Gujarat High Court
Bulk Marine Pvt. Ltd. vs M.V.Silvia Glory (Imo 9622942) on 26 June, 2020
Author: Sonia Gokani
Bench: Sonia Gokani
C/AS/11/2019 IA ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (FOR ORDERS) NO. 1 of 2019
In R/ADMIRALITY SUIT NO. 11 of 2019
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M.V.SILVIA GLORY (IMO 9622942) Versus BULK MARINE PVT. LTD.
========================================================== Appearance:
MR ZARIR BHARUCHA, Ld. ADVOCATE, MR DHAVAL M BAROT for the PETITIONER(s) No. MR MIHIR THAKOR, MR MANAV A MEHTA for the RESPONDENT(s) No. ========================================================== CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI Date : 26/06/2020 IA ORDER Rule. Learned Advocate, Mr. Mehta, waives service of rule for the respondent.
1. For the sake of brevity, the applicant, herein, shall be referred to as the defendant, whereas, the opponent shall be referred to as the plaintiff, in this matter.
2. The plaintiff is the Company, incorporated under the laws of Singapore, having its office at the address mentioned in the cause-title of the main matter, being Admiralty Suit No. 11 of 2019. The Company is engaged in the business of shipping and it also charters the vessels.
2.1 The defendant Vessel is a foreign, sea going vessel, flying the flag of Hong Kong, identified by its IMO 9622942 and its registered Head Owner is the Applicant/Defendant i.e. Best Excellence Corporation Limited.
3. The Plaintiff has sought judgment and decree against the Page 1 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Defendant Vessel and her arrest, sequestration, condemnation and sale for securing and/or satisfying the Plaintiff's claim as per particulars of claim. The Plaintiff has filed the said Suit within the territorial jurisdiction of this Court, narration of the relevant facts and documents by way of averments in the plaint, are as under:
3.1 The plaintiff chartered the Defendant Vessel which was originally chartered from its Head Owners; Best Excellence Corporation Limited to Lianyl Shipping Limited and from Lianyl Shipping Limited to Admiral Shipping LLC (Admiral hereinafter). The plaintiff and Admiral entered into Charter Party dated 12.09.2018, on a one Time Charter trip via Indonesia to West Coast India only. Under the terms of the Charter Party the Charterer, the plaintiff claims to have a lien on the ship for all the monies paid in advance to Admiral and not earned.
3.2 The Plaintiff then entered into a Voyage Charter Party Agreement with one Excelzior Logistics Limited, U.K. (Excelzior hereinafter) for the carriage of 55,000 MTS of Indonesian Steam Coal in Bulk from Muara Berau, East Kalimantan to Kandla Port, India / Other Ports in West Coast of India as per charter's option, but, not south of Mumbai as narrated in detail in clause 7 of the said Agreement. The said Bills of Lading were to be issued from the load port. As per the said Charter Party, the plaintiff herein had a right of lien on the Cargo loaded on the ship for the repayment of the Freight Charges, Dead Freight as well as Demurrage.
3.3 Pursuant to the said Voyage Charter Party Agreement a total quantity of 53,575 MT Indonesian Steam Coal in Bulk was loaded on the Vessel on 21.10.2018. Consequently Bills of Lading dated 21.10.2018 were issued by the Plaintiff's Agent "PT Wallem Sentosa Page 2 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Shipping Service" at the load port, in conformity with the Mate's Receipt issued by the Master of the Defendant Vessel. Such Bills of Lading were signed by the plaintiff's agent pursuant to a post facto Letter of Authority dated 23.10.2018, issued by the Master of the Vessel. The Bills of Lading clearly mentioned "Freight payable as per Charter Party dated 12/09/2018". The said Bills of Lading were issued showing one PT Energi Lintas Samudra (representative of Nava Investment PTE LTD of Indonesia) as the shipper with further endorsement "To Order of Habib Bank Zurich (Hong Kong) Ltd, Hong Kong" and showing notified parties as (1) AR. Trading Co Ltd and (2) Torq Commodities Private Limited. The said Bills of Lading issued by plaintiff's Agent, remained in its safe custody, as per the terms of the Charter Party. The Head-
Owners/ Master of the Vessel, thus, according to the Plaintiff, had the actual knowledge of the rights and liability of the plaintiff arising from the Charter Party dated 12.09.2018 entered into with Excelzior Logistics, U.K. 3.4 The Plaintiff issued a Freight Invoice on 23.10.2018, as per freight mentioned in the Voyage Charter Party Agreement dated 12.09.2018 with Excelzior Logistics Limited, U.K. The plaintiff's claim arises from the Charter Party Agreement read with the Bills of lading forming an agreement in relation with carriage of Goods and use and/or hire of the Vessel. The said invoice payment was to be made within five banking days after completion of loading and releasing of signed stamped B\L and receipt of Invoice from plaintiff. The Original Bills of Lading were to be kept in the custody of the Agent and to be released to the Shippers upon irrevocable receipt of full freight into Owners' nominated account.
3.5 The Plaintiff was awaiting freight payment and thereupon Page 3 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER
instructed its Agent to part with the Original Bill of lading as per the Agreement. However, the Plaintiff was informed that there has been certain dispute between Seller and Buyer of the Cargo with respect to opening of the Clean Letter of Credit. The plaintiff was informed by the Shipper not to forward the Original Bills of Lading to the Buyer (Torq Commodities Private Limited). The plaintiff was also repeatedly advised by the Shipper to withhold the Original Bills of Lading and not part with the possession of the same. The plaintiff was, therefore, left with no other alternative but to retain the Original Bills of Lading, comprising its right to demand the Freight. In the meanwhile, the Vessel arrived at Kandla at outer anchorage on 07.11.2018. Due to the delay that had occurred at the load port, the plaintiff was entitled to recover an amount of USD 325,961.46 towards load port demurrage. The plaintiff had also become entitled to recover demurrage due to the delay that had occurred in discharge of the Cargo at Kandla and anticipating that discharge would not take place before 30.11.2018, it estimated the demurrage at discharge port to the sum of USD 253,272.50. Thus, the plaintiff raised a demurrage Invoice dated 19.11.2018 for the sum of USD 579,233.96.
3.6 As soon as the owner Lianyl Shipping Limited came to know about the dispute between the Shipper (Nava Investment Private Limited) and the old Buyer (Torq Commodities LLC),it requested the plaintiff's agent on 21.11.2018 to send the original Bills of Lading to it. The owner also sought confirmation from plaintiff's agent, if, they were still holding the original Bills of Lading or not. Plaintiff's agent, in turn, replied on the very same day and confirmed the possession of the original Bills of Lading and stated that they would release the same only after written communication from their principal, i.e. plaintiff, and Head Owners i.e. Best Excellence Corporation Limited. It was further clarified Page 4 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER that they would part with the cancelled Bills of Lading to the head owners only or any other (entity), if routed through their principal i.e. plaintiff.
3.7 On 20.11.2018, the plaintiff's agent sent an e-mail to the Head Owners' Agent (Forerunner Shipping Company Limited) and the Master of the Vessel, informing them that old contract between Shipper and Torq Commodities LLC stood cancelled and therefore, earlier load port Bills of Lading would remain cancelled. They were also informed that the details of revised Mates' Receipts and Bills of Lading would be forwarded to them for their approval.
3.8 By way of e-mail dated 22.11.2018, the Head Owner through its Agent (Forerunner Shipping Company Limited) advised plaintiff's Agent to stamp the original Bills of Lading null & void and courier them along with Mates' Receipts to the head owners on the address provided. It is further its case that the Head owner and the Master of vessel maintained a stoic silence regarding the approval of the revised Mate's Receipt and Bill of Lading. While acting in good faith, the Plaintiff cancelled the Bills of Lading and Mates' receipts and sent the same to the Head Owner of the Vessel to re-issue the Mates' Receipts. The plaintiff, subsequently, also sent the revised draft of the Bills of Lading and Mates' Receipts to the Master of the Vessel and the Head Owners for their confirmation. The plaintiff also requested the Master of the Vessel to sign and send the Mate's Receipt, so that plaintiff's Agent could issue the switched Bill of Lading. As stipulated in the Charter Party, the Bill of Lading had to be issued in conformity with the Mate's Receipt only. Therefore, even though the plaintiff's Agent had the Letter of Authority to issue the switched Bill of Lading, the same could not be done in absence of the Mate's Receipt. The plaintiff also Page 5 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER sent various reminders, but, the same was of no consequence. In fact, at one point even the Shipper expressed its displeasure over the delay in signing of the Mate's Receipt by the Master of the Vessel. The Owner and the Master of the Defendant Vessel continued to maintain their silence over the issuance of the switched bill of lading and Mate's Receipt. Meanwhile, the plaintiff learnt from the market through reliable sources that Nava Investment Private Limited acting through PT Energi Lintas Samudra as the Seller/Shipper of the Cargo on account of its disputes with the original buyer had terminated the earlier Sale Purchase Contract with Torq Commodities LLC and had entered into a Re-Sale Contract with Vimal Coal Private Limited.
3.9 It is the say of the plaintiff that to its utter surprise, the Master of the Vessel, acting under the instructions of the Head Owners of the Vessel, on 28.11.2018 cancelled the Letter of Authority dated 23.10.2018, issued in favour of the plaintiff and/or its agent, authorizing them to legally sign and issue the Bills of Lading. The Master further stated that he was awaiting for further instructions from the Head Owners to re-issue the Bills of Lading and Mate's Receipt. The plaintiff upon the receipt of information of the alleged illegal termination of the Letter of Authority, by the Master of the Vessel at behest of the head owners, addressed an email dated 29.11.2018 to the Master as well as to the Head Owner, lodging its protest against such illegal termination of the Letter of Authority. The plaintiff vide such e-mail also questioned the intention of the Master and the Head Owners in canceling the Letter of Authority and warned them of the consequences and reserved its rights to prosecute them for the future losses/claims.
3.10 According to the plaintiff, the cancellation of the Letter of Authority not only resulted in breach of the terms and conditions of the Page 6 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Charter Party dated 12.09.2018 entered into with Excelzior Logistics Limited, UK, but, it also infringed upon the rights of the plaintiff to recover freight, dead-freight, demurrage and other charges from the Shipper. Such fraudulent termination of Letter of Authority, thus, entitled the plaintiff to proceed against the head owners for the claim set out in this Suit.
3.11 The Master of the Vessel and the Head owners, on receipt of the plaintiff's communication dated 29.11.2018, realized that they may be put to serious consequences by the cancellation of the Letter of Authority during the subsistence of the Charter Party dated 12.09.2018 entered into with Admiral Shipping LLC. Therefore, the head owners of the vessel in collusion with the owners terminated and/or ensured the termination of the back-to-back Charter Parties, including the Charter Party dated 12.09.2018. It is urged that the Admiral Shipping LLC could not have terminated the Charter Party dated 12.09.2018, as the Admiral had already received part payment, towards hire charges, from the plaintiff, and therefore a lien, charge, claim was already created over the vessel in favour of the plaintiff. According to the plaintiff, a total sum of USD 969,806.80/- was already paid to Admiral Shipping and only a meager sum of about USD 110.543.07/- was left to be paid.
3.12 It is alleged by the plaintiff that perusal of termination Notice would, itself, indicate the collusion of the Head owner (Best Excellence Corporation Limited) with the owners (Lianyl Shipping Limited and Admiral Shipping LDC). Admiral Shipping LLC vide Termination notice dated 02.12.2018 sought to terminate the Charter Party with effect from 30.11.2018. Such dating back of the Termination was done with an attempt to cover up the alleged fraudulent cancellation of the Letter of Authority. The plaintiff has thus, claimed Page 7 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER entitlement to arrest the defendant vessel in order to exercise its claim. The head owners terminated all the back to back charter parties, according to the Plaintiff, to escape its liability to pay plaintiff's claims. The plaintiff has also communicated its opposition to the alleged illegal termination by Admiral Shipping LLC. The Plaintiff also sent e-mail dated 12.12.2018 through its Advocate to the seller of the Cargo, Nava Investments Private Limited and to the proposed Buyer, Vimal Coal Private Limited and intimated that the Plaintiff would exercise lien over the cargo for the reasons mentioned, therein. Since, they denied the right of the Plaintiff to exercise the lien, the Plaintiff through its Advocate sent further reply via e-mail dated 14.12.2018 and clarified that it has all the rights to exercise lien and it would proceed to exercise the same.
3.13 According to the plaintiff, it has a recognized maritime claim against the defendant vessel under the provisions of Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, and the international conventions. According to the plaintiff, claim is constituted on a valid maritime claim, as is held by the Apex Court in the case of 'M.V. ELISABETH AND ORS. Vs. HARWAN INVESTMENT AND TRADING PVT. LTD., HANOEKARHOUSE, SWAT', AIR 1993 SC 1014, and as laid down by way of ratio binding to all Courts. The plaintiff has further averred that it is entitled to proceed in rem and this Court has jurisdiction to entertain and try this Suit under the provisions of the Admiralty Act, 2017.
4. It is worthwhile to mention at this juncture that this Court granted interim relief, on 26.02.2019, by passing the following order:
"[1.0] The Suit was filed on 18.02.2019 and came to be circulated on 19.02.2019. The Defendant had already Page 8 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER filed the Caveat No.371 of 2019, and therefore Mr. Dhaval M. Barot appeared for the defendant vessel, having been supplied with the advance copy of the Plaint.
[2.0] On the said day with consent of the Advocates appearing on behalf of both the parties the same came to be adjourned to 21.02.2019, as the connected matters were kept for hearing on the same day. Today morning the Advocate appearing for the Plaintiff mentioned for urgent circulation. Considering the urgency, matter is permitted to be circulated today.
[3.0] Shri Mihir J. Thakore, leaned Senior Counsel for the plaintiff, submitted that the claim is with respect to recovery of the advance hire charges paid /freight and demurrage recoverable from the owners of the Defendant vessel. It is the say of the plaintiff that the head owners along with the dispondent owners of the defendant vessel had colluded inter se to frustrate the rights of the plaintiff, by making the plaintiff part with the custody of the Original bills of lading. It is further say of the plaintiff, that thereafter the head owner through the Master of the Vessel has fraudulently cancelled the Letter of Authority issued in favour of plaintiff and /or its agent and has further cause to terminate back to back charter parties, and therefore the head owner of the defendant vessel is liable for the claim of the plaintiff. The plaintiff contended that the plaintiff's claim is a recognized maritime claim.
[4.0] Having considered the plaint and the supporting documents, it prima facie appears that the plaintiff's claim requires consideration. In the mean time, it would be in the interest of justice to order arrest of the defendant vessel as had been prayed for. On hearing Shri Mihir J. Thakore, learned Senior Counsel for the plaintiff and upon reading the plaint herein declared at Ahmedabad on the 18.02.2019 filed by the advocate for the plaintiff herein and the affidavit of Shri Vilas Datania, power of attorney holder of the plaintiff above named, affirmed on 17.12.2018 AND UPON HEARING counsels for the plaintiff AND UPON THE PLAINTIFF giving an undertaking in writing to the Registrar of this Court to pay such sums by way of damages as this Court may award as compensation in the event of the defendant sustaining Page 9 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER prejudice by this order, I DO ORDER THAT the Registrar of this Court DO ISSUE a warrant for the arrest of the defendant vessel, M. V. SILVIA GLORY, along with her hull, engines, gears, tackles, bunkers, machinery, apparel, plant, furniture, equipments and all appurtenances, at present lying at the Deendayal Port at Harbour of Kandla and that the Warrant of Arrest be executed at any time of the day or night or on Sundays or holidays and I DO FURTHER ORDER that the Port Officer at the Deendayal Port/ Kandla Port and the Customs Authorities at Deendayal Port/ Kandla Port do effect the arrest, seizure or detention of the defendant vessel, M. V. SILVIA GLORY at the Deendayal Port/ Kandla Port or such other place wherever she may be within the territorial waters of India AND I do further order that in the event of the defendant and/ or those interested in her depositing in this Hon'ble Court a sum of U.S. $1,470,563.93 together with further interest thereon at the rate of 1% per month on U.S. $1,270,563.93 from the date of filing suit until payment the said Warrant of Arrest shall not be executed against the defendant vessel M.V. SILVIA GLORY.
[5.0] The Port Officer and the Customs Authorities at Deendayal Port/ Kandla Port are directed to arrest the vessel at present lying at Deendayal Port/ Kandla Port within the territorial waters of India and to keep the vessel under arrest until further orders of this Court. It is further ordered that the Port Officer and the Customs Officer at Deendayal Port/ Kandla Port shall render all assistance to the plaintiff or its representative in effecting the warrant of arrest on the vessel M. V. SILVIA GLORY.
[6.0] The undertaking filed by Mr. Vilas Datania, power of attorney holder of the plaintiff is taken on record.
[7.0] The plaintiff is permitted to serve the warrant of arrest on the master of the vessel M.V. Silvia Glory via her agent. The plaintiff is also permitted to serve the order by fax as well as email upon the Port and Customs Authorities at Deendayal Port / Kandla. The authorities are directed to act on the basis of order received by fax / email and take M.V. Silvia Glory under arrest.Page 10 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
C/AS/11/2019 IA ORDER
Stand over to 06.03.2019
Direct service is permitted TODAY."
5. On the next date, learned Advocate, Mr. Dhaval M. Barot, filed his appearance for and on behalf of the applicant-defendant and requested for urgent circulation of the main matter. He also furnished the cash security of USD 14,71,000/-, comprising of principal amount, interest and other loses. The short-fall of amount of interest, approximately USD 4000/- was calculated from the date of filing of the Suit, i.e. 18.02.2019 till payment, i.e. on 27.02.2019.
6. This Court (Coram: Mr. A.J. Desai, J.) passed following order on 27.02.2019:
"[1.0] Mr. Dhaval Barot, Learned Advocate for the Defendant mentioned this matter for urgent circulation today. Permission is granted for urgent circulation and suit is taken up for hearing for the release of the Defendant Vessel.
[2.0] Mr. Dhaval Barot, learned Advocate appearing for the Defendant has submitted a purshish stating that the Registered Owners of the Defendant Vessel has furnished cash security to this Court, without prejudice to their rights and contentions in the suit and has prayed that the order of arrest be vacated and the Defendant Vessel be released from arrest. The purshish is taken on record.
[3.0] Mr. Dhaval Barot, Learned Advocate for the Defendant states that the Registered Owners have, on a without prejudice basis and without admitting to any liability, paid into the account of the Registrar General, High Court of Gujarat, a cash security of USD 1471000/- which comprises of the Principal Amount, interest and Cost of Litigation as claimed by the Plaintiff and as Page 11 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER directed in the order dated 26.02.19. The shortfall of amount of interest approximately USD 4000/- calculated from the date of filing of the suit I.e. 18.02.19 till payment i.e. 27.02.19 will be deposited by the registered owners of the defendant within a period of one week from today. The registered owners undertake to deposit the said sum of USD 4000/- within a period of one week from today. Therefore the total amount which will be deposited by the registered owners would be USD 1475000/-.
[4.0] Mr. Manav Mehta, Learned Advocate for the Plaintiff states that only on receipt of proof of actual deposit by the Registry, this Court may pass order of release of the Defendant Vessel.
[5.0] Having heard the Learned Advocates for the respective parties and in light of the fact that Defendant stated that it has deposited security of USD 1471000/- towards the Plaintiff's claim in the Suit and has undertaken to deposit further amount of USD 4000/- within a period of one week from today as mentioned above, on a without prejudice basis, the following order is passed:
a. Registry shall verify that the Registered Owners of the Defendant Vessel has deposited an amount of USD 1471000/- in Punjab National Bank, NRI Branch, Pelican Building, Ashram Road, Ahmedabad in Account No. 740600VQ00000013, Swift Code No. PUNBINBBAIB and AD Code No. 0303969.
b. On confirmation of the receipt of the remittance of USD 1471000/- as above, the concerned branch of Punjab National Bank is further directed to invest the same in a Fixed Deposit with cumulative effect in the name of Registrar, High Court of Gujarat.
c. On receipt of the intimation that such remittance has been made and received by Punjab National Bank, NRI Branch, the Defendant Vessel shall be permitted to sail out of the Deendayal Port. On remittance of USD 1471000/- being received by the Bank, the Bank shall Page 12 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER intimate the same to the Registry forthwith.
d. On such intimation being received by the Registry, the order of arrest dated 26.02.2019 shall stand vacated, and the Defendant Vessel shall be permitted to sail out.
e. Registry shall inform the Learned Advocates for the Defendant and the Plaintiff about such remittance having been received by the Bank.
f. Upon the Registry informing the Learned Advocate for the parties about such remittance having been received by the Bank, the Port Officer and Customs Authority at the Deendayal Port are directed to permit the Defendant Vessel to sail out of the Deendayal Port and render all necessary assistance to the Defendant and its representatives on production of simple copy of such communication addressed by the Registry to the Learned Advocate for the Defendant;
g. Upon the Registry informing the Advocate for the Defendant that the remittance has been received, it will also be open for the Defendant and/or its Advocate to communicate the above order by fax message/Email at their own cost and the Port and Customs Authority at the Deendayal Port are directed to act on fax/email message with an ordinary copy of the order; [6.0] It is made clear that the security furnished shall be without prejudice to the rights and contentions of the parties.
[7.0] S.O. to 06.03.2019.
[8.0] Direct service is permitted TODAY."
7. The present application came to be filed on 05.03.2019 by the defendant-applicant for setting aside the arrest of the vessel and for return of the amount of security deposit tendered by the defendant and also for directing the plaintiff to furnish the counter guarantee.
Page 13 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER
8. The applicant-defendant by moving present application has sought the following prayers:
"65. ...
a. Order and direct the order of arrest 26 February, 2019 be vacated and the security furnished by the Applicant be returned, along with accrued interest;
b. Order and direct that the Respondent's suit be dismissed.
c. order and direct that the Respondent/plaintiff to compensate the Applicant/Defendant for its legal costs of USD 1,75,000 and that pending the hearing of the Application, the Respondent / Plaintiff secure the Applicant / Defendant's said legal costs under Order 25, Rule 1 of the Code of Civil Procedure.
d. order and direct that the Respondent/Plaintiff compensate the applicant/Defendant towards losses suffered by the Applicant/Defendant on account of the wrongful/unjustified arrest of the vessel, in pursuance of the undertaking given by the respondent/plaintiff.
e. pending the hearing of this application, the respondent/plaintiff be directed to furnish security of USD 175,000 towards losses suffered by the Applicant and towards legal costs and security of USD 390,790 for losses incurred in Admiralty Suit No. 1 of 2019 for unpaid bunkers admittedly ordered by the respondent aggregating to USD 5,65,790/-.
f. For ad-interim reliefs in terms of the relevant prayer clauses above.Page 14 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
C/AS/11/2019 IA ORDER
g. ..."
9. This application more being a written-statement and also an application for vacating the stay, the detailed contentions raised herein deserve consideration.
9.1 The defendant has denied each and every averment made in the plaint and it is contended that the plaintiff has no prima facie case and there is no privity of contract with the plaintiff. This application has been preferred for the purpose of vacating the order of arrest and for return of amount of security.
9.2 It is, further, urged that the plaintiff has suppressed the important documents and material and has mis-stated the facts with a mala fide intention. It is also urged that the order of arrest was also not obtained with the clean hands.
9.3 According to the defendant, it is normal in the shipping trade that the owner of a vessel to charter or hire out a vessel to Party - A and party A , in turn, to sub-charter the vessel to Party-B and so on and so forth and the same has been done in the instant case. The contractual chain evolved in the context of this vessel is narrated as follows:
"Best Excellence Corporation Ltd. (Head Owner / Applicant/ Defendant)→Lianyl Shipping Ltd. →Admiral Shipping LLC → Bulk Marine Pvt. Ltd.
(Respondent/Plaintiff)→ Excelzior Logistics Ltd.."Page 15 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
C/AS/11/2019 IA ORDER 9.4 According to the defendant, this is found in Clause 3 of the
Voyage Charter party dated 12.09.2018, entered into between the Plaintiff and its contractual counterpart, i.e. Excelzior Logistics Ltd. and between Lianyl Shipping Ltd. and Admiral Shipping LLC, together with time charter party dated 31.08.2018. It is, therefore, emphasized that there is no direct contractual connection between the plaintiff and the defendant. The plaintiff would pass on its instructions up the chain and the defendant, if, instructed by its charterer (i.e. Lianyl Shipping Ltd.) to do so, would accept the said instructions. The defendant, therefore, was not obliged to take any instructions directly from the Plaintiff if, at all, there was any direct interaction between the defendant and the plaintiff, it was only because Lianyl Shipping Ltd., which is the contractual partner of the defendant, had instructed the defendant to do so.
9.5 The Clause-8 of the Charter Party between the defendant and Lianyl Shipping Ltd. states as under:
"... The Captain (although appointed by Owners) shall be under the orders and directions of the Charterers as regards employment and agency..."
9.6 According to the defendant, cargo was loaded on board of the vessel on 21.10.2018 for carriage from Muara Berau, Indonesia to Kandla, India.
9.7 Since, the Defendant did not have any agent at load port, to save time and for ease of logistical purposes, the Defendant issued a Letter of Authority dated 23.10.2018 to the Plaintiff for the limited purpose of authorizing the plaintiff to sign Bills of Lading, strictly in accordance with Mate's Receipt for and on behalf of the defendant and Page 16 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER under no circumstances, was there any other agreement or arrangement between the Plaintiff and the defendant. The Plaintiff's right to obtain such Letter of Authority from the Master originates from Clause-58 of the Charter Party between Admiral Shipping LLC and the defendant. The said clause 58 reads provides that "...Master and Owners to authorize Charterers and/ or their agents to sign Bill of Lading for and on behalf of the Master, if so, required by Charterers, as long as Charterer's fulfill their obligations, stipulated in this Charter Party...".
9.8 From a bare perusal of the said clause, according to the Defendant, it becomes clear that the Letter of Authority would remain operative so long as the Plaintiff fulfills obligations under the Charter Party. According to the Defendant, the Plaintiff failed to fulfill its obligations under the Charter Party, as a result of which, the Letter of Authority was revoked. The Letter of Authority permitted the Plaintiff's agent, Wallem Sentosa Shipping Services to issue Bills of Lading on the Defendant's behalf. However, the Plaintiff did not acquire any rights under the Bills of Lading, which remained a contract between the defendant and the cargo owners. All that was agreed was that, for logistical purposes, Wallem could be the party to physically issue the Bills of Lading. Bills of lading for the Cargo on board were issued on 02.11.2019 by Wallem on the defendant's behalf. As there was a subsequent change in the buyers of the Cargo, the defendant was asked to issue "Switched Bills of Lading". Initially, it was the Plaintiff, who, on 20.11.2018, at 15:41 hrs., had asked the Defendant to issue the Switched Bills of Lading. There are several subsequent and prior communications on this aspect. The Plaintiff, therefore, according to the defendant ought to have disclosed the communications to which it was a party. However, the Plaintiff has deliberately suppressed some of Page 17 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER those.
9.9 On 19.11.2018, the defendant received an email from Bromar Shipping Ltd.. By the said email, Bromar informed the Defendant that Lianyl had received instructions from its sub-charterer that the Original Bills of Lading were null and void and that the bills of lading were to be reissued. This has been suppressed by the Plaintiff. On 20.11.2018, the Defendant responded to the plaintiff that it will check with its charterers and revert back and this clearly shows that the Defendant was acting for and on behalf of Lianyl. On 20.11.2018, the defendant received another response from Bromar, whereby, Bromar informed that Lianyl had passed along the Plaintiff's message as to the reason for re-issuance of Bills of Lading, which has been suppressed by the Plaintiff. Further, on 23.11.2018, the Plaintiff sent an email to the Master with the draft Bills of Lading it wanted the Master to authorize it to issue. According to the Defendant, this ought not to have been done, since, the Plaintiff had no direct contractual relationship with the Defendant. It is, thus, the say of the Defendant that the draft Bills of Lading sent by the Plaintiff clearly show that the place of issue is to be shown as Indonesia. It was the Plaintiff's draft that showed the place of issue as Indonesia, despite the Vessel being in India by that time. Moreover, the said draft erroneously back dated the Bills of Lading to 21.10.2018, which pre-dated the Letter of Authority, which was issued on 23.10.2018. This also has been suppressed by the Plaintiff.
9.10 According to the Defendant, it was bound to follow its charterer's, namely Lianyl's instructions, if the same was in terms of the Charter Party between the Defendant and Lianyl. However, no instruction had been forthcoming from Lianyl on issuance of fresh Bills of Lading in the form required by the Plaintiff. In view of this, taken Page 18 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER along with the fact that it had no direct contractual relationship with the Plaintiff, the defendant did not respond to the Plaintiff's email. The Plaintiff, then, sent another email on 23.10.2018, in which it raised according to the Defendant several unpalatable contentions. Since, certain vague allegations had been made against it, the Defendant was constrained to respond to the Plaintiff directly vide email dated 24.11.2018, whereby, it highlighted the lack of privity of contract between the Plaintiff and the Defendant and proceeded to respond to each of the Plaintiff's incoherent allegations. This email also has been deliberately suppressed by the Plaintiff. Thereafter, on 28.11.2018, the Defendant was informed that Lianyl was going to terminate its Charter Party with Admiral for non-payment of hire. Admiral's non-payment to Lianyl was no doubt triggered by the Plaintiff's admitted default in payment of hire to Admiral. Thereafter, the Defendant revoked the Letter of Authority given by the Master to Wallem. i.e. the Plaintiff's agent, in accordance with Clause-58 of the Charter Party between Admiral and the Plaintiff. The Defendant, on 28.11.2018, revoked the Letter of Authority dated 23.10.2018 given to Wallem, only because the Plaintiff failed to fulfill its obligations to pay hire to Admiral, who in turn failed to pay Lianyl, thus, breaching the conditions of the Charter Party, led to chain of consequence. On 30.11.2018, Lianyl sent another email to Admiral terminating the Charter Party between it and Admiral, where, the Defendant was also marked in, and so was the Plaintiff's agent.
9.11 Thereafter, Admiral, on 02.12.2018, effectively passed on the same message to the Plaintiff that because of the Plaintiff's failure to pay hire to it, Admiral could not, in turn, pay hire to Lianyl and as a result of which, Lianyl terminated its contract with Admiral and Admiral in turn terminated its contract with the Plaintiff.
Page 19 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER 9.12 Thus, the picture that emerges is that the Plaintiff stopped
paying hire to its contractual counterpart, owner, as a result of which the Charter Patty chain was broken. The chain having been broken, the Plaintiff's entitlement to any Letter of Authority also came to an end. In any case, the Plaintiff's entitlement was dependent on it fulfilling its obligations under its Charter Party with Admiral. Having, thus, failed to fulfill its obligation of payment of hire, it was, but, logical that, inter alia, the Letter of Authority would be revoked.
9.13 Therefore, according to the defendant, on Lianyl's instructions, it authorized the issuance of Switched Bills of Lading on 14.12.2018 by one Cos Marine Co. Ltd, who was its newly appointed load port agent in Indonesia. The Plaintiff sought to place reliance on email dated 29.11.2018, which was sent by it, after the Letter of Authority was revoked by pointing out that this had remained unanswered. However, according to the defendant, this is factually incorrect, since, the said email was immediately responded by the defendant's Lawyer at Hong Kong on 30.11.2018, itself, which has been suppressed by the Plaintiff.
9.14 It is the case of the Defendant that the plaint dated 28.02.2019 for arrest of the vessel was filed by the Plaintiff on the misconceived ground that it has a legitimate maritime claim/lien against the vessel. The Plaintiff also, according to the defendant, has vaguely and mischievously held the defendant liable for amounts due to it from third parties, who are wholly unrelated to the Defendant. The Plaintiff has vaguely categorized its claim as a 'Maritime Claim' under the Admiralty (Jurisdiction and Settlement) of Maritime Claims Act, 2017, without specifically pointing out to this Court, the nature of its claim. The Plaintiff's case seems to be centered around (i) Alleged fraudulent Page 20 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER cancellation by the Defendant, on 28.11.2018, the Letter of Authority dated 23.11.2018 given in favour of Wallem i.e. the Plaintiff's agent (ii) the Defendant colluded with Admiral and Lianyl and terminated all the Charter Party agreements, (iii) the Defendant concocted the Switched Bills of Lading dated 14.12.2018 and colluded with the shipper on the ground that the place of issuance is shown as Indonesia, while the Vessel was in India and (iv) the Defendant is liable to reimburse the hire paid by the Plaintiff to Admiral or, alternatively, the freight or demurrage or dead freight due to the Plaintiff from its charterer, Excelzior Logistics Ltd., UK.
9.15 According to the Defendant, none of these furnishes a cause of action to the Plaintiff against the Defendant and they are all, not only patently false, but as such, have no basis in law or in fact. The Plaintiff, according to the Defendant, has failed to show any in personam liability of the Defendant for the purported maritime claim set out in its Plaint. It is urged that the Admiralty Act, 2017, specifically, provides that in personam liability of the owner of the vessel is mandatory for maintaining an action in rem against the vessel. Thus, the Plaintiff's case, in fact, is against Admiral for alleged wrongful termination of its Charter Party and / or against Excelzior Logistics Ltd., UK, for nonpayment of freight or dead freight or demurrage and / or against the cargo interests for an alleged lien on the cargo.
9.16 It is, further, the say of the Defendant that it does not stand to gain anything by defrauding the Plaintiff, as is wrongly alleged by the Plaintiff. The Switched Bills of Lading issued by the Defendant are genuine and it is not concerned with or responsible for the cancellation of any of the Charter Parties. There is a complete absence of element of fraud involved as alleged in cancellation of Letter of Authority and Page 21 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER therefore, the Defendant shall not be liable for advance hire, if any, paid by the Plaintiff to Admiral Shipping LLC. It shall also not be liable for the non-receipt of freight or dead freight or demurrage due to the plaintiff from Excelzior Logistics Ltd., UK, and there is no Maritime Claim against it. The Plaintiff, according to the Defendant, has raised purported claims on several parties, including the shipper, its charterer, namely Excelzior Logistics Ltd., UK, and Admiral Shipping LLC, the consignee and the owner, the defendant. According to the Defendant, this is nothing, but, a fishing expedition by the Plaintiff to try and harass the defendant into settling its alleged claim, which arose due to the default of its counterpart, namely Excelzior Logistics Ltd., UK.
9.17 The stand taken by the Defendant, thus, can be summarized that the Defendant issued the Letter of Authority for the limited purpose of authorizing the Plaintiff for signing the Bills of Lading for and on behalf of the defendant only because the Defendant did not have any agent at the load port. The Plaintiff failed to fulfill its obligations under the Charter Party with Admiral Shipping LLC, as a result of which, the entire chain is broken. The Defendant also never had any contractual relationship with the Plaintiff and it has no obligation towards the Plaintiff. The alleged loss occurred to the plaintiff was prior to the Defendant's, alleged, wrongful revocation of the Letter of Authority dated 23.10.2018. It is also the case of the Defendant that the Plaintiff's debtor is its Charterer, Excelzior Logistics Ltd., UK. The Plaintiff, however, has sought to hold several parties liable for the said claim. The Plaintiff has already secured its claim by way of alleged lien to be exercised over the cargo, therefore, the present Suit is nothing, but, the gross abuse of the process or law. It is also urged that the entire action is illegal, untenable and deserves dismissal of the suit with costs.
Page 22 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER
10. This has been replied to by the other side by way of its power-of-attorney, where, all the details, which have been provided in the plaint, by and large, have been reproduced. However, all allegations with regard to the suppression of material facts etc. have been denied in toto. It is the stand of the plaintiff that serious disputes have arisen between the parties, which would require adjudication, by permitting the parties to lead evidence and such complex factual disputes can only be decided during the course of trial. It is, therefore, urged that the Plaintiff has made out a strong, prima facie, case, which warrants dismissal of the present application.
11. Affidavit-in-rejoinder also has been filed by the Defendant through its power-of-attorney, namely Shri. Ganesh Marwadi, who has denied all the contents of the affidavit filed by the Plaintiff. According to him, there are no triable issues involved in the Suit and the Plaintiff has not made out, even, prima facie case, as to why the arrest should be upheld. Apart from the bald averments, no material has been produced. On the contrary, the relevant material, according to the Defendant, has been deliberately suppressed by the Plaintiff, which would also make the Suit liable to be dismissed at the threshold.
12. This Court has heard the learned Senior Advocate Mr. Bharucha with learned Advocates, Mr. Dhaval Barot and Mr. Khoobchandani for the applicant-defendant and learned Sr. Advocate, Mr. Mihir Thakor, with learned Advocate, Mr. Manav Mehta, for the respondent-plaintiff.
12.1 Both the sides have also produced various documents and Page 23 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER
also have filed their written-submissions in support of their respective pleadings.
12.2 They also relied on various authorities for substantiating their pleadings and oral submissions, which, as and when necessary ,shall find place in this order.
13. For the Best Excellence Corporation Ltd.-the applicant/ original defendant, which is the head Owner of the defendant vessel, namely Silvia Glory, Learned senior Advocate Mr. Bharucha seeking vacation of the order of arrest dated 26.02.2019 and the return of security and security for costs has essentially and predominantly, fervently submitted that the time charterer of the defendant-vessel, namely Lianyl Shipping Ltd., came into picture on account of Charter Party Agreement between the applicant-Best Excellence Corporation Ltd. and Lianyl dated 07.02.2018. There is already an Email to conclude the contract between the parties, which incorporates terms of an earlier charter party dated 25.05.2017. The Charterer was to use the defendant-vessel and pay the hire and for bunkers.
13.1 The Lianyl gave a sub-contract to the time Charter Admiral Shipping LLC vide agreement dated 31.08.2018. In turn, it gave the sub-sub-time Charter of the vessel to one Bulk Marine Pvt. Ltd., i.e. the original plaintiff and the opponent in this application, on 12.09.2018. The Bulk Marine is the party, at whose behest, the arrest of the defendant vessel has been ordered in Admiralty Suit No. 1 of 2018. It was the Bulk Marine, which had ordered fuel through G.P. Global APAC Pvt. Ltd. and defaulted in making the payment. It is the Bulk Marine, which has defaulted in making payment of hire to Admiralty Shipping. The Bulk Page 24 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Marine has given sub-sub-sub Voyage Charter of the vessel to Excelzior Logistics Ltd. by virtue of the Charter Party agreement dated 12.09.2018 entered into by and between the Bulk Marine and the Excelzior Logistics Ltd..
13.2 It is the say of the Learned Counsel that according to the Bulk Marine, Excelzior Logistics Ltd. is an insolvent and it defaulted in making payment of freight, dead freight and demurrage to Bulk Marine from 30.10.2018. Hence, for the outstanding dues, the Bulk Marine has initiated arbitration proceedings in London, where, the Excelzior is not appearing, allegedly.
13.3 It is, further submitted that it is not unusual in the shipping industry, for the head owner to lease or hire a vessel to a charterer and the charterer, then, sub-leases or hires the vessel to a sub-charterer and so on.
13.4 The contractual arrangements were such that Excelzior would pay freight to Bulk Marine and Bulk Marine would arrange for carriage of goods from Indonesia to India, under the voyage charter party dated 12.09.2018, entered into between Bulk Marine and Excelzior.
13.5 Bulk Marine was required to pay, on regular basis, hire to Admiral and Admiral was to make available the vessel M.V. Silvia Glory for its use as directed under the time charter party dated 12.09.2018, entered into between Admiral and Bulk Marine. The Admiral was also required to pay regular hire to Lianyl and Lianyl was to make available the vessel, M.V. Silvia Glory for its use, as directed under the Time Page 25 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Charter Party dated 31.08.2018 between Lianyl and Admiral.
13.6 Lianyl was also required to pay regular hire to Best Excellence and Best Excellence was to make available the vessel, M.V. Silvia Glory, for its use, as directed under the Charter Party dated 07.02.2018 between Best Excellence and Lianyl.
13.7 According to the Counsel, these are the four separate Charter Party agreements or contracts, which create separate rights and obligations between the parties to the contract.
13.8 It is also the submissions on the behalf of the applicant that in a contract for the sale of goods, once the shipper / seller loads its goods onto the vessel, the ship owner or its nominee, at load port, issues Bill of Lading to the shipper, representing the goods being carried. The shipper or seller, then, endorses and gives the Bill of Lading to the consignee or buyer and receives payment in exchange for the same. This would be either done directly or through bank. Then, the consignee or the buyer, at the discharge port, present the Bill of Lading to the ship owner and take delivery of the goods. The Bill of Lading duly endorsed in favour of a party is evidence of the entitlement to the goods of that party.
13.9 According to the senior Advocate, the party, which would have rights under the Bill of Lading, is the ship owner, the shipper and the consignee or any other party to whom the Bill of Lading has been endorsed. However, mere physical possession of the Bill of Lading does not confer any rights under the Bill of Lading, unless it has been endorsed to the lawful holder of the bills of lading. In this regard, the Page 26 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER reliance is placed on the decision of the Apex Court in 'BRITISH INDIA STEAM NAVIGATION CO. LTD. VS. SHANMUGAVILAS CASHEW INDUSTRIES AND OTHERS', 1990 SCC (3) 481.
13.10 It is, thus, the say of the Counsel that transaction between the shipper and torq is irrelevant to the present Suit, except, to the extent that Bulk Marine has made reference to a dispute between the shipper and the Torq as the background against which, the claim for freight, dead-freight and demurrage has arisen. It is emphatically urged before this Court that the only parties, which shall have right under the Bill of Lading are the shipper-Nava Investments Pvt. Ltd., carrier or ship owner - Best Excellence and the consignee, i.e. Vimal Coal Pvt. Ltd.
13.11 It is the say of the applicant that the Bulk Marine never had any rights under the Bills of Lading, as it was merely a charterer in a chain of charterers, whose only limited logistical role was to physically give the Bills of Lading through its agent, namely Wallem Shipping, to the shipper, i.e. Nava Investments Pvt. Ltd., at load port. Wallem Shipping was appointed for the limited purpose of issuing bills to the shipper, as it did not have a local agent at the load port, i.e. Indonesia.
13.12 It is emphasized before this Court that the entire Suit is an experiment and an abuse of process of law, since, the plaintiff is a dishonest litigant, who has admittedly defaulted in making payment of hire to Admiral and it also has not made payment for the bunkers ordered by it from PG Global, which has resulted into wrongful arrest of the defendant-vessel in Admiralty Suit No. 1 of 2018. it is also urged that the Plaintiff also has, mischievously, filed ambiguous caveat against release from arrest and despite repeated requests to provide Page 27 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER the details of cause of action so also the quantum of claim against the Head Owners, it has not provided the same, and thereby, has suppressed the material documents, at the time of obtaining the order of arrest of the defendant-vessel.
13.13 According to Ld. Counsel for the Defendant, the claim for freight, dead-freight and demurrage, was due to the plaintiff from its Voyage Charterer, namely Excelzior, on 30.10.2018. There is ex facie no causation or link between the plaintiffs alleged claim for freight, dead freight or demurrage and any of the applicant's alleged wrongs. It is urged that the plaintiff has commenced arbitration proceedings against Excelzior in London, where, the case pleaded in the arbitration proceedings, before the Court at London in respect of the very claim, is entirely contrary and wholly inconsistent with the averments made in the Plaint so also the arguments made before this Court. It is, therefore, urged that the plaintiff has ascribed completely different and opposite reasons before the Court at London and before this Court. It is, further, urged that despite Excelzior's failure to participate in the proceedings before the Court at London, the plaintiff has taken no action to obtain and execute an award against Excelzior and instead, it is wrongly seeking to recover its outstanding dues, since, Excelzior is an insolvent, from the defendant-vessel, though, there is no privity of contract with 'the applicant.
13.14 It is also, further, urged that the plaintiff ex facie has no maritime claim against either the defendant-vessel nor is there any material on record to give the Court a 'Reason to Believe' that the applicant is liable to pay the unpaid freight, dead freight and demurrage to the plaintiff. Again, the averments made in the plaint are unsupported by the correspondence. It is also urged that the averments made in the Page 28 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER plaint are completely false and unsupported by the documents produced by the plaintiff, itself.
13.15 According to the Defendant, the vexatious and oppressive nature of the plaintiff's action is further established by the oral arguments, which travel beyond the scope of pleading, since, it is a completely new case of the tort of deceit, where, the privity of contract is sought to be advanced in oral arguments by the plaintiff. It is also emphasized that the order of arrest is wrongly obtained by the plaintiff, on the basis of completely false and unsubstantiated assertions and by suppression of relevant and material facts and correspondences.
13.16 It is urged by the Counsel that, while assessing the merits of the case of the Bulk Marine, the standard of the review should be as provided by the Apex Court in case of 'VSNL VS. KAPITAN KUD, 1996 SCC (7) 127 and the English Law in case of 'SCHWARZ & CO. (GRAIN) LTD. VS. ST. ELEFTERIO'. The standard of review to be applied by a Court in an admiralty suit is the same as in any other interim order, i.e. the prima facie case. This stands to reason, since, the admiralty law is a sub-set of general commercial law and the same principles apply.
13.17 According to the applicant, if, the version of the plaintiff is accepted, then, there will never be a case of an arrest being vacated, since, no case is beyond all reasonable doubt and that would be also contrary to the general principles of commercial law. The standards of review in an admiralty cause have been codified by Section 5(1) of the Admiralty Act, 2017, which provides that the Court must have a reason to believe to uphold the arrest.
Page 29 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER 13.18 According to the applicant, the Indian Admiralty Act, 2017,
is vastly different. Section 5(1) of the Admiralty Act, 2017, states that the Courts must have a reason to believe that the ship owner is liable, and therefore, there is no requirement, under the Indian Law, to postpone or defer the determination of the ship owner's liability to trial. The review is not, whether, the ship owner 'would be liable', but, it is the one, whether, the ship owner 'is liable'. A comparative chart of the Administration of Justice Act, 1956, and the Admiralty Act, 2017, also has been produced.
13.19 It is, therefore, urged that the decision in 'VSNL' (Supra) follows the decision in case of 'SCHWARZ & CO. (GRAIN) LTD.' (Supra), which is no longer a good law, in view of the clear wordings of Admiralty Act, 2017. It is, further, urged that 'VSNL' (Supra) has been interpreted by both by the Bombay and the Gujarat High Courts to mean that the party seeking an arrest, needs to make out a prima facie case. The legislative intent underlying Section 5(1) of the Act of 2017 is apparent. The expression, 'Reason to Believe' employed in Section 5(1) of the Act of 2017, indicates that the legislature was conscious of the fact that the arrest of a ship is a drastic remedy, which disrupts international trade and prejudices innocent third parties. Therefore, the legislature intended the Courts to exercise the arrest jurisdiction cautiously and carefully, after it is satisfied that the owner of the ship is liable. Thus, this new statutory provision imposes a duty on the Courts to probe and evaluate the case of both parties and not just that of the claimant or the plaintiff.
13.20 In short, what has been emphasized on the part of the applicant-Defendant is that the Bulk Marine presently considers Best Page 30 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Excellence liable for the freight, which the Excelzior failed to pay to the Bulk Marine under the Voyage Charter Party dated 12.09.2018, entered into between the Bulk Marine and Excelzior. It also considers the Head Owner liable for the total hire the Bulk Marine has paid to Admiral under the Time Charter Party dated 12.09.2018, entered into by and between the Admiral and Bulk Marine, and thus, from the Head Owner, Best Excellence, it seeks to recover the amount paid under its contract with Excelzior and Admiral, which ought to be recovered from its contractual counterpart. Thus, according to the applicant/Defendant, this is in violation of the basic principles of Admiralty Law. The owner can never be liable for debt, dead-freight or hire or demurrage. According to the applicant, it is noting, but, the abuse of process of law on the part of the Bulk Marine to contend that the amount, which is due to it, be paid by the Head Owner. It, in fact, has urged that the amount due cannot be recovered from the ship owners. It is also the grievance on the part of the applicant-respondent that in the plaint, the case pleaded against the Head Owner is in no manner substantiated by any document. The arguments were orally advanced at the time of applying for the arrest of the defendant-vessel and thereby, a wholly new case was orally made by the plaintiff in response to the submissions for vacating the order of arrest of vessel.
13.21 Another ground, which has been raised is of suppression by Bulk Marine, which according to the applicant-respondent, is a dishonest litigant. It failed to pay G.P. Global, on account of which the vessel came to be arrested by GP Global of Best Excellence . It also failed to pay hire to its contractual counterpart, Admiral Shipping and then, Bulk Marine obtained an ex parte order of arrest of vessel, by suppressing all vital documents, the details of which have already been provided. Therefore, it is urged that the plaintiff-since does not have any privity of the contract with the owner-Defendant, it would be guided by Page 31 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER the instructions of its contractual counterpart, i.e. Lianyl. It is lamented that no case is made out of any kind of tort, let alone the tort from deceit, being committed by the Excelziors. No fruitful gain is to be obtained by the defendant by disqualifying the plaintiff. It has also raised the very claim against Excelziors, i.e. shipper, for exercise of lien on goods. It also has taken a stand in support of its case, it has claimed. Although, it has already secured its claim on account of Lianyl. It is, therefore, urged that the contemporaneous documents in the correspondence would not give the Court any reason to believe that the Defendant is responsible for alleged claim of the plaintiff. It, on the contrary, demonstrates that applicant/ Defendant can never be held liable for plaintiff's claim, which arises on 24.09.2018. Since, there is suppression of the material fact by which the order of arrest of the vessel was obtained, the same deserves to be vacated without waiting for the recordance of the evidence. The applicant-respondent also shall be entitled to claim legal costs, since, the plaintiff is a foreign company, having its place of business in Singapore and it does not possess any property in India. It also has urged that the respondent, since, is required to secure legal costs to the tune of USD1706450, it should not happen that one party is fully covered and the other party is left high and dry as that would be contrary to the principles of equity. The exigency is made for interim condition, which is just and reasonable, as Section 11(1) of the Admiralty Law also provides such discretion to this Court. When the arrest is not justifiable, the plaintiff should be put to the strictest terms and conditions and it should be asked to deposit the costs and other expenses, which are likely to occur.
14. The plaintiff's stand as canvassed by its Senior Advocate Mr.Mihir Thakore is that it is incorrect on the part of the applicant- Defendant to plead that the plaintiff has taken a contrary stand against the Excelziors in arbitration proceedings. Even otherwise, according to Page 32 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER the plaintiff, present Suit and the arbitration proceedings are based on two separate and distinct cause of actions.
14.1 The law sought to be relied on, as laid down by the various Courts in India is not being disputed. The reliance is also placed on the text of International Convention on the Arrest of Ship dt. 2.03.1999, which also is not being disputed. However, the interpretation of the text done by the respondent-applicant is not admitted. For the authorities, which are sought to be relied on by the defendant, it is urged that the ratio laid down therein are not disputed. However, it is urged that there will be no applicability of the said ratio to the case of the applicant- respondent. It is also urged that the admiralty jurisdiction being a special jurisdiction, the scope of the inquiry would also demand that the fraud is to be looked into and the same has to be established, before it is believed.
14.2 The Learned Counsel of the plaintiff, in its submissions before this Court has urged that the plaintiff has a maritime claim under Section 419 and 414 of the Act, which relates to a crime relating to the carriage of goods and damage on the board. The vessels, whether contained any charter party or otherwise. Section 414 relates to a crime relating to use of voyage of the vessel, whether it was contained under the charter party or otherwise. It is urged that it should not be argued on the part of the applicant-Defendant that the plaintiff does not have any privity of contract with the applicant in respect of the Charter Party dated 12.09.2018. Therefore, Sections 419 and 414 of the Act would not be attracted. The defendant is the registered owner of the vessel, namely M.V. Sylvia Glory, when the same was arrested. The maritime claim arose when the applicant refused to approve the second bill of lading and the defendant revoked the Letter of authority and when the new bills of lading had been issued by the defendant, by revocation of Page 33 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Letter of Authority, the defendant made itself liable for the claim. It is only at the time of conclusion of suit that it can be ascertained as to what extent the defendant shall be liable. The interpretation of Section 51A, particularly, the words "Is Liable" is to be read in context of the preceding text, i.e. "the person, who owned the vessel at the time, when maritime claim arose". It is, therefore, the case of the plaintiff that it is only required to prima facie show that the defendant is liable for maritime claim, when it arises, so also the vessel owner.
14.3 It is, further, the say of the Learned Senior Advocate that the Charter Party dated 31.08.2018, entered into between Lianyl and Admiral Shipping is not with regard to defendant's claim that it has produced and the Charter Party dated 12.09.2018, entered into between Admiral and defendant also permits sub-letting of the vessel. The rider clause of the said Charter Party, particularly, Clause-58 permitted switching of the bill of lading, subject to the owners' approval and the same shall not be delayed or withheld unreasonably. Moreover, every time, the plaintiff was required to switch the bill of lading, it was required to approach the head owner for its prior approval. Clause-58 obliged the head owner or the defendants to permit the switching of bill of lading without any delay or without withholding the same, unreasonably.
14.4 In the instant case, such approval had been withheld by the defendant and therefore also, the plaintiff is legally entitled to prosecute its claim against the defendants. The bills of lading were issued under the authority of the master, who is employed by the Head Owner, all throughout. It is, further, the say of the plaintiff that back-to-back charter parties, including the one entered into between the plaintiff and Admiral Shipping provided for switching of bills. In view thereof, when the shipper communicated to the plaintiff that there was a change in Page 34 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER assignee, the plaintiff sought approval of the Head Owner for the switching of bills of lading on 20.11.2018. Further, the plaintiff's agent was never informed by the agent of the Defendant/applicant that the shipper had returned the original bill of lading to the plaintiff's agent. Even, Lianyl also attempted to seek original bill of lading, which was denied by the Plaintiff's agent and yet it insisted for original bills of lading to be tendered to the Head Owner. Thereafter, on 22.11.2018, the Defendant 's agent asked the plaintiff's' agent to forward the first original and non-original bills of lading to the head owner at the address provided, therein. Thus, there was a duty cast upon the Head Owner under Clause-58 of the Charter party, which clearly reflects that the plaintiff and its agent, in good faith, had parted with the original bill of lading, knowing fully well that on confirmation of switching of bills of lading shall be received shortly from the defendants. Thus, it was from the plaintiff that it received part possession of the original bill of lading. After the Bulk Marine sent the bills through courier to the Defendant and started pressing for approval of the same that this chain of events resulted, pre planned and designed.
14.5 So far as the argument of the applicant-defendant of the plaintiff having suppressed various material, while obtaining the order of arrest from the Court, is concerned, the plaintiff has relied on the decision of the Apex Court in case of 'SJS BUSINESS ENTERPRISES PVT. LTD. VS. STATE OF BIHAR & ORS.', (2004) 7 SCC 166, which lays down that as a general rule, suppression of material facts would disqualify a litigant from obtaining any relief. However, such suppression must be relevant and should have a bearing on the merits of the case.
14.6 According to the Counsel of the plaintiff, this is not a case, where, there is suppression of any material fact, which would have a bearing on the merits of the established case.
Page 35 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER
15. On having thus heard learned Counsels on both the sides and on careful consideration of the material, which has been placed before this Court and before adjudicating the issues raised before it, it shall need to regard the law on the subject, pressed into service by both the sides.
15.1 The Plaintiff has contended severely by insisting that various disputed questions of facts have arisen in this case which shall need to be adjudicated on conclusions of trial. This court needs to examine is whether the claim of the Plaintiff is vexatious or not. Once the Plaintiff makes out a reasonably arguable case, the matter should go for the trial.
15.2 It will be a matter of examination, by this Court, whether, there exists reason for exercising the jurisdiction under the Admiralty Law. What is vital at this stage to decide is whether there is a material suppression on the part of the plaintiff in obtaining interim relief and whether is it feasible for the court to decide serious objections on the part of the Defendant/applicant of continuation of interim relief subject to the security furnished by plaintiff, till the matter goes for the full fledged trial.
15.3 Plaintiff has endeavoured also to shift entire burden on the Defendant by denying clearly that there is any suppression on the part of the Plaintiff warranting dismissal of the suit. According to it, most of the emails allegedly suppressed were not marked to the Plaintiff. On privity of contract, it insists that the Charter Party dt.07.02.2018 between the Respondent and Lianyl permits Lianyl to sublet the vessel and Clause 58 obligates the head owner Respondent to approve Page 36 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER switching of bills of lading , without any delay, or without withholding the same unreasonably, thereby constituting a privity between the applicant and the Plaintiff. Defendant since had withheld approval without giving any reasons, much less cogent reasons, that has resulted into the present claim. Again, it is the say of the Plaintiff that all the bills of lading were issued under the authority of Master who is under the employment of the head owners all throughout.
16. The first and foremost requirement would be to consider whether the claim would fall under the Maritime claim or Maritime lien under the Admiralty act 2017.
16.1 The Admiralty jurisdiction is defined under section 2(A) under the definition clause which is to be exercised by the High Court under section 3, in respect of maritime claims specified under this act.
16.2 Section 2(1)(C) speaks of "arrest" which means 'the detention or restriction for removal of a vessel by order of the High Court to secure a maritime claim including seizure of a vessel in execution or satisfaction of judgment or order.' 16.3 Section 2(1)(e) defines the High Court in relation to the Admiralty proceedings which includes also the High Court of Gujarat.
16.4 The plaintiff has put forth its claims as Maritime Claims arising under section 4(1)(g) and 4(1)( h) of the act.
16.5 Apt would be to reproduce at this stage, Section 4 (1)(g) of Page 37 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER the Act: "4. Maritime claim.--(1) ...
(g) agreement relating to the carriage of goods or passengers on board a vessel, whether contained in a charter party or otherwise; "
It relates to an agreement relating to the carriage of goods and passengers on board a vessel, whether contained in a Charter Party or otherwise.
16.6 Section 4(1) (h) reads thus:
"4. Maritime claim.--(1) ...
(h) agreement relating to the use or hire of the vessel, whether contained in a charter party or otherwise; (i) salvage services, including,"
This provision relates to an agreement relating to the use or hire of the vessel, whether contained in the Charter Party or otherwise.
16.7 'Maritime claim' would mean claim referred to in section 4, which provides thus:
"4. Maritime claim.--(1) The High Court may exercise jurisdiction to hear and determine any question on a maritime claim, against any vessel, arising out of any--
(a) dispute regarding the possession or ownership of a vessel or the ownership of any share therein;Page 38 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
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(b) dispute between the co-owners of a vessel as to the employment or earnings of the vessel;
(c) mortgage or a charge of the same nature on a vessel;
(d) loss or damage caused by the operation of a vessel;
(e) loss of life or personal injury occurring whether on land or on water, in direct connection with the operation of a vessel;
(f) loss or damage to or in connection with any goods;
(g) agreement relating to the carriage of goods or passengers on board a vessel, whether contained in a charter party or otherwise;
(h) agreement relating to the use or hire of the vessel, whether contained in a charter party or otherwise;
(i) salvage services, including, if applicable, special compensation relating to salvage services in respect of a vessel which by itself or its cargo threatens damage to the environment;
(j) towage;
(k) pilotage;
(l) goods, materials, perishable or non-perishable provisions, bunker fuel, equipment (including containers), supplied or services rendered to the vessel for its operation, management, preservation or maintenance including any fee payable or leviable;
(m) construction, reconstruction, repair, converting or equipping of the vessel;
(n) dues in connection with any port, harbour, canal, dock or light tolls, other tolls, waterway or any charges of similar kind chargeable under any law for the time being in force;
(o) claim by a master or member of the crew of a vessel or their heirs and dependents for wages or any sum due out of wages or adjudged to be due which may be recoverable as wages or cost of repatriation or social insurance contribution payable on their behalf or any amount an employer is under an obligation to pay to a person as an employee, whether the obligation arose out of a contract of employment or by operation of a law (including operation of a law of any country) for the time being in force, and includes any claim arising under a manning and crew agreement relating to a vessel, notwithstanding anything contained in the provisions of sections 150 and 151 of the Merchant Shipping Act, 1958 (44 of 1958);Page 39 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
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(p) disbursements incurred on behalf of the vessel or its owners;
(q) particular average or general average; 4
(r) dispute arising out of a contract for the sale of the vessel;
(s) insurance premium (including mutual insurance calls) in respect of the vessel, payable by or on behalf of the vessel owners or demise charterers;
(t) commission, brokerage or agency fees payable in respect of the vessel by or on behalf of the vessel owner or demise charterer; (u) damage or threat of damage caused by the vessel to the environment, coastline or related interests; measures taken to prevent, minimise, or remove such damage; compensation for such damage;
costs of reasonable measures for the restoration of the environment actually undertaken or to be undertaken; loss incurred or likely to be incurred by third parties in connection with such damage; or any other damage, costs, or loss of a similar nature to those identified in this clause;
(v) costs or expenses relating to raising, removal, recovery, destruction or the rendering harmless of a vessel which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such vessel, and costs or expenses relating to the preservation of an abandoned vessel and maintenance of its crew; and (w) maritime lien."
16.8 Section 2(g) defines 'Maritime lien' which means Maritime claim against the owner, demise Charters, manager or operator of the vessel referred to in clauses (a) to (e) of subsection (1) of section 9 which will continue to exist under subsection (2) of that section.
16.9 It would be apt to reproduce the entire provision at this stage:
"9. Inter se priority on maritime lien.--(1) Every maritime lien shall have the following order of inter se priority, namely Page 40 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER
(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 salvage services including special compensation relating thereto;
(d) claims for port, canal, and other waterway dues and pilotage dues and any other statutory dues related to the vessel;
(e) claims based on tort arising out of loss or damage caused by the operation of the vessel other than loss or damage to cargo and containers carried on the vessel.
(2) The maritime lien specified in sub-section (1) shall continue to exist on the vessel notwithstanding any change of ownership or of registration or of flag and shall be extinguished after expiry of a period of one year unless, prior to the expiry of such period, the vessel has been arrested or seized and such arrest or seizure has led to a forced sale by the High Court:
Provided that for a claim under clause (a) of sub-section (1), the period shall be two years from the date on which the wage, sum, cost of repatriation or social insurance contribution, falls due or becomes payable.
(3) The maritime lien referred to in this section shall commence--Page 41 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
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(a) in relation to the maritime lien under clause (a) of sub-section (1), upon the claimant's discharge from the vessel;
(b) in relation to the maritime liens under clauses (b) to (e) of sub-
section (1), when the claim arises, and shall run continuously without any suspension or interruption:
Provided that the period during which the vessel was under arrest or seizure shall be excluded.
(4) No maritime lien shall attach to a vessel to secure a claim which arises out of or results 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 any law for the time being in force;
(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."
The term 'Territorial water" shall have the same meaning as assigned to it in the territorial waters, continental shelf, exclusive economic zone and other Maritime zones act 1976 , as defined under section 2 (k)of the Act.
16.10 Section 3 provides for Admiralty jurisdiction and maritime claims.
"3. Admiralty jurisdiction.--Subject to the provisions of sections 4 and 5, the jurisdiction in respect of all maritime claims under this Act shall vest in the respective High Courts and be exercisable over the waters up to Page 42 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER and including the territorial waters of their respective jurisdictions in accordance with the provisions contained in this Act: Provided that the Central Government may, by notification, extend the jurisdiction of the High Court up to the limit as defined in section 2 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (80 of 1976)."
16.11 It is apparent from section 3 that jurisdiction in respect of all maritime claims under this act, subject to section 4 and 5 of the said act, vests in the respective High courts and be exercisable over the waters up to and including the territorial waters of their respective jurisdictions in accordance with the provisions contained in this act. The central government of course, has power by notification to extend the jurisdiction of the High Court up to the limit as defined in section 2 of the territorial waters, Continental shelf, Exclusive Economic zone and other Maritime zones act, 1976.
16.12 Under section 4, the High Court is given the discretion to exercise jurisdiction to hear and determine any questions on a maritime claim against any vessel. It defines maritime claims from clauses (a) to (w). Section 4(1)(w) under the Maritime claim provides maritime lien, which are of five kinds and defined under Section 9 of the Act.
16.13 Section 5 permits the High Court to order arrest of any vessel in rem which is within its jurisdiction for the purpose of providing security against a maritime claim which is the subject of Admiralty proceeding where the court has reason to believe that the person who owned the vessel at the time when the maritime claim arose is liable for the maritime claim and is the owner of the vessel when the arrest is effected.
Page 43 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER 16.14 Again, as held in some of the authorities referred to
hereinafter , 'reason to believe' is opined to be stronger than satisfaction and there should be reasons to believe and such reasons must be on the basis of information which is in the possession of the concerned officer and there has to be a live link between the information and the formation of belief. It is emphasized that there has to be a genuine satisfaction arrived at upon a honest and reasonable evaluation of information coming to authority. The reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief and rational connection postulates that there must be a direct link or close nexus which should be there between the material before the officer and the belief which is formed. Thus, the belief must not be arbitrary and irrational and the belief must not be based on mere suspicion, but, should be based on information. If the information is non-existent or irrelevant or the belief is dishonest, then, such action is liable to be struck down by the court.
16.15 Of course, it is necessary to emphasize at this stage that the discretion under section 5 of the Admiralty is with the High Court which has to satisfy itself and it has a reason to believe that the person who owned the vessel at the time of arrest of Vessel was liable for Maritime claim when it arose ,on the basis of the live link of information and on arriving at genuine satisfaction, it surely under the law can exercise its discretion. The question that would arises as to whether the information which have been provided are genuine, on the strength of which the court can formulate its belief and in fact has based its genuine satisfaction that the Respondent herein as the owner of the vessel was responsible for the in personam liability that existed of the owner of the vessel which is mandatory for maintaining an action in rem against the Page 44 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER vessel. It is trite that for Maritime claim set out in the plaint, the plaintiff is required to show in personam liability of the defendant. In other words, for the maritime claims set out by the party claiming arrest, the Admiralty Act provides for establishing in personam liability of the owner of the vessel which is mandatory for maintaining any action in rem against the vessel.
16.16. A vessel can be arrested by way of discretion of the High Court in accordance with section 4 and 5 of the Admiralty Act . A party, seeking arrest of a vessel must have a maritime claim against a ship and also needs to satisfy the court that such person as the owner of the vessel is liable in personam for the maritime claim. Thus, where a party which seeks arrest of the vessel needs to plead specifically claiming against the vessel and also is required to satisfy the court that the person against whom the claim is maintained, as the owner of the vessel is liable in personam for such claim. Alternatively, The party seeking arrest of the vessel must have Maritime lien on the vessel in which case, the requirement of personal liability of the owner is not insisted by the Act.
16.17 Maritime lien is defined under the Act and Section 9 provides the details of the same. Admittedly, the plaintiff herein does not plead Maritime lien, but, Maritime claim against the Defendant. For the plaintiff to succeed, it needs to demonstrate that the Defendant is personally liable for its claim. Plaintiff namely Bulk Marine if has a maritime claim, the court needs to on the basis of information's provided by the plaintiff shall have to have reason to believe that the defendant , Best excellence is liable in personam for the maritime claim pleaded by the plaintiff for the court to grant arrest of the vessel. This is what the statute provides. For the plaintiff to establish the liability of Page 45 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Defendant, it has contended 1) the privity of contract with Best excellence by way of clause 58 of charter party between plaintiff Bulk Marine and Admiral and it has also contended that 2) Best Excellence is guilty of tort of deceit and therefore, is liable for plaintiff's Maritime claim. According to the Defendant, neither of these cases has been pleaded in the plaint by the plaintiff and it has been subsequently pleaded in the oral submissions.
16.18 According to the Plaintiff, it has already pleaded in its plaint, with regard to the Maritime claim against the defendant under section 4(1)(g) and 4(1)(h) of the Act and it is not required to plead legal provisions in the pleadings and it has, in fact, pleaded that its Maritime Claims arise from Charter Party Agreement read with the Bill of lading, in relation to the carriage of goods and hire of vessel and it has also claimed that so far as the question of privity of contract is concerned, there is no necessity that the claim in question be directly connected with some agreement made between the two parties. It has also maintained that it has not suppressed anything or any document which can have any bearing upon the final outcome. Again, According to the plaintiff, it has to show prima facie only that the Respondent was the owner of the vessel at the time when liability arose in connection with the Maritime claim, at the time of arrest which it has already established.
17. At this stage the decisions relied on by the parties deserve to be regarded.
17.1 The High Court of Sikkim in its decision in 'SIKKIM SUBBA ASSOCIATES VS. UNION OF INDIA (UOI) AND OTHERS', in Civil Writ Petition No. 10 of 2004, Dated: 31.05.2005, has explained the term Page 46 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER "reason to believe", which according to it, means a genuine satisfaction arrived at upon a honest and reasonable evaluation of information coming to authority. Again, there must be a reasonable nexus between the satisfaction and the situation contemplated in any of the Clauses, as the Court was considering the matter under the Income Tax Act, 1961.
17.2 The "reason to believe" is opined to be stronger than satisfaction and such reasons to believe must be on the basis of the "information", which is "in the possession of" the concerned officer. It also emphasized that there must be a live link between the information and the formation of belief.
17.3 The relevant findings and observations of the Sikkim High Court read thus:
'29. It is further well-settled that the expression "reason to believe" as decided by the apex Court means a genuine satisfaction arrived at upon a honest and reasonable evaluation of information coming to authority. Furthermore, there must be a reasonable nexus between the satisfaction and the situation contemplated in any of the Clauses (a), (b) and (c). Meaning of the expression "reasons to believe" is stronger than satisfaction. There should be reasons to believe and such reasons to believe must be on the basis of the "information" which is "in the possession of" the concerned officer. It is further well- settled that there must be live link between the information and the formation of belief. In Sheo Nath Singh v. AAC and Ors. (1971) 82 ITR 147 (SC) at p. 153, it was held in para 10 that the words "reason to believe"
suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the ITO would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. In ITO and Ors. v. Lakhmani Page 47 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Mewal Das (1976) 103 ITR 437 (SC) at pp. 437-438, it was held that the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief and rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of his belief and the live link or close nexus which should be there between the material before the ITO in the present case and the belief which he was to form. Further, in Ganga Saran & Sons (P) Ltd. v. ITO and Ors. (1981) 130 ITR 1 (SC), it was held that the AO must have reasons to believe which is stronger than the word "satisfied" and that the belief must not be arbitrary and irrational. In Calcutta Discount Co. Ltd. v. ITO and Anr. (1961) 41 ITR 191 (SC) it was held that the belief must not be based on mere suspicion but should be based on information.
30. It is further well-settled that the Courts can interfere if information is nonexistent or irrelevant or the belief is dishonest. In ITO v. Seth Bios, (supra), it was held that if the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. In Vindhya Metal Corporation and Ors. v. CIT (supra) at p. 239 approved by apex Court in (1997) 224 ITR 614 (SC) (supra), it was held that the existence or otherwise of condition precedent to exercise of power under these provisions is open to judicial scrutiny and the absence of the condition precedent would naturally have the effect of vitiating the authorization made by the CIT and the proceedings consequent thereto. It was further held that the existence of information and its relevance to the formation of the belief can undoubtedly be gone into by the Court.
Further, in Ganga Prasad Maheshwari and Ors. v. CIT (supra) at pp. 1053-4 it was held that if action has been taken by the public authorities without there being actual reasons to believe about the existence of relevant facts, such action is without jurisdiction and it is open to the person impugning the action to question the very existence of the belief and to contend that the authority actually did not entertain any such belief.1
31. It is thus well-settled that under Article 226 of the Constitution, the High Court while exercising its Page 48 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER jurisdiction examines the existence of the information on which belief is said to be formed and as to whether the information was of such a nature that there was a live link or a rational connection between the "information" and the formation of the belief. In this jurisdiction, the Court examines the satisfaction of the concerned authority on the information in his possession and does not substitute its own satisfaction by evaluating the information and/or material before it. "
17.4 This authority, thus, makes it clear that the Court, while examining the satisfaction of the concerned authority, on the basis of the information in its possession, is not required to substitute its own satisfaction by evaluating the information or the material and it needs to examine the link, as to whether, the information was of such a nature that there was a live link or a rational connection between the "information" and the formation of the belief.
17.5 The Apex Court in 'ASLAM MOHAMMAD MERCHANT VS. COMPETENT AUTHORITY AND OTHER', (2008) 14 SCC 186, while dealing with the matter under the NDPS Act, 1985, was considering the issue of pre-requisites, as to what statutory requirements to be complied with for initiating a valid proceeding under the NDPS Act, where, it has held that notice for forfeiture cannot be issued on the basis of ipse dixit of the competent authority and there must exist some material in this regard before the concerned authority for exercising such powers. Though, a roving enquiry is not contemplated under this Act, a proper application of mind on the part of the competent authority would be imperative prior to issuance of such notice.
17.6 The Apex Court, while considering this aspect, has held that it is a trite law that, whenever, a statute provides for "reason to believe", Page 49 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER either the reasons should appear on the face of the notice or they must be available on the materials which had been placed before it. The findings and observations of the Apex Court run as under:
"REASON TO BELIEVE
50. This brings us to the next question as to what does the term "reason to believe" mean. We may in this behalf notice some precedents operating in the field.
51. In the context of the provisions of Section 147 of the Income Tax Act, this Court in Phool Chand Bajrang Lal Vs. ITO : [1993] 203 ITR 456] held:-
"25. From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assesses to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income- tax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an assesses to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and Page 50 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief."
(See also Income Tax Officer Vs. Lakshmani Mewal Das [(1976) 103 ITR 437].
In Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007 (8) SCALE 396], interpreting the term `reason to believe' as used under Section 247 (a) of the Income Tax Act, 1961, it was opined :
"To confer jurisdiction under Section 247(a) two conditions were required to be satisfied firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assesses to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment."
17.7 It is a matter of examination by this Court as to whether there exists sufficient materials on record providing live link and as to whether, there exists reason for exercising the jurisdiction under the Admiralty Law.
18. From the detailed examination of the material on record, it is Page 51 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER apparent prima facie that there is no direct contractual connection between the plaintiff and the respondent- applicant. The plaintiff has direct contract with the Admiral and not with the Best Excellence, which is the head owner. The plaintiff chartered the vessel from Admiral, when it entered into charter party dated 12.09.2018, on a one time charter, via Indonesia to west coast India. The plaintiff, then, entered into a voyage party agreement with the Excelzior for the carriage of 55000 MT of Indonesian Coal from Moaraberau East Kalimanthan to Kandla Port, India or to any other port on the west coast of India. The said bill of lading was issued from the load port, pursuant to the said voyage charter party agreement to 53575 MT Indonesian coal was loaded on the vessel on 21.10.2018. Accordingly, the bills of lading, Dated:
21.10.2018, issued by the plaintiff's agent P.T. Valem Sentossa Shipping Services at the load port was in conformity with the mate's receipt issued by the master of the vessel. Such bill of lading was signed by the plaintiff's agent, pursuant to the letter of authority issued by the master of the vessel. This bill of lading also showed P.T. Energy Lintas Samudra, which is the representative of Nava Investments Pvt. Ltd., Indonesia, as a shipper with the endorsement, "To order of Habib Bank, Zurich, (Hong Kong Limited) Hong Kong", showing notified parties as (1) A.R. Company Ltd. And (2) Torque Commodities Pvt. Ltd.. As per the terms of the charter party, plaintiff's agent issued bills of lading and the same remained in its safe custody.
18.1 The plaintiff also issued freight invoice on 23.10.2018, as per the voyage charter party agreement dated 12.09.2018 with Excelzior. According to the plaintiff, the invoice payment was to be made within five banking days from the date of lading and releasing of the signed and stamped bills of lading and receipt of the bank. The original bills of lading were to be kept in the custody of the agent and were to be released to the shipper upon receipt of full freight in the Page 52 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER nominated account. The plaintiff, since, was waiting for the freight payment, it did not part with the original bills of lading, as per the condition, because there had been certain disputes between the seller and the buyer of the cargo with respect to the opening of clean letter of credit. The shipper requested the Plaintiff not to forward the original bills of lading to the buyer, i.e. the Torque Commodities Pvt. Ltd. and it was also repeatedly advised by the shipper to withhold the original bills of lading, and therefore, the same had been retained.
18.2 The vessel arrived at Kandla, outer anchorage, on 07.11.2018. The delay that had occurred at the load port, the plaintiff was to recover USD325961.46 towards the load port demurrage. Due to discharge of the cargo at Kandla, the plaintiff also averred entitlement to recover demurrage due to such delay and it estimated the demurrage at the discharge port to the sum of USD253272.50. Thus, the plaintiff raised demurrage invoice dated 19.11.2018 for the sum of USD579,233.96.
18.3 Lianyl Shipping, when came to know about the dispute between the shipper-Nava Pvt. Ltd. and the old buyer-Torque Commodities Pvt. Ltd., it requested the plaintiff's agent on 22.11.2018 to send original bills of lading to Lianyl. It was confirmed from the plaintiff's agent that it was still holding the original bills of lading. The agent had also insisted that only on written communication from the principal, i.e. the Plaintiff and the head owner-Best Excellence, the same shall be released. It was also clarified that the cancelled bills of lading should be parted with and accordingly, on 20.11.2018, the plaintiff's agent sent an email to the head owner's agent, i.e. Forerunner Shipping Company Ltd., and the master of the vessel, informing that the old contract between the shipper-Torque Commodities stood cancelled, and therefore, the earlier load port bills of lading would remain cancelled. It Page 53 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER was also informed that the details of revised mate's receipts and the bills of lading shall be forwarded to them for their approval. The Head Owner through its agent advised the agent of the plaintiff to stamp the original bills of lading as the null and void and courier the same along with mate's receipt to the head owner, at the address provided by the head owner. According to the plaintiff, acting in the good faith, the plaintiff cancelled the bills of lading and the mate's receipt and sent the same to the head owner with a hope to get the mate's receipt reissued. It also sent revised bills of lading and the mate's receipt to the master of the vessel and the head owner for its confirmation. A request was made to the master of the vessel to sign and send Mate's receipt so that the plaintiff's agent can issue new switched bills of lading. The charter party agreement stipulated that the bills of lading are to be issued in conformity with the mate's receipt. Therefore, in absence of mate's receipt, the switched bills of lading could not be issued, even if, the plaintiff's agent was having the letter of authority to issue such switched bills of lading. Nothing was done at the end of the head owner or the master of the vessel and they both continued to maintain silence over the issuance of the switched bills and the mate's receipt. It the meantime, it was realized that the Nava Investments Pvt. Ltd. acting through P.T. Energy Lintas Samudra, as the shipper, on account of the dispute with the original buyer had terminated the earlier sale purchase contract with Torque and had entered into a resale contract with the Vimal Coal Pvt. Ltd.. In the meantime, the letter of authority, issued on 23.10.2018, in favour of the P.T. Energy Lintas Samudra Shipping Service had been cancelled by the head owners of the vessel on 20.11.2018.
18.4 A protest was lodged through email against such termination of the letter of authority. The plaintiff also questioned the intention of the master of the vessel and the head owner in cancelling Page 54 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER such letter of authority. Allegations are also to the effect that with the head owners of the vessel in collusion with the respondent, the owners had terminated back-to-back charter parties, including the charter party dated 12.09.2018 between the plaintiff and the Admiral Shipping. The fraud is alleged against the defendant-applicant.
18.5 On a bare perusal of the material on record shows that the charter party was terminated by the Admiral Shipping for non-payment of total sum of hire by the Plaintiff. Clause-5 of the charter party between the Admiral Shipping and the plaintiff, entitled the Admiral Shipping to withdraw the vessel from the charter in the event of non- payment of hire. Admittedly, the plaintiff has not paid total amount of hire, but, paid substantial sum which can technically entitle Admiral Shipping to terminate charter party. Lianyl terminated its charter party with the Admiral, as the Admiral failed to make payment of hire to Lianyl. The applicant/Defendant is directly concerned with the charter party with Lianyl and has no apparent connection with any other of charter parties, subsequently entered into by Lianyl, Admiral Shipping as well as the Bulk Marine. Although, the defendant is prima facie right that the contractual disputes between the plaintiff and the Admiral cannot involve the applicant, as the plaintiff shall have its contractual remedies against the Admiral Shipping, had that been a neat contract having no whisper of role of the Defendant, except being the head owner of the vessel. It is also a matter of record that the plaintiff has already initiated arbitration proceedings against the Excelzior in London, with whom it had entered into the contract as permissible in shipping line and which failed to pay to the Plaintiff. The plaintiff also would have remedy to commence arbitration against Admiral Shipping for the alleged wrongful termination of the charter party. It also emerges that the letter of authority, which was issued to Valem by the applicant was for logistical purpose, since, the defendant did not have its agent at the load port, i.e. Page 55 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Indonesia. It had issued letter of authority to the plaintiff for the purpose of authorizing the plaintiff to sign the bills of lading. Certain facts emerging from record are vital to be referred here. On behalf of the head owner, It is the say of the defendant that the letter of authority was revoked on the ground of the plaintiff having failed to fulfill its obligation of payment of hire to Admiral Shipping. Initially, of course, the say of the defendant remains attractive that the plaintiff shall have no right under the bills of lading by virtue of such signing by its agent. Since, the bill of lading is a contract between the head owner and the cargo addressee and ordinarily, the cancellation of the letter would have no bearing on the plaintiff's claims. It has been emphasized that there is no causal link between the plaintiff's claims and cancellation of the letter of authority. The Plaintiff raised invoice for demurrage, dead freight and unpaid freight on its contractual counterpart Excelzior with the due date of payment of 30.10.2018, which it failed to pay. It is also a matter of record that the plaintiff's contractual counterpart is Admiral and there is two degrees of separation between the plaintiff and the head owner. There are two kinds of claims made by the plaintiff, i.e. (1) against the Admiral for advance refund of hire paid to it. According to the plaintiff, it could not make payment of hire to Admiral to the tune of USD 110,543.07, but otherwise, a huge 80% amount has already been paid in advance. And 2) as mentioned earlier, so far as the claimed amount of freight invoice, demurrage etc., is concerned, it is the Excelzior Limited-the charterer, which is being sued by the plaintiff. The arbitral proceedings have already commenced. It is permissible for the parties to pursue remedies against two different parties, as has been noticed from the material, which has been placed by the respondent. The very basis of the claim against the Excelzior and the material placed before this court does have different premise prima facie and hence, it is noticeable that it is attempting its remedies from different parties.
Page 56 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021C/AS/11/2019 IA ORDER 18.6 In this entire chain, Clause 58 between the plaintiff and the Admiral in the Charter Party entered on 12.09.2018 is Prima facie found vital to be referred to. This provides for approval of the head owner for allowing the split bills and the switched bills of lading and such approval is not to be delayed or withheld, unreasonably. Even if, the plaintiff's claims are independent, it will not be possible to hold at this stage that the cancellation of the Letter of Authority on the part of the head owner has absolutely no causal link between the plaintiff's claim and the cancellation of such letter of authority. The averred claim of the less paid hire existed, of course, before the cancellation of the letter of authority. But, there is a specific allegation on the part of the plaintiff that it had made a request to the head owner after, after once the Lianyl intervened and made a request for original bills of lading. The plaintiff's agent had stamped the original bills of lading as null and void and had couriered the same along with mate's receipt to the head owner, at the address, it had given. Thereafter, repeated requests were made on the part of the plaintiff to the head owner and the master of the vessel for the revised mate's receipt and bills of lading which had met with the stoic silence. This had happened on account of the shipper having dispute with the old buyer Torque Commodities and thereafter, the new buyer Vimal Coal had been found by the shipper. The request and the repeated requests made to the master of vessel to supply the mate's receipt was for the switched bills of lading, keeping the issue open. The same was not responded to and eventually the letter of authority had been recalled. Therefore, to say that this has absolutely no connection with the chain of events that took place of cancellation of the charter party, as Lianyl was not paid by the Admiral Shipping and the Admiral Shipping has not been paid by the plaintiff, which had not been paid by Excelzior may not be looked at in isolation.
18.7 The plaintiff-Bulk Marine has claimed freight, dead freight Page 57 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER
from Excelzior, as it failed to pay the Bulk Marine, under the Voyage Charter Party dated 12.09.2019, entered into between the Bulk Marine and the Excelzior. It has also claimed from the Best Excellence, the respondent, herein, the total hire that the Bulk Marine has paid to the Admiral under the Voyage Charter party dated 12.09.2019 between the Admiral and the Bulk Marine. The attempt on the part of the plaintiff is to seek recovery from the respondent-Best Excellence under its contract with Excelzior and the Admiral, which ordinarily requires to be recovered from the contractual counterparts.
18.8 The Bulk Marine's claim arose, firstly, on 24.10.2018 against the Excelzior. Subsequently, on 19.11.2018, against the shipper and on 10.12.2018, against the new consignee. The Bulk Marine has exercised a lien on the cargo for securing its claim and on 11.01.2019, it chose then to claim against the Best Excellence. This, of course, is prima facie very clearly noticeable that the plaintiff has continued to attempt to get its claim from different parties and one such attempt is also in the present suit claiming maritime claim against the defendant. It is not required to plead law, of course, in its pleadings, but it had laid its claim basing on the Admiralty act,2017 where both maritime claim due to private of contract and fraud are pleaded. It would not be out of place to refer to the details, which have been given herein above that the first time charterer is Lianyl Shipping Limited. It is a matter on record that there is a charter party agreement between the respondent and the Lianyl dated 07.02.2018. There is an email concluding the contract and incorporating the terms Charter Party dated 25.05.2017. The charterer is permitted to use the vessel and to pay the hire and for bunkers also. The Second Time Charter Party is with Admiral Shipping. There is an agreement between Lianyl and Admiral dated 31.08.2018. The third in the line is the time charter party of the Vessel with the Bulk Marine-the plaintiff, herein. By way of the agreement dated 12.09.2019 between Page 58 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Admiral and the Bulk Marine, the Bulk Marine is also a party, which has sought the arrest of the vessel in another Admiralty Suit being Admiralty Suit No. 1 of 2018. The plaintiff has defaulted in making the payment of hire to Admiral. It also had ordered fuel from G.P.Global and defaulted in making the payment. The Excelzior is the fourth voyage charterer of the vessel and the voyage charter party agreement is dated 12.09.2018 between the plaintiff and the Excelzior. The Excelzior has failed in paying to the Bulk Marine dead freight and demurrage due to it from 30.10.2018. There is already arbitration in London, commenced by the plaintiff against the Excelzior for recovery of the outstanding dues. Thus, as per the contractual agreements, the Excelzior was to pay freight to the Bulk Marine and it would arrange for carriage of goods from Indonesia to India under the Voyage Charter party dated 12.09.2018 entered between the plaintiff and the Excelzior. The plaintiff was also required to pay regular hire to Admiral and Admiral was to make arrangement of the vessel, M.V. Sylvia Glory, for its use under the time charter party dated 12.09.2018 between the Admiral and the plaintiff. Admiral Shipping would be required to pay hire to Lianyl and Lianyl would make the vessel available, as provided and directed under the time charter party dated 31.08.2018 between Lianyl and the Admiral and Lianyl would be required to pay regular hire to the Defendant-Best Excellence and the Best Excellence would need to make available vessel for its use, as provided under the time charter party dated 12.09.2018 between the Best Excellence and Lianyl. It is not in dispute that all the four charter party agreements are separate contracts, creating independent rights and obligations between the parties. It is an admitted fact that in a contract for sale of goods, once the seller loads its goods on to the vessel, the ship owner or its nominee issues, at the load-port, the bill of lading to the shipper, representing the goods being carried. The shipper, then, would give the bill of lading to the consignee buyer and would receive payment in exchange of the same. This would Page 59 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER happen either directly or through a bank. The buyer, at the discharge port, would present the bill of lading and would take the delivery of the goods. Thus, the bill of lading duly endorsed in favour of a particular party is a proof of entitlement of that party of the goods. Thus, the parties to the bill of lading could be the ship owner, shipper and the consignee or any other party to whom the Bill of lading has been endorsed. The dispute, according to the plaintiff, is that there was a dispute between the shipper and the Torque, which is the background against which an alleged claim of freight, demurrage and the dead freight arose, whereas, according to the Defendant, the only parties, which have rights under the bill of lading are the shippers, i.e. Nava Investments Pvt. Ltd., the Defendant-Best Excellence, the ship owner and the consignee, i.e. Vimal Coal Pvt. Ltd..
18.9 It is an emphatic contention on the part of Defendant that the Bulk Marine never had any rights under the bills of lading, since, it was merely a charterer in the chain of charterers, whose limited logistical role was to physically give the bill of lading to its agent Valem Shipping to the shipper, i.e. Nava Investments, at the load port. Valem Shipping was appointed by the Defendant on 23.10.2018 for the purpose of issuance of bills to the shipper, since, the Defendant did not have any local agent at the load port, Indonesia. For this, it has heavily relied on Clause-58 , which is a clause incorporated in the Charter party dated 07.02.2018 between the Defendant and the Lianyl, which permits Lianyl to sub-let the vessel. Clause-58 permits, split bills and also switched bills, subject, of course, to the Head Owner's approval. There is no privity of contract directly between the plaintiff and the Head Owner/Defendant. It is through this clause that there is an insistence on the part of the plaintiff, since, Clause 58 permits switching of bills of lading, subject to the Head Owners' approval, the Head Owner would not delay or withhold unreasonably, switching of the bills of lading. It is Page 60 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER also apparent from the record that, as and when, the plaintiff was required to collect the bill of lading, which was issued; it was required to approach the head owner for its prior approval. If, there was no reason for the head owner to delay, it was to immediately on verification needed to approve . This prima facie brings the role of the defendant where claim on the part of the plaintiff is that it constitutes the privity of contract between the plaintiff and the Defendant. Even if there is no direct contract, this clause does bring into picture an important role of the defendant at a crucial juncture. The plaintiff had approached the head owner, seeking its approval, which was withheld without assigning any reason, which resulted into the present claim, and hence, it is urged that it can prosecute its claim against the applicant-the original defendant. It is not in dispute that the bills of lading were issued under the authority of master, who was under the employment of the head owner, all throughout. The plaintiff, of course, has pleaded that there had been fraudulent termination of the Letter of Authority, which entitled the plaintiff to proceed against the head owner. It also in its plaint claimed that for recovery of freight invoice dated 23.10.2018 and demurrage invoice dated 19.11.2018 along with other charges, the plaintiff can claim from master and the head owner. Since, it was aware that the plaintiff could suffer, as a result of such fraud on its part.
18.10 Even while accepting that the defendant issued the letter of authority in favour of the agent of Plaintiff because it did not have any agent at load port (Indonesia), to save time and for ease of logistical purpose, and, it had authorized the plaintiff to sign the bills of lading on behalf of the defendant, pleading of total absence of any legal connection with the Plaintiff is difficult to endorse without the trial. Even if it is believed prima facie that it in no manner creates any independent contract between plaintiff and defendant and even if it is assumed and accepted that the defendant had legitimate right to cancel the letter of Page 61 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER authority at the instance of Lianyl, the fact remains that according to the defendant, non fulfillment of conditions of charter party by the plaintiff is the reason for the defendant to cancel the letter of authority. It is contended that the Plaintiff failed to fulfill conditions of the charter party by illegally suspending payment of freight to the Admiral even though there was no off hire event. Had there been no connection at all between the plaintiff and the defendant , there was no reason for the defendant, depending on nonpayment of hire to the admiral, to cancel the letter of authority even at the instance of Lianyl. There appears to be a chain and as mentioned herein above, Clause 58 does require the original owner to approve the bills of lading without loss of time and therefore, to say that there is absolutely no connection between the parties for the plaintiff to bring the actions against the defendant applicant is not prima facie found acceptable. It is again a matter of record that original bill of lading after cancelling the same had been sent to the Head owner and what would transpire between the Lianyl and the head owner was not the concern of the plaintiff. It could not thereafter had any bill of lading issued till cancellation of chain of contract of charter parties as the defendant did not direct the master to issue the same and without the bill of lading, it could not have proceeded further. It can be prima facie believed that the defendant would not stand to gain by defrauding any of the parties in the chain however , the dispute between the shipper and Torque principally gave rise to cancellation of original bill of lading and surely that was the matter of concern for everyone in the chain and more particularly that precipitated the chain of cancellation eventually.
19. This Court is conscious of the fact that a contractual lien over the vessel can only be created by the actual owner of the Vessel and not by any of the respondent owners. The clause of charter party also has provided that the charterer's Lien cannot prevail over the rights of an Page 62 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER owner of the ship and it is specifically pleaded by the original owner that no contractual lien has been created in the present case. The court is also aware of the fact that the plaintiff is legally required to show maritime lien as provided in the statute to maintain action in rem against the vessel or in personam liability of the owner of the vessel for it to claim maritime claim, otherwise, the plaintiff would not be entitled to proceed against the vessel in rem nor to get order of arrest of the vessel for securing any Maritime claim if there exists no such claim or lien. Plaintiff has claimed under Section 4(1) (g) and (h) against the defendant and it is surely an arguable matter necessitating trial before such claim in limine could be terminated.
19.1 This court has, prima facie reason to believe as can be noticed from the factual details discussed that there existed causal link for it to grant interim relief, even if no direct contract creating in personam liability as otherwise required for maritime claim against the head owner exists. Even in absence of direct contract with the defendant and in absence of any suppression going to the root and because of alleged fraud pleaded which vitiates everything, there does exist material providing prima facie satisfaction for the maintainability of suit and for the same to go for trial, continuing the interim relief. Although, the defendant has alleged of malicious and vexatious prosecution by the plaintiff, noticing the serious disputed questions of law and facts raised by the Plaintiff and defendant both, striking a balance, without further dilating the facts which may ultimately cause prejudice on either side in the suit, while holding that the issues raised need to be decided at the end of trial and interim protection needs to continue under the circumstances, the request on the part of the defendant to direct security to the plaintiff deserves to be acceded to since the plaintiff is not a company based in India nor having any assets in this country and in the event of defendant's version being upheld, serious prejudice may arise which requires to be regarded specifically at this juncture. This Page 63 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER Court also cannot be obvious of the fact that multiple channels have been opened by the plaintiff for redressing its claims and even if this action is not termed as a 'fishing expedition' now, in wake of limited but essential role of the head owner as discussed above, nor even if is precluded from taking recourse from more than one forums at this stage, the plaintiff is surely required to be thrust upon certain conditions so that even if it chooses to simply withdraw this suit once its claim elsewhere gets satiated or if fails to prove eventually its case, it thereby may not seriously jeopardize the right of the other side. This court is conscious of pending litigations at the hands of the plaintiff against other parties as also the direction of this court for the defendant to deposit cash security while permitting the vessel to sail. In the event of issuance of direction of cost in any of such eventualities, there may not be availability of any source of fund.
20. The plaintiff as noted earlier has been granted the order of arrest and since the Vessel was arrested, at the request of the defendant , cash security to the tune of USD 1471000/- comprising of Principal amount, interest and cost has been permitted to be furnished and fixed deposited by an order dt.27/2/2019 . According to the defendant, for the legal cost which the defendant is likely to incur is quantified to USD 1,75,000 and accordingly, it is urged by the defendant that the plaintiff be directed to furnish such sum if trial is contemplated by the court for which detailed calculation is given.
21. Order xxv of Civil Procedure Code contemplates directing furnishing of security to the Plaintiff which deserves reproduction at this juncture. Order xxv of CPC provides as under:
"Rule 1 Order XXV of Code of Civil Procedure 1908 "When security for costs may be required front plaintiff"Page 64 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021
C/AS/11/2019 IA ORDER (1) At any stage of a suit,. the Court may, either of its own motion or on the
application of any defendant, order the plaintiff, for reasons to be recorded, to give within the time fixed by it security for the payment of all costs incurred and likely to be incurred by any defendant.
Provided that such an order shall be made in all cases in which it appears to the Court that a sole plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are, residing out of India and that such plaintiff does not possess or that no one of such plaintiffs possesses any sufficient immovable property within India other than the property in suit.
(2) Whoever leaves India under such circumstances as to afford reasonable probability that he will not be forthcoming whenever he may be called upon to pay costs shall be deemed to be residing out of India within the meaning of the proviso to sub-rule (1) Rule 2 Order XXV of Code of Civil Procedure 1908 "Effect of failure to furnish security"
1) In the event of such security not being furnished within the time fixed, the Court shall make an order dismissing the suit unless the plaintiff or plaintiffs are permitted to withdraw there from.
(2) Where a suit is dismissed under this rule, the plaintiff may apply for an order to set the dismissal aside and, if it is proved to the satisfaction of the Court that he was prevented by any sufficient cause from furnishing the security within the. time allowed, the Court shall set aside the dismissal upon such terms as to security, costs or otherwise as it thinks fit, and shall appoint a day for proceeding with the suit.
(3) The dismissal shall not be set aside unless notice of such application has been served on the defendant."
21.1 This Provision is quite clear that the court may on its own motion can order the plaintiff or on an application by the defendant can direct the plaintiff for payment of costs incurred by the defendant or likely to be incurred by the defendant . Proviso to this provides that if the plaintiff resides out of India and does not possess any sufficient immovable property, the court shall make such an order. While so directing the court shall need to furnish the reasons for the same. In the event of Plaintiff failing to furnish security, the court shall order dismissal and in the event of such dismissal , plaintiff can be permitted to plead sufficient cause and the court can consider the same to permit setting aside of Page 65 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021 C/AS/11/2019 IA ORDER such dismissal order, to direct proceeding with the suit. In the instant case also, the plaintiff admittedly resides outside India and does not have any property much less immovable property in India. Therefore, for the reasons stated here in above, particularly at para19.1,there is a requirement for this court to direct the plaintiff to furnish the security to the tune of US dollars 1,75,000.( one lakh seventy five thousands dollars).
22. Resultantly, the following order:
22.1 Application 1 of 2019 preferred by the defendant is PARTLY ALLOWED.
22.2 While rejecting the request to quash and set aside the order of arrest and dismiss the suit, plaintiff is DIRECTED to furnish the security to the tune of USD 175000 (One lakh seventy five thousands only) 22.3 Let the security be furnished within EIGHT WEEKS from the date of receipt of copy of this order via official e-mail of the parties or their Counsels.
22.4 Once the amount of security is deposited, the same shall be fixed deposited for the period of 12 (TWELVE) months and the same shall be renewed on a regular basis, till the Admiralty suit is finally decided. None of the findings or observations shall come in the way of either side nor shall they prejudice anyone being of prima facie nature and which are made only with a view to decide this application.
22.5 Parties are at liberty to request for early hearing of the Admiralty Suit 11 of 2019.
(SONIA GOKANI, J) DHARMENDRA KUMAR/UMESH Page 66 of 66 Downloaded on : Mon Feb 22 07:18:45 IST 2021