Orion Asya Shipping & Trading Co. vs Global Marine Transportation ...
2001 Latest Caselaw 1379 Del

JUDGMENT

A.K. Sikri, J.

1. These two cases are taken up together. On the Pyrites Phosphates & Chemical Ltd. (for short 'PPCL') has to pay certain amount to Global Marine Transportation Inc. (for short 'GMT'). PPCL does not dispute this liability and is ready to pay this amount. In fact the amount stands deposited in this court. However, Tata Limited which has filed Suit No.205/97 claims preferential right to recover the amount payable by PPCL to GMT. On the other hand Orion Asya Shipping & Trading Ltd. has filed AA No.127/96 (for short 'Orion') for recovery of this amount by enforcing the award against GMT. Both have claims against GMT. For the purpose of recovery of its amount of US $ 585070 Tata Ltd. has filed the Suit No.205/97 against GMT. On the other hand, Orion has obtained two awards amounting to US $ 245500 against GMT and it has filed AA NO.127/96 under Section 49 of the Arbitration and Conciliation Act, 1996 read with Section 6 of the Foreign Awards (Recognition & Enforcement) Act, 1961 for enforcement of this amount and claims lien over the amount payable by PPCL to GMT.. This is how both Tata Ltd. as will as Orion are making claim over the amount payable by PPCL to GMT. The question which is t o be decided as to who is entitled to this amount.

2. This question which falls for determination has the foll o wing history.

3. Orion is the disponet owner of Vessel 'ZEYNEP-K' Time Charter Party (for short 'CP') dated 14th August, 1995 entered into between Orion and GMT. GMT hired this vessel from Orion for about 100 days w.e.f. 24th August, 1995. Certain hire charges were payable by GMT to Orion as per this agreement. After hiring the ship GMT entered into various contracts with different parties for carrying their cargos. One such CP dated 4th September, 1995 was entered into between GMT and PPCL through Transchart, Ministry of Surface and Transport. As per this, a cargo consisting of 24726 MT of Murate of Phosphate (for short 'MOP')/urea was to be carried for Hamburg to Paradeep and Pondicherry in India. It may be mentioned that before this on 15th August, 1995 GMT had approached Tata Ltd. to finance the freight of the vessel to carry MoP of Transchart/PPCL. Therefore, as per clause 31(a) of the CP dated 4th September, 1995 Tata Ltd. were the freight beneficiary, meaning thereby freight to be paid by PPCL to GMT was assigned to be paid to Tata Ltd. This is a normal practice in shipping trade duly recognised in law, where third party finances a voyage and makes profits on the freight. As per Clause 31(b) of CP, 90 per cent of freight was payable within seven days of 'safe arrival' of ship at the first discharge port and remaining 10 per cent of freight (with demurrage less discharge) was payable within 120 days of discharge of cargo and on production of certain documents mentioned therein. Clause 31(d) stipulates that the entire freight was deemed to have earned on 'safe arrival' of vessel and cargo at first port of discharge. On 19th October, 1995 ship arrived at Paradeep, which was the first discharge port. It sailed for Paradeep on 26th October, 1995 and arrived there on 30th October, 1995. According to Tata Ltd. on 19th October, 1995 the entire freight had been earned and belonged to Tata Ltd. as per clause 31(d) of the CP.

4. Clause 45 of the the CP dated 14th August, 1995 provided for the manner in which hire charges for hiring the ship were to be paid by GMT to Orion. As per Clause 18 owners i.e. Orion have a lien upon all cargos, and all sub-freights for any amounts due under this charter, including General Average contributions. According to the case set up by GMT although initial payments under the said CP were paid by GMT to Orion, higher Installment of US$ 150000 which became due on 22nd October, 1995 was not paid by GMT. When vessel arrived at Pondicherry with balance cargo of 9726 MT of Mop on 28th October, 1995, one M/s Unitrans Shipping & Trading Pvt. Ltd. acting as agent of Orion exercised lien on cargo. M/s Transchart reacted vide fax dated 1st November, 1995 to the exercise of this lien stating the before fixing vessel with GMT they had obtained no objection certificate from Orion. Orion replied vide fax dated 2nd November, 1995 to Transchart proposing to shift lien from cargo to freight of US $ 380,000 be released to them either on production or joint written instructions of Orion and GMT or production of final London arbitration award. By fax of even date the Transchart accepted the proposal of Orion to withhold funds due from Government of India to GMT and also agreed to release the amount to lawful claimant on reaching final settlement. The cargo which belonged to PPCL was allowed to be discharged at Pondicherry. Since GMT failed to make payment of higher charges to Orion, Orion invoked arbitration as provided under Clause 17 of CP dated 14th August, 1995 and arbitration proceedings commenced. The Arbitral Tribunal gave first interim award on 16th January, 1996 for US $ 1,14,849.50 with interest at the rate of 7.35 per cent from 1st December, 1995 to the date of award. On 24th June, 1996 second interim final award was given by learned arbitrators awarding a sum of US $ 1,21,603.76 with interest at the rate of 7.5 per cent from 8th December, 1995 to the date of award. In this manner under the two awards, GMT has to pay a sum of US $ 245,500 to Orion. On the other hand, Tata Ltd. which had financed the freight of the vessel to carry Mop of Transchart/PPCL is claiming US $ 585070 along with interest at the rate of 12 per cent per annum and in view of clause 31(a) of CP dated 4th September, 1995 the case putforth by Tata Ltd is that the freight payable by PPCL to GMT has become payable to Tata Ltd.

5. It may be noted at this stage that on 3rd November, 1995 Transchart had sent fax to Orion assuring that balance US $380000 will be withheld with Government of India and will not be released to anybody till final settlement is reached between Orion and GMT. On 4th December, 1995 Transchart/PPCL paid US $ 526375 to Tata Ltd. on account of freight due under CP dated 4th September, 1995. Thereafter, vide fax dated 24th January, 1996 and 30th January, 1996 Transchart showed its inability to pay further payment to Tata Ltd. unless agreement is reached between Tata Ltd. and Orion. There is also as fax dated 23rd May, 1996 on record given by Transchart to the solicitors stating that Orion was fully award of agreement of CP dated 4th September, 1995 between PPCL and GMT in which Tata Ltd. is the freight beneficiary, to whom freight due under said CP assigned by GMT even before the commencement of the Voyage. 'Tata Ltd. are not concerned with the dispute between Orion and GMT and on the basis of CP agreement PPCL had with Tata Ltd. they intend to release fund under unjustified lien to Tata Ltd. This has been objected to by Orion's solicitors vide letter dated 28th May, 1995. By another fax dated 29th June, 1996 addressed to solicitors of Orion, Transchart took the following position:

"1. Vessel originally fixed for shipment of UREA form YUZHNY to India and before fixing vessel necessary NOC was obtained from OSTL and head owners.

2. Shipment of MoP form Hamburg was diversion of voyage as shipper at YUZHNY could not load urea on arrival of YUZHNY and there was no need to obtain fresh NOC from OSTL who also did not object for diversion.

3. Freight due under CP dated 4th September, 1995 between GMT and PPCL was assigned by GMT to Tata Ltd. before commencement of the voyage.

4. Transchart was not concerned with the provisions in CP dated 14th August, 1995 between OSTL and GMT.

5. Transchart on behalf of PPCL finalised CP dated 4th September, 1995 with GMT. Liened fund is withhold with PPCL who may be contracted for further communication in the matter."

6. However, before any payment could be made, Orion filed AA No.127/96 and this court passed injunction order dated 28th October,1996 in this petition restraining GMT from receiving a sum of US $ 380000. On the other hand, IA No.966/97 in Suit No.205/97 filed by Tata Ltd. this court has passed order dated 3rd December, 1997 restraining Transchart/PPCL from making any amount towards freight and demurrage.

7. Initially, the matter was heard at length and counsel for both the parties argued their respective cases whereby both claimed preferential right over the aforesaid sum of US $ 380000 which has been deposited in this court. However, later on it transpired that it is only IA No.966/97 which is filed by the Tata Ltd. in suit No.205/97 which needs to be decided. This application is under Order xxxviii Rule 5 CPC. Matter was fixed for direction and clarifications obtained when parties agreed that it is this application which is to be decided at this stage. Of course, Orion pressed its AA No.12796 and submitted that enforcing the award the aforesaid amount be paid to Orion.

8. As the issue involved essentially relates to the disposal of IA No.966/97, it is not necessary to state here the arguments at length which are advanced by counsel for both the parties. The purpose would be served in noticing the contention of both the parties in brief.

9. BASIS OF CLAIM PUTFORTH BY ORION:

In the first place, it is submitted that the petition being AA No.127/96 has been filed for enforcement of the foreign awards and respondent No.2/PPCL is made party in view of the undertaking given by it. It is submitted that in view of Clause 18 of CP dated 14th August, 1995 between Orion and GMT, Orion had lien over the entire cargo which a which was duly exercised by letter dated 28th October, 1995 through agent of Orion. Learned counsel for Orion argued that lien is considered to be charge of the unpaid charter hire. In a number of cases it has been held by the English courts that the master on behalf of the owner or the vessel is entitled to exercise lien over the cargo and sub-freight for the unpaid charter hire till the freight is paid. In this case the Orion is legally entitled to recover from GMT charter hire in respect of voyage for 100 days in terms of Clause 31 of CP dated 14th August, 1995. GMT has paid a charter hire charges for 75 days totalling to a sum of US $ 789,625 till 10th October, 1995 but has failed to pay charter hire thereafter. It was also argued that hire became due on 22nd October, 1995 for a sum of US $ 1,50,000 which Orion has demanded from GMT. GMT did not make any payment even after receipt of such notice. In view of this Orion though the master of the vessel has exercised its lien over the cargo and sub-freight as per provisions of Clause 17 of the CP dated 14th August, 1995 on 28th October, 1995.

10. The claim of Tata Ltd. by way of Suit No.205/97 is also refuted on the following two additional ground:

a) Tata Ltd. has already initiated in action before the High Court of Justice, Queen's Bench Division (Commercial Court), London and obtained an order of Mereva Injunction over the assets of the respondent No.1 throughout the world. In course of the said proceeding, Tata Ltd. has given an undertaking before the Hon'ble Court that it will not approach any other court without obtaining the leave of the court. Tata Ltd. has not produced any records to show that it has already obtained the leave of the High Court of Justice, Queen's Bench Division(Commercial Court), London before filling the present suit. In view of this court should dismiss the suit of Tata Ltd. as it has been filed in breach of the undertaking.

b) In CP dated 4th September, 1995 there is an arbitration clause and therefore Tata Ltd. could not file Suit No.205/97 and the mater is required to be referred to arbitration especially when application under Section 8 of the Arbitration and Conciliation Act, 1996 has already been filed in the suit by one of the defendants for this purpose.

11. BASIS OF CLAIM PUTFORTH BY TATA LTD.:

As per Clause 31(a) of the Charter Party, GMT named Tata Ltd. as freight beneficiaries as the Voyage was financed by Tata Ltd. on the request of GMT. This is a normal practice in shipping trade [recognised in law & upheld in Leslie v. Gutheri (1835)] where third party finances a voyage and makes profits on the freight. As a result, the freight which would have been payable by PPCL to GMT, was assigned to be paid to Tata Ltd. Orion as well as the head owners were informed of this and their consent was also obtained. As per clause 31(b) of the Sub-Charter, 90 per cent freight was payable within seven days of he safe arrival of the ship at first discharge port and remaining 10 per cent of the freight (with demurrage less dispatch) was payable within 120 days of completion of discharge of cargo an on production of certain documents. As per Clause 31(d) entire freight was deemed earned on safe arrival of vessel and cargo at first port of discharge. Therefore, on 19th October, 1995 the entire freight had been earned and belonged to Tata Ltd.

12. It was also submitted that prior to entering into the said CP, a fixture note dated 4th September, 1995 was signed on behalf of PPCL and GMT and prior this note also, Tata Ltd. were named as the freight beneficiary. It was further submitted that prior to the execution of the said fixture note, no objection certificate were also obtained by GMT from Orion as well as the head owners of the vessel, M/s Preveze Beynelminel Nakliyat Anonim Sirketi, Turkey.

13. It was further argued that Orion are not entitled to enforce the foreign awards against the money being withheld by PPCL inasmuch as the money withheld by PPCL being freight payable under the CP dated 4th September, 1995 never belonged to GMT as Tata Ltd. had been named as freight beneficiaries even before the freight was earned and became payable.

14. From the aforesaid facts disclosed above and the arguments of the counsel for both Orion as well as Tata Ltd., following admitted position emerges:

1. There is an award in favor of Orion, which is a foreign award and Orion has filed AA No.127/96 for enforcement of this award. The award is against GMT. However, while enforcing this award, Orion is seeking to recover the amount not from GMT directly but the amount which PPCL has to pay to GMT. This claim is made on the ground that as per CP dated 14th August, 1995 between Orion and GMT, Orion has lien over the entire cargo and this lien was duly exercised by letter dated 28th October, 1995. The order basis is that PPCL had given an undertaking to the Orion for payment of this amount.

2. Tata Ltd. has filed Suit No.205/97. This is suit for recovery of US $ 585070 Along with interest primarily against PPCL. It is founded on the averments that the freight which was payable by PPCL to GMT was assigned to be paid to Tata Ltd., and therefore, the said freight payable by PPCL to GMT should be paid to Tata Ltd.

3. Thus on the one hand, Orion claims lien over that freight in view of CP dated 14th August, 1995 and on the other hand, Tata Ltd. makes preferential claim over the same freight on the basis of the aforesaid assignment.

4. In the suit filed by Tata Ltd. the defendant No.2/PPCL has filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 alleging that there is an arbitration agreement between the parties, and therefore, suit field by the Tata Ltd. is not competent and the appropriate course is to refer the matter for arbitration in accordance with arbitration agreement between the parties.

5. On 13th August, 2001 counsel for PPCL informed that PPCL has become a sick company and has approached the BIFR for rehabilitation and reference has since been registered by the BIFR. He also informed that in view of this, PPCL has also moved an application under Section 22 of Sick Industrial Companies(Special Provisions ) Act, 1985 for stay of the proceedings.

15. One has to decide the IA 966/97 filed by Tata Ltd. in suit No.205/97 which is an application under Order xxxviii Rule 5 read with Section 151 CPC keeping in view these facts. It is prayed in this application that defendants 1 and 2 be directed to forthwith deposit the entire balance rate and demurrages Along with interest amounting to US $ 585070 and permit the plaintiffs to withdraw the same. As mentioned above, this amount already stands deposited in this court. Now, Tata Ltd. in this application are pressing for withdrawal of this amount. On the other hand, Orion in AA No.127/96 are claiming their right over this amount and pray that in be paid to them. After going though the submissions of both the parties, this court is of the view that order in favor of Tata Ltd. at this stage for payment of the amount to them cannot be passed till the issues raised in (4) and (5) above are sorted out. After the decision on those issues, the Tata Ltd. can seek revival of the prayer in this application. For same reason, Orion also cannot get the amount as of today unless it is first decided as to who has the preferential rights over this amount. As already noted above, the award is against GMT but the enforcement is not against GMT but the amount of freight payable by PPCL to GMT over which Orion claims its lien. Therefore, it would be appropriate if the amount which is lying in this court, namely, US $ 386456 remains in this Court. It is already kept in fixed deposit. Whosoever ultimately succeeds would get the amount Along with interest.

16. With these observations IA No.966/97 stands disposed of.

17. AA No.127/96 would remain pending and would be tagged along with suit No.205/97.