Madras High Court
2009 (3) Ctc 611 (Interaccess Marine ... vs K.M.Allauddin And Others) on 22 October, 2010
Author: S.Rajeswaran
Bench: S.Rajeswaran
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22/10/2010 CORAM THE HON'BLE MR. JUSTICE S.RAJESWARAN A.Nos.4337 and 4810 of 2010 in C.S.No.708 of 2010 ORDER
Application No.4337 of 2010 has been filed by the plaintiff to order interim arrest of the respondent vessel MV Dhuvaafaru Galaxy (Ex: MV Hikaadhoo carrier), a ship registered in Maldives together with engines, tackles, cranes, derricks, machinery and the paraphernalia and other articles on board the said vessel presently lying in the Indian waters at the Port of Kannur (Kerala), Azhikkal anchorage, Silk Yard, or wherever found within the territorial waters of India, pending disposal of the above suit.
2. Application No.4810 of 2010 has been filed by the impleaded second defendant to revoke the order of arrest of the vessel MV Dhuvaafaru Galaxy dated 11.08.2010 in Application No.4337 of 2010 in C.S.No.708 of 2010.
3. For the sake of convenience, the parties are referred to as per their rankings in the suit.
4. The plaintiff is a Partnership firm and they have filed the above suit for the following reliefs:
(a) For a sum of Rs.1,26,75,328.46 together with interest at the rate of 24% per annum from the date of plaint till the date of realization.
(b)For the arrest and sale of the defendant vessel MV Dhuvaafaru Galaxy (Ex: MV Hikaadhoo carrier) together with engines, tackles, cranes, derricks, machinery and the paraphernalia and other articles on board the said vessel presently lying in the Indian waters at the Port of Kannur (Kerala), Azhikkal anchorage, Silk Yard, or wherever found within the territorial waters of India.
(c)For a direction to adjust the sale proceeds of the defendant vessel MV Dhuvaafaru Galaxy (Ex: MV Hikaadhoo carrier) against the suit claim.
5. The plaint averments are as follows:
The plaintiff is an Import and Export Company and they are also engaged in the business of Clearing and Forwarding Agency which includes supply of various necessaries to Vessel in Dock. The defendant in the course of business would lie anchored in the Indian Ports at various places at various points of time, particularly in Chennai and Tuticorin Ports. When the ship is so anchored, the plaintiff would supply various necessaries to the defendant at the request of the Master of the Vessel. The plaintiff would raise invoices and as such, maintaining a Running Account with the defendant.
6. The plaintiff has been supplying necessaries to the defendant for several years and an outstanding amount to the credit of the plaintiff stood at US $270,386.56 as at 19.03.2009. The defendant confirmed the aforesaid dues by their fax letter dated 27.04.2009, sent by Mr.Asif, affixing the seal of the company. Even after such confirmation of balance outstanding, the defendant availed the services of the plaintiff for the value of US $28,519.93. The defendant after negotiations, issued a letter of authority dated 22.07.2009 to the plaintiff to authorize the plaintiff to sell its defendants sister vessel M.V.Maafaru. The plaintiff realized a sum of US $ 150,000 and out of the sale proceeds, a sum of US $ 27,000 towards release of the sister vessel from arrest of another creditor which was settled by the plaintiff was adjusted and interest charges and crew charges at US $ 48,669.58 and US $23,810.07 respectively were also adjusted. After adjusting the sale proceeds of M.V.Maafaru as stated above, the total outstanding of the defendant stood at US $ 248,386.14. The said amount is outstanding from 16.02.2010.
7. The defendant has not made any payment despite repeated demands and therefore, the plaintiff was forced to invoke the Admirality jurisdiction of this Court. According to the plaintiff, they supplied stores, lube oil and other essentials to the defendant and therefore, the plaintiff is having a Maritime lien as well as the action in right in rem against the defendant.
8. The defendant is in deep financial crisis and therefore, the defendant is not in a position to settle the confirmed debts of the plaintiff. The defendant vessel is now berthed in Kannur Port for loading cargo and it is expected to remain in the Port for about two days. Various proceedings for recovery have been initiated by the creditors in India and abroad against the defendant and therefore, it is necessary to arrest the defendant Vessel and to protect the interest of the plaintiff. With the above pleadings, the plaintiff filed the suit for the aforesaid reliefs.
9. Along with the suit, the plaintiff filed O.A.No.4337 of 2010 for an order of interim arrest of the defendant vessel.
10. This Court, on 11.08.2010 ordered the arrest of the Vessel for two weeks and the interim order of arrest was later on extended by this Court.
11. One St.Antonys Traders having office at Tuticorin got themselves impleaded as second defendant in the suit and they filed A.No.4810 of 2010 to revoke the order of arrest dated 11.08.2010.
12. In the affidavit filed in support of A.No.4810 of 2010, a partner of the impleaded party stated that they are carrying on the business of purchase of old Vessel for the purpose of breaking and one such vessel is M.V.Dhuvaafaru Galaxy which was registered at Maldives. According to them, this vessel is not owned by M/s.Marine Exports and Trading Company Pvt. Ltd. (METCO). In fact, this vessel was owned by Miss Nazea Abdul Guddoos, republic of Maldives. After due negotiations, this ship was purchased by the impleaded party under MOA dated 24.06.2010. The price was fixed between the owner and the impleaded party at US $ 97,500/-. This sum of US $ 97,500/- was sent through Banking Channel i.e., South Indian Bank, Tuticorin to State Bank of India, Male, Maldives. Since the contract between the parties is on FOB basis, the firm took possession of the vessel from Male, Maldives for sailing to Kannur, Kerala for breaking up. Thus, according to them, the sale of the vessel took place as early as on 24.06.2010 to the impleaded party. The impleaded party is a bonafide purchaser for value, without notice of any claim for supply of alleged essentials or otherwise. The case of the plaintiff that METCO is the owner of the vessel is not correct. METCO is the owner of the vessel M.V.Maafaru. Therefore, their agreement with METCO is for the ship M.V.Maafaru and not of the ship M.V.Dhuvaafaru Galaxy. The case of the impleaded party is that there is no essential or necessaries supplied to M.V.Dhuvaafaru Galaxy and on a false representation. M.V.Dhuva Faaru Galaxy was wrongly arrested by the plaintiff. There is no claim of maritime lien against M.V.Dhuvaafaru Galaxy. If at all there is any claim, it can only be a claim in personam against the owner of the vessel and no claim in rem will lie. Hence, they prayed for revoking the order of arrest of the vessel M.V.Dhuvaafaru Galaxy dated 11.08.2010.
13. A counter affidavit has been filed by the plaintiff in A.No.4810 of 2010.
14. In the counter affidavit, it is stated that the defendant vessel is owned by METCO only and it is registered in the name of Ms.Nazwa Abdul Guddoos, one of its Directors. METCO own yet another ship M.V.Maafaru which was earlier sold by the plaintiff with the approval of the METCO. The vessel M.V.Maafaaru was also registered in the name of one Mr.Abdul Guddoos Ibrahim, whereas the other statutory documents and safety certificate carried the name of METCO. According to the plaintiff, it is the common practice in Maldives to register in the name of the Individual Director of the Company. Ms.Nazua Abdul Guddoos being a Director in METCO is well aware of the claim of the plaintiff herein and the purported sale of the defendant vessel to the impleaded party herein. It is a fraudulent transaction made with an intention to defeat the legitimate claims of the plaintiff. It is denied that the impleaded party is a bonafide purchaser for value without notice of any claim against the defendant vessel. The supplies of necessaries were made to the defendant vessel by the plaintiff and the hence the plaintiff is having a maritime lien. Maritime Lien travels with the Vessel and the lien subsists even if the vessel is sold either with or without notice of such maritime claim. Therefore, the plaintiff is entitled to exercise its right in rem in respect of the defendant vessel. Hence, they prayed for the dismissal of A.No.4810 of 2010.
15. I have heard the learned counsel for the plaintiff and the learned counsel for the impleaded party. I have also gone through the entire documents available on record.
16. The main contention of the learned counsel for the impleaded party is that, the claim for supply of necessaries for arrest of vessel would not give rise to cause of action in rem. He contended that only in the case of maritime lien, the Admirality jurisdiction of this Court could be invoked. If it is a maritime claim, only a suit in personam would lie and not a suit in rem. In support of his submissions, the learned counsel relies on the following judgments:
1.2009 (3) CTC 611 (Interaccess Marine Bunkering Ltd. vs. K.M.Allauddin and others)
2. AIR 2002 MDS 150 DB (S.Samiyullah vs. Owners and Parties Interested in the Vessel M.V.Makar)
17. Per contra, the learned counsel for the plaintiff contends that they have established a prima facie case for arresting the ship and therefore, the same need not be revoked at the instance of the impleaded party.
18. In support of his submissions, the learned counsel for the plaintiff relies on the decision of the Honble Supreme Court reported in 2004 (9) SCC 512 (Liverpool & London S.P. & I Association Ltd. vs. M.V.Sea success I and another) and 2006 (4) SCC 620(O.Konavalov vs. Commander, Coast Guard Region and others)
19. I have considered the rival submissions carefully with regard to facts and citations.
20. Before deciding the issue that arises for consideration, let me refer to the decision referred to by the learned counsel for the impleaded party:
1. In 2009 (3) CTC 611 (cited supra), a learned Judge of this Court held as follows:
35. Thus, we find two provisions in the Merchant Shipping Act, 1958, one in Section 148, for recovery of wages, disbursements, etc., by the Master of the ship and another in Section 443, for recovery of the value of the damage caused by a ship to the property of a citizen of India. Section 148 reinforces that the Master of the ship shall have the same rights, liens and remedies, as a seaman would have under this Act or by any law or custom, both in respect of his wages and also in respect of the disbursements or liabilities properly made or incurred by him. Therefore, coupled with the fact that under Section 139, the lien of the seaman cannot be forfeited by agreement, the Master as well as the seamen of the ship can trace their rights, liens and remedies to custom of usage, in respect of the recovery of wages or the disbursements made or liabilities incurred. But in so far as the damage caused by a foreign vessel is concerned, Section 443 empowers this Court to detain the vessel, till the value of the damage caused and costs incurred, are secured.
36. Therefore, it is clear from the above discussion that the codified law relating to Admiralty jurisdiction, does not contain express provisions as to when a maritime lien is created. On the contrary, Sections 139 and 148 provide an indication that one may have to advert to the customary law, to see when a maritime claim gets elevated as a maritime lien.
55. As stated earlier, India is a signatory to the above Convention. There is no Municipal Law in conflict with the above International Convention. On the contrary, Section 148(1) of the Merchant Shipping Act, 1958, which has already been extracted earlier, makes it clear that the Master of a ship has the same rights, liens and remedies for the recovery of his wages as a seaman has under this Act or by any law of custom. It is clear from the detailed discussion that by custom, the seamen and the Master have a maritime lien over the vessel, in respect of wages due to them. Such a customary right has been preserved by Section 148(1) of the Merchant Shipping Act, 1958 and reiterated by India signing the International Convention on Maritime Liens and Mortgages.
56. It appears that even statutorily, many countries have recognised the existence of a maritime lien in favour of the Master and seamen. Under Article 2 of Chapter 3 of the Maritime Act of Finland, the claim for unpaid salary or other emoluments to the Master or other persons employed on Board, creates a maritime lien. The Israeli Supreme Court has opined that the existence of maritime lien is subject to the lex causae, while the question of priorities between maritime liens is subject to the lex fori.
59. Therefore, the claim made by Capt. Papaspamatiou, the Master of the vessel, for the wages remaining unpaid, is not a mere maritime claim but a claim giving a right of maritime lien. The lien cannot even get extinguished, by virtue of a confiscation by the Government under the provisions of the Customs Act, 1962. Therefore, I hold that Capt. Papaspamatious claim for unpaid wages, constitute a maritime lien, which has priority over the mortgage claim made by The Royal Bank of Scotland, in terms of Article 5.1 of the International Convention on Maritime Liens and Mortgages, 1993.
70. Thus, there is a divergence of opinion on the question whether supply of necessaries constituted a maritime lien, despite the fact that it does not fall under any one of the five categories receognised by English Courts and listed out by D.R.Thomas on Maritime Liens. This is perhaps due to a small mix up first between a maritime claim and a maritime lien and next between a maritime lien and a statutory lien.
74. As held consistently by all Courts, the arrest of the ship is only for the purpose of securing the claim of the plaintiff against an unknown owner of a vessel or against a known owner of a vessel not amenable to the jurisdiction of the Admiralty Court except when the vessel has arrived within the territorial waters of the country. Even in M.V.Elisabeth case, the Supreme Court observed in para 49 that the arrest of the ship may be (i) to acquire jurisdiction, or (ii) to obtain security for the satisfaction of the claim when decreed, or (iii) in execution of a decree. In para 50, the Supreme Court indicated that the attachment by arrest is only provisional and that "its purpose is merely to detain the ship until the matter has been settled by a competent Court". In para 51, the Supreme Court stated as follows:
"51. The attachment being only a method of safeguarding the interest of the plaintiff by providin g him with a security, it is not likely to be ordered if the defendant or his lawyer agrees to "accept service and to put in bail or to pay money into Court in lieu of bail." (See Halsbury's Laws of England, 4th Edn. Vol.1p.375, etc)"
80. The last portion of the passage extracted above, makes it clear that an action in rem and the order of arrest need not necessarily indicate the presence of a maritime lien, since the right to proceed in rem now stands extended to many claims which do not constitute a maritime lien. In other words, every maritime lien gives a right to initiate an action in rem and to seek an order of arrest of the vessel. But every action in rem and every order of arrest does not presuppose the existence of a maritime lien.
84. But unfortunately for the applicants, whose claims are based upon the supply of necessaries, the Supreme Court did not reognise anywhere in its decision in M.V.Elisabeth, the existence of a maritime lien, in favour of supplier of necessaries. All that the Supreme Court said was that the expression "damage done by a ship" appearing in Section 443 is so elastic as to include even the breach of obligations created by contracts and that the powers of the Court are not limited by colonial practices. A reading of the judgment of the Supreme Court in M.V.Elisabeth, in totality, would show that there are a wide range of claims, in respect of which an action in rem could be initiated and the arrest of the vessel sought. Neither any of the provisions of the Merchant Shipping Act, 1958 nor any portiion of the decision in M.V.Elisabeth, recognise the existence of a maritime lien in favour of the supplier of necessaries. As pointed out by the Bombay and Calcutta High Courts (in Elinoil Hellenic Petroleum and Saba International), the passing reference in paragraph-99 of the decision in M.V.Elisabeth, to "the supply of necessaries", cannot be taken to lay down a proposition of law that the supply of necessaries constituted a maritime lien. As a matter of fact, the observation made in para-99 is actually with reference to the law in England as it grew and developed. But we have found from the Halsbury's Laws of England, that even today, a maritime lien is not created in favour of a supplier of necessaries. This is why, even in Epoch Enterrepots vs. M.V.WON FU, 2002 (4) CTC 554 (SC) : 2003 (1) SCC 305, the Supreme Court quoted with approval those 5 categories of maritime liens listed in Thomas on Maritime Liens and The Brussels Convention of 1967. In Enterrepots, the Supreme Court took note of M.V.Elisabeth and yet did not expressely go beyond those 5 categories of maritime liens.
96. Thus, even the procedural rules take care of only three out of five categories of maritime liens, enlisted by Thomas on Maritime Liens. Out of the five heads of maritime liens, listed by thomas, viz., (i) damage done by a ship (ii) salvage (iii) seamen's wages (iv) Master's wages and disbursements and (v) bottomry, Orer 42, Rule 3 deals only with three heads viz., (i) wages (ii) bottomry and (iii) salvage. I am not for a moment drawing an inference from Order 42, that the other two claims (left out in Order 42) cannot be recognised as constituting a maritime lien. I am only drawing attention to the fact that Order 42 explicity recognises that a claim for wages can be by way of an action in rem. Coupled with the recognition in Sections 139 and 148(1) of the Merchant Shipping Act, 1958, to the lien of the seamen and the Master of a ship for their wages and the absence of any such reference or recognition to the claim of the supplier of necessaries, it is clear that a claim for supply of necessaries, is neither recognised by custom or usage nor recognised statutorily as constituting a maritime lien.
97. Therefore, I hold that the claim for supply of necessaries do not constitute a maritime lien, though it certainly constituted a maritime claim, giving a right of action in rem with a right to seek an order of arrest of the vessel.
21. From the above judgment, the following propositions of law has been laid down by this Court which are as follows:
1. Two provisions are relevant in the Merchant Shipping Act, 1958, one in Section 148 for recovery of wages, disbursements, etc., by the Master of the ship and another in Section 443 for recovery of the value of damages caused by a ship to the property of a citizen of India.
2.Codified law relating to Admirality jurisdiction does not contain express provisions as to when maritime lien is created.
3.Supreme Court in 2003 (1) SCC 305 quoted with approval, the definition of the expression from Brassels Convention of 1967 and from Thomas on Maritime Liens.
4.All types of claim on the vessel or on its owners cannot be treated as coming under the category of Maritime Lien.
5.By custom, the seamen and the Master have a maritime lien over the vessel, in respect of wages due to them and such a customary right has been preserved by Section 148(1) of the Merchant Shipping Act, 1958 and reiterated by India by signing in the International Convention on Maritime Liens and Mortgages, 1993.
6.The claim made by the Master of a Vessel for the wages remaining unpaid is not a consumer maritime claim, but, claim giving a right to maritime lien.
7.There is a divergence of opinion on the question whether supply of necessaries constitute a maritime lien, despite the fact that it does not fall under any one of the five categories recognized by the English Courts.
8.The arrest of a ship is only for the purpose of securing the claim of the plaintiff against the intending owner of a vessel or against a known owner of a vessel not amenable to the jurisdiction of the Admirality Court except when the vessel has arrived within the territorial waters of the country.
9.An action in rem and the order of arrest need not necessarily indicate the presence of a maritime lien since the right to proceed in rem now stands extended to many claims which do not constitute a maritime lien.
10.The Supreme court did not recognize the existence of maritime lien in favour of supplier of necessaries.
11.Claim for supply of necessaries do not constitute a maritime lien, though it certainly constituted a maritime claim giving a right of action in rem with a right to seek an order of arrest of the vessel.
2. In AIR 2002 MAD 150 (cited supra), this Court held as follows:
13. The next contention putforth by the defence is that the vessel Eagle II was originally owned by M/s. Belgica Company Limited and the present owner namely M/s. Permana Shipping Company, purchased the same under the Memorandum of Understanding where it was agreed that the purchase of the ship was free from all encumbrances and martitime liens. It remains to be stated that the said memorandum of Understanding referred to by the defendant is not filed in Court. From the evidence, it would be abundantly clear that the plaintiff has not even taken steps to ascertain the owner of the ship though P.W. 1 has stated that he verified the Lioyds register containing the name of the ship, year of the built and tonnage and name of the owner but he is unable to say who is the present owner of the ship. He would further add that he did not exactly know whether the Globe Trade and Transport, incorporated, are the owners or the managers of the ship. The defendant has categorically stated in the written statement that the vessel M. V. Makkar was presently owned by M/s. Permana Shipping Company, Cuprus, but P.W. 1 would say that he did not verify the Lloyds Shipping register after August, 1997 when the written statement of the defendant is filed to find out whether the said statement is correct or not. Learned counsel for the defendant would submit that even according to the plaintiff, neither the orders were placed nor the supplies were made to the present owners of the ship and thus there was no contractual relationship between the present plaintiff and the present owners of the ship and hence the present owners are not liable.
14. Counterintg the above contention, the learned counsel for the plaintiff would state that the essence of the maritime lien is that it is a right which travels with the ship into whosoever possess it might subsequent go (sic) and in the instant case though the ship has been subsequently transferred to the present purchaser, the plaintiff has got a maritime lien in view of the supply of the necessaries. in support of his contention, he relied on Section 20(2) of the Supreme Court Act, 19S1 wherein the types of claims or disputes which fell within the power of English admiralty Court to hear and determine. Section 20(2)(m) reads "Any claim in respect of a case or materials supplied to a ship for her operation or maintenance". Relying on the Halsbury's Laws of England Fourth Edition Volume 43. learned counsel for the defendant would urge that the maritime lien cannot be applied to the present facts and circumstances of the case. Describing the nature and extent of the maritime liens, Halsbury's Laws of England. Fourth Edition. Volume 43 Shlpping'and Navigation pararaph 1131 reads as follow ;
"A maritime lien is a claim or privilege a maritime res in respect of service done to it or injury caused by it. Such a lien does not import or require possession of the res, for it is a claim or privilege on the res to be carried into effect by legal process. A marl-time lien travels with the res into whosesoever possession it may come, even though the res may have been purchased without notice of the lien or may have been seized by the shelff under a writ of fieri favias issued at the instance of execution creditors. A maritime lien is inchoate from the moment the claim or privilege attaches, and, when called into effect by the legal process of a proceeding in rem, relates back to the period when it first attached.
A maritime lien only attaches to the particular res in respect of which the claim arises and not to any other property of the owners."
Paragraph 1133 reads as follows :
"The maritime liens recognised by English law are those in respect of bottomry and respondentia bonds, salvage of property, seamen's wages and damage. A maritime lien has been held not to exist in respect of towage, necessaries or insurance contributions. It is doubtful whether a maritime lien exists in respect of pilotage dues."
15. Applying the principles of law laid in the Halsbury's Laws of England as referred above, it would be clear that the supply of necessaries will not fall within the admiralty lien and on that basis the plaintiff cannot seek recovery from the present owner for the alleged supply of the necessaries made to the earlier owner. Hence, the Court without any hesitation has to hold that the plaintiff has neither adduced necessary and sufficient proof as to the orders for and supply of the necessaries nor has he shown that he is entitled in law to recover the same from the present owner though the alleged supplies were made to the earlier owner.
22. In the above judgment, this Court held that supply of necessaries will not fall within the admirality lien and on that basis, the plaintiff cannot seek recovery from the present owner for the alleged supply of necessaries made to the earlier owner.
23. In 2004 (9) SCC 512 (cited supra), the Honble Supreme Court held that the unpaid insurance premium of P and I club would come within the purview of the expression necessaries supplied to any ship.
24. In 2006 (4) SCC 620 (cited supra) the Honble Supreme Court held that the seaman who were on board on the vessel were entitled to the full wages notwithstanding the fact of its confiscation. The Supreme Court further observed that the maritime lien for seamans wages will follow the ship and its proceeds in whosesoever hand they may come, by title or purchase from the owner and the lien re-attaches to the things after sale and to whatever is substituted for it, even in the hands of a bonafide purchaser for value without notice.
25. In the light of the above judgments, if the facts of the present case are considered, it is very clear that the plaintiff is seeking recovery of money from the defendant for supplying necessaries to the defendant for every orders. If that being so, the judgments referred to by the learned counsel for the impleaded party will operate against the prayer of the plaintiff to arrest the ship as this Court has categorically held that claim for supply of necessaries do not constitute a maritime lien giving a right of action in rem with a right to seek an order of arrest of the vessel.
26. The judgment relied on by the learned counsel for the plaintiff were rendered by the Honble Supreme Court in a different context and the questions of maritime lien and its applicability to necessaries was not decided thereon and therefore they are not helpful to the case of the plaintiff.
27. It is not for this Court to go into the allegations of the collusion between the defendant and the proposed party and the allegation that the same company is the owner of both the vessels. It is for the plaintiff to establish these facts in a manner known to law at the time of trial and the same cannot be considered at this interlocutory stage.
28. Therefore, once it is admitted in the plaint itself that the plaintiff is seeking recovery of money for the various necessaries supplied to the defendant, then, the law laid down by this Court will apply, which means the plaintiff cannot seek for an order of arrest of the vessel as the claim for supply of necessaries do not constitute a maritime lien though it certainly constituted a maritime claim.
29. Hence, I have no hesitation in allowing A.No.4810 of 2010 filed by the impleaded second defendant and accordingly the order of arrest of the vessel M.V.Dhuvaafaru Galaxy is revoked and consequently A.No.4337 of 2010 is dismissed. No cost.
cse