Bombay High Court
Gulf Petrochem Energy Private Limited vs M.T. Valor (Imo: 9226009) on 15 April, 2015
Author: S.C. Gupte
Bench: S.C. Gupte
sg 1/28 nmsl581-15
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
NOTICE OF MOTION (L) NO. 581 OF 2015
IN
ADMIRALTY SUIT (L) NO.94 OF 2015
Gulf Petrochem Energy Pvt. Ltd. ...Plaintiff
vs
M.T. VALOR ...Defendant
Mr. Shenoy Prasad a/w. Mr. Naishadh Bhatia, i/b. Crawford Baylely & Co.,
for the Plaintiff.
Mr. Zarir Bharucha, i/b. Bimal Rajasekhar, for the Defendant.
ig WITH
NOTICE OF MOTION (L) NO. 805 OF 2015
IN
ADMIRALTY SUIT (L) NO.240 OF 2015
Drop Energy Services Ltd. ...Plaintiff
vs
m.t. Tradewind (IMO No.8504636) ...Defendant
.....
Mr. Ashwin Shanker, for the Plaintiff.
Mr. Rahul Narichania, Senior Advocate, i/b. M/s. Mulla & Mulla & Craigie
Blunt & Caroe, for the Defendant.
.....
CORAM : S.C. GUPTE, J.
Reserved on : 30 MARCH, 2015
Pronounced on : 15 APRIL, 2015
.....
(JUDGEMENT) :
. These two Motions are taken out by the Defendants in two
admiralty suits for vacating the respective arrests of the Defendant vessels. The Motions involve common questions of law and are heard together.
::: Downloaded on - 16/04/2015 00:00:41 :::sg 2/28 nmsl581-15
2. The Defendant Vessel in Admiralty Suit No. 94 of 2015 is under arrest for a maritime claim of USD 67,458.87 towards supply of bunkers by the Plaintiff, whereas the vessel in Admiralty Suit No. 240 of 2015 is under arrest for a claim of USD 243,239.36 also in respect of supply of bunkers. Whereas the order of arrest was executed in the former case and a security for the claim was furnished and the vessel released against such security, in the latter case the arrest warrant was yet to be served on the vessel at the time the matter was argued, though the vessel was within the territorial waters of India. In both cases, the owners of the vessels contest the maritime claims on the ground of lack of privity between the respective Plaintiffs and the owners concerning the supply of bunkers, claiming that OW Bunker Middle East DMCC and OW Bunker Malta Ltd.
were purchasers of bunkers, though bunkers were physically supplied to the vessels. These two OW companies are facing bankruptcy proceedings and both Plaintiffs seek to enforce their claims against the vessels, which are opposed by the owners of the vessels inter alia on the ground of lack of privity, as noted above. That is the gist of the controversy in the two Motions.
3. In Admiralty Suit No. 94 of 2015, the vessel M. T. VALOR was at port of Kandla in India, when OW Bunker Middle East DMCC ("OW Bunker") approached the Plaintiff for supply of bunkers to the vessel. The Plaintiff issued order confirmation to OW Bunker, who in turn issued purchase order confirmation. The Plaintiff thereupon supplied bunkers against a Bunker Delivery Receipt, under which the Chief Engineer of the vessel acknowledged receipt of bunkers. The Plaintiff thereafter learnt that OW Bunker's parent company had become insolvent. The Plaintiff thereupon cancelled all credit provided to OW Bunker and issued a demand notice to the owners of the vessel. The Plaintiff asserts that the claim for ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 3/28 nmsl581-15 bunkers supplied to the vessel is a maritime claim, which can be enforced against the vessel in rem. This is the case with which the Plaintiff has come before this Court and got the vessel arrested. On the other hand, the case of the owners of M. t. VALOR is that the Plaintiff appears to have entered into contracts with OW Bunker for supplies to various vessels and M. t. VALOR was only one of them. The vessel M. t. VALOR was on a time charter with Bryggen Shipping International AS ("Bryggen"); Bryggen ordered bunkers from Bergen Bunkers AS ("Bergen"); Bergen, who is a non-physical bunker supplier, then entered into a contract with OW Bunker, another non-
physical bunker supplier; OW Bunker, in turn, entered into a contract with Gulf Petroleum Pte. Ltd., a Singapore based company, which is a group company of the Plaintiff; and the group company instructed the Plaintiff to make the physical supply. Based on these facts, which are not in dispute, firstly, it is submitted that the supply was to a time charterer (Bryggen) and not to the owner, and secondly, the contract of supply even as far as Bryggen is concerned, was with Bergen, whereas the Plaintiff or its group company's contract for supply was with OW Bunker. It is, therefore, submitted that there is no privity between the owners of the vessel, i.e. the Defendant, and the physical supplier of bunkers, i.e. the Plaintiff, and unless there is an underlying liability of the owners (or demise charterers as opposed to time charterers), the vessel is not liable to arrest for a maritime claim which does not create any maritime lien. That is the Defendant's case in the Notice of Motion.
4. The facts in the companion Notice of Motion, i.e. Notice of Motion (L) No. 805 of 2015, are more or less similar except that the vessel in question, M. t. Tradewind, was not on time charter when the delivery of bunkers was made, but the contract for supply was between the owners of the vessel and OW Bunker Malta Ltd. (a sister company of OW Bunker in the earlier case). On the other hand, the bunkers were actually supplied to ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 4/28 nmsl581-15 the vessel M. t. Tradewind by one Fos Petroleum SA ("FOS"), who in turn, was a physical supplier, on whom the order for supply was placed, by the Plaintiff and who was paid by the Plaintiff for the bunkers supplied by it. Even in this case, it is the case of the owners of the vessel that no liability is owed by them to the Plaintiff for supply of bunkers and their vessel cannot be subjected to arrest in the absence of such liability.
5. The questions, which commonly arise in these two Motions, on the facts narrated above, are these:
(i) Whether any underlying liability against owners of a ship is necessary for her arrest for enforcement of a maritime claim which does not give rise to a maritime lien? This, in turn, raises the question of privity, as explained below, and translates into the question as to whether or not there needs to be a privity of contract between the Claimant and the Owners;
(ii) What is the measure of assessment of a prima facie case to be applied for arrest of a ship in a case where the liability, or privity, as in this case, is contested? Should it be merely the yardstick of an Order 7 Rule 11 inquiry, which is purely an inquiry on demurrer, as suggested by the Plaintiff, or should the defence also be considered, as suggested by the Defendants in the present case.
Based on the answers to these two questions, the question as to whether or not the arrests are liable to be vacated in the facts of the two individual cases can, then, be answered.
6. This Court in Jones P. Company Vs. M. V. Kamal XXXXI & Anr. 1 1 ADMS 67-14, Coram: S.C. Gupte, J. dated 7/4/15.
::: Downloaded on - 16/04/2015 00:00:41 :::sg 5/28 nmsl581-15 considered the question of liability in personam of the owner of the ship in the matter of her arrest. After considering the Arrest Conventions of 1952 and 1999, the English common law principles governing arrests of ships for enforcement of maritime claims and the provisions of Merchant Shipping Act, 1958, and applying the law laid down by the Supreme Court on the subject, this Court held that for effecting an arrest, there must be a link between the person liable in personam and the ship concerned in the claim at two critical times, i.e. when the cause of action arose and when the action is brought. The person liable in personam must be the owner or demise charterer of the ship when the claim arose in respect of that ship; and that person must be in possession or control of that ship either as the beneficial owner or under a charter of demise when the action is brought. This is what this Court held in that case:
"10. Thus it is that an action in rem in relation to a ship, in any case other than for enforcement of a maritime lien, is in substance an action against the shipowner, though, by reason of the peculiar nature of the maritime trade, the action is actually initiated by arresting of a ship. The shipowner per se may not be amenable to the jurisdiction of the Admiralty Court. That is why the action is initiated against the ship which is within the jurisdiction of the Court. There are two objectives behind such arrest. Firstly, the Admiralty Court thereby acquires jurisdiction and secondly, the plaintiff obtains a security for satisfaction of his claim when decreed. The owner of the ship may then choose to enter appearance and deposit a security as bail for the release of his ship, thereby submitting to the jurisdiction of the Admiralty Court. Once he so submits to the jurisdiction and secures release of the ship, the proceedings against him continue as a personal action. Just as a defendant in an original admiralty action in personam is liable for the full amount of the plaintiff's established claim, likewise a defendant in an action in rem acknowledging thus the service of such action is saddled with full liability even when the judgment exceeds the value of the res or of the bail provided. In other words, as soon as the owner of the arrested vessel submits to the jurisdiction of the Admiralty Court, as noted above, the proceedings in rem assume the character of proceedings in personam.
11. Once this is acknowledged, it is easier to see why there must be a link between the person liable in personam (i.e. one ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 6/28 nmsl581-15 who would be liable if the action succeeded) and the ship concerned in the claim at two critical times. Once when the cause of action arose (at which juncture he must be the owner or charterer, as the case may be) and again when the action is brought (at which time he must be in possession or control of the ship either as the beneficial owner or the charterer under a charter of demise). The links (owner, charterer or in possession or control) not only apply to the ship in regard to which the claim is brought (the particular ship) but even to "any other ship"."
After construing the relevant provisions of the Arrest Conventions of 1952 and 1999, this Court held that except for maritime claims which give rise to a maritime lien, in all other cases one of the essential conditions for arrest of a ship is that the ship, in respect of which the claim arose, was owned by, or under a demise charter with, the person liable in personam when the cause of action arose. This Court found that there is no difference in this respect in the Arrest Conventions of 1952 and 1999.
7. A liability in personam can arise only as a matter of contract or quasi contract or by way of tort or under statute. If it is a matter of contract, it is necessary to show privity of contract between the Claimant and the person liable, for without such privity no contract can be said to exist. There may be cases where elements of contract may be absent and yet the relationship between the parties gives rise to a right in one party and a corresponding liability in the other. Section 70 of the Contract Act provides such a case. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is liable to compensate the former. In shipping parlance this is the principle of salvage under the English law. Where a person rescues a ship from peril, the owner of the rescued ship and the cargo owners incur a liability to compensate such rescuer. These are cases of quasi contract. But it is important to ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 7/28 nmsl581-15 remember that a quasi contract may not be available for claiming a right in the face of an enforceable express contract. If there an express contract which can be enforced, one will have to go by the terms of that contract. Then there are cases of tortious liability. Unlike in the case of contract where duties are fixed by parties, in case of torts the duty owed by a party towards another is primarily fixed by law and breach of such duty gives rise to a liability. Liability arising out of loss or damage caused due to the operation of the ship is an instance of such liability. (Damage done by a ship, in addition, gives rise to a maritime lien.) Lastly, there are statutory liabilities which a statute directly casts on parties. Port dues, waterway dues and charges, etc. are such statutory liabilities. A maritime claim arises against the owner or demise charterer, as the case may be, as a result of any of the liabilities described above.
8. Before we deal with the facts of the individual cases before us and apply the law discussed above, we must formulate the standard of inquiry contemplated in cases of arrest. It is submitted by the Plaintiffs in both these cases that the standard of inquiry in such cases is the one applied in an Order 7 Rule 11 inquiry. When one applies for rejection of plaint under Order 7 Rule 11, one argues the case on a demurer. Assuming without admitting the averments made in the plaint to be true, whether a cause of action is made out by the Plaintiff. That is the focus of the inquiry. One does not take into account the aspects of defence raised by the other party in its defence of the claim. The Plaintiffs in these two cases submit that as in the case of an application for rejection of plaint, so in the case of an application for arrest or vacating the arrest, the inquiry must be simply with reference to the averments in the plaint. On the other hand, it is submitted by the Defendants that one must consider the prima facie merits of the Plaintiff's case after taking into account both the plaint and the defence. It is submitted that arrest of a ship has drastic consequences from ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 8/28 nmsl581-15 the point of maritime trade generally and the vessel sought to be arrested particularly; the Plaintiff cannot in all cases be permitted to simply have a ship arrested on the basis of his unilateral statements, which may be patently false. Both parties have referred to judgments of Courts in support of their respective submissions in this behalf.
9. The leading case on the point is the case of Videsh Sanchar Nigam Ltd. Vs. M. V. Kapitan Kud2 decided by the Supreme Court. That was a case where a commercial ship, M. V. Kapitan Kud, was arrested for having caused in the course of its navigation damage to the international cable laid by the Plaintiff, VSNL, resulting in disruption of overseas telecommunication. The Plaintiff's case was that the vessel had anchored in a prohibited area and caused the damage. The owners of M. V. Kapitan Kud thereupon moved a Notice of Motion for release of the vessel, on the ground that there was absolutely no evidence that the damage was caused by their vessel. The learned trial judge ordered release of the vessel. The Division Bench of this Court, after considering the material, held that "it cannot be said that the claim of the appellant/original plaintiff is vexatious. It cannot be said that the matter does not warrant any trial", but declined to interfere with the order of the trial court on the ground that the captain of the vessel had filed an undertaking that the vessel belonged to a company wholly owned by the Ukrainian Government and in the event of the suit being decreed, they would honour the decree. The Supreme Court, whilst considering the matter, applied the standard: Whether the Plaintiff has reasonably arguable best case in an admiralty action. The Court applied the law laid down in this behalf in the cases Schwarz & Co. (Grain) Ltd. Vs. St. Elefterio Ex Arion (Owners) 3 and Moschanthy,4 and held as follows:
2 (1996) 7 SCC 127 3 [1957] P 179; [1957] 1 Lloyd's Rep 283 4 [1971] Vol. 1 Lloyd's Rep. 37 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 9/28 nmsl581-15 "13. In Schwarz & Co.(Grain) Ltd. v. St. Elefterio Ex Arion (Owners), Willmer, J. considering the scope of prima facie case held at page 185 that "it has not been suggested that the proceedings are frivolous or vexatious, so as to call for the exercise of the court's inherent jurisdiction to halt such proceedings in limine. The defendants' argument is founded on the proposition that Section 3(4) of the Act of 1958 introduced a new restriction on the right to proceed in rem and that a plaintiff cannot arrest a ship under that Sub-section unless he can prove - and prove at the outset
- that he has a cause of action sustainable in law. In my judgment that proposition rests upon a misconception of the purpose and meaning of Section 3(4)".
It was held that the scope of the Act was to enlarge the jurisdiction of admiralty court but not to restrict its jurisdiction. At page 187 it was held that "it is possible (these things have been known to happen) that a higher court might take a different view; but in the meantime the ship, which is a foreign ship, has been freed from arrest, has gone, and may never return to this country. It might be that in those circumstances the plaintiffs would have lost their right for ever to entertain proceedings in rem in this country. The remedy for the defendants is to release their ship is to be put in appeal. The action will then be tried at the appropriate time when all the facts have been ascertained due consideration will be given to the arguments at law which the defendants desire to advance."
Accordingly the motion for release of the ship was dismissed.
14. In The Moschanthy where the question was whether the admiralty action was vexatious, following the ratio of Willmer, J. in St. Elefterio (supra) it was held that action could not be successful. It was held that courts should only stay the action on the ground when the hopelessness of the plaintiff's claim is beyond doubt. If it is not beyond doubt but on the contrary the plaintiff has arguable, even though difficult, case even in law the action would be allowed to proceed to trial. The application for stay was accordingly rejected."
The Court did not either agree with the approach of the Division Bench or the finding of the learned trial judge that no prima facie ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 10/28 nmsl581-15 case was made out. The Court held that there was strong evidence to show that at the relevant time the respondent - vessel was within the vicinity of the damaged cable and there was a triable case. The Court observed that the ship was a foreign ship; if it left the shores of Indian territorial waters, it would be difficult to get hold of it; and the claim thereby, even if successful, would remain unexecutable or land in trouble in private international law in its enforcement. The Court, in the premises, allowed the appeal and permitted release of the vessel only against adequate security.
10. This then is the standard or measure of inquiry in the case of an arrest or application for release from arrest: Does the Plaintiff have reasonably arguable best case. If the Plaintiff has such arguable, even though difficult, case, the arrest must be sustained and the action ought to be allowed to go to trial. But this reasonably arguable case is not necessarily to be assessed on the basis of allegations in the plaint and material produced therewith alone. There is no logical necessity for excluding the material produced by the defendant for such an inquiry. Learned Counsel for the Plaintiffs relied upon the judgments of our Court in Crescent Petroleum Ltd. Vs. M. V. MONCHEGORSK 5 and Chemoil Adani Pvt. Ltd. Vs. M. V. Hansa Sonderburg 6 in support of their contention that the inquiry must be only to see if the plaint "discloses no cause of action". No doubt the Court considered in M. V. MONCHEGORSK whether the plaint discloses no cause of action. But then that was a case actually under Order 7 Rule 11, for dismissal of the suit. The suit in rem was claimed to be without jurisdiction and not maintainable against the defendant vessel. The Court actually inquired into circumstances in which the plaint can be struck out as disclosing no cause of action as considered 5 AIR 2000 Bom 161 6 2010 (112) BOMLR 2056 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 11/28 nmsl581-15 by this Court in Bomi Muchershaw Mistry Vs. Kesharwani Co-operative Housing Society Ltd.7 Our Court in Bomi Muchershaw Mistry had held that the power of taking a plaint off the record was an attribute of a court of record and must be exercised with utmost caution and only when the Court was absolutely sure that the Plaintiff does not have an arguable case at all. Of course, in the case of M. V. MONCHEGORSK our Court (per Nijjar J. as he then was) did say that matters of defence, such as the defendant's reliance on documents to rebut any presumption arising in favour of the plaintiff, which may properly be decided on appreciation of evidence, do not fall for consideration at the interlocutory stage, when an arrest is sought. The Court held that for a plaint to be branded as an abuse of the process of the Court, it would not be sufficient to simply find that the story told in the plaintiff's pleadings was highly improbable or difficult to believe.
(To some extent, these observations have relevance even from the point of view of our case, as would be discussed below.) The case of M. V. Hansa Sonderburg (supra) was a case of an application for vacating the order of arrest. The trial Court found, after analyzing the pleadings and cases of rival parties, that there was no case for an arrest. The Division Bench of our Court, on appeal, disagreed with the approach of the trial Court. The Division Bench found that the learned Judge "proceeded to analyze the rival cases as if it is a hearing of the suit and in that process rendered conclusive findings". The Division Bench held that this "was not permissible in this case and particularly at the interim stage". As for the prima facie conclusion on the basis of the factual matrix, the Division Bench relied upon the conclusion of the Learned Single Judge in M. V. MONCHEGORSK (supra), which was distinguished by the trial Court in the impugned order, observing as follows:
"51. We do not know how this judgment could have been distinguished by the learned Single Judge in our case. The stage at which the matter stood before Hon'ble Justice Nijjar and in this
7 1988(3) Bom. C.R. 238 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 12/28 nmsl581-15 case is interlocutory. No conclusive judgment or finding was warranted and necessary to be rendered. In these circumstances, the reliance on this judgment should have clinched the issue. To our mind, this judgment has been erroneously distinguished although it is binding."
Even in the case of M. V. Sea Renown Vs. Energy Net Ltd. 8, the Gujarat High Court was concerned with an application under Order 7 Rule 11 of the CPC as well as for discharge of bank guarantee furnished in lieu of release of the vessel. It found that it was difficult in that case to come to the conclusion that hopelessness of the respondent's claim was beyond doubt and refused to grant the relief to the appellant - defendant.
11. The net result of the above discussion is that the Court has to consider at the time of arrest or application for vacating arrest whether the plaintiff has a reasonably arguable best case for claiming arrest. The Court is not thereby considering the relative merits of the rival cases and considering whether the plaintiff's case is more probable than the defendant's, considering the preponderance of probabilities. The standard is of a 'reasonably arguable case' and not a 'probable case' at the interlocutory stage. At the same time, there is nothing in law to require the Court to restrict the inquiry to only the averments made in the plaint and material produced therewith and not look to the defence. What the Courts mean is simply that the Court is not required to analyze the rival material to find if the Plaintiff has a probable case, something which the Court would do at the trial. At the same time, it does not mean that only the plaintiff's material should be looked at. There is a great danger in allowing the Plaintiff in all cases to have the vessel arrested on unilateral assertions. It may be that the Plaintiff suppresses important documents, which are themselves indisputable. The defendant may bring them to the court in defence. Then if the plaintiff cannot contest these documents, it would be a 8 O.J. Appeal No.21 of 2003 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 13/28 nmsl581-15 travesty of justice to still allow the Plaintiff to rely on his unilateral assertions in the plaint and seek confirmation of the arrest. The requirements of the standard of 'reasonably arguable case' are satisfied if on the basis of the material before the Court, whether brought by the plaintiff or the defendant, the plaintiff can be said to have a case to go to trial with. If he has, the arrest is justified. If not, it is not justified.
12. Let us now consider the facts of the individual cases before us and consider the respective arrests applying the yardsticks explained above.
Notice of Motion (L) No. 581 of 2015
13. In the first place, the cause of action is non-payment for supply of bunkers and the only connection of the owners of the vessel to that cause of action claimed in the plaint is that OW Bunker approached the Plaintiff via email and issued a Purchase Order Confirmation "on behalf of the Defendant vessel". It is admitted that the Plaintiff's buyer was OW Bunker and it was OW Bunker to whom the Plaintiff looked for payment, but it is claimed that the order confirmation issued by the Plaintiff included a term that marine fuel was delivered not only on the credit of the buyer, but also on the credit of the vessel receiving the fuel. The relevant clause, Clause 3 (e), of the standard terms and conditions forming part of the Order Confirmation is quoted below:
"Clause 3(e) : Marine fuel is delivered hereunder not only on the credit of Buyer but also on credit of the vessel receiving delivery of marine fuel, and it is agreed and Buyer warrants that Seller will have and may assert a maritime lien against the receiving vessel for the amount of the purchase price of said marine fuel together with all delivery and other charges forming part of the agreement of sale. All associated costs to recover the unpaid bills will be solely on the buyer ordering the fuel."::: Downloaded on - 16/04/2015 00:00:41 :::
sg 14/28 nmsl581-15 If one has regard to the documents produced by the Defendant, it was Bryggen, the time charter of the vessel (and not the owners), who had placed the order on Bergen, a non-physical bunker supplier, who in turn entered into a contract with OW Bunker, another non- physical supplier, who then entered into a contract with the Plaintiff's group company based in Singapore. It was this group company, which, then, instructed the Plaintiff to supply bunkers to the vessel. This chain is not disputed by the Plaintiff, though the Plaintiff terms the same as irrelevant. What is relevant, according to the Plaintiff, is that the physical supply was made to the vessel by the Plaintiff at the instance of OW Bunker, who represented itself as acting on behalf of the vessel and agreed to various terms which had the effect of binding the vessel. This Court is at a complete loss to appreciate how a third party non-physical bunker supplier can at all make a representation to a physical supplier on behalf of the owners of the vessel (or even the time charters, for that matter) and seek to bind the vessel or deal with the physical supplier on the credit of the vessel. To show such entitlement, there must be at least an arguable case of the owners having authorized the third party non-physical supplier to do so. There is not even an allegation in the plaint, leave aside a reasonably arguable case, that OW Bunker had the requisite authority to bind the vessel or trade on its credit. All that the plaint states is that OW Bunker acted on behalf of the owners of the vessel. The plaint is silent on how OW Bunker gets the authority to do so. It is secondly alleged that the Chief Engineer of the Defendant vessel acknowledged receipt of bunkers, and the bunker delivery receipt bears the stamp of Valor Maritime Limited, the owners of the vessel. This acknowledgment does not take the Plaintiff's case any further. Acknowledging physical delivery is one thing and agreeing to be bound for payment therefor is quite another. Simply by reason of the Chief Engineer of the vessel having stamped the delivery note acknowledging the receipt of ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 15/28 nmsl581-15 bunkers, the Plaintiff cannot claim privity of contract with the owners or their agents insofar as the supply contract is concerned.
14. The facts of our case are similar to the case of Raj Shipping Agencies Vs. M. V. "BUNGA MAS TIGA" 9, which was a case under Order 7 Rule 11. The plaintiff there was a physical supplier of bunkers, whilst the defendant was a foreign flag flying vessel. An order for supply of bunkers to the vessel was placed by one M/S North End Oil (Asia) Pvt. Ltd.; the supply was made to the vessel and the receipt of the oil was acknowledged by the Chief Engineer of the vessel; the invoices were drawn on M/S North End Oil; the Plaintiff later came to know that an Administrative Receiver was appointed of M/S North End Oil; and the Plaintiff thereupon applied for arrest of the vessel. On these facts, a Learned Single Judge of our Court decided the question of legality in the following words:
"8. It is clear from the observations quoted above that an action in rem is devised by the Court to overcome a difficulty of personal service on the owner of the vessel. For that purpose, the vessel itself is treated as a person, so that the liability of the owner of the vessel can be enforced against the vessel itself. It is thus clear that even for maritime lien there has to be an enforceable right in the plaintiffs against the owner of the vessel. That right is enforceable against the vessel. But existence of a right in the Plaintiffs against the owner of the vessel, is a must. Insofar as the present case is concerned, averments in the plaint do not disclose any existing right in the Plaintiffs against the owner of the vessel. In the present case, it is clear that there were two independent contracts in relation to purchase of oil. There was one contract between the owner of the Defendant No. 1/ vessel and M/s. North End Oil Pvt.
Ltd. whereby the owner of the Defendant No. 1/ vessel agreed to purchase oil at the stated price from M/s. North End Oil Ltd., and the second contract was between M/s. North End Oil Pvt. Ltd. and the plaintiffs, whereby M/s. North End Oil Pvt. Ltd. agreed to purchase oil from the Plaintiffs at a stated price. The price of oil in both these contracts is different. Insofar as, the purchase of oil by the owner of the Defendant No. 1/ vessel is concerned, there is no privity of contract between the Plaintiffs and the owner of the Defendant No. 1/ vessel. Not only that but even a demand of the price was made by the Plaintiffs from M/s. North End Oil Pvt. Ltd.
9 2001(4) Mh.L.J. 324
::: Downloaded on - 16/04/2015 00:00:41 :::
sg 16/28 nmsl581-15
and the Plaintiffs have also lodged their claim with M/s. North End Oil Pvt. Ltd. The first Defendant has produced on record receipts which show that the owner of the first defendant vessel has already made payment of price of oil to M/s. North End Oil Pvt. Ltd.. It is further to be seen here that in case the Plaintiffs claim against the Defendant No. 1/ vessel and its owner is held to be maintainable then, the owner of the Defendant No. 1/ vessel would be liable to pay price of the oil to two parties, namely M/s. North End Oil Pvt. Ltd. as also the Plaintiffs. In my opinion, adopting such course of action would not amount to advancing justice. Insofar as the Judgment of the learned Single Judge in the case of Trans Gulf Oil & Shipping Inc. relied on by the learned Counsel for the Plaintiffs is concerned, it is clear from the observations in paragraph 10 of that judgment that in that case there was a specific averment made in the plaint that the master of the vessel himself had requested supply of bunkers from the Plaintiff. Thus the case disclosed in the plaint of that case was a direct contract between the owner of the vessel and the Plaintiff. In my opinion, that is the distinguishing feature between that case and the present case. In my opinion, supply of necessity would not make the owner of the vessel liable to pay the price of the supply, unless the Plaintiffs prove that the supplies were made at the instance of either the owner of the vessel or at the instance of the person authorised by the owner of the vessel."
The facts of that case are on all fours with the facts of our case except that there the payment for the oil was actually made by the defendant vessel to M/S North End Oil. That fact by itself is not determinative of the issue. Even here, though payment is not actually made to OW Bunker by the time charterers, the Assignee in bankruptcy is bound to call for payment towards the contract of supply, which was evidently performed. On the other hand, unlike in the case in Raj Shipping Agencies (supra), where the order was actually placed by the owners of the vessel with M/S North End Oil, in our case it was the time charterer, Bryggen, who placed the initial order. It is common knowledge that in a time charter, the bunker is supplied by the charterer. It is the charterer who pays for it. In fact in our case, the Defendant has placed on record the terms of the fixture note/time charter party agreement under which Bryggen as time charterer had undertaken to procure the bunkers during the duration of the time ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 17/28 nmsl581-15 charter-party agreement. No doubt the Plaintiff does not admit either the factum of the charter-party agreement or its terms, but then, it is for the Plaintiff to show that there is a privity of contract between him and the owners of the vessel under which his maritime claim has arisen. The supply was requisitioned by Bryggen, and the Plaintiff's contract is between OW Bunker and a group company of the Plaintiff. There is not even a case that a copy of this contract was sent to the owners. There is no averment either that the owners held out that they would be bound by the terms and conditions of that contract.
15. A learned Single Judge of our Court in the case of M. V. Flag Mersinidi & Anr. - Applicants10 also has, in a somewhat similar situation, whilst dealing with an argument that there was a privity of contract with the vessel, held as follows:
"23. ...................................................... A vessel cannot enter into any contract with anybody. Only an owner or person authorised by the owner can enter into a contract and bind the vessel. In law a vessel may be looked at as an independent juridical personality. But to say that there is privity of contract with the vessel but not with the owners is stretching it too far and is incorrect. An action in rem against a vessel can be maintained only if there is an underlying obligation of the owner and an action in personam is maintainable against the owner. The contract is between the plaintiff and defendant no.
2. Copy of the contract has not, admittedly, been even sent to the owner. There is not even an averment that the owner, defendant no. 3, has held out that they will be bound by the terms and conditions of the contract that has been entered into between the plaintiff and defendant no. 2. Therefore, it can never be accepted that U.S. Law is applicable vis-a-vis, the plaintiff and defendant no. 3. "
16. The learned Single Judge in the case of M. V. Flag Mersinidi relied upon the Canadian case of World Fuel Services Corporation Vs. The Ship "Nordems"11. The ship in that case was on a sub-time charter. On 10 NMS.763.13 dtd. 16/4/14 Coram:K.R. Shriram,J.
11 CanLII-2011 FCA 73 (CanLII)
::: Downloaded on - 16/04/2015 00:00:41 :::
sg 18/28 nmsl581-15
the request of the sub-time charterer, the supplier sold bunkers. The supplier's mail made it clear that the sale was "on the credit of the vessel"
and the sub-time charterer was "presumed to have authority to bind the vessel with a maritime lien". The Canadian Court noted the gist of the facts and the issue before it as follows:
"[54] I must emphasize that the bunkers were not ordered either by the master of the ship or by an agent of the shipowners. They were ordered by Parkroad, a sub-time charterer who was expressly prohibited from taking on necessaries on the credit of the shipowners and their ship. The relevant question, in my view, is whether, in the circumstances of this case, behaviour or conduct on the part of the shipowners could have led the appellant to believe that Parkroad was authorized to purchase the bunkers on their behalf or on the credit of their ship"
Then, after considering the authorities on the subject, the Court proceeded to hold as follows:
[58] Professor Tetley then concludes his discussion of this issue at page 572 by making the following remarks:
Neither the time nor the voyage charterer is regarded as the servant or agent of the shipowner.
Therefore, assuming there is no question of "holding out", there would seem to be no need for the owner to notify suppliers that such a charterer, in contracting with them, does not bind the owner's personal credit.
Moreover, the supplier's duty to inquire is another argument available to the owner and ship.
[Emphasis added] [59] In my view, Professor Tetley's exposition of the law is correct. With this in mind, I now turn to the question of whether or not, on the facts of the case, the Judge erred in concluding that the presumption had been rebutted by the shipowners.
[60] As I have already indicated, I am of the opinion that the Judge did not make any error in concluding as he did. First, there can be no doubt in my mind that the appellant knew or ought to have known that Parkroad was not the owner of the ship. The appellant had access, as its seller's general terms and conditions reveal and the Judge so ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 19/28 nmsl581-15 found, to publications such as Lloyd's Register of Shipping, which would have allowed the appellant to determine the ownership of the vessel. In other words, these publications showed that the ship was owned by the respondent Partnerreederei ms "Nordems" and not by Parkroad. Consequently, the appellant was on notice and should have taken steps to verify whether Parkroad had authority to bind the vessel.
[61] In the event, there is no evidence that the appellant made any attempt to contact the shipowners so as to ascertain whether Parkroad was authorized to purchase bunkers on their behalf. The only possible inference is that the appellant did not make such an attempt or, if it did, it did not want to know.
[62] I am also unable to detect from the evidence any conduct or behaviour on the part of the shipowners which could have led the appellant into thinking that Parkroad was somehow authorized by them to purchase bunkers on their behalf.
[63] It is also of some significance that the appellant dealt at all times with Parkroad only. As proof of this, I note that the invoice for the supply of bunkers, although addressed also to the shipowners, was sent to Parkroad only and not to the shipowners. In fact, there was no contact between the appellant and the shipowners until the time when the appellant began giving serious consideration to a possible arrest of the ship, at which time the appellant knew that Parkroad was either bankrupt or that, in any event, it would not likely be able to satisfy its claim. In fact, as the Judge found, the first correspondence sent by the appellant to the shipowners is dated December 8, 2008, i.e. 4 days prior to the arrest of the vessel at Baie Comeau."
17. The discussion of Federal Court of Appeal at Ottawa, Ontario, Canada in NORDEMS is quite apposite even in the facts of our case. There is nothing on record that either Bryggen, Bergen or OW Bunker had any authority to bind the owners of the vessel; there is nothing to show that the owners at any time led the Plaintiff into thinking that either of these parties had the authority of the owners to purchase bunkers on their behalf or to bind them. The Plaintiff knew that OW Bunker, who was its contracting ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 20/28 nmsl581-15 party, was not the owner of the vessel. The Plaintiff ought to have taken steps to verify whether OW Bunker had the authority to bind the vessel.
Not only is there no such fact alleged but the Plaintiff at all times dealt with only OW Bunker. It even addressed a communication to Bryggen that the bunkers were supplied to the vessel 'A/C OW Bunker' and invoiced to OW Bunker (invoice was of the Plaintiff's group company), and requested Bryggen not to make payment to OW Bunker for the subject supply, but instead pay directly to the Plaintiff 'to avoid any unforeseen situation later on' (Email dated 10 November 2014). This email is not disputed by the Plaintiff. This email makes two things clear. Firstly, it shows that it was always the plaintiff's case that the bunkers were supplied 'A/c OW Bunker', invoiced to OW Bunker and payable by it. Secondly, it shows that even after OW Bunker's plight was known to the Plaintiff, the request for payment was made to Bryggen (the time charterer) and not the owners of the vessel. On all these facts, there is not even a reasonably arguable case that there is any privity of contract between the Plaintiff and the owners of the vessel.
18. The cases of Crescent Petroleum (supra) and Chemoil Adani (supra) relied upon by the Plaintiff are clearly distinguishable. In Crescent Petroleum, the master of the vessel had acknowledged "the liability of the owner of the vessel to pay the price of bunkers supplied" and that is how the facts of that case were distinguished by the Learned Single Judge from the facts of Raj Shipping Agencies and other cases. In Chemoil Adani, the averment in the plaint was that the bunkers were supplied at the request of the master of the vessel. A copy of the Master's request was produced with the plaint. In fact whilst distinguishing the judgment of the Learned Single Judge in Raj Shipping Agencies (supra) and another judgment of a Learned Single Judge following it, the Division Bench in Chemoil Adani observed as follows:
::: Downloaded on - 16/04/2015 00:00:41 :::sg 21/28 nmsl581-15 "52. As far as the judgment of other two learned Single Judges of this Court taking a view that the plaint in those cases does not disclose any cause of action are concerned, there, on facts, it was found that the only ground on which the vessel was proceeded against was because the orders were placed by it. The vessel was sought to be roped in without stating as to how it and its owner is liable. In fact, what was relied upon was only the bunker confirmation and nothing more. In that case, the document was found to be completely self-serving and unilateral. The acceptance of the consignment/bunkers therein was not attributed to the Master. It is in such circumstances and relying upon the paras of the plaint that the learned Judge in m.v. Chopol-II rejected the plaint. That was a finding rendered on a meaningful reading of the plaint (See paras 6,7,8,9 and
13).
53. In Raj Shipping (supra) once again the learned Single Judge found, on facts, that the plaintiff has not shown that the supplies were made at the instance of either the owner of the vessel or at the instance of the person authorized by the owner of the vessel. There were no clear averments that the supplies were made at the instance of the owner of the vessel. In the present case, such averments are made throughout."
19. It is thus clear that the Plaintiff has no case even under the law laid down in Chemoil Adani. As in the case of Raj Shipping Agencies, the Plaintiff does not even attempt to show how the owner of the vessel is liable; mere bunker confirmation by the Chief Engineer of the vessel does not entail any liability on the part of the owner. The Plaintiff has not shown that the supplies were made at the instance of the owner or a person authorized by the owner.
20. There is thus no privity of contract between the owners of the vessel and the Plaintiff, and hence, no contractual liability on the part of the owners. It is, however, submitted that necessaries supplied to a ship are prima facie presumed to have been supplied on the credit of the ship. That may be so in the absence of other material. If the undisputed material on record indicates that the parties who supplied the necessaries did not do so ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 22/28 nmsl581-15 at the instance not of the owners of the ship but of another person to whom they invoiced and looked alone for payment, it is sufficient to rebut such presumption. And no trial is required in the present case for rebuttal of this presumption. The presumption is rebuttable here on the basis of uncontested material available at this interlocutory stage itself. In The owner of the Stranship "HEIWA MARU" Vs. Bird & Co., 12 the court considered the question thus:
" It is now necessary to consider in what cases person who supplies necessaries is entitled to have recourse to the ship instead of to the owners personally.
In the case of The Mogilrft it was said that prima facie persons who have advanced money for necessaries on behalf of a foreign ship are entitled to sue in rem, but that it is an essential element of all actionable claims for necessaries that there should be a debtor liable in personam, and that this personal liability may or may not be enforceable by proceedings in rem against the ship. "One who supplies to a ship upon the order of the master necessaries which it is not within the actual or apparent authority of the master to order on the credit of the owner, has no right to recover against the owner by any proceedings whether in personam or in rem."
In the case of The Heinrich Bjorn Lord Watson said that a creditor who has no maritime lien cannot have an action in rem unless at the time of the institution of the action the res is the property of his debtor, and it was held in that case that there is no maritime lien for necessaries.
It seems clear therefore that before there can be an action in rem there must be a personal liability on the part of the owner.
Necessaries supplied to a ship are of course prima facie presumed to have been supplied on the credit of the ship but there is a passage in the judgment of their Lordships of the Privy Council in the case of Foong Tai v. Buchheister which shows that that presumption can be rebutted, and in the case of The Castlegate Lord Herschell said that disbursements made by the master on account of the ship must be limited to disbursements which he had a right to make on the credit of the owners of the ship and did not extend to disbursements 12 1923 RANGOON 163 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 23/28 nmsl581-15 made by him for purposes for which the charterers ought to have made provision, even though in a sense they might be said to have been made on account of the ship."
The statement of law in that case is clearly applicable to the facts of our case. The Plaintiff has no case to proceed against the vessel in rem on the basis of the presumption as alleged.
21. It is next contended that in any event the bunkers were delivered to the vessel without indicating to do so gratuitously and the vessel had the benefit of the same. In other words, there is a case of a quasi contract, a case covered by Section 70 of the Contract Act. In the face of an enforceable express contract, as explained by me above, a quasi contract cannot be made the foundation of a claim. There is an express contract here between the Plaintiff (or its group company) and OW Bunker, which governs the contractual relationship between the parties. This contract is very well enforceable. The Plaintiff cannot in that case fall back upon a quasi contract or the principle of Section 70.
22. This is not a case of a tortious liability. So also, there is no statutory liability. None of the heads of liability is available to the Plaintiff to bring an action against the owners of the vessel. There is, thus, no case at all for arrest of the Defendant vessel and the security provided by the owners in lieu of release of the vessel will have to be returned to the owners.
Notice of Motion (L) No. 805 of 2015
23. Unlike in the case of M. t. VALOR, in this case the order for supply of bunkers was placed by the owners of the vessel or their agents, though is was not placed on the Plaintiff, but on OW Bunker Malta Ltd.
::: Downloaded on - 16/04/2015 00:00:41 :::sg 24/28 nmsl581-15 ("OW Bunker"). OW Bunker, in turn, placed an order on the Plaintiff. The Plaintiff then placed an order on FOS, a physical supplier. The supply was made by FOS to the vessel and acknowledged by the owners or their agents. The Plaintiff claims to have paid FOS for the supply and become an assignee of the latter's right to receive payment for the physical supply. As explained in the case of M.t. VALOR, so in this case too the owner would have no privity of contract with the Plaintiff, but the question is, whether the presumption of the supply of bunkers being on the credit of the ship can be said to be displaced in this case at this interlocutory stage, or is it a case which needs to go to the trial. Is it a case whether the owners had authorized pledging of the credit of the ship for supply of bunkers.
24. It is admitted by the Defendant that owners of the Defendant vessel had requisitioned the bunkers and it was M/S Pendulum Ship Management Inc. ("Pendulum"), the managers of the vessel, who had requested for the supply. Even the Sales Order Confirmation of OW Bunker was addressed to Pendulum and was to the account of "master and/or owners and/or charterers and/or M. V. Tradewind and/or Pendulum Ship Management". This Sales Order Confirmation expressly made the sale and delivery of the marine fuel subject to OW Bunker Group's terms and conditions. The fuel was obviously to be supplied on the credit of the vessel. OW Bunker's terms of sale make it very clear. Now, OW Bunker, in turn, entered into a contract with the Plaintiff. The bunker nomination issued by the Plaintiff expressly states that the Plaintiff was pleased to confirm having placed the nomination "acting as contractual seller and in accordance with instructions received by purchasers M/V "Tradewind" and owners and/or managing owners and/or operators." The general terms and conditions included terms not only to the effect that the goods were supplied upon the faith and credit of the vessel, but that all goods supplied/delivered shall remain the property of the seller and shall be held ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 25/28 nmsl581-15 as his bailee until the buyer has fully made all payments for the same to the seller. The goods so supplied were admittedly received by the owners of the vessel or their agents. And lastly, there is an assignment of the right to receive the payment from FOS to the Plaintiff upon payment by the latter to the former. This case is prima facie borne out by the record available before this Court.
25. No doubt the defence raises several issues. In the first place, it is claimed that the Defendant had no knowledge at any point of time of the Plaintiff's purported general terms and conditions for sale of marine fuels. Secondly, though it is not disputed that as between the owner and OW Bunker the supply was to be on the ship's credit, the supply physically made through a third party, namely, the Plaintiff, is said to be not subject to such credit. Thirdly, the assignment of the right to receive the payment by the physical supplier, FOS, to the Plaintiff is disputed. But these are all matters of trial. At this interlocutory stage, it cannot be said that the Plaintiff's case based on the documents noted above is not even a reasonably arguable case. The facts of this particular case are clearly within the law laid down by our Court in Chemoil Adani case (supra). The distinguishing feature used in that case to distinguish the facts of that case from the facts in Raj Shipping Agencies (supra), namely, placement of the order for bunkers by the owners or their agents, is clearly present in this case also. The owners or their agents in the present case placed the order and also accepted the supplies, the supplier acknowledged the owners or their agents as the purchasers of the fuel and clearly purported to bind them. The supplier claims that the instructions referred in the bunker nomination were received by the purchasers, i.e. owners or their agents. No doubt whether or not the supplier's terms were brought to the notice of the owners or their agents when the supply was accepted by the latter is an important issue and I dare say the Plaintiff has a difficult case on hand in ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 26/28 nmsl581-15 that respect, but I still cannot persuade myself to come to a conclusion that the Plaintiff does not even have a reasonably arguable best case to insist on a trial.
26. There is one more reason why this particular case must go to trial. After the Plaintiff sent an invoice to the Defendant vessel, the managers of the vessel, Pendulum, communicated their willingness to settle the invoice provided the vessel got a complete discharge upon such payment. The difficulty faced by the managers was that they had received competing claims, one from the Plaintiff and the other from ING Bank claiming as assignees of OW Bunker for the same supply and the position was further complicated by OW Bunker's bankruptcy. In other words, the contest was not for payment of the supplies but for getting discharge for such payment. On these facts, it is possible to argue that the liability per se is not disputed and the case must go to trial. Whether the payment, on the particular facts of the case, should be ordered in favour of the Plaintiff or not may be an issue, but it calls for a trial. It cannot be said that the Plaintiff has no arguable case. In Forysthe Trading Services Ltd. Vs. M. V. Niizuru,13 in somewhat similar facts, our Court held that in the face of the Defendant vessel accepting liability to pay for the bunkers received by it, the suit could not be dismissed only on the ground of lack of privity; there operated an estoppel against the owner of the vessel. The question of such estoppel is an issue which will have to be decided at the trial.
27. For all these reasons, there is no case for vacating the arrest in Admiralty Suit (L) No. 240 of 2015. Before we dispose of the Motion, one more question, however, needs to be settled. It is submitted by the Defendant that the vessel M. t. Tradewind was not within the territorial waters of India, when the arrest order was passed. There is some 13 2004(5) Bom C.R. 806 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 27/28 nmsl581-15 controversy on this score. The Plaintiff submits that the Defendant had intentionally switched off the AIS recorder and that the Plaintiff bona fide believed that the vessel was within the territorial waters and applied for arrest. The fact of the matter is that the vessel is admittedly in the Indian territorial waters today and can be served with the arrest warrant. There is also a judgment of our Court in Geetanjali Wooler Pvt. Ltd. Vs. M. V. X- Press Annapurna14 that it is not necessary that the ship must be in territorial waters of India when the suit is filed or arrest is applied, but that no warrant can be executed unless the vessel comes within the territorial waters of India. The Court can acquire jurisdiction if the writ or warrant of arrest is executed on the ship when it arrives within its territorial jurisdiction. This position is not contested by the Defendant's Counsel, but it is submitted that the warrant is still not executed and hence, there is no jurisdiction as yet. Today, there is a warrant issued; the ship is within the territorial waters; and the warrant can be executed. That it is yet to be physically executed is no ground to vacate the arrest. Execution of warrant is a ministerial act; the Plaintiff may do so even now. There is no merit, thus, in the contention.
28 In the premises, the following order is passed :
(i) Notice of Motion (L) No. 581 of 2015 is made absolute in terms of prayer clause (a);
(ii) Prayer (c) is adjourned to the hearing of the suit and will be decided at the hearing;
(iii) Notice of Motion (L) No. 805 of 2015 is dismissed;
14 2005(6) Bom.C.R. 31 ::: Downloaded on - 16/04/2015 00:00:41 ::: sg 28/28 nmsl581-15
(iv) The Defendant's contentions that the arrest is wrongful are, however, kept open and the Defendant shall be at liberty make a claim of damages in that behalf and apply for a security at the trial of the suit;
(v) The costs to be the costs in the cause.
28. Learned Counsel for the Plaintiff in Notice of Motion (L) No. 581 of 2015 seeks a stay of the order. On the Plaintiff's undertaking to pay for the costs to cover the damages resulting from the stay sought, the order is stayed for a period of two weeks from today.
29. On the application of the Defendant in Notice of Motion (L) No.805 of 2015, the Defendant is permitted to secure the amount of the Plaintiff's claim by deposit of cash in this Court. Such deposit shall be without prejudice to the rights and contentions and also remedies of the Defendant. The amount of security shall be calculated in accordance with the particulars of claim as at the date of the suit and further interest payable on the principal sum from the date of the suit till today at the rate of 6 percent per annum. On deposit of such security, the vessel shall be released forthwith. The Instrument of Release shall be dispensed with. Sheriff, Port, Customs and all other authorities to act on the copy of this order duly authenticated by the Associate of this Court.
(S.C. GUPTE, J.) ::: Downloaded on - 16/04/2015 00:00:41 :::