Calcutta High Court
Paharpur Cooling Towers Ltd. vs The Owners And Parties Interested In The ... on 26 June, 2001
Equivalent citations: AIR2001CAL213, (2001)2CALLT445(HC), AIR 2001 CALCUTTA 213, (2002) 1 ACC 117, (2002) CAL WN 760, (2001) 2 CALLT 445
Author: A.K. Ganguly
Bench: Ashok Kumar Ganguly
JUDGMENT A.K. Ganguly, J.
1. The case of the plaintiff in this admiralty suit is based on a claim for damages. The case is that the ship M.V. Lima-I carried the Cargo belonging to the plaintiff and she reached the sand heads on 1.4.2001 and was berthed on 9.4.2001. Thereafter, on or about 14.4.2001 at the Haldia Port the discharge of cargo commenced and was continued on diverse dates. Ultimately, the discharge of cargo was completed on 27.4.2001.
2. It is not in dispute that the entire quantity of cargo was discharged and taken delivery of by the plaintiff.
3. The cargo in this case is a kind of fertilizer and its effective use demands that its moisture content must remain very low and within a specified level. According to the plaintiff, such moisture content cannot exceed 0.5%.
4. But in the plaintiffs cargo, which she carried, at the time of discharge, the moisture content exceeded more than the prescribed limits.
5. In order to make out this case, the plaintiff mainly relies on three survey reports and some other documents and contended that as a result of this excessive moisture content, the Cargo cannot be put to any use and the plaintiffs property in the cargo has been damaged and as such this admiralty suit has been filed and these proceedings have been initiated for an interim order for arresting the ship. This Court, upon hearing the plaintiffs counsel on 25th May. 2000, passed an exparte order for arrest of the ship.
6. At the instance of the defendant ship owner, the matter was placed before the learned Vacation Judge with a petition for vacating the order of arrest. The learned vacation Judge look up the matter on 6th June, 2001 and passed the following order:
"Present:--
The Hon'ble Justice Subhro Kamal Mukherjee.
6th June, 2001 Dictated Order The Court:--In Order to explain certain discrepancies about the focus standi of the applicant, liberty is granted to the petitioner in this application to file a supplementary affidavit by June 11, 2001. Let this application be listed before the appropriate Bench on 13lh June, 2001.
Mr. Sen, learned advocate appearing for the Calcutta Port Trust submits that there is some congestation in Haldla Port and the ship may be shifted to Calcutta Port. By consent of the parties leave is granted to shift the ship at Calcutta Port. All parties including the Port Trust, Calcutta Port as well as Haldla Port are to act on a signed xerox copy of this order on the usual undertaking. Sd/-
Subhro Kamal Mukherjee, J."
7. Thereafter, on the reopening of the Court, the defendant mentioned the matter on 13th June, 2001 and the Court gave directions for affidavit and further heard the parties on several days.
8. The learned counsel for Lima Shipping and Trading Co., inc, a company organized under the appropriate laws of Turkey and carrying on business at Altunizarde, Erdem soch, Sabun Cuo Glue, Sit. 'C' Block, No. 6, D:9, Uskudar, Istanbul, Turkey (hereinafter referred to as the defendant company) urged that no prima facie case has been made out by the plaintiff for the arrest of the ship and the ex parte order of arrest obtained by the plaintiff should be discharged.
9. It has been further urged that the cargo in question namely standard pink Muriat of Potash of CIS origin [henceforth referred to as MOP] has not suffered any loss or damage on account of failure and negligence of the defendant Company. It was contended that the said vessel was seaworthy in all respects and the learned counsel relied on various certificates in respect of the seaworthiness of the said vesel. Those certificates granted by the Government of Republic of Turkey, which are annexed as annexure X-2 to the vacating petition (hereinafter called 'the petition"). From those certificates it appears that those were issued under the provisions of International Convention for Safety of Life at Sea, 1974 as modified by the Protocol of 1988 relating thereto. Those certificates mentioned that the said ship as seaworthy till 30th July, 2001 as a consequence of surveys being carried out. 11 further appears from certificate dated 8.2.2001 that the ship has been certified in accordance with the requirement of regulation 1/10 of the aforesaid convention and in accordance with the assembly resolution A. 718(17) relating to early implementation of the harmonized system of survey certification. It is certified that the survey showed that the condition of the structure, machinery and equipment as defined in the said regulation was satisfactory and the ship complied with the relevant requirement of chapter 11-1 and 11-2. The learned counsel also relied on another certificate issued by the Government of Republic of Turkey under the provision of International Convention of the Prevention of Pollution of Ships, 1973. The certificate was to the extent that the survey showed the equipment of the ship and the conditions thereof are in all respects satisfactory and the ship compiled with the requirement. All the certificates were valid upto 30th July, 2001. The learned counsel also relied on the equipment certificate and It appears that the said certificate is also valid till 30th July, 2001.
10. The learned counsel relied on various documents issued in respect of the ship by the Inspectorate (Suisse), S.A. Those certificates are hold Inspection reports. Those four certificates were issued by the same inspectorate between 5.12.2000 and 7.12.2000 certifying that upon inspection, the Cargo holds were found suitable for carrying the above mentioned cargo and it was certified that the holds in the ship namely hold No. 1, hold No. 3, hold No. 4 and hold No. 5 contained the aforesaid cargo namely MOP in bulk.
11. The learned counsel for the defendant Company has also drawn the attention of the Court to a document issued by the Ministry of the Transport of Ukraine. Relying on the said document the learned counsel urged that it showed that the cargo in question at the port of loading at Ukraine showed moisture content of 0.8%. The learned counsel submits that if particulars of the said certificates are compared with the cargo in question, the quantity would also virtually tally. It will also appear that the port of loading is the same, the vessel is the same, and the date of loading is also the same. The learned counsel also relied on the bill of lading and the mate's receipt. From those documents it appeared that the cargo was partly loaded from open area and it also appeared that the weight, the measure, the quality, condition, contents and value of the materials is unknown.
12. From the aforesaid documents and materials, the learned counsel urged the following points: (a) the ship was perfectly in seaworthy condition,
(b) all the holds were absolutely clean and fit for storage of cargo in question,
(c) the claim of the plaintiff that the moisture content of the cargo is 0.5% at the lime of loading is doubtful, (d) the cargo was partly loaded from open area, (e) This may increase the moisture content of the cargo at the time of loading itself.
13. The learned counsel also strongly criticized the certificates furnished by the plaintiff. It has been urged that entire cargo has been taken delivery of by the plaintiff and no sample is left. Therefore, there is nothing to show that the survey reports are of the cargo which was shipped by M.V. Lima-I.
14. The learned counsel has drawn the attention of this Court to the first Survey certificate by S.G.S. and pointed out that the report shows that during the discharge of Cargo there was Intermittent rain. The said survey certificate is dated 12th May.-2001 and shows the average moisture content of cargo in the order of 1.2%. The learned counsel however, pointed out that from the said report disclosed by the plaintiff itself it appears that the cargo in the vessel holds were found to be "in free flowing condition". The Cargo being in free flowing condition means that it was in powdery form without excessive moisture content.
15. The learned counsel further submitted that second certificate relied on by the plaintiff was given by R.V. Briggs and Co. but it shows that the sample was not drawn by them and sample was submitted to them on 8.5.2001 but the discharge was completed on 27.4.2001 and its moisture content was 0.85%. Apart from that it appears that the package containing the material, which was given for survey was not sealed and there was no chemical analysis. The third certificate which was relied on by the plaintiff shows that sample was received in the laboratory for analysis on 29.4.2001 and the sample was not in accordance with the specification and the moisture content was found to be 0.65%.
16. Relying on the aforesaid facts, the learned counsel urged that no prima facie case has been made out by the plaintiff for arrest of the ship. The learned counsel urged that the ship was perfectly seaworthy, its holds were absolutely clean. The moisture content in the cargo may go up for various reasons which cannot be attributed to be defendant Company. It was admittedly loaded from open area, secondly at the time of discharge, there was intermittent rain. There was no survey during the period of discharge. There is no knowing the fact whether the survey reports are in respect of the very same cargo which was carried by the ship. Apart from that the survey reports are inconsistent in the sense that different reports are showing different moisture content in the cargo. So on these materials, most of which have been disclosed in the plaint. It cannot be said that there is a prima facie case of negligence against the defendant Company and as such the order of arrest should be discharged.
17. The learned counsel further submitted that from the prayer in the plaint, it is clear that they have prayed for a decree against the defendant company for Rs. 10,92,54,740.90p. which is more than the price of the entire cargo. This decree has been prayed for after taking delivery of the entire cargo. But since the plaintiff has not been able to make out any prima facie case, they have also alternatively prayed for an enquiry into the loss and damages suffered by the plaintiff and decree for such sums as may be found due upon such enquiry. The learned counsel submitted that the total quantity of the cargo was 16,496.42 Metric ton and has been taken delivery of by the plaintiff.
18. The learned counsel urged that if the plaintiff found that the entire cargo is useless it was open to them not to take delivery of the same but they have not done that. This shows that their case in the plaint that the entire cargo is useless cannot be accepted. In other words, the learned counsel contended that if the entire cargo is useless in that case they need not have incurred costs for removing the whole of its from the ship and could have left it there. But the fact that they have taken delivery of the entire cargo shows that the cargo was in a marketable condition. So their case of alleged loss and damage in respect of the said cargo, assuming but not admitting that the moisture content has gone up during the shipment, has not been crystallized and so they have made an alternative prayer for an enquiry into the loss and damage and decree for such sum as may be found due upon such enquiry. Since the alleged damage has not been ascertained in the case, the present petition filed by them for arrest of the ship to secure the payment of the aforesaid amount of Rs. 10,92,54744.90p. is totally misconceived and cannot be sustained and as such the order should be discharged.
19. The learned counsel also urged that in a suit for damages there is hardly any scope for ad interim order unless the rights to get damages are crystallized and in the facts and circumstances of the case, it is clear that the plaintiff has not been able to establish such a prima facie case.
20. The learned counsel further submitted that arrest of a ship can only be ordered in cases were the plaintiff has a lien over the vessel in question. In support of this contention, the learned counsel relied on Halsbury's Laivs of England 4th Edition (reissue) volume I (1)--Butter worths, London 1989. The learned counsel relied on paragraph 320 at page 395-96 of the said edition of Halsbury. ReJiance was placed on the following passage of Halsbury:
"320. Extent of jurisdiction. The Admiralty Jurisdiction of the High Court includes Jurisdiction to hear and determine any claim for loss of or damage to goods carried in a ship, and any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship. The words 'agreement relating to use or hire of a ship arc not to be given a restricted meaning. The Jurisdiction is wide enough to cover claims in tort arising out of any agreement relating to the carriage of goods in a ship. An agreement relating to the use or hire of a ship includes a contract for services rendered by motorboats to a ship where those services involve more than some incidental and minor use of those boats. The words 'use or hire of a ship' are also wide enough to cover the case of the hire of a tug under a towage contract.
Claims in respect of damage to cargo do not, unless they result from damage done by a ship, give rise to a maritime lien."
21. The learned counsel placed particular reliance on the statement of law in Halsbury to the effect that "claims in respect of damage to cargo do not, unless they result from damage by a ship, give rise to a Maritime Lien". The learned counsel further submitted that in the instant case, the plaintiff does not have any Maritime Lien and as such is not entitled to an order of arrest. In respect of the said contention, the learned counsel further relied on Article 4 of the International Convention on Maritime Lien and Mortgage, 1993. Particular reliance was placed on Article 4 of the convention. The said article is set out below:
"Each of the following claims against the owner, demise charterer, manager or operator of the vessel shall be secured by a maritime Hen on the vessel:
(a) claims for wages and other sums due to the master, officers and other members of the vessel's complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
(b) claims in respect of loss of life or personal injury occurring, whether on land or on water. In direct connection with the operation of the vessel;
(c) claims for reward for the salvage of the vessel;
(d) claims for port, canal, and other waterway dues and pilotage dues;
(e) claims based on port arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers' effects carried on the vessel.
2. No maritime Hen shall attach to a vessel to secure claims as set out in subparagraphs (b) and (c) of paragraph 1 which arise out of or result from:
(a) damage in connection with the carriage of oil or other hazardous or noxious substances by sea for which compensation is payable to the claimants pursuant to International conventions of national law providing for strict liability and compulsory insurance or other means of securing the claims: or
(b) the radioactive properties or a combination of radioactive properties with toxic, explosive or other hazardous properties of nuclear fuel or of radioactive products or waste."
22. By relying on the said article, the learned counsel submitted that in the instant case, the plaintiffs claim can come under clause l(e) of Article 4 and if the said clause is properly read it would be clear that loss of or damage to cargo is taken out of the purview of Article 4(1)(e) of the said Convention. The learned counsel further submits that Clause 2 of Article 4 has no application to the plaintiffs case. Since in the instant case the alleged damage to cargo has not been done by the ship, there is no maritime lien in favour of the plaintiff and therefore, the order of arrest is not at all sustainable. The learned counsel also relied on the decision of Supreme Court in the case of M.V. Elisabeth and Ors. v. Kara-art Investment and Trading Pvt. Ltd., . The learned counsel relied on paragraphs 85 and 90 of the said judgment in order to contend that although India is not a party to Brussels Convention, the legal principles evolved in such conventions have become part of our laws as a result of unifications and development of Maritime Laws of the world. Those conventions must be regarded as part of international common law rooted in the general principle of our national laws. The apex Court held that such law should be adopted and adapted by Courts to supplement the national statute on the subject. According to the apex Court those principles should supply the lacunae in the Merchant Shipping Act. Therefore, it is urged that though India is not a signatory to Brussels Convention, the principles of law flowing out of such convention should form part for our national law on a Maritime claim. The learned counsel further relying on Elisabeth (supra) urged that the power of arrest is recognized in several international conventions and although many of these contentions have not been ratified by India they should be regarded as part of our common law. Relying on those observations of Supreme Court,- the learned counsel urged that the brussels Convention should govern the claim of the parties in a dispute like the present case. The learned counsel, therefore. submitted that in the facts of this case since the plaintiff does not have a maritime lien, these proceedings for arrest must fail and should be dismissed.
23. Mr. S.N. Mukherjee, the learned counsel appearing for the plaintiff has contended that this Court has sufficient jurisdiction to maintain the present proceeding and also the order of arrest it has passed. The learned counsel submitted that the Admiralty jurisdiction of this Court is derived from Admiralty Court Act, 1861 and specially section 6 of the said Act. The learned counsel submitted that the said Act has been extended to Calcutta High Court by the Colonial Courts Act of Admiralty. 1890 read with Colonial Courts of Admiralty [India Act) 1891. The learned counsel submitted that there is a difference between Maritime claim and maritime lien and this difference is brought out very clearly in Halsbury's Laws of England in para 311. The learned counsel submitted that where damage is done by a ship or to a ship in such cases there is a question of maritime Hen. But where damage is caused to the cargo as a result of negligent carriage of the same, as in the instant case, there is no question of maritime lien and as such there arises a maritime claim as in the present one. In such a case the admiralty jurisdiction of this Court can be invoked and the proceeding for arrest of the ship, a proceeding "In Rem', can be initiated.
24. The learned counsel, in seeking to refute the case made out by the ship owners, urged that in the instant case, admittedly the owner of the ship is a foreign party and the ship is a foreign vessel. The learned counsel further urged that there is no dispute that the owner of the vessel has no assets in India and there is no dispute about the price of the cargo. The learned counsel has referred to the affidavit of Sujit Som, the executive Vice-President of the Plaintiff, and submitted that in the instant case, from the irrevocable letter of credit opened in favour of the plaintiff, it is clear that the entire price of the cargo being Rs. 9,40,45,890/- has been debited from the plaintiffs account with H.S.B.C, The learned counsel further submitted with reference to the bill of lading that the cargo in question has been described in the bill of lading as "clean on board" and the freight has been prepaid.
25. The learned counsel submitted that since a 'clean on board' bill of lading has been issued, the ship owner is estopped from contending that the quality of the goods was not proper at time of shipment. The learned counsel further submitted that the bills of lading is a commercial document and according to Law Merchant as the holder of a commercial document like the bill of lading, the plaintiff is entitled to receive the goods as mentioned in the bill of lading and as a consignee, its rights are crystallised on the basis of the clean bill of lading. If the goods suffer any deterioration in quality in the course of shipment, for that, it is the carrier's responsibility and not that of the consignee. In support of the aforesaid contention, the learned counsel relied on a few decisions, which will be considered by the Court later on. The learned counsel further submits that there is no challenge to the certificate in respect of the cargo issued by the Swiss inspectorate on 9th December, 2000 prior to shipment. The said certificate showed that the moisture content in the goods was 0.5%.The learned counsel further submitted that no reliance could be placed on annexure. X-5 annexed to the vacating petition of the said company. It was submitted that on a comparison between page 75 and page 79 which is the 15th page of X-5, it will appear that the name of the ship is different, the number of the ship is different and annexure X-5 would show that the same was issued on 23rd December. 1999 and is valid up to 31st December. 2000 whereas, in the instant case, admittedly the loading of cargo started at the port of loading on 6.12.2000. The learned counsel further submitted that in the instant case the vacating application filed by the defendant company does not contain any averment that the damage to the cargo was in view of the rain, nor has it been alleged that damage is caused to the cargo in view of the fact that the same was loaded from an open area. The learned counsel further submitted that in the instant case, the certificates of seaworthiness were issued before the commencement of the voyage. Therefore, no reliance can be placed on them. It is further urged that assuming that the case of the defendant company is correct that these are the renewal certificates even then they merely show that the time when the ship started its Journey it was seaworthy. But those certificates do not throw any light on what happen during the journey. In other words, the crucial period is the one between 9.12.200-the date on which the ship sailed from the loading port and 14.4.2001 when the discharge of cargo started. The learned counsel contended that all that happened during that period is within the special knowledge of the defendant company and there is no averment by the ship owner that there is no negligence on their part during the said period.
26. With reference to the conditions of carriage which are printed on the reverse of the bill of lading, the learned counsel submitted that from the general paramount clause it is clear that Indian law will apply since the law in the country of shipment mainly the Ukraine law is unknown. So the corresponding legislation of the country of destination namely Indian Law will apply. The learned counsel submitted that in so far as Indian Law is concerned, namely the Indian Carriage of Goods by Sea Act, 1925 has been amended by Multi Modal Transportation of Goods Act, 1993 [hereinafter called. CGSA]. Relying on Clause 3(c) of Article III of CGSA of 1925, the learned counsel submitted that after receiving the goods in his charge, the carrier or the master or the agent of the Carrier shall, on demand of the Shipper, issue to the shipper a bill of lading showing amongst other things the apparent order and condition of the goods. The learned counsel further urged that such a bill of lading shall be prima facie evidence of receipt by the carrier of the goods as described in the same. The learned counsel further relied on Article 4 of CGSA in order to contend that proof to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith. The learned counsel also relied on Clause 5 of Article III of CGSA and it is set out below:
"5. The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight as furnished by him, and the shipper shall indemnify the carrier against all loss, damages, and expenses arising or resulting from inaccurancles in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper."
27. The learned counsel said that the proviso in paragraph 4 namely "however, proof to the contrary shall not be admissible if the bill of lading has been transferred to a third party acting in good faith" has come by way of amendment to CGSA by the Multi Modal Transportation of Goods Act, 1993 [Act 28 of" 1993].
28. Before dealing with the rival submissions, this Court proposes first to deal with the question relating to the Court's Jurisdiction to pass an order of arrest of the ship in the facts of this case. Even if the findings of the Court are Interlocutory in nature but since a question of Jurisdiction of this Court has been raised, the same must be decided first before passing even order of interlocutory nature.
29. The admiralty Jurisdiction of this High Court is initially founded on the Admiralty Courts Act, 1861 which was made applicable to India by the Colonial Courts of Admiralty Act, 1890 read with (The) Colonial Courts of Admiralty (India) Act, 1891.
30. Even prior thereto, Clause 26 of the Charter of 1774 which established the Supreme Court of Judicature at Fort William in Bengal reads as follows:
"And it is our further will and pleasure, and we do hereby grant ordain, establish, and appoint that the said Supreme Court of Judicature at Fort William in Bengal, shall be a Court of Admiralty, in and for the said provinces, countries, or districts, of Bengal, Behar and Orissa, and all other territories and islands adjacent there unto, and which now are, or ought to be, dependent thereupon and we do hereby commit and grant to the said Supreme Court of Judicature, at Fort William in Bengal, full power and authority to take cognizance of, hear, examine, try and determine all causes, civil and maritime, and all pleas of contracts, debts, exchanges, policies of assurances, accounts, charter parties agreements, loading of ships, and all matters and contracts, which in any manner whatsoever relate to freight or money due for ships hired and let out, transport-money, maritime usury or bottomry or to extortions, trespasses, injuries, complaints, demands, and matters, civil and maritime, whatsoever, between merchants, owners, and proprietors of ships and vessels, employed or used within the Jurisdiction aforesaid, or between others contracted, done, had, or commenced. In, upon or by the sea, or public rivers, or ports, creeks, harbours, and places overflown, within the ebbing and flowing of the sea, and high-water mark, within, about, and throughout the said three provinces, countries of districts, of Bengal, Bihar and Orissa and all the said territories or islands adjacent there unto and dependent thereupon, the cognizance whereof both belong to the jurisdiction of the Admiralty, as the same is used and exercised in that part of great Britain called England, together with all the singular their incidents, emergents and dependencies annexed and connected caused whatsoever, and to proceed summarily therein with all possible dispatch, according to the Courts of our Admiralty of that part of Great Britain called England, without the strict formalities of law, considering only the truth of the fact, and the equity of the case."
31. Reference in this connection may also be made to sections 6 and 7 of the Admiralty Courts Act, 1861.
"Section 6. The High Court Admiralty shall have Jurisdiction over any claim by the Owner or consignee or assignee of any bill of lading of any goods carried into any Port in England or Wales in any ship, for damage done to the goods or any part thereof by the negligence or misconduct of or for any breach of duty or breach of contract on the part-of the Owner, master, or crew of the ship, unless it is shown to the satisfaction of the Court that at the time of the institution of the cause any Owner or part Owner of the ship is domiciled in England or Walse;
Section 7. The High Court of Admiralty shall have jurisdiction over any claim for damage done by any ship."
32. In this connection, section 2 of Colonial Courts of Admiralty (India) Act. 1891 is also pertinent and set out below:
"2, Appointment of Colonial Courts of Admiralty.--The following Courts of unlimited civil jurisdiction are hereby declared to be Colonial Courts of Admiralty, namely:-
(1) the High Court of Judicature at Fort William in Bengal;
(2) the High Court of Judicature at Madras, (3) the High Court of Judicature at Bombay."
[Underlined for emphasis]
33. In view of the aforesaid statutory provisions the conferment of admiralty Jurisdiction on the High Court Judicature at Calcutta cannot be doubted.
34. The next point urged by the learned counsel on the aspect of jurisdiction is that since the instant claim for damages of the plaintiff Is merely a maritime claim and does not involve any maritime Hen, this Court cannot pass any order for arrest of the ship since the plaintiff has got no lien in respect of the ship. This Court finds that the aforesaid point raised by the defendant company is also without any substance for the reasons indicated below.
35. Maritime lien is privileged claim against the ship, it may also be a right in the property in the ship and it travels with the ship. It is almost like a covenant running with the land.
36. Since a ship has to pay for the wrong it has done namely by way of collision or otherwise, she can be compelled to pay. In the case of a lien on her. even by a forced sale. A maritime Hen may be invoked against the ship even in the hands of an innocent purchaser. But all cases of maritime claim arising out of damages to the cargo do not fasten a lien on the ship. This aspect has been very lucidly dealt with in Roscoe's Admiralty Practice, 5th Edition by G. Hutchinson. Extracts from page 27 of that treaties are extracted below:
"Scarcely a trace appears of the modern doctrine of arrest being founded upon a maritime lien: the fact that goods and ships that had no connection with the cause of action, except as belonging to the defendant, were subject to arrest, points to the conclusion that arrest was mere procedure and that its only object was to obtain security that Judgment should be satisfied."
37. In this connection, this Court has considered the International Convention of Maritime Lien and Mortgages, 1993 cited by Mr. Gupta, the learned Counsel for the defendant company. From the perusal of the said convention, it is clear that the same relates to claims of mortgage and claims of lien which virtually amount to property in the vessel and in such cases maritime lien, follows the vessel notwithstanding any change of ownership or of registration or of flag.
38. But so far as maritime claim is concerned, no Indian law had defined what is a maritime claim. But having regard to the peculiar mature of admiralty law relating to water, commerce and navigation, it frequently involves foreign nation. So much of the admiralty law in our country has evolved In concert with the maritime and admiralty laws of other countries. This has been recognized by Supreme Court In 'Elisabeth'. So in 'Elisabeth' the Hon'ble Supreme Court in order to explain maritime made a reference to the Supreme Court Act, 1981 [hereinafter called SCA1 an Act of British Parliament. Under section 20 of SCA the extent of the admiralty jurisdiction of High Court has been indicated and section 20-A{2) of SCA makes it clear that the admiralty jurisdiction of the High Court shall extend to hearing and determination of any of the claims mentioned in sub section 2(g) which talks of any claim for loss or of damages to goods carried in a ship. So it is clear that admiralty jurisdiction of the High Court is extended to a cargo claim as is the position in the instant case. Section 21 of SCA indicates the mode of exercise of admiralty jurisdiction and section 21(4) of SCA stipulates that in the case of any claim mentioned in section 20, sub-section 2(e) to (r), which would obviously include claim under sub-section 2(g), an action 'in REM', whether or not the claim gives rise to a maritime Hen of the ship, can be brought in the High Court against that ship. Therefore, it is clear that in respect of a cargo claim an action 'in REM' can be brought in the High Court against the ship in which the cargo was carried. This has been done in this case.
39. Reference in this connection may also be made to Brussel's Convention which is admittedly held to be a part of our common law in 'Elisabeth' even though India is not a signatory to that convention. Under the said convention, maritime claim has been defined in Article 1. The relevant portion of Article 1 is set out below:
"Article 1. In this connection the following words shall have the meanings hereby assigned to them:
(1) "Maritime claim" means a claim arising out of one or more of the following.
(a) .....
(b) .....
(c) .....
(d) .....
(e) .....
(f) loss or of damage to goods including baggage carried in any ship;
Arrests has also been defined in the said convention in Articles 2 as follows:
"Article 2. Arrest means the detention of a ship by Judicial process to secure a maritime claim, but does not include the seizure of a ship In execution or satisfaction of a judgment."
40. Previously in England it was held in The Victoria' (1887) 12 PD 105 that the words 'damage done by a ship' did not extend the Jurisdiction of the admiralty Court to include a claim by owner of cargo against the carrying ship. But this law is no longer good and has now become academic in the light of the subsequent provisions of SCA specially section 20(2)(g) as referred to above as the same specifically includes a claim for damages to cargo carried in a ship. So the argument of the learned counsel for the defendant company might have been upheld about 100 years ago, but not today. In view of the express provisions of Brussels convention of 1S52 and the provisions of SCA 1981 referred above the same is liable to be rejected.
41. Similarly, law has developed in India also as has been noted in 'Elisabeth' while construing section 443 and section 444 of the Merchant Shipping Act, 1958 [hereinafter called MSA], While construing the word 'damage' in section 443 of MSA, the apex Court in 'Elisabeth' held as follows:
"the sections are wide in terms and the expression 'damage' Js not necessarily confined to physical damage. Ordinarily damage is caused by physical contract of the ship, such as in collision. But damage can also be caused to property by breach of contract or acts of commission or omission on the part of the carrier or his agents or servants by reason of the negligent operation and management of the vessel, as, for example, when cargo is damaged by exposure to weather or by negligent stowage; or, by the misconduct of those in charge of the ship, like when cargo is disposed of contrary to the instructions of the owner or by reason of theft and other misdeeds. In all these cases, damage arises by reason of loss caused by what is done by the ship or by the breach, negligence or misdeeds of those in charge of the ship." [para 79, page 1038 of the report. ]
42. The learned Judges again in paragraph 80 of 'Elisabeth' have held that in absence of any statue in India comparable to English statues of admiralty jurisdiction, there is no reason why the words 'damage caused by a ship' appearing in section 443 of MSA should be narrowly construed to limit them to a physical damage and exclude any other damages. The learned Judges held "the expression is wide enough to include all maritime questions or claims". It is therefore, clear, that in view of the aforesaid interpretation of the apex Court of the expression 'damage caused by a ship' this Court is unable to accept the contention advanced by the learned counsel for the defendant company that in the instant case, on the basis of the plaintiffs allegation of damage to cargo, a proceeding for arrest of the ship is not maintainable.
43. Proceeding for arrest of the ship is a proceeding 'in REM'. The proceeding 'in REM' is an action in law which is normally brought against the offending things which in admiralty Jurisdiction is normally the ship or the RES whereas an action 'In PERSONAM' is an action brought against person. Having regard to the peculiar nature for admiralty claim, both the action 'in REM' and action 'in PERSONAM' may be rolled into one in a proceeding at its different stages- In admiralty law, the vessel is a juridical person having not only rights but also liabilities and these are distinct from owners of the ship. Such liabilities may be enforced by judicial process against the ship and these become binding upon everybody who is interested in her and is conclusive upon the whole world. This is true in an action 'In REM' against the ship. Sometime an action 'In REM' against the ship has to be satisfied by the sale of the ship. That is why the ship is treated as a person. But sometime such an action compels her owner to submit to the Judicial process. As soon as such submission takes place, the owner surrenders to the process and makes himself liable to be proceeded against 'In PERSONAM'.
44.-This device in procedure possibly had to be made to overcome the difficulty at times of personal service on the ship owner. But once the ship is arrested, that compels the ship owner to enter appearance and then the owner becomes personally liable and thus the action becomes an action 'In PERSONAM1.
45. Commenting on this, the learned Judges of the Supreme Court in 'Elisabeth' has described this as a practical procedural device developed by Courts for rendering justice in accordance with substantive law even in cases of maritime claims arising by reason of breach of contract for the carriage of goods and other transactions, [see in paragraph 68 in 'Elisabeth"].
46. So in this context, the arrest of a ship is for the purpose of detaining it unless the matter is finally settled by a competent Court. The arrest of a ship primarily serves two purposes namely (a) assumption of Jurisdiction and (b) obtaining of security. As noted above arrest is an action 'In REM' but once the owner enters appearance, the proceeding continues 'In PERSONAM'
47. For the reasons aforesaid, it is clear that the instant case which is arising out of a cargo claim is a maritime claim and the Court has Jurisdiction to arrest the ship specialty for securing the claim of the plaintiff against the ship owners, the defendant company.
48. Mr. Mukherjee, the learned counsel for the plaintiff has relied on certain decisions for the purpose of contending that having regard to clean bill of lading, the ship owner is estopped from contending that the goods were not in proper order when they were shipped. He further sumitted that since the ship owner accepted the goods in an apparent good condition, they are to effect the delivery of the goods in such apparent good condition.
49. The first Judgment on which reliance was placed is in the case of Silver v. Ocean Steam Ship Co., reported in 1930 King's Bench Division 416. The learned counsel relied on the speech of Lord Justice Curators in Stiver (supra). In that case the damage was allegedly done to a large consignment of Chinese eggs is course of transit from China to London. The Judgment was delivered by the Appeal Court on an appeal from the final Judgment of the learned trial Judge. Evidence was adduced before the learned trial Judge about insufficient packing and the matter was considered finally before delivery of Judgment by the learned Judge. The learned Judges formulated in page 424 of the report the two questions which fell for consideration. The first question was that under the law prior to the Carriage of Goods by Sea Act, 1925, the ship owner who received goods in apparent good order and condition had to deliver the goods in the same good order and condition. But if he had not delivered the goods in such apparent good order and condition, he must discharge the burden of proving exceptions which protected him from damages. The second point was that the statement apparent good order and condition in the bill of lading estops the ship owner from proving that the goods were not in apparent good order and condition when shipped and therefore, estops him for alleging that at the time of shipment there were external defects in them which were apparent to reasonable inspection. Relying on these principles, Mr. Mukherjee submitted that in the instant case, at a pre-shlprnent stage, the moisture content of the goods was found to be 0.5% and the goods were 'clean on board' as it would appear from the bill of lading. Therefore, at the time of delivery, the goods must be in that condition and if it is not so, the ship owner is estopped from contending that the goods suffered any damage from any inherent defect in them.
50. While making his comment on the said judgment Mr. Gupta, the learned counsel for the ship owner submitted that in the instant case also the goods, when shipped, were found to be clean on board and the same was also the condition of the goods when the ship reached the destination. It has been contended that the entire goods were taken delivery of by the plaintiff. No complain was made at the time of discharge whereas in Silver (supra), in the process of discharge nets were used. This was found not to be in order by the learned Judges. Certain defects also appeared In packaging and on consideration of evidence about the nature of discharge, the damages were assessed. So this judgment has no bearing on the facts of this case even though the principles in the said Judgment are well settled.
51. The next Judgment on which reliance was placed by Mr. Mukherjee on this aspect is in the case of Peter Ceremer etc. v. General Carriers S.A. reported in l973(2) Lloyd's Law Report, 366. In that case it was found that the goods were actually damaged before shipment but the ship owner issued a clean bill of lading. In that context, the learned Judges came to the conclusion that the defendant is liable to the first and second plaintiffs in damages for the deterioration of the condition of their goods and the defendants are estopped from contending that this damage was done due to the pre-shipment conditions of goods. The learned counsel for the defendant submitted that in the instant case also at the time of delivery the goods were in free-flowing condition and this shows that they were in powdery form and apparently in good order and there was no complain doing discharge. As such no negligence can be attributed to the ship owners in the matter of carriage of said goods.
52. The next case on which reliance was placed by Mr. Mukherjee on this aspect is in the case of E. & B. Steamship Co. Ltd. v. Sha Misrtmal . The said case was on a different footing altogether inasmuch as question was to And out whether the ship owner was liable for deceit. It was found that the ship owner knowingly issued the clean bill of lading and when it should not have been issued and the same was issued with Intent that on that basis payment be made to the holder of the bill under the letters of credit. Here there is no allegation of deceit against' the ship owner nor is there any allegation that the ship owner is in collusion with the seller of the goods. Therefore, this Court is of the view that apart from the principles which have been laid down in the said case the facts of the said case are totally different. However, Mr. Gupta relied on paragraph 20 of the said Judgment in order to contend that estoppels applies only where the bad condition of the goods 'is discernable on a reasonable examination of the containers having regard to their contents'. He further urged that in the instant case, from an ocular test of the cargo it is not possible to discern its moisture content but the cargo which was 'clean on board' in the bill of lading at a pre-shlpment stage was similarly found in apparently good order after shipment. Therefore, there was no negligence on the part of his client.
53. Two other Judgments were also cited by Mr. Mukherjee on the question of fixing the liability of the carrier in damages. One was in the case of Textiles & Yarn (P) Ltd. v. IN. Steamship Co., . This Judgment was also delivered at the final hearing of the suit for damages. Relying on the said Judgment Mr. Mukherjee submitted that the carrier has to give full details of the goods in transit since it is within his special knowledge. However, in paragraph 10 on which Mr. Mukherjee relied it is made clear that the plaintiff has to prove that the loss occurred due to negligence for the want of skill of the defendant. But this Court finds that the said case was on a totally different factual situation inasmuch as there was admitted loss of goods in transit namely the consignment was of 25 bales and 2 bales were short landed. Here that is not the complain. There is no short landing of the cargo.
54. The next case on which Mr. Mukherjee relied was in the case of M/s. Jayanti Shipping Co. v. Food Corporation of India, . In that case, there was also short delivery, as a result of spillage due to the Instrumentality of the landing agents. In this case there is no question of a short delivery. It is, however, clear that the principles which were laid down in Jayanti Shipping (supra) are very sound but they are not attracted to the facts of this case.
55. Mr. Mukherjee, cited another Judgment on the question of furnishing of security. The said decision of the Admiralty Division of English Court, reported in 1971 Volume I, Lloyd's Law Report, 37 is referred to as The Moschanthy' case. It appears that out of the plaintiffs claim of 45,000 ibs of security, the Court granted 35,000 Ibs and held that the same is not excessive. The said decision was arrived at by the Court on the facts of that case. But while doing so, the Court came to the conclusion in para 46 of the report that it has always the power to control the amount of security in connection an action 'In REM' and such power is never ousted by agreement between the parties. In the same page Justice Brandon also came to the conclusion that the power to exact security in support of a claim 'In REM' is a very strong power but it must not be used oppressively. The learned Judge was very clear in the concluding portion of the judgment by recording that while delivering the said Judgment the learned Judge only acted in the exercise of discretion in the facts of that case.
[Underlined for emphasis)
56. Mr. Mukherjee also relied on a few other decisions on the question of security and the Court will consider them now.
57. The Division Bench of Calcutta High Court in Stephen Commerce Private Limited v. Owners and Parties in Vessel M.T. Zatma Nauard, , has laid down certain principles on the question of release of arrest of a ship on furnishing security. It has been held that the Court has the power and discretion to control both the quantum and manner of security. This is also the view expressed in The Moschanthy' case. The Division Bench further held that the 'reasonably best arguable case of the plaintiff should be the basis for deciding the quantum of security and cash security should be preferred.
58. Mr. Gupta pointed out from various paragraphs of the Judgment in Stephen Commerce (supra), that the negligence of the ship owners In the storage of the cargo (it was Kerosene) is apparent. There was wide discrepancy in the saybolt parameter of the kerosene as a result of its deterioration due to negligent storage. Samples were from drawn from the holds of the ship prior to discharge. These distinct factual features apart, there was strong evidence demonstrating the negligence of the ship owners. So there can be no doubt that the fact situations in Stephen Commerce (supra) and the present case are substantially different.
59. The next case cited was the decision In the case of Videsh Sanchar Nigam v. M.V, Kapttan Kud, reported in AIR 1996 Cal 516. It was a case of the ship damaging the International Cable which extends on sea-route from Singapore to France. Therefore, it was a traditional case of damage done by a ship and not case of cargo claim. In the facts of that case, the Court held that there is a strong triable case of the plaintiff and the ship being a foreign ship it could not be released from arrest by merely recording the undertaking of the Captain that in the event the plaint the plaintiffs suit is decreed, it would honour the same. So out of a claim of 28 crores. the Hon'ble Supreme Court directed cash deposit of 10 crores and filing of certain undertaking in the form directed by the Hon'ble Supreme Court.
60. The other case cited on this point is the decision in the case of Alexandras Dryron S.A. v. Owners and Parties Interested tn vessel M.V. Prapti, . In that case the application of the ship owner's for release of the vessel on deposit of Rupees One crore was rejected by the learned single Judge. An appeal was filled against the order of the learned single Judge. But the Appeal Court, after entertaining the appeal, refused to grant any interim order. From that, an appeal was taken to Supreme Court by way of filing an S.L.P. The Hon'ble Supreme Court directed the release of vessel on accepting a much smaller amount of security. So the interlocutory finding of the learned single Judge, in view of the subsequent order of the Hon'ble Supreme Court to the contrary, loses its binding character.
61. Another unreported judgment was cited by Mr. Mukherjee to show that arbitration cannot be a remedy in this case. Before me that point has not been urged by the learned counsel for the defendant. So I need not consider that aspect of the matter.
62. The initial exparte order of this Court dated 25.5.2001 arresting the ship was passed on the condition that if a sum of Rs. 10,92,54,744.90/- is deposited by the defendant with the Registrar, Original Side of this Court or security is furnished for the like amount by way of bank guarantee or any other approved security, the order of arrest will remain stayed.
63. But now after hearing the parties and considering the facts of this case at the interim stage, this Court is of the view that the amount of security should be reduced.
64. The Court has ample authority to do so. This is clear from the Judgment in The Moschanthy' case and also from the Judgment of the Division Bench of this Court in Stephen Commerce (supra) and also a well-considered judgment of a learned single Judge in Mohamad Saleh Behbehari v. Owners and Parties interested in M.V. Notts, reported in 1981(2) Calcutta Law Journal 129. In para 52, page 141-142 of report, the learned Judge clearly held that the settled practice of this Court in Admiralty jurisdiction has been that the amount of security can be reduced and in some cases the Court directed the release of the ship without any security.
65. At this interlocutory stage the facts of this case have been discussed already. Admittedly the amount of security mentioned in the exparte order of this Court represents the entire claim of the plaintiff including (a) the entire value of the cargo (b) loss of profit on the same of the cargo (c) costs incurred in removing the hardened cargo from the hold of the vessel.
66. Even accepting the principle of 'reasonably arguable best case' of the plaintiff, this Court cannot accept, at this interlocutory stage, the aforesaid claim. The facts of the case at this stage do not show that the case of the plaintiff is bound to succeed. The particulars furnished by the plaintiff in paragraph 22 of the affidavit of arrest are not made out in view of the facts which have been disclosed by the defendant in their vacating petition. This is of course an interlocutory finding.
67. But then the Court while assessing the prima facie case of the plaintiff, phrased as 'the reasonably arguable best case' in Admiralty jurisprudence, cannot totally ignore the version of the case given by the defendant about the seaworthiness of the ship and hold the certificates,
68. Here the complain of the plaintiff is that the cargo was found to have hardened even in the course of discharge and the ship owner refused to have a Joint survey. But the fact remains that the discharge of the entire cargo was made. It is only after taking delivery of the entire cargo samples were taken and tested. It was open to the plaintiff to refuse to take delivery of the cargo. They incurred expenditure for taking delivery of the cargo possibly with the expectation that they were in apparent good order and condition. It is not expected of hardened business organization like the plaintiff to incur expenses for taking delivery of cargo if it is totally useless, The Court has to consider all these possibilities.
69. Apart from that from the show cause notice issued to the plaintiff which has been disclosed it does not appear that entire cargo has been rendered useless.
70. The Court cannot also brush aside the fact that it was raining during the period of discharge. Certain doubts have been created about the moisture content of the cargo at a pre-shipment stage. It is difficult for this Court, at this Interlocutory stage, to resolve those doubts. The cargo was also found to be 'free-flowing' by organization conducting survey which was admittedly conduct after discharge of the entire cargo.
71. All these aspects are weighing on the conscience of the Court at the time of exercising its discretion in deciding the quantum of security and considering the defendant's plea for ordering the release of the ship. These are essentially questions of facts on which discretion has to be exercised at an interlocutory stage. So decisions rendered on different facts in another case is hardly a guide.
72. But in The Moschanthy case' the Court cautioned that the power to order arrest of a ship 'to exact security' is a very "strong power" and "must not be used oppressively". This is a general proposition laid down for universal application.
73. So applying those tests, and considering the facts the Court proposes to reduce the quantum of security. This Court however, records that its consideration of the facts of this case at this interlocutory stage will have no bearing at the final hearing of the suit and the learned Judge will be at liberty to decide the facts afresh on the evidence to be adduced before him without being influenced in any way by any observation in this Judgment. Of course the Court's finding on Jurisdiction may bind him.
74. So this Court Is of the view that the Justice of the case will be sufficiently met if the order of arrest is modified as follows:
The vessel, M.V. Lima, arrested by the order dated 25.5.2001 may be released on fulfilling both the conditions mentioned below:
(i) On the defendant's depositing cash in Indian currency which would amount to one hundred thousand American dollars with the Registrar, Original Side, Calcutta High Court. The Registrar is to invest the same amount in short term fixed deposit account with any nationalised bank and keep on renewing the same periodically and:
(ii) On the defendant's furnishing a bank guarantee of Rupees 50 lakhs with any nationalised bank or any recognized foreign bank or by way of cash in Indian Currency with the Registrar Original Side, Calcutta High Court. If necessary the said bank guarantee may be renewed from time to time.
The undertaking given by the plaintiff in terms of the order dated 25.5.2001 read with the subsequent affidavit by Its officer will continue. The suit may be heard expeditiously, The vacating application is thus disposed of. No order as to costs.
The prayer for stay made by Mr. Mukherjee is considered and only a very short stay is granted till this Friday i.e. 29.06.2001.
Xerox certified copy of the order, if applied for, may be supplied to the parties on usual basis.
All the parties including the Registrar, O.S. are to act on a signed copy of the operative portion of this Judgment on the usual undertaking.
75. Application disposed of