Bombay High Court
Mv Wen Shan - Imo No 9311804 vs Kge Global Logistics Llc Fz on 21 March, 2024
Author: R.I. Chagla
Bench: R.I. Chagla
12-ial-6146-2024.doc
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO.6146 OF 2024
IN
COM ADMIRALTY SUIT NO.7 OF 2024
Mv Wen Shan - IMO No.9311804 ...Applicant (Ori.
Now known as M.V. Sencer 1 Defendant)
In the matter between
KGE Global Logistics LLC FZ ...Plaintiff
Versus
Mv Wen Shan - IMO No.9311804 ...Defendant
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Prathamesh Kamat, Abhimanyu Singh, Kayush Zaiwalla and Pinak
Bhagwat i/b. Priyanka Patel for the Plaintiff.
Mr. Arnab Ghosh for Defendant / Applicant.
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CORAM : R.I. CHAGLA J.
DATE : 21ST MARCH, 2024.
ORDER :
1. By this Interim Application, the Applicant / Original Defendant has sought setting aside of the exparte Order dated 2nd February, 2024 for arrest of the vessel, M.V. Sencer 1 (IMO No.9311804) previously know as M.V. Wen Shah "subject vessel" and for the subject vessel to be released. Further, consequential relief has been sought.
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2. Mr Khatri the learned Counsel appearing for the Applicant has taken this Court through the documents relied upon by the Applicant and in support of his submissions that the subject vessel was under the ownership of the Applicant and not its erstwhile owner HTC Shipping INC. These documents are as under:-
(a) Memorandum of Agreement dated 16th November, 2023;
(b) Addendum dated 12th December, 2023 appointing the Applicant as nominee buyers:
(c) Legal Bill of Sale (Apostilled and Notarized) dated 18th December, 2023;
(d) Protocol of Delivery and acceptance dated 20th December, 2023;
(e) Provision Certificate dated 23rd December, 2023;
(f) Deletion certificate of the erstwhile flat dated 26th December, 2023;
(g) Certificate of Registry dated 5th February, 2024;
(h) Incumbency certificates of the Applicant and erstwhile owners;
(i) Current Equasis Report showing Applicant as the present owner since 23rd December, 2023. 2/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 :::
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3. Mr. Khatri has submitted that there is no privity of contract between the Applicant and the Plaintiff. Hence, the condition set out in Section 5(1) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 has not been met.
4. Mr. Khatri has submitted that the Plaintiff had failed to make out a prima facie case for arrest of subject vessel. He has submitted that the Plaintiff had only relied upon Equasis Report printed on 2nd February, 2024 at Exhibit A to the Plaint which shows that the subject vessel is owned by the New HTC Shipping INC. He has submitted that the Equasis Report in absence of any other evidence to sustain the arrest is impermissible where there is evidence to the contrary.
5. Mr. Khatri has submitted that amongst the documents relied upon by the Applicant, there is a certificate of Registry issued by Zanzibar Maritime Authority which seals the issue in so far as ownership of the subject vessel is concerned. He has placed reliance upon Omega Petro Energy Pvt. Ltd. Vs. MV Kumar and SSR Marine Services1 wherein the learned Single Judge of this Court held "At this 1 Interim Application (L) No.25322 of 2022 in Comas (L) No.24639 of 2022 decided on 5th June, 2023.
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12-ial-6146-2024.doc juncture, the Plaintiff cannot be permitted to refer to clauses of the Memorandum of Agreement and question the title of the Applicant over the subject vessel. In any event, the certificate of Indian Registry, in a sense, seals the issue. Insisting upon the proof of payment for an entire consideration, in my view, was wholly unwarranted."
6. Mr. Khatri has relied upon the decision of this Court in Amrut Dredging and Shipping Ltd. Vs. Khakra Marine Transport 2 in support of his contention that the Admiralty Court cannot entertain a challenge to the transfer of the vessel, even if it intended to defeat or defraud creditors. The Admiralty Court's jurisdiction to proceed in rem against the vessel relies on the critical link between the ship sought to be arrested and the person liable in personam at two junctures: at the time of accrual of the cause of action and at the time of arrest.
7. Mr. Khatri has submitted that the Certificate of Registry issued by the Zanzibar Maritime Authority is required to be treated as a genuine document as per the Commercial Documents Evidence Act, 1939. He has in this context relied upon the decision of the Calcutta 2 Admiralty Suit (L) No.1134 of 2014 on 9th June, 2015. 4/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 :::
12-ial-6146-2024.doc High Court in Proactive Ship Management Private Ltd. Vs. Green Ocean3. The Calcutta High Court has held that "the prima facie view as to ownership is further strengthened by the provision of Section three of the Commercial Documents Evidence Act, 1939. These documents mentioned in Part I of the schedule to the 1939 Act referred to by GOSPL in support of its ownership convinces this Court as to its ownership as on the date of arrest".
8. Mr. Khatri has further placed reliance upon decision of this Court in MV Rainbow Ace Vs. Lufeng Shipping Company Limited4. This is in support of his contention that a prima facie case cannot be merely based on suspicion. The arrest of the vessel on the basis of suspicion raised certainly causes more injury to a third party than the Plaintiff. Just the balance of convenience would be against the arrest of the vessel.
9. Mr. Khatri has also relied upon the decision of this Court in Siva Bulk Limited Vs. MV Aodobao and Anr. 5, wherein this Court held that the Plaintiffs in that case failed to discharge the initial 3 IA No. GA.3 of 2021 in AS/2 of 2021. 4 Admiralty Suit No.29 of 2013 decided on 13th April, 2021. 5 2016 SCC OnLine Bom 3539.
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12-ial-6146-2024.doc burden of proof which was upon them to establish that the beneficial owner of the Defendant No.1 vessel is Cosco. The Plaintiffs cannot be heard to state or argue that the Defendant No.1 vessel should provide disclosures as sought by the Plaintiffs. The Plaintiffs who have failed to even prima facie establish their case cannot be allowed to press for the confirmation of the same only by pointing to the pleadings of the Defendant No.1 or their conduct. It is settled law that the Plaintiff who approaches the Court should succeed on the strength of its own case rather than the weakness of the Defendant's case.
10. Mr. Khatri has also referred to the decision of the Gujarat High Court in Monjasa Ltd. Vs. M.T. Alpine Duke6. The Court has held that for vacating of interim order of arrest granted under Section 5 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, the Court is required to see the prima facie case, balance of convenience and irreparable loss on the basis of the documents produced by both sides i.e. by the Plaintiff along with the Plaint as well as the Defendant while filing an application for vacating the arrest on the facts of each case.
6 Civil Application No.1 of 2019 in R/Admiralty Suit No.3 of 2019 decided on 14th November, 2022.
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11. Mr. Khatri has submitted that the Plaintiff's reliance on just the Equasis Report cannot be said to be enough to sustain the arrest. This Court in Siva Bulk Ltd. (Supra) has held that the Plaintiff's reliance on information obtained from websites which are for the purpose of obtaining the arrest of a ship can lead to disastrous consequences. Further, the Gujarat High Court in Monjasa Ltd. (Supra) noted that the Plaintiff in that case relied upon the Sea Web Report to file its maritime claim and apart from that there was nothing to rebut the prima facie evidence produced on behalf of the Applicant - Owner of the Defendant vessel, which has prima facie demonstrated that Oxygen Maritime Management Inc. has nothing to do with the ownership of the Defendant vessel.
12. Mr. Khatri has submitted that apart from the documents on record there is a proof of payment of purchase consideration which has been annexed to the written submissions and which is document titled as Receipt of Collection dated 16th December, 2023. This shows that as per the terms of the Memorandum of Agreement remaining balance of 758,805.00 USD (purchase price of US$ 1,000,000.00 - US$ 141,195.00 in the amount payable to the seafarers and US$ 100,000.00 as Deposit) has been paid by hand, in 7/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 ::: 12-ial-6146-2024.doc cash and in full on 16th December, 2023 by and between the New HTC Shipping Inc. and Ceak Global Shipping Limited. Further, there is a final settlement of crew wages which is also annexed to the written submissions which shows payment to the seafarers.
13. Mr. Khatri has submitted that the Plaintiff has resisted the release of the subject vessel on the ground that the documents relied upon by the Applicant have some discrepancy. He has submitted that the decisions relied upon by the Plaintiff are distinguishable on facts and can in no event assist the Plaintiff in the present case considering that the Certificate of Registry has been issued by Zanzibar Maritime Authority which is unambiguous proof of ownership in favour of the Applicant.
14. Mr. Prathamesh Kamat, the learned Counsel appearing for the Plaintiff herein has submitted that the documents relied upon by the Applicant show the suspicious nature of the sale transaction. That apart the proof of payment which has been annexed to the written submissions itself shows that the purchase consideration of the subject vessel had been received at the time when the subject vessel was arrested by this Court on 4th January, 2024. There have 8/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 ::: 12-ial-6146-2024.doc been payments made towards the crew wages in January, 2024 when the subject vessel was under arrest. Further, the sale consideration cannot be stated to have been paid on 16th December, 2023.
15. Mr. Kamat has referred to the Memorandum of Agreement (MoA) more particularly Clause 3, which is payment. It provides that on delivery of the vessel but not later than (2) banking days after the date that Notice of Readiness has been given in accordance with Clause 5, (Notice, time and place of delivery), the deposit shall be released to the sellers, and balance of of the purchase price and all other sums payable on delivery by the buyers to the sellers under the agreement shall be paid in full free of bank charges or cash to the sellers Account. He has submitted that there were documents such as the legal Bill of Sale to be furnished by the seller in exchange for payment of the purchase price. Therefore, as per the MoA, the sequence was (i) Delivery; (ii) Payment of purchase price;
(iii) Issuance of Bill of Sale. However, in the present case, the Bill of Sale was issued on 18th December, 2023, prior to the purported delivery (dated 20th December, 2023), therefore prior to payment. This is not just inconsistent with the terms of the MoA but also with the terms of the Bill of Sale which records receipt of payment 9/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 ::: 12-ial-6146-2024.doc consideration. He has submitted that although the Plaintiff sought for inspection of the original documents, the Applicant did not provide inspection.
16. Mr. Kamat has submitted that under Section 19 of the Indian Sale of Goods Act, 1930, which is pari materia with Section 17 of the English Sale of Goods Act, 1979, where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intends it to be transferred. For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. Thus, the title of goods will pass based on the intention of the parties which has to be ascertained from the terms of the contract. Since, the MoA contemplates transfer of title on payment of the entire sale consideration, the proof of such payment is imperative.
17. Mr. Kamat has submitted that the subject vessel was custodia legis from 4th January, 2024 until 1st February, 2024 when remaining part of the sale consideration was paid. He has placed reliance upon the decision of the Supreme Court in MV Elisabeth & 10/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 ::: 12-ial-6146-2024.doc Ors. Vs. Harwan Investment and Trading Private Ltd. 7. The Supreme Court has held that upon arrest of the vessel it is brought under the custody of the Marshal (now Sheriff) and any interference with his custody is treated as contempt of the Court which has ordered the arrest.
18. Mr. Kamat has submitted that in the present case, considering that payments towards sale consideration have been made when the subject vessel was custodia legis, i.e. under arrest, there could not have been any transfer of title of the subject vessel in favour of the purported new owners.
19. Mr. Kamat has referred to further inconsistencies in documents relied upon by the Applicant including the Bill of Sale. This has been authenticated in Panama when pertinently neither the buyers nor sellers nor resident or incorporated in Panama. He has also referred to the Maritime Transport Act, 2006, in particular Section 30 (i) thereof which provides where a ship becomes entitled to be registered while at port in a country outside Zanzibar or ship entitled to be registered under Section 9(1) (d) of this Act then 7 1993 Supp (2) Supreme Court Cases 433.
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12-ial-6146-2024.doc subject to sub-section (2) of Section 30, the proper officer may, on the application of the owner or Master of the ship, grant to him provisional certificate of registry stating particulars including time and place of the purchase of ship. He has submitted that there is no document which records the time and place of purchase of the ship. Further under Section 20(1) of the Maritime Transport Act, 2006 there has to be a survey to be conducted prior to the registration. The certificate of such survey is to delivered to the Registrar of Ships prior to registration. The subject vessel had been arrested and detained in Mumbai anchorage since 19th July, 2023. Thus, there is no way how this survey could have been done.
20. Mr Kamat has submitted that in view of these inconsistencies in the documents and suspicion nature of the sale of the subject vessel, the same is required to be relegated to a trial and hence no relief can be granted in the present Interim Application. He has placed reliance upon the decision of the Gujarat High Court in Marlin Maritime Trading Ltd. V. Interocean Ship Repairs LLC 8 and Chrisomat Corporation Vs. MJR Steels Private Limited and Anr .9 It 8 Civil Application (OJ) No.1 of 2018 in R/ Admiralty Suit No.22 of 2018 decided on 15th October, 2018, Paras 56-60, 71-74).
9 (2018) 16 SCC 117.
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12-ial-6146-2024.doc has been held that an ideal test in a vacating application is that an Admiralty Court, on perusal of documents feels that a further investigation may be necessary, the matter will have to be relegated to trial. The law is well settled that to vacate an order of arrest is to virtually non-suit the Plaintiff. The opportunity of Plaintiff to demolish the Applicant's documents in trial will be denied to the Plaintiff if the Interim Application is allowed, and the arrest order is vacated.
21. Mr. Kamat has submitted that the decisions relied upon by the Applicant are confined to the facts of those cases and are inapplicable in the present case.
22. Having considered the submissions, in my view this is a fit case to relegate the matter to a trial. I prima facie find that the sale transaction is suspicious. The documents relied upon by the Applicant are riddled with inconsistencies and which cannot be accepted without proof. Further, the MoA itself contemplates that the transfer of title of the vessel shall be subject to payment of entire sale consideration. This, in my prima facie view has not been satisfied in view of the remaining sale consideration having been paid when the 13/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 ::: 12-ial-6146-2024.doc subject vessel was under arrest, having been arrested on 4th January, 2024.
23. I find much merit in the submission of Mr. Kamat based on the decision in MV Elisabeth & Ors. (Supra) that upon arrest, the subject vessel is custodia legis and hence there can be no interference with such custody and any interference thereof shall be treated as contempt of Court. This has been expressly held in paragraph 49 of MV Elisabeth & Ors. (Supra).
24. I find from the Receipt of Collection which forms part of the written submissions of the Applicant, an amount of US$ 141,195.00 was payable to the seafarers and which is part of the sale consideration of the subject vessel. The balance payment of US$ 758,805.00 (purchase price of US$ 100,000.00 less US$ 141,195,.00 in the amount payable to the seafarers and US$ 100,000.00 as Deposit) is stated to be paid by hand in cash and full on 16th December, 2023 by and between New HTC Shipping INC and Ceak Global Shipping Limited. Further, upon a perusal of the statement - 'Final Settlement of the Crew Wages' which is annexed to the written submissions of the Applicant, it appears that Crew Wages have been 14/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 ::: 12-ial-6146-2024.doc paid from 18th January, 2024 till 27th January, 2024 i.e. the period when the subject vessel was under arrest by order dated 4th January, 2024. Thus, though it has been contended by the Applicant that the sale consideration has been received on 16th December, 2023, this contention merits no acceptance.
25. Further, under Section 19 of the Sale of Goods Act, 1930, property under contract for the sale of specific or ascertained goods is transferred to the buyer at such time as the parties to the contract intend it to be transferred. In the present case, the subject vessel was to be transferred only upon receipt of entire sale consideration. Hence, given the above prima facie finding that the subject vessel has not been transferred to the Applicant prior to the arrest of the subject vessel, such transfer cannot be accepted by this Court as it amounts to interference with the custody of the Sheriff.
26. Accordingly, the relief sought for in the Interim Application cannot be granted. The issue that arises herein namely, whether the Defendant vessel has been transferred to the Applicant is relegated to a trial. The Plaintiff cannot be non-suited by vacation of the arrest given the prima facie findings of this Court. 15/16 ::: Uploaded on - 28/03/2024 ::: Downloaded on - 12/04/2024 02:26:37 :::
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27. Mr. Khatri has sought for security to be provided by the Plaintiff in view of the present Application not having been allowed.
28. I find that in the arrest order dated 2nd February, 2024 passed by this Court, there is an undertaking of the Plaintiff which sufficiently protects the Applicant herein and which undertaking has been accepted by this Court. The vessel is still under detention of the port authorities and that the charter party Agreement has been entered into by the Applicant on 25th January, 2024 during such detention order. Thus, I prima facie do not find that any loss will be caused to the Applicant in the event the Applicant eventually succeeds.
29. Interim Application is accordingly rejected. There shall be no order as to costs.
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