Liverpool And London Steamship ... vs Arabian Tankers Co., Llc And Ors.
2003 Latest Caselaw 567 Bom

JUDGMENT

F.I. Rebello, J.

1. The petitioners have described themselves as nonprofit making mutual ship owners insurance association who provide insurance cover to their members. The petitioners have been constituted by and comprise ship owners themselves. Each member makes proportionate contribution to the club fund and all claims made against any member by third parties are settled by the petitioners from out of the said fund after scrutiny. The case of the petitioners is that one Faisal A1 Suwaidi is an individual concerned with the ownership and shares in various vessels as described in paragraph three of the petition. It is also averred that Mr. Suwaidi has represented/held himself out to be and acted in the capacity of the owner/individual concerned with the ownership of the respondent Nos. 1, 2 and 3 as well as the shares in the vessel. The petitioners had invoked the admiralty jurisdiction of this Court for recovery of assets described as Insurance premium not only in respect of the said vessel but also insurance dues of the fleet, on the ground that it will constitute a maritime Claim. This Court by order dated January 22, 2003 in Notice of Motion No. 3110 of 2002 in Admiralty Suit No. 13 of 2002 granted part relief. There are also arbitral proceedings which are presently going on at London. The plaintiffs have framed rules which are known as Liverpool and London Steamship Protection and Indeminity Association Limited. Rule 47 pertains to disputes and the resolution thereto. Rule 47-C reads as under :

"Nothing herein shall affect or prejudice the right of the Association to take action and/or commence proceedings in any jurisdiction to enforce its rights of lien on ships or to otherwise obtain security by seizure, attachment or arrest of assets for any amount owed to the association."

Clause 48 pertain to law governing the parties and it reads as under :

"These rules and any special terms of entry form a contract of insurance between the association and a member, and subject to the right of the association under Rule 47-C to enforce its right of lien in any jurisdiction in accordance with local law in such jurisdiction, shall be construed in accordance with English law."

Subsequent to the order of this Court dated January 22, 2003, the petitioners have taken out this petition under Section 9 of the Act of 1996. Admittedly, the defendants 1, 2 and 3 are foreign companies. The action against the said respondents have been commenced in this Court for what is set out in paragraph twenty six of the petition. It is averred that the 1st and 2nd respondents have traded within the jurisdiction of this Court by bringing the vessel m.t. Symphony-I as well as other vessels owned by them, into the jurisdiction of this Court and having them entered with the port and customs authorities. On entry, it is contended that the vessel becomes subject to all municipal and local laws. The assets of the 1st and 2nd respondents are presently within the jurisdiction of this Court and consequently this would entitle this Court to pass orders in respect of such an asset. The 1st and 2nd respondent, it is averred, have specifically appointed M/s. J.M. Baxi Co., who have acted as agents on their behalf in respect of the vessel m.t. Symphony-I. Further M/s. J.M. Baxi & Co., have also acted on behalf of respondent Nos. 1 and 2, on past occasions in respect of the same as well as other vessels owned/ operated/managed by the respondent Nos. 1 and 2. M/s. J.M. Baxi have accepted and disbursed monies on behalf of the vessels owned by the 1st and 2nd respondents. It is then averred that the vessel is presently anchored within the jurisdiction of this Court. In these circumstances, it is contended that this Court would have jurisdiction to try and dispose of this petition as the 1st and 2nd respondents carry on business within the jurisdiction of this Court. It is also averred that the vessel m.t. Symphony-I is the only assets of the 1st and 2nd respondents available to the petitioners as otherwise they will not be in a position to execute the Award. The respondent Nos. 1 and 2, it is contended, have not challenged the arrest of the vessel either in the Admiralty Suit No. 13 of 2003 or in the suit filed against the vessel. The case of the petitioners further is that the respondents seem to have created fictitious mortgages. The respondent No. 4 who has been joined as party respondent No. 4 claims a mortgage on the ship. It is pointed out that this mortgage apparently is a fictitious mortgage as the value of the vessel would be to the tune of US $ 1.5 million whereas the mortgage is to the extent of US $ 7.5 million. Two other vessels belonged to respondent No. 1. One has been scrapped and another has been arrested after it was abandoned at Kochi. In these circumstances it is pointed out, that this Court should grant interim relief to protect the assets belonging to respondent Nos. 1 and 2 pending passing of the Award by the Arbitral Tribunal constituted in London.

2. The respondent Nos. 1, 2 and 3 have not appeared before this Court though duly served. An affidavit to that effect has been filed by one Cesar Pereira. The address for service of the said respondents is admittedly not within the jurisdiction of this Court. The respondent No. 4 has filed an affidavit through a constituted attorney. In the reply it is contended that the petition constitutes a blatant abuse of process of this Court by the petitioners and consequently that the petition in its entirety is based on the very same cause of action as in Admiralty Suit No. 13 of 2002 also instituted by the petitioners and is not maintainable in law. At any rate the present action is barred by res judicata or principle akin to res judicata as there already has been adjudication on the question raised in the present petition by order dated January 22, 2003 in Admiralty Suit No. 13 of 2003. It is then pointed out that the claim by the petitioners is for a period prior of 1999 and as such ex facie barred by limitation. It is also pointed out that this is not the Court within the meaning of Section 2(e) of the Act of 1996 which would have jurisdiction and consequently the petition ought to be rejected.

Judgments relied upon by the parties would be adverted to in the course of discussion to the extent that they are relevant.

3. Jurisdiction of this Court to entertain a petition is based on Clause 12 of the Letters Patent. Amongst others it provides that the defendant could be sued before this Court if the defendant at the time of the commencement of the suit shall dwell or carry on business, or personally work for gain, within such limits. This Court in an admiralty action taken out against the vessel in Notice of Motion 2528 of 2002 in Admiralty Suit No. 30 of 2002 as also other Motions including Admiralty Suit No. 13 of 2002 has passed an order on 17th October, 2002. That order notes that the owners of the vessel have abandoned the vessel m.t. Symphony-I (ex-Arabian Lady). The order for arrest has been passed in a suit pending before this Court in its Admiralty jurisdiction. One of the suits has been instituted by members of the crew who have claims in respect of their unpaid wages. The Court found that under those circumstances it was essential to ensure that necessary steps are taken for the maintenance of the vessel. As there was no objection certain directions were issued. Amongst them were that the respondent No. 4 in Admiralty Suit No. 30 of 1982 was allowed to possess the vessel m.t. Simphony-I (ex-Arabian Lady) subject to various conditions one of them being an express condition which was acceptable to respondent No. 4 that they would file an undertaking that the vessel would not be removed from the port precincts. Such an undertaking has been filed. The other condition was that the existing shipping agents J.M. Baxi would be substituted by Marcons Ship Management Pvt. Ltd. The respondents were also directed to take necessary steps to ensure the due repayment of the Port dues by the new Shipping agents. Statement made on behalf of the respondent No. 4 was also recorded that the P. & I. coverage in respect of the vessel as well as a marine policy covering the Hull and machinery shall be duly obtained forthwith and shall be kept renewed.

4. With the above some of the contentions now raised on behalf of the respondents may be dealt with before adverting to the main issue as to whether this is a competent Court of Civil Jurisdiction where a petition could be filed and more so whether this Court in view of the judgment of the Apex Court in Bhatia International v. Bulk Trading S.A., .

would have jurisdiction and whether on the merits the petitioner has made out any case warranting relief as prayed for.

5. We may firstly deal with the contention as to whether the present action is based on the same cause of action as set out in Admiralty Suit No. 13 of 2002 and if so whether that would be a bar considering the provisions of Order II, Rule 2 of the Code of Civil Procedure. Invocation of Section 9 of the Act of 1996 is only as an interim measure pending commencement, in the course of the proceeding and after the Award is passed it becomes executable. In other words it is to protect the subject matter of the property of the arbitral agreement and/or to secure the petitioner. It is not, therefore, a substantive relief where the Court can pass a decree on final relief. Even otherwise the action in rem is by way of invoking the admiralty jurisdiction in respect of a maritime claim or lien or statutory dues falling therein. We have earlier adverted to an order of this Court dated January 22, 2003, in Notice of Motion No. 3110 of 2002 in Admiralty Suit No. 13 of 2002. The admiralty action was initiated on the ground that the Insurance premium paid in respect of the fleet was also subject to the admiralty jurisdiction. This Court after noting the law took the view that insurance premium for fleet would not fall within the admiralty jurisdiction and the claim based on insurance premium would be limited to the insurance premium of the ship unless considering the earlier Division Bench judgment of this Court. The present action for direction in respect of the insurance premium of the fleet, cannot be said to be the same cause as in the pending suit, considering the finding by this Court which order has been upheld in appeal that fleet premium would not constitute a cause for admiralty action. The question, therefore, of "attracting Order II, Rule 2 would not arise. The first contention, therefore, must be rejected. Considering the incidental issue whether the principles of res judicata or principles analogous to res judicata would apply even in respect of interim orders there can be no difficulty that the principles analogous to res judicata can be applied. In the instant case the argument based on res judicata will have to be rejected for the same reasons while rejecting the contention under Order II, Rule 2, as the cause of action is different. It is not necessary to dwell further on that contention.

6. The third contention is based on the ground that the amount of insurance premium claimed is not within the period of 3 years which could be claimed considering the provisions of the Indian Limitation Act, 1963. As noted earlier we are really not concerned with the substantive action by the petitioner. The substantive action by way of arbitral proceedings are before the Arbitrators, who have the venue of Arbitration in London and prima facie as the law applicable is the English law, which provides for limitation of 6 years. An Award passed by an English Court where the period of limitation is different from that in this country would be still be enforced in this country as a foreign Award as prima facie it would not be against the public policy of India as held by the Apex Court in Renusagar Power Co. Ltd. v. General Electric Co., . The tests which were laid down under the earlier law for enforcement of foreign Awards continue to be applicable also under the Act of 1996 insofar as the foreign Award is concerned. That contention, therefore, must be rejected.

7. We then come to the issue as to whether this Court would have jurisdiction to entertain, decide and hear this application. This Court has taken the view that the Competent Civil Court is the Court having jurisdiction over the subject matter. In other words if this Court has jurisdiction over the subject matter then only will this Court have jurisdiction irrespective of the pecuniary limits of the claim. We have adverted earlier to Clause 12 of the L.P.A. A suit could be filed within the jurisdiction of this Court if the defendant resides or carries on trade or business within the jurisdiction of this Court. Section 9 has now been interpreted by the Apex Court to be applicable not only to domestic Arbitrations, but also to international commercial Arbitrations. [See: Bhatia International (supra)]. While deciding the jurisdiction of Municipal Courts whilst invoking the jurisdiction under Section 9 of the Act of 1996 in the case of international commercial Arbitration this is how the Apex Court has summed up the position of law :

"To conclude, we hold that the provisions of Part I would apply to an Arbitrations and to all proceedings relating thereto. Where such Arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial Arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply."

From that judgment it is not possible to know as to what was the substantive law of the underlying agreement. However, learned counsel on behalf of the respondent No. 4 points out that the laws in that case were the laws of Switzerland. The seat of Arbitration was at Paris and the rules governing the arbitral proceedings were that of the International Chamber of commerce. Considering the Rules of International Chamber of Commerce the Apex Court held that a Competent Civil Court in India had jurisdiction to entertain the petition under Section 9. In the instant case we have earlier referred to Rules 47 and 48 framed by the plaintiffs. In terms of those rules the dispute or difference must be referred to Arbitration in London and the Arbitrators are to be members of the London Maritime Arbitration Association and the Arbitration will be subject to the U.K. Arbitration Act, 1996 and statutory amendments and the Rules of the London Maritime Arbitration Association as published from time to time. The rule in respect of the contract have to be construed in accordance with the English law. Once that be the case what emerges is that the substantive law of the contract is English law, the law of the Arbitration agreement is the English Arbitration Act 1996 and the arbitral procedure or the curial law would be the Rules of the London Maritime Arbitration Association. Once this is considered the substantive law of the contract, the law of the arbitral agreement and the curial law would be as existing in England, but for Rules 47-C and 48 framed by the petitioner. Under Rules 47-C and 48 framed by the petitioner arrears of insurance premium result in creating a lien on the ship which will entitle seizure, attachment or arrest of assets for any amounts owed to the association. Under Rule 48 the rights of lien can be enforced in any jurisdiction in accordance with local law in such jurisdiction and it has to be construed in accordance with English law. Once that be the case and applying the same principles as applied in the case of Bhatia International (supra), there is no difficulty in holding that the courts in India will have jurisdiction even in case of international commercial agreement.

8. The next question, therefore, that will have to be answered is whether this Court would have jurisdiction to entertain the petition. As already referred to "the Court" must mean the Court having jurisdiction over the subject matter. In these circumstances the question would be whether the respondent Nos. 1, 2 and 3 can be sued within the jurisdiction of this Court. The contention on behalf of the respondent No. 4 is that the respondent Nos. 1 to 3 do not carry on trade or business within the jurisdiction of this Court as normally understood and as such this Court would have no jurisdiction. Reliance was placed on the judgment of the Apex Court in the case of World Tanker Carrier Corporation v. SNP Shipping Services Pvt. Ltd. and Ors. etc., and more specifically paragraph nineteen to contend that under the principles of private International Law, a Court cannot entertain an action against a foreigner resident outside country or a foreigner not carrying on business within the country, unless he submits to the jurisdiction of the Court here. This principle applies to actions in personam. The respondent Nos. 1 to 3 have not appeared before this Court, nor opposed the jurisdiction of this Court on the ground that the action against them, is not within the jurisdiction of this Court. In other words if otherwise this Court has jurisdiction then the present action would be maintainable. Objection as to jurisdiction has come from the respondent No. 4 and not from respondent Nos. 1 to 3. In the case of Pachaiammal and Anr. v. Hindustan Co-operative Insurance Society Ltd., Madras and Ors., AIR 1941 Madras 270 the issue before the Madras High Court was whether the Insurance Company which had its head office at Calcutta and branch office at Madras, but contracts of insurance were made in Calcutta and not in Madras, could be said to be a company carrying on business in Madras within the meaning of Clause 12 of the Letters Patent of the Madras High Court. While deciding the matter the learned Division Bench of the Madras High Court held that what is meant by carrying on business has been the subject of much judicial discussion and it must now be regarded as settled, that a company only carries on business where it enters into contracts relating to its business, not at places where it may have canvassers or agents for the purpose of obtaining offers of business and attending to matters ancillary to its business. Reliance is also placed for similar effect on the judgment of the Madras High Court in the case of Sankunni Panikkar v. Rama Panikar and Ors., It is based on these observations that it is contended that even considering Clause 12 of the Letters Patent as the respondents are not carrying on any business within the jurisdiction of this Court it would have no jurisdiction. In so far as having agents within the jurisdiction of this Court, it is contended that the agent only acts on behalf of the master and not on behalf of the principal and for that purpose reliance is placed on Section 148 of the Customs Act.

9. In Municipal Council of Cocannda v. "Clan" Line Steamers Ltd. AIR 1919 Madras 209 the local authority sought to recover professional tax on ship agent on the ground that a shipowner exercises his trade at all the ports at which his steamers habitually call to discharge or load cargo. While considering the issue the learned Division Bench of the Madras High Court held that in the absence of other arrangements, the shipowner is represented by the ship's master in all the business incidental to loading and unloading, and it is open to question whether the fact that this business is done by a resident agent himself carrying a business there and not by the master, makes any difference. It is unnecessary to pursue this question, because it is, I think, clear upon the authorities that where, as in the present case, the freight earning contracts with shippers which enable profits to be earned by sea carriage are not entered into at the port in question by the shipmaster or the local agent of the shipowner, but elsewhere, the shipowner cannot be held to exercise his trade at the port merely because he employs a ship agent there to attend to other matters, such as issuing shipping orders and signing Bill of Lading pursuant to contracts already made, and receiving payment of advance freight. However, in the instant case before us the following facts emerge. The respondent Nos. 1 and 2 continue to be the owners of the ship. The finding of this Court in another proceedings is that the owners have abandoned the ship which is in the custody of the Sheriff of Bombay. The respondent No. 4 has been allowed merely to possess the ship. In other words the respondent No. 4 is holding the ship for and on behalf of the real owners. The insurance premium as also Maritime insurance is paid by respondent No. 4 on behalf of the owners. The further fact is that the owners are represented by agents within the jurisdiction of this Court. The nature of the agency cannot be ascertained or set out in the absence of any material before this Court. Most importantly the respondent Nos. 1 to 3 themselves have not come before this Court and opposed the jurisdiction of this Court on the ground that this Court would have no jurisdiction. The property is within the jurisdiction of this Court. If all these tests are applied and considering that what the respondent No. 4 is claiming is merely as mortgagee and is holding the ship within the jurisdiction of this Court and has submitted to the jurisdiction of this Court both in admiralty action as well as in this petition it will be difficult to hold that this Court would have no jurisdiction to entertain, hear and decide this petition on the facts as they exist. The above discussion would show that once the vessel is within the jurisdiction of this Court and the respondent No. 4 is holding the vessel within the jurisdiction of this Court, and respondent No. 4 has given an undertaking to this Court not to remove the ship outside the jurisdiction of this Court without the permission of this Court and further as the respondent Nos. 1 and 2 have chosen not to oppose the jurisdiction of this Court it will be difficult to hold that this Court has no jurisdiction to entertain and decide the petition. For the reasons stated above the contentions as raised on behalf of the respondents will have to be rejected.

10. Having held that this Court has jurisdiction the question is whether the relief as prayed for by the petitioners ought to be granted in terms of the agreement between the petitioners and the respondents. The petitioners have a lien on the ship. They are seeking to exercise their lien bearing in mind Clause 48 of the agreement. Under Clause 47 read which Clause 48 the parties have agreed that the ship could be attached considering the lien that the petitioners have in their favour. It is made clear that this lien which is considered is distinct and different from the lien as understood under admiralty law. This lien forms part of the contractual terms between the petitioners and the respondents owners. The petitioner has pointed but that the respondents owners have no other assets and if the vessel is taken outside the jurisdiction of this Court and that too at the instance of a mortgagee, it will be difficult to realise the amount Awarded in the proceedings that are going on. In these circumstances to my mind the petitioners have made out a case that they are entitled to protection for the amount as set out by them in the petition. The order to be passed will have to take into consideration the earlier order of this Court and the undertaking furnished by respondent No: 4 pursuant to the order dated 17th October, 2002 in Notice of Motion No. 2528 of 2002 in Admiralty Suit No. 30 of 2002 as also in the other Motions. In the light of that the following order :

There will be an injunction in terms of prayer Clause (a). If the order as set out in the order dated 17th October, 2002 in Notice of Motion No. 2528 of 2002 in Admiralty Suit No. 30 of 2002 and other Motions is varied and/or set aside, which permits the ship to be taken out of the jurisdiction of this Court, in that event there would be also relief in terms of prayer Clause (a)(i). Considering that respondent Nos. 1 and 2 are not present before this Court, it will not be possible to grant the relief in terms of prayer Clause (b) as also prayer Clause (c). The other reliefs can only be considered as and when the Award is made and subject to the Award to be passed.

With the above observations, petition stands disposed off. No order as to costs.

Parties/Authorities to act on an ordinary copy of this order duly authenticated by the Associate/Personal Secretary of this Court.