Calcutta High Court
Stephen Commerce Pvt. Ltd. vs Owners And Parties In Vessel M.T. Zaima ... on 28 August, 1998
Equivalent citations: AIR1999CAL64, AIR 1999 CALCUTTA 64, (1999) 1 CAL WN 475
JUDGMENT
1. We have heard six applications at the ad interim stage made one each in aid of six different admiralty appeals.
2. Three of the appeals are from three orders dated 24-8-98 and three others from three orders made on the very next day i.e. 25-8-98.
3. The appellants in the six appeals have filed in August 1998 three several admiralty suits.
4. In each of the suits the defendants are the owners and parties interested in the vessel Motor Tanker "Zaima Navard".
5. That tanker had carried in her holds large quantities of superior quality kerosene from Singapore and had touched at Bude Budge, Calcutta for discharge of the cargo.
6. The three plaintiffs are the consignees of the kerosene, the shippers being at Singapore. The shippers are also the voyage charterers of the tanker.
7. The quantity of kerosene involved in regard to the three plaintiffs is some 9,000 Metric Tonnes.
8. The consignment value of the goods is upwards of Rs. 7 crore, when the dollar value is converted into the Indian rupee equivalent at the current rate of exchange.
9. The tanker was put under arrest by obtaining ex parte orders from the admiralty Court. Two of these orders were passed on the 17th of August 1998 and in each of those two orders the direction was that cash security to the extent of the amount claimed in the suit would have to be furnished by the vessel before release from arrest could be obtained. The deposit of the money would have to be made with the learned Registrar, Original Side of this Court. In the one order of 13-8-98, only arrest was ordered.
10. On 17-8-98 the Court also took the usual counter undertaking of the plaintiffs through learned Counsel that the plaintiff will also pay damages if it is ultimately held that the plaintiff was not entitled to obtain the order of arrest.
11. In the impugned orders passed on 24-8-98 and 25-8-98 the order for furnisning of cash security for release of the vessel was radically altered. It was recorded in the first day's order that a fax message containing the letter of undertaking given by the London Steamship Mutual Owners Insurance Association Ltd. was produced by Mr. Chakraborty appearing for the defendant; it was recorded also that that Association is a member of the P. & I. Club.
12. The copy showed the undertaking of the Association to be for the full money value; His Lordship recorded that learned Counsel appearing for the plaintiff was not agreeable to the letter of undertaking being furnished (instead of the money security). Then His Lordship in the Court below observed as follows :--
"I find this attitude (of not taking the letter security instead of money) to be rather unreasonable and a departure from the settled practice of this Court".
13. On the 25th of August 1998 all that was done was that the undertaking Association was directed to state also that the money, if payable, would be paid at Calcutta.
14. An undertaking was given by or on behalf of the learned advocates-on-record appearing for the defendants that the original signed letter of undertaking from the London Association would be produced in the Court below on or before 31-8-98. We have been shown three original letters signed by a Director of the Manager of the London Association.
15. The Manager is A Billborough, also located at London, at distric E1.
16. The point which arises even at this stage is whether, in the face of opposition by the plaintiffs, the Court can nonetheless direct the plaintiffs to be content with security of the above nature, and on the basis of such a letter security, allow the arrested vessel to be released; points also arise as to how the discretion of the Court should be used in these matters for fixation of admiralty security.
17. We note here that although the order for arrest was passed on three petitions presented on behalf of the three plaintiffs the variation took place on oral mentioning and listing of the matters only. Absolutely no document, no Court paper, no petition or no affidavit is to be found affirmed by the defendants on oath and tendered before the Court below.
18. As there were no affirmed papers on behalf of the defendants in the Court below there are no copies of those before us. The stage has not reached for filing of an opposition in the Appeal Court by the respondents. Such filing of opposition will also take time. Those would have to be replied to. Thereafter we shall be in a position only to dispose of the six applications in aid of the six appeals. The appeals, if it is insisted that those be heard in the usual manner, will take a much longer time for final disposal.
19. The ship, however, lies still under arrest pursuant to stay orders granted from time to time by the Appeal Court, the last extension in regard to which was made by us yesterday.
20. In a situation of this nature it is neither just nor proper to keep the vessel under arrest and await pleadings and final disposal of the appeal matters. A solution has to be reached immediately, which will be both just and suitable to the facts and circumstances of this case.
21. Mr. Sen appearing in support of the applicants submitted that the letter security sought to be substituted in place of money security is no security at all. It is not an undertaking given to Court. It is an undertaking to pay if and when suits and appeals are disposed of in favour of the plaintiffs.
22. Mr. Sen submitted that in view of the decision of the Supreme Court in the case of 'Elisabeth' , there has been a remarkable widening of the admiralty jurisdiction of the High Court having jurisdiction over international ports in India, and in view of such widening, damage to cargo by the ship caused by improper storage, is indisputably within the admiralty jurisdiction of the Calcutta High Court.
23. This is an appropriate place to state how, according to the plaintiffs, their cargo got damaged by the ship.
24. According to Mr. Sen his three clients purchased Kerosene of very superior quality. The purchased Kerosene was of the great clarity. The test known as the Saybolt test performed by an organization at Singapore revealed that prior to loading on the ship the Saybolt parameter of the consignment of kerosene was plus 28.
25. A copy of the Singapore report is relied upon.
26. The Kerosene was loaded, not in containers, but straight on to the ship's hold. The quantum was, as we have indicated, 9,000 metric tonnes i.e., 9 million kgs. which would be somewhere of the order of 10 million litres, (plus about a hundred and twenty five thousand litres more, to be more exact).
27. This considerable quantity of kerosene was carried by the arrested ship from Singapore to Calcutta. It appears that the only cargo of the ship, a tanker, was kerosene.
28. On the 11th of August one surveyor Boda on behalf of the plaintiffs went on board the ship and tested the kerosene. According to them the kerosene was not sound. A protest letter regarding discolouration was handed over by them to the ship's master.
29. Boda's report on 12-8-98 states that they found out that the ship had carried on her two last voyages but one, molasses in her hold. A copy report of Boda is also in the papers.
30. On the 12th of August, 1998 random samples were drawn from the top, middle and bottom of the kerosene in the holds by one I.B.P. Company, who are the successors of Indo Burma Petrol Company.
31. It is a State Undertaking. That test showed that the Saybolt parameter had gone down from plus 28 to minus 4/minus 5.
32. According to Mr. Sen the whole value of the goods was lost to his clients. They had contracted for and paid for kerosene of superior quality, the minimum requirement for which is a Saybolt parameter of plus 10. Thus the plaintiffs filed suits for the entirety of the price paid by them to the shippers.
33. It is on record that the consignment of kerosene has been off-loaded from the ship. It was off-loaded on to the Port area. Under instructions from the importers the ship had to wash the kerosene pipelines to remove traces of kerosene. According to Mr. Sen this consignment of kerosene imported under what is now an OGL, would have to be cleared from the Port area and duty, if any, to be paid on it also. The consignment is so huge that its future manipulation is not a matter of any ordinary commerical activity. According to Mr. Sen, since his clients contracted for high quality kerosene and got no quantity of it, the prices paid were entirely lost.
34. Mr. Sen next submitted that if the ship sails away, the claim against the ship for negligent storage in her holds, thereby contaminating and spoiling the cosignment of kerosene, will remain an empty claim in the three Admiratly Suits here. Even if decrees are passed there will be nothing to obtain satisfaction of those decrees from. The importers obtained their consignment free on board having themselves nominated the ship and also arranged for insurance. If the ship now sails away without furnishing proper security prior thereto, the reasonable claims for damages in regard to cargo on board would become for ever unrealizable.
35. Mr. Sen then relied upon the case of Kapitan Kud, .
36. There that Ukrainian ship had seriously damaged (on a very reasonable prima facie probability) a very valuable marine cable. The Supreme Court ordered release of the Vessel only upon furnishing of security of two types, roughly half in cash and roughly a little more than half by way of a Ukrainian Government guarantee to be given through the Ambassador. The total security was near to Rs. 30 crore.
37. Sen showed from this case passages approved by the Supreme Court, and occurring in Halsbury's Laws of England where it is stated to the effect that in Admiralty actions the plaintiff is entitled to obtain security on the basis of the plaintiffs' reasonably arguable best case. Mr. Sen emphasized that the Supreme Court ordered security of a very heavy amount, on the basis that the reasonably arguable best case of the plaintiff, that the M.V. Kapitan Kud could have damaged the valuable marine cable was prima facie sustainable and therefore called for furnishing of such heavy security.
38. Mr. Sen then gave us 1(1) Halsbury 392, that is a paragraph regarding furnishing of guarantee in lieu of bail. The paragraph runs as follows :--
"392. Guarantee in lieu of bail, a guarantee or undertaking by a bank, insurance company, protection and indemnity association, or other guarantor satisfactory to the claimant, to pay any amount found to be due from the defendant and not paid by him is, in practice, usually accepted in lieu of bail or payment into Court. The terms of such a guarantee are agreed between the parties and no formal procedure is involved. Since the guarantor gives no undertaking to the Court, enforcement of his liability could only be by way of a substantive action upon the contract of guarantee. In other respects, the effect of acceptance of a guarantee appears to be the same as the effect of giving bail".
39. Mr. Sen submitted on this basis that if the guarantee to be given by a third party, like the London Association here, is not acceptable to the plaintiff, then and in that event it cannot be an effective substitute of money security.
40. Mr. Sen showed us our Admiralty Rules and placed in particular Rule 17 therefrom. It is better here to set out not only Rule 17 but also Rules 4 and 20. The three Rules are as follows:--
"4. Arrest warrant after affidavit.-- In suits in rem a warrant for the arrest of property may be issued at the instance either of the plaintiff or of the defendant at any time after the suit has been instituted, but no warrant of arrest shall be issued until an affidavit by the party or his agent has been filed, and the following provisions complied with :--
(a) The affidavit shall state the name and description of the party at whose instance the warrant is to be issued, the nature of claim or counter-claim, the name and nature of the property to be arrested, and that the claim or counterclaim has not been satisfied.
(b) In a suit of wages or of possession the affidavit shall state the national character of the vessel proceeded against; and if against a foreign vessel, that notice of the institution of the suit has been given to the Consul of the State to which the vessel belongs, if there be one resident in Calcutta and a copy of the notice shall be annexed to the affidavit.
(c) In a suit of bottomry the bottomry bond, and if in a foreign language also a notarial translation thereof, shall be produced for the inspection and persual of the Registrar, and a copy of the bond, or of the translation thereof, certified to be correct shall be annexed to the affidavit.
(d) In a suit of distribution of salvage the affidavit shall state the amount of Salvage money awarded or agreed to be accepted, and the name, address and description of the party holding the same.
the name, address and description of the party holding the same".
"17. Security.--Where security is to be given in the Registry, it shall be given according to the rules and practice of the Court as to security in the case of an attachment before judgment in an ordinary Civil suit".
"20. On payment into Registry release of property.-- An attorney may obtain the release of any property by paying into the Registry the sum in which the suit has been instituted".
Mr. Sen submitted on this basis that the rules of attachment before judgment are applicable in admiralty matters. It is convenient to set out at this stage Rules 1 and 9 from Order 38, the latter of which was specifically placed by Mr. Sen :--
"0.38... Where defendant may be called upon to furnish security for appearance.
1. Where at any stage of a suit, other than a suit of the nature referred to in Section 16, Clauses (a) to (d), the Court is satisfied, by affidavit or otherwise,--
(a) that the defendant, with intent to delay the plaintiff, or to avoid any process of the Court or to obstruct or delay the execution of any decree that may be passed against him,--
(i) has absconded or left the local limits of the jurisdiction of the Court, or
(ii) is about to abscond or leave the local limits of the jurisdiction of the Court, or
(iii) has disposed of or removed from the local limits of the jurisdiction of the Court his property or any part thereof, or
(b) that the defendant is about to leave India under circumstances affording reasonable probability that the plaintiff will or may thereby be obstructed or delayed in the execution of any decree that may be passed against the defendant in the suit, .
the Court may issue a warrant to arrest the defendant and bring him before the Court to show cause why he should not furnish security for his appearance :
Provided that the defendant shall not be arrested if he pays to the officer entrusted with the execution of the warrant any sum specified in the warrant as sufficient to satisfy the plaintiff's claim; and such sum shall be held in deposit by the Court until the suit is disposed of or until the further order of the Court."
"Removal of, attachment when security furnished or suit dismissed.
9. Where an order is made for attachment before judgment, the Court shall order the attachment to be withdrawn when the defendant furnishes the security required, together with security for the costs of the attachment, or when the suit is dismissed."
41. Lastly Mr. Sen showed us Section 112 of the Code of Civil Procedure which, we note from his argument, excludes the applicability of the Code from the Admiralty or Vice Admiralty jurisdiction just as it excludes the Civil Procedure Code from criminal matters. Section 112(2) is set out below :--
"112. (1) xxx xxx xxx (2) Nothing herein contained applies to any matter of criminal or admiralty or vice-admiralty jurisdiction, or to appeals from orders and decrees of Prize Courts."
42. As vice-admiralty jurisdiction is colonial admiralty jurisdiction, that phrase does not have much meaning any more.
43. Two copies of the documents found acceptable in the Court below as substitutes for money security are to be kept on record, countersigned sheets are to be marked 'A' and 'B'. Mr. Sen argued that if these undertakings are undertakings to Court, (which according to him those were not), the enforcement of those would need issuance of personal process outside jurisdiction and as against Directors and other officers of English companies in England. This would not be permissible or in accordance with the accepted civilized international practice and law. Mr. Sen again submitted that in case the guarantee is not acceptably to the plaintiffs, then the undertaking of a third party to pay, in case of successful termination of litigation, cannot be substituted, against the wishes of the plaintiff, for money security or the guarantee of a nationalized bank, if that is acceptable to Court.
44. Thus Mr. Sen submitted that the orders of 24-8-98 and 25-8-98 should be stayed and the orders of 17-8-98 (to be very exact not all three orders were of 17-8-98 but one of those was of 13-8-98) should be revived so that the vessel can sail away after furnishing due money security for the price of goods totally lost to the plaintiffs. According to Mr. Sen, this was a reasonable view to take on the basis of the reasonably arguable best case put forward by the plaintiffs.
45. The last argument of Mr. Sen was that as Mr. Chakraborty had tendered in the Court below a form of guarantee, of whatever nature, covering the entirety of the claim in the three suits, the appeals were limited only to examining the form of the guarantee or security and the scope of the appeals did not extend to the examination as to whether total security for the entirety of the claim was rightfully ordered to be secured to not.
46. Mr. Chakraborty appearing for the defendants (to take the answer to the last argument of Mr. Sen first) submitted that, if in the discretion of the Court of Appeal, it appeared that even the amount of the security should be reduced, then the Court of Appeal has sufficient power to use that discretion in favour of the respondents, notwithstanding the fact that there were no appeals or cross-objections filed by the respondents from the orders appealed from. Mr. Chakraborty relied in this regard on Order 41 Rule 33 of the Code of Civil Procedure, the relevant portion of which is set out below :--
"Power of Court of Appeal.
33. The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of alt or any of the decrees, although an appeal may not have been filed against such decrees. . . "
47. In aid of this argument Mr. Chakraborty gave us the case of Bihar Supply Syndicate, reported at and showed us paragraph 29 of the judgment. There the above Rule of the Code is briefly but, with respect, held fully construed.
48. In our opinion, so far as this point is concerned, Mr. Chakraborty's submissions are well-founded. It would be improper just because Mr. Chakraborty's clients tendered to the Court below a certain form of guarantee for the full amount, to hold for that reason, that Mr. Chakraborty's clients had debarred themselves from arguing about the quantum of security, even if the Court should order for money security, instead of taking letter security. To hold so, would be to hold the clients of Mr. Chakraborty bound to only one aspect of their guarantee, viz., the quantum, without paying any attention to the other aspect of the guarantee, which is the type of the guarantee. In our opinion, this would be an unjust separation of two inseparable aspects of the same thing, which is the guarantee. Thus we feel free to use our discretion, in accordance with settled principles, both as regards the quantum and as regards the type of the admiralty security.
49. It was Mr. Chakraborty's next contention, most emphatically argued, that the claims of the plaintiffs as made out cannot and should not be secured in full. He submitted that the goods have been off-loaded. Those are now stored in the port area. It might be that those have already gone out. The facts did not indicate that the plaintiffs treated the consignment to be utterly valueless. If that is so, the entire price of goods paid cannot be claimed by way of security as a reasonably arguable best case of the plaintiffs. According to Mr. Chakraborty, mitigation is a must, where the plaintiffs sue in damages. If the kerosene has a realisable market price in India, then that price has to be obtained by the plaintiffs and to that extent their claims must stand reduced. Thus, ordering for full security would not be an appropriate use of discretion in the instant case. Mr. Chakraborty next argued, that when the Appeal Court passes a discretionary order, even in an appeal fully heard, from a discretionary order of the First Court, the appeal Court does not interfere unless it appears that the discretion in the Court below has been used on the basis of a wrong principle or that there is something perverse or some serious non-consideration of materials, in the assessment, or prima facie assessment, of facts. According to Mr. Chakraborty, the principles involved in the matter of furnishing of admiralty security were not broken in the Court below and there the facts were all heard; thus the discretion was properly exercised and it should not be interfered with. Mr. Chakraborty then submitted that in case we are minded to order for money security, and the suit is ultimately dismissed, after long years of preparation and ultimate trial, his clients would, most unjustly, lose use of the blocked money for the entirety of this period. Thus would work very harshly on his clients. Mr. Chakraborty's next submission was that the London Association is a member of the P & I Club. The P & I Club is well-known, or should be well-known, to all shipping circles. According to Mr. Chakraborty, the balance sheet of the London Association shows a more than impeccable financial picture. M/s. A. Billbrough are their accredited Managers and there is no reason why a letter of guarantee given from these well-known and trustworthy parties should not suffice for the purpose of securing the plaintiffs' doubtful claims in these matters.
50. Mr. Chakraborty also argued with great emphasis that the entirety of the kerosene should be put under the control of a Court's Receiver. The entirety of the consignment should be sold under the custody of Court. Unless that is done, it would not be possible to ascertain what the value of the consignment in India as of date is. If that is not ascertained, the actual claim of the plaintiffs; after mitigation, would not come to surface. If this real claim remained hidden, the ordering of full security on the basis of the superficial claim of the plaintiffs would work injustice.
51. We take up the defence regarding the appointment of Receiver first. The appointment of a Receiver over 10 Million litres of kerosene is not an ordinary matter. Before the Court takes into its custody, through its officer, a property to be dealt with in the best interest of all parties to the litigation, the parties must be willing to extend to the Receiver finances and all other necessary assistance which is needed for the subsequent custody and disposal of the goods. If Receivers were to be appointed over 10 million litres of kerosene now lying at Budge Budge, the question would arise as to who would finance, even in the first instance, the taking out of the kerosene from the port's storage area, payment of duties, if any, storing thereafter until disposal, and finding for disposal parties who are willing to take kerosene, the sayboit factor of which has come down from + 28 to 4-5 in one week or so.
52. If parties cannot be found who can and will render voluntary assistance to the Receiver in all these matters, the Court cannot touch property which is connected with the litigation. Mr. Chakraborty's clients have not stated anything from which we can find that they are ready to extend finances and other resources to the Receiver on the basis of which the Receiver can, by use of his independent discretion, whenever he wishes, dispose of 10 million litres kerosene in the open Indian market.
53. We are not in a position to compel to Mr. Sen's clients to assist the Receiver in the matter of sale through Court. They have lost their price for the goods. That is their case. They have paid price arid presumably, freightand insurance also, in full. They have undisputed property in the goods. There is no claim made by any party yet, in aid of which the appointment of a Receiver is called for over the plaintiffs own goods. The plaintiff has not asked for appointment of Receiver over their own goods; they have asked for arrest of the defendant's ship. In these circumstances, we do not see how we can practically and effectively utilize the suggestion of Mr. Chakraborty that 10 million litres of kerosene be put under custody of the Court's Receiver or Receivers and dealt with by him or them.
54. Regarding the point of mitigation urged by Mr. Chakraborty before the Court, the case that the kerosene is readily saleable in Indian market, has to be made out before it can be used for reducing the plaintiff's security. It has to be shown also that there are not other factors which will offset this argument of mitigation. We have as yet only one sided papers before the Court. Those are the plaints and petitioners of the plaintiffs. On that basis it is very difficult to conclude, as on date, that the amount of security should be reduced because the plaintiffs have not stated about mitigation.
Port Charges, duties, profits which could have been earned from high quality kerosene of Sayboit parameter +28, -- these all would be relevant factors. So would be the payment of other costs, charges, freight and insurance.
55. Let us state here what we understand to be the law in the matter of admiralty security, where the form and quantum of security are both disputed.
56. Rule 4 of our Admiralty Rules gives one the starting point of arrest and subsequent release by furnishing security. The question of security comes in after the vessel has been put under arrest. That warrant issues on an ex parte application and is carried out by the Marshal. We have noted that there are, in other parts of the rules, quaint provisions as to how the arrest is to be effected by affixation to the main mast of the ship, and thereafter a copy can be left there, although these days in ships THERE ARE NO no masts, main or secondary.
57. Be that as it may, after the arrest has been made, the owners and parties interested in the ship cause representation to be made to Court, so that the arrest might be lifted.
58. It might be done by consent of parties. Such consent might be on a solicitor to solicitor basis. The guarantee of a third party like the P & I Club or a member of the P & I Club might be acceptable to both the parties and the Court then has nothing more to do about it than record it in its order, as to what has been found by the parties to be an acceptable security.
59. Where there is no agreement, but for reasons practical or otherwise, it is felt on behalf of the ship that the entirety of the claim should be secured and the ship got released immediately, that also can be done practically as a matter of course. Rule 20 above shows that upon furnishing of such security, release is as much as a matter of course, as was the arrest in the beginning.
60. Where, however, the parties and their advocates-on-record dispute as to the form or amount of security, we have a problem in hand. That problem is to be solved by an appropriate application of Rule 17 of the Admiralty Rules and Order 38.
61. Under Sub-rule (b) of Order 38 a foreigner, simply because he is a foreigner, and a decree might be passed against him, might face arrest and the necess (sic) of furnishing security, because he does not reside in India. If it appears to the Court that the claim of plaintiff is reasonably arguable to a certain extent, that the defendant is a foreigner who is about to leave India, and that the decree if passed, might be delayed in execution because of the residence abroad of the plaintiff, the Court would have jurisdiction to issue a warrant of arrest and maintain it until security is furnished. It is noteworthy, that this jurisdiction to issue warrant and call for security, is vested with the Court in regard to foreigners, just as it is vested with the Court in regard to dishonest and fraudulent Indian defendants, although the foreigner might be a man of blemishelss finance and character, yet, because he is a foreigner, and because the decree against him will have to be trasmitted abroad for execution, the Court is vested with the jurisdiction to call for security. This jurisdiction has to be appropriately exercised in all cases which come before the Court.
62. A ship touching temporarily at the Port of Calcutta is in the same position as a foreign personal defendant who is about to leave jurisdiction. If the claim against the ship is reasonably arguable, then to the extent of the reasonably best decree obtainable by the plaintiff, the Court can and should obtain security from the ship before relasing her arrest. The personal arrest as against a foreigner under Order 38, Rule 1(b) is substituted by the Marshal's arrest under our Admiralty Rules, or other admiralty arrest as levied on ships touching temporarily at Indian Ports, over which admiralty jurisdiction is exercised by some Courts, such as the Calcutta High Court.
63. It is well known that in the matter of determination of an Order 38 security the Court has discretion Both as to the manner and the amount of security. Such discretion extends in similar manner to the Court in regard to admiralty security also.
64. Just as in an Order 38 matter a dispute as to the amount or type of security is to be resolved by the First Court by calling for papers and affidavits from both sides, similarly in matters of admiralty security, in case a dispute arises, the form and type of security have to be settled after calling for affidavits or petitions from all the parties to the admiralty suit.
65. We find in this case, that in the Court below, the cash security called for was changed to the form of a letter security, or a guarantee security, without calling for affidavits from the side of the ship. We were not told that any direction for affidavits was given at all. In shipping matter demurrage and large claims are often involved, these affidavits regarding fixation of security might have to be called for at the shortest notice, it is not satisfactory that the matter be disposed of on mere oral mentioning.
66. For example, here, we are ordering a long, detailed and reasoned order because we feel we can neither maintain an order for immediately realizable security to the extent of Rs. 7 crore, or simply lift it, without giving the matter our best possible attention and all the time that the matter deserves. To try to conclude the matter in any other way could, according to us, be not doing our duty properly.
67. It is a matter of ordinary practical common sense, that when the security takes merely the form of a letter, coming from reputed company, signed by its Director, it is the eaisest thing to change a figure in the letter from 1 million to 2 million. It is not so easy, when the form of the security is money security. Thus the type of security and the amount of security are both important. It is well known that Bank Guarantees in India generate litigation after litigation and it is much easier to furnish a Bank Guarantee of Rs. 7 crore, even, or may be especially, of, a Nationalised Bank than to furnish security of Rs. 7 crore in cash.
68. Thus, when weighing the reasonably arguable best possible case of the plaintiff, and in determining the type and amount of security, the Court must take into consideration all the relevant facts and circumstances of the case will be postponed. It does not always happen that the special, nearly arbitral, summary procedure envisaged from Rule 52 of our Admiralty Rules is adopted. The case might await trial for a long time, which might be quite a few years. Yet, almost as soon as the suit is filed, the matter of security has to be determined by the Amiralty Court. That determination, it is no over-estimate to state, settles the compass of the suit. If, for example, we order a security of Rs. 1 crore to be paid, the practical value of the three suits will never exceed Rs. 1 crore, Before we reach an appropriate figure we, therefore, have to look at all the facts and circumstances available.
69. As regards the form of security, Mr. Chakraborty submitted that the good name of the London Assurance and P. & I. Club should weigh heavily with the Court. We find that in the Court below it was observed that refusal to accept the guarantee security of the London Assurance was, accordingly to his Lordship, a departure from the settled practice of this Court.
70. Mr. Chakraborty has shown us some orders of 1996/97 passed in this Court where such letter guarantees were accepted as security. We note that our Admiralty Rules are a result of a colonial proclamation of 1916. 82 year have passed thereafter. To justify that the acceptance of letters and guarantees furnished by the P & I Club of London or its members has become a settled practice of this Court, we would need more than one or two recent orders, which is all that could be produced by Mr. Chakraborty.
71. In our experience, whatever little might it be, admiralty suits are not as common in this Court, as, say, landlord and tenant, suits. Dispute as to admiralty security do not often reach the Appeal Court. If, however, such disputes are really battled out, as here, it is our opinion that the Judges would be better advised, even to look silly by not accepting letters and guarantees from parties whose names should have been acceptable to the Court, than to accept security in a form which ultimately turns out to be useless or difficult of execution after the suit, let us say, has reached a conclusion in favour of the plaintiff.
72. If, because of the good name of the P. & I. Club and the London Assurance, they pay up after the suit and appeals are over (we are not suggesting that they necessarily would not) well and good. But the Court is more concerned with the possibility as to what will happen if they do not pay up. In that event the plaintiff has to go abroad. The very purpose of obtaining admiralty security, that the plaintiff does not have to chase the ship, or the owners and parties interested in the ship, all over the world, would be defeated, because the plaintiff, even after winning the admiralty suit, would have to go to England to enforce the letter of security.
73. In our opinion, if the plaintiffs seriously object, as they here do, it would be neither proper nor open to the Admiralty Court to accept security by way of a letter or a guarantee issued from a foreign party, be their economic credentials and business reputation ever so high.
74. Mr. Chakraborty next submitted that the blockade of money security might work out to be very unjust if ultimately the suits are dismissed. This is counter-balanced by the fact that the plaintiffs also claim that they have lost Rs. 7 crores, and it would work out to be very unjust to them, if they were to succeed in their suit later on, and find that though their aggregate decree is worth Rs. 7 crore and more, yet those are only paper decrees, impossible of execution in India.
75. This is why the Courts have adopted, as stated in Halsbury and quoted in the Kaptain Kud case, the most salutary and wise guiding principle of fixing admiralty security working out, even at the interlocutory stage, what the security should be, on the reasonably arguable best case of the plaintiffs.
76. As on date, the reasonable arguable best case of the plaintiffs is that the price of goods paid for by them is totally lost, the Saybolt factor having dropped because of the ship's negligent storage from plus 28 to minus 4/minus 5. On this basis, they are entitled as on date, to ask full security, as in our opinion, there is no other form of security which is certainly and easily covertible for satisfaction of a money decree; as we have stated, bank guarantees in India merely generate litigation.
77. We make it clear, that we are proposing to conclude matter up to this extent, that after the money security has been furnished, and even before or after the ship has sailed away, it will be open to the defendants to apply in the Court below, or to use affidavits in ensure to the arrest applications in the Court below or do both and pray there for reduction or even total release of the money security and for any other just reliefs.
78. They will be entitled to take all points regarding facts there, including the point of mitigation. As and when the points are raised, those might be met by the plaintiffs, clarifying to greater detail, why they have claimed the entire price of the goods, the value, if any to them, of the off-loaded 10 million litres of kerosene; also, may be the damages, if any, for not obtaining in India unto themselves the Saybold plus 28 kerosene at the contracted price. We are aware, that all these might not leave the plaint, or the admiralty case, exactly where those are to-day; but it is not unknown, that as litigation goes on, the plaint has to be supported in different ways, then it was sought to be supported, when it was first conceived by the learned draftsman. It would not be wise to discount these factors, just as it would not be wise to discount the paperless submissions of the defendants.
79. It is also our opinion, that the plaintiffs should furnish, on an Advocate-on-record Advocate-on-record basis, statements every fortnight, clarifying therein their future dealing with the entire consignment of kerosene; the disclosure as to such dealings should include, but not be limited by or to, the clearance obtained from the Port area and the monies paid in regard thereto, the duty paid in regard to the kerosene, the parties to which the kerosene is sold or disposed of, and the price obtained thereby. In case these details are not furnished in time, there will be liberty to apply in the Court below for reduction or release of security at any time during the pendency of the suit. This part of our order, like all other parts, is subject to further consideration at the adjoined stage of the application.
80. Although we are allowing affidavits and counters to the arrest applications to be filed in the Court below, we do not propose to dispose of these stay applications finally, but we call for affidavits before us as well. We have passed a long and detailed order only because we feel an urgency about the ship having to be released on some just and equitable terms as on the facts available to date. In such of the six applications, there will be orders in terms of prayers (a) and (b) until further orders of Court. The stay orders will not prevent the first Court from calling for further affidavits from the parties and disposing of the arrest applications on those affidavits. Until such disposal the original orders passed on 13-8-1998 and 17-8-1998 will remain operative, thus allowing the vessel to be released on furnishing of money security as ordered there. The defendants will be entitled to deliver counter-claims in the Court below, if so entitled, and they will be entitled also to include therein claims for wrongful detention of the ship in regard to which the plaintiffs' undertakings were taken in the two orders of 17-8-1998, but there will be liberty to apply in the Court below for variation or vacating of the order of security in case the fortnightly statements above are not furnished.
81. We clearify that although in the case of Venkateshwar, release on furnishing of case security was not specifically ordered on 13-8-1998, nor the plaintiff's to indemnity taken, yet that release can always be obtained under Rule 20, and we do not find any necessity of making any clarification in that regard, especially, because, whether the plaintiff undertakes or not, the plaintiff is liable in law to compensate the defendant, if it is ultimately shown, that the arrest order had been wrongfully obtained by the plaintiff.
82. Service of notice of motion in the six applications, if not already effected, will be effected within Monday week, Opposition Monday thereafter, reply Monday following. All six matters will appear as Adjd. Applications the working day following. The order and observations are without prejudice to the rights and contentions of the parties, so far as final interlocutory stages are concerned, and the appeals and the suits as well.
83. The parties, the learned Registrar, Original Side, the Marshal of this Court, and all other concerned will act on authenticated copies of this Dictated Order, on the usual undertakings this single order will govern all the six applications for the time being.
84. Stay of operation of this order is asked for, but it is refused, because a stay would mean almost an unconditional release of the vessel on the basis of the letter security.