Gujarat High Court
Vital Ventures Ltd vs M.V.Infinity Imo 8115215 A Motor Vessel ... on 2 November, 2015
Author: Vipul M. Pancholi
Bench: Vipul M. Pancholi
O/AS/34/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
ADMIRALITY SUIT NO. 34 of 2015
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VITAL VENTURES LTD.....Plaintiff(s)
Versus
M.V.INFINITY IMO 8115215 A MOTOR VESSEL FLYING THE FLAT
OF LIBERIA & 1....Defendant(s)
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Appearance:
MR SN SOPARKAR, SENIOR COUNSEL WITH MR BHARAT T RAO,
ADVOCATE for the Plaintiff(s) No. 1
MR DAXAY D PATEL, ADVOCATE for the Plaintiff(s) No. 1
MR MIHIR THAKORE, SENIOR COUNSEL WITH MS.RENU R.SINGH,
ADVOCATE for the Defendant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 02/11/2015
ORAL ORDER
1. Vital Ventures Limited-plaintiff has filed the present Admiralty Suit against defendant no.1-Vessel i.e. M.V.Infinity IMO 8115215 and M/s Baben Tasimacilik Insaat Taahhut ve Ticaret Limited.
2. In this Admiralty suit, the plaintiff has prayed for the following reliefs:
"36(a) That this Hon'ble Court order and direct Defendant no.2 to pay to the Plaintiff a sum of USD 33,09,000/- (this includes USD 25,50,000/- + Interest @8% per annum thereon upto 30.9.2015) along with interest thereon at the rate of 12% Page 1 of 49 HC-NIC Page 1 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER per annum from the date of the filing of the present Suit till payment and/or realization;
(b) the Defendant vessel along with her hull, tackle, engines, gears, plant, machinery, articles, things apparel, equipment, stores and other paraphernalia on board be arrested by and under the order of this Hon'ble Court for satisfaction of the Plaintiff's claim, costs and poundage;
(c) the Defendant vessel along with her hull, tackle, engines, gears, plant, machinery, articles, things apparel, equipment, stores and other paraphernalia on board be condemned and sold and the sale proceeds be appropriated and/or held towards satisfaction of the Plaintiff's claim, costs and poundage;
(d) that pending the hearing and final disposal of the suit:
(i) the Defendant Vessel along with her hull, tackle, engines, gears, plant, machinery, articles, things apparel, equipment, stores and other paraphernalia Page 2 of 49 HC-NIC Page 2 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER on board be arrested by and under the order of this Hon'ble Court towards satisfaction of the Plaintiff's claim, costs and poundage; and
(ii) pending the hearing and final disposal of the suit the Defendant vessel along with her hull, tackle, engines, gears, plant, machinery, articles, things apparel, equipment, stores and other paraphernalia on board be condemned for sale and the same be sold under the orders and directions of this Hon'ble Court and the sale proceeds be deposited in this Hon'ble Court;
(e) for interim and ad-interim reliefs in terms of prayer clause (f) above;
(f) for costs; and
(g) xxxx"
3. At the outset, it is required to be noted that on the first date of the hearing of this Admiralty Suit, learned Senior Counsel Mr.Mihir Thakore appeared with learned advocate Ms.Renu Singh on behalf of the owner the vessel i.e. Glamour Maritime SA. Learned counsel requested Page 3 of 49 HC-NIC Page 3 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER that the present suit itself is not maintainable and therefore the owner of vessel wants to file reply. Learned counsel, under the instruction of the owner of the defendant vessel, made the statement that his client will not file bill of entry or beach the vessel upto 9.10.2015 and thereafter this statement was continued from time to time as the matter was adjourned for filing reply and rejoinder. Learned counsel appearing for the owner of the defendant vessel mainly contended that this suit is not maintainable and therefore this Court may first decide the said issue.
4. Heard learned senior counsel Mr.S.N.Soparkar with learned advocate Mr.Rao for the plaintiff, learned senior counsel Mr.Mihir Thakore with learned advocate Ms.Renu Singh for defendant no.1-vessel.
5. Learned counsel Mr.Soparkar submitted that the plaintiff is engaged in the business of shipping and also purchasing ships for the purpose of recycling/breaking of ships whereas defendant no.1 is a foreign sea going vessel flying the flag of Liberia having IMO No.8115215 whereas defendant no.2 is a company incorporated under the laws of Turkey. It is submitted that defendant no.2 has purchased the defendant vessel Page 4 of 49 HC-NIC Page 4 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER from the plaintiff. Therefore, on 4.10.2011, the plaintiff agreed to sell defendant-vessel to the defendant no.2 for USD 7500000. Out of the said sale price, USD 4100000 has been paid and the remaining amount of Rs.3400000 has to be paid by credit agreement on the basis of Sellers Credit Agreement attached with the Memorandum of Agreement. Learned counsel referred to four different agreements executed on 4.10.2011 itself. Copy of Memorandum of Agreement is produced at Exh.A, Vessel Mortgage Agreement executed by defendant no.2 is produced at Exh.B, Profit Sharing Agreement executed by the defendant no.2 in favour of the plaintiff is produced at Exh.C whereas Sellers Credit Agreement is produced at Exh.D with the plaint.
5.1. After referring to the relevant clauses of the aforesaid agreements, learned counsel Mr. Soparkar submitted that as per clause-III of Memorandum of Agreement, buyer-defendant no.2 has to execute Sellers Credit Agreement. Buyer has to register mortgage upon the vessel. As per the Profit Sharing Agreement, the buyer has agreed to pay equity to the plaintiff in installments and the last date of installment provided under the said agreement is 10.10.2014. As per the Sellers Credit Agreement, last date of payment of installment is 10.3.2013. It is further contended Page 5 of 49 HC-NIC Page 5 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER that defendant no.2 has not registered the mortgage upon the defendant-vessel with the ship registry and also failed to make payment of remaining amount as per the Sellers Credit Agreement. As per the case of the plaintiff, defendant no.2 has paid only USD 850000 and not paid the remaining amount as agreed.
5.2. Learned counsel Mr. Soparkar for the plaintiff submitted that though the defendant no.2 is not permitted to transfer the vessel in February, 2013, the ownership of the vessel has been changed to Glamour Maritime SA(Liberia), a subsidiary of Makro Denizcilik, a company belonging to Mr.Erol Yucel who is the owner of the defendant no.2. It is contended that such transfer of ownership is against the terms and conditions of the agreement entered into by the defendant no.2 with the plaintiff and more particularly clause II of Profit Sharing Agreement. Learned counsel further submitted that the plaintiff had very good long standing personal and business as well as commercial relations with the defendant no.2 and its director Mr.Erol Yucel. The defendant no.2, its director and his family members continued to assure that the debt amount shall be repaid and they will not transfer the ownership of vessel. The plaintiff has, therefore, not taken any legal Page 6 of 49 HC-NIC Page 6 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER action and relied upon the assurances of the defendant no.2. The defendant no.2 has lastly paid an amount of USD 25000 on 4.11.2014. Thereafter, no amount is paid and therefore legal notice was sent to the defendant no.2 by E-mail. Learned counsel Mr.Soparkar referred to various correspondence which has taken place between the plaintiff through its agent-defendant no.2's director Mr.Erol Yucel and Mr.A.Burak Akdemir, son-in-law of Mr.Erol Yucel. After referring to the said correspondence, learned counsel submitted that repeatedly the assurances were given by the aforesaid persons that the payment will be made. However, no such payment is made till date.
5.3. Learned counsel Mr.Soparkar further contended that when defendant no.2 realized that now the plaintiff has started pressing hard for the recovery of the outstanding amount, defendant no.2 through M/s Glamour Maritime SA (Liberia), a subsidiary of Makro Denizcilik, a company owned by family and relatives of Mr.Erol Yucel decided to sell the defendant-vessel for the purpose of scrapping and vessel has started travelling to Alang West Coast, Bhavnagar.
5.4. Learned counsel Mr. Soparkar at this stage submitted that after filing of the present suit, Page 7 of 49 HC-NIC Page 7 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER the plaintiff has collected certain documents and from the same it has been revealed that there is a systematic fraud committed by defendant no.2- Glamour Maritime SA and Skybulk Shipping SA with the sole intention to defraud the claim of the plaintiff of USD 35 lacs. Learned counsel submitted that defendant no.2 and Glamour Maritime SA are subsidiary companies of Makro Denizcilik and Makro Denizcilik is third party manager of Skybulk shipping SA and Ms.Basak Akademir is the daughter of Mr.Erol Yucel who is having various companies in Republic of Turkey. Now it has been revealed that defendant no.2, without taking prior written permission of the plaintiff, during the subsistence of the agreement has transferred the ownership of the defendant vessel in the name of Skybulk Shipping SA for USD 35 lacs on 9.1.2013. The said company is also having address of 80, Broad Street, Monrovia Liberia, Skybulk Shipping SA has further transferred the defendant-vessel in favour of Glamour Maritime SA whose address is also 80, Broad Street, Monrovia Liberia. Thus, both the companies are having the same address and bill of sale has been executed on 21.1.2013 stating that the entire amount of USD 35 lacs has been paid. It is further pointed out by learned counsel that defendant no.2 and Glamour Maritime SA are subsidiary companies of Makro Denzicilik and Page 8 of 49 HC-NIC Page 8 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER Ms.Basak Akademir is director of both the defendant no.2 and Glamour Maritime SA. Learned counsel referred to the documents produced with the affidavit-in-rejoinder in support of the said contention. Learned counsel thereafter referred to page nos.110, 29, 32, 35 and 40 and pointed out that Ms.Basak Akademir signed all the aforesaid documents. Thus, the defendant no.2 has committed fraud with the plaintiff. In fact, defendant no.2 cannot transfer ownership of the vessel before completion of 36 months as per clause IV of the Profit Sharing Agreement.
5.5. Learned counsel Mr.Soparkar would contend that as per clause (v) of Article 1 (1) of International Convention of Arrest of Ships (Geneva) 1999 (hereinafter referred to as `1999 convention'), any dispute arising out of a contract for the sale of ship is a maritime claim. Thus, in the present case, the dispute has arisen out of a contract for the sale of the ship and therefore the claim of the plaintiff can be said to be maritime claim. Thus, this Court is having admiralty jurisdiction to entertain this suit. Learned counsel for the plaintiff further submitted that the plaintiff is having prima facie case, balance of convenience is also in favour of the plaintiff and if the interim relief as prayed for is not granted, the plaintiff will Page 9 of 49 HC-NIC Page 9 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER suffer irreparable loss. The plaintiff is having arguable case on merits and the objections raised by the defendant and the contention taken by the defendant can be looked into at the time of hearing of the suit and therefore at this stage preliminary contention taken by the owner of the defendant-vessel with regard to maintainability of this suit may not be considered by this Court.
6. On the other hand, learned senior counsel Mr.Mihir Thakore appearing with Ms.Renu Singh for the owner of the defendant-vessel has taken the preliminary objection with regard to maintainability of the present suit. Learned counsel for the owner of the defendant-vessel mainly contended that Glamour Maritime SA is the owner of the defendant-vessel and therefore the alleged transaction mentioned by the plaintiff with the defendant no.2 has now no relevance. The defendant-vessel was having ownership with one Skybulk Shipping SA which has sold the vessel to Glamour Maritime SA. Glamour Maritime SA has obtained the finance from the bank on the vessel. In fact, there is no transaction between the plaintiff and Glamour Maritime SA and therefore any claim or transaction occurred in the year 2011 by the plaintiff with defendant no.2 will have no relevance. In fact, the plaintiff has suppressed certain facts and not produced Page 10 of 49 HC-NIC Page 10 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER complete documentary evidence before this Court and thereby misled this Court with regard to the ownership of the vessel. Learned counsel has referred to the documents annexed with the affidavit-in-reply and submitted that Glamour Maritime SA has purchased the defendant-vessel from Skybulk Shipping SA.
6.1. Learned counsel Mr.Thakore thereafter contended that the alleged claim of the plaintiff is based on purported dispute arising out of an alleged contract of sale. The plaintiff is just an unpaid seller and being an unpaid seller, its rights are circumscribed by Sale of Goods Act. Being an unpaid seller, the plaintiff has allowed to transfer the defendant-vessel to defendant no.2. Admiralty Suit is not maintainable even against defendant no.2. The claim of the plaintiff does not give rise to any maritime lien. It is contended that the arrest convention of 1999 clearly provides that nothing in convention would create a maritime lien. Learned counsel referred to the convention of maritime lien and mortgage of 1993 and submitted that the said convention recognizes only five types of claims as secured by maritime lien, which read as under:
"(a) Claims for wages and other sums due to the master, officers and other members Page 11 of 49 HC-NIC Page 11 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER of the Vessel's complement in respect of their employment on the Vessel, including costs of repatriation and social insurance contributions payable on their behalf.
(b) Claims in respect of loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the vessel.
(c) Claims for reward for the salvage of the vessel.
(d) Claims for port, canal and other waterways dues and pilotage dues;
(e) Claims based on tort arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passengers' effects carried on the vessel."
6.2. It is further contended by learned counsel Mr. Thakore that even the contract of sale of defendant-vessel was between the plaintiff and defendant no.2 and not between the plaintiff and Skybulk Shipping SA or the plaintiff and Glamour Maritime SA and therefore there is no dispute with regard to contract of sale of the vessel with Skybulk Shipping SA or Glamour Maritime SA. Hence the present suit is not maintainable.
6.3. Learned counsel Mr.Thakore thereafter submitted that the claim of the plaintiff is not a maritime lien and therefore once the ownership changes, there is no right of claim against the third party purchaser. In fact, the plaintiff has stated in the plaint in paragraphs 3.4 that the vessel is sold to Glamour Maritime SA in Page 12 of 49 HC-NIC Page 12 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER February, 2013, even then, Glamour Maritime SA is not joined as party-defendant while filing the Admiralty Suit. Thus, the present suit is not maintainable.
6.4. Learned counsel Mr. Thakore thereafter contended that the plaintiff has based this suit on an alleged agreement dated 4.10.2011 executed between the plaintiff and defendant no.2. Learned counsel referred to clause 16 of the said agreement. The said clause provides for referring the dispute to the arbitrator. Thus, in view of the arbitration agreement, the suit is not maintainable. Learned counsel places reliance upon the decision rendered by the Honourable Supreme Court in the case of Bharat Aluminium Company V/s Kaiser Aluminum Technical Services Inc., reported in (2012)9 SCC 552.
6.5. Learned counsel Mr. Thakore for the defendant thereafter submitted that defendant no.1-vessel has arrived at Alang for breaking purpose. The defendant vessel is not a navigable vessel and therefore Admiralty Jurisdiction would not be available to the plaintiff. Once the vessel is beached for breaking purpose, it cannot be said to be a vessel.
6.6. At this stage, learned counsel Mr. Thakore Page 13 of 49 HC-NIC Page 13 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER submitted that there is no privity of contract between the plaintiff and owner of defendant No.1. Plaintiff has suppressed the fact that vessel is already agreed to be sold to NKD Maritime and it has further entered into a Memorandum of Agreement with Shree Ram Steel Rolling Mills (Unit 2). The vessel arrived at Alang Anchorage. The customs department had arranged for rummaging. On 05.10.2015, the agent had applied to the customs authorities as well as sought permission of port authority to beach the vessel and filed cargo declaration before the customs authorities. The vessel is ready to beach and on account of filing of present suit, the same is pending before the authorities.
6.7. Learned counsel Mr.Thakore further contended that the dispute raised by the plaintiff does not fall in any of the ship arrest conventions. The claim of the plaintiff cannot be treated as maritime lien or maritime claim. The suit for damages will not be maintainable in the admiralty jurisdiction.
6.8. It is further contended by learned counsel Mr. Thakore that the plaintiff is relying upon the agreement dated 4th October 2011 and present suit is filed in October, 2015 for enforcement of the said agreement. Thus, the suit is time barred Page 14 of 49 HC-NIC Page 14 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER and therefore the same is required to be dismissed. Learned counsel Mr.Thakore thereafter contended that corporate veil cannot be pierced or lifted in the facts of the present case. Learned senior counsel Mr.Mihir Thakore further contended that when four different agreements were entered into on 4.10.2011 between the plaintiff and defendant no.2, it can be said that the sale of the vessel was concluded. Learned counsel referred to the Sellers Credit Agreement and submitted that sale was completed because part payment was made and credit was given partly. Vessel was mortgaged, therefore, transaction of sale was complete. Thus, the dispute is not in respect of sale of the vessel as contended by learned advocate for the plaintiff. He further contended that clause (v) of Article 1 (1) of 1999 convention is not applicable in the facts of the present case because the dispute is with regard to non- fulfillment of Sellers Credit Agreement. It is further submitted that Sellers Credit Agreement is a loan agreement and dispute is arising out of the loan agreement and therefore said dispute cannot be termed as maritime claim. The loan transaction is outside the admiralty jurisdiction.
6.9. Learned counsel Mr.Thakore thereafter
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referred to the various provisions contained in the Sale of Goods Act, more particularly, sections 2(7), 45, 46, 47, 49, 50 and 55 of the said Act.
6.10.Learned counsel Mr. Thakore thereafter submitted that plaintiff has not produced any document with regard to the registration of the mortgage. The plaintiff has not pointed out any law that mortgage can be created in absence of registration.
6.11.Learned counsel Mr. Thakore thereafter contended that assuming without admitting that the claim of the plaintiff is arising out of clause (v) of Article 1 (1) of 1999 convention, even then, the vessel is transferred to defendant no.2. Thereafter, defendant no.2 transferred the defendant vessel to Skybulk Shipping SA. Skybulk Shipping SA has, in turn, transferred the ownership of the defendant-vessel to Glamour Maritime SA. Therefore, the claim of the plaintiff cannot be said to be a maritime claim. Hence, the defendant-vessel, which is of the ownership of Glamour Maritime SA, cannot be arrested.
6.12.In support of the aforesaid submissions, learned counsel Mr.Thakore has referred to and Page 16 of 49 HC-NIC Page 16 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER relied upon the following decisions :
(i)Croft Sales And Distribution Limited V/s M.V.Basil (Imo No.7532650), reported in 2011(2) GLR 1027.
(ii) Croft Sales And Distribution Limited V/s M.V.Basil (Imo No.7532650) decided by Hon'ble Division Bench in O.J.Appeal No.6 of 2011 on 17.2.2011.
(iii)Michail Arhangelos S A C/o Agent Seawind Maritime Co V/s M V Star 7 (Ex M V Michail Arhangelos) and Anr., reported in 2011(2) GLH 70 more particularly 11 to 14 and 16.
(iv) Epoch Enterrepots V/s M.V.Won Fu reported in 2003(1) SCC 305.
(v) Balwant Rai Saluja and another V/s AIR India Limited and others, reported in 2014(9) SCC 407 paragraphs 66 to 74.
6.13.Relying upon the decision rendered by the learned Single Judge as well as Hon'ble Division Bench of this Court in the case of Croft Sales and Distribution Ltd. (supra), learned counsel Mr. Thakore contended that the dispute raised by the plaintiff is purely in connection with the Page 17 of 49 HC-NIC Page 17 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER commercial transaction for sale of the vessel and in no way connected with our nation directly or indirectly. Contract in question does not involve any public law character and therefore the claim of the plaintiff cannot be termed as maritime claim. Hence, the present suit is not maintainable before this Court.
7. Learned counsel Mr.Soparkar appearing for the plaintiff in rejoinder mainly submitted that admiralty jurisdiction gives right to the plaintiff which is not a new right given to the plaintiff but it is in addition to right under the Sale of Goods Act. He further submitted that the claim of the plaintiff is covered under clause (v) of Article 1(1) of 1999 convention under the head of maritime claim. He once again referred to four agreements entered into between the plaintiff and defendant no.2 on the very same date and thereafter submitted that it is not correct on the part of the defendant to say that the claim of the plaintiff is not a maritime claim. However, learned counsel for the plaintiff fairly submitted that the claim of the plaintiff may not be a maritime lien but it can be certainly said to be a maritime claim.
7.1. Learned counsel Mr. Soparkar submitted that the plaintiff can exercise right of arrest of Page 18 of 49 HC-NIC Page 18 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER vessel under Article 3 of 1999 convention. He contended that from the documents produced on record, it can be said that Ms.Basak Akademir, Mr.Barak Akademir, Mr.Erol Yucel are one way or the other connected with the defendant no.2, Skybulk Shipping SA and Glamour Maritime SA. In fact, defendant no.2 and Glamour Maritime SA are subsidiary companies of Makro Denzicilik. Ms.Basak has signed certain documents which are produced on record from which it can be said that all these companies though are different entity in the eye of law are under the control of one family and, therefore, in the facts of the present case, this Court may pierce the corporate veil.
7.2. At this stage, learned counsel Mr. Soparkar referred to the decision rendered by the Hon'ble Supreme Court in the case of M.V.Elisabeth & Ors. V/s Harwan Investment & Trading Pvt.Ltd. reported in 1993 Supp(2) SCC 433 and more particularly paragraph 46 reads as under:
"46. The foundation of an action in rem, which is a peculiarity of the Anglo- American law, arises from a maritime lien or claim imposing a personal liability upon the owner of the vessel. A defendant in an admiralty action in personam is liable for the full amount of the plaintiff's established claim. Likewise, a defendant acknowledging service in an Page 19 of 49 HC-NIC Page 19 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER action in rem is liable to be saddled with full liability even when the amount of the judgment exceeds the value of the res or of the bail provided. An action in rem lies in the English High Court in respect of matters regulated by the Supreme Court Act 1981, and in relation to a number of claims the jurisdiction can be invoked not only against the offending ship in question but also against a `sistership' i.e., a ship in the same beneficial ownership as the ship in regard to which the claim arose.
"The vessel which commits the aggression is treated as the offender, as the guilty instrument or thing to which the forfeiture attaches, without any reference whatsoever to the character or conduct of the owner...." (Per Justice Story, The United States v.The Big Malek Adhel).
7.3. Learned counsel Mr. Soparkar thereafter referred to the decision rendered by the Hon'ble Supreme Court in the case of Liverpool & London S.P. & I Association Ltd. V/s M.V.Sea Success I and another, reported in (2004)9 SCC 512 and more particularly referred the observation and findings given by the Hon'ble Supreme Court in paragraphs 143 to 146, 150 to 160.
7.4. Learned counsel thereafter has placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of Tata Engineering and Locomotice Co.Ltd. V/s State of Bihar, reported in AIR 1965 SC 40 and more Page 20 of 49 HC-NIC Page 20 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER particularly paragraph 24 which reads as under:
"24. The true legal position in regard tot eh character of a corporation or a company which owes its incorporation to a statutory authority, is not in doubt or dispute. The Corporation in law is equal to a natural person and has a legal entity of its own. The entity of the Corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the Corporation. This position has been well established ever since the decision in the case of Salomon v. Salomon and Co. was pronounced in 1897; and indeed, it has always been the well-recognised principle of common law. However, in the course of time, the doctrine that the Corporation or a Company has a legal and separate entity of its own has been subjected to certain exceptions by the application of the fiction that the veil of the Corporation can be lifted and its face examined in substance. The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the Corporation. As a result of the impact of the complexity of economic factors, judicial decisions have sometimes recognised exceptions to the rule about the juristic personality of the corporation. It may be that in course of Page 21 of 49 HC-NIC Page 21 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more."
7.5. Learned counsel Mr. Soparkar has also placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of New Horizons Limited and another V/s Union of India and others, reported in 1995(1) SCC 478, more particularly on paragraphs 27 to 36 as under:
"27.The conclusion would not be different even if the matter is approached purely from the legal standpoint. It cannot be disputed that, in law, a company is a legal entity distinct from its members. It was so laid down by the House of Lords in 1897 in the leading case of Salomon v. Salomon & Co.8 Ever since this decision has been followed by the courts in England as well as in this country. But there have been inroads in the doctrine of corporate personality propounded in the said decision by statutory provisions as well as by judicial pronouncements. By the process, commonly described as "lifting the veil", the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favour of the economic entity constituted by a group of associated companies. This course is adopted when it is found that the principle of corporate personality is too flagrantly opposed to justice, convenience or the interest of the Revenue. (See :
Gower's Principles of Modem Company Law, Page 22 of 49 HC-NIC Page 22 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER 4th Edn., p. 112.) This concept, which is described as "piercing the veil" in the United States, has been thus put by Sanborn, J. in US v. Milwaukee Refrigerator Transit Co.9: "When the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.
28.In a number of decisions, departing from the narrow legalistic view, courts have taken note of the realities of the situation.
29.In Scottish Coop. Wholesale Society Ltd. v. Meyer10, a case under Section 210 of the Companies Act, 1948, Viscount Simonds has quoted with approval the following observations of Lord President Cooper:
"In my view, the section warrants the court in looking at the business realities of a situation and does not confine them to a narrow legalistic view.
30.Similarly in Harold Holdsworth & Co. (Wakefield) Ltd. v. Caddies, it was argued that the subsidiary companies were separate legal entities each under the control of its own board of directors, that in law the board of the appellant company could not assign any duties to anyone in relation to the management of the subsidiary companies, and that, therefore, the agreement cannot be construed as entitling them to assign any such duties to the respondent. The argument was rejected by Lord Reid with the observation: "This is too technical an argument." The learned law Lord went on to hold 8 1897 AC 22: (1895-9) All ER Rep 33 9 (1905) 142 Fed 247, 255 10 1959 AC 324,343 :(1958) 3 All ER 66: (1958) 3 WLR Page 23 of 49 HC-NIC Page 23 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER 404 11 (1955) 1 All ER 725 :(1955) 1 WLR 352 496 "This is an argument in re mercatoria, and it must be construed in the light of the facts and realities of the situation." (All ER p. 738)
31.In DHN Food Distributors Ltd. v. London Borough of Tower Hamlets12 the Court of Appeal was dealing with three companies, out of which one was the holding company and the other two were its subsidiaries. After quoting the views of Prof. Gower that "there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group" Lord Denning, M.R. has observed : "This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point." (p. 467) In the same case, Goff, L.J. has said : "[T]his is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil." (p.468) The observations of Shaw, L.J. were to the following effect:
"Why then should this relationship be ignored in a situation in which to do so does not prevent abuse but would on the contrary result in what appears to be a denial of justice?" (p.473) In this case the holding company was held entitled to compensation for disturbance from premises in its occupation on account of compulsory purchase of the property which belonged to one of the subsidiaries and in which the holding company had no interest. This was a case in which the court lifted the corporate veil so as to confer a benefit on the company.
32.It may, however, be stated that the
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existing state of the law in England in this field is not very satisfactory. According to Professor Gower the development "has been essentially haphazard and irrational" (See Gower's Principles of Modern Company Law, 4th Edn., p. 138).
33.This Court in Juggi Lal Kamlapat v. CIT13 has laid down that "in certain exceptional cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade". (SCR p.995).
34.In State of U.P v. Renusagar Power Co.14 this Court lifted the veil to hold that Hindalco, the holding company, and Renusagar Power Co., its subsidiary, should be treated as one concern and the power plant of Renusagar must be treated as the own source of generation of Hindalco and Hindalco would be liable to payment of electricity duty on that basis. It was observed: (SCC p. 94, para 66) "It is high time to reiterate that in the expanding of horizon of modem jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. ... The horizon of the doctrine of lifting of corporate veil is expanding."
12 (1976) 3 All ER 462: (1976) 1 WLR 852 13 (1969) 1 SCR 988 : AIR 1969 SC 932 14 (1988) 4 SCC 59 : 1988 Supp (1) SCR 627 497
35.There are cases where the court has looked behind the facade of the company and its place of registration in order to determine its residence and for this purpose the test laid down is the place of the central management and control. (See :
Page 25 of 49HC-NIC Page 25 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER De Beers Consolidated Mines Ltd. v. Howe15.) Similarly the Court has looked at the corporators in order to determine the character of the corporation as an enemy alien or as a British resident (See :
Daimler Co. Ltd. v. Continental Tyre and Rubber Co. Ltd. 16). According to Professor Gower this does not involve breach of the principle laid down in Salomon case8. (,See:Gower's Principles of Modern Company Law, 4th Edn., p. 136.)
36. After making a special study of this branch of the law, a learned scholar has discerned four different attitudes towards the company in judicial pronouncements. According to him these categories, in progressive order, are (i) peeping behind the veil; (ii) penetrating the veil; (iii) extending the veil; and (iv) ignoring the veil. The decisions relating to determination of residence or enemy status of a company have been placed by him in the category of "peeping behind the veil"
where the court peeps behind the veil and concludes from the shareholders or from the people in control of the company, something about the nature of the company. (See S. Ottolenghi From Peeping Behind the Corporate Veil to Ignoring it Completely
17.)"
7.6. Thereafter, learned counsel Mr. Soparkar has placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of Delhi Development Authority V/s Skipper Construction Co. (P) Ltd. And another reported in 1996(4) SCC 622, more particularly, paragraphs 24 to 28.
7.7. Learned counsel Mr. Soparkar has also relied Page 26 of 49 HC-NIC Page 26 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER upon the decision rendered by the Hon'ble Supreme Court in the case of Subhra Mukherjee and another v/s Bharat Coking Coal Ltd. And others, reported in 2000(3) SCC 312, more particularly, on paragraphs 11 and 12.
7.8. Learned counsel Mr.Soparkar thereafter submitted that Glamour Maritime SA is not in business of ship breaking. From the documents produced by learned advocate for Glamour Maritime SA, it is pointed out that till date the bill of entry is not filed nor the vessel is beached and therefore the defendant vessel cannot be said to be beached for the breaking purpose. Therefore, the defendant-vessel is still a vessel and therefore the decision relied upon by the defendant in the case of Michail Arhangelos S A (supra) is not applicable in the facts of the present case.
7.9. Learned counsel Mr.Soparkar thereafter submitted that when the Hon'ble Supreme Court has delivered the judgment in the case of Liverpool & London S.P. & I (supra), 1999 convention was not in force and correct facts were not pointed out to the Hon'ble Supreme Court that 1999 convention is not brought into force and applicable to India. Relying upon the said decision rendered by the Hon'ble Supreme Court, the learned Single Page 27 of 49 HC-NIC Page 27 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER Judge as well as the Hon'ble Division Bench of this Court, in the case of Croft Sales and Distribution Limited (supra) have wrongly placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of Liverpool & London S.P. & I (supra) and learned counsel has tried to distinguish the facts of the present case and the facts of the case of Croft Sales and Distribution Limited (supra).
7.10. Learned counsel Mr.Soparkar at this stage submitted that in fact 1999 convention is now made applicable from 14.9.2011 in terms of Article 14(1) of 1999 convention. Learned counsel placed on record the document pointing out that ten countries have expressed their consent to be bound by the said convention. He therefore submitted that in the year 2004 when the Hon'ble Supreme Court has decided the case of Liverpool & London S.P. & I(supra), 1999 convention was not in fact applicable.
7.11.In the aforesaid background, learned counsel submitted that now the Bombay High Court as well as Madras High Court have after considering the decision rendered by the Hon'ble Supreme Court in the case of Liverpool & London S.P. & I(supra) as well as the decision rendered by this Court (learned single Judge as well as the Hon'ble Page 28 of 49 HC-NIC Page 28 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER Division Bench), in the case of Croft Sales and Distribution Limited(supra), have taken a different view. Learned counsel, therefore, has placed reliance upon the decision rendered by the Bombay High Court in the case of Great Pacific Navigation (Holdings) Corporation Limited V/s M.V.Tongli Yantai, reported in 2011 SCC Online Bombay 883, more particularly on paragraphs 16 to
26. 7.12.Learned counsel Mr.Soparkar thereafter has placed reliance upon the decision rendered by the High Court of Madras in the case of MT Titan Vision V/s KTV Health Food Pvt.Ltd. reported in 2014 SCC Online Madras 12328 and more particularly paragraphs 20, 30 and 54 to 56.
7.13. Thus, learned counsel Mr.Soparkar submitted that in view of the decision rendered by the Bombay High Court as well as the Madras High Court in the aforesaid cases, this Court may adopt the same view.
7.14. In view of the aforesaid submissions, learned counsel Mr.Soparkar submitted that the plaintiff is having prima facie case and an arguable case and all the defences taken by the owner of the defendant-vessel can be considered at the time of the trial of the admiralty suit.
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Thus, this Court may pass an order of arrest of defendant vessel.
8. Having heard the learned counsel appearing for the parties and on perusal of the relevant record, following facts emerge on record:
(i) That the plaintiff has invoked admiralty jurisdiction of this Court by filing the present suit against the defendant No.1 vessel and defendant No.2 - M/s. Baben Tasimacilik Insaat Taahhut ve Ticaret Limited. It is the case of the plaintiff that defendant No.2 had purchased the defendant vessel from the plaintiff and therefore on 04.10.2011 plaintiff agreed to sale the defendant vessel to defendant No.2 for USD 75,00,000. Part payment was made and for remaining amount four different agreements were executed which are produced at Exh.A to Exh.D. Various correspondences took place between the plaintiff through its agent and defendant No.2.
Defendant No.2 and its Director have assured to make the payment and lastly the payment of USD 25,000/- was made on 04.11.2014.
(ii) Defendant No.2 sold the defendant No.1 vessel to Skybulk Shipping S.A. on 09.01.2013. Skybulk Shipping S.A. in turn sold the defendant vessel to Glamour Maritime SA. Thus, Glamour Maritime SA Page 30 of 49 HC-NIC Page 30 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER is the owner of the defendant vessel. However, Glamour Maritime SA also agreed to sell the defendant vessel to NKD Maritime and thereafter NKD Maritime entered into a Memorandum of Agreement with Shree Ram Steel Rolling Mills (Unit 2).
(iii) Defendant vessel had arrived at Alang Anchorage for breaking purpose. However, till date the vessel is not beached nor the bill of entry is filed.
(iv) It is alleged by the plaintiff that Glamour Maritime S.A. is a subsidiary of Makro Denizcilik, a company belonging to Mr. Erol Yucel, who is the owner of defendant No.2.
(v) Defendant No.2 and Glamour Maritime S.A. are subsidiary companies of Makro Denizcilik and Makro Denizcilik is a third party manager of Skybulk Shipping S.A. Skybulk Shipping S.A. and Glamour Maritime S.A. both are having the same address i.e. 80, Broad Street, Monrovia Liberia. Ms. Basak Akademir is the Director of defendant No.2 and Glamour Maritime SA. Thus, learned counsel for the plaintiff contended that defendant No.2 has played a fraud with the plaintiff and therefore in the facts of the case, Corporate Veil is required to be lifted/pierced.
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9. In view of the aforesaid broad facts of the case and in view of the contentions raised by the learned counsel for the parties, following main issues arise for consideration by this Court in exercise of admiralty jurisdiction with regard to the maritime claim raised by the plaintiff.
(a) Whether the present Admiralty Suit is maintainable invoking admiralty jurisdiction of this Court?
(b) Whether the defendant vessel can be said to be a "vessel" when it is arrived at port Alang for the purpose of breaking?
10. To decide the controversy involved in this suit, first of all it is necessary to refer to International Convention Relating to the Arrest of Sea-Going Ships, Brussels, May 10, 1952 and Article 3 of Brussels Convention of 1952 reads as under:
"(1) Subject to the provisions of para (4) of this article and of article 10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail; but no ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claims enumerated in article 1, (o), (p) Page 32 of 49 HC-NIC Page 32 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER or (q).
(2) Ships shall be deemed to be in the same ownership when all the share therein are owned by the same person or persons.
(3) A ship shall not be arrested, nor shall bail or other security be given more than once in any one or more of the jurisdictions of any of the Contracting States in respect of the same maritime claim by the same claimant; and, if a ship has been arrested in any of such jurisdictions, or bail or other security has been given in such jurisdiction either to release the ship or to avoid a threatened arrest, any subsequent arrest of the ship or of any ship in the same ownership by the same claimant for the maritime claim shall be set aside, and the ship released by the Court or other appropriate judicial authority of that State, unless the claimant can satisfy the court or other appropriate judicial authority that the bail or other security had been finally released before the subsequent arrest or that there is other good cause for maintaining that arrest.
(4) When in the case of charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claim. The provisions of this paragraph shall apply to any case in which Page 33 of 49 HC-NIC Page 33 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship."
11. There is no dispute that 1952 Convention has no reference to 'dispute arising out of contract for sale' in the definition clause of 'maritime claim' of the ship.
12. It is also necessary to refer to International Convention of 1999, in which, Article 1 contains definitions and sub-article 1 defines 'maritime claim' and clause (v) of sub- article 1 of Article 1 reads as under:
"any dispute arising out of a contract for the sale of the ship'.
Sub-Article 2 of Article 1 defines 'arrest', which reads as under:
"Arrest means any detention or restriction on removal of a ship by order of a Court to secure a maritime claim, but does not include the seizure of a ship."
Article 2 defines powers of arrest and sub-article 2 of Article 2 provides that a ship may only be arrested in respect of a maritime claim but in respect of no other claim. Sub-article 3 of Article 2 provides that a ship may be arrested for the purpose of obtaining security. Article 3 provides for exercise of right of arrest and reads as under:
Page 34 of 49HC-NIC Page 34 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER "1. Arrest is permissible of any ship in respect of which a maritime claim is asserted if:
[a] the person who owned the ship at the time when the maritime claim arose is liable for the claim and is owner of the ship when the arrest is effected, or [b] the demise charterer of the ship at the time when the maritime claim arose is liable for the claim and is demise charterer or owner of the ship when the arrest is effected; or [c] the claim is based upon a mortgage or a 'hypotheque' or a change of the same nature on the ship; or [d] the claim relates to the ownership or possession of the ship; or [e] the claim is against the owner, demise charterer, manager or operator of the ship and is secured by a maritime lien which is granted or arises under the law of the State where the arrest is applied for.
2. Arrest is also permissible of any other ship or ships which, when the arrest is effected, is or are owned by the person who is liable for the maritime claim and who was, when the claim arose:
[a] owner of the ship in respect of which the maritime claim arose; or [b] demise charterer, time charterer or voyage charterer of that ship.
This provision does not apply to claims in respect of ownership or possession of a ship.
3. xx xx xx"Page 35 of 49
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13. The Division Bench of this Court in the case of Croft Sales and Distribution Ltd. (supra) has observed and held in para 11 to 19, para 22 and 33 as under:
"11. In our view, the following aspects are required to be considered:-
(a) The applicability of International Convention of Arrest of Ship (Geneva 1999) (hereinafter referred to as 'Geneva Convention/1999 Convention) and if yes, the limits of the jurisdiction of this Court.
(b) Whether the available ship can be arrested even if the Geneva Convention is to apply.
(c) Whether the available ship can be termed as sister-ship by lifting the corporate veil.
(d) If there is no right in rem qua available ship, whether suit can be maintained for invoking admiralty jurisdiction.
(e) The consequential order.
12. The learned Counsel appearing for the appellant has contended that in view of the decision of the Apex Court in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another, reported in (2004) 9 SCC, 512 read with the Full Bench decision of Bombay High Court in the case of O.J. Ocean Liner LLC v. M.V. Golden Progress & Anr., reported at 2007(2) Bombay C.R. 1, 1999 Convention is applicable and can be enforced in India, whereas the learned Counsel appearing for the respondents No.1 and 18 contended that 1999 Convention is Page 36 of 49 HC-NIC Page 36 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER not in force since the minimum number of countries i.e. 10, are not signatories to the Convention and it was submitted that as per the website of United Nations (U.N.), as on 8.2.2011 on the aspects of status of Geneva Convention, it has been mentioned as not yet in force by referring to Article 14 that the Convention shall enter into force in six months following the date on which 10 States have expressed their consent to be bound by it and the signatories in the status are shown as '6' and, in any case, our Country has not ratified the Convention of 1999. It was also submitted that the aforesaid factum appears was not brought to the notice of the Apex Court as well as to the Full Bench of Bombay High Court when the decisions were rendered in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra) as well as in the case of O.J. Ocean Liner LLC v. M.V. Golden Progress & Anr. (supra). It was also submitted that the Apex Court in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra) at para 43 did record that certain countries have ratified the convention of 1999 and in the submission of the learned Counsel for the respondents No.1 and 18, those countries were present, but they have not ratified.
13. It is undisputed position that the suit of the plaintiff has been filed based on 1999 Convention for arrest of the ship.
14. We may only record that in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra), the Apex Court on the Page 37 of 49 HC-NIC Page 37 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER aspects of Convention has recorded at para 43 about the ratification of the Convention of 1999 by various countries and, therefore, it is not possible for us to entertain the contention that the Convention of 1999 is not in force or not ratified by the requisite number of countries as per Article 14 of the Convention of 1999. However, in the very decision, the Apex Court at paragraphs 59 and 60, has observed thus:-
"59. M.V. Elisabeth is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that there does not exist any primary act touching the subject and in absence of any domestic legislation to the contrary; if the 1952 Arrest Convention had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be applied.
60. Application of the 1999 Convention in the process of interpretive changes, however, would be subject to; (1) domestic law which may be enacted by Parliament; and (2) it should be applied only for enforcement of a contract involving public law character." (Emphasis supplied)
15. In view of the above, in the very decision, while observing that 1999 Convention may be applied, it is specifically also observed that the application of such Convention shall be subject to Domestic Law enacted by the Parliament and it should be applied only Page 38 of 49 HC-NIC Page 38 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER for the enforcement of contract involving public law character. This means that both the conditions are to be observed while applying the Convention of 1999.
16. The aforesaid leads us to examine the question as to whether the contract in question is involving public law character or not. The contract in question for sale of the particular ship is produced by the plaintiffs themselves with the plaint at Annexure-A and the same is entered into between the plaintiffs and defendant No.3 herein. It is purely a commercial transaction for sale of the ship and, in no way, connected with our nation directly or indirectly, nor is there any operation and/or involvement of the State or any instrumentality of the State as per Article 12 of the Constitution of India. The said contract dated 21.8.2008, upon which the reliance has been placed by the plaintiff, in our view would not attract any public law character, in any manner, whatsoever. In our view, the parameters of the contract involving public law character has to be read as per the legal provisions prevailing in our country. It is by now well settled that the contract may attract public law character, if the State or instrumentality of the State, is directly or indirectly connected therewith in enforcement of the contract or implementation thereof. Further, by virtue of the said contract, if there is any question arises for the sovereignty of the Nation, environment, pollution, dispute of sea water etc., where larger or huge or any public interest is involved, such contract may also attract public law character. We do not find any element of public law character in the present contract in question even if the terms and conditions of the contract agreement are Page 39 of 49 HC-NIC Page 39 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER considered as they were.
17. On the second aspect of domestic law enacted by the Parliament, if considered, provisions of CPC would be required to be followed, even if one has to enforce the Convention of 1999. The order of arrest of the ship may fall at par with the provisions of Order 38 Rule 5 of the CPC, providing for attachment before judgement or, in any case, the principles analogues thereto. Order 38 Rule 5 of CPC would be attracted only when the defendant is to defeat the realization of the decree that may be passed against him. It would presuppose the prayer in the suit for realization of any amount through a decree, whose execution is sought to be frustrated by the defendant. The Order 38 Rule 5 reads as under:-
"5(1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him. ..."
18. The prayers made in the suit at paragraph 52 is not for realization of any amount by way of decree or otherwise while invoking the admiralty jurisdiction. Therefore, the condition precedent for exercise of the power for attachment before the judgement or any other order for, the arrest of the ship as provided under Order 38 Rule 5 of CPC which is as per law made by Parliament is not satisfied. Such may equally apply for applicability of the provisions of Order 7 Rule 11 of CPC in a suit where , the Page 40 of 49 HC-NIC Page 40 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER plaint does not disclose a cause of action or the entertainment thereof is barred by any law.
19. In view of the aforesaid, even if the Convention of 1999 is to apply, but for the fact that the contract is not involving any public law character, the said condition as read by the Apex Court in the above referred decision of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra) is not satisfied. Further, the limitation as provided by the CPC for the order of arrest, which is akin to the power to be exercised by the Civil Court for arrest of the ship is not satisfied. As per the above referred decision of the Apex Court, if both the conditions are not satisfied 1999 Convention cannot be applied, nor the admiralty jurisdiction can be invoked based on the Convention of 1999.
22. In view of the aforesaid, we find that as per the aforesaid decision of the Apex Court in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra), as the conditions are not satisfied, no relief can be granted to the plaintiff based on 1999 Convention.
33. If the matter is considered in light of the aforesaid parameters read with the decision of the Apex Court in the case of Liverpool and London S.P. & I Association Limited v. M. V. Sea Success I and Another (supra), and more particularly the observations made at paragraph 60, since the contract is not involving the public law character, the suit can be said as Page 41 of 49 HC-NIC Page 41 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER barred or non-maintainable. Under these circumstances, it can be said that the requirement of Order 7 Rule 11 Clause (A) and (D) are satisfied.
14. Thus, in view of the aforesaid two conventions of 1952 as well as 1999 as well as aforesaid binding decision of this Court, this Court is of the opinion that in the present case the dispute between the plaintiff and even defendant No.2 is with regard to contract of sale of the vessel. The agreements are produced on record. From reading the contents of the said agreements, it can be said that it is purely a commercial transaction for sale of the vessel and in no way connected with our nation directly or indirectly; nor is there any operation and/or involvement of the State or any instrumentality of the State as per Article 12 of the Constitution of India. Moreover, the agreements which are executed on 04.10.2011 and relied upon by the plaintiff and produced at Exh.A to D with the compilation, in the opinion of this Court, would not attract any public law character in any manner whatsoever. As per the aforesaid binding decision of this Court, the parameters of the contract involving public law character has to be read as per the legal provisions prevailing in our country. The contract may attract public law character, if the State or instrumentality of the State, is directly or indirectly connected Page 42 of 49 HC-NIC Page 42 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER therewith in enforcement of the contract or implementation thereof. Moreover, by virtue of the said contract if there is any question arises for the sovereignty of the nation, environment, pollution, dispute of sea waters etc., where larger or huge or any public interest is involved, such contract may also attract public law character. In the present case, the element of public law character in the agreements in question is missing. Thus, even if the convention of 1999 is applicable, but for the fact that the agreements relied upon by the plaintiff do not involve any public law character, the aforesaid condition laid down by the Hon'ble Supreme Court in the case of Liverpool & London S.P. & I Association Ltd. (supra) and the Hon'ble Division Bench of this Court in the case of Croft Sales and Distribution Ltd. (supra), is not satisfied. Thus, in the opinion of this Court, no relief can be granted to the plaintiff based on 1999 convention.
15. Learned counsel Mr. Soparkar has heavily relied upon the decision rendered by the learned Single Judge of Bombay High Court in the case of Great Pacific Navigation (Holdings) Corporation Ltd. (supra). In the said decision, Bombay High Court, after considering the decision rendered by the Hon'ble Supreme Court in the case of Page 43 of 49 HC-NIC Page 43 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER Liverpool & London S.P. & I Association Ltd. (supra) as well as the decision rendered by the Hon'ble Division Bench of this Court in the case of Croft Sales and Distribution Ltd. (supra), held in para 25 as under:
"25. I am, with respect, unable to agree with the judgment of the Hon'ble Gujarat High Court. As stated above, in both the judgments of the Supreme Court, neither the State nor any instrumentality of the State was involved. The contracts were of a purely private nature. In M.V.Elisabeth (supra), the plaintiff i.e. the respondent was a private limited company. Defendant No.1 was a foreign vessel which was owned by defendant No.2, which was a foreign company. The dispute also involved only a breach of duty by leaving the Port and delivering the goods to the consignee in breach of the plaintiff's directions to the contrary, thereby committing the tort of conversion of the goods."
16. Learned counsel Mr. Soparkar has also placed heavy reliance upon the decision rendered by learned Single Judge of Madras High Court in the case of MT Titan Vision (supra), wherein Madras High Court also, after considering the aforesaid two decisions rendered by the Hon'ble Supreme Court as well as the Hon'ble Division Bench of this Court, held that the submission made by counsel for the defendant that since there is no existence of public law character in the contract in the present case, the arrest of the vessel Page 44 of 49 HC-NIC Page 44 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER cannot be made, is liable to be rejected. Thus, Madras High Court discarded the said contention.
17. In view of the aforesaid facts, this Court is of the opinion that the decision rendered by the Hon'ble Division Bench of this Court in the case of Croft Sales and Distribution Ltd. (supra) is binding to this Court especially when the learned counsel appearing for the parties have failed to draw the attention of this Court that the aforesaid decision rendered by the Hon'ble Division Bench of this Court carried in appeal and the Hon'ble Supreme Court took a different view than the view taken by the Hon'ble Division Bench of this Court and therefore it is binding to this Court. In this view of the matter, the answer to the first issue is in negative.
18. Now, so far as issue No.2 is concerned, it is to be noted that the learned counsel for the defendant has raised a contention that the defendant vessel has arrived at Alang for the purpose of breaking and therefore now the same cannot be said to be a 'vessel' and the same is not navigable and therefore in view of the decision rendered by this Court in the case of Michail Arhangelos S.A. C/o Agent Seawind Maritime Co. (supra), admiralty jurisdiction of this Court would not be available to the Page 45 of 49 HC-NIC Page 45 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER plaintiff.
19. I have gone through the facts and discussions made by this Court in the decision relied upon by learned counsel for the defendant. In the said case, MOA was entered into between the parties referred to breaking/demolition of ship; the pollution clearance was granted by GPCB; custom duty was paid on import of the ship; permission of beaching was granted by GMB and even before the order of arrest was passed by this Court, the vessel was already beached and therefore this Court held that no maritime claim can be entertained in admiralty jurisdiction.
20. In the facts of the present case, from the documents produced on record and from the pleadings as well as from the statement made by the learned counsel appearing for the defendant on the very first day of the hearing that the defendant will not file bill of entry or beach the vessel till the next date of hearing. The said statement is continued from time to time . Thus, the fact remains that the vessel is not beached and bill of entry is not filed. Therefore, the customs clearance is not granted. Thus, in the facts of the present case, the decision relied upon by learned counsel for the defendant is not applicable and therefore it can Page 46 of 49 HC-NIC Page 46 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER be said that the defendant vessel is still navigable vessel. Hence, answer to second issue is in affirmative.
21. Now, so far as the other contentions raised by the parties about the privity of contract between the plaintiff and the owner of defendant vessel viz. Glamour Maritime S.A. and contention with regard to lifting of corporate veil are concerned, in view of the finding given by this Court hereinabove that the present admiralty suit is not maintainable, the aforesaid contentions are not required to be dealt with by this Court on merits otherwise it would cause prejudice to the parties in any other proceeding that might have been and may be filed before any other appropriate court/forum. Therefore, the decisions relied on by learned counsel appearing for the parties on the point of previty of contract as well as lifting of corporate veil, are not discussed in this order. It is clarified that as and when the proceedings are filed before the concerned Court/forum with regard to the aforesaid contentions taken by the parties, the same shall be decided in accordance with law without being influenced by the observations made in this order.
22. In view of the aforesaid discussion, present Page 47 of 49 HC-NIC Page 47 of 49 Created On Tue Nov 03 00:34:11 IST 2015 O/AS/34/2015 ORDER admiralty suit is not maintainable and accordingly the same is dismissed.
(VIPUL M. PANCHOLI, J.) Srilatha/Jani After order of dismissal of this Admiralty Suit is passed by this Court, learned advocate Mr. B.T. Rao appearing for the plaintiff has requested that the statement made by the learned Senior Counsel appearing on behalf of the owner of the defendant-vessel be continued for a period of one week, so that the plaintiff can challenge this order before the appropriate higher forum.
Learned advocate Mr. Y.N. Ravani for the defendant-vessel objected to such request and submitted that this Court has already passed an order of arrest of the defendant-vessel in Admiralty Suit Nos. 36 of 2015 and 38 of 2015. He also pointed out that both the aforesaid suits are now kept on 6th November, 2015, and therefore, this Court may not grant any stay at present in these proceedings. Learned advocate Mr. Ravani also submitted that the plaintiff is not having any prima facie case, and therefore, when the suit is dismissed, this Court may not allow to continue the statement made by the learned senior counsel for the defendant.
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In the facts of this case, I am of the
opinion that when the statement made by the
learned Senior Counsel for the defendant on the very first day of hearing of the suit was extended from time to time till 3rd November, 2015 and when the arrest order is already passed by this Court in other two suits against the defendant vessel and those suits are now kept on 6th November 2015, the interest of the plaintiff can be said to be protected. However, it is clarified that this Court will not permit the concerned plaintiffs of Admiralty Suit Nos. 36 of 2015 and 38 of 2015 to withdraw the suit, even if the matter is settled with the defendants till 6th November, 2015. Therefore, the statement made by the learned senior counsel in the present suit is not required to be extended, as the interest of the plaintiff is already protected by way of arrest order passed in other suits.
(VIPUL M. PANCHOLI, J.) Jani Page 49 of 49 HC-NIC Page 49 of 49 Created On Tue Nov 03 00:34:11 IST 2015