Bombay High Court
Siem Offshore Rederi As vs Altus Uber Imo No. 9385300 on 25 September, 2018
Bench: K.R. Sriram
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL NOTICE OF MOTION (L) NO.1392 OF 2018
IN
COMMERCIAL ADMIRALITY SUIT (L) NO.20 OF 2018
Altus Uber ...Applicant
IN THE MATTER BETWEEN :
Siem Offshore Redri AS ...Plaintiff
Vs.
Altus Uber ...Defendant
----
Mr. Prashant Pratap, senior advocate a/w. Mr. Vishal Muglikar I/b.
Mr. Kaushik Krishnaswamy for plaintiff.
Mr. Sunip Sen a/w. Ms. Priyanka Pol I/b. Pol Legal Juris for defendant/
applicant in NMCDL/1392/2018.
----
CORAM: K.R.SHRIRAM, J.
RESERVED ON: 30th JULY 2018
PRONOUNCED ON: 25th SEPTEMBER 2018
P.C.:
1 This notice of motion is taken out by one Marine Engineering
Diving Services (FZC) [hereinafter referred to as MEDS] on behalf of
defendant vessel, for setting aside/recall of the order of arrest dated 1 st June
2018 and releasing defendant vessel - Altus Uber from arrest.
2 Plaintiff had obtained an ex-parte order of arrest on 1 st June
2018 from the vacation Judge. Defendant is an offshore supply vessel/
platform vessel flying the flag of Liberia and presently at Mumbai within the
territorial waters of India and within admiralty jurisdiction of this Court.
According to plaintiff, defendant vessel is owned by MEDS and MEDS has
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denied this fact. According to MEDS they are only the bareboat charterers of
the vessel and the owner is someone else - Swordfish Shipco Limited.
3 Plaintiff has filed this admiralty suit, inter alia, for recovery of
amount of USD 28,889,304/- which includes charter hire in the sum of
USD 6,797,554/- and claim for capital value of a vessel in the sum of
USD 22,061,750/- together with further interest and costs. It is plaintiff's
case that plaintiff had entered into a bareboat charter-party dated 13 th May
2015 (said bareboat charter-party) with the owners of defendant vessel and
the owners of defendant vessel committed a breach thereof.
4 According to plaintiff, plaintiff is the owner of a motor vessel -
Siem Marlin. By the said bareboat charter-party, plaintiff gave on bareboat
charter m.v. Siem Marlin to MEDS for a firm period of five years with a
purchase obligation at the end of the five years or a purchase option at the
end of the first/second/third/fourth year from the date of delivery.
According to plaintiff, MEDS was to take delivery of Siem Marlin between
25th September 2015 and 25th October 2015. It seems MEDS were to, prior
to delivery of Siem Marlin furnish a bank guarantee for USD 4,000,000/- as
guarantee for full performance of the obligations under the charter-party
and this bank guarantee was to be furnished in between 10 th September
2015 to 15th September 2015. As the bank guarantee was not furnished, the
time to take delivery of Siem Marlin was extended to 8th November 2015 to
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22nd November 2015. An addendum to the charter-party dated 13th May
2015 was entered into on 11 th October 2015. Once again, it is plaintiff's case
that MEDS did not honour its commitment and therefore, without prejudice
to and whilst keeping all its rights and remedies under the bareboat charter
alive, plaintiff and MEDS entered into a BIMCO supply time charter-party
dated 7th November 2015. This charter-party was to come into effect only
upon MEDS furnishing a bank guarantee for USD 2,000,000/-. It is stated
that this charter-party was also breached by MEDS and therefore, plaintiff
through its advocates' letter dated 26 th January 2016, informed MEDS that it
was in repudiatory breach of its obligation under the bareboat charter-party
despite giving enough opportunities to rectify the breach and in view
therefore, terminated the charter-party and in view thereof, plaintiff had no
option but to accept MEDS - charterers repudiation and notified MEDS
about bringing the charter-party to an end. Plaintiff also informed MEDS
about steps plaintiff will be taking to mitigate their losses and finally
invoked arbitration clause. The arbitration was invoked in April 2016. On
26th April 2016, plaintiff filed its statement of claim before the arbitral
tribunal and copy was sent to MEDS. MEDS, by an email dated 17 th May
2017 requested for extension of time till mid July 2017 to submit their
response/defence to plaintiff's claim, which was rejected and an extension of
14 days time was granted. Thereafter, from June 2017 negotiations were
going on between the parties and no settlement was arrived at.
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5 According to plaintiff, sometime in November 2017, plaintiff
learnt that MEDS had purchased defendant vessel - Altus Uber. Plaintiff
relied upon a Seaweb Report dated May 2018 which confirms that MEDS
was the owner/charterer of Altus Uber. Therefore, plaintiff filed this
admiralty suit in this Court for the same (identical) claim that it has made in
the arbitration proceedings in London. Plaintiff obtained the order of arrest
as mentioned above. According to plaintiff, notwithstanding the pendency of
the arbitration proceedings and award that may be passed in London,
plaintiff is entitled to file the present suit seeking arrest of defendant vessel
as security for plaintiff's claim in the suit. According to plaintiff, it is also
entitled to seek decree against defendant vessel and obtain security for its
claim in the suit. An alternative stand also is taken that defendant vessel can
be retained as security for the arbitration proceedings commenced in
London. Paragraph 46 of the plaint reads as under:
46. The Plaintiff notwithstanding the pendency of the arbitration
proceedings and award that may be passed in arbitration proceedings in
London are entitled to file the present admiralty suit seeking arrest of the
Defendant vessel as security for the Plaintiff claim in the suit. The
Plaintiff is entitled to seek decree against the Defendant vessel as claimed
in the suit and obtain security for its present claim in the suit. In the
alternative the Defendant vessel can be retained as security for the
arbitration proceedings commenced in London.
6 It is in this background that MEDS/applicant has taken out the
present notice of motion for vacating the order of arrest. According to
applicant:
(a) Plaintiff having already commenced arbitration in London
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cannot file this suit for the same relief. If plaintiff wanted any security it has
to take steps under the English Arbitration Act and not file a suit in this
nature and obtain an order of arrest;
(b) the Seaweb Report which notes that MEDS are the owners
is incorrect and defendant vessel is not owned by applicant and therefore,
no action in rem is maintainable against defendant vessel;
(c) even though plaintiff has sought a decree, in effect, reading
the plaint as a whole or on a holistic reading of the plaint it is evident that
the main intention for filing the present suit is only to obtain security
pending arbitration and nothing else;
(d) averments or prayer for decree are only cosmetic with no
intention of pursuing the same because plaintiff having elected to go to
arbitration and proceeded in the arbitration by filing statement of claim, this
suit cannot go in for trial. Once security is furnished that will be the end of
the suit and therefore, effectively the suit is filed only for security until the
enforcement and/or execution of the arbitral award. Such a suit is not
maintainable in view of the judgment of the Apex Court in Bharat
Aluminium Company vs. Kaiser Aluminium Technical Services INC 1
(hereinafter referred to as BALCO) and judgment of a single judge of this
Court in Rushab Ship International LLC vs. Bunkers onboard Ship M.V.
African Eagle and Freight and Ors. 2 (hereinafter referred to as African
1. (2012) 9 SCC 552
2. 2014 (4) Bom. C.R. 269
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Eagle); and
(e) even under the new Admiralty (Jurisdiction and Settlement
of Maritime Claims) Act, 2017 (hereinafter referred to as Admiralty Act,
2017) the Act does not provide for security in foreign arbitrations which
provision was there under Article VII of the International Convention on
Arrest of Ships, 1999 (hereinafter referred to as 1999 Arrest Convention)
and as the Admiralty Act has excluded that provision similar to Article VII,
the suit for security pending arbitration is not maintainable.
7 It is plaintiff's case that:
(a) the arbitration is an action in personam against MEDS and
the present suit is an action in rem against defendant vessel and both are
maintainable;
(b) a Full Bench of this Court in J.S. Ocean Liner LLC vs. m.v.
Golden Progress and Anr.3 (hereinafter referred to as Golden Progress) has
noted that absent explicit legislation providing that action in rem may be
used to obtain and retain security even though the merits of the dispute are
to be determined in the arbitration proceedings and that subject matter of
the dispute falls within admiralty jurisdiction, some procedure which is not
prohibited and that is also not inconsistent with the law be devised which
helps in advancing the cause of justice in accordance with Article VII of
Arrest Convention, 1999;
3. 2007 (2) Bom C.R. 1
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(c) the judgment in BALCO (Supra) and in African Eagle
(Supra) though has laid down the correct proposition in law, both are
technically not applicable today because in the present case (i) plaintiff has
sought a decree; (ii) after these two judgments, Section 9 of the Arbitration
and Conciliation Act 1996 (hereinafter referred to as Arbitration Act, 1996)
has undergone an amendment in as much as now an application under
Section 9 during the arbitration was maintainable even for foreign
arbitration;
(d) just because an action in rem cannot be maintainable for
arrest of ship under Section 9 of Arbitration Act, 1996 as held by the Full
Bench of this Court in Golden Progress (Supra), it does not mean that
plaintiff will be rendered remediless mainly because an action in rem in the
facts and circumstances of the case, independent of the arbitration was
maintainable and just because there was an arbitration clause and plaintiff
commenced arbitration, in London, does not mean plaintiff should be put to
disadvantage and
(e) Article VII of the 1999 Arrest Convention provided for a
situation where arbitration proceedings have been commenced and an
action in rem was maintainable for security pending arbitration. The
Admiralty Act, 2017 does not have a similar provision. At the same time, it
does not bar the provisions of 1999 Arrest Convention. As held by the Apex
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Court in m.v. Elizabeth vs. Harwan Investment and Trading Pvt. Ltd. 4 and
m.v. Sea Success I vs. Liverpool and London Steamship Protection and
Indemnity Association Limited5 and Golden Progress (Supra) if the law is
silent and there is no express prohibition and the provisions are not
inconsistent with the law, a procedure can be devised which helps in
advancing the cause of justice and in m.v. Sea Success I (Supra) the Apex
Court has held that the 1999 Arrest Convention can be applied as a
provision of law in India.
8 Dealing with plaintiff's point of view, Shri Sen submitted that a
suit is totally different from arbitration and Section 10 of the Code of Civil
Procedure, 1908 provides that the pendency of a suit in a foreign Court does
not preclude the Courts in India from trying a suit founded on the same
cause of action. But as far as arbitrations are concerned, the statutory
mandate requires parallel Court proceedings to be stayed. A suit during the
pendency of a foreign judicial proceeding is expressly permitted but no such
thing is permitted in arbitration. It is a contractual bar on the party.
9 Though Shri Sen made submissions on various other points like
on Section 8 and Section 45 of the Arbitration Act, 1996 the main thrust of
his argument was plaintiff having commenced arbitration proceedings
cannot file a suit in another forum for the same cause of action. Any action
4. AIR 1993 S.C. 1014
5. 2002 (2) Bom. C.R. (O.S.) 537
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that plaintiff wishes to take has to be strictly under the law of arbitration in
the country where arbitration has commenced. Shri Sen submitted that
because this Court has in African Eagle (Supra) and AL LAAYA (Supra) held
that a suit only for security in foreign arbitration proceedings is not
maintainable, plaintiff has filed this suit with the prayer for decree and
when one reads the plaint as a whole, the purpose behind the suit is to
obtain security in the arbitration proceedings. Therefore, the suit has to be
dismissed. Shri Sen submitted that the Court's jurisdiction to arrest a ship in
an action in rem should not be exercised for the purpose of providing
security for an award which was to be made in arbitration proceedings.
According to Shri Sen, the purpose of the exercise of the jurisdiction is to
provide security in respect of the action in rem and not to provide security in
some other proceedings, for example, arbitration proceedings. Shri Sen
submitted that the arbitration and award are different proceedings and will
become a different cause of action and is not subject matter of this suit and
one cannot get security for one thing in proceedings for another thing. The
cause of action sought to be secured has not arisen and is speculative.
Shri Sen relied upon BALCO (Supra) and African Eagle (Supra). Shri Sen
also submitted that the reliance of Mr. Pratap in the judgment of the
Division Bench of this Court in Islamic Republic of Iran vs. m.v. Mehrab 6 is
also misplaced. Shri Sen submitted that Mehrab (Supra) is no more good
6. AIR 2002 Bom 517
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law and post Mehrab (Supra), the Apex Court in BALCO (Supra) has held
that in a suit for security for claims in a foreign arbitration proceeding is not
maintainable as the cause of action sought to be secured has not arisen and
is speculative. It was also applicant's case that the law laid down by S.P.
Gupta vs. Union of India7, is "Procedure is but a handmaiden of justice and
the cause of justice can never be allowed to be thwarted by any procedural
technicalities". Whether a person may sue on the subject matter of
arbitration in breach of an arbitration agreement is not a procedural matter.
Further, there is no inherent right to security as such in any litigant unless
such right is otherwise expressly granted. It is a substantive law issue
whether there is a right to get security in a particular case. Even BALCO
(Supra) held that if you do not have a right granted by statute, you simply
have no right and the Courts can and should do nothing about it. The Court
was not 'finishers and polishers' for the purpose of giving security. If
legislature did not give that right or there was a lacuna or gap left, it was
simply too bad. The Courts cannot fill that in. To that extent, all judgment s
giving security on the basis of `justice' or equity or the like are overruled.
That right must flow from the law and nothing else. Further, plaintiff, a
Norweigian litigating in London against an Emirati company simply
demands that the Court create a right to security in India for him. It has not
even tried to explain why it cannot get security in the UAE especially since it
7. [1982] 2 SCR, 365, 520, 521
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alleges that the person liable, MEDS, owns two other ships as well. Even in
equity plaintiff has not made out a case although equity won't step in to fill
a perceived gap in substantive law.
10 Shri Sen also submitted that 'securing the amount in dispute' in
arbitration is now extended to international arbitrations seated abroad.
Section 2 of the Arbitration Act, 1996 has been amended to extend Section 9
to foreign arbitrations (Part II). The issue of security for foreign arbitrations
is covered by statute but excludes the right to proceed in Admiralty. BALCO
(supra) considered the situation where a party has no remedy of obtaining
security and held that it was not the Court's function to devise a method of
obtaining security. The Arbitration Act, 1996 is held to be a self contained
code with no possibility of looking outside in respect of arbitrations (Fuerst
Day Lawson vs. Jindal8). The Arbitration Act, 1996 deals with all matters
relating to arbitrations and awards and specifically provides for
circumstances in which a party may secure the amount in dispute, including
in foreign arbitrations. If it does not permit something, or if no remedy is
available elsewhere, it does not follow that Indian law must be juggled
around to give plaintiff security. It simply means that by Indian law plaintiff
is not entitled to security.
This directly overrules Mehrab (Supra) and Golden Progress
(Supra) to the extent it permits securing the amount in dispute in the
8. (2011) 8 SCC 333
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arbitration through a method not permitted by the Arbitration Act, 1996.
The Admiralty Act, 2017 omitted Section 23 of the 1861 Act
and did not incorporate the Convention provisions relating to arrest and
security for arbitration. Instead, it restricted jurisdiction to "The High Court
may exercise jurisdiction to hear and determine any question on a maritime
claim .....". The new Act also defines arrest as "detention or restriction for
removal of a vessel by order of a High Court to secure a maritime claim
including seizure of a vessel in execution or satisfaction of a judgment or
order;" An arbitration award is not a maritime claim and does not fall
within any of these. Jurisdiction is therefore limited to the maritime claim
itself, not awards which form a different cause of action.
11 Both, the Arbitration Act, 1996 (as amended in 2015) and the
Admiralty Act, 2017 are consolidating statutes. The nature of Consolidating
is explained by the Supreme Court as follows:
The Code of Civil Procedure as its preamble indicates, is an Act to
consolidate and amend the laws relating to the procedure of the Courts of
Civil Judicature. No doubt it also deals with certain substantive rights.
But as the preamble vouchsafes, the object essentially is to consolidate the
law relating to Civil Procedure. The very object of consolidation is to
collect the law bearing upon the particular subject and in bringing it
upto date. A consolidating Act is to be construed by examining the
language of such a statute and by giving it its natural meaning
uninfluenced by considerations derived from the previous state of the
law.
Prem Lal Nahata vs. Chandi Prasad Sikaria9
Consolidating statutes are complete in themselves as to the then
9. (2007) 2 SCC 551
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existing state of law. When amending the Arbitration Act, 1996 and
enacting the Admiralty Act, 2017, Legislature had the benefit of the
Conventions as well as the 1999 Arrest Conventions. Neither is incorporated
and if they were part of the law before these statutes, it is no longer
permissible to take them into consideration. Both statutes expressly deal
with the subject matter here, i.e., arrest as well as securing the amount in
dispute in arbitration. In light of the foregoing, it was further submitted:
(a) An Arbitration agreement is a bar on the parties from
approaching any judicial authority except as permitted by the Arbitration
Act. There is also a fetter on jurisdiction with a limited window. No suit can
lie on a subject matter covered by an arbitration agreement and the bar is
on any action on the same subject matter before any judicial authority. It is
immaterial whether the action is in personam or in rem, so long as the
subject matter is covered by the arbitration agreement. There is, however,
always a chance that a party may file a suit in breach of the arbitration
agreement and if suit filed before any step has been taken in the arbitration
a Court has a preliminary jurisdiction to examine the arbitration agreement
but must dismiss or at least stay the suit once the subject matter is found to
be covered by an arbitration agreement (S. 8). In this case, there is an
existing reference to arbitration and a suit is barred at the threshold.
(b) In the case of an arbitration, the original cause of action
gets eclipsed and will be subsequently supplanted by a future award which
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will, in future form the cause of action provided always that the Plaintiff
succeeds in the arbitration.
(c) Interim relief can only be in aid of final relief. This
proposition applies both to in rem and in personam.
(d) Once a matter is referred to arbitration, it is referred in
pursuance of a contractual remedy. The underlying cause of action exhausts
itself or does not survive. The underlying claim will never be considered by
the Court thereafter. Instead the issue, if at all will be the validity of the
arbitration and/or the award, i.e., a totally different cause of action that:
i. is not subject matter of the suit as existing;
ii. is a cause of action that has not arisen;
iii. is a speculative cause of action, i.e., presumes that
plaintiff will succeed in the arbitration.
Plaintiff, in such matters (i.e., covered by an arbitration
agreement) cannot maintain an action for a decree on the underlying claim
once the arbitral tribunal has been constituted. It is immaterial whether
defendant is the party himself or someone whose liability is derived through
the party. Since he cannot get final relief in the suit on his claim, he
obviously cannot get interim relief. Equally, he cannot get security for a
future award (apart from the fact that it is speculative) because that is not
his cause of action in the suit and interim relief can only be in aid of final
relief.
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12 Shri Sen further submitted that once there is a reference, the
underlying cause of action is exhausted / excluded and plaintiff's cause of
action from then on is the future award that he may get in the arbitration
and this is what P. Anand Gajapathy Raju10 also states. The new Admiralty
Act, 2017 permits arrest only for maritime claims: "The High Court may
order arrest of any vessel ........ for the purpose of providing security against
a maritime claim which is the subject of an admiralty proceeding,....". That
'lacuna' if any, cannot be filled in by the Courts. Golden Progress (Supra)
allowed arrests to secure arbitrations/awards only where the tribunal had
not been constituted, i.e., a suit filed before the reference. It restricted the
right to arrest and hold security during the window before parties are
referred to arbitration or the suit is stayed.
After Golden Progress (Supra), Section 9 of the Arbitration Act,
1996 was amended to cover even international commercial arbitrations. It
now covers `securing the amount in dispute'. Section 9, however, did not
incorporate anything akin to the UK Arbitration Act provision. The
Admiralty Act, 2017 was enacted but did not incorporate similar provision,
nor incorporated Art VII of the 1999 Arrest Convention or similar provision
but in fact restricted the power to arrest. Fuerst Day Lawson (Supra) holds
that the Arbitration Act, 1996 is a self contained code with a negative
import, i.e., only such acts as are mentioned in the Act are permissible to be
10. AIR 2000 SC 1886
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done and acts or things not mentioned therein are not permissible to be
done. Other means of securing the amount in dispute are, therefore,
excluded. BALCO (Supra) held that neither a suit on the main cause of
action, nor on the future award, nor one for interim relief lies. It also held
the Courts could not fill in any lacuna if it exists. The Admiralty Act, 2017
was enacted as a consolidating statute but did not incorporate Art. VII of the
1999 Arrest Convention. Instead, it allows arrests only for maritime claims
and limits jurisdiction to maritime claims. Art. VII of the 1999 Arrest
Convention itself refers to a pre-reference suit only. The Convention cannot
apply in view of the later statute and further, it now directly conflicts with
both statutes. Golden Progress (Supra) cannot be implemented nor can it be
good law in view of BALCO (Supra) and Fuerst Day Lawson (Supra). Golden
Progress (Supra) in any event restricted the Mehrab position only to future
arbitrations (where reference had not commenced) and does not permit
suits or arrests in pending arbitrations/where arbitrations have
commenced. That position will never change whether the action is in rem or
in personam because it is the underlying subject matter of the dispute that
gets excluded from scrutiny by the Courts. If at all, after an award is made,
it is the award and its validity that might get scrutinised but never the
original cause of action. The original cause of action gets excluded or
exhausted or subsumed by the reference to arbitration. A suit on the
underlying cause of action cannot survive a reference to arbitration.
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13 To sum up, Shri Sen submitted that Indian common law as well
as English law did not permit actions in rem/ arrest of vessels for obtaining
security in support of arbitration or arbitral awards. This was obviously
because (a) neither the arbitration or arbitral awards was a subject matter
of the suit, (b) the then existing subject matter of the suit would not survive
the arbitration, and (c) the security in support of a future award was
speculative and not a valid cause of action. This position was changed in
UK. In India, this subject matter is dealt with by the Arbitration Act, 1996
but the Act does not permit Admiralty actions for security for awards. Being
a self contained code, it is not permissible to look outside the Act for matters
relating to arbitration or arbitral awards (unless they expressly relate to
these matters). Golden Progress (Supra) is limited to suits instituted before a
reference to arbitration. Golden Progress (Supra) must be deemed to have
been overruled because Fuerst Day Lawson (Supra) puts in the negative
connotation barring the application of other laws. BALCO (Supra) says the
cause of action does not survive and the potential cause of action, i.e., the
award is speculative and not a valid cause of action. There is no final relief
in furtherance of which an interim relief can be ordered. Neither the
Arbitration Act, 1996 nor the amending Act of 2015 nor the Admiralty Act,
2017 permit arrest or incorporate any provision similar to Art VII of the
1999 Convention and/or the UK provisions. Golden Progress (Supra)
expressly stated "The applicability of Arrest Convention, 1999 in the absence
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of any domestic law or inconsistency with the domestic law would be more
in regard to the international general principles and interaction between the
arbitration agreement and in rem action". It was also based on S. 45, at a
time when S. 9 did not extend to foreign arbitrations. After BALCO (Supra),
Fuerst Day Lawson (Supra), the Arbitration Amendment Act 2015 and the
Admiralty Act, 2017, this position no longer exists. Once a suit is dismissed,
there can be no question of retention of security. There would be no
proceeding in which security would be retained. There can be no concurrent
adjudication on the subject matter of the arbitration and that part of the suit
has to be dismissed as barred by law, especially since the arbitration has
already commenced. There is no subsisting cause of action, the award being
a speculative future cause of action. In fact the prayer is "applied as a
security to enure for the benefit of an Award that would be passed in favour
of the Plaintiff'....
14 Shri Pratap made equally elaborate extensive submissions and
while dealing with Shri Sen's submissions, very convincingly explained why
Shri Sen's view point should not be accepted. I am inclined to agree with
Shri Pratap's submissions. Instead of reproducing the submissions, I shall
straightaway proceed to give my conclusions. My conclusions are an
endorsement of Shri Pratap's submissions.
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15 The Full Bench, in Golden Progress (Supra), held in paragraph
78 (i) that an application under Section 9 of the Arbitration Act, 1996 is not
maintainable for the arrest of the vessel for obtaining security of an award
that may be made in arbitration proceedings. The opinion of the Full Bench
was that Section 9 (ii) (b) of the Arbitration Act, 1996 cannot be construed
so as to read into it in rem jurisdiction. According to the Full Bench, the said
provision did not cover the arresting of a ship or the keeping of a ship under
arrest, in the exercise of the Court's jurisdiction in rem at all. The Court said
that what is provided by Section 9(ii) (b) is securing the amount in dispute
in the arbitration by way of an interim measure which does not include the
arrest of the ship and the said provision does not refer to the jurisdiction to
issue a warrant of arrest. The Full Bench did not make any distinction
between the case where arbitration has already been commenced before an
action in rem is filed and a case wherein arbitration is yet to be commenced
and on commencement an action in rem is filed. It will be useful to
reproduce paragraph 78 of the judgment in Golden Progress (Supra) which
reads as under:
78. We shall, accordingly, articulate our conclusions thus:
(i) An application under Section 9 of the Arbitration and Conciliation Act,
1996 is not maintainable for the arrest of the vessel for obtaining security of
an Award that may be made in arbitration proceedings. The view to the
contrary in m.v. Indurva Valley, to that extent is overruled.
(ii) An action in rem (in admiralty jurisdiction) for recovery of the claim
and arrest of the vessel where the parties have agreed to submit the dispute
to arbitration can be maintained and in such case if by way of an interim
measure, the vessel is arrested or the security provided to obtain the release
of the vessel, matter shall proceed in accord with Article VII of the
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International Convention on Arrest of Ships, 1999.
(iii) If the proceedings are brought within the time so ordered by the Court
before the arbitral tribunal, any final decision resulting therefrom shall be
recognised and given effect with respect to the arrested ship or to the security
provided in order to obtain its release provided that the defendant has been
given reasonable notice of such proceedings and a reasonable opportunity to
present the case for defence and in accord with the provisions contained in
Arbitration and Conciliation Act, 1996.
(iv)With regard to clauses (ii) and (iii), it is, however, clarified that
retention of security shall remain a matter of discretion and it shall be for
the court to pass appropriate order in that regard after taking into
consideration all relevant circumstances.
16 The reasons given by the Full Bench for its conclusions
articulated in paragraph 78 are extremely important. These are set out in
paragraphs 72, 73 and 77. Of particular importance is what the Full Bench
has stated in paragraph 73 which reads as under:
"the application of Article VII of 1999 Arrest Convention in admiralty
jurisdiction in our view would be purposive and preferable. The applicability
of Arrest Convention, 1999 in the absence of any domestic law or
inconsistency with the domestic law would be more in regard to the
international general principles and interaction between the arbitration
agreement and in rem action. Such purposive interpretation would be in
consonance with broadly accepted international procedure by which the
security obtained by the arrest of the ship in the action in rem is retained to
satisfy the judgment and award of arbitral tribunal ..............".
17 The view of the Full Bench in paragraph 77 is equally
important. It said:
"We are of the view, absent explicit legislation providing that action in rem
may be used to obtain and retain security even though the merits of the
dispute are to be determined in the arbitration proceedings and that subject
matter of the dispute falls with admiralty jurisdiction, some procedure which
is not prohibited and that is also not inconsistent with the law be devised
which helps in advancing the cause of justice in accord with Article VII of the
Arrest Convention, 1999".
18 Thus what the Full Bench has done is to devise a procedure
which is not prohibited and is also not inconsistent with the law and which
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helps in advancing the cause of justice. This is the touch stone of the
judgment in Golden Progress (Supra) and the emphasis of the Full Bench is
on a purposive interpretation in consonance with broadly accepted
international procedure by which security obtained by the arrest of the ship
in an action in rem is retained to satisfy the judgment and the award of
arbitral tribunal. Thus what the Full Bench has done is to evolve a
procedure which is neither prohibited nor inconsistent with domestic law
with a view to advancing the cause of justice.
19 To quote (Late) Mr. Justice V.R. Krishna Iyer from (The
Chairman, Board of Mining Examination and Chief Inspector of Mines
vs. Ramjee11) "to be literal in meaning is to see the skin and miss the soul of
the Regulation". The soul of the judgment in Golden Progress (Supra) is to
devise a procedure to permit a party who has agreed to submit disputes to
arbitration to file an action in rem for the purpose of obtaining security for
his claim in arbitration whether already commenced or yet to be
commenced. To hold otherwise in the light of BALCO (Supra) (which is dealt
with hereinafter) would tantamount to looking at the skin and missing the
soul. Neither is there any scope or reason to re-interpret this judgment in
the light of BALCO (Supra). Both operate in different fields. BALCO (Supra)
in regard to Section 9 of the Arbitration Act, 1996 (pre 2015 amendment)
and Golden Progress (Supra) in regard to an action in rem under the
11. (1977) 2 SCC 256
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Admiralty jurisdiction, which is not available under Section 9.
20 A single judge of the Calcutta High Court in the case of
Alexandras Dryron S.A. vs. M.V. Prapti12 was faced with a similar situation
where plaintiff had commenced arbitration against the charterer for breach
of charter-party in London and subsequently commenced an action in rem in
the Calcutta High Court for arrest of a vessel to secure their maritime claim
against the charterer under the charter-party. The claim in arbitration and
the claim in the suit were similar. In paragraph 9 of the judgment the Ld.
Judge relied upon English cases including the case of The Jalamatsya13 and
adopted the principle of allowing a Claimant in an arbitration to secure the
claim by issuing a writ in rem which was a principle based on common law
procedure. This also shows that allowing a Claimant to arrest the vessel for
securing a claim which is the subject matter of arbitration is a principle
based on common law procedure. Consistent with this common law
procedure is the procedure devised by the Full Bench in Golden Progress
(Supra) for retention of security in such cases where arbitration is pending
or yet to be commenced and an action in rem is filed to obtain security in
respect of a maritime claim.
21 The Ld. Judge held that there was no abuse of process of the
Court by instituting the admiralty suit to secure a claim made in the pending
12. 1997 SCC Online Cal 331
13. (1987) Volume 2 Lloyds Law Reports 164
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arbitration already commenced in London.
22 As observed by the Hon'ble Apex Court in M.V. Elizabeth
(Supra) "Procedure is but a handmaiden of justice and the cause of justice can
never be allowed to be thwarted by any procedural technicalities".
23 All of the above shows that the retention of security method
devised by the Full Bench in Golden Progress (Supra) is only a practical
procedural device to do substantial justice to a Claimant who is seeking
security in respect of a maritime claim which is required to be arbitrated.
24 Let us examine whether the judgment of the Constitution Bench
of the Apex Court in BALCO (Supra) changes the position?
The background to the BALCO judgment (Supra) was the
uncertainty prevailing in the matter of application of Section 9 appearing in
Part I of the Arbitration Act, 1996 to international commercial arbitrations
held outside India which fall under Part II of the said Act. A three Judge
Bench of the Apex Court in the case of Bhatia International vs. Bulk
Trading S.A.14 had taken the view that a party can apply for interim
measures of protection under Section 9 notwithstanding the fact that the
arbitration is held outside India and hence falling under the Part II of the
said Act. This was followed by the Apex Court in Venture Global
Engineering vs. Satyam Computer Services Ltd.15. The Apex Court in
14. (2002) 4 SCC 105V
15. (2008) 4 SCC 190
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BALCO (Supra) overruled both Bhatia International (Supra) and Venture
Global Engineering (Supra) and held that Section 9 cannot be made
applicable to an arbitration which takes place outside India because Section
9 falls under Part I of the said Act and does not apply to international
commercial arbitrations where the seat of arbitration is outside India since
Part I is limited to arbitration that takes place in India. It is in this context
that the Apex Court observed that it would also not be open to a party to file
a civil suit only for interim reliefs in the absence of any main relief in the
suit. This is because interim relief can only be granted in aid of or as
ancillary to the main relief.
25 In view of the judgment in BALCO (Supra), the Arbitration Act,
1996 was amended with effect from 23 rd October 2015 to provide that the
provisions of Section 9 shall also apply to international commercial
arbitrations even if the place of arbitration is outside India.
26 Thus the purpose of BALCO (Supra) was served and the law
was amended. Consequently, as matters stand today it is open to a party to
apply to a Court in India for interim measures under Section 9 even if the
seat of arbitration is outside India. This application can be made prior to or
during the pendency of arbitration proceedings, i.e., to secure a claim in
future or pending arbitration and even after the arbitration proceedings but
before it is declared enforced.
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27 BALCO (Supra) does not impact the judgment in Golden
Progress (Supra) in any manner. Golden Progress (Supra) holds in
paragraphs 31 and 34 that on its true construction Section 9 does not refer
to the jurisdiction to issue a warrant of arrest and does not cover the arrest
of a ship or the keeping of a ship under arrest in exercise of the Court's
jurisdiction in rem at all. A vessel cannot be arrested under Section 9
irrespective of whether the interim measure is sought in connection with a
domestic arbitration under Part I or an international commercial arbitration
the seat of which is outside India. Thus BALCO (Supra) holding that interim
measures under Section 9 cannot be availed of if the seat of arbitration is
outside India does not impact Golden Progress (Supra) in any manner as,
according to Golden Progress (Supra), "Section 9 cannot be construed so as
to read into it in rem jurisdiction". Thus a Court has no power to arrest a ship
under Section 9 irrespective of whether the arbitration is in India under Part
I or the seat of arbitration is outside India and Part II applies.
28 The position as regards to Section 9 of the Arbitration Act, 1996
was completely different prior to the amendment of the said Act in 2015.
Since Section 9 fell in Part I of the Act and Part I dealt only with domestic
arbitrations, it followed as a matter of necessary implication that Section 9
is not available in respect of foreign arbitrations held outside India, which
are covered by Part II of the Act. In not making available the remedies under
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Section 9 to international commercial arbitrations falling under Part II and
by not having an equivalent provision in Part II, the intention of the
legislature was not to permit Section 9 measures in regard to international
commercial arbitration held outside India which fell under Part II of the Act.
This was not just a lacuna in the law which could be filled in by the law
Courts. Applicability of Section 9 was impliedly excluded. If interim
measures are available for a certain type of arbitration (domestic) and not
available for other types of arbitration (foreign with seat outside India) then
it is not merely a lacuna but there is an implied exclusion to such measures
being made available for foreign arbitrations. It is in this context that the
Constitution Bench in BALCO (Supra) held that the Court cannot
supplement this lacuna and the remedy is for the Parliament to rectify the
same. It is in this context the Court observed in paragraph 168 of BALCO
(Supra) that the intention of Parliament is available within the text and the
context of the provisions. The Court also noted in paragraph 170 of BALCO
(Supra) that the same law (as regards interim measures) was contained in 3
different instruments, i.e., the Arbitration Act, 1940 read with the 1961 Act
and Arbitration (Protocol and Convention) Act, 1937 and cannot be
considered as a lacuna when the same law is consolidated into one
legislation, i.e., the Arbitration Act, 1996. The position as regards an action
in rem to secure a claim in pending or future arbitration is completely
different and has no connection with either the Arbitration and Conciliation
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Act, 1996 or the judgment in BALCO (Supra).
29 On the contrary, sustenance can be taken from the fact that the
Arbitration Act, 1996 was amended in October 2015 and Section 9 of the
Act is now available for the purpose of interim measures in respect of a
foreign arbitration where the seat of arbitration is outside India. These
interim measures can be sought from a Court in India before
commencement of arbitration, during the pendency of arbitration and after
the award is made but before it is declared enforceable. Thus, there is
nothing inherently wrong in permitting interim measures to secure a claim
during the pendency of foreign arbitration. The Arbitration Act, 1996
specifically permits this. However, since Section 9 does not cover arrest of a
ship in exercise of the Court's in rem jurisdiction, the Golden Progress
(Supra) then devised a procedure consistent with in rem proceedings and
the principle that merely because parties have agreed to arbitrate their
disputes, the jurisdiction of a civil Court is not ousted. This is consistent
with the principles that no party should be left without remedy to apply for
interim measures to protect and secure his claim on the ground that the seat
of arbitration is outside India and that arbitration has been commenced.
Thus interim measures are now available to a party both under Section 9 of
the amended Arbitration Act, 1996 and also by way of in rem proceeding's
for arrest of a ship where the seat of arbitration is outside India.
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30 An action in rem is filed by way of a suit and governed by the
provisions of the Code of Civil Procedure, 1908. The Full Bench in Golden
Progress (Supra) was conscious of the fact that a suit cannot be filed
simplicitor for interim relief as they have expressed their conclusion in
paragraph 78(ii) by saying that the action in rem must be for recovery of the
claim. This can only mean that a decree must be sought as a decree is the
only manner in which a claim can be recovered in a suit.
31 This Court in African Eagle (Supra) was considering an action in
rem where the prayer in the suit was confined to seeking security pending
arbitration, i.e., for interim reliefs only. The suit was not for recovery of the
claim at all and no final relief of decree was sought. It is in this context, this
Court, relying upon the settled legal position reiterated in BALCO (Supra)
held that such a suit only for interim relief is not maintainable. The present
suit of plaintiff is not such a suit. In fact in the case of African Eagle (Supra),
this Court observed in paragraph 21 that "the Full Bench (in Golden
Progress), in my view has not considered a situation like in the present suit as
to whether a suit seeking a final relief at the interlocutory stage is
maintainable or not". Consequently, the judgment in African Eagle (Supra)
is distinguishable on facts because that suit was only for interim relief and
no decree for recovery of the claim was sought.
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32 The Admiralty Act, 2017 does not affect in any manner the view
taken by the Full Bench in Golden Progress (Supra). The Admiralty Act, 2017
sets out the jurisdiction of the Court to entertain an action in rem in respect
of certain identified maritime claims and also the power of the Court to
arrest a ship to secure such claims. As long as plaintiff is able to satisfy the
jurisdictional test set out in the Act and show that it has a maritime claim
and the ship is within jurisdiction and the ship is liable to be arrested by
exercise of powers conferred by Section 5 of the Admiralty Act, plaintiff is
entitled to an order of arrest of the vessel in question. The procedure to be
followed by the Court for retention of security in the event the parties have
agreed to refer the disputes to arbitration which is either pending or yet to
be commenced, is not provided in the statute. Neither was any such
procedure provided under the law applicable for arrest of ships prior to the
Full Bench judgment in the Golden Progress (Supra). Thus the Full Bench
judgment devised this procedure for retention of security following a
successful in rem action and arrest of a ship to secure a maritime claim in
proceedings filed in the Admiralty jurisdiction of the High Court. This does
not in any manner affect the Court's jurisdiction under the law as it stood
prior to or under the Admiralty Act, 2017. Infact the Admiralty Act, 2017 is
silent on the procedure following the arrest of a ship. If the disputes are to
be arbitrated then the procedure devised by the Full Bench is to be applied
as the same is neither inconsistent nor prohibited by the said Act but, on the
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contrary, is in accord with international general principles and based on
interplay between the arbitration agreement and an in rem action.
33 The Full Bench in Golden Progress (Supra) has devised a
procedure consistent with Article VII of 1999 Arrest Convention and based
on sound reasons set out in paragraphs 73 and 77 of the judgment . The Full
Bench has observed that such a procedure would help in advancing the
cause of justice and in accord with Article VII of 1999 Arrest Convention.
Thus the Full Bench has drawn upon Article VII to devise a procedure to do
substantial justice to a party who seeks to invoke the in rem jurisdiction of
the High Court where the merits of the claim are to be adjudicated in
arbitration proceedings. Section 5 on the other hand simply confers the
powers of arrest upon the High Court. It does not set out any procedure to
be applied once a vessel is arrested pursuant to exercise of powers by the
High Court under Section 5. Thus Section 5 applies at the stage of arrest.
The procedure devised by the Full Bench in consonance with Article VII
applies after the vessel has been arrested. The two operate in different
fields.
34 Following the arrest of a vessel in an action in rem, in the event
the disputes are to be arbitrated (whether the arbitration has commenced or
is yet to be commenced), once the retention of security method as devised
by the Full Bench is adopted, the suit is required to be stayed and the
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security retained for the benefit of the arbitration and the final award that
may be passed. The successful Claimant who obtains an award would then
have to satisfy the High Court that the award is enforceable under the
provisions of the Arbitration Act, 1996. Once the award is declared
enforceable then the security retained by the High Court pursuant to the
action in rem will be made available to the Claimant in satisfaction of the
judgment of the High Court declaring the award enforceable as a decree of
the High Court. This is also made clear by the Full Bench in paragraph
78(iii) where the Court refers to recognition of the final decision of the
tribunal in accord with the provisions contained in the Arbitration Act,
1996.
35 The Division Bench of the Hon'ble Gujarat High Court in the
case of Nautical Global Ship Management BMCC vs. M.T. Nautical Global
VII16 also applied the retention method as devised by the Full Bench in
Golden Progress (Supra) consistent with the provisions of Article VII of the
1999 Arrest Convention. The Division Bench also observed that "the suits
are required to be kept pending and as such are required to be stayed till
competent court and/or arbitral tribunal decide the disputes/claims between
the parties". From this judgment it is also clear that retention method
adopted and the procedure devised by the Full Bench in Golden Progress
(Supra) has also been applied by the Hon'ble Gujarat Court as recently as
16. 2017 SCC Online Guj 487 (judgment dated 2nd March 2017 in admiralty suit no.3 of 2017)
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March 2018.
36 Another facet of the use of an action in rem for the purpose of
obtaining security for a claim which is the subject matter of in personam
proceedings turns on the well settled distinction between in rem and in
personam proceedings. This distinction is clearly brought out by three
different judgments of this Court of three different Ld. Single Judges as
below.
37 In the case of Crescent Petroleum Ltd. vs. M.V.
Monchegorsk17, a Single Judge of this Court held and observed with
reference to Section 35 of the Admiralty Courts Act, 1861, "that a perusal of
the same would clearly show that this Court exercises jurisdiction in rem
independently of the proceedings which may be taken out against the persons
liable in personam". This distinction of an action in rem and an action in
personam is valid even today. The Ld. Judge thereafter referred to the
judgment of the English Court in the case of "Nordglimt" and quoted a
passage from that case which appears on page 9 of the judgment . "........ It
is of the character of proceedings in rem that they are not alternative to
proceedings in personam; they are cumulative. The cause of action in rem does
not merge with a judgment in personam given in respect of a cause of action
in personam arising from the same facts........... If an action in rem would be
still open to a claimant after having recovered a judgment in personam (but
17. 1999 SCC OnLine Bom 610/AIR 2000 Bom 161
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without having obtained full monetary satisfaction), then how much more
clearly must it be open to him to commence the action in rem whilst the action
in personam is still pending and has not yet proceeded to judgment .". The
Single Judge agreed with the aforesaid proposition and held "I am in
respectful agreement with the observations made above and would adopt the
same".
38 From the above it is clear that commencement of in personam
proceedings is no bar to an action in rem. This is because the two sets of
proceedings are cumulative and not in the alternative. Arbitration is in
personam. Commencement of arbitration therefore is no bar to
commencement of an action in rem even though both may arise from the
same facts. Thus the Plaintiff having commenced in personam proceedings
by way of arbitration against MEDS can commence in rem proceedings for
arrest of the Defendant vessel to obtain security in respect of its maritime
claim. Such an in rem action is permissible in law and would not amount to
abuse of process.
39 Another Single Judge of this Court in the case of Korea Metals
Trading Corporation vs. M.V. Smart18 held in paragraph 8 that ".......the
jurisdiction of this Court to entertain an action in rem against the vessel which
is in Indian water cannot be ousted by an agreement between the parties.......".
The Ld. Judge further held in paragraph 8 that "The Admiralty jurisdiction is
18. Dated 9th January 2002 in Notice of Motion No 3074 of 2001 in Admiralty Suit No 30 of 2001
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conferred on this Court by statute, therefore it can be ousted only by a statute
and not by an agreement between the parties". These observations make it
clear that in rem jurisdiction is not ousted by a provision in the Contract to
refer disputes to arbitration. If that is the position then surely it is not
ousted merely because arbitration is invoked. The Single Judge referring to
the judgment of the Apex Court in M.V. Elizabeth (Supra) paragraphs 55,
56 and 58, held in paragraphs 9 and 10 of the judgment as follows:-
"9. The present suit, therefore, is an action in rem. The significant
feature of an action in rem is that jurisdiction can be assumed by this
Court in respect of any maritime claim by arrest of the ship irrespective
or the nationality of the ship or of its owner. The admiralty law confers
upon the claimant a right in rem to proceed against the ship as
distinguished from a right in personam to proceed against the owner of
the ship. It is clear that an action in rem initiated against the vessel gets
converted into action in personam against the owner, once the owners
appears before the court and furnishes security.
xxxxxxxxxxxxxx
10. It is, thus, clear that until the owner appears before the Court and
furnishes security for getting the vessel released from arrest, the action is
an action in rem against the vessel and for satisfaction of the claim of the
Plaintiff the vessel itself can be sold, but once the owner appears before
the Court and furnishes security, then it becomes an action in personam
against the owner and it is at that stage that the owner can raise all the
defences that are available to him. Of course, an owner or the vessel can
come before the Court and even without furnishing security can seek
vacation of the order of arrest on some basic issues like when the owner
says that the vessel itself was not in Indian water, that there is no
maritime claim against the vessel or that there is no liability on the
owners of the vessel. But the owners of the vessel cannot come before the
Court without furnishing security and raising other defences like
desirability of this Court making interim orders in favour of the Plaintiff,
because of the conduct of the Plaintiff or other defences on merits or the
controversy....................".
(emphasis supplied)
40 It is clear from the above quoted portions from M.V. Smart
(Supra) which relies upon paragraphs 55, 56 and 58 of M.V. Elizabeth
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(Supra) that it is only after the owner enters appearance and submits to
jurisdiction and furnishes security that the action in rem gets converted into
an action in personam. It is at this stage before proceeding further with the
action in personam, the Court will adopt the procedure devised by the Full
Bench in Golden Progress (Supra). Until such time as the owner has entered
appearance and submitted to jurisdiction and furnished security, the action
in rem remains an action in rem and the vessel is available to the Plaintiff as
security in respect of its maritime claim which is the subject matter of in
personam proceedings by way of arbitration against the owner or the party
liable in personam. Furnishing of security is also essential for the action in
rem to be converted to an action in personam because until such time
security is furnished, the vessel remains under arrest and the action against
the vessel continues in rem.
41 The observations of another Single Judge of this Court (Goa
Bench) in Prime International Ltd. vs. M.V. Mariner IV and Ors. 19 are
very relevant in the context of the powers of the Court to render substantial
justice based upon the principles of justice, equity and good conscience.
These observations are made in connection with the power of the Court to
grant an order of arrest and to retain security notwithstanding the fact that
the parties have agreed to submit their disputes to arbitration. In paragraph
11 (page 26) the Ld. Judge said as follows:-
19. Unreported judgment dated 8th November 1996 in Civil Suit No.1/96 and Civil Application No.175/96, Appellate Side
(Panaji Bench) Goa
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"The question is whether this Court has jurisdiction to grant interim
relief pending the reference of the dispute to arbitration or giving effect to
the clause pertaining to the arbitration. Even under the Indian
Arbitration Act 1940, the jurisdiction of the Civil Court to grant interim
relief pending the hearing of the application for stay was never
considered to be ousted. The jurisdiction of the civil court continued in
the matter of granting of interim relief. Such a power was also there even
after the matter had been referred by the parties to arbitration. In other
words, there was never any ouster of the jurisdiction.......... The
jurisdiction to do justice is a part of the jurisdiction which a court of
record has........... It is not something which is conferred on the Court. It
is something that it is inherent in the Court to do justice between the
parties.
In paragraph 14 the Ld. Judge held that:
"The admiralty jurisdiction of the Court is an action in rem when the
court acts against a vessel by arresting it in the enforcement of a
maritime claim. It is only when the owner of a vessel puts in an
appearance and gives security that the action becomes an action in
personam. The clause for arbitration is not between the Plaintiff and the
Defendant No.1, but between the Plaintiff and Defendant No.2 and 3 or
rather Defendant No.2. It is therefore this clause for arbitration between
the Plaintiffs and Defendant No.2 that has been given effect to. This will
be given effect to after the Court exercise its jurisdiction of arresting the
ship."
The Ld. Judge then refers to the powers of the Court to make
interlocutory orders and refers, in paragraph 15, to paragraphs 66 and 67 of
the Apex Court judgment in M.V. Elizabeth (Supra) and lastly states in
paragraph 16 as follows:-
"Therefore, what is relevant to be seen from this pronouncement of the
Apex Court is that the proceedings continue as a personal action after the
owner puts in an appearance and furnishes security. Before that action is
in rem. It will not be out of the context to also refer to para 87 of the
judgment of the Apex Court reproduced below:-
The judicial power of this country, which is an aspect of national
sovereignty is vested in the people and in articulated in the provisions of
the Constitution and the laws and is exercised by Courts empowered to
exercise it. It is absurd to confine that power to the provisions of imperial
statutes of a bygone age. Access to Court which is an important right
vested in every citizen implies the existence of the power of the Court to
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render justice according to law. Where statute is silent and judicial
intervention is required, Court strive to redress grievance as according to
what is perceived to be principles of justice, equity and good conscience"
The Ld. Judge holds in paragraph 17, which is the ratio of the
judgment , as follows:
"From the paragraphs in the judgment of m.v. Elisabeth as reproduced,
it is clear that the provisions in a contract for reference to arbitration
does not oust the admiralty jurisdiction of this Court which is an action
in rem. It is only when the owner put an appearance and gives security
that the action becomes an action in personam. It is from that stage that
the provisions pertaining to arbitration, etc. have to be considered.
However, the power of the Court to do justice between the parties is
inherent to it at all times as long as the court is seized of the matter. This
action to do justice between the parties has not been taken away by the
provisions of section 45 of the arbitration and conciliation act 1996.
There is no express provision in the Act nor by implication can it be
understood that the power which is inherent to the court to do justice to
the parties is to be understood as being taken away by the provisions of
section 45. Such an interpretation is not possible considering the law as
it earlier stood and the express language of section 45. In my opinion
therefore the power of granting interim relief till the parties are directed
to proceed in arbitration continues with the court."
(emphasis supplied)
42 From the judgment in Mariner IV (Supra), the following
position emerges:-
a) The jurisdiction to do justice is a part of the jurisdiction which
a Court of record has.
b) Where statue is silent and judicial intervention is required,
Courts strive to redress grievances according to what is
perceived to be principles of justice, equity and good conscience
(referring to M.V. Elizabeth).
c) Prima facie no matter is deemed to be beyond the jurisdiction
of the superior Court unless it is expressly shown to be (M.V.
Elizabeth).
d) The admiralty jurisdiction of the court is invoked by an action
in rem when the Court arrests the vessel for securing a maritime
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claim. It is only when the owner of the vessel puts in an
appearance and gives security that the action becomes an action
in personam. The clause for arbitration is not between the
Plaintiff and the vessel but between the Plaintiff and the owner
of the vessel. This clause for arbitration will be given effect to
after the Court exercises its jurisdiction to arrest a ship. It is
from that stage that the provisions pertaining to arbitration have
to be considered.
e) The power of the Court to do justice is inherent to it at all
times as long as the Court is seized of the matter. This power to
do justice between the parties is not taken away by the
provisions of the Arbitration and Conciliation Act, 1996.
f) The power of granting interim relief till the parties are
directed to proceed in arbitration continues with the Court.
43 The same observations apply with equal force when it comes to
the provisions of the Admiralty Act, 2017 and there is no express provision
in the said Act nor by implication can it be understood that the powers
which are inherent to the Court to do justice to the parties, are taken away.
44 It is thus clear from the above judgment s in M.V. Smart
(Supra) and M.V. Mariner IV (Supra) read with M.V. Elizabeth (Supra) that
an action in rem gets converted into an action in personam only after the
owner or party liable in personam enters appearance and submits to
jurisdiction and furnishes security. It is only after this happens that the
arbitration provisions are required to be considered and given effect to. As
held in M.V. Monchegorsk (Supra), in personam proceedings are no bar to an
action in rem. Consequently, applying the principles set out in the aforesaid
three judgment s and the judgment in M.V. Elizabeth (Supra) to the facts of
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the present case, it is clear that it was open to the Plaintiff to commence in
personam proceedings by way of arbitration in respect of its claim and also
to commence an action in rem for arrest of a defendant vessel. It is only
after the owner or party liable in personam enters appearance and submits
to jurisdiction and furnishes security that the action would continue as an
action in personam and it is at that stage that this Hon'ble Court would
apply the procedure devised by the full bench in Golden Progress (Supra) to
retain security for the benefit of the arbitration commenced by plaintiff.
45 Golden Progress (Supra) is only devising the procedure based
upon legal principles as set out by various judgment s referred to above
including M.V. Elizabeth (Supra) to ensure that the cause of justice is served
and based upon principles of justice, equity and good conscience which are
a hallmark of the administration of justice. Jurisdiction to arrest a vessel to
secure a maritime claim is also an equitable jurisdiction to do justice to a
Claimant and ensure that he is able to realize the fruits of a judgment ,
decree or award that he may eventually obtain whether by way of
arbitration or in Court proceedings. The overriding principle there is that
the High Court being a Court of equity, it is equitable principles that must
guide the Court in the matter of interlocutory orders. The procedure devised
by the Full Bench is consistent with these principles and can be adopted in
the facts and circumstances of the present case to secure the maritime claim
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of the Plaintiff by the action in rem and arrest of the Defendant vessel.
46 A right in rem is a valuable right that a party has for the
purpose of obtaining security in respect of a maritime claim. To debar a
party from approaching the Court on the ground that the party has agreed
to arbitration would tantamount to depriving a party of his vested right to
file an action in rem under the Admiralty Act, 2017. This right cannot be
taken away unless there is a statutory bar or an express provision denying
such a right to a Claimant. There is no such bar or prohibition under
existing law. Neither is there any bar to the exercise of this right merely
because in personam proceedings have been commenced by way of
arbitration or in Court. On the contrary considering the distinction between
in rem and in personam proceedings, it is manifestly clear that a right in rem
is available to a Claimant notwithstanding commencement of in personam
proceedings in respect of the same claim and cause of action. This is because
a right in rem in admiralty jurisdiction is essentially available to secure a
maritime claim by arrest of a ship. It is only after the owner of the ship
enters appearance and submits to jurisdiction and provides security that the
action in rem would proceeds as an action in personam. It is only at that
stage that the Court will apply the arbitration clause in the Contract
between the parties and require the parties to arbitrate their claims. By this
the right in rem is preserved and any security that the Claimant is able to
obtain by exercising this right, is retained and made available to the
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Claimant for the purposes of satisfying his claim in the in personam
proceedings whether by way of arbitration or in Court.
47 Applicant has not been able to show a single judgment of any
Court in India or for that matter a foreign Court that would have any
bearing on the submissions of plaintiff supported by the judgment s in
Golden Progress (Supra), Monchegorsk (Supra), Mariner IV (Supra) and M.V.
Smart (Supra). None of the judgment s relied upon by the Applicant are
relevant for the purpose of considering the issues as raised in the
application. The judgment s relied upon by the Applicant can be
distinguished as under:
i) Indus Mobile Distribution Pvt. Ltd. vs. Datawind
innovations Pvt. Ltd. & Ors.20 :
This was a case where the parties had had agreed to the seat of
arbitration as Mumbai and also that the Courts at Mumbai would have
exclusive jurisdiction. The party applied to the Delhi High Court for interim
relief under Section 9 and for appointment of arbitrator under Section 11.
The Delhi High Court held that no part of the cause of action arose in
Mumbai and therefore the exclusive jurisdiction clause cannot apply. The
Supreme Court held that the jurisdictional tests under the Code of Civil
Procedure are not applicable and it is open to a party to designate a neutral
venue as a juridical seat. Consequently, once the seat of arbitration is fixed
it would be in the nature of an exclusive jurisdiction clause. The neutral
20. (2017) 7 SCC 675
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venue may not be in the classical sense have jurisdiction and neither would
the provisions of Section 16 to 21 of Code of Civil Procedure be attracted. In
arbitration law the moment a seat is agreed as Mumbai, it would vest the
Mumbai Court with exclusive jurisdiction for the purposes of regulating
arbitral proceedings.
It is clear that the judgment has no application to the present
case. The judgment deals with an application under Section 9 and 11 of the
Arbitration Act, 1996. The present suit is an action in rem and not an
application under the Arbitration Act, 1996.
ii) Fuerst Day Lawson Ltd. vs. Jindal Exports Ltd. (Supra):
This judgment dealt with the question whether the Arbitration
Act, 1996 is a complete code in itself and if so whether an order made under
Part II of the said Act is appealable under Letters Patent notwithstanding the
fact that it is not appealable under Section 50 of Part II which expressly
provides for appealable orders. The Apex Court held that since the
Arbitration Act, 1996 contained an exhaustive code in itself, Letters Patent
appeal against an order not appealable under Section 50 stands excluded.
This has no relevance to the facts of the present case or the question of law
that arises. Proceedings in rem are not proceedings under the Arbitration
Act, 1996 and the latter bring a complete code in itself is of no consequence.
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iii) Booz Allen and Hamilton Inc. vs. SBI Home Finance Ltd.
& Ors.21 :
This judgment infact makes it clear that disputes relating to
rights in rem are required to be adjudicated by Court and not by private
arbitration. Thus the only way to exercise a right in rem in Admiralty is by
filing an action in rem for arrest of defendant vessel as has been done by
plaintiff. Just as a mortgage suit for sale of mortgaged property is an action
in rem for enforcement of a right in rem so also is an Admiralty Suit for
arrest and sale of a ship in an action in rem for enforcement of a right in
rem. Both Suits are not mere Suits for money but are for the enforcement of
a right in rem which can only be enforced by a Court having jurisdiction and
not by an arbitral tribunal. This judgment of the Apex Court in fact support
plaintiffs and is of no assistance to applicant.
iv) Prem Lala Nahata & Anr. vs. Chandi Prasad Sikaria
(supra) :
Applicant relied upon paragraph 9 of this judgment. This
judgment deals with rejection of Plaint under Order 7 Rule 11(d) of the
Code of Civil Procedure as barred by law. However, applicant has not been
able to show any bar to the maintainability of the present suit in rem in the
admiralty jurisdiction of this Court. It is also held in the said judgment that
the Code of Civil Procedure is an Act to consolidate and amend the laws
relating to the procedure of the Courts of civil judicature. The very object of
21. (2011) 5 SCC 512
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consolidation is to collect the law bearing upon the particular subject and in
bringing it up-to-date. It is in this context that it was submitted by the
Applicant that the Admiralty Act, 2017 is also a consolidating statute since
in the Statement of objects and reasons it is stated that "The Admiralty
(Jurisdiction and Settlement of Maritime Claims) Bill, 2016 consolidates the
existing British era laws on civil matters of admiralty jurisdiction of courts,
admiralty proceedings on maritime claims, arrest of vessels and relating issues
in line with modern trends in the maritime sector and in uniformity with
prevalent international practices." However, the purpose of the Admiralty
Act, 2017 was not to deal with the procedure to be followed once an action
in rem is filed and the order of arrest is made consistent with the provisions
of the Admiralty Act, 2017 and particularly Sections 3, 4 and 5 thereof. The
procedure for retention of security is a procedure devised by Golden Progress
(Supra) once there is a successful arrest of a ship in compliance with the
legal requirements which are now set out in the Admiralty Act, 2017.
Neither was this procedure set out in the law as it stood prior to the
Admiralty Act, 2017. This is a procedure evolved by the Full Bench in
Golden Progress (Supra). The Admiralty Act, 2017 has not set out the
procedure but only the extent of the Court's jurisdiction to arrest a ship.
What happens after the ship is arrested and the owners submits to
jurisdiction and furnishes security is that the suit will proceed in personam
and the Code of Civil Procedure will apply. Similarly, it is only after the
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owner submits to jurisdiction and furnishes security that the arbitration
provisions will apply [see the observations of Rebello J. in Mariner IV
(Supra) and also Deshmukh J. in M.V. Smart (Supra)]. It is at this stage that
the retention of security method devised by Full Bench in Golden Progress
(Supra) will apply. Hence the judgment in Prem Lala Nahata (Supra) is of
no assistance to applicant.
v) Intesa Sanpaolo S.P.A. vs. Videocon Industries ltd. 22 :
Applicant did not press this judgment although a copy was
tendered. It is clearly not relevant to the facts of the present case or the
issue that arises. The present suit is neither on a foreign judgment and
neither has plaintiff's cause of action merged into either an award or a
judgment . The arbitration proceedings are pending.
vi) Sunil B. Naik vs. Geowave Commander23 :
Although a copy was tendered, this judgment was not pressed
by applicant. It is clearly not relevant. In this case, plaintiff had a maritime
claim arising out of a time charter of his own ship to the time charterer. The
person liable was the time charterer. Plaintiffs sought to arrest another
vessel which was demise chartered to the time charterer, i.e., a vessel on
demise charter to the time charterer. Neither the 1999 Arrest Convention
nor the Admiralty Act, 2017 permits such an arrest. This question also does
22. (2014) 183 Comp Cases 395
23. (2018) 5 SCC 505
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not arise in the facts of the present case where the Plaintiff's claim arises out
of a demise charter and the person liable is the demise charterer and the
vessel arrested is owned by and / or demise chartered to the same demise
charterer.
48 It was submitted by applicant that it is open to plaintiff to
commence an action in rem to obtain security in respect of a maritime claim
in the event plaintiff has not commenced arbitration. What this means is
that if the Plaintiff wants to secure his maritime claim he has to first wait
until he is able to track and arrest the vessel before he commences
arbitration. If he commences arbitration first then he will not be entitled to
file an action in rem for arrest of the vessel to secure his maritime claim.
Such a proposition of law is not supported by any judgment nor does it
advance the cause of justice but on the contrary would be regressive in
operation inasmuch as it would put a party who has agreed to refer disputes
to arbitration at a massive disadvantage because such a party would lose its
right in rem to arrest a ship to secure his maritime claim, if he commences
arbitration before filing an action in rem. As stated earlier, a right in rem is
a valuable right and a party cannot be deprived of the same if he has
invoked arbitration, unless there is an express prohibition to this effect in
law.
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49 Golden Progress (Supra) held that an action in rem for arrest of
a ship to secure a maritime claim can be filed notwithstanding that the
disputes are to be arbitrated, irrespective of whether arbitration is pending
or is yet to be commenced. In fact, Article 2(3) of the 1999 Arrest
Convention states "a ship may be arrested for the purpose of obtaining
security notwithstanding that, by virtue of a jurisdiction clause or arbitration
clause in any relevant contract, or otherwise, the maritime claim in respect of
which the arrest is effected is to be adjudicated in a State other than the State
where the arrest is effected, or is to be arbitrated, or is to be adjudicated subject
to the law of another State". This makes it clear that a ship may be arrested
even where a maritime claim is to be arbitrated. The words "is to be
arbitrated" is a very neutral expression and would mean that the dispute is
to be ultimately decided in arbitration and not in Court irrespective of
whether arbitration is pending or yet to be commenced. In this context,
reference may be made to a judgment of the English Court in Jalamatsya
(Supra) where the Court was called upon to interpret the provisions of
Section 26 of the Civil Jurisdiction and judgment s Act, 1982. The said
section stated "Where in England and Wales, or Northern Ireland, a Court
stays or dismisses Admiralty proceedings on the ground that the dispute in
question should be submitted to arbitration.........." It was argued in that case
that the words "should be submitted" meant a future submission to
arbitration and would not apply to a case where arbitration had already
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been commenced. The Judge negatived such interpretation for sound
practical commercial reasons and held as follows:-
"If that point were valid it would follow that there would be crucial
distinctions to be drawn between those cases in which an arbitration had
been commenced, and those cases in which, although there was an
arbitration agreement, the arbitration had not been commenced. Such a
construction would place upon solicitors practicing in this field of
litigation an intolerable burden. One does not have to draw very much
on one's imagination to see that it would be vital before nominating an
arbitrator to find out whether a ship belonging to the defendants, or
respondents in the arbitration, was on the verge of coming to the
country. Equally, shipowners might be tempted to divert a ship rather
than come within the jurisdiction and have their ship arrested, at least
until arbitration had been commenced, when they would come in with
impunity. To my mind such a construction is entirely contrary to the
whole concept which was envisaged when s.26 was enacted. That section
was enacted to enable claimants (I use a neutral expression) to obtain
security if they proceeded by way of arbitration rather than by action. In
my judgment s.26 applies whether or not in arbitration has already
been commenced. It follows that if an arbitration has been commenced,
and if the claimants in the arbitration have not obtained security for any
possible award, they can quite properly issue a writ in rem if they know
that a ship belonging to the respondents in the arbitration is coming
within the jurisdiction, and they may arrest that ship in order to obtain
security".
50 The above reasoning equally applies when considering in rem
arrest for the purpose of obtaining security in a case where arbitration
proceedings had already been commenced, applying the procedure devised
by the Full Bench in Golden Progress. It matters not whether arbitration has
been invoked or is yet to be invoked.
51 Any other interpretation would not only defeat the interest of
justice but would be contrary to the avowed objective of Courts and
Parliament to promote alternative dispute resolution by way of arbitration
or mediation. If a party agrees to arbitration it cannot be that he is to be
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deprived of his right in rem to obtain security in respect of his maritime
claim. Just as a party who agrees to arbitration with the seat of arbitration
outside India (after 2015 amendment) can apply for interim measures to a
Court in India under Section 9 of the Arbitration Act, 1996, irrespective of
the fact that arbitration may have already been invoked before any such
application is made, so also a party should not be deprived of his right in
rem to invoke admiralty jurisdiction and obtain arrest of a ship to secure his
maritime claim even if arbitration may have already been invoked. As noted
earlier also, after 2015 amendment, under Section 9 read with Section 2 of
the Arbitration Act, 1996, a party can approach this Court for securing the
amount in dispute in the arbitration even in the arbitration. Just because the
party cannot maintain an admiralty action in rem under Section 9, can such
a party be deprived of a chance to secure its claim in arbitration? In Golden
progress (Supra) the Full Bench has in paragraph 78 held that the Court has
to devise a procedure to permit a party who has agreed to submit disputes
to arbitration and as noted earlier, there is no explicit legislation barring
such security.
52 Plaintiff had given their vessel Siem Marlin on bareboat charter
to MEDS under a bareboat charter-party dated 13 th May 2015. Thus MEDS
was the demise charterer of plaintiff's vessel. Plaintiff has various claims for
damages against MEDS for breach of charter-party. Plaintiff's claims are
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maritime claims under Section 4(h) of the Admiralty Act, 2017 because
these are claims arising out of an agreement relating to the hire of the
vessel.
As per Section 5(2) read with Section 5(1)(b) of the Admiralty
Act, 2017, plaintiff is entitled to arrest a vessel which is either owned by or
on demise charter to MEDS when the arrest is effected.
According to plaintiff, MEDS is the owner of defendant vessel
Altus Uber. In support of this assertion plaintiff relies upon the following
documents:-
i) Seaweb Report that shows MEDS as the registered
owner.
ii) IR Class documents where the classification society IRS
confirms that the registered owner of the vessel is MEDS
and the former name of the vessel was Swordfish and the
vessel's port of registry is Monrovia and flag is Liberia.
iii) Documents from the website of MEDS where they "offer
three of its own DP II vessels on time charter basis". The
names of these three vessels shown on the website are Altus
Exertus, Altus Optimus and Altus Uber.
The test under Section 5 is "whether the Court has reason to
believe". The above documents and particularly the failure of MEDS to even
disclose the alleged bareboat charter-party under which they claim to be the
demise charterers, is sufficient to demonstrate prima facie that MEDS are the
owners. MEDS, however, denies that they are owners but say that they are
the demise charterers of the vessel. This makes no difference to the arrest of
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defendant vessel. Plaintiff is entitled to arrest defendant vessel even if MEDS
is the demise charterer of the vessel as contended by them and not the
owner. This appears on a plain reading of Section 5(2) of the Admiralty Act,
2017 read with Section 5(1)(b) of the said Act. The powers of arrest are set
out in Section 5 of the Admiralty Act, 2017. For the purposes of plaintiff's
claim Section 5(2) of the Admiralty Act, 2017 is relevant. Section 5(2)
provides for arrest of any other vessel in lieu of the vessel against which a
maritime claim has been made. This means that two different vessels need
to be involved to satisfy the requirement of S. 5 (2) viz.,
a. "The vessel" with respect to which the dispute originally
arose - the contract vessel or offending vessel;
b. "any other vessel" to be arrested to secure the claims in
respect of "the vessel" - the securing vessel.
Note: "Securing Vessel" cannot be the "Contract
vessel/offending vessel". They are different vessels.
Since Section 5(2) is subject to the provisions of sub-section
(1), the relevant provisions pertaining to a claim against a demise charterer
are contained in sub-section 5 (1)(b) which provides as follows:-
"the demise charterer of the vessel at the time when the maritime claim
arose is liable for the claim and is the demise charterer or the owner of
the vessel when the arrest is effected."
For 5(1)(b) to respond to 5(2), we must identify the contract
vessel/offending vessel and the securing vessel which is being arrested as
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follows:-
a. "The Vessel" - (contract vessel/offending vessel) (i.e. 'SEIM MARLIN) of
which the demise charterer is MEDS at the time when the maritime claim
arose and is liable for the claim.
b. "any other vessel"- (securing vessel) (i.e. ALTUS UBER) of which
MEDS is the demise charterer or the owner when the arrest is effected.
53 Thus assuming MEDS is the demise charterer of Altus Uber as
contended by applicant and not the owner as contended by plaintiff, yet
applying the provisions of Section 5(2) read with Section 5(1)(b) of the
Admiralty Act, 2017, the vessel Altus Uber is liable to be arrested for the
purpose of providing security in respect of the maritime claim of plaintiff for
which MEDS is liable as demise charterer of plaintiff's vessel.
54 Consequently, no case has been made out for vacating the order
of arrest which has been correctly granted by this Court on 1 st June 2018
under the provisions of Section 5 of the Admiralty Act, 2017. The
application of MEDS is liable to be dismissed with costs.
55 Notice of motion dismissed with cost, which is fixed at
Rs.5 lakhs.
Digitally
(K.R. SHRIRAM, J.)
signed by
Gauri Gauri Amit
Gaekwad
Amit Date:
Gaekwad 2018.09.26
11:48:06
+0530
Gauri Gaekwad
