Bombay High Court
Sparebanken Sogn Og Fjordane vs M.V. Bos Angler on 19 October, 2012
Bench: S. J. Kathawalla
KPP -1-
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
NOTICE OF MOTION NO. 558 OF 2012
IN
ADMIRALTY SUIT NO. 24 OF 2011
Sparebanken Sogn og Fjordane, a Bank incorporated )
under the laws of Norway and having office at )
Langebruvegen 12, NO-6800 Forde, Norway )...Plaintiff
vs.
1. m.v. BOS ANGLER, ( and her owners and all other )
persons concerned and/or interested in her), a motor
vessel registered in a foreign port, flying the flat of
Norway together with her hull, tackle, engines,
)
)
)
machinery, boats, bunkers, equipment, paraphernalia )
and all other appurtenances presently in the port and )
harbour of Tuticorin, within the territorial waters of )
India and within the Admiralty & Vice Admiralty )
Jurisdiction of this Hon'ble Court. )
2. Bos Angler AS, a Company registered under the )
laws of Norway and having office at Nedre Astveit 12,
)
5106 Ovre Ervik, Norway )
3. M/s. Spence and Co., represented by its Partner )
Mr. R. Rajamanickam, New No. 30, Old No. 220, )
NSC Bose Road, Parrys, Chennai-600 001 )
4. Marine Plus, a proprietary concern and having its )
administrative office at Marine Mansion, #23-23-12 )
Sivalayam Temple Ward Street, Opp. Ore Berth Gate, )
Vizag-530 001. )
5. Global Fuels and Lubricants Inc., a Company )
incorporated and organized under the laws of Panama, )
having its Principal office at Aeulestrasse 74 )
FL-9490 Vaduz, Liechtenstein, Panama and )
representative office at A-14, Shri Ram Industrial )
Estate, Plot No. 13, G.D. Ambedkar Road, Wadala, )
Mumbai-400 031 )
::: Downloaded on - 09/06/2013 19:18:22 :::
KPP -2-
6. Asean International Ltd., a limited )
liability company having its Principal Office at )
DAFZA SE Block A, Suite 824, )
Dubai, United Arab Emirates )..Defendants
Mr. Atul Rajadhyaksha, Senior Advocate, along with Mr. Z. Bharucha, instructed
by Mr. Bimal Rajasekhar, for the Plaintiff.
Mr. V.K. Ramabhadran for Defendant No.3.
Mr. Rahul Narichania, along with Mr. Shiv Iyer, Mr. Prashan Kamat and Mr.
Sujan Malhotra, instructed by M/s. Bose & Mitra & Co., for Defendant No.4.
Ms. Sneha Phene, instructed by M/s. Little & Co., for the Respondents.
Mr. A.M. Vernekar for Defendant Nos. 5 and 6.
CORAM: S.J. KATHAWALLA, J.
Judgment reserved on : August 01, 2012
Judgment pronounced on : October 19,2012
JUDGMENT:
By the above Notice of Motion, the Plaintiff seeks 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 4th January 2012;
(b) For an order and direction that the Sheriff shall send for
publication 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 alia, that the order of priority of
claims against the said proceeds shall be determined after the
KPP -3-
period mentioned is determined by this Hon'ble Court with respect
to 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."
2. The relevant facts are briefly set out hereunder:
3. The above Admiralty Suit was originally filed by the Plaintiff against
Defendant No.1 vessel - m.v. BOS ANGLER and Defendant No.2 - Bos Angler
AS, the owner of the said vessel, for an order and decree in favour of the
Plaintiff and against the Defendants for a sum of NOK 176,500,000 (Norwegian
Kroner One Hundred and Seventy Six Million Five Hundred Thousand only)
equivalent to Indian Rs. 143,43,50,896/- (Rupees One hundred forty three
crores forty three lakhs fifty thousand and eight hundred ninety six only), and
interest at the rate of 12% per annum from the date of the institution of the suit
till payment/realization and also for a declaration that there is a valid and
subsisting first priority registered mortgage on the Defendant No.1 vessel in
favour of the Plaintiff. By the said suit, the Plaintiff also sought arrest of the
Defendant No.1 vessel, sale of the same and application of the sale proceeds
towards the satisfaction of the Plaintiff's claim in the suit.
4. After the above suit was filed, Defendant Nos. 3 to 6 sought intervention
in the suit on the ground that they are interested in the property (Defendant
KPP -4-
No.1 vessel), which is the subject matter of the suit or in the money realised
from the same, under Rule 949 of the Bombay High Court (Original Side)
Rules, 1980 ("the said Rules"). The Intervention Applications have been
allowed and Defendant Nos. 3 to 6 are joined as party Defendants to the suit.
5. Thereafter since Defendant No.2 went into liquidation and the Official
Liquidator of the estate of Defendant No.2 is appointed, the Official Liquidator
is joined as party Defendant No.7 to the suit.
6. On 16th June 2011, the Plaintiff took out Notice of Motion No. 1817 of
2011 inter alia seeking an order and direction for appraisement, survey and
valuation of the first Defendant vessel and to order and direct the sale of the
vessel. On 8th July 2011, this Court inter alia directed the Sheriff of Bombay, to
get the appraisement, survey and valuation of the vessel carried out by M/s.
Ericson and Richards at the plaintiff's costs. On 3rd August 2011, M/s. Ericson
and Richards (Valuer) submitted its report dated 1 st August 2011, when the
Court fixed the reserve bid for the sale of the first Defendant vessel at Rs. 250
crores. The Sheriff of Mumbai was directed to seek confirmation of the sale of
the Defendant No.1 vessel from this Court within five weeks from the date of
publishing the advertisement as directed by the Court.
7. At the auction fixed on 20th September 2011, no bids were received.
KPP -5-
This Court (Coram: S.C. Dharmadhikari, J.) therefore by its order dated 4 th
October 2011 directed that the Sheriff shall once again put up the said vessel
for sale. Being aggrieved by the order passed by this Court dated 4 th October
2011, the Plaintiff filed an Appeal being Appeal No. 758 of 2011 before the
Hon'ble Division Bench of this Court. The Appeal Court ordered a fresh sale
upon certain fresh terms and conditions. Accordingly, the Sheriff of Mumbai
advertised the sale of Defendant No.1 vessel in various publications as well as
the websites. Despite the above advertisements, no fresh offer was received. In
view thereof, the Appeal Court by its order dated 30 th November 2011 allowed
sale of the Defendant No.1 vessel in favour of the Plaintiff. However, once
again the Appeal Court provided in its order that if in case during the period of
fourteen banking days referred to in direction (b) of the said order, any party
comes forward before the Court with a firm bid along with deposit of US$
500,000 to pay an amount higher than the amount offered by the Plaintiff with
a minimum difference of one million US Dollars, the same shall be accepted.
The Appeal Court in its order also directed that "the appellant shall be at liberty
to apply to the Admiralty Court for directions under Rule 951 of the Bombay High
Court (Original Side) Rules". Since no higher bid was received from any
purchaser/bidder, the sale was confirmed in favour of the Plaintiff and
Defendant No.1 vessel was sold to the Plaintiff and the purchase price of the
same is deposited with the Prothonotary and Senior Master of this Court.
KPP -6-
8. Pursuant to the liberty granted by the Appeal Court to the Plaintiff to
apply to the Admiralty Court for directions under Rule 951 of the said Rules,
the Plaintiff has taken out the above Notice of Motion seeking reliefs as set out
therein.
9. For the purpose of deciding the present Notice of Motion, Rules 947 to
951 of the said Rules are relevant and the same are reproduced hereunder for
ready reference:
"947.Sheriff may apply for directions.- The Sheriff may at
any time make a report to the Court and apply for directions
with respect to property under arrest in a suit. The Court may
direct notice of the application to be given to any person
concerned with the property before passing orders on the
report.
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.
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 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.
KPP -7-
(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.
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 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 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 orders 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
KPP -8-
may specify, beginning with the day on which the
proceeds of sale are paid into Court.
(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 for 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.
KPP -9-
(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."
10. Mr. Rajadhyksha, the Learned Senior Advocate appearing for the
Plaintiff submitted that only a party which has obtained or obtains a decree
or order against the property or the proceeds of sale can apply under Rule 951
(1) of the said Rules. He submitted that there is a distinction in law between a
decree and an order. It has been held by the Hon'ble Supreme Court in
Vidyacharan Shukla vs. Khubchand Baghel 1 that a decree is a formal expression
of adjudication conclusively determining the rights of parties with regard to all
or any of the controversies in a suit, whereas order is a formal expression of any
decision of a civil court which is not a decree. Judgment is a statement given
by the Judge of his grounds in respect of a decree or order. He submitted that
since both expressions (decree or order) are to be found in Rule 591 (1) of the
said Rules, it is clear that a party which has obtained or obtains (a) a decree or
(ii) an order is entitled to apply for determination of priority of the claims
against the proceeds of the sale of the property. The language of Rule 951 (1)
of the said Rules is clear, plain and unambiguous, it covers either of the two
situations mentioned above. It is not necessary that the party which applies for
the determination of priority of the claims against the proceeds of the sale of
1 AIR 1964 SC 1099 at page 1114/para 28
KPP -10-
the property must necessarily obtain a decree. It is enough if such a party
obtains or has obtained an order against the said property i.e. Defendant No.1
vessel. In the present case the Plaintiff is a party which has obtained an order
against Defendant No. 1 vessel which is the said property. The Learned Senior
Counsel appearing for the Plaintiff therefore submitted that the Plaintiff having
obtained an order against the said property is entitled to apply for relief under
Rule 951 (1) of the said Rules.
11. The Learned Senior Advocate appearing for the Plaintiff further
submitted that the prayers in the Notice of Motion are in consonance with Rule
951 (2) of the said Rules. Whereas Rule 951 (2) of the said Rules uses the
negative expression "until after the expiration of 90 days..." ,the prayer clause
(a) in the Notice of Motion is in the affirmative viz. " shall be determined after
the expiration of 90 days...". He submits that by the above Notice of Motion, he
is only seeking that some time be fixed after the expiry of which the priorities in
respect of the claims shall be decided, so that the notice as provided under
Rule 951 (3) of the said Rules can be issued inviting claims from claimants
against the proceeds of sale of Defendant No.1 vessel deposited with the
Prothonotary and Senior Master of this Court. He further submitted that
prayer (b) of the Notice of Motion is consequential and expressly refers to Rule
951 (3) of the said Rules which is also a consequential Rule.
KPP -11-
12. The Learned Senior Counsel appearing for the Plaintiff further
submitted that under Rule 951 (2) of the said Rules, the Court may make a
further order which will provide for matters contained in sub-clauses (a), (b)
and (c ) of the said sub-Rule. This further order is to be made when the order
of sale is to be made. In all other cases, the further order referred to in Rule
951 (2) of the said Rules can be made after obtaining judgment.
13. The Learned Senior Counsel appearing for the Plaintiff, submitted
that there are several reasons for the Plaintiff to apply at this stage for an order
under Rule 951 (2) of the said Rules which reasons are as follows:
(a) It is in consonance with the language of Rule 951 of the said Rules;
(b) The Plaintiff is vitally interested that all claimants who may have a
claim against Defendant No.1 vessel are known and are before this Court since
this Court has ordered that the Defendant No.1 vessel be sold and the proceeds
be credited in this Court;
(c ) This Court is in charge of the disbursal of the sale proceeds
recovered out of the sale of the Defendant No.1 vessel and the moneys are lying
under the control and in seisin of this Court.
(d) It is in the interest of all claimants to realize the number of
claimants against the Defendant No.1 vessel at this stage. It is possible for each
of the claimants to realize where each of them would stand in the order of
priority. For example, if the Plaintiff realizes at this stage itself, upon receipt of
KPP -12-
the claims from all claimants, that there are several claimants or even one or
more claimants who will rank above the Plaintiff in the order of priority, and
that there is no chance or even a slender chance that the Plaintiff will recover
any amount in the execution of a decree, the Plaintiff may not pursue the claim
in the suit. Thus, exercising powers under Rule 951 (2) of the said Rules and
making a further order is in the interest of all claimants against Defendant No.1
vessel.
(e) There is no prejudice to any of the Defendants in the suit if this
Court exercises powers under Rule 951 (2) of the said Rules and makes a
further order inviting claims against the Defendant No.1 vessel to be lodged in
this Court.
(f) There is also a practical side to the provision in Rule 951 of the said
Rules in directing a notice to be issued under Rule 951 (2) of the said Rules,
like once all creditors have come forward, the total amount of all claims have
been established and securities scrutinized it might also be possible to discuss
between the creditors an amicable solution in order to avoid going through the
court system to get paid. Before the expiration of the advertisement period and
the time limit to come forward with a claim no one will ever try to get to an
amicable settlement of claims since there would be no point. And once a
Plaintiff has fought for years in Court and finally obtained a judgment then the
chances of an amicable settlement would be even smaller.
KPP -13-
14. The Learned Senior Counsel appearing for the Plaintiff submitted
that for the aforestated reasons the Notice of Motion deserves to be allowed.
15. Mr. Ramabhadran, the Learned Advocate appearing for Defendant
No.3 - M/s. Spence & Co., submitted that any order for sale of the property in
an Admiralty Suit could only be made either under Rule 948 or under Rule 950
of the said Rules. There are no other Rules which govern the order for sale of
the property in an Admiralty Suit. Rule 948 of the said Rules governs the order
of sale by the Court after the property is arrested but prior to obtaining the
decree or judgment. The expression "such order" in Rule 948 of the said Rules
could only mean the manner in which the property could be sold i.e. either by
public auction or by private treaty and the manner in which the sale of the
property would be advertised, the name of the newspapers, etc. "Such order"
cannot be read as an order as envisaged in Rule 951 (2) (a) of the said Rules.
If that was the intention of framing the said Rule, in that event, Rule 948 of the
said Rules would have clearly said so.
16. The Learned Advocate for Defendant No.3 submitted that the Court
would be in a position to fix a time period as contemplated under Rule 951 (2)
(a) of the said Rules to be followed by publication of notice, only if at least one
of the Plaintiffs who have filed the suit against the property, has obtained
decree against the property or the sale proceeds of the vessel. If the Plaintiff
has obtained decree against the property or the proceeds of the sale, the
KPP -14-
question of fixing any time period as contemplated under Rule 951 (2) (a) of
the said Rules does not arise.
17. The Learned Advocate appearing for Defendant No. 3 has submitted
that reference in Rule 951 of the said Rules to " any party who has obtained
or obtains a decree or order against the said property or the proceeds of the
sale", necessarily contemplates a situation where a party has not only obtained
a decree, but also an order against the said property or proceeds of the sale as
envisaged under Rule 950 of the said Rules. The words "decree" or "order" are
to be read conjunctively i.e. the party has obtained a "decree and order". If
the words "decree" or "order" are read disjunctively, it would lead to an
absurdity in as much as any party could apply by way of Notice of Motion
seeking an order for determining the order of priority although such party has
neither obtained a decree nor a judgment in his favour. Once it is conceded by
the Plaintiff that Rule 951 (1) of the said Rules could be invoked only after
judgment or decree, the words "decree" or order" necessarily have to be read
conjunctively. In support of this contention, the Learned Advocate appearing
for Defendant No. 3 has relied on the decision of the House of Lords in the
case of Federal Steam Navigation Co. Ltd. vs. Department of Trade and Industry 2.
The Learned Counsel has also relied on a passage from "Maxwell on the
Interpretation of Statutes" which is quoted hereunder:
"In ordinary usage, "and" is conjunctive and "or" disjunctive.
2 [1974] 1 W.L.R. 505
KPP -15-
But to carry out the intention of the Legislature it may be
necessary to read "and" in place of the conjunction "or" and
vice versa."
It is therefore submitted on behalf of Defendant No.3 that since the Plaintiff has
not obtained decree against the sale proceeds of the vessel, it is not entitled to
seek reliefs as sought for under Rule 951.
18. It was further submitted on behalf of Defendant No. 3 that if the
property arrested in an Admiralty suit is not sold pending the hearing and final
disposal of the suit, in such an event the Court may order the property to be
sold under Rule 950 of the said Rules at the time of passing of a decree, either
with or without previous notice. "Notice" so referred under Rule 950 of the
said Rules is the notice as contemplated in Rule 951 (2) ( c)of the said Rules.
If the Court has ordered the property to be sold with previous notice, in such a
case the Court shall first determine the period as prescribed under Rule 951 (2)
(a) of the said Rules. The period so determined by the Court is subject to such
an extension as the Court may grant under Rule 951 (2) (b) of the said Rules.
It is further submitted that the expression "order" referred to under Rule 951
(1) of the said Rules is an order passed by the Court for the sale of the property
as contemplated under Rule 950 of the said Rules and not against the
"proceeds of sale". The expression "decree" is to be read with the "proceeds of
sale" and not against the property.
19. It is further submitted on behalf of Defendant No. 3 that this Court
KPP -16-
in the case of Agro Marine Supply Company vs. S.S. Easthampton3, has after
quoting with approval a passage from British Shipping Laws, clearly laid down
that priorities could be decided only after judgment.
20. The Learned Advocate appearing for Defendant No. 3 has without
prejudice to the submissions recorded hereinabove, and only in the alternative
submitted that a party could seek relief as contemplated under Rule 951 (2)
(a) of the said Rules. However, such a relief could be sought only at a time
when the order of sale is passed and not any time thereafter, until such party
obtains a judgment. In the present case, the order of sale was passed on 3 rd
August 2011 by this Court. No such order as contemplated under Rule 951 (2)
(a) of the said Rules was passed at the time of the order of sale of the vessel. In
view of the failure of the auction of the vessel in the first instance, second time
advertisement was released for sale of the vessel by an order dated 4 th October,
2011 of this Court. Even at that stage no such order as contemplated under
Rule 951 (2) (a) of the said Rules was passed.
21. The Learned Advocate appearing for Defendant No. 3 has in the
alternative further submitted that assuming without admitting that the Plaintiff
is entitled to invoke Rule 951 of the said Rules at this stage, such an
application is maintainable only under Rule 951 (1) of the said Rules. When
such an application is made the Court has the discretion to grant relief as
3 [1965] Vol. LXXI P. 832
KPP -17-
sought for in terms of Rule 591 (2) (a) of the said Rules. It is submitted that
the discretion to grant or not grant relief vests with the Court if any application
is made by a party before obtaining Judgment and/or decree against the sale
proceeds. The Court would not have any such discretion only if the party who is
making the application has already obtained judgment in his favour either
against the property or against the sale proceeds of the vessel. Considering that
the Plaintiff in this case has not taken any steps though the Court had directed
by its order dated 23rd August 2011, no purpose whatsoever would be served at
this stage by passing an order under Rule 951 (2) (a) of the said Rules. The
Court will have absolutely no idea in order to fix a period as envisaged under
Rule 951 (2) (a) of the said Rules. In fact, the Plaintiff is not in a position to
state to the Court the period which the Court has to prescribe under Rule 951
(2) (a) of the said Rules. It is further submitted that the Plaintiff is unable to
show the purpose, the reason and the object for which this application is being
made at this stage. It is sought to be contended by the Plaintiff that by inviting
and invoking Rule 951 (2) (a) of the said Rules, no prejudice would be caused
to any of the parties. However, since the application is being made by the
Plaintiff, it is for the Plaintiff to establish the rule and the power under which
such application could be made. It is immaterial whether it would cause any
prejudice to any other parties or not. It is further submitted that if the Plaintiff's
claim as a mortgagee, as allegedly claimed, succeeds, the present application
would be infructuous inasmuch as ahead of the mortgagees claim, only other
KPP -18-
claim would be statutory dues and the dues of crew members and no other
claim could have priority over the alleged claim of the Plaintiffs (as
mortgagees). The crew members have already filed the proceedings in this
Court and therefore except statutory dues there could be no other dues which
could be in priority over the alleged mortgage claim of the Plaintiff.
22. It is therefore submitted on behalf of the Defendant No.3 that the
Notice of Motion deserves to be dismissed with costs.
23. Mr. Rahul Narichania, Learned Advocate appearing for Defendant
No. 4 Marine Plus, has made submissions similar to those advanced on behalf of
Defendant No.3. However, the Learned Advocate appearing for Defendant No. 4
does not agree with the submission advanced on behalf of Defendant No.3 that
the words "previous notice" appearing in Rule 950 of the said Rules refer to
the notice set out in Rule 951 (3) of the said Rules. It is submitted on behalf
of Defendant No.4 that the occasion to pass an order of sale with or without
previous notice appearing in Rule 950 of the said Rules mostly arises in
situations where the ship owner despite being served with a writ of summons
has either not come forward to defend the suit or has after entering appearance
either not filed its written statement or not defended the suit on the date when
the suit is to be heard. It is submitted that the words "make such other order in
the premises as he may think just" under Rule 950 of the said Rules merely
gives the discretion to the Court to pass a Judgment/Decree in favour of the
KPP -19-
Plaintiff and order the sale of the vessel or pass any other order that it deems fit
after being satisfied that the claim of the Plaintiff is well founded.
24. The Learned Advocate appearing for Defendant No. 4 has referred
to the position of law in England, Hong Kong, Singapore, New Zealand and
Australia in support of his contention that a party may apply to the Court for
determination of order of priority of claims against the ship or property, only
after obtaining a judgment in the suit.
25. Mr. A.M. Vernekar, the Learned Advocate appearing for Defendant
Nos. 5 and 6 has made submissions similar to the submissions made by the
learned Advocates appearing for Defendant No.3 and Defendant No.4.
However, the Learned Advocate appearing for Defendant Nos. 5 and 6 has
differed from the submission made on behalf of Defendant No.3 qua the words
"with or without previous notice" appearing in Rule 950 of the said Rules and
has submitted that the notice appearing in the said Rule cannot be termed as a
notice referred to in Rule 951 (3) of the said Rules. He has submitted that the
words "with or without previous notice" appearing in Rule 950 of the said Rules
could only be interpreted to mean a notice to the other parties interested in the
property ordered to be sold. It is submitted that the parties that would be
interested in the property ordered to be sold would be the owner of the
property, the other claimants who are the Plaintiffs in other suits (in case of
KPP -20-
multiple claims) filed against the property and to the Caveators who have
entered the caveat against the release of the property from arrest. The Learned
Advocate appearing for Defendant Nos. 5 and 6 further submitted that the
words "or make such or other order in the premises he may think just"
appearing in Rule 950 of the said Rules is the order which the Court may make
as specified in Sub-Rule (2) (a) of Rule 951 of the said Rules. It is submitted
that a plain reading of Rule 951 of the said Rules makes it clear that only a
party who has a Decree in his favour can apply under Rule 951 of the said Rules
for passing an order determining the priority of the claim against the sale
proceeds of the property sold.
26. It is further submitted on behalf of Defendant Nos. 5 and 6 that the
words "any party" appearing in Rule 951 (I) of the said Rules can only be
interpreted to mean either a Plaintiff who has obtained a decree and
simultaneously also an order of sale of the property proceeded against under
Rule 950 of the said Rules or any other Plaintiff who has obtained a judgment
in his favour subsequent to the sale of the property under Rule 950 of the said
Rules. The order contemplated under sub-Rule (2)(a) of Rule 951 and
referred to in sub-Rule (1) (a) of Rule 951 of the said Rules has necessarily to
be an order which the Court may make under Rule 950 of the said Rules as
specified by the words "or make such other order in the premises as he may
think just". It is submitted that reading of Rules 950 and 951 together makes it
KPP -21-
abundantly clear that Rule 951 of the said Rules can be invoked only by a party
who has a judgment/decree of the Court for his claim in his favour. If a Court
has made a further order as specified in sub-Rule 2 (a) of Rule 951 of the said
Rules at the time of passing an order of sale of the property proceeded against
under Rule 950 of the said Rules, then such a Plaintiff referred to in Rule 950 of
the said Rules can apply for determination of priorities under Rule 951 (1) of
the said Rules only after the expiry of the period of 90 days or such other period
as the Court may have specified while making the order under Rule 950 of the
said Rules and in all other cases by a party/Plaintiff only after obtaining
judgment. It is therefore submitted that the Notice of Motion taken out by the
Plaintiff is premature and not maintainable and thus liable to be dismissed.
27. The Learned Senior Advocate appearing for the Plaintiff has in
rejoinder submitted that the submissions made on behalf of the Defendants are
baseless and untenable. He has submitted that sale can be pendente lite under
Rule 948 of the said Rules or sale after judgment under Rule 950 of the said
Rules. In both the cases, while passing the final order of sale i.e. confirming the
sale in favour of a particular bidder, the Court has the option of making a
further order under Rule 951 (2) ( c), of the said Rules issuing public notice
and inviting claims. The Learned Senior Counsel submitted that there is a
distinction between Rule 951 (1) and Rule 951 (2) of the said Rules. The
former deals with the stage and time for determination of priorities and the
KPP -22-
latter deals with the stage and time for issue of public notice inviting claims
within seven days of receipt of the sale proceeds in Court. For the sake of the
present proceedings, it may be assumed, though the Plaintiff does not concede
the position, that the determination of priorities may require a judgment as
contemplated by Rule 951 (b) of the said Rules. However, there is no
requirement for obtaining judgment as a pre-cursor for obtaining a further
order of public notice inviting claims within seven days of receipt of the sale
proceeds in Court as envisaged by Rule 951 (2) (c ) of the said Rules.
28. The Learned Senior Advocate appearing for the Plaintiff has further
submitted that the public notice under Rule 951 (2) ( c) of the said Rules is
necessary for the determination of priorities. The Court needs to have before
it,all the claims against the property before it determines the priorities, which
will not be possible without a public notice as envisaged by Rule 951 (2) (c ) of
the said Rules. Further order under Rule 951 (2) (c ) of the said Rules can be
obtained, and the notice inviting claims issued at the time of the final sale of the
ship or after the sale proceeds are deposited in Court. There is no requirement
that publication of the notice envisaged by Rule 951 (2 ) (c ) of the said Rule
await judgment. Parties mentioned in Rule 951 (2) (b) of the said Rules have
the option of getting the time period extended in the event of being unable to
prove their claims within the specified period under Rule 951 (3) of the said
Rules. It is submitted that if the further order under Rule 951 (2) ( c) of the
KPP -23-
said Rules is not given at the time of ordering the sale, the order directing
public notice can be obtained by a party at any time at or after the sale
proceeds are deposited in Court, without any requirement of first obtaining
judgment. However, the determination of priorities may have to await
judgment. It is, therefore, submitted that the Notice of Motion be made
absolute.
29. I have perused the pleadings and the written submissions filed by
the parties. I have also considered the submissions advanced by the Learned
Advocates appearing for the parties.
30. Rule 948 of the said Rules provides for an application for an order
"that the arrested property be sold" and "the sale proceeds be paid into the
registry to the credit of the Suit". The requirements of the Rule are:
i) The Suit must be in rem;
ii) The property proceeded against must have been arrested; and
iii) The service of the Writ of Summons must have been effected upon
the defendant.
On this application the court may make such order as it may think fit. This
evidently means that an order concerning sale and proceeds of such sale under
Rule 948 of the said Rules is an interim order.
KPP -24-
31. Rule 950 of the said Rules also provides for an order that "the
property proceeded against be sold", and "the sale proceeds paid into the
registry to the credit of the Suit". The order under this Rule is obviously after
the passing of a decree. The Rule, in terms, says so. Such an order may be
passed at the time of the decree or even thereafter. The order may be passed
"with previous notice" or "without previous notice". There is some
controversy between the parties as to this notice. To whom is the notice to be
issued and to what is this notice previous to?. The Plaintiff has argued that this
notice can only be issued to the defendant and it must be prior to the court
ordering sale of the property proceeded against, whereas Defendant No.3 has
contended that "notice" referred to under Rule 950 of the said Rules is the
notice contemplated in Rule 951 (2) (c) of the said Rules and this notice is
meant for all claimants against the property or its sale proceeds. A bare reading
of Rules 950 and 951 of the said Rules shows that "previous notice"
contemplated under Rule 950 is wholly different from the public notice under
Rule 951 (2) (c) of the said Rules. The notice under Rule 950 of the said Rules
is prior to sale of the property proceeded against whereas the notice under Rule
951 (2) (c) of the said Rules is issued only after the sale proceeds of the
property sold are deposited in court. Even the contents of such latter notice, as
indicated by Rule 951 (3) (a) and (b) of the said Rules, signify that the property
has already been sold and sale proceeds have been paid into court. Previous
notice contemplated under Rule 950 of the said Rules is clearly meant for the
KPP -25-
defendant to the suit. At the stage of sale under Rule 950 of the said Rules it is
only the defendant who may be interested in showing cause against the sale of
the property proceeded against. He may choose to satisfy the decree and may
not allow the sale to go through or may oppose the sale in any other manner.
Third parties, who may also have claims against sale proceeds on the basis of
priorities envisaged by law, need not be notified at this stage.
32. Rule 951 of the said Rules concerns 'determination of priority of
claims' and provides for an application for 'an order determining the order of
priority of the claims against the proceeds of sale of the said property'. The
question is at what stage is this application to be made? Whether this
application can be made at the interim stage when sale is ordered under Rule
948 of the said Rules or only after decree under Rule 950 of the said Rules?
33. Rule 951 of the said Rules clearly provides the following as
necessary conditions for making of the application:
(i) The Suit must be in rem;
(ii) The Court must have ordered the property proceeded against to be
sold;
(iii) The party making the application must have obtained (or obtains)
"a decree or order against the said property or the proceeds of
sale thereof".
The timing of such an application must be 'after obtaining judgment' or in a
KPP -26-
case covered by Sub-rule (2) 'after the expiration of the period specified in
the order under Sub-rule(2) (a)'.
34. The question which directly arises is what is meant by 'decree or
order against the said property or the proceeds of sale thereof'. It is a
distinctive feature of admiralty actions in rem that a particular property is
recognized as a legal person, which can sue or be sued. Admiralty Suit in rem is
filed 'against a particular property". A decree passed by an admiralty court is
"against the property". In pursuance of such a decree, there could also be an
order for "property proceeded against to be sold" and "the sale proceeds
paid into the Registry". The Defendants argue that the Rule contemplates that
both 'decree' and 'order' must be in place before an application can be made
under Rule 951 of the said Rules whereas the Plaintiff contends that either a
decree or an order, be it even an interim order under Rule 948, is sufficient to
enable a plaintiff to file such application. The question, in other words, is
whether the word "or" in the expression "decree or order against the said
property" should be read conjunctively or disjunctively. There are weighty
reasons that the word must be read conjunctively and not disjunctively. Firstly,
the use of the word "decree" implies a final decision "against the property" in
the sense of an admiralty Suit in rem as discussed above. Secondly, the context
also suggests that there must be a finality attached to any decision as regards
the property proceeded against. The purpose of Rule 951 of the said Rules is the
KPP -27-
determination of priorities amongst different claimants who have proved their
claims against the property proceeded against or its sale proceeds. There is no
purpose to be 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. After all, such plaintiff may as well fail in his Suit. It would be
absurd to require persons having claims against the said property or sale
proceeds thereof to prove their claims and obtain decrees on the application of
such a plaintiff. This absurd implication can be avoided by invoking a
permissible canon of construction, namely, by reading the word "or" in the
expression "decree or order against the said property" in a conjunctive rather
than disjunctive manner i.e. by reading "or" as "and". So read, the provision
implies that both 'decree' under Rule 950 of the said Rules and order of sale and
deposit, whether under Rule 948 or Rule 950 of the said Rules, must be in place
before an application under Rule 951 of the said Rules can be made. The timing
of such application may be any time after obtaining the judgment or in a case
where the order of sale contains the further order under Sub-rule (2), after
expiry of the period specified under Sub-rule (2) (a). This settles the main
controversy in the matter.
35. The Plaintiff, however, has further contended that even if it is
accepted that an application for order of priorities under Rule 951 (1) of the
said Rules can be made only after the decree, an order under Rule 951 (2) of
KPP -28-
the said Rules can always be obtained at the time of or subsequent to an order
of sale under Rule 948 of the said Rules.
36. Now, it may be seen that Rule 951 (2) of the said Rules is merely a
corollary to Rule 951 (1) of the said Rules and cannot be read in isolation. As
explained above, Rule 951 (1) of the said Rules contemplates determination of
priorities only upon a decree against the said property or the proceeds of sale
thereof. Rule 951 (2) of the said Rules is only relevant for the determination of
further specified period post such decree, whereafter alone an application under
Rule 951 (1) of the said Rules can be made. 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. None of the grounds urged by the Plaintiff in support of his alternative
case appears to suggest otherwise. The advisability of knowledge to other
creditors for the purpose of lodging and proving their claims or the need of the
creditors to have an overview of the claims against the property proceeded
against, are not sufficient grounds to out-weigh the considerations listed above.
The creditors' knowledge and possibility of overview can as well come after
a decree is obtained by one of the claimants, namely, the Plaintiff here. The
KPP -29-
Rule is certainly not designed to enable the claimant like the Plaintiff in this
Suit to assess his chances in the face of a line of priority and take a call on
whether to pursue his suit or not, as suggested by the Plaintiff.
37. In the result, even the alternative plea of the Plaintiff is found to be
devoid of any merit.
38. In the light of the above discussion, the position, so far as it relates
to the controversy before the court, is that an order for sale of the property
proceeded against can be passed either at the interim stage under Rule 948 of
the said Rules or at or after the judgment under Rule 950 of the said Rules. In
case an order for sale is passed at an interim stage, the court may proceed to
pass an order under Rule 951 (2) of the said Rules at any time after judgment.
In the absence of an interim order of sale already passed, the court may at the
time of the decree or any time thereafter order sale and deposit of sale proceeds
of the property proceeded against and at that time or any time thereafter,
consider whether or not to pass an order under Rule 951 (2) of the said Rules. If
an order under Rule 951 (2) of the said Rules is passed in either case, an
application under Rule 951 (1) of the said Rules may be filed only after
expiration of the period specified in such order. In any other case, the
application may be filed any time after the judgment.
KPP -30-
39. In the above discussion, I have considered and dealt with only those
submissions of the Defendants, which were necessary to decide the issues before
me. It is not necessary for me to express an opinion on the other submissions
made by them.
40. In the circumstances, the above Notice of Motion is dismissed.
However there will be no order as to costs.
(S.J. KATHAWALLA, J.)
