Bombay High Court
Cupid Shipping Pte Ltd vs Cargo Of Sand, Aggregate And ... on 27 June, 2016
Bench: S.J. Kathawalla
KPPNair 1 NMS 1410 of 2016
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
NOTICE OF MOTION NO. 1410 OF 2016
IN
ADMIRALTY SUIT NO. 19 OF 2016
Hoang Anh Shipping JSC )
having address at 41 B Ha Doan )
II Street-Dong Hai II Ward -- Hai An )
District, Hai Phong City, Vietnam )..Applicant
In the matter between
Cupid Shipping Pte Ltd., a Company registered under )
the laws of Singapore, 120, Lower Delta Road, )
13/10 Cendex Centre, Singapore-169 208 )..Plaintiff
versus
1. Cargo of Sand, Aggregate and Cement currently )
Laden/to be laden on board m.v. Ocean 39 at )
Port and Harbour Tuticorin )
2. Blue Metal Investments Pvt. Ltd., a Company )
Registered under foreign laws and having its )
Office at G Fanas, 1st floor, Raghebai Hinguin, )
Male, Republic of Maldives )...Defendants
Mr. Prathamesh Kamat, along with Mr. Kunal Shah, instructed by M/s. Bhatt
& Saldanha, for the Applicant.
Mr. Bimal Rajsekhar, along with Ms. Richa Sahay, instructed by Mr. Ashwin
Shankar for the Plaintiff.
Mr. V.R. Dhond, Senior Advocate, amicus curiae.
Ms. S. Priya for M/s. Siva Agencies.
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KPPNair 2 NMS 1410 of 2016
CORAM: S.J. KATHAWALLA, J.
Judgment reserved on : 21st June, 2016
Judgment pronounced on: 27th June,2016
JUDGMENT:
1. The present Notice of Motion is taken out by the owner of the vessel
m.v. Ocean 39 ("the ship'') for a direction from this Court inter alia against
the Plaintiff to offload the cargo laden on board the ship which cargo was
arrested and continues to be under arrest at the instance of the Plaintiff by an
ex parte order dated 15th March, 2016, and to permit the ship to sail out
immediately. The owner of the ship shall be hereinafter referred to as 'the ship
interests'.
2. On 15th March, 2016, the Plaintiff secured an ex-parte order of arrest of
cargo laden on board the ship. The cargo thereupon became custodia-legis at
the instance of the Plaintiff.
3. No orders were sought or granted for arrest of the ship. There is
therefore no legal impediment against the ship sailing out. Practically however
the order of arrest has operated as a restraint against the ship leaving port since
the cargo remains on her board.
4. The ship interests are anxious that the cargo be off loaded and the ship
be permitted to sail out immediately. It is the case of the ship interests that her
KPPNair 3 NMS 1410 of 2016
classification is about to expire and for the renewal thereof she needs to sail to a
foreign port for dry-docking.
5. All parties agree that the immediate course of action, in these
circumstances, is to separate the cargo from the ship so as to put an end to any
further un-necessary detention of the ship. However, the parties are unable to
arrive at consensus as to who will bear for the substantial costs that will be
incurred in the discharge of the cargo and the subsequent maintenance and
preservation thereof, post such discharge.
6. The issue which therefore falls for the immediate consideration of this
Court is whether, in the facts and circumstances of the present case, the
Plaintiff herein, who has secured an order of arrest over cargo laden on board
the ship m.v. Ocean 39 (but has neither sought nor obtained any order for the
arrest of the ship) can:-
a. refuse to bear the costs of (i) discharge of the cargo; and (ii) its
consequential storage until the question of the Plaintiff's entitlement to
proceed against the cargo is decided by this Court; and
b. insist that the owner of the ship interests bear this cost.
7. Since there is no direct judgment available on the above issue, this Court
appointed Mr. Venkatesh Dhond, Senior Advocate, as amicus curiae in
the matter.
KPPNair 4 NMS 1410 of 2016
8. Briefly set out are the submissions advanced on behalf of the Plaintiffs.
a. The Plaintiffs contend that they cannot be made liable for these costs.
They are entitled to and have only secured the arrest of the cargo. They
did not seek the arrest or detention of the ship. All that they have sought
and obtained is the arrest of the cargo.
b. It is not their fault that the cargo arrested happens to be on board the
ship and that its location has the practical effect of detaining the ship.
They have absolutely no objection to or difficulty with the cargo being
discharged to ensure that the cargo and the ship are separated.
c. the costs incurred in this exercise and to maintain the separated cargo
must be borne by the person who seeks judicial assistance for such
separation. If therefore the ship interests want orders for discharge of
the cargo, the ship interests must pay;
d. the settled position in Law both in England and India is that where a
ship is under arrest and the cargo on her board is not under arrest, the
owner of the cargo who seeks discharge thereof must bear the cost.
Strong reliance is placed on (i) Paras 4.69 and 4.70 of Admiralty
Jurisdiction and Practice (4th Ed) by Nigel Meeson and John A. Kimbell;
(ii) Para 15.116 of Enforcement of Maritime Claims (3rd Ed) by D.C.
KPPNair 5 NMS 1410 of 2016
Jackson; and (iii) the decision dated 20th April, 2015 (S.C. Gupte J.) in
the case of Jaldhi Overseas Pte Ltd vs M.V. DAEBO LUMUT.
e. There is absolutely no reason why the same logic ought not to be
extended to the converse i.e. where the cargo is under arrest and the ship
is not. In support of the argument that the same rationale ought to be
extended to the converse (i.e. the case before this Court), reliance is
placed on para 15.116 of Jackson (supra).
9.
Briefly set out are the submissions advanced on behalf of the ship
interests Applicant owners and the cargo interests.
a. It is a fundamental principle of law that orders inter-parte should not
operate to prejudice the interest of innocent third parties and if such an
eventuality is likely, Courts must mould the relief granted to protect
such interests;
b. The ship interests of the ship are completely innocent third parties who
have been caught in the midst of a dispute between the Plaintiffs and
persons who the Plaintiffs regard as being owners of cargo on board the
ship;
c. It is a settled principle of civil law that it is the obligation of the person
who seeks to attach property to bear all expenses for its preservation,
KPPNair 6 NMS 1410 of 2016
maintenance, custody and possession. Reliance in this behalf is placed on
Rules 462 and 483 of the High Court (O.S.) Rules ("OS Rules");
d. There is no rationale or logic why the position in Admiralty law should
be any different. In fact Rule 966 of the OS Rules makes civil law
practice applicable to Admiralty as well ;
e. Therefore it is the obligation of the Plaintiffs to bear all expenses for the
preservation of the property under arrest and ensure that innocent third
parties (ship interests) do not suffer;
f. The only way this can be achieved in this case is for the Plaintiffs, who
have secured the arrest of the cargo, to bear the costs of discharge and
preservation of the cargo;
g. An added complication in this case is that there is a dispute over who
owns the cargo on board. The Plaintiffs contend that it belongs to Blue
Metal Investments Pvt Ltd (Defendant No. 2) against whom they have a
maritime claim and have therefore secured its arrest. On the other hand,
one Siva Agencies (Applicants in Notice of Motion No. 1214 of 2016)
claim that the cargo belongs to them and title thereto never passed to
Blue Metal Investments Pvt Ltd. Hence there is also a serious dispute
about the ownership of the cargo;
KPPNair 7 NMS 1410 of 2016
h. Both ship interests and cargo interests also submit that the Plaintiffs
have absolutely no entitlement whatsoever to an order of arrest of the
cargo and the arrest is thoroughly oppressive vexatious and an abuse of
the process of law.
10. Mr. Ventakesh Dhond, the learned amicus curiae has submitted that in
the facts of the present case it should be the Plaintiffs, who, in the first instance
should bear the costs of discharge and storage of the cargo under arrest. In
support of this contention, he has relied on Rules 462, 483 and 966 of the
Bombay High Court (Original Side) Rules. He has pointed out that the two
treatises and the decision of this Court in Jaldhi Overseas Pte. Ltd. vs. m.v.
Daebo Lumut (supra) relied upon by the Plaintiff do not support the
contention of the Plaintiff that they are not responsible for the costs incurred
in the discharge of the cargo which is under arrest at their instance. Since both
the treatises relied upon by the Plaintiff expressly cite, in support, the
provisions of part 61 of the Civil Procedure Rules( CPR), Mr. Dhond has
submitted that CPR 61 (10) clearly establish that there is no absolute or general
rule that it is only the 'ship interests' which must bear the costs and expenses.
It is for the Court, on the consideration of the facts and circumstances of an
individual case to decide on whom this burden must lie. Mr. Dhond has
pointed out a large number of distinguishing features in the facts in the case of
KPPNair 8 NMS 1410 of 2016
Jaldi Overseas Pte Ltd. m.v. Daebo Lumut (supra) and the present case and
has submitted that therefore the said decision is of no assistance to the
Plaintiff. Mr. Dhond has therefore submitted that the request of the ship
interests is just fair and equitable. It does no one any injustice or harm. On the
other hand , the dogged refusal of the Plaintiff to bear the costs incurred will
warrant serious prejudice to innocent third parties.
11. I have considered the submissions advanced by the Learned Advocates
appearing for the Plaintiffs, the ship interests and the cargo interests and the
relevant High Court Rules, the treatises and the case law relied upon by them.
I have also considered the detailed submissions advanced by the learned amicus
curiae.
12. At the outset it is clarified that this Court is not deciding the various
contentions raised as to whether the arrest is lawful or not. The immediate
concern, at this stage, is to separate the cargo and the ship so as to prevent any
further detention of the ship. That the only practical course is to pass orders for
the discharge of the cargo from the ship is accepted by all. The only question
therefore is, who must bear the costs in this behalf.
13. There can be no serious debate on the legal proposition that an order of a
Court which operates inter-parte cannot and/or should not be permitted to
affect the rights of innocent third parties. Where the effect of an order passed
KPPNair 9 NMS 1410 of 2016
by the Court is to seriously prejudice and/or cause substantial loss and/or to
interfere with the activities of a third party, it is the duty of the Court to mould
relief in a manner in which innocent third parties who are unconnected with the
dispute, do not suffer prejudice. Applying this proposition to the facts of the
present case, it would only be just, fair and proper for this Court to mould relief
in such a manner that minimal disturbance and/or interference and/or
prejudice is caused to the ship interests who find themselves caught in the
midst of a dispute between the Plaintiff and cargo interests.
14. It is equally well settled a proposition of law that where a party secures
an order of attachment over movable property and/or property becomes
custodia legis at the instance of a party, the costs and/or expenses that are
incurred to continue such attachment and/or to preserve and/or protect and/or
maintain the property which is custodia legis, are to be borne, in the first
instance by the party who has moved the Court and obtained such relief. Ready
illustrations of such instances can be found in cases where attachment /
seizure / arrest /detention of property is ordered or where property is made
custodia legis ( by appointing a Court Receiver or Liquidator). In such cases,
unless there is strong reason to make a departure, it is the
Plaintiff/Applicant/person who has moved the Court for and/or secured such
relief, who, in the first instance, makes payment of the costs incurred in relation
thereto.
KPPNair 10 NMS 1410 of 2016
15. In so far as this Court on its Ordinary Original side is concerned,
statutory recognition of this principle is found in Rule 462 of the Bombay High
Court (Original Side) Rules. A reading of Rule 462 makes it clear that it is the
judgment creditor (applicant) who, in the first instance, bears the expenses of
maintaining possession of the property to be attached". The expression
"maintaining possession of the property to be attached" cannot be read in a
restrictive sense to mean maintaining possession of the property at the place
where it was originally found. This expression, must be given a practical
and/or sensible and/or informed reading to include expenses incurred in
maintaining the possession of the property at a place and in a mode and manner
which is most suitable and/or appropriate for the property. For example if the
property in question is perishable or requires to be stored/maintained in certain
conditions, then the costs of maintaining it in such conditions will, in the first
instance, have to be borne by the person who has secured the attachment.
Another illustration is if property which is attached is extremely valuable and is
required to be maintained in a safe/secure environment, then it is the person
who has attached the property who must, in the first instance, bear the costs of
such storage. Such person cannot disclaim responsibility for its preservation
and maintenance.
KPPNair 11 NMS 1410 of 2016
16. Absent compelling or very strong reasons, the position on the Admiralty
side is no different. Rule 483 of the Bombay High Court (Original Side) Rules,
expressly provides that the Rules relating to arrest or attachment in execution
of a decree shall, with necessary modifications, apply to arrest or attachment
before judgment. Rule 966 of the Bombay High Court (Original Side) Rules,
provides that the Rules and practice of this Court on the Original Side shall, if
not inconsistent with the Admiralty Rules, apply to suit and proceedings on the
Admiralty Side as well. Consequently, unless the Plaintiff is in a position to
show any provision in the Admiralty Rules or any principle of Admiralty law or
other good reason which requires that the rule/practice on the Civil Side be
departed from, it would only be appropriate and proper for this Court to apply
in its Admiralty Division the same principles which are followed by this Court
whilst exercising Civil Jurisdiction.
17. The Plaintiff's reliance on (i) Paras 4.69 and 4.70 of Admiralty
Jurisdiction and Practice (4th Ed) by Nigel Meeson and John A. Kimbell; (ii)
Para 15.116 of Enforcement of Maritime Claims (3 rd Ed) by D.C. Jackson; and
(iii) the decision dated 20th April, 2015 (Gupte J.) in the case of Jaldhi Overseas
Pte Ltd vs M.V. DAEBO LUMUT, as supporting an absolute proposition that
- "in all cases of 'cargo under arrest, ship not under arrest' where a ship
interest seeks the discharge of cargo, the costs must be borne by the ship
KPPNair 12 NMS 1410 of 2016
interests only", is not correct. No such absolute proposition, as the Plaintiff
seeks to project, exists. The material relied upon by the Plaintiff also does not
appear to support or sustain any such absolute proposition. A closer and
informed reading thereof, in fact suggests that the legal position is much more
nuanced and each case before the court is required to be considered and
decided in the facts and situation prevalent in that case. This is more
particularly discussed below.
18.
Both the treatises relied upon by the Plaintiff expressly cite, in support,
the provisions of Part 61 of the CPR. It will therefore be extremely instructive
to examine the provisions of Part 61. Now if CPR 61(7) (8), (9) and (10) are
read together, the clear position that emerges is that where a ship is not under
arrest but cargo on her board is, persons interested in the ship ("ship
interests") who wish to obtain the discharge of cargo, have two options:-
Option 1 : If they are willing to pay the costs involved, they can request the
Marshal to authorize steps to discharge the cargo and give an written
undertaking to pay the cost;
Option 2 : If they are unwilling to pay the costs involved, they can apply to the
court for appropriate orders/directions for discharge of cargo and for payment
of fees and expenses for discharge and storage. [CPR 61(10)]
KPPNair 13 NMS 1410 of 2016
The provisions of CPR 61(10) therefore clearly establish that there is no
absolute or general rule that it is only the 'ship interests' which must bear the
costs and expenses. Instead they recognize that it may well be others (including
a Plaintiff whose arrest has brought forth the events requiring the discharge).
Therefore, it is for the court, on the consideration of the facts and
circumstances of an individual case, to decide on whom this burden must lie.
19. In this backdrop if the observations in the two treatises are considered,
the following will be clear:-
The views of the authors in paras 4.69 and 4.70 of Meeson are of no assistance
to the Plaintiff, in the present case. Firstly, whilst both these paras are under
the heading "Cargo under arrest in a ship not under arrest", the opinion of the
authors is not of much assistance to the submission made by the Plaintiff..
Firstly, para 4.69 merely recognizes that, under English law, a ship owner has
the two options referred to above: one of which is "apply to the court for an
appropriate order"Secondly, the views expressed by the authors merely
reiterate what Part 61 (7) to (10) of the CPR enjoin. They do not lay down any
proposition as the Plaintiff submits. Para 4.70 only deals with a case of "if
borne by the shipowners". The "if" cannot be read to mean "must be".
Similar is the case with para 15.116 of Jackson. The entirety of paragraph 15.116
(barring the last sentence) deals with a case where the ship is arrested and cargo
KPPNair 14 NMS 1410 of 2016
interests seek the discharge of cargo on her board. This is not so in the present
case. In any event, what the author observes (by relying on the decision of
Sheen J. in "The Jogoo") is that where cargo interests elect to discharge cargo
(not under arrest) from on board a ship under arrest and pay for the same, they
cannot be heard to contend that - by doing so they have (i) rendered a service to
the ship after her arrest; (ii) increased the price at which the ship could be sold;
and (iii) contributed to (meaning enhanced) the fund available for distribution,
entitling them to treat these expenses as a first charge. To put it another way,
their action of discharging cargo was not done to enhance the value of the res
and therefore no priority could be claimed. This observation has absolutely
nothing whatsoever to do with the present case. Once the import of paragraph
15.116 and the 'reasoning" therein is clearly understood, it will be clear that the
last sentence thereof suggesting that the same reasoning be applied where
cargo is under arrest and the ship is not, is also of no assistance to the Plaintiff.
20. The decision of this Court in the case of Jaldhi Overseas Pte Ltd vs
M.V. DAEBO LUMUT is also of no assistance to the Plaintiff since the facts of
that case were completely different. In that case, the ship had been arrested at
the port of Vizag. She had on her board cargo which was intended to be
delivered at the port of Haldia. The shipowner made an application to permit
the ship to travel, under arrest, from Vizag to Haldia. This was rejected. Whilst
rejecting this request, the Court noted the submission by the cargo owner that it
KPPNair 15 NMS 1410 of 2016
was willing to discharge the cargo at Vizag and take it to Haldia by road
provided that the costs incurred in this exercise were treated as Sheriff's
expenses (meaning a contribution to the res after the arrest) and paid out first.
Following the reasoning in The Jogoo, this Court held that these expenses were
by cargo owners for their own convenience and not for enhancing the value of
the res and therefore could not be accorded any priority. The facts of the
present case are far removed from that in the case of Jaldhi (supra) and
therefore the decision in the case of Jaldhi has absolutely no application.
21. There are a large number of distinguishing features in the present case.
Firstly, the ship is not under arrest; secondly, the ship interests are not
agreeable to pay for the discharge of cargo, nor seeking that this be treated as a
sheriff's expense: the request made by ship interests is akin to that
contemplated by CPR 61(10). Thirdly, the basis of the request is that the ship
interests, are an innocent third party who are suffering prejudice by reason of
the Plaintiff's action in arresting property. They are being denied the right to
the use and enjoyment of their ship and the ship is being converted into a
storage place for cargo under arrest. It is the duty of the Plaintiff to ensure that
an innocent third party does not suffer serious prejudice. As the Plaintiff has
been remiss on this account, the ship interests have been constrained to seek
redress from this Court.
KPPNair 16 NMS 1410 of 2016
22. In view thereof, as correctly submitted by Mr. Dhond, the request of the
ship interests is just, fair and equitable. It does no one injustice or harm. On
the other hand, the refusal of the Plaintiff to bear the costs incurred will
warrant serious prejudice to innocent third parties.
23. The Notice of Motion taken out by the ship interests is therefore
allowed. The Plaintiffs shall offload the cargo under arrest laden on board the
ship m.v.Ocean 39 and complete the discharge on or before Wednesday, 29 th
June, 2016, at their cost, thereby enabling the ship to sail, failing which the
order of arrest of cargo dated 15th March, 2016 shall forthwith stand vacated.
Since the ship has been detained on account of arrest of the cargo on
board the ship, to prevent further prejudice to the Applicant, the Customs,
Port and other statutory authorities are directed to permit immediate discharge
and storage of the cargo by the Plaintiff.
Since the Seaworthiness Certificate of the ship has expired during the
period of detention of the ship, the Port, Customs and other statutory
authorities are directed to permit the ship to sail immediately after the
discharge of the cargo laden on Board. The Customs, Port and other statutory
authorities shall not detain the ship on this ground.
The Applicant is permitted to communite by fax/e-mail, the Sheriff's
letter and a copy of this order to all concerned authorities.
KPPNair 17 NMS 1410 of 2016
All concerned authorities to act on a copy of this order duly
authenticated by the Associate of this Court.
24. Before parting with this order, I would like to record my appreciation for
the valuable assistance rendered by Mr. Dhond, the Learned Amicus Curiae to
this Court.
(S.J. KATHAWALLA,J.)
