The Swedish Club vs V8 Pool Inc. And 3 Ors
2021 Latest Caselaw 8201 Bom

         This Order is modified/corrected by Speaking to Minutes Order dated 29/07/2021
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                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                 ADMIRALTY AND VICE ADMIRALTY JURISDICTION
                          IN ITS COMMERCIAL DIVISION
                   INTERIM APPLICATION (L) NO.2227 OF 2021
                                     IN
                COMMERCIAL ADMIRALTY SUIT (L) NO.9620 OF 2020
The Swedish Club                         ....Applicant/Intervener
IN THE MATTER BETWEEN :
V8 Pool Inc.                             ....Plaintiff
          V/s.
GP Asphalt I and Ors.          ....Defendants
                                   WITH
                  CHAMBER ORDER (L) NO.13130 OF 2021
                                   WITH
                INTERIM APPLICATION (L) NO.12020 OF 2021
                                     IN
            COMMERCIAL ADMIRALTY SUIT (L) NO.6302 OF 2021
                                   WITH
                      JUDGE'S ORDER NO.55 OF 2021
                                     IN
            COMMERCIAL ADMIRALTY SUIT (L) NO.6607 OF 2021
                                   WITH
                      JUDGE'S ORDER NO.56 OF 2021
                                     IN
            COMMERCIAL ADMIRALTY SUIT (L) NO.6608 OF 2021
                                   WITH
               COMMERCIAL ADMIRALTY SUIT NO.29 OF 2021
                                     ----
Mr. Bimal Rajasekhar for applicant in IAL/2227/2021 (The Swedish Club).
Mr. Prathamesh Kamat a/w. Ms. Pooja Tidke, Ms. Krushi Barfiwala and
Mr. Ryan Mendes i/b. Parinam Law Associates for plaintiff in
COMAS/29/2021.
Ms. Apurva Pohonerkar-Mehta for plaintiff in COMASL/6302/2021 and
applicant in IAL/12020/2021.
Mr. Prashant Pratap, Senior Advocate a/w. Mr. Kumar Abhishek Singh,
Mr. Shubham Agrahari, Mr. Nishant Bhatia, Mr. Siddharth Singh and
Mr. Nishaan Shetty i/b. Anoma Law Group LLP for plaintiff in
COMASL/6607/2021 and COMASL/6608/2021.
Mr. Prathamesh Kamat a/w. Mr. Jithin Pius Jose i/b. Mr. Harsh Pratap for
plaintiff in COMASL/9620/2020.

Gauri Gaekwad




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          This Order is modified/corrected by Speaking to Minutes Order dated 29/07/2021
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Mr. D. S. Choudhari, Dy. Sheriff of Mumbai present.
                                    ----
                                       CORAM : K.R.SHRIRAM, J.

DATED : 21st JUNE 2021

P.C. :

1 Applicant is a P & I Club with whom defendant no.1 vessel was

entered for protection and indemnity cover. Though various prayers are

sought in the application, Mr. Rajasekhar submitted that since the vessel has

already been sold and the crew members have already been disembarked

and repatriated and the sale proceeds are lying with the Prothonotary and

Senior Master, High Court, Bombay, the prayers can be modified as under :

(i) The applicant be permitted to make payment of USD 31,250 per month, calculated from 21 December 2020 till date of sale or till February 2021 (i.e. four months from November 2020, which is when owner discontinued payment of wages), whichever is earlier directly to the crew members as wages to the crew members who on board the vessel and who have not been paid their wages during the period of arrest;

(ii) All of the said amounts which are paid by the Applicant be treated as "Sheriff's expenses"/expenses for maintenance of the vessel/expenses in the course of sale and be paid out first in priority from the sale proceeds along with the other expenses in the course of sale;

(iii) That, insofar as crew wages for November 2020 and till 21 December 2020 are concerned, the Hon'ble Court direct that the Applicant be permitted to get assigned to itself all such crew wage claims, maintaining intact the maritime lien nature of such claims and to make payment of such wages.

Gauri Gaekwad

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2 Mr. Rajasekhar submitted that applicant has an obligation to

pay minimum four months wages under Regulation 2.5.2, Standard A2.5.2

of the Maritime Labour Convention 2006, which reads as under :

Standard A 2.5.2 - Financial security

1. In implementation of Regulation 2.5, paragraph 2, this Standard establishes requirements to ensure the provision of an expeditious and effective financial security system to assist seafarers in the event of their abandonment.

2. For the purposes of this Standard, a seafarer shall be deemed to have been abandoned where, in violation of the requirements of this Convention or the terms of the seafarers' employment agreement, the shipowner:

(a) fails to cover the cost of the seafarer's repatriation; or

(b) has left the seafarer without the necessary maintenance and support; or

(c) has otherwise unilaterally severed their ties with the seafarer including failure to pay contractual wages for a period of at least two months.

3. Each Member shall ensure that a financial security system meeting the requirements of this Standard is in place for ships flying its flag. The financial security system may be in the form of a social security scheme or insurance or a national fund or other similar arrangements. Its form shall be determined by the Member after consultation with the shipowners' and seafarers' organizations concerned.

4. The financial security system shall provide direct access, sufficient coverage and expedited financial assistance, in accordance with this Standard, to any abandoned seafarer on a ship flying the flag of the Member.

5. For the purposes of paragraph 2(b) of this Standard, necessary maintenance and support of seafarers shall include: adequate food, accommodation, drinking water supplies, essential fuel for survival on board the ship and necessary medical care.

6. Each Member shall require that ships that fly its flag, and to which paragraph 1 or 2 of Regulation 5.1.3 applies, carry on board a certificate or other documentary evidence of financial security issued by the financial security provider. A copy shall be posted in a conspicuous place on board where it is available to the seafarers. Where more than one financial security provider provides cover, the document provided by each provider shall be carried on board.

7. The certificate or other documentary evidence of financial security shall contain the information required in Appendix A2-I. It shall be in English or accompanied by an English translation.

Gauri Gaekwad

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8. Assistance provided by the financial security system shall be granted promptly upon request made by the seafarer or the seafarer's nominated representative and supported by the necessary justification of entitlement in accordance with paragraph 2 above.

9. Having regard to Regulations 2.2 and 2.5, assistance provided by the financial security system shall be sufficient to cover the following:

(a) outstanding wages and other entitlements due from the shipowner to the seafarer under their employment agreement, the relevant collective bargaining agreement or the national law of the flag State, limited to four months of any such outstanding wages and four months of any such outstanding entitlements;

(b) all expenses reasonably incurred by the seafarer, including the cost of repatriation referred to in paragraph 10; and

(c) the essential needs of the seafarer including such items as: adequate food, clothing where necessary, accommodation, drinking water supplies, essential fuel for survival on board the ship, necessary medical care and any other reasonable costs or charges from the act or omission constituting the abandonment until the seafarer's arrival at home.

10. The cost of repatriation shall cover travel by appropriate and expeditious means, normally by air, and include provision for food and accommodation of the seafarer from the time of leaving the ship until arrival at the seafarer's home, necessary medical care, passage and transport of personal effects and any other reasonable costs or charges arising from the abandonment.

11. The financial security shall not cease before the end of the period of validity of the financial security unless the financial security provider has given prior notification of at least 30 days to the competent authority of the flag State.

12. If the provider of insurance or other financial security has made any payment to any seafarer in accordance with this Standard, such provider shall, up to the amount it has paid and in accordance with the applicable law, acquire by subrogation, assignment or otherwise, the rights which the seafarer would have enjoyed.

13. Nothing in this Standard shall prejudice any right of recourse of the insurer or provider of financial security against third parties.

14. The provisions in this Standard are not intended to be exclusive or to prejudice any other rights, claims or remedies that may also be available to compensate seafarers who are abandoned. National laws and regulations may provide that any amounts payable under this Standard can be offset against amounts received from other sources arising from any rights, claims or remedies that may be the subject of compensation under the present Standard.

Gauri Gaekwad

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3 Under Clause 6 of Standard A2.5.2 quoted above, a certificate or

other documentary evidence of financial security issued by the financial

security provider, which admittedly is applicant, shall be posted in a

conspicuous place on board where it is available to the seafarers. This

certificate of financial security was provided by applicant and posted in a

conspicuous place on board the first defendant vessel because of the

certificate of entry provided by applicant for the period 20th February 2020 to

20th February 2021. This certificate of entry is evidence of the contract of

indemnity insurance between defendant no.2 (owner of defendant no.1) as

member of applicant and applicant. Therefore, the submission of Mr.

Rajasekhar that it is not a contractual obligation but only under the

convention is not correct. The certificate of insurance/financial security as

required under Clause 6 that was on board reads as under :

THIS IS TO CERTIFY that there is in force a policy of insurance or other financial security in respect of the abovenamed ship while in the above ownership which meets the financial security requirements of Regulation 2.5.2, Standard A2.5.2 of the Maritime Labour Convention 2006 as Amended, where it is in force and applicable.

................

The policy of insurance is subject to certain conditions and limitations details of which can be found on the provider's website under "Maritime Labour Convention Extension Clause 2016". This certificate has been issued for and on behalf of the above- named provider of insurance or other financial security.

The certificate of entry under the P & I cover issued by applicant

contained certain conditions and limitations and it reads as under :

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1. Subject only to the other provisions of this MLC Extension ("the Extension"), the Association shall discharge and pay on the Member's behalf under the 2006 Maritime Labour Convention as amended (MLC 2006) or domestic legislation by a State Party implementing MLC 2006:

(a) Liabilities in respect of outstanding wages and repatriation of a seafarer together with costs and expenses incidental thereto in accordance with Regulation 2.5, Standard A2.5 and Guideline B2.5; and ..........

4 Clause 9 of Standard A2.5.2 provides for applicant to cover

(a) outstanding wages and other entitlements due from the shipowner to

the seafarer under their employment agreement, the relevant collective

bargaining agreement or the national law of the flag State, limited to four

months of any such outstanding wages and four months of any such

outstanding entitlements; (b) all expenses reasonably incurred by the

seafarer, including the cost of repatriation; and (c) the essential needs of the

seafarer including such items as food, drinking water supplies, essential fuel

for survival on board the ship, necessary medical care etc. The cost of

repatriation shall cover travel by appropriate and expeditious means,

normally by air and include provision for food and accommodation of the

seafarer from the time of leaving the ship until arrival at the seafarer's home

etc.

Under Clause 12 of Standard A2.5.2 if the provider of insurance

or other financial security, which in this case is applicant, has made any

payment to any seafarer in accordance with this Standard, such provider

Gauri Gaekwad

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shall, up to the amount it has paid and in accordance with the applicable

law, acquire by subrogation, assignment or otherwise, the rights which the

seafarer would have enjoyed.

5 Mr. Rajasekhar stated that applicant is obligated to pay the four

months wages and other entitlement due from the shipowner to the

seafarer, cost of repatriation, essential needs etc. Mr. Rajasekhar further

stated that applicant had provided for food, drinking water supplies,

medical care etc. and incurred cost of repatriation of the 14 crew members

and though these are obligations of applicant under the convention, the

Court had ordered to be reimbursed by treating them as Sheriff's expenses

and a claim for the same has been filed with the Sheriff of Mumbai and the

Sheriff's report is pending disposal. Those heads of expenses are :

(a) INR Rs.1,79,827/- towards food, water and provisions for the defendant vessel, roughted through this office;

(b) INR Rs.48,762/- for sign off and disembarkation of the Chief Office;

(c) INR Rs.3,85,647/- for sign off and disembarkation of the 8 non MSM crew members;

(d) INR Rs.2,98,332/- for sign off and disembarkation of the balance 6 crew members;

(e) INR Rs.63,730/- and INR Rs.15,930/- for medical treatment of the Chief Engineer;

(f) INR Rs.82,889/- for flight tickets for 10 crew members;

Gauri Gaekwad

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I have to say it was so granted because plaintiff had consented.

Mr. Rajasekhar states that applicant be permitted to pay the

four months wages but his application for leave of this Court to pay is

restricted for the period from the date of arrest till the date of sale and once

leave is granted, that should be treated as Sheriff's expenses. In short,

applicant wants to comply with its obligations as required under the

Certificate of Entry granted to the vessel, i.e., its contractual obligation, but

wants to claim it from the sale proceeds without filing a suit, prove the

claim and without standing in the queue while Court decides on priorities.

In my view, applicant should not aspire to be in such an exalted position

when it is only discharging its contractual obligations.

6 Mr. Rajasekhar relied on a judgment of the English Court in

The Berostar1 to submit that leave of the Court was required to pay the

wage arrears and, therefore, applicant has applied to this Court for leave.

In my view, the judgment is not applicable to the facts and

circumstances of this case because that was a case where a mortgagee had

volunteered to pay the wages of the crew. The mortgagee, unlike applicant

herein, had no obligation in law or under any contract to pay any crew

wages. Here is a case where applicant is obligated under the cover given to

the vessel to pay the four months wages and other expenses mentioned in

the cover note referred above.

1. [1970] Vol. 2 LLR 403

Gauri Gaekwad

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7 Mr. Rajasekhar also relied upon on an extract from an article by

William Tetley in the Journal of Maritime Law and Commerce, Vol. 15, no.3,

July 1984 but in fairness agreed that there also the author has opined that

leave of the Court is required for voluntary payment. At the same time, Mr.

Rajasekhar states that even if it is not voluntary payment but an obligation

under the P & I cover given by applicant to the vessel, still leave of the

Court will be required to pay the four months wages and other entitlements

and incur expenses.

8 Mr. Rajasekhar submitted, relying on the order passed by the

learned Single Judge of this Court on 28 th July 2020, 7th August 2020 and

17th August 2020 in Commercial Admiralty Suit (lodging) No.7 of 2020,

that four months crew wages payable by applicant can be treated as

Sheriff's expenses. Again those orders are not applicable to the facts and

circumstances of the case at hand today because those orders were not

passed in applications filed by a P & I Club and the provisions of Maritime

Labour Convention were not brought to the notice of the Court.

Mr. Rajasekhar also relied upon (a) an order dated

5th November 2020 and 18th December 2020 in Interim Application No.5196

of 2020 in Commercial Admiralty Suit (lodging) No.5166 of 2020 and

(b) an order dated 21st September 2019 in Commercial Notice of Motion

No.2261 of 2019 in Commercial Admiralty Suit (lodging) No.63 of 2019.

These orders are also not applicable because (a) the application was made

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by crew members and not a P & I Club, and (b) the provisions of Maritime

Labour Convention were not brought to the notice of or placed before the

Court.

9 Mr. Rajasekhar submitted that international practice says leave

has to be obtained and once the amount is paid, it should be treated as

Sheriff's expenses and for that he relied on an order dated 30 th April 2019

passed by the High Court of Republic of Singapore in the matter of the

vessel BRIGHTOIL LION AND BRIGHTOIL GRACE. That order has no

reasons given and as the Court also has not dealt with any submissions, it

appears more to be a consent order. Therefore, the said order is of no

assistance to this Court.

10 Mr. Pratap and Mr. Kamat object to treating the

contractual/legal obligation of applicant as Sheriff's expenses.

Mr. Kamat ofcourse states that he had consented to the payment of the

amounts incurred by applicant for essential needs including food, drinking

water, medical expenses, cost of repatriation etc. and therefore, the Court

may allow the reliefs sought in the Sheriff's report but the four months

wages to be paid by applicant, it cannot be paid out of the sale proceeds

now as Sheriff's expenses. Mr. Pratap states that even those expenses to

which Mr. Kamat had consented could not have been treated as Sheriff's

expenses because that was the obligation of applicant (and I agree with

Mr. Pratap) but in this case, since plaintiff has consented and the Court had Gauri Gaekwad

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passed an order directing those expenses to be treated as Sheriff's expenses,

pursuant to which applicant had incurred those expenses, the Court may as

an exception in this case, allow the Sheriff's report to the extent certified by

the Deputy Sheriff.

Mr. Kamat and Mr. Pratap submitted, and I agree with them,

that where a P & I Club discharges its obligations under the P & I cover

given to the vessel or as Mr. Rajasekhar would want to say under the

Maritime Labour Convention, they do not need leave of the Court. The P & I

Club can make the payment and lodge a claim under the rights which it

would obtain under Clause 12 of Standard A2.5.2 of the convention.

11 If one sees Clause 2 of Standard A2.5.2, the obligation of

applicant gets triggered where a seafarer has been abandoned and such an

abandonment is deemed to happen where the shipowner (a) fails to cover

the cost of the seafarer's repatriation or (b) has left the seafarer without the

necessary maintenance and support or (c) has otherwise unilaterally

severed their ties with the seafarer including failure to pay contractual

wages for a period of at least two months. Therefore, the obligation to pay

by a P & I Club has nothing to do with a vessel being arrested.

12 Clause 8 of Standard A2.5.2 provides that the assistance

provided by the financial security system shall be granted "promptly" upon

request made by the seafarer or the seafarer's nominated representative and

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supported by the necessary justification of entitlement in accordance with

paragraph 2 of Standard A2.5.2. Mr. Rajasekhar states that this application

was filed even before a request was made. In such a case, in my view,

applicant should have granted promptly the assistance provided by the

financial security system, i.e., four months wages, entitlements and

expenses, which has not been done. I am not commenting on the

obligations of the P & I Club but it is open to them to make the payment as

and when they wish.

13 In the circumstances, to sum up it is open to applicant to fulfill

its obligations and applicant admits in the application itself that it is legally

obligated and thereafter, apply to the Court to be reimbursed the amount

from the sale proceeds. What kind of application, whether a separate suit or

join in the crew suit, applicant has to decide and Court will consider the

same at that stage. What will be the priority of applicant will be decided at

the time of deciding the priorities. Certainly, the obligations of applicant to

pay the four months wages or the assistance to be provided as mentioned in

Clause 9 and 10 of Standard A2.5.2 of the convention cannot be treated as

Sheriff's expenses.

14 Mr. Rajasekhar stated that since the crew members' wages upto

maximum of four months will be paid by applicant, they would stand in the

shoes of the crew members as provided in Clause 12 of Standard A2.5.2.

Gauri Gaekwad

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Mr. Rajasekhar also submitted that at the appropriate stage, applicant will

argue that having stepped into the shoes of the crew members, they also

have a maritime lien and stand on a higher priority.

15 Under Clause 12, if applicant has made any payment to any

seafarer in accordance with Standard A2.5.2, applicant shall, up to the

amount it has paid and "in accordance with the applicable law", acquire by

subrogation, assignment or otherwise, the rights which the seafarer would

have enjoyed. Therefore, it is for applicant to make the payment and

thereafter, apply to the Court to be reimbursed the amount that it has paid

which application will be considered by the Court on its own merits

including whether applicant will have a maritime lien or any other special

priority at that stage.

16 Interim application accordingly stands disposed.

17 In view of the above, the amounts as mentioned in the Sheriff's

Report No.36-A of 2021 to the extent of prayer clauses - (a) and (b) is

allowed. It is once again clarified that this amount was paid in view of the

consent granted by plaintiff and it cannot treated as a precedent. Sheriff's

Report No.36-A of 2021 accordingly stands disposed.

18 A problem that we will face in every such case is, and Mr.

Rajasekhar very fairly agreed, that how will the Court decide the issue in an

application of this nature as to whether the claim of the crew for wages,

Gauri Gaekwad

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which applicant wishes to pay or has paid for a maximum of four months

wages, is correct? If a suit had been filed, the crew member would have

stepped into the witness box to prove his claim and would be subject to

cross examination.

(K.R. SHRIRAM, J.)

Gauri Gaekwad