Bombay High Court
Aurobindo Pharma Limited vs Nippon Yusen Kabushiki Kaisha on 20 August, 2024
Author: A. S. Chandurkar
Bench: A. S. Chandurkar
2024:BHC-OS:12697
Diksha Rane comm. appeal l no.18060-23.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL APPEAL (L) NO.18060 OF 2023
IN
INTERIM APPLICATION NO.540 OF 2020
IN
COMMERCIAL ADMIRALTY SUIT NO.14 OF 2020
WITH
INTERIM APPLICATION (L) NO.18362 OF 2023
IN
COMMERCIAL APPEAL (L) NO.18060 OF 2023
AUROBINDO PHARMA LIMITED ..APPELLANT
(ORIGINAL PLAINTIFF)
VS.
NIPPON YUSEN KASUSHIKI KAISHA
& ORS. ..RESPONDENTS
(ORIGINAL DEFENDANTS)
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Mr. Prathamesh Kamat a/w. Mr. Vishal Shriyan, Mr. Arsalan A. Thaver
i/b. Mr. Vishal Shriyan for the appellant/original plaintiff.
Mr. Venkatesh Dhond, Senior Advocate a/w. Ms. S. Priya, Mr. Akshay
Kolsepatil, Mr. Abhimanyu Singh, Mr. S. Venkiteswaran, Mr. S. P.
Sudharshan, Mr. Siddhanth Tuli for respondents.
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Coram : A. S. Chandurkar & Rajesh S. Patil, JJ.
Date on which the arguments were heard : 10th July 2024.
Date on which the judgment is pronounced : 20th August 2024.
JUDGMENT (PER : Rajesh S. Patil, J.)
1. The appellant is original plaintiff in commercial admiralty suit, who has challenged order dated 7th June 2023, passed in Interim Application No. 540 of 2020 in Commercial Admiralty Suit No.14 of 1 Diksha Rane comm. appeal l no.18060-23.doc 2020. The said Interim Application No. 540 of 2020 was filed by original defendant no.2 (respondent no.1 herein) seeking dismissal of suit and return of security amount deposited by defendants.
2. By the impugned order dated 7 June 2023, learned Single Judge of this Court has dismissed the commercial admiralty suit filed against defendant no.1 - vessel (respondent no.2 herein) and directed that the cash deposit, as security against arrest of vessel by defendant no.2 (respondent no.1 herein) be returned to defendant no.2 along with interest accrued thereon and the suit to proceed against defendant no.2 and defendant no.3.
3. The parties are hereinafter referred to as per their nomenclature before the Admiralty Court, for the sake of convenience.
4. The plaintiff has filed commercial admiralty suit against defendant no.1 - containership, defendant no.2 named as a corporate entity having its office in Japan and defendant no.3 - a company incorporated in India set up by defendant no.2. No reliefs are sought against defendant no.3. It is the case of the plaintiff that the plaintiff had entrusted defendant no.2 with carriage of pharmaceuticals goods to be carried from Port of Nhava-Sheva to London, Gateway Port, 2 Diksha Rane comm. appeal l no.18060-23.doc U.K. which was to be carried by vessel 'CCNI ARAUCO 6327', Bill of Lading was issued by defendant no.3. The said vessel - 'CCNI ARAUCO 6327' caught fire at Hamburg port. Consequently, the said goods of the plaintiff were carried to its destination by another vessel 'IOS MONTE ALERGRE'. On the goods reaching to its Port, Bailee rejected to take delivery of the goods. The consignee thereafter loaded the goods in vessel "Colombo Express" from London Gateway port to Chennai, India. Upon the receipt of the goods by plaintiff in India, the plaintiff took samples and carried out their own analysis to check the Assay Percentile to know the effectiveness of the drug as per the specified standard. There was reduction and hence degradation. Since the source or nature of impurity could not be identified, the goods would have to be necessarily rejected. All these goods were meant to be used in the manufacture of medicines for human consumption, if there are any doubts as to the strength or quality of the product the same needed to be destroyed. Hence, the plaintiff put up these facts before the defendant no.3.
5. The plaintiff thereafter lodged a claim with their insurers, the New India Assurance Company Limited, who appointed surveyors to investigate the claims. The said surveyors carried a survey and assessed the loss and submitted its report dated 30 th April 2018. The 3 Diksha Rane comm. appeal l no.18060-23.doc plaintiff being not satisfied with the observations, comments and remarks made in the said survey report, the plaintiff filed the commercial admiralty suit against the defendants in the admiralty jurisdiction of this Court in the Commercial Division. In the suit, the plaintiff sought arrest of defendant no.1- vessel and for a money decree for a sum of US dollars 8,25,600 together with interest at the rate of 18% p.a. from the date of the filing of the suit till payment and further a sum of Rs. 23,53,542/- together with interest at the rate of 18% p.a. from the date of filing of the suit.
6. An application was made by the plaintiff for arrest of the vessel
- defendant no.1. The defendant no.3, who is an Indian company filed a caveat against arrest being Caveat No. 153 of 2019. The defendant no.3 gave an undertaking to give security in such sum not exceeding US dollars 1 million in accordance with Rule 936 of the High Court Original Sides Rules. The parties thereafter entered into Consent Terms and agreed on the security to be furnished.
7. The defendant no.2 thereafter filed Interim Application No.540 of 2020 for rejection of plaint. So also, defendant no.1 - vessel filed Interim Application No.548 or 2020, seeking dismissal of the suit against them. The plaintiffs after that filed their replies to the 4 Diksha Rane comm. appeal l no.18060-23.doc interim applications.
8. After hearing both the parties, by its order dated 7 June 2020 the Single Judge of this Court allowed Interim Application No.548 of 2020 of defendant no.1 - vessel and partly allowed Interim Application No.540 of 2020 filed by defendant no.2. The Single Judge directed that the amount of security of Rs.6,50,77,230.68 deposited by defendant no.2 be returned back to defendant no.2 along with accrued interest thereon and the suit filed against defendant no.1 - vessel was dismissed and a further direction was given that the suit to proceed against defendant nos.2 and 3.
9. Being aggrieved by the order passed by the learned Single Judge of this Court on 7th June 2023 in Interim Application No.540 of 2020 and Interim Application No.548 of 2020, the plaintiff has preferred the present commercial appeal before this Court. SUBMISSIONS
10. Mr. Prathmesh Kamat made his submissions on behalf of the appellant (plaintiff).
(I) He submitted that NYK Theseus being the registered owner of defendant no.1- vessel and defendant no.2 were one and the same entities, hence defendant no.1 - vessel was liable to be proceeded 5 Diksha Rane comm. appeal l no.18060-23.doc against for enforcement of the liability of defendant no.3. (II) He submitted that the vessel which was to be arrested was a sister vessel of 'CCNI ARAUCO 6327' the vessel which carried the goods of the plaintiff from Port of Nhava-Sheva to London, Gateway Port, U.K. Both being owned by the same group.
(III) He submitted that the plaintiff should have been given an opportunity to establish their case at trial by leading evidence, instead of dismissing the suit at the interlocutory stage. (IV) He submitted that the contents of the plaint have to be treated as correct while considering or entertaining an application filed by the defendant under Order 7 Rule 11 of the CPC.
(V) He submitted that in the present case, the learned Single Judge while granting the defendants Interim Applications proceeded on the basis of the averments made by the defendants in the Interim Applications.
(VI) He submitted that even on merits the plaintiff had a good case as it was the duty of the carrier that while the goods were in their possession, they should have taken proper care and delivered the goods in good condition to the bailee.
6
Diksha Rane comm. appeal l no.18060-23.doc (VII) He submitted that the proposition of law as laid down in the judgments cited by the plaintiffs were not considered in its proper perspective.
(VIII) He referred to three judgments to support his submission, viz.:
(a) Kamala and others Versus K. T. Eshwara SA and others1
(b) Sapura Dana SPV PTE. Ltd. vs. Barge Sapura 2000 - Order passed by Single Judge of Bombay High Court in I. A. (L) No. 8108 of 2021 in Commercial Admiralty Suit No. 21 of 2021.
(c) Judgment passed in Notice of Motion No. 767 of 2014 in Admiralty Suit No. 84 of 2013, by Single Judge of Bombay High Court in MSC Mediterranean Shipping Company vs. MV MSC Clementina and others.
(IX) He submitted that therefore this Court should allow the present appeal and set aside the impugned order passed by the Single Judge of this court.
11. Senior Counsel Mr. Venkatesh Dhond appeared on behalf of respondents (original plaintiffs) and made submissions. (I) Mr. Dhond submitted that the defendant no.1 - vessel which is sought to be arrested by the plaintiff and the vessel on which the 1 (2008) 12 SCC 661 7 Diksha Rane comm. appeal l no.18060-23.doc goods of the plaintiff were carried from Port of Nhava - Sheva to London, Gateway Port, U.K., both the vessels are owned by two different entities. Therefore, they are not sister concern which is a fact as can be seen in the averment made in the plaint. Therefore, the suit is not maintainable and should have been dismissed and has been rightfully dismissed by the Single Judge of this court as against the defendant no.1- vessel.
(II) He referred to the averments made in the plaint and took us through the paragraph nos.8, 10, 36, 37, 39, 40 and 41 of the plaint, to show what are the submissions made by the plaintiff, in order to file the suit against the defendants.
(III) He thereafter referred to Exhibit 'O' of the plaint which is a table referring to the various ships and the registered owners and ship Managers of such ships. He submitted that the said list does not mention the name of defendant no.1 - vessel.
(IV) He thereafter referred to the impugned order and more particularly to paragraph 23 of the impugned order. (V) He also referred to paragraphs nos.21, 24 and 25 of the judgment of the Supreme Court in Kamala (supra). He submitted that 8 Diksha Rane comm. appeal l no.18060-23.doc the ratio laid down in said judgment does not support the plaintiff and in fact supports the case of the defendants.
(VI) He thereafter referred to the judgment of Sapura (supra) of Bombay High Court and referred to paragraph nos.1, 2 (b) which refers to the concept of non-sister vessel. He also referred to paragraphs no.14,16,18 and 21 in order to prove the point of goods supplied. He submitted that therefore even the judgment of Bombay High Court in Sapura (supra) does not support the case of the plaintiff and in fact is in favour of the arguments made on behalf of the defendants.
(VII) He thereafter referred to the judgment of MSC Meditriann (supra) and pointed out paragraph no.4, 8(2) and 40 of the said judgment. He submitted that after going through these paragraphs one can see that even this judgment supports the case of the defendants and is of no help to the plaintiff.
(VIII) He thereafter cited Section 5(1) of the Admiralty Act, 2017. (IX) He submitted that the learned Single Judge has carefully considered the submissions made by both the parties and have also considered the averments made in the plaint and taking into 9 Diksha Rane comm. appeal l no.18060-23.doc consideration the relevant judgments on the point has rightly dismissed the suit against defendant no.1- vessel and has directed that the amount deposited by defendant no.2 should be returned back.
(X) Mr. Dhond also further submitted that there are no averments in the plaint that there was a fraud committed by the defendants. Therefore, there was no question of lifting of a corporate veil. (XI) He submitted that the present appeal is devoid of merits and the same should be dismissed with costs.
ANALYSIS AND CONCLUSION:
12. We have heard learned counsel for both the sides and have also gone through the pleadings.
13. The present Commercial Appeal challenges an impugned order dated 7th June 2023 passed by the learned Single Judge of this Court whereby the Interim Application filed by the defendant no.1 - vessel has been allowed thereby dismissing the Commercial Admiralty Suit filed against defendant no.1 - vessel, and the Interim Application filed by the defendant no.2 has been partly allowed thereby directing the return of security amount deposited by defendant no.2 along with 10 Diksha Rane comm. appeal l no.18060-23.doc accrued interest.
14. The plaintiff claim is for damages or loss caused to its goods carried on board the vessel m.v. CCNI ARAUCO 6327, which was covered by bill of lading dated 8th August 2016 issued by defendant no.3 as agent of defendant no.2.
15. The defendant no.3 had filed a caveat against the arrest of defendant no.1 - vessel in this Court. The defendant no.3 in order to avoid the order for arrest of defendant no.1- vessel on without prejudice basis offered to furnish security for the plaintiff's alleged claim in the suit, by way of a club letter of undertaking and to replace the club letter of undertaking by a bank guarantee. This was accepted by the Single Judge of this Court by his order dated 26 th September 2019. Accordingly, on 18th December 2019, the defendant on a without prejudice basis furnished security for the plaintiff's claim in the suit by way of cash deposit.
16. Thereafter, on 20th January 2020 the defendant no.2 filed an Interim Application under the provisions of Order 7, Rule 11 of C.P.C., seeking therein dismissal of the suit and the security furnished by the defendant by way of cash deposit be returned back to the defendant.
So also, Interim Application was filed by defendant no.1 - vessel for 11 Diksha Rane comm. appeal l no.18060-23.doc dismissal of the suit.
17. We have gone through the averments made in the plaint. The plaintiff claim is that the plaintiff's cargo was carried on board the vessel m.v. CCNI ARAUCO 6327 from Nahva-Sheva port. The said vessel m.v. CCNI ARAUCO 6327 is not made party defendant in the present suit. Neither the owner of vessel m.v. CCNI ARAUCO 6327 has been made as a party defendant. It is the claim of the plaintiff that defendant no.1 - vessel should be considered as a sister vessel of m.v. CCNI ARAUCO 6327 as both the vessels belonged to the same group company 'NYK Line'.
18. Plaintiff claimed that defendant no.1 - vessel and the vessel on which the cargo of the plaintiff was carried m.v. CCNI ARAUCO 6327 should be considered as sister vessels since the owner of both the vessels is a common group 'NYK Line'.
19. Under the Admiralty Law, there is no doubt that a sister ship of the owner of the vessel can be arrested for maritime claim. The said provision one finds in Section 5 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (for short 'Admiralty Act').
20. In the present proceedings, the plaint goes on a footing that 12 Diksha Rane comm. appeal l no.18060-23.doc defendant no.1 - vessel is owned by a one ship company, and defendant no.2 is managing the defendant no.1 - vessel. Paragraph 7 of the plaint reads as under :
"7. The registered owner of the Defendant No.1 vessel is NYK THESEUS CORP. S.A. a one-ship Company incorporated under the laws of panama. The Defendant vessel is operated, managed and controlled by Defendant No.2. The registered owner of the Defendant vessel is also a company which is owned, financed, operated, funded, managed and controlled entirely by Defendant No.2. For all practical purposes Defendant No.2 is the owner and/or deemed owner of the 1st Defendant vessel. An Equasis Report showing the ownership and other details of the Defendant NYK THESEUS vessel is annexed hereto and marked as Exhibit "A"."
21. Therefore, the plaint proceeds on the basis that defendant no.1 is a vessel which did not carry the subject goods. The owner of defendant no.1 vessel is not a party defendant in the present proceedings. It further states that the owner of defendant no.1 vessel is a company which is owned, financed and controlled by defendant no.2. As per the cause title of plaint, defendant no.2 is registered and carrying on business at Japan. Paragraph 7 further states that for all practical purposes defendant no.2 is an owner and/or deemed owner of defendant no.1 vessel. Paragraph 5 of the plaint states that defendant no.3 is joined as a proforma defendant whose presence may be necessary for the purpose of the suit. However, no reliefs are sought against defendant no.3. Paragraph 4 of the plaint reads as 13 Diksha Rane comm. appeal l no.18060-23.doc under:-
"4. Defendant No.2 has set up a 100% subsidiary in India called NYK Line (India) Pvt. Ltd. Defendant No.3 abovenamed, which has its office at 12th Floor, "Windfall" Sahar Plaza Complex, Sir M.V. Road, Andheri (East), Mumbai 400 059. Defendant No.2 owns 100% of the share capital of Defendant No.3. Defendant No.3 canvases and solicits business in India in the name of NYK Line. Defendant No.3 advertises for and on behalf of NYK Line in India and also issue Bills of Lading on their behalf. They also collect freight in respect of cargoes shipped out of India on NYK Line vessels and remit the same to Defendant No.2. Thus Defendant No.2 is deemed to carry on business in India through Defendant No.3 NYK Line (India) Pvt. Ltd. at its address in Mumbai."
22. Therefore, there is no dispute that the owner of defendant no.1 vessel is not being joined in the plaint. The ship on which the goods were carried that vessel is not party to the present proceedings. Neither the plaintiff could prove that owner of the said subject vessel and the owner of the defendant no.1 vessel is the same entity.
23. Only making an averment and submitting that both the owners of the vessels are group companies, the plaintiff at this stage is not able to prove the said fact. Therefore, prima facie, there is no case is made out by the plaintiff. Hence, we are of a view that since defendant no.1 - vessel is not a sister vessel of m.v. CCNI ARAUCO 6327, the plaintiff's suit claim will not fall under the provisions of Section 5(2) of the Admiralty Act.
24. The claim of the plaintiff is that defendant no.1 - vessel is a 14 Diksha Rane comm. appeal l no.18060-23.doc one ship company. The said ships are owned by one ship company, however, they belong to the group 'NYK', which is one of the biggest ship company in the world ranked sixth.
25. We have considered the submission of the plaintiff, however, the plaintiff was not able to show us any provisions in law whereby there was any kind of a bar of floating a concept called as one ship company. Since the vessel on which the plaintiff's cargo was carried was m.v. CCNI ARAUCO 6327, is owned by a company who is not made a party to the present proceedings and the defendant no.1 - vessel is owned by a different ship company, the argument of the plaintiff on this count fails, and not accepted by us.
26. Division Bench of this Court in the decision in Polygreen International DMCC vs. Mt Pamboor 2 and Ors. 2, in Paragraph nos. 53 and 55 held as under:-
"53. Can this alter ego/pierced corporate veil Jurisprudence be invoked willy-nilly every time it is found that one company is the holding company or parent of another? There is enough law to indicate that there is nothing so very wrong in one family setting up with common shareholding multiple companies, each holding different assets. A different consideration may arise when a company is a debtor, and it deliberately incorporates another company to move assets away to put them beyond the reach of the creditors. There, courts have frowned upon these attempts and have always allowed a creditor to follow the assets into the hands of the so-called separate company. But what is required is that there must be an element of deceit, an attempt at fraud, something colourable. In Cax & Kings Ltd v SAP India Pvt Ltd & Anr. (2022 SCC Online SC 570; paragraph 90), 2 2002 SCC OnLine Bom 1704 15 Diksha Rane comm. appeal l no.18060-23.doc the Supreme Court said that corporate law doctrines such as piercing the veil and alter ego are a means by which to identify fraudulent activity. Though this was in the context of binding third parties to arbitration clauses, the principle remains. Similarly, in Vodafone International Holdings BV v Union of India, (2012) 6 SCC 613:
paragarph 74 the Supreme Court held (in the context of taxation) that to properly invoke the doctrines of beneficial ownership, lifting the corporate veil or concept of alter ego. It must be shown that the transaction was a colourable device. When this is successfully done, the separate corporate juristic entity principle will be ignored, being seen as a device or a conduit "In the pejorative sense".
55. Therefore, to deploy the 'alter ego' doctrine justifying a piercing of the corporate veil, the defendant or debtor must, to use a Dickensian phrase, be shown to be an "Artful Dodger". Otherwise, the very essence of corporate/company law and its fundamental precept that every company is a distinct legal entity would get effaced. The mere commonality or common directorships or interlocking shareholding are by themselves not even prima facie evidence or one being the alter ego of the other."
(Emphasis supplied)
27. It is settled law, as held in the judgment of Kamala (supra) by the Supreme Court, that while dealing with application filed under Order 7, Rule 11 of C.P.C., what is relevant are the averments made in the plaint. In the present proceedings taking into consideration the averments of the plaint as discussed above, we are satisfied that the admiralty suit will not be maintainable against defendant no.1 - vessel.
28. In the judgment referred by the plaintiff of Sapura (supra), the application filed by defendants, seeking declaration that order of arrest of defendant no.1 - vessel was wrongfully and for refund of security was rejected by learned Single Judge. However, the learned 16 Diksha Rane comm. appeal l no.18060-23.doc counsel informed that Appeal against the said order is pending. In the said proceeding dismissal of the suit was not sought. So also, the plaintiff had supplied the equipment and personnel to the defendant no.1 - vessel. In the present proceedings, the plaintiff had not even made the vessel which carried the goods of plaintiff as party defendant to the suit.
29. In the judgment cited of Bombay High Court of MSC Mediterranean Shipping Company (supra), the State of Maharashtra had filed suit claiming compensation to the fisherman who suffered loss due to the spill from vessel m.v. MSC Chitra. It was claimed that defendant no.1 - vessel, and m.v. MSC Chitra were sister ship, and defendant no.3 were the demise charter/managers of defendant of both vessels. Therefore, the Court held that prima facie, the application under Order 7, Rule 11 can't be granted. As the facts in this proceeding were quite different than the present proceeding. The ratio laid down will not be applicable to present proceeding.
30. Admittedly, the plaintiff's goods were not supplied in defendant no.1 - vessel. So also, the defendant no.1 - vessel is not a sister vessel of the vessel m.v. CCNI ARAUCO 6327 in which plaintiff's goods were shipped, therefore, the plaintiffs claim will also 17 Diksha Rane comm. appeal l no.18060-23.doc not fall under Section 5(1) of the Admiralty Act.
31. We are satisfied that the claim of the plaintiff against defendant no.1 - vessel, will not fall under Section 4 (Maritime Claim) of the Admiralty Act.
32. While allowing the Interim Application of the defendant, the learned Single Judge held that plaintiff had made no efforts to attribute an element of fraud in the plaint. It was also further held that no effort was made to show as to who was registered owner of the vessel m.v. CCNI ARAUCO 6327, against whom the Maritime claim primarily arose. It was not the case of the plaintiff that the defendant no.2 is the demise charterer of defendant no.1 - vessel and the plaint was silent about the claim of fraud or dishonest intent on the part of defendant no.2 so as to justify the lifting of corporate veil. Therefore, the learned Single Judge came to a finding that in such a situation the suit requires to be dismissed qua the defendant no.1 - vessel and the amount deposited by the defendant no.2 requires to be returned back. However, the claim of the defendants as regards the suit being barred by the law of limitation and as regards the jurisdiction bar, the same would be a question to be decided after the issues are framed and the pleadings are laid by the parties. On the 18 Diksha Rane comm. appeal l no.18060-23.doc said findings the learned Single Judge has dismissed the suit against defendant no.1 - vessel and has also directed to return the cash deposit to the defendant no.2 with accrued interest.
33. We find no infirmity in the findings recorded by the learned Single Judge, hence, the present Appeal filed by the plaintiff is rejected. No costs.
34. The Interim Application is also disposed of.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]
35. At this stage the learned counsel for the appellant seeks continuation of the interim direction staying the refund of security deposit. The learned counsel for the respondent opposes the said request. In the facts of the case, this judgment shall operate after a period of four weeks from today.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]
19
Signed by: Diksha Rane
Designation: PS To Honourable Judge
Date: 20/08/2024 20:24:34