NMS1835-08.doc 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ADMIRALTY & VICE ADMIRALTY JURISDICTION NOTICE OF MOTION NO.1835 OF 2008 IN ADMIRALTY SUIT NO.14 OF 2008 Alpha Oil International .. Plaintiffs Versus m.t.CHEM LILY & Ors. .. Defendants Mr.Ashwin Shankar for plaintiffs Mr.Prashant Pratap for defendants CORAM : S.C.DHARMADHIKARI, J. DATE : 17th February 2011. P.C.: 1] This is a defendant’s motion. 2] The relief that is now pressed is in terms of prayer clauses (b) and (c) thereof, which read as under:- “(b) The security provided by the defendants be discharged and returned to the defendants” “(c) The plaintiff be directed to deposit in this Court or furnish security in the sum of US$1,20,000.00 being the loss and damage suffered by he owners of the NMS1835-08.doc 2 defendant vessel from 13th March 2008 to 18th March 2008 as a result of the arrest order dated 11th March 2008 and such further sums calculated at the rate of U.S.$20,000/- per day till the date of release of the vessel.” 3] It is contended by Mr.Pratap for defendant in support of these reliefs that the order of arrest is not maintainable in law and that even the order of security should be vacated forthwith. 4] It is contended further that there is complete suppression of material facts, inasmuch as in para 1 of the plaint it is stated that M/s.S.H.Marine Ltd., Seol, Korea (S.H.Marine for short) was demise charterer of the defendant vessel. Plaintiffs are also based in the same country. They have supplied bunkers at the instance of S.H.Marine to the defendant vessel. Mr.Pratap submits that the bunkers may have been supplied to other vessels but in the instant case the motion concerns the defendant vessel. If pages 46 and 47 of the plaint together with the substantive paras are perused, it is apparent that the acknowledgement and confirmation of the liability is by S.H.Marine. It is plaintiff’s own case that the order of arrest is claimed under the Geneva Convention. If the NMS1835-08.doc 3 Geneva Convention is perused and particularly Article 3, which is entitled “Exercise of right of arrest”, clause 1 falling thereunder provides that arrest is permissible of any ship in respect of which a maritime claim is asserted, if the demise charter of the ship at the time when the maritime claim arose is liable for the claim and is demise charterer or owner of the ship when the arrest is vacated. In the submission of Mr.Pratap, if paras 7 and 9 of the plaint are perused, the twin conditions contemplated by this article are not satisfied. It is not proper to rely upon only on the first part but the demise charter must be subsisting when the arrest is effected. In the instant case, it has been pointed out that prior to the order of arrest, the demise charter between the owners of the defendant vessel and S.H.Marine has been terminated. The termination is effected on and from 21st February 2008. This termination is accepted by S.H.Marine. No third party can raise the issue as to whether this termination is valid, legal and proper or not. Once, S.H.Marine has accepted this termination and the said S.H.Marine is not joined as a party, then, it is clear that the order dated 19th March 2008, which is without prejudice to the rights and contentions of parties, enables the defendants to seek relief in terms of prayer clause (b). If the order of arrest is obtained wrongfully and the security is also directed to be furnished on the pleas raised in the plaint NMS1835-08.doc 4 and when it is pointed out that there is suppression of material facts from this Court, then, even the security must be released. Since, the arrest is wrongful and even the order of security was obtained in the aforementioned manner, this Court should grant reliefs in terms of prayer clause (c) of the motion, as well. For all these reasons, this motion be made absolute is his submission. 5] On the other hand Mr.Ashwin Shanker, appearing for plaintiff submitted that the plaint must be read as a whole. If the plaint is considered in its entirety, then, there is no substance in any of the contentions raised on behalf of the defendant. He submits that the plaintiff has stated that there was a bare-boat demise charter of the vessel and it arrived on that basis. The demise charterer is S.H.Marine. But it has been clearly stated in para 2 of the plaint that at the request of the defendants, through S.H.Marine, the bunkers and fuel were supplied to the nominated vessel, including the defendant vessel. Mr.Shanker has relied upon para 2 of the plaint and the annexure to the plaint and particularly Exh.B in support of his contention that even the defendants are liable for the claim of plaintiffs. He relies upon the definition of the terms “buyer”, “owner”, “vessel” and invited my attention to clause 14.1 appearing under NMS1835-08.doc 5 the heading “arrest of the vessel”. Mr.Shanker then invited my attention to Exh.D-2 of the plaint and contended that the term “buyer” appearing has been understood in the context of the agreement itself, viz., Master and/or Charterer and/or owners and/or S.H.Marine. Further, all sales are on credit of the vessel. The buyer is presumed to have authority to bind the vessel with the maritime lien. Disclaimer stamps placed by vessel on the bunker receipt will have no effect and and will not waive seller’s lien. He also relied upon the documents annexed to the plaint at page 41 Exh.G-1 and submits that the balance confirmation must be seen not in isolation but in the backdrop of the averments contained in the plaint and together with the earlier annexures. So seen and considered, the claim of the plaintiff arises on the basis that the charterers had the authority to bind the vessel owners. Once such is the position on which the plaint proceeds, then, whether the demise charter has been terminated or not is not relevant. That cannot displace the case of the plaintiff at this stage. The termination which is allegedly with effect from 21st February 2008 and allegedly confirmed by S.H.Marine is not an admitted position. The effect of this can be tested only at the trial. This Court cannot proceed to accept this letter and more so because in the plaintiff’s affidavit in support of the arrest dated 18th March 2008, which is their version in reply to the NMS1835-08.doc 6 defendants in the instant motion. They have annexed a document dated 29th February 2008 wherein S.H.Marine, despite alleged termination, have remitted monies in the account of defendants i.e. owners of the vessel and in respect of very vessel which is the defendant to the suit. In such circumstances, the plaintiffs must be given an opportunity to displace the defendant’s case as set up on the basis of the denials and this Court should not allow the motion. 6] As far as the convention is concerned, apart from the fact that the convention is yet to be ratified, Mr.Shanker submits that the Hon’ble Supreme Court in a decision reported in 2004 (9)SCC 512 (Liverpool London S.P. & I Association Ltd. Vs. m.v. SEA SUCCESS 1 and Anr.) has clarified that the convention of 1999 would be subject to domestic law which may be enacted by the Parliament and it should be applied only for enforcement of law involving public law character. Therefore, whether the 1952 convention alone applies or both conventions are applicable is also an arguable issue and this Court must not proceed to accept the version of the defendant. 7] For all these reasons, it is contended that the plaintiffs have NMS1835-08.doc 7 pleaded in the plaint U.S. Law. The Supreme Court in the very decision (Liverpool London) has held that American decisions have persuasive value but on account of the global changes and outlook in trade and commerce, the Indian Courts may take into account American laws. Even on that count, this Court should not express any final opinion. 8] In rejoinder Mr.Pratap has pointed out that the plaintiffs have proceeded on the basis of the 1999 Convention and have themselves pleaded that the vessel was under a demise charter with M/s.S.H.Marine. Non joinder of S.H.Marine along with the above mentioned factors is reason enough to vacate the order of furnishing security for release of the vessel and, therefore, the motion be allowed as prayed. 9] With the assistance of learned Counsel for parties, I have perused the plaint and the annexures thereto so also the notice of motion and all affidavits on record. 10] At the outset I have accepted the statement of Mr.Shanker that the affidavit filed in support of the order of arrest dated 18th March 2008 is the reply of plaintiffs to the instant motion and particularly because the NMS1835-08.doc 8 defendants have re-joined thereto. 11] The plaint proceeds on the basis that the plaintiffs have filed the suit against the defendants for recovery of a sum of U.S.$12,24,976.12 together with interest in terms of particulars of claim annexed to the plaint. The plaintiffs have stated that they are entitled to obtain order of arrest because the vessel was at the relevant time within territorial waters of India. It is the BB / Demise charter by S.H.Marine. The BB Charter Agreement has been referred to in para 2 of the plaint and according to plaintiffs the terms were independently incorporated in individual contracts. The defendants were the buyers of the fuel sold by the plaintiffs. Plaintiffs sold the fuel on the credit of the vessel and accordingly enjoyed maritime lien over the defendants. A maritime lien also arises under the U.S.Laws which govern the terms of sale of fuel to the defendants. The right to arrest vessel was also contractually created. Para 3 refers to the documents in support of the supply to another vessel and the invoices. Similar is the case with paras 4 and 5 and in para 6 reference is made to the documents for supply of fuel to the defendant vessel. The fuel was supplied at Singapore. In such circumstances, in para 7 of the plaint, plaintiffs have stated that on failure to make payment NMS1835-08.doc 9 by the defendant vessel and also by its BB charter, a claim for supply of necessaries to the vessel arises, which entitles them to invoke the admiralty jurisdiction of this Court. They have brought the claim under the 1999 Geneva Arrest Convention which is applicable in terms of the Supreme Court decision. In para 8 of the plaint it is stated that the plaintiffs have a claim against the defendant vessel and the BB charterers of the defendant vessel is also personally liable and obliged to pledge the principal amount. It is in view of the above and by referring to Admiralty Courts Act, Geneva Arrest Convention read with the decision of the Supreme Court that the suit is filed and that is how the order of arrest has been claimed. 12] After reading all these averments in their entirety together with relevant annexures and particularly those, to which my attention is invited by Mr.Shanker, I am of the opinion that the relief as prayed by the defendants cannot be granted. 13] It is not possible to accept the contentions of Mr.Pratap at this stage stage itself that the termination of the demise charter is much prior to the date of arrest and, therefore, the twin conditions as set out in the NMS1835-08.doc 10 Geneva Convention are not satisfied. If the plaint allegations are seen as a whole, the liability of the defendants is also alleged as the owners of the vessel. In terms of the agreement what has been relied upon is the agreement between the demise charterer and the owner and the authority of the charterer, therefore, to bind the owner. Whether that authority has come to an end as alleged by the defendant or whether it was subsisting is a contentious issue. The Court cannot at this stage itself accept the contents of the documents which are relied upon by the defendants without they being proved. Equally, when the plaintiffs are stating that the documents produced are not genuine nor their contents conclusive, then, all the more and when the plaintiffs have produced certain documents allegedly showing remittances by the demise charterer to the owners of the vessel, this is a fit case where both sides need to be given an opportunity to prove their rival versions. In such circumstances, to my mind, I cannot proceed on the basis that the demise charter was not subsisting and was validly and legally terminated when the vessel in question was arrested i.e. On 18th March 2008. 14] Any larger issue or controversy raised in the light of applicability of the conventions and whether the Geneva Convention 1999 NMS1835-08.doc 11 together with Brussels Convention would be applicable are also matters which must be determined on the basis of the case proved at the trial and any opinion being expressed on this issue would be premature. The argument proceeds also on the basis of the applicability of the decision of the Supreme Court and particularly in the case of M/s.Liverpool & London (supra). The circumstances in which the decisions which are referred to in this judgement are rendered and whether the conventions are applicable also should be left open for being considered at an appropriate stage and that is at trial. Thus assuming that 1999 Convention was the governing one, whether the twin conditions as mentioned therein and particularly Article 3(1)(b) are satisfied, is a matter which must be decided at that stage. Equally any opinion being expressed on the applicability of Americal laws will not be in the interest of parties when the above view is taken. In the light of the above discussion, motion fails and it is accordingly dismissed. 15] The other request made by Mr.Pratap is that the defendant is incurring cost of keeping the bank guarantee alive till the disposal of the suit and, therefore, appropriate undertakings must be obtained from the plaintiff including furnishing of security at this stage because even the NMS1835-08.doc 12 plaintiff is a mere bunker supplier and a foreign entity. If at the trial the plaintiff does not succeed the undertaking given on paper is not capable of being enforced. 16] It is not possible to grant any reliefs in terms of the nature claimed by Mr.Pratap, particularly in the light of the view that I have taken. Ultimately, if the plaintiffs are unable to prove its case, defendants can request the Court to enforce the undertaking given to the Court and the Court can always pass appropriate orders in that behalf. Even that controversy is left open for being determined at that stage. 17] Needless to state that denial of the reliefs in the motion will not prevent the defendants from making an appropriate application claiming compensation from the plaintiffs and all contentions in that behalf are kept open. Mr.Pratap states that the written statement of the defendant will be filed within six weeks from today. Place the suit for framing issues after eight weeks. (S.C.Dharmadhikari, J)