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AS/10/2010 33/ 35 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
ADMIRALITY
SUIT No. 10 of 2010
For
Approval and Signature:
HONOURABLE
MR.JUSTICE ANANT S. DAVE
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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CROFT
SALES AND DISTRIBUTION LTD
Versus
M
V BASIL (IMO NO.7532650) & others
======================================
Appearance :
Mr.
S.N. Soparkar, Senior Advocate with Mr. Bharat T. Rao for the
plaintiff.
Mr.
Mihir Joshi, Senior Advocate, with Mr. R.J. Oza, Mr. Amitav Majmudar
and Mr. Aditya Krishnamurthy for defendant Nos. 1 and 18
DS
AFF.NOT FILED (N) for Defendant(s) : 2 - 3,7 - 10.
MR YN RAVANI
for Defendant(s) : 11,
MS AMEE YAJNIK for Defendant(s) : 14,
MR
DIPEN A DESAI for Defendant
No.17
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CORAM
:
HONOURABLE
MR.JUSTICE ANANT S. DAVE
Date
: 24/01/2011
CAV
JUDGMENT
1 Plaintiff-company
has filed the present suit claiming the following relief:
[A] That this
Hon ble Court be pleased to, during the pendency of arbitration
proceeding pending at London, to arrest and detention of M.V. BASIL
with her hull, engines, gears, tackles, bunkers, machinery, apparel,
plant, furnitures, fixtures, appurtenances and paraphernalia, at
present lying at harbor at Alang Anchorage, Bhavnagar, in order to
secure, the plaintiff claim as per the particulars of claim at
Annexure-A.
[B] That the
defendant No.1 Vessel M.V. BASIL together with her hull, engines,
gears, tackles, bunkers, machinery, apparel, plant, furnitures,
fixtures, appurtenances and paraphernalia, at present lying at harbor
at Alang Anchorage, Bhavnagar, be arrested by warrant of arrest of
this Honourable Court and the same be condemned in respect of the
claim herein and be ordered to be sold along with her hull, engines,
gears, tackles, bunkers, machinery, apparel, plant, furnitures,
fixtures, appurtenances and paraphernalia, at present lying at harbor
at Alang Anchorage, Bhavnagar, and the net sale proceeds thereof be
ordered to be applied to the satisfaction of the plaintiff s claim
herein and the cost of this suit.
[C] That pending
hearing and final disposal of the suit, this Honourable Court be
pleased to order and direct arrest of M.V. BASIL with her hull,
engines, gears, tackles, bunkers, machinery, apparel, plant,
furnitures, fixtures, appurtenances and paraphernalia, at present
lying at harbor at Alang Anchorage, Bhavnagar, or wherever she is
within the territorial waters of India.
[D] For interim
and ad-interim orders in terms of prayers (B) and (C)
The
present suit is valued at Rs.55,79,53,650/- [US $ 12,398,970].
2. Initially,
an oral order dated 1st November 2010 was passed by the
learned Single Judge [Coram: Hon ble Mr. Justice Bankim N. Mehta]
directing the Port Officer and the Custom Authorities at Bhavnagar to
arrest the vessel M.V. BASIL at present lying at Alang Anchorage at
Bhavnagar within the territorial waters of India and to keep the
vessel under arrest under further orders of this Court. The above
order was passed upon the condition that the plaintiff should file an
undertaking in writing and an affidavit to the Registrar of this
Court to pay such sums by way of damages as this Court may award as
compensation in the event of the defendants and/or any party
sustaining prejudice by this Court and on further condition that the
plaintiff shall deposit Rs.25 lakhs on or before 15.11.2010 in the
Registry. At the same time, the defendants were granted liberty to
approach this Court in case of any difficulty. It is further ordered
that, in the event of the defendants and/or those interested in her
depositing in this Court a sum of Rs.55 crore or equivalent U.S.
Dollars with interest thereon @ 18% per annum from the date of
institution of the suit till payment/realization towards the
satisfaction of the plaintiff s claim in the suit and/or furnishing
security to the satisfaction of the Registrar of this Court in the
said sum of Rs.55 crore or equivalent U.S. Dollars with interest
thereon @ 18% per annum from the date of institution of the suit till
payment/realization, the said warrant of arrest shall not be executed
against the defendant vessel M.V. BASIL.
3. From
the proceedings of the suit, it appears that the matter was heard
during Diwali vacation for about two hours but, due to paucity of
time, the matter was adjourned and, on 23rd November 2010,
an oral order came to be passed by the learned Single Judge that
considering the fact that the matter is highly contested and is
likely to occupy substantial time and the learned Single Judge was
not available after 1st December 2010, liberty was given
to the parties to mention the matter before the Hon ble Chief
Justice. Upon filing a note by the learned counsel for the defendants
and the submission made by the Registry, the Hon ble Chief Justice
directed the Registry to list this matter before this Court and the
matter was heard by this Court accordingly.
4. The
plaintiff-Company is incorporated at British Virgin Islands in the
name and style of M/s. Croft Sales & Distribution Limited and,
inter-alia, is engaged in the business of sales and purchase of
floating structures namely ships, motor tanker, vessel and the same
are sold for demolition to China, Pakistan, Bangladesh and India.
5. The
plaintiff has invoked admiralty jurisdiction of this Court by filing
the present suit for the arrest of the vessel M.V. BASIL, defendant
No.1, for securing guarantee or security for the amount reflected at
Annexure A till the final disposal of the arbitration
proceeding pending at London between the plaintiff and defendant No.3
herein.
6. Shri
S.N. Soparkar, learned Senior Counsel for the plaintiff, has relied
on the following facts and canvassed submissions accordingly.
6.1 Defendant
No.1-Vessel is flying the flag of St. Vincent and Grenadines and the
registered owner is Diva Maritime Company, defendant No.18 herein. It
is the case of the plaintiff that, for all purposes, the vessel is
owned, managed, controlled and operated by her beneficial owner M/s.
Overseas Marine Enterprises [OME], defendant No.2 herein, situated at
the address mentioned in the cause tile of the suit. Defendant
No.2-OME is a company established and having its working and
functional offices at 83, Posidonos Avenue in Flyfada, Greece. The
Company is a Liberian Company with a fully functional office
established in Greece and the registered Directors of the company are
Mr. Georgios Tsakiroglou, President Director, Ms. Maria Koutri, Vice
President/Director and Mr. Konstantions Drivas, Secretary/Director.
According to the plaintiff, defendant No.2-company is the principal
company which manages two vessels, namely, [i] ZAIRA from 13.4.2000
to 22.8.2007, renamed as MAX [owned by Bailey Shipping Limited]
from 23.8.2007 to 31.12.2007 [the relevant letters to the Ministry
were sent by the owners]; and [ii] M.V. BASIL owned by Diva Maritime
Company, which is beneficially owned, controlled and operated by
defendant No.2- OME.
6.2 It
is the further case of the plaintiff that both the vessels are
registered as single dollar companies in offshore jurisdictions and
are flying the flags of convenience and have only one property i.e.
ship and both these companies are the subsidiary companies of the
main holding company being defendant No.2- OME and have common
Directors including the President and other Directors of defendant
No.2- OME.
6.3 According
to the plaintiff, on 21st August 2008 the plaintiff
entered into Memorandum of Agreement for purchasing the vessel M.V.
MAX, which was renamed as M.V. AXIS, and the total value of the
vessel is 13624814 US dollars as per Annexure A to the MOA. On
29th August 2008, defendant No.3 executed Addendum No.1
whereby it was agreed that until 15 days after vessel beaches, the
deposit of 20% amount as per clause 2 of the MOA dated 21.8.2008 will
be kept in trust as a security against legal or any other costs in
connection with possible arrest. Clause 8 of the MOA dated 21.8.2008
stipulates that the sellers warrant that the vessel, at the time
of physical and legal delivery is free from all encumbrances and
maritime liens or any other debts whatsoever. Should any claim, which
have been incurred prior to the time of delivery, be made against the
vessel, the sellers hereby undertake to unconditionally indemnify the
buyers against all consequences of such claims . Clause 10 of the
MOA dated 21.8.2008 specifies conditions of delivery According to
the plaintiff, clause 12[c] of the MOA dated 21.8.2008 is material
for the purpose of this suit, which reads as under:
[c] Letter of
Undertaking from the Sellers signed by duly appointed
Attorney-in-Fact of the sellers, certifying that the vessel at the
time of delivery is free from all encumbrances, mortgages, maritime
liens and any other debts and liabilities whatsoever and undertaking
to indemnify the Buyers against consequences of any claims which have
been incurred prior to the delivery of the vessel .
6.4 As
per the above MOA, 20% amount of MOA i.e. 2724962.08 USD was to be
kept with defendant No.7 [the brokers] and, as per Addendum No.1
dated 29th August 2008, to be held as trust and security
and balance 80% was credited in the account of defendant No.7, with
80% amount of Euro 7147991.27 being released in favour of M/s. Bailey
Shipping Limited, which was owned, controlled, operated and managed
by defendant No.2- OME. The above 80% was released to defendant No.3
at the time of physical delivery of the vessel to the plaintiff.
However, defendant No.3 and defendant No.7 did not comply with the
terms of Addendum No.1 dated 29th August 2008. The vessel
was also registered in the name of MV AXIS at Tuvalu Ship Registry at
Singapore, as the vessel was meant for demolition. On 1st
September 2008, the plaintiff accepted the delivery on the basis of
the documents supplied by defendant No.3 of non-encumbrance. The
plaintiff signed MOA for sale of M.V. AXIS, ex M.V. MAX, to M/s.
Sheema Steels of Bangladesh and delivered the vessel at the outer
anchorage of Chittagong, Bangladesh. Formalities for beaching of the
vessel were completed with the Customs Authority, Bangladesh, on the
basis of the documents supplied by M/s. Sheema Steels and on 30th
September 2008 the plaintiff had given physical delivery of M.V.
AXIS, ex M.V. MAX.
6.5 On
1st October 2008, M/s. Intermare Transport GMBH of
Hamburg, Germany who had outstanding charterer and other claim for
necessaries over the vessel, brought Admiralty Suit No.18 of 2008 in
the Bangladesh High Court and the vessel was arrested pursuant to an
order passed by the Bangladesh High Court. Since the plaintiff had no
knowledge about the above encumbrance of M/s. Intermare Transport
GMBH of Hamburg, Germany and the certificate of non-encumbrance was
given and M/s. Sheema Steels of Bangladesh has made all payments as
per the MOA, on account of the order of arrest of M.V. AXIS, ex M.V.
MAX, by the Bangladesh High Court, M/s. Sheema Steels of Bangladesh
pressed hard for the return of the amount which was paid by it as per
the MOA. It is the further case of the plaintiff that, the vessel
M.V. AXIS, ex M.V. MAX, was sold and it was beached for breaking
purpose and the registration was cancelled with Tuvalu Port Registry,
Singapore. Since notice of arbitration was sent by defendant No.3
through their solicitors, the arbitrators were appointed on 29th
October 2008. The solicitor of the plaintiff served statement of
claim to the Arbitrators on 22nd September 2009. In the
meanwhile, defendant No.3-Bailey Shipping Limited did not intend to
serve any claim subject to the pending decision and outcome in
Bangladesh. The plaintiff requested its law firm at Greece for
carrying out search of the constitution of Bailey Shipping Limited,
Overseas Marine Corporation and other associated companies and,
accordingly, an e-mail was sent to the plaintiff by the above Greek
law-firm on 8th December 2008. Defendant No.3 did not
cooperate with the arbitration claim and no guarantee was given that
if the plaintiff succeeds in the arbitration, then the award would be
enforced. The plaintiff received claim from M/s. Sheema Steels and it
was also incorporated in the arbitration claim by the plaintiff
before the Arbitrator at London. The plaintiff moved an application
in the Greek Court for withdrawal of 20% amount, which was kept with
the International Ship Brokers pursuant to the addendum to MOA, but,
before the hearing could take place, 20% amount was withdrawn from
the Bank by defendant No.3 through its lawyer and, thus, the
plaintiff s cause of action has arisen on the date when MOA was
entered into and defendant No.3 had undertaken in writing two letters
that the vessel is free from all encumbrances and if any charges,
liabilities arose before selling of the vessel to the plaintiff, it
would be borne by defendant No.3 and defendant No.3 had not fulfilled
its obligation and acted contrary to the terms of the MOA and, hence,
the present Admiralty Suit is filed by the plaintiff. It is the
further case of the plaintiff that the cause of action has arisen
also because defendant No.3 has fraudulently acted by making wrong
declarations and managing with the Registry for non-encumbrance
certificate whereby the plaintiff has been defrauded and third party
liability had arisen, hence, the plaintiff is entitled to invoke the
admiralty jurisdiction of this Court. Besides, according to the
plaintiff, the dispute is pertaining to sale of the vessel and,
therefore, it falls within the definition of Article 1(v) of
International Convention on the Arrest of Ships, Geneva, dated March
12, 1999 and, therefore, it is a maritime claim and the plaintiff is
entitled for the relief claimed in the present suit.
7. In
the above back-drop of facts, Shri S.N. Soparkar, learned Senior
Counsel appearing for the plaintiff, has submitted that the order of
arrest dated 1st November 2010 passed by the learned
Single Judge after considering various aspects including the facts
and case-laws deserves to be continued unless the defendants are
ready and willing to deposit a sum of Rs.55 crore or equivalent US
dollars with interest as ordered by this Court.
7.1 Shri
S.N. Soparkar, learned Senior Counsel, has vehemently submitted that
the defendant-ship, which is registered with Marshall Islands, does
not disclose the real owner and the registration is on-line and was
done by an agent having the office at Greece. The share issued to the
President, Secretary and Treasurer is one and Panagiotis
Karapanagiotis does not hold any share which has no value. In fact,
the real owners are Mr. Konstantinos Drivas, Mr. Spyridon Stivakts,
Georgios Taskoroglou whereas defendant Nos. 2, 3 and 18 have not
disclosed their shareholding pattern and remained silent, except some
correspondence which took place between the law-firms. It is further
submitted that the plaintiff has made all efforts to complete the
arbitration proceeding at London but defendant No.3 has not
cooperated and no security was paid about enforcement of the award if
any made in favour of the plaintiff and defendant No.1 is a
sister-ship of M.V. AXIS, ex M.V. MAX, and, therefore, considering
clause 1, sub-clause (v) of Geneva Convention of 1999, clause 1,
sub-clause (v) of Article I, sub-clause 2 of Article 3 of Geneva
Convention 1999, the plaintiff is entitled to invoke admiralty
jurisdiction of this Court.
7.2 Shri
S.N. Soparkar, learned Senior Counsel, has relied upon International
Convention of Brussels of 1952 and another Convention of Geneva, 1999
and submitted that, for the maritime claim of the plaintiff with
regard to the ship M.V. AXIS, ex M.V. MAX, defendant No.1-vessel
which is beneficially owned, operated and managed by defendant No.2,
is rightly ordered to be arrested by this Court. From the record, as
available, it is submitted that defendant No.1 is sister-ship of M.V.
AXIS, ex M.V. MAX, because of the shareholding in whose favour 500
shares have been issued, the value of ship is nil and, therefore,
this shareholding does not have any financial stake and defendant
No.2 who is contesting all the litigation in the name of defendant
No.18 is the real owner. Shri S.N. Soparkar, learned Senior Counsel,
has also relied upon the decisions of the Apex Court in the case of
M.V. Elizabeth vs. Harman Investment & Trading Private Limited,
reported in AIR 1993 SC 1014 [1993 Supplementary (2) SC 433] and in
the case of Liverpool & London Steamship Protection and Indemnity
Association vs. M.V. Sea Success, reported in (2004) 9 SCC 512 and
other decisions including the decision of the Bombay High Court with
regard to sister-ship.
7.3 As
per the learned Senior Counsel for the plaintiff, cause of action had
arisen as early as when the MOA was signed on 21.8.2008 and, as per
clause 8, the sellers had warranted that the vessel was free from
encumbrances and maritime liens or any other debts when the physical
possession and legal delivery was handed over. It is further
submitted that the cause of action has genesis in the above MOA and
the events which have taken place pursuant to that and the clauses
contained thereunder. That, since defendant No.3 has not cooperated
in the arbitration proceeding and no amount will be available towards
the claim made by the plaintiff to secure security of such amount,
the interim relief granted by the learned Single Judge of arresting
defendant No.1-vessel may be continued till final outcome of the
suit.
8. Mr.
Mihir Joshi, learned Senior Counsel appearing for defendant No.18,
has also provided certain relevant dates with regard to incorporation
of defendant No.18, Diva Maritime Company, as recorded in the
Certificate of Incumbency as on 4th July 2007 and also
Certificate of Registry in respect of defendant No.1, M.V. BASIL, on
23rd October 2007, so as to indicate that defendant No.18
was the registered owner of the vessel since the above date. Even the
Management Agreement between defendant No.18 and defendant No.2 for
defendant No.1-M.V. BASIL, was entered into as on 24th
October 2007. So far as other events which took place between the
plaintiff and defendant No.3 about purchase of the vessel M.V. AXIS,
ex M.V. MAX, as on 21st August 2008 onwards and filing of
Admiralty Suit No.18 of 2008 in the Bangladesh High Court on 1st
October 2008 are concerned, there appears to be no dispute.
8.1 Mr.
Mihir Joshi, learned Senior Counsel appearing for defendant No.18,
has vehemently opposed to continuing of arrest order and/or
confirmation of the same on the ground that the plaintiff does not
have maritime claim so as to invoke admiralty jurisdiction of this
Court at all. It is submitted that the claim of the plaintiff is
based on 1952 Convention which does not include any dispute arising
out of a contract for the sale of a ship to be a maritime claim and
the said category, which is included in Article I(1)(v) of the 1999
Convention, is not applicable to a non-signatory State like India.
That, the decision of the Apex Court in the case of M.V. Sea Success
[supra] is based on an incorrect factual premise that all the
participants referred in the preamble of the Convention have
consented to be bound by it. In fact, only 9 States had consented
and, as par Article 14, consent of 10 States is required and,
therefore, the Convention has not come into force. Alternatively, it
is submitted that, as per Article I(1)(v), Article 2(2), Article 3(1)
of 1999 Convention, a
maritime claim means a claim or claims specified therein, which would
permit the claimant to arrest any ship in respect of which a maritime
claim is asserted to secure such a claim. Therefore, if
the above Articles are seen, the plaintiff seeks indemnification from
defendant No.3 in respect of a claim made by M/s. Sheema Steels in
the arbitration against the plaintiff for breach of warranty
regarding sale of M.V. AXIS, ex M.V. MAX, by the plaintiff to it and
the breach is relatable to a breach of assurances given by defendant
No.3 to the plaintiff at the time of sale of the said vessel.
8.2 The
above submission is crystallized by the learned Senior Counsel for
defendant No.18 that the plaintiff could not have sought arrest of
the particular ship-M.V. MAX, regarding which, the dispute had
arisen between the plaintiff and defendant No.3 out of a contract for
the sale of M.V. MAX, since the said ship was of its own ownership
and in fact, later on, sold to M/s. Sheema Steels when the purported
cause of action for indemnification arose in favour of the plaintiff
against defendant No.3 when M/s. Sheema Steels purportedly initiated
arbitration proceedings against defendant No.3 on or after 1st
October 2008. Therefore, the particular ship could not have
been arrested to secure the claim against defendant No.3 since it was
not an asset of defendant No.3 at all and, therefore, the plaintiff
has no maritime claim of the nature contemplated under the Arrest
Conventions. It is further submitted that no claim can at all arise
since the plaintiff has not suffered any damage or loss for the
claimed amount as alleged in the plaint. The claim is fanciful and
hypothetical. So far as the claim made by M/s. Sheema Steels in the
arbitration proceeding against the plaintiff is concerned, no damage
is ascertained or quantified in favour of the plaintiff.
8.3 Mr.
Mihir Joshi, learned Senior Counsel appearing for defendant No.18 has
reemphasized, while reiterating, that a dispute arising out of a
contract for the sale of the ship is a new head of maritime claim and
such a dispute is not relatable to an existing head of maritime claim
and is not necessary to be adopted in the process of interpreting any
existing term/phrase under admiralty jurisdiction of this Court and
further submitted that the decision of the Apex Court in the case of
Liverpool, (2004) 9 SCC 512 that the Convention could be applied in
the process of interpretive changes, was in the context of the term
‘necessaries’ as contained in the Admiralty Court Act, 1861, for
interpreting inclusion of insurance premium by applying Article
1(1)(q) of the 1999 Convention. The above judgment applying 1999
Convention relates to only for enforcement of contract involving
public law character; the present case involves a dispute between
private parties and has no element of public law and, therefore also,
this Court will not exercise power.
8.4 It
is next contended by Mr. Mihir Joshi, learned Senior Counsel
appearing for defendant No.18, that the plaintiff cannot seek arrest
of M.V. BASIL as a sister vessel of the particular vessel
M.V. MAX;
[i] Certain
claims may be brought not only against the ship in connection with
which the claim arises but also against other ships commonly
referred to as sister ships , if the following conditions are
satisfied
[a] the
claim must have arisen in connection with Ship A ; and
[b] the
person who would be liable on the claim in a claim in personam must
have been the owner or the charterer or in possession or control of
Ship A when the cause of action arose; and
[c] at
the time when the claim is brought, i.e. when the claim form is
issued, the person who would be liable on the claim in a claim in
personam must be the beneficial owner of all shares in the Ship B
against which the claim is brought;
[ii] In
the present case on the averments made in the plaint, when the cause
of action arose in favour of the plaintiff to seek indemnification
against Bailey Shipping when M/s. Sheema Steels purportedly initiated
arbitration proceedings against it some time after 1.10.2008, Bailey
Shipping was not the owner/charterer or in possession or control of
the particular ship MAX [Ship A as referred to above] and the
question of arresting any other ship as a sister ship does not arise
at all.
[iii] Moreover,
since the claim, styled as a maritime claim by the plaintiff, would
not have entitled the plaintiff to arrest the particular vessel-MAX,
the issue of seeking arrest of a purported sister ship does not arise
and the scheme of the Conventions clearly indicates an entitlement to
the arrest of the particular ship as the foundation enabling the
arrest of a sister ship.
[iv] That,
in any case, Bailey Shipping and Diva Maritime are two independent
legal entities and the Certificates of Registry indicate that the two
vessels are registered in their individual names which registrations
are not challenged as sham/bogus and, therefore, the requirement of
arrest of a sister ship is not met with.
[v]
For statutory or quasi ‘in rem’ claims, an in personam obligation
must arise against the owner of the vessel as security for its claim.
There would be no question of arrest of a vessel for securing the
dues of a claimant when the vessel, at the time the ‘maritime’ claim
arose, was of the ownership and in possession of the claimant itself.
A claim which does not so entitle the plaintiff to seek arrest of
the particular ship under the relevant provisions, is not a maritime
claim contemplated under the Convention.
[vi] In
any case, the plaintiff’s contention regarding when the ’cause of
action’ arose in its favour is absolutely misconceived, both in the
context of ‘particular ship’ and ‘sister ship’ and even on facts the
plaintiff cannot seek arrest of either vessel since the
pre-requisites are not complied with. In so far as the particular
ship -MAX/AXIS is concerned, the maritime claim arose in favour of
the plaintiff for breach of warranty of the MOA upon sale and
delivery of the vessel and not before that. In other words, the
plaintiff could not have filed a suit against Bailey Shipping
claiming damages for breach of warranty even a day prior to the
actual sale and delivery of the vessel. Once the vessel was of its
own ownership, when the claim arose, the question of arresting the
same would not arise. The contention of the plaintiff that the cause
of action arose upon the execution of the MOA when Bailey Shipping
was the owner is misconceived since what is required to be
ascertained under the Conventions is when the maritime claim arose
and ’cause of action’ in this context would mean a right to sue
accruing to the plaintiff, and not cause of action as understood in
civil law as being a bundle of facts required to be proved by the
plaintiff. In any case, the plaintiff has not suffered any damage
upon sale of the vessel and therefore the aforesaid contention is
not germane. The plaintiff claims indemnification and the right to
sue/claim would arise only upon Sheema Steels raising a claim upon
the plaintiff, which is much after September 2008 at which time
Sheema Steels was the owner of MAX/AXIS and the plaintiff could not
have arrested the said vessel. Similarly, for arrest of a sister
ship even under the 1999 Convention it is necessary that the owner
of the ‘sister ship’ at the time of its arrest was the
owner/charterer of ‘the particular ship’ when the claim arose. As
stated above, Sheema Steels was the owner of the particular ship
when the claim/right to sue for indemnification arose in favour of
the plaintiff. In any case even if it is presumed that such right
arose on account of breach of warranty, it arose only upon and after
sale of ‘the particular ship’ at which time also it is the
plaintiff which was the owner of ‘the particular ship’ when the
claim arose and, therefore, arrest of a sister ship of the purported
ex-owner/vendor of the vessel is not permissible under the Arrest
Conventions.
8.5 Mr.
Mihir Joshi, learned Senior Counsel appearing for defendant No.18,
has also opposed to lifting of corporate veil as submitted by the
learned Senior Counsel appearing for the plaintiff, since no pleading
or particulars have been given in the plaint regarding the alleged
fraud and also on the ground that defendant No.18 was incorporated on
4th July 2007 and owned M.V. BASIL from 23rd
October 2007, while the purported claim of the plaintiff arose
against defendant No.3 after the Admiralty Suit was filed by M/s.
Intermare Transport GMBH of Hamburg, Germany, in the Bangladesh High
Court and M/s. Sheema Steels purportedly initiated arbitration
proceeding against the plaintiff. It is also submitted that the
plaintiff has failed to even prima-facie establish that defendant
No.3 and defendant No.18 have the same shareholders or they are
wholly owned subsidiaries of each other or that a third party,
defendant No.2- OME. That, in the incorporation of Diva Maritime or
its ownership of BASIL, there is no device or sham designed to
defraud the plaintiff and, therefore, it is not entitled to seek
lifting of the corporate veil. The
contention that the vessel MAX/AXIS and the vessel BASIL are
‘beneficially owned’ by Overseas Marine Enterprises-defendant No.2
which can be ascertained by lifting the corporate veil of the
registered owner thereof and therefore the requirement of sister ship
stands complied with, is not tenable at law. The registered owner of
MAX was Bailey Shipping and it has never been OME. OME is, therefore,
neither owner or charterer of MAX/AXIS and in any case since even as
per the plaintiff the dispute arises out of a contract for the sale
of the ship, it necessarily arises only with its owner and not
charterer, which in any case OME is not. The contention that the
corporate veil be lifted cannot be accepted in the absence of any
fraud being pleaded in the incorporation of Bailey Shipping or its
ownership of MAX/AXIS as against the plaintiff. In any case OME is
not the shareholder of Bailey Shipping. The onus is on the plaintiff
to establish these facts, which it has failed to do and there is no
question of adverse inference since the said parties are not subject
to the jurisdiction of this Court. The registered owner of BASIL is
Diva Maritime and any connection with OME or Bailey Shipping has
been specifically denied by it. Once again no fraud is even pleaded,
far being established by the plaintiff, warranting lifting of
corporate veil. The contention that mere averment in the plaint is
sufficient is misconceived since the observation was made in the case
of Liverpool by the Supreme Court in the context of deciding the
issue whether the plaint disclosed a cause of action at all and at
the stage of interim relief the relative strength of the parties’
case would have to be examined by the Court. The plaint is based
purely on conjectures and surmises since the plaintiff seeks a
fishing inquiry to find out the shareholders purportedly behind the
registered shareholders of the respective companies and that too of
both companies to prove identity of ownership, which is a procedure
or claim unknown to law. In any case single ship companies is a
legitimate means to do business and in the absence of fraud, the
corporate veil cannot be lifted to extent liability. This is an
accepted proposition under Indian law as also internationally under
admiralty jurisdiction. The Supreme Court in Liverpool has also not
stated anything to the contrary and mere observations made while
leaving the issue open for decision by the Bombay High Court cannot
be read out of context and even the judgment of Aventicum referred to
therein regarding lifting the corporate veil was a case of fraud.
8.6 Inter-alia,
with regard to concept of beneficial ownership, it is submitted that
1952 Convention contemplates legal ownership alone and 1999
Convention, presuming it is effective, contemplates owner, demise
charterer, time charterer or voyage charterer and there is no other
concept of beneficial ownership and it is to be considered in
relation to shares in the ship and there is no evidence that
defendant No.3 is owned, managed and controlled by defendant No.2-
OME.
8.7 The
learned Senior Counsel appearing for defendant No.18 also relied upon
correspondence and letter of the Solicitors of the plaintiff dated
27th October 2010 and submitted that defendant No.2- OME
is not the beneficial owner of defendant No.2-Bailey Shipping and
disputed the contents of e-mail dated 8th December 2008.
8.8 The
learned Senior Counsel appearing for defendant No.18 also disputed
the merits of the claim and submitted that it is not open for the
Court to go into merits of such claim which is vague and that too
even during pendency of the arbitration. There are no particulars and
pleadings about such huge claim and no details have been given about
the claim made by M/s. Sheema Steels or any likelihood of suffering
any damages.
8.9 The
plaintiff’s contention that its claim as made must be accepted for
the purpose of securing the amount and it is not open for the Court
to go into the merits of such claim which is pending in arbitration,
is also misconceived
and such a huge claim is made without any particulars or pleadings
contained in the plaint at all. In law a claim made against a seller
by a third party does not amount to an encumbrance at all and the
entire claim of the plaintiff on this basis is wholly unjustified.
Even, no documents with details have been produced by the plaintiff
on record to establish such claim being made by Sheema Steels, the
basis thereof and the documents produced in support. Further, the
plaintiff has not established a real likelihood of suffering any
damages pursuant to the claim of Sheema Steels. It is unfair for the
plaintiff not to have disclosed that the claim of Sheema Steels was
not being pursued at the time of filing the suit and in fact the
vessel had been broken up as indicated in the extracts produced by
the plaintiff itself, that the arbitration between the plaintiff and
Bailey Shipping was abandoned at the time of filing the suit as is
evident from the letter dated 4.10.2010 and the present suit is
clearly an abuse of process. Moreover, the plaintiff has also not
disclosed that an amount of 20% of the consideration was considered
reasonable under its MOA with Bailey Shipping to cover arrest of the
vessel MAX/AXIS in the hands of the purchaser.
In view of written statement and affidavit-in-reply filed by
defendant No.18, it is submitted that the suit may be dismissed as
being not maintainable and the interim relief to arrest defendant
No.1 Vessel M.V. BASIL may be vacated.
9. The
parties have almost completed and filed their pleadings.
10. Having
heard the learned counsel appearing for the parties and on perusal of
the relevant record, the following main issues arise for
consideration of this Court in exercise of admiralty jurisdiction
with regard to the maritime claim raised by the plaintiff:
[i] Whether
the International Convention on the Arrest of Ships, Geneva, dated
March 12, 1999 applies to the Courts in India having admiralty
jurisdiction in view of the decision of the Apex Court in the case
of Liverpool & London Steamship Protection and Indemnity
Association vs. M.V. Sea Success, reported in (2004) 9 SCC 512 in
the facts of this case ?
[ii] Whether
the plaintiff has maritime claim so as to invoke admiralty
jurisdiction of this Court for arrest of ‘sister ship’ viz. vessel
M.V. BASIL, defendant No.1, for securing guarantee or security for
the amount reflected in Annexure A till final disposal of
the arbitration proceedings pending at London between the plaintiff
and defendant No.3 herein and the plaintiff can seek arrest of
vessel M.V. BASIL, defendant No.1, as a ‘sister vessel’ of
‘particular vessel’ – ‘M.V. MAX/M.V. AXIS’ and the ’cause of
action’ had arisen for filing the suit and invoking admiralty
jurisdiction of this Court and the present suit is maintainable ?
[iii] Whether
is it necessary for this Court to lift ‘corporate veil’, as
submitted by the learned Senior Counsel for the plaintiff, so as to
ascertain beneficial ownership of vessel ‘M.V. MAX/M.V. AXIS’ and
vessel M.V. BASIL, by OME, defendant No.2 herein ?
11. Firstly,
it is necessary to refer to International Convention Relating to the
Arrest of Sea-Going Ships, Brussels, May 10, 1952 and Article 3 of
Brussels Convention of 1952 reads as under:
(1) Subject
to the provisions of para (4) of this article and of article 10, a
claimant may arrest either the particular ship in respect of which
the maritime claim arose, or any other ship which is owned by the
person who was, at the time when the maritime claim arose, the owner
of the particular ship, even though the ship arrested be ready to
sail; but no ship, other than the particular ship in respect of which
the claim arose, may be arrested in respect of any of the maritime
claims enumerated in article 1, (o), (p) or (q).
(2) Ships
shall be deemed to be in the same ownership when all the share
therein are owned by the same person or persons.
(3) A
ship shall not be arrested, nor shall bail or other security be given
more than once in any one or more of the jurisdictions of any of the
Contracting States in respect of the same maritime claim by the same
claimant; and, if a ship has been arrested in any of such
jurisdictions, or bail or other security has been given in such
jurisdiction either to release the ship or to avoid a threatened
arrest, any subsequent arrest of the ship or of any ship in the same
ownership by the same claimant for the maritime claim shall be set
aside, and the ship released by the Court or other appropriate
judicial authority of that State, unless the claimant can satisfy the
court or other appropriate judicial authority that the bail or other
security had been finally released before the subsequent arrest or
that there is other good cause for maintaining that arrest.
(4) When
in the case of charter by demise of a ship the charterer and not the
registered owner is liable in respect of a maritime claim relating to
that ship, the claimant may arrest such ship or any other ship in the
ownership of the charterer by demise, subject to the provisions of
this Convention, but no other ship in the ownership of the registered
owner shall be liable to arrest in respect of such maritime claim.
The provisions of this paragraph shall apply to any case in which a
person other than the registered owner of a ship is liable in respect
of a maritime claim relating to that ship.
11.1 There
is no dispute that 1952 Convention has no reference to ‘dispute
arising out of contract for sale’ in the definition clause of
‘maritime claim’ of the ship.
12. It
is also necessary to refer to International Convention on the Arrest
of Ships, Geneva, March 12, 1999, in which, Article 1 contains
definitions and sub-article 1 defines ‘maritime claim’ and
clause (v) of sub-article 1 of Article 1 reads as under:
any
dispute arising out of a contract for the sale of the ship’.
Sub-Article
2 of Article 1 defines ‘arrest’, which reads as under:
Arrest
means any detention or restriction on removal of a ship by order of a
Court to secure a maritime claim, but does not include the seizure of
a ship.
Article
2 defines powers of arrest and sub-article 2 of Article 2 provides
that a ship may only be arrested in respect of a maritime claim but
in respect of no other claim. Sub-article 3 of Article 2 provides
that a ship may be arrested for the purpose of obtaining security.
Article 3 provides for exercise of right of arrest and reads as
under:
1. Arrest
is permissible of any ship in respect of which a maritime claim is
asserted if:
[a] the
person who owned the ship at the time when the maritime claim arose
is liable for the claim and is owner of the ship when the arrest is
effected, or
[b] the
demise charterer of the ship at the time when the maritime claim
arose is liable for the claim and is demise charterer or owner of the
ship when the arrest is effected; or
[c] the
claim is based upon a mortgage or a ‘hypotheque’ or a change of the
same nature on the ship; or
[d] the
claim relates to the ownership or possession of the ship; or
[e] the
claim is against the owner, demise charterer, manager or operator of
the ship and is secured by a maritime lien which is granted or arises
under the law of the State where the arrest is applied for.
2. Arrest
is also permissible of any other ship or ships which, when the arrest
is effected, is or are owned by the person who is liable for the
maritime claim and who was, when the claim arose:
[a] owner
of the ship in respect of which the maritime claim arose; or
[b] demise
charterer, time charterer or voyage charterer of that ship.
This
provision does not apply to claims in respect of ownership or
possession of a ship.
3. xx
xx xx
Thus,
sub-article 2 of Article 3 of Geneva Convention of 1999 is important
and relevant for deciding whether the plaintiff has maritime claim or
not. A close look and careful reading of above sub-article 2 of
Article 3 permits arrest also 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, owner of the ship in respect of which the
maritime claim arose for which, in the facts of this case, no
contention has been raised about demise charterer, time charterer or
voyage charterer of that ship.
12.1 That
applicability of Geneva Convention of 1999 qua the maritime claim
made before the Indian Courts exercising admiralty jurisdiction was
considered by the Apex Court in the case of Liverpool [supra] and it
was finally held that the Convention could be applied in the process
of interpretive changes. However, the contention of the learned
Senior Counsel for defendant No.18 that the Apex Court was oblivious
to the fact that the above Convention of 1999 had not come into force
and effect since ten countries had not ratified and signed finally
and, therefore, it is not operative and effective, cannot be gone
into by this Court. Even otherwise, under Article 141 of the
Constitution of India, the law laid down down by the Apex Court is
binding to this Court. In the case of Liverpool [supra], the Supreme
Court held that the 1999 Arrest Convention could be applied in the
process of interpretive changes and though India being not a
signatory country thereto, it is applicable to the Indian Courts
exercising admiralty jurisdiction. In paragraph 60, it is held that
the 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 and, this
being not a contract of public law character, the decision in the
case of Liverpool [supra] is not applicable to the present case.
Further, in the case of Liverpool [supra[, the judgment and order of
the Bombay High Court in Appeal No.226 of 2001 in Admiralty Suit
No.32 of 2000, was upheld with regard to claim amount of insurance as
‘necessaries’ and that unpaid insurance premium being a maritime
claim would be enforceable in India. It is further observed that the
Letters Patent Appeal was maintainable, but, the question of
beneficial ownership of a ship was not a question of fact alone and
being a mixed question of fact and law, the approach of the High
Court was found to be not correct, the matter was remanded to the
Bombay High Court granting liberty to the parties to file application
for vacating stay.
12.2 Admittedly,
Brussels Convention of 1952 never included a claim arose out of a
contract for sale of ship to be a maritime claim. Therefore, the
maritime claim, as asserted by the plaintiff, is based on the
definition contained in Article 1, sub-article 1, clause (v) of 1999
Convention.
13. If
the issue about the maritime claim of the plaintiff is examined in
the context of the facts narrated hereinabove, it arises, according
to the plaintiff, out of an agreement, namely, Memorandum of
Agreement [MOA] dated 21st August 2008 for purchasing
vessel ‘M.V. MAX’, renamed as ‘M.V. AXIS’ and clause 8 of the said
MOA stipulating that the sellers warrant that the vessel, at the time
of physical and legal delivery is free from all encumbrances and
maritime liens or any other debts whatsoever and further the sellers
hereby undertake to unconditionally indemnify the buyers against all
consequences of such claims in case if any debt was incurred prior to
the time of delivery. After purchase of vessel ‘M.V. MAX’, it was
renamed as ‘M.V. AXIS’ and was registered at Tuvalu Port Registry,
Singapore and it was meant for demolition and delivery of the vessel
was accepted by the plaintiff on 1.9.2008. Thereafter, as per the MOA
signed by the plaintiff with M/s. Sheema Steels of Bangladesh, the
vessel was delivered at the outer anchorage of Chittagong, Bangladesh
and physical delivery was given along with documents to the said
M/s. Sheema Steels of Bangladesh on 30.9.2008. That, Admiralty Suit
No.18 of 2008 was brought in by M/s. Intermare Transport GMBH of
Hamburg, Germany, on 1.10.2008 at the Supreme Court of Bangladesh,
High Court Division, at Dhaka, for arrest of vessel ‘M.V. AXIS’,
Ex-‘M.V. MAX’. Thereafter, a notice of arbitration was sent by
defendant No.3 through their solicitors on 22.9.2009 and it is
pending for further adjudication. However, the claim made in the
plaint clearly reveals that the suit is filed for securing guarantee
or security for the amount reflected in Exhibit A till the
final disposal of the arbitration proceedings pending at London
between the plaintiff and defendant No.3. The above premise is the
foundation and basis of filing the suit.
14. The
plaintiff was the registered owner of the ship as per the MOA dated
21.8.2008 till it was sold to M/s. Sheema Steels of Bangladesh as
per the MOA dated 14.9.2008. So, the plaintiff was the owner of ‘M.V.
AXIS’, Ex-‘M.V. MAX’, – a ‘particular ship’, till it was sold to M/s.
Sheema Steels of Bangladesh and was in total ownership, control and
possession of the ship. It is necessary that in the nature of ‘in
rem’ claims, either statutory or quasi ‘in rem’ claims, in order to
enable such claimant to seek arrest of the vessel as security or for
securing guarantee of the claim, an ‘in personam’ obligation ought
to have arisen against the owner of the vessel in favour of the
claimant. Therefore, sub-article 2 of Article 3 of 1999 Convention
permits arrest of any other ship or ships namely ‘sister ship’ only
if such ship is owned by the person who is liable for the maritime
claim and when such claim had arisen such person was the owner of
the ship in respect of which the maritime claim had arisen. The
plaintiff himself was the registered owner and, therefore, till 30th
September 2008, no claim could have arisen against the ownership of
its own vessel ‘M.V. AXIS’, Ex-‘M.V. MAX’, when it was sold to M/s.
Sheema Steels of Bangladesh. Subsequently, the said vessel was in
ownership, control and possession of M/s. Sheema Steels of
Bangladesh and, thus, as per Article 3 of Brussels Convention of 1952
as well as sub-article 2 of Article 3 of 1999 Geneva Convention,
no maritime claim could have been made against vessel ‘M.V. AXIS’,
Ex-‘M.V. MAX’ till 30.9.2008 or thereafter. The claim, which does not
so entitle the plaintiff to seek arrest of ‘particular ship’ under
the relevant provisions, is not a maritime claim contemplated under
the Convention, because the plaintiff was the owner of the particular
ship when the cause of action arose.
15. The
plaintiff has presumed that defendant No.1 is owned, operated and
managed beneficially by defendant No.2 on the basis that the
shareholders in whose favour 500 shares have been issued the value of
share is ‘nil’. Even according to the plaintiff, defendant No.1-ship
is registered at Marshall Islands but does not disclose the real
owner and such registration is on-line and it was done by the Agent
of Marshall Islands having the office at Greece and the certificate
issued shows the same address and that the agent had no share. It is
contended by the learned Senior Counsel for the plaintiff that, since
the shareholding pattern of defendant Nos. 2, 3 and 18 has not been
disclosed and it is a single dollar company, this Court has to lift
the veil bringing about the real character of defendant No.18 so
that, the arrest of defendant No.1, being a ‘sister ship’ of ‘M.V.
AXIS’, Ex-‘M.V. MAX’, can be considered in the correct perspective.
The above contention of the learned Senior Counsel for the plaintiff
is misconceived in as much as defendant No.18 was registered as early
as on 4.7.2007 and certificate of registry was issued in respect of
defendant No.1-BASIL on 23.10.2007 and on 24.10.2007, management
agreement was entered into between defendant No.18 and defendant
No.2-OME for defendant No.1-BASIL. Therefore, it cannot be presumed
and believed that the above company, namely, defendant No.18-DMC, was
incorporated to defraud the plaintiff, who entered into MOA at later
stage on 21.8.2008 with defendant No.3. In absence of any fraud
prima-facie established, no corporate veil can be lifted to extend
liability since the registration of a single ship companies is a
legitimate means to do business. Assuming that Bailey Shipping
[defendant No.3] and Diva Maritime [defendant No.18] are sister
companies, the admiralty jurisdiction does not contemplate giving the
plaintiff a right of arresting a ship which is not the ‘particular
ship’ or a ‘sister ship’, but the ship of a sister company of the
owners of the ‘particular ship’. Therefore, question of lifting of
corporate veil, as canvassed by the learned Senior Counsel for the
plaintiff, pales into absolute insignificance. The contention of Mr.
S.N. Soparkar, learned Senior Counsel for the plaintiff that the
address of defendant No.2-OME, defendant No.3-Bailey Shipping Limited
and defendant No.18 Diva Maritime Company is one and same at Athens,
Greece and, therefore, defendant No.18 is also owned and managed by
defendant No.2 and, therefore, both the ships are held by one group
only, has no merit or substance. The documents produced by the
plaintiff on record [at Annexure M and N ] do not,
prima-facie, reveal that the above companies have any relationship
inter-se much less defendant No.1-M.V. BASIL being sister ship of
particular ship ‘M.V. AXIS’, Ex-‘M.V.MAX’. Xerox copies produced by
the plaintiff on record at Annexure M , at the most, show that
defendant No.2-OME is Manager, but the owner of ‘M.V. AXIS’,
Ex-‘M.V.MAX’ was defendant No.3. Further, what is reflected at page
124 of compilation is that defendant No.1-M.V. BASIL is owned by
registered owner defendant No.18 and ISM Manager is defendant
No.2-OME, but, as stated earlier, defendant No.18 is registered owner
of defendant No.1 since 15.10.2007 and again defendant No.2-OME is
Ship Manager since 1.7.2002 and again as ISM Manager since 9.5.2008.
Internet Ships Register produced at page 125 of compilation also
confirms the above facts. Therefore, only because the address of the
above companies is the one and same, as contended by the learned
Senior Counsel for the plaintiff, it cannot be presumed that the
above companies were constituted and registered to defraud the
plaintiff.. That concept of ownership of ship is different and the
ship can be said to be or deemed to be in the same ownership only
when all the shares therein are owned by the same person or persons.
Nothing is brought on record to indicate that all the shares were
owned by the persons who are alleged to have beneficially control
over the ship. Even the law firms engaged by the plaintiff who
carried out search about the title of the defendant-ship and
defendants-companies have also not adhered to their correspondence
and the contents of the communication.
16. That
‘sister ship’ of a sister company and ‘sister ship’ of ‘particular
ship’ on the basis of ownership both are different concepts. The
person who would be liable on the claim in a claim in personam must
have been owner or the charterer or in possession or control of
‘particular ship’ when the cause of action arose and, at the time
when the claim is brought i.e. when the claim form is issued, the
person who would be liable on the claim in a claim in personam must
be the beneficial owner of all the shares in the ship against the the
claim is brought [sister ship]. The person against whom the claim is
lodged was not owner of ‘particular ship’ ‘M.V. AXIS’, Ex-‘M.V. MAX’
, that is the foundation of the claim against ‘sister ship’
defendant No.1-BASIL. Unless the particular person is liable for the
claim towards ‘particular ship’, he cannot be made liable for the
claim of ‘sister ship’. Further, arrest of sister ship of Ex-owner
of particular ship is not permissible under the Arrest Convention.
Admittedly, the owner of the sister ship at the time of its arrest
was not the owner of the particular ship when the claim arose.
17. Again,
in the case of Liverpool [supra], the Apex Court considered the
concept of ‘beneficial ownership’ by placing reliance on certain
authorities in paragraph 144 onwards and, ultimately, in paragraph
156 held that the question as to whether the asset of a 100%
subsidiary can be treated as an asset of the present company would
again depend upon the fact situation of each case, by relying upon
the case-law in ‘Aventicum’ and ‘Andrea Ursula’. In the facts of the
present case, from the documents on record, it is established, as
discussed earlier, that defendant No.2-OME is ‘Manager’ of defendant
No.18 and not in ‘beneficial ownership’. Thus, vessel M.V. BASIL,
defendant No.1, being ‘sister ship’ of vessel ‘M.V. AXIS’, Ex-‘M.V.
MAX’ , is concerned, the plaintiff is unable to show any documentary
evidence that it is owned, controlled and managed by defendant
No.2-OME. Therefore, vessel M.V. BASIL, defendant No.1, alleged to
have been a ‘sister ship’ of ‘M.V. AXIS’, Ex-‘M.V. MAX’, could not
have been arrested towards security for the claim made in the
arbitration proceedings as maritime claim.
18. As
a result of foregoing discussion, this Court has come to the
conclusion that the plaintiff has failed to establish and sustain and
even prima-facie prove that the plaintiff has maritime claim to
invoke admiralty jurisdiction of this Court.
19. Further,
no ’cause of action’ has arisen for filing the suit and invoking
admiralty jurisdiction of this Court because the plaintiff himself
was the registered owner and, therefore, till 30th
September 2008, no claim could have been registered against the
ownership of its own vessel ‘M.V. AXIS’, Ex-‘M.V. MAX’, when it was
sold to M/s. Sheema Steels of Bangladesh. Subsequently, the said
vessel was in ownership, control and possession of M/s. Sheema
Steels of Bangladesh. So, the plaintiff could not have brought
maritime claim against its own ship. Further, the plaintiff is not in
a position to establish that defendant No.1-BASIL is a ‘sister ship’
of ‘M.V. AXIS’, Ex-‘M.V. MAX’. In short, the damage which is likely
to be suffered by the plaintiff is based on the damages claimed by
M/s. Sheema Steels, Bangladesh, against the plaintiff. In the above
context and in absence of any maritime claim, as held earlier, this
Court has considered that the cause of action has not arisen.
19.1 Besides,
since the maritime claim is based on a huge claim raised by defendant
No.17-Sheema Steels against the plaintiff as stated in paragraphs 35
and 36 of the plaint and no particulars have been furnished except
bald reference to various heads of loss/damages etc. In absence of
details and particulars about the damage caused to the plaintiff and
no pleadings in this regard, this Court cannot ascertain or determine
the damage as claimed.
20. So
far as exercise of admiralty jurisdiction by this Court when the
arbitration is pending is concerned, this Court is in complete
agreement with the decision of the Bombay High Court in the case of
Islamic Republic of Iran vs. M.V. Mehrab, AIR 2002 Bombay 517, that
when the dispute between the plaintiff and the defendant No.3 is
pending for arbitration at London, admiralty jurisdiction of this
Court can be invoked. However, in view of the findings recorded
above, this issue does not require any further deliberation.
21. As
regards admiralty jurisdiction of High Courts in India, in the case
of M.V.Elisabeth and Ors. v. Harwan Investment & Trading Pvt.
Ltd.,, Hanoekar House, Swatontapeth, Vasco-De, Gama, Goa [AIR 1993 SC
1014], the Apex Court has held that the High Courts in India
being superior courts of record have original and appellate
jurisdiction and they have inherent and plenary powers. Unless
expressly or impliedly barred, and subject to the appellate or
discretionary jurisdiction of this Court, the High Courts have
unlimited jurisdiction, including the jurisdiction to determine their
own powers and that courts admiralty jurisdiction is not limited to
what was permitted by the Admiralty Court Act, 1861 and the Colonial
Courts of Admiralty Act, 1890.
21.1 No
doubt, the Apex Court in the case of A.B.C. Laminart Pvt. Ltd. and
Anr. v. A.P. Agencies, Salem [(1989) 2 SCC 163] has defined
meaning of cause of action in the context of Section 20(c) of Civil
Procedure Code, 1908 but such cause of action is to be seen in the
context of admiralty jurisdiction of this court with regard to
maritime claim permitted under Convention of 1952 and Convention of
1999.
21.2 So
far as lifting or piercing the corporate veil and submissions
canvassed by learned counsel for the plaintiff is concerned, it can
be undertaken by Court to see the real persons behind the veil who
are involved in defrauding other by corporate and illegal means and
the Court in India as a Court of equity has certain powers. In the
case of Delhi Development Authority vs. Skipper Construction
Company (P) Ltd, reported in (1996) 4 SCC 622, the Apex Court
referred to the case of Salomon v. Salomon & Co. Ltd. [1897 AC
22] and found that when the notion of legal entity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime,
the law will regard the corporation as an association of persons and
where such device of incorporation is used for some illegal or
improper purpose and the Company is a mere ‘sham’, the Court can
exercise powers to lift the corporate veil but only in the
circumstances where fraud is intended to be prevented, or trading
with an enemy is sought to be defeated, the veil of a corporation is
lifted by judicial decisions. In the facts of this case, no such
exercise is necessary in view of legal and valid incorporation of
Company registered with the countries as per the documents produced
as early as in 2007.
21.3 So
far as decision of the Bombay High Court in the case of Islamic
Republic of Iran v. M.V. Mehrab and Ors. [AIR 2002 Bombay 517],
this Court has no difficulty to agree with the proposition that
admiralty jurisdiction of High Court can be exercised to arrest ship
to secure claim in future or pending arbitration. However, when the
Court has already come to the conclusion that no maritime claim is
established to arrest a sister ship, defendant No.1 herein, no
further discussion on the issue is necessary.
21.4 However
in a decision of Queen’s Bench Division (Admiralty Court) in the case
of the Maritime Trader [1981 (2) 153] Mr. Justice Sheen
while considering the provisions of Administration of Justice Act,
1956 and Section 3(4) with regard to arrest of a sister ship of a
chartered vessel, considered the concept of beneficial ownership of
the ship, relied on Lord Diplock’s observation that to be liable to
arrest a ship must not only be the property of the defendant to the
action, but also be identifiable as the ship in connection with
which the claim made in the action arose ( or a sister ship of that
ship). After considering other decisions, it was also observed that
according to the legal meaning of the words a company is not the
beneficial owner of the assets of its own subsidiary. The legal
meaning of the words takes account of the Company structure and the
fact that each Company is a separate legal person. The Onus is upon
the plaintiff to show that the person against whom it is sought to
invoke the admiralty jurisdiction by arresting his ship is the person
who is beneficial owner of the shares in that ship and that he is the
person who is liable in an action in personam. In the facts of this
case, no such fact of ‘beneficial owning of the shares in the ship’
is established by the plaintiff.
21.5 In
the case of the I congreso Del Partido [1980 (1) 23],
while considering the action in rem and admiralty jurisdiction under
Section 3(4) Administration of Justice Act, 1956, in appeal though
Lord Denning M.R. disagreed to the view of absolute sovereign
immunity to the State as held by Justice Robert Goff, Lord Justice
Waller found that the Court will not grant immunity where a
commercial vessel involved in a private law activity is subject to a
private law claim, but, considering many international authorities
and affidavits filed by the foreign lawyers, it was held that, if the
claim for sovereign immunity is founded on an act said to be ‘jure
imperii’, then the nature of the act must be examined; however, the
appeal bench agreed with the following finding of Justice Robert Goff
that the natural and ordinary meaning of the words ‘beneficially
owned as respects all the share therein’ in section 3(4) of the
Administration of Justice Act, 1956, was that they referred only to
such ownership as was vested in a person who, whether or not he was
the legal owner of the vessel, was in any case the equitable owner,
and were not applicable to the case of a demise charterer or indeed
any other person who had only possession of the vessel however
full and complete such possession might be and however much control
over the vessel he might have. The ratio of the decision
as above supports the case of the defendants and the concept of
‘beneficial ownership’ is not to be applied to the case of a demise
charterer or indeed any other person who had only possession of the
vessel however full and complete such possession might be.
21.6 In
a case of the EVPO Agnic [1988(2) 411], in an appeal
preferred against the decision of Mr. Justice Sheen adjourning their
application to set aside the writ and warrant of arrest issued and
obtained by the plaintiffs, and considering Section 21(4) of Supreme
Court Act, 1981 along with Section 21 (1) to (4), the Court of Appeal
examined the concept of right of arrest in respect of ‘the particular
ship’, ships in the same ownership and ships which had been
transferred into different legal ownership but where the owners of
the particular ship retained the beneficial ownership of the shares
in that ship, and held that the section did not confer the plaintiffs
the right to arrest a ship which was a ship of a sister Company of
the owners of ‘the particular ship’ and the appeal was allowed and
warrant of arrest was set aside.
21.7 In
the case of Polestar Maritime Limited vs. M.V.QI LIN Men and
others, Appeal (Lodging) No.772 of 2008, the Division Bench of
the Bombay High Court, vide judgment and order dated 6th
January 2009, confirmed the finding of the learned Single Judge as
recorded in paragraph 4, as under:
In my view,
merely because the shareholders are common or their holding in two
different companies duly registered under the Companies Registration
Act, is identical would not make the two companies one and the same
entity. It is elementary principle of law when a company is
incorporated it becomes a separate legal entity different from the
persons constituting it. Therefore, assuming for the sake of argument
that the shareholders of the two companies are common, [presently
there is no material on record that the shareholders of the two
companies are identical] that would not make the defendant No.2 the
owner of the defendant No.1 ship. As the defendant No.1 vessel is not
owned by defendant Nos. 2 or 3, plaintiff cannot arrest the
defendant No.1 vessel for the alleged maritime claim against
defendant Nos. 2 or 3. the maritime claim is neither against
defendant No.1 ship nor there is any maritime claim against the owner
of the defendant No.1 ship.
21.8 Therefore,
the above case law is applicable to the facts of the present case and
when the plaintiff has failed to establish its maritime claim either
against defendant No.1-ship or against its owner, the arrest order is
to be vacated.
22. In
view of the above discussion, issue no.(i) is answered in the
affirmative, but the ratio of decision in the case of Liverpool
[supra] cannot be made applicable to the facts of the present case as
the contract between the plaintiff and defendant No.3 does not
involve enforcement of a contract of public law character; and issue
Nos. (ii) and (iii) are answered in the negative and, consequently,
it is held that the suit is not maintainable.
23 In
the result, the admiralty suit is dismissed. The interim order dated
1.11.2010 for the arrest and detention of M.V. BASIL, defendant No.1,
is vacated. Notice is discharged with no order as to costs. The
amount of deposit, if any, made by the plaintiff shall be returned.
24 After
the judgment and order is pronounced, the learned counsel for the
plaintiff requests that the above judgment and order may be suspended
so as to enable the plaintiff to avail remedy of appeal, to which,
learned counsel for defendant No.18 has objection.
25 However,
considering the facts and circumstances of the case, so as to enable
the plaintiff to approach the higher forum, operation of this
judgment and order shall remain stayed upto 2.2.2011.
No
order as to costs.
Direct
service is permitted.
(ANANT
S. DAVE, J.)
(swamy)
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