Gujarat High Court
M.V. Lucky Field vs Universal Oil Ltd on 24 November, 2008
Author: K.A.Puj
Bench: K.A.Puj
OJCA/36420/2006 1/79 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION No. 364 of 2006
In
ADMIRALITY SUIT No. 8 of 2006
For Approval and Signature:
HONOURABLE MR.JUSTICE K.A.PUJ
=========================================================
Whether Reporters of Local Papers may be allowed
1 to see the judgment ?
2 To be referred to the Reporter or not ?
Whether their Lordships wish to see the fair copy
3 of the judgment ?
Whether this case involves a substantial question
of law as to the interpretation of the
4 constitution of India, 1950 or any order made
thereunder ?
Whether it is to be circulated to the civil judge
5 ?
=========================================================
M.V. LUCKY FIELD - Applicant(s)
Versus
UNIVERSAL OIL LTD. - Respondent(s)
=========================================================
Appearance :
MR PRATAP, Sr. Counsel with MR AS VAKIL for Applicant(s) : 1,
MR MIHIR THAKORE, Sr. Counsel with MR SANDIP SINGHI, SINGHI & CO for
Respondent(s) : 1,
=========================================================
CORAM : HONOURABLE MR.JUSTICE K.A.PUJ
Date : 24/11/2008
ORAL JUDGMENT
1. The defendant vessel through its owners, Luckyfield Shipping Corp. S.A. Republic of HC-NIC Page 1 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 2/79 JUDGMENT Pannama, has filed this application for vacating and/or setting aside the order of arrest of the defendant vessel passed by this Court on 25.8.2006 and for discharge and return of the security furnished in the sum of US$ 252,233.95. The defendant vessel has also sought damages for wrongful arrest of the defendant vessel and/or security in respect of its claim for wrongful arrest.
2. It is the case of the owners of the defendant vessel that there was no privity of contract between the plaintiff and the owners of the defendant vessel in order for the plaintiff to maintain an action in personam for the arrest of the vessel to secure its claim. There was no in personam liability of the owners in respect of the claim made by the plaintiff and hence an action in rem would not lie for arrest of the owners' vessel. The order for supply of bunkers to the vessel was placed by IMC Maritime Group HC-NIC Page 2 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 3/79 JUDGMENT Inc. with the respondent. The said IMC Maritime Group Inc. are not the owners of the vessel but the time charterers of the vessel. The request for supply of the bunkers has come from the buyer and the buyer is identified as IMC Maritime Group Inc. and the physical suppliers was the plaintiff i.e. Universal Oil Ltd. It is clear from the order placed by the broker LQM Petroleum Services Inc. that the buyer is IMC Maritime Group Inc. who is liable to pay and will be making payment for the bunkers supplied. The plaintiff arranged for bunkers to the defendant vessel on 10.3.2006 as required under the contract. The invoice also indicates that the supply of bunkers has been made to the IMC Maritime Group Inc. C/o LQM Petroleum Services. The plaintiff pursued IMC Maritime Group Inc. for recovery of the price of bunkers supplied to the vessel. As IMC Maritime Group were experiencing financial difficulties, they requested for 60 day HC-NIC Page 3 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 4/79 JUDGMENT extension for payment of the invoice and offered to pay interest at the rate of 2%. The said IMC Maritime Group Inc. did not make payment and subsequently went into liquidation. In these circumstances broker LQM Petroleum Services suggested to plaintiff that they should contact the owners for commercial settlement.
3. It is also the case of the defendant vessel that only thereafter for the first time on 18.5.2006 i.e. two months after supply of bunkers and only because the contracting party viz. the buyer IMC Maritime Group could not pay, the plaintiff approached the owners of the defendant vessel for payment. The said liability was promptly denied by the owners through their solicitors, who informed the plaintiff that their claim was against the contracting party IMC Maritime Group Inc.
4. In the above background of the matter, HC-NIC Page 4 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 5/79 JUDGMENT Mr.Pratap, learned Senior Counsel appearing with Mr. A.S.Vakil, for the applicant/ defendant vessel has submitted that the buyer and the contracting party i.e. IMC Maritime Group Inc. has purchased the bunkers from the plaintiff and is liable to make payment and has admitted liability but is not in a position to pay because of financial difficulties. He has, therefore, submitted that the person liable to pay for the bunkers supplied by the plaintiff is the buyer IMC Maritime Group Inc. at whose instance and on whose account and at whose request the bunkers were supplied. The owners of the defendant vessel are not liable to make payment as they have not contracted with the plaintiff for the purchase of the bunkers. He has, therefore, submitted that there is no in personam liability on the owners of the defendant vessel and consequently no action in rem can lie against the defendant vessel. He has, therefore, submitted that exparte HC-NIC Page 5 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 6/79 JUDGMENT order of arrest dated 14.8.2006 is required to be set aside and/or vacated and the security in the sum of US$ 2,52,233.95 deposited by the owners of the defendant vessel is required to be returned forthwith.
5. He has further submitted that the decision of this Court in the case of m. v. Sea Renown & Anr. Vs. Energy Net Ltd., dated 15.7.2003, relied upon by the plaintiff is not applicable to the facts of the present case. In the case of m. v. Sea Renown although the bunkers were supplied at the instance of the Time Charterers, Geepee Shipping & Trading Inc. the Master expressly acknowledged liability to pay for the bunkers supplied by issuing a receipt bearing his signature. There was an express acknowledgment of liability by the Master on behalf of the owners of the vessel for payment of the bunkers supplied to the vessel. On these facts, this Court has held that this HC-NIC Page 6 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 7/79 JUDGMENT signified the acceptance of liability by the Master on behalf of the owners and consequently it was open to the bunkers supplier to sue the owners of the vessel for recovery and file an action in rem for arrest of their vessel. He has further submitted that in the present case, there is no such acknowledgment / acceptance of liability by the Master on behalf of the vessel to pay for the bunkers supplied. The buyer is IMC Maritime Group Inc. who have acknowledged their liability to pay. The said buyer is not the owner of the vessel. The plaintiff has sent an invoice to the said buyer. The plaintiff has granted extension of time to the said buyer to make payment on the buyer's request and on payment of interest. He has, therefore, submitted that there is no privity of contract between the plaintiff and the owner of the defendant vessel and no in personam liability of the owners of the vessel to pay for the bunkers which were HC-NIC Page 7 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 8/79 JUDGMENT supplied at the request of the IMC Maritime Group Inc. who are liable to pay for the same.
6. He has further submitted that the owners of the defendant vessel have already paid for the bunkers to the time charterers, IMC Maritime Group Inc. under the contract between the parties. The defendant vessel was chartered by its owners to IMC Maritime Group Inc. under a Time Charter party dated 1.2.2006. According to the terms of the time charter - which are standard in the trade, the charterers are required to provide and pay for all fuel consumed by the vessel. Thus, it is the charterers' obligation to provide and pay for bunkers. It is in discharge of this obligation that the charterers placed an order with the plaintiff for supply of bunkers to the vessel. At the end of the charter period when the vessel is redelivered back to the owners, the owners HC-NIC Page 8 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 9/79 JUDGMENT are required to pay to the charterers the value of the bunkers remaining on board. The vessel was redelivered back to the owners on 22.3.2006. The owners, therefore, paid to the charterers the value of the bunkers on board the vessel which were supplied by the plaintiff at the request of the charterers, by giving credit to the charterers of the value of the bunkers against the hire due from the charterers under the charterparty. This is evident from the final hire statement of the owners of the vessel dated 23.3.2006 where the owners have given credit to the charterers of US$ 2,33,827.00 towards the bunkers on board the vessel aggregating to 601.900 mt IFO and 64 mt DO which cover the quantities supplied by the plaintiff. He has, therefore, submitted that the owners of the defendant vessel have already paid the charterers for the bunkers supplied by the plaintiff and are not liable to pay the amount twice over in any event. HC-NIC Page 9 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 10/79 JUDGMENT
7. Mr.Pratap has further submitted that the plaintiff's claim is against their contracting counterparty IMC Maritime Group Inc. and they can have no claim against the owners of the defendant vessel. Consequently, the order of arrest is required to be vacated and/or set aside and the security deposited in Court be returned to the owners of the defendant vessel.
8. Mr.Pratap has further submitted that the ex parte order of arrest was made by this Court on 14.8.2006. On that date, the defendant vessel was at the port of Sikka. The vessel arrived at Sikka on 2.8.2006 for discharge of cargo. The vessel was under a time charter to STX Panocean, Korea, at a hire rate of US$ 19,000.00 per day. The plaintiff waited till the vessel was nearing completion of discharge before applying for an order of arrest. Even when the order of arrest was HC-NIC Page 10 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 11/79 JUDGMENT granted on 14.8.2006, the plaintiff did not serve the order of arrest on the vessel. The defendant vessel sailed from Sikka on 16.8.2006 arrived at the port of Kandla on 16.8.2006 and completed discharge of cargo on 22.8.2006. The order of arrest was not served on the vessel during its entire stay at Kandla port. It was only when the agents of the vessel applied for port clearance on 22.8.2006 that they were informed by the Kandla port authorities that there was an order of arrest of the vessel and port clearance would not be granted. He has, therefore, submitted that the plaintiff deliberately delayed the service of the ex parte order of arrest in order to cause maximum detention and loss to the vessel and its owners. Since there was great urgency the defendant vessel approached this Court on 24.8.2006 for release of the vessel on furnishing security in the amount of the suit claim by depositing the claim amount in this HC-NIC Page 11 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 12/79 JUDGMENT Court in Indian rupees without prejudice to their rights and contentions. The said oral application was opposed by the plaintiff on the specific plea that the defendant vessel is required to give security in United States Dollars and not in Indian rupees. This submission was downright absurd and legally unsustainable. This was only with a view to cause further delay in the release of the vessel since the defendant vessel had already remitted security amount to their advocates for deposit in the Court and the said amount had already been converted into Indian rupees by the Bank which is an authorised foreign exchange dealer as per the requirement of law. The defendant vessel was apprehending that if the hearing is delayed or order of release is not made available in view of shortage of time the vessel would be detained for further four days which would result in the further loss of US$ 19,000.00 per day to the defendant vessel. He has, therefore, HC-NIC Page 12 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 13/79 JUDGMENT submitted that the delay in detention has been caused to the vessel for a period of 4.0833 days and they have suffered a loss on the sum of US$ 82,238.33 being the amount offhire and bunkers consumed during off hire, as debited to their account by the vessel's charterers STX Pan Ocean, Korea, as a result of the order of the arrest of the vessel. But for the arrest order, the owners of the defendant vessel would have earned the said amount as hire and this is a direct loss caused to the owners of the defendant vessel as a result of the arrest order and deliberate delay in service of the same on the defendant vessel. He has, therefore, submitted that this Court should direct the plaintiff to deposit the said amount of US$ 82,238.33 with this Court.
9. Mr.Pratap has, therefore, made three broad submissions.
(A) There is no privity of contract with the HC-NIC Page 13 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 14/79 JUDGMENT owner of the vessel and consequently no action for arrest of the vessel can lie. To make good this submission, he urged following points;
(i) The essence of an Admiralty action in rem is to obtain security in respect of a maritime claim against the owner of the vessel, by arrest of the vessel. If there is no claim against the owner, then his property, namely, the vessel is not liable to be arrested. This is akin to any proceedings for attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure. One cannot attach a person's property unless one will have a claim against that person. The same analogy applies when it comes to enforcing a maritime claim. That this has always been the legal position in India will be demonstrated by the following.
(ii) A foreign ship can be arrested in HC-NIC Page 14 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 15/79 JUDGMENT respect of any maritime claim against its owner ( See (1993) Supp. (2) S.C.C. 433 M.V.Elisabeth pra 92). The foundation of an action in rem arises from a maritime lien or claim imposing a personal liability upon the owner of the vessel (See M.V. Elisabeth para
46). What was basic was the existence of cause of action arising out of tort or contract in relation to the Master or owner of the ship. There has to be existence of a right arising out of contract or agreement entered into with the Master or owner of the ship (See M.V. Elisabeth para 99).
(iii) In all cases where there is no maritime lien (admittedly there is no maritime lien in the case of a claim for supply of bunkers to a vessel), a right in personam exists for any claim that may arise out of a contract. If the contract is with the owner of the vessel then a right in rem is available against the vessel. Otherwise HC-NIC Page 15 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 16/79 JUDGMENT only a right in personam exists against the contracting party. (See (2003) 1 SCC 305 Epoch Enterrepots Vs. M.V. WON FU).
(iv) Thus as can be seen from the above, there can be no action in rem for a maritime claim unless there is privity of contract with the owner of the vessel. This has always been the legal position in India as declared by the Supreme Court in both the aforesaid judgments.
(v) The Brussels Convention 1952 does not alter the position in any manner. The interpretation sought to be put on Article 3 of the said Convention by the plaintiff is wrong. It is implied in Article 3 that the owner must be the person liable. This is made clear by the further provision in Article 3 allowing for arrest of any other vessel owned by the person who is the owner of the vessel in question. This is only HC-NIC Page 16 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 17/79 JUDGMENT possible if the owner is liable. For the owner to be liable there must be a cause of action against the owner arising out of contract or agreement. (see the commentary on Berlingieri on Arrest of Ships 2006 edition). In any event, whatever be the interpretation of the plaintiff as regards Article 3 of the said Convention, the aforesaid judgments of the Apex Court in m.v. Elisabeth and m.v. WON FU make it clear that there must be privity of contract and a cause of action against the owner in respect of a maritime claim for a right in rem to be available against the vessel of the owner.
(vi) The position is now made clear by the Arrest Convention, 1999 ( which is applicable as per m.v. Sea SUCCESS (2004) 9 S.C.C. 512) which provides in Article 3(1) that "Arrest is permissible of any ship in respect of which a maritime claim is asserted if the person who owned the ship at the time when HC-NIC Page 17 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 18/79 JUDGMENT the maritime claim arose is liable for the claim... " The Supreme Court was conscious of the fact that this Convention does not abridge or curtail any right in rem which was otherwise available to a claimant. This right was always available only in the event the maritime claim was against the owner of the vessel and not otherwise. This right remains.
(vii) Thus for an action in rem to lie against a vessel, it is essential that there must be a maritime claim against the owner of the vessel who must be liable in respect of the claim. In the event the claim arises under a contract, no action in rem is permissible unless the contract is with the owner of the vessel.
(viii) In the case of m.v. Bunga Mas Tiga reported in 2002 (1) All MR 145 (Raj Shipping Agencies vs. m.v. Bunga Mas Tiga & Anr.), the HC-NIC Page 18 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 19/79 JUDGMENT owner of the vessel contracted with M/s. North End Oil for supply of bunkers. North End Oil in turn contracted with Raj Shipping Agencies for supply of bunkers. Raj Shipping Services supplied the bunkers. Thereafter Raj Shipping Agencies demanded payment from North End Oil. Since no payment was received, Raj Shipping Agencies filed a suit and obtained an arrest of the vessel. The arrest was set aside on the application of the vessel / owner. The court held that in the event the contract for purchase of bunkers is not entered into by the seller with the owner of the vessel, then no action in rem can lie against the vessel at the behest of the seller. There is no privity of contract between the plaintiff and the owner of the vessel. All demands for payment were made by the plaintiff against the contracting parties who were not the owners. It is clear that there has to be an enforceable right in the plaintiff against HC-NIC Page 19 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 20/79 JUDGMENT the owner of the vessel. The right is enforceable against the vessel. But existence of a right in the plaintiff against the owner of the vessel is a must.
(ix) In the case of m.v. CHOPOL 2 (unreported - Bombay High Court), the bunkers were supplied to the vessel by Scandinavian Bunkering AS at the request of M/s. Eurasia Shipping Ltd., who were the charterers of the vessel through an order placed by M/s. Anderson Hughes Co. Ltd. There was no order placed by the owners of the vessel. The arrest was set aside on the application made by the vessel owner M/s.Korean Polish Shipping Ltd. The court held that no privity of contract with owners of the vessel is created by acceptance of bunkers by the Chief Engineer. The plaintiff has to show that the bunkers were supplied at the instance of the owners.
HC-NIC Page 20 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 21/79 JUDGMENT
(x) The law was summed up in the case of m.v. NIIZURU (unreported - Bombay High Court) where the Court held in para 13 "Now as a result of several judgments of this Court as also other courts it is clear that when the suit is instituted for recovery of a maritime claim there has to be privity of contract between the plaintiff and the owner of the defendant vessel."
(xi) Hence on a reading of the aforesaid judgments, the legal position is amply clear. Privity of contract with the owner is essential for an action in rem to lie against the vessel in respect of a maritime claim. One need not go into the interpretation of the conventionprovisions at all. None of the three judgments are based upon a interpretation of the convention. They proceed on the basis of the law declared by the Apex Court in the case of m.v. Elisabeth and affirmed in the case of m. v. WON FU. HC-NIC Page 21 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 22/79 JUDGMENT
(xii) The position under English law is the same and made clear by the judgment in the case of the YUTA BONDAROVSKAYA reported in (1998) Vol.2 Lloyd's Rep. Page 357. In this case bunkers were supplied at the instance of the time charterer EMEL who did not pay. The supplier IMS filed an action in rem for arrest of the vessel. The owners applied for setting aside the arrest. The Court held : "(a) It was the responsibility of the time charterer under a time charter to provide and pay for bunkers if the time charterer wished to use the vessel for his own purposes; the idea that an owner who time chartered his vessel to a time charterer was authorizing a time charterer to contract on his behalf was contrary both to the express terms and to the underlying basis of a time charter;
Under the standard forms of time charter the owner was expressly not agreeing to pay for the bunkers;
(b) It was not even arguable that a time charterer had the owner's authority to make bunker HC-NIC Page 22 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 23/79 JUDGMENT contracts on its behalf, whether implied actual authority, apparent or ostensible authority or any other kind of authority;
(c) The claim was bound to fail and the vessel would be released from arrest;
(d) If a bunker supplier wished to ensure payment and was not willing to give the time charterer credit he should obtain the consent of the shipowner or demise charterer before the contract was made, or he should insist on payment in advance or upon security from the time charterer; there was however no warrant for holding a shipowner or demise charterer personally liable without his consent."
(xiii) It is thus clear from the authorities set out above that a bunker supplier can have no right to arrest the vessel for the price of bunkers supplied at the instance of any person other than the owner of the vessel. Only if the owners of the vessel contracted HC-NIC Page 23 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 24/79 JUDGMENT with the bunker supplier for supply of bunkers that the owner would be liable in contract and the supplier would have a maritime claim against the vessel. The plaintiffs assertion that notwithstanding the fact that the buyer is not the owner of the vessel, the vessel owner is liable since the bunkers were supplied to the vessel and received by the Master and this creates privity of contract between the plaintiff and the owners of the vessel, is incorrect and clearly wrong in law and contrary to the aforestated legal position which is known or ought to be known to bunker suppliers.
(xiv) In the present case, the admitted position is;
(a) The contract for supply of bunkers was between the plaintiff as sellers and IMC Maritime Group as buyers. The contract was not between the plaintiff and the owners of the vessel Lyckyfield Shipping Corp. S.A. HC-NIC Page 24 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 25/79 JUDGMENT
(b) The master of the vessel acknowledged receipt of the bunkers on board the vessel by signing the bunker delivery note as proof of delivery just like a delivery challan.
(c) Invoice dated 10.3.2006 bearing No.4295 for the price of bunkers is raised by the plaintiff to the account of IMC Maritime Group C/o LQM Petroleum Services and sent to LQM Petroleum Services.
(d) No demand on the owners of the vessel for payment.
(e) The Broker, LQM Petroleum Services requested time extension on behalf of IMC Maritime Group for payment. IMC Maritime Group also offers to pay interest.
(f) Plaintiff accepts offer and confirms time extension.
HC-NIC Page 25 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 26/79 JUDGMENT
(g) The broker, LQM Petroleum Services, informs plaintiff that IMC Maritime Group will not be able to pay presently and suggests that the plaintiff contact the owners of the vessel for a "commercial settlement".
(h) Plaintiff requests the vessel's managers to make payment of their invoice No.4295 dated 10.3.2006 which is the invoice raised on IMC Maritime Group and sent to the said brokers LQM Petroleum Services.
(xv) The above clearly demonstrates that plaintiff was aware that the liability was of IMC alone and not the owners of the vessel. (xvi) The plaintiff says in the plaint that they carry on business of supply of bunkers to ships all over the world by themselves or through their agents. It is inconceivable HC-NIC Page 26 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 27/79 JUDGMENT that they are not aware that if their contracting counter party is not the owner of the vessel, they can have no claim against the vessel. It is further simply not believable that the plaintiff is not aware of the legal position and the consequences of supplying bunkers at the instance of time charterers.
(xvii) The case of m.v. "Sea Renown" relied upon by the plaintiff is completely distinguishable on facts because in that case the bunker delivery receipts (Exh. 1 to OJCA) contain an express stipulation that the bunkers delivered are for the account of the owners of the vessel who are responsible for the payment of the bunkers supplied. This stipulation was acknowledged by the master of the vessel who put his signature below the same, thus accepting owners liability to pay for the bunkers. This created an obligation on the owners of the vessel to pay for the HC-NIC Page 27 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 28/79 JUDGMENT bunkers supplied and consequently the vessel was liable to be arrested. There is no such stipulation in the bunker delivery note (Exh. F to the Plaint) in the present case where the master has simply acknowledged receipt of the bunkers as evidence of delivery. (xviii) The case of m.v. "Sea Renown" also does not consider the judgment of the Hon'ble Supreme Court in the case of m.v. WON FU, the provisions of the 1999 Arrest Convention and the judgment of the English Court in the case of m.v. "Yuta Bondarovskaya, all of which make it clear that for arrest of a vessel, the owners of the vessel must be liable in respect of the claim and that no arrest was permissible in respect of bunkers supplied at the instance of a time charterer. (ixx) In fact, the English judgment in case of m.v. "Yuta Bondarovskaya deals with each and every contention raised by the plaintiff HC-NIC Page 28 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 29/79 JUDGMENT in the present suit and conclusively holds that in case of supply of bunkers at the request of a time charterer, neither the vessel nor the owner of the vessel is liable. (B) Arrest is oppressive and contrary to just and equitable principles.
(i) The IMC Maritime Group, as Time Charterer of the vessel, were required to provide and pay for the bunkers. The bunkers on board remained the property of IMC Maritime Group. When the charter came to an end, the owners of the vessel were required to take over the bunkers remaining on board the ship and pay the value thereof to IMC Maritime Group who are entitled to deduct the value thereof from the last hire payment. This is the case in all time charters without exception. Accordingly, when the charter came to an end on 22.3.2006, the owners, as per the Final Hire Statement, gave credit to HC-NIC Page 29 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 30/79 JUDGMENT the charterers in the sum of US$ 198,627.00 for 601.900 metric tonnes of IFO and US$ 35,200.00 towards 64 metric tonnes of MDO. Thus the owners have already paid the charterers, IMC Maritime Group a sum of US$ 2,33,827.00 for the bunkers. This is reflected in the Final Hire statement at Ex.3 of OJCA and the averments will be found in para 6 of the OJCA. Hence this makes it demonstrably clear that the owners have paid for the bunkers to the Time Charterers and it is the latter who have failed to pay the plaintiff for which the remedy of the plaintiff is against the Charterers alone who are also the buyers of the bunkers under the contract with the plaintiffs.
(C) Damages for wrongful arrest;
(i) As a result of the order of arrest dated 14.8.2006, the vessel was detained for period of 4.0833 days. The vessel which was under
HC-NIC Page 30 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 31/79 JUDGMENT time charter to STX Pan Ocean, Korea, at a charter rate of US$ 19,000.00 per day (charter party at Ex.2 to the OJCA) was treated as off hire for this period as evidenced by the off hire calculations and debit note issued by STC Pan Ocean (ex. 9 to OJCA). Thus the direct loss suffered by the defendant on account of the arrest of the vessel is the loss of charter hire for 4.0833 days aggregating to US$ 82,238.33.
(ii) The plaintiff's conduct is wrongful and malicious. They knew that there is contracting counter party, IMC Maritime Group and their claim is against IMC Maritime Group alone. Yet, they instituted the action against the defendant vessel and against the owners of the defendant vessel.
(iii) The plaintiff deliberately and maliciously did not serve the order of arrest obtained on 14.8.2006 till 22.8.2006 and that HC-NIC Page 31 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 32/79 JUDGMENT too only on the port authorities at Kandla.
Had they served the order of arrest immediately, as they were bound to, the detention would have reduced as the defendant would have had sufficient time to put up security before the vessel completed discharge. However, the plaintiff waited until the vessel completed discharge on 22.8.2006 and was ready to sail out, before they served the order of arrest on the port authorities. This was done with ulterior motives to cause losses to the owner of the vessel.
(iv) Apart from the above, the plaintiff wrongfully opposed deposit of Indian Rupees in this Court by the defendants as security on 24.8.2006 despite knowing fully that Indian Rupees are legal tender and they cannot insist on a foreign currency deposit. This caused further delay in release of the defendant vessel.
HC-NIC Page 32 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 33/79 JUDGMENT
(v) This is a fit and proper case where not only damages for wrongful arrest should be awarded in the sum of US$ 82,238.33 but also exemplary costs.
(vi) The plaintiff is a foreign company with no assets. They have appointed an individual in India as their constituted attorney. The undertaking in damages given by the said individual is of no value. This must therefore be fortified by a bank guarantee or cash deposit in the amount of damages claimed.
10. This application was strongly opposed by the plaintiff and affidavitinreply was filed on 23.11.2006. Mr. Mihir Thakore, learned Senior Counsel appearing with Mr.Sandip Singhi for Singhi & Co., for the original plaintiff, submitted that the plaintiff has made out a good cause of action HC-NIC Page 33 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 34/79 JUDGMENT against the defendant vessel and even on the basis of a reasonably arguable best case being the test required by the Hon'ble Supreme Court, to be satisfied in Admiralty cases, it is evident that the plaintiff's claim is well founded in law and on facts. He has, therefore, submitted that the present application is clearly misconceived and not maintainable. No case is made out for rejection of the plaint for want of cause of action nor has any such relief been claimed. He has further submitted that the defendant vessel has failed to set out under what provisions of law it is entitled to the reliefs claimed in the application. He has further submitted that there is no substance in the submission that there is no privity of contract between the owners of the defendant vessel and the plaintiff and no cause in rem for arrest of the defendant vessel can lie. He has further submitted that there is also no substance in the submission that the order HC-NIC Page 34 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 35/79 JUDGMENT for supply of bunkers was only placed by IMC Maritime Group Inc. with the plaintiff. M/s.LQM Petroleum Services Inc. representing themselves as brokers had placed a bunker nomination dated 3.3.2006 upon the plaintiff requisitioning bunkers on behalf of the defendant vessel and IMC Maritime Group Inc. He has further submitted that the bunkers were supplied to the defendant vessel and to the faith and credit of the defendant vessel. The contents of the plaint bear this out. The defendant vessel is, therefore, liable to pay for the value of the bunkers. There is privity of contract with the owners of the defendant vessel and the defendant vessel and/or its owners are also liable to make payment for the value of the bunkers as the bunkers were supplied to the defendant vessel which has consumed the same and benefited. The bunkers were supplied without intending to do so gratuitously. The owners of the defendant vessel are, therefore, bound and HC-NIC Page 35 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 36/79 JUDGMENT liable to make payment for the value of the bunkers. He has further submitted that the bunkers were supplied by the plaintiff to the defendant vessel through the agent of the plaintiff. In bunkering business, vessels all over the world at various remote places requisition supply of bunkers. It is impossible for the bunker supplier to have branches at every nook and corner of the world. Whenever requisition for supply of bunker is made the plaintiff through its agents ensures the supply and accordingly bills/invoices the vessel for the supply of the bunkers. He has further submitted that the supply of the bunkers was made to the defendant vessel. The word "on account of IMC Maritime Group C/o LQM Petroleum Services" appearing in Ex.G to the plaint does not mean that the owners of the defendant vessel are not liable for the supply of the bunkers. The invoice was drawn on the owners of the defendant vessel and was HC-NIC Page 36 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 37/79 JUDGMENT given to the Chief Engineer of the vessel. The period of credit granted is customary in bunkering business. There was no request made or required to be made by the owners of the defendant vessel or IMC Maritime Group for credit. The plaintiff initially took up the matter with brokers M/s. LQM Petroleum Services Inc. and received an email dated 13.4.2006 from LQM Petroleum Services Inc. stating that IMC Maritime Group requested for a 60 day extension of time to make the payment. He has, therefore, submitted that the plaintiff pursued IMC Maritime Group for recovery of the price of the bunkers. The plaintiff had no option but to exercise patience and wait for payment. The plaintiff was forced to agree to grant time of 60 days to receive the payment. Since IMC Maritime Group did not make payment the LQM Petroleum Services suggested to the plaintiff to contact the owners for commercial settlement. Merely because IMC Maritime Group Inc. has HC-NIC Page 37 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 38/79 JUDGMENT admitted liability but is not in a position to make payment because of financial difficulties does not absolve the owners of the defendant vessel from their liability. He has, therefore, submitted that the facts and case pleaded in the plaint reveal that the owners of the defendant vessel are liable to discharge their liabilities. He has further submitted that the liability would even otherwise independently arise from a delivery/supply of bunkers on the faith and credit of the vessel and from the documents such as instruction for delivery of bunkers to the Master/Chief Engineer of the defendant vessel, bunker delivery note and invoice. He has further submitted that the distinction sought to be drawn by the defendant in the facts of the present case as well as facts of m.v. Sea Renown & Anr. are not sustainable. It is further submitted that the principle of Sea Renown case clearly applies to the present case as well. From the facts pleaded HC-NIC Page 38 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 39/79 JUDGMENT in the plaint, it is evident that the defendant vessel too has accepted the general terms and conditions of the plaintiff. The said general terms and conditions of the plaintiff clearly specify that the sale of the product is to the credit of the receiving vessel. Having received and consumed the said bunkers and having accepted the terms and conditions; and having signed the Bunker Delivery Receipt without any protest, remark or disclaimer, having received the invoice unreservedly, it no longer lies in the mouth of the defendant vessel to deny liability for payment of the value of the bunkers to the plaintiff.
11. Mr. Thakore has further submitted that there is no substance in the submission that there is no acknowledgment / acceptance of liability by the Master on behalf of the owner of the defendant vessel to pay for the bunkers supplied. The Chief Engineer is HC-NIC Page 39 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 40/79 JUDGMENT incharge of the machineries of the vessel and is one of the senior most officers on board the vessel who has signed the documents. The Chief Engineer is in fact incharge of the management of the vessel and its machineries and equipment. The supplies were made to the faith and credit of the vessel which fact is evident on a plain reading of the plaint. Merely because IMC Maritime Group Inc. have acknowledged their liability to pay does not in any manner absolve the owners of the defendant vessel of its liabilities to pay for the value of the bunker. Mr.Thakore has further submitted that the fact whether the owners of the defendant vessel have already paid for the bunkers to IMC Maritime Group Inc. under the contract between the parties is wholly irrelevant and immaterial as the plaintiff has yet not been paid for the value of the bunkers. He has further submitted that the plaintiff is not admitting the fact as to whether the defendant vessel was HC-NIC Page 40 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 41/79 JUDGMENT chartered by its owners. He has further submitted that the defendant vessel has taken too much time to create and/or fabricate documents with a view to evade liability. He has further submitted that the terms and conditions of the alleged charterparty were never known to the party nor were made known to them. The said charterparty is, therefore, not binding upon the plaintiff.
12. Mr. Thakore has further submitted that there is no substance in seeking any relief from this Court with regard to damages claimed by the owners of the defendant vessel. He has submitted that the exparte order of the arrest was made on 14.8.2006. 15.8.2006 was a public holiday and nothing could be done since the office were not functioning on 15.8.2006. The exact location of the vessel could not be found on 15.8.2006. However, for the information received by the plaintiff it was clear that HC-NIC Page 41 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 42/79 JUDGMENT the vessel was somewhere between the port of Sikka and Kandla. In fact, a representative was deputed in Rajkot, which is the near distance from Kandla and Sikka to serve the warrant of arrest of the vessel. From the information that was ascertained on 15.8.2006 it was informed that the vessel was somewhere between Sikka and Kandla. Consequently the representative had gone to serve warrant of arrest and returned to Ahmedabad on 15.8.2006. On 16.8.2006 the respondent received the information that the defendant vessel had arrived at Kandla outer anchorage. On 16.8.2006 itself advocate for the plaintiff faxed notices to the Port Officer, Kandla and the Assistant Commissioner of Customs. At that time, the representative of the plaintiff was informed that the vessel was in stream and not yet berthed. The representative therefore returned to Ahmedabad on 21.8.2006. Thereafter, the plaintiff received information that the HC-NIC Page 42 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 43/79 JUDGMENT vessel had berthed at Kandla. Accordingly, the representative of the plaintiff again went to Kandla late at night and effected service of the notice/warrant of arrest on the Master of the defendant vessel on 22.8.2006. He has, therefore, submitted that absolutely no intention on the part of the plaintiff, deliberately or otherwise to delay the defendant vessel or cause prejudice to the owners of the defendant vessel. He has further submitted that the present application is completely baseless and unfounded.
13. Mr.Thakore has further submitted that there was no intention on the part of the plaintiff to cause delay in the release of the vessel. As a matter of fact, there was no delay and there was no detention of the defendant vessel for a period of 4.0833 days. He has emphatically submitted that the Chief Engineer was bound and obliged to make HC-NIC Page 43 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 44/79 JUDGMENT remarks or reservations that the owners were not liable for the supply. There is also no substance in the submission that the owners of the defendant vessel are not parties to the confirmation for bunkers nomination. He has further submitted that the documents produced by the plaintiff clearly show that the defendant vessel is liable for the supply of bunkers to the defendant vessel. The invoice was issued to the Chief Engineer of the defendant vessel and the words "on account of IMC Maritime Group" does not absolve owners of liability for the value of bunkers particularly when the invoices drawn on the defendant vessel and given to the Chief Engineer. He has further submitted that there is no substance in the submission that there is no contract between the plaintiff and the owner of the vessel and the suit is not maintainable against the vessel in Admiralty rem. He has further submitted that there is contract with the owners of the HC-NIC Page 44 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 45/79 JUDGMENT defendant vessel and that the plaintiffs have more than reasonably arguable case in law. The issue involved in the matter cannot be decided at the interim stage. The plaintiff should be given full opportunity to prove their case at the trial. Otherwise, grave harm and prejudice would be caused to the plaintiff since the defendant vessel is foreign vessel and is unlikely to return to the Indian territory. If the claim of the plaintiff were not secured, any decree passed by this Court at the final hearing of the suit will be merely a piece of paper. He has, therefore, submitted that the present application for vacating the order of arrest and/or return of security deserves to be rejected.
14. In response to the affidavitinreply to the present application the defendant vessel have filed affidavitinrejoinder on 14.12.2006 to which the plaintiffs have filed HC-NIC Page 45 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 46/79 JUDGMENT affidavitinsir rejoinder on 2.2.2007. In defendant vessel's affidavit in rejoinder and plaintiff's affidavit in sirrejoinder, both the parties have more or less made reiterations of their respective contentions and denied the facts and averments made by the other party. Written submissions were also filed on behalf of the defendant vessel as well as the plaintiffs.
15. Having heard the learned advocates appearing for the parties and having considered their pleadings and submissions made orally and in writing and having considered relevant provisions relating maritime laws and conventions as well as the decided case law on the subject, the Court does not find any substance or merits in this application and it is liable to be rejected. The applicant/defendant vessel's case in a nutshell is that;
(i) That the m.v. Lucky Field was at all HC-NIC Page 46 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 47/79 JUDGMENT relevant time of the supply of bunkers under a time charter dated 1.2.2006 to IMC Maritime Group who under the alleged time charter party dated 1.2.2006 was liable to pay for the bunkers.
(ii) That though the bunkers were supplied and delivered to the vessel m.v. Lucky Field by the plaintiff there was no privity of contract between the owners of the defendant vessel and the plaintiff.
(iii) That in absence of privity of contract, the vessel m.v.Lucky Field cannot be held liable or responsible to pay for the value of bunker and could therefore not be arrested in an action in rem.
(iv) That the Application of the owners of the defendant vessel is not for rejection of the plaint under Order VII Rule 11 for want of cause of action but is an application for HC-NIC Page 47 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 48/79 JUDGMENT setting aside an order of arrest and for damages.
(v) The owner of the defendant vessel has also prayed for losses and damages to be paid to them for the alleged wrongful arrest of the vessel.
16. The submissions of the plaintiff in response to the above are as follows :
(i) The plaintiff had admittedly supplied and delivered bunkers to the vessel m.v.
Lucky Field and the said vessel has consumed the said bunkers. The plaintiff submits that there was/is privity of contract with the owners of the vessel in relation to the supplies. In any event it is submitted that privity is not required.
(ii) The claim of the plaintiff falls under Section V of the Admiralty Courts Act, 1861 HC-NIC Page 48 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 49/79 JUDGMENT which reads as under: "5. The High Court of Admiralty shall have jurisdiction over any claim for necessaries supplied to any ship elsewhere than in the port to which the ship belongs, unless it is shown to the satisfaction of the Court that at the time of institution of the cause any owner or partowner of the ship is domiciled in England or Wales; provided always, that if in any such cause the respondents do not recover twenty pounds he shall not be entitled to any costs, charges, or expenses incurred by him therein, unless the Judge shall certify that the cause was a fit one to be tried in the said Court." (Emphasis Supplied)
(iii) A plain reading of Section V of the 1861 Act contemplates the following.
(a) That an action is maintainable against the vessel if necessaries (fuel/bunkers) are supplied to the ship;
(b) That an action would not be maintainable HC-NIC Page 49 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 50/79 JUDGMENT against the vessel if the owner or part owner of the vessel is domiciled in England or Wales (Note: England or Wales is to be read as "India" since this is pre independence enactment) It is, therefore, evident that Section V contemplates the following:
(i) That the owner is liable or deemed to be liable if the supplies are made to the vessel;
(ii) The vessel is liable to be proceeded against in an action in rem if the vessel is not registered in that;
(iii) Section V only contemplates the owner being liable if the supplies are made to the ship.
(iv) Section V in fact does not even contemplate requirement of the privity of contract between the supplier and the owner of the vessel Section V does not state that vessel will only be liable if the supplies HC-NIC Page 50 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 51/79 JUDGMENT are only requisitioned by the owner.
(iv) From the above, it is evident that there was privity of contract between the supplier and the owner of the vessel and that the owner of the vessel is liable in respect of the said supplies.
17. Disclosure of cause of action;
(i) For this Court to vacate the order of arrest and return the security, it is required to consider first and foremost whether the plaint discloses a cause of action. If on a plain reading the plaint discloses a cause of action, the order of arrest is not liable to be set aside and/or vacated.
(ii) If the plaint discloses a cause of action, the order of arrest cannot be vacated. This would lead to an incongruous situation where though the plaint discloses a HC-NIC Page 51 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 52/79 JUDGMENT cause of action, the order of arrest is vacated. It is therefore imperative that whilst considering the present application the Court is bound to consider the same applying the principles of Order VII Rule 11 of th Code of Civil Procedure, 1908. In this regard, the attention of the Court is invited to the following judgment.
(a) In the case of m.v. Sea Renown and Anr. Vs. Engergy Net Ltd., O.J. Appeal No.231 of 2003, the Division Bench of the Court inter alia held;
"13. The plea that the learned Single Judge has committed an error in treating the application filed by the appellants as an application filed under Order VII, Rule 11 of the CPC and, therefore, the impugned order should be set aside, cannot be accepted. Three circumstances, namely, (a) that no written statement was filed till the date of filing application; (b) that averments have been made in the application demanding dismissal of the suit on the ground HC-NIC Page 52 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 53/79 JUDGMENT that no cause of action is available to the respondent against the appellants; and (c) damages have been claimed by the appellants in the application, may persuade a Court to treat the application as if filed under the provisions of Order VII, Rule 11 of the CPC. If the application is treated as one having been filed under the provisions of Order VII, Rule 11 of the CPC, then the Court will have to proceed on demurrer, and try to find out with reference to the averments made in the paint and documents produced therewith, whether cause of action is available to the respondent against the appellants. In para 4 of the plaint, the respondent has made averments, inter alia, as under... ..."
In the facts of the present case, the following similarities to the Sea Renown case (Supra) may be noted:
(i) The applicant has also not filed its written statement.
(ii) The applicant has categorically stated that "the suit is not maintainable against the vessel in rem" and "the Court has no HC-NIC Page 53 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 54/79 JUDGMENT jurisdiction to entertain the suit".
(iii) The applicant has claimed damages from the respondent.
Thus all 3 requirements set out in para No.13 of the judgment of the Division Bench of this Court in the m.v. Sea Renown case (Supra) are applicable to the present. The touchstones of order VII Rule 11 must necessarily be applied whilst considering the application. These touchstones are well enshrined in the judgment of the Bombay High Court (in an Admiralty matter) which set forth below:
(b) In the case M/s. Crescent Petroleum Ltd., Vs. m.v. MONCHEGORSK" & another 2001 (1) BCR 645 in para 4 & 5 the Bombay High Court held as follows:
"4. The Court has the power under Order 7, Rule 11 (a) of the Code of Civil Procedure to reject the plaint at the threshold. But in this case HC-NIC Page 54 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 55/79 JUDGMENT the Court would reject the plaint only if it comes to the conclusion that necessary averments and material has not been placed before the Court to show, at least prima facie, that PAL had entered into the contract for bunkers at the instance, authority or faith of the vessel or its owners. In the event the Court comes to the conclusion that necessary averments have been made to disclose a cause of action in personam against the owner of the vessel, then it would not be necessary to decide the question of law raised by Mr.Mukherjee viz. for an action in rem to lie it is essential that the owner of the vessel is liable in personam. It would be necessary to decide this question only if the Court comes to the conclusion that necessary averments have not been made to disclose a cause of action in personam against the owner. Having perused the plaint and the documents which are made available. I am prima faice of the a triable issue with regard to the bunkers being supplied to the owners. Therefore, it would not be necessary to decide the question of law at this stage come to the conclusion, at this interlocutory stage, that there are no averments HC-NIC Page 55 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 56/79 JUDGMENT showing that the bunkers have been supplied to the ship on the alleged authority of the owner..."
5. It would also not be possible to accept the submission of Mr.Mukherjee to the effect that even prima facie it could not be held that the necessaries were supplied on express/ implied authority of the vessel. The circumstances in which the plaint can be struck out as disclosing no cause of action has been considered by a Division Bench of this Court in the case of (Bomi Munchershaw Mistry v. Kesharwani CoOp.Housing Society Ltd. and others) 3, 1988 (3) Bom. C.R.
238. The ratio has been set out in para 12 and 19 of the judgment which are as follows:
To my mind it is evident that our judicial system would never permit a respondent to be driven from the judgment seat in this way without any Court having considered his right to be heard, expect in cases where the cause of action was obviously bad and almost incontestably bad." From the above it is therefore crystal clear that the plaint discloses a cause of action. HC-NIC Page 56 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 57/79 JUDGMENT The plaintiff is only required to make out a triable case. A reasonably arguable best case as per the test laid down by the Supreme Court in the VSNL vs. Kapitan Kud case AIR 1996 SC 516 is to be satisfied.
(iii) Averments made in the plaint and the documents attached therewith disclose the cause of action.
18. Legal submissions :
The submissions of the plaintiff made during the course of hearing are broadly formulated as under :
(i) The reliefs prayed in OJ Civil Application No.364 of2006 can be granted only if the action of the plaintiff is frivolous or vexatious (See VSNL vs. m. v. Kapitan Kud 1996 (7) SCC 127)
(ii) The Arrest Convention of 1999 has not been ratified by minimum number of countries.
HC-NIC Page 57 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 58/79 JUDGMENT Such convention is not yet in force in any part of the world. The Arrest Convention of 1999 cannot be resorted to for the purpose of restricting or truncating the wide and ever expanding jurisdiction of the High Court. The rights available under the 1952 Convention cannot be taken away by the 1999 Convention.
(iii) The question whether supply of bunkers in the instant case of the defendant vessel imposes the liability upon the owner of the ship is of such nature that it requires evidence at the time of trial and cannot be decided at this stage.
(iv) The return of security can be ordered only if the plaintiff has failed to disclose a cause of action against the defendant vessel. The Courts would be extremely slow in ordering the return of the security since the judgment in favour of the plaintiff will HC-NIC Page 58 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 59/79 JUDGMENT become unenforceable and infructuous in absence of security.
19. The Court now proceeds to deal with each of the aforesaid submissions.
Submission (i) : The plaintiff relied upon two decisions in support of the first submission. In a decision reported in (1996) 7 SCC 127, it is held in para 15 that the claim was not vexatious, but the claim was triable and if there is a strong triable case, the security is required to be furnished. The only test for determining whether the case is triable or not is by finding out whether the claim is not vexatious. Therefore, it is established in an admiralty action that the claim is not vexatious and it is triable. The requirement of prima facie case as understood in the context of interim injunction under Order 39 of the Code of Civil Procedure, 1908 is not to be imported while exercising the admiralty HC-NIC Page 59 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 60/79 JUDGMENT jurisdiction. It is sufficient to establish that the claim is triable and not vexatious. In a decision reported in (1998) 2 Lloyd's Rep.357, it is held as follows : "It is certainly open to a defendant to apply to the court at an early stage of an action for a stay on the ground that the action has no chance of success and is therefore, vexatious and the Court certainly has power in the exercise of its inherent jurisdiction to grant a stay on that ground...... Court however, should only stay an action on that ground when the hopelessness of the respondent's claim is beyond doubt. If it is beyond doubt but on the contrary, the respondent has an arguable even though difficult case in fact and law, the action should be allowed to proceed to trial ....... This last principle applies, in my view, as much to an action in rem as to an action in personam, even though the former involves a defendant in providing security and maintaining it until the action is determined, while the later does not. HC-NIC Page 60 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 61/79 JUDGMENT Submission (ii) :
The Arrest Convention of 1999 is not yet ratified by 10 countries. A printout obtained from the website clearly provides that the international convention on arrest of ship, 1999 is not yet in force. Its statute indicates that there are only six signatories and seven parties to such convention. In the case reported in (2004) 9 SCC 512, there is a reference made by the Hon'ble Supreme Court to the Arrest Convention of 1999. In particular, para 43 of the judgment states that the countries mentioned in the said para have ratified convention. This is factually not correct. The Arrest Convention, 1999 is not yet ratified by all the countries mentioned in the said para. The website clearly shows that such convention is not in force. The Hon'ble Supreme Court was concerned with the Arrest Convention of 1999 in the context HC-NIC Page 61 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 62/79 JUDGMENT of the question whether the insurance premium paid for the ship constitutes 'necessaries' so as to give rise to a maritime lien. Such question is answered in the affirmative by referring to the Arrest Convention of 1999. Arrest Convention of 1999 cannot be resorted to for the purpose of restricting or truncating the expanding jurisdiction of Indian Courts. The rights available under the Arrest Convention of 1952 cannot be taken away by the Arrest Convention of 1999. The decision reported in (1993) Sup.2 SCC 433 clearly provides that India has not adopted the Brussels' convention and yet the provisions of the convention are the result of international unification and development of the maritime laws of the world and can be regarded as international common law and which can be adopted and adapted by the Courts to supplement and compliment national statute on the subject, in absence of HC-NIC Page 62 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 63/79 JUDGMENT specific statutory provisions. Although this convention may not have been ratified by India, they embodied the principles of law recognized by the generally of maritime states and can therefore, be regarded as part of our common law. In particular, it is held in para 64 that where statutes are silent and remedy is sought, it is the duty of the Court to devise procedural rules by analogy and expediency. Briefly stated, the Arrest Convention of 1952 read with the judgment of the Hon'ble Supreme Court in case of m.v. Elizabeth clearly establishes that the jurisdiction of the Indian Courts cannot be truncated or restricted except by national statutes. It is not proper to reject the claim of the plaintiff by putting 1999 Arrest Convention on the same footing as 1952 Convention. In the Sea Success case the Supreme Court of India applied the 1999 Arrest Convention because the 1952 Arrest Convention did not provide for P & I call HC-NIC Page 63 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 64/79 JUDGMENT money claims to be a maritime claim to enable the arrest of the vessel. It is in this context that the Supreme Court relied upon the 1999 Arrest Convention to expand the jurisdiction of the Court. By relying on the 1999 Arrest Convention which is wider is being sought to be narrowed or whittled down. It would be an error to hold that 1999 Arrest Convention has the effect of superseding 1952 Arrest Convention.
Submission (iii) : Admiralty Court Act, 1861 provides that the bunkers supplied to the ship constitute 'necessaries' so as to give rise to maritime claim. In the instant case, the facts on record very clearly establish the following:
(i) The charter party between the owner and charterer was not known, or made known to the plaintiff at the time of supply of bunkers to the ship. The plaintiff did not and could HC-NIC Page 64 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 65/79 JUDGMENT not have known, that the ship was under a time charter (see para 18(vi) to (viii) to plaint). Since master of the ship/chief engineer are the employees of the owner and since they have not disclosed to the plaintiff about the time charter at the time of supply of the bunkers, the plaintiff could not have known about such time charter at all.
(ii) The bunker confirmation, bunker nomination and revised bunker nomination clearly referred to the general terms and conditions subject to which the bunkers are supplied by the plaintiff. It clearly provides that the sale of the bunkers is subject to such general terms and conditions and that the copy of the same is available on request. No such request was made by the Master of the ship/ Chief Engineer. Such terms and conditions are a part of the contract. In a decision reported in (1978) 1 HC-NIC Page 65 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 66/79 JUDGMENT All England Report page 18 it is held that the reference made in the purchase order of the plaintiff to the general conditions of the contract obtainable at request was sufficient to incorporate into the contract such conditions. In the instant case also, similar language is used, and therefore, such conditions are part of the contract. In particular Clauses 1.3, 2.6 and 3.3 are relevant. Clause 3.3 provides that the sale of the products is on the credit of the buyer, the receiving vessel and/or otherwise provided in Clause 1.3 and that the settler shall have a maritime line against the receiving vessels and that the buyer or its agents are authorized to encumber the receiving vessels.
(iii) The bunker delivery note is signed by the Master of the Ship/ Chief Engineer.
Invoice is issued to the account of Owners/ Charters/ Master/ Operator. The original HC-NIC Page 66 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 67/79 JUDGMENT invoice is handed over to the Master of the Ship/Chief Engineer.
20. Looking to the aforesaid facts on record, it is sufficiently triable/arguable that the Master of the Ship/Chief Engineer had actual or implied or ostensible authority and that by no stretch of imagination, such claim can be described as vexatious.
21. It is sufficiently triable/arguable that bunkers are supplied to the credit of vessels and this is sufficient to arrest the ship irrespective of the question whether the owner is liable in personam or not. In a well recognized classic by D.C. Jackson Enforcement of Maritime Claims (Second Edition), it is stated on page No.197 as under: "The prerequisite that the person liable in personam should be beneficial owner at the time that the action was brought was clearly contrary HC-NIC Page 67 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 68/79 JUDGMENT to the Arrest Convention so far as the liability to arrest was concerned. In effect, the convention provides simply that the ship in respect of which the claim arose may be arrested, whoever is liable in respect of the claim, and there is no reference to ownership or any other link at the time the action is brought"
22. The facts of the present case are indistinguishable from the facts of the case before the Division Bench of this Court in the case of m.v. Sea Renown (Supra). In this case the Court refused to go into the merits or evidentiary value of the documents and held that the suit should proceed to trial on merits without deciding the question whether an action in rem lies only if the owner is liable in personam.
23. A decision of the Bombay High Court in the case of M/s. Crescent petroleum Ltd. Vs. m.v.
"MONCHEGORSK" & another is also closely HC-NIC Page 68 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 69/79 JUDGMENT applicable to the facts of the present case. It was also a case of supply of bunkers. It records the submission that the law in India does not require that an action in rem would lie only if the owner is also liable in personam. In the said case, Clause 21 of the general terms and conditions read as under: "21 LIEN. Where product is supplied to a vessels, in addition to any other security, this agreement is entered into and product is supplied expressly on the faith and credit of vessel. It is agreed and acknowledged that a lien on the vessel is thereby created for the price of the product and other charges agreed to by the buyer in this agreement, and the seller in agreeing to deliver the produce to the vessel does no relying on the faith and credit of the vessel. The buyer, if not the owner of the vessel, hereby warrants that he has the authority of the owner to pledge the vessel's credit and he has or will give notice of the provisions of his Clause to the owner. Seller shall not be bound by any attempt by any person to restrict, limit or prohibit its lien or liens attaching to a vessel that has been HC-NIC Page 69 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 70/79 JUDGMENT supplied."
24. The Bombay High Court has proceeded on the ground that the agreement was entered into expressly on the faith and credit of the vessel and that it has agreed and acknowledged that a lien on the vessel is thereby created. It is also agreed that the buyer, if not the owner of the vessel, warrants that he has the authority of the owner to pledge vessel's credit. In view of such clause, it was held that it was not possible without trial to hold that the contract was not entered into on behalf of the owners. Clause 21 would raise a rebuttable presumption that the 'necessaries' have been supplied to the vessels on the express or implied authority of the owner. In the instant case, no evidence is adduced to rebut such presumption. The reliance on the time charter is not justified since it is not a signed document. Even if the owner has paid HC-NIC Page 70 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 71/79 JUDGMENT to the charterer, their liability to the plaintiff does not disappear. There is no evidence on record that the plaintiff was aware about the time charter or the terms and conditions of the charter party.
25. Generally damages can only be awarded by a Court in the following circumstances;
(i) Where it is held by the Court that the arrest was wrongful.
(ii) An arrest is deemed to be wrongful when the Court comes to the conclusion that the arrest was malafide or in crassa negligencia.
(iii) The question whether action was wrongful and quantification of the loss can only be decided at trial and not an interim stage.
(iv) The owner of the defendant vessel HC-NIC Page 71 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 72/79 JUDGMENT cannot claim damages in an interim application. The question of loss has to be determined and proved by the owners of the defendant vessel in a trial and this would require filing of a counter claim. The damages cannot generally be awarded in the interim application.
(v) The allegations that the plaintiff deliberately delayed the service of warrant of arrest with a view to delay the ship and put the pressure upon the ship and shipowner to furnish the security have been dealt with in para 15 of the affidavit in reply filed by the plaintiff in which detailed reasons are given as to why the warrant of arrest could not be served upon vessel due to its movements. This issue can be decided only at the time of trial.
(vi) The plaintiffs' insistence on security of US$ currency may not be objected to since HC-NIC Page 72 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 73/79 JUDGMENT the invoice in US$ currency and the suit claim was in US$ currency. The shipowners being a foreign company could easily furnish a security in US$ 2,52,109.84 which they eventually did. Therefore no grievance in this regard can be made. In any case, it would not give any rise to a claim for payment of damages.
26. Distinguishing judgments relied on by owners of defendant vessel.
The judgments relied upon by the owners of the defendant vessel are dealt with as under: A. (1998) 2 Lloyd's Rep.357 The Yuta Bondarovskaya In this case, the supplier of necessaries was undoubtedly aware that the vessel was under a time charter. This is evident upon reading the following paras of the judgment. Para 3 first column page 357 HC-NIC Page 73 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 74/79 JUDGMENT Para 1 first Column page 359 In the present case the plaintiff was never informed or aware that the vessel was allegedly time chartered and that under the time charter the charterer was responsible for payment for the fuel. Clause 2 of alleged charter party in fact qualifies the said clause by stating "except as otherwise agreed". This clearly shows that the parties could come to a contrary agreement. The owners of the defendant vessel had not stated that there was no other agreement. In the Yuta Bondarovskaya case the supplier sought arrest of the vessel of the demise charterer and not the owner in the present case which is an action under Section V of the Admiralty Courts Act , 1861 against the vessel of the owner.
Thus this judgment clearly cannot be applied HC-NIC Page 74 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 75/79 JUDGMENT for the facts of the present case. B. (2003) 1 SCC 305 Epoch Enterrepots Vs. m.v. WON FU This claim does not involve a claim for supply of necessaries. The issue that arose for consideration in this case that whether there was an agreement for use and hire of a vessel, the breach of which could permit the arrest of the vessel.
This judgment and its observation of the Hon'ble Supreme Court cannot be applied to the facts of the case.
It is settled law that a judgment of Supreme Court cannot be read as a statute but must be read in a contractual settings which clearly does not apply to the facts of the case. C. Unreported judgment in Forsythe Trading HC-NIC Page 75 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 76/79 JUDGMENT Service Ltd., Vs. nilzuru.
The said judgment is once again not applicable for the following reasons:
(i) Section 3 of Brussels Convention was not argued.
(ii) Section V the Admiralty Court Act was not argued.
(iii) This was admittedly a case where there was a chain of contracts and the respondent had admittedly not supplied the bunkers to the vessel. The same had been supplied by the physical supplier under a chain of contracts. The physical suppliers admittedly had never supplied the bunkers at the behest of the owner. There being as many as 5 to 6 parties in the chain of transactions which is evident on a reading of the first few pages of the judgment.
This judgment too is distinguishable. D. Scandinavian Bunkering As Vs. m.v. Chopol HC-NIC Page 76 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 77/79 JUDGMENT
- 2
(i) Section 3 of Brussels Convention was not argued.
(ii) Section 5 the Admiralty Court Act was not argued.
(iii) In the present case the Court rejected the plaint because from the averments it was evident that the plaint failed to disclose any cause of action. In fact that plaint contained an averment which badly affected the case. The said averment is quoted in para 11 of the judgment at para 8.
E. Raj Shipping Agencies Vs. m.v. Bunga Mas Tiga & Anr.
(i) Section 3 of Brussels Convention was not argued.
(ii) Section V the Admiralty Court Act was not argued.
(iii) In this case there was a chain of transaction and the supplier was approached by another party to make the supply. HC-NIC Page 77 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 78/79 JUDGMENT
(iv) The shipowner had in fact made the payment to that other party who had requested the supplier to make the supplies. The shipowner could not be required to make the payment twice. The facts of this case are completely different and the observations cannot be relevant in the present case. F. Arrest Convention 1999 As discussed earlier even under the 1999 Arrest Convention the shipowner is liable for the loss for the supplies made to the vessel. In conclusion, it is held that the present case is clearly covered by the Sea Renown case (Supra) and Monchegorsk case (Supra). If the arrest is vacated a decree passed at the final hearing will be rendered infructuous since the vessel may never return to India. The shipowner is also not from a 44A Reciprocating Country. Thus gave harm and prejudice would be caused if the arrest is HC-NIC Page 78 of 79 Created On Sat Apr 30 03:00:00 IST 2016 OJCA/36420/2006 79/79 JUDGMENT vacated. Hence application is rejected without any order as to costs.
(K. A. PUJ, J.) kks HC-NIC Page 79 of 79 Created On Sat Apr 30 03:00:00 IST 2016