Bombay High Court
M.V. Nordlake vs Union Of India on 7 March, 2012
Author: Chief Justice
Bench: Mohit S. Shah, Ranjit More
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
APPEAL NO.30 OF 2012
IN
NOTICE OF MOTION NO.1525 OF 2011
IN
ADMIRALTY SUIT NO.23 OF 2011
1.M.V. Nordlake )
a Motor Vessel flying on the )
flag of Cyprus and a registered )
at a port outside India, together
ig )
with a hull, tackle Machinery, )
engines, equipment paraphernalia )
and all her appurtenants presently )
lying and being at the Port of )
Mumbai within the territorial )
jurisdiction of this Hon'ble Court )
and all interested in her. )
2. MS NORDLAKE GMBH, )
a foreign Company incorporated )
under foreign laws having its place )
of business at C/o.Reederi, "Nord" )
Klaus E Oldendorff )..APPELLANTS
)(ORI.DEFENDANTS)
Versus
Union of India )
through the Indian Navy )
the Commanding Officer, )
INS Vindhyagiri, C/o. Fleet Mail )
Office, Mumbai-400 001. )..RESPONDENT
)(ORI. PLAINTIFF)
Mr. Iqbal Chagla, Senior Advocate with Mr. Sunip Sen i/b. M/s. Bhatt &
Saldhana for the Appellants.
Mr. D.J. Khambata, Additional Solicitor General with Mr. Rahul
Narichania and Mr. Som Sinha i/b. Dhiren H. Shah for respondents.
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CORAM: MOHIT S. SHAH, C.J. &
RANJIT MORE, J.
JUDGMENT RESERVED ON : 01 February 2012.
JUDGMENT PRONOUNCED ON : 07 March 2012.
JUDGMENT (Per Chief Justice):
This appeal raises interesting question about the extent of minimum security which in Admiralty Court must require the owner of an arrested vessel (which has caused damage to the plaintiff's property) to furnish in order to get the vessel released from from the order of arrest passed by the Admiralty Court.
2. This appeal is directed against the order dated 16 November 2011 of the learned Admiralty Judge dismissing the Notice of Motion taken out by the appellants herein, defendants in the Admiralty Suit. The suit is filed by the respondent herein for arrest and sale of the ship M.V. Nardlake, (hereinafter referred to as "the vessel" or "the 1st defendant vessel") and for claiming damages to the tune of Rs.1058.54 crores together with interest at 18% per annum from the date of suit till payment.
3. The 1st defendant vessel collided with the plaintiff's vessel INS Vindhyagiri on 30 January 2011 near Sunk Rock Light House, Mumbai. The plaintiffs have arrested 1st defendant vessel by virtue of an order dated 23 February 2011 in Admiralty Suit Lodging No.436 of 2011. The 2nd defendant MS Nordlake GMBH has filed Admiralty Suit Lodging No.1012 of 2011 under part XA of the Merchant Shipping Act, 1958 to limit their liability in respect of claims of whatsoever nature in the aggregate of Rs.20,01,86,113/- (rounded off to Rupees twenty crores for ::: Downloaded on - 09/06/2013 18:16:22 ::: gopi 3 app-30-12_Judgment_-4.3.2012 the present appeal) being the limit prescribed by Part XA of the Merchant Shipping Act, 1958.
The defendants filed Notice of Motion No.1525 of 2011 before the learned Admiralty Judge of this Court on 10 May, 2011 praying for the following reliefs:-
"(a) Upon the defendants providing security or guarantee of Rupees 20,01,86,113 (Rupees Twenty Crores) as provided for under Section 352B of the Merchant Shipping Act, 1958 this Court be pleased to order release of the 1st defendant vessel from the order of arrest under Section 352D of the Merchant Shipping Act, 1958.
(b) in the alternative and without prejudice to prayer (a) above, pending the hearing and final disposal of this suit and/or the 2nd defendant's suit for limitation of liability being Admiralty Suit Lodging No.1012 of 2001 this Court be pleased to order the release of 1st defendant vessel upon the defendants giving security of US $ 10,500,000 equivalent to Indian Rupees 46,87,12,650 (Rupees 46.87 crores) (as on 7 April 2011) when the vessel was surveyed and valued using an exchange rate of United States Dollars to Indian Rupees 44.64 for one US $ as representing the current market value of the 1st defendant vessel or as may be directed by this Court without prejudice to the right of the 2nd defendant to limit liability in accordance with Part XA of the Merchant Shipping Act, 1958.::: Downloaded on - 09/06/2013 18:16:22 :::
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(c) upon the defendants being permitted to furnish security under Section 352C of the Merchant Shipping Act, 1958, the same shall substitute the security so ordered to be furnished in this motion ......"
(emphasis supplied)
4. At the hearing of the Notice of Motion before the learned Single Judge, defendants did not press relief in terms of prayer clause (a) "at this stage". However, the learned counsel for the defendants seriously pressed relief (b) by submitting that the security that the plaintiff is entitled to is the 1st defendant vessel; at the highest the plaintiff can realise the value by auction/sale of the vessel to be conducted by this Court and, therefore, the highest security which the plaintiff is entitled to is upto the value of the 1st defendant vessel. Hence, without prejudice to the right of limiting its liability, the 2nd defendant is willing to give security upto the value of the 1st defendant vessel in lieu of the release of the 1st defendant vessel from arrest. The defendants urged the following grounds:-
(i) It was submitted that the vessel was inspected on 13 June 2011 by surveyors M/s.Dheeraj Offshore Surveyors and Adjusters Pvt. Ltd., who assessed the mortgage value of defendant No.1 vessel as on 7 April 2011 at US $ 105,00,000 equivalent to Indian Rs.47 crores approximately.
(ii) It was also submitted that the 1st defendant vessel being under arrest does not serve any purpose, but the vessel will deteriorate in value if it continues to be under arrest.::: Downloaded on - 09/06/2013 18:16:22 :::
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(iii) The plaintiffs' claim for damages is yet to be proved. The
plaintiffs have chosen to cause the arrest of the vessel.
Therefore, it is ultimately the value of the vessel which would be the governing factor and on the date of sale as well, it is that valuation which will be the crucial aspect. Hence, nothing above the value of the 1st defendant vessel, can be claimed as security. The second defendant is ready and willing to furnish the security upto the value of the vessel.
Hence, the vessel be released from arrest on the basis of security in the said sum of Rs.47 crores or any other sum which the Court may determine as the value of the vessel.
5. The learned single Judge dismissed the Notice of Motion after holding that in view of the provisions of Rule 954 of the Bombay High Court (Original Side) Rules (the "O.S.Rules" and Section 443 of the Merchant Shipping Act, 1958 (the "MS Act") and the two unreported judgments of this Court the defendants are bound to give security of the sum which represents the entire claim of the plaintiffs in the suit. The learned Single Judge also held that the arrested vessel cannot be released on depositing the sum being the value of the vessel as computed in terms of the valuation report submitted by the 2nd defendant.
The aforesaid order is challenged in this appeal.
6. Mr. Iqbal Chagla, learned Senior Advocate for the appellants has raised the following contentions:-
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(a) Reliance is placed on the International Convention on
Arrest of Ships 1999 and particularly Article 4 thereof. Clause 2 of the said Article provides that in the absence of Agreement between the parties as to the sufficiency and form of the security, the Court shall determine its nature and the amount thereof, not exceeding the value of the arrested ship Clause 5 of the said Article also indicates that the total amount of security to be provided for release of the arrested ship should not exceed the claim for which the ship has been arrested or the value of the ship, whichever is lower.
(b) It is submitted that as per the decision of the Supreme Court in Liverpool & London S.P. & I Asson. Ltd. vs. M.V. Sea Success I1 and the judgment of the Full Bench of this Court in J.S. Ocean Liner LLC vs. M.V. Golden Progress & Anr.2, the International Convention on Arrest of Ships, 1999 is applicable in India. Hence, the security is required to be given in accordance with provisions of the said Convention.
(c) Reliance is placed on Halsbury's Laws of England, 4th Edition, Volume 1 and on the decision of the Probate Division, Queen's Bench in the Charlotte's case in support of the contention that the security cannot be more than the value of the arrested vessel.
1(2004)9 SCC 512 2 2007 (2) All M.R. 367 equivalent to 2007 (2) Bombay Cases Reporter 1 ::: Downloaded on - 09/06/2013 18:16:22 ::: gopi 7 app-30-12_Judgment_-4.3.2012
(d) Reliance is placed on the decisions of the Supreme Court in M.V. Elisabeth and Ors. vs. Harwan Investment & Trading Pvt. Ltd.,3 and in World Tanker Carrier Corporation vs. SNP Shipping Services Pvt. Ltd. & Ors.4
(e) Rule 954 of the High Court (Original Side) Rules provides that the vessel arrested under a warrant may be ordered to be released:
(i) ig ........
(ii) on the defendant paying into Court the amount claimed in the suit or
(iii) on the defendant giving such security for the amount claimed in the suit as the Court may direct, or
(iv) on any other ground that the Court may deem just.
(emphasis supplied by counsel)
(f) It is submitted that if under the law the vessel could not be released unless the defendants give security for the entire amount claimed in the suit without any discretion being conferred on the Court Clause (iii) of Rule 954 would not have employed the words "as the Court may direct". The very purpose of giving discretion to the Court to fix the amount of security which the defendant may give for getting the arrested vessel released is to enable the Court to permit the 3 1993 Supp. (2) S.C.C. 433 4 AIR 1998 S.C. 2330.
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(g) It is also submitted that whatever may be the plaintiffs claim, even when the suit will be decreed all that the plaintiffs will get will be the value of the ship which may be realised upon auction of the arrested vessel under Rule 950. Under Rule 948 also the plaintiffs have a right to request the Court to auction the vessel and get deposited the sale proceeds in the Court. Even in such a case, the plaintiff will not have anything more than the value of the vessel and the plaintiffs' right will only be to proceed against the owner of the vessel.
(h) It is also submitted that the first defendant vessel was arrested as far back as on 23 February 2011 and for the last 12 months the defendants have been incurring huge expenses for maintaining the vessel including payment of salaries and wages to the members of the crew. If the impugned order is not set aside and the defendants are not permitted to remove the vessel by giving security of the value of the 1st defendant vessel, the 2nd defendant will continue to be saddled with huge expenses being incurred to maintain the 1st defendant vessel.
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7. On the other hand Mr. Khambata, learned Additional Solicitor General appearing for the respondent-Union of India has opposed the appeal and made the following submissions:-
(i) The arrest of vessel and its release is governed by provisions of the Merchants Shipping Act, 1958, particularly Section 433 thereof, which specifically require that the arrested vessel can be released upon security of entire claim of the plaintiffs together with costs. Hence two views are not possible.
(ii) Rule 954 of the Bombay High Court (Original Side) Rules also requires the defendant to give security for the entire claim of the plaintiff in the suit. Even sub-clause (3) thereof requires the defendant to give security for the amount claimed in the suit. The words therein "as the Court may direct" only clarify the words "such security"
and not the words "for the amount claimed in the suit".
(iii) Reliance is placed on the decisions of the Court of Appeal in The Bazias 3 The Bazias 45 and of the Supreme Court in Videsh Sanchar Nigam vs. M.V. Kapitan Kud,6 in support of the contention that the usual practice has always been that the arrested vessel will only be released on the provision of sufficient security to cover the amount of the claim, plus interest and costs, on the basis of the plaintiffs' reasonably arguable best case.
5 1993 Lloyd Law Journal, 673 to 683
6 1996(7) SCC 127
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Mr. Khambata placed heavy reliance on the following observations in paragraphs 8, 14 and 15 of the judgment in Videsh Sanchar Nigam Limited case:-
(i) the plaintiff is only required to establish a reasonably arguable best case, even though difficult in law. (para
14)
(ii) the amount to be secured should be sufficient to cover the Plaintiff's claim, together with interest and costs on the basis of his reasonably, arguable best case. (para 8)
(iii) if the foreign ship leaves the shore of Indian territorial water, it is difficult to get hold of it and it may not return to the jurisdiction of Indian courts. The claim thereby, even if successful would remain unexecutable or land in trouble in private international law in its enforcement. (para 15) "...It is seen that there is a strong triable case for the reasons stated earlier. The ship is a foreign ship and if it leaves the shores of Indian territorial waters it is difficult to get hold of it and it may not return to the jurisdiction of Indian courts. The claim thereby, even if successful, would remain unexecutable or land in trouble in private international law in its enforcement".
(iv) Relying on the decisions in M.V. Elisabeth & Anr. vs. M/s. Harwan Investment & Trading Co. & Anr. 1993 Supp. S(2) SCC 433, Videsh Sanchar Nigam v. M.V. Kapitan Kud. 1996(7) SCC 127, and m.v. Mariner IV vs. Videsh Sanchar Nigam Ltd.6, it is submitted that the object of Section 433 of the MS Act, the other applicable Rules and the case law is that the plaintiffs' right to get the vessel arrested is not only to secure the value of the vessel, but also to require the owner of the vessel to submit to the jurisdiction of the Admiralty Court arresting the vessel and to require such owner to 6 1998 (1) Mah. L.J. 751, ::: Downloaded on - 09/06/2013 18:16:22 ::: gopi 11 app-30-12_Judgment_-4.3.2012 secure the entire claim of the plaintiff in the suit. Hence the vessel cannot be permitted to be released merely upon the defendant furnishing security for the value of the arrested vessel.
(v) The 1999 Convention is not applicable in the facts of this case, as the arrested vessel has caused damage to a ship of the Indian Navy and Article 8 (3) excludes application of Convention to a naval ship.
(vi) Even otherwise, the 1999 Convention is inconsistent with the Municipal Law as found in Section 433 of the MS Act and Rule 954 of the Original Side Rules of this Court. Hence, the Municipal Law will apply and not the convention.
(vii) In the alternative, it is submitted that the valuation of the vessel at US $ 10.5 million is grossly inadequate and the 1st defendant vessel is grossly under-valued for the purpose of giving lower security.
8. In rejoinder, Mr. Chagla has submitted that :
(i) Article 8(3) of the 1999 Convention will come in the way of arrest of a vessel of the Indian Navy, but in case of the alleged damage caused to a Navy vessel by a private foreign ship, the 1999 Convention applies.::: Downloaded on - 09/06/2013 18:16:22 :::
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(j) Section 433 of the MS Act merely provides for detention of ship at a pro tem stage before the plaintiff files legal proceedings for damages and, therefore, substantive rights and liabilities of the parties, including those relating to orders to be passed for furnishing security for release of the vessel during pendency of the suit for damages continue to be governed by the admiralty law as part of the common law.
(k) In any view of the matter, there is no conflict or inconsistency between the 1999 Convention and general admiralty law on the one hand and Section 433 of the MS Act on the other hand.
Discussion
9. The Merchants Shipping Act, 1958, hereinafter referred to as "the MS Act", was enacted by Parliament to foster the development and ensure the efficient maintenance of an Indian mercantile marine in a manner best suited to serve the national interests and for that purpose to establish a National Shipping Board to provide for the registration, certification, safety and security of Indian ships and generally to amend and consolidate the law relating to merchant shipping. Section 443 of the Act reads as under:-
::: Downloaded on - 09/06/2013 18:16:22 :::gopi 13 app-30-12_Judgment_-4.3.2012 "443. Power to detain foreign ship that has occasioned damage.-
(1) Whenever any damage has in any part of the world been caused to property belonging to the Government or to any citizen of India or a company by a ship other than an Indian ship and at any time thereafter that ship is found within Indian jurisdiction, the High Court may, upon the application of any person who alleges that the damage was caused by the misconduct or want of skill of the master or any member of the crew of the ship, issue an order directed to any proper officer or other officer named in the order requiring him to detain the ship until such time as the owner, master or consignee thereof has satisfied any claim in respect of the damage or has given security to the satisfaction of the High Court to pay all cost and damages that may be awarded in any legal proceedings that may be instituted in respect of the damage, and any officer to whom the order is directed shall detain the ship accordingly.
(2) Whenever it appears that before an application can be made under this section, the ship in respect of which the application is to be made will have departed from India or the territorial waters of India, any proper officer may detain the ship for such time as to allow the application to be made and the result thereof to be communicated to the officer detaining the ship, and that officer shall not be liable for any costs or damages in respect of the detention unless the same is proved to have been made without reasonable grounds.
(3) In any legal proceedings in relation to any such damage aforesaid, the person giving security shall be made a defendant and shall for the purpose of such proceeding be deemed to be the owner of the ship that has occasioned the damage."
(emphasis supplied)
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10. Rules 948, 950, 952 and 954 of the Bombay High Court (Original Side) Rules read as under:-
"948. Application for sale of arrested property.-- In a suit in rem if the property proceeded against has been arrested, the plaintiff may, at any time after service of the Writ of Summons upon the defendant, apply to the Court by Notice of Motion for an order that the arrested property be sold by the Sheriff and the sale proceeds be paid into the registry to the credit of the suit. The Court may make such order on the application as it may think fit."
950. Judgment for the plaintiff if claim well foundes.- When the suit comes up for hearing before the Court, if the judge is satisfied that the plaintiff's claim is well founded, he may pass a decree for the plaintiff and may order the property proceeded against to be sold with or without previous notice and the sale proceeds paid into the registry to the credit of the suit or make such other order in the premises as he may think just.
952. Property not to be released unless notice is given to the Caveator.-- No property arrested under a warrant shall be ordered to be released, unless notice is given to the person who has filed a Caveat against the release thereof and whose Vaceat is outstanding in the Caveat Release Book.
954. Release of arrested property.-- Subject to the provisions of Rule 952, property arrested under a warrant may be ordered to be released.
(i) at the request of the plaintiff, before an appearance in person or a vakalatnama is filed by the defendant; or
(ii) on the defendant paying into Court the amount claimed in the suit; or
(iii) on the defendant giving such security for the amount claimed in the suit as the Court may direct; or
(iv) on any other ground that the Court may deem just."
(emphasis supplied)
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11. International Convention on Arrest of Ships, 1999 is made upon the States parties to the Convention being convinced of the necessity for a legal instrument establishing international uniformity in the field of arrest of ships which takes account of recent developments in related fields. Article 2 provides for power of arrest and Clause 2 thereof provides that a ship may only be arrested in respect of a maritime claim but in respect of no other claim. "Maritime Claim" is defined by Article 1(1) as claim arising out of, inter alia (a) loss or damage caused by the operation of the ship. Article 3 enunciates the circumstances in which the arrest of ship is permissible in respect of maritime claim.
12. Article 4 deals with release from arrest and is required to be quoted verbatim :-
"Article 4. Release from arrest.
1.A ship which has been arrested shall be released when sufficient security has been provided in a satisfactory form, save in cases in which a ship has been arrested in respect of any of the maritime claims enumerated in article 1, paragraphs 1 (s) and (t). In such cases, the Court may permit the person in possession of the ship to continue trading the ship, upon such person providing sufficient security, or may otherwise deal with the operation of the ship during the period of the arrest.
2. In the absence of agreement between the parties as to the sufficiency and form of the security, the Court shall determine its nature and the amount thereof, not exceeding the value of the arrested ship.
3. Any request for the ship to be released upon security being provided shall not be construed as an acknowledgment of liability nor as a waiver of any defence or any right to limit liability.::: Downloaded on - 09/06/2013 18:16:23 :::
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4. If a ship has been arrested in a non-party State and is not released although security in respect of that ship has been provided in a State Party in respect of the same claim, that security shall be ordered to be released on application to the Court in the State Party.
5. If in a non-party State the ship is released upon satisfactory security in respect of that ship being provided, any security provided in a State Party in respect of the same claim shall be ordered to be released to the extent that the total amount of security provided in the two States exceeds:
(a) the claim for which the ship has been arrested, or
(b) the value of the ship, whichever is the lower. Such release shall, however, not be ordered unless the security provided in the non-party State will actually be available to the claimant and will be freely transferable.
6. Where, pursuant to paragraph 1 of this article, security has been provided, the person providing such security may at any time apply to the Court to have that security reduced, modified, or cancelled".
(emphasis supplied)
13. A bare perusal of the above Article would show that the Convention supports the appellant-defendant's case that the amount of security should be the claim for which the ship has been arrested or the value of the ship, whichever is lower. The learned Counsel for the respondent-plaintiff has, however, raised three serious objections to the applicability of the Convention viz:-
(i) The Indian Parliament has not adopted the 1999 Convention and the matter is exclusively governed by Section 443 of the MS Act, 1958 and Rule 954 of the High Court (OS) Rules;::: Downloaded on - 09/06/2013 18:16:23 :::
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(ii) Article 8 (3) of the Convention of 1999 makes the Convention inapplicable to ships belonging to the Navy or the ships arrested for claims of a Government and, therefore, in the facts of the present case, since the 1st Defendant vessel is arrested for claim arising from damage to the ship of the Indian Navy, the Convention of 1999 would not apply.
(iii) In any view of the matter, even if the 1999 Convention is applicable, there is inconsistency between the provisions of Section 443 of the Merchants Shipping Act, 1958 on the one hand and Article 4 of the Convention on the other hand. Therefore, as per the settled legal position, in case of such inconsistency or conflict, it is the Municipal law which will prevail and not the International Convention. In support of this proposition reliance is placed on the decisions in m.v.
Mariner IV, a Foreign Flag Vessel and Anr. vs. Videsh Sanchar Nigam Ltd. and In Liverpool and London S.P. And 1 Asson Ltd. vs. M.V.1 and Anr.
Re: Objection (i):
14. It is true that Indian Parliament has not adopted the International Convention on Arrest of Ships, 1999. However, the Apex Court as well as a Full Bench of this Court have held in favour of applying the 1999 Convention. When the decision was rendered by the Supreme Court in Elizabeth's case in the year 1993, obviously the International Convention on Arrest of Ships, 1999 was not yet made and, ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 18 app-30-12_Judgment_-4.3.2012 therefore, the Supreme Court referred to the Brussels Conventions of 1952, for civil and penal jurisdiction in matters of collision, which was not yet adopted by India. The Supreme Court made the following pertinent observations in paragraph 76 of the judgment :-
"India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various conventions intended to facilitate international trade. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships".
(emphasis supplied)
15. In Liverpool and London S.P. and 1 Asson Ltd. vs. M.V.1 Sea success and Anr.1 the Supreme Court made the following observations for application of 1999 Arrest Convention:-
"60. M.V. Elisabeth (supra) is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that there does not exist any primary Act touching the subject and in absence of any domestic legislation to the contrary, if the 1952 Arrest Convention had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be applied.
Application of 1999 Convention in the process of interpretive changes, however, would be subedit to: (1) domestic law which may be enacted by Parliament; and (2) it should be applied only for enforcement of a contract involving public law character.
1 (2004)9 SCC 512
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16. A Full Bench of this Court has followed the aforesaid decision in J.S. Ocean Liner LLC vs. M.V. Golden Progress & Anr.2 and particularly made the following pertinent observations in para 72 of the judgment:-
"72. We find considerable force in the argument of the counsel for the plaintiffs that it is unnecessary to apply Rena K principle in view of the Arrest Convention, 1999 which is as much part of our law and the statute in view of the decisions of the Supreme Court in m.v. Elisabeth and m.v. Sea Success. As a matter of fact, Mr. Prashant Pratap also suggested and, in our view, rightly that the court can straightaway apply the principle set out in the Arrest Convention, 1999.
17. Having perused the decision of the Apex Court in M.V.Elizabeth & Ors. (supra) and Liverpool and London vs. MV Sea Success (supra) as well as the Full Bench decision of this Court, it is clear that the application of International Convention on Arrest of Ships, 1999 cannot be denied only on the ground that the said Convention has not been converted into legislation by Indian Parliament.
Re: Objection (ii):
18. The learned Additional Solicitor General relied on Clauses (2) and (3) of Article 8 in support of his contention that the 1999 Convention would not apply in the present case:
"(2) This Convention shall not apply to any warship, naval auxiliary or other ships owned or operated by a State and used, for the time being, only on government non-
commercial.
2 2007(2) aLL MR367
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(3) This Convention does not affect any rights or powers vested in any Government or its departments, or in any public authority, or in any dock or harbour authority, under any international convention or under any domestic law or regulation, to detain or otherwise prevent from sailing any ship within their jurisdiction".
19. Reliance placed on Clause (2) of Article 8 is thoroughly misconceived. What Article 8(2) provides is that the Convention cannot be invoked for arresting a war ship or any other ship of the Indian navy. In the present case the 1st defendant vessel is admittedly not a war ship , naval ship nor auxiliary or other ship owned or operated by the State.
Article 8(2) does not refer to a ship to which the damage is caused, but it refers to the ship to be arrested or arrested ship.
20. The learned Additional Solicitor General, however, pressed the preliminary objection more seriously on the basis of Clause (3) of Article 8. It was submitted that since the Government of India in its Defence Department is exercising the powers vested in it under Section 443 of the domestic law to detain the 1st defendant vessel, the 1999 Convention does not and cannot affect those powers or the right to get full security for its claim as conferred by Section 443 of the domestic law.
21. Though the argument may prima facie appear to be attractive, on close scrutiny, it cannot be accepted. Clause (3) of Article 8 is required to be read in its entirety. It provides that the rights or powers of a Government, any public authority, or any dock or harbour authority under any International Convention or under any domestic law or regulation, are not affected, in so far as such International Convention, domestic law or regulation confers upon the Government authority to detain any ship or to prevent any such ship from sailing within their ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 21 app-30-12_Judgment_-4.3.2012 jurisdiction. The words "Government" "any public authority" "any dock or harbour authority" all indicate that the Convention does not affect the rights and powers of Government/ authority to detain a vessel for its dues such as customs duty or wharfage or other port charges payable by the ship in question. What Section 443(1) of the Merchant Shipping Act confers is not a right to detain the ship, but a right to move the High Court to issue an order requiring an officer to detain the ship until such time as the owner, etc., of the ship has satisfied any claim in respect of the damage to the plaintiff's ship or has given security to the satisfaction of the High Court to pay cost and damages that may be awarded in the suit for damages. Similarly, the power conferred by sub-section (2) of Section 443 is the power of an officer to detain the ship before an application can be made under sub-section (1) of Section 443. Hence, Section 443 does not confer power on the Government as the Government but only confers right on the Government company / citizen of India (whose property is damaged by a ship which is found within the Indian jurisdiction) to move the High Court for issuing an order of arrest. Admittedly, the 1st defendant vessel has been arrested pursuant to an order issued by this Court and it has not been arrested by the Government in exercise of its power as a Government.
22. We may at this stage also refer to the submissions of Mr.Chagla that Section 443 (1) of the Merchant Shipping Act, 1958 merely provides for detention of a ship as a pro tem arrangement before the plaintiff files suit for damages.
It is not possible to accept this contention. Section 443(1) in terms provides for power of the High Court to detain the ship until such time as the owner, etc., of the vessel (which has caused the damage to the plaintiff's property) has paid the damages or has given security to the ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 22 app-30-12_Judgment_-4.3.2012 satisfaction of the High Court for the same. It is not possible to accept the contention that the words "in any legal proceedings that may be instituted" contemplates proceedings to be filed in future for claiming damages and not the proceedings or suit in which the order of arrest is made. It may be that the plaintiff whose property has been damaged by the defendant's vessel, may file the suit giving only a rough or broad estimate of the damage caused to its property and after obtaining an order of arrest of the defendant vessel an application in such a suit may thereafter seek amendment of the plaint to give full particulars of the damage and to make a final claim of damages. Hence the explanation "in any legal proceedings that may be instituted" do not necessarily contemplate future proceedings, but essentially contemplate the suit filed, in which the order of arrest is obtained, which may subsequently be amended to give better particulars of, or enlarge, the original claim. In other words, the security to be given to the satisfaction of the High Court may be for all costs and damages that may be awarded in the suit, in which the plaint may be permitted to be amended for enlarging the claim after full particulars of the damage caused to the plaintiff's property are ascertained.
23. The upshot of the above discussion is that both Section 443(1) of the Merchant Shipping Act, 1958 as well as Article 4 of the International Convention on Arrest of Ships, 1999 will apply to the present case.
Re : Objection (iii)
24. That bring us to the most important contention raised on behalf of the respondent-plaintiffs that there is a conflict or inconsistency ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 23 app-30-12_Judgment_-4.3.2012 between the Municipal law as contained in Section 443 of the Merchant Shipping Act, 1958 on the one hand and Article 4 of the International Convention on Arrest of Ships, 1999 on the other hand and, therefore, Section 443 of the MS Act will prevail over Article 4 of 1999 Convention.
25. There is no controversy about the proposition that in case of conflict between municipal law and an International 1999 Convention, the Court will have to apply the municipal law. The law on the subject has been laid down in the following decisions:-
In Liverpool and London S.P. And 1 Asson. Ltd. vs. M.V. Sea success 1 and Anr.1, para.108 of the said judgment reads as under:-
"108. The rules for ship arrest in international fora are not uniform. Despite International Convention on the Arrest of Sea-going Ships 1952 as amended in the year 1999 either having been adopted by some countries or adopted by others, the law is enforced by the concerned countries having regard to their own domestic legal system. Where, how and when can a maritime claimant most advisedly arrest a ship in pursuit of its claim either in rem or in personem had all along been a complicated question keeping in view the principles of 'lex fori'".
In m.v. Mariner IV, a Foreign Flag Vessel and Anr. vs. Videsh Sanchar Nigam Ltd.7 , following propositions have been enunciated:-
"19. In our opinion the aforesaid judgments make it clear that in case of conflict between the municipal law and the international law or conventions, the court will have to apply the municipal law. However, when there is no conflict between the two then all just principles of international law or conventions could be legitimately applied unless either they are in conflict with any statute or are prohibited by any municipal law".
1 (2004)9 SCC 512 7 1998(1) Mh.L.J., 751 ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 24 app-30-12_Judgment_-4.3.2012
29. The aforesaid observations of the Apex Court in our opinion very clearly suggest that unless there is any prohibition by the municipal laws the principles of trans- national law or international conventions could be applied for affording remedy for the satisfaction or realisation of maritime claim.
26. To determine the above principal contention, it is necessary not only to consider the domestic law and Article 4 of 1999 Convention, but also to look at the Admiralty law being applied before coming into force of the above municipal law/Convention and thereafter.
27. Article 4 of the 1999 Convention in terms contemplates a situation where the value of the ship may be less than the plaintiff's claim for which the defendant ship has been arrested. The Convention in clear terms provides that in such a case, the security to be provided will be lower of the two amounts i.e., the security will be the value of the arrested vehicle. On the other hand Section 443(1) of the M.S. Act does not contemplate any such situation and merely provides that the High Court which has ordered arrest of the ship at the instance of the plaintiff (whose property has been damaged by the defendant ship) will indicate the security which the owner of the defendant ship has to give to the satisfaction of the High Court. The words "to pay all costs and damages that may be awarded in any legal proceedings that may be instituted in respect of the damage" merely contemplates the maximum amount for which the High Court will ask the defendant to give security. There is nothing in Section 443(1) of the Act which indicates that the Legislature had contemplated a situation where value of the arrested ship was less or substantially less than the plaintiff's claim in the Admiralty Suit. In view of the above discussion, there does not appear to be any conflict between ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 25 app-30-12_Judgment_-4.3.2012 Article 4 of the 1999 Convention on the one hand and Section 443(1) of the M.S. Act.
28. Even assuming that there is a conflict or inconsistency between the two, we will have to consider the principles of interpretation of statutes. In "Principles of Statutory Interpretation" (11th Edition 2008), by Justice G.P. Singh, the following settled principles of interpretation have been laid down:
Principle of harmonious construction, It is the duty of the Courts to avoid "a head on clash"
between two sections of the same Act. Similarly, the provisions of one section of a statute cannot be used to defeat those of another "unless it is impossible to effect reconciliation between them." (Sanjeevayya D. v. Election Tribunal, Andhra Pradesh8, Krishna Kumar v. State of Rajasthan,9 Sultana Begum v. Premchand Jain10 and Commissioner of Income Tax v. Hindustan Bulk Carriers11. To harmonise is not to destroy. A familiar approach in all such cases is to find out which of the two apparently conflicting provisions is more general and which is more specific and to construe the more general one as to exclude the more specific. State of U.P. v. Renusagar Power Co.12, Life Insurance Corporation of India v. S.V. Oak13, (Compulsive provision will control a discretionary provision) the question as to the relative nature of the provisions general or special has to be determined with reference to the area and extent of their application either general or 8 AIR 1967 SC 1211 p.1213 (para 4) 9 (1991) 4 SCC 258 10 AIR 1997(1) SCC 737 11 (2003) 3 SCC 57 (Page 74) 12 1988(4) SCC 59 13 AIR 1965 SC 975(980) = 1965(1) scr 403 ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 26 app-30-12_Judgment_-4.3.2012 special in a particular situation. Collector of Central Excise, Jaipur v. Raghuvar (India) Ltd.14, if a special provision is made on a certain matter, that matter is excluded from the general provision. These principles have also been applied in resolving a conflict between two different Acts. In Jasbir Singh v. Vipin Kumar Jaggi15, the Court held that Section 64 of the NDPS act will prevail over Section 307 of Cr.P.C. 1974 as it is a special provision in a Special Act which is also later.
29. Applying the aforesaid principle of harmonious interpretation, it appears that Section 443 (1) of the M.S. Act confers discretion on the High Court to require the defendant to give security upto the extent of the plaintiff's claim for damages in the Admiralty Suit and, therefore, the discretion is circumscribed by the amount of the plaintiff's claim as the outer limit. On the other hand Article 4 of the Convention of 1999 specifically deals with all the 3 situations:-
(i) where the plaintiff's claim is higher than the value of the arrested vessel, security must be confined to the value of the arrested vessel;
(ii) where value of the arrested vessel is higher than the plaintiff's claim, security must be confined to the plaintiff's claim
(iii) where both the amounts are equal, there would be no controversy for the amount of security to be given.
14 (2000) 5 SCC 299 15 (2001) 8 SCC 289 ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 27 app-30-12_Judgment_-4.3.2012
30. Apart from the aforesaid conclusion based upon analysis of the language of the two provisions under consideration, we are of the view that reference to the law prevailing prior to coming into force of the Convention also buttresses our conclusion.
31. In Halsbury's Laws of England, 4th Edn. Volume 1, (1) Admiralty, the law regarding the amount of security to be given is set out in the following terms:-
"386.ig Introduction. The usual step following an acknowledgment of service in an action in rem is for the owner of the property arrested to procure its release by giving security for the plaintiff's claim. This may be done either by paying the amount of the plaintiff's claim into court, or by providing bail in a sufficient amount, or by furnishing a guarantee acceptable to the plaintiff's. The third method is nowadays the most common in practice."
389. Amount, effect and costs of bail. The bail bond states an upper limit to the amount for which the sureties may become liable, and this amount should be sufficient to cover the plaintiff's claim, together with interest and costs on the basis of his reasonably arguable best case. The amount is normally agreed between the parties; in the absence of agreement, the matter may be decided by the registrar on a contested application for released. The bail represents the res, and when once it has been given the ship is wholly released from the cause of action, and cannot be arrested again for that cause of action in order to obtain further bail. If necessary, either party may take out a commission of appraisement to ascertain the value of the res."
390. Amount of bail in collision actions. The amount of bail provided in certain actions for loss caused without the defendant owner's recklessness or knowledge that such loss would probably result may, whether the vessel be British or ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 28 app-30-12_Judgment_-4.3.2012 foreign, be reduced to the amount for which the owners are liable under the statutory provisions as to limited liability1, together with interest and costs². If, however, the right of the owners to limit their liability is disputed, bail must be given to the full value of the res but at the plaintiffs' risk in respect of costs if it should turn out that they have made an exorbitant demand for bail3.
(emphasis supplied)
32. The learned counsel for the plaintiff submitted that
(i) in collision cases the Merchant Shipping Act, 1894 imposed a statutory limitation on the quantum of damages for which an owner /vessel was liable for in the event of damage caused by it. Hence as noticed in para 390 in collision cases the security required was upto the statutory limitation of the claim.
(ii) para 390 cannot be read as contradicting para 389 hence the reference to the value of the res (where statutory limitation is disputed) is must necessarily be on the basis that the value of the res is more than the statutorily limited claim.
33. In our view, the law as expounded in Halsbury's Laws of England, Fourth Edn.Vol.1(1) is clear where the right of the vessel owners to limit their liability on the basis of tonnage (limited liability) is not available to the vessel owner, security has to be given for full value of the arrested vessel and once the security for full value of the arrested vessel is given, the vessel has to be released from the cause of action and cannot be arrested again on that cause of action.
1 Ie the provisions contained in the Merchant Shipping Act 1979 S.17 (I), Sch.4 Pt. I; see paras 362-364.
² The Duchesse de Brabant (1857) SW 264; The Sisters (1875) 32 LT 837. 3 The Charlotte (1920) P 78; The Norwalk Victory (1949) 82 L1L Rep. 539."
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34. In The Charlotte's case, (1920) Probate Division, 78 the plaintiffs in an action by collision filed Admiralty Suit for damages of 80,000 pounds and sought leave to arrest French steamship Charlotte belonging to the defendants under Section 503 of the Merchant Shipping Act, 1894 corresponding to Part XA of the Merchant Shipping Act, 1958 in India. The statutory liability of the owners of The Charlotte was fixed at 13,000 pounds. The defendants gave security for the said amount. The Court upheld the plaintiff's claim for security for the full market value of the vessel Charlotte estimated at 63,000 pounds. The Court relied on the practice as stated in Williams and Bruce's Admiralty Practice, as follows:-
"If the amount for which a cause of damage is instituted exceeds the statutory limit, the defendant, on filing an affidavit in the damage suit, stating the tonnage of his ship, and that the collision happened without the actual fault or privity of any of the owners, will, if these facts are not denied by the plaintiff, be entitled to have the ship released on bail being given to an amount sufficient to cover the amount of the statutory limit, and interest and costs. Of course, the plaintiff may dispute the facts on which the defendant's right to avail himself of the benefit of the provisions of the statute rests, and then bail must be given to the full value of the property."
(emphasis supplied)
35. It would thus appear from the Charlotte case that where the statutory limitation is not invoked or the statutory limitation does not apply (as provided in Part X-A of the Merchant Shipping Act, 1958), the security has to be given for the full value of the arrested vessel. If the law was that security must be for full claim of the plaintiffs even in excess of the value of the arrested ship, the plaintiff would have claimed, and the Court in the Charlotte case would have required the defendants to give, security of 80,000 pounds which was the plaintiffs claim. However, the ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 30 app-30-12_Judgment_-4.3.2012 amount of security was confined to value of the arrested vessel "Charlotte" which was 63,000 pounds.
36. In Admiralty Jurisdiction and Practice by Nigel Messon, and John A. Kimbell, Fourth Edition, 2011 the following passages deal with the controversy at hand:-
"4.80. The claimant is entitled to security in an amount sufficient to cover the amount of his best reasonably arguable case, together with interest and costs, but cannot demand security in an amount which exceeds the value of the property proceeded against. If there is a dispute as to the amount of security to be provided, the owner of the arrested property may apply to the Admiralty Registrar for the amount of security to be determined. He may also apply at any stage for an order that the amount of security be reduced.
4.81. Where there is a dispute about the value of the property arrested this is normally resolved by negotiations between the parties' respective solicitors. However, if such negotiations fail, it is open to the owner of the arrested property to file an affidavit of value and tender security in that amount. The affidavit of value should be made by a person having actual knowledge of the value, i.e. The person who carried it out, and not simply on information and belief.
(emphasis supplied)
37. The learned Additional Solicitor General heavily relied on the decision of the Court of Appeals in The Bazias 3 The Bazias 4 (1993 Lloyd's Law Journal, 673) By writs issued on 24 September 1992 the plaintiff charters, commenced proceedings in rem against the vessels Bazias 3 and Bazias 4 to obtain security for their counterclaim in arbitration proceedings against the defendant owners of the vessels. On 28 September, the vessels were arrested.
::: Downloaded on - 09/06/2013 18:16:23 :::gopi 31 app-30-12_Judgment_-4.3.2012 On 29 September, the case was placed before Saville J., as vacation Judge in Admiralty, on the defendants' motion for a stay under Section 1 of the Arbitration Act 1975 and for the warrant of arrest to be set aside. Saville, J., made an order that the vessels should remain under arrest, but allowed them to return to their employment on their cross- channel service against certain undertakings given by the defendants and by the freighters, who had given an application to intervene. Thus, the vacation Judge without dealing with the application under Section 1 of the English Arbitration Act 1975 or under Section 26 of the British Act of 1992, made the order by which the vessels were to remain within custody of the Admiralty Marshal and yet be allowed to trade outside the jurisdiction.
On 5 October Sheen J., made an order regularising the position. He varied the order of SavilleJ., by ordering that the vessels return to, or remain in, the jurisdiction of the court pending a full hearing on 9 October. But on 6 October both the orders (Saville J. and Sheen J.) were appealed. The Court of Appeal delivered the judgment on 7/8 October 1992.
38. The judgment of Lloyd L. J., leading the three Judge Bench pointed out that the central question before the Court of Appeal was:-
"I turn then to the central question. Section 26 of the Act of 1982 came into force on 1 November 1984. As to the pre- existing law, I start with a passage from the judgment of Robert Goff L.J. In the Andria now renamed Vasso (1984) Q.B. 477, 490:
However, on the law as it stands at present, the court's jurisdiction to arrest a ship in an action in rem should not be exercised for the purpose of providing security for an award which may be made in arbitration proceedings. That is ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 32 app-30-12_Judgment_-4.3.2012 simple because the purpose of the exercise of the jurisdiction is to provide security in respect of the action in rem, and not to provide security in some other proceedings, for example, arbitration proceedings."
Then Lord Lloyd J., referred to the reason for enactment of Section 26 of the Act of 1982. The entire discussion was, therefore, on the question whether the Court could ask the defendant to give security for the plaintiff's claim in arbitration proceedings and the Court answered the question by stating that Section 26 of the Act of 1982 empowered the Court to require the defendant to give security for the satisfaction of any award or judgment which may be given in arbitration proceedings.
39. The Court of Appeal referred to the usual practice that the vessel will be released on production of sufficient security to cover the amount of the claim, interest and costs on the basis of the plaintiff's reasonable arguable best case, but the Court was not called upon to consider the question whether the security should be confined to value of the vessels. The appeal was essentially against the trial Court's order which, the Appellate Court, found to be a contradiction. It is important to note that the order of the trial Court was not to keep security to the extent of the value of the ship and, therefore, the decision in the Court of Appeal cannot be treated as an authority for the proposition canvassed by the learned Additional Solicitor General, merely because the amount of security demanded in that case happened to exceed the value of the two arrested vessels.
As per the settled legal position, a decision is an authority on what it actually decides and not what logically follows from that decision.
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40. In view of the above discussion, it is not possible to accept the submission made by Shri Kambhata for the plaintiffs that the decision in Bazias's case lays down the proposition canvassed by the plaintiffs.
41. Mr. Kambhata, learned counsel for the plaintiffs then heavily relied on decision of the Supreme Court in Videsh Sanchar Nigam vs. M.V. Kapitan Kud.6 The international telecommunication cable laid by Viesh Sanchar Nigam were damaged by the vessel m.v. Kapitan Kud. The Nigam, therefore, filed suit claiming Rs.28 crores as damages from the defendant vessel. The vessel was arrested, but a Division Bench of this Court passed an order permitting the vessel to sail merely upon an undertaking to be given by the captain of the vessel belonging to a company owned by the Ukrainian Government. The Supreme Court set aside that order and, allowing the appeal, directed that the vessel be released only on the condition of depositing Rs.10 crores and undertaking to be given by the Ukrainian Government through its Ambassador to its Embassy in India in writing duly undertaking that in the event of the suit being decreed they would comply with the decree without reference to execution and the undertaking should be for the balance amount of Rs.18 crores and towards costs and other expenses roughly calculated at Rs.25 crores. However, value of the vessel which was arrested in the above case is not to be found in the judgment and, therefore, this judgment does not purport to throw light on the question which arises in the present case.
42. At the same time, reliance placed by the learned Counsel for the appellant-defendant on the decision of the Supreme Court in World Tanker Carrier Corporation vs. SNP Shipping Services Pvt. Ltd. & Ors.,17 6 1996(7) scc 127 17 AIR 1998 SC 2330 ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 34 app-30-12_Judgment_-4.3.2012 also does not conclude the controversy. That decision only explains the rationale for introduction of limitation of liability in Part XA of the MS Act, 1958. The whole purpose of limitation of liability is to protect the owner against large claims, by limiting the liability of the owner of the vessel on the basis of tonnage of the vessel. Since defendant No.2 has not pressed their prayer for limitation of the plaintiffs claim under the above provisions "at this stage", it is not necessary to refer to the said decision in World Tanker Carrier Corporation.
43. We may now refer to the decision of the Supreme Court in Elizabeth v. Harwan Investments & Trading,3 on which both the parties have placed reliance. The learned Additional Solicitor General for respondent -plaintiff has relied upon the following observations:-
(i) "The liability of the ship owner is not limited to value of the res primarily proceeded against. An action ..... in rem becomes a personal action against a defendant upon appearance, and he becomes liable for the full amount of a judgment unless protected by the statutory provisions for the limitation of liability." (para 45)
(ii)A defendant in an admiralty action in personam is liable for the full amount of the Plaintiffs established claim.
Likewise, a defendant acknowledging service in an action in rem is liable to be saddled with full liability even when the amount of the judgment exceeds the value of the res or of the bail provided. (para 46) 3 1993 Supp (2) SCC 433 ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 35 app-30-12_Judgment_-4.3.2012
(iii) A Plaintiff seeking to enforce his maritime claim against a foreign ship has no effective remedy once it has sailed away and if the foreign owner has neither property nor residence within jurisdiction.(para 47)
(iv)"The detention of the Foreign Ship is authorized in terms of Sections 443 and 444. In view of their vital significance in the enforcement of maritime jurisdiction.".........(para 78)
(v)"........ such a ship is liable to be detained when found within Indian jurisdiction by recourse to Sections 443 and 444 of the MS Act, 1958 read with the appropriate rules of practice and procedures of the High Court. These procedural provisions are but tools for enforcement of substantive rights which are rooted in general principles of law, apart from statutes and for the enforcement of which a party aggrieved has a right to invoke the inherent jurisdiction of a Superior Court." (para 79) (emphasis supplied)
44. On the other hand, the learned counsel for the appellant- defendant has relied upon the underlined observations in para 79 of the judgment and also on the following observations in para 76 of the judgment :-
"India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various conventions intended to facilitate international trade. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 36 app-30-12_Judgment_-4.3.2012 embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships".
(emphasis supplied) The learned counsel for the appellant-defendant has also relied upon the following observations made by this Court in m.v.
Mariner IV, a Foreign Flag Vessel and Anr. v. Videsh Sanchar Nigam Ltd.7:-
30. The observation of Lord Denning in Banko 1977 1 LLR 49 and in Rasu Martima clearly shows that the arrest of other ships of the defendants so long as they are within its jurisdiction was in vogue in England. The observations of Lord Denning in the case of Trendtex Trading and the conclusion reached by the learned Judge i.e. "that the rules of international law have changed and do change and that the Court have given effect to the changes without the aid of any Act of Parliament, it follows that the rules of international law, as existing from time to time do form part of our English law:" also support the proposition that without specific adoption by the municipal law, applicable rules of international law could be legitimately adopted by the Court to further the remedy and cause of justice".
(emphasis supplied)
45. Having carefully considered the rival submissions, it appears to us that though the observations relied upon by the respondent-plaintiff may, prima facie, support their case, it needs to be noted that in Elizabeth case, the Supreme Court was not concerned with he question which has arisen in the present case, whether the owner of the arrested vessel is bound to give security in excess of the value of the arrested vessel, in order to get arrested vessel released from the order of arrest passed by the Admiralty Court.
7 1998 (1) Mh.L.J. 751
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16
46. In State of Haryana v. AGM Management Services Ltd., (paras 9 to 12), the Supreme Court has laid down the following salutary principles :-
"7. "9. The courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of the courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of the courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes."
Again in the same judgment, the Supreme Court observed as under:-
"In British Rlys. Board v. Herrington Lord Morris said : (All ER p. 761c) `There is always peril in treating the words of a speech or a judgment as though they were words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case.'
11. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper."
47. The facts which were raised in Elizabeth case and the controversy decided by the Supreme Court were as under:-
16 (2006) 5 SCC 520 ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 38 app-30-12_Judgment_-4.3.2012 "4. The plaintiff is a private limited company having its registered office in Goa. The case of the plaintiff is that the defendants acted in "breach of duty" by leaving the port of Marmagao on February 8, 1984 and delivering the goods to the consignee in breach of the plaintiff's directions to the contrary, thereby committing conversion of the goods entrusted with them. The suit was instituted in Andhra Pradesh High Court invoking its admiralty jurisdiction by means of an action in rem. The vessel was arrested when it entered in Port of Vishakhapatnam on April 13, 1984 after returning from foreign ports. On the owner of the vessel entering appearance and providing security by furnishing a Bank Guarantee under protest in the sum of Rs.14,25,000 the vessel was released from detention.
5.The defendants moved an application in the High Court raising a preliminary objection to the jurisdiction of that court.
They contended that the plaintiff's suit against a foreign ship owned by a foreign company not having a place of residence or business in India was not liable to be proceeded against on the admiralty side of the High Court by an action in rem in respect of a cause of action alleged to have arisen by reason of a tort or a breach of obligation arising from the carriage of goods from a port in India to a foreign port. They did not, however, contend that the alleged cause of action not having arisen in Andhra Pradesh, the suit ought not to have been filed in Andhra Pradesh. Their sole contention on the question of jurisdiction was as regards the lack of admiralty jurisdiction of any court in Andhra Pradesh or any other State in India to proceed in rem against the ship on the alleged cause of action concerning carriage of goods from an Indian port to a foreign port. The preliminary objection was overruled by the learned Single Judge and his order was confirmed by the learned Judges of the Division Bench by their order which is challenged in SLP (C) No.10542 of 1985. The suit was finally decreed by the learned Single Judge and appeal therefrom is the subject-matter of the case transferred to this Court.
6. The crucial question for our consideration is, therefore, the dispute about jurisdiction. If that question were to be answered in favour of the defendants, it would be unnecessary to express any view on the merits of the Transferred Case, for suit itself would ten stand dismissed."
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48. The contention of the appellant-defendant was that the extent of admiralty jurisdiction and the judicial power peculiar to the jurisdiction, as conferred on the Indian High Courts remained frozen as on the date of Admiralty Court Act, 1861 (British Act) made applicable to India by the colonial Courts of Admiralty Act, 1890 (a British Act made by British Parliament) read with the Colonial Courts of Admiralty (India) Act, 1891 declaring certain Indian Courts of unlimited civil jurisdiction as colonial Courts of admiralty and declaring the High Court of Judicature at Madras as one of such Courts. There was no dispute about the fact that upon formation of Andhra Pradesh State, the High Court of Andhra Pradesh also has such admiralty jurisdiction as was granted to the High Court of Judicature at Madras, but the extent of this admiralty jurisdiction and the judicial power peculiar to that jurisdiction, as conferred on the Indian High Courts, remained frozen as on the date of Admiralty Court Act, 1861. The wider powers assumed by the British Courts subsequent to the statute of that country did not enlarge the admiralty jurisdiction of Indian High Courts. In the absence of any subsequent British or Indian statute widening the admiralty jurisdiction of the Indian High Courts, the jurisdiction of Andhra Pradesh High Court over a foreign ship by means of an action in rem does not extend to any matter falling outside the Admiralty Court Act, 1861. Applying section 6 of that Act, the Indian High Court exercising the admiralty jurisdiction has no power to deal with any claim concerning any outward cargo because section 6 is confined to inward cargo. Consequently, the arrest of the vessel in purported exercise of admiralty jurisdiction in rem, concerning the claim relating to outward cargo, was null and void and of no effect. This contention of the appellants before the Supreme Court was fortified by certain decisions of Calcutta, Bombay and other High Courts.
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49. The Supreme Court did not accept reasoning of the High Courts in those decisions and held that the narrow view adopted in those decisions on the source and ambit of the admiralty jurisdiction of the High Courts was not warranted. The Supreme Court held as under:-
"25. It was because of the unlimited civil jurisdiction that was already vested in High Courts that they were declared to be Colonial Courts of Admiralty having the same jurisdiction in extent and quality as was vested in the High Court of England by virtue of any statute or custom. The High Courts were declared to be competent to regulate their procedure and practice in exercise of admiralty jurisdiction in accordance with the Rules made in that behalf. There is, therefore, neither reason nor logic in imposing a fetter on the jurisdiction of these High Courts by limiting it to the provisions of an imperial statute of 1861 and freezing any further growth of jurisdiction. This is all the more true because the Admiralty Court Act, 1861 was in substance repealed in England a long time ago. See Halsbury's Laws of England, 4th ed. Vol. I(1), para 307; Halsbury's Statutes of England, Vol. I, p. 9.
26. Assuming that the admiralty powers of the High Courts in India are limited to what had been derived from the Colonial Courts of Admiralty Act, 1890, that Act, having equated certain Indian High Courts to the High Court of England in regard to admiralty jurisdiction, must be considered to have conferred on the former all such powers which the latter enjoyed in 1890 and thereafter during the period preceding the Indian Independence Act, 1947. What the Act of 1890 did was, as stated earlier, not to incorporate any English statute into Indian law, but to equate the admiralty jurisdiction of the Indian High Courts over places, persons, matters and things to that of the English High Court. As the admiralty jurisdiction of the English High Courts expanded with the progress of legislation, and with the repeal of the earlier statutes, including in substance the Admiralty Court Acts of 1840 and 1861, it would have been reasonable and rational to attribute to the Indian High Courts a corresponding growth and expansion of admiralty jurisdiction during the pre- independence era. But a restrictive view was taken on the question in the decisions of the High Courts cited above."::: Downloaded on - 09/06/2013 18:16:23 :::
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50. The question before the Supreme Court was also that the words, "damage caused by a ship" appearing in Section 443 of the Merchant Shipping Act, 1958 only meant physical damage and any other damage arising by reason of operation of vessel in action, carriage of goods was excluded. In paras 78 and 79 of the judgment, the Supreme Court held that Sections 443 and 44 are wide enough to include not only physical damage but also the damage caused to the plaintiff's property by breach of contract or acts of commission of omission on the part of the carrier or his agents or servants by reason of negligence of operation and management of the vessel. The Supreme Court held that expression is wide enough to all maritime questions and claims.
51. The Supreme Court held that though the Merchant Shipping Act provides a detailed code of substantive and procedural law regulating shipping as an industry and the control exercised over it by the competent authorities, the jurisdictional questions concerning arrest of foreign ships are in many respects left unregulated by the Indian legislation. While the provisions of various international conventions concerning arrest of ships, civil and penal jurisdiction in matter of collision, maritime liens and mortgages etc. have been incorporated in the Municipal Laws in many maritime States, India, lags behind them in adopting these unified rules.
By reason of this void, doubts of jurisdiction often arises.
Thereafter, the Supreme Court made the following significant observations :-
"84............Although India has not adopted the various Brussels Conventions, the provisions of these Conventions are the result of international unification and development of the maritime laws of the world, and can, therefore, be regarded as the international common law or transnational ::: Downloaded on - 09/06/2013 18:16:23 ::: gopi 42 app-30-12_Judgment_-4.3.2012 law rooted in and evolved out of the general principles of national laws, which, in the absence of specific statutory provisions, can be adopted and adapted by courts to supplement and complement national statutes on the subject.
In the absence of a general maritime code, these principles aid the courts in filling up the lacunae in the Merchant Shipping Act and other enactments concerning shipping. [P]rocedure is but a handmaiden of justice and the cause of justice can never be allowed to be thwarted by any procedural technicalities." [S.P.Gupta v. Union of India (SCC p.210, para 17]"
The Supreme Court also made the following pertinent observations in para 89 of the judgment:-
"89. ......... These conventions contain the unified rules of law drawn from different legal systems. Although many of these conventions have yet to be ratified by India, they embody principles of law recognised by the generality of maritime States, and can therefore be regarded as part of our common law. The want of ratification of these conventions is apparently not because of any policy disagreement, as is clear from active and fruitful Indian participation in the formulation of rules adopted by the conventions, but perhaps because of other circumstances, such as lack of an adequate and specialised machinery for implementation of the various international conventions by co-ordinating for the purpose the Departments concerned of the Government."
In view of the above, it is clear that the Supreme Court decision in Elizabeth did not even purport to lay down the principle which is now being canvassed on behalf of the respondent-plaintiff.
52. In short, as held by the Supreme Court in M.V. Elisabeth's case although India has not adopted such Convention the provisions of such Conventions are the result of international unification and development of the maritime laws of the world.
::: Downloaded on - 09/06/2013 18:16:23 :::gopi 43 app-30-12_Judgment_-4.3.2012 We also find that the Merchant Shipping Act, 1958 has been amended from time to time. After International Convention on Arrest of Ships, 1999, the principal Act was amended by Amendment Act 63 of 2002 for adding Part XA to provide limitation of liability on the basis of the international Convention on Limitation of Liability for Maritime Claims (LLMC) 1976 and Civil Liability Convention (CLC 1992) and other Conventions and the Safety of Life at Sea (SOLAC) Convention 1974 as amended in 1988 and the Fund Convention 1992.
However, there is no Legislative amendment disapproving the principle in Article 4 of the International Convention on Arrest of Ships, 1999. Hence, the pre-existing principle of Admiralty Law in vogue for the last several decades must be treated as continuing to apply in India.
53. We must also deal with the submission made on behalf of the respondent-plaintiff that in M.V.1 Sea Success case, the 1999 Convention would be subject to the domestic law which may be enacted by Parliament and that the Convention should be applied only for an enforcement of the contract involving public law character. The observations in the said decision would apply where the International Convention provides for a law which was not hitherto the principle in International Common Law.
But where the International Convention merely adopts the pre-existing International Common Law (as enunciated in Halsbury's Law of England and various commentaries on admiralty jurisdiction as referred to in this judgment), the caveat sounded in para 60 of the judgment in M.V.1 Sea Success case would not apply.
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54. The learned Counsel for the respondent has vehemently relied upon two unreported judgments of this Court (1) dated 8 September 1986 and the other dated 6 May 2010.
55. Obviously when the decision in Admiralty Suit No.14 of 1986 was rendered on 8 September 1986, the learned Single Judge did not have an occasion to deal with the International Convention on Arrest of Ships, 1999. Otherwise also on carefully going through the said judgment we find that the learned Single Judge referred to various text books on Admiralty law and two important judgments cited by the learned counsel for the defendants in support of the contention that maximum security that could be asked for is the value of the arrested vessel and nothing more: Admiralty Practice 1902 (Bruce) at page 291/ British Shipping Laws, Volume I / Admiralty Practice by Mc.Guffie, Fugeman and Gray at page 322 / British Shipping Laws, Volume 14 by D.R. Thomas at page 387 / Charlotte's case and the decision of the Privy Council in The Law Reporters, Privy Council Appeal Cases, Volume 4 page 194-211, Hulsbury's Laws of England, Fourth Edn.Vol.1 page 377 which is similar to para 386 quoted in para 31 of this judgment.
It is necessary to reproduce the following observations made by the Privy Council in the last cited case:-
"Their Lordships find that this is not the rule in the Admiralty Courts, but that after bail has been given, on a proper case being made out, the Court of Admiralty will go into the question, whether the res which was seized - the whole of the property which was attached - was of more or less value than the amount for which the bail was given, and if it is found that it is for less value, then the parties will only be obliged to pay the amount of that....."
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56. The learned Single Judge then gave the following reasons for rejecting the defendants' application for reducing the amount of security:-
"10. Looking to the rival contentions and keeping the observations made in the aforesaid citations in mind, it may be stated that in the cases cited by Mr. Mukherjee, the cases of CHARLOTTE, and THE STAFFORD SHIRE deal with damage done by a ship, and a lien in respect thereof must necessarily be confined to the value of the ship. The third case refers to a bottomary bond and the security called for must necessarily be confined to the extent of the bond. But as stated earlier, in the present case, the damage to the ship only amounts to Rs.52,21,108.80. A large part of the plaintiffs' claim is in respect of the amount that will be required to remove the wreck from the sea which they are under a statutory duty to carry out. That the plaintiff is under a statutory obligation to do so is not disputed by the defendants. If this be the position, then considering Rule 952 of the Court and the observations contained in Earsden and Halsbury's laws of England (reproduced above), a security equivalent to the plaintiffs' claim would be proper. Mr. Kukherjee's contention that the security must be such sum to the extent of the value of the ship in the facts and circumstances of this case cannot be sustained."
(emphasis supplied) Plaintiffs' claim was for Rs.3.70 crores and the Court found that damage to the ship amounted to Rs.52.21 lakhs, but large part of the plaintiffs claim was in respect of the amount to remove the wreck from the sea which the plaintiffs themselves are under a statutory duty to carry out. The judgment does not indicate the value of the vessel. In any case the underlined reasoning given by the learned Single Judge supports the defendants' case.
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57. The second decision dated 6 May 2010 rendered by another learned Single Judge of this Court in Notice of Motion No.1368 of 2010, did, however, refer to the submissions of the defendant regarding Arrest Convention of 1999 (para.11 of the Judgment). However, the decision does not indicate any reason for not acting upon the said International Convention on Arrest of Ships, 1999 and particularly Article 4 thereof.
The learned Single Judge simply referred to provisions of Section 433 of the MS Act without holding that the provisions of Article 4 of the 1999 Convention are inconsistent with the provisions of Section 433 of the MS Act or Rule 954 of the Original Side Rules of this Court. It is, therefore, not possible to approve the proposition laid down in the said decision.
58. In view of the above discussion, we hold that when value of the arrested vessel is less than the plaintiff's best arguable case in an Admiralty Suit for damages, the value of security which the Admiralty Court may call upon owner of the arrested vessel to furnish will not exceed value of the arrested vessel as independently assessed.
59. Since there is a dispute about the valuation made by the valuer appointed by the second defendant, the matter will have to be remitted to the learned Admiralty Judge for getting independent valuation of the arrested vessel and thereafter, for passing appropriate orders in light of the principles laid down in this judgment.
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60. In the facts of the present case therefore, we set aside the order dated 26 November 2011 of the learned Admiralty Judge and restore Notice of Motion No.1525 of 2011 on the file of the learned Admiralty Judge for the purpose of deciding the same after getting independent valuation of the arrested vessel.
61. Appeal is accordingly allowed to the aforesaid extent.
ig CHIEF JUSTICE
(RANJIT MORE, J.)
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