PNP 1/16 APP679-30.11.sxw
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
APPEAL NO.679 OF 2012
IN
NOTICE OF MOTION NO.558 OF 2012
IN
ADMIRALTY SUIT NO.24 OF 2011
Sparebanken Sogn Og Fjordane ..Appellant.
versus
M.V. Bos Angler and others ..Respondents.
.....
Mr. Atul Rajadhyaksha, Senior Advocate with Mr.Zarir Bharucha, Mr. Nikhil Pai,
Mr. Archit Dhir i/b Mr. Bimal Rajashekhar for the Appellant.
Mr. V.K. Rambhadran for Respondent No1 to.3.
Mr. Rahul Narichania with Amitara Majumdar, Mr. Shivkumar Iyer, Mr. Sujan
Malhotra and Ms. Ramya Dharamraj i/b Bose & Mitra & Co. for Respondent
No.4.
Mr. A.M. Vernekar i/b Narichania & Narichania for Respondents 5 and 8.
......
CORAM : DR.D.Y.CHANDRACHUD, and
A.A.SAYED, JJ.
30 November 2012.
ORAL JUDGMENT (PER DR. D.Y.CHANDRACHUD, J.) :
Admit, by consent made returnable forthwith. The learned counsel appearing on behalf of the Respondents waive service on behalf of the respective Respondents. By consent, the Appeal is taken up for hearing and final disposal.
2. This Appeal arises from a judgment of a Learned Single Judge dated 19 October 2012 in a Motion which was taken out in an Admiralty Suit.
3. The suit in the admiralty jurisdiction of this Court has been instituted against a vessel, M.V. Bos Angler, and her owners for a decree in an amount of Norwegian Kroners 176.500 million equivalent to Rs.143.43 Crores together ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 2/16 APP679-30.11.sxw with interest. The Plaintiff, in appeal in these proceedings, is a bank incorporated under the laws of Norway and seeks a declaration of the existence of a valid and subsisting first priority registered mortgage on the vessel. The Plaintiff sought arrest and sale of the vessel in the exercise of the jurisdiction in rem, and application of the sale proceeds towards the claim in the suit. The Third to Sixth Defendants were allowed to intervene in the suit in accordance with the provisions of Rule 949 of the rules framed by this Court on the Original Side and have since been impleaded as Defendants. The owners of the vessel were taken into liquidation in Norway and the Liquidator has been impleaded as the Seventh Defendant.
4. On a Motion by the Plaintiff, an order was passed on 8 July 2011 for appraisement, survey and valuation. A valuation report was submitted on 3 August 2011. A reserve bid of Rs.250 Crores was fixed by the Court and a direction was issued to the Plaintiff to advertise the sale of the vessel. On 13 September 2011 the Learned Single Judge declined to grant permission to the Plaintiff to bid for the vessel. In appeal on 16 September 2011 the Plaintiff was allowed to bid for the vessel. No bids were received. On 4 October 2011 the Single Judge ordered that the vessel shall be put up for sale once again. On 13 October 2011 the Plaintiff filed an appeal against the order of the Learned Single Judge allowing a second round of auction sale. In that appeal the Division Bench allowed the auction sale to proceed. The Plaintiff was the highest bidder at the second auction. On 30 November 2011 the Division Bench allowed the sale of the vessel to the Plaintiff subject to conditions. The sale was confirmed in favour of the Plaintiff. The Plaintiff has deposited the sale consideration, U.S. $ 33.1 million with the Prothonotary and Senior Master on 4 January 2012.
5. A Motion was moved by the Plaintiff before the Learned Single Judge on 15 February 2012 seeking inter alia the following reliefs :
"(a) For an order and direction that the order of priority of claims against the sale proceeds shall be determined after the expiration of ninety days or of such other period as the Court may specify from 4 th January 2012,
(b) For an order and direction that the Sheriff shall send for publication ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 3/16 APP679-30.11.sxw in such newspapers as the Court may direct, a notice complying with the provisions of Sub-rule 951(3) of the Bombay High Court Rules stating, inter ala, that the order of priority of claims against the said proceeds shall be determined after the period mentioned determined by this Hon'ble Court with respect of prayer (a) and that any person having a claim against the property or the proceeds of sale thereof should file his claim before the Hon'ble Court before the expiration of the said period;" (emphasis supplied).
6. The Learned Single Judge by the order which is impugned in these proceedings noted that during the course of the submissions it was stated on behalf of the Plaintiff that while a determination of priorities may have to await judgment, nonetheless an order directing the issuance of a public notice could be obtained at any time after the sale proceeds were deposited in Court, for the purpose of inviting claims. The Learned Single Judge was of the view that the purpose of Rule 951 of the Rules framed by this Court on the Original Side is the determination of priorities amongst different claimants who have proved their claims against the property proceeded against or its sale proceeds. Hence, in the view of the Learned Single Judge no purpose would be served by inviting claims within a specified period at the instance of a Plaintiff who was yet to obtain a decree and it would be untenable to require persons having claims against the property or the sale proceeds to prove their claims and to obtain decrees on the application of such a Plaintiff. The finding of the Learned Single Judge is summarized in the following extract from the decision :
"Obviously, Rule 951(1) and 951(2) of the said Rules are both designed to achieve determination of priorities. Mere issuance of notice inviting claims without any intention of deciding the priorities is not the idea of these two Sub-rules. In any event, as discussed above, no purpose is served by undertaking an exercise of fixing priorities by inviting claims within a specified period at the instance of a plaintiff who has yet to obtain a decree and in fact such an exercise may well be an exercise in futility."
7. When the Appeal came up for hearing a preliminary objection has been raised to the maintainability of the Appeal on behalf of the Third, Fourth, Fifth and Sixth Defendants on the ground that the order passed by the Learned Single Judge declining to issue a notice for inviting claims does not constitute a judgment within the meaning of Clause 15 of the Letters Patent. Reliance was ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 4/16 APP679-30.11.sxw placed on the judgment of the Supreme Court in Shah Babulal Khimji v. Jayaben D. Kania1. In support of the challenge to the maintainability of the Appeal, it has been urged on behalf of the contesting Respondents that a decision rendered on a matter of procedure does not amount to a judgment within the meaning of Clause 15 of the Letters Patent. In the present case, it was submitted that the judgment of the Single Judge does not affect any of the valuable rights of the Plaintiff nor does it work to cause serious injustice, since the invitation of claims would stand deferred until the Plaintiff has obtained judgment. On this ground, it was submitted that the Appeal is not maintainable.
8. We are not inclined to accept the challenge to the maintainability of the Appeal. The test of what constitutes a judgment under Clause 15 of the Letters Patent as expounded in the judgment of the Bench of three Learned Judges of the Supreme Court in Shah Babulal Khimji is that "whenever a trial Judge decides a controversy which affects valuable rights of one of the parties, it must be treated to be a judgment within the meaning of the Letters Patent" 2. The Supreme Court held that there may be interlocutory orders which though not covered by Order 43, Rule 1 of the Code of Civil Procedure possess the characteristics and trappings of finality in that, the orders may adversely affect a valuable right of a party or decide an important aspect of the trial in an ancillary proceeding3. Consequently while every interlocutory order cannot be regarded as a judgment, "only those orders would be judgments which decide matters of moment or affect vital and valuable rights of the parties and which work serious injustice to the party concerned"4. In an appeal arising out of admiralty proceedings in Liverpool & London S.P. & I Association Ltd. v. M.V. Sea Success I5 the Supreme Court held that an order of a Trial Judge declining to entertain an application for the rejection of a plaint under Order 7 Rule 11 of the Code of Civil Procedure would constitute a judgment within the meaning of Clause 15 of the Letters Patent. It was sought to be urged before the Supreme Court that while declining to exercise the discretion to reject a plaint, the Trial Judge does not determine a right or liability and that all defences in the suit 1 AIR 1981 SC 1786.
2 paragraph 106 at page 1813.
3 paragraph 113 at page 1815.
4 paragraph 115 at page 1816.
5 (2004) 9 SCC 512.
::: Downloaded on - 09/06/2013 19:27:08 :::
PNP 5/16 APP679-30.11.sxw
would in any event be open to the Defendant. The Supreme Court held that the idea underlying Order 7 Rule 11(a) is that when no cause of action is disclosed, the Court should not unnecessarily protract the hearing of a suit and the object of the amendments to the Civil Procedure Code is to save expenses, ensure expedition and avoid the resources of the Court being used on cases which will serve no useful purpose. "A litigation which in the opinion of the Court is doomed to fail would not further be allowed to be used as a device to harass a litigant" 6.
In this view of the matter, the Court held that an order of the Trial Judge declining to reject a plaint under Order 7 Rule 11 would constitute a judgment, since the rights conferred upon parties are determined one way or the other.
9. In the present case, the Plaintiff sought at the hearing of the Notice of Motion an interlocutory order inviting claims in respect of the vessel or the proceeds of the sale which now lie deposited in the Court. The Learned Single Judge has by his impugned decision rendered a final interpretation of the provisions contained in Rule 951 of the Rules framed by the High Court on the Original Side. The view which has been taken by the Learned Single Judge is that an exercise of inviting claims cannot be undertaken at the instance of a Plaintiff who has yet to obtain a decree in the suit and the expression "decree or order" under Rule 951 must be construed in a conjunctive rather than a disjunctive manner. The Learned Single Judge has rendered a final determination on the interpretation of Rule 951. The effect of the interpretation is that a notice inviting claims cannot be issued unless and until the Plaintiff obtains a decree in the suit. The contention of the Plaintiff - a matter which would be decided separately in a subsequent part of this judgment - is that relegating a Plaintiff to the procedure of inviting claims after a decree is passed would unnecessarily protract the proceedings in the exercise of the admiralty jurisdiction and be a source of a needless loss of time and expense since the claims which are then received would have to be adjudicated upon in order to set the process of determining priorities in Motion. In our view, not merely does the judgment of the Learned Single Judge have the trappings of finality on the issue of the interpretation of Rule 951 which has been decided, but the consequences of that view would to the Plaintiff result in indefinitely delaying the distribution of 6 paragraph 133 at page 560.
::: Downloaded on - 09/06/2013 19:27:08 :::PNP 6/16 APP679-30.11.sxw the proceeds realized on the sale of the vessel. This is a matter of serious prejudice and on the test which has been laid down by the Supreme Court in Shah Babulal Khimji, we are of the view that an appeal under Clause 15 of the Letters Patent is maintainable.
10. Essentially, the Motion before the Learned Single Judge involved an interpretation of the provisions contained in Part - III of the Original Side Rules which relate to the exercise of the admiralty jurisdiction. In Part - III the Court has framed rules for regulating the procedure and practice in cases brought before the High Court under the Colonial Courts of Admiralty Act 1890. Rule 946 postulates that in a suit in rem, the writ of summons or the warrant of arrest shall be served on the property against which the suit is brought. Rule 947 empowers the Sheriff at any time to make a report to the Court and to apply for directions with respect to property arrested in a suit. Rule 948 provides as follows :
"R. 948. Application for sale of arrested property. - In a suit in rem if the property proceeded against has been arrested, the plaintiff may, at any time after service of the Writ of Summons upon the defendant, apply to the Court by Notice of Motion for an order that the arrested property be sold by the Sheriff and the sale proceeds be paid into the registry to the credit of the suit. The Court may make such order on the application as it may think fit."
11. Rule 949 allows a person who has interest in the property of a vessel under arrest or in the money representing the proceeds of a sale and who is not a Defendant to the suit to apply for intervention. An application for the grant of leave has to be made by affidavit and upon the grant of leave the person who is permitted to intervene has to file his appearance and is to be treated thereafter as if he were a Defendant to the suit. Such a person is required, upon the grant of leave to intervene, to serve on every other party to the suit such pleading as may be specified. Rule 949 provides as follows :
"R. 949. Interveners. - (1) Where property against which a suit in rem is brought is under arrest or money representing the proceeds of sale of that property is in Court, a person who has interest in that property or money ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 7/16 APP679-30.11.sxw but who is not a defendant to the suit may, with the leave of the Judge, intervene in the suit.
(2) An application for the grant of leave under this rule may be made ex-parte by affidavit showing the interest of the applicant in the property against which the suit is brought or in the money in Court.
(3) A person to whom leave is granted to intervene in a suit shall file an appearance in person or a Vakalatnama therein within the period specified in the order granting leave. On filing such appearance or Vakalatnama, the intervener shall be treated as if he were a defendant in the suit.
(4) The Judge may order that a person to whom he grants leave to intervene in a suit, shall, within such period as may be specified in the order, serve on every other party to the suit such pleading as may be so specified."
Rules 950 and 951 make the following provisions :
"950. Judgment for the plaintiff if claim well founded - When the suit comes up for hearing before the Court, if the judge is satisfied that the plaintiff's claim is well founded, he may pass a decree for the plaintiff and may order the property proceeded against to be sold with or without previous notice and the sale proceeds paid into the registry to the credit of the suit or make such other order in the premises as he may think just."
"951. Order for sale of property and determination of priority of claims - (1) Where in a suit in rem the Court has ordered the property proceeded against to be sold, any party who has obtained or obtains a decree or order or order against the said property or the proceeds of sale thereof may -
(a) In a case where the order for sale contains the further order referred to in sub-rule(2), after the expiration of the period specified in the order under sub-rule rule(2)(a), or
(b) in any other case, after obtaining judgment, apply to the Court by Notice of Motion for an order determining the order of priority of the claims against the proceeds of sale of the said property.
(2) Where in a suit in rem the Court order the property proceeded against to be sold, it may further order-
(a) that the order of priority of the claims against the proceeds of sale of the property shall not be determined until after the expiration of ninety days or of such other period as the Court may specify, beginning with the day on which the proceeds of sale are paid into Court;::: Downloaded on - 09/06/2013 19:27:08 :::
PNP 8/16 APP679-30.11.sxw
(b) that any party to the suit or to any other suit in rem against the property proceeded against or the sale proceeds thereof may apply to the Court to extend the period specified in the order;
(c) that within seven days after the date of payment into Court of the proceeds of sale, the Sheriff shall send for publication in, such newspapers as the court may direct a notice complying with the provisions of sub-rule (3).
(3) The notice referred to in sub-rule (2) shall state -
(a) that the property (particulars to be specified) has been sold by the order of the High court in a suit in rem giving the number of the suit and the names of the parties to the suit;
(b) that the gross proceeds of the sale, specifying the amount thereof, have been paid into Court;
(c) that the order of priority of the claims against the said proceeds will not be determined until after the expiration of the period (specifying it) specified in the order of sale;
(d) that any person having a claim against the property or the proceeds of sale thereof, should apply to the Court for leave to intervene and prove his claim before the Court and obtain a decree before the expiration of that period.
(4) The Sheriff shall lodge in the registry a copy of each newspaper in which the notice referred to in sub-rule (2) (c) has appeared.
(5) The expenses incurred by the Sheriff in complying with an order of the Court under this rule shall be included in his expenses relating to the sale of the property.
(6) An application to extend the period referred to in sub-rule(2) (a) shall be made by Notice of Motion, which shall be served on the parties to the suit and on all persons who have obtained leave to intervene in the suit."
12. Now before we construe the provisions contained in the Rules, it would be at the outset necessary to revisit some of the fundamental principles in regard to the exercise of the jurisdiction in rem in admiralty proceedings. When an action is brought against a vessel in rem, the Court exercises its jurisdiction treating the vessel which is sued as an entity in itself. When the Court orders the sale of the vessel, it has the inherent power in the exercise of its admiralty jurisdiction to ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 9/16 APP679-30.11.sxw convey upon the purchaser a valid title to the res that is sold free of all charges and encumbrances. This principle was established in the common law as one fundamental to public policy, since it would be manifestly contrary to the evolution of maritime law if a Court of competent jurisdiction which effected the sale of a ship were unable to convey a valid title to an innocent purchaser. Consequently, once a vessel has been sold in the exercise of the jurisdiction in rem, all claims against the vessel have to be enforced against the proceeds of the sale and before the Court which exercises jurisdiction to arrest and thereafter sell the vessel. Equally, it is a matter of settled principle that the Court which holds the proceeds of the sale holds them not merely for the benefit of the Plaintiff who moves the Court in the jurisdiction in rem but for and on behalf of all persons who may have claims in respect of the property of the vessel and, after the sale, in respect of the sale proceeds. Consequently, even if in a given case the claim of the Plaintiff were to fail, that would not obviate the fundamental duty and obligation of the Court in the exercise of the admiralty jurisdiction to ensure that the monies which it holds are properly distributed to persons whose claims have been adjudicated upon for realization. Upon the process of adjudication, the issue of determining priorities would arise. The issue of determining priorities comes up before the Court in a situation where the amount representing the aggregate of the claims against the vessel exceeds the amount which has been realized upon the sale of the vessel. Obviously in a situation where the aggregate of the claims is equal to or less than the amount which lies deposited with the Court every one of the claims can be paid in full and it is in a situation where the aggregate of the claims represents a value in excess of what is realized upon the sale of the vessel that the determination of priorities assumes importance. These principles of law have been consistently followed and reiterated in the exercise of the admiralty jurisdiction in common law countries.
13. A succinct statement of law is contained in Nigel Messon on Admiralty Jurisdiction and Practice7 :
"4.110 The sale of a ship or other property by the court gives the 7 Third Edition 2003.
::: Downloaded on - 09/06/2013 19:27:08 :::PNP 10/16 APP679-30.11.sxw purchaser title free of all maritime liens and other charges or encumbrances, and after the sale all claims or demands against the ship can only be enforced against the proceeds of sale. Thus in The "Tremont"8 Dr. Lushington said9: "The jurisdiction of the Court in these matters is confirmed by the municipal law of this country and by the general principles of the maritime law; and the title conferred by the Court in the exercise of this authority is a valid title against the whole world, and is recognised by the Courts of this country and by the courts of all other countries." And in The "Acrux"10 Hewson J. said11 :
"The title given by such process [ a sale by the Admiralty Marshal ] is a valid title and must not be disturbed by those who have knowledge or who may receive knowledge of the proceedings in this Court. So far as all the claimants against this ship before her arrest are concerned, their claims are now against the fund in this Court and not against the ship properly sold to an innocent purchaser free of encumbrances. Were such a clean title as given by this Court to be challenged or disturbed, the innocent purchaser would be gravely prejudiced. Not only that, but as a general proposition the maritime interests of the world would suffer. Were it to become established, contrary to general maritime law, that a proper sale of a ship by a competent Court did not give a clean title, those whose business it is to make advances of money in their various ways to enable ships to pursue their lawful occasions would be prejudiced in all cases where it became necessary to sell the ship under proper process of any competent Court. It would be prejudiced for this reason, that no innocent purchaser would be prepared to pay the full market price for the ship, and the resultant fraud, if the ship were sold, would be minimized and not represent her true value."
Again in paragraph 4.121 the author notes as follows :
"4.121 Unless the net proceeds of sale of a ship sold by the court in a claim in rem are sufficient to meet all the claims against the ship, or all the parties reach agreement as to the distribution of the fund, it will be necessary for the court to determine how the fund in court is to be divided among the several claimants, and whether any particular claimant is to be afforded priority over any other claimant. The law on priorities is considered separately.12 Where in a claim in rem against a ship the court makes an order for sale, it may also fix a time within which notice of claims against the proceeds of sale must be filed and the time and manner in which notice of that time must be advertised. 13 Any party which requires the period specified in the order to be extended should intervene in the claim in which the order for sale 8 (1841) 1 Wm. Rob. 163.
9 Ibid. at page 164.
10 (1962) 1 Lloyd's Rep. 405.
11 Ibid. at page 409. cols. 1-2.
12 Chapter 6
13 C.P.R. Part 61.10(2).
::: Downloaded on - 09/06/2013 19:27:08 :::
PNP 11/16 APP679-30.11.sxw
was made and apply in that claim.14" (emphasis supplied)
14. Rule 948 provides for the sale of arrested property in a suit in rem pendente lite. Under Rule 948 the Plaintiff in a suit in rem where the property proceeded against has been arrested may apply to the Court for a sale of the property at any time after the service of the writ of summons upon which the Court may make such order as it thinks fit. Under Rule 950 when the suit comes up for hearing before the Court, the Judge may decree the claim of the Plaintiff upon being satisfied that the claim is well founded and may order the property proceeded against to be sold with or without previous notice. The notice that is contemplated in Rule 950 is prior to the sale of the vessel. Upon a direction for the sale of the vessel, the Judge is empowered to further direct that the sale proceeds may be paid into the registry to the credit of the suit. The Judge is also empowered to make such other order in the premises as he may think just.
15. Sub rule (1) of Rule 951 applies in a situation where in a suit in rem the Court has ordered the property proceeded against to be sold. In such a situation any party who has obtained or obtains a decree or order against the property or the proceeds of sale may apply to the Court for an order determining the order of priority of claims against the proceeds of the sale. Such an application is contemplated in either one of two eventualities viz. (i) in a case where the order for sale contains a further order, referred to in sub rule (2) after the expiration of the period specified in the order under sub rule 2(a); or (ii) in any other case after obtaining judgment. The prefatory part of Rule 951(1) indicates that the following essential conditions must be fulfilled :
i) The institution of a suit in rem;
ii) An order of the Court directing the sale of the property proceeded against; and
iii) An application by a party who has obtained or obtains a decree or order against the property or the proceeds of sale.
16. Clauses (a) and (b) of sub rule (1) define the point in time after which an 14 The "El Hassani" and The "Ibendaound" [1969] 2 Lloyd's Rep. 630 (Brandon J.).
::: Downloaded on - 09/06/2013 19:27:08 :::PNP 12/16 APP679-30.11.sxw application for an order determining the order of priority of claims can be filed. In a case where the order for sale contains a further order referred to in sub rule (2), an application can be made after the expiration of the period specified in the order under sub rule (2)(a). In any other case, such an application can be filed after obtaining judgment. Sub rule (2) of Rule 951 defines the powers of the Court where, in a suit in rem the Court has ordered the property proceeded against to be sold. The directions which the Court can issue are that (i) The order of priority of claims shall not be determined until after the expiry of 90 days or such other period as the Court may specify from the payment of the proceeds of sale into Court; (ii) Any party to the suit or to any other suit in rem against the property proceeded against or the sale proceeds may apply to the Court for extension of the period specified in the order; and (iii) Within seven days after the payment into the Court of the proceeds of the sale, the Sheriff shall send for publication in the newspapers a notice complying with the provisions of sub rule (3). Sub rule (3) of Rule 951 specifies the contents of the notice which is referred to in sub rule (2). The notice has to specify that (i) The property has been sold by the order of the High Court in the suit in rem furnishing the names of the parties and number of the suit; (ii) The gross proceeds of sale have been paid into Court; (iii) The order of priority of claims against the proceeds shall not be determined until after the expiry of the period specified in the order of sale and (iv) That any person having a claim against the property or the proceeds of sale should apply to the Court for leave to intervene to prove his claim before the Court and obtain a decree before the expiration of that period.
17. Before the Learned Single Judge it was stated on behalf of the Plaintiff that an order for the determination of priorities may have to await judgment. The relief that was pressed in the Motion was the publication of a notice inviting claims. The Learned Single Judge held that both sub rules (1) and (2) of Rule 951 are designed to achieve a determination of priorities and no purpose can be served by inviting claims within a specified period at the instance of a Plaintiff who is yet to obtain a decree. Sub rule (1) of Rule 951, in our view, governs an application to the Court for an order determining the priority of claims against the proceeds of the sale of the arrested vessel. Before applying to the Court for the determination of priorities, an applicant must have obtained a decree or order ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 13/16 APP679-30.11.sxw against the property or the proceeds of sale. It is only thereafter that an application can be moved before the Court for an order determining the priority of claims at the stages indicated in clause (a), or as the case may be, clause (b) of sub rule (1). The power of the Court under sub rule (2) comes into existence once in a suit in rem the Court has ordered the property proceeded against to be sold. The Court is empowered to defer a determination of the priority of claims after the expiration of the period stipulated in clause (a). Under clause (b) of sub rule (2) the Court is empowered to extend the period which is specified in the order at the behest of any party to the suit or to any other suit in rem against the property proceeded against. Clause (c) of sub rule (2) of Rule 951 throws light on the ambit of the provision, in that it empowers the Court to direct that within seven days of the payment into Court of the proceeds of the sale, the Sheriff shall publish a notice complying with the provisions of sub rule (3). This would have no meaning and would be rendered otiose if the publication of even a notice inviting claims is to be deferred until judgment. Among the contents of such a notice is that any person having a claim against the property or the proceeds of the sale should apply to the Court for leave to intervene and to prove his claim before the Court and obtain a decree before the expiration of that period.
18. The object underlying the issuance of a notice under sule rule (3) of Rule 951 is to furnish intimation to all persons who may have a claim in respect of the vessel or the proceeds of the sale thereof. The notice constitutes intimation of the institution of the proceedings before the Court, the sale of the property and of the fact that any claimant who seeks to establish a claim against the property of the vessel or the sale proceeds must necessarily apply to that Court and prove his claim within a stipulated period. The essence of a notice is that it constitutes an intimation to all claimants at large with claims against the vessel or the sale proceeds of the vessel that it is to the Admiralty Court which has assumed jurisdiction following the arrest of the vessel that claims must be brought and proved. A claimant who fails to bring a claim before the Admiralty Court, may nonetheless assert a claim in personam against the owner of the vessel, but once a vessel has been arrested and sold, a claim in a suit in rem has to be brought before the Admiralty Court exercising jurisdiction in rem and before that ::: Downloaded on - 09/06/2013 19:27:08 ::: PNP 14/16 APP679-30.11.sxw Court alone. The Learned Single Judge has, in our view, and with great respect, failed to make a distinction between on the one hand the process involving an invitation of claims and the culmination of that process in the form of a determination of the order of priorities. The invitation of claims is a notice to all claimants who wish to assert a claim in rem in respect of the vessel or sale proceeds that have been realized. Once claims are received those claims have to be adjudicated upon and upon the adjudication of claims an order of priorities would have to be determined in a situation where the aggregate of the claims exceeds the value of the res that has been realized. There is no reason or justification to defer the invitation of claims to a date after a decree, if any, is passed in favour of the Plaintiff. As a matter of fact the position in law would make it clear that even if the Plaintiff in a given case were to fail in the suit which asserts a claim in rem, the Court nonetheless is under an obligation to distribute the sale proceeds to such claimants whose claims have been duly proved in the exercise of the admiralty jurisdiction. The obligation of the Court to distribute the sale proceeds which have been realized upon the order of arrest and sale is thus independent of the position of a particular Plaintiff before the Court. But fundamentally to our mind, the order of the Learned Single Judge would result in a situation where the distribution of the proceeds of sale would be indefinitely delayed and a plaintiff or for that matter other claimants would have to wait for an indefinite period upon the passing of a decree in the suit for the process of adjudication of other claims to commence. If the proposition which has been accepted by the Learned Single Judge were to be reflective of the correct legal position, that would result in a situation where a Plaintiff whose claim has been adjudicated upon would thereafter have to await an invitation of claims and until other claims are adjudicated upon in the Court of admiralty jurisdiction. This consequence would be wholly unintended. On the contrary, it is the duty of the Court while exercising its admiralty jurisdiction to give effect to the policy of law which is to further the expeditious adjudication and realization of claims in rem and the efficacious distribution of the sale proceeds that are realized upon the sale of a vessel. This can be achieved by the Court expeditiously issuing a notice inviting claims from persons who may have a claim against the property or the proceeds of sale to apply before the Court and for leave to intervene and prove their claims before the expiration of the period.
::: Downloaded on - 09/06/2013 19:27:08 :::PNP 15/16 APP679-30.11.sxw
19. It was asserted on behalf of the contesting Respondents that if this interpretation were to be adopted, claimants for whom the period of limitation is yet to expire would be compelled to bring a claim before the Court on an expeditious basis. The answer to this objection is that Rule 951(2)(b) empowers not only a party to the suit, but a party to any other suit in rem against the property proceeded against or the sale proceeds to apply for extension of the period specified in the order passed by the Court. An application for the extension of the period specified by the Court has to be considered in the judicious exercise of the discretion of the Trial Judge and there is no reason or justification to presuppose that this discretion would be exercised otherwise than on the basis of well established principles.
20. An order for the determination of priorities must undoubtedly await judgment. This principle has been enunciated in a judgment of Mr. Justice V.M.
Tarkunde in Argo Marine Supply Co. v. S.S. Easthampton, an American Steamship15. The Motion before the Learned Single Judge sought two reliefs : (I) That the order of priority of claims against the sale proceeds shall be determined after the expiration of 90 days or of such other period as the Court may specify; (ii) A direction that the Sheriff shall send for publication a notice complying with the provisions of Rule 951(3) stating that the order of priority of claims shall be determined after the period determined by the Court and that any person having a claim against the property or the proceeds of sale should file his claim before the expiration of the specified period. As we have already noted, during the course of the hearing before the learned Single Judge it was stated on behalf of the Plaintiff that the determination of priorities may have to await judgment and the prayer in the Motion was confined to a notice inviting claims. For the reasons which we have indicated, we have come to the conclusion that the Learned Single Judge has erred in coming to the conclusion that the issuance of a notice inviting claims would have to be deferred until after judgment has been obtained by the Plaintiff. In our view, this would not be reflective of the correct position in law on the interpretation of Rule 951 of the High Court (Original Side) Rules.
15 (1969) 71 BLR 832.
::: Downloaded on - 09/06/2013 19:27:08 :::PNP 16/16 APP679-30.11.sxw
21. In the circumstances, we set aside the impugned order of the Learned Single Judge dated 19 October 2012. The proceeds from the sale of the vessel have been deposited in the registry of this Court on 4 January 2012. We direct in consequences that a notice inviting claims within the meaning of Rule 951(3) shall be issued. We would request the Learned Single Judge to issue such consequential directions as may be necessary for that purpose. The Appeal is allowed in the aforesaid terms.
There shall be no order as to costs.
Stay refused.
ig (Dr. D.Y. Chandrachud, J.)
(A.A.Sayed, J.)
::: Downloaded on - 09/06/2013 19:27:08 :::