Delhi High Court
Samson Maritime Ltd. And Anr. vs Union Of India And Ors. on 29 May, 2019
$~1 to 4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 22.05.2019
Pronounced on: 29.05.2019
+ CM APPLN. 14120/2019 in W.P.(C) 3070/2019
SAMSON MARITIME LTD. AND ANR. ..... Petitioners
Through Mr.Rajiv Nayyar, Sr. Adv. with
Mr.Mahesh Agarwal, Mr.Rishi
Agarwal, Mr.Amitava R. Majumdar,
Mr.Karan Luthra, Mr.Pranjit
Bhattacharya & Ms.Manjira Das
Gupta, Advs.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through Ms.Pinky Anand, ASG with
Ms.Saudamini Sharma, Mr.Balendu
Shekhar & Mr.Sumit Teterwal, Advs.
for R-1 & 2.
Mr.Ripu Daman Bhardwaj, CGSC for
R-3 & 4.
Mr.Rajesh Ranjan, Adv. with
Ms.Kritika Sachdeva, Adv. for
Shipyards Association of India.
+ CM APPLN. 14123/2019 in W.P.(C) 3071/2019
THE GREAT EASTERN SHIPPING
COMPANY LIMITED AND ANR. ..... Petitioners
Through Mr.Kapil Sibal, Sr. Adv. with
Mr.Mahesh Agarwal, Mr.Rishi
Agarwal, Mr.Amitava R. Majumdar,
Mr.Karan Luthra, Mr.Pranjit
Bhattacharya & Mr Adit Pujari, Advs.
versus
W.P.(C) 3070/2019 & batch matters P age 1 of 25
UNION OF INDIA AND ORS. ..... Respondents
Through Ms.Pinky Anand, ASG with
Ms.Saudamini Sharma, Mr.Balendu
Shekhar & Mr.Sumit Teterwal, Advs.
for R-1 & 2.
Mr.Ripu Daman Bhardwaj, CGSC for
R-3 & 4.
Mr.Rajesh Ranjan, Adv. with
Ms.Kritika Sachdeva, Adv. for
Shipyards Association of India.
+ CM APPLN. 14130/2019 in W.P.(C) 3073/2019
GREATSHIP (INDIA) LTD. AND ANR. ..... Petitioners
Through Mr.Sandeep Sethi, Sr. Adv. with
Mr.Mahesh Agarwal, Mr.Rishi
Agarwal, Mr.Amitava R. Majumdar,
Mr.Karan Luthra & Mr.Pranjit
Bhattacharya, Advs.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through Ms.Pinky Anand, ASG with
Ms.Saudamini Sharma, Mr.Balendu
Shekhar & Mr.Sumit Teterwal, Advs.
for R-1 & 2.
Mr.Ripu Daman Bhardwaj, CGSC for
R-3 & 4.
Mr.Rajesh Ranjan, Adv. with
Ms.Kritika Sachdeva, Adv. for
Shipyards Association of India.
+ CM APPLN. 14136/2019 in W.P.(C) 3076/2019
SEVEN ISLANDS SHIPPING LIMITED AND ANR. ..... Petitioners
Through Mr.Balbir Singh, Sr. Adv. with
Mr.Mahesh Agarwal, Mr.Rishi
Agarwal, Mr.Amitava R. Majumdar,
Mr.Karan Luthra, Mr.Pranjit
W.P.(C) 3070/2019 & batch matters P age 2 of 25
Bhattacharya & Ms.Monica
Benjamini, Advs.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through Ms.Pinky Anand, ASG with
Ms.Saudamini Sharma, Mr.Balendu
Shekhar & Mr.Sumit Teterwal, Advs.
for R-1 & 2.
Mr.Ripu Daman Bhardwaj, CGSC for
R-3 & 4.
Mr.Rajesh Ranjan, Adv. with
Ms.Kritika Sachdeva, Adv. for
Shipyards Association of India.
CORAM:
HON'BLE MR. JUSTICE SURESH KUMAR KAIT
ORDER
CM APPLN. 14120/2019 in W.P.(C) 3070/2019
CM APPLN. 14123/2019 in W.P.(C) 3071/2019
CM APPLN. 14130/2019 in W.P.(C) 3073/2019
CM APPLN. 14136/2019 in W.P.(C) 3076/2019
1. Vide these applications, the applicants/petitioners sought stay of the
operation of Notification No. 2 of "Make in India" dated 13.02.2019 and
Circular No. 2/2019 dated 22.03.2019. The same were stayed vide order
dated 28.03.2019 till further orders.
2. Being aggrieved, the respondents filed LPA Nos. 326/2019, 327/2019,
328/2019 and 331/2019 and the same have been disposed of vide order
W.P.(C) 3070/2019 & batch matters P age 3 of 25
dated 13.05.2019, whereby, requesting this Court to take-up and dispose of
the applications for interim relief at the earliest. Accordingly, these
applications are taken up for disposal by this common order.
3. Since reply and rejoinder have been filed in C.M. No. 14123/2019,
therefore, the said application is being taken up as a lead application and the
order passed in this application shall be applied in all the applications.
4. The case of the applicants/petitioners is that promulgation of
Notification dated 13.02.2019 by the respondent no.1 and Circular
No.02/2019 dated 22.03.2019 by the respondent no.2 which have been
issued under Sections 406 and 407 of the Merchant Shipping Act, 1958
(hereinafter referred as MS Act, 1958), whereby allowed a completely alien
concept of an "Indian Built Ship" to get commercial rights higher than an
Indian Flag Vessel under the Act, 1958 and to destroy any statutory
recognition and preference available to an Indian Flag Vessel over Foreign
Flag Vessels.
5. Mr. Kapil Sibal, learned senior counsel appeared on behalf of
applicants/petitioners submitted that the Act, 1958 was promulgated by the
Parliament to encourage and promote the growth and development of ships
under the Indian Flag consequent to their registration as "Indian Ships". The
W.P.(C) 3070/2019 & batch matters P age 4 of 25
ACT, 1958 has no concern with the place of built of the ship. The said Act
only concern itself with the ownership and registration of the ship. If the
ownership is wholly Indian, it becomes an Indian Ship, otherwise it is a
Foreign Ship. The DGS exercises control through the Act, 1958 upon the
Indian Ships in case of emergencies or war. Indian Ships are, therefore, the
second line of defence in the case of an emergency. As of the year 2002,
there were 560 Indian Ships and as on date, there are 1384 Indian Ships. The
Gross Tonnage has increased from approximately 68 lakh GRT in 2002 to
approximately 1.25 crore GRT in 2018. All nations of the world zealously
protect their national flag fleet of ships by providing incentives/benefits.
This in legal terms is known as " Cabotage Law". In India, cabotage exists
in limited form, to promote the growth and development of Indian Ships. A
Right of First Refusal (RoFR) was available to an Indian Ship wherein any
customer/consumer/charterer who wished to engage a ship and had floated
an enquiry/tender for the same. If an Indian Ship was available for the said
business at the price quoted by the foreign flag ship, the business would be
awarded to the Indian Ship. If the Indian Ship is not available or is unwilling
to pick up that business at a rate which is tendered by a Foreign ship, only
then a license under the Act, 1958 was granted to the Foreign Ship.
W.P.(C) 3070/2019 & batch matters P age 5 of 25
6. Learned senior counsel further submitted that by virtue of the above,
the Indian Ship-owners were incentivized to invest in Indian Flag Ships
which resulted in increase in the national tonnage though foreign built, as
mentioned above. Under the Act, 1958, it is only the Indian character of the
Ship through registration which is of concern to the DGS. By the Impugned
Notification/Circular, the regime has been altered to the prejudice of the
Indian Ships to the effect that there is no incentive or preference available to
them in the Indian business, due to which, a ship which was originally built
in India, but may be owned by a foreigner will get the first preference in
Indian business. This amounts to changing the goal-post from the Act, 1958
related to the ownership of the ship to be Indian, to a goal-post completely
extraneous to the Act, 1958 i.e. the place of built of the ship.
7. The impugned Notification/Circular, in respect of the preference to
Indian Ships against Foreign Ships, (which was previously allowed),
nullifies the RoFR. It completely ignores the Indian character of a ship being
the only relevant criteria under the Act, 1958 and makes it purely
consumer/charterer's choice oriented. In respect of a character floating a
tender, under the Impugned Notification/Circular, the RoFR is obtained only
by an Indian Built Ship, irrespective of the flag it carries. The price being
W.P.(C) 3070/2019 & batch matters P age 6 of 25
the lowest by the bidder, does not operate as a factor in allowing an Indian
Ship to get the said business. Upon the making of such choice by the
consumer, even a Foreign Ship gets a license to operate for Indian business,
mechanically without dispute. Thus, through the Impugned Notification, the
very basis of the Act, 1958 stands completely removed making the exercise
violative of the aforesaid Act.
8. It is further submitted that the prejudice being caused to the
applicants/petitioners which is as follows:-
a. As per the Act, 1958, an "Indian Ship" i.e. a ship hoisting the Indian
national colours statutorily has thereby conferring an "Indian
Character" on the vessel. For the first time, the Impugned
Notification introduces "Indian Built Ship", as a concept
extraneous/alien to the Act, 1958. By giving a without jurisdiction
preference to an Indian Built Ships irrespective of the Flag of the ship,
the concept of flagging/ownership has been arbitrarily obliterated
which is beyond the provisions of the Act, 1958.
b. Consequently, vessels built in India (including foreign flag) would
arbitrarily/discriminatingly, get preference over Indian flag vessels in
securing Indian business. The impugned Notification is irrational
W.P.(C) 3070/2019 & batch matters P age 7 of 25
inasmuch as it does not take into consideration that a player in the
shipping industry cannot change his entire fleet overnight and convert
it into Indian Built Ships on account of shipbuilding being a time
consuming exercise and therefore, destroys the entire investment
made by such players over the years and completely obliterated their
right to do business.
9. It is further submitted that Foreign Built Foreign Flag Vessels have
been placed at par with Foreign Built Indian Flag Vessels in the RoFR
hierarchy. This destroys the very purpose of registering any ship as an
Indian Flag Vessel under the Act, 1958 and is against the Preamble of the
said Act and bears absolutely no nexus to the supposed Make in India policy
objective of the Impugned Notification.
10. Learned senior counsel further submitted that a policy of the
executive cannot destroy the legislation governing the field and any policy
must be in consonance with the objective sought to be achieved by the Act,
1958 as has been held by the Hon'ble Supreme Court of India in State of
Sikkim vs. Dorjee Tshering Bhutia and Others: (1991) 4 SCC 243. Further,
the impugned Notification violates the rule of reciprocity and is therefore
bad in law. An Indian Ship owner owing an Indian Flag Vessel built outside
W.P.(C) 3070/2019 & batch matters P age 8 of 25
India does not have any RoFR/preferential benefit in the country of build of
his vessel; however, conversely, a foreigner owning Foreign Flag Vessel
built in India has a RoFR higher than the Indian Ship. The basic notion of
reciprocity underlies most legal relationships and therefore assumes crucial
importance in the international arena where co-operation between sovereign
states is inevitably necessary. The Foreign Flag Vessel gets benefit in its
own country as well as in India, whereas, an Indian Flag Vessel is left in the
lurch by being equated to a Foreign Flag Vessel in India without any
reciprocal benefit being provided to an Indian Flag Vessel in the country of
its built. Accordingly, the respondent nos. 1 and 2 have failed to take into
account the principles of reciprocity which is crucial in international trade
before opening up the market to foreign vessels, when Indian Ships are not
allowed to operate in the markets of such foreign countries. This is violative
of India's economic and trade policy, contradictory to its national interest
and violative of the constitutional rights of the petitioner.
11. He further submits that the Impugned Notification/Circular is,
therefore, violative of Articles 14, 19(1)(g) and 21 of the Constitution of
India inasmuch as it seeks to treat unequals as equals (i.e. Foreign owned
Ships to Indian Ships) and treats equals as unequals (i.e. Indian Built Indian
W.P.(C) 3070/2019 & batch matters P age 9 of 25
Ships as of higher preference than Indian Ships).
12. On the other hand, Ms.Pinky Anand, learned Additional Solicitor
General appearing on behalf of respondents submits that impugned
notifications have been issued pursuant to the "The Make in India" policy
which is in larger public interest and does not violate any right of the
petitioners and therefore no irreparable and grave harm will be caused to the
petitioners. The object and purpose of the Act, 1958 is the umbrella
legislation enacted with the object to promote the development of a robust
mercantile marine and to ensure that the interests of the nation are best
served. The preamble to the Act states:-
"An Act to foster the development and ensure the efficient
maintenance of an Indian mercantile marine in a manner
best suited to serve the national interests and for that
purpose to establish a National Shipping Board, to
provide for the registration, certification, safety and
security of Indian ships and generally to amend and
consolidate the law relating to merchant shipping"
13. It is submitted that "Indian Mercantile marine", includes in its ambit
the domestic ship-building industry. The ship-building industry and ship-
repair industry being essential elements of the supply chain are important
for maintenance of the national merchant fleet. Part XIV of the Act deals
with the Control of Indian ships and ships engaged in coasting trade.
W.P.(C) 3070/2019 & batch matters P age 10 of 25
Section 406 provides for the requirement of licence to be granted by the
Director General to Indian ships and ships chartered by Indian
citizens/Indian companies/societies registered in India. Section 407 deals
with the requirement of licensing of ships other than an Indian Ship or a
ship chartered by Indian citizens/Indian companies/societies registered in
India for engaging in coasting trade. The Department of Industrial Policy
and Promotion issued orders dated 15.06.2017 and 28.05.2018 under Rule
153(iii) of the General Financial Rules, 2017 to encourage „Make in India‟
and promote manufacturing and production of goods and services in India
with a view to enhancing income and employment. These orders
introducing the Make in India policy have not been assailed by the
petitioner. The instant Shipping Development Circular No. 02/2019 has
been issued in furtherance of the Make In India policy and in exercise of
powers vested with the Director General of Shipping under Section 406 and
407 of the Act, 1958.
14. It is further submitted that the Maritime cabotage is generally
defined as sea transport of passengers and goods between two ports located
in the same country. Cabotage restrictions are practised world over. There
are several explanations for cabotage restrictions. Cabotage restrictions
W.P.(C) 3070/2019 & batch matters P age 11 of 25
ensure economic growth and social well-being by developing local capacity
in several segments of the maritime transport value chain, including ship-
building and repair. India has been trying to give impetus to its struggling
coastal trade, and to that end, Circular no. 02/2002 dated 08.11.2002 was
issued which gave inter alia guidelines for grant of licence to foreign flag
vessels. This circular was issued in exercise of powers under Section 406
and Section 407 of the Act, 1958 introducing the Provision for Right of
First Refusal (RoFR) defined as "right which accrues to a bidder in the
tendering process- who offers an Indian Flag vessel and whose rate though
not being the lowest - to be awarded the tender, subject to his matching of
the lowest rate offered by a bidder, who offers a foreign flag vessel."
15. She further submitted that RoFR is a part of the Cabotage principle
of protecting domestic coastal trade. The modalities of RoFR are the
prerogative of the State Machinery and are not dependent upon the
principle of reciprocity between two nations. There is no universal
definition of "Cabotage" and there are no universal standard guidelines to
be followed while framing a Cabotage policy. It has to be tailored to each
nation's specific needs and requirements. RoFR is a means to achieve a
specific goal which differs according to the regional requirements and
W.P.(C) 3070/2019 & batch matters P age 12 of 25
economic needs of each nation. In the present situation, the Goal sought to
be achieved is the development of the Indian Ship Building Industry which
is currently flailing, despite the fact that India has a Coastline of
approximately 7500 Kms and there is immense potential for a domestic
ship building industry to thrive.
16. It is further submitted that the growth of the shipbuilding sector has
been stunted in India due to lack of sustained support and requisite public
investment in the maritime sector. In 2017, the thrust of the Government
was to encourage and promote domestic manufacture of goods. To that end,
the Government decided to implement, the Make in India Policy, wherein
thrust was given to procure locally made goods and services, as much as
was possible. By the notification dated 13.02.2019, it was decided that the
chartering of ships/vessels etc. through open/global tender process should
give preference to bidders who offer Indian built ships. Aforesaid
notification and circular dated 22.03.2019 is a policy support measure to
promote indigenous ship building industry. The Indian ship-building
industry suffers from various policy constraints and an adverse tax
structure, which has not encouraged the growth of this industry to the
desired extent. Only about 6.5% of India's EXIM (Export-Import) trade is
W.P.(C) 3070/2019 & batch matters P age 13 of 25
carried by Indian flag ships, of which the Indian built ships are negligible
in number.
17. Learned Additional Solicitor General further submitted that there are
two instances under which the RoFR may be exercised are:
(i) The L1 bidder is a Foreigner or an entity registered outside
India, offering a ship not built in India.
(ii) The L1 bidder is a Citizen of India or Company registered in
India or Society registered in India or Indian Shipping
Company/organization with a vessel registered/flagged in
India, offering a ship not built in India.
(iii) From amongst the bidders eligible to exercise RoFR, the
priority to exercise this Right would lie in sequence from the
lowest to the highest bidder within the margin of purchase
preference. The exercise of RoFR would cease as soon as an
eligible bidder in order of priority matches L1. The first
priority would be given to any bidder who offers an Indian
built ship. In case none of the bidders offering Indian built
vessels matches the L1 price, then RoFR would be offered to
bidders who are either citizens of India or Companies
W.P.(C) 3070/2019 & batch matters P age 14 of 25
registered in India or Societies registered in India or offering a
vessel flagged in India or outside. In case none of the bidders
eligible to exercise RoFR matches the L1 quote, then the
charter shall be awarded to the L1 bidder.
18. Thus, category 1 is Indian built ship offered by Citizen of
India/Indian Company/Society Registered in India irrespective of whether
the vessel is Indian Flagged or Foreign Flagged for this category the
paramount requirement is the vessel should be built in India which is in
consonance with the object and nexus envisaged in the Make in India
policy. The notification dated 13.02.2019 and circular issued thereto is
issued in pursuance.
19. Category II is in absence of any vessel from the aforementioned
category I RoFR will be accorded to the bidders who mandatorily are
Indian Citizens/Indian Company/ Society registered in India irrespective of
the vessel being Indian Flagged or Foreign Flagged. All the petitioners who
own Indian Flagged vessel built outside India fall in Category II. Apart
from entities like the petitioners, who are offering foreign flagged vessels
manufactured outside India, those Indian Citizens/Indian
Companies/Societies registered in India will also be able to compete with
W.P.(C) 3070/2019 & batch matters P age 15 of 25
the entities like the petitioners. The only difference between the petitioners
and other Indian Citizens/ Indian company/ Society registered in India will
be regarding ownership of such vessels. The Indian Flagged vessels are
necessarily owned by the petitioners. However, the other category is of
Indian entities offering hired or chartered foreign vessels. This category
ensures object and nexus of Make in India order of the Government of
India, to promote maritime services offered by Indian Citizens/Indian
Companies/ Societies Registered in India.
20. To strengthen her arguments, learned ASG has relied upon the case
of Bhavesh D. Parish vs. Union of India: (2000) 5 SCC 471whereby
observed that while considering an application for staying the operation of
a piece of legislation, and that too pertaining to economic reform or
change, then the courts must bear in mind that unless the provision is
manifestly unjust or glaringly unconstitutional, the courts must show
judicial restraint in staying the applicability of the same.
21. Also relied upon the case of Delhi Development Authority vs.
Skipper Construction Co. (P) Ltd.: (1996) 4 SCC 622 whereby the
Hon'ble Supreme Court has held that before making the order, the court
must be satisfied that it is a case which calls for such an order.
W.P.(C) 3070/2019 & batch matters P age 16 of 25
22. In case of State of W.B. vs. Calcutta Hardware Stores: (1986) 2
SCC 203 whereby the Hon'ble Supreme Court has observed that
deprecating the cursory manner of passing such interlocutory orders for the
mere asking, should have passed the impugned order in the manner that
they did.
23. In case of BALCO Employees' Union (Regd.) vs. Union of India:
(2002) 2 SCC 333 whereby held that process of disinvestment is a policy
decision involving complex economic factors. The Courts have consistently
refrained from interfering with economic decisions as it has been
recognised that economic expediencies lack adjudicative disposition and
unless the economic decision, based on economic expediencies, is
demonstrated to be so violative of constitutional or legal limits on power or
so abhorrent to reason, that the Courts would decline to interfere.
24. The fact remains that the Act, 1958 governs ownership of and not
where the ship is built. This essential difference seems not appreciated by
the respondents. The proposed new regime under the impugned
Notification, in fact attempt to create a scenario wherein a Foreign Built,
Foreign Owned, Foreign Flag Vessel is treated on the same pedestal as a
Foreign Built, Indian Owned and Indian Flagged vessel. This has no nexus
W.P.(C) 3070/2019 & batch matters P age 17 of 25
to the purported and ostensible objective of the impugned notification
which is to further the interest of the Ship Building Industry in India. The
impugned notification seeks to do is to do away totally with the existing
protection which is provided to Indian Ships to have a right to do Indian
business by matching the lowest rate quoted by the Foreign Flag Ships. The
protection was to promote Indian Flag Ships to further the objective of the
Act, 1958 and increase Indian tonnage. The impugned regime has no
connection with giving any encouragement to the shipbuilding industry.
The new regime creates a scenario when an Indian Flag Vessel owned and
offered by an Indian citizen/Indian Company/ Indian Society is placed on
the same pedestal as Foreign Flag Vessel offered by an Indian citizen/ India
Company/ India society in its capacity as a mere "charterer" which does
not require registration under the Act, 1958. This clearly is not linked to the
ostensible objective or the policy of "Make in India" and also amounts to
treating unequals as equals. As per the impugned notification dated
13.02.2019, the respondent has created the following classes of priority
which is not envisaged within the scheme of the Act, 1958:
(a) An Indian Built Ship irrespective of its Flag would get first priority
to do business in India.
W.P.(C) 3070/2019 & batch matters P age 18 of 25
(b) An Indian Ship and a Foreign Flag Ship have been equalised so long
as the Foreign Flag Ship is chartered by an Indian Citizen/Indian
Company/Indian Society.
25. The Impugned Notification issued under the Act, 1958 needs to
operate within the confines of said Act and not beyond it. The Impugned
Notification seeks to provide RoFR to ships already built in India prior to
the date of the impugned notification irrespective of such Indian built ships
being foreign flag or Indian flag. It seems giving RoFR to ships already
built in India before the date of the impugned notification does not
incentivise future shipbuilding in any manner whatsoever thereby defeating
the objective of "Make in India". The foreign ship owners invest in Indian
shipping Companies and set up 100% subsidiaries under the FDI regime to
flag vessels in India and set up offices in India only to take advantage of
RoFR Regime thereby increasing not only the Indian Tonnage, but to
provide additional revenue, foreign exchange, tax and employment in
India. The dilution of the RoFR Regime may reduce foreign direct
investment in shipping in India.
26. For Indian Flag Vessels the requirement is to have a full compliment
of Indian National Seafarers. Thus, under the impugned notification, the
W.P.(C) 3070/2019 & batch matters P age 19 of 25
Government may be looser on revenue and deprive Indian Seafarers of
employment. The objective of the Act, 1958 is to equate Foreign Flag
Ships with Indian Flag Ships thus making India as a rare exception
amongst maritime nations which gives no preference to its domestic flag
vessels over foreign flag vessels in respect of Indian trade. All ships which
have been registered under the Act, 1958 prior to the date of the impugned
notification would not be granted any protection whatsoever for being an
Indian Flag Ship and therefore, they can be left to idle without business.
The previous regime only allowed Indian Flag Ships with limited
protection to do the Indian business by matching the lowest rate quoted by
a Foreign Flag Ship i.e. without any price preference. The new RoFR
regime would enable a foreign flag ship to secure the Indian business
without any weightage/consideration being given to the Indian Flag as
Indian Flag Ships are equalised in the RoFR hierarchy with Foreign Flag
Ships. The impugned regime seems to have any nexus to the object sought
to be achieved of India being a Maritime Force.
27. As stated by the counsel for the petitioner that respondents have
ignored the public interest at stake inasmuch as the impugned regime
intends to incentivise the moribund shipbuilding industry comprising of 20
W.P.(C) 3070/2019 & batch matters P age 20 of 25
active shipyards which are plagued by financial difficulties by devastating
a buoyant Indian shipping industry comprising of 200 odd shipping
companies employing thousands of Indian citizens and supporting ancillary
industries and having invested around INR 68,000 crores to increase Indian
Tonnage and have altered their position based on the declared regime by
the Government of India.
28. In Halliburton Offshore Services Inc. Vs. Principal Officer of
Mercantile Marine Department: (2017) 14 SCC 238, the Hon'ble
Supreme Court has held as under:-
"54. Registration of ship is a means of bestowing
nationality upon the ship which is an age old practice in
maritime industry. By registration under the M.S. Act,
1958, a ship is recognised as an Indian Ship and becomes
entitled to fly Indian Flag and is thus eligible to claim the
benefits, privileges, advantages or protection enjoyed by
Indian Ships under the Act. Flag of the ship is the prima
facie or visible evidence of registry. Under customary
international law, ships are regarded as part of the
territory of the Flag State-an extension of the country or
floating island. Registration, therefore, operates as a
bridge between the ships and the mainland and extends
nationality rights to the Ship; it serves as a legal
institution linking the ship to a State. The flag-state or the
State of registry, has the right to exercise jurisdiction
over the ship, is responsible for it and has the right to
protect it. Therefore, there is no gainsaying that
registration of a ship casts serious responsibilities on the
registering State. For this very reason, it is important to
ensure that all the requisites for registration of a ship are
W.P.(C) 3070/2019 & batch matters P age 21 of 25
strictly complied with, be it an Indian ship or ship built
abroad entitled to become Indian ship."
"74. If we carefully analyse the provisions of Part V of
the Act, in the context of the definitions of important
terms contained in Section 3 of the Act, we find that
"ownership" of the ship is central to the scheme. As per
Section 21 of the Act for the purpose of this Act, a ship
shall not be deemed to be an Indian ship unless owned
wholly by persons to each of whom the description in
Section 21 Clauses (a) to (c) applies. The inevitable
corollary is that the ship shall be deemed to be an Indian
ship, if it is wholly owned by the persons who are the
citizens of India or qualify under Clause (b) or (c) of
Section 21. However, such a proposition cannot hold
good as status of an Indian ship can be obtained only by
complying with the procedure for registration of ship,
laid down in the Act and Rules. Therefore, 'ownership by
an Indian' is a pre-requisite of provisional as well as final
registration. Forms 3 to 5 contained in Schedule I to
1960 Rules deal with Declaration of Ownership by
Individuals, Declaration of Ownership by Joint Owners
and Declaration of Ownership on behalf of a company
respectively. As per Section 27, 'the owner of every
Indian ship' in respect of which an application for
registry is made shall cause such ship to be surveyed by a
surveyor. 'The owner of an Indian ship' who applies for
registry under the Act shall, before registry, Under
Section 28 mandate marking of the ship permanently.
Section 29 directs the owner of the vessel to furnish a
declaration of ownership of the ship containing, inter
alia, specification of the time and place where the ship
was built. Section 30 mandates filing of a builder's
certificate with the particulars of the ship, like proper
denomination, tonnage etc. as indicated in Section 30. A
careful analysis of the provisions of Part V of the Act, in
particular Section 20 to Section 32, makes it clear that
ownership of the ship and completion of construction of
W.P.(C) 3070/2019 & batch matters P age 22 of 25
the ship i.e. the ship being 'fully built' are central to Part
V."
29. In Brij Mohan Lal vs. Union of India: (2012) 6 SCC 502, the
Hon'ble Supreme Court has held as under:
"Certain tests, whether this Court should or not
interfere in the policy decisions of the State, as stated
in other judgments, can be summed up as:
(I) If the policy fails to satisfy the test of
reasonableness, it would be unconstitutional.
(II) The change in policy must be made fairly and
should not give impression that it was so done
arbitrarily on any ulterior intention.
(III) The policy can be faulted on grounds of mala fide,
unreasonableness, arbitrariness or unfairness etc.
(IV) If the policy is found to be against any statute or
the Constitution or runs counter to the philosophy
behind these provisions.
(V) It is dehors the provisions of the Act or
Legislations.
(VI) If the delegate has acted beyond its power of
delegation."
30. Under Section 21 of the Act, 1958 only an Indian Ship is statutorily
recognised. Under Section 68, only an Indian Sip is entitled to the benefits
and advantages under the Act. The respondents in the garb of the purported
new regime cannot efface the Statute and incorporate a totally new and
alien concept and category which is not recognised by the Act itself.
31. On the one hand, the respondents contend that the impugned
notification and the circular have been issued in exercise of the statutory
W.P.(C) 3070/2019 & batch matters P age 23 of 25
power under Section 406 and 407 of the MSA, however, on the other hand,
the respondents contend that the impugned notification is a policy decision.
The impugned notification being one under Sections 406 and 407 cannot
efface and obliterate the ethos and legislative intent of the Act, 1958.
32. It is pertinent to mention that under the previous regime which has
been in place for the last more than two decades, the Foreign Flag Ships
have been participating in Indian Trade and Entrepreneurs who are not ship
owners or who do not have the capacity to own ships have been
participating in inquiries through the charter of both Indian Ships and
Foreign Flag Ships. The impugned notification may result in increase in
Shipping Capacity as also chartering of Ships by non-ship owners. The
Indian Ships are a Class by itself and equalisation of Indian Ships with
Foreign Flag Ships amounts to treating unequals equally which is violative
of Article 14 of the Constitution of India.
33. It is pertinent to mention here that globally coasting trade is
exclusively reserved for National ships bearing the national Flag of that
jurisdiction (commonly referred to as "cabotage") for e.g. the United States
of America, China, Brazil, Japan etc. As stated in rejoinder, in fact, 80% of
the countries in the world have cabotage restrictions. No country in the
W.P.(C) 3070/2019 & batch matters P age 24 of 25
world gives same treatment to the National ships compared with Foreign
Flag V'essels. The effect of the impugned Regime would be that the entire
Indian trade would fall in the hands of Foreign Flag Vessels and Indian
Ships would be rendered completely out of the market.
34. It is pertinent to mention here that in spite of the protection, only
about 6% of the business was done by the Indian Flag Ships which
underscores the prevalence of unfettered competition by foreign flag
vessels in the Indian market.
35. In view of above discussion, I am of the opinion that prima facie the
impugned notification and circular are against the Scheme of the Act, 1958,
therefore, order dated 28.03.2019 is made absolute.
36. I hereby make it clear that the discussion and observations made by
this Court in passing this order, are not on the merit of the writ petitions
and shall not be referred at the time of final disposal by either of the
parties.
37. The applications are disposed of, accordingly.
(SURESH KUMAR KAIT)
JUDGE
MAY 29, 2019
rhc/ab
W.P.(C) 3070/2019 & batch matters P age 25 of 25
