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Bombay High CourtIndian Cases

New Era Shipping Ltd. And Hatimi Steels vs M.V.P. Express And Ors. on 21 August 2007

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Bombay High Court
New Era Shipping Ltd. And Hatimi Steels vs M.V.P. Express And Ors. on 21 August, 2007
Equivalent citations: 2007(109)BOM.L.R.1875
Author: S.C. Dharmadhikari
Bench: S.C. Dharmadhikari

S.C. Dharmadhikari, J.

Page 1877

1. This chamber summons and the notice of motion in this Admiralty Suit can be disposed of by a common order, inasmuch as they were heard together so also similar contentions were canvassed by parties.

Page 1878

2. The plaintiff has instituted this suit in the Admiralty & Vice Admiralty jurisdiction of this Court for the following reliefs:

(a) For an order of Arrest of the 1st Defendant vessel for a sum of Rs. 42,60,000/-as per the particulars of claim shown in Exh.N hereto;
(b) That the defendants be ordered to permit the plaintiffs a survey of the first defendant vessel;
(c) For an order and decree in favour of the plaintiffs and against the first and second defendants for Rs. 42,60,000/ as per the particulars of claim shown in Exh.N hereto;
3. It is the case of plaintiff that it is a company engaged in business of owning barges and ships. The first defendant vessel is a foreign flag ship presently lying at Port Alang, Gujarat. The plaint proceeds on the basis that the vessel owners are unknown and she is presently on her final voyage for ship breaking operations. Second defendants are the representatives of the owners of the vessel. They are responsible and instrumental in vessel sailing into Alang for the proposed breaking of the same. Third defendants are Gujarat Maritime Board, a Statutory authority in the State of Gujarat, established, inter alia, to supervise and control ship breaking activities in that State.

4. It is contended that the vessel is currently under the jurisdiction of the third defendant. The suit has been filed seeking damages against the first and second defendants on account of collision of first defendant vessel with that of the vessel by name m.v.KINSHIP MODESTY. This vessel viz., KINSHIP MODESTY was chartered by the plaintiffs.

5. The vessel of plaintiffs was in Gujarat for charterers operations. She had completed discharge of her cargo at Port Bhavnagar and was waiting at the anchorage outside Bhavnagar port for her next cargo assignment. Her engines were off and her anchor was dropped as required for the vessel that would be waiting for her position to receive cargo.

6. At about 05.15 hrs. on 6th July 2007, the first defendant vessel came in physical contact with the plaintiffs vessel. The first defendant vessel was on her journey to Alang and was on duty to look out for the vessels that are in anchor. Whilst the first defendant vessel was making her approach, the plaintiffs Master apprehended that first defendant vessel was moving too close to the plaintiffs vessel. He and the Chief Officer called on the first defendant vessel on VHF Channel No. 16 and 17 and tried to get his attention by flashing lights. This was intended to warn the Master and crew of the first defendant vessel of their manoeuvre to avoid plaintiffs vessel. Notwithstanding the same, the first defendant crew paid no heed to the warning signals and made unfortunate contact with plaintiffs vessel arising out of their negligent and reckless navigation.

7. As a result of this contact, plaintiffs vessel suffered damage and investigations revealed the extent of the same. The same is disclosed in a statement, a copy of which is annexed as Annexure “E” to the plaint. Plaintiffs vessel was, therefore, required to be repaired and the cost estimated for the same was Rs. 25 lakhs. Plaintiffs vessel will lose its six days before she enters her dry dock and, thereafter, it is likely that the vessel will Page 1879 undertake repairs for 14 days in dry-dock after which only she will be able to undertake any commercial employment. Consequently, she will not be entitled to charter hire assignments for this period. The vessel was fixed for charter at Rs. 88,000/-per day and it is expected to lose a sum of Rs. 17,60,000/- towards loss of income and that is how the claim for damages has been made.

8. In paras 11 and 12 of the plaint, this is what is stated:

11. In view of the foregoing, the plaintiff respectfully submits that this Honble Court is entitled to invoke and exercise its Admiralty jurisdiction under the Admiralty Courts Act, 1840 and 1861, the Brussels Arrest Convention Act, 1852, the Geneva Arrest Convention 1999 read with the various High Court and and Supreme Court Judgments. This Honble Court, therefore, has jurisdiction to entertain, try and dispose of the present suit. The plaintiffs are based within the Courts jurisdiction and have suffered their loss here. The collision took place within the Admiralty jurisdiction of this Honble Court.
12. The first defendant vessel is presently in the port and harbour Alang and has come for the purpose of demolition/breaking, after which she will be lost forever. Consequently an ad-interim order of arrest of the first defendant vessel is necessary, failing which grave, irretrievable loss and injury will be caused to the plaintiffs. In the absence of an order of arrest, the plaintiffs suit will be rendered infructuous as the first defendant vessel is the only substantial asset, owned by first and second defendant. Moreover, there is no other equally alternative, efficacious remedy available to the plaintiff.
It is therefore contended that the arrest of first defendant vessel is the only manner in which plaintiffs lien/claim against the first defendant vessel and the second defendant can be secured, failing which any decree passed against them will be impossible to be executed.

9. The above mentioned prayers and reliefs are based upon these averments in the plaint.

10. An application for arrest of first defendant vessel was made and this Court passed an order of arrest of first defendant vessel on 12th July 2007.

11. The notice of motion is on behalf of applicants/proposed defendant No. 4 praying for vacation of the order of arrest dated 12th July 2007, either on the basis of erroneous averments in the plaint or that this Court lacks jurisdiction to pass the same.

12. Further relief is that the plaintiff be directed to compensate the applicant-proposed defendant No. 4 @ Rs. 75,000/- per day with effect from 12th July 2007 until the date the demolition activity at Floor No. 24-A (55) in respect of first defendant vessel can occur or commence.

13. The facts upon which the chamber summons, which claims relief of intervention and the above notice of motion are based are as follows.

14. The vessel m.v.P.EXPRESS was not lying afloat in port Alang on the date of verification/affirmation of the plaint, since she had been beached on July 7, 2007, which was the matter of public knowledge and/or within Page 1880 the knowledge of the plaintiffs and/or deemed to be within the constructive knowledge of plaintiffs. For these reasons, the order dated July 12, 2007 was obtained on the basis of false and/or erroneous pleadings, as also the fact that the vessel m.v.P.EXPRESS was not a “Ship”, i.e. legally capable of navigation and amenable to an action in rem, and therefore, not amenable to the Admiralty and Vice admiralty jurisdiction of this Court. Consequently the order dated July 12, 2007 is liable to be revoked, recalled and/or modified or setaside.

15. The applicant having contracted vide a memorandum of agreement dated 8th June 2007 for the purchase of the m.v.P. EXPRESS, intended for demolition at Alang, accepted physical delivery of the m.v.P.EXPRESS from her then owners Attar Ltd. of Kingstown, Saint Vincent & the Grenadines, vide Physical Delivery Certificate, at about 1640 hrs. on 6th July 2007. The applicants further state that in pursuance of an application dated 6th July 2007 for beaching of the m.v.P. EXPRESS, permission was granted by the office of the Port Officer, Ship Recycling Yard, Alang in relation to the beaching of the m.v.P.EXPRESS. The applicant deposited Import Duties in relation to the m.v.P.EXPRESS with the local customs authorities. Following payment of requisite customs duties, requisite No objection for beaching was accorded by the Superintendent of Customs, Bhavnagar. Consequently, beaching of m.v.P.EXPRESS occurred at around 0900 hrs. on July 7, 2007. Upon beaching, m.v.P.EXPRESS ceased to be a “ship” and was boarded by demolition labourers employed by the applicant for purpose of “breaking” for scrap purposes. The m.v.P.EXPRESS on beaching, has been rendered permanently incapable of being re-floated. The m.v.P.EXPRESS is also no longer registered as a “ship”, having been deleted from her flag-state registry. The applicant further submits that the applicant is a bonafide purchaser without notice of any alleged collision as has been alluded to in the plaint. As such bonafide purchaser without notice, the applicant is entitled to be compensated for the loss and damage sustained by the applicant, which has been quantified at the rate of Rs. 75,000/- per day as per particulars annexed to the affidavit in support of notice of motion.

16. It is thus contended that as owner of the movable property that comprise the erstwhile m.v.P.EXPRESS and whose demolition was interrupted by virtue of the order of arrest dated 12th July 2007 made by this Court, correspondence was entered into with the plaintiff pointing out the above facts. Plaintiffs were called upon to take steps to raise the order of arrest. But they having neglected to do so, the above proceedings have been initiated. Insofar as, the loss caused to the applicant is concerned, it is contended thus:

9. I say that the applicant is a bona fide purchaser without notice of any alleged collision as has been alluded to in the plaint. As such bona fide purchaser without notice, the applicant is entitled to be compensated for the loss and damage sustained by the applicant, which has been quantified at the rate of Rs. 75,000/- per day as per the particulars appended. I submit that the plaintiff has furnished an undertaking to provide damages for wrongful arrest at the time of the filing of the present suit, which is thus liable to be invoked, and the Page 1881 loss of the applicant be thus compensated in the sum of Rs. 75,000/- per day with effect from 12th July 2007 through until the date when the order of lifting of arrest is duly conveyed to the competent authorities, such that will permit for breaking/demolition activities in respect of the movable property lying beached on Plot No. 24-A(55), Alang. Additionally, the applicant submits that all legal costs incurred in defending this wrongful action instituted by the plaintiff, are liable to be reimbursed by the plaintiff to the applicant and prays for appropriate reliefs in this regard, in addition to the particulars appended hereto.
It is in these circumstances that a prayer is made that the applicant be compensated for the loss in the sum of Rs. 75,000/- per day with effect from 12th July 2007 till the date on which the order is lifted or raised. A further sum for incurring legal expenses and costs should also be paid.

17. Upon the notice of motion and chamber summons being served, plaintiffs filed an affidavit in reply urging that both proceedings are misconceived and not maintainable. There is misrepresentation of facts and it is falsely urged that this Courts jurisdiction under the Admiralty & Vice Admiralty jurisdiction cannot be invoked. The argument is that the application itself is not maintainable. There is no document evidencing transfer of ownership or acquisition of title with regard to defendant No. 1 vessel. The authenticity of the documents produced is disputed. Documents are anti-dated and executed to set up a transaction. Presuming that they are genuine, it is contended that no Letter of Credit has been opened, no Bill of Sale has been executed, no Commercial Invoice has been issued and no certificate of first defendant being free from liens/encumberances is placed on record. It is contended that the documents establishing payment of customs duty GMB charges and filing of IGM/Bill of entry would falsify the case of applicant assuming the same are genuine.

18. With regard to the basic submission on jurisdiction, it is contended thus:

It is denied that defendant No. 1 is not a ship. Defendant No. 1 was a ship at the time the proceedings were instituted. Defendant No. 1 was a ship when the order of arrest was obtained. Defendant No. 1 was a ship when the order was communicated and/or served. Defendant No. 1 is a ship even today. The factum of her alleged importation for breaking and the fact that her bottom rests on a mud flat at low tide do not retract therefrom.
19. It is denied that the defendant vessel was beached on 7th July 2007. The record panchanama and communications addressed by the plaintiffs and/or their Advocates to the Gujarat Maritime Board indicate that no beaching had taken place till 11th July 2007. It is insuch circumstances that it is denied that the applicant has any right to intervene in the proceedings. Consequently, when there is no evidence of any right being created in the vessel, the order of arrest cannot be set aside at the behest of the applicants.

20. There are further Affidavits in support of the chamber summons and Compilation of Document is tendered on behalf of the Applicants. Copies of the same have been served on the plaintiffs Advocate.

Page 1882

21. Ms. sett appearing for the applicant submits that the legal position cannot be brushed aside. She submits that Rule 949 of High Court (O.S) Rules permits intervention. Therefore, and when valuable right of the applicant in the vessel is being adversely affected so also the documents proving that the applicant is a bonafide purchaser for value without notice, both, the chamber summons and notice of motion are maintainable. She submits that the plaint must be read as a whole. She submits that the vessel has not come as a navigating ship which is capable of carrying cargo and passengers. She has not come on any specific voyage. On the other hand, it has been brought to the shipyard where demolition and destruction activities are undertaken. She submits that Alang is a place where ship dismantling and demolition activities are undertaken on large scale and, thereafter, the vessel/ship is sold as scrap. She submits that at the time of filing of the suit, the vessel had already been beached. She submits that its status is that of a vessel already beached, it is boarded by Customs Authorities, dismantling activities are going on. It has ceased to be a ship or vessel and, therefore, not amenable to the jurisdiction of this Court.

22. It is further contended that notwithstanding the fact that the applicant had put forth incontrovertible evidence in support of the fact that the m.v.P.EXPRESS had been imported for demolition and was beached on 7th July 2007 at 0900 hrs. as detailed in the affidavit dated 21st July 2007 filed by Mr.Mathai to which photographs evidencing the P.Express had been beached, coupled with Tide tables are annexed. She submits that the denial by plaintiffs of the above facts is thus malafide.

23. It is further submitted by Ms.sethna that the m.v.P.EXPRESS by virtue of her having been admittedly beached on 7th July 2007 ceased to be amenable to the Admiralty & Vice Admiralty Jurisdiction of this Court and, therefore, the order of arrest dated 12th July 2007 is liable to be vacated. In support of her contentions she has placed reliance upon the following judgments of this Court:

a) The unreported judgment of this Court in the case of Communications and Commerce International v. m.v.SAABA and Ors., of Learned Single Judge and a Division Bench dated 28th July 2001 and 16th July 2001 respectively.
(b) – North End Oil Ltd. v. m.v.KIM An and Anr. decided on 25th February 1999;
(c) A.I.R. 1999 Bom. 18 in the case of Ocean Marine Mutual Insurance Association Ltd. v. m.v.WONFU and Ors. decided on 24th August 1998;
(d) Unreported judgment of Gujarat High Court in Western Ship Breaking Industry v. Laiki Bank (Hellas) S.A. dated July 2006;
(e) m.v.ELISABETH v. Harwan Investment & Trading (P) Ltd. and Anr. Ms.Sethna has also relied upon Definitions of the Term “ship”/”Vessel” in several statutes including Admiralty Page 1883 Courts Act, 1861, Merchant Shipping Act, 1958, Major Port Trusts Act, 1963, Indian Ports Act, 1908, as also the Dictionary meaning cited in the judgment of this Court pronounced in the case of m.v.SAABA (supra).
24. In support of her abovementioned submissions, Ms.sethna has relied upon the following propositions from the afore-referred judgments viz.

(a) That in view of plaintiffs being in the business of shipping, a presumption must arise that plaintiffs knew about beaching of the P.Express (and such other anterior acts as were liable to be performed by the applicant, including payment of Customs Duties, securing permission for beaching, etc.)
(b) That once the vessel owner (in this case the applicant) has declared his intention to the local customs authorities to demolish the arrived vessel through having effected payment of import duties, the vessel ceases to be legally capable of navigation and is thus no longer amenable to arrest and/or admiralty jurisdiction. In this regard she specifically relied upon Clause 11 of the Memorandum of Agreement dated 8th June 2007 which stipulates that the sale shall occur for demolition only.
(c) That upon the beaching of the vessel, she ceases to be legally and mechanically capable of navigation and accordingly, does not remain a ship liable to arrest.
25. Ms. sett has relied upon Judgment of this Court Vohra Agencies v. M.V. Irni and Ors. dated 1st February 1993 in support of her contention that applicant has a right to intervene as also that the case of applicant regarding purchase of the vessel for purposes of demolition is required to be accepted even at the prima facie stage in view of documents filed supporting such case.