Calcutta High Court
Gms Marine Company Limited vs The Owners And Parties Interested In on 7 May, 2010
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
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IN THE HIGH COURT AT CALCUTTA
ADMIRALTY JURISDICTION
GA No. 3121 of 2009
GA No. 3476 of 2009
AS No. 15 of 2009
GMS MARINE COMPANY LIMITED
-Versus-
THE OWNERS AND PARTIES INTERESTED IN
THE VESSEL M.V. VINASHIN SKY
GA No. 3493 of 2009
GA No. 304 of 2010
AS No. 19 of 2009
YIKANG MARINE SERVICES COMPANY LIMITED
-Versus-
THE OWNERS AND PARTIES INTERESTED IN
THE VESSEL M.V. VINASHIN SKY
For the Plaintiff in
AS No. 15 of 2009: Mr Tilok Bose, Sr. Adv.,
Mr K. Thakkar, Adv.,
Mr Anubhav Sinha, Adv.,
Mr Amit Kr. Nag, Adv.,
Ms Swati Chaudhary, Adv.,
Mr Piyush Meharia, Adv.
For the Plaintiff in
AS No. 19 of 2009: Mr K. Thakkar, Adv.,
Mr U.K. Das, Adv.,
Mr T. Goswami, Adv.
For the Vietnamese petitioner: Mr Ratnanko Banerji, Adv.,
Ms Lopita Banerji, Adv.,
Mr Surjya Chakroborty, Adv.,
Mr Swarajit Dey, Adv.,
Mr Ujjwal Pramanik, Adv.
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Hearing concluded on: May 4, 2010.
BEFORE
The Hon'ble Justice
SANJIB BANERJEE
Date: May 7, 2010.
SANJIB BANERJEE, J. : -
Both admiralty suits are actions in rem directed against the same vessel,
MV Vinashin Sky. The plaintiffs are different. There are several applications
which have been listed and heard. The principal issue raised in both suits is by
one Vietnam Shipbuilding Industry Group though the legal status of such entity
is unclear and, but for an appellate court order, such entity may not have had a
right of audience in the second suit. In the opening paragraph of GA No. 3476 of
2009, which is a petition for dismissal and/or rejection of the plaint relating to
the earlier suit, the Vietnamese petitioner has not elaborated on its legal status
though the petitioner in claiming that one Vinashin Ocean Shipping Company
Ltd is its wholly owned subsidiary, has given an impression that the petitioner is
probably a company. The petitioner claims to be a State-owned enterprise of the
Socialist Republic of Vietnam. In the translated version of its certificate of
business registration the first heading under which the petitioner's name figures
reads "Name of Company." But it would be presumptuous to assume that the
petitioner is a company in the sense that the word is understood in this country,
when the petitioner has omitted to unhesitatingly describe itself as such. In
paragraph 6 of its petition in the earlier suit, the petitioner has casually stated
that it is "a state owned company" and that "the petitioner company is an
instrumentality of the Socialist Republic of Vietnam." It is the petitioner's
understanding of the Indian law in the context of Section 86 of the Code of Civil
Procedure, "that a foreign company being a state owned company falls within the
meaning of 'Foreign State' " as has been claimed in paragraph 8 of the petition.
But admiralty jurisdiction, as experience shows, is, in a sense, treacherous
territory where both the plaintiff and a party claiming to represent the res, which
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is at the centre of the action, oftentimes create illusions of a cause of action or a
defence, whether to obtain a snap order of arrest and extract a settlement or for
paving the way for the vessel to slip away. It would not do to easily assume that
the petitioner is a company notwithstanding its casual averment made in one or
more paragraphs of its petition and affidavits. The Vietnamese entity appears,
however, to be a juristic entity. The immediate object of the present exercise is
both to ascertain the nature of its organisation and to assess whether it has a
legal interest in the vessel which is relevant in this jurisdiction.
There are two interlocutory actions in AS No. 15 of 2009: GA No. 3121 of
2009 is the plaintiff's petition for arrest (described in this jurisdiction as affidavit
of arrest); and, GA No. 3476 of 2009 is the Vietnamese entity's petition for
dismissal of the suit or rejection of the plaint relating thereto. In AS No. 19 of
2009, GA No. 3493 of 2009 is the plaintiff's affidavit of arrest and GA No. 304 of
2010 is a plea by the Vietnamese entity for supply of water to the vessel as it
remains arrested by orders of this Court with its crew on board. Appropriate
orders have been passed earlier on GA No. 304 of 2010 and such petition is
disposed of, without prejudice to the plaintiff's contention that the petitioner
therein may not have any locus standi to maintain the petition, with a direction
that till such time the vessel remains arrested the crew on board should be
supplied water and other essentials for survival against due payment therefor.
The affidavits of arrest can only be taken up for consideration after the initial
objection, though technically such objection has only been made in the first suit
by way of a petition and in the second suit by an affidavit in response to the
affidavit of arrest. The affidavit filed in the second suit is on behalf of an
undisclosed person claiming interest in the vessel. By an appellate court order,
however, the Vietnam Shipbuilding Industry Group, as one of the appellants in
the relevant proceedings, has to be heard on its objection to the action even in
the second suit.
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GA No. 3476 of 2009 is being considered again on rebound. It was
disallowed by an order dated January 15, 2010 on the following finding:
"I am, therefore, of the opinion that the petitioner has not been able to
discharge its burden of proving that the petitioner who in this case is
Vietnam Shipbuilding Industry Group enjoys immunity under Section 86 of
the Code of Civil Procedure. The petition is, therefore, dismissed."
The order of January 15, 2010 was recorded in GA No. 3442 of 2009 and
it is the common case of the appearing parties that the reference to such number
was a mistake. GA No. 3442 of 2009 was a petition of similar import as GA No.
3476 of 2009, but was not pressed by the petitioner due to some technical defect
therein and the subsequent petition was brought. There is no dispute on either
side that it was the petition numbered as GA No. 3476 of 2009 that stood
rejected by the order dated January 15, 2010. Two sets of appeal were carried in
the two suits and they were disposed of by a common order of February 25,
2010. The appellate court noticed that the appellants (Vietnam Shipbuilding
Industry Group and Another) had invoked Order XLI Rule 27 of the Code to rely
on a document that had not been placed before the trial court. In view of such
new material produced the appeal court directed as follows:
"... we simply remand the matter back to the Learned trial Court for
adjudication after taking into account the new document sought to be
placed before us and for which leave has been sought for in this appeal. We
request the Hon'ble Judge to take up the matter at His Lordship's earliest
convenience."
The stay petitions in the appeal and the appeals were disposed of by the
order of February 25, 2010. Upon the appellate court order being placed before
this Court, a controversy arose between the appearing parties as to whether only
the new document was to be assessed or the entirety of the matter had to be
revisited. The matter was mentioned before the appellate court on March 19,
2010 whereupon the appellate court recorded the Vietnamese entity's submission
that it was also desirous of producing the certificate of the Indian Consulate in
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support of the new document that it had sought to produce before the appellate
court under Order XLI Rule 27 of the Code. The appellate court elucidated the
import of its previous order on the following lines:
"... we clarify that since the applicant-appellant had sought to rely upon a
document which was not earlier produced before the trial Court, in the
facts and circumstances of the case we had permitted the applicant-
defendant to produce such document. Therefore, if any further document
is required to be produced in support thereof, the interests of justice
require that the applicant-defendant be permitted to produce all such
documents as would support the applicants' case on the basis of that
particular document which was sought to be produced before this Court
under Order 41 Rule 27 of the Code of Civil Procedure.
It is further clarified that while this Court had not expressed any
opinion on the correctness or otherwise of the order of the trial court
rendered on the basis of the material produced before the trial Court at
that stage, this Court did not state in so many words that the order
rejecting application under Order 7 Rule 11 was set aside. But
nonetheless, it would not be possible to speculate as to whether the
additional document/s sought to be produced by the applicant-defendant
would by themselves tilt the case in favour of the applicant-defendant.
Ultimately, the effect of such additional document/s will have to be
considered along with the effect of the other material already produced
before the trial Court. Therefore, the matter is remitted back to the trial
court for considering the overall effect of the material produced earlier read
with the document/s sought to be produced now before the trial Court,
without being inhibited by the previous judgment which shall be treated as
set aside."
It is, therefore, necessary that GA No. 3476 of 2009 be heard on whatever
material the parties have brought till date. The parties have taken some time in
preparing affidavits and the matter has been taken up immediately after a round
of affidavits relating to the new and additional documents has been completed.
The plaint case in AS No. 15 of 2009 is that under a time charterparty of
October 25, 2007 the plaintiff chartered a vessel by the name of MV Vinashin
Glory. Disputes and differences arose between the plaintiff and the owners of the
vessel following which the vessel was withdrawn from the charter by the plaintiff
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on February 5, 2008. The plaintiff claims that a settlement agreement was
thereafter executed between the plaintiff and the owners of the MV Vinashin Glory
whereunder the owners were liable to compensate the plaintiff in the sum of US
$3,650,000 in respect of the plaintiff's claims under the time charterparty of
October, 2007. The plaint speaks of the settlement and a proposed charterparty
contemplated to be executed simultaneously on June 26, 2008 obliging the
owners of MV Vinashin Glory to redeliver the vessel to the plaintiff. The plaint
says that some payments were made by the plaintiff to the owners of MV Vinashin
Glory. It is the claim relating to MV Vinashin Glory that the plaintiff has carried in
the suit to this Court against an alleged sister vessel, MV Vinashin Sky. At the
hearing the earlier plaintiff has clarified that the claim in the present action does
not include loss of profits and similar heads of claim that this plaintiff can
otherwise claim in personam against the owners of MV Vinashin Glory.
The plaintiff in AS No. 19 of 2009 claims to have effected supplies to
Vinashin Sky and to her alleged sister vessels by the names of Vinashin Liner 1
and Vinashin Liner 2. It is this plaintiff's assertion that the supplies of
necessaries required by the vessels were in the nature of master's disbursements
giving rise to a maritime claim.
In either case, the relevant plaintiff has relied on certification by the Lloyd's
Maritime Information Unit as to the owners of the vessel in bringing the suits
against an alleged sister vessel of the ships against whom the claim originally
arose, though in the later suit a part of the claim is directly against MV Vinashin
Sky. The Lloyd's Maritime Information Unit (MIU) particulars indicate that the
registered owners of all the vessels referred to by the plaintiffs is Vinashin Ocean
Shipping Company Ltd (hereinafter referred to as Vinashin Ocean). The registered
owner of Vinashin Sky, according to Lloyd's MIU, is Vinashin Ocean since after
September 28, 2005. Vinashin Ocean is also shown to be the commercial
operator and technical manager of Vinashin Sky. The beneficial owner of the
vessel that now remains arrested in Haldia is shown by the Lloyd's MIU to be the
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Government of the Socialist Republic of Vietnam. The petitioner in GA No. 3476
of 2009 has criticised the plaintiff in the earlier suit relying on a single page from
the Lloyd's MIU papers where only the name of the registered owner is reflected
and the names of the operator and beneficial owner of the ship are not revealed.
The petitioning Vietnamese entity (hereinafter also referred to as VSIG) suggests
that the plaintiff in AS No. 15 of 2009 was aware that it was the State of Vietnam
which was the beneficial - and hence the ultimate - owner of the res in question
and had deliberately concealed such fact to obtain an order of arrest. The same
criticism, however, is inappropriate for the plaintiff in AS No. 19 of 2009 since
Annexure "A" to the later plaint discloses the entirety of the Lloyd's MIU
documents relating to Vinashin Liner 1, Vinashin Liner 2 and Vinashin Sky. The
res that remains arrested here is a general cargo vessel of GT 10,337 MT and
DWT 15,000 MT.
VSIG has not brought a petition in the nature of demurer in the second
suit on its perceived understanding that a favourable order on its petition in the
first suit would suffice for even the second action to be stultified. VSIG has relied
on some sketchy documents in its petition and it is not difficult to gauge why its
endeavour failed on January 15, 2010. It has disclosed further documents in its
affidavit-in-reply and new documents have now been disclosed in an affidavit
that it has filed following the remand of the petition. The first point canvassed in
the petition is that that the plaintiff in AS No. 15 of 2009 is not a registered
company as there is no trace of any company by the plaintiff's name that has
been incorporated or existing in the British Virgin Islands. In support of such
contention, VSIG has relied on a search report furnished by Kelvin Chia
Partnership on October 21, 2009. The plaintiff in the first suit has accepted that
it has not been incorporated or registered in the British Virgin Islands but says it
is registered in South Korea. The cause title reflects that the plaintiff is a
company incorporated in the British Virgin Islands but also shows that the
plaintiff carries on business in Seoul.
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The second, and more vociferous, assertion of VSIG is that it is a State-
owned organisation and an instrumentality of the Socialist Republic of Vietnam
which, according to it, would imply that neither suit is maintainable as no
previous consent under Section 86 of the Code of Civil Procedure, 1908 has been
obtained by the plaintiffs. VSIG says that as a State-owned company it falls
within the definition of "foreign state" as recognised in Section 87A of the Code.
In support of such contention, VSIG has appended a copy of the certificate of
registration relating to Vinashin Sky. The certificate in Vietnamese language
appears as Annexure "A" to its petition and is dated July 22, 2005. In the further
affidavit that VSIG has filed following the matter being remanded, it has relied on
a copy of the English translation of the certificate of registration which it has
been obtained on July 27, 2008. The copy of the certificate appears at page 4 of
the subsequent affidavit. The certificate of authenticity of the translation appears
at the following page and alongside it there appears an attestation under the seal
of a notary public in Vietnam. The Consular certification of the Indian Embassy
in Hanoi is as to the signature and seal of the named notary public which
appears on the next page. Since the originals have not been produced, the exact
links between the three parts of the seemingly single document do not appear
clear.
At page 8 of the subsequent affidavit, VSIG has relied on a translated
version of a document that appears to have been issued on January 28, 2010 by
the Ministry of Transport of the Socialist Republic of Vietnam. The subject of the
document records, "Re. Certification of the State-owned enterprise status of
VINASHINLINES Company belongs to Vietnam Shipbuilding Industry Group and
M.V. Vinashin Sky under ownership of Vietnam's State." The declaration in such
document reads as follows:
"Vietnam's Ministry of Transport had received Official Letter No.
979/BC-VTVD-KT dated 28/12/2009 by VINASHIN Ocean Shipping One
Member Company Limited (VINASHINLINES) reporting the arrest of MV
VINASHIN SKY in India and requesting for certification of State-owned
enterprise status of the Company, the owner of MV VINASHIN SKY.
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Vietnam's Ministry of Transport does hereby certify that:
1. Shipping is under Vietnamese Ministry of Transport.
2. Vinashin Ocean Shipping Co. Ltd. is wholly owned by Vietnam
Shipbuilding Industry Group. Vietnam Shipbuilding Industry Group is
100% stated owned (sic, state-owned) enterprise.
In which, VINASHIN SKY is owned by the Group with the following
specific details:
- MV VINASHIN SKY. Nationality: Vietnamese. IMO Code: 9306524.
Call sign 3WLB;
- Certificate of Registration No. 975/DK-2005. HP issued on
22/7/2005 by The Ships and Seafarers Registry Office in Hai Phong of
Vietnam National Maritime Bureau;
- The Ship Owner is Vietnam Shipbuilding Industry Corporation (now
is Vietnam Shipbuilding Industry Group);
- Operator is VINASHIN Ocean Shipping Company (now is VINASHIN
Ocean Shipping One Member Company Limited).
Vietnam's Ministry of Transport certifies the aforementioned
information and proposes Vietnam's Consular Department, concerned
Agencies and Organizations to help and support Vietnam's enterprise to
resolve the aforesaid case."
VSIG has also relied on the certificate of business registration relating to
Vinashin Ocean issued by the Hanoi Department of Planning & Investment,
Business Registration Division. The abbreviated name of Vinashin Ocean appears
to be Vinashinlines. Vinashin Ocean is entitled, in terms of the document, inter
alia, to manage and exploit the transportation of model ships and other ships;
organise and operate multi-model transportation; lease transportation ships;
and, act as "vessel agent, loading, discharging and transporting cargo." The legal
capital of Vinashin Ocean is 1,500 billion Vietnamese Dong. VSIG has relied on
paragraph 5 of the certificate that provides as follows:
"5. Name of Owner: VIETNAM SHIPBUILDING INDUSTRY GROUP
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Decision of establishment or allowed to establish (with organisation) of:
Prime Minister, No: 104/2006/QD-TTg dated May 15th 2006
Certificate of Business Registration Number (with enterprise): 0106000739
By: BUSINESS REGISTRATION DIVISION -HANOI DEPARTMENT OF
PLANNING & INVESTMENT
Date of issuance: July 5th 2006
..."
Again, the certification of the authenticity of translation and the seal and
signature of the notary public do not appear on the last page of the document
but on a following page and the attestation by Consular certification by the
Indian Embassy in Hanoi is on another page. The original document has not
been produced and the links between the document and its certification and the
certification and its attestation do not appear clearly.
A further document has been relied upon by VSIG, apparently emanating
from the office of the Prime Minister of Vietnam that is dated May 15, 2006 and
runs from page 19 to page 28 of the subsequent affidavit. The certification of the
authenticity as to translation and the notarial certificate as to the authentication
appear on a separate page and the Consular certification on the following page.
VSIG says that such document of May 15, 2006 shows that it was the decision of
the Prime Minister of Vietnam to set up a company under Article 1 as the
Vinashin Group "on the basis of restructuring the existing managing and
governing, and financially dependent member units of Vietnam Shipbuilding
Industry Corporation." Clause 1 under Article 1 describes Vinashin Group as a
State enterprise "with its own legal status, seal and logo ... to be eligible to self
control its business; to be responsible to take over the legal responsibilities and
obligations of Vietnam Shipbuilding Industry Corporation." Clause 4 under
Article 1 records that the "charter capital" of Vietnam Shipbuilding Industry
Group would be the equity of Vietnam Shipbuilding Industry Corporation as on
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January 1, 2006 after being audited. The business operations of VSIG are
particularised under clause 5 of Article 1. The 12 several heads do not include
owning ships but embrace marine service business. Clause 6 reveals that the
management and operation structure of VSIG would be through a board of
directors as "a direct representative of State owner." Clause 8 is entitled
"organizational structure of Vietnam Shipbuilding Industry Group" and names
several organizations thereunder. The subsidiary organisations of VSIG are
indicated at clause 9 and the name of Vinashin Ocean does not figure therein.
Clauses 10, 11 and 12 of Article 1 of the document detail several organisations
where "100% charter capital" is owned by VSIG or where "50% charter capital" is
owned by VSIG or which are "cooperating companies whose 50% charter capital"
is owned by VSIG. The name of Vinashin Ocean does not figure under any of the
clauses.
A copy of the certificate of business registration of VSIG appears at page 31
of its subsequent affidavit. It appears to have been registered for the first time on
July 5, 2006 and for a second time on August 22, 2008. The English version of
the certificate names 38 areas of business operations of the State-owned
enterprise but does not reflect that it may own or operate cargo vessels. The
capital of the enterprise is 12,700 billion VND but the owner of the organisation
is not indicated. The name of Vinashin Ocean appears at item no. 7 of the first
group of units in a list which appears to be part of the certificate of business
registration of VSIG.
VSIG claims that since the certificate of registration of Vinashin Sky, in its
translated version, shows that the owner is Vietnam Shipbuilding Industry
Corporation which, according to VSIG at the hearing, is its predecessor in
interest and since it is evident that VSIG is a State-owned enterprise of the
Socialist Republic of Vietnam, the present actions should be immediately
arrested and the arrest of the vessel forthwith lifted. In such context VSIG relies
on Dictionary of Shipping Terms (4th Ed.) by Peter R. Brodie where the Lloyd's
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Register of Shipping is shown to be a British ship classification society (page
147). As to what a classification society is, has been spelt out at page 61 of the
book:
"Classification society Organisation whose main function is to carry out
surveys of ships while being built and at regular intervals after
construction, its purpose being to set and maintain standards of
construction and upkeep for ships and their equipment. Each classification
society has a set of rules governing the requirements for surveys and, for a
ship to maintain her class, she must comply with these rules. In most
countries, it is not obligatory for a shipowner to have his ship classed but
there would be considerable difficulties in trading if the ship were not,
since it is often a condition of the ship's insurance and a requirement of
most charterers and shippers. Classification societies also inspect and
approve the construction of shipping containers. These organisations exist
in most of the principal maritime countries."
VSIG submits that the Lloyd's MIU is no substitute for a sea-going vessel's
certificate of registration. It is the positive case of VSIG in the opening sentence of
its petition, that it is the owner of Vinashin Sky and in support of such claim the
certificate of registration is referred to in the first paragraph of the petition. It is
not the case of VSIG in its petition or the affidavit in reply that VSIG and Vietnam
Shipbuilding Industry Corporation are the one and the same entity or that VSIG
is the new avatar or the successor in interest or even the successor at law of
Vietnam Shipbuilding Industry Corporation. In course of the hearing, VSIG has
read the document of May 15, 2006 issued by the office of the Prime Minister to
squarely suggest that VSIG may be a reincarnation of Vietnam Shipbuilding
Industry Corporation. But it is a question of fact and the fact was required to be
clearly stated and established. There is no averment in the petition or in the
affidavit in reply or the subsequent affidavit relating to GA No. 3476 of 2009 to
the effect that VSIG and Vietnam Shipbuilding Industry Corporation are the
same entity or that VSIG is otherwise entitled to all that stood in the name of
Vietnam Shipbuilding Industry Corporation.
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The matter can end by the same token that VSIG has brandished in its
gambit to clear the vessel out of Indian waters and the arrest that she now
suffers. It is the simple case of VSIG that the ownership of a vessel has to be
decided by its certificate of registration and such certificate alone. But the
certificate of registration that VSIG relies on does not bear the name of VSIG.
VSIG has relied on Section 3(a) of the Commercial Documents Evidence Act,
1939 that records that for the purpose of the Evidence Act, 1872 and
notwithstanding anything contained therein, a court "shall presume, within the
meaning of that Act, in relation to documents included in Part I of the Schedule
... that any document purporting to be a document included in Part I ... and to
have been duly made by or under the appropriate authority, was so made and
that the statements contained therein are accurate." VSIG refers to the seventh
entry in Part I of the Schedule to the 1939 Act which lists a certificate of registry
therein. It refers to the previous entries where the Lloyd's Register of Shipping is
referred to but there is no mention of the Lloyd's Maritime Information Unit
certification. It is the Vietnamese entity's argument that the registered owner as
reflected in the Lloyd's MIU certification relied upon by the plaintiff is of no
relevance or consequence as the law mandates that a certificate of registry shall
be presumed to be duly made by the authority appearing to have made it and the
contents of the document would be deemed to be accurate.
In the context of the legal submission on the basis of the said Act of 1939,
the plaintiffs contend that the expression "shall presume" has been defined in
Section 4 of the Evidence Act, 1872. The definition mandates that whenever it is
directed that the court shall presume a fact, it shall regard such fact as proved,
unless and until it is disproved. The plaintiffs say that Section 3 of the 1939 Act
gives rise only to a rebuttable presumption and they rely on a judgment reported
at (1986) 2 SCC 486 (Sodhi Transport Co. v State of UP) and another of a Single
Judge of the Madras High Court reported at 1993 (41) ECC 161(Cannon Steels
Pvt. Ltd. v. Union of India). Paragraph 14 of the Supreme Court report enunciates
that a presumption is not in itself evidence but only makes a prima facie case for
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the party in whose favour it exists; that it is a rule concerning evidence and
indicates the person on whom the burden of proof lies. A distinction is made
between conclusive proof and rebuttable presumption: in the first case it obviates
the production of any other evidence to dislodge the conclusion to be drawn on
proof of certain facts; in the other case it only points out the party on whom lies
the duty of going forward with evidence on the fact presumed. The Madras case
dealt with a matter under the 1939 Act and concluded,
"15. Under the Commercial Documents Evidence Act, 1939, a Court for
the purposes of the Indian Evidence Act shall presume within the meaning
of that Act in relation to documents included in Part I of the Schedule that
such document was duly made by or under appropriate authority and the
statements contained therein are accurate. Item 18 in Part I of the
Schedule to the Act relates to "Certificate of Origin of Goods" issued by a
recognised Chamber of Commerce. Section 4 of that Act defines a
"recognised Chamber of Commerce" as a Chamber of Commerce recognised
by the Government of its country as being competent to issue certificates of
origin, including any other association similarly recognised. But, under
Section 4 of the Indian Evidence Act, whenever it is provided by that Act
that a Court shall presume a fact, it shall regard such fact as proved
unless and until it is disproved. Thus, even in cases of mandatory
presumptions, it is open to the opposite party to disprove the same. It is
not as if the certificate of origin issued by the Taiwan Chamber of
Commerce is a conclusive proof of the statement contained therein."
In course of the supplemental submission advanced on behalf of the
plaintiff in the second suit, the Vietnamese Maritime Code has been placed. The
said Code, in its first article, records that it "governs legal relations incident to
the use of sea-going vessels for economic, scientific-technological, cultural, sport,
social and State service purposes" which are thereafter collectively referred to as
maritime shipping activities. The second article says that maritime shipping
activities are conducted by organisations and individuals of Vietnam and by
foreign countries, joint venture and foreign cooperative enterprises based in
Vietnam. The first clause of Article 3 make the provisions of the Code applicable
to sea-going vessels employed "exclusively for the carriage of cargo or of
passenger and luggage" and other areas of activity and such vessels are referred
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to as merchant sea-going vessels. The plaintiff in the second suit has particularly
relied on Articles 12(1), 14(3) and 14(4) of the said maritime code and has
contended that the evidentiary value of a "Ship's Registry Certificate" in Vietnam
is recognised only for the purpose of establishing the Vietnamese nationality of
the ship. This plaintiff suggests that the data entered in the National Registry
Book of ships may constitute legal evidence for the interested parties but the
certificate only constitutes evidence of the Vietnamese nationality of the ship. As
a logical next step, this plaintiff implies that the certificate that VSIG has carried
to this Court is not one which has been "duly made" within the meaning of
Section 3 of the Commercial Documents Evidence Act, 1939. Articles 12(1), 14(3)
and 14(4) of the said Maritime Code are set out:
"Article 12
1. Vietnamese sea-going vessels are subject to the obligations of being
entered in the "Vietnam National Registry Book of ships".
(*) In the present Code where the "Council of Minister" is referred to, it
should be understood now the "Government"
The registration of ships in Vietnam is public and against the payment of a
certain fee and made by the Registrar of Vietnamese ships. Persons
interested may demand certified abstracts from, and copies of entries in
the "Vietnam National Registry Book of ships"."
"Article 14
...
3. The data entered in the "National Registry Book of ships" shall constitute legal evidences for the interested parties.
4. After the completion of the procedures for registration the ships shall receive the "Ship's Registry Certificate". This Certificate shall constitute evidence of Vietnamese nationality of the ship."
The plaintiffs caution that the quality of the documents, the inaccurate and unreliable translation and certification relating thereto, and the fact that the State of Vietnam has not appeared to claim the vessel allegedly owned by it should make the Court wary of accepting all that has been shown and argued by 16 VSIG. They refer to the certificate of registration of Vinashin Sky that has been issued in the year 2005, well prior to the first registration of VSIG as an entity on July 5, 2006. They urge that if the certificate of registration is the be-all and end- all of the matter, it is an open and shut case when it is evident that the vessel is not registered in favour of VSIG. The plaintiffs point to the several anomalies in the VSIG documents - that the chart at page 32 of VSIG's subsequent affidavit has 38 items but the original in Vietnamese language at page 41 has 40 items; that the document at pages 34 to 37 of VSIG's subsequent affidavit does not agree with the one in Vietnamese language at pages 43 to 48 of the same affidavit; and, that the seventh entry in Vietnamese language at page 43 of its subsequent affidavit cannot translate to Vinashin Ocean Shipping Company Ltd since the Vietnamese version of Vinashin Ocean Shipping Company Ltd in the certificate of registration is "CONG TY VAN TAI VIEN DUONG VINASHIN" and not "CONG TY TNHH MOT THANH VIEN VAN TAI VIEN DUONG VINASHIN" as appears under the seventh entry at page 43 of the subsequent affidavit of VSIG. The plaintiffs claim that there is no absolute proposition that the vessel of a different concern can be claimed to be a sister vessel of another concern if there is a common beneficiary. In this context, the plaintiffs rely on a judgment reported at (2000) 1 Cal LT 367 (Owners & Parties Interested in the Vessel M.V. "Dong Do" v. Ramesh Kumar & Co. Ltd.) where, at paragraph 9, the Division Bench observed that "a ship belonging to the Shipping Corporation of India cannot be said to be a sister ship belonging to Oil and Natural Gas Commission" though both concerns may ultimately be controlled by the government.
The plaintiffs refer to a judgment reported at 1988 (1) WLR 1090 (The Evop Agnic) where the question raised was whether, in the context of Article 3 of the 1952 Arrest Convention, the word "owner" referred to the registered owner, who was necessarily the legal owner of the vessel, or to someone who had only an equitable property in the ship. The conclusion of the Court of Appeal was that the "owner" had to be the registered owner. In course of holding that a plaintiff's right of arresting a ship which was not the particular ship or a sister ship but was only 17 a ship of a sister company of the owners of the particular ship, it observed as follows:
"The plaintiff's real case is that Mr. Evangelos Pothitos, who describes himself as a Greek shipowner, or his company, Pothitos Shipping Co. S.A., is the real owner of both ships and indeed of all the ships in the Pothitos fleet. This involves the proposition that the registrations are shams. I am as realistic as most judges who have served in the Commercial Court, but I really do not see the commercial advantage of the creation of sham registered ownerships. Mr. Pothitos no doubt has a legitimate interest in running these ships, including the two with which we are concerned, as a fleet, but he can do this by running a series of genuine one-ship shipowning companies as a group. He does not need a structure involving a holding company and subsidiaries, and still less sham companies."
The plaintiffs say that the plaintiffs do not wish to rest their case on the apparent anomalies in the VSIG documents. They insist that even if the court were to assume that Vinashin Sky is owned by the State of Vietnam, the present attempt to arrest the actions must still fail.
The legal issue that arises is as to whether Section 86 of the Civil Procedure Code would be applicable in the present case and in an admiralty action in rem. It is VSIG's contention that since it is a suit begun by the filing of a plaint, an admiralty action in rem would attract the provision of Section 86 of the Code. The plaintiffs suggest that the substantive provision that is embodied in Section 86 of the Code would not apply to an admiralty action in rem. Section 86 of the Code needs first to be seen:
86. Suits against foreign Rulers, Ambassadors and Envoys.--(1) No foreign State may be sued in any Court otherwise competent to try the suit except with the consent of the Central Government certified in writing by a Secretary to that Government:
Provided that a person may, as a tenant of immovable property, sue without such consent as aforesaid a foreign State from whom he holds or claims to hold the property.
(2) Such consent may be given with respect to a specified suit or to several specified suits or with respect to all suits of any specified class or classes, and may specify, in the case of any suit or class of suits, the Court in which the foreign State may be sued, but it shall not be given, unless it appears to the Central Government that the foreign State--18
(a) has instituted a suit in the Court against the person desiring to sue it, or
(b) by itself or another, trades within the local limits of the jurisdiction of the Court, or
(c) is in possession of immovable property situate within those limits and is to be sued with reference to such property or for money charged thereon, or
(d) has expressly or impliedly waived the privilege accorded to it by this section.
(3) Except with the consent of the Central Government, certified in writing by a Secretary to that Government, no decree shall be executed against the property of any foreign State.
(4) The preceding provisions of this section shall apply in relation to--
(a) any Ruler of a foreign State;
(aa) any Ambassador or Envoy of a foreign State;
(b) any High Commissioner of a Commonwealth country; and
(c) any such member of the staff of the foreign State or the staff or retinue of the Ambassador or Envoy of a foreign State or of the High Commissioner of a Commonwealth Country as the Central Government may, by general or special order, specify in this behalf, as they apply in relation to a foreign State.
(5) The following persons shall not be arrested under this Code, namely:--
(a) any Ruler of a foreign State;
(b) any Ambassador or Envoy of a foreign State;
(c) any High Commissioner of a Commonwealth Country;
(d) any such member of the staff of the foreign State or the staff or retinue of the Ruler, Ambassador or Envoy of a foreign State or of the High Commissioner of a Commonwealth Country, as the Central Government may, by general or special order, specify in this behalf.
(6) Where a request is made to the Central Government for the grant of any consent referred to in sub-section (1), the Central Government shall, before refusing to accede to the request in whole or in part, give to the person making the request a reasonable opportunity of being heard."
Prior to the 1976 Amendment to the Code, Section 86(1) began with the words "No Ruler of a foreign State may be sued ..." There were several judicial pronouncements to the effect that the extent of sovereign immunity recognised by Section 86 prior to its amendment covered only the ruler. The specific reference 19 to the ruler and the related pronouns were deleted from the provision by the 1976 Amendment.
VSIG submits that Section 86 of the Code would reveal that there is no absolute immunity for a foreign sovereign in India but an aspiring plaintiff must first obtain permission of the Central Government before suing a foreign State in any court. VSIG says that the expression, "trades within the local limits" that appears in Section 86(2)(b) indicates that if any commercial activity is undertaken by a foreign sovereign within the jurisdiction of the relevant court, the permission would ordinarily be granted by the Central Government to sue such foreign sovereign. VSIG contends that implicit in such clause is that notwithstanding a foreign sovereign carrying on commercial activities within the jurisdiction of a court, permission of the Central Government has to be obtained before such foreign sovereign can be sued. This, according to VSIG, would preclude the invocation in India of the now-popular theory in international law that a foreign sovereign that undertakes commercial activities may not claim immunity from being sued in connection with such activities.
Of the several judgments that VSIG has cited, it has stressed more on the judgments reported at (1994) 1 SCC 282 (Veb Deutfracht Seereederei Rostock v. New Central Jute Mills Co. Ltd.), 2005 (3) CHN 203 (State of Ukraine v. Md. Shafique Khan) and (1998) 1 LLR 1 (Republic of India and the Government of the Republic of India (Ministry of Defence) v. India Steamship Co. Ltd.). The sheet- anchor of the plaintiffs' legal submission is a judgment reported at 1999 (1) Cal LJ 141 (State of Ukraine v. Elitarious Ltd). The plaintiffs have also placed much reliance on a judgment of the Australian Federal Court reported at [2006] FCAFC 192 (Comandate Marine Corp v. Pan Australia Shipping Pty Ltd) and on international conventions as admitted into the body of Indian laws by the judgment reported at 1993 Supp (2) SCC 433 (MV Elisabeth v. Harwan Investment & Trading Pvt. Ltd.). As is normally the case when a pure question of law is addressed, both sets of parties have referred to common judgments.
20To better understand the Supreme Court opinion in Rostock, VSIG has first referred to the Division Bench judgment reported at AIR 1983 Cal 225 (New Central Jute Mills Co. Ltd. v. VEB Deutfracht Seereederei Rostock) which was carried to the Supreme Court on a certificate granted by the High Court. The plaintiff in that suit was the consignee of certain goods covered by a bill of lading. The plaintiff claimed that the goods were damaged in course of being shipped. The claim in the suit filed on the original side of this Court was for a money decree against a German Democratic Republic organisation that can, for convenience sake, be called Rostock. As the first defendant, Rostock petitioned to this Court that it was a department and/or agency and/or instrumentality of the German Democratic Republic and asserted that the doctrine of sovereign immunity even extended to an incorporated body having a juristic personality; but since it was but a department of a foreign State it was entitled to immunity extended by the comity of nations to a sovereign State, its property and person. Rostock relied on an authenticated extract from the GDR Shipping Register that showed that the relevant vessel, Ernst Schnelier was owned by the people of GDR and hence owned by the State. Rostock's petition was allowed by the trial court upon it being found to have been established that it was a part of a foreign government or State and could not be proceeded against in a suit without the prior consent of the Central Government under Section 86 of the Code which had admittedly not been obtained. The Division Bench referred to several provisions from the Constitution of GDR and framed the following question at paragraph 17 of the report:
"17. ... The question in this case, is that when the suit is expressly or ex facie not against a foreign State by name as such, will Section 86 still applied if it is contended that in reality the suit is against an organ or institution which forms a part of that State ..."
The answer to the question is found at paragraph 25 of the report and at paragraph 26 another ancillary issue was raised. At paragraph 28 of the report it 21 was held that it was premature at the interlocutory stage to contend whether any immunity could be claimed before it being assessed on facts as to whether the transaction was commercial in nature. The relevant extracts from paragraphs 25, 26 and 28 are set out:
"25. In the aforesaid view of the matter in our opinion Section 86 of the Code of Civil Procedure cannot have any application in the facts and circumstances of the case. It is not a suit ex facie against a foreign State. Therefore, Section 86 of the Code in our opinion would not have any application. In coming to the conclusion that Section 86 is confined to the suit against a State by name as such we are supported by the principles of interpretation that in making construction of a statute which is not explicit it should be in consonance with the general principle of international law. Under the general principles of international law, had not there been Section 86, a suit against a department of the State would still lie and it would be for the department of a foreign State to claim immunity. If such immunity is availed of, the Court is to grant such immunity. It would not be proper to curtail that right unless the legislative intent was clear and expressive on this point. In our opinion such legislative intent was not explicit. Therefore, we are of the opinion that in the suit as stated in this case Section 86 has no application.
"26. The next question that arises is that apart from Section 86 would the defendant/respondent be still entitled to immunity and that raises further questions, namely, whether in the facts and circumstances of the case there is sufficient evidence in this case to hold that the D.S.R. line is part of the foreign State and incidentally naturally whether in respect of a department of a foreign State which is incorporated as a separate legal entity this theory of immunity would still be applicable. That in our opinion should be a matter which should be decided in the suit as a preliminary issue that that is an issue which is taken in the written statement by the defendant. ..."
"28. It is not necessary at this stage to decide whether the respondent is claiming immunity as part of the German Democratic Republic and as such entitled to immunity. Further it is premature at this stage to contend whether there is immunity as such in respect of commercial transaction involved in this case. In the view we have taken, we are, therefore, on that ground, not referring to the numerous decisions which were cited before us from both sides. We, therefore, hold that Section 86 of the Civil Procedure Code would not be a bar in this case for the reasons mentioned earlier. But whether the defendant would be entitled to sovereign immunity in international law, a plea can be taken in the written statement. If such a 22 plea is taken, then that plea should be decided as a preliminary issue for trial."
In the appeal on certificate to the Supreme Court, the object of the body of international law that went into the codification of Section 86 of the Civil Procedure Code was noticed at paragraph 5 of the report:
"5. One of the principles of International Law is that every sovereign State respects the independence of every other foreign State. This absolute independence and the international comity underlines the relationship between sovereign States. The object of Section 86 of the Code is to give effect to the principles of International Law. But, in India it is only a qualified privilege because a suit can be brought with the consent of the Central Government in certain circumstances. Just as an independent sovereign State may statutorily provide for its own rights and liabilities to sue and be sued so can it provide rights and liabilities of foreign States to sue and be sued in its Courts. It can be said that effect of Section 86 thus is to modify the extent of doctrine of immunity recognised by the International Law. If a suit is filed in Indian Courts with the consent of the Central Government as required by Section 86, it shall not be open to any foreign State to rely on the doctrine of immunity. Sub-section (1) of Section 86 says in clear and unambiguous terms that no foreign State may be sued in any court, except with the consent of the Central Government certified in writing by the Secretary to that Government. Sub-section (2) prescribes that such consent shall not be given unless it appears to the Central Government that the case falls within any of the clauses (a) to (d) of sub- section (2) of Section 86. Sub-section (6) enjoins that where a request is made to the Central Government for the grant of any consent referred to in sub-section (1), the Central Government shall before refusing to accede to the request in whole or in part, give to the person making the request a reasonable opportunity of being heard. On a plain reading of different sub- sections of Section 86, it is apparent that no foreign State may be sued in any court in India, except with the consent of the Central Government which has to be certified in writing by the Secretary to that Government. In view of the provisions aforesaid, before any action is launched or a suit is filed against a foreign State, person concerned has to make a request to the Central Government for grant of the necessary consent as required by sub- section (1) of Section 86 and the Central Government has to accede to the said request or refuse the same after taking into consideration all the facts and circumstances of the case. In a sense it amounts to a bar on the power of court itself which is entitled to try all suits of civil nature in view of Section 9 of the Code. But, Section 9 itself recognises the limitation on such courts to try any suit the cognizance whereof is either expressly or impliedly barred. As such whenever a relief is sought against a foreign 23 State, the court before which such claim is lodged has to examine whether the person concerned has got the consent of the Central Government in terms of Section 86 of the Code."
At paragraph 6 of the report, the contention of the plaintiff in that case that the dispute had arisen in connection with a commercial contract was noticed and was repelled since Section 86(2)(b) incorporated the circumstances where a foreign sovereign trades within the jurisdiction of the appropriate court. The Supreme Court then referred to the judgment reported at (1966) 1 SCR 319 (Mirza Ali Akbar Kashani v. United Arab Republic), which has been copiously referred to by the parties to the present proceedings as will be noticed subsequently. The Supreme Court relied on two English decisions on the subject [Baccus S.R.L. v. Servicio Nacional Del Trigo, (1956) 3 All ER 715, and Krajina v. The Tass Agency, (1949) 2 All ER 274] and a Division Bench judgment of this Court in Royal Nepal Airlines Corpn v. Monorama Meher Singh Legha [AIR 1966 Cal 319] for the principle that a State may for certain purposes under its legislation give some department of the State the status and rights of a juridical entity without seeking to deprive the department of its general immunity from a suit. The Supreme Court concluded that a plea of immunity raised by a corporate undertaking of a foreign State had to be examined. The relevant extracts from paragraph 9 and paragraph 11 of the report capture the principle:
"9. ... But, at the same time, it must be impressed that any plea of immunity raised by a corporate undertaking of a foreign State, has to be examined on the basis of materials produced on behalf of such undertaking or corporation. The initial onus of establishing that such corporation or undertaking had right to immunity, must be discharged. If it satisfies the court that because of any constitutional provision, although such corporation has its separate legal entity, still it shall be deemed to be a department of the State for purpose of immunity, then only the onus will shift to the plaintiff to disprove any such claim."
"11. ... The immunity and protection extended to the foreign State on the basis of International Law should not be stretched to a limit, so that a foreign company and corporation, trading within the local limits of the jurisdiction of the court concerned, may take a plea of Section 86, although 24 prima facie it appears that such company or corporation is liable to be sued for any act or omission on their part or for any breach of the terms of the contract entered on their behalf. It is neither the purpose nor the scope of Section 86 to protect such foreign traders, who have committed breach of the terms of the contract, causing loss and injury to the plaintiff. But, if it appears to the Central Government that, any attempt on the part of the plaintiff, to sue a foreign State, including any company or corporation, is just to harass or to drag them in a frivolous litigation, then certainly the Central Government shall be justified in rejecting any such application for consent, because such motivated action on the part of the plaintiff, may strain the relations of this country with the foreign State."
What is of significance in the Rostock case is that the judgment was rendered in the context of a regular suit filed on the Original Side of this Court. It was not an admiralty action and certainly not an admiralty action in rem.
VSIG next relies on a judgment reported at AIR 1998 Bom 287 (Kenya Airways v. Jinibai B. Kheshwala). In the opening paragraph of the report the four questions that fell for consideration before the Division Bench were framed. The first and third questions were, respectively, whether Kenya Airways could be held to be a foreign State within the meaning of Section 86 of the Code and whether Kenya Airways had waived its right under Section 86 of the Code. Many years before it raised the issue, Kenya Airways had filed its written statement in a suit where the plaintiff claimed possession of a flat in Bombay wherein a manager of Kenya Airways, while he was in the previous employment of another airline, had entered into possession. The suit was filed in 1978 and Kenya Airways filed its written statement in 1979. When the suit was taken up for hearing in December, 1994 a contention was raised by Kenya Airways that since the plaintiff had not obtained the consent of the Central Government under Section 86 of the Code, the suit was not maintainable. Upon such contention being expressly urged by way of a notice of motion, additional issues were framed as to the maintainability of the suit. The plaintiff thereafter, without prejudice to his contention that Section 86 of the Code was inapplicable, sought permission from the Central Government to continue with the suit. The trial Judge declined a request for the 25 question relating to Section 86 of the Code being taken up as a preliminary issue since it has been raised after 16 years of the institution of the suit. Kenya Airways challenged such order before the Supreme Court. The Supreme Court opined that the trial court had to first hear the parties on the question relating to Section 86 of the Code. Before the Supreme Court, the plaintiff relied on a communication from the Ministry of External Affairs that no permission under Section 86 of the Code was necessary in the facts and circumstances of the case. Following the Supreme Court order, the trial Judge took up the preliminary issues and found that the defendants had failed to prove that Kenya Airways was an undertaking of the Government of the Republic of Kenya or that its ownership vested in the government. It is such order that was brought before the Division Bench. At paragraphs 14 and 15 of the report the Division Bench considered whether the plea urged by Kenya Airways after 16 years was available to it at such stage. The conclusion on such score is recorded in the closing sentences of paragraph 15 of the report:
"15. ... In our judgment, it is not open to the defendants to raise the plea for the first time after almost sixteen years of the filing of the suit after submitting themselves to the jurisdiction of the Court. They have filed their appearances and appeared in the proceedings. They have given undertakings and made statements thereby avoided appointment of Court Receiver. They have filed their respective written statements wherein this plea has not been raised. Having submitted to the jurisdiction of the Court they would be deemed to have waived their right if any under Section 86 of the Code. They cannot, therefore, be permitted to raise the plea in respect of maintainability of the suit under Section 86 of the Code. Present suit, thereafter, cannot be held to be 'not maintainable' on the ground of want of consent under Section 86 of the Code."
Having held that the plea could not be raised by the Kenya Airways at the stage that it had been, the Division Bench took up the question as to whether Kenya Airways was a foreign State within the meaning of Section 86 of the Code. The issued is answered at paragraph 34 of the report in the following passage:
"34. ... In our view, as long as the shares are wholly owned by the Government of Kenya and the same are not transferred to the public under the aforesaid Article, the third defendant has not ceased to be a 26 Government Company. It is not uncommon that Government Companies are, after passage of time, privatised and are often made into public companies. If that were to happen then certainly the third defendant would lose the status of being a Government Company. However, as long as the Company is fully owned and controlled by the Government of Kenya the same would be entitled to claim the immunity under Section 86 of the Code. The said immunity would be available to the third defendant even though it is engaged in commercial activities as in India the sovereignty is not lost even though a foreign State Government may be engaged in commercial activities. ..."
The trial court order was, however, affirmed, though on a different ground:
that Kenya Airways had submitted to the jurisdiction by waiving its right under Section 86 and was thus disentitled to claim the protection thereunder. The plaintiffs have criticised the second part of the judgment beginning paragraph 16 of the report as being in the nature of an obiter dictum since notwithstanding the finding that Kenya Airways was entitled to protection under Section 86 of the Code, the suit was directed to continue nonetheless without the Central Government's previous or subsequent consent.
The judgment next placed by VSIG is one rendered by a Division Bench reported at 2005 (3) CHN 203 (State of Ukraine v. Md. Shafique Khan) in an admiralty suit in rem. A vessel MV Toyvo Antikaynen, registered at Odessa in Ukraine, was arrested following three admiralty actions being commenced while the vessel was berthed at the Kidderpore Docks in Calcutta. The State of Ukraine, claiming to be the owner of the ship, applied in each of the suits for the plaint relating thereto to be taken off the file as the actions had apparently been commenced against a foreign State without permission having been obtained under Section 86 of the Code. Such plea of sovereign immunity was rejected by the trial court and affirmed in appeal. The State of Ukraine moved the Supreme Court but did not obtain any stay of the Division Bench order. During the pendency of the matter before the Supreme Court, the vessel was sold in a fourth suit that had been ostensibly brought against the ship. Prior to the sale of the 27 vessel, a fifth suit was registered by the respondent in the appeal on which the judgment under discussion was rendered.
The previous judgment of the Division Bench affirming the dismissal of the plea for rejecting the plaints relating to the first three admiralty suits concerning MV Toyvo Antikaynen is reported at (1999) 1 Cal LJ 141 (State of Ukraine v. Elitarious Ltd). An appeal was preferred from such judgment to the Supreme Court but was withdrawn. Md. Shafique Khan was not a party to the Supreme Court proceedings.
Though the Elitarious judgment has been cited by the plaintiffs, it is necessary in the context of Shafique Khan to consider the earlier judgment relating to the same vessel. In Elitarious the Division Bench noticed a number of the authorities that have been cited here, including MV Elisabeth, Mirza Ali and Rostock, before the opinion was expressed at paragraphs 33 to 36 of the report:
"33. Now as regards the first contention raised by Mr. Mukerji is concerned, in our opinion, the same has got no force. In order that a plaint can be rejected under Order 7 Rule 11 of the Code of Civil Procedure it must appear from the averment made in the body of the plaint itself that the suit is barred by any law. In the instant case as it appears from the averment of the plaint it cannot be said that the suit is barred by any law for the time being in force. Whether the defendant is really state of Ukraine or not is a matter of evidence and such fact can be decided only after taking evidence. ..."
"34. In view of the aforesaid provision, an issue can be decided as preliminary issue if the case may be disposed of on an issue of law only. Moreover, such issue must relate to jurisdiction of the Court or to a bar to suit created by any law for the time being in force. In the instant case from the averment made in the plaint it does not appear that the suit has been filed against any foreign state. Whether the vessel is really owned by the foreign state is an issue of fact and such fact can be adjudicated after consideration of materials on record. Therefore, there is no scope of rejection of the plaint at this stage or even deciding the suit itself on the basis of a preliminary issue.
"35. Moreover, we find substance in the contention of Mr. Deb that the bar created under Section 86 of the Code is restricted only to a suit and 28 not to any other proceeding. In this connection reference may be made to the decision of the Apex Court in the case of Mirza Ali Akbar Kashani v. The United Arab Republic & Anr. reported in AIR 1966 SC 230. In the aforesaid decision, the Supreme Court has in clear language stated that Section 86(1) of the Code is not merely a procedural provision and the same is in a sense a counter part of Section 84. It is now well settled that by virtue of Section 141 of the Code of Civil Procedure only procedural part of the Code of Civil Procedure can be made applicable to a Misc. Civil Proceeding. But the substantive right created by the Code cannot be made applicable by taking aid of Section 141 of the Code of Civil Procedure. In this connection reference may be made to a decision of this Court in B..N. Biswas v. Monoroma Debi reported in AIR 1948 Calcutta 77 and also to the Special Bench decision of this Court in Noor Nahar Bewa v. R.N. Deb reported in 1988 (1) CHN 461. Thus, the provision contained in Section 86 being substantive in character, the said provision has got no application to a proceeding under the Admiralty Jurisdiction of this Court. It may further be mentioned here that in the decision of His Highness, the Maharana Sahib Shri Bhagwat Singh Bahadur of Udaipur v. The State of Rajasthan & Ors. reported in AIR 1964 SC 444, it has been held that proceeding under Industrial Disputes Act is not a suit and as such Section 87 of the Code of Civil Procedure has got no application to such proceeding. Similarly in the decision reported in AIR 1965 SC 1798, it has been held that provision contained in Section 86 of the Code has got no application to a proceeding under Section 14 of the Arbitration Act. The decision of Royal Nepal Airlines v. Monorama Meher Singh Legha & Anr. reported in AIR 1966 Cal 319 and also of V.D.S. Rostock reported in AIR 1994 SC 516, cited by Mr. Mukerji, in our opinion, are not applicable in the instant case as in those cases the Courts were dealing with a suit for recovery of money filed in the Original Side of this Court. It is now well settled that merely because the provision of the Code of Civil Procedure has been made applicable to a proceeding does not imply that the said proceeding is a suit within the meaning of the Code of Civil Procedure. The instant proceeding in rem is not an ordinary suit contemplated under the Code of Civil Procedure. As held by the Apex Court in M.V. Elisabeth (supra) it is by virtue of the (power) conferred by Article 225 of the Constitution of India that this Court as a superior Court of record can exercise its Admiralty and inherent power to arrest a ship. Apart from the aforesaid Admiralty Jurisdiction exercised by the High Courts as stated above, ordinary Courts having territorial and pecuniary jurisdiction are not vested with such power. Therefore, these proceedings are not suits within the meaning of Section 86 of the Code of Civil Procedure.
"36. As regards the second contention raised by Mr. Mukerji, it is now well settled that the rules recognised by Public International Law are not in reality law in that sense of the term unless it is recognised by any statute 29 of a country. In this connection the definition of International Law as given in Osborn's Concise Law Dictionary, 7th Edition may be referred. There it has been clearly stated that International Law is only binding on the Court of the country in so far as it has been adopted and made part of Municipal Law. As indicated above, the full immunity of a foreign state from being sued in a foreign country has not been recognised by the Statute in this country as will appear from Section 86 of the Code of Civil Procedure. Such immunity is limited to the extent as indicated in the said section."
As recorded at paragraph 6 of Shafique Khan, the plea of sovereign immunity relating to MV Toyvo Antikaynen was raised by the State of Ukraine in such fifth admiralty suit against the same ship and was considered by the trial court and rejected in August, 2004. The suit was decreed. A review petition failed. The matter was carried to the Division Bench against the judgment and decree in the fifth suit. The Elitarious judgment was placed before the Court in Shafique Khan and the legal issue was addressed at paragraphs 30, 31, 32 and 35 of the report:
"30. We have carefully considered the submissions made on behalf of the respective parties and the decisions cited by the learned Counsels in support of their respective submissions. Although, the question now being raised by Mr. I.P. Mukherjee had been considered by a Division Bench of this Court in the case of State of Ukraine vs. Elitarious Ltd. (supra) the issue appears to have been differently answered by the Hon'ble Supreme Court.
"31. It appears to us that the provisions of section 86 of the Code of Civil Procedure imposes a restrictive bar and not an absolute bar in respect of suits filed against Foreign States. In view of the decision of the Hon'ble Supreme Court in the case of V.D.S. Rostock (D.S.P. Lines) Department of G.D.R. (supra) and Videsh Sanchar Nigam Limited (supra), we are inclined to hold that a suit in the admiralty jurisdiction against a vessel owned by a Foreign State is competent, subject to compliance with the provisions of section 86 of the aforesaid Code. As was observed by the Hon'ble Supreme Court in the earlier of the two aforesaid cases, it is neither the purpose nor the scope of section 86 to protect foreign traders who have committed breach of the terms of a contract causing loss and injury to the plaintiff. But at the same time, it is also not the intention of the Central Government to encourage frivolous litigation against a Foreign State. In the Videsh Sanchar Nigam Limited case which was one arising out of an admiralty suit filed in the Bombay High Court, although, the provisions of section 86 were 30 not noticed, the Supreme Court imposed certain conditions both on the State of Ukraine as well as the Captain of the vessel before allowing the ship to leave the harbour.
"32. Both the said two cases emphasised the fact that an admiralty suit may be filed against a foreign-owned vessel. Consequently, in our view, section 86 with its restrictions would apply to such action. In fact, in the V.D.S. Rostock case, while discussing the provisions of section 86 of the Code of Civil Procedure, the Hon'ble Supreme Court held that without permission having been obtained from the Central Government, the suit as filed against the vessel in question was incompetent."
"35. However, having regard to the restrictive nature of the bar imposed under section 86 of the Code of Civil Procedure, we are of the view that the ownership of the vessel by a Foreign State has to be established before the bar under section 86 of the Code of Civil Procedure can be invoked."
At paragraph 33 of Shafique Khan the Division Bench expressed the view that the provisions of Section 86 of the Code "are not absolutely substantive in character but a combination of both substantive and procedural rights." Elitarious had held that Section 86 of the Code contained a substantive provision and in view of Section 141 of the Code it was only the procedure under the Code that would be applicable to an admiralty action in rem and not the substantive provisions of the Code. That Section 86 of the Code is not merely procedural is recognised in Mirza Ali Akbar which is discussed in greater detail later in this judgment.
The plaintiffs raise several issues relating to Shafique Khan. The plaintiffs say that despite noticing the previous Division Bench judgment in Elitarious and the law as recognised therein, Shafique Khan took a contrary view by referring to the law having been laid down differently by the Supreme Court than as expressed in Elitarious. The plaintiffs point out that the first sentence of paragraph 31 of Shafique Khan is the law of the land as long as admiralty actions in rem are not bunched with general suits of the ordinary kind. It is the plaintiffs' further submission that neither Rostock nor the judgment reported at (1996) 7 SCC 127 (Videsh Sanchar Nigam Limited v. MV Kapitan Kud), that have been 31 referred to in the second sentence of paragraph 31 of the Shafique Khan report, holds that a suit in the admiralty jurisdiction would be subject to compliance of Section 86 of the Code. The plaintiffs submit that the third sentence of paragraph 32 of Shafique Khan is at variance with the Supreme Court judgment in Rostock.
It may be recollected here that Rostock was a suit filed on the Original Side of this Court and it was not directed against a vessel. Rostock was neither an admiralty action in rem nor even an admiralty action in personam. The plaintiff in Rostock had made a claim in respect of a transaction relating to a vessel of which the first defendant was the owner. It was a claim in personam by way of a regular suit and directed against a juristic person, though it concerned the carriage of goods by a sea-faring vessel. Kapitan Kud, on the other hand, can be seriously interpreted to imply the Supreme Court's view that Section 86 of the Code would be inapplicable to an admiralty action in rem. Though the Supreme Court did not notice Section 86 of the Code in Kapitan Kud, as has been pointed out towards the end of paragraph 31 of Shafique Khan, the issue should obviously have arisen even though the conservative view may be that it passed sub silentio. The facts in Kapitan Kud are so closely connected to a vessel owned by a State that they need to be iterated in the present context. The claim of the plaintiff in the admiralty action in rem before the Bombay High Court was that Kapitan Kud had caused damage to an international cable which extended on the sea route from Singapore to France and had a branch in Bombay. Paragraph 3 of the Supreme Court report records that "the appellant led the Admiralty Suit ... against the respondent-vessel claiming damages of about Rs.28 crores ..." On a notice of motion for arrest of the vessel taken out by the plaintiff, Kapitan Kud was arrested. More than a month later, as the report records, "the vessel made an application for release from arrest ..." The trial court released the vessel. In the appeal from the order of release, a Division Bench directed assessors to give their estimate of the anchoring position and the probable involvement of the vessel in the breakage of the cable. The captain of the ship declined to participate in the proceedings before the assessors. The assessors concluded that the cable had 32 been damaged by the anchor of an ocean-going ship and that the probability of such ocean-going vessel being Kapitan Kud was very high. At paragraph 15, the Supreme Court rendered its opinion and directed, inter alia, that the Ukrainian Government give an undertaking through its accredited authority that in the event of the suit being decreed it would comply with the decree without reference to execution. The vessel was directed to be released if the deposit as directed was made and undertakings as sought were furnished. Paragraph 15 of the report is quoted:
"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 respondent-vessel 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 a 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 successful, 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 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; (iii) the 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."33
It is of significance it was noticed by the Supreme Court that the State of Ukraine was the party that had to comply with the decree that could ultimately be passed in the admiralty suit. Though the report does not indicate that a plea under Section 86 of the Code had been raised by the defendants before the Supreme Court, the Supreme Court noticed in the fourth sentence of paragraph 15 of the report that the Division Bench of the Bombay High Court had declined to interfere with the order of the trial Judge releasing the vessel "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 plaintiffs have referred to five sets of international conventions in their attempt to suggest that in view of the dictum in MV Elisabeth, the principles embraced in such provisions would be part of the common law in this country. At paragraph 76 of MV Elisabeth there is reference to the Brussels Convention of 1926 and the Brussels Convention of 1952. The 1952 Convention relates to arrest of sea-going ships. The last sentence of paragraph 76 lays down that although these conventions have not been adopted in India by legislation, the principles incorporated in the conventions are 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." At paragraph 88 of MV Elisabeth, Nagendra Singh's International Maritime Convention, British Shipping Laws, Volume 4 has been referred to. The plaintiffs rely on the 1926 Brussels Convention as it quoted in the text approved by the Supreme Court. Articles 1 and 4 of such Convention provide as follows:
"Article 1 - Sea-going ships owned or operated by States, cargoes owned by them, and cargoes and passengers carried on State-owned ships, as well as the States which own or operate such ships and own such cargoes shall be subject, as regards claims in respect of the operation of such ships or in respect of the carriage of such cargoes, to the same rules of liability and 34 the same obligations as those applicable in the case of privately-owned ships, cargoes and equipment."
"Article 4 - States shall be entitled to rely on all defence prescriptions and limitations of liability available to privately-owned ships and their owners.
Any necessary adaptation or modification of provisions relating to such defences, prescriptions and limitations of liability for the purpose of making them applicable to ships of war or to the State-owned ships specified in Article 3 shall form the subject of a special Convention to be concluded hereafter. In the meantime, the measures necessary for this purpose may be effected by national legislation in conformity with the spirit and principles of this Convention."
The plaintiffs say that no special case is made out for State-owned ships in the 1926 Convention. In the same vein, the plaintiffs have relied on the 1952 Brussels Convention and the 1999 Geneva Convention on the arrest of ships. The plaintiffs have also referred to the United Nations Convention on Jurisdictional Immunities of States and their Property, 2004 to which India is a signatory but it has not been ratified in this country. The plaintiffs place clauses (1) and (2) of Article 3 of the 1952 Convention as such provisions recognise the right of a claimant to proceed against a sister vessel of the one in relation to which the maritime claim arose. The plaintiffs say that the 1952 Convention does not carve out any exception for State-owned vessels. Article 3 of the 1952 Convention, in its relevant part, provides as follows:
"Article 3 "(1) Subject to the provisions of para. (4) of this article and of article 10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail; but no ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claim enumerated in article 1,
(o), (p) or (q).
"(2) Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons."35
The plaintiffs rely on a judgment reported at (2004) 9 SCC 512 (Liverpool & London SP & I Assn Ltd v. MV Sea Success I). The plaintiffs place paragraph 59 to 61 of the judgment for the proposition that since MV Elisabeth incorporated the 1952 Brussels Convention on arrest of ships as part of the law applicable in India, the 1999 Geneva Convention, formally known as International Convention on the Arrest of Ships, 1999, should also be applicable in this country. Paragraph 59 to 61 of the report provide, "59. M.V. Elisabeth is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that there does not exist any primary act touching the subject and in absence of any domestic legislation to the contrary; if the 1952 Arrest Convention had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be applied.
"60. Application of the 1999 Convention in the process of interpretive changes, however, would be subject to: (1) domestic law which may be enacted by Parliament; and (2) it should be applied only for enforcement of a contract involving public law character.
"61. It is not correct to contend as has been submitted by Mr Bharucha that this Court, having regard to the decision in M.V. Elisabeth, must follow the law which is currently prevalent in UK and confine itself only to the 1952 Arrest Convention in Indian admiralty jurisprudence. The question is as to if the 1952 Arrest Convention had been applied keeping in view the changing scenario why not the 1999 Arrest Convention also? A distinction must be borne in mind between a jurisdiction exercised by the High Courts in India in terms of the existing laws and the manner in which such jurisdiction can be exercised. Once the court opines that insurance is needed to keep the ship going -- it has to be construed as "necessaries". The jurisdiction of the courts in India, in view of the decision of this Court in M.V. Elisabeth is akin to the jurisdiction of the English courts but the same would not mean that the Indian High Courts are not free to take a different view from those of the English courts. As regard application of a statute law the Indian High Courts would follow the pre-independence statute but Indian courts need not follow the judge-made law."
The plaintiffs rely on Article 3(1)(a) and 3(2)(a) of the 1999 Convention on the exercise of right of arrest. They also place the first two limbs of Article 8 of 36 the Convention to suggest that only ships owned or operated by a State and used for the time being on government non-commercial service would be exempt from the provisions of the 1999 Convention. The relevant clauses are set out:
"Article 3: Exercise of right of arrest "1. Arrest is permissible of any ship in respect of which a maritime claim is assessed if:
(a) the person who owned the ship at the time when the maritime claim arose is liable for the claim and is owner of the ship when the arrest is effected; or"
"2. Arrest is also permissible of any other ship or ships which, when the arrest is effected, is or are owned by the person who is liable for the maritime claim and who was, when the claim arose:
(a) owner of the ship in respect of which the maritime claim arose; or"
"Article 8: Application "1. This Convention shall apply to any ship within the jurisdiction of any State Party, whether or not that ship is flying the flag of a State Party.
"2. This Convention shall not apply to any warship, naval auxiliary or other ships owned or operated by a State and used, for the time being, only on government non-commercial service."
In the backdrop of the 1952 and 1999 Arrest Conventions, the plaintiffs place a commentary on State-owned ships from Berlingieri on Arrest of Ships (4th Ed, 2006). Paragraphs 99.240 and 99.241 from the commentary are of some relevance:
"99.240 When, during the CMI 1951 Naples Conference, the proposal was made to include in the Convention a rule excluding from the scope of the Convention State-owned ships used on Government non-commercial service, strong opposition thereto was encountered from some delegations. The reason for such opposition was that at that time the 1926 Brussels Convention on Immunity of State-owned Ships has not yet been ratified by several maritime countries, including the United Kingdom. Subsequently, the principle that private maritime law conventions should not apply to State-owned ships used on Government non-commercial service was 37 generally accepted, while all proposals for a wider exemption in respect of State-owned ships were rejected. A provision on immunity of State-owned ships has thus been inserted in Article 8(2) of the 1999 Convention.
"99.241 While the text of the Draft Articles was based on the provision of the 1993 MLM Convention, the text adopted by the Conference is based on Article 3 of the 1926 Immunity Convention, even if not all the types of ships reference to which is made in that article are mentioned in Article 8(2) of the 1999 Convention."
The plaintiffs say that there is a 2004 document entitled the "United Nations Convention on Jurisdictional Immunities of States and Their Property" to which India is a signatory though it has not been ratified by India. The plaintiffs rely on the provisions of Articles 5, 10 and 16 of such Convention to show how international law on the subject has progressed. The plaintiffs also refer to the official annex to the Convention with respect to Article 10 that explains clause (3) of that Article. The relevant provisions are quoted:
"Article 5: State immunity A State enjoys immunity, in respect of itself and its property, from the jurisdiction of the courts of another State subject to the provisions of the present Convention."
"Article 10: Commercial transactions "1. If a State engages in a commercial transaction with a foreign natural or juridical person and, by virtue of the applicable rules of private international law, differences relating to the commercial transaction fall within the jurisdiction of a court of another State, the State cannot invoke immunity from that jurisdiction in a proceeding arising out of that commercial transaction.
2. Paragraph 1 does not apply:
(a) in the case of a commercial transaction between States; or
(b) if the parties to the commercial transaction have expressly agreed otherwise.
3. Where a State enterprise or other entity established by a State which has an independent legal personality and is capable of:
38(a) suing or being sued; and
(b) acquiring, owning or possessing and disposing of property, including property which that State has authorized it to operate or manage, is involved in a proceeding which relates to a commercial transaction in which that entity is engaged, the immunity from jurisdiction enjoyed by that State shall not be affected."
"Article 16: Ships owned or operated by a State
1. Unless otherwise agreed between the States concerned, a State which owns or operates a ship cannot invoke immunity from jurisdiction before a court of another State which is otherwise competent in a proceeding which relates to the operation of that ship if, at the time the cause of action arose, the ship was used for other than government non- commercial purposes.
2. Paragraph 1 does not apply to warships, or naval auxiliaries, nor does it apply to other vessels owned or operated by a State and used, for the time being, only on government non-commercial service.
3. Unless otherwise agreed between the States concerned, a State cannot invoke immunity from jurisdiction before a court of another State which is otherwise competent in a proceeding which relates to the carriage of cargo on board a ship owned or operated by that State if, at the time the cause of action arose, the ship was used for other than government non- commercial purposes.
4. Paragraph 3 does not apply to any cargo carried on board the ships referred to in paragraph 2, nor does it apply to any cargo owned by a State and used or intended for use exclusively for government non- commercial purposes.
5. States may plead all measures of defence, prescription and limitation of liability which are available to private ships and cargoes and their owners.
6. If in a proceeding there arises a question relating to the government and non-commercial character of a ship owned or operated by a State or cargo owned by a State, a certificate signed by a diplomatic representative or other competent authority of that State and communicated to the court shall serve as evidence of the character of that ship or cargo."
"Annex to the Convention ...39
With respect to Article 10 The term "immunity" in Article 10 is to be understood in the context of the present Convention as a whole.
Article 10, paragraph 3, does not prejudge the question of "piercing the corporate veil", questions relating to a situation where a State entity has deliberately misrepresented its financial position or subsequently reduced its assets to avoid satisfying a claim, or other related issues."
The second plaintiff has referred to the United Nations Convention on the Law of the Sea of 1982. The plaintiff in the later suit says that both India and Vietnam signed the Convention on December 10, 1982. This plaintiff relies on a table recapitulating the status of Convention which shows that India apparently ratified the Convention on June 29, 1995 and Vietnam ratified it on July 25, 1994. No statute has, however, been cited in support of the statement that India has ratified the Convention. The plaintiff in the second suit relies on Articles 28 and 32 which are bunched under sub-section (b) of Section 3 of the Convention applicable to merchant ships and government ships operated for commercial purposes. This plaintiff suggests that no exception has been made for government vessels operated for commercial purposes under the said Convention. Article 28 covers the civil jurisdiction of a coastal State in relation to foreign ships and Article 32 covers the extent of immunity accorded under the Convention to warships and other government ships. Article 32 refers to Articles 30 and 31 which have no relevance to the present context. Articles 28 and 32 provide as follows:
"Article 28 - Civil jurisdiction in relation to foreign ships
1. The coastal State should not stop or divert a foreign ship passing through the territorial sea for the purpose of exercising civil jurisdiction in relation to a person on board the ship.
2. The coastal State may not levy execution against or arrest the ship for the purpose of any civil proceedings, save only in respect of obligations or liabilities assumed or incurred by the ship itself in the course or for the purpose of its voyage through the waters of the coastal State.40
3. Paragraph 2 is without prejudice to the right of the coastal State, in accordance with its laws, to levy execution against or to arrest, for the purpose of any civil proceedings, a foreign ship lying in the territorial sea, or passing through the territorial sea after leaving internal waters."
"Article 32 - Immunities of warships and other government ships operated for non-commercial purposes With such exceptions as are contained in subsection A and in articles 30 and 31, nothing in this Convention affects the immunities of warships and other government ships operated for non-commercial purposes."
The parties have referred to a number of judgments to demonstrate how the question of sovereign immunity of a foreign State being sued in India has been addressed by courts. The Supreme Court judgment in Mirza Ali Akbar [(1966) 1 SCR 319] has been referred to in great detail by both sets of parties. The matter emanated from this Court. The plaintiff in that suit sued a foreign State for damages. The defendant foreign State applied for revocation of the leave granted under clause 12 of the Letters Patent and for rejection and/or taking the plaint off the file on the ground that the suit was incompetent in the absence of consent of the Central Government under Section 86 of the Code. In addition, it was contented that a foreign State could not be impleaded in a suit in this country on the principle of absolute immunity. The trial court held (at paragraph 12 of the judgment reported at AIR 1960 Cal 768) that Sections 83 to 87A of the Code, as it then stood, applied only to suits by or against Rulers of foreign States and did not contemplate any consent being required as a condition precedent to the institution of any suit against a foreign State. The trial court thereafter proceeded to consider the immunity of a foreign State being sued in this country on the basis of the international law recognised at that time. Upon such consideration, the trial court concluded as follows at paragraph 31 of the report:
"31. I have, under these circumstances, come to the conclusion first, that there is no principle of absolute immunity. Secondly, the nature of the transaction in the present case is one where the suit does not disregard the 41 legislative or administrative sovereignty of the foreign state. Thirdly, the suit does not seek to enforce foreign, public or fiscal law. Fourthly, the claim in respect of the contract forming the subject matter of the suit is of a commercial nature and such a transaction is not entitled to immunity. Fifthly, where the rule of law prevails the foreign state ought to be entitled to such immunity but no more as enjoyed by the domestic state before its own tribunal. I hold therefore that the defendants are not entitled to immunity in this suit."
On appeal by the foreign State, the Division Bench agreed with the trial court that Section 86 of the Code, as it then stood (prior to the 1976 Amendment, Section 86 covered a Ruler of a foreign State and not expressly the foreign State), but found that the suit was barred by the general principles of international law which formed part of Indian law. It was such decision of the Division Bench reported at AIR 1962 Cal 387 (United Arab Republic v. Mirza Ali Akbar Kashani) that fell for consideration before a Constitution Bench [(1966) 1 SCR 319]. At paragraphs 24 and 25 of the report, it was held that the right under Section 86 of the Code would be available to Rulers of all foreign States, whatever may be the form of government in such States. Paragraph 29 of the judgment has been stressed on, particularly by the Vietnamese petitioner, in the context of Elitarious and Shafique Khan. It is submitted by such petitioner that the last sentence of paragraph 29 implies that the substantive part of Section 86(1) is only the liability on foreign States to be sued in this country and that the rest of the sub- section is procedural. The contention of the plaintiffs, on the other hand, is that Section 86(1) on its plain reading and its interpretation at paragraph 29 of the report would imply that the substantive part of Section 86(1) of the Code is that no foreign State may be sued in any court in India without the consent of the Central Government and that the manner of certification is the procedural aspect. Paragraph 29 of the judgment assumes great significance in the context:
"29. The effect of the provisions of Section 86(1) appears to be that it makes statutory provision covering a field which would otherwise be covered by the doctrine of immunity under international law. It is not disputed that every sovereign State is competent to make its own laws in relation to the rights and liabilities of foreign States to be sued within its 42 own municipal courts. Just as an independent sovereign State may statutorily provide for its own rights and liabilities to sue and be sued, so can it provide for rights and liabilities of foreign States to sue and be sued in its municipal courts. That being so, it would be legitimate to hold that the effect of Section 86(1) is to modify to a certain extent the doctrine of immunity recognised by international law. This section provides that foreign States can be sued within the municipal courts of India with the consent of the Central Government and when such consent is granted as required by Section 86(1) it would not be open to a foreign State to rely on the doctrine of immunity under international law, because the municipal courts in India would be bound by the statutory provisions, such as those contained in the Code of Civil Procedure. In substance, Section 86(1) is not merely procedural; it is in a sense a counter-part of Section 84. Whereas Section 84 confers a right on a foreign State to sue, Section 86(1) in substance imposes a liability on foreign States to be sued, though this liability is circumscribed and safeguarded by the limitations prescribed by it. That is the effect of Section 86(1)."
Several other judgments on sovereign immunity in general and the applicability of Section 86 and its purport, not necessarily in the context of an admiralty action in rem, have been cited by the parties. In State of Rajasthan v. Vidhyawati, reported at (1962) Supp (2) SCR 989, a Constitution Bench considered the question as to the extent of the vicarious liability of the government for the tortious acts of its employees acting in the course of their employment. In that case a claim for compensation against the State of Rajasthan was dismissed in a suit for damages for the tortious act of the first defendant to the suit. On appeal, the High Court of Rajasthan passed a decree against the State of Rajasthan which appealed to the Supreme Court. On a consideration of Article 300(1) of the Constitution, the court traced the roots of Article 300 to Section 176 of the Government of India Act, 1935 which emerged from Section 32 of the Government of India Act, 1915 which, in turn, evolved from Section 65 of the Government of India Act, 1858. The argument before the Supreme Court was that it was an attribute of sovereignty that a State could not be sued in its own courts without its consent and that in England the Crown could not be made liable for damages for tortious acts of its servants since the King could not be guilty of personal negligence or misconduct and, thus, could 43 not be made responsible for the negligence or misconduct of his servants. At paragraph 15 of the report, the court opined that there was "no difficulty in holding that the State should be as much liable for tort in respect of a tortious act committed by its servants within the scope of its employment and functioning as such, as any other employer." The court recognised that the immunity of the Crown in the United Kingdom was based on old, feudalistic notions of justice and noticed that the rule of immunity of the Crown, based on common law in the United Kingdom, had disappeared from the land of its birth.
The same question, though with a difference in shades, was taken up by another Constitution Bench in the judgment reported at 1965 (1) SCR 375 (Kasturi Lal Ralia Ram Jain v. State of Uttar Pradesh). The issue in the case was whether the State Government was liable to compensate the appellant for loss caused to the appellant by the negligence of police officers employed by the State. A partner of the appellant firm, on his way to sell gold, silver and other goods in the Meerut market, was taken into custody by three police constables. The gold and silver in his custody were seized from him when he was taken into custody but only the silver returned to him when he was enlarged on bail the following day. A suit was brought claiming the return of the gold or, in the alternative, a money decree corresponding to the value thereof. Article 300(1) of the Constitution was again considered and its origin pegged to Section 65 of the Government of India Act, 1858. The judgment distinguished the Vidhyawati dictum and held that there was "a material distinction between acts committed by the servants employed by the State where such acts are referable to the exercise of sovereign powers delegated to public servants, and acts committed by public servants which are not referable to the delegation of any sovereign powers." Though both the Vidhyawati and the Kasturi Lal judgments are not central to the matter in issue in the present proceedings, there is at least one subsequent judgment reported at (1999) 6 SCC 667 (Common Cause, A Registered Society v. Union of India) where it was held that the efficacy of Kasturi Lal as a binding precedent had been eroded in view of several subsequent 44 decisions (paragraph 78). That the order in Common Cause was subsequently modified by the Supreme Court is an entirely different matter.
The plaintiffs have placed strong reliance on a case reported at (1986) 4 SCC 678 (Harbhajan Singh Dhalla v. Union of India) which dealt with the refusal of the Central Government to grant consent under Section 86 of the Code to sue a foreign State to the petitioner before the Supreme Court. The plaintiffs rely on paragraph 13 and paragraph 23 of the report:
"13. In India where rule of law prevails, the foreign State ought to be entitled to such immunities but to no more as are enjoyed by the domestic State before its own Tribunal. This was observed by Ray, J. sitting singly, as the Chief Justice of India then was, in Mirza Akbar Kasini v. United Arab Republic."
"23. It is well to bear in mind the two principles on which sovereign immunity rest. The principle expressed in maxim par in parem non habet jurisdictionem is concerned with the status of equality. The other principle on which immunity is based is that of non-intervention in the internal affairs of other states. See in this connection Brownlie "Principles of Public International Law, 3rd Edn., pp. 322-25. Much has happened in different States since Marshall, C.J. of the United States in Schooner Exchange v. McFaddon explained the principle and said that a state within its own territory as being "necessarily exclusive and absolute". In the days of international trade and commerce, international interdependence and international opening of embassies, in granting sanction the growth of a national law in this aspect has to be borne in mind. The interpretation of the provisions of Code of Civil Procedure must be in consonance with the basic principles of the Indian Constitution."
In Harbhajan Singh Dhalla the Supreme Court noticed the judgments in Mirza Ali Akbar rendered both by the trial court and the Division Bench and the final judgment of the Supreme Court overruling the view of the Division Bench of this Court. The plaintiffs say that in the Supreme Court judgment of Mirza Ali Akbar the aspect as to the sovereign immunity of a foreign State de hors Section 86 of the Code was not gone into. The plaintiffs submit that what is of significance in Harbhajan Singh Dhalla is the dictum that a foreign State ought to be entitled to such immunity, but to no more, as are enjoyed by the domestic 45 State before its own tribunals. The plaintiffs insist that despite noticing the Constitution Bench judgment in Mirza Ali Akbar, the opinion in Harbhajan Singh Dhalla recorded that the provisions of the Civil Procedure Code had to be interpreted in consonance with the basis principles of the Constitution. The plaintiffs argue that if a suit against a government company in India would not need previous permission to be obtained from any statutory authority, there is no logic in a company owned by a foreign State being accorded a higher status. The criticism levelled by the Vietnamese petitioner to the plaintiffs' contention is that the judgment in Harbhajan Singh Dhalla was rendered in the context of the Central Government declining leave under Section 86 of the Code. It is also urged by the Vietnamese entity that Harbhajan Singh Dhalla did not consider the law from the aspect of the applicability of Section 86 of the Code to any particular situation. In other words, the Vietnamese petitioner suggests that if the municipal law in India imposes a condition precedent to an action being instituted, Harbhajan Singh Dhalla can govern how the Central Government's discretion should be exercised but not whether Section 86 would be applicable at all.
There is considerable force in the submission of the Vietnamese petitioner. For instance, Section 86(2) postulates, inter alia, four situations where the Central Government may grant permission for a foreign State to be sued in an Indian court. It does not necessarily follow that if any of the four situations arise, the previous consent contemplated under Section 86 of the Code would be redundant. What the Section contemplates is that the instances covered by the four clauses in sub-section (2) may be cited as grounds for obtaining the consent, but the fact that a foreign State had instituted a suit against a party in an Indian court, or it trades within the local limits of the jurisdiction of the court, or it is in possession of immovable property within such local limits and is to be sued with reference to such property or the money charged thereon, or it has expressly or impliedly waived the privilege - would not, by itself, allow a person seeking to sue the foreign State to institute the suit without obtaining consent from the Central 46 Government. On the other hand, it cannot be missed that Section 86 of the Code is only a bar to a suit but it does not impose a prohibition on the court. It is thus evident that if Section 86 of the Code is applicable to the two actions here, they have to be dismissed as incompetent for the admitted position that no consent of the Central Government has been obtained in either case.
The plaintiffs have relied on another judgment reported at (1994) 6 SCC 205 (N. Nagendra Rao & Co. v. State of A.P.) where the court noticed, at paragraph 15 that the doctrine of sovereign immunity in the internal context had no relevance now since it had undergone a drastic change. The history of the law on the subject is recounted in the report and it is observed that the old and archaic concept of sovereignty does not survive (paragraph 22). The court noticed the earlier distinction between sovereign and non-sovereign functions being those which were categorised as regal and those that were regarded non- regal functions. At paragraph 24 of the report, the court held that in the modern sense the distinction between sovereign and non-sovereign powers did not exist, but it depended on the nature of the power and the manner of its exercise. Later in the same paragraph the court ruled that "acts such as defence of the country, raising armed forced and maintaining it, making peace or war, foreign affairs, power to acquire and retain territory, are functions which are indicative of external sovereignty and are political in nature ... not amenable to jurisdiction of ordinary civil court." Upon according absolute immunity to the State in respect of such matters, the judgment held as follows in the opening part of paragraph 25 of the report:
"25. But there the immunity ends. No civilised system can permit an executive to play with the people of its country and claim that it is entitled to act in any manner as it is sovereign. The concept of public interest has changed with structural change in the society. No legal or political system today can place the State above law as it is unjust and unfair for a citizen to be deprived of his property illegally by negligent act of officers of the State without any remedy. From sincerity, efficiency and dignity of State as a juristic person, propounded in nineteenth century as sound sociological basis for State immunity the circle has gone round and the emphasis now 47 is more on liberty, equality and the rule of law. The modern social thinking of progressive societies and the judicial approach is to do away with archaic State protection and place the State or the Government on a par with any other juristic legal entity. Any watertight compartmentalization of the functions of the State as "sovereign and non-sovereign" or "governmental and non-governmental" is not sound. It is contrary to modern jurisprudential thinking. The need of the State to have extraordinary powers cannot be doubted. But with the conceptual change of statutory power being statutory duty for sake of society and the people the claim of a common man or ordinary citizen cannot be thrown out merely because it was done by an officer of the State even though it was against law and negligent. Needs of the State, duty of its officials and right of the citizens are required to be reconciled so that the rule of law in a Welfare State is not shaken. Even in America where this doctrine of sovereignty found its place either because of the "financial instability of the infant American States rather than to the stability of the doctrine's theoretical foundation", or because of "logical and practical ground", or that "there could be no legal right as against the State which made the law"
gradually gave way to the movement from, "State irresponsibility to State responsibility". In Welfare State, functions of the State are not only defence of the country or administration of justice or maintaining law and order but it extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. The demarcating line between sovereign and non- sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the State cannot claim any immunity. ..."
The plaintiffs have also referred to a subsequent judgment reported at (2000) 8 SCC 61 (Agricultural Produce Market Committee v. Ashok Harikuni) where the extent of sovereign function and the sovereign's immunity in an ordinary civil action have been discussed and N. Nagendra Rao & Co. has been followed.
The plaintiffs rely on an unreported Division Bench judgment of the Delhi High Court in RFA No. (OS) 33/1999 (International Development Research Centre v. Durgeshwari Sahi) delivered on January 25, 2007 for the principle that Section 86 of the Code does not protect the private activity of a foreign corporation. The respondent before the appellate court sought a decree for mesne profits in 48 respect of an immovable property against a Canadian defendant. The defendant claimed that it was a public sector, non-commercial, international corporation created by an Act of the Parliament of Canada and, as such, a Crown-owned corporation entitled to the protection under Section 86 of the Code. The suit was instituted without permission of the Central Government and the defendant claimed that the lack of permission was fatal to the action. The Division Bench referred to Rostock and Mirza Ali Akbar and took the view that there was "no scope of unnecessarily expanding the scope of the expression ("foreign State") or construing it so strictly that it would defeat the purpose of the provision. The judgment also held that the conditional or absolute immunity, even if extended to a corporation or a company of a foreign State, could not be claimed in respect of its contractual obligations. The court noticed that the absolute immunity available under international law had been diluted and a restrictive theory of immunity was in vogue, including in the United Kingdom and the United States of America.
In another unreported Division Bench judgment of the Delhi High Court in FAO (OS) No. 403 of 2002 (International Development Research Centre v. Ramesh Mehta) delivered on July 25, 2008 that the plaintiffs cite, a regular suit was brought on the Original Side of the Delhi High Court against a party which claimed to be a foreign State. The plea was rejected by the trial court. The previous judgment in Durgeshwari Sahi relating to the same Canadian defendant was noticed by the Division Bench. Such earlier judgment had been made the subject matter of a special leave petition before the Supreme Court which was disposed of as the contractual obligations of the parties had been worked out. The question of law was, however, left open. In Ramesh Mehta the Division Bench of the Delhi High Court took the view that what the order of the Supreme Court in leaving the question of law open implied was that the Supreme Court did not "put its seal of approval or disapproval on the view taken" by the Delhi High Court in the earlier judgment. In the later judgment the Division Bench proceeded to hold that, even in such circumstances, the earlier judgment would 49 bind another Bench of the Delhi High Court of coordinate jurisdiction. It observed that the situation would lend itself to any of the three possibilities: the earlier judgment could be followed as it was a binding precedent on a coordinate Bench; or, a dissenting view could be taken and the question referred to a larger Bench; or, it could be held that the earlier judgment was per incurium and the matter could be decided afresh. Since the Canadian defendant did not assert that the earlier judgment was per incurium, the later Division Bench assessed the matter for the purpose of determining which of the remaining two alternatives it would adopt. The later judgment concurred with the earlier view taken by the same court and dismissed the appeal.
The Vietnamese petitioner has relied on the decision of the trial court in Durgeshwari Sahi (referred to as Durgeshwari Devi in the judgment) reported at 79 DLT 750. It is submitted that the trial court merely found on facts that the Canadian defendant was neither a foreign State nor a department of a foreign State. The Vietnamese petitioner suggests that the Division Bench expanded the scope of the appeal in holding at paragraph 12 that the expression "foreign State"
even on its liberal construction, "would not expand to a sphere which is void of any concept of any sovereign action." The submission is that paragraph 12 of the appellate court order in Durgeshwari Sahi goes against the grain of Section 86 of the Code since the provision, on its proper interpretation, does not leave a plaintiff with the choice of assessing whether the bar under Section 86 of the Code would be restricted only to "the functions of a State as understood in its wider sense." There may be merit in the petitioner's contention but it is not necessary to enter into such troubled waters.
The Vietnamese petitioner has placed reliance on a Single Bench decision of the Delhi High Court reported at 24 (1983) DLT 1 (Deepak Wadhwa v. Aeroflot) where, after tracing the history of the doctrine of sovereign immunity in this country, it was held at paragraph 9 of the report that the Civil Procedure Code did not distinguish between acts jure imperii and acts jure gestionis and that 50 what appears in the Code is exhaustive of the matter dealt with. Paragraph 9 of the report is set out:
"9. The question of sovereign immunity or privileges in India depends upon the construction of the statutory provisions. Amendments have been made from time to time in the Code. The Judicial Committee in Baroda's case (supra) had held that the provisions of Section 86 could not be waived. Clause (d) of Sub-section (2) of Section 86 was substituted in 1951 which makes it clear that the privilege accorded could be waived either expressly or impliedly. Section 433 of 1877 Code or Section 86 of 1908 Code did not prevent absolutely the suits against foreign Government or a trading Corporation which is an organ of a foreign Government. Those suits were made conditional on the consent to be given on the satisfaction of the specified conditions. The trading or commercial activity of the sovereign is one of the conditions on the satisfaction of which the consent to sue can be given. When these provisions were made in the Code of 1877 and later enacted in the Code of 1908, the doctrine of immunity under International Law did not draw any distinction between acts jure imperii and act jure gestionis. Those provisions did not completely cover the field of doctrine of immunity under International Law, but adopted a modified doctrine of immunity in the Code which is codifying enactment. The provisions of the Code are clear and explicit and thus only those provisions can be looked into for considering the extent. There was an opportunity to make amendments in the Code in 1976 when exhaustive amendments were being made and the transformation in the International Law about the doctrine of sovereign immunity had taken shape. The legislature did not make any amendments in that regard in the Code. The Code specifically deals with the immunity and the extent of it. It must be taken to be exhaustive of the matter dealt with."
The Vietnamese petitioner insists that the word "suit" in Section 86(1) of the Code covers an admiralty action. It suggests that traditionally the actions have been known as admiralty suits and the municipal law on the doctrine of sovereign immunity that finds specific mention in Section 86 of the Code cannot be made inapplicable to admiralty actions on the ground that these are not suits as ordinarily understood. The petitioner says that a reading of the Admiralty Rules of this Court would not show that the actions in this jurisdiction are not to be regarded as suits; that some of the provisions in the Rules recognise the applicability of the Code; and, that Section 112 of the Code refers to the 51 admiralty and vice-admiralty jurisdiction. The plaintiffs counter that the Admiralty Rules of this Court make it obvious that the actions in this jurisdiction are not regular suits as ordinarily understood. The parties have placed several provisions from the Rules. The Vietnamese petitioner says that Section 112(2) of the Code that carves out an exception for, inter alia, matters pertaining to the admiralty and vice-admiralty jurisdiction has been judicially recognised to imply that the exception would be confined to Part VII of the Code that relates to appeals.
In furtherance of the argument that an admiralty suit would be covered by Section 86 of the Code, the Vietnamese petitioner asserts, on the strength of a judgment reported at (1965) 3 SCR 201 (Nawab Usmanali Khan v. Sagar Mal) that an admiralty action is initiated, just like ordinary suits, with a plaint. Paragraph 7 of Nawab Usmanali Khan quotes the Privy Council in the interpretation of the word 'suit':
"7. ...
'The word 'suit' ordinarily means, and apart from some context must be taken to mean, a civil proceeding instituted by the presentation of a plaint.' ..."
At paragraph 8 of the report it was held that proceedings under Section 14 read with Section 17 of the Arbitration Act, 1940 do not commence "with a plaint or petition in the nature of a plaint, and cannot be regarded as a suit and the parties to whom the notice of the filing of the award is given under S. 14(2) cannot be regarded as "sued in any Court otherwise competent to try the suit", within the meaning of S.86(1) read with S.87B, Code of Civil Procedure." A few lines down in the same paragraph, the Supreme Court recognised that Section 86(1) read with Section 87B of the Code conferred upon "the Rulers of former Indian States substantive rights of immunity from suits." After the 1976 Amendment the substantive rights now are conferred on foreign States and not 52 exclusively to its Rulers, though Mirza Ali Akbar had blurred the distinction nearly a decade before the Amendment.
The plaintiffs have referred to a Division Bench judgment reported at AIR 1956 Bom 45 (Indrajitsinghji Vijaysinghji v. Rajendrasinghji Vijaysinghji). Both the plaintiffs and the Vietnamese petitioner have relied on the following passage from paragraph 4 of the report:
"(4) ... But whatever the principle of International law may be, we are concerned with the statutory form that it has taken in our country. In the very forefront we notice that there is an important departure from the rule of International law because in India a Ruler of a Foreign State can be sued with the consent of the Central Government. ..."
The two sets of parties approach the law as recognised in the extract from their opposing standpoints. The Vietnamese petitioner claims that the essence of the opinion is that when the municipal law requires previous consent to be obtained for instituting an action, the international law on the point is utterly irrelevant. The plaintiffs contend that the judgment must be understood in the context of the doctrine of absolute sovereign immunity that reigned in the post- Second World War international scene; that the passage set out implies that the court disregarded what was in vogue internationally to apply the more restrictive extent of immunity as mandated by the law of the land. The parties present the classical paradox of the glass being half full or half empty depending on the perspective. But it is not necessary to read any more into the judgment than the axiomatic position that if the municipal law covers a field no volume or quality of international law can be substituted in preference to the law of the land.
The plaintiffs rely on a Privy Council judgment reported at 1977 AC 373 [PC] (Philippine Admiral (Owners) v. Wallem Shipping (Hong Kong) Ltd.) on the question of sovereign immunity in an action in rem against a State-owned merchant ship engaged in ordinary trade. After the Second World War, Japan agreed with the Philippines to make available certain sums by way of reparations for damage done in course of the war. A Reparations Commission was set up 53 which acquired a vessel but transferred it to a shipping company against instalment payments. Two actions in rem were brought in Hong Kong against the ship, Philippine Admiral, for goods supplied and disbursements made for the ship. Another action ensued for damages on account of breach of a charterparty. The Government of Philippines invoked the doctrine of sovereign immunity and applied for the actions to be set to naught. The Supreme Court in Hong Kong agreed with the Philippines Government. The Full Court allowed the resultant appeal. The Government of Philippines appealed to the Judicial Committee which held that although the theory of absolute immunity was applicable to an action in personam against a foreign sovereign State on a commercial contract, it was inapplicable to an action in rem to which the restrictive theory would apply. The Privy Council regarded the Philippine Admiral to be an ordinary trading ship, did not follow a Court of Appeal decision in The Porto Alexandre [(1920) PD 30] and ruled that the actions could not be stayed on the ground of sovereign immunity. The following passages from paged 397, 398 and 402 are of relevance:
"There is no doubt - as was indeed conceded by counsel for the appellants
- that since the Second World War there has been both in the decisions of courts outside this country and in the views expressed by writers on international law a movement away from the absolute theory of sovereign immunity championed by Lord Atkin and Lord Wright in The Cristina towards a more restrictive theory. This restrictive theory seeks to draw a distinction between acts of a state which are done jure imperii and acts done by it jure gestionis and accords the foreign state no immunity either in actions in personam or in actions in rem in respect of transactions falling under the second head." (From page 397) "The next landmark in the shift of opinion above mentioned to which their Lordships would refer is a letter - the so-called "Tate letter" - addressed on May 19, 1952, by J.B. Tate, the acting legal adviser of the State Department, to the then acting Attorney-General of the United States notifying him of a change in the policy of the Department of State with regard to the granting of sovereign immunity to foreign governments. The letter first refers to what it describes as two conflicting concepts of sovereign immunity. According to the classical or absolute theory a sovereign cannot without his consent be made a respondent in the courts of another sovereign, while according to the newer or restrictive theory 54 immunity is only recognised with regard to acts done jure imperii as opposed to acts done jure gestionis. ..."(From page 398) "Their Lordships turn now to consider what answer they should give to the main question raised by this appeal - whether or not they should follow the decision of the Court of Appeal in The Porto Alexandre [1920] P. 30. There are clearly weighty reasons for not following it. ... Secondly, although Lord Atkin and Lord Wright approved the decision in The Porto Alexandre the other three Law Lords who took part in The Cristina [1938] A.C. 485 thought that it was at least doubtful whether sovereign immunity should extend to state-owned vessels engaged in ordinary commerce. ... Thirdly, the trend of opinion in the world outside the Commonwealth since the last war has been increasingly against the application of the doctrine of sovereign immunity to ordinary trading transactions. Lastly, their Lordships themselves think that it is wrong that it should be so applied. In this country - and no doubt in most countries in the western world - the state can be sued in its own courts on commercial contracts into which it has entered and there is no apparent reason why foreign states should not be equally liable to be sued there in respect of such transactions. ... But similar difficulties arise under the "absolute" theory, for there one has to decide whether the defendant - if not the foreign state itself - is or is not so closely connected with it as to make the action in substance one against the foreign state - a difficulty which caused a division of opinion in the Court of Appeal in Baccus S.R.L. v. Servicio Nacional del Trigo [1957] 1 Q.B.
438. The only reason for following The Porto Alexandre which appears to their Lordships to have much weight is that to apply the "restrictive" theory to actions in rem while leaving actions in personam to be governed by the absolute theory would produce a very illogical result. The rule that no action in personam can be brought against a foreign sovereign state on a commercial contract has been regularly accepted by the Court of Appeal in England and was assumed to be the law even by Lord Maugham in The Cristina. It is no doubt open to the House of Lords to decide otherwise but it may fairly be said to be at the least unlikely that it would do so, and counsel for the respondents did not suggest that the Board should cast any doubt on the rule. So counsel for the appellant could and did argue with force that granted that the restrictive theory was to be preferred, the courts should leave it to the government to ratify the 1926 and 1972 Conventions and to introduce the legislation necessary to make them part of our law and should not tamper with the law as so far declared in England by applying the restrictive theory to actions in rem. But their Lordships - while recognising that there is force in that argument - are not prepared to accept it. Thinking as they do that the restrictive theory is more consonant with justice they do not think that they should be deterred from applying it so far as they can be the thought that the resulting position may be somewhat anomalous. ..." (From page 402) 55 The plaintiffs say that, after the judgment in MV Elisabeth, there can be no argument in this country that admiralty actions in rem are quite distinct from regular suits. The plaintiffs refer to several paragraphs of the report as to how an admiralty action in rem has been regarded by the Supreme Court. At paragraph 55 of the report the court observed that such an action in rem is directed against the ship itself to satisfy the claim of the plaintiff out of the res. The ship is, for such purpose, treated as a person. Such an action may constitute an inducement to the owner to submit to the jurisdiction of the court, thereby making himself liable to be proceeded against by the plaintiff in personam. At paragraph 56 the Supreme Court held that a plaintiff in an admiralty action in rem "does not sue the owner directly and by name; but the owner or anyone interested in the proceedings may appear to defend." At paragraph 61 the Supreme Court noticed that the right of enforcement of maritime liens was available prior to the introduction of the statutes; that admiralty law was derived from the laws of Oleron supplemented by the civil law; and, for a long time in England the admiralty court developed the law independently fighting its battles with the common law courts on the question of jurisdictional boundaries till by statutory intervention the court structure came to be unified. At paragraph 63 the court recorded that such was the history of admiralty law in India that it would be misleading and incorrect to confine it to statutes. After referring to a Bombay judgment of 1873, where it was held that the statutory intervention had neither increased or otherwise affected the court's jurisdiction in admiralty, the report opined at paragraph 64, "64. Where statutes are silent and remedy has to be sought by recourse to basic principles, it is the duty of the court to devise procedural rules by analogy and expediency. Actions in rem, as seen above, were resorted to by courts as a device to overcome the difficulty of personal service on the defendant by compelling him to enter appearance and accept service of summons with a view to furnishing security for the release of the res; or, in his absence, proceed against the res itself, by attributing to it a personality for the purpose of entering a decree and executing the same by sale of the 56 res. This is a practical procedural device developed by the courts with a view to rendering justice in accordance with substantive law not only in cases of collision and salvage, but also in cases of other maritime liens and claims arising by reason of breach of contract for the hire of vessels or the carriage of goods or other maritime transactions, or tortious acts, such as conversion or negligence occurring in connection with the carriage of goods. Where substantive law demands justice for the party aggrieved, and the statute has not provided the remedy, it is the duty of the court to devise procedure by drawing analogy from other systems of law and practice. To the courts of the "civil law countries" in Europe and other places, like problems seldom arise, for all persons and things within their territories (including their waters) fall within their competence to deal with. They do not have to draw any distinction between an action in rem and an action in personam."
At paragraph 69, the judgment referred to the Colonial Court of Admiralty Act, 1890 by which the jurisdiction of the Indian High Courts was equated to that of the English High Court and the Supreme Court regarded the Statute of 1890 to be an enabling statute, and not one of limitation of power. Sections 443 and 444 of the Merchant Shipping Act were quoted and sub-section (3) of Section 443 emphasised on inasmuch as it provides that "the person giving security shall be made a defendant and shall for the purpose of such proceeding, be deemed to be the owner of the ship that has occasioned the damage."
The plaintiffs have relied on a passage from Corpus Juris Secundum, Vol. 2 paragraph 92 in support of the argument that an action in rem in admiralty is an action against a specific thing or res rather than against an individual, and in this form of proceedings the owner of the property constituting the subject of the action is not recognised until he appears, enters a claim and defends. The Vietnamese petitioner is quick to point out that elsewhere in the paragraph it is recorded that an action in rem is a procedural device in admiralty for more readily effectuating the liability of some jural person who has breached some personal obligation; and that there can almost invariably be no in rem liability in the absence of in personam liability.
57The debate between the proponents of the personification theory and those furthering the procedural theory has continued for long and it would be unwise to get caught in this labyrinth. This much can be said; that the form of action is one of convenience but it is the vessel which is the target of an in rem action in admiralty since the vessel must be within the territorial jurisdiction of the court hearing the cause and subject to its order through the process of arrest. The debate between the theorists continues unabated as will be evident from a number of the subsequent authorities cited.
VSIG refers to a judgment reported at (1896) ILR 21 Bom 351 (Chandulal Khushalji v. Awad Bin Umar Sultan Nawaz Jung Bahadur) for the proposition that Section 433 of the 1877 Code was a privilege granted to a foreign State. Section 433 of the 1877 Code was the precursor to Section 86 of the 1908 Code. On facts, however, the case may not be of assistance to VSIG since the Bombay High Court held that a foreign Ruler who had submitted to jurisdiction and had participated in the proceedings for a substantial length of time was precluded from subsequently asserting the privilege and his immunity.
The Vietnamese petitioner has next referred to a judgment reported at AIR 1944 Lah 302 (Darbar Patiala v. Firm Narain Das Gulab Singh) to demonstrate that Section 86 of the Code was held to be applicable to the Patiala State Bank which was then owned by the Maharaja of Patiala. In the same vein, VSIG relies on a Single Bench judgment reported at AIR 2002 Del 103 (Mansoor Mumtax v. Saudi Arabian Airlines Corporation) where the Saudi Arabian Airlines Corporation was regarded to be an extension of the Kingdom of Saudi Arabia. The Court relied on the Royal Nepal Airlines Corporation judgment of a Division Bench of this Court (AIR 1966 Cal 319) and on Article 14 of the Constitution of the Kingdom of Saudi Arabia that provided that all the wealth under the ground or on the surface or in the national territorial waters in the land or maritime domain in that country was the property of the State. The Court found that though the airline was an independent organisation that had been conferred a legal capacity, 58 it was attached to the Ministry of Defence and Aviation of Saudi Arabia and entitled to the restricted sovereign immunity in respect of a suit accorded by Section 86 of the Code.
VSIG has relied on a judgment reported at (2000) 8 SCC 278 (MV Al Quamar v. Tsavliris Salvage (International) Ltd) where the applicability of the Code to the admiralty jurisdiction fell for consideration. VSIG has relied on paragraphs 14 to 25 of the report which cover the discussion leading to the conclusion that "we are unable to record our concurrence pertaining to the exclusion of the Code in admiralty jurisdiction" (paragraph 22). At paragraph 21 of the report Elitarious was noticed and, in the context of the legal question under discussion in MV Al Quamar, found to be inapposite since the very applicability of the Code to the admiralty jurisdiction was not directly considered in Elitarious. The Supreme Court recognised the ratio decidendi in Elitarious to be as follows:
"21. ... the judgment dealt with the various provision of CPC vis-à-vis 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. ..."
VSIG has also cited a judgment reported at 1888 (12) ILR Bom 237 (The Bombay and Persia Steam Navigation Company Ltd v. Shepherd and Haji Ismail Hossein). The admiralty action was for collision and had been originally filed against the owners of a ship. An amendment to the plaint was allowed by adding the ship as a party defendant. On a construction of Sections 28, 48 and 50 of the 1882 Code, the Court held that a vessel was included within the meaning of the word "defendant" used in Section 28 since a vessel "for this purpose is invested with a persona ..." VSIG relies on a passage from the judgment where the court observed that the rules regulating admiralty practice provide that a suit shall be commenced by a plaint according to the provisions of the Code of Civil Procedure.
VSIG says that the recent trend in admiralty jurisdiction in England is to move away from the personification theory and recognise an admiralty action to 59 be nothing more than a claim against a juristic entity rather than against the res. It is submitted that the legal fiction of the action being against the vessel seems to have been discarded now and an admiralty action is regarded as being an action in personam from its inception. VSIG relies on a judgment reported at (1998) 1 LLR 1 (Republic of India and the Government of the Republic of India (Ministry of Defence) v. India Steamship Co. Ltd.). In that case the vessel, Indian Grace, carried the plaintiff's cargo from Uddevala in Sweden to Cochin. During the journey a fire broke out in one of the holds. A part of the plaintiff's goods was jettisoned and another part was damaged. The plaintiff wrote to the owners of the vessel claiming total loss of the cargo. The Union of India as plaintiff instituted a regular suit before the court of a subordinate judge in Cochin seeking damages for short-landing. The suit was decreed. Before such decree was passed, the Union of India caused a writ in rem to be issued in the Admiralty Court in England on a sister ship of Indian Grace. The claim was in respect of the damaged cargo. The owners of the ship caused an undertaking to be furnished, promising to pay the claim if proved, whereupon the sister ship was allowed to sail. The owners thereafter applied to strike out the claim on the basis of Section 34 of the Civil Jurisdiction and Judgments Act, 1982 that, in essence, provides that no proceedings may be brought by a person in England on a cause of action in respect of which a judgment has been given in his favour in proceedings between the same parties or their privies in a court of an overseas country, unless that judgment is not enforceable or entitled to recognition in England. The trial court struck out the proceedings. The Court of Appeal dismissed the resultant appeal. The plaintiff carried the matter to the House of Lords which ruled that there was an identity between the causes of action in the two sets of proceedings. The matter was remitted for consideration by the admiralty Judge who held that the previous suit did not prevent the plaintiffs bringing an in rem proceedings in the Admiralty Court. On the owners' appeal, the Court of Appeal came to a contrary conclusion which the plaintiff challenged in the House of Lords. In considering the matter, the House of Lords referred to the sovereign 60 immunity cases and held that there was a fiction in the development of admiralty law that needed to be discarded. The following passages from the report are apposite:
"The sovereign immunity cases The reality that an action in rem is an action against the owner of the ship is supported by the line of sovereign immunity cases. I will refer only to the most significant cases. In The Parlement Belge, (1880) 5 P.D. 197 the Court of Appeal held that an action in rem indirectly impleaded a sovereign who was the owner of the vessel served because his property was affected by the judgment of the Court. In this century the Courts have gone further and held that a sovereign whose ship is served in an action in rem is in fact directly impleaded as a defendant. This appears clearly from the judgments of Lord Atkin (at p. 157; p. 491), Lord Thankerton (at p. 158; p.
493), Lord Macmillan (at p. 159; p. 498) and Lord Wright (at p. 162; p. 505) in The Cristina, (1938) 60 Ll.L.Rep. 147; [1938] A.C. 485. A perusal of those judgments show clearly that the reasoning of the House of Lords depended in the first place not on principles of international law but on an analysis of the development of the action in rem in English law. Because the sovereign was held to be directly impleaded the principle of sovereign immunity was then applied. The decision of the House of Lords in The Arantzazu Mendi, (1939) 63 Ll.L.Rep. 89; [1939] A.C. 256 was to the same effect. The proposition that the foreign sovereign is directly impleaded as a defendant by service on his vessel is therefore conclusively established. That proposition must carry with it the legal consequence that the sovereign is a party to the action in rem." (From page 8) "The role of fictions in the development of the law has been likened to the use of scaffolding in the construction of a building. The scaffolding is necessary but after the building has been erected scaffolding serves only to obscure the building. Fortunately, the scaffolding can usually be removed with ease: Fuller, Legal Fictions, (1967), p. 70. The idea that a ship can be a defendant in legal proceedings was always a fiction. But before the Judicature Acts this fiction helped to defend and enlarge Admiralty jurisdiction in the form of an action in rem. With the passing of the Judicature Acts that purpose was effectively spent. That made possible the procedural changes which I have described. The fiction was discarded.
It is now possible to say that for the purposes of s. 34 an action in rem is an action against the owners from the moment that the Admiralty Court is seized with jurisdiction. The jurisdiction of the Admiralty Court is invoked by the service of a writ, or where a writ is deemed to be served, as a result of the acknowledgement of the issue of the writ by the defendant 61 before service: The Banco, [1971] 1 Lloyd's Rep. 49; [1971] P. 137. From that moment the owners are parties to the proceedings in rem.
Subject to the plea of estoppel, s. 34 is therefore a bar to the action in rem." (From page 10) VSIG has cited a Privy Council judgment reported at (1983) 1 LLR 351 (The August 8). The Judicial Committee held in such case that a summary judgment could be passed in an admiralty action in rem just as it could be done in an admiralty action in personam. The point that VSIG intends to make is that an admiralty action is no different from the run of the mill civil suit. VSIG suggests that if the High Courts in this country originally derived their authority in the admiralty jurisdiction from the custom, practice and usage that was subsequently codified in England, the development of the law in that country should also be incorporated into the admiralty law of this country.
The plaintiffs argue to the contrary. They submit that the case made by the VSIG is founded on the departure from the classical view that was made in Indian Grace. The plaintiffs have brought a judgment of the Australian Federal Court reported at [2006] FCAFC 192 (Comandate Marine Corp v. Pan Australia Shipping Pty Ltd) where Indian Grace has come in for severe criticism. The Australian Federal Court judgment has also referred to the disapproval of Indian Grace in Singapore. In the Australian case, the dispute between a Liberian company and an Australian company concerned the time charter of Comandate, which was a general cargo vessel. The Australian company ran a coastal liner shipping service from and to Australian ports. Initially the service was undertaken by one ship. The Australian company obtained a time charter of Comandate to bolster its services. Disputes arose under the time charter and the Australian company claimed damages. It commenced in rem proceedings in Australia under the Admiralty Act, 1988. Security was put up on behalf of the vessel and it was released from arrest. The relevant charterparty contained an arbitration clause that provided for arbitration in London and the governing law 62 to be the English law. The solicitors of the owners sought an assurance from the Australian company that it would submit all disputes exclusively to arbitration in accordance with the charterparty and threatened to seek an anti-suit injunction in England unless the Australian company indicated its concurrence within the time specified. Before the time expired the Australian company obtained an order in Australia injuncting the owners of the vessel from taking any step in any other court to restrain the continuation of the admiralty proceedings in Australia. It was an anti-anti-suit injunction. On behalf of the vessel a motion was brought for stay of the proceedings and for vacating the anti-anti-suit injunction which was dismissed. It was such decision that fell for consideration in the judgment under discussion.
In referring to Indian Grace, the Federal Court took the view that it was incorrect to say that before an owner or demise charterer who is a relevant person files an appearance and submits personally to the jurisdiction of the Court, the action in rem is other than against the ship (paragraph 105). Paragraphs 99, 100 and 118 of the report may be noticed:
"99. All the above has proceeded on the basis put forward by Pan that the commencement of the action in rem against Boomerang I can be taken as the full equivalent of an action between Comandate Marine and Pan. That rests on the assumption that the action in rem when filed was an action between Comandate Marine and Pan. This is not correct, though at least since 1998 in England it has the support of the House of Lords in Republic of India v. India Streamship Co Ltd (No 2) (The 'Indian Grace') [1998] AC 878, which was relied upon by Pan in this context.
"100. In The 'Indian Grace' Lord Steyn (with whom Lord Browne-Wilkinson, Lord Hoffmann, Lord Cooke of Thorndon and Lord Hope of Craighead agreed) concluded that the notion of an action against an inanimate object was a fiction which had outlived its useful life. The action in rem, he said, should be recognised for what it is, an action between the plaintiff and, in the language of the Admiralty Act, the relevant person. It was said that this was the position prior to any appearance by the relevant person."
"118. Further, to assimilate judgments resulting from the actions in rem and in personam is to debilitate the utility of the action in rem. The force of 63 the procedural theory is to bring the owner liable on the action to court to appear and expose itself to the claim for its full amount. If the claimant has to bring the action in rem knowing that this is its one action against the defendant owner, it may risk disaster in proceeding in rem. If the owner does not appear and if the claimant proceeds against the ship, it may gain little from the action (even if it has a strong case). Other claimants may come in - mortgagees, lienees, other statutory claimants. None of these, or at least the amount each is owed, would have been apparent to the claimant before judgment. Yet, having gone to judgment in rem, the claimant is precluded from proceeding against in personam because really it has, according to The 'Indian Grace', already had its opportunity against the defendant owner in personam by the in rem action. There has been no personal submission by the relevant person and so it is difficult to see how the plaintiff can somehow enforce the in rem judgment against other assets of the relevant person. If this is the position, there is a clear opportunity for a party liable for a maritime claim to collude with others to undermine entirely the worth of the underlying cause of action. The action in rem is a necessary tool of international maritime commerce for the recovery of just claims. To treat it as the equivalent of the in personam claim risks making it a dangerous lottery, thereby diminishing its practical value."
The plaintiffs refer to Section 41 of the Evidence Act and to the Letters Patent applicable to this Court. The Letters Patent, which has been preserved by the Constitution, confers jurisdiction relating to several classes of matters including admiralty, insolvency, testamentary and matrimonial cases.
In the supplemental submission on behalf of the plaintiff in the second suit, several judgments have been cited to establish the distinction between the government and a government-owned company. In the judgment reported at AIR 1964 SC 1486 (Andhra Pradesh State Road Transport Corporation v. ITO BIB Ward, Hyderabad) the Supreme Court reiterated the well-known proposition that shareholders of a company do not own the property of the company. In the judgment reported at (1982) 1 SCC 125 (Western Coalfields Ltd v. Special Area Development Authority, Korba), the Court held that a company was distinct from the government though the government may be in complete control thereof. On similar lines, the judgment reported at (2003) 5 SCC 163 (A.K. Bindal v. Union of 64 India) found that the government was not responsible for the salary of the employees of a government company.
The plaintiff in the second suit has relied on a judgment reported at (2003) 6 SCC 611 (John Vallamattom v. Union of India) for the proposition that a restrictive provision has to be strictly construed and may be interpreted with reference to its origin. In that case the Supreme Court referred to the history behind the incorporation of Section 118 of the Succession Act, 1925 and struck it down as being violative of Article 14 of the Constitution. This plaintiff has referred to a judgment reported at (2009) 9 SCC 1 (Suchita Srivastava v. Chandigarh Administration) for the proposition that an international convention ratified by India is "binding on our legal system." The convention in question was the United Nations Declaration on the Rights of Mentally Retarded Persons, 1971 that was considered in the context of the right of a mentally retarded woman to terminate her pregnancy.
The plaintiff in the later suit has also placed reliance on a judgment of the Supreme Court of South Africa in Case No. 686 of 1991 delivered on November 12, 1993 (The Shipping Corporation of India Ltd v. Evdomon Corporation & anr.). The first respondent before the South African Supreme Court was a Liberian company in the business of owning and chartering ships that entered into a charterparty with the Government of India relating to MV Kavo Peirates as the disponent owner thereof. The purpose of the charter was to carry a cargo of bagged rice from Thailand to India. The Government of India apparently failed to pay a portion of the freight due under the charterparty. Evdomon invoked the admiralty jurisdiction in South Africa for the attachment of a vessel that it claimed belonged to the Government of India and was berthed in the port of Saldanha Bay undergoing repairs. The claimant asserted that it had no confidence of obtaining true commercial justice in India since the charterparty contained an arbitration clause that contemplated arbitration in India. The Government of India did not intervene in the action but the Shipping Corporation 65 of India (SCI) did, and furnished appropriate security following which the vessel was released. SCI claimed that it was the owner of the vessel and not the Government of India. A prayer was made for release of the security. The claimant in the admiralty action contended that since SCI was wholly owned by the Government of India it was really an "organ, department or instrumentality" of the Indian Government. The South African Supreme Court noticed the extent of State participation in India in industrial and economic development, the Companies Act, 1956 and that SCI was wholly owned by the Government of India though such company had its board of directors for the immediate management of its day to day affairs. The Court considered the articles of association of SCI, the oral evidence of its company secretary and the nature of the claim brought by the claimant. The Court held that for the purpose of the admiralty jurisdiction as conferred by the statute in South Africa, the property of SCI could not be regarded as the property of the Government of India despite the government being its overwhelming majority or sole shareholder.
Finally, the plaintiffs refer to several judgments on the principles pertaining to stare decisis and binding precedents. The plaintiffs first refer to a judgment reported at (1969) 2 SCC 481 (Bhudan Singh v. Babi Bux) for the principle that a later Division Bench cannot sit in judgment over the correctness of a decision rendered by a Bench of coordinate jurisdiction. Paragraph 7 of the report captures the essence of the sentiment:
"7. ... The learned Judges declined to follow the decision in Pheku Chamar case. They came to the conclusion that the Legislature used a wide language in Section 9 and it covers the case of buildings belonging to persons who constructed them lawfully or unlawfully. It is unfortunate that the latter Division Bench should have thought it proper to sit in judgment over the correctness of a decision rendered by a Bench of coordinate jurisdiction. Judicial propriety requires that if a bench of a High Court is unable to agree with the decision already rendered by another coordinate bench of the same High Court, the question should be referred to a larger bench. Otherwise the decisions of High Courts will not only lose respect in the eyes of the public, it will also make the task of the subordinate courts difficult."
66In the judgment reported at (1968) 1 SCR 455 (Tribhovandas Purshottamdas Thakkar v. Ratilal Motilal Patel), the Supreme Court emphasised on the rationale behind the principles relating to binding precedents for the purpose of securing uniformity and certainty in the law. Paragraphs 7, 8 and 9 of the report are of importance:
"7. Before parting with the case, it is necessary to deal with certain questions of fundamental importance in the administration of justice which the judgment of Raju, J., raises. The learned Judge observed-- (1) that even though there is a judgment of a Single Judge of the High Court of which he is a member or of a Division Bench of that High Court, he is not bound to follow that precedent because by following the precedent the Judge would act contrary to Section 165 of the Indian Evidence Act, and would also violate the oath of office taken by him when entering upon his duties as a Judge under the Constitution; and (2) that a judgment of a Full Bench of the Court may be ignored by a Single Judge, if the Full Bench judgment is given on a reference made on a question of law arising in a matter before a Single Judge or a Division Bench. Such a judgment, according to Raju, J., would "not be a judgment at all" and "has no existence in law".
"8. The observations made by the learned Judge subvert the accepted notions about the force or precedents in our system of judicial administration. Precedents which enunciate rules of law form the foundation of administration of justice under our system. It has been held time and again that a Single Judge of a High Court is ordinarily bound to accept as correct judgments of courts of coordinate jurisdiction and of Division Benches and of the Full Benches of his Court and of this Court. The reason of the rule which makes a precedent binding lies in the desire to secure uniformity and certainty in the law.
"9. We may refer to the observations made by Venkatarama Aiyar, J., in Jaisri Sahu v. Rajdewan Dubey and the cases referred to therein. If decisions of the same or a superior court are ignored, even though directly applicable, by a Judge in deciding a case arising before him, on the view that every Judge is entitled to take such view as he chooses of the question of law arising before him as Venkatarama Aiyar, J., observed, the "law will be bereft of all its utility if it should be thrown into a state of uncertainty by reason of conflicting decisions"."
67In the next judgment reported at (1965) 3 SCR 218 (Shri Bhagwan v. Ram Chand) cited by the plaintiffs, the values of judicial decorum and propriety were stressed at paragraph 18:
"18. Before we part with this appeal, however, we ought to point out that it would have been appropriate if the learned Single Judge had not taken upon himself to consider the question as to whether the earlier decisions of the Division Benches of the High Court needed to be re-considered and revised. It is plain that the said decisions had not been directly or even by necessary implication overruled by any decision of this Court, indeed, the judgment delivered by the learned Single Judge shows that he was persuaded to re-examine the matter himself and in fact he had substantially recorded his conclusion that the earlier decisions were erroneous even before his attention was drawn to the decision of this Court in Laxman Purshottam Pimputkar case. It is hardly necessary to emphasise that considerations of judicial propriety and decorum require that if a learned Single Judge hearing a matter is inclined to take the view that the earlier decisions of the High Court, whether of a Division Bench or of a Single Judge, needed to be reconsidered, he should not embark upon that enquiry sitting as a Single Judge, but should refer the matter to a Division Bench or, in a proper case, place the relevant papers before the Chief Justice to enable him to constitute a larger Bench to examine the question. That is the proper and traditional way to deal with such matters and it is founded on healthy principles of judicial decorum and propriety. It is to be regretted that the learned Single Judge departed from this traditional way in the present case and chose to examine the question himself."
The plaintiffs have also relied on the judgments reported at (1976) 3 SCC 677 (Union of India v. K.S. Subramaniam) and (1976) 4 SCC 52 (The State of U.P. v. Ram Chandra Trivedi) for the proposition that in cases where a High Court finds any conflict between the larger and smaller Benches of the Supreme Court, it cannot disregard or skirt the views expressed by the larger Benches.
On the applications for arrest, the plaintiff in the earlier suit has referred to the pleadings filed on behalf of VSIG in this Court. At paragraph 4 of its petition, VSIG has refused to deal with the merits of the claim. In the stay petition relating to the appeal (which, by virtue of the appellate court order, has been treated as the affidavit-in-opposition to the affidavit of arrest) there is no assertion on facts 68 to refute the plaintiff's claim. At paragraph 18 of the affidavit in reply in GA No. 3476 of 2009, VSIG has insisted that an adjudication on merits cannot arise before its objection as to the competence of the action is decided.
The position is no different in the later suit though some disturbingly amusing facts emerge. There is an affidavit affirmed by one Raghunath Nath Ghosh who claims to be "the authorized representative of the defendants as there (sic, their) Constituted Attorney," which makes interesting reading. A few passages from such affidavit are set out:
"1. I am the Constituted Attorney of the defendant abovenamed in India and, as such, I am competent and authorized to make and affirm the instant affidavit for and on its behalf. I am aware of the facts and circumstances of the instant case."
"4. At the very outset I say that the Suit filed by the plaintiff being A.S. No. _____ of 2009 is not maintainable as framed and the Plaint disclosed no cause of action. It is stated that the Government of the Socialist Republic of Vietnam is the owner of the Vessel VINASHIN LINER I and also the Vessel VINASHIN SKY. From the copy of the Lloyds Maritime Information annexed by the plaintiff in its Affidavit of Arrest, it would clearly appear that the beneficial owner of VINASHIN LINER I and VINASHIN LINER II and also VINASHIN SKY is the Government of the Socialist Republic of Vietnam."
"6. Admittedly the Government of Vietnam is the owner of the vessel which has been, VINASHIN SKY. Under Section 6 of the Code of Civil Procedure no "Foreign State" may be sued in court otherwise competent to try the suit except with the consent of the Central Government certified by a Secretary to that Government."
Quite apart from the fact that the deponent did not identify the donor of the power of attorney and he has run a case contrary to the one canvassed by VSIG in respect of the same vessel, a copy of the power of attorney handed over following a specific request of Court on May 6, 2010 reveals that the grant was made on a letter-head of VSIG and is dated February 12, 2010. But the month is not mentioned in the body of the power of attorney. The power of attorney claims to have been "signed sealed and delivered for and on behalf of Vinashin." It is the 69 same power of attorney that mentions the name of Haradhan Ghosh as an attorney. Haradhan Ghosh verified the affidavit in support of the petition relating to GA No. 3476 of 2009 more than a month before the power of attorney was executed and Raghunath Nath Ghosh (and not Raghunath Ghosh) affirmed the affidavit on behalf of "the defendants" in opposition to the affidavit of arrest to the second suit.
Even disregarding the colossal discrepancy and the utter irresponsibility all around resulting in waste of court time, and assuming that the acts done by the attorneys can be subsequently ratified by the donor, the case run on facts in the affidavit filed in the second suit is contrary to the stand taken by VSIG. All this is referred to only in the context of the applications for arrest since it is the plaintiffs' case that assuming that it is the State of Vietnam which is the owner of Vinashin Sky, it is not entitled to the privilege reserved unto a foreign State by Section 86 of the Code.
The question that needs to be answered is as to whether these two actions cannot be carried forward since the plaintiff in either case has not obtained any consent from the Central Government under Section 86 of the Code. The legal issue that needs to be immediately addressed is whether Section 86 of the Code applies to an admiralty action in rem. Such legal issue is quite distinct from the questions as to whether the doctrine of sovereign immunity generally applies to an admiralty action in rem or whether such doctrine applies in this country to an admiralty action in rem.
For a legal right to be meaningful, it must have two attributes. There must first be the conferment or acknowledgement of the right in a body of law. There must next be a recognised manner of enforcing the right. In the civil law recognised in this country, the mode of enforcement of certain legal rights may be by proceedings other than by way of an ordinary civil suit as envisaged by the Civil Procedure Code. The manner of enforcement of particular rights - say, relating to industrial disputes or in respect of arbitration reference or for certain 70 classes of matters pertaining to companies - may only be before specialised judicial or quasi-judicial fora. This is generally (or almost invariably) provided for by a statute. As a corollary, the source of the power of an adjudicatory forum has two aspects. The body must be conferred the jurisdiction to undertake the function of adjudication of certain classes of actions as may ordinarily be specified for it by a statute; usually the subject-matter of a forum's authority and the extent thereof (for example, pecuniary and territorial) are also statutorily laid down. The manner in which the forum goes about the business of adjudication is based on the body of substantive law applicable to the proceedings that the forum is authorized to entertain. The mandate to adjudicate and the manner of adjudication generally has three facets: the extent of the authority of the forum; the body of substantive law that it may apply in adjudicating the matters before it; and, the procedure that it adopts in course of the adjudication.
The source of authority of High Courts in India exercising admiralty jurisdiction is the body of colonial laws on the subject in the pre-Constitution era as preserved and enhanced by Article 225 of the Constitution and declared to be the law of the land by the Supreme Court in MV Elisabeth. An admiralty action in India cannot be carried to a civil court other than to High Courts. The substantive authority of the High Courts to receive an admiralty action does not flow from Section 9 of the Code or from the relevant Letters Patent in chartered High Courts. The provisions of Sections 16 to 20 of the Code do not apply to admiralty actions; indeed, they are anathema to the structure of the action. The Code contemplates at least one identified juristic entity as the defendant to a suit or, as in Order 1 Rule 8, a definite group of identifiable persons. The writ of summons under the Code has to be served on a juristic person. The Code does not contemplate an action de jure against a res whether or not one subscribes to the procedural theory or the personification theory that have engaged many an admiralty court beyond these shores. MV Elisabeth says that the admiralty action in rem is unknown to civil law as in countries subscribing to civil law "all proceedings are initiated by actions in personam." Though the Vietnamese 71 petitioner insists that an admiralty suit is much like an ordinary suit as it commences with a plaint or a petition in the nature of a plaint, the word "suit" used in Section 86(1) of the Code has to be a suit as is normally understood by the Code and one that is instituted and proceeded with in accordance with the Code. In other words, the essence of Section 86(1) of the Code is substantive in nature and it cannot be extended to civil jurisdictions other than to suits as generally understood under the Code. Section 141 of the Code makes the position clear by extending only the procedural features of the Code to other civil jurisdictions:
"141. Miscellaneous proceedings.--The procedure provided in this Code in regard to suits shall be followed, as far as it can be made applicable, in all proceedings in any court of civil jurisdiction.
Explanation.--In this section, the expression "proceedings" includes proceedings under Order IX, but does not include any proceeding under Article 226 of the Constitution."
A few examples may help unravel the mystery. It is possible that an industrial unit may be run in this country by an organisation which is directly or de facto controlled by a foreign State. If an industrial dispute arises in relation to such an organisation in India, Section 86(1) of the Code cannot be pressed into service to assert the bar thereunder. Similarly, if an agreement where a foreign State is a party contains an arbitration clause to which Part I of the Arbitration and Conciliation Act, 1996 applies, a petition under any of the provisions of Part I of the said Act cannot be resisted on the count that prior leave of the Central Government under Section 86 of the Code was necessary. Again, a foreign State may carry on business in India in today's liberalised atmosphere through a company over which the foreign State exercises direct control. If then such company in India has some minority shareholding that is not controlled by the foreign State, it cannot be said that a petition for oppression and mismanagement against the company and seeking reliefs against the foreign State which is the major shareholder will have to await the previous consent of 72 the Central Government under Section 86 of the Code. It is on such reasoning that an admiralty action may be said to stand on a different footing than a suit as contemplated by the word in Section 86 of the Code; quite irrespective of the question as to whether the doctrine of foreign sovereign immunity would be available to such classes of civil action in this country to which Section 86 of the Code does not apply in terms.
The word "suit" is not defined in the Code. Such word is used in the admiralty jurisdiction as a synonym for action or claim. The jurisdiction borrows other legal terminology from the more common form of civil action for convenience and not to ascribe the strict legal connotation thereof.
There are provisions in the Code which are merely procedural and others which are substantive in nature. A particular provision may be both procedural and substantive. Mirza Ali Akbar recognises Section 86 of the Code to be both substantive and procedural. It is difficult to conceive that the substantive aspect of a provision cannot be discerned from the procedural content thereof. The substantive facet of Section 86(1) of the Code appears to be that no suit may be brought against a foreign State in any court in India without the previous consent of the Central Government. The procedural feature is the manner in which the consent has to be obtained. Section 141 of the Code cannot be carried to an absurd limit to suggest that notwithstanding the substantive part of a provision not being attracted to a particular situation, the procedural element thereof would apply, regardless, to proceedings in other civil jurisdictions. If the procedural part of a particular provision is inextricably connected to the substantive part or if the procedural aspect merely indicates the manner in which compliance of the substantive part has to be obtained, the procedural part of such provision will not apply to proceedings in other civil jurisdictions if the substantive element is not attracted. There are, for instance, several aspects of the Civil Procedural Code which do not apply to the testamentary jurisdiction. There are other principles recognised in the Civil Procedure Code - say the 73 doctrine of finality of adjudication or res judicata - that are matters of general public policy and apply, to the extent practicable, to proceedings in other civil jurisdictions.
MV Elisabeth says, and as has been recognised in other countries, that upon a juristic entity appearing to furnish security or to support the vessel which is at the centre of an admiralty action in rem, it becomes an action in personam. Some English authorities have held that the action that commenced as an action in rem becomes an admiralty action in rem and in personam upon the relevant person entering appearance. MV Elisabeth has not conclusively pronounced that the proceedings initiated as an admiralty action in rem is completely converted into an action in personam upon the relevant person entering appearance. But nothing turns on the matter.
Section 86(1) envisages prior leave being obtained from the Central Government to institute a suit against a foreign State in a Court in this country. It is possible that a claimant in an admiralty action in rem is bona fide unaware of the owner of the vessel or the juristic entity in possession thereof being effectively a foreign State and the action is brought. It is then open to the foreign State whether to enter appearance or not. It cannot be said that the bar as to the institution of the action that Section 86 contemplates would come into play with retrospective effect only upon the foreign State exercising its discretion to enter appearance and assert its status. If Section 86 has to be given its true meaning, the bar is to the action whether or not any one comes to claim the protection thereunder. As noticed earlier, even though it is possible to waive the protection accorded under Section 86, but the consent of the Central Government has still to be obtained prior to the institution of the suit by citing the waiver. It is in such context that a bit more may be read into Kapitan Kud than is conventionally permissible. On the other hand, the bar under Section 86 of the Code is to the action and not on the court; which may imply that if the objection is not raised 74 by the person accorded the privilege under that provision, it may not tell upon the authority of the court to receive or continue with the action.
Thence to the most onerous and unpleasant task of assessing the binding precedents that have been brought to bear on the principal issue as to whether Section 86 of the Code would apply to an admiralty action in rem. Given that the subsequent Division Bench judgment in Shafique Khan found that the view expressed in the previous Division Bench judgment in Elitarious was at variance with how the issue appeared to have been "differently answered" by the Supreme Court, the two opinions are irreconcilable. Paragraph 5 of Shafique Khan refers to an appeal before the Supreme Court on the issue of sovereign immunity claimed by the State of Ukraine that was "finally heard on 21st August, 2001." Later at paragraph 5 of Shafique Khan it is recorded that by the order dated August 21, 2001, the "Supreme Court granted leave to the appellants to withdraw the appeal and the special leave petition leaving the question of law that arose therein open for consideration in the event the appellant succeeded in establishing its ownership." Since the rest of the report in Shafique Khan did not refer to the effect of the Supreme Court order of August 21, 2001, it was necessary to see the records relating to the appeal in Shafique Khan. Paragraph 5 of the report in Shafique Khan mirrors the contents of paragraphs 16A, 17, 18 and 19 of the stay petition relating to the appeal. The order under appeal in Shafique Khan is dated August 9, 2004 and appears at pages 62 to 71 of the stay petition. The trial court construed the implication of the Supreme Court order of August 21, 2001 that left the questions of law open. The relevant passage of the trial court appears at page 67 of the stay petition where it was held that since the Division Bench judgment (in Elitarious) was not upset by the Supreme Court, the same was binding on the trial court. The Division Bench judgment in Shafique Khan did not dwell upon the import of the Supreme Court order of August 21, 2001 or the understanding thereof by the trial Court, though the entirety of the trial court judgment and order was set aside.
75So that there may not be any ambiguity in the matter, the order of the Supreme Court made on August 21, 2001 in CA No. 2072 of 1998, CA No. 5141 of 1998 and SLP No. 19501 of 1998 needs to be seen:
"The question as to whether or not the appellant-State of Ukraine is the owner of the vessel in question has yet to be established at the trial of the Admiralty Suits. Learned counsel for the appellants submits that the appellants will do so at the trial and that he be permitted to withdraw the appeals and the special leave petition leaving the question of law that arises therein open for consideration in the event that the first appellant succeeds in establishing its ownership. Learned counsel for the respondents have no objection to this procedure being followed.
The civil appeals and the special leave petitions are dismissed as withdrawn, leaving the question of law that arises therein open."
The first paragraph of the order recorded the submission of the State of Ukraine and the concurrence of the respondents in the course of action suggested. The order of the Supreme Court is embodied in the second paragraph. The order is couched in identical language as in the matter considered by a Division Bench of the Delhi High Court in Ramesh Mehta as noticed above. There, the Delhi High Court construed the Supreme Court order by which the question of law was left open to imply that the question was left open as far as the Supreme Court was concerned but since the Division Bench view of the Delhi High Court that fell for consideration before the Supreme Court had not been approved or rejected, such previous Division Bench view remained binding on a subsequent Division Bench of that Court. The Court said in Ramesh Mehta that it was open to the subsequent Division Bench to follow the previous Division Bench as a binding precedent or take a contrary view and refer the matter for consideration to a larger Bench or consider whether the previous Bench Decision was per incuriam and, if found so, address the legal question afresh.
Elitarious squarely and unequivocally held that Section 86 of the Code would not apply to an admiralty action in rem. The reasons for which Shafique 76 Khan found that the question had to be answered differently have been discussed earlier and it is evident that the two Supreme Court judgments that Shafique Khan drew sustenance from to take a different view did not address the specific question. It is also of relevance that in Al Quamar the Supreme Court quoted Elitarious and noticed that the ratio decidendi in Elitarious was that actions in admiralty jurisdiction were not suits within the meaning of Section 86 of the Code. The question that engaged the Supreme Court in Al Quamar was whether the provisions of the Code would apply to the admiralty jurisdiction. It is of some significance that though the Supreme Court held in Al Quamar that the provisions of the Code would generally apply to the admiralty jurisdiction and it noticed the ratio decidendi in Elitarious, it did not question the correctness the view expressed in Elitarious.
In a Division Bench judgment of this Court reported at 2007 (4) CHN 605 (Upananda Chatterjee v. State of West Bengal) it was held, on the basis of the Supreme Court dictum in The State of Bihar v. Kalika Kuer [(2003) 5 SCC 448], that if it appeared that divergent views on the same question of law had been expressed in judgments of two Benches of equal strength, the earlier judgment would be binding unless the subsequent judgment was based on a change in law or on a binding precedent rendered after the earlier judgment. The following passage at paragraph 19 is relevant:
"19. ... It is now settled law that in case of conflict of the decision of two Benches of equal strength, the former will prevail unless the principle laid down in the former one has been overruled by a Superior Court or unless due to change of law, the former one is no longer applicable. The latter Division Bench, as it appears from the judgment placed before us, has disagreed with the view taken in the case of Aloke Pramanik on the ground of misapplication of the principles laid down in the decision of the Supreme Court in the case of K. Narasimiah vs. H.C. Singri Gowda & Ors., reported in AIR 1966 SC 330, to the facts of the said case and for non consideration of some other decisions of the Supreme Court laying down the principles to be followed in deciding whether a statutory provision is mandatory or not. In our view, once a Division Bench, has taken a stance that a particular decision of the Supreme Court is applicable in the facts of a case and by 77 relying upon such decision comes to a conclusion on a particular facts of a case, the latter Bench, if it intends to disagree in the similar facts, should refer the matter to the learned Chief Justice for constitution of a Larger Bench. ..."
In Bhudan Singh, which the plaintiffs had cited, a similar sentiment was expressed. In Kalika Kuer the Supreme Court observed at paragraph 10 as follows:
"10. ... In connection with this observation, we would like to say that an earlier decision may seem to be incorrect to a Bench of a coordinate jurisdiction considering the question later, on the ground that a possible aspect of the matter was not considered or not raised before the court or more aspects should have been gone into by the court deciding the matter earlier but it would not be a reason to say that the decision was rendered per incuriam and liable to be ignored. The earlier judgment may seem to be not correct yet it will have the binding effect on the later Bench of coordinate jurisdiction. Easy course of saying that earlier decision was rendered per incuriam is not permissible and the matter will have to be resolved only in two ways -- either to follow the earlier decision or refer the matter to a larger Bench to examine the issue, in case it is felt that earlier decision is not correct on merits. ..."
The Kalika Kuer judgment also discussed the meaning of the expression "per incuriam" and quoted with approval a passage from paragraph 578 of the Halsbury's Laws of England (4th Ed.) Volume 26 on "Judgment and Order":
"A decision is given per incuriam when the court has acted in ignorance of a previous decision of its own or of a court of co-ordinate jurisdiction which covered the case before it, in which case it must decide which case to follow; or when it has acted in ignorance of a House of Lords decision, in which case it must follow that decision; or when the decision is given in ignorance of the terms of a statute or rule having statutory force. A decision should not be treated as given per incuriam, however, simply because of a deficiency of parties, or because the court had not the benefit of the best argument, and, as a general rule, the only cases in which decisions should be held to be given per incuriam are those given in ignorance of some inconsistent statute or binding authority. Even if a decision of the Court of Appeal has misinterpreted a previous decision of the House of Lords, the Court of Appeal must follow its previous decision and leave the House of Lords to rectify the mistake."78
Judge-made law relating to binding precedents is founded on the need for predictability and certainty regarding the law. It is a rule of judicial discipline which is sine qua non for sustaining the system. In Mahadeolal Kanodia v. Administrator General of W.B. [(1960) 3 SCR 578] three Judges of the Supreme Court observed:
"19. ... If one thing is more necessary in law than any other thing, it is the quality of certainty. That quality would totally disappear if Judges of coordinate jurisdiction in a High Court start overruling one another's decisions. If one Division Bench of a High Court is unable to distinguish a previous decision of another Division Bench, and holding the view that the earlier decision is wrong, itself gives effect to that view the result would be utter confusion. The position would be equally bad where a Judge sitting singly in the High Court is of opinion that the previous decision of another Single Judge on a question of law is wrong and gives effect to that view instead of referring the matter to a larger Bench. In such a case lawyers would not know how to advise their clients and all courts subordinate to the High Court would find themselves in an embarrassing position of having to choose between dissentient judgments of their own High Court."
The rule relating to binding precedents is connected to the principle of stare decisis. In its full form the principle is contained in the Latin maxim, stare decisis et non quieta movere, which means to stand by decisions and not to disturb what is settled. The adage has also been explained as, "those things which have been so often adjudged ought to rest in peace." As the Constitution Bench in (1981) 2 SCC 362 (Waman Rao v. Union of India) noticed, the doctrine of stare decisis is the basis of common law. It originated in England and was used in the colonies as the basis of their judicial decisions. The genesis of the rule may be sought in factors peculiar to English legal history, the most important of them being the absence of a code. The Normans forbore to impose an alien code on a half-conquered realm, but sought instead to win as much widespread confidence as possible in their administration of law, by the application of near uniform rules. The older the decision, the greater its authority and the more truly was it 79 accepted as stating the correct law. As the gulf of time widened judges became increasingly reluctant to challenge old decisions. The principle of stare decisis is also firmly rooted in American jurisprudence. It is regarded as a rule of policy which promotes predictability, certainty, uniformity and stability. The legal system, it is said, should furnish a clear guide for conduct so that people may plan their affairs with assurance against surprise. It is important to further fair and expeditious adjudication by eliminating the need to relitigate every proposition in every case. In Waman Rao, the Supreme Court quoted with approval from H.M. Seervai in Constitutional Law of India where the author had pointed out how important it was for judges to conform to a certain measure of discipline so that decisions of old standing are not overruled for the reason merely that another view of the matter could also be taken.
In view of the binding Division Bench judgment in Upananda Chatterjee, which has followed the dictum in, inter alia, Bhudan Singh and Kalika Kuer, it is the view of the earlier Division Bench judgment in Elitarious that remains the law declared on the issue by this High Court as it has neither been rendered irrelevant by any change in the law nor has it been overruled by virtue of any subsequent judgment of greater authority.
There is one point that would remain uncovered if the discussion were to stop with the conclusion that Section 86 of the Code would not apply to an admiralty action in rem. Would that imply that the doctrine of sovereign immunity is altogether irrelevant in an admiralty action in rem in this country? On a reading of paragraph 36 of Elitarious it would appear that the Division Bench took the view that de hors Section 86 of the Code the doctrine of sovereign immunity could not be invoked in this country. It is submitted with respect that such position, if indeed paragraph 36 implies it, may be at variance with MV Elisabeth, a judgment which that Division Bench noticed. It may also be regarded as being of no further efficacy by reason of the opinion in MV Sea Success I which is a subsequent judgment rendered by the Supreme Court. But it would be a 80 half-truth if it were only stated that the applicability of foreign conventions in the domestic law has been upheld in MV Sea Success I and that by itself would render paragraph 36 of Elitarious bad in law. It probably would not; since MV Sea Success I did not take a different view from the position in law as in existed prior to Elitarious. MV Sea Success I merely followed MV Elisabeth on such aspect and MV Elisabeth was wholesomely referred to in Elitarious, though not on this facet of the law. It is submitted by this Court that if the doctrine of sovereign immunity is altogether inapplicable in the admiralty jurisdiction, it would lead to a serious anomaly where a vessel owned by a foreign State, regardless of its character and use, may be arrested and, indeed, cause embarrassment to the Indian State. It is respectfully submitted by this Court that the principles preserved in the body of international law relating to the doctrine of sovereign immunity as tempered by its reflection in Indian law - that is, the spirit of Section 86 of the Code - may be applied to an admiralty action in rem.
There appears to be authoritative support for such submission. Notwithstanding the trial court in Mirza Ali Akbar holding that Section 86 of the Code, as it then stood, did not apply to that suit, it assessed the matter on the basis of the doctrine of sovereign immunity as recognised in international law. The Division Bench reversed the decision by holding that notwithstanding Section 86 of the Code not applying in terms in that matter, the suit was barred by the "general principles of International Law which now form part of the Indian law." The Supreme Court, at paragraph 11 of the report, recognised that two questions fell for consideration by it: the first was in relation to the application of Section 86 of the Code; and the second in regard to the scope and effect of the doctrine of sovereign immunity under international law. The Supreme Court then proceeded to consider the first question and observed that if the answer to the first question was in favour of the defendant foreign State, "then the interesting point about immunity under international law may not have to be considered." The Supreme Court held that the Calcutta High Court was in error in holding that Section 86 of the Code, as it then stood, did not create a bar against that 81 suit. The following sentence from paragraph 11 of the report would show that the other aspect was left untouched:
"11. ... That being our view, we do not propose to consider whether the court of appeal was right in upholding the respondents' plea of absolute immunity under international law. ..."
That would imply that the Division Bench view of this Court in Mirza Ali Akbar would still hold the field if the law has not undergone a change or if a different view on the legal issue has not been taken by a higher authority. The law has, indeed, been altered. But the variation was to such effect as would have had a material bearing on the other aspect of the Division Bench verdict which was upset by the Supreme Court anyway. That Section 86 of the Code was subsequently amended would not impact the facet of the Division Bench decision that was left unconsidered by the Supreme Court and which is the subject of the immediate discussion. The Division Bench upheld the trial court opinion that the principle of foreign sovereign immunity would be applicable and could be appropriately invoked in this country de hors Section 86 of the Code or in a situation where Section 86 of the Code did not apply in terms. In fact, the Division Bench disagreed with the trial court order but not with the basic premise thereof. The Division Bench arrested the civil suit in that case by applying such principle. The order was upheld by the Supreme Court, not the Division Bench analysis and interpretation, but by applying a reasoning that did had not found favour at either stage in this Court but without taking into account the applicability of the principles of the doctrine in international law. The principle of stare decicis stares starkly from the Mirza Ali Akbar decision of the Division Bench, particularly since the view has remained unchallenged (and unconsidered) for a substantial period of time.
In theory, the reverence accorded by a nation State to another would be based on the respect that the domestic sovereign would command in its own State, whether by custom or by the diktat of an edict. The application of the 82 principle, personified in the feudal concept that the king can do no wrong (where sovereignty was a personal attribute of the king), was transported by England to its colonies whether in absolute or slightly diluted terms. To begin with, a foreign sovereign enjoyed absolute immunity. According to the classical or absolute theory a sovereign could not, without his consent, be made a respondent in the courts of another sovereign. By early nineteenth century the doctrine of immunity of foreign ships of war from proceedings in rem in a domestic forum was established both in England and in the United States. Such immunity was progressively extended in both countries to foreign public vessels, not being ships of war, by the principle that the use of the vessel for a public purpose was the important factor (Columbia Law Review, Vol. 45, No.1; Pp 80-85). As to what would amount to "public use" was expanded over course of time and it came to pass in the United States by 1926 that ships of a foreign sovereign engaged in commercial activities would enjoy the same privilege, though it was later made a necessary condition for invoking immunity that the foreign sovereign be in possession of the ship whether or not it was the owner. By this time, The Porto Alexandre in England extended immunity in the admiralty jurisdiction in England to any ship owned by a foreign sovereign. Whatever may have been the position in England or in the United States, the 1926 Brussels Convention did not make out any special case for State-owned vessels. As international trade picked up after the Second World War, the absolute immunity that all foreign State-owned ships enjoyed came to be doubted even in the United States and in England while the absolute theory was replaced in some other countries by the newer or restrictive theory of immunity that only accorded immunity with regard to acts done jure imperii as opposed to acts done jure gestionis. Into two decades after the Second World War, the United States had moved along from the absolute theory in Schooner and had embraced the more modern approach in international law; the shift being gradual after the "Tate Letter" of 1952. An article entitled "Sovereign Immunity of States Engaged in Commercial Activities"
(Columbia Law Review, Vol. 65, No.6; Pp 1087-1100) lamented that the transition 83 was not fast enough in the United States though it noticed that from the time of the 1926 Brussels Convention the international thinking was otherwise than what was prevalent in the United States. The article noted that most of the major European powers had supported the restrictive theory with the notable exceptions being the Warsaw Pact countries and the judicial opinion being unclear in England. The law on such aspect in the United States and in England is now found in their statutes: the Foreign Sovereign Immunities Act, 1976 in the United States and the State Immunity Act, 1978 in England. These statutes appear to apply across the board and are not restricted to ordinary civil suits.
In Harbhajan Singh Dhalla, the Supreme Court articulated that the immunity of foreign States to be sued in the domestic forum of another State was part of the general international law and international order. There are two principles on which the doctrine of foreign sovereign immunity rests. The thought expressed in the maxim par in parem non habet jurisdictionem is concerned with the status of equality. The other principle on which foreign sovereign immunity is based is that of non-intervention in the internal affairs of other States. In Harbhajan Singh Dhalla, the Court observed that much had happened in different States since Schooner explained the principle apropos a State within its own territory as being "necessarily exclusive and absolute." The Harbhajan Singh Dhalla judgment mandated that in the changed scenario of international trade and commerce, international interdependence and international opening of embassies, "in granting sanction (under Section 86 of the Code) the growth of a national law in this aspect has to be borne in mind (and the) interpretation of the provisions of Code of Civil Procedure must be in consonance with the basic principles of the Indian Constitution." The judgment in Harbhajan Singh Dhalla noticed the Constitution Bench view in Mirza Ali Akbar and still opined that the immunity available to the State in India had to be taken into account in the Central Government considering an application for permission under Section 86 of the Code to file a civil suit against a foreign State. The earlier Constitution Bench decision and the opinion in Harbhajan Singh Dhalla can be reconciled only 84 if the Mirza Ali Akbar dictum is confined to the applicability of Section 86 of the Code and is seen to have said nothing on the substance of that provision. If the exercise of the discretion under Section 86 of the Code is to be so tempered, as required by Harbhajan Singh Dhalla, by the consideration of the doctrine of sovereignty as applicable to the Indian State under the Constitution in taking up an application for consent thereunder; when a plea of immunity is taken by a foreign State (assuming, for the moment, that the request is appropriately made) in proceedings to which Section 86 of the Code does not apply in terms, such claim has to be assessed on the basis of the prevalent international law on the aspect in the light of Section 86 of the Code as tempered by the consideration of the doctrine of sovereignty as applicable to the Indian State under the Constitution. It is again respectfully submitted by this Court that it is such test that ought to be applied to the plea carried by the Vietnamese petitioner to this Court.
But even if the international law on the doctrine of sovereign immunity of a foreign State and the spirit of Section 86 of the Code were to be applied to assess the challenge launched by the Vietnamese petitioner - though it cannot actually be applied in view of paragraph 36 of Elitarious - the objection raised here would fail since it is not in dispute that Vinashin Sky, whether or not it is owned by the State of Vietnam, is engaged in commercial activities which, both by virtue of the current trend on the subject in international law and the standard embodied in Section 86 of the Code, would disqualify the challenge. The result is that the objection raised as to the maintainability and the continuation of the actions has to fail.
GA No. 3476 of 2009, which is the petition for dismissal of the earlier suit, is dismissed. The Vietnamese petitioner will pay costs assessed at Rs.3 lakh to be shared equally by the two sets of plaintiffs. The applications for arrest, GA No. 3121 of 2009 in AS No. 15 of 2009 and GA No. 3493 of 2009 in AS No. 19 of 2009, are allowed and the orders of arrest are confirmed. In either case, the order 85 of arrest will stand vacated if security is furnished, in Indian currency, to the entire extent of the respective plaintiff's claim inclusive of interest as on the date of the security being furnished. This has to be so since the best arguable case of either plaintiff has to be what appears from the relevant affidavit of arrest as the merits of either claim have not been assailed. There will be no order as to costs in the applications for arrest. GA No. 304 of 2010, which has been brought on behalf of the vessel for a direction for water and essential supplies to be maintained to it as it remains arrested with crew on board, is allowed with a direction that water and essentials will be supplied to the vessel as long as it remains arrested subject to payment of the expenses therefor. The order in GA No. 304 of 2010 is made without prejudice to the plaintiffs' contention that the petitioner therein has no locus to maintain the petition. There will be no order as to costs in GA No. 304 of 2010.
Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(Sanjib Banerjee, J.)