Gujarat High Court
Michail vs M on 11 May, 2011
Author: Anant S. Dave
Bench: Anant S. Dave
Gujarat High Court Case Information System
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AS/3/2011 23/ 23 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
ADMIRALITY
SUIT No. 3 of 2011
For
Approval and Signature:
HONOURABLE
MR.JUSTICE ANANT S. DAVE
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ? yes
2
To
be referred to the Reporter or not ? yes
3
Whether
their Lordships wish to see the fair copy of the judgment ? no
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ? no
5
Whether
it is to be circulated to the civil judge ? no
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MICHAIL
ARHANGELOS S A C/O AGENT SEAWIND MARITIME CO
Versus
M
V STAR 7 (EX M V MICHAIL ARHANGELOS) and others
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Appearance :
Mr.
Umesh D. Shukla for MR MANAV A MEHTA
for Plaintiff
Mr.Mihir
Thakore, Senior Advocate with Mr. R.S. Sanjanwala for the
defendants.
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CORAM
:
HONOURABLE
MR.JUSTICE ANANT S. DAVE
Date
: 11/05/2011
CAV
JUDGMENT
1 Plaintiff, a Company incorporated under the laws of Marshal Islands and engaged in the business of shipping, has filed this suit as per the pleadings in paragraph 3 of the plaint for security pending ongoing London Arbitration which has commenced seeking repossession of "M.V. STAR 7" [ex-M.V.Michail Arhangelos] [for short , 'defendant-vessel'] and/or the balance of the amount claimed in the arbitration being the market value of the vessel. It is further pleaded that a fraud was played by defendant No.2 against the plaintiff and further fraud was played by defendant No.2 against defendant No.3 and, therefore, the plaintiff is also seeking arrest and sequestration of the vessel and for a direction that the possession of the arrested vessel be handed over to the plaintiff. It is pleaded that the defendant-vessel is lying at the Port of Alang and this Court has admiralty jurisdiction over the defendant-vessel. Defendant No.2 is a registered company trading in ship scraps situated at Hong Kong and defendant No.3 is also in the business of ship scraps.
2 The plaintiff has produced true copies of registration certificates initially registered on 1st December 2005 at St. Kitts & Nevis International Ship Registry and the said registration was valid till 30th November 2009. Subsequently, from the record it appears that, the registration of the vessel at St. Kitts & Nevis International Ship Registry expired on 30th November 2009 and, from the letter dated 23rd December 2010 addressed by the plaintiff to Tanzania Zanzibar International Registry of Shipping, the vessel was registered provisionally at Panama Registry and the vessel 'M.V. Michail Arhangelos' was registered at St. Kitts & Nevis International Ship Registry on purchase by defendant No.2, Star Matrix Limited. Arrangements were made to register the vessel at Tanzania Zanzibar International Registry of Shipping.
3 However, from the pleadings and submissions, it appears that on 2nd April 2010, a Memorandum of Agreement [MOA] was entered into between the plaintiff [seller] and defendant No.2, Star Matrix Limited, Hong Kong [buyer] for sale of the defendant-vessel and it was agreed that the sale consideration would be US $ 1.1 Million and as per the terms of the MOA, certain outstanding wages and charges were to be paid along with an understanding that after payment of certain wages and dues, the balance money was to be kept in a joint account between the seller and the buyer in Punjab National Bank, Hong Kong, in a separate account and this money was to be released to the seller upon the vessel being dismantled by 50% or maximum as per the days of beaching at the breakers yard. It also reserved the right of the seller to cancel the contract and the amount deposited as per clause 2 shall be forfeited to the seller and, in case of dispute arises in connection with any interpretation of any term of the contract, it was to be decided by the arbitration in the City of London, U.K. with English law to apply. The plaintiff also raised commercial invoice dated 8th April 2010 upon the plaintiff for the sum of sale consideration namely US $ 1.1 Million. In the meanwhile, according to the plaintiff, communication took place and, though full payment was not received from defendant No.2, a receipt for full payment for US $ 1.1 Million was issued by the plaintiff and possession of the defendant-vessel was handed over to defendant No.2 and, accordingly, addendum dated 5th May 2010 was executed and due to part payment and understanding and assurance by defendant No.2 to pay the balance amount, the bill of sale was drawn for the full amount. Since no response was received for payment of the balance due, notice of cancellation of the MOA and bill of sale was served upon defendant No.2 and an arbitrator was appointed and the MOA and bill of sale came to be cancelled and defendant No.2 was called upon to deliver the vessel as they had breached the terms of the MOA and the title and ownership had not passed in their favour. By e-mail dated 23rd December 2010, the plaintiff also informed about cancellation of the MOA and bill of sale to Tanzania Zanzibar International Registry of Shipping with which defendant No.2 arranged for temporary registration of the defendant-vessel and informing that the plaintiff were still owners of the vessel and not to issue any kind of ship certificate without confirmation with the plaintiff.
4 The plaintiff upon coming to know about arrest of the defendant-vessel by this Court in Admiralty Suit No.1 of 2011 filed by Destel Marine Limited and thereafter on an inquiry having been made, came to know that defendant No.2 have sold the defendant-vessel to defendant No.3 as per the MOA dated 22nd September 2010. The plaintiff has not admitted the above MOA between defendant No.2 and defendant No.3 and emphasized that the title in the vessel has not passed in favour of defendant No.2 in view of non-payment of full consideration of sale. It is submitted that the case of the plaintiff is governed by 1952 Brussels Convention and Article 1[o] pertaining to 'maritime claim' since the dispute arises as to title and ownership and, therefore, it is prayed even in the plaint and so submitted that this Court may be pleased to declare the plaintiff as owner of the defendant-vessel and further direct defendant No.2 and defendant No.3 to hand over possession of the said vessel to the plaintiff and inter-alia it is also prayed for the arrest of the vessel and further prayer that in case of sale, the sale proceeds be ordered to be applied to the satisfaction of the plaintiff's claim along with costs and also to decree the suit by holding that defendant No.2 and defendant No.3 are liable to the plaintiff for the remaining market value of the defendant-vessel being US$2069238 as claimed in the arbitration proceedings.
5 Mr. Mihir Thakore, learned Senior Counsel appearing for defendant No.3, has raised preliminary objections with regard to maintainability of the admiralty suit in view of the pleading of the plaint. At the outset, it is submitted that, in the contextual facts and the basic pleadings in the suit, a dispute arises out of a contract for sale of the defendant-vessel and the pleadings pleaded in paragraphs 3, 4.1, 4.2, and 4.4 referred to the MOA dated 2nd April 2010 between the plaintiff and defendant No.2 about sale of the defendant-vessel and the dispute about sale consideration paid and unpaid and, therefore, a prayer to declare the plaintiff as owner and in possession of the defendant-vessel and some understandable pleadings are made only with a view to invoke admiralty jurisdiction by branding the claim as 'maritime claim' and, as held by this Court in [i] O.J. Appeal No.6 of 2011 in Admiralty Suit No.10 of 2010 in the case of Croft Sale and Distribution Ltd vs. M.V. Basil, decided on 17.2.2011 and in [ii] Admiralty Suit No.2 of 2011 in the case of M/s. Unique Trading Co. vs. M.T. Johar, decided on 23.3.2011, the suit is not maintainable at all. The learned counsel further submits that the MOA dated 2nd April 2010 between the plaintiff and defendant No.2 is a contract between two private parties and, since there is not an iota of public law element as held by the Apex Court in the case of Liverpool & London S.P. & I Association Ltd vs. M.V. Sea Success-I and another, reported in (2004) 9 SCC 512 and relied upon by this Court in the above-referred two decisions, the suit deserves to be dismissed with costs. He further submits that no money decree is claimed in the suit and no arrest can be ordered on the line of Order 38 Rule 5 of the Code of Civil Procedure as held by this Court in O.J. Appeal No.6 of 2011 in Admiralty Suit No.10 of 2010. It is reiterated that whatever held in the case of Liverpool [supra] about applicability of Convention of 1999 will apply with equal force to 1952 Brussels Convention as held by the Apex Court in the case of M.V. Elisabeth & others vs. Harwan Investment & Trading Pvt. Ltd, (1993) Suppl. 2 SCC 433 and, in view of what is observed in paragraph 74 of the above judgment, the Convention is to be applied subject to domestic law which may be enacted by the Parliament. Further, in view of the following decisions of the Bombay High Court [i] in Appeal No.635 of 2001 in the case of Communications and Commerce International Pvt Ltd vs. M.V. Saba decided by the Division Bench on 10.7.2001 [ii] in the case M.V. Saba decided by the Single Judge; and [iii] in the case of New Era Shipping Ltd vs. M.V. Express & others, reported in 2007(6) Bom.C.R.138, it is submitted that the vessel was beached at 4.30 a.m. on 5th March 2011 before even the arrest order was passed by this Court on 5th March 2011 and, therefore, once the vessel was beached, it was no more in the territorial waters and the jurisdiction would be only of Civil Court as per the local law and no admiralty jurisdiction could have been invoked. It is, therefore, submitted that now the vessel is on the landmass of India under the civil court jurisdiction and, therefore, the law laid down by this Court in the case of Western Ship Breaking Industry vs. Laiki Bank (Helias) S.A., Manu/GJ/8251, is having binding precedent and persuasive value both and no other view can be taken and, therefore, this plaint be rejected and the suit be dismissed.
5.1 The learned Senior Counsel for defendant No.3, while submitting on merits of the case, has referred to various clauses of the MOA dated 2nd April 2010, bill of sale, letter dated 21st December 2010 and clause 9(a) of the MOA with regard to 'default' if made by the buyer and the right of the seller under the contract and submitted that the said clause provided for cancellation of contract and claiming damages and not for reservation for disposal of the goods. The learned counsel also referred to expiration of initial registration with St. Kitts & Nevis International Ship Registry on 30th November 2009 and, thereafter, provisional registration as referred to in the letter dated 23rd December 2010 addressed by the plaintiff to Tanzania Zanzibar International Registry of Shipping which the buyer, namely, defendant No.2 had undertaken to register the vessel in its present form. The learned counsel has also referred to deletion certificate dated 11th June 2010 issued by Panama Registry due to transfer of registration to Tanzania Zanzibar International Registry of Shipping so as to indicate that after expiry of registration on 30th November 2009, it was registered at Panama Registry, as admitted.
5.2 The learned Senior Counsel for defendant No.3 has also referred to the MOA entered into between defendant No.2 and defendant No.3 on 22nd September 2010 and the delivery date was extended from 31st October 2010 to 15th January 2011 as per the addendum dated 31st October 2010 and payment of sum of US $ 1 lakh was made on 28th September 2010. A provisional certificate of registration dated 2nd November 2010 was issued by Tanzania Zanzibar International Registry of Shipping to defendant No.2 and appointment of Arbitrator was made by the plaintiff and a letter was addressed by defendant No.2 appointing O. Donovan on 24th December 2010. A reference is made to certificate of non-encumbrance dated 27th December 2010 issued by Tanzania Zanzibar International Registry of Shipping, opening of letter of credit on 29th December 2010 by defendant No.3 and arrival of the vessel at Alang Enchorage at 11.50 p.m. [23.50 hrs.] on 31st December 2010, amendment of letter of credit on 3rd January 2011 and the letter of credit was released on the same day for 2105270 USD. On the very day, the vessel was registered by the Officer of the Gujarat Maritime Board and upon submission of the report Gujarat Maritime Board recommended for issuing beaching permission. On 4th January 2011, the following events took place: Commercial invoice was raised by defendant No.2 on defendant No.3; bill of sale was issued acknowledging receipt of purchase price of the vessel; transfer of property, title and ownership in the vessel in favour of Kathiawar Steels; notice of readiness was issued by the agent of defendant No.2 in favour of defendant No.3; physical delivery was taken by Kathiawar Steels upon issuance of certificate of delivery by the Master of the vessel; bill of entry was made with the customs authorities and customs duty of Rs.1,68,18,923/- was paid for import of the vessel in India for home consumption by defendant No.3; the Gujarat Maritime Board granted permission to submit relevant documents for beaching the vessel; the Superintendent of Customs addressed a letter that they have no objection to grant clearance for beaching the vessel; the Gujarat Maritime Board granted beaching permission to the vessel and in fact the vessel was beached in the early morning at 4.30 a.m. on 5th January 2011 as per the certificate issued by the Gujarat Maritime Board on 10th January 2011 even before the arrest order came to be passed on 5th January 2011. In view of the above, it is submitted, even on merit also, that the plaintiff has no case based on title, ownership and possession of the vessel.
6 Mr. Umesh Shukla, learned counsel for the plaintiff has submitted that the claim of the plaintiff is based on clause [o] of Article 1 of 1952 Arrest Convention and the said clause is wide enough to cover all the disputes regarding title or ownership of a ship. Even if 1952 Arrest Convention is interpreted on stand alone basis and in view of the law laid down by the Apex Court in the case of M.V. Elisabeth [supra] where the Apex Court emphasized for expansion of admiralty jurisdiction and not for curtailment, the present suit is maintainable and the relief is claimed to declare the plaintiff as owner and having title over the ship and to pass a decree as prayed for in USD and, in the alternative, prayer (B) be granted.
6.1 Inter-alia, it is submitted that there is sufficient public law element existing in the present contract between the plaintiff and defendant No.2 and the such judgment will operate in rem and, in registration and dealing with the ship, number of public authorities are involved and many banks and financial institutions have their stake and, therefore, the test of 'public law element' is satisfied. It is further submitted that the observation regarding 'public law element', as a passing observation with no force of law, is not binding to this Court. So far as the judgments of the Bombay High Court and this Court on the issue of 'whether the beaching of a vessel extinguishes admiralty jurisdiction of this Court' are concerned, it is submitted that the appeals are pending before the Apex Court where the interim relief is also granted and, therefore, the said decisions have no force and binding to this Court to take a view as taken therein. The learned counsel for the plaintiff has also relied on various provisions of UK Sales of Goods Act where certain provisions are pari-materia with the Indian Sales of Goods Act and referred to clauses 8 and 9 of the MOA between the plaintiff and defendant No.2 to make it clear that the ownership does not pass till the entire payment is made to the plaintiff and right of cancellation of the contract was available to both, the plaintiff and defendant No.2, as provided in the above clause including forfeiture of money paid and the damages and right to repossess the vessel from the purchaser. The learned counsel for the plaintiff has also referred to clause 6 of the contract where the risk passes with delivery of the vessel and this condition is a departure from Section 20 of the UK Act where in Section 20 risk passes with title whether the delivery is made or not but at the same time Section 20 applies until the parties have not agreed to the contrary. Since as per the MOA between the plaintiff and defendant No.2 clause 6 is subject to other conditions including clauses 8 and 9 in the facts of this case, the risk passes with delivery but without passing of the ownership. Therefore, the ownership remains with the plaintiff even after subsequent MOA was entered with defendant No.3 by defendant No.2 in breach of contractual agreement. The learned counsel for the plaintiff has disputed the manner and method in which the MOA was entered into between defendant No.2 and defendant No.3 and opposed the claim of defendant No.3 as bona fide purchaser, since after serving notice dated 21st December 2010, defendant No.3 acted in collusion with defendant No.2 and also referred to the conduct of defendant No.3 in issuing amended letter of credit where defendant No.3 has waived valuable conditions of the earlier unamended letter of credit to defendant No.2. He also highlighted the permission granted by the GPCB and GMB Authorities and payment of customs duty within no time and referred to the order dated 5th January 2011 passed by this Court arresting the defendant-vessel where it was clearly stated that 'beaching shall be subject to further order that may be passed in the proceedings' and, therefore, no such permission or so-called beaching of the vessel will have no consequence and it will be open for this Court to consider the claim of the plaintiff on its own merit.
6.2 Learned counsel for the plaintiff has further referred to Article 7 of Brussels Convention of 1952 and specifically referred to sub-articles (2), (3) and (4) of the above Article and submitted that the above Article was not considered by the Division Bench and, therefore, the above judgment needs to be applied only after considering the provisions of Article 7 in the context of the facts of the case.
6.3 So far as registration of the vessel with Tanzania Zanzibar International Registry of Shipping and deletion of registration at Panama Registry is concerned, it is submitted that it was unilateral and the plaintiff was not involved in the said process and such registration is a formality and cannot defeat the right of the mortgagee which was registered, and, considering overall facts, it is submitted that this Court has jurisdiction to try the suit and the decree as prayed for may be passed.
7. Having heard the learned counsel appearing for the parties and on perusal of the relevant record, the following main issues arise for consideration of this Court in exercise of admiralty jurisdiction with regard to the maritime claim raised by the plaintiff:
[i] Whether the suit is maintainable ?
[ii] Whether the plaintiff has maritime claim so as to invoke admiralty jurisdiction of this Court for arrest of the defendant-vessel "
8. To decide the aforesaid issues, it is necessary to refer to International Convention Relating to the Arrest of Sea-Going Ships, Brussels, May 10, 1952 and Article 1(o) of Brussels Convention of 1952 reads as under:
"(1) 'Maritime Claim' means a claim arising out of one or more of the following:
[o] disputes as to the title to or ownership of any ship."
8.1 It is also necessary to refer to International Convention on the Arrest of Ships, Geneva, March 12, 1999, in which, Article 1 contains definitions and sub-article 1 defines 'maritime claim' and clause (v) of sub-article 1 of Article 1 reads as under:
"any dispute arising out of a contract for the sale of the ship'.
8.2 The relevant clauses 6, 8, 9(a) and 12 of MOA dated 2nd April 2010 read as under:
"6. The vessel with everything belonging to her shall be for Sellers' risk and expense until she is delivered to the Buyers, but subject to conditions of this contract, the vessel with everything belonging to her shall be delivered and taken over as she is at the time of delivery, after which the Sellers have no responsibility for possible faults or deficiencies.
8.(a) Should the vessel become a total or constructive total loss before delivery, this contract shall be considered null and void and the deposit along with interest to be immediately returned to the Buyers.
[b] Should the vessel suffer substantial partial damage due to any reason before delivery affecting the light displacement of the vessel, the Buyers will have the option to cancel this Agreement or ask for appropriate reduction in the purchase price. If the buyers opt to cancel then the deposit along wit interest to be immediately returned to the Buyers.
[c] If the Seller are not able to transfer title of the vessel or the Buyers shall be unable to accept transfer of the vessel both in accordance with this contract due to outbreak of war, restraint of Government, princes or people of any nation or United Nations or Act of God, or if the vessel should become an actual or constructive total loss, then either the Sellers or the Buyers may terminate the contract upon written or telegraphic notice from one party to the other without any liability upon either party hereunder. The deposit referred to in Clause 2 hereof, if delivered to the Sellers, shall be released to the Buyers along with interest accrued forthwith and the Agreement shall thereupon be null and void.
9(a) If default be made by Buyers in payment of purchase price or in respect of their obligations under this contract, the Sellers shall have the right to cancel this contract in which case the amount deposited in Clause 2 shall be forfeited to the Sellers and all proven loss & proven damage arising there under shall be recoverable by the Sellers. Such compensation shall only be payable by the Buyers provided that default on Buyers part is for causes other than those referred to in Clause 8(c) hereof.
12. If any dispute should arise in connection with the interpretation in fulfilment of this contract, the same shall be decided by arbitration in the City of London, U.K. With English law to apply and shall be referred to a single arbitrator to be appointed by the parties hereto. If the parties cannot agree upon the appointment of the single arbitrator the dispute shall be settled by three arbitrators, each party appointing one arbitrator and the third being appointed by London Maritime Arbitrators Association in London. If any of the appointed arbitrators refuses or is incapable of acting, the party who appointed him shall appoint an arbitrator in his place.
If one party fails to appoint an arbitrator, either originally or by way of substitution for two weeks after the other party having appointed his arbitrator has sent th party making default notice by mail cable or telex to make the appointment, London maritime Arbitrators Association shall, after application from the party having appointed his arbitrator, also appoint on behalf of the party making default.
The award rendered by the Arbitration Court shall be final and binding upon the parties and may if necessary be enforced by the court or any other competent authority in the same manner as judgment in the court of justice."
9. Firstly, it is necessary to consider the preliminary contention as to maintainability of the suit in its present form under the Admiralty jurisdiction of this Court in view of the judgment dated 17th February 2011 passed by a Division Bench of this Court in O.J. Appeal No.6 of 2011 confirming the decision dated 24.1.2011 of this Court in Admiralty Suit No.10 of 2010. In the above case, similar issue arose about maritime claim arising out of dispute of contract of sale of a vessel and applicability of Geneva Convention of 1999. After examining various aspects and the decision of the Apex Court in the case of Liverpool [supra] vis-a-vis Article 1(v), Article 2(3) and Article 3(2) of Geneva Convention of 1999, a Division Bench, in paragraphs 10 to 15 in the above decision, held as under:
"10. We may only record that in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra), the Apex Court on the aspects of Convention has recorded at para 43 about the ratification of the Convention of 1999 by various countries and, therefore, it is not possible for us to entertain the contention that the Convention of 1999 is not in force or not ratified by the requisite number of countries as per Article 14 of the Convention of 1999. However, in the very decision, the Apex Court at paragraphs 59 and 60, has observed thus:-
"59. M.V. Elisabeth is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that there does not exist any primary act touching the subject and in absence of any domestic legislation to the contrary; if the 1952 Arrest Convention had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be applied.
60. Application of the 1999 Convention in the process of interpretive changes, however, would be subject to; (1) domestic law which may be enacted by Parliament; and (2) it should be applied only for enforcement of a contract involving public law character." (Emphasis supplied)
11. In view of the above, in the very decision, while observing that 1999 Convention may be applied, it is specifically also observed that the application of such Convention shall be subject to Domestic Law enacted by the Parliament and it should be applied only for the enforcement of contract involving public law character. This means that both the conditions are to be observed while applying the Convention of 1999.
12 The aforesaid leads us to examine the question as to whether the contract in question is involving public law character or not. The contract in question for sale of the particular ship is produced by the plaintiffs themselves with the plaint at Annexure-A and the same is entered into between the plaintiffs and defendant No.3 herein. It is purely a commercial transaction for sale of the ship and, in no way, connected with our nation directly or indirectly, nor is there any operation and/or involvement of the State or any instrumentality of the State as per Article 12 of the Constitution of India. The said contract dated 21.8.2008, upon which the reliance has been placed by the plaintiff, in our view would not attract any public law character, in any manner, whatsoever. In our view, the parameters of the contract involving public law character has to be read as per the legal provisions prevailing in our country. It is by now well settled that the contract may attract public law character, if the State or instrumentality of the State, is directly or indirectly connected therewith in enforcement of the contract or implementation thereof. Further, by virtue of the said contract, if there is any question arises for the sovereignty of the Nation, environment, pollution, dispute of sea water etc., where larger or huge or any public interest is involved, such contract may also attract public law character. We do not find any element of public law character in the present contract in question even if the terms and conditions of the contract agreement are considered as they were.
13. On the second aspect of domestic law enacted by the Parliament, if considered, provisions of CPC would be required to be followed, even if one has to enforce the Convention of 1999. The order of arrest of the ship may fall at par with the provisions of Order 38 Rule 5 of the CPC, providing for attachment before judgement or, in any case, the principles analogues thereto. Order 38 Rule 5 of CPC would be attracted only when the defendant is to defeat the realization of the decree that may be passed against him. It would presuppose the prayer in the suit for realization of any amount through a decree, whose execution is sought to be frustrated by the defendant. The Order 38 Rule 5 reads as under:-
"5(1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him. ..."
14. The prayers made in the suit at paragraph 52 is not for realization of any amount by way of decree or otherwise while invoking the admiralty jurisdiction. Therefore, the condition precedent for exercise of the power for attachment before the judgement or any other order for, the arrest of the ship as provided under Order 38 Rule 5 of CPC which is as per law made by Parliament is not satisfied. Such may equally apply for applicability of the provisions of Order 7 Rule 11 of CPC in a suit where , the plaint does not disclose a cause of action or the entertainment thereof is barred by any law.
15. In view of the aforesaid, even if the Convention of 1999 is to apply, but for the fact that the contract is not involving any public law character, the said condition as read by the Apex Court in the above referred decision of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra) is not satisfied. Further, the limitation as provided by the CPC for the order of arrest, which is akin to the power to be exercised by the Civil Court for arrest of the ship is not satisfied. As per the above referred decision of the Apex Court, if both the conditions are not satisfied 1999 Convention cannot be applied, nor the admiralty jurisdiction can be invoked based on the Convention of 1999."
10. From the conspectus of facts and submissions made by the learned counsel for the plaintiff, what emerges is a dispute arises out of a sale of a ship/vessel, defendant No.1 herein, as per the MOA dated 2.4.2010 where the plaintiff is referred as 'seller' and defendant No.2 as 'buyer'. It also appears from the record that a receipt was issued towards full consideration for sale amount of USD 1.1 Million by the plaintiff but the communication and e-mail between the plaintiff and defendant No.2 mention about a dispute about the sale consideration paid and unpaid. In view of the above, the genesis of the dispute alleged between the plaintiff and defendant No.2 is MOA dated 2.4.2010 and, if the above MOA is perused, it is a contract for sale of defendant No.1-vessel between the plaintiff and defendant No.2 and the contentions raised by the learned counsel for the plaintiff, as recorded in the foregoing paragraphs, about the title and ownership of the ship, which also emanate from the said MOA and, therefore, without delving deep into the contention about 'maritime claim' as raised by the plaintiff governed by 1952 Brussels Convention and, alternatively, the contract has a 'public law element' and, therefore, falls within the parameters of M.V. Success [supra] and Liverpool [supra] and also under 1999 Geneva Convention, are misconceived. Thus, the dispute between the plaintiff and defendant No.2 emanates from the MOA dated 2.4.2010 and as provided in various clauses of the contract including clause 9 of the MOA and, for the remedy to recover damage, possession if any and to receive compensation, etc. by the plaintiff from defendant No.2 being in the realm of 'private contract', invokation of admiralty jurisdiction branding the same as 'maritime claim' under Article 1(o) of the 1952 Convention, which refers to dispute about 'title and ownership', cannot be accepted.
11 In the judgment dated 10th July 2001 in Appeal (L) NO.835 of 2001 in Admiralty Suit No.14 of 2001, the Division Bench of the Bombay High Court, upholding the view of the learned Single Judge, held that once the vessel is beached, no maritime claim can be entertained while exercising admiralty jurisdiction. The Division Bench has reproduced paragraph 7 of the judgment dated 28.6.2011 of the learned Single Judge and ultimately found that the vessel was beached for the purpose of demolition or breaking, and it could not have been described as 'ship' or 'vessel' and the claim for an action in rem was not sustainable.
12 In the judgment dated 7th July 2006 in Civil Application No.6 of 2006 in Admiralty Suit No.1 of 2006, reported in Manu/GJ/8251/2006, this Court held in paragraphs 21 and 23 as under:
"21.
The question for consideration, still would be that after partial demolition of the ship, can the same be held to be navigable? In my considered opinion, report of the Commissioner makes it clear that the ship, as on today, is no more navigable. The argument of the learned counsel for the plaintiff that even if the wrecks of a ship are repaired, it can be made navigable, then, the wrecks would be taken to be a ship or a vessel, is too tall an argument. Navigability is the first requirement for a ship. If an article as it is, cannot be navigated in the deep waters, then, such article cannot be called a ship or a vessel fit for navigation. Because of the demolition of a ship into small pieces, there does not exist a ship or a vessel, the argument of the learned counsel for the plaintiff is applied, there would be chaotic results. Debris and small pieces cannot be said to be a ship or a vessel. In the modern times, Radio equipments are must. In the present matter, the Radio equipment has already been demolished. It is also to be seen that the vessel is lying beached on Plot No. 80 of the applicant-firm. It has not been beached for repairs or allied purpose, but it has been imported into Indian territory as goods for home consumption after payment of the customs duty. The intention of the importer would be material and would be decisive to some extent. It is undisputed that middle portion of the vessel's nose has been found to be cut. Cuting of the middle portion of the vessel's nose would make it clear that the vessel is not to be re-used, but the same is to be consumed as goods.
23. The dictionary meaning of "ship" is "vessel employed in navigation". Navigability of a vessel is dominant factor in deciding whether it is a ship or not. Navigability of a vessel would not depend only on its mechanical navigability, but would also depend on its legal navigability. From the facts, it would clearly appear that that the Intervener declared their intention to authorities in India that they were importing goods in India and they wanted to discontinue its use as a ship for carrying cargo or passengers and they accordingly paid the customs duty on the vessel as goods, the owners became disentitled to navigate the vessel, and therefore, the vessel ceased to be a ship on its import after payment of the custom duty for its home consumption. I would respectfully agree with the observations made by the learned Single Judge in the above-referred matter that the moment, vessel was beached for the purpose of demolition or breaking up, it ceased to be a ship or a vessel."
13 In the case of New Era Shipping Limited vs. m.v. P. Express, reported in 2007 (6) Bom.C.r. 138, the learned Single Judge of the Bombay High Court [Coram: Dharmadhikari S.C., J.], in paragraph 46, has relied upon the decision in the case of North End Oil Limited vs. m.v. Kim An and another, 1992 (2) Bom.C.R. 448, and the paragraph 66 of the said judgment was reproduced by Justice Dharmadhikari about the burden cast upon the plaintiff when the suit is filed for action in rem and arrest of vessel to prima-facie prove that the res was in existence on the date of its arrest. If the defendant denies the existence of res and contends that res was demolished, the burden is still on the plaintiff to prove that on the date of arrest the res was intact in existence and not demolished to such an extent so as to get converted in to goods. Thereafter, while considering the judgment in the case of Saaba [supra], Justice Dharmadhikari held in paragraph 47 as under:
"47.
The third decision is of another learned Single Judge of this Court, (D.K.Deshmukh, J). in Notice of Motion No.1302 of 2001 in Admiralty Suit No.14 of 2001 dated 28th June 2001. After considering the rival contentions in paras 7 and 8 this is what is observed by the learned Single Judge:-
"7.
Now if in the light of these rival submissions the record of the case is perused, it is clear that when the plaint that is filed in the present suit was drafted, the plaintiffs were aware that the defendant No.1 vessel is at present lying at the port and harbour at Mumbai. The plaintiffs were also aware that she is scheduled to be beached on 19th May, 2001. The plaintiffs have stated in the plaint that they are carrying on business of managers of merchant vessels. If the plaintiffs on 19th May, 2001 were aware that the vessel is in Mumbai and that it is to be beached on 19th May, 2001 for the purpose of demolition, then in my opinion, considering the business which the plaintiffs carry on, the plaintiffs must have made enquiries with the port authorities. In my opinion, therefore, it would be safe to assume that the 46 plaintiffs were aware of the purpose for which the vessel has been brought to Mumbai. It is clear from the bill of entry produced by the defendants that the defendant No.1 vessel was imported into India for the purpose of demolishing and that because the vessel was brought in India for the purpose of demolition, the Importer was held liable for payment of customs duty on the vessel and it became goods which were being imported in India. In fact, the caption of the bill of entry is "Bill of Entry for Home Consumption". The bill of entry further shows that by 10th May, 2001, customs duty had already been paid for importing the vessel, but the plaintiffs chose not to disclose this in the plaint. It is difficult to believe that a plaintiff who know even the exact date on which the vessel is to be beached for demolition, was not in a position on enquiry to find out the purpose for which the vessel has been imported and as to whether any payment have been made for that purpose. Considering that the plaintiffs are in the business of managing the vessels, it would be safe to assume that, it knew that, for demolition of a vessel, the owners have to take a plot on lease, have to pay customs duty on the vessel, therefore it cannot be believed that the plaintiffs, who knew that the vessel is scheduled to be beached for demolition on 19th May, 2001, did not know that customs duty has been paid on 8th May, 2001, that a plot has been taken on lease for the purpose of beaching the vessel. But the plaintiffs have chosen not to disclose these facts in the plaint. It is further pertinent to note, according to the agreement between the plaintiffs and the owners of the vessel, the crew of the vessel was to be engaged by the plaintiffs and the defendants have stated in the affidavit, that when the vessel reached Mumbai, the crew of the vessel was Pakistani and the plaintiffs are also a Pakistani Company. In any case, from the bill of entry and documents produced by the defendants, it is clear that the vessel was imported in India for the purpose of breaking it. Perusal of provisions of clause 2 of Admiralty Act, 1861 shows that a ship includes any description of vessel used in navigation. Thus, the Admiralty Act does not define the word "Ship". In the admiralty jurisdiction of this Court, this Court can entertain an action in rem against a ship. The General Clauses Act also defines the term "Ship" but it also gives inclusive definition. Therefore, so far as the meaning of the term "Ship" is concerned, we will have to go back to the meaning attached to the term in common parlance. Dictionary meaning of the term "Ship" is a vessel employed in navigation. Thus navigability of the vessel is a dominant factor in deciding whether it is a ship or not. The navigability of a vessel will depend not only on its mechanical navigability but also on its legal navigability. It appears, that once the defendants, declared their intention to the authorities in India, that they are importing the vessel as goods in India and they want to discontinue its use as a ship for carrying cargo and paid customs duty on the vessel as goods. Legally, the owners became disentitled to navigate the vessel, and therefore, from that moment the vessel ceased to be a ship. The defendant No.1 vessel when it was imported into India was definitely a ship but the moment the owners declared their intention to discontinue its use as ship or a vessel and not only declared their intention but acted pursuant to that intention and made declarations before the authorities and paid amounts and took further actions like taking a patch on lease for breaking of the ship, their intention was manifest that they want to discontinue the use of the defendant No.1 vessel as a ship. A ship like any other thing remains entitled to its description until facts are established to show that it has become disentitled to its ordinary name or description. On import of the defendant No.1 vessel into India as goods and payment of customs duty pursuant to that, disentitled the owners to use the defendant No.1 as a ship or a vessel. In any case, when at 9.45 a.m. on 19th May, 2001, the vessel was beached for the purpose of demolition or breaking up, it could not have been described as a ship or a vessel. In my opinion, therefore, the defendant No.1 was not amenable to an action in rem on 19th May, 2001 and therefore, obviously it could not have been arrested.
8. In so far as the judgements referred to above relied on by the learned counsel for the plaintiffs are concerned, I have gone through the judgements. Those judgements cannot be said to be authority for the proposition that a ship continues to be treated as a ship either till its registration continues or till it looks like a ship. On the other hand, in my opinion, the judgement relied on by the learned counsel for the plaintiffs go to show that in determining whether a ship can be continued to be treated as a ship or not, the intention of the persons in control of the ship is material inasmuch as though a vessel or a ship may be incapable of being used as a ship or vessel temporarily either because it has met with an accident or because extensive repairs are necessary to it, but if the owners of the vessel intend to continue to use it as a ship; or a vessel and for that purpose, takes actions, then, the vessel can still be treated as a vessel. The judgements referred to above do not support the case of the plaintiffs."
13.1 In paragraph 60, the Court considered the judgment of the Apex Court in the case of m.v. Elisabeth [supra] and in paragraph 63 held as under:
"In my view, the pleadings in the present cases are on par with the decisions which have been rendered by learned Single Judges of this Court [D.G. Deshpande, J. and D.K. Deshmukh, J.]. These decisions are squarely applicable to the facts of this case. The law laid down therein, therefore, applies with full force. In such circumstances, the request made by Ms. Sett to accept the ratio of these cases deserves to be accepted."
14 Therefore, when MOA dated 2.4.2010 between the parties referred to breaking/demolition of ship; even the pleadings in the plaint also mentioned that the vessel was brought for demolition; the pollution clearance was granted by the GPCB; customs duty was paid on import of the ship; permission of beaching was granted by GMB and, even before the order dated 5.1.2011 came to be passed by this Court for arrest warrant, the vessel was already beached and, therefore, no maritime claim can be entertained in admiralty jurisdiction.
15 The contention of the learned counsel for the plaintiff about non-consideration of sub-articles (2), (3) and (4) of Article 7 of Brussels Convention of 1952 by the Division Bench has no merit and this Court would not like to go into the above contention which primarily deals with the jurisdiction of the Court of the country in which the arrest is made to determine the case upon its merits if the domestic law of the country in which the arrest is made gives jurisdiction to such courts or in any of the cases enumerated in sub-article (1). Thus, the above contention has also no merit and deserves to be rejected.
16 The contention of the learned counsel for the plaintiff that the contract in the present case has 'public law character' on the ground that the registration of the vessel is to be carried out with various authorities and the finance of the scheduled bank is involved while recovering the dues and, therefore, the case may be viewed from the above angle, has no merit, in as much as, in every single case of trade, commerce or business, financial assistance either from the Bank or Financial Institution in the form of loan, advance, etc. may be involved and the registration of the vessel as required under the Convention or the existing law cannot be considered to be involving 'public law character' vis-a-vis the contract in question. Further, interpretation of clauses 6, 8 and (a) of the contract in the context of the provisions of UK Sales of Goods Act and the ownership and title remained with the seller, will also have to be considered after interpreting the clauses of the MOA dated 2nd April 2010 and the addendum thereto and, therefore, the basis of the dispute is MOA dated 2nd April 2010 and, considering overall facts as discussed hereinabove, the contract between the plaintiff and defendant No.2 has no 'public law character' and, in absence of such 'public law character', as held by by the Apex Court in the case of Liverpool [supra] and the Division Bench of this Court in O.J. Appeal No.6 of 2011 in Admiralty Suit No.10 of 2010, the suit is not maintainable.
17. As regards applicability of clause 1(o) of Brussels Convention of 1952 is seen in the above context, the contract between the plaintiff and defendant No.2 is purely a contract between the private parties and a conjoint reading of clauses 6, 8 and 9(a) of the MOA would reveal that the plaintiff was entitled to receive compensation and damages and more particularly a bill was issued for full consideration of USD 1.1 Million by the seller. Hence, even an attempt to interpret the above clauses of the MOA in favour of the plaintiff would fail and coupled with the fact that pending the arbitration as provided in clause 12 where an inbuilt mechanism is provided about resolution of the dispute in connection with the interpretation in fulfilment of the contract and such dispute shall be decided by arbitration in the City of London, U.K. with English law to apply, and the dispute arises out of the contract of sale of ship between the plaintiff and defendant No.2, in my opinion, the admiralty suit is not maintainable.
18. The contention of Mr. Shukla, learned counsel for the plaintiff that the Authorities have acted swiftly on 4th January 2011 in granting beaching permission and, thereby, they have colluded with the defendants, cannot be gone into by this Court in exercise of admiralty jurisdiction.
19. The other contentions raised by the learned counsel for the plaintiff about expiry of initial registration of the vessel on 30th November 2009 and the provisional registration at Panama Registry and, thereafter, at Tanzania Zanzibar International Registry of Shipping, need not have to be considered in view of the finding of this Court that the dispute in question is not covered either by 1952 Convention or 1999 Convention and the suit deserves to be dismissed.
20. It is mentioned that, against the judgments of the Bombay High Court, as referred to in this judgment, Special Leave Petitions were filed in the Apex Court wherein the stay was granted and the Special Leave Petitions are pending. However, the law laid down in the judgments of the Bombay High Court remains as it is.
21. As a result of foregoing discussion, this Court has come to the conclusion that the plaintiff has failed to establish and sustain and even prima-facie prove that the plaintiff has maritime claim to invoke admiralty jurisdiction of this Court and issue Nos. (i) and
(ii) are answered in the negative and, consequently, it is held that the suit is not maintainable. The suit is dismissed accordingly. Notice is discharged.
(ANANT S. DAVE, J.) (swamy) Top