1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 92 OF 2010 IN NOTICE OF MOTION NO. 271 OF 2010 IN ADMIRALTY SUIT (L) NO. 87 OF 2010 BEST FOOD INTERNATIONAL PVT. LTD. ) A company incorporated under the Companies Act ) 1956 and having its office at Plot No.11, Opp. Green ) Market, B/E Satnam Dharam Kanda ) O/S Bhagatanwala, Amritsar, Punjab 143001 ) H.O. : P.O. Box 5, Indri-132041 Karnal ).. Appellant (Org.Applicant) Versus 1) NAVBHARAT INTERNATIONAL LTD. ) a company incorporated under the Companies ) Act, 1956 and having its office at 5192 ) Naya Bazar, Delhi 110006 ) 2) CARGO ONBOARD MV AMNITEES ) 3) MOHSEN LINE GENERAL TRADING LLC. ) a company registered under the Laws of UAE ) and having its office at P.O. Box No.182466 ) Deira, Dubai, U.A.E. ).. Respondents (No.1-Orig.Plff. Nos.2 and 3 Org.Deft.Nos. 1 and 2) Shri S. Venkiteshwaran, Senior Advocate, a/w Shri A.M. Vernekar i/b Chambers of Javed Gaya for the Appellant. Shri F.E. Devitre, Senior Advocate a/w Shri Ashwin Shanker for Respondent No.1. Shri D.C. Gomes for Respondent No.3. 2 CORAM : ANIL R DAVE, C.J. AND S.C. DHARMADHIKARI J. JUDGMENT RESERVED ON : 24TH FEBRUARY 2010 JUDGMENT PRONOUNCED ON : 23RD MARCH 2010 JUDGMENT : (Per S.C. Dharmadhikari, J.) Admit. Respondents waive service. By consent, Appeal is taken up for hearing forthwith. It is agreed between the parties that the final hearing of the Appeal shall be treated as disposal of Notice of Motion No. 271 of 2010 pending before the learned Single Judge. 2. This Appeal under Clause 15 of the Letters Patent is directed against the order dated 4th February 2010 passed in the afore- mentioned Notice of Motion which was moved by the Appellant- original Applicant. The parties to this Notice of Motion are Respondent No.1-original Plaintiff and original Defendant Nos.1 and 2 being Respondent Nos.2 and 3 herein. Any reference to them as per their original position be understood accordingly. 3. The learned Single Judge passed an ad-interim order and posted the Notice of Motion for hearing and final disposal. However, the learned Judge directed the Applicant to furnish security to the extent of US $ 7.52 million as a pre-condition for vacating the order of arrest of a cargo which was on board vessel MV AMITEES. 3 4. The Applicant-Appellant filed the above Notice of Motion praying that this Court should forthwith vacate the order dated 12th January 2010 and warrant of arrest issued in furtherance thereof by which the Defendant No.1 cargo on board the above vessel was arrested. The second relief that was claimed by the Applicant-Appellant was to allow it to reclaim its cargo on board the vessel MV AMITEES at the earliest. The application was moved on 20th January 2010 and supported by an affidavit of one Aslyn Fernandez, Constituted Attorney of the Applicant-Appellant. 5. He stated that the order passed by this Court is obtained by the Respondent No.1-Plaintiff by suppressing relevant and material facts from this Court. It was the case of the Appellant that the plaint proceeds on the basis that the Respondent No.2-original Defendant No. 1 cargo belongs to Respondent No.3-original Defendant No.2. It was stated that out of the quantity of 15,000 metric tons of the cargo of Indian Pusa Basmati Rice 1121 presently laden upon the said vessel at Kandla, 13,000 metric tons belonged to the Appellant. This cargo is valued at US $ 14.3 million. 4 6. It was the case of the Appellant that they entered into a Contract as a seller on 9th November 2009 with Respondent No.3- original Defendant No.2 buyer. Under the said contract, the Appellant agreed to sell cargo specified therein which the Respondent No.3 agreed to purchase on the terms and conditions mentioned in the Contract. Reference is made to Items/Clauses of the Contract and in paragraph 6 of the affidavit in support of the Notice of Motion, the Appellant stated that by Clause 9 of the Contract, the date of shipment was to be between 12th -17th January 2010. That was mentioned in the Bill of Lading. The Appellant commenced loading on 5th January 2010 and completed the same on 9th January 2010. Thereafter reference is made to the Bills of Lading Numbers, Mates receipts and then it was urged that the Bills of Lading have not been endorsed in favour of any party. 7. The grievance of the Appellant was that the Suit of Respondent No.1-original Plaintiff has been filed on 12th January 2010. In the Plaint, the fact that 13,000 metric tons of the said cargo belongs to the Appellant has been suppressed and it has been stated that the Defendant No.2 is the owner of the cargo. The Appellant stated that they came to know of the present proceedings when the Sheriff levied attachment on `the cargo’ on 12th January 2010, at Kandla. 5 8. Thus, it is the case of the Appellant that 13,000 metric tons of the cargo belongs to them and not to Respondent No.3, the Plaint suppresses this crucial fact and mis-represents that Defendant No.2- Respondent No.3 before us is the owner of the entire cargo of 15,000 metric tons. It is stated that the cargo is of a perishable nature and if the Appellant is not allowed to deal with the same by vacating the order of arrest, then, grave and serious loss and prejudice will be caused to the Appellant. 9. It was also urged that Respondent No.1 has set out in the Plaint that their claim against Respondent No.3-original Defendant No. 2 is purely contractual. It is in personam. Their relation arises out of a contract which is distinct to that between Appellant and the Respondent No.3. Therefore, Respondent No.1-Plaintiff have no maritime claim and they are not entitled to invoke the Admiralty jurisdiction of this Court. This was the plea raised in the alternative. For all these reasons, it was prayed that the Notice of Motion be made absolute. 10. It is common ground that this Notice of Motion was contested by only Respondent No.1-Plaintiff. They filed an affidavit in 6 reply of their Constituted Attorney and urged that their Plaint does not proceed on the basis that Defendant No.1 cargo as a whole belongs to Defendant No.2. The attachment is sought to be levied to the extent of the cargo belonging to Defendant No.2 which is sufficient to cover the claim of the Plaintiff. Respondent No.1-Plaintiff stated that they have no objection if the balance cargo is clarified to be not subject to the order of arrest. 11. Accusing the Appellant of suppressing material and relevant facts, the reply proceeds on the basis that the Contract between the Applicant and Defendant No.2 is fabricated and forged. Several clauses of the Contract between the Applicant and Defendant No.2 have been referred to in the affidavit in reply and it was stated that the Bills of Lading and the Mates Receipts have not been submitted with the affidavit in support. Respondent No.1 called upon the Applicant’s Advocate to forthwith supply copies of these documents but they are not complying with the said request. Further, it is incorrect that the Plaint falsely states that the cargo does not belong to Defendant No.2. If the cargo is of perishable nature, then the Appellant -Applicant is free to provide security and have their cargo transported. It is the case of Respondent No.1 that the vessel on which the cargo is presently laden also remains under arrest. 7 12. It is stated that the claim against Defendant No.2 is subject matter of Arbitration at London. This is a maritime claim and/or a maritime question and/or maritime dispute between the Plaintiff and Defendant No.2 arising out of Defendant No.2’s failure to provide a vessel under the contract of sale and also breach out of or related to a contract for the use or hire of a ship. Therefore, this Court has jurisdiction to entertain and try the Suit. 13. Paragraph 10 of the affidavit in reply reads thus : “10. With reference to para 14, the claim against the defendant no.2 has been properly expressed within the body of the plaint, and is subject matter of London arbitration that has been recently commenced. Both parties have made their respective appointments/ nomination of the members in the Arbitral Tribunal. There is a maritime claims/ and or a maritime question/ and or maritime dispute between the plaintiffs and the defendants no.2, arise out of the def. no.2 failure to provide a vessel under the contract of sale and also a breach arising out of or related to a contract for the use or hire of a ship. Thus this Hon’ble Court has the necessary Admiralty jurisdiction to order security pending the dispute resolution between the plaintiffs and Def. no.2.” 14. Although it is stated that Defendant No.2 has filed an affidavit which was on the record of the Notice of Motion, it was stated therein that Respondent No.1-Plaintiff’s understanding of paragraph 7 8 of the Plaint is misleading, mala fide and false and that Respondent No. 1 have no right and have not made out even a prima facie case to sustain this understanding, yet, the material contest was between the Appellant and Respondent No.1. 15. Since, both sides have referred to the plaint allegations, it would be convenient to peruse them. The Plaint is filed in the Admiralty and Vice Admiralty jurisdiction of this Court on the basis that the original Plaintiff is a company incorporated under the Indian Companies Act, 1956. Defendant No.1 is described as “Cargo onboard MV AMITEES at Kandla” and it is stated that the said cargo comprises of Indian Pusa Basmati Rice 1121 presently laden on board a vessel MV AMITEES at Kandla. It is stated that the cargo is a property of Defendant No.2 valued approximately at US $ 17 million. Defendant No.2 is impleaded as a person engaged in the business of trading in agricultural produce. It is stated that Respondent No.1 have a claim of US $ 7.52 million against Defendant Nos.1 and 2 who are impleaded as Respondent Nos.2 and 3 to the Appeal. The claim arises out of the breach of three Contracts of Sale. It is stated that the Contracts are of 9th June 2009, 29th June 2009 and 6th July 2009 each of which states that it is PMT FOB ST Kandla. 9 16. It is stated that under all these Contracts, Respondent No.3 which is Defendant No.2 to the Suit, was obliged to place the vessel in Kandla Port. The Contracts contained details of the payment terms and the documents required for the same. It was stated that English Law was to apply as per the GAFTA Arbitration terms. After referring to the details of the Contracts and alleging that only a limited quantity was loaded and, therefore, the breach of the Contracts was committed. There were also certain defaults alleged in paragraphs 4 and 5 of the Plaint and for all these reasons it was stated that Respondent No.1’s London Solicitor invoked arbitration against the original Defendant No. 2 for their claim arising out of the three Contracts. It was stated that the present maritime Suit seeks to obtain security from Defendant No.2 for a sum of US $ 7.52 million pending the hearing and final disposal of the GAFTA Arbitration. 17. Paragraph 7 of the Plaint has been read and re-read before us and, therefore, it would be convenient to reproduce it, so also paragraph 8. Paragraphs 7 and 8 of the Plaint read as under :- “7. It is submitted that under the Admiralty Courts Act, 1861, Letters Patent and our Original Side High Court Rules and the various decisions of the Supreme Court on admiralty law, the Plaintiffs have a maritime 10 claim which they are entitled to enforce in personam against the 2nd Defendants and in rem against any asset of theirs to be found within this Court's Admiralty Jurisdiction. The Plaintiffs understand that the 2nd Defendants are owners of rice cargo valued at US $ 17 million laden on board MV AMITEES under the Sale of Goods Act, which has been impleaded as the 1st Defendant in the present suit. The plaintiffs have a copy of the checklist for the Shipping Bill. This cargo has been sold by few Indian exporters at Kandla to the 2nd Defendants (as buyers). The Plaintiffs thus have an in rem action against the 1st Defendants. 8. There is thus an amount of US $ 7.52 million due and payable to the Plaintiffs with further interest @ 12% pa from date of suit till the date of payment/realization and costs. Since this ranks as a maritime claim, it is submitted that the Plaintiff are entitled to seek a decree qua the 1st Defendant for an amount of US $ 7.52 million with further interest @ 12% pa from date of suit till the date of payment/realization and costs. This is as security pending the GAFTA Arbitration to be held in London. The Plaintiffs pray accordingly. Hereto annexed and marked as Exhibit "A" are the particulars of the Plaintiffs' claim.” 18. It is in these circumstances that a decree in favour of the Plaintiff and against the Defendants in the sum of aforementioned US Dollars together with interest has been claimed and a request was made that the cargo presently lying in the port and Harbour Kandla be ordered to be arrested by the Sheriff of Mumbai under a warrant of arrest issued by this Court and this cargo be therefore detained. 11 19. Prayer clauses (d) and (e) of the Plaint read thus : “(d) That pending the hearing and final disposal of the suit, the 1st Defendant cargo be arrested and detained under the orders of this Hon'ble Court and/or be restrained by an order of injunction of this Hon'ble Court from sailing out of the port and harbour of Kandla and/or moving out of the territorial waters of India; (e) That pending the hearing and final disposal of the suit, the Sheriff of Mumbai be directed to have the 1st Defendant cargo appraised by any suitable marine surveyors according to true value thereof and upon such value certified in writing by the said surveyors to sell the said defendant vessel by public auction free and clear from all exiting claims, liens, and/or any encumbrances for the highest price that can be obtained for the said 1st Defendant Cargo;” 20. Upon this Suit being filed in this Court on 12th January 2010, an ex-parte application for arrest was made which came to be granted by this Court on 12th January 2010. 21. The usual undertakings were filed and hence the Applicant-Appellant was required to move the subject Notice of Motion for vacating the order of arrest of Defendant No.1. That is how the controversy arose between parties which led to the impugned order being made. The learned Judge in the impugned order has observed that the averments which have been made require the Court to deal 12 with connected documents. This would enable the Court to decide the ownership/title of the cargo in question and various aspects of and concept of FOB are also relevant. Therefore, till detailed hearing takes place and the issue of title of the cargo is settled, it would not be proper to grant the request of the Appellant. Therefore, by granting liberty to produce necessary documents to the Appellant, the Court observed that whether the cargo in question can fall within the ambit of maritime lien or maritime claim is another aspect which can be gone into only at the hearing of the Motion and cannot be decided on the basis of averments raised by parties. Yet, the learned Judge made it clear that Respondent No.1-Plaintiff is entitled for the security of the amount to the extent of 7.52 million US $ which the parties to the Suit/Defendants or the Applicant-Appellant can furnish jointly and/or individually and subject to that the arrest order can be vacated. 22. It is this order and conclusion against which the instant Appeal has been filed. While keeping the request of the Appellant- Applicant pending, the learned Judge has impleaded it as a party Defendant to the Suit. 23. Shri Venkiteshwaran, learned Senior Counsel appearing on behalf of the Appellant, submitted that that at a prolonged 13 and detailed hearing before the learned Single Judge at which the Plaint Averments were referred to, documents as are necessary were perused and even the case law was brought to the Court’s notice. Therefore, it is not as if there was no material to resolve the issues raised in the Notice of Motion. Shri Venkiteshwaran submits that when the cargo is of perishable nature by postponing the adjudication, none would benefit by the course adopted by the learned Judge. Therefore, it is desirable and in the interest of justice that both sides be heard finally by the Division Bench and parties thereafter would abide by this Court’s order subject to their legal rights. In other words, despite the order being termed as an ad-interim order, considering the controversy involved, the request of Shri Venkiteshwaran was not to leave the matter to be now resolved by the learned Single Judge. Instead, the Appeal Court should dispose of the Notice of Motion pending before the learned Single Judge. 24. This course of action was acceptable to Shri Devitre, learned senior Counsel appearing for Respondent No.1-original Plaintiff and that is how we have heard them at length. 14 25. The first contention of Shri Venkiteshwaran, learned Senior Counsel appearing on behalf of the Appellant, is that this Court could not have entertained the Suit in its Admiralty and Vice Admiralty jurisdiction. Shri Venkiteshwaran has submitted that the Admiralty jurisdiction of this Court could not have been invoked by Respondent No.1-original Plaintiff. The Plaintiffs are not sure about the nature of their claim. According to them it is a maritime claim or a maritime question or a maritime dispute. During the course of arguments, they coin another word “maritime flavour” to describe the nature of their claim. All this shows that the Plaintiffs are taking a chance. Unless they have a maritime claim or a maritime lien they cannot maintain an action for arrest in the Admiralty Court. Shri Venkiteshwaran submits that claims which are essentially contractual are brought in within this Court’s Admiralty jurisdiction by referring to the Letters Patent of this Court being Letters Patent of 1823. This Letters Patent may have been referred to by the Supreme Court in the decision of M.V. Elisabeth and others vs M/s Harwan Investment & Trading Co. and another, reported in AIR 1993 SC 1014, however, this Court’s Admiralty jurisdiction cannot be widened to such an extent so as to bring within its ambit any contract with a maritime flavour. Shri Venkiteshwaran submits that the word “maritime flavour” is pressed into service by Respondent No.1- Plaintiff by borrowing it from a decision of the American Court. The 15 argument is as long as there is a maritime flavour it can be considered as a maritime claim. However, the decision in MV Elisabeth (supra) does not lay down any such principle. Referring to paragraph 65 of this decision, Shri Venkiteshwaran submits that the Hon’ble Supreme Court has not held that any claim claim directly or indirectly associated with the maritime trade or which has a maritime flavour can be agitated in Admiralty jurisdiction. He submits that the Admiralty jurisdiction can be invoked only in the case of maritime claim or maritime lien. 26. Shri Venkiteshwaran then submitted that if the Plaint filed in the instant case is perused, it would be apparent that all that has been alleged is that the original Defendant No.2 were obliged to place the vessel in Kandla Port. However, the claim of the Plaintiff is clearly for a breach of contract for sale of goods. Although, in paragraph 7 of the Plaint it is alleged that the Plaintiff has a maritime claim, yet, that is because the parties have entered into a contract which provides for FOB shipment of cargo. However, this by itself is not sufficient to hold that the claim falls within Admiralty jurisdiction. 27. Shri Venkiteshwaran submits that the plaint allegations and the documents produced by the Plaintiff themselves would go to show that their claim arises because they are unpaid sellers for 7400 metric 16 tons of rice as the contract quantity was 8000 metric tons. The deficit shipment is to the extent of 600 metric tons. In this behalf, if the Advocate’s notice prior to the institution of the Suit, copy of which is annexed to the Plaint, is perused, it would be apparent that the claim is nothing but arising out of a breach of a contract for failing to make any payment and making arrangement for lifting of the cargo. If the breach is of such a nature, then it is apparent that it is not within the Admiralty and Vice Admiralty jurisdiction of this Court. The claim is maintainable in Ordinary Original Civil Jurisdiction of this Court. However, the jurisdiction, powers and authority thereunder are distinct and separate from Admiralty jurisdiction. Every claim arising under a contract where the goods are to be shipped would not mean that it is a maritime claim. If the plaint allegations are perused as a whole and if they are assumed to be true for the purposes of jurisdiction, then, what follows therefrom is that the dispute between the parties has no relevance to any ship or carriage of goods by sea. On the contrary, there is no ship or vessel involved. The grievance is that the cargo was not shipped. Relying upon a decision in “THE “TESABA” reported in (1982) Vol. I LLR 397, Shri Venkiteshwaran submits that any claim arising out of any agreement relating to the carriage of goods in a ship or to the use or hire of a ship has to be against a particular vessel and it does not cover claims relating to carriage in unidentified vessel. 17 28. In the instant case, the claim is clearly not a maritime claim and, therefore, the Motion ought to have been allowed unconditionally by the learned Single Judge. Instead, he fell in patent error in postponing the adjudication and at the same time directing release of cargo against the Applicant furnishing security so as to satisfy Plaintiff’s claim. This means that the learned Judge has failed to exercise his jurisdiction in law. The learned Judge ought to have gone by the uncontroverted allegations in the Plaint for deciding as to whether the claim of the Plaintiff falls within this Court’s Admiralty or Vice Admiralty jurisdiction. That could have been done by referring to the Plaint and the documents referred therein. Shri Venkiteshwaran submits that assuming everything stated in the Plaint to be true, it is clear that the claim of the Plaintiff does not come within the purview of the Admiralty or Vice Admiralty jurisdiction of this Court and on this short ground alone the order of arrest of a cargo needs to be vacated. 29. Shri Venkiteshwaran relied upon the following in support of his above submission : (i) Epoch Enterrepots vs M.V. WONTU, reported in (2003) 1 SCC 305. (ii) Extract from Maritime Liens (Volume 14) by D.R. Thomas. 18 (iii) Extract from Admiralty and Maritime Law Guide International Conventions. (iv) Liverpool & London S.P. & I Association Ltd. vs. M.V. Sea Success I and another, reported in (2004) 9 SCC 512. (v) Queen’s Bench Division (Admiralty Court) decision in The “TESABA” reported in (1982) Vol. I. LLR 397. (vi) Extract from “The Sale of Goods Act” - Pollock & Mulla- page 214. (vii) Mitsui & Co. Ltd. and another v Flota Mercante Grancolombiana S.A. - (The “Ciudad de Pasto”) (1988) Vol. 2 LLR 208. 30. On the other hand, Shri Devitre, learned