IN THE HIGH COURT OF GUJARAT AT AHMEDABAD O.J.APPEAL No 11 of 2002 in MISC.CIVIL APPLICATION No 33 of 2000 with CIVIL APPLICATION No 52 of 2002 with LETTERS PATENT APPEAL (STAMP) and/or O.J. APPEAL No 1369 of 2000 For Approval and Signature: Hon'ble MR.JUSTICE KSHITIJ R.VYAS Sd/- and Hon'ble MR.JUSTICE D.H.WAGHELA Sd/- ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? 1 & 2 YES; 3 to 5 NO -------------------------------------------------------------- JAISU SHIPPING CO. PVT. LTD. Versus M.V. ASEAN JADE -------------------------------------------------------------- Appearance: MR DD VYAS for M/S.VYAS ASSOCIATES for Appellant MR AS VAKIL with MR PS PRATAP for Respondent ...........for Respondent No.2 and 3 -------------------------------------------------------------- CORAM : MR.JUSTICE KSHITIJ R.VYAS and MR.JUSTICE D.H.WAGHELA Date of decision: 27/12/2002 C.A.V. JUDGEMENT (Per : MR.JUSTICE D.H.WAGHELA) 1. This appeal is preferred from the judgment and order dated 27.2.2002 of the learned single Judge in Miscellaneous Civil Application No.33 of 2002 in Admiralty Suit No.10 of 2000, whereby, the application of the respondent herein was allowed and the appellant herein (the original plaintiff) was ordered to pay Rs.2,70,000/- per day for detention of the vessel for eight days. By consent and at the request of the learned counsel, the appeal was taken up for final hearing at the admission stage. The appellant also filed an appeal from the earlier order dated 30.6.2000 vacating the order of the vessel's arrest in which the reasons were to be given afterwards. It was stated at the Bar that the impugned judgment containing the reasons and final order being challenged in this appeal on all the available grounds, that former appeal lying in the Registry under office-objections since August 2000 as Letters Patent Appeal (Stamp) No.1369 of 2000 as also O.J.Appeal (Stamp) No.1369 of 2000 would not survive and shall no more be required to be registered. 2. It must be noted at the outset that the original Admiralty Suit No.10 of 2000 is pending and the opponent herein was not a party to that suit. However, on the allegations and premises that the opponent herein, i.e. the ship M.V.ASEAN JADE, was a sister-ship of the vessel M.V. ASEAN CRYSTAL (also known as ASEAN MARINER), whose owners were the defendants in the suit, and that the former ship was likely to sail out of the Port of Kandla on 26.7.2000, an application being Miscellaneous Civil Application No.24 of 2000, was filed in Admiralty Suit No.10 of 2000 and, by the order dated 23.6.2000, an ex parte order for arrest of the former ship was obtained. The admiralty suit appears to have been filed on 8.6.2000 and, at the time of initial hearing on 19.6.2000 when notice returnable on 3.7.2000 was ordered to be issued, amendment was also granted so as to increase the amount of claim from US $ 8,79,190.86 to US $ 15,17,770 along with interest @ 18% as also an amount of Rs.30,000/- per day by way of damages from the date of the suit till the disposal of the suit. It also appears from the record that the appellant herein had filed another application being Miscellaneous Civil Application No.23 of 2000 with the prayers to order the defendants in the suit to transfer the ASEAN CRYSTAL or any other vessels or other properties or to give bank security for the suit-claim and that application was never pressed for any order although notice was also issued therein and made returnable on 3.7.2000. Thus, in short, after increasing the amount of claim by way of amendment and even during the pendency of an application for securing the further claim, (the owner of ASEAN CRYSTAL having already provided the security by a Letter of Indemnity to the extent of US $ 1.2 million against the original claim of US $ 8,29,190.86) the application for arrest of M.V. ASEAN JADE was made and an ex parte order of arrest was obtained on 23.6.2000 which was admittedly served only on 27.6.2000 when M.V. ASEAN JADE was about to sail. Being aggrieved by the order of arrest, the respondents herein filed Miscellaneous Civil Application No.33 of 2000 in which the impugned judgment was delivered after filing of affidavits and counter-affidavits of the parties and written and oral arguments spread over a period of about one-and-half years. The order of arrest was, however, vacated earlier on 30.6.2000 and the hearing that ensued related to the amount of damages to be awarded in view of allegedly unlawful arrest of the ship M.V. ASEAN JADE. 3. Assailing the impugned judgment of the learned single Judge, the learned senior counsel Mr.D.D.Vyas, appearing for the appellant, submitted that the damages could have been awarded only after leading of evidence and enquiry into the proper amount of damages and such enquiry could not have been carried out in a summary manner as was done by the learned single Judge. He also submitted that the amount of damages claimed by the respondent was merely based upon ipse dixit of the interested party and could not have been the basis in absence of any legal evidence which could have been and ought to have been led. He also submitted that the ship ASEAN JADE was in any case not bound to sail on 27.6.2000 and its sailing might have been delayed for any other reason. He also made a grievance that the contentions and submissions of the appellant were not fully appreciated and dealt with by the learned single Judge while granting the prayer for damages, as also in vacating the order of arrest made in Miscellaneous Civil Application No.24 of 2000 referred hereinabove. 4. Learned counsel Mr.A.S.Vakil, appearing for the respondent, fairly conceded at the outset that, in view of the amount of damages having been calculated on per day basis and for eight days and in view of the fact that the order of arrest was served only on 27.6.2000 and it was vacated on 30.6.2000 and the ship had actually sailed on 1.7.2000, the detention of the ship was for a period of five days at the most and accordingly the damages on per day basis could be reduced to that extent. He, however, emphatically submitted that the averments made by the applicant (appellant) for arrest were palpably false and the court was misled into believing, prima facie, that the ship ASEAN JADE and ASEAN CRYSTAL were sister-ships and under the common ownership. He supported the judgment insofar as the procedure followed by the court was in tune with Rule 367 of the Rules of High Court of Bombay (Original Side), 1957 contained in Part I, Chapter XXI as applicable to the High Court of Gujarat under Section 32 of the Bombay Reorganization Act, 1960. 5. The facts emerging from the reading of the record of Miscellaneous Civil Application No.33 of 2000 are that ASEAN JADE had approached the Court with a prayer to set aside ex parte order of its arrest alleging fraudulent misrepresentation and suppression of facts and documents with the intention of causing it wrongful loss. The alleged claim for damage suffered by the original plaintiff due to drifting of M.V.ASEAN CRYSTAL and collision with "KAMAL VII", a floating dry-dock owned by the plaintiff was already covered for an amount of US $ 1.2 million and secured by a letter of undertaking issued by the Protection of Indemnity (P&I) Club in Singapore on 27.5.1999 when further proceedings were stayed in the High Court of the Republic of Singapore in Admiralty in Rem No.336 of 1999 in favour of the courts in India. About eight months thereafter, action in personam in the form of the original Admiralty Suit No.10 of 2000 came to be filed with the same claim of US $ 879,190.86 without ASEAN JADE or its owners being made a party to the suit. After amending and increasing the claim amount to exceed US $ 1.5 million and obtaining on 23.6.2000 an ex parte order of arrest of M.V. ASEAN JADE alleging it to be a sister-ship, the order was served on 27.6.2000 when it was about to sail out of the Port of Kandla. M.V. ASEAN JADE was loaded with a cargo of 13,200 MTs. of agricultural products for export to China. The cargo of agricultural products on board was perishable cargo valued at US $ 2.75 million. The detention of ASEAN JADE was alleged to be causing a loss of US $ 6000 per day on account of daily costs of maintenance and crew and additional daily port expenses, agency charges, legal costs, management fees etc. Therefore, the applicant exhorted the court to summarily invoke the undertaking furnished by the plaintiff so as to pay damages to the applicant @ Rs.2,70,000/- for each day of detention and to vacate the ex parte order of injunction and arrest. Upon such application dated 29.6.2000 and after hearing the parties, the Court set aside on 30.6.2000 the order of arrest passed on 23.6.2000 in Miscellaneous Civil Application No.24 of 2000. The applicant had, along with his application on affidavit filed the documents showing that the owners of ASEAN JADE and ASEAN CRYSTAL were different and even located in different countries and hence both could not be considered as sister-ships. It was also stated that the letter of guarantee accepted by the original plaintiff as security in respect of its alleged claim clearly stated that it was provided to the plaintiff in consideration of the plaintiff refraining from arresting the vessel ASEAN CRYSTAL (now named ASEAN MARINER) or any other vessel, asset or property in the same or associated ownership, management, possession or control in connection with the plaintiff's alleged claim for damages as a result of the alleged collision between ASEAN CRYSTAL and KAMAL VII. 5.1 After the aforesaid order dated 30.6.2000 vacating the order of arrest, the appellant herein filed an affidavit to aver that the claim in the suit had exceeded the letter of guarantee of US $ 1.2 million; that allegation of the daily expenses and costs due to detention to the tune of US $ 6000 was denied and the allegations of suppression of fact, malicious arrest and perpetuation of fraud were also denied. By a further affidavit it was stated that the directors of Universal Maritime Ship Holding Ltd. and Glori Ship Management Pvt. Ltd. were the owners of ASEAN CRYSTAL; that Golden Century Maritime Pvt. Ltd. was a subsidiary of Glori Ship Management Pvt. Ltd. which was also managing ASEAN JADE; that the address of Glory Ship Management Pvt. Ltd. and Golden Century Maritime Pvt. Ltd. was same and were having common staff, common telephones and both companies had common shareholders. It was specifically averred that if the corporate veil was lifted, both the companies were same and both ships were the ships of sister-concerns. The denial of the claim for damages was reiterated. Thereafter, by an affidavit dated 11.7.2000 of the Constituted Attorney of Golden Century Maritime Pvt. Ltd., owners of M.V. ASEAN JADE, the above allegations made on behalf of the original plaintiff were denied and it was reasserted that the vessel was ready to sail on 27.6.2000 when permission to sail was denied due to the order of arrest. And, it was only in the afternoon of the 1st of July, 2000 that the vessel could sail at about 2048 hours after obtaining Port and Customs permission pursuant to the order dated 30.6.2000. It was also specifically averred that the daily loss of US $ 3000 was evident from the demurrage rate under the charter party contract under which the vessel was loaded. It was also stated that the higher rate must apply where the detention was by a third party since additional losses on account of port charges, agency fees, management fees, communication expenses etc. had to be taken into account. In such circumstances, daily loss of US $ 6000 was claimed. It was also alleged that the plaintiff, after being aware of ASEAN JADE having arrived at Kandla Port on 14.6.2000, had waited until 23.6.2000 for an order of arrest and that order was served on 27.6.2000 without serving copies of the plaint and the miscellaneous civil application and thus the plaintiff had deliberately delayed execution of the warrant of arrest till the last minute so as to cause maximum loss. The affidavit was supported by copies of the Charter Party Contract evidencing the condition of demurrage @ US $ 3000. The appellant herein did not file any reply to the said last affidavit even as the hearing continued till 22.2.2002 according to para 4.1 of the impugned judgment. 5.3 The inescapable conclusions from the above record of facts are :- (a) That the vessels MV ASEAN JADE and MV ASEAN CYSTAL were not sister-ships under the same ownership. Admittedly, the relationship between the two owners of the two ships in question could not be established unless the corporate veil was lifted and no reason was placed on record or made out to lift the corporate veil; (b) That the details of the losses caused due to detention of MV ASEAN JADE under the order of arrest were stated on oath with the support of documentary evidence and the same were not denied after the last affidavit dated 11.7.2000; (c) That issues of propriety of the procedure and jurisdiction for awarding damages were not specifically raised by the appellant in either of their affidavits filed in reply to the application for damages; (d) That an undertaking to pay damages/ compensation in the event of the party affected by interim relief as envisaged in the applicable Rule 367 of the Rules of the High Court of Bombay (Original Side), 1957 was never filed by the appellant; (e) That the plaintiff had not pressed the separate application filed for additional security from the original defendants; and (f) That the application for arrest of ASEAN JADE as a sister-ship of ASEAN CRYSTAL was not moved in time and the ex-parte order of arrest was obtained and served in such manner that the ASEAN JADE could not have the time to have the order of arrest vacated without detention after being ready to sail. 5.4 It was in such circumstances that the impugned judgment and order, containing reasons for the earlier order dated 30.6.2000 and awarding damages, was made after extensive hearings spread over more than one year. 6. In the above background of facts and the contentions calling into question the jurisdiction and procedure, it would be advantageous to refer to the relevant observations made by Their Lordships in M.V. ELISABETH v. HARWAN INVESTMENT & TRADING PVT. LTD., GOA [ AIR 1993 SC 1014 ], which is an erudite treatise on the Maritime Law in India, although the nature of dispute in that case was different. The abstract of the relevant observations may be extracted as under: " Because of the unlimited civil jurisdiction already vested in the High Courts, they were declared to be Colonial Courts of Admiralty having the same jurisdiction in extent and quality as was vested in the High Court of England by any statute or custom under the provisions of the Colonial Courts of Admiralty Act, 1890 read with the Colonial Courts of Admiralty (India) Act, 1891. The High Courts were declared to be competent to regulate their procedure and practice in exercise of admiralty jurisdiction in accordance with the Rules made in that behalf. There was, therefore, neither reason nor logic in imposing a fetter on the jurisdiction of the High Courts by limiting it to the provisions of an imperial statute of 1861 and freezing any further growth of jurisdiction. (para 25). ......As the admiralty jurisdiction of the English High Courts expanded with the progress of the legislation, and with the repeal of the earlier statutes, including in substance the Admiralty Courts Acts of 1840 and 1861, it would have been reasonable and rational to attribute to the Indian High Courts a corresponding growth and expansion of admiralty jurisdiction during the pre-independence era. (para 26). Describing the unified court structure in England, Jackson sums up: 'The Admiralty Court developed independently, having its own battle with common law courts over jurisdictional boundaries. During the 18th and early 19th centuries, its influence and power decreased, but through statutes of 1840 and 1861, the court received a firm foundation on which it has built since. It came in from the cold into the general union of courts in 1873-5 and is now integrated into the High Court, being a branch of the Queen's Bench Division.... Once under the umbrella of the unified court structure, common law and equitable principles became directly available in the Admiralty Court. No longer need claimants have to seek these elsewhere and no longer did jurisdictional boundaries necessarily indicate the availability of substantive rights and remedies'. (para 43). '.......In admiralty the vessel has a juridical personality, an almost corporate capacity, having not only rights but liabilities (sometimes distinct from those of the owner) which may be enforced by process and decree against the vessel binding upon all interested in her and conclusive upon the world, for admiralty in appropriate cases administers remedies in rem, i.e. against the property, as well as remedies in personam, i.e. against the party personally (Benedict, The Law of American Admiralty, 6th ed. Vol.I p.3). (para 45). Admiralty Law confers upon the claimant a right in rem to proceed against the ship or cargo as distinguished from a right in personam to proceed against the owner. The arrest of the ship is regarded as a mere procedure to obtain security to satisfy judgment....(para 46). ......An action in rem lies in the English High Court in respect of matters regulated by the Supreme Court Act, 1981 and in relation to a number of claims the jurisdiction can be invoked not only against the offending ship in question but also against a "sister-ship" i.e. a ship in the same beneficial ownership as the ship in regard to which the claim arose. (para 47). A ship may be arrested (i) to acquire jurisdiction; or (ii) to obtain security for satisfaction of the claim when decreed; or (iii) in 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 shipowner; and he should in that event be compensated by the arresting party. (para 49). It is by means of an action in rem that the arrest of a particular ship is secured by the plaintiff. .......The arrest of the foreign ship by means of an action in rem is thus a means of assuming jurisdiction by the competent court. (para 57). The real purpose of arrest in both the English and the Civil Law system is to obtain security as a guarantee for satisfaction of the decree, although arrest in England is the basis of assumption of jurisdiction, unless the owner has submitted to jurisdiction. (para 59). It may not be correct to say that the admiralty jurisdiction of the English Courts is dependent entirely on statutes. ......Remedy for enforcement of maritime liens was available prior to the introduction of statutes. .....By statutory intervention the court structure came to be unified and substantive rights and remedies became available without regard to jurisdictional boundaries. Although statutes now control the field, much of the admiralty law is rooted in judicial decisions and influenced by the impact of civil law, common law and equity. .....Any attempt to confine admiralty or maritime law within the bounds of statutes is not only unrealistic but incorrect. Although this branch of the law in England is now governed generally by statutes, the law in all its aspects can be understood only by viewing it in the context of decisions of courts and the general principles which are common to common law and equity. (paras 61 and 62). .....The right to seize a vessel by legal process is therefore partly based on rights conferred by general maritime law and partly upon the right to take legal action of this nature granted by statute.....(para 63). In tracing the history of admiralty law in India, it is likewise misleading and incorrect to confine it to statutes. Statutes have been codifications of rules of law as developed by usage, practice and custom. As stated by Westropp,C.J. of the Bombay High Court in Bardot v. The American Ship or Vessel 'Augusta' (1873) 10 Bombay High Court Reports, 110 at p.113 :- "...If we have jurisdiction to entertain this suit, it must be sought for in the general maritime law administered by Courts of Admiralty.....We must hold it to be quite clear that the Statutes 3 & 4 Vict.c.65 (1840), 24 Vict.c 10 (1861), and 26 & 27 Vict.c.24 (1863), do not increase or in any wise affect our jurisdiction either in Admiralty or Vice-Admiralty, and that if we have jurisdiction to entertain this cause, that jurisdiction must be sought for outside those Statutes. (page 64). Where statutes are silent and remedy has to be sought by recourse to basic principles, it is the duty of the court to devise procedural rules by analogy and expediency. Action in rem is a practical procedural device developed by courts with a view to rendering justice in accordance with substantive law not only in cases of collision and salvage, but also in cases of other maritime liens and claims arising by reason of breach of contract for the hire of vessels or the carriage of goods or other maritime transactions, or tortious acts.....(para 65). It is likewise within the competence of the appropriate Indian Courts to deal, in accordance with the general principles of maritime law and the applicable provisions of statutory law, with all persons and things found within their jurisdiction. The power of the court is plenary and unlimited unless it is expressly or by necessary implication curtailed. Absent such curtailment of jurisdiction, all remedies which are available to the courts to administer justice are available to a claimant against a foreign ship and its owner found within the jurisdiction of the concerned High Court. This power of the court to render justice must necessarily include the power to make interlocutory orders for arrest and attachment before judgment. (para 66). The High Courts in India are superior courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred, and subject to the appellate or discretionary jurisdiction of this Court (Supreme Court), the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers. (para 67). In equating the admiralty jurisdiction of the Indian High Court to that of the English High Court, the Colonial Court of Admiralty Act, 1890 significantly refers to the admiralty jurisdiction of the High Court in England "whether existing by virtue of any statute or otherwise". This is an enabling statute, and not a statute of limitation of power. It aids, and does not fetter, the growth of jurisdiction. There is no reason why the words 'statute or otherwise' should be so construed as to exclude the various sources from which the admiralty jurisdiction in England developed. Apart from statutes, the