Gujarat High Court
M V Cape Climber vs Glory Wealth Shipping Pvt. Ltd on 13 July, 2015
Equivalent citations: AIR 2015 (NOC) 1204 (GUJ.)
Author: Vipul M. Pancholi
Bench: Vipul M. Pancholi
O/OJCA/96/2015 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (OJ) NO. 96 of 2015
In ADMIRALITY SUIT NO. 30 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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M V CAPE CLIMBER....Applicant(s)
Versus
GLORY WEALTH SHIPPING PVT. LTD....Respondent(s)
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Appearance:
MR. BHADRISH S RAJU, ADVOCATE for the Applicant(s) No. 1
MR MIHIR THAKORE, SENIOR ADVOCATE WITH MS PAURAMI B
SHETH, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 13/07/2015
CAV JUDGMENT
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O/OJCA/96/2015 CAV JUDGMENT
1. Rule. Learned advocate Ms. Paurami B. Sheth waives service of notice of Rule for the respondent - original plaintiff.
2. The applicant - original defendant has filed this application for the following relief/s:
"A. That the ex parte order of arrest of the Defendant Vessel dated 29th December 2014 be vacated and/or set aside; and/or B. Rejection of the plaint under Order 7, Rule 11 (a) and/or
(d); and/or C. That pending the hearing and final disposal of the instant Original Jurisdiction Civil Application, this Hon'ble Court be pleased to pass the following orders at the ad interim stage itself:
I. Order directing the Plaintiff to pay port anchorage charges imposed by the Mundra port authorities in substitution of the Applicant and/or II. Order allowing the Defendant Vessel to sail under arrest to the Kandla Port and/or III. Order directing the Mundra Port authorities to levy reasonable port anchorage charges with respect to the Defendant Vessel.
D. Costs of this application be provided for; and/or"
3. This Court by an order dated 29.12.2014 in Admiralty Suit No.30 of 2014 directed the Port Authority and the Customs Authorities at Mundra to arrest the defendant vessel lying at Port of Mundra within the territorial waters of India in pursuant to which the defendant vessel has been arrested. The applicant - original defendant has, therefore, filed this application for vacating the order of arrest.
4. The factual matrix of the case are that:
Page 2 of 68 O/OJCA/96/2015 CAV JUDGMENT4.1 By a charter party on an amended NYPE 93 Form with additional clauses evidenced by a Fixture Recap dated 5th June 2008, the plaintiff chartered the vessel "Mineral Capeasis" to one Industrial Carriers Inc. (hereinafter referred to as 'ICI') for a period of 12 to 13 months. The said vessel was duly delivered into the service of ICI on 15.08.2008. In pursuant to Clause 11(a) hire of USD 183,000 per day was payable by ICI to the plaintiff every 15 days in advance. ICI paid three installments of hire but failed to pay 4th installment of hire which became due on 17th August 2008 amounting to USD 26,42,556.62. On 30th September 2008, the plaintiff gave notice to ICI to make the outstanding payment.
However, ICI did not make such payment to the plaintiff. The plaintiff, therefore, invoked the London arbitration clause of the charter party on 7th October 2008 and referred all the disputes and differences arising out of the said charter party to arbitration in London and appointed arbitrator and thereby called upon ICI to appoint their arbitrator which they failed to appoint. The dispute referred to arbitration by the plaintiff was for the following claims:
"(a) for unpaid hire in the sum of USD 37,15,482.18 and
(b) for the damages in the sum of USD 3,78,59,502 together with interest and costs."
4.2. The arbitrator made and published the award on 29th October 2009 by which ICI was ordered to pay a sum of USD 3,85,28,759.18 to the plaintiff with interest and costs. It is the case of the plaintiff that ICI has not challenged the award before the High Court at London. As per the case of the plaintiff, ICI is liable under the judgment and decree of High Court of Justice, Queen's Bench Division, Commercial Court, London to pay an amount of USD 4,70,92,790.74 to the plaintiff along with GBP 4,750 towards the arbitrator's fees.
Page 3 of 68 O/OJCA/96/2015 CAV JUDGMENT4.3. It is the case of the plaintiff that registered owner of the defendant vessel, Freight Bulk Pvt. Ltd., Singapore (hereinafter referred to as 'Freight Bulk') is incorporated under the laws of Singapore. The plaintiff has stated in detailed in para 12 to 25 in the plaint whereby the plaintiff claimed against Freight Bulk, Vista, Haichi and Viktor Baranskyi, which are alter egos/successors in interest and/or fraudulent transferees with respect to ICI.
4.4. On 22.11.2013, one Flame S.A. Moved the District Court for the Eastern District of Virginia, Norfolk Division, U.S.A., to obtain a writ of judicial attachment for the vessel "M.V. Cape Viewer", which was also owned by the owners of defendant vessel Freight Bulk Pte. Ltd. and was, therefore, a sister vessel of the defendant vessel. The Court granted the attachment in its order dated 22nd November 2013 and the vessel was attached on 29th November 2013. It is the case of the plaintiff that to execute the said award, the plaintiff intervened in the said suit filed by Flame S.A. and after initially denying the plaintiff's motion to intervene, the Court entered an order of attachment on 19th December 2013 and on 20th December 2013 and thereby the said Court consolidated the plaintiff's attachment action with Flame's attachment action.
4.5. The plaintiff also filed separate proceedings in the Southern District of New York, who issued a default judgment against ICI in the amount of USD 4,63,82,772.91 on 12th May 2014.
4.6. It is further the case of the plaintiff that the United States District Judge, vide order dated 19th September 2014, concluded that ICI, Vista, Freight Bulk Pte.Ltd. and Viktor Baranskyi are alter egos of each other and that ICI had fraudulently transferred its assets to Vista to defraud Page 4 of 68 O/OJCA/96/2015 CAV JUDGMENT the creditors such as the plaintiff. In the said proceedings, during the crossexamination of Viktor Baranskyi, he fled midway while testifying and therefore the District Court at Norfolk observed against him.
4.7. Plaintiff has, therefore, stated that Viktor Baranskyi is the beneficial owner of the defendant vessel and also the owner of ICI and that he incorporated Freight Bulk as a sham company with the sole intent to defeat the claims of bona fide creditors such as the plaintiff. The ultimate ownership and control of ICI on one hand and Freight Bulk/Vista/Haichi on the other hand vests with Viktor Baranskyi and Freight Bulk, Vista and Haichi have been incorporated as sham companies with the fraudulent intention to defeat the bona fide claims of creditors such as the plaintiff and therefore plaintiff requested that the Court may pass necessary orders to pierce the Corporate Veil of these and other sham companies incorporated by Viktor Baranskyi.
4.8. It is further the case of the plaintiff that owner of the defendant vessel/beneficial owner and the defendant vessel are jointly and severally liable to the plaintiff for the amount of decree which remained unpaid on fraudulent transfer by ICI. The arbitral award is in favour of the plaintiff which has become enforceable vide judgment and order dated 08.09.2014 and now entered as judgment and became decree as per order dated 19.11.2014 passed by Queens' Bench under Arbitration Act, 1996 (English).
4.9. It is further the case of the plaintiff that plaintiff is entitled to enforce the judgment and decree issued on 23rd December 2014 under Section 44A of Code of Civil Procedure, 1908 as it is passed by Superior Court of a reciprocating territory viz. United Kingdom. The plaintiff is, therefore, entitled to execute the said decree against ICI by arrest of the Page 5 of 68 O/OJCA/96/2015 CAV JUDGMENT defendant vessel as per the laws and various judgments prevailing in India as ICI and the defendant vessel are beneficially owned and controlled by Viktor Baranskyi and the Baranskyi family.
4.10.The plaintiff has, therefore, stated that it has a maritime claim against the defendant vessel which legitimately entitles it to procure the arrest, condemnation and sale of defendant vessel in execution of the judgment and decree.
4.11.The plaintiff has, therefore, invoked the admiralty jurisdiction of this Court relying upon the decision rendered by the Hon'ble Supreme Court in the case of M.V.Elisabeth & Ors. v. Harwan Investment & Trading Pvt. Ltd., [1993 Supp (2) Supreme Court Cases 433].
4.12.The plaintiff has also averred in the plaint that the defendant vessel has arrived at Mundra Port within the territorial waters of India and likely to sail away soon and therefore in this background, the plaintiff has prayed before this Court that an adinterim order of arrest of the defendant vessel restraining her from sailing may be passed otherwise grave and irretrievable loss and injury would be caused to the plaintiff. The plaintiff also stated that prima facie case is also in its favour.
5. In this background of the facts, this Court passed an order on 29.12.2014 and directed the Port Officer and Custom Authorities at Mundra to arrest the vessel M.V. CAPE CLIMBER, which was lying at Port of Mundra within the territorial waters of India and also directed to keep the said vessel under arrest until further orders of this Court.
6. The applicant - original owner of defendant vessel - Freight Bulk Pte. Ltd. has, therefore, filed this application for vacating the order of Page 6 of 68 O/OJCA/96/2015 CAV JUDGMENT arrest on various grounds.
7. Heard learned advocate Mr. B.S.Raju for the applicant - original defendant and learned Senior Counsel Mr. Mihir Thakore with learned advocate Ms. Paurami B. Sheth for the opponent - original plaintiff.
8. Learned advocate Mr. Raju has contended that the order of arrest is required to be vacated mainly on the following grounds:
(a) That the present admiralty suit is not maintainable for want of presence of necessary parties.
(b) The plaintiff does not have the maritime claim as recognized in Indian Admiralty Law to obtain an order of arrest for the defendant vessel.
(c) The claim of the plaintiff is time barred. (d) The party purportedly liable for the alleged claim of the plaintiff is
not the owner and/or beneficial owner of the defendant vessel.
(e) Plaintiff does not have the resources to compensate the applicant for the wrongful arrest of the defendant vessel.
(f) The plaintiff cannot approach this Court under the provisions of Section 44A of CPC.
9. To substantiate the aforesaid contentions, learned counsel Mr. Raju for the applicant argued at length and referred to the various provisions of law as well as various decisions. Learned counsel for the Page 7 of 68 O/OJCA/96/2015 CAV JUDGMENT applicant submitted that the suit is required to be dismissed for want of just and necessary party. The plaintiff is under an obligation to join its liquidator appointed in the Singaporean winding up proceedings as party in the instant case. The plaintiff has not produced any documents substantiating its version of taking permission of filing a suit before this Court from the liquidator appointed by the Singaporean Court. Hence, the suit is not maintainable for want of just and necessary party.
10. Learned counsel for the applicant further submitted that the arrest of the defendant vessel in the instant proceedings is fundamentally in the nature of an application to enforce a London arbitral award dated 29th October 2009 which has been subsequently converted into a judgment of the English High Court on 19th November 2014, in India. As per the provisions of the Admiralty Act, 1861 and as per 1999 and 1952 Arrest Conventions, an award or a judgment on an award is not a "maritime claim" whereby a ship can be arrested. Learned counsel referred to and relied upon Article 1(2) of 1999 and 1952 Arrest Convention, which reads as under:
"2. "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 in execution or satisfaction "of a judgment or other enforceable instrument."
11. Relying upon the aforesaid Article, learned counsel for the applicant submitted that the procedure of arrest is not available once the plaintiff's claim has been crystallized into an arbitral award and/or a judgment of a foreign Court. That the plaintiff's cause of action, which was a cause of action in personam has merged into an award and/or judgment in personam. Once the plaintiff's claim arising from the use and hire of a ship has been merged into an arbitral award, the plaintiff's right Page 8 of 68 O/OJCA/96/2015 CAV JUDGMENT to move the Indian Admiralty Court has been divested. Learned counsel for the applicant referred to and relied upon Article 1 (1) of 1952 International Convention for the Unification of Certain Rules Relating to the Arrest of SeaGoing Ships, which assigned the meaning of the words "Maritime Claim", as under:
"(1) "Maritime Claim" means a claim arising out of one or more of the following:
(a) damage caused by any ship either in collusion or otherwise;
(b) loss of life or personal injury caused by any ship or occurring in connection with the operation of any ship;
(c) salvage;
(d) agreement relating to the use or hire of any ship
whether by charter party or otherwise;
(e) agreement relating to the carriage of goods in any
ship whether by charter party or otherwise;
(f) loss of or damage to goods including baggage carried in
any ship;
(g) general average;
(h) bottomry;
(i) towage;
(j) pilotage;
(k) goods or materials wherever supplied to a ship for
her operation or maintenance;
(l) construction, repair or equipment of any ship or dock
charges and dues;
(m) wages of Masters, Officers, or crew;
(n) Master's disbursements, including disbursements
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made by shippers, charterers or agent on behalf of a ship or her owner;
(o) disputes as to the title to or ownership of any ship;
(p) disputes between coowners of any ship as to the ownership, possession, employment, or earnings of that ship;
(q) the mortgage or hypothecation of any ship"
12. Learned counsel submitted that when the cause of action arising out of an agreement 'in relation to the use of hire of a ship' has merged into an arbitral award and is at least one step removed from the original agreement, the plaintiff is not entitled to invoke the admiralty jurisdiction of this Court. Learned counsel has relied upon the decision of Queen's Bench Division (Admiralty Court) The Bumbesti [(1999) 2 Lloyd's Law Reports 481], in which it was held as under:
"22. Conclusion on principal issue one: Is a claim on an arbitration award within par. (h) of s. 20(2) of the Supreme Court Act, 1981?
I have come to the conclusion that the answer I must give to this question is "no". I think that it is not within the paragraph as a matter of construction. I also consider that I am bound by the decision of the Court of Appeal in The Beldis. My reasons are as follows:
(1) The "claim" in this case is the action on the award. That "claim" clearly "arises out of" the agreement to refer the dispute that had arisen under the bareboat charterparty.
In The Antonis P Lemos the House of Lords held that the phrase "arises out of" in par. (h) should be given a broad construction, so as to mean "In connection with": see p. 290, cols. 1 and 2; p. 731F. Upon the analysis of the Court of Appeal in Bremer Oeltransport a claim on an award "arises out of" or is "in connection with", the agreement to refer the particular dispute to arbitration, or the agreement Page 10 of 68 O/OJCA/96/2015 CAV JUDGMENT to refer future disputes generally to arbitration.
(2) However, that agreement to refer disputes is not, itself, an "agreement in relation to the use or hire of a ship". This is because the arbitration agreement, whether it is the individual reference or the general agreement to refer, is a contract that is distinct from the principal contract, i.e. the bareboat charterparty in this case. The distinction between the contracts is, as Mr. Garland submitted, made clear in case such as Heyman v. Darwins Ltd., (1942) 72 Ll.L.Rep. 65; [1942] A.C. 356; and Harbour Assurance (U.K.) Ltd. v. Kansa General International Assurance Co. Ltd., [1993] 1 Lioyd's rep. 455; [1993] Q.B. 701; and see s. 7 of the Arbitration Act, 1996.
(3) In the Antonis P Lemos, at p. 289, COL. 2; p. 730 FG, the House of Lords accepted that the authorities on par. (h) of 1981 Act and its statutory predecessors made it clear that a narrow meaning must be given to the expression 'in relation to' in that paragraph. The agreement to refer to arbitration individual disputes that have arisen out of a charterparty, or the agreement to refer future disputes in general that arise out of a charterparty, must be agreements that are indirectly "in relation to the use or hire of a ship". But, in my view, they are not agreements that are sufficiently directly "in relation to the use or hire of a ship". The arbitration agreement is, at least, one step removed from the "use or hire" of a ship. The breach of contract relied upon to found the present claim has nothing to do with the use or hire of the ship; it concerns the implied term to fulfill any award made pursuant to the agreement to refer disputes. In my view the breach of the contract relied on when suing on an award does not have the reasonably direct connection with the use or hire of the ship that Lord Keith held in the Gatoil case was necessary to found jurisdiction under this paragraph: see p. 188, col. 1; p.271AB. (4) Therefore, upon the proper construction of par. (h), an action on an award is not one on an agreement which is "in relation to the use or hire of a ship". This was the conclusion of the Court of Appeal in The Beldis. The current paragraph is the statutory successor to the wording that was considered in that case. Unless there is some material Page 11 of 68 O/OJCA/96/2015 CAV JUDGMENT distinction in the wording, then I believe that I must follow the construction given by the Court of Appeal to the wording in that case. There is no significant distinction, as Mr. Justice Bradon pointed out in The Eschersheim: see p. 195, col. 1; p.93G."
13. Learned counsel for the applicant submitted that the claim of the plaintiff is time barred. The plaintiff has stated in the plaint that the present suit is filed for recovery and enforcement of the amount of arbitral award dated 29th October, 2009, which has now became a judgment and decree of the High Court of Justice at London. The High Court of Justice at London has merely rubber stamped the arbitral award dated 29th October 2009. Learned counsel has relied upon Explanation 2 of Section 44A of the Code of Civil Procedure, 1908 and submitted that it expressly provides "Decree" with reference to a Superior Court which means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect to a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment.
14. Learned counsel referred to and relied upon various provisions of the Arbitration and Conciliation Act, 1996 and submitted that the Limitation Act of 1963 is applicable to any application filed for the enforcement of a foreign award under Part II of the Arbitration and Conciliation Act, 1996. Learned counsel has referred to and relied upon the decision of the Hon'ble Supreme Court in case of The Kerala State Electricity Board, Trivandrum v. T.P. Kunhaliumma, [AIR 1977 SC 282], in which in para 22, it was observed as under:
"22. The conclusion we reach is that Article 137 of 1963 Limitation Act will apply to any petition or application filed under any Act to a Civil Court. With respect we differ from the view taken by the two Page 12 of 68 O/OJCA/96/2015 CAV JUDGMENT Judge Bench of this Court in Athani Municipal Council case (AIR 1969 SC 1335) (supra) and hold that Article 137 of 1963 Limitation Act is not confined to applications contemplated by or under the Code of Civil Procedure. The petition in the present case was to the District Judge as a court. The petition was one contemplated by the Telegraph Act for judicial decision. The petition is an application falling within the scope of Article 137 of 1963 Limitation Act."
15. Learned counsel for the applicant has relied upon the decision rendered by the Bombay High Court in case of Noy Vallesina Engineering Spa v. Jindal Drugs Limited [2007 (1) RAJ 339 (Bom)], and more particularly the observations made in para 5 and 8 of the said decision.
16. Learned counsel for the applicant also referred to and relied upon the provisions of Section 49 of the Arbitration and Conciliation Act, 1996, which provides as under:
"49. Enforcement of foreign awards. Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court."
17. Learned counsel for the applicant submitted that the provisions of Article 137 of the Limitation Act, 1963 applies in the context of enforcing a foreign arbitral award under Part II of the Arbitration and Conciliation Act, 1996. Admittedly the arbitral award at London was passed on 29th October 2009 i.e. prior to three years of the date when the instant suit was instituted and therefore the suit is barred by limitation.
18. Learned counsel for the applicant submitted that the party purportedly liable for the alleged claim of the plaintiff is not the owner and/or beneficial owner of the defendant vessel. The plaintiff has failed Page 13 of 68 O/OJCA/96/2015 CAV JUDGMENT to disclose as to whether they have taken any steps to enforce and/or execute the London arbitral award against ICI, the party against which the plaintiff has purportedly obtained the London arbitral award. The present suit is required to be dismissed for nondisclosure of this material fact. The proceedings before the U.S. Court were against the vessel M.V. Cape Viewer and hence not a proceeding between the parties before this Court and U.S. Court could not exercise jurisdiction over the applicant as the applicant is a company incorporated in Singapore. Learned counsel referred to Article 3(3) of 1999 Arrest Convention, which reads as under:
"The arrest of a ship which is not owned by the person liable for the claim shall be permissible only if, under the law of the State where the arrest is applied for, a judgment in respect of that claim can be enforced against the ship by judicial or forced sale of that ship"
19. Thus, the learned counsel submitted that the test as to whether the defendant vessel is owned and/or beneficially owned by the person liable for the maritime claim ought to be governed by Indian Law and not the Law of State of Virginia and the Indian Law does not recognize the alter ego doctrine. Learned counsel submitted that the test for piercing the corporate veil under Indian Law is different from the Law in Virginia.
20. Learned counsel for the applicant referred to and relied on the decision in case of M.T.Hartati [2014 (3) ABR 311], in which it was held as under:
"30. Further rules of interpretation require that a word should be given its normal, plain and natural meaning. An owner will naturally mean a person in whose name the ship is registered. A ship is not registered in the name of the beneficial owner. A beneficial owner only owns the shares in the company Page 14 of 68 O/OJCA/96/2015 CAV JUDGMENT in whose name the ship is registered. If the beneficial owner is wound up or if an individual's assets are attached, one of the assets of the company or the individual will be the shareholding in the company in whose name the ship is registered. The ship will not be the asset of the beneficial owner company or individual. Let us assume the situation where the plaintiffs chose to file action in personam and not in rem. Will the action in prsonam be filed against the owning company or the beneficial owner? The answer undoubtedly is the owning company."
21. Learned counsel has referred to Section 25 of the Merchant Shipping Act, 1958 and submitted that as per the said section a ship is divided into 10 shares.
22 Learned counsel for the applicant relied on the decision of the Hon'ble Apex Court in the case of Liverpool & London P & I Association v. M.V.Sea Success [(2004) 9 SCC 512].
23. Learned counsel for the applicant, therefore, submitted that the concept of beneficial ownership is restricted to shares in a ship as contemplated in 1952 Arrest Convention.
24. Learned counsel for the applicant has referred to and relied upon the provisions of Section 3 of the South African Admiralty Jurisdiction Regulation Act 105 of 1983 and submitted that the legal regime in India relating to the arrest of ships is expressly different from jurisdictions such as South Africa which have statues expressly allowing the Court to disregard the corporate and juristic personality of a company.
25. Learned counsel submitted that the party liable under the London arbitral award dated 29th October 2009 was ICI. The plaintiff's case is that the assets of ICI had allegedly been siphoned off in the year 2008, Page 15 of 68 O/OJCA/96/2015 CAV JUDGMENT whereas the applicant has been incorporated in the year 2012. It is, therefore, impossible that the assets and funds of ICI were directly transferred to the applicant. The plaintiff is unable to make out any case rather prima facie case as to how the assets of ICI had been purportedly transferred to the applicant, especially when the alleged act of fraud has been committed in the year 2008, whereas, the applicant company was formed in the year 2012. That a prima facie case for obtaining an arrest of a vessel cannot be made out by bald allegations of assets/funds of ICI passing through some 'money laundering entities' without being able to identify the same. The plaintiff has miserably failed to make out any case rather prima facie case that the assets of more than USD 1.58 Million from ICI have been transferred to Mr.Viktor Baranskyi or Vista Shipping. The plaintiff has tried to demonstrate that funds from ICI were purportedly transferred to Vista Shipping and admittedly it is not the case that the funds/assets from ICI have been transferred to the applicant. Learned counsel submitted that assuming without admitting that Mr. Viktor Baransky was indeed an 18% shareholder in ICI, the same does not make him personally liable for the purported debts of ICI towards the plaintiff. It is trite law that a shareholder having 18% stake in a company cannot be made liable for the debts of the company. Learned counsel referred to and relied upon the decision of the Hon'ble Apex Court in the case of Indowind Energy Limited. V. Wescare (India) Limited [(2010) 5 SCC 306]. In the said decision, in para 17, the Hon'ble Supreme Court observed as under:
"17. It is not in dispute that Subuthi and Indowind are two independent companies incorporated under the Companies Act, 1956. Each company is a separate and distinct legal entity and the mere fact that the two Companies have common shareholders or common Board of Directors, will not make the two companies a single entity. Nor will the existence of common shareholder or Directors lead to an inference that one company will be bound by the acts of the other....."Page 16 of 68 O/OJCA/96/2015 CAV JUDGMENT
26. Learned counsel for the applicant also relied on the decision rendered by the Hon'ble Apex Court in the case of Bacha F. Guzdar, Bombay v. Commissioner of Income Tax, Bombay (1955) 1 SCR 876, in which in para 7, it was held that:
"7. ..................It is true that the shareholders of the Company have the, sole determining voice in administering the affairs of the Company and are entitled, as provided by the Articles of Association to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders.... There is nothing in the Indian Law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is a juristic person entirely distinct from the shareholders."
27. Learned counsel for the applicant submitted that the plaintiff is a company in liquidation and in such scenario the applicant would suffer irreparable harm and prejudice in the event the arrest of the defendant vessel is found to be unlawful.
28. Learned counsel for the applicant submitted that the plaintiff cannot approach this Court under the provisions of Section 44A of CPC since there is no decree in the case on hand. The underlying cause of action of the plaintiff is arising out of a London Arbitral Award dated 29th October 2009 and not the judgment of the English High Court dated 19th November 2014. Learned counsel further submitted that the London Arbitral Award dated 29th October 2009 was converted on 19th November 2014 into a judgment of the English High Court merely to juggle this Court that the claim was within limitation. The award was Page 17 of 68 O/OJCA/96/2015 CAV JUDGMENT converted into a judgment just before filing the instant suit before this Court and after the the 3 years period had expired. The judgment dated 19th November 2014 has been obtained under Section 66 of the English Arbitration Act, 1996 and therefore the learned counsel referred to and relied on the provisions of Section 66 of the English Arbitration Act, 1996, which, interalia, provides as under:
"66. Enforcement of the award.
(1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the Court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award.
(4) Nothing in this section affects the recognition or enforcement of an award under any other enactment or rule of law, in particular under Part II of the M1Arbitration Act, 1950 (enforcement of awards under Geneva Convention) or the provisions of Part III of this Act relating to the recognition and enforcement of awards under the New York Convention or by an action on the award."
29. Learned counsel for the applicant has further submitted that the judgment dated 19th November 2014 of the English High Court is not a reasoned judgment and admittedly the English High Court did not consider any evidence which had been placed before the London Arbitral Tribunal. In support of the said submission, learned counsel referred to and relied upon the contents of order dated 8th September 2014 of English High Court, which is annexed with the compilation of Admiralty Page 18 of 68 O/OJCA/96/2015 CAV JUDGMENT Suit No.30 of 2014 at Exh.D at page 101. Learned counsel also referred to and relied on the provisions of subsection (2) of Section 2 of the Code of Civil Procedure, 1908, which reads as under:
"(2) "decree" means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. It shall be deemed to include the rejection of a plaint and the determination of any question within section 144, but shall not include
(a) any adjudication from which an appeal lies as an appeal from an order, or
(b) any order of dismissal for default."
30. Learned counsel for the applicant submitted that an award converted into a judgment can never merge into a decree as per the settled law. In support of this, learned counsel relied on the decision of the Hon'ble Supreme Court in the case of G.C.Kanungo v. State of Orissa, [(1995) 5 SCC 96]. In the said decision, in para 16 and 17, the Hon'ble Supreme Court observed and held as under:
"16. What is of importance and requires our examination is, whether such Court when makes an award of the Special Arbitration Tribunal filed before it, a 'Rule of Court' by its judgment and decree, as provided under Section 17 of the Principal Act, does such award of the Special Arbitration Tribunal merge in the judgment and decree, as argued on behalf of the petitioners. We find it difficult to accede to the argument. What cannot be overlooked is, that the award of a Special Arbitration Tribunal, as that of an award of an arbitrator, is, as we have already pointed out, a decision made by it on the claim or cause referred for its decision by way of arbitral dispute. When the Court makes such award of a Special Arbitration Tribunal a 'Rule of Court' by means of its judgment and decree, Page 19 of 68 O/OJCA/96/2015 CAV JUDGMENT it is not deciding the claim or cause as it would have done, if it had come before it as a suit for its judgment and decree in the course of exercise of its ordinary civil jurisdiction. Indeed, when such award is made to come by a party to the dispute before Court for being made a 'Rule of Court' by its judgment and decree, it is to obtain the super added seal of the Court for such award, as provided for under the Principal Act, to make it enforceable against the other party through the machinery of Court. Therefore, the judgment and decree rendered by the Civil Court in respect of an award is merely to superadd its seal thereon for making such award enforceable through the mechanism available with it for enforcement of its own judgments and decrees. The mere fact that such judgments or decrees of Courts by which the awards of Special Arbitration Tribunals are made 'Rules of Court' or are affirmed by judgments and decrees of superior Courts in appeals, revisions or the like, cannot make the awards the decisions of Courts. Hence, when the awards of Special Arbitration Tribunals are made by the judgments and decrees of Court, 'Rules of Court' for enforcing them through its execution process, they (the awards) do not merge in the judgments and decrees of Courts, as would make them the decisions of Court. The legal position as to non merger of awards in judgments and decrees of Courts, which we have stated, receives support from certain observations in the decision of this Court in Satish Kumar & Ors. v. Surinder Kumar & Ors., [(1969) 2 S.C.R. 244]. There, this Court was confronted with the question, whether an award made by an arbitrator which had become unenforceable for want of registration under the Registration Act, ceased to be a decision of the arbitrator, which binds the parties or their privies. In that context, this Court observed that an award is entitled to that respect which is due to the judgment and decree of last resort. And if the award which had been pronounced between the parties has become final, a second reference of the subject of the award becomes incompetent. It further observed that if the award is final and binding on the parties, it can hardly be said that it is a waste paper unless it is made a 'Rule of Court'. Hegde, J. who agreed with the above observations of Sikri, J. (as His Lordship then was) while speaking for Bachawat, J. also, observed that the arbitration has the first stage which commences with arbitration agreement and ends with the making of the award, and then a second stage which relates to the enforcement of the award. He also observed that it was one thing to say that a right is not created by the award but it is an entirely different thing to say Page 20 of 68 O/OJCA/96/2015 CAV JUDGMENT that the right created cannot be enforced without further steps.
17. Therefore, our answer to the point is that the awards of Special Arbitration Tribunals did not merge in judgments and decrees of the Courts even though the Courts by their judgments and decrees made such awards 'Rules of Court' for their enforceability through the Courts availing their machinery used for execution of their decisions, that is, their own judgments and decrees."
31. Learned counsel also referred to and rely on Explanation 2 of Section 44A of the Code of Civil Procedure, 1908, which provides as under:
"Explanation 2 "Decree" with reference to a superior Court means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect to a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment."
32. Learned counsel for the applicant submitted that relying upon the aforesaid Explanation 2 of Section 44A of the Code, the Delhi High Court, in case of Marina World Shipping Corporation Limited v. Jindal Exports Private Limited [2007 (3) ARBLR46 (Delhi)], has refused to allow the enforcement of a London Arbitral Award converted into a judgment of the English High Court. Learned counsel referred to and relied upon the observations made by the Delhi High Court in para 27, 28 and 30 of the said decision, which are as under:
"27. On consideration of the submissions of the learned Counsels for the parties, in my considered view, it is obvious that Section 44A of the said Code was enacted to make the decrees of superior courts of reciprocating territories executable in the same manner as decrees passed in the Courts in India. However, the legislature in its wisdom has deemed it appropriate to carve Page 21 of 68 O/OJCA/96/2015 CAV JUDGMENT out exceptions. The exception is really contained in Explanation 2 which excludes from within its ambit an arbitration award. The object is clear that where an award is executable as a decree, the Court should not straightaway execute the award. This position also flows from the existing legal position in India as it then was or is even now. Under the 1940 Act the process of the court had to be gone through to make the decree of the court executable. Under the 1996 Act the award is executable as a decree but the parties have an option to file objections under Section 34 of the said Act.
28. A reading of the provisions of PartII of the said Act makes it clear that the mode and manner of enforcement of foreign award is specified therein. Section 48 itself specifies the nature of objections which can be raised by a party opposing the implementation and execution of an award which are to some extent similar to the provisions of Section 34 of the said Act. The enforceability of a foreign award is of course a prerequisite since without the same there can be no question of even an endeavor to enforce the said award. In my considered view, the ambit and scope of Explanation 2 of Section 44 of the said Act makes it clear that the exception is carved out in case of an arbitration award "even if such an award is enforceable as a judgment or decree". A reading of the Queens Bench Division order itself makes it clear that the object of the said order was to make the award enforceable as a decree or judgment. It will not make the same equivalent to a decree of a superior court of a reciprocating territory when specifically an exception is carved out in Explanation 2.
30. Learned Counsel for the decree holder did succinctly set out as to how the legal provisions have developed in England but I see no conflict of law in the present case. The legal provisions as enacted make a decree of a superior court executable but not a foreign award even if it be sanctified in the form of a judgment or decree. One is not going into the question of consideration of the objections filed by the judgment debtor before the Court and the same being out of time without any examination on merit. Suffice to say that in case of a reciprocating country the methodology for enforcement of the award is as contained in PartII of the said Act. This would naturally imply, as fairly conceded by learned Counsel for the judgment debtor, that the scope of objections has to be within the ambit of Section 48 of Page 22 of 68 O/OJCA/96/2015 CAV JUDGMENT the said Act. I am thus of the considered view that the remedy of the petitioner is by filing appropriate proceedings under the said Act."
33. Per contra, learned Senior Counsel Mr. Mihir Thakore appearing with Ms. Paurami B. Sheth for the respondent original plaintiff submitted that pursuant to the arbitration proceedings commenced in London, the arbitrator gave award dated 29.10.2009 in favour of the plaintiff and against one ICI in respect of the plaintiff's claim raised under charterparty. Learned counsel further submitted that one Flame and the plaintiff filed consolidated proceedings before the District Court, Virginia against ICI, Vista Shipping Ltd., Freight Bulk and Viktor Baranskiy, in which, by way of judicial attachment, the said Court attached M.V. Cape Viewer, sister vessel of present defendant, both owned by Freight Bulk. After the trial, the District Court at U.S. concluded that ICI, Vista, Freight Bulk and Viktor Baranskiy are alter egos of each other and that ICI had fraudulently transferred its assets to Vista. The ICI, Vista, Freight Bulk, are therefore, jointly and severally liable up to the value of M.V.Cape Viewer to Flame and present plaintiff. Thus, there is clear finding on facts by US District Court that ICI and the defendant are alter egos. Prima facie, therefore, the plaintiff has valid claim in law and on facts against the defendant. Based on the award passed in the arbitration proceedings at London, the High Court of Justice Queen's Bench Division, Commercial Court has passed the order dated 08.09.2014 for entering the same in the terms of award and entered as judgment and thereupon passed decree vide subsequent order dated 19.11.2014 in accordance with Sections 66, 67 and 68 of English Arbitration Act. The plaintiff, by way of filing present suit, is seeking enforcement of this decree dated 19.11.2014 under Section 44A of the Code of Civil Procedure, 1908. Learned counsel for the plaintiff further Page 23 of 68 O/OJCA/96/2015 CAV JUDGMENT submitted that it is an undisputed fact that India and U.K. Are reciprocating territories and Decree of English Court is enforceable in India. Alternatively, the plaintiff is entitled to file suit and claim decree on the basis of the decree of the Court of Justice Queen's Bench Division as per the decisions rendered by the Hon'ble Supreme Court in the case of M.V.Elisabeth (Supra) and in the case of M.V.Al QUAMAR v. TSAVLIRIS SALVAGE (INTERNATIONAL) LTD. & ORS. [(2000) 8 SCC 278].
34. Learned counsel for the plaintiff further submitted that since the claim of plaintiff is not vexatious or frivolous and has reasonable arguable case in law, there is no reason whatsoever not to allow the plaintiff to proceed with the trial. If the arrest is vacated without directing the defendant to furnish adequate security for releasing the vessel, the plaintiff's suit, even if decreed against the defendant will be unenforceable in law as by the time the vessel would have left Indian Territorial waters. Learned counsel for the plaintiff submitted that therefore the correct course would be to release the vessel against adequate security and put up the case for trial and all interesting questions of law and on facts be finally decided.
35. Learned counsel for the plaintiff submitted that admiralty jurisdiction can be invoked for execution of a foreign decree in India irrespective of the definition of Arrest given under Article 1(2) of the Arrest Convention of 1952 or under Article 1.2 of Arrest Convention of 1959. In support of the said contention, learned Senior Counsel relied upon the decision of the Hon'ble Supreme Court in the case of M.V.Elisabeth & Ors. (supra).
36. Learned counsel for the plaintiff thereafter referred to and relied Page 24 of 68 O/OJCA/96/2015 CAV JUDGMENT upon the decision of the Hon'ble Supreme Court in the case of M.V.Al QUAMAR (Supra). Relying upon the aforesaid decisions, learned counsel for the plaintiff submitted that irrespective of provisions of Arrest Conventions, the High Court in India are superior Courts of Records, they have inherent and plenary powers and that therefore there is no reason to hold that this Court has no jurisdiction to arrest the ship on the basis of judgment and decree of Queen's Bench of England being Superior Court.
37. To allay the contention raised by the learned advocate for the applicant - original defendant that the plaintiff's case is for enforcement of award and not for enforcement of decree, learned counsel for the plaintiff submitted that the plaintiff is seeking enforcement of decree of High Court of England dated 19.11.2014 and not enforcement of award. The award has culminated into a decree as per the provisions of English Arbitration Act. What is excluded by Explanation II to Section 44A of Code of Civil Procedure, 1908 is Award's enforceability as Decree. Here, the plaintiff is not seeking enforcement of Award as a Decree and hence Explanation II does not apply in the present case. Learned counsel referred to Section 2(2) of the Code of Civil Procedure, 1908 and submitted that the said Section defines "Decree" which means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all matters in controversy in the suit. The facts of the case of GC Kanugo (supra) relied upon by the learned advocate for the applicant are different than the facts of present suit and therefore the said decision is not applicable in present case. Learned counsel submitted that there may be mismatch between reciprocating countries and New York Convention countries e.g. Papua and New Guinea and Aden (Yemen) are reciprocating territories but not New York Convention Countries and Page 25 of 68 O/OJCA/96/2015 CAV JUDGMENT award in such countries will not be enforceable under Sections 47 to 49 of the Arbitration Act, 1996 but Decree pursuant to Award of these countries will be enforceable in India under Section 44A of C.P.C. Thus, no interpretation can be placed on provisions which will make party remediless.
38. Learned counsel further submitted that a difference is required to be drawn between an Award, which is executable as decree and an Award, which is required to be made a Rule of the Court. Award under Arbitration and Conciliation Act, 1996 is executable as a decree in view of Section 36 thereof and therefore it may fall in Exception II of Section 44A, while Award under Arbitration Act, 1940 and Award under English Arbitration Act, 1996 is required to be made Rule of the Court and such decrees can always be executed under Section 44A of the CPC. In support of this contention, learned counsel relied upon the decision of Hon'ble Supreme Court rendered in the case of Morgan Securities & Credit (P.) Ltd., v. Modi Rubber Ltd. [(2006) 12 SCC 642] and more particularly the observations made in para 40, 41 and 42 of the said decision.
39. Learned counsel for the plaintiff further relied upon the decision rendered by the Hon'ble Supreme Court in the case of Union of India & Ors. v. Manager, M/s. Jain & Associates, [(2001) 3 SCC 277], and more particularly the observations made in para 10 to 13.
40. Learned counsel for the plaintiff submitted that foreign Award/Decree can be executed in three ways; (1) Award as per provisions of Sections 47 and 48 of Arbitration and Conciliation Act, 1996 if it is a New York Convention Country's award on fulfilling two conditions as per Section 44 of the Act, (2) award made a Rule of Court Page 26 of 68 O/OJCA/96/2015 CAV JUDGMENT in countries where it is pronounced and decree being enforced under Section 44A of C.P.C. if such are reciprocal countries and (3) Award/Decree being treated as evidence and suit filed on that basis. Thus, all three possibilities can arise in International Law and all remedies are open to the party. Learned counsel submitted that Law does not prohibit exercise of any option or to come for execution of Decree. There is no prohibiting provisions in the Arbitration Act as well as C.P.C., which prohibits expressly or impliedly a party from pursuing either remedy and such prohibition ought not to be read in absence of any specific bar.
41. Now, in response to the contention raised by the learned advocate for the applicant that the claim of the plaintiff is time barred, learned counsel for the plaintiff submitted that the claim is not time barred by limitation as decree on Award in England is required to be obtained in six years as per Article 7 of English Limitation Act, 1980 and such decree dated 29.11.2014 is executable in India in twelve years as per Indian Limitation Act. Learned Senior Counsel referred to and relied on Article 7 of English Limitation Act, 1980.
42. Learned counsel for the plaintiff has further submitted that the suit of the plaintiff is not for execution of Award under Section 47 to 48 of the Arbitration and Conciliation Act, 1996 and hence Article 137 of the Limitation Act has no applicability.
43. Learned counsel further submitted that the view taken in The Bumbesti (supra) that an Arbitration Agreement in a bareboat charter is one step removed from use and hire of ship is extremely restrictive view for if there is an Arbitration Agreement in a charter party and disputes arises under charter the claim made which is the basis of Arbitral Award Page 27 of 68 O/OJCA/96/2015 CAV JUDGMENT is a maritime claim under Article I of the Arrest Convention.
44. Learned counsel for the plaintiff further submitted that the defendant vessel is beneficially owned by Viktor Baranskyi and ICI as it is evident of the decision of US District Court. This view is taken by the U.S. District Court upon full fledge trial and still holds good. Thus, one Court has taken this view and Jury has also given its own verdict.
45. Learned counsel for the plaintiff has, therefore, submitted that in such circumstances, plaintiff is required to be given an opportunity to lead evidence at trial and prove its case and at this juncture it would be inappropriate to hold that the plaintiff has no case more so when one Court has taken a favourable view in same set of facts. Thus, in view of above, the plaintiff has reasonably arguable case in law and on facts and the plaintiff's claim cannot be said to be frivolous and vexatious and there is no reason not to allow the plaintiff to proceed for trial. Hence, the order of arrest of defendant vessel is not required to be vacated.
46. I have considered the arguments canvassed by the learned counsel appearing for the parties and perused the documents produced on record. I have also gone through the relevant laws and the decisions cited by the learned counsel for the parties.
47. The first contention of learned advocate Mr. Raju appearing for the applicant is that the present admiralty suit is not maintainable for want of presence of necessary parties. This contention is misconceived. In view of the fact that plaintiff has specifically stated that the plaintiff has legal competency to initiate legal proceedings in its own name. The Scheme of Arrangement dated 13.07.2012 has been approved by the Singapore Court vide order dated 15.04.2013. Copy of the said order is produced at page 30 of the compilation of present application. From Page 28 of 68 O/OJCA/96/2015 CAV JUDGMENT para 2.2.1(ii) of the said order it is clear that the plaintiff is entitled to initiate and conduct legal proceedings for recovery of such 'account receivables' that are due to them without requiring any further notice from the Scheme Administrator. Thus from the words 'account receivables' referred in the said clause refers to all sums which remain due and payable by anyone to the plaintiff which also includes the amount claimed in the present admiralty suit. In fact plaintiff has not at all stated in the plaint that they are facing winding up proceedings and therefore it is not necessary to join liquidator as party in the present proceedings. In fact from the record it is further clear that this ground was pleaded by the applicant before the concerned U.S. Court in the proceedings. However, from the order passed by U.S. District Court it is clear that the said contention was not accepted.
48. The second contention of learned advocate Mr. Raju appearing for the applicant is that the plaintiff is not entitled to invoke the admiralty jurisdiction of this Court. In support of the said contention, learned advocate Mr. Raju mainly submitted that the claim of the plaintiff cannot be termed as a maritime claim. The Arrest Conventions of 1952 and 1999 do not include the claim arising out of an award to be a maritime claim.
49. The aforesaid submission canvassed by the learned advocate Mr. Raju for the applicant is misconceived. This Court is of the opinion that admiralty jurisdiction can be invoked by this Court for execution of a foreign decree in India irrespective of the definition of 'Arrest' given under Article 1(2) of the Arrest Convention of 1952 or under Article 1.2 of the Arrest Convention, 1999 in view of the law laid down by the Hon'ble Supreme Court in the case of M.V. Elisabeth (Supra) and in the case of M.V.Al Quamar (Supra).
Page 29 of 68 O/OJCA/96/2015 CAV JUDGMENT50. The Hon'ble Supreme Court in the case of M.V. Elisabeth (Supra) observed and held as under:
"44. "The law of admiralty, or maritime law, .... (is the) corpus of rules, concepts, and legal practices governing... the business of carrying goods and passengers by water." (Gilmore and Black, The Law of Admiralty, page (1). The vital significance and the distinguishing feature of an admiralty action in rem is that this jurisdiction can be assumed by the coastal authorities in respect of any maritime claim by arrest of the ship, irrespective of the nationality of the ship or that of its owners, or the place of business or domicile or residence of its owners or the place where the cause of action arose wholly or in part.
"..... In admiralty the vessel has a juridicial personality, an almost corporate capacity, having not only rights but liabilities (sometimes distinct from those of the owner) which may be enforced by process and decree against the vessel, binding upon all interested in her and conclusive upon the world, for admiralty in appropriate cases administers remedies in rem, i.e., against the property, as well as remedies in personam, i.e., against the party personally...". (Benedict, The Law of American Admiralty, 6th ed. Vol. I p.3.)
45. Admiralty Law confers upon the claimant a right in rem to proceed against the ship or cargo as distinguished from a right in personam to proceed against the owner. The arrest of the ship is regarded as a mere procedure to obtain security to satisfy judgment. A successful plaintiff in an action in rem has a right to recover damages against the property of the defendant. 'The liability of the shipowner is not limited to the value of the res primarily proceeded against ... An action .... though originally commenced in rem, becomes a personal action against a defendant upon appearance, and he becomes liable for the full amount of a judgment unless protected by the statutory provisions for the limitation of liability'. (Roscoe's Admiralty Practice, 5th ed. p.29)
47. Merchant ships of different nationalities travel from port Page 30 of 68 O/OJCA/96/2015 CAV JUDGMENT to port carrying goods or passengers. They incur liabilities in the course of their voyage and they subject themselves to the jurisdiction of foreign States when they enter the waters of those States. They are liable to be arrested for the enforcement of maritime claims, or seized in execution or satisfaction of judgments in legal actions arising out of collisions, salvage, loss of life or personal injury, loss of or damage to goods and the like. They are liable to be detained or confiscated by the authorities of foreign States for violating their customs regulations, safety measures, rules of the road, health regulations, and for other causes. The coastal State may exercise its criminal jurisdiction on board the vessel for the purpose of arrest or investigation in connection with certain serious crimes. In the course of an international voyage, a vessel thus subjects itself to the public and private laws of various countries. A ship travelling from port to port stays very briefly in any one port. A plaintiff seeking to enforce his maritime claim against a foreign ship has no effective remedy once it has sailed away and if the foreign owner has neither property nor residence within jurisdiction. The plaintiff may therefore detain the ship by obtaining an order of attachment whenever it is feared that the ship is likely to slip out of jurisdiction, thus leaving the plaintiff without any security.
48. A ship may be arrested (i) to acquire jurisdiction; or (ii) to obtain security for satisfaction of the claim when decreed; or
(iii) in execution of a decree. In the first two cases, the court has the discretion to insist upon security being furnished by the plaintiff to compensate the defendant in the event of it being found that the arrest was wrongful and was sought and obtained maliciously or in bad faith. The claimant is liable in damages for wrongful arrest. This practice of insisting upon security being furnished by the party seeking arrest of the ship is followed in the United States, Japan and other countries. The reason for the rule is that a wrongful arrest can cause irreparable loss and damages to the shipowner; and he should in that event be compensated by the arresting party. (See Arrest of Ships by Hill, Soehring, Hosoi and Helmer, 1985)."
49. The attachment by arrest is only provisional and its purpose is merely to detain the ship until the matter has been finally settled by a competent court. The attachment of the vessel Page 31 of 68 O/OJCA/96/2015 CAV JUDGMENT brings it under the custody of the marshal or any other authorized officer. Any interference with his custody is treated as a contempt of the court which has ordered the arrest. But the marshal's right under the attachment order is not one of possession, but only of custody. Although the custody of the vessel has passed from the defendant to the marshal, all the possessory rights which previously existed continue to exist, including all the remedies which are based on possession. The warrant usually contains a monition to all persons interested to appear before the court on a particular day and show cause why the property should not be condemned and sold to satisfy the claim of the plaintiff.
50. The attachment being only a method of safeguarding the interest of the plaintiff by providing him with a security, it is not likely to be ordered if the defendant or his lawyer agrees to "accept service and to put in bail or to pay money into court in lieu of bail". (See Halsbury's Laws of England, 4th edn. Vol. 1, p. 375 etc.).
56. It is by means of an action in rem that the arrest of a particular ship is secured by the plaintiff. He does not sue the owner directly and by name; but the owner or any one interested in the proceedings may appear and defend. The writ is issued to "owners and parties interested in the property proceeded against." The proceedings can be started in England or in the United States in respect of a maritime lien, and in England in respect of a statutory right in rem. A maritime lien is a privileged claim against the ship or a right to a part of the property in the ship, and it "travels" with the ship. Because the ship has to "pay for the wrong it has done", it can be compelled to do so by a forced sale. (See The Bold Buccleaugh, (1851) 7Moo. PC 267). In addition to maritime liens, a ship is liable to be arrested in England in enforcement of statutory rights in rem (Supreme Court Act, 1981). If the owner does not submit to the jurisdiction and appear before the court to put in bail and release the ship, it is liable to be condemned and sold to satisfy the claims against her. If, however, the owner submits to jurisdiction and obtains the release of the ship by depositing security, he becomes personally liable to be proceeded against in personam in execution of the judgment if the amount decreed exceeds the amount of the bail. The arrest of the foreign ship by means of an action in rem is thus a means of assuming jurisdiction by the competent court.
Page 32 of 68 O/OJCA/96/2015 CAV JUDGMENT58. The real purpose of arrest in both the English and the Civil Law systems is to obtain security as a guarantee for satisfaction of the decree, although arrest in England is the basis of assumption of jurisdiction, unless the owner has submitted to jurisdiction. In any event, once the arrest is made and the owner has entered appearance, the proceedings continue in personam. All actions in the civil law whether maritime or not are in personam, and arrest of a vessel is permitted even in respect of nonmaritime claims, and the vessel is treated as any other property of the owner, and its very presence within jurisdiction is sufficient to clothe the competent tribunal with jurisdiction over the owner in respect of any claim. (See D.C.Jackson, Enforcement of Maritime Claims, (1985) Appendix
5). Admiralty actions in England, on the other hand, whether in rem or in personam, are confined to well defined maritime liens or claims and directed against the res(ship, cargo and freight) which is the subjectmatter of the dispute or any other ship in the same beneficial ownership as the res in question.
66. The High Court in India are superior courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred, and subject to the appellate or discretionary jurisdiction of this Court, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers. (See Naresh Shridhar Mirajkar and Ors., v. State of Maharashtra and Anr., [1966] 3 SCR 744. As stated in Halsbury's Laws of England. 4th edition, Vol. 10, para 713 :
"Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court."
74. All foreign merchant ships and persons thereon fall under the jurisdiction of a coastal State as they enter its waters. Subject to the right of 'innocent passage', the coastal State is free to exercise jurisdiction over such ships in respect of matters the consequence of which extend beyond the ships. Such ships are subject to the local jurisdiction in criminal, civil and Page 33 of 68 O/OJCA/96/2015 CAV JUDGMENT administrative matters. This jurisdiction is, however, assumed only when, in the opinion of the local authorities, the peace or tranquillity of the port is disturbed, when strangers to the vessel are involved or when the local authorities are appealed to. Questions which affect only the internal order and economy of the ship are generally left to the authorities of the flag State. Coastal States are entitled to assume jurisdiction in respect of maritime claims against foreign merchant ships lying in their waters. These ships are liable to be arrested and detained for the enforcement of maritime claims. The courts of the country in which a foreign ship has been arrested may determine the cases according to merits, provided they are empowered to do so by the domestic law of the country or in any of the cases recognised by the International Convention relating to the Arrest of Seagoing Ships, Brussels, 1952.* The maritime claims in respect of which the power of arrest is recognised in law include claims relating to damage caused by any ship either in collision or otherwise; claims relating to carriage of goods in any ship whether by charterparty or otherwise, loss of or damage to goods etc. These principles of international law, as generally recognised by nations, leave no doubt that, subject to the local laws regulating the competence of courts, all foreign ships lying within the waters of a State, including waters in ports, harbours, roadsteads, and the territorial waters, subject themselves to the jurisdiction of the local authorities in respect of maritime claims and they are liable to be arrested for the enforcement of such claims.
82. The admiralty jurisdiction of the High Court is dependent on the presence of the foreign ship in Indian waters and founded on the arrest of that ship. This jurisdiction can be assumed by the concerned High Court, whether or not the defendant resides or carries on business, or the cause of action arose wholly or in part, within the local limits of its jurisdiction. Once a foreign ship is arrested within the local limits of the jurisdiction of the High Court, and the owner of the ship has entered appearance and furnished security to the satisfaction of the High Court for the release of the ship, the proceedings continue as a personal action.
88. Admiralty jurisdiction is an essential aspect of judicial sovereignty which under the Constitution and the laws is Page 34 of 68 O/OJCA/96/2015 CAV JUDGMENT exercised by the High Court as a superior court of record administering justice in relation to persons and things within its jurisdiction. Power to enforce claims against foreign ships is an essential attribute of admiralty jurisdiction and it is assumed over such ships while they are within the jurisdiction of the High Court by arresting and detaining them.
89. All persons and things within the waters of a State fall within its jurisdiction unless specifically curtailed or regulated by rules of international law. The power to arrest a foreign vessel, while in the waters of a coastal State, in respect of a respect of a maritime claim, wherever arising, is a demonstrable manifestation and an essential attribute of territorial sovereignty. This power is recognised by several international conventions.* These conventions contain the unified rules of law drawn from different legal systems. Although many of these conventions have yet to be ratified by India, they embody principles of law recognised by the generality of maritime States, and can therefore be regarded as part of our common law. The want of ratification of these conventions is apparently not because of any policy disagreement, as is clear from active and fruitful Indian participation in the formulation of rules adopted by the conventions, but perhaps because of other circumstances, such as lack of an adequate and specialised machinery for implementation of the various international conventions by coordinating for the purpose the concerned Departments of the Government. Such a specialised body of legal and technical experts can facilitate adoption of internationally unified rules by national legislation. It is appropriate that sufficient attention is paid to this aspect of the matter by the concerned authorities. Perhaps the Law Commission of India, endowed as it ought to be with sufficient authority, status and independence, as is the position in England, can render valuable help in this regard. Delay in the adoption of international conventions which are intended to facilitate trade hinders the economic growth of the nation."
51. The Hon'ble Supreme Court in the case of M.V.Al Quamar (Supra), observed and held as under:
Page 35 of 68 O/OJCA/96/2015 CAV JUDGMENT"3. Assumption of admiralty jurisdiction by the Andhra Pradesh High Court and passing of an order of arrest in execution of a judgment and decree of the High Court of Justice Queen's Bench Division, Admiralty Court in London in Case No. 1994 Folio No. 1693 dated 9111988, is the key issue for discussion in these appeals by the grant of special leave.
4. Adverting to a brief reference to the factual aspect of the matter at this juncture it appears that an execution petition was filed before the learned Single Judge of the Andhra Pradesh High Court in terms of Section 15 of the Admiralty Courts Act and Section 44A read with Order 21 Rule 10 of the Code of Civil Procedure for executing the decree issued by the High Court of Justice Queen's Bench Division (Admiralty Court) in an action by the first respondent against the second respondent herein claiming damages for repudiation of an LOF salvage contract. Needless to record that the second respondent was said to be the owners of the vessel M.V. Al Quamar ex Al Tabish.
5. The factual score depicts that pending the execution petition, the decreeholder prayed for an interlocutory order to issue a warrant of arrest against the vessel together with hull, tackle, engines, machinery equipments, stores etc. The learned Single Judge of the Andhra Pradesh High Court on 1591999 granted an interim order as prayed for on a prima facie view of the matter that the execution petition can be filed in the High Court which is otherwise having original admiralty jurisdiction. The records depict that the appellant herein filed a petition to vacate the interim order principally on the ground that the ownership of the ship having been transferred bona fide and for valuable consideration to Quamar Shipping Ltd., the ship as attached in terms of the order of 1591999 cannot possibly be kept under attachment in execution of the decree against the original owner being Respondent 2 herein. The appellant contended that in any event, the latter being not a party to the judgment, question of execution on the basis thereof would otherwise be a total miscarriage of justice.
14. The cardinal issue pertains to the invocation of Section 44A of the Code in the matter under consideration, for enforcement of a foreign judgment in the Andhra Pradesh High Court stands contradicted by Mr Chidambaram on two specific counts. The same being on the first count: the Civil Procedure Code cannot Page 36 of 68 O/OJCA/96/2015 CAV JUDGMENT possibly be made applicable to any matter of criminal or admiralty or viceadmiralty jurisdiction. The basis of the submission however, was laid on Section 112 of the Code. The ouster provision (Section 112) may thus be noted herein below for its true scope and purport:
"112. (1) Nothing contained in this Code shall be deemed.--
(a) to affect the powers of the Supreme Court under Article 136 or any other provision of the Constitution, or
(b) to interfere with any rules made by the Supreme Court, and for the time being in force, for the presentation of appeals to that Court, or their conduct before that Court. (2) Nothing herein contained applies to any matter of criminal or admiralty or viceadmiralty jurisdiction, or to appeals from orders and decrees of prize courts."
15. Incidentally, Sections 112(1)(a) and (b) stand substituted by the Adaptation of Laws Order 1950 and as a matter of fact, the state of affairs prevailing in the preIndependence period has been set right by the legislation of 1950 (Adaptation of Laws Order). A look at the provisions of two parallel Codes of Civil Procedure 1882 and 1908 together with the moderation after independence will obviously clarify the situation. The parallel Codes and the present Section 112 thus runs:
16. This comparative analysis of the provisions of the Code as amended from time to time unmistakably goes to show that as regards Sections 112(a) and (b) in the postindependence period, the powers of this Court under Article 136 stand substituted in place and stead of His Majesty in Council and the Judicial Committee of the Privy Council. The Adaptation of Laws Order however, did not in fact, add to or alter subsection (2) of Section 112 which also finds place in Section 616 of the 1882 Code in identical language. The nonexclusion of subsection (2) howsoever surprising it may be in independent India, but the fact remains that the 1950 legislation has chosen not to omit it from the statutebook and as such a meaning shall have to be attributed thereto. It is significant to note that subsection (2) of Section 112 even after the Adaptation of Laws Order 1950 speaks of decree of prize courts.
21. Needless to record here that in accordance with the salutary Page 37 of 68 O/OJCA/96/2015 CAV JUDGMENT principle of interpretation and one of the golden canon of statutory interpretation being that the latter provision shall prevail over the earlier and in the event, the Adaptation of Laws Order deemed it expedient to exclude applicability of the Civil Procedure Code in terms of Section 112(2) as is being contended by Mr Chidambaram, question of incorporating Section 140 or continuing therewith and in any event in the 1976 Code would not have arisen. The learned Single Judge in our view has rightly decided the applicability of the Code of Civil Procedure even in admiralty jurisdiction. Reliance was placed in support of the exclusion of the Code pertaining to admiralty jurisdiction in the decision of the Calcutta High Court in the case of State of Ukraine v. Elitarious Ltd.(wherein I was a party). A mere perusal of the judgment of the High Court, however, negates the contention in support of the appellant. As a matter of fact, Mr Ashok H. Desai, appearing for the respondents relies on the judgment as a judgment in sub silentio and we feel it rightly so, since the judgment dealt with the various provision of CPC visàvis the admiralty actions and the ratio decidendi of the decision being admiralty jurisdiction is not an ordinary original civil jurisdiction and thus not a suit within the meaning of Section 86 of the Code. In para 37 of the decision in State of Ukraine v. Elitarious Ltd. (supra) the High Court upon reference to the Jolly Varghese case (Jolly George Varghese v. Bank of Cochin) observed as below:
"37. In this connection reference may be made to the decision of the Supreme Court in (17) Jolly George Varghese v. Bank of Cochin. While considering Article 11 of the International Covenant on Civil and Political Right to which India is a signatory, the Apex Court in para 6 of the judgment inter alia made the following observations:
'... India is now a signatory to this covenant and Article 51(c) of the Constitution obligates the state to "foster respect for International law and treaty obligations in the dealings of organised peoples with one another". Even so until the Municipal law is changed to accommodate the covenant what binds the Court is the former, not the latter. A.H. Robertson in "Human Rights -- in National and International Law"
rightly points out that International Conventional law must go through the process of transformation into the Page 38 of 68 O/OJCA/96/2015 CAV JUDGMENT Municipal law before the international treaty can become an internal law....' In view of the aforesaid decision of the Supreme Court, in our opinion, even if a suit appears from the statement in the plaint to be barred by any International law the plaint cannot be rejected unless such International law has gone through 'the process of transformation into Municipal law'. Thus, we conclude that in order to bring a case within the mischief of Order 7 Rule 11(d) of the Code of Civil Procedure, the suit must appear from the statement made in the plaint to be barred by any State made law including any ordinance, order, byelaw, rule, regulation, notification, custom or usages having in the territory of India the force of law. As the word has not been defined in the Code of Civil Procedure, in arriving at the aforesaid conclusion, we have thought it profitable to take aid of Article 13(3)(a) of the Constitution of India. Thus, we find no force in the second contention of Mr Mukharji."
22. On the wake of the aforesaid, we are unable to record our concurrence pertaining to the exclusion of the Code in admiralty jurisdiction. Significantly, the Admiralty Rules of the High Court at Madras, which stand adopted by the Andhra Pradesh High Court in no uncertain terms also negate the submission in support of the appeal. The relevant Admiralty Rules are however set out hereinbelow:
"2. A suit shall be instituted by a plaint drawn up, subscribed and verified according to the provisions of the Code save that if the suit is in rem, the defendants, may subject to such variation as the circumstances may require, be described as 'the owners and parties interested in' the vessel or other property proceeded against instead of by name.
* * *
29. An attorney instituting a suit against any property in respect of which a caveat has been entered in the register of admiralty suits shall forthwith serve a copy of the plaint upon the party on whose behalf the caveat has been entered or upon Page 39 of 68 O/OJCA/96/2015 CAV JUDGMENT his attorney.
* * *
32. If when the suit comes before the court it is satisfied that the claim is well founded, it may pronounce for the amount which appears to be due and may enforce the payment thereof by order and attachment against the party on whose behalf the caveat has been entered and by the arrest of the property if it then be or thereafter come within the jurisdiction of the court.
* * *
34. Every sale under decree of the court, shall, unless the Judge shall otherwise order, be made by the Sheriff in like manner as a sale of moveable property in execution of a decree in an ordinary civil suit.
* * *
50. Where no other provision is made by these rules, proceedings in suits brought in the court in the exercise of its admiralty jurisdiction shall be regulated by the rules and practice of the court in suits brought in it in the exercise of its ordinary original civil jurisdiction."
These Rules having correlation with the ordinary civil jurisdiction thus cannot but be said to be subscribing to a view contra to that canvassed before us by the appellant.
26. Adverting now to the second count of submissions of Mr Chidambaram to the effect that the judgment of the English Court cannot but be termed to be the judgment in personam and the execution petition for the arrest of the vessel and subsequent order thereon thus is not maintainable; Mr Chidambaram found fault with the Bench decision of the High Court affirming the maintainability of the execution petition since arrest of a ship according to his contentions, operates in rem and not in personam and it is on this score, strong reliance was placed on the decision of the court of appeal in the case of City of Mecca, The. Jessel, M.R. in the decision under reference stated as below:
"There is no suggestion from beginning to end that the ship is liable; there is no declaration that the ship is liable, and it does not appear on the proceedings Page 40 of 68 O/OJCA/96/2015 CAV JUDGMENT that the ship was even within the jurisdiction at the time the action was commenced against the owners. An action for enforcing a maritime lien may no doubt be commenced without an actual arrest of the ship, but there is no suggestion that they intended anything of the kind, and, in fact, the law does not allow it. An action against a ship, as it is called, is not allowed by the law of Portugal. You may in England and in most countries proceed against the ship. The writ may be issued against the owner of such a ship, and the owner may never appear, and you get your judgment against the ship without a single person being named from beginning to end. That is an action in rem, and it is perfectly well understood that the judgment is against the ship. In the present case the judgment does not affect the ship at all, unless the ship should afterwards come within the jurisdiction of the Portuguese Court, and then it can be made a proceeding by which you can afterwards arrest the ship and get it condemned. Therefore, it seems to me to be plain that this is a personal action as distinguished from an action in rem, and it is nothing more or less; and any attempt to make it out something else (because the law of Portugal does not allow actions in rem) is really to change the real nature of the action to meet the exigencies of those who want to make the judgment of the Court of Portugal go further than it really does."
29. Mr Chidambaram, has also placed strong reliance on the Brussels Convention, being the international convention relating to the arrest of seagoing ships of 1952; while it is true that India has not adopted the same, but its relevance however cannot be doubted in any way in the perspective of maritime lien. On this score, however we can usefully note the observations of this Court in M.V. Elisabeth which reads as below: (SCC pp. 46970, para 76) "Indian legislation has not, however, progressed, notwithstanding the Brussels Protocol of 1968 adopting the Visby Rules or the United Nations Convention on the Carriage of Goods by Sea, 1978 adopting the Hamburg Rules. The Hamburg Rules Page 41 of 68 O/OJCA/96/2015 CAV JUDGMENT prescribe the minimum liabilities of the carrier far more justly and equitably than the Hague Rules so as to correct the tilt in the latter in favour of the carriers. The Hamburg Rules are acclaimed to be a great improvement on the Hague Rules and far more beneficial from the point of view of the cargoowners. India has also not adopted the International Convention relating to the Arrest of Seagoing Ships, Brussels, 1952. Nor has India adopted the Brussels Conventions of 1952 on civil and penal jurisdiction in matters of collision; nor the Brussels Conventions of 1926 and 1967 relating to maritime liens and mortgages. India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various conventions intended to facilitate international trade. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships."
30. Mr Chidambaram in continuation of his submissions rather emphatically contended that the High Court has significantly overlooked the fact that it is only when a decree in rem is passed that a vessel may be arrested for obtaining satisfaction of the claim or the execution of a decree in rem especially in a maritime action having maritime lien. Mr Chidambaram contended that in the event however, the proceedings are in personam as in the present case then and in that event, exercise of such a power by a foreign litigant would not arise. The appellant contended that the decreeholder has to proceed only against the judgmentdebtor and not against the vessel and it is on this count a strong criticism has been levelled against the judgment of the High Court to the effect that there has been a total confusion as regards exercise of admiralty power in execution of a judgment in rem and judgment in personam. Admittedly the decree of the English Court is in personam, and against Respondent 2 and not the appellantpetitioner herein. It is on this score further reliance was placed on the decision of this Court in the case World Tanker Carrier Corpn. v. SNP Shipping Services (P) Ltd.9 wherein this Court had the following to observe: (SCC p. 319, para 20) Page 42 of 68 O/OJCA/96/2015 CAV JUDGMENT "20. Under principles of Private International Law, a court cannot entertain an action against a foreigner resident outside the country or a foreigner not carrying on business within the country, unless he submits to the jurisdiction of the court here. This principle applies to actions in personam."
31. Mr Chidambaram very strongly commented against the judgment of the High Court for lack of appreciation so far as the English decree is concerned and contended that the entire claim was in regard to the damages on the ground of a breach of contract in the matter of performance of salvage operations, which in fact was never performed and as such question of any maritime claim acquired therefrom would not arise. It is on this score that the learned Chief Justice speaking for the Bench of the Andhra Pradesh High Court in the judgment impugned has the following to state:
"In India there is not much distinction in civil law system between maritime law and other branches of law. The courts administer them alike. A perspective of the law further emerges from the reading of the said judgment that where the statutes are silent the remedy has to be sought by reference to the basic principle. It is the duty of the court to devise procedural rules by analogy and expedience. It was observed 'the action in rem as seen above were resorted to by the court as a device to overcome the difficulty of personal service on the defendant by compelling him to enter appearance and accept service of summons and for furnishing security for the release of the res or any action proceeded against the res itself by entering a decree and executing the same by sale of the res. This practical procedural device developed by the courts with a view to render justice in accordance with the substantive law not only in the cases of collision and salvage but also in case of other maritime liens and claims arising by reason of breach of contract for hire of vessel etc. etc. * * * By reading of the judgment reported in M.V. Page 43 of 68 O/OJCA/96/2015 CAV JUDGMENT Elisabeth1 we are of the considered view that the vessel is a juridical person; a maritime claim can be enforced against the vessel; there is no substantive distinction between the Admiralty Court's jurisdiction and the jurisdiction under the common law for execution of a decree of a foreign origin in view of the provisions of Section 44A of the Code. Apart from this, the High Court has jurisdiction being a repository of the power to reach its arm to do justice. By reading of the judgment we are unable to agree with the contention of the learned counsel for the respondent that the Supreme Court has laid down any law that a ship can be arrested only for securing a maritime claim and not in execution of satisfaction of a judgment especially in view of the statutory provisions of Section 44A of the Code."
32. Mr Ashok H. Desai for Respondent 1 and being the decree holder, however, in no uncertain terms contended that as a matter of fact it is of no significance at all if the judgment be termed to be the judgment in rem or judgment in personam especially in the facts of the matter under consideration having due regard to the domestic law and in particular Section 44A of the Code of Civil Procedure. Before however, dealing with the same, a passage from Encyclopaedia Britannica (Transportation Law) may be of some significance. Learned authors thereof while referring the components of maritime law had the following to state pertaining the maritime liens; a word of caution at this juncture ought to be introduced by reason of the confusion in populas (sic populus) between a maritime claim and maritime lien whereas claim cannot but be termed to be a genus lien is a particular species arising out of the genus and the two terms namely, claim and lien cannot be identified with each other so as to accord same meaning. Let us, however, address ourselves on maritime lien as is available in the encyclopaedia and the same reads as below:
"Maritime liens: although admiralty actions are frequently brought in personam, against individual or corporate defendants only, the most distinctive feature of admiralty practice is the proceeding in rem, against maritime property, that is, a vessel, a cargo, or 'freight', which in shipping means the Page 44 of 68 O/OJCA/96/2015 CAV JUDGMENT compensation to which a carrier is entitled for the carriage of cargo.
Under American maritime law, the ship is personified to the extent that it may sometimes be held responsible under no liability. The classic example of personification is the 'compulsory pilotage' case. Some State statutes impose a penalty on a shipowner whose vessel fails to take a pilot when entering or leaving the waters of the State. Since the pilotage is thus compulsory, the pilot's negligence is not imputed to the shipowner. Nevertheless, the vessel itself is charged with the pilot's fault and is immediately impressed with an inchoate maritime lien that is enforceable in court.
Maritime liens can arise not only when the personified ship is charged with a maritime tort, such as a negligent collision or personal injury, but also for salvage services, for general average contributions, and for breach of certain maritime contracts."
33. Be it noted that there are two attributes to maritime lien:
(a) a right to a part of the property in the res; and (b) a privileged claim upon a ship, aircraft or other maritime property in respect of services rendered to, or injury caused by that property. Maritime lien thus attaches to the property in the event the cause of action arises and remains attached. It is, however, inchoate and very little positive in value unless it is enforced by an action. It is a right which springs from general maritime law and is based on the concept as if the ship itself has caused the harm, loss or damage to others or to their property and thus must itself make good that loss. (See in this context Maritime Law by Christopher Hill, 2nd Edn.)
34. As regards the concept of proceeding in rem and proceeding in personam, it should be understood as actions being related to the same subjectmatter and are alternative methods pertaining to the same claim and can stand side by side.
38. Incidentally, a plain reading of Section 44A would depict Page 45 of 68 O/OJCA/96/2015 CAV JUDGMENT the following components:
(i) The decree must be of a superior court of a
reciprocating territory.
(ii) The decree is to be filed in a District Court.
(iii) The decree may be executed in India as if it had been
passed by the District Court.
(iv) Provisions of Section 47 CPC shall apply, subject to the
exceptions specified in clauses (a) to (f) of Section 13.
(v) "Decree" means any decree under which a sum of money is payable. (See Explanation II.)
39. Section 44A thus indicates an independent right, conferred on to a foreign decreeholder for enforcement of its decree in India. It is a fresh cause of action and has no correlation with jurisdictional issues. The factum of the passing of the decree and the assumption of jurisdiction pertaining thereto, do not really obstruct the full play of the provisions of Section 44A. It gives a new cause of action irrespective of its original character and as such it cannot be termed to be emanating from the admiralty jurisdiction as such. The enforcement claimed is of an English decree and the question is whether it comes within the ambit of Section 44A or not. The decree itself need not and does not say that the same pertains to an admiralty matter neither is it required under Section 44A of the Code. Though however in the facts of the matter under consideration, the decree has been passed by the High Court of England (a superior court) in its admiralty jurisdiction, registration in this country, as a decree of a superior foreign court having reciprocity with this country would by itself be sufficient to bring it within the ambit of Section 44A. The conferment of jurisdiction in terms of Section 44A, cannot be attributed to any specific jurisdiction but an independent and an enabling provision being made available to a foreigner in the matter of enforcement of a foreign decree.
45. In the view as above, the appellants' contention pertaining to Section 44A thus cannot be sustained. The apprehension of there being a "horrendous consequences" on the wake of the observations as above thus cannot but be stated to be totally unrealistic and with respect, a figment of imagination.
46. Mr Chidambaram by way of an alternative submission Page 46 of 68 O/OJCA/96/2015 CAV JUDGMENT contended that assuming Section 44A of the Code is applicable for the execution of a decree in personam obtained from an Admiralty Court in Britain but since Section 44A is not a self contained Code for execution of a decree, the same is not exhaustive and the same, as a matter of fact does not displace the common law and it has to be read along with the wellsettled principles of common law in matters relating to execution of decree for a sum of money. Strong reliance was placed on the Foreign Judgment (Reciprocal Enforcement) Act, 1933 and it is on this context, reliance was placed on the decision in Black Clawson case12. It has been contended that since Section 44A was introduced by an amendment after the Foreign Judgment (Reciprocal Enforcement) Act, 1933 it is apparent that the legislature did not think it fit to include in Section 44A into the 1933 Act. Without dilating much on this score, in our view, the decisions of the New Zealand and the Australian Courts as noticed above, answer the same in no uncertain and unambiguous language. The views expressed by the English Courts in Black Clawson case12 has been expressly dissented from in both the decisions noticed above and we do feel it expedient to reiterate the views expressed as above more so by reason of the fact that the 1933 Act on which Black Clawson12 was decided expressly saved the applicability of the common law though to a limited extent by and under Section 8(3) of the Act.
47. As noticed above Section 44A is an independent provision enabling a set of litigants whose litigation has come to an end by way of a foreign decree and who is desirous of enforcement of the same; it is an authorisation given to the foreign judgments and as noticed above, the section is replete with various conditions and as such independently of any other common law rights, an enabling provision for a foreign decreeholder to execute a foreign decree in this country, has been engrafted on to the statutebook to wit: Section 44A of the Code.
52. In fine, the legal fiction created by Section 44A makes the Andhra Pradesh High Court, the Court which passed the decree and as such competency of the High Court to entertain the execution proceeding cannot be doubted in any way.
53. In the premises abovesaid, we do not find any merit in the appeals before us and thus the same are liable to be dismissed Page 47 of 68 O/OJCA/96/2015 CAV JUDGMENT subject to the liberty reserved to the appellants as indicated herein below.
54. This order of dismissal however, would not preclude the appellant herein, to obtain release of the attached ship on furnishing a bank guarantee of a nationalised bank for suitable amount to the satisfaction of the Registrar (Judicial) of the Andhra Pradesh High Court, pending the execution proceedings. The amount of bank guarantee may be fixed by the Registrar (Judicial) after hearing the parties or their advocates. Furnishing of such bank guarantee will be in addition to the undertakings required to be furnished by the appellant pursuant to the order of the High Court which is the subjectmatter of civil appeal arising out of SLP (C) No. 18616 of 1999. Furnishing of such bank guarantee will also be without prejudice to the appellant's rights and contentions regarding the merits of the decreeholders' claim qua the arrested ship. Once such bank guarantee is furnished by the appellant and requisite undertakings as earlier ordered by the High Court are filed, the ship will be released from attachment and will be permitted to sail out of the port of Visakhapatnam. In case the execution petition ultimately succeeds on merits against the appellant it will be open to Respondent 1 decreeholder to encash bank guarantee amount towards its claim in the execution proceedings. Subject to the aforesaid modification both the appeals stand dismissed with no order as to costs in each of them."
52. Thus, from the observations made by the Hon'ble Supreme Court in the aforesaid two decisions, it is clear that the High Courts in India are superior courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers. The real purpose of arrest in both the English and the Civil Law systems is to obtain security as a guarantee for satisfaction of the decree. All actions in the civil law - whether maritime or not - are in personam, and arrest of a vessel is permitted even in respect of nonmaritime claims, and the vessel is Page 48 of 68 O/OJCA/96/2015 CAV JUDGMENT treated as any other property of the owner, and its very presence within jurisdiction is sufficient to clothe the competent Court with jurisdiction over the owner in respect of any claim. On the other hand, admiralty actions in England, whether in rem or in personam, are confined to well defined maritime liens or claims and directed against the res (ship, cargo and freight) which is the subject matter of the dispute or any other ship in the same beneficial ownership as the res in question. The attachment being only a method of safeguarding the interest of the plaintiff by providing him with a security. Such attachment by arrest is only provisional and its purpose is merely to detain the ship until the matter has been finally settled by the competent Court. The admiralty jurisdiction of the High Court is dependent on the presence of the foreign ship in Indian waters and founded on the arrest of that ship.
Further, Section 44A thus indicates an independent right, conferred on to a foreign decreeholder for enforcement of its decree in India. The conferment of jurisdiction in terms of Section 44A, cannot be attributed to any specific jurisdiction but an independent and an enabling provision being made available to a foreigner in the matter of enforcement of a foreign decree.
In view of the aforesaid observations made by the Hon'ble Supreme Court, I am of the opinion that this Court is having admiralty jurisdiction to entertain the present suit and therefore the contention of learned advocate for applicant is required to be discarded.
53. The third contention of learned advocate Mr. Raju for the applicant is that the present admiralty suit is required to be dismissed as it is time barred. The main contention of the learned advocate is that the Limitation Act of 1963 is applicable to any application filed for the Page 49 of 68 O/OJCA/96/2015 CAV JUDGMENT enforcement of a foreign award under Part II of the Arbitration and Conciliation Act, 1996. Article 137 of the Limitation Act, 1963 provides three years period for any application to a Court for which there is no express stipulation in the Act. Learned advocate Mr. Raju further submitted that Article 136 of the Limitation Act is not applicable to the facts of the case. He pointed out that the award is passed by the arbitrator in the year 2009 and the present admiralty suit is filed in December 2014 and therefore it is time barred.
54. The aforesaid contention of learned advocate Mr. Raju is misconceived because in the present case the arbitrator has passed an award on 29.10.2009. The plaintiff has followed the procedure for getting permission of the High Court to enforce the arbitrator's award as a judgment. The permission was sought from the High Court of England to enforce the arbitration award as a judgment. The said order was passed exparte on 08.09.2014. The said order was required to be served upon the respondent of the award. That ICI had 32 days for requesting the Court for setting aside the said order. However, ICI failed to apply to the Court for setting aside the said order within the prescribed time limit. The plaintiff was, therefore, entitled to ask the Court to enter the judgment in its favour and judgment was entered on 19.11.2014. Order to obtain certified copy of the judgment for serving it to the respondent was received on 23.12.2014. As per Article 136 of the Limitation Act, the period of limitation of 12 years is prescribed for the execution of any decree.
55. Learned Senior Counsel Mr. Thakore is also right in submitting that as per Article 7 of English Limitation Act, 1980 the claim is not barred by limitation as decree on Award in England is required to be obtained in six years. Article 7 of English Limitation Act, 1980 provides Page 50 of 68 O/OJCA/96/2015 CAV JUDGMENT that:
"7. Time limit for actions to enforce certain awards. An action to enforce an award, where the submission is not by an instrument under seal, shall not be brought after the expiration of six years from the date on which the cause of action accrued."
56. Thus, from the aforesaid Article it is clear that time limit for actions to enforce certain awards is six years.
57. Moreover, the present suit is not for execution of the award under Sections 47 and 48 of the Arbitration and Conciliation Act, 1996 and therefore Article 137 of the Limitation Act of 1963 is not applicable to the facts of the present case and therefore the contention raised by learned advocate Mr. Raju for the applicant is not accepted.
58. The next contention of learned advocate Mr. Raju for the applicant is that the defendant vessel is not beneficially owned by ICI and therefore the suit itself filed against the defendant vessel, which is owned by the applicant herein, is not maintainable. The main contention is that the principle of Alter Ego is not applicable in India and the plaintiff has failed to prove that the applicant, ICI and Mr. Viktor Baranskyi are Alter Egos of each other.
59. This contention of the learned advocate Mr. Raju for the applicant is also not required to be accepted in view of the fact that U.S. District Court has specifically given the finding after full fledged trial that defendant vessel is beneficially owned by Viktor Baranskyi and ICI. In the order dated 19.09.2014, U.S. District Court concluded as under:
"IV CONCLUSION For the reasons herein, the Court FINDS that: 1) ICI, Vista, FBP, Page 51 of 68 O/OJCA/96/2015 CAV JUDGMENT and Viktor Baranskiy are alter egos of each other and 2) ICI frequently transferred its assets as well as the charter of the HARMONY FALCON to Vista, ICI, Vista, FBP, and Viktor Baranskiy are therefore are jointly and severally liable up to the value of the CAPE VIEWER to Flame and Glory Wealth. A separate judgment in accordance with Rule 58 of the Federal Rules of Civil Procedure will issue.
The Clerk is DIRECTED to forward a copy of this Memorandum Opinion to all Counsel of Record.
IT IS SO ORDERED."
60. Till today, the aforesaid findings are not set aside by any higher forum as submitted by the learned advocates and therefore it is clear that ICI, Vista, Freight Bulk (present applicant) and Viktor Baranskyi are Alter Egos of each other. Moreover, the U.S. District Court has, after full fledge trial, held that ICI, Vista, FBP and Viktor Baranskyi are alter egos of each other and since the plaintiff has made specific averments in the plaint and also produced relevant documents in support of the conclusion arrived at by the U.S. District Court on record, at this stage, I am of the prima facie opinion that there is no reason to take a different view than the view taken by the U.S. District Court after fullfledge trial. Therefore, the present suit is maintainable against the defendant vessel.
61. The fifth contention of learned advocate Mr. Raju for the applicant is that the plaintiff does not have the resources to compensate the applicant for the wrongful arrest of the defendant vessel. However, with regard to this contention it is clear from the record that the applicant herein filed OJCA No. 250 of 2015, wherein the present applicant - defendant has prayed that the original respondent herein - original plaintiff be directed to submit counter security in the sum of US $ 1,114,215.45 and US $ 13,517.45 for every day of further day of detention from 19th March 2015 or such other sum as this Court may deem fit. It was also prayed that this Court be pleased to direct the Page 52 of 68 O/OJCA/96/2015 CAV JUDGMENT plaintiff to provide security in the sum of US $ 1,50,000/ for the cost of the proceedings till date and for future costs. This Court has already decided that application by order dated 2122/04/2015, whereby the plaintiff herein is directed to furnish bank guarantee of Rs.25,00,000/ within stipulated time limit. Learned advocate for the parties submitted that against this order, O.J.Appeal is pending. Thus, from the said order it is clear that this Court has already given direction to the plaintiff to pay certain amount by way of security. Therefore, in this application, no further order is required to be passed with regard to this contention.
62. The last contention of the learned advocate for the applicant - original defendant is that the plaintiff cannot approach this Court under the provisions of Section 44A of C.P.C. Learned advocate Mr. Raju mainly contended that there is no decree in the present case and the underlying cause of action of the plaintiff arises out of London Arbitral Award dated 29th October 2009 and not the judgment of the English High Court dated 19th November 2014. Another submission of learned advocate Mr. Raju is that Section 44A of Code of Civil Procedure, 1908 bars action on an arbitration award. He relied upon explanation 2 to Section 44A of the Code as observed hereinabove.
63. However, the aforesaid contention raised on behalf of the learned counsel for the applicant is misconceived. In the present case, the plaintiff is seeking enforcement of decree of English High Court dated 19.11.2014. The arbitration award was passed in favour of the plaintiff on 29.10.2009. Learned Senior Counsel Mr. Thakore is right in submitting that the said award has culminated into a decree as per the provisions of the English Arbitration Act.
64. The provisions of Section 44A of the Code of Civil Procedure, Page 53 of 68 O/OJCA/96/2015 CAV JUDGMENT 1908 provide as under:
"44A. Execution of decrees passed by Courts in reciprocating territory (1) Where a certified copy of a decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court.
(2) Together with the certified copy of the decree shall be filed a certificate from such superior Court stating the extent, if any, to which the decree has been satisfied or adjusted and such certificate shall, for the purposes of proceedings under this section, be conclusive proof of the extent of such satisfaction or adjustment.
(3) The provisions of section 47 shall as from the filing of the certified copy of the decree apply to the proceedings of a District Court executing a decree under this section, and the District Court shall refuse execution of any such decrees, if it is shown to the satisfaction of the Court that the decree falls within any of the exceptions specified in clauses (a) to (f) of section 13.
Explanation I "Reciprocating territory" means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section; and "Superior Courts"
with reference to any such territory means such Courts as may be specified in the said notification.
Explanation II "Decree" with reference to a Superior Court means any decree or judgment of such Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty, but shall in no case include an arbitration award, even if such an award is enforceable as a decree or judgment.
65. Thus, what is excluded by explanation 2 of Section 44A of the Code is enforceability of an award as decree. In the present case, the plaintiff is not seeking enforcement of award as a decree as observed Page 54 of 68 O/OJCA/96/2015 CAV JUDGMENT hereinabove and therefore explanation 2 will not be applicable in the present case.
66. Moreover, subsection (2) of Section 2 of the Code of Civil Procedure defined the word "decree", which means the formal expression of an adjudication which so far as regards the Court expressing it conclusively determines the right of the party with regard to all matters in controversy in the suit.
67. There is a difference between an award which is executable as decree and award which is required to be made a Rule of Court. An award made under Arbitration and Conciliation Act of 1996 is executable as a decree in view of Section 36 of the said Act and therefore it may fall in Explanation II of Section 44A. However, an award passed under Arbitration Act of 1940 is required to be made rule of the Court and such decree can always be executed under Section 44A of the Code of Civil Procedure, 1908. The provisions of Sections 15, 16 and 17 of the Arbitration Act, 1940 are similar to the provisions made in English Arbitration Act, 1996. The provisions of Sections 15, 16 and 17 of the Arbitration Act, 1940 are considered by the Hon'ble Supreme Court in the case of Manager, M/s. Jain & Associates (Supra), in which in pare 10 to 13, the Hon'ble Supreme Court observed as under:
"10. We would further refer to Sections 15, 16, 17, 30 and 33 of the Act, which read as under:
15. Power of Court to modify award.(1) The Court may by order modify or correct an award
(a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or Page 55 of 68 O/OJCA/96/2015 CAV JUDGMENT
(b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision; or
(c) where the award contains a clerical mistake or an error arising from an accidental slip or omission.
16. Power to remit award.(1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit
(a) where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or
(b) where the award is so indefinite as to be incapable of execution; or
(c) where an objection to the legality of the award is apparent upon the face of it.
(2) Where an award is remitted under subsection (1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court:
Provided that any time so fixed may be extended by subsequent order of the Court.
(3) An award remitted under subsection (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed.
17. Judgment in terms of award. Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award.
Page 56 of 68 O/OJCA/96/2015 CAV JUDGMENT* * *
30. Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;
(c) that an award has been improperly procured or is otherwise invalid.
33. Arbitration agreement or award to be contested by application. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:
Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.
(emphasis added)
11. In view of the aforequoted Sections, it can be stated that
(a) after receipt of an award, the Court can suo motu refuse to make award rule of the Court on the ground that (I) part of the award is upon a matter not referred to arbitration; and (ii) the award is imperfect in form or contains any obvious error. The Court can also remit the award to arbitrator in case (i) where the award has left undetermined any matter referred to arbitration; or (ii) where it has determined any matter not referred to arbitration; or (iii) the award is so indefinite as to be Page 57 of 68 O/OJCA/96/2015 CAV JUDGMENT incapable of execution; or (iv) is on the face of it illegal. This is also provided under parenthesis clause of section 17 which provides Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall proceed to pronounce judgment Therefore, it cannot be stated that in case where objections under Section 30 or 33 are not filed the Court is bound to pass decree in terms of the award.
(b) Section 5 of Limitation Act gives discretion to the Court to extend the time for filing application under Section 30 or 33 raising objections to the award.
(c) The Civil Procedure Code including Order IX Rule 13 is applicable to the proceedings initiated by producing award before the Court for passing a decree.
(d) The power of the Court to modify the award under Section 15 or to remit the award to the arbitrator for reconsideration under Section 16 varies from the jurisdiction of the Court to set aside the award under Section 30 or to determine the validity of the arbitration agreement or an award under Section 33.
12. The result is before pronouncing judgment, the Court has to apply its mind to arrive at the conclusion whether there is any cause to modify or remit the award. Further the phrase pronounce judgment would itself indicate judicial determination by reasoned order for arriving at the conclusion that decree in terms of award be passed. One of the meaning given to the word Judgment in Websters Comprehensive Dictionary [International Edition, Vol. I (1984)] reads thus : the result of judging; the decision or conclusion reached, as after consideration or deliberation. Further, Order XX Rule 4(2) C.P.C. in terms provides that Judgment shall contain a concise statement of case, the points for determination, the decision thereon, and the reasons for such decision. This is antithesis to pronouncement of nonspeaking order.
13. Section 17 of the Act is, to some extent, similar to the provisions of Order VIII Rule 5 and/or Rule 10 CPC. Order VIII provides the procedure where written statement by the defendant is not filed. Order VIII Rule 5(2)(4) provides that where the defendant has not filed a pleading, it shall be lawful for the Page 58 of 68 O/OJCA/96/2015 CAV JUDGMENT court to pronounce judgment on the basis of facts contained in the plaint and after pronouncing the judgment a decree is required to be drawn up in accordance with such judgment. Under Order VIII Rule 10 where any party from whom a written statement is required under Rule 1 or Rule 9 fails to present the same within the time permitted or fixed by the court, the court shall pronounce judgment against him or make such order in relation to the suit as it thinks fit and on the pronouncement of such judgment a decree shall be drawn up. This rule gives a discretion to the Court either to pronounce the judgment against the defendant or make such order in relation to the suit as it thinks fit. While interpreting Order VIII, this Court in Balraj Taneja & Another v. Sunil Madan & Another [(1999) 8 SCC 396] held that merely because written statement is not filed the Court should not proceed to pass judgment blindly and observed thus: "The court has not to act blindly upon the admission of a fact made by the defendant in his written statement nor should the court proceed to pass judgment blindly merely because a written statement has not been filed by the defendant traversing the facts set out by the plaintiff in the plaint filed in the court. In a case, specially where a written statement has not been filed by the defendant, the court should be a little cautious in proceeding under Order 8 Rule 10 CPC. Before passing the judgment against the defendant, it must see to it that even if the facts set out in the plaint are treated to have been admitted, a judgment could possibly be passed in favour of the plaintiff without requiring him to prove any fact mentioned in the plaint. It is a matter of the courts satisfaction and, therefore, only on being satisfied that there is no fact which need be proved on account of deemed admission, the court can conveniently pass a judgment against the defendant who has not filed the written statement."
68. The Hon'ble Supreme Court in the case of Morgan Securities & Credit (P.) Ltd., (Supra), in para 40, 41 and 42, observed and held as under:
Page 59 of 68 O/OJCA/96/2015 CAV JUDGMENT"40. An award under the 1996 Act indisputably stands on a different footing visavis an award made under the Arbitration Act, 1940. Whereas under the 1940 Act, an award was required to be made a rule of the court to make it enforceable, the 1996 Act, however, raises a legal fiction. When an award is made, an application under Section 34 is required to be filed questioning the validity thereof. Once such an application is filed, it remains under suspension in the sense that it would not be enforceable. Only upon expiry of the period specified in Section 34 to challenge an award or when such objection is refused, the same would become enforceable. Section 36 merely specifies as to how such an award can be enforced by laying down that it can be enforced as if it were a decree.
41. The legal fiction created under Section 36 has, therefore, a limited application. An award is, thus, to be treated to be a decree even without intervention of the Court only for the purpose of its enforceability.
42. Thus, an order can be passed by the Board for suspending the operation of the award if any occasion arises therefor."
69. Thus, from the aforesaid provisions of law and in view of the aforesaid decisions, it is clear that a foreign award/decree can be executed in three different ways (1) award as per provisions of Sections 47 to 48 of Arbitration and Conciliation Act, 1996, if it is a New York Convention Award on fulfilling two conditions as per Section 44 of the Act; (2) Award made a Rule of Court in country where it is pronounced and decree being enforced as u/s. 44A of the Code if they are reciprocal countries and (3) Award/Decree being treated as evidence and suit filed on that basis.
70. Thus, in the opinion of this Court all the three possibilities can arise in International Law and all remedies are open to the party. Law does not prohibit exercise of any option or to come for execution of decree. There is nothing in the provisions of the Arbitration Act and Page 60 of 68 O/OJCA/96/2015 CAV JUDGMENT Code of Civil Procedure, 1908, which prohibits expressly or impliedly a party from pursuing either remedy and such prohibition cannot be read in absence of any specific bar.
71. The decision relied upon by the learned advocate for the applicant in the case of G.C.Kanungo (Supra) has no applicability in the facts and circumstances of the present case because in the said case the Hon'ble Supreme Court was concerned with the validity of Arbitration (Orissa Second Amendment) Act, 1991. Thus, in the said decision it was held by the Hon'ble Supreme Court that the award does not merge into a judgment. However, the facts of the present case are different. Hence, the said decision is not applicable.
72. Moreover, the reliance placed by the learned advocate Mr. Raju for the applicant on the decision in case of Marina World Shipping Corporation Ltd. (Supra) decided by Delhi High Court is also misconceived. In the said case it was held by Delhi High Court that in case of an arbitral award only award can be enforced under Section 47, 48 and 49 of Arbitration and Conciliation Act, 1996 and not under Section 44A of the Code of Civil Procedure, 1908. Learned Senior Counsel Mr. Thakore for the plaintiff has rightly given the example that there may be a mismatch between reciprocating countries and New Your Convention countries, e.g. Papua, New Guinea and Aden (Yemen) are reciprocating territories but not New York Convention countries and therefore the award passed in such country will not be enforceable under Sections 47 to 49 of the Arbitration and Conciliation Act, 1996 but decree pursuant to award of these countries will be enforceable in India under Section 44A of the Code. Thus, in view of such position, the interpretation made by learned advocate for the applicant cannot be applied, otherwise, in a given situation the concerned party will be Page 61 of 68 O/OJCA/96/2015 CAV JUDGMENT remediless.
73. In view of the overall facts and circumstances of the present case, the other decisions cited and relied upon by the learned advocate for the applicant are not applicable to the facts of this case and therefore no detailed discussion is made.
74. Now the important question which is to be considered by this Court is that the arrest order issued by this Court is to be vacated or not in the facts and circumstances of the present case. For deciding the said question, following important questions are required to be considered by this Court:
(1) Whether the claim of the plaintiff is vexatious or frivolous? (2) Whether the plaintiff is having reasonable arguable case in law? (3) Whether the plaintiff is having prima facie case and balance of convenience is in favour of the plaintiff or not? (4) If the order of arrest is vacated without furnishing security by the defendant, whether the plaintiff would suffer irreparable loss or not?
75. In Schwarz & Co. [Grain] Ltd. v. St. Elefterio EX Arion [Owners]. [(1957) Probate Division 179], Willmer, J. considering the scope of prima facie case, observed and held as under:
"It has not been suggested that the proceedings are frivolous or vexatious, so as to call for the exercise of the court's inherent jurisdiction to halt such proceedings in limine. The defendants' argument is founded on the proposition that section 8 (4) of the Act of 1956 introduces a new restriction on the right to proceed in rem, and that a plaintiff cannot arrest a ship under that subsection unless he can prove--and prove at the outset--that Page 62 of 68 O/OJCA/96/2015 CAV JUDGMENT he has a cause of action sustainable in law. In my judgment that proposition rests upon a misconception of the purpose and meaning of section 3 (4). As it appears to me, that subsection, so far from being a restrictive provision, is a subsection introduced for the purpose of enlarging the Admiralty jurisdiction of the court. As I view it, its purpose is to confer, and to confer for the first time in England, the right to arrest either the ship in respect of which the cause of action is alleged to have arisen or any other ship in the same ownership. That is an entirely new right so far as the law of England is concerned, although it previously existed in other countries, including Scotland; and the reason for conferring that right now is for the purpose of bringing this country into line with other countries as a result of an international convention. In my judgment the purpose of the words relied on by Mr. Roskill, that is to say, the words "the person who would be liable on the claim in an action in "personam," is to identify the person or persons whose ship or ships may be arrested in relation to this new right (if I may so express it) of arresting a sister ship. The words used, it will be observed, are "the person who would be liable " not " the person " who is liable," and it seems to me, bearing in mind the purpose of the Act, that the natural construction of those quite simple words is that they mean the person who would be liable on the assumption that the action succeeds. This action might or might not succeed if it were brought in personam; that would depend upon the view which the court ultimately took of the various contentions raised by Mr.Roskill. But clearly, if the action did succeed, the person or persons who would be liable would be the owner or owners of the steamship. St. Elefterio. In such circumstances, in the absence of any suggestion that the action is a frivolous or vexatious action, I am satisfied that the plaintiffs are entitled to bring it and to have it tried, and that, whether or not their claim turns out to be a good one, they are entitled to assert that claim by proceeding in rem.
It is an odd circumstance, but it almost seems as if there must be some malignant fate which ordains that questions of this character so frequently arise on the last day of term, i.e., in circumstances in which, if the judge takes the wrong view, there is no practicable way of putting him right in the Court of Appeal without the possibility of inflicting irreparable damage on the party against whom the decision goes. I make that observation because I think it adds point to what I want to say in conclusion, Page 63 of 68 O/OJCA/96/2015 CAV JUDGMENT namely, that any other construction of Section 3 (4) of the Act, other than the construction I have sought to put upon it, would, as it seems to me, lead to the most intolerable difficulties in practice. If Mr.Roskill is right in saying that a plaintiff has no right to arrest a ship at all, unless he can show in limine a cause of action sustainable in law, what is to happen in a case (and, having regard to the argument I have listened to, this may be fillet such a case) where the questions of law raised are highly debatable, and questions on which it may be desired to take the opinion of the Court of Appeal or even of the House of Lords? 'Suppose, for instance, following Mr. Roskill's argument that this court comes to the conclusion, on the preliminary argument held at this stage of the action, that the action is not one that is sustainable in law, it will presumably set aside the writ and the warrant of arrest. It is possible (these things have been known to happen) that a higher court might take a different view; but in the meantime the ship, which is a foreign ship, has been freed from arrest, has gone, and may never return to this country. It might be that in those circumstances the plaintiffs would have lost their right for ever to entertain proceedings in rem in this country.
The fact is, and this is the sanction against abuse, that the plaintiffs, if their alleged cause of action turns out not to be a good one will be held liable for costs, and those costs will include the costs of furnishing bail in order to secure the release Of the ship. The defendants can always secure the release of their ship by the simple expedient of furnishing bail. It is true that if, as they say it will, the action fails, they will probably not recover inter partes the whole of the costs of furnishing the bail; but in that respect I do not know that they are in any different position from other defendants in other types of action. That observation applies especially in these days of legal aid. There is many a defendant, who has been unsuccessfully sued, and who at the end of it all finds himself in the position that he cannot recover the whole of his costs. That is one Of the incidents of litigation which, as it seems to me, parties have to accept in modern conditions.
But, as I have said, the simple remedy for the defendants, if they want their ship released, is to put in bail. The action will then be tried, and at the appropriate timewhen all the facts have been Page 64 of 68 O/OJCA/96/2015 CAV JUDGMENT ascertained--due consideration will be given to the arguments on law which the defendants desire to advance.
In my judgment, therefore, this motion is misconceived and I find myself unable to accede to it."
76. The Hon'ble Supreme Court in the case of Videsh Sanchar Nigam Limited v. M.V.Kapitan Kud & Ors. [(1996) 7 SCC 127] has observed and held in para 13 to 15 as under:
"13. In Schwarz & Co. [Grain] Ltd. v. St. Elefterio EX Arion [Owners]. [(1957) Probate Division 179], Willmer, J. considering the scope of prima facie case held at page 185 that "it has not been suggested that the proceedings are frivolous or vexatious, so as to call for the exercise of the court's inherent jurisdiction to halt such proceedings in limine. The defendants argument is founded on the proposition that section 3 [4] of the Act of 1956 introduced a new restriction on the right to proceed in rem and that a plaintiff cannot arrest a ship under that subsection unless he can prove and prove at the outset that he has a cause of action sustainable in law. In my judgment that proposition rests upon a misconception of the purpose and meaning of section 3 [4]".
It was held that the scope of the Act was to enlarge the jurisdiction of admiralty court but not to restrict its jurisdiction. At page 187 it was held that "it is possible [these things have been known to happen] that a higher court might take a different view; but in the meantime the shop, which is a foreign ship, has been freed from arrest, has gone, and may never return to this country. It might be that in those circumstances the plaintiffs would have lost their right for ever to entertain proceedings in rem in this country. The remedy for the defendants is to release their ship is to be put in appeal. The action will then by tried at the appropriate time when all the facts have been ascertained due consideration will be given to the Page 65 of 68 O/OJCA/96/2015 CAV JUDGMENT arguments at law which the defendants desire to advance."
Accordingly the motion for release of the ship was dismissed.
14. In The Moschanthy [(1971) 1 Lloyd's Law Reports 37 at 42] where the question was whether the admiralty action was vexatious, following the ratio of Willmer, J. in St. Elefterio [supra] it was held that action could not be successful. It was held that courts should only stay the action on the ground when the hopelessness of the plaintiff's claim is beyond doubt. If it is not beyond doubt but on the contrary the plaintiff has arguable, even though difficult, case even in law the action would be allowed to proceed to trial. The application for stay was accordingly rejected.
15. The admiralty action is an action in rem. The Division Bench found that the claim was not vexatious but is triable. There is strong evidence to show that at the relevant time the respondentvessel was within the vicinity of the damaged cable. The Division Bench declined to interfere on the ground that the Captain of the vessel filed an undertaking that the vessel belonged to the Black Sea Shipping Company which is wholly owned by the Ukrainian Government. The undertaking given by the Captain of the vessel that in the event of the suit being decreed they would honour the decree, was accepted by the Court and it directed the release of the vessel. We think that neither the approach of the Division Bench of the High Court nor the finding of the learned Trial Judge on the admiralty jurisdiction that no prima facie case is made out, is right. It is seen that there is strong triable case for the reasons stated earlier. The ship is a foreign ship and if it leaves the shores of Indian territorial waters it is difficult to get hold of it and it may not return to the jurisdiction of Indian courts. The claim thereby, even if sucessful, would remain unexecutable or land in trouble in private international law in its enforcement. Under these circumstances, we are of the firm opinion that the vessel may be released on the certain conditions, viz., [i] the respondent shall deposit a sum of Rs.10 crores; [ii] the Ukrainian Government shall give an undertaking through its accredited authority, more particularly may be its Ambassador attached to its Embassy in India in writing duly undertaking that in the event of the suit being decreed they would comply with the decree without reference to the execution; [iv] the Page 66 of 68 O/OJCA/96/2015 CAV JUDGMENT undertaking should be for balance amount of Rs.18 crores and towards costs and other expenses roughly put at Rs.25 crores. It would be open to them to comply with these directions at any time. We are not fixing any time limit because it would be open to them to comply with it at any time and until then the ship shall remain arrested and shall not leave the shores of the Indian territorial waters. On deposit of Rs.10 crores and on furnishing of undertakings to the satisfaction of the Division Bench of the High Court, as stated above, the High Court would give appropriate direction for releasing the vessel in accordance with law."
77. Thus, from the aforesaid discussion and from the material placed on record as well as from the arguments canvassed on behalf of the learned advocates for the parties, this Court is of the opinion that the case of the plaintiff is not vexatious or frivolous. The plaintiff is having reasonably arguable case on facts as well as on law and there is no reason to allow this application filed by the applicant. The plaintiff is having prima facie case as well as balance of convenience is also in favour of the plaintiff and therefore if the arrest order passed by this Court is vacated without issuing any directions to the applicant - original defendant to furnish adequate bail or security, the plaintiff would suffer irreparable loss. Moreover, if the order of arrest is vacated and ultimately the suit of the plaintiff even if decreed against the defendant, the same would be unenforceable in law because in the meantime the vessel would leave the Indian territorial waters.
78. In view of the aforesaid discussion, this application fails and hence rejected. However, as observed in Schwarz & Co. [Grain] Ltd. (Supra), the simple remedy for the applicant - original defendant, if it wants to release its ship, is to put in bail. The action will then be tried, and at an appropriate time when all the facts will be ascertained, due consideration will be given to the arguments on law which the applicant Page 67 of 68 O/OJCA/96/2015 CAV JUDGMENT desires to advance.
(VIPUL M. PANCHOLI, J.) Jani Page 68 of 68