Bombay High Court
O. S. V. Crest Mercuty One(Imo ... vs Vision Projects Technologies ... on 26 July, 2022
Bench: N. J. Jamadar
ial-17189-2021.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ADMIRALTY AND VICE ADMIRALTY JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO.17189 OF 2021
IN
COMMERCIAL ADMIRALTY SUIT (L) NO.13462 OF 2021
OSV Crest Mercury 1 (IMO 9724398) ...Applicant/
Ori. Defendant
VISHAL In the matter between
SUBHASH Vision Projects Technologies Private Limited ...Respondent/
PAREKAR Ori. Plaintiff
Digitally signed by
VISHAL SUBHASH vs.
PAREKAR
Date: 2022.07.26 OSV Crest Mercury 1 (IMO 9724398) ...Defendant
18:38:38 +0530
Mr. Ashwin Shanker, for the Applicant/Ori. Defendant.
Mr. Prathmesh Kamat i/b. Ms. Priyanka Patel, for the Respondent/
Ori. Plaintiff.
CORAM : N.J. JAMADAR, J.
RESERVED ON : 1st APRIL, 2022
PRONOUNCED ON : 26th JULY, 2022
------------
JUDGMENT :
1. OSV Crest Mercury/the defendant vessel and her registered
owner Continental Radiance Offshore Private Limited (Continental
Radiance) have taken out this application purportedly under order
39 Rule 4 of the Code of Civil Procedure, 1908 (the Code) for
vacating the order of arrest of the defendant vessel dated 21 st June,
2021, unconditionally, or in the alternative reducing the security to
be provided for the release of the defendant vessel to USD 18415
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and also for a direction to provide a counter security in the sum of
USD 4885024.74.
2. The background facts leading to this application can be
summarized as under:-
a] Vision Projects Technologies Private Limited (Vision Projects)
instituted a Commercial Admiralty Suit praying, inter alia, an order
and decree directing the defendant vessel to pay to the plaintiff a
sum of Rs. USD 1,873,082.32 along with further interest @ 18% p.a.
and for the arrest and sale of the defendant vessel and the
application of the sale proceeds towards the claim of the plaintiff.
b] Vision Projects asserted that the defendant vessel is a tug/
offshore supply vessel having IMO 9724398. It is an Indian flag
vessel. On the date of the institution of the suit, it was lying at port
and harbor at Mumbai port in Indian territorial waters. Continental
Radiance is the registered owner of the defendant vessel. A
Bareboat Charterparty BARECON 2001 was executed between
Vision Projects and Continental Radiance on 19th October, 2015 for a
period of five years.
c] Vision Projects claimed under the terms of the BARECON
2001, it carried out a special survey, drydocking and various
repairs to the defendant vessel, at the instance of Continental
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Radiance. Under the terms of charterparty 90% of the costs
incurred for carrying out the special survey/statutory drydock was
to be incurred by Continental Radiance. The plaintiff further
averred that it had also arranged for agency services of Benline
Agency India Private Limited and had also made payments to
various authorities, vendors etc. for and on behalf of the defendant
vessel, at the instance of Continental Radiance.
d] The plaintiff asserted that Continental Radiance failed to pay
the agency fees as well as reimburse the amounts incurred by the
plaintiff towards agency fees, for and on behalf of the defendant
vessel. Continental Radiance also failed to pay for the statutory
drydock and for various repairs carried out by the plaintiff to the
defendant vessel, at the instance of Continental Radiance. This gave
rise, according to the plaintiff, to a maritime claim to the tune of
USD 1,873,082.32 for the costs incurred and services provided by
the plaintiff to the defendant vessel.
3. Apprehending that the defendant vessel may be re-exported
out of Indian waters, by the owners of the defendant vessel, by
circumventing the necessary customs procedure and without
following proper re-export formalities and the defendant vessel may
be taken to a location beyond the jurisdiction of this Court, the
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plaintiff moved for the arrest of the defendant vessel. By an order
dated 21st June, 2021 this Court ordered the arrest of the defendant
vessel.
4. The defendant vessel and her registered owner have taken out
this application for vacating the order of arrest and the
consequential or alternative reliefs with the assertion that the order
of arrest is required to be vacated as it was obtained by suppressing
material facts and on the basis of the material which did not justify
the arrest of the vessel. Multiple grounds have been raised by the
applicants, which according to the applicant, either singly or
collectively make it imperative to vacate the order of arrest of
defendant vehicle as it is causing grave prejudice to the applicant.
5. The grounds on which the order of arrest is sought to be
vacated can be culled out as under:-
a] A false case of urgency, to the knowledge of the plaintiff, was
attempted to be made out to obtain the order of arrest.
There was no possibility of the defendant vessel sailing out of
the Indian territorial waters, without following proper re-export
formalities. In fact, the plaintiff was in default in transferring the
agency and taking steps to re-export the defendant vessel.
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b] The order of arrest was obtained without notice to the
defendant despite the defendant having lodged a caveat under
section 148A of the Code.
Neither any notice was given by the plaintiff before moving
the Court nor the Court gave notice to the defendant. Moreover, the
plaintiff suppressed the fact that it was served with a notice of
caveat. Yet, ex parte ad-interim relief of arrest of the defendant
vessel was obtained on 21st June, 2021.
c] The plaintiff's case also suffers from active misrepresentation.
(i) Notice was not given to the defendant despite service of the
caveat, (ii) The defendant moved for ex parte interim order in
breach of an express undertaking given to the Court on 16 th June,
2021. The said fact of an undertaking having been given was
suppressed from the Court. (iii) The plaintiff, "used and relied upon"
without prejudice correspondence.
d] On merits the claim of the plaintiff that it discharged the
liability of the defendant vessel to the third party is not at all made
out. It is contended that third party to whom the plaintiff claimed to
have made payments had already been secured or their liabilities
were discharged by the owners of defendant vessel. The plaintiff
have failed to substantiate the claim of having made the payments
on behalf of the defendant vessel to the third party.
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e] Lastly, since the charterparty provide for resolution of the
dispute through arbitration, an admiralty action in rem in aid of
security of arbitration proceeding is not permitted.
6. The defendant/applicant further contended that the defendant
has a counter claim of USD 4.5 million against the plaintiff. Since
the substantial sums are due and payable by the plaintiff to the
applicant, as particularized in paragraph 40 of the application, the
instant claim is nothing but a counter blast to avoid the liability.
7. An affidavit in reply is filed on behalf of Vision Projects.
8. After adverting to the jural relationship between the plaintiff
and Continental Radiance under the charterparty agreement, the
plaintiff asserts that, indisputably, the plaintiff had drydocked the
defendant vessel, undertaken repairs and completed the special
survey of defendant vessel. However, Continental Radiance failed
and neglected to pay to the plaintiff the contractual sums as agreed
under clause 10(g) of the Charterparty Agreement. It is further
asserted that whilst charterparty was in its concluding stage, the
Continental Radiance reneged from its obligations under the
charterparty and sought to unjustifiably impose the costs of repairs
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and dry dock of defendant vessel solely to the count of the plaintiff.
9. The plaintiff has contested the assertion of the defendant that
it had approached the Court with unclean hands and that there was
no urgency. The caveat filed by the owners of the defendant vessel
under section 148A of the Code was of no avail in admiralty action.
No caveat was filed in accordance with the Rule 1072 of the Bombay
High Court (Original Side) Rules, 1980 (Rules, 1980). It was denied
that the plaintiff committed breach of the undertaking given to the
Court. According to the plaintiff, the undertaking was only to the
effect that the plaintiff would not in any manner object to the owner
of the defendant vessel making the necessary application to move
the defendant vessel or allow it to be sent out. The plaintiff was
neither directed nor undertook to make any application and/or to
take any steps for the defendant vessel to sail out. The said
undertaking did not impair the statutory right of the plaintiff in
seeking arrest of the vessel, for enforcement of the maritime claim.
10. The plaintiff averred that there is no embargo to enforce a
maritime claim against a vessel despite existence of arbitration
agreement. According to the plaintiff, an action in rem is
maintainable for enforcement of maritime claim and for arrest of
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vessel despite the existence of arbitration agreement. As regards
the expenses incurred for drydocking, special survey and repairs,
the plaintiff asserted that all those expenses were incurred by the
plaintiff under the terms of the charterparty and Continental
Radiance was liable to defray the costs thereof.
11. The applicant has filed an affidavit in rejoinder.
12. In the wake of the aforesaid pleadings, I have heard Mr.
Ashwin Shanker, learned counsel for the applicant and Mr.
Prathmesh Kamat, learned counsel for the respondent. The learned
counsels have taken me through the pleadings and the documents
placed on record in support of their respective claims.
13. In the context of the submissions canvassed by the learned
counsels, it may be apposite to record and consider the submissions
under the broad heads which, according to the applicant, warrant
the vacating of the order of the vessel. I propose to deal with the
grounds in two parts. First, those grounds which are not rooted in
thickets of facts. Second, the grounds which emerge from the facts.
14. To begin with, it may be appropriate to note few un-
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controverted facts. The jural relationship between the defendant
vessel and Continental Radiance is not in dispute. Nor the fact that
Vision Projects and Continental Radiance entered into a
charterparty on 19th October, 2015 for a term of five years. It was a
Bimco Standard Bareboat Charter.
15. By and large, there is no controversy over the fact that under
clause 10(g) captioned "periodical drydocking", the charterer was
to drydrock the vessel, clean and paint her under water parts and
90% of the costs of special survey were to be borne by the owners of
the defendant vessel and the balance 10% were to be borne by the
charterer. It seems a dispute arose between the parties over the
scope of special survey and the party who was liable to pay the
expenses of drydocking and repairs. The charter party provided for
resolution of the dispute through arbitration to be conducted in
accordance with London Maritime Arbitrators Association.
16. Continental Rediance, the owner of the vessel filed
Commercial Arbitration Petitions (L) No. 12391 of 2021 and 12392
of 2021. After noting that the defendant vessel had already been in
possession of the petitioner and recording the statement made on
behalf of Vision Projects that Vision Projects will not in any manner
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object to the petitioner making necessary application and taking
necessary steps to move the vessel or to allow it to be sent out, by
consent of parties, Hon'ble Mr. Justice Mohit Shah, came to be
appointed to decide the disputes and differences between the
parties under the contract in question, and the petitions were
disposed of.
17. In the backdrop of the aforesaid unconroverted facts, I deem it
appropriate now to deal with grounds which do not hinge upon the
facts.
Non Disclosure of caveat filed under section 148A of the Code :-
18. Mr. Ashwin Shanker, learned counsel for the applicant
submitted that the plaintiff deliberately suppressed the fact that
caveat under section 148A of the Code was served on the plaintiff. A
notice, which the plaintiff was enjoined to give consequent to the
service of the caveat before making a motion for the arrest of the
defendant vessel, was not given to the defendant. This non-
disclosure of caveat coupled with non-service of notice upon the
defendant, according to Mr. Shanker, constitute a malafide litigative
strategy of highest order and therefore furnishes a surer ground for
vacating the order of arrest. Had the factum of caveat been
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disclosed, Mr. Ashwin Shanker urged, the Court would not have
passed an ex parte order of arrest of the defendant vessel. Mr.
Shanker would further urge that a caveat under section 148A of the
Code and the one under Rule 1072 of Rules, 1980 can both co-exist.
These provisions are not mutually exclusive. Therefore, the fact
that caveat was not filed in accordance with Rule 1072 cannot be
put forth as a subterfuge for not disclosing the factum of caveat
under sec.148A of the Code having been served upon the plaintiff.
19. Mr. Prathamesh Kamat, learned counsel for the plaintiff
joined the issue by canvassing a submission that the caveat under
section 148A of the Code is not at all germane to the proceedings
under admiralty jurisdiction. Since special rules are framed by the
High Court in exercise of the powers under section 16 of the
Admiralty (Jurisdiction and Settlement of Maritime Claims) Act,
2017 (Admiralty Act, 2017) entitled, 'Rules for Regulating The
Procedure And Practice in Cases Brought Before The High Court
Under The Admiralty (Jurisdiction And Settlement of Maritime
Claims) Act, 2017' which prescribe a special caveat under Rule 1072
against the arrest of the vessel, the general provisions under section
148A cannot be resorted to. Thus, the special rules prevail over the
general procedure prescribed by the Code.
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20. To bolster up this submission, Mr. Kamat placed reliance on
the judgment of the Supreme Court in the case of Iridium India
Telecom Limited vs. Motorola INC.1 and an order by this Court in the
case of K. Marine Agencies Private Limited vs. M.V. Bahri Jazan
(IMO No.9620970)2.
21. Rule 1072 of the Rules, 1980 read as under:-
Caveat against arrest of ship :-
(a) Any person desiring to prevent the arrest of any
ship shall file in the registry a praecipe, signed by
himself or his Advocate, who may be acting for him,
requesting for entering caveat against the arrest of
such ship and undertaking to enter appearance in
person or by vakalatnama in any suit that may be
instituted against such ship and undertaking to give
security in such suit in a sum not exceeding the
amount to be stated in the praecipe or to pay into the
registry such sum. The caveat shall contain the name,
address and email address of the caveator and/or his
advocate, as the case may be. Caveat against issue of a
warrant or order of arrest of such ship shall
thereupon be entered in a book to be kept in the
registry, called "Caveat Warrant Book". The Caveat
Warrant Book shall state the amount of security that
the Caveator has undertaken to provide as per the
praecipe.
(b) The fact that there is a caveat against arrest in
force shall not event a party from applying for a
warrant or order of arrest and the ship to which the
caveat relates, arrested without notice to the
Caveator. Where any ship with respect to which a
caveat against arrest is in force is arrested in
pursuance of a warrant or order of arrest, the person
at whose instance the caveat has been entered may
apply to the court by way of an interim application for
1 (2005) 2 Supreme Court Cases 145.
2 Comm.Admiralty Suit (L) No. 677 of 2017 Dt.21-11-2017
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an order under this rule and, on the hearing of the
application, the court, unless it is satisfied that person
procuring arrest of the ship had a good and sufficient
reason for so doing, may order discharge of warrant
or order of arrest and may also order such person to
pay to the applicant, damages in respect of the loss
suffered by the applicant as a result of the arrest.
22. A bare perusal of the aforesaid provisions and comparing and
contrasting it with the provisions contained in Rule 148A of the
Code, make it evident that a caveator in admiralty action who
desires to prevent the arrest of any ship, gives two undertakings.
First, to enter appearance in person or by filing vakalatnama in any
suit that may be instituted against such ship. Second to give
security in such suit for a sum not exceeding the amount to be
stated in the praecipe or to pay into the Registry such sum. These
two special requirements in a caveat under Rule 1072 stem from the
purpose for which a ship may be ordered to be arrested. Rule 1070
makes the position clear. It provides that in any suit in rem, no
service of writ of summons or warrant of arrest shall be required
when the advocate for defendant agrees to accept the service having
entered a caveat or otherwise or to give security or to pay money
into Court. Thus undertakings to enter appearance and to give
security or to pay money in Court serve a definite purpose. I,
therefore, find it rather difficult to accede to the submissions of Mr.
Shanker that there is no qualitative difference between a caveat
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under section 148A of the Code and the one under Rule 1072 of the
Rules, 1980 and the party who files an ordinary caveat, under
section 148A, is equally entitled to the privilege of notice and
hearing before interim order is passed.
23. It is well recognized that in the event of conflict between the
rules framed by the Chartered High Court and the provisions of
Code of Civil Procedure, 1908 the rules framed by the High Court
prevail. Reliance by Mr. Kamat, on the judgment of the Supreme
Court, in the case of Iridium India Telecom Limited (supra) appears
well placed. In the said case, the Supreme Court was confronted
with the correctness of the view of this Court that the amended
provision of Order VIII Rule 1 of the Code would not apply to the suit
instituted on the Original Side of the High Court and that such suit
would continue to be governed by the High Court (OS) Rules. In
paragraph 20, the Supreme Court underscored the primacy of the
rules framed by the Chartered High Court as under.
20] The Legislature recognized the special role assigned to
the Chartered High Courts and exempted them from the
application of several provisions of the Code in the exercise
of their ordinary or extra-ordinary civil jurisdiction for the
simple reason that those jurisdictions were governed by the
procedure prescribed by the rules made in exercise of the
powers of the Chartered High Courts under clause 37 of the
Letters Patent. Interestingly, Section 652 of this Act itself
empowered the High Courts to make rules "consistent with
this Code to regulate any matter connected with the
procedure of the Courts of Civil Judicature subject to its
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superintendence", suggesting that consistency with the
Code was a sine qua non only when making rules for the
subordinate courts.
24. In paragraph 39, the Supreme Court concluded as under:-
39] Taking into account the extrinsic evidence, i.e.
the historical circumstances in which the precursor of
Section 129 was introduced into the 1882 Code by a
specific amendment made in 1895, we are of the view
that the non obstante clause used in Section 129 is not
merely declaratory, but indicative of Parliament's
intention to prevent the application of the CPC in
respect of civil proceedings on the Original Side of the
High Courts.
25. Consistent with the aforesaid position in law, it would be
impermissible to urge that a caveat filed under section 148A of the
Code in admiralty jurisdiction would command the same value as
the caveat filed under Rule 1072 of the Rules, 1980.
26. Mr. Kamat also invited the attention of the Court to the
observations of a learned single Judge in the case of K. Marine
Agencies Private Limited vs. M. V. Bahri Jazan 3 wherein while
passing an ex parte order of arrest of vessel, where a caveat under
section 148A of the Code was filed but not the one as contemplated
under Rule 929 of the Rules, 1980 (Old Rules), the learned single
Judge observed that in the absence of caveat under Rule 929, no
cognizance of caveat filed under section 148A of the Code could be
3 Com.Admr.Suit (L) NO.677 of 2017, Dt.21-11-2017.
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taken by the Court. Undoubtedly, the said observation was made
while passing an ex parte order and it may not commend itself as
ratio. However, the fact remains that this Court refused to take
cognizance of a caveat filed under section 148A of the Code, while
exercising admiralty jurisdiction in the face of special provision
contained in the High Court (O.S.) Rules.
27. In view of the aforesaid consideration, I am not persuaded to
agree with the submissions of Mr. Shanker that the order of arrest
deserves to be vacated for the non disclosure of the caveat under
section 148A of the Code and/or non service of the notice on the
applicant/defendant.
Breach of undertaking recorded in order dated 16 th June, 2021 in
Commercial Arbitration Petition (L) Nos. 12391 of 2021 and 12392
of 2021 :-
28. Mr. Shanker advanced a two pronged submission. One, there is
a deliberate suppression of the undertaking, given by the plaintiff in
the above arbitration petition, in the plaint. Two, the action of
moving for the arrest of defendant vessel was in breach of the said
undertaking.
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29. It would be necessary to immediately notice the statement
made on behalf of the plaintiff-Vision Projects in the said petition
and recorded by the Court.
4] Mr. Kamat in addition makes a further statement
that, in view of these instructions, his clients will not
in any manner object to the Petitioners making the
necessary application and taking all necessary steps
to move the vessel or to allow it to be sent out. If the
Respondents or their existing agent's consent or co-
operation is required, whether for repairs or for
removal of the vessel, Mr. Kamat assures the Court
that this will be readily forthcoming from the
Respondents. The statement is also noted and
accepted.
7] It goes without saying that Mr Kamat statements
are without prejudice to his rights and contentions in
arbitration.
30. On the aspect of the alleged non-disclosure, it would be suffice
to note that in paragraph 33 of the plaint, the plaintiff made a
reference to the arbitration proceeding initiated by Continental
Radiance and the order passed therein dated 16 th June, 2021. It is
further pleaded that the statement of the plaintiff to handover
/transfer its agency to the owners of defendant vessel was recorded
therein.
31. It could be urged that the plaintiff ought to have extracted the
relevant part of the order dated 16th June, 2021, which recorded the
said statement of the plaintiff and also annexed copy thereof.
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However, the omission to do so does not constitute suppression of
facts as the plaintiff did plead the gist of the proceedings in the
arbitration petition.
32. The second limb of the submission on behalf of the defendant
that the said statement recorded by the Court constituted an
undertaking not to seek arrest of the defendant vessel, in my
considered view, is not borne out by the statement recorded by the
Court. Moreover, it would be superfluous to delve into this aspect of
the matter in view of the clarification made by the learned Single
Judge (Hon'ble G.S. Patel, J.), in an order dated 24 th September,
2021, as to what the said statement connoted. In paragraph 3 of the
order dated 24th September, 2021, Hon'ble G.S. Patel, J. clarified as
under:-
3] It seems that the Respondent to the Arbitration
Petitions represented by Mr Kamat has since moved
for arrest of the vessel. Obviously, the statement that
he made on 16th June, 2021 was, first, confined to that
matter and could not have permissibly extended to
any other litigation. Second, that statement could not
operate as a restraint against the Respondent from
adopting legal proceedings as in accordance with law.
4] No further clarification is required.
(emphasis supplied)
33. In view of the clear and explicit clarification that the said
statement could not operate as a restraint against the respondent
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(Vision Projects) from adopting legal proceeding in accordance with
law, I am afraid it is still open to the defendant to urge this ground.
Arrest of vessel in aid of security for arbitration proceeding under
part 1 of the Arbitration and Conciliation Act, 1996 impermissible :-
34. It would be contextually relevant to note, at this stage,
another ground of challenge to the arrest of vessel emanating from
the Commercial Arbitration Petition (L) Nos. 12391 of 2021 and
12392 of 2021. Mr. Ashwin Shanker submitted that as recorded in
the order dated 16th June, 2021 in Commercial Arbitration Petition
(L) Nos. 12391 of 2021 and 12392 of 2021, the parties agreed that
the dispute be resolved through arbitration in accordance with the
Indian Law. A sole arbitrator came to be appointed. With this
development, according to Mr. Ashwin Shanker. The institution of
the admiralty suit can only be said to be for the purpose of the
arrest of the vessel so as to obtain the security for the award which
may eventually be passed. Inviting the attention of the Court to the
provisions contained in sections 5 and 8 of the Arbitration and
Conciliation Act Mr. Ashwin Shanker submitted that the arrest of a
ship in aid of security for Indian arbitration is legally impermissible.
35. Mr. Ashwin Shanker would further urge that even in the
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affidavit in reply to the instant application, the plaintiff/respondent
has not disputed that section 8 of the Arbitration and Conciliation
Act applies with full force and vigor and the dispute between the
parties was required to be referred to arbitration. In the light of this
stand of the plaintiff, according to Mr. Ashwin Shanker, nothing
survives in the admiralty suit. To bolster up the submission that the
admiralty action in rem in aid of security for Indian arbitration
proceeding is not permissible in law, Mr. Ashwin Shanker placed a
very strong reliance on a Division Bench judgment of this Court in
the case of Altus Uber vs. Siem Offshore Rederi AS4.
36. Mr. Prathmesh Kamat, controverted the aforesaid submission
on behalf of the applicant by canvassing a proposition that the
commencement of 'in personam' proceeding (arbitration) is not an
impediment to initiate an action 'in rem'. Elaborating the
submission, Mr. Kamat would urge that right in rem is available to a
party having a maritime claim notwithstanding the commencement
of any in personam proceeding in respect of the same claim or cause
of action. It was, thus, submitted that the fact that owners of the
defendant vessel had proceeded against the plaintiff in arbitration
'in personam' cannot preclude the plaintiff from instituting an
action 'in rem' for the arrest of the defendant vessel. Mr. Kamat
4 2019 SCC OnLine Bom 1327.
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submitted that the reliance placed by the applicant on the judgment
of the Division Bench in the case of Altus Uber (supra) does not
advance the cause of the applicant. On the contrary, the said
judgment lends support to the proposition canvassed on behalf of
the respondent/plaintiff.
37. Mr. Kamat would urge that the judgment of the learned single
Judge in the case of Siem Offshore Redri AS vs. Altus Uber 5 which
was carried in appeal before the Division Bench in the case of Altus
Uber (supra) extensively considers the challenge now sought to be
mounted on behalf of the applicant and repels the submission that
an action in rem for arrest of the vessel is barred in the event the
dispute is amenable to arbitration (whether the arbitration has
commenced or yet to be commenced). The observations of the
learned single Judge, in paragraph 56, in the case of Siem Offshore
(supra) encapsulate the position in the context of right 'in rem'. It
reads as under:
56. 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
5 2018 SCC OnLine Bom 2730.
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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 Claimant for the purposes of
satisfying his claim in the in personam proceedings
whether by way of arbitration or in Court.
The appeal Bench in the case of Altus Uber (supra),
considered the challenge to the aforesaid enunciation of law.
38. Mr. Ashin Shanker invited the attention of the Court to the
observations of the Division Bench in paragraph Nos. 71, 92, 98, 99
and 100 to lend support to the proposition that an order of arrest,
even in an action in rem, cannot be passed in aid of Indian
arbitration proceeding.
39. I have carefully considered the submission of Mr. Ashwin
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Shanker and perused the judgment of the Division Bench in the case
Altus Uber (supra) especially the observations in the above
numbered paragraphs. I am afraid to accede to the submission on
behalf of the applicant that the observations in the aforesaid
paragraphs lay down the proposition as is sought to be canvassed on
behalf of the applicant. In fact, the Division Bench had postulated, at
places more than one, that the fact that the dispute is amenable to
arbitration does not ipso facto imply that the vessel cannot be
arrested in an action in rem. The observations of the Division Bench
in paragraphs 68 to 72 make this position abundantly clear.
Paragraphs 68 to 72 read as under:
68. No statute caters to every fact situation. The
submission that what is not provided of is impliedly
excluded, is not correct. The Admiralty Act 2017 is not
a self-contained code unlike the Arbitration and
Conciliation Act, 1996. It sets out the extent of the
jurisdiction of the court (territorial and over ships -
section 3) , a list of maritime claims (section 4) and the
powers of the court to arrest a ship for the purpose of
providing security in respect of a maritime claim
(section 5). The Admiralty Act, 2017 does not refer to
stay of Admiralty proceedings once the ship is arrested
and security provided. That comes in by virtue of
Section 45 of the Arbitration and Conciliation Act,
1996. This does not mean that the suit is not
maintainable or that there is an implied bar. The
presence of an arbitration agreement does not oust the
jurisdiction of a Civil Court. Even if the suit is stayed
there is no bar to retention of security in the suit.
69. The Apex Court has in several judgments supported
such interpretative changes having regard to the ever
changing global scenario (paragraph 56 of m.v. Sea
Success (2004) 9 SCC 512). In the case of Al Quamar
(2000) 8 SCC 278 para 43 the Apex Court also
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observed that "the Court has to approach modern
problems with some amount of flexibility as is now
being faced in the modern business trend. Flexibility is
the virtue of the law courts as Roscoe Pound puts it.
The pedantic approach of the law courts are no longer
existing by reason of the global change of outlook in
trade and commerce".
70. Courts promote alternate dispute resolution by
arbitration and mediation. A party willing to arbitrate
cannot be put at a disadvantage and be told that he has
lost his right to obtain security by arrest of a ship.
Every charterparty and every other form of Standard
Shipping Contract out of which most disputes arise
contains a printed arbitration clause. It would be a
retrograde step if in case of disputes a party has no
right to obtain security by arrest of a ship if he has a
maritime claim. This would not serve the cause of ADR
in India which Courts are keen to promote to ease the
burden on Courts of law suits clogging the system.
71. On Mr. Chinoy's submissions Mr. Pratap would
submit that section 5 of the Arbitration Act bars
intervention of the Court in matters governed by Part-I.
The present case is not an application under Part-I and
consequently the bar of section 25 of the Arbitration
Act 1996 has no application. He would submit that the
suit is not barred inasmuch as it is only on an
application of the party that section 8 of the
Arbitration Act 1996 applies. He would submit that we
must refer to section 10 of the Code of Civil Procedure,
1908. 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. If this be so, then, how can
the pendency of foreign arbitration proceedings be a
bar to a suit in India on the same cause of action. In
such a case of a prior foreign suit, if security by way of
interim relief is obtained by the plaintiff in the suit in
India the Court may, on the application of the
defendant, either put the plaintiff to an election if it is
found to be vexatious or stay the suit and retain
security or make the stay conditional upon alternate
security being provided. The suit in India on the same
cause of action can be stayed and security retained. The
same can be done in the case of a foreign arbitration.
72. The submission that once there is an arbitration
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agreement and arbitration has been invoked, the Court
has no jurisdiction to arrest a ship in exercise of the
Admiralty jurisdiction, has been specifically held to be
incorrect by the English Court of Appeal in The Andria.
Thus the purpose of the Plaintiff in invoking the
Admiralty jurisdiction cannot affect the existence of
the jurisdiction. Thus it cannot be said that the Court
has no jurisdiction to arrest a ship or to maintain an
arrest where the purpose of the Plaintiff is simply to
obtain security for an award in arbitration proceedings.
The jurisdiction is simply there. The Court has the
power to arrest.
(emphasis supplied)
The Division Bench has thus ruled in clear and explicit terms
that it cannot be said that the Court has no jurisdiction to arrest the
ship or to maintain an arrest where the purpose of the plaintiff is
simply to obtain security for the award in arbitration proceeding. It
was in terms observed that the purpose of the plaintiff in invoking
the admiralty jurisdiction cannot affect the existence of the
jurisdiction.
40. The observations in paragraphs 98 to 100 in the case of Altus
Uber (supra) read as under:
98. We are not deciding any larger issue or wider
controversy simply because Mr. Sen's argument have not
rested on the above provision of the Arbitration Act alone.
He has gone ahead and criticized the approach of the
learned single Judge by contending that the instant suit
only seeks to protect or secure the claim in the on-going
foreign arbitration. Thus, his contention is that this suit is
filed to obtain a security for the ultimate award that would
be made in favour of the plaintiff.
99. Far from it, this suit is filed to recover the amounts,
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more particularly set out in the prayer clause by urging
that there is a maritime claim. Mr. Sen pertinently does
not dispute that the underlying claim in this case is
otherwise a maritime claim. However, his argument is that
such a claim, which is referred to in section 4 of the
Admiralty Act, 2017, is pressed by the plaintiff in the on-
going arbitration proceedings. Therefore, the present suit
is filed only to secure the claim and the fruits of the
arbitral proceedings abroad. Thus, in the event the Award
passed in favour of the plaintiff in the foreign arbitration
has to be enforced, then, there has to be a security for it
and for that reason, this suit is filed.
100. We do not think so. Ultimately, this aspect has to be
decided on the facts and circumstances of each case. No
general rule can be laid down. One would have to read
every plaint and the allegations therein carefully. One
would have to take the plaint allegations as a whole and
read them harmoniously. One would have definitely and to
arrive at a proper conclusion, read the allegations in this
manner. They would have to be assumed to be true.
Therefore, we are not saying that a suit to secure the claim
in the arbitral proceedings can be filed irrespective of the
requirements stipulated in the Admiralty Act, 2017. They
have to be fulfilled and all preconditions satisfied. We are
not laying down such a principle as is apprehended by Mr.
Sen. All that we are saying is that in the backdrop of the
facts and circumstances of this particular case, we do not
think that the suit has been filed to secure the claim in the
pending foreign arbitral proceedings. By this finding and
conclusion and which is based entirely on the facts and
circumstances of each case, we are not laying down any
general rule, much less a principle of law that a suit
simplicitor to secure a claim in the arbitration abroad
would be always maintainable in the Admiralty jurisdiction
of this Court. We think that our clarification is enough to
understand the ultimate conclusion that we have reached.
It is only to negate the argument of Mr. Sen that the
instant suit is filed to claim arrest of a vessel as a security
for the pending foreign arbitration that we have made
these detailed observations.
41. The aforesaid enunciation of law indicates that when the
arrest of the ship is sought to be contested as being an exercise
directed merely to ensure the security in aid of arbitration
proceeding, the Court is enjoined to evaluate the true nature and
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remit of the plaint. The Division Bench was cautious enough to
explicitly observe that it did not propose to lay down that the suit to
secure the claim in arbitration proceeding can be filed irrespective
of the requirements stipulated in the Admiralty Act, 2017. The
question as to whether the suit has been instituted merely to secure
the claim in arbitration proceeding has to be decided on the facts
and circumstances of each case. Applying the aforesaid test, in the
said case, the Division Bench observed that it did not find that the
said suit had been filed to secure the claim in the pending foreign
arbitration proceeding.
42. On the aforesaid touchstone, reverting to the facts of the case,
from a meaningful perusal of the averments in the plaint as a whole
it becomes abundantly clear that the plaintiff/respondent has
premised its claim on the facts that it had provided services to
defendant vessel at the instance of its owners, employees,
representatives etc. The particulars of the claim (Exhibit HH to the
plaint) comprises costs of dry docking and special survey, including
repairs procurement of spares and supplies, costs of supplies from
17th November, 2020 to 4th March, 2021 and agency fees from 17th
November, 2020 till the date of the institution of the suit. The
plaintiff has thus sought a decree against the defendant vessel to
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pay to the plaintiff a sum of USD 187308.32 along with interest. The
plaintiff asserts that the claims of the plaintiff are maritime claims
under section 4(1)(h), 4(1)(p) and 4(1)(t) of the Admiralty Act,
2017. A reading of the plaint as a whole thus prima facie leads to an
inference that the plaintiff has instituted a comprehensive suit for
the recovery of the amount which plaintiff asserts constitutes a
maritime claim.
43. In other words the suit does not appear to be a measure for
interim relief only but presents itself as a substantive action for
recovery of maritime claim. The submission on behalf of the
applicant that the suit is instituted merely to secure the claim, in an
arbitration proceeding, is simply not borne out by the averments in
the plaint and the material on record.
44. The aforesaid consideration dissuades me from acceding to
the submission on behalf of the applicant that in view of the
invocation of the arbitration and commencement of the arbitration
proceeding, the arrest of the vessel in an action in rem is legally
unsustainable. The challenge to the order of arrest on this count
thus falls through.
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Restricted liability of the owner of the vessel under the Charter
Party Agreement :-
45. It was urged on behalf of the applicant that the under the
terms of the Charter Party Agreement dated 19 th October, 2015, the
liability of the owner of the vessel was restricted to 90% of the
special survey costs. In contrast, all the costs and expenses of the
repair and maintenance of the vessel were to be borne by the
Charterer. The plaintiff has in breach of the contract professed to
saddle the owner with the costs of non class survey repairs and
upkeep of the vessel as well as the costs of drydocking which was
under the terms of the contract to the account of the plaintiff. The
plaintiff thus inflated the claim exponentially. Mr. Shanker invited
attention of the Court to the clauses in the Charter Party
Agreement which, according to him, make it explicitly clear that
the owners were not liable to pay any amount save and except 90%
of the special survey costs. Even the expenses of drydocking were
exclusively to the account of the plaintiff.
46. Mr. Kamat, learned counsel for the plaintiff, on the other
hand, submitted that the case sought to be developed at the time of
canvassing submissions is at variance with the case set up in the
Interim Application. There are admissions by way of pleadings in
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the Interim Application wherein the applicant/ defendant admitted
that it had agreed to incur 90% of the costs of drydocking and
special survey. According to Mr. Kamat, the applicant/defendant did
not question the apportionment of the liability. What was sought to
be put in contest was the quantum of the liability qua each item of
expenses claimed to have been incurred by the plaintiffm on the
premise that there was no break up of the expenses, no invoices and
the invoices were not supported by underlying documents. And
there was misfeasance on the part of the plaintiff in not properly
negotiating with the vendors before the invoices were raised. To this
end, reliance was sought to be placed on the correspondence
exchanged between the parties, prior to the institution of the suit.
47. Before dealing with the aforesaid rival contentions, it may be
expedient to note few clauses of the Charter Party dated 19 th
October, 2015. The following sub-clauses of Clause 10 under the
caption 'Maintenance and Operation' bear upon the controversy.
10] Maintenance and Operation :-
(a)(i) Maintenance and Repairs- During the Charter
period the vessel shall be in the full possession and at
the absolute disposal for all purposes of the every
respect. The charters shall maintain the vessel, her
machinery, boilers, appurtenances and spare parts in
a good state of repair, in efficient operating condition
and in accordance with good commercial
maintenance practice and, except as provided for in
Clause 14(I), if applicable, at their own expenses they
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shall at all times keep the vessel's Class fully up to
date with the classification society indicated in Box
10 and maintain all other necessary certificates in
force at all times.
(b) Operation of the Vessel- The Charterers shall at
their own expense and by their own procurement
man, victual, navigate, operate, supply, fuel and
whenever required, repair the Vessel during the
Charter period and they shall pay all charges and
expenses of every kind and nature whatsoever
incidental to their use and operation of the Vessel
under this Charter, including annual flag State fees
and any foreign general municipality and/or state
taxes excluding any Singapore Taxes associated with
the Owner's profit and revenue. The master, officers
and crew of the vessel shall be the servants of the
Charteres for all purposes whatsoever, even if for any
reason appointed by the owners. Charterers shall
comply with the regulations regarding officers and
crew in force in the country of the Vessel's flag or any
other applicable law.
(f) Use of the Vessel's Outfit, Equipment and
Appliances-
The Charterers shall have the use of all outfit,
equipment, and appliances on board the vessel at the
time of delivery, provided the same or their
substantial equivalent shall be returned to the
owners on re delivery in the same good order and
condition as when received, ordinary wear and tear
excepted. The Charterers shall from time to time
during the Charter period replace such items of
equipment as shall be so damaged or worn as to be
unfit for use. The Charterers are to procure that all
repairs to or replacement of any damaged, worn or
lost parts or equipment to effected in such manner
(both as regards workmanship and quality of
materials) as not to diminish the value of the vessel.
The Charterers have the right to fit additional
equipment at their expense and risk but the
Charterers shall remove such equipment at the end of
the period if requested by the owners. Any equipment
including radio equipment on hire on the vessel at
time of delivery shall be kept and maintained by the
charterers and the Charterers shall assume the
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obligations and liabilities of the owners under any
lease contracts inn connection therewith and shall
reimburse the owners for all expenses incurred in
connection therewith, also for any new equipment
required in order to comply with radio regulations.
(g) Periodical Dry Docking- The Charterers shall dry
dock the Vessel and clean and paint her underwater
parts whenever the same may be necessary, but not
less than once during the period stated in Box 19 or, if
Box 19 has been left blank, every sixty (60) calendar
months after delivery or such other period as may be
required by the classification society or flag state.
90% of the costs of the special survey shall be borne
by the owners and the balance 10% shall be borne by
the Charterers. Charterers shall be granted an
allowance of a period free of charter Hire from the
date the vessel embarks on her voyage for the special
survey and until the vessel returns on site to
recommence the End Contract. The Charterers
undertake to exercise their best endeavors to
complete the special survey and return the vessel on
site in the shortest possible period.
48. Clause 10(a)(i), inter alia, provides that the Charterer shall
maintain the vessel, her machinery, boilers and spare parts in a
good state of repair, in efficient operating condition and in
accordance with good commercial maintenance practice. Sub clause
(b) provided for the operation of the vessel at the expenses of the
Charterer and whenever required repair the vessel during the
charter period. Sub clause (f) casts an obligation on the Charterer to
return to the owner the vessel in the same good order and condition
as it was when received, ordinary wear and tear excepted.
49. The controversy in the case at hand primarily revolves
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around the clause (g) which provides for periodical drydocking.
Under sub clause (g), the Charterer was enjoined to drydock the
vessel and clean and paint her under water parts whenever the
same may be necessary but not less than during the period specified
and, if not specified, over 60 calendar months after delivery. The
second part of clause (g) provides that 90% of the costs of special
survey shall be borne by the owners and balance 10% shall be borne
by the charterer.
50. In the light of the aforesaid stipulations in the Charter Party,
the nature of the case set up by the plaintiff and the response
thereto, as is evident from the averments in the Interim
Application, need to be appreciated.
51. It is the case of the plaintiff that it had carried out statutory
drydock and incurred the costs of special survey in its entirety.
Despite having incurred the expenses and raised invoices, the
defendant committed default in payment of its share of costs and
expenses. Paragraph 34 of the plaint culls out the nature of the
claim. It reads as under:
34] The plaintiff submits that despite carrying out the
statutory dry dock as well as repairs in the dry dock,
procuring materials from various vendors, the owners
of the defendant vessel have failed to pay for the same.
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Under the terms of the Charterparty, the owners of the
defendant vessel were required to incur 90% of these
payments with the liability of the plaintiff being 10%.
Despite providing the owners of the defendant vessel
with invoices, work done certificates, invoices raised
by the vendors and the proof of remittances, the
owners of the defendant vessel have failed and
neglected to make the payments which they were
obliged to make under the Charterparty.
52. The aforesaid averments were sought to be met by the
applicant/defendant in paragraph 40 of the Interim Application.
The applicant/defendant contended that it agreed that it was liable
to pay 90% of the costs in terms of clause 10(g) of the Charter Party
extracted above. However, the non-payment thereof was sought to
be justified by ascribing reasons in sub para (a) to (k) of paragraph
40 of the Interim Application. It would be expedient to extract the
sub paragraph (a) and (h) as the rest of the paragraphs contained
the amount which the plaintiff owes to the defendant on other
counts. Relevant part of paragraph 40 reads as under:-
40. With reference to paragraph 34, the applicants agree
that 90% is payable, as per the terms of clause 10(g) of the
bare boat charter. This amount has not been paid because :
(a) Insufficient proof of the Class Special Survey liability
has been provided by the respondent/plaintiff to the
applicants, as referred to above. Further, not all tax
invoices provided pertain to the alleged Class Special
Survey liability. There are also discrepancies between the
invoice at Exhibit T (at Page 142 of the plaint) with the
plaintiff's compilation of documents.
(h) Respondent/plaintiff's incorrectly claim USD 1,252,432
towards non-Class Special Survey Costs which were to the
Respondent/plaintiff's account and/or arose as a result of
the respondent/plaintiff's failure to properly maintain the
applicant vessel.
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53. After referring to the invoices, raised on the defendant, in
paragraph 37, the plaintiff has averred as under:-
37] The owner of the defendant vessel has deliberately
failed to make payments on specious grounds. The
plaintiff was obliged to carry out dock /special survey.
Though not contractually bound, the plaintiff kept the
owners in the loop before carrying out the said survey.
The owners of the defendant vessel through their
representatives have confirmed Goa Shipyard to
carryout special survey/dry dock for the defendant
vessel had themselves negotiated with the vendors
from whom the plaintiff procured spare parts materials
etc for repairs of the defendant vessel. Mr. Jayaraman
Venkatraman had personally negotiated and approved
the vendors. Therefore, specious grounds on which the
owners of the defendant vessel are attempting to
renege from their obligations to make payments are
contrary to their own conduct and agreement. It is
clear that the plaintiff having got their vessel dry dock
are now trying to arm-twist the plaintiff by not paying
the entire amounts which they are obliged to pay under
the terms of the Charterparty and basis what was
agreed between the parties.
54. In response thereto, in paragraph 43 of the Interim
Application, the defendant/applicant inter alia contends as under:-
43] With reference to paragraph 37, the reasons
why no amounts are payable by the applicants to
the respondent/plaintiff have already been
previously made out above. In fact, there are
substantial sum due and payable by the
respondent/plaintiffs to the applicants. This suit
is nothing but a counter blast, with a view to try
and avoid liability. ......... .................... ..........
The applicants were not involved in, and have
not approved, the costing for the Class Special
Survey of the applicant vessel. The
respondent/plaintiffs have failed to show the
normal requirements to be entitled to
reimbursement of 90% of the Class Special
Survey expenses from the applicants.
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55. In the backdrop of the aforesaid pleading, at the outset, it is
necessary to appreciate arena of the controversy between the
parties. Evidently, there is no qualm over the fact that the
defendant/applicant was obligated to pay 90% costs of the Special
Survey. Upon perusal of the correspondence, which has been
exchanged between the parties, the fact that the Special Survey was
carried out at Goa Shipyard appears rather incontrovertible. The
controversy between the parties essentially seems to revolve
around the question as to whether the expenses which the plaintiff
claimed to have incurred properly fell in the realm of Special Survey
or they were non-class repairs. Additionally, the quantum of the
expenses allegedly incurred by the plaintiff is sought to be put in
contest on both the counts; one, the factum of repairs and two, the
expenses allegedly incurred therefor.
56. At this stage, it would be necessary to note that though a
distinction was sought to be drawn between the expenses of
drydocking and the Special Survey, yet, it seems that, the parties
did not appreciate the issue of liability for drydocking and special
survey costs in such water-tight compartments. In fact, in
paragraph 9 of the Interim Application while dealing with
averments in paragraph 4 of the plaint, the defendant contended
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that while the liability to pay the statutory drydock and repairs was
partly admitted, there was no amount due and payable by the
defendant/applicant after set off, of the liability of the plaintiff to the
defendant/applicant.
57. Mr. Ashwin Shanker, the learned counsel for the
applicant/defendant would, however, urge that the defendant has
consistently taken a stand that the liability of the defendant was
restricted to 90% of the Special Survey costs and non class repairs
were to the account of the plaintiff. To this end, attention of the
Court was invited to a communication dated 23rd December, 2019
whereby the plaintiff's attention was drawn to clause 10(b) of the
Charter Party, extracted above, and it was asserted that the
defendant was willing to assist in the procurement of the spares on
behalf of the VPT (the plaintiff), if payment could be made to them
in advance prior to the issue of purchase order for spares.
58. In the aforesaid context, the correspondence exchanged
between the parties, especially in the wake of demand made by the
plaintiff is required to be considered. In the communication dated
5th February, 2021, the plaintiff claimed a sum of USD 1375661.46
towards Special Survey Costs. Clause (a) to (d) and (g) of the said
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communication read as under:-
a) As you are aware, the vessel Special Surveys were
undertaken and completed at Goa Shipyard Ltd.
b) The Total expenditure incurred is INR
15,30,00,000/- (INR Fifteen Crores and Thirty Lakhs
Only) which is equivalent to USD 2,067,568/- (USD
Two Million Sixty-Seven thousand,five hundred and
sixty-eight Only).
(c) The entire total expenditure of INR
15,30,00,000/- was financed by VPT as requested by
PR in view of excellent on-going relationships.
(d) As per the Clause 10(g) of the Bare Boat Charter
between PR and VPT, the owner's Share (90%) is
Rs.13,77,00,000/- (Rs. Thirteen Crores Seventy
Seven Lakhs Only) which is equivalent to USD
1,860,810/-(USD One Million Eight Hundred Sixty
Thousand Eight Hundred Ten Only) and Charter's i.e.
VPT share is 10% amounting to INR 1,53,00,000/-
(INR One Crore Fifty Three Lacs Only) or USD
206756.
........ ...........
(g) Accordingly, we request to PR to
reimburse/refund an anount of INR 10,17,98,208/-
(INR Ten Crores Seventeen Lakhs Ninety Eight
Thousand Two Hundred Eight Only) which is
equivalent to USD 1,375,651.46 (USD One Million
Three Hundred and Seventy Five Thousand Six
Hundred Fifty One only) after adjusting an amount
due to PR as per (d) above and after adjusting VPT's
share of 10% of the Special Survey & Drydock
Expenses mentioned at (c) above. The amount
refundable to VPT in equivalent USD is
1,375,661.46/-.
59. In response to the aforesaid communication, the defendant
called upon the plaintiff to furnish a break down of the amount
claimed under paragraph (b) and (d) above and copies of
supporting documents for the work allegedly executed, so as to
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facilitate the defendant to verify as to whether the amounts claimed
were recoverable under clause 10(g) of the Charter Party. This was
followed by further exchange of correspondence leading to demand
by the plaintiff on 1st March, 2021 whereby the copies of invoices
and supporting documents were professed to be shared. The
demand was reiterated on 4th March, 2021.
60. In the communication dated 5th March, 2021, addressed on
behalf of the defendant, with reference to the previous
correspondence and in the context of the controversy, the
defendant asserted as under:-
5. Finally, on 25th February, 2021 by five emails VPT
sent CROPL copies of what you say are all relevant
invoices which make up the claims asserted. However,
VPT note that despite the special survey having been
completed more months earlier, VPT have yet to
provide very basic industry standard supporting
documents. VPT have merely provided invoices and a
table summarizing the invoices.
6. As VPT will recall CROPL and VPT agreed a matrix
of responsibility for the costs incurred for the special
survey which allocated costs between VPT and
CROPL. No attempt was made by VPT to put forward
claims based on an agreed allocation of costs and all
that VPT provided was a collection of invoices with no
apparent order, no supporting documents whatsoever
and no breakdown based on what was agreed still less
any evidence of payment let alone work completion
and delivery of parts and materials invoiced.
Moreover, CROPL was not at any stage given the
opportunity to verify or approve or re-negotiate
financial commitments before thy were made or
before invoices were issued.
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9. Once this has been done, we can discuss at an
operational and commercial level to try to reach some
agreement on what work was properly done and parts
and material supplied at what verifiable and proper
cost and for whose accounts the costs fall under the
agreed matrix of responsibility. There is also the
question of the time spent and agreement needs to be
reached on an appropriate time for VPT to have taken
to carry out the Class Special Survey having in mind
that CROPL have not been pain hire.
61. In the communication dated 23rd March, 2021, emanating
from the defendant, it was contended that the cost claimed by the
plaintiff related to routine maintenance and does not form part of
the Special Survey Drydocking Matrix of Responsibility, the parties
had agreed upon.
62. The following paragraphs of the said communication make the
stand of the defendant clear:-
There are costs related to routine
maintenance and not part of the special
survey/dry docking matrix of responsibility we
agreed upon. There are many examples of this
related to opex-navigational charts,servicing,
ships spares, lamps/lights, PPE, pest control, etc.
We have indicated all the attached amounting to
USD 1.2 mil for your easy reference. Do note that
out of this amount, almost USD 900,000 are only
pro-forma invoices and not even final invoices.
On the Goa dry dock charges, it is very
high. Despite the COVID situation, the vessel could
have been taken out of Goa and put into
anchorage, but that did not happen.
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63. A peculiar feature of the case at hand is that the parties
agreed that a 'Responsibility Matrix' was agreed upon prior to the
docking of the vessel for repairs, a copy of which is annexed at
Exhibit J to the Interim Application. The responsibilities of the
Charterer and joint responsibilities of owner and Charterer in the
ratio of 90% and 10% were carved out qua each of the items of the
repairs. Interestingly the parties are in unison on the point that
they disown the said Responsibility Matrix.
64. The situation which thus emerges is that, at this stage, the fact
remains that Special Survey of the vessel was carried out at Goa
Shipyard. Indubitably, the defendant/applicant was enjoined to pay
90% of the costs of the Special Survey. It seems the parties had also
agreed to share the responsibility as regards the items of the
repairs. The controversy between the parties revolves around the
issue as to whether particular item of repairs falls within the ambit
of Special Survey or a non-class repair, who was to incur the
expense of such repairs, whether there were documents in support
of the claim of the plaintiff of having incurred the expenses and the
like. In the very nature of things, these issues are rooted in facts. At
this juncture, the Court is not equipped to adjudicate these issues
which plainly warrant a trial.
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65. In the aforesaid view of the matter, I am not persuaded to
agree with the submission on behalf of the defendant/applicant that
liability of the applicant was restricted and, prima facie, there is
material to indicate that the plaintiff has exponentially inflated the
claim.
Suit claim includes the items for which the plaintiff has not incurred
any expenses and/or the defendant has already satisfied those
claims :-
66. Mr. Ashwin Shanker strenuously submitted that the falsity of
long list of claims of the plaintiff is borne out by the fact that the
plaintiff has included even those items which have been already
secured and/or paid for by the defendant, and for which no demand
has ever been raised on the plaintiff much less discharged by the
plaintiff.
67. Mr. Ashwin Shanker invited the attention of the Court to Item
No. 17 of the Chart containing the particulars of the expenses
allegedly incurred by the plaintiff for the defendant vessel. Mr.
Shanker submitted that the claim of Unique Marine Services was
already secured by the defendant in terms of the order dated 17 th
February, 2021 passed in Commercial Admiralty Suit (L) No. 10052
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of 2020 instituted by Unique Marine Services. Mr. Shanker would
further urge that the expenses allegedly shown to have been
incurred at Item Nos. 24, 25 and 37 of the said chart have also been
discharged by the defendant. Attention of the court was invited to
payment advice, Exhibit (f) to the affidavit in rejoinder dated 27 th
July, 2021, whereunder a sum of USD 12697.96 was paid by the
defendant to vendor Bureau Veritas.
68. Mr. Kamat, learned counsel for the plaintiff submitted that
the plaintiff agrees for a reduction of Rs. 26 lakhs claimed by the
plaintiff towards the claim of Unique Marine Services and a further
reduction of USD 12236.85 being the amount paid by the owners of
the defendant vessel, to Bureau Veritas.
69. Mr. Shanker further pointed out that even the claim of Indian
Register of Shipping for a sum of Rs. 12,27,031 and Triton Diving
Services Pvt. Ltd., for a sum of Rs. 1,78,180/- have been discharged
by the applicant. Mr. Shanker would thus urge that these
discrepancies and duplication demonstrate un-trustworthiness of
the claim of the plaintiff.
70. Indeed, the plaintiff concedes in no uncertain terms that the
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claims towards Unique Marine Services and Bureau Veritas are
required to be excluded from the total claim of the plaintiff. Prima
facie, the claims towards Indian Register of Shipping and Triton
Diving Services Pvt. Ltd. adverted to above, appear to be
contentious. However, I find it rather difficult to throw the entire
claim of the plaintiff overboard on account of aforesaid
discrepancies. The reason is not far to seek. Indisputably, the
Special Survey of the vessel has been carried out at Goa Shipyard.
The controversy, as is indicated above, revolves around the liability
qua each item of the repairs/expenses, which is essentially a matter
for trial. The proper course, in my considered view, would be to
reduce the security to be furnished by the defendant/applicant by
the aforesaid four items.
False case of urgency :-
71. Mr. Ashwin Shanker, would submit that there was no prospect
of the defendant vessel leaving territorial waters without necessary
custom and port clearances. Since the respondent/ palintiff had
imported the vessel by completing the customs formalities, it was
only the plaintiff who could have completed the re-export custom
formalities. Therefore, there was no pressing urgency to seek the
arrest of the vessel. Mr. Shanker invited the attention of the Court
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to the correspondence from Benline Agencies emphasizing that re-
export was required to be advised by the plaintiff. The attention of
the Court was also invited to the contentions in the affidavit in sur-
rejoinder that the plaintiff admitted that it had imported the
defendant-vessel under its own importer/exporter code, to bolster
up submission that the vessel could not have sailed without
completion of export formalities.
72. In opposition to this, Mr. Kamat laid emphasis on the fact that
in the Arbitration Petition filed by the owner of the defendant
vessel, it was noted that the vessel in question was already in
possession of the owner and its crew was on board the vessel. It was
further submitted that a person seeking the arrest of the vessel was
only required to satisfy the Admiralty Court that he had
undischarged maritime claim, to proceed in rem against the vessel.
73. There is a serious dispute as to whether the owner of the
defendant vessel was put in effective control over the defendant
vessel. In this proceeding and at this stage, I deem it superfluous to
delve deep into this contentious issue. In my view, what has to be
seen is whether the action of moving for arrest of the ship was
legally sustainable. It is not sought to be contested that the plaintiff
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had a maritime claim.
74. The reliance placed by Mr. Kamat on the judgment of this
Court in the case of Raj Shipping Agencies vs. Barge Madhwa and
Another6 to point out the distinction between an action for arrest of
a ship and an order of attachment before judgment seems well
founded. This Court pointed out the distinction in the following
words:
88] Also, to be borne in mind is the difference
between an arrest and an attachment. An arrest
cannot be equated to an attachment. A maritime
claimant has a right in rem which he is entitled to
exercise by an arrest of the ship. The only test he
has to satisfy is to show that he has prima facie a
maritime claim and identify the ship. As against
this, an attachment before judgment is a
discretionary interim order that any type of
Claimant would be entitled to apply upon satisfying
the requirements of the Code of Civil Procedure
(CPC). He is not entitled to an attachment as a
matter of right or as a manner of enforcement of a
right.
89] The arrest of a ship in an Admiralty claim in
rem is "sequestration" and not an "execution". In
Meeson paragraph 3.81 refers to the judgment in In
re Australian Direct Steam Navigation Company58
where the Master of the Rolls Sir George Jessel said
"The term 'sequestration' has no particular technical
meaning; it simply means detention of property by a
Court of Justice for the purpose of answering a
demand which is made. That is exactly what the
arrest of a ship is ......".
75. Since prima facie there does not seem to be much controversy
6 2020 SCC OnLine Bom 651
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over the fact that the plaintiff had a maritime claim and the plaintiff
had undertaken not to object the defendant making necessary
application and taking necessary steps to move the vessel or to
allow it to be sent out, I am not persuaded to hold that the action of
moving for the arrest of the ship was mala fide. Thus, the prayer of
the defendant to vacate the order of arrest on this count cannot be
acceded to.
76. The conspectus of the aforesaid consideration is that the
application for vacating the order of arrest of the vessel deserves to
be rejected. However, the amount of security to be furnished needs
to be scaled down to the extent of four claims adverted to above.
Hence, the following order.
ORDER
1] The application stands rejected.
2] However, the amount of security to be provided by the
defendant for the release of the defendant vessel stands reduced by:
(a) Rs. 23 lakhs towards the claim of Unique Marine Services.
(b) USD 12697.96 towards claim of Bureau Veritas.
(c) Rs. 12,27,031/- towards the claim of Indian Register of
Shipping.
(d) Rs. 1,78,180/- towards claim of Triton Diving Services.
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3] The reduction of security as regards Item (c) an d (d) is,
however, subject to the rights and contentions of the parties.
The application stands disposed in aforesaid terms with no
order as to costs.
(N.J.JAMADAR, J.)
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