Bombay High Court
Aurobindo Pharma Limited vs Nyk Theseus (Imo No. 9356701) And 2 ... on 7 June, 2023
Bench: N. J. Jamadar
2023:BHC-OS:4474
IA540-2020AWIA548-2020IN.DOC
Santosh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION NO. 540 OF 2020
IN
COMM ADMIRALTY SUIT NO. 14 OF 2020
Nippon Yusen Kabushiki Kaisha, a
Corporate entity organized under the Laws
of Japan, and carrying on business using
the trade name NYK Line and having its
office at Yusen Building, 3-2, Marunouchi 2
- Chome, Chiyoda -Ku, Tokyo, 100 - 0005, ...Applicant/
Japan Defendant No.2
In the matter between
Aurobindo Pharam Limited ...Plaintiff
Versus
NYK Theseus (IMO No.9356701) and ors. ...Defendants
WITH
INTERIM APPLICATION NO. 548 OF 2020
IN
COMM ADMIRALTY SUIT NO. 14 OF 2020
NYK Theseus (IMO No.9356701), a
Container Ship registered in Panama, and
flying the flag of Panama together with her
hull, tackle, engines, machinery, boats,
bunkers, equipment, paraphernalia, and all
other appurtenaces presently at Mumbai
Anchorage, in Indian territorial waters and
within the Admiralty and Vice Admiralty ...Applicant/Ori.
Jurisdiction of this Hon'ble Court. Defendant No.1
In the matter between
Aurobindo Pharam Limited ...Plaintiff
Versus
NYK Theseus (IMO No.9356701) and ors. ...Defendants
1/36
::: Uploaded on - 07/06/2023 ::: Downloaded on - 08/06/2023 22:01:54 :::
IA540-2020AWIA548-2020IN.DOC
Mr. Venkatesh Dhond, Senior Advocate, a/w Abhimanyu
Singh, Akshay Kolsepatil, i/b Ms. S. Priya, for the
Applicant/Ori. Defendant Nos.1 & 3.
Mr. Prathamesh Kamat, a/w Vishal Shiryan, Arsalan Thaver,
i/b Vishal Shriyan, for the Respondent in IA/540/2020 -
Ori. Plaintiff.
CORAM: N. J. JAMADAR, J.
RESERVED ON: 19th JANUARY, 2023
PRONOUNCED ON: 7th JUNE, 2023
ORDER:-
Interim Application No.540 of 2020
1. The applicant - defendant No.2 has preferred this
application to dismiss the suit and return the security
furnished by the applicant, revoke the grant of leave under
Clause XII of the Letters Patent and, in the alternative, return
the plaint to the plaintiff for presentation before the appropriate
forum. A direction is also sought against the plaintiff to pay an
amount of Rs.35,00,000/- together with interest on cash deposit
of Rs.6,50,77,230.68 at the rate of 18% p.a. from the date of
deposit i.e. 18th December, 2019 till payment and/or realization.
2. The applicant - defendant No.2 is a legal entity organized
under the laws of Japan.
3. Aurobindo Pharma Limited, the plaintiff, instituted a
commercial admiralty suit against the applicant - defendant
No.2, NYK Theseus (IMO No.9356701) defendant No.1 - the
IA540-2020AWIA548-2020IN.DOC
Vessel and NYK Line (India) Pvt. Ltd., defendant No.3, asserting
that the applicant - defendant No.2 is a legal entity organized
under laws of Japan and carries on business as a carrier under
the trade name NYK Line. Defendant No.3 is a 100% subsidiary
of the applicant, in India. The registered owner of defendant
No.1 Vessel NYK Theseus Corporation SA is a one ship company
incorporated under the Laws of Panama. The Vessel was
entirely managed and controlled by defendant No.2. The
registered owner of defendant No.1 Vessel was also a company. It
was owned, financed, operated, funded, managed and controlled
entirely by defendant No.2 and, thus, for all practical purposes
defendant No.2 was the owner and/or deemed owner of
defendant No.1 Vessel.
4. Asserting the aforesaid jural relationship inter se
defendants, the plaintiff claimed that it had entrusted defendant
No.2 with carriage of pharmaceutical cargo consisting of 20
pallets of CENFURX AXET INTM from the port of Nhava-Sheva
to London Gateway Port, UK. The cargo was shipped on board
the vessel CCNI ARAUCO 6327 in the refrigerator container and
a Bill of Lading No. MAN0631846/003 dated 8 th August, 2016
was issued by defendant No.3 as an agent for and on behalf of
defendant No.2. En-route the discharge port the said vessel
IA540-2020AWIA548-2020IN.DOC
CCNI ARAUCO 6327 caught fire at Hamburg Port. Eventually,
the plaintiffs goods were transshipped by defendant No.2 on
board another vessel and the same were delivered to the
consignee GlaxoSmithKline at the place of delivery, on 3rd
November, 2016. However, the consignee rejected the said cargo
and returned the same to the plaintiff. Hence, the plaintiff has a
maritime claim under Section 4(1)(f) of the Admiralty
(Jurisdiction and Settlement of Maritime Claims) Act, 2017 ("the
Admiralty Act, 2017") for loss or damage in connection with the
said cargo. The plaintiff was, therefore, entitled to file an action
in rem and seek arrest of any vessel owned by the
carrier/defendant No.2.
5. In addition, it was asserted that the plaintiffs claim was in
bailment for loss and damage to the cargo when it was in the
custody, care and control of the carrier as bailee, rendering it
unfit for its intended use. It was further asserted that the
plaintiff also had a claim in tort and/or in negligence against
defendant No.2. The plaintiff was thus entitled to proceed in
personam against defendant No.2 for recovery of its claim for
loss and damage to its goods.
6. The plaintiff thus prayed for arrest of defendant No.1 -
Vessel and a money decree in the sum of US$ 825,600 together
IA540-2020AWIA548-2020IN.DOC
with interest at the rate of 18% p.a. and in the sum of
Rs.23,56,542/- along with interest at the rate of 18% p.a. from
the date of institution of the suit till payment and/or realization.
7. Defendant No.3 had filed a caveat against the arrest of
defendant No.1 - Vessel. In order to obviate the arrest of
defendant No.1 - Vessel, the applicant - defendant No.2, on a
without prejudice basis, furnished security in the form of cash
deposit.
8. This application is preferred with the assertions that this
Court lacks jurisdiction to hear and determine the suit as under
Bill of Lading exclusive jurisdiction is conferred on Tokyo
District Court. The applicant contends the plaintiff was
otherwise not entitled to maintain an action in rem against
defendant No.1 - Vessel. The registered owner of NYK Theseus,
the vessel, does not owe any personal liability and therefore in
the absence of in personam liability of the registered owner an
action in rem against defendant No.1 - Vessel is not tenable. The
claim of the plaintiff that applicant No.2 is the owner and/or
deemed owner/true owner or real owner of defendant No.1 -
Vessel is stated to be a subterfuge to maintain an action in rem.
It is contended that none of the conditions stipulated by Section
IA540-2020AWIA548-2020IN.DOC
5 of the Admiralty Act, 2017 to justify the arrest of defendant
No.1 in rem is fulfilled.
9. The applicant asserts defendant No.1 - Vessel is not the
sister ship of M.V. CCNI ARAUCO 6327, in which the plaintiff's
cargo was loaded. No case for lifting the corporate veil is made
out. The applicant claimed to be only the Time Charter of
defendant No.1 - Vessel under the Time Charter party dated 18 th
November, 2008. Since the plaintiff has no maritime claim
against defendant No.1 - Vessel and/or her registered owner
NYK Theseus, defendant No.1 - Vessel could not have been
proceeded against or arrested or called upon to furnish security.
Hence, the security is required to be returned.
10. The tenability of the suit is also assailed on the ground
that the suit is barred by law of limitation as in accordance with
the provisions of the Hague Visby Rules and the Indian Carriage
of Goods by Sea Act, 1925 ("the Act, 1925"), the applicant -
carrier stood discharged from any liability after expiry of one
year from the date of the delivery of the cargo. Institution of
suit on 5th September, 2019 in the face of the confirmation of
rejection of the goods latest by 7 th March, 2017 is stated to be
hopelessly barred by limitation. Thus, the suit deserves to be
dismissed on this count as well and the security refunded.
IA540-2020AWIA548-2020IN.DOC
11. The plaintiff resisted the application by filing an affidavit-
in-reply. It was contended that this Court has jurisdiction to
entertain and determine the suit. Since defendant No.1 - Vessel
was within the territorial waters and within admiralty
jurisdiction of this Court when the plaintiff moved for arrest of
defendant No.1, this Court had the jurisdiction to entertain the
admiralty action. According to the plaintiff, the cause of action
arose within the admiralty jurisdiction of this Court. In any
event, the clause conferring jurisdiction on the District Court,
Tokyo does not preclude an admiralty action in rem against
defendant No.1 - Vessel. It was denied that defendant No.1 -
Vessel was not liable to be arrested for the maritime claim. The
claim of defendant No.2 that it was only a Time Charter of
defendant No.1 was put in contest. Applicability of the Hague
Visby Rules as well the Indian Carriage of Goods by Sea Act,
1925 was also put in contest. The application to dismiss the
suit, release the security and pay damages as claimed by
defendant No.2 was stated to be wholly misconceived.
Interim Application No.548 of 2020
12. IA/548/2020 is filed on behalf of defendant No.1 - Vessel
seeking dismissal of the suit qua defendant No.1 - Vessel on the
ground that the plaintiff is not entitled to entertain an action in
IA540-2020AWIA548-2020IN.DOC
rem against defendant No.1 - Vessel, for the reasons assigned in
the aforesaid application taken out by defendant No.2.
13. The plaintiff has contested the application reiterating that
NYK Theseus the registered owner of defendant No.1 and
defendant No.2 are one and the same entities and/or alter ego
of each other and in the circumstance defendant No.1 - Vessel is
liable to be proceeded against for enforcement of the liability of
defendant No.2.
14. I have heard Mr. Dhond, the learned Senior Advocate for
the applicant, and Mr. Kamat, the learned Counsel for the
plaintiff, at some length. I have also perused the averments in
the plaint, applications and affidavits-in-reply thereto. The
learned Counsels have taken me though the relevant documents
and the governing provisions.
15. Mr. Dhond canvassed a three-pronged submission. First,
action in rem against defendant No.1 vessel was wholly
unsustainable. The plaintiff moved to arrest defendant No.1 -
Vessel on the basis of omnibus claims. Neither a case for
piercing the corporate veil nor for invocation of alter ego
principle was made out. Defendant No.2 being only a time
charterer of defendant No.1 - Vessel, Defendant No.1 Vessel
could not have been arrested for the alleged in personam
IA540-2020AWIA548-2020IN.DOC
liability of defendant No.2 in the absence in personam liability of
the registered owner of defendant No.1 - Vessel, which is a
distinct entity.
16. Mr. Dhond urged with a degree of vehemence that the
plaint singularly lacks the allegations of fraud or dishonest
financial transactions. On the contrary, the allegations in the
plaint are that defendant No.2 had resorted to the device of
incorporating "one ship company" at diverse locations for tax
benefits. Therefore, according to Mr. Dhond, no case for lifting
the corporate veil was even remotely made out. The entire
edifice of beneficial ownership of defendant No.1 - Vessel by
defendant No.2, thus crumbles and, therefore, the security
furnished to obviate the arrest of defendant No.1 - Vessel is
required to be refunded along with damages and costs.
17. To bolster up the aforesaid submissions Mr. Dhond placed
reliance on a Division Bench judgment of this Court in the
matter of Polygreen International DMCC vs. MT Pamboor 2 (IMO
9914852)1, a judgment of learned Single Judge of this Court in
the case of Kimiya Shipping INC vs. M.V. Western Light2, a
1 2022 SCC Online Bom 1704.
2 2014 SCC Online Bom 257.
IA540-2020AWIA548-2020IN.DOC
judgment of this Court in the case of M/s. Universal Marine vs.
M/T Hartati.3
18. Second, Mr. Dhond would urge that the suit instituted on
5th September, 2019 was clearly barred by law of limitation.
Banking upon the provisions contained in the Indian Carriage
of Goods by Sea Act, 1925 ("the Act, 1925"), Mr. Dhond would
urge that under Article 3 Rule 6 of the Act, 1925, the carrier of
the ship stands discharged from all liabilities in respect of loss
or damage unless the suit was brought within one year after
delivery of goods or the date when the goods should have been
delivered. Even if the case of the plaintiff as pleaded in
paragraph 49 of the plaint was taken at par and it was assumed
that the cause of action lastly arose on 16 th October, 2017, as
claimed by the plaintiff, institution of the suit on 5 th September,
2019 was clearly barred by law of limitation.
19. Third, Mr. Dhond submitted that even otherwise this
Court has no jurisdiction to entertain, try and adjudicate the
suit as under the Hague Rules legislations, which govern the
contract between the parties, the District Court at Japan was to
have exclusive jurisdiction to entertain any dispute arising out
of carriage of the goods. In any event, according to Mr. Dhond,
3 2014(2) Bom CR 854.
IA540-2020AWIA548-2020IN.DOC
the goods were shipped at Nhava Sheva Port, which is beyond
the ordinary original civil jurisdiction of this Court. And,
therefore, this Court has no territorial jurisdiction to entertain,
try and decide the suit.
20. Mr. Kamat, the learned Counsel for the plaintiff, joined the
issues sought to be raised on behalf of the applicant. Mr.
Kamat would urge that the plaint contains adequate averments
to indicate that the applicant - defendant No.2 is the owner of
defendant No.1 - Vessel for all intent and purpose. In the plaint,
the plaintiff has elaborately spelled out the modus operandi
adopted by defendant No.2 to own and operate a fleet of
hundreds of vessels. In this view of the matter, according to Mr.
Kamat, at this stage, the Court would not be justified in delving
deep into the contentions of the applicant - defendant No.2 as
the questions as to whether the case for lifting corporate veil is
made out or defendant No.2 is the alter ego of NYK Theseus
Corporation, the registered owner of defendant No.1 - Vesel, are
the matters for trial. At this stage, only the averments in the
plaint are required to be considered. So construed, according to
Mr. Kamat, no case for the release of the security or rejection
and/or return of the plaint has been made out.
IA540-2020AWIA548-2020IN.DOC
21. Mr. Kamat would urge that the reliance sought to be
placed on the Hague Rules and the Carriage Of Goods By The
Sea Act, 1925 is of no assistance to the applicant/defendant
No.2. Those rules would apply provided there is specific
stipulation in the Bill of Lading. In the absence thereof, neither
the jurisdiction of the Court can be questioned nor the plea of
the limitation can be urged. Mr. Kamat would further submit
that the question of applicability of the provisions of Japanese
laws, is a question of fact and, therefore, a matter for trial. At
any rate, according to Mr. Kamat, the aspect of limitation is a
mixed question of law and fact and cannot be legitimately
adjudicated in an omnibus application ranging from refund of
security to rejection of plaint to award of damages.
22. To being with, uncontroverted facts. The plaintiff claimed
to have entrusted the cargo to defendant No.3, a 100%
subsidiary of defendant No.2, a named carrier for carriage at
the port of Nhava Sheva to London Gateway Port UK. The cargo
was shipped on board the vessel M.V. CCNI ARAUCO 6327. The
cargo was allegedly damaged on account of the fire on board
M.V. CCNI ARAUCO 6327. GalxoSmithKline, the consignee,
allegedly refused to accept the delivery of the cargo.
IA540-2020AWIA548-2020IN.DOC
23. Evidently, no material is placed on record to show who is
the registered owner of M.V. CCNI ARAUCO 6327. Neither M.V.
CCNI ARAUCO 6327 is proceeded against in rem nor the
registered owner of M.V. CCNI ARAUCO 6327 is proceeded
against in personam.
24. The case of the plaintiff is that NYK Theseus Corporation
SA, the registered owner of defendant No.1 is a one ship
company incorporated under the laws of Panama. Defendant
No.1 - Vessel is, however, operated, managed and controlled by
defendant No.2 - applicant. Registered owner of defendant No.1
- Vessel NYK Theseus Corporation SA., is also a company which
is owned financed, operated, funded, managed and controlled
entirely by defendant No.2. For all practical purposes, according
to the plaintiff, defendant No.2 is the owner and/or deemed
owner of defendant No.1 - Vessel (paragraph 7 of the plaint).
25. In the Equasis Folder in respect of NYK Theseus,
defendant No.1 - Vessel, NYK Theseus Corporation SA is shown
as a registered owner of defendant No.1 - Vessel since 11 th
November, 2016. It also indicates that Osaki Marine
Corporation was the erstwhile registered owner of defendant
No.1 - Vessel since 25th November, 2008. One NYK Theseus
IA540-2020AWIA548-2020IN.DOC
Ship Management PTE Limited is shown ISM manager of
defendant No.1 - Vessel since 28th April, 2009.
26. In the backdrop of the aforesaid facts, the crucial question
that wrenches to the fore is whether the plaintiff was justified in
proceeding in rem against defendant No.1 - Vessel and seeking
its arrest for enforcement of the maritime claim which the
plaintiff claimed to have against defendant No.2?
27. Recourse to few provisions of the Admiralty Act, 2017 may
be apposite. Section 2(1)(f) of the Admiralty Act, 2017 defines,
"maritime claim", to mean a claim referred to in Section 4.
Section 4(1) of the Act, 2017, in turn, contains a list of the
claims which are designated as maritime claims. In the context
of the indisputable transaction at hand, the relevant part of
Section 4(1)(f) can be extracted as under:
"4. Maritime claim.- (1) The High Court may exercise
jurisdiction to hear and determine any question on a
maritime claim, against any vessel, arising out of any -
.........
(f) loss or damage to or in connection with any goods.
........"
28. Under Section 5 of the Act, 2017, the High Court may
order arrest of any vessel which is within its jurisdiction for the
purpose of providing security against the maritime claim upon
IA540-2020AWIA548-2020IN.DOC
arriving at the satisfaction regarding the conditions precedent
for arrest stipulated therein. Section 5 reads as under:
"5. Arrest of vessel in rem.-- (1) The High Court may order
arrest of any vessel which is within its jurisdiction for the
purpose of providing security against a maritime claim
which is the subject of an admiralty proceeding, where the
court has reason to believe that--
(a) the person who owned the vessel at the time when
the maritime claim arose is liable for the claim and is the
owner of the vessel when the arrest is effected; or
(b) the demise charterer of the vessel at the time when
the maritime claim arose is liable for the claim and is the
demise charterer or the owner of the vessel when the arrest
is effected; or
(c) the claim is based on a mortgage or a charge of the
similar nature on the vessel; or
(d) the claim relates to the ownership or possession of
the vessel; or
(e) the claim is against the owner, demise charterer,
manager or operator of the vessel and is secured by a
maritime lien as provided in section 9.
(2) The High Court may also order arrest of any other
vessel for the purpose of providing security against a
maritime claim, in lieu of the vessel against which a
maritime claim has been made under this Act, subject to the
provisions of sub-section (1):
Provided that no vessel shall be arrested under this
sub-section in respect of a maritime claim under clause (a)
of sub-section (1) of section 4."
29. The case at hand, would primarily be covered by Clause (a)
of Sub-section (1) of Section 5. If the said stipulation is
satisfied, then the applicability of the provisions contained in
Sub-section (2) of Section 5 justifying the arrest of, "any other
vessel" for the purpose of providing security against a maritime
claim would crop up for consideration. It is imperative to note
that the provisions of Sub-section (2) empowering the High
IA540-2020AWIA548-2020IN.DOC
Court to order the arrest of any other vessel in lieu of the vessel
against which a maritime claim has been made, are subject to
the provisions of Sub-section (1). Thus, the arrest of a "sister
ship" must also relate to one of the clauses of Sub-section (1)
and satisfy the conditions thereof.
30. As noted above, in the case at hand, defendant No.1 -
Vessel is not the vessel on board the cargo was laden. Thus,
primarily, the plaintiffs have a maritime claim for loss or
damage to or in connection with the cargo against the vessel
M.V. CCNI ARAUCO 6327. The plaintiffs, however, profess to
arrest defendant No.1 - vessel on the premise that defendant
No.2 carrier is the "owner" of defendant No.1 - Vessel and thus
defendant No.1 satisfies the requirement of, "any other vessel"
under Sub-section (2) of Section 5 of the Act, 2017.
31. It would be necessary to note that the existence of a
maritime claim against a vessel, of which the vessel proceeded
against is claimed to be a sister ship, "is imperative". It does not
appear that under the Act, 2017, the arrest of any vessel against
which there is no maritime claim, is permissible. In the case of
MT Pamboor 2 (supra), a submission was sought to be
canvassed premised on the difference in the phraseology used in
Section 5(1) of the Admiralty Act, 2017 and Article 3 of Arrest
IA540-2020AWIA548-2020IN.DOC
Convention that, under the Admiralty Act, 2017 arrest of even
the vessel against which there is no maritime claim, is
permissible. This submission was repelled by the Division
Bench by enunciating that Section 5(1) requires that there be a
maritime claim against the vessel sought to be arrested. Section
5(2) is a fall back position, if the vessel against which there is
the maritime claim cannot be arrested, then any other vessel
can be arrested, but this has to be in lieu of the vessel against
which there is a maritime claim. The maritime claim itself must
exist in both cases.
32. The aforesaid enunciation thus makes it abundantly clear
that for the arrest of a, "sister ship" under Section 5(2) of the
Act, 2017 for enforcement of a maritime claim against a vessel,
the commonality of the ownership of both the vessels is required
to be established. In other words, is it incumbent upon a
person moving for the arrest of a vessel, being the other vessel,
to establish the nexus between the vessel against which
maritime claim exists and the other vessel as the "sister ship".
33. How this element is professed to be satisfied by the
plaintiff in this case? Recourse to the pleadings contained in
paragraphs 37 to 39 of the plaint, in which the alleged modus
operandi of defendant No.2 is sought to be spelled out, becomes
IA540-2020AWIA548-2020IN.DOC
necessary, as that constitutes the core of the plaintiffs case to
arrest defendant No.1- Vessel as the sister ship of M.V. CCNI
ARAUCO 6327. They read as under:
"37. The Plaintiff submits that NYK Line is the trade name of
Defendant No.2 Nippon Yusen Kabushiki Kaisha, a legal entity
registered under the laws of Japan. NYK Line is a well-known
carrier internationally and operates at ports worldwide including
several ports in India. Defendant No.2 is the 6 th largest container
carrier in the world and as per the website of their India agents,
they own and operate a fleet of 799 major ocean vessels (as at
the end of 2017) including 97 container ships. The modus
operandi or the manner in which Defendant No.2 acquires ships
and owns, operates, manages, funds and controls the ships as a
carrier for sea transportation of goods, is as follows :-
a. Defendant No.2 acquires a ship either as a new
building or from the secondhand market.
b. Defendant No.2 then incorporates a company in a
flag of convenience country such as Panama, Liberia etc. This is
because ship manning, regulatory and operational requirements
for ships under such flags of convenience are not as stringent as
they would be in other countries such as India or in other parts
of Europe, etc. These countries also offer substantial tax rebates
and concessions in respect of earnings out of operation of ships.
In recent years, Singapore has also offered various incentives for
registering ships under the Singapore flag by non-Singapore
companies with the only requirement being that the vessel be
registered in the name of a Singapore Company. Thus this would
also require incorporation of a ship owning company in that
country. It is only for the purpose of convenience that companies
are set up in such jurisdictions so that the ship is registered in
the ownership of such companies as only then it can fly the flag of
such country and avail of all the benefits. Such companies have
no other assets except the ship in question.
c. These companies have a nominal share capital and
are not in a position to raise funds to acquire ships. The funding
is entirely done by the parent company who has set up the
company in such jurisdictions. The company may have nominee
local Directors and/or nominee shareholders as may be required
by local law. However they act as per the dictates of the present
company. The ship is then transferred to such company which is
managed, operated and controlled by the parent company from
outside the country of the flag of the ship either directly or by
appointing a ship manager. The profits earned from the operation
of the ship are made available to the parent company by using
various methods.
d. Defendant No.2 has been doing precisely this. One-
ship companies are registered in such countries but are funded,
managed, operated and controlled by Defendant No.2. These one-
ship companies are nominees of Defendant No.2. The address of
these one ship companies is also shown as C/o. NYK Line, Japan.
IA540-2020AWIA548-2020IN.DOC
e. These ships are then operated by Defendant No.2 as
carrier. The management of these ships is also done by Defendant
No.2 and/or a related entity.
f. These ships are a part of NYK Fleet of ships and
Defendant No.2 issues Bills of Lading as carrier in respect of
goods transported on these ships. It is however possible that
NYK Line may also allow other slot charterers to whom space on
the ships is leased out for shipment of containers by slot
charterers as carriers.
g. All profits of such companies from ship owning
ultimately enure to the benefit of Defendant No.2. Whenever the
ship owing entity require funds, these are provided by Defendant
No.2. The company has no independent existence and is set up
solely for the purpose of acting as registered owner of the ship.
These one-ship companies are nominees of Defendant No.2.
h. All of these ships have the prefix "NYK". In this
manner Defendant No.2 represents to the whole would that this is
their ship and they are the owners and carriers. This gives
confidence to shippers and exporters to give their cargo for sea
transportation to Defendant No.2. Shippers therefore rely upon
this representation to make shipments on such " NYK" vessels of
Defendant No.2. Annexed hereto and marked as Exhibit "O" is a
list of 23 ships owned operated managed and controlled by
Defendant No.2 in the manner aforementioned. This list is only
indicative and not exhaustive.
38. The Plaintiff submits that if this is the manner in which
Defendant No.2 operates and that these one-ship companies are
only set up to fly flags of convenience and for obtaining tax
benefits in those countries from earnings/operations of these
ships, then it is clear that the real owner of these ships is NYK
Line and Nippon Yusen Kabushiki Kaisha. The Plaintiff submits
that Defendant No.2 holds itself out as the owner of these ships
and such ships can be proceeded against in rem for a maritime
claim against NYK Line who is liable for the claim and is deemed
to be the owner of such ships.
39. The Plaintiff submits that each of the one-ship companies
are nominees of Defendant No.2 who is real or true owner of the
ship including the Defendant vessel NYK Theseus."
34. The substance of the plaintiffs claim is that defendant
No.2 who claims to be the sixth largest container carrier and
own about 800 major vessels, including around 100 container
ships acquires a ship, then incorporates a company in a flag of
convenience country to avail of the benefits of flexible regulation
and tax incentives and operates the Vessel exercising persuasive
IA540-2020AWIA548-2020IN.DOC
control. Those one ship companies are financed, operated,
managed and controlled by defendant No.2 and they are mere
nominees of defendant No.2. All those ships are part of NYK
Theseus fleet of ships and defendant No.2 issues Bill of Lading
as carrier in respect of goods transported on board those ships.
In effect, the one ship companies are the nominees of defendant
No.2, who is the real or true owner of the vessels, including
defendant No.1 - vessel.
35. Mr. Dhond would urge that none of the aforesaid elements
attributed to defendant No.2, even if taken at face value, would
justify an inference that defendant No.2 is the owner of
defendant No.1 - Vessel. It was submitted that it is fairly well
recognized that the corporation has distinct juristic entity from
that of its directors and shareholders. A Court would be
justified in piercing the corporate veil only where the case of
fraud or dishonest siphoning of funds is made out. In the case
at hand, no effort is made to even aver, much less establish, the
element of fraud. Mere identity of the shareholders or directors
or the fact that the companies operate from one and the same
address, by itself, is not sufficient to lift the corporate veil. Nor
a one ship company is a taboo. Thus, according to Mr. Dhond,
the aforesaid averments in the plaint do not justify the professed
IA540-2020AWIA548-2020IN.DOC
arrest of defendant No.1 - Vessel as the sister vessel of the M.V.
CCNI ARAUCO 6327.
36. In the case of Kimiya Shipping INC (supra) the return of
the security was sought on the ground that the arrested vessel
was not the sister vessel of M. V. Eastern Line against whom the
plaintiff had a maritime claim and no case for piercing the
corporate veil was made out. After an analysis of the provisions
of the Arrest Convention, the pleadings and the decisions which
enunciated the law as regards lifting of corporate veil, the
learned Single Judge has enunciated the law as under:
"22. It is trite law that a company is a separate juristic
entity distinct from the shareholders; its assets are separate
and distinct from those of its members; it can sue and be
sued exclusively for its own purpose; its creditors cannot
obtain satisfaction from the assets of its members; the
liability of the members or shareholders is limited to the
capital invested by them; similarly, the creditors of the
members have no right to the asserts of the corporation and
unless fraud is asserted or at least alleged in the plaint, as
required under Order VI Rule 4 and in such a way that it will
be sustained at the time of trial, the question of lifting a
corporate veil does not arise. To accept the plaintiff's
submissions that there need not be any fraud or underlying
element of dishonesty in formation of corporate entities
would amount to violating and shaking these fundamental
tenants of corporate law.
23. In my opinion, simply because the shareholders, the
Directors (in this case were not common) the addresses of the
two companies that own the tow ships are common or the
constituted attorney who was appointed to buy the vessel is
the same or that both the ships were purchased pursuant to
the board meeting on the same day does not mean that the
efforts of the subscribers were to conceal that fact and does
not automatically mean that the intention to register the two
ships in different names was to play a fraud. There is no bar
in purchasing ships in different names if that is the way a
person wants to do his business. There is of course an
IA540-2020AWIA548-2020IN.DOC
exception that the intention was to mask the true owners
and the companies are a sham."
37. In the case of M/T Hatati (supra) where the owner of the
arrested vessel had moved for reducing the security, the
question of arrest of a ship which is not owned by the person
liable for the maritime claim again arose for consideration. In
the context of the submission that all the ships were owned by
the companies which are subsidiaries of a common entity, a
learned Single Judge of this Court enunciated that there is
nothing wrong in the said method of incorporation unless it
could be shown that the said modus operanti was adopted with
an intent to defraud or the entire exercise was a sham.
38. The observations in paragraphs 29, 34 to 38 are material
and hence extracted below.
"29. I am afraid, as regards his first submission that
"owner" is to be read as "beneficial owner" and not
"registered owner", I cannot agree with the submissions of
the learned Counsel for the Plaintiffs. As to how did the
Plaintiffs and what is the basis on which the Plaintiffs
obtained an order of arrest has to be seen. Arrest
Convention 1999 is a legal instrument to establish
international uniformity in a field of arrest of ships taking
into account developments in related fields. Article 3 (1)
relates to arrest of a ship in respect of which a maritime
claim is asserted. Article 3 (2) relates to arrest of any other
ship or ships other than ship in respect of which a maritime
claim is asserted. Which "any other ship or ships can be" is
clearly mentioned in Article 3 (2) (a)". Those are ship or
ships which, when the arrest is effected, is or are owned by
the person who is liable for the maritime claim and who
was, when the maritime claim arose a owner of the ship in
respect of which a maritime claim arose. Though the Arrest
Convention has not defined who the "owner" is, it certainly
IA540-2020AWIA548-2020IN.DOC
means a "registered owner". The reason why it has to be
meant a registered owner is because the only person who
could held be liable for a claim against the ship, is the
person who owns all the shares in the ship and who would
be liable on the claim in an action in personam. The only
person who can be liable for action in personam is the
registered owner of the vessel and no one else. If the 'owner'
should be meant to be beneficial owner, the convention
would have said 'beneficial owner'. This is because beneficial
owner need not 21 NMS - 1080 - 2013 mean he is the
registered owner. On the contrary registered owner or the
owner in whose name the ship is registered would also be
the beneficial owner unless otherwise proved. S. 25 (b) and
(c) of the Merchant Shipping Act, 1958 makes it very clear."
......
34. Indian law views each company incorporated under
the Companies Act as a separate and legal entity from its
shareholders and other companies and the fact that the two
companies have common shareholders or common Board of
Directors will not convert the two companies into a single
entity [INDO WIND ENERGY LTS. Vs WESCARE (INDIA)
LTD. 2010 (5) SCC 306]. The apex court in Bacha F. Guzder
vs Commissioner of Income Tax AIR 1955 SC 74 held that
shareholders do not buy any interest in the property of the
company and an incorporated company has an identity
different from that of its 24 NMS - 1080 - 2013
shareholders. It is also trite that Indian law does not permit
one to ignore the independent corporate identity of a limited
company and to lift the corporate veil to identify the
shareholder as owner of the property of the limited company
in the absence of fraud.
39. This is the legal position in many countries. It is for
that reason when it comes to arrest of ships in India, Article
3 (3) of the 1999 convention must be read to provide that
arrest of a ship which is not owned by the person liable for
the claim shall be permissible, which means arrest of a ship
in common beneficial ownership is permissible, if Indian
Law would permit.
36. Indian law says shareholders are not the owners of the
assets of the company. Therefore, to arrest a ship which is
not owned by the person liable for the claim, which means
arrest of a ship under common beneficial ownership, is not
permissible unless fraud is established.
37. Here is a case where Plaintiffs have obtained an order
of arrest of the 1st Defendant-Vessel. The order of arrest
obtained is a very drastic step and moreover it is obtained ex-
parte. An incorporated company has an independent identity
and is different and distinct from that of its shareholders.
The submission of the Plaintiffs that the 25 NMS - 1080 -
2013 concept of beneficial owner by itself requires the lifting
IA540-2020AWIA548-2020IN.DOC
of corporate veil is not sustainable. None of the case relied
upon by the Plaintiffs permitted lifting of corporate veil to
make the shareholders of a corporate entity the owner of a
property belonging to the corporate entity. None of the
judgment relied upon by the Plaintiffs support the fact that
the order of arrest can be obtained of a vessel which is owned
by a different entity not by the entity that owned the vessel
against which the maritime claim arose just because both
the entities are owned by a common holding entity.
38. In some cases the Court could look behind the
registered owner to determine the beneficial ownership. It
could lift the veil not once but more than once but the
necessary ingredient for doing so is that the independent
companies are nothing but sham to defraud the creditors.
For two or more ships to be called sister ships they have to be
registered under the same ownership. For two ships owned
by different entities to be called sister ships, the corporate
veil has to be pierced. To pierce corporate veil fraud has to be
established. Fraud has to be prima face established at the
time of obtaining the order of arrest. A mere bald averment in
the plaint is not enough. There has to be prima face evidence
which would show that the intention of the owners to register
the ships in different names was to play a fraud on the
creditors or a sham to mask the true owners and it should be
such that 26 NMS - 1080 - 2013 in all likelihood this
allegation will be sustained during the final hearing of the
Suit. Otherwise it would set a wrong trend. As illustrated in
M.V. Dong DO (Supra) in India various government
companies are in existence who are independent of each
other having a distinct identity. In foreign jurisdictions a
Shipping Corporation of India ship might get arrested for a
claim against ONGC by simply showing common ownership
and baldly alleging fraud and the judgments of our Courts
will be used for persuasive effect."
40. All these judgments were again considered by the Division
Bench in the case of MT Pamboor 2 (supra) and the legal
position was expounded in the following words:
"53. Can this alter ego / pierced corporate veil
jurisprudence be invoked willy-nilly every time it is found
that one company is the holding company or parent of
another? There is enough law to indicate that there is
nothing so very wrong in one family setting up with common
shareholding multiple companies, each holding different
assets. A different consideration may arise when a company
is a debtor, and it deliberately incorporates another
IA540-2020AWIA548-2020IN.DOC
company to move assets away to put them beyond the reach
of the creditors. There, courts have frowned upon these
attempts and have always allowed a creditor to follow the
assets into the hands of the so-called separate company.
But what is required is that there must be an element of
deceit, an attempt at fraud, something colourable. In Cox &
Kings Ltd v SAP India Pvt Ltd & Anr , (2022 SCC Online SC
570; paragraph 90), the Supreme Court said that corporate
law doctrines such as piercing the veil and alter ego are a
means by which to identify fraudulent activity. Though this
was in the context of binding third parties to arbitration
clauses, the principle remains. Similarly, in Vodafone
International Holdings BV v Union of India, (2012) 6 SCC
613: paragarph 74 the Supreme Court held (in the context of
taxation) that to properly invoke the doctrines of beneficial
ownership, lifting the corporate veil or concept of alter ego,
it must be shown that the transaction was a colourable
device. When this is successfully done, the separate
corporate juristic entity principle will be ignored, being seen
as a device or a conduit "in the pejorative sense".
55. Therefore, to deploy the 'alter ego' doctrine justifying a
piercing of the corporate veil, the defendant or debtor must,
to use a Dickensian phrase, be shown to be an "Artful
Dodger". Otherwise, the very essence of corporate/company
law and its fundamental precept that every company is a
distinct legal entity would get effaced. The mere
commonality or common directorships or interlocking
shareholding are by themselves not even prima facie
evidence or one being the alter ego of the other."
41. The Division Bench has thus held in clear terms that there
is nothing so very wrong in one family setting up with common
share holding multiple companies, each holding different assets.
The mere commonality or common ownership, directorship or
interlocking share-holding are by themselves not even prima
facie evidence of one being the alter ego of the other. There
must be an element of deceit, an attempt at fraud, something
colourable.
IA540-2020AWIA548-2020IN.DOC
42. In the light of the aforesaid exposition of law, reverting to
the facts of the case, it becomes abundantly clear that the
plaintiff has made no effort to attribute an element of fraud. At
best, the case of the plaintiff is that for the sake of convenience
and to represent the word that NYK Line is the carrier with a
huge fleet and make people repose trust in the NYK Ship Line,
defendant No.2 represents the word that it is the owner of all
the vessels, though the nominees of defendant No.2 are its
registered owners. This assertion, even if taken at par, in my
view, is not sufficient to justify piercing of the corporate veil.
43. Mr. Kamat would further urge that in the light of the
averments in the plaint and the material on record the question
as to whether defendant No.2 was the real owner of defendant
No.1 - Vessel must be determined at the trial, and not at this
stage. To bolster up this submission reliance was placed on a
decision of this Court in the case of MSC Mediterranean
Shipping Company S.A. in the matter between The State of
Maharashtra vs. MV MSC Clementina4.
44. I have perused the aforesaid judgment. It becomes evident
that the decision therein was rendered in the peculiar facts of
the case wherein the allegation was that on account of oil spill
4 2015 SCC Online Bom 4224.
IA540-2020AWIA548-2020IN.DOC
and dangerous cargo being off loaded due to collision of the
vessels, there was environmental damage. In that context, the
Court held that the question whether defendant No.2 was the
beneficial owner of defendant Nos.4 and 5 and consquently
defendant No.1 therein and MV MSC Chitra were sister ships
could only be determined at the trial. The decision having been
rendered in a completely different fact situation, would not
assist the cause of the submission on behalf of the plaintiff.
45. In the case at hand, as noted above, no effort was made to
show as to who was the registered owner of M.V. CCNI ARAUCO
6327 against whom the maritime claim primarily arose.
Secondly, there is a bare denial that the defendant No.2 is the
time charterer of defendant No.1 Vessel. It is not the case of the
plaintiff that defendant No.2 is the demise charter of defendant
No.1 - Vessel, even in the alternative. Thirdly, the plaint is
conspicuously silent about the alleged claim of fraud or
dishonest intent on the part of defendant No.2 so as to justify
the lifting of the corporate veil. Fourthly, the modus operandi
pleaded by the plaintiff, without anything more, does not render
the necessary assurance to draw an inference that the said
modus operandi was actuated by a design to defraud, or it was
a colourable exercise.
IA540-2020AWIA548-2020IN.DOC
46. In the circumstances, I find it difficult to accede to the
submission on behalf of the plaintiff that the arrest of defendant
No.1 - Vessel could be legitimately had by invoking the
provisions contained in Section 5(2) of the Admiralty Act, 2017.
The security furnished by defendant No.2 to obviate the arrest of
defendant No.1, on without prejudice basis, is thus required to
be refunded along with the interest accrued thereon.
47. A necessary corollary of the aforesaid finding is that the
plaintiff has no right to proceed in rem against defendant No.1 -
Vessel as jural relationship between defendant No.1 and
defendant No.2, gets snapped. If the plaint does not indicate
that for in personam action against defendant No.2, defendant
No.1 - Vessel could be proceeded with in rem, the suit qua
defendant No.1 - Vessel becomes completely untenable as it is
not at all the case of the plaintiff that it has an independent
maritime claim against defendant No.1 - Vessel. Arrest of
defendant No.1 - Vessel was sought to be effected only on the
premise that defendant No.2 is the real, though not the
registered owner, of defendant No.1 - Vessel. As this claim of
the plaintiff is not found to be, prima facie, sustainable, the
interim application preferred on behalf of defendant No.1 -
IA540-2020AWIA548-2020IN.DOC
Vessel to have the suit dismissed qua defendant No.1 - Vessel
deserves to be allowed.
48. Dismissal of the suit qua defendant No.1 - Vessel, however,
does not entail the consequence of dismissal of the suit as a
whole. Jural relationship of the consignor and the carrier
between the plaintiff and defendant Nos.2 and 3, is not
disputed. Plaintiff has also sued as a bailor for damages and
prosecutes action against defendant Nos.2 and 3, in personam.
49. To seek the dismissal of the suit, as a whole, against all
the defendants, Mr. Dhond made an endeavour to demonstrate
that the plea of the defendants was not in the nature of an
application for rejection of the plaint. It was urged that for non-
compliance of the statutory mandate the suit deserves to be
dismissed. As indicated above, the bar of limitation and
jurisdiction were sought to be pressed into service.
50. On the aspect of limitation, Mr. Dhond would urge that in
view of the provisions contained in Clause (6) of Article III of the
Act, 1925, the carrier stands discharged from all liability unless
the suit was brought within one year after the delivery of the
goods or the date when the goods should have been delivered. It
was urged that this provision has been interpreted to mean that
the liability of the carrier stands totally extinguished and not
IA540-2020AWIA548-2020IN.DOC
only the remedy as regards the liability is destroyed. Reliance
was placed on the decisions of the Supreme Court in the cases
of The East and West Steamship Company, Georgetown,
Madras, vs. S. K. Ramalingam Chettiar 5 and Bhagwandas B.
Ramchandani vs. British Airways6
51. Per contra, Mr. Kamat would urge that the very
applicability of the provisions contained in the Act, 1925 is a
matter in contest. Inviting the attention of the Court to the
provisions contained in Section 4 of the Act, 1925 which provide
that every Bill of Lading, or similar document of title, issued in
India which contains or is evidence of any contract to which the
Rules apply, shall contain an express statement that it is to
have effect subject to the provisions of the said rules as applied
by the said Act, it was urged that there is no stipulation in the
Bill of Lading that the Rules will have the application to the
contract in question. In any event, according to Mr. Kamat, the
question of limitation cannot be decided in abstract and
requires evidence as it is a mixed question of fact and law. To
buttress this submission as well, reliance was placed on the
decision in the case of MV MSC Clementina (supra).
5 AIR 1960 SC 1058.
6 2022 SCC Online SC 939.
IA540-2020AWIA548-2020IN.DOC
52. Section 2 of the Act, 1925 provides that subject to the
provisions of the said Act, the Rule set out in the Schedule
appended thereto shall have effect in relation to and in
connection with the carriage of goods by sea in ship carrying
goods from any Port in India to any other Port, whether in or
outside India. Twin conditions need to be satisfied. One, there
should be carriage of goods by sea in ships. Two, such carriage
of goods shall be from any port in India to any other port within
or beyond India. Both the conditions, appear to be satisfied as
the goods were carried by the ship M.V. CCNI ARAUCO 6327
from Nhava Sheva Port in India to the Gateway Port, UK.
53. The relevant part of Clause 6 of Article III under the
caption of Responsibilities and Liabilities reads as under:
"In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the
date when the goods should have been delivered. [This period
may, however, be extended if the parties so agree the cause of
action has arisen:
Provided that a suit may be brought after the expiry of
the period of one year referred to in this sub-paragraph
within a further period of not more than three months as
allowed by the Court.]
54. Third paragraph of Clause 6, extracted above, provides
that the carrier shall be discharged from all liabilities in respect
of loss or damage to the goods unless the suit is brought within
one year after delivery of goods or the date when the goods
IA540-2020AWIA548-2020IN.DOC
should have been delivered. The proviso empowers the Court to
extend the period of limitation for not more than three months.
55. In East and West Tin Sheet (supra) the Supreme Court
held that the Court found it difficult to draw any reasonable
distinction between the words, "absolve from liability" and
"discharge from liability" and thought that the words, "discharge
from liability" were intended to mean and do mean that the
liability has totally disappeared and not only that the remedy as
regards the liability has disappeared.
56. In the case at hand, the plaintiff claims the cause of action
first arose on 3rd November, 2016 when the goods were delivered
by the defendant to the GlaxoSmithKline in UK, then on 16 th
February, 2017 when those goods were rejected by the consignee
and, also on 16th October, 2017 when the plaintiff received the
goods at its factory at Hyderabad. The institution of the suit on
5th September, 2019, the defendants allege is, therefore, clearly
barred by limitation.
57. The plaint proceeds on the premise that the claim is
within the period of limitation as the suit came to be instituted
within three years of the accrual of the cause of action.
Alternatively, the plaintiff asserts its claim is also based in
negligence for which the period of limitation is three years. The
IA540-2020AWIA548-2020IN.DOC
question that would arise for consideration is whether the
provisions contained in the Act, 1925 or the provisions of
Limitation Act, 1963 would govern the suit.
58. In the case of Bhagwandas B. Ramchandani vs. British
Airways7 in the context of the provisions of Rule 30 of Second
Schedule Carriage by Air Act, 1972, the Supreme Court held
that the expressions, "right" and "extinguished" employed by the
Convention as adopted and incorporated by the Parliament in
Rule 30 of the Second Schedule clearly establishes the intention
of the law-giver that the right to damages would not subsist
after the expiry of the period mentioned therein.
59. In the case of Deep Sea Maritime Ltd. vs. Monjasa A/s
(The "ALHANI")8 Queen's Bench Division (Commercial Court)
held that Article III Rule 6 is not limited to claim for breach of
the Hague Rule obligation. It is generally recognized that Article
III Rule 6 is not limited in its applications to claims formulated
as an allegation of a breach of the Hague Rules articles, it being
well established that a cargo claimant cannot circumvent the
limitations and exclusions in the rules by suing the shipowner
for the torts of negligence or conversion, or indeed for breach of
bailment.
7 2022 SCC Online SC 939.
8 [2018] Vol 2 LLOYD's Law Reports 563.
IA540-2020AWIA548-2020IN.DOC
60. I have perused the Bill of Lading. It does not contain the
statement envisaged by Section 4. Can that be of decisive
significance in determining the period of limitation which would
govern the instant claim for damages for damage to the cargo?
When the cause of action can be said to have lastly arisen to the
plaintiff? Whether the plaintiff would be entitled to sue
defendant Nos.2 and 3 in bailment or negligence? And, if yes,
which law would govern the action? All these questions, in my
considered view, cannot be adjudicated at this stage. Some of
these questions are rooted in facts. The question of limitation
would then partake character of a mixed question of law and
facts. It would, therefore, be appropriate to adjudicate this
question at the trial.
61. The bar of jurisdiction in view of the provisions contained
in terms and conditions of the contract between the parties
subject to which the goods were carried also hinges upon the
question as to whether the Bill of Lading was subject to the
provisions of International Carriage of Goods by Sea Act, 1957 of
Japan or the Hague Rules Legislation. Clause (2) (Clause
Paramount) provides, inter alia, that if Hague Rules Legislation
compulsorily applies to the Bill of Lading then the contract
would be subject to the provisions of such Hague Rules
IA540-2020AWIA548-2020IN.DOC
Legislation, lest it would be governed by the provisions of
International Carriage of Goods by Sea Act, 1957 of Japan. By
its very nature, this question also merits determination at the
trial. It would therefore be appropriate to decide the question of
jurisdiction after a proper issue is raised on pleadings.
62. The upshot of the aforesaid consideration is that Interim
Application No.540 of 2020 deserves to be partly allowed to the
extent of the prayer for the refund of the security deposit along
with interest accrued thereon. Interim Application No.548 of
2020 also deserves to be allowed as the Court finds that no case
to proceed against defendant No.1 Vessel in rem has been prima
facie made out. The suit thus deserves to be dismissed qua
defendant No.1 Vessel NYK Theseus. However, the suit would
proceed qua defendant Nos.2 and 3.
63. Hence, the following order:
:ORDER:
(i) Interim Application No.540 of 2020 stands partly
allowed.
(ii) The amount of security i.e. Rs.650,77,230.68/-
deposited by the defendant No.2 be returned to
defendant No.2 along with interest accrued thereon
IA540-2020AWIA548-2020IN.DOC
on proper identification and in accordance with the
Rules.
(iii) Interim Application No.548 of 2020 stands allowed.
(iv) The suit stands dismissed qua defendant No.1 NYK
Theseus.
(v) The suit to proceed against defendant Nos.2 and 3.
(vi) Costs in cause.
[N. J. JAMADAR, J.]
At this stage, Mr. Kamat, the learned Counsel for the
plaintiff, seeks stay to the execution and operation of this order.
Since the deposit was made on 18 th December, 2019, the
direction to refund the security deposit, alongwith interest
thereon, stands stayed for a period of four weeks from today.
[N. J. JAMADAR, J.]
