IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.02.2011 Coram The Hon'ble Mrs. Justice R.BANUMATHI and The Hon'ble Mr. Justice M.M.SUNDRESH O.S.A.Nos.346 and 347 of 2010 O.S.A.Nos.346 and 347 of 2010: Hari & Company A partnership firm having office at Export House, 133, Great Cotton Road, Tuticorin-628 001, rep. by its Power Agent V.Maheswaran. .. Appellant in both appeals. Vs 1.St. Antony's Traders having office at Old No.4/28, New No.4/161 CGE Colony, Tuticorin-628 003 rep. by its Partner A.Lephonse. 2.Owners and persons interested in the Vessel MV Dhuvaafaru Galaxy, (Ex: MV Hikaadhoo carrier) Now lying at the Azhikkal anchorage, Silk Yard, The Port of Kannur Kerala, rep. by its Master. .. Respondents in both appeals. Appeals preferred against the common order of this Court in Application Nos.4337 and 4810 of 2010 in C.S.No.708 of 2010 dated 22.10.2010. For Appellant .. Mr.AV.K.Ezhilmani For Respondents .. Mr.K.Chandrasekaran for R1 COMMON JUDGMENT R.BANUMATHI, J https://hcservices.ecourts.gov.in/hcservices/ These appeals arise out of the order of learned single Judge in A.Nos.4337 and 4810 of 2010 whereby the learned single Judge declined to pass an order of arrest of Vessel MV Dhuvaafaru Galaxy holding that claim of supply of necessaries do not constitute a "maritime lien". 2. Plaintiff is an Import and Export Company and they are also engaged in the business of Clearing and Forwarding Agency which includes supply of various necessaries to Vessel in Dock. Case of Plaintiff is that Defendant in the course of business would lie anchored in the Indian Ports at various places at various points of time, particularly in Chennai and Tuticorin Ports. When the ship is so anchored, the Plaintiff would supply various necessaries to the Defendant at the request of the Master of the Vessel. Plaintiff would raise invoices and as such, maintaining a running Account with the Defendant. It is averred that Plaintiff has been supplying necessaries to the Defendant for several years and an outstanding amount to the credit of the Plaintiff stood at US $270,386.56 as at 19.3.2009. Defendant confirmed the aforesaid dues by their fax letter dated 27.4.2009 sent by one Asif, affixing the seal of the company. Even after such confirmation of balance outstanding, the Defendant availed the services of the Plaintiff for the value of US $28,519.93. After negotiations, Defendant issued a letter of authority dated 22.7.2009 to the Plaintiff to authorize the Plaintiff to sell Defendant's sister Vessel MV Maafaru. Plaintiff realized a sum of US $150,000 and out of the sale proceeds, a sum of US $27,000 towards release of the sister Vessel from the arrest of another creditor which was settled by the Plaintiff was adjusted and interest charges and crew charges at US $48,669.58 and US $23,810.07 respectively were also adjusted. After adjusting the sale proceeds of MV Maafaru as stated above, the total outstanding of the Defendant stood at US $248, 386.14 and the said amount is outstanding from 16.2.2010. 3. Alleging that the Defendant has not made any payment despite repeated demands, Plaintiff has filed the suit C.S.No.708 of 2010 invoking admiralty jurisdiction of this Court. According to Plaintiff, they supplied stores, lube oil and other essentials to Defendant and therefore, Plaintiff is having maritime lien and an action in rem against the ship MV Dhuvaafaru Galaxy. Stating that Defendant's Vessel MV Dhuvaafaru Galaxy is now berthed in Kannur Port, Kerala for loading cargo and it is expected to remain in the Port for another couple of days, Plaintiff has filed the suit :- (a) for recovery of a sum of Rs.1,26,75,328.46 together with interest at the rate of 24% p.a. from the date of plaint till the date of realisation; https://hcservices.ecourts.gov.in/hcservices/ (b) for the arrest and sale of Defendant Vessel MV Dhuvaafaru Galaxy (Ex: MV Hikaadhoo carrier); and (c) for a direction to adjust the sale proceeds of Defendant Vessel MV Dhuvaafaru Galaxy (Ex: MV Hikaadhoo carrier) against the suit claim. 4. On application filed by the 1st Respondent/Impleading party in A.No.4810 of 2010, 1st Respondent was ordered to be impleaded in the suit. Case of 1st Respondent/Impleading party is that they are carrying on the business of purchase of old Vessel for the purpose of breaking and one such Vessel is MV Dhuvaafaru Galaxy which was registered at Maldives. According to 1st Respondent/Impleading party, Vessel MV Dhuvaafaru Galaxy is not owned by M/s.Marine Exports and Trading Company Private Limited (METCO) and Vessel MV Dhuvaafaru Galaxy was originally owned by Ms. Nazea Abdul Guddoos and after due negotiation, MV Dhuvaafaru Galaxy was purchased by the 1st Respondent/Impleading party under Memo of Agreement dated 24.6.2010. 1st Respondent firm took possession of the Vessel from Male, Maldives for sailing to Kannur, Kerala for breaking up. According to 1st Respondent/Impleading party, sale of the Vessel took place as early as on 24.6.2010 to the 1st Respondent and 1st Respondent-Impleading party is a bonafide purchaser for value without notice of any claim for supply of the alleged essentials. Plaintiff's agreement with METCO is for the ship MV Mafaaru and not for the ship MV Dhuvaafaru Galaxy. Further case of 1st Respondent/Impleading party is that there is no essential or necessaries supplied to MV Dhuvaafaru Galaxy and on false representation, MV Dhuvaafaru Galaxy was wrongly arrested by the Plaintiff. There is no claim of "maritime lien" against MV Dhuvaafaru. If at all there is any claim, it can only be in personam against the owner of the Vessel and no claim in rem will lie. Hence, 1st Respondent/Impleading party prayed for revoking the order of arrest of Vessel MV Dhuvaafaru Galaxy dated 11.08.2010 passed by the learned single Judge. 5. Upon consideration of the rival contention of parties and after referring to the decision reported in Interaccess case [2009 (3) CTC 611], learned single Judge held that Plaintiff is seeking recovery of money from the Defendant for various necessaries supplied to the Defendant which means that Plaintiff cannot seek for an order of arrest of the Vessel MV Dhuvaafaru as the claim for supply of necessaries do not constitute a maritime lien though it certainly constituted a maritime claim. 6. Challenging the impugned order of learned single Judge and placing reliance upon (2004) 9 SCC 512 [Liverpool and London S.P. https://hcservices.ecourts.gov.in/hcservices/ & I Association Limited v. M.V.Sea Success I and another], Mr.AV.K.Ezhilmani, learned counsel for Appellant contended that to assume admiralty jurisdiction, learned single Judge ought to have ordered arrest of the Vessel MV Dhuvaafaru Galaxy. Placing reliance upon 1993 Supp (2) SCC 433 [M.V.Elisabeth and others v. Harwan Investment and Trading Private Limited, Hanoekar House, Swatontapeth, Vasco-de-gama, Goa], learned counsel for Appellant would contend that when maritime claim is not defined in the Statutes, a liberal interpretation has to be given to the maritime lien and while so, the learned single judge erroneously held that the suit is based on supply of necessaries only and it does not enjoy the maritime lien. Learned counsel for Appellant would further contend that even assuming that supply of necessaries do not give rise to maritime lien, the substantial claim of Plaintiff consists of Port dues, pilotage, tax etc. which enjoys maritime lien and the suit is based on bonafide claim and rightful maritime lien against the Vessel MV Dhuvaafaru Galaxy. 7. Mr.K.Chandrasekaran, learned counsel appearing for 1st Respondent/Impleading party has submitted that the suit claim is for trade due payable by MV Dhuvaafaru Galaxy and by Memo of Agreement, Plaintiff was asked to sell Defendant's sister Vessel MV Maafaru and out of the sale proceeds, Plaintiff was asked to adjust the claim. It was further contended that Plaintiff has not rendered any service to the ship MV Dhuvaafaru Galaxy giving rise to maritime lien and the admiralty jurisdiction of the Court is abused by the Plaintiff. Learned counsel appearing for 1st Respondent would further contend that if at all there is any claim, it can only be a claim in personam against the owner of the Vessel and no suit or claim in rem would lie and the suit in rem is misconceived. 8. Upon consideration of the order of learned single Judge and rival contentions and materials on record, the following point arises for consideration:- Whether the claim for supply of stores, lube oil to MV Dhuvaafaru Galaxy constitutes a maritime lien, a right in rem against the Vessel MV Dhuvaafaru Galaxy with a right to seek an order of arrest of the Vessel? 9. Before we go into the question whether "maritime lien" is created infavour of Plaintiff and supply of "necessaries", it is necessary to briefly refer to the nature and scope of admiralty jurisdiction, the distinction between "maritime lien" and "supply of necessaries". Admiralty jurisdiction of the High Courts in our country is coterminous with the admiralty jurisdiction of the High Court of England, as it existed at the time of the passing of the https://hcservices.ecourts.gov.in/hcservices/ Colonial Courts of Admiralty Act, 1890 by the British Parliament. A brief historical background of this jurisdiction in our country is also found in the decision of the Bombay High Court reported in Kamalakar Mahdev v. S.S.Navigation Co. Ltd. AIR 1961 Bom 186; and the decision of Calcutta High Court in Jayaswal Shipping Co. v. S.S.Leelavati, AIR 1954 Cal 415; and M.V. Elisabeth case [1993 Supp (2) SCC 433 and also by the single Judge of this Court in Interaccess case in 2009 (3) CTC 611. 10. By the Letters Patent issued under the charter of 1823, Supreme Courts were established at Bombay, Calcutta and other places in the country. The concluding portion of Cl.53 of the Letters Patent of Bombay (which is similar to the others) extract from the aforesaid decision [AIR 1961 Bom 186] reads as follows:- " ...... the cognizance whereof doth belong to the jurisdiction of the Admiralty, as the same is used and exercised in that part of Great Britain called England, together with all the singular their incidents, emergents, and dependencies, annexed and connexed causes whatsoever; and to proceed summarily therein, with all possible despatch, according to the course of our Admiralty of that part of Great Britain called England without the strict formalities of law, considering only the truth of the fact and the equity of the case". After the Indian High Courts Act of 1861, the High Courts of Judicature of Calcutta, Madras and Bombay superseded the Supreme Court. By the Letters Patent of 1862, the admiralty jurisdiction previously exercised by the Supreme Court was to be exercised by the High Courts. The Letters Patent of 1862 was superseded by the Letters Patent, 1865 and under the new Letters Patent also, the Admiralty Jurisdiction of the High Courts remained the same, that is, those of the Admiralty Courts in England. The jurisdiction of the Admiralty Courts in England, in respect of the offences on high seas, is of ancient origin. 11. The Admiralty Courts Act of 1840 was passed by the British Parliament to improve the practice and extend the jurisdiction of the High Court of Admiralty in England. This was the first of a series of Acts, which enlarged or defined the Admiralty jurisdiction. The next important legislation in England, regarding the jurisdiction of the High Court of Admiralty is the Admiralty Courts Act of 1861. 12. The British Parliament also passed Colonial Courts of Admiralty (India) Act, 1891, with a view to declare certain High Courts in India to be colonial Courts of Admiralty, as contemplated by the Colonial Courts of Admiralty Act, 1890. Section 2 of this Act mentions the various High Courts, and the https://hcservices.ecourts.gov.in/hcservices/ High Court of Madras is one of them. There has been no legislation affecting the Admiralty jurisdiction in India after 1860. Section 106 of the Government of India Act, 1915, Section 223 of the Government of India Act, 1935 and Article 225 of the Constitution preserved their status and Madras High Court continues to be a Court of record, having original and appellate jurisdiction including Admiralty jurisdiction vested in it by the Letters Patent. 13. The Merchant Shipping Act, 1958 contains various provisions to enforce territorial jurisdiction. The Act being essentially regulatory in character, the various authorities, tribunals and Courts entrusted with the administration and enforcement of its provisions are specifically stated. The High Court is defined under Section 3(15) of Merchant Shipping Act, 1958. The detention of a foreign ship is authorised in terms of Sections 443 and 444. Sections 443 and 444 relate to detention by reason of damage caused in any part of the world by a foreign ship to property belonging to the Government of India or to an Indian citizen or company. In M.V.Elisabeth case, the Supreme Court observed that the sections are wide in terms and the expression 'damage' is not necessarily confined to physical damage. Ordinarily damage is caused by physical contact of the ship, such as in collision. But damage can also be caused to property by breach of contract or acts of commission or omission on the part of the carrier or his agents or servants by reason of the negligent operation and management of the vessel. 14. The practice and procedure to be followed in admiralty jurisdiction of this Court are governed by Colonial Courts of Admiralty Act, 1890, Colonial Courts of Admiralty (India) Act, 1891, International Convention for Unification of Certain Rules Relating to Maritime Liens and Mortgages at Brussels, 1926, Brussels Arrest (of Seagoing Ships) Convention, 1952, Merchant Shipping Act, Or.42, R.3 of High Court Original Side Rules, 1956. Or.42, Rule 3 of High Court Original Side Rules relates to admiralty jurisdiction and the procedure to be followed which we would refer shortly. These procedural provisions are only tools for enforcement of substantive rights. 15. In admiralty jurisdiction, rights of parties are mostly governed by custom, usage and practice that is why in M.V.Elisabeth case, the Supreme Court observed that Indian statutes lag behind the development of International law in comparison to contemporaneous statutes in England and other maritime countries. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships. 16. Once a foreign ship is arrested in Indian waters by an https://hcservices.ecourts.gov.in/hcservices/ order of the High Court, in exercise of the admiralty jurisdiction vested in it by statute or inherent in it as a court of record, in respect of any maritime claim against its owner, wherever the cause of action may have arisen, and whether or not the ship is subsequently released by the owner furnishing security, proceedings must continue against the owner as in any other suit. The arrest of the vessel while in Indian waters by an order of the High Court concerned, as defined under the Merchant Shipping Act, 1958 [Section 3(15)] attracts the jurisdiction of the competent court to proceed with the trial, as in the case of any other suit, as an action against the owner, and any decree obtained by the plaintiff is executable against any property of the owner available within jurisdiction, including the security furnished by him for release of the vessel. 17. The history of admiralty jurisdiction and foundation of action in rem and action in personam has been considered in M.V. Elisabeth case, where the Supreme Court held as under:- "47. Merchant ships of different nationalities travel from port to port carrying goods or passengers. They incur liabilities in the course of their voyage and they subject themselves to the jurisdiction of foreign States when they enter the waters of those States. They are liable to be arrested for the enforcement of maritime claims, or seized in execution or satisfaction of judgments in legal actions arising out of collisions, salvage, loss of life or personal injury, loss of or damage to goods and the like. They are liable to be detained or confiscated by the authorities of foreign States for violating their customs regulations, safety measures, rules of the road, health regulations, and for other causes. The coastal State may exercise its criminal jurisdiction on board the vessel for the purpose of arrest or investigation in connection with certain serious crimes. In the course of an international voyage, a vessel thus subjects itself to the public and private laws of various countries. A ship travelling from port to port stays very briefly in any one port. A plaintiff seeking to enforce his maritime claim against a foreign owner has neither property nor residence within jurisdiction. The plaintiff may therefore detain the ship by obtaining an order of attachment whenever it is feared that the ship is likely to slip out of jurisdiction, thus leaving the plaintiff without any security. 48. A ship may be arrested (i) to acquire jurisdiction; or (ii) to obtain security for satisfaction of the claim when decreed; or (iii) in https://hcservices.ecourts.gov.in/hcservices/ execution of a decree. In the first two cases, the court has the discretion to insist upon security being furnished by the plaintiff to compensate the defendant in the event of it being found that the arrest was wrongful and was sought and obtained maliciously or in bad faith. The claimant is liable in damages for wrongful arrest. This practice of insisting upon security being furnished by the party seeking arrest of the ship is followed in the United States, Japan and other countries. The reason for the rule is that a wrongful arrest can cause irreparable loss and damages to the ship owner; and he should in that event be compensated by the arresting party. (See Arrest of Ships by Hill, Soehring, Hosoi and Helmer, 1985). 49. The attachment by arrest is only provisional and its purpose is merely to detain the ship until the matter has been finally settled by a competent court. The attachment of the vessel brings it under the custody of the Marshal or any other authorized officer. Any interference with his custody is treated as a contempt of the court which has ordered the arrest. But the Marshal's right under the attachment order is not one of the possession, but only of custody. Although the custody of the vessel has passed from the defendant to the marshal, all the possessory rights which previously existed continue to exist, including all the remedies which are based on possession. The warrant usually contains a monition to all persons interested to appear before the court on a particular day and show cause why the property should not be condemned and sold to satisfy the claim of the plaintiff. 50. The attachment being only a method of safeguarding the interest of the plaintiff by providing him with a security, it is not likely to be ordered if the defendant or his lawyer agrees to "accept service and to put in bail or to pay money into court in lieu of bail". (See Halsbury's Laws of England, 4th Edn., Vol.1, p.375 etc.). 51. The service of the warrant is usually effected by affixing it on the main mast or single mast of the ship. A ship which has been arrested under an order of attachment may be released by the court if sufficient bail is put in to cover the claim of the plaintiff as well as the costs of the action. https://hcservices.ecourts.gov.in/hcservices/ The sureties are liable for the amount entered in the bail bond. 52. If the ship or cargo under arrest before judgment has not been released by the defendant by putting in sufficient bail, and if the property is found deteriorating, the court has the power to order the sale of the property after notice has been duly issued to the parties interested. 53. If the plaintiff has finally obtained a decree of condemnation and sale of the ship, the court will issue an order to the competent officer commanding him to sell the property, in execution of the decree, and to bring the proceeds into court. Thereupon the officer shall issue proper notice and arrange for the sale of the property by auction. The proceeds of the sale are paid into the registry of the court and they shall be disposed of by the court according to law. 54. A personal action may be brought against the defendant if he is either present in the country or submits to jurisdiction. If the foreign owner of an arrested ship appears before the court and deposits security as bail for the release of his ship against which proceedings in rem have been instituted, he submits himself to jurisdiction." 18. Action in rem and action in personam – Action in rem is against the ship itself. The proceeding in rem is against the maritime property, that is a Vessel, Cargo or Freight. Maritime lien pertains to the action in rem and travels with the ship. Any claim of the owners of the vessel may be a "maritime claim", but everyone of them may not give rise to "maritime lien". Considering the action in rem and arrest of a particular Vessel and action in personam, in M.V.Elisabeth case in Paragraphs 55 and 56, the Supreme Court held as follows:- "55. An action in rem is directed against the ship itself to satisfy the claim of the plaintiff out of the res. The ship is for this purpose treated as a person. Such an action may constitute an inducement to the owner to submit to the jurisdiction of the court, thereby making himself liable to be proceeded against by the plaintiff in personam. It is, however, imperative in an action in rem that the ship should be within jurisdiction at the time the proceedings are started. A decree of the court in such an action binds not merely the parties to the writ but everybody https://hcservices.ecourts.gov.in/hcservices/ in the world who might dispute the plaintiff's claim. 56. It is by means of an action in rem that the arrest of a particular ship is secured by the plaintiff. He does not sue the owner directly and by name; but the owner or any one interested in the proceedings may appear and defend. The writ is issued to "owners and parties interested in the property proceeded against. The proceedings can be started in England or in the United States in respect of a maritime lien, and in England in respect of a statutory right in rem. A maritime lien is a privileged claim against the ship or a right to a part of the property in the ship, and it "travels" with the ship. Because the ship has to "pay for the wrong it has done', it can be compelled to do so by a forced sale. [See Bold Buccleaugh (The) (1851) 7 Moo PC 267]. If the owner does not submit to the jurisdiction and appear before the court to put in bail and release the ship, it is liable to be condemned and sold to satisfy the claims against her. If, however, the owner submits to jurisdiction and obtains the release of the ship by depositing security, he becomes personally liable to be proceeded against in personam in execution of the judgment if the amount decreed exceeds the amount of the bail. The arrest of the foreign ship by means of an action in rem is thus a means of assuming jurisdiction by the competent court." 19. "Maritime claim" and "Maritime lien" – The issue falling for consideration is applicability of "maritime lien" on supply of necessaries to MV Dhuvaafaru Galaxy. Now the issue is what is a "maritime claim" and what is a "maritime lien" and whether Plaintiff's claim is a "maritime lien" which would warrant arrest of the vessel MV Dhuvaafaru Galaxy. In P.Ramanatha Aiyar's Advanced Law Lexicon, a "maritime lien" is defined as "a lien or claim for salvage, damages or wages, made in respect of any maritime adventure charged upon the vessel.". The Law Lexicon elaborates "Maritime lien" as under:- "A maritime lien is a claim or privilege upon