the order for sale of the ship is passed and the proceeds are in the custody of the Court, it is for this Court to decide on the priorities and the initiation of proceedings under Companies Act, will not result in stay of the proceedings.
34. Mr.N.V.srinivasan, learned counsel for the applicants would draw my attention to the judgment of the court of Appeal Singapore reported in 1999 3 SLR 721, wherein, the court of Appeal Singapore had followed the judgment of the Hon'ble Supreme Court in M.V.Elisabeth and others Vs. Harwan Investment & Trading Pvt. Ltd., and another reported in AIR 1993 SC 1014 and observed that an action in rem once commenced against the ship is an action against the ship itself and continues as such even though it may also be an action in personam against the owner thereof.
35. If the owner does not enter appearance and the judgment is obtained the judgment is enforceable only against the ship and an extent of the value of the ship. However, if the owner enters appearance the action will continue as action in rem against the ship and an action in personam against the owner and the judgment is obtained which is enforceable against the ship and also against the owner in full extent of the judgment.
36. In view of the above pronouncements, I am of the considered opinion that the action in rem initiated under the Admiralty jurisdiction stands on a totally different footing and the same cannot be made subject to the proceedings under the Companies Act against the owner of the ship. Thus action in rem being only against the ship itself, it cannot be construed as an action against the owner of the ship, in order to invoke Section 446(2), for staying the said action. Even otherwise, the proceedings under the Admiralty jurisdiction being the proceedings under the Merchant Shipping Act 1958 which is a special enactment will not be affected by the proceedings under the Companies Act which is a general law. As pointed out in Allahabad Bank Vs.Canara Bank and another reported in 2000 (4) SCC 406, as well as in Damji Valji Shah and another Vs. Life Insurance Corporation of India & others reported in 1965 3 SCR 665, the proceedings under the special enactments cannot be affected by initiation of winding up proceedings.
37. In the result, I conclude that the proceedings in C.S.No.89 of 2013 being proceedings in rem against the ship, which is treated as a juristic person will not be affected by the initiation of winding up proceedings against the Company which is the owner of the ship and these proceedings will have to be decided by the Court in exercise of its Admiralty jurisdiction. The proceedings could neither be stayed under 446(2) of Companies Act nor the applicants will be directed to obtain the leave of the Company Court to proceed with the Applications.
38. Registry is directed to post all the applications on 09.01.2018 for decision on individual claims.
03.01.2018 dsa Index : Yes/No Internet : Yes/ No Speaking Order/ Non-speaking order R.SUBRAMANIAN.J., dsa A.Nos.2997/2013, 2998/2013, 2899/2013, 1713/2013,1715/2013, 1719/2013, 1723/2013, 1674/2013, 1675/2013, 1085/2013, 4014/2013, 4015/2013, 3584/2013, 3585/2013, 4544/2013, 4545/2013, 4204/2013, 4205/2013, 4207/2013, 4208/2013, 4210/2013, 4211/2013, 4213/2013, 4215/2013, 4219/2013, 4220/2013, 5716/2013, 5717/2013, 5973/2013, 5974/2013, 93/2014, 3819/2013, 3820/2013, 3821/2013, 851/2013, 727/2014 in CS.No.89/2013 03.01.2018