IN THE HIGH COURT OF GUJARAT AT AHMEDABAD ADMIRALITY SUIT No 14 of 2003 WITH MISC.CIVIL APPLICATION No 187 of 2003 For Approval and Signature: HON'BLE MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO 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? -------------------------------------------------------------- M.G. FORESTS PTE LTD. Versus "M.V. PROJECT WORKSHIP" -------------------------------------------------------------- Appearance: 1. ADMIRALITY SUIT No. 14 of 2003 MR MJ THAKORE WITH MR RS SANJANWALA for Petitioner No. 1 MR T POORNAM WITH MR RJ OZA for Respondent No. 1 .......... for Respondent No. 2 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE D.A.MEHTA Date of decision:24/02/2004 CAV.JUDGEMENT 1 The plaintiff in the suit is a Private Limited Company incorporated and registered under the laws of Singapore and its registered office is in Singapore at the address stated in the cause title. It is averred in the plaint that the plaintiff Company was promoted by Mr.Mukesh Gupta and Mrs.Gupta who are also the Directors of the plaintiff Company. It is further averred that the said promoters and Directors are also promoters and Directors of Gupta Global Exim Private Limited, a company incorporated and registered in India and having its office and works in Gandhidham (Gujarat). It is further stated in the plaint that the promoters and Directors of the plaintiff Company are persons ordinarily residing in Gujarat and having their business in Gujarat. 2 Defendant No.1 is the vessel named "M.V.Project Workship"(hereinafter referred to as 'the vessel'). It is a foreign sea going vessel registered in Willenstad, Netherlands and flying a Dutch Flag. The registered owners are M/s.Sakhalin Heavy Transport Group. Though it is stated in the plaint that the registered owners are having place of business at the address mentioned in the cause title, in fact, no such address is mentioned in the cause title. 3 Defendant No.2 is a Company incorporated and registered under the laws of Hong Kong and having its registered office at the address mentioned in the cause title i.e. in Hong Kong. It is stated that defendant no.2 is engaged in the business of financing transactions and one such transaction is entered into by the plaintiff for purchase of the goods in question. 4 The case of the plaintiff is that it entered into a charter party agreement with owners of defendant no.1 for transportation of goods by sea from Guyana to Tuticorin in India. For this purpose, a fixture note dated 26/8/2003 was executed on or around 8/9-9-2003. That defendant no.1 Vessel arrived at Georgetown Guyana in or around 2nd week of September 2003 and the shippers loaded 5825.8406 CBM hardwood wooden logs. That accordingly a bill of lading was issued dated 23/9/2003 denoting shipper as one Barama Company Limited. The column containing the name of the consignee does not bear any name but states 'to order' while the column of notify address states name of defendant no.2. The vessel sailed on 25/9/2003 from Georgetown Guyana. 5 It is averred that on the basis of the aforesaid date of sailing the expected time of arrival of the vessel was last week of October 2003, but in fact the vessel arrived at the port of destination i.e. Tuticorin in India, only on 16.12.2003. Thus, according to the plaintiff the delay in delivering the cargo at the port of destination resulted in the inability of the plaintiff to deliver the cargo to one Shri Ambica Timber Depot, Chennai, with whom the plaintiff had entered into an agreement on 20/9/2003. According to the plaintiff, before the vessel was chartered the plaintiff was given to understand that the speed of the vessel would be around 9 to 10 knots and hence, the plaintiff had entered into an agreement for sale of the cargo in light of the expected time of arrival after 35 days of voyage from the date of sailing from Guyana. That due to delay in arrival of the vessel at the port of destination Shri Ambica Timber Depot had expressed its inability to take the delivery of the cargo at the rates agreed upon between the parties. This according to the plaintiff resulted in a situation where the plaintiff was likely to incur loss in the entire transaction. It is stated in paragraph 5.5 of the plaint that the resultant loss to the plaintiff and/or the defendant no.2 is USD 233,033.62 which is solely attributable to delayed delivery of cargo by the defendant No.1 vessel. 6 The plaintiff, therefore, has preferred this suit and in paragraph 15A the following prayer is made : "15. The plaintiff therefore prays :- (A) That the defendant vessel M.V."M.V.Project Workships" along with hull, tackle, engines, machinery, boats, apparel and other paraphernalia at present lying in port of harbour Tuticorin be ordered to be arrested with a view to secure the plaintiff's claim in arbitration proceedings to be instituted in London subject to English Laws". 7 The plaint was presented on 19/12/2003 and this Court made an order of arrest of the vessel on the same day. 8 The defendant no.1 vessel has put in its appearance and contested the claim of the plaintiff by preferring Misc. Civil Application No. 187 of 2003. In the said application, the following prayers are made : "In the premises aforesaid, the Applicant most respectfully prays that this Hon'ble Court may be pleased to : a) dismiss Admirality Suit No.14 of 2003; b) without prejudice to the above and in the alternative that the plaint be rejected; and c) without prejudice to the above to set aside, vacate the order of arrest passed on 19.12.2003 and to release the vessel m.v.PROJECT WORKSHIPS". 9. Mr.T.Poornam, appearing along with Mr.Rasesh Oza on behalf of the Vessel has raised the following contentions : (a) That this Court has no jurisdiction to entertain this Admiralty Suit, (b) That the plaintiff has no right, title or interest over the goods received from Guyana, as the plaintiff is neither a consignee nor endorsee; and hence, the plaintiff has no right to bring this suit, (c) The right of the plaintiff is limited to being charterer of the vessel, (d) That the basis of the suit is non existent. That there is no condition in the contract either as to speed of the vessel or as to the period of the voyage. (e) That even otherwise there is no ground for making any claim against the vessel : as no stipulation of time is shown to exist either in the contract of purchase (entered into with Barama Company Limited) or in the contract of sale (stated to have been entered into with Shri Ambica Timber Depot, Chennai): thus, the perceived loss is merely notional. It was, therefore, urged that the suit be dismissed and the order of arrest be vacated. 9.1 On the aspect of jurisdiction it was urged that the vessel was not within territorial jurisdiction of this Court and hence, this Court could not have exercised the Admiralty jurisdiction for ordering the arrest of the vessel. Alternatively, it was submitted that as the facts on record show, neither the whole nor in part, cause of action can be said to arise within the local limits of this Court. That the case of the plaintiff was that the plaintiff should be protected by ordering arrest of the vessel so as to secure the plaintiff's claim in arbitration proceedings which were yet to be instituted in London. That the entire basis was highly presumptuous in as much as the plaintiff had not brought any fact on record to show that in fact it had incurred any loss. Alternatively, it was urged that by virtue of Section 9 of the Arbitration and Conciliation Act 1996, this Court would not have any jurisdiction. 9.2 Inviting attention to various averments in the plaint, correspondence placed on record, and terms of the fixture note it was submitted that as on the date of the plaint the bill of lading was admittedly not in favour of the plaintiff; that the bill of lading does not even bear an endorsement in favour of the plaintiff. In fact, as can be seen from the bill of lading it was in favour of defendant no.2 and if any one had a prima facie right on the basis of bill of lading available on record, it was only defendant no.2. That in such circumstances, the plaintiff had no right, title or interest over the cargo and as a consequence the plaintiff could not even claim a right to sue as owner of the goods, on the basis of perceived loss from the transaction of purchase and sale. The right of the plaintiff was limited and was co-extensive to the right a charterer might have. 9.3 Alternatively, it was further contended that taking into consideration the fixture note dated 26/8/2003 it was apparent that there was no stipulation in the fixture note as regards either the speed of the vessel or the time of voyage. It was submitted that this aspect had to be appreciated in the context of the fact that the fixture note, in the column of vessel particulars, stated various details, including technical details about the vessel, but nowhere was any mention made as regards the speed at which the vessel was likely to travel. That on reading the entire fixture note it could not be stated that there was any representation as regards speed, or that there was any clause pointing out the speed of the vessel,and there was no clause giving any guarantee/warrantee as to the period during which the vessel would complete the voyage. It was also submitted that the fixture note did not contain any clause as regards penalty for delay. In fact, after clause 41 of the fixture note it was specifically stated that this fixture is subject to all other terms, conditions exceptions as per "CENCON" Charter (As Revised 1922, 1976 and 1994). After referring to the aforesaid condition regarding applicability of "CENCON" Charter attention was invited to paragraph 6(i) of the application filed by the vessel wherein the Owners' Responsibility Clause has been reproduced, as under : 'Owners' Responsibility Clause. The Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case the loss, damage or delay has been caused by personal want of due diligence on the part of the Owners or their Manager to make the Vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied or by the personal act or default of the Owners or their Manager. And the Owners are not responsible for loss, damage or delay arising from any other cause whatsoever, even from the neglect or default of the Master or crew or some other person employed by the Owners on board or ashore for whose acts they would, but for this Clause, be responsible, or from unseaworthiness of the Vessel on loading or commencement of the voyage or at any time whatsoever". 9.4 It was therefore submitted that it was not even the case of the plaintiff that delay, if any, had been occasioned due to personal want of due diligence on the part of the Owners or their Manager to make the vessel in all respects seaworthy, nor was it a case where vessel was not properly manned, equipped or supplied, nor was it the personal act or default of the Owners or the Manager. That in fact, the delay, if any, had been occasioned due to the circumstances beyond the control of the owners of the vessel. That even the plaintiff did not dispute the fact that the vessel developed mechanical problem during voyage resulting in the vessel having to undertake repairs enroute. 9.5 It was, therefore, urged that in the circumstances as the plaintiff had not only failed to make out a prima facie case in its favour and against the defendant, but also failed to make out any case i.e. in other words it was a hopeless case requiring dismissal of the suit in limine. 10. Mr.M.J.Thakore, learned Senior Advocate appearing with Shri R.S.Sanjanwala on behalf of the plaintiff submitted that the law was well settled that High Court being a superior Court, was vested with jurisdiction unless it was expressly shown that it did not have jurisdiction. It was submitted that the provisions of the Merchant Shipping Act, 1958 did not apply and considering the provisions of the Colonial Courts of Admiralty Act, 1890 read with provisions of the Colonial Courts of Admiralty (India) Act, 1891 it was clear that the Court was required to exercise jurisdiction in relation to territorial waters as defined in (The) Territorial Waters, Continental, Shelf Exclusive Economic Zone and Other Maritime Zones Act, 1976. Inviting attention to Section 120 of the Code of Civil Procedure, 1908 (for short 'the Code'), it was submitted that the High Court in exercise of its original civil jurisdiction was not bound by provisions of Sections 16, 17 & 20 of the Code, viz. the sections which dealt with the normal concept of territorial jurisdiction of Civil Court. Therefore, it was urged that while instituting the Admiralty Suit it was not necessary to show as to where the subject matter of the suit was situate and the requirement of the residence of the defendant or the requirement of cause of action, wholly or in part, arising within the local limits of a Court was also not required to be established. Thus, it was submitted that the jurisdiction of the High Court was not to be confined to applying the usual tests for determination of jurisdiction, and considering the settled legal position it was apparent that the grounds on which the defendant was contesting the jurisdiction of this Court could not be the grounds for divesting this Court of its admiralty jurisdiction which extended over entire territorial waters of the Union of India. 10.1 It was also submitted that the Provisions of Section 9 of the Arbitration and Conciliation Act, were not applicable in admiralty jurisdiction considering the definition of 'Court' given in Section 2(c) of the said Act. That even otherwise at the time of filing of the suit action was in rem and not in personam. That arbitration proceedings having not yet commenced, alternatively, this Court can validly exercise jurisdiction to entertain application under Section 9 of the Arbitration Act and grant interim relief till the Reference was made on an application under Section 8 of the Arbitration Act. 10.2 In relation to the contention as regards right to sue it was submitted that the transaction had to be examined under provisions of Sale of Goods Act. That defendant no.2 did not dispute that the said defendant was only a financier of the transaction in question and hence, defendant no.2 having opened a letter of credit favouring Barama Company Limited, the bill of lading was drawn in favour of defendant no.2; such bill of lading was a negotiable instrument whereunder title to the goods would pass by endorsement. It was further urged that the entire transaction had to be viewed in the overall context viz. the plaintiff negotiating the purchase of goods, entering into contract of purchase with Barama Company Limited, negotiating with defendant no.2 to obtain a letter of credit favouring the seller in relation to the purchase to be made by the plaintiff, the plaintiff thereafter negotiating sale of the goods, and ultimately after realising the sale price from the ultimate purchaser passing on the sale consideration to defendant no.2 for financing transaction after retaining the profit/loss earned/incurred by the plaintiff. It was therefore contended that the bill of lading could not be read in isolation. 10.3 It was submitted that the delivery of cargo at the port of destination was severely delayed due to Engine breakdown and this fact was not disputed by defendant no.1. In support of this proposition reliance was placed on paragraph 5.6 of the plaint wherein extract of communication addressed on behalf of the owners to the agent of the plaintiff has been reproduced. 10.4. It was further contended that the law of charter parties made it clear that there was an implied warranty in law and for this purpose attention was invited to various articles from the book "SCRUTTON ON CHARTER PARTIES" (20th Edition). That, therefore, even if the fixture note did not contain any stipulation as to guarantee/warranty regarding period of voyage, in normal course of events the law presumed such a warranty that cargo would be delivered within a reasonable time from the date the ship sails. 11. Mr.Poornam in rejoinder submitted that the plaintiff was aware that the vessel was already under arrest by two orders made by High Court of Tamilnadu on 17/12/2003. That as these orders were prior in point of time the plaintiff could have filed a Caveat in the High Court at Chennai to ensure that the order of arrest was not vacated without hearing the plaintiff. That in such circumstances, the plaintiff has not made out any case for bringing the suit before this Court. 12 Both the sides have made elaborate submissions in relation to the admiralty jurisdiction of this Court and for this purpose placed reliance upon number of decisions. However, both the sides have heavily relied upon the decision of the Apex Court in case of M.V.Elisabeth and others Vs. Harwan Investment and Trading Pvt.Ltd., 1993 Supp.(2) SCC 433. On behalf of the plaintiff reliance has also been placed on Division Bench decision dated 20/7/2001 rendered by Mumbai High Court in case of Mr.Kamlakar Dube Vs. M.V.Umang, Appeal No.59 of 2000 in Notice of Motion No. 1153 of 1998 in Admiralty Suit No.33 of 1997. On the other hand, on behalf of the vessel a decision of Division Bench of Madras High Court rendered on 26/10/1995 in case of M/s. Seawaves Shipping Services Vs. M/s.Adriatic Tankers Shipping Co. in O.S.A.No.251/95 (1996-1-L.W.182) has been relied upon. The Mumbai High Court decision has dissented from the view expressed by Madras High Court and hence, it will become necessary to deal with the issue of admiralty jurisdiction of this Court. 13. On behalf of the plaintiff it was contended that in light of the fact that this Court has come into existence under the Bombay State Reorganization Act, 1960, the jurisdiction and the powers which were exercised and enjoyed by the Bombay High Court prior to 1/5/1960 shall be available to this Court and hence, the decision of the Bombay High Court in relation to exercise of admiralty jurisdiction should be preferred to any contrary view expressed by any other High Court. In this connection, clause 32 of the Letters Patent was also referred to trace the history or jurisdiction in admiralty matters which were exercised by the Bombay High Court. 14. Section 120 of the Code stipulates that Sections 16, 17 & 20 of the Code will not apply to the High Court in exercise of its original civil jurisdiction. Section 16 of the Code stipulates that subject to the pecuniary or other limits prescribed by any law, suits in relation to different matters are to be instituted where subject matter is situate. Clause (f) pertaining to recovery of immoveable property actually under distraint or attachment requires that a suit be instituted in the Court within local limits of whose jurisdiction the property is situate. The Explanation lays down that "property" in Section 16 of the Code means property situate in India. Section 17 of the Code pertains to institution of suits for immovable property situate within jurisdiction of different Courts. This section requires that the suit may be instituted in any Court within the local limits of whose jurisdiction any portion of the property is situate. 15. Section 20 of the Code pertains to other suits to be instituted where the defendants reside or cause of action arises. Clause (a) lays down that a suit shall be instituted in a Court within the local limits of whose jurisdiction the defendant resides or carries on business; Clause (b) pertains to a situation where there are more than one defendants, and institution of suit may be against any of the defendants; Clause (c) pertains to the cause of action, viz. where cause of action, wholly or in part, arises within the local limits of jurisdiction of a Court. 16. Therefore, on a plain reading of provisions of Section 120 with Sections 16, 17 & 20 of the Code it can be said that in the situation stipulated in these sections the High Court in original civil jurisdiction is not required to determine its civil jurisdiction on the basis of provisions of the aforesaid three Sections. 17. Article 226 of the Constitution of India which grants powers to High Court to issue certain writs stipulates that every High Court shall have powers, throughout the territories in relation to which it exercises jurisdiction for the enforcement of any rights conferred by part III of the Constitution and for any other purpose. Under Article 226(2) of the Constitution, the power conferred by Clause (1) is also available to a High Court in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. Thus, it can be seen that even while exercising extraordinary powers available under the Constitution the jurisdiction of the High Court is primarily circumscribed by its territorial limits viz. the jurisdiction has to be in context of the territorial jurisdiction available to the High Court. In this context it will be useful to refer to the decision of the Apex Court in case of Union of India and others Vs. Adani Exports Ltd. and Another, 2002(1) SCC 567. "16. It is clear from the above constitutional provision that a High Court can exercise the jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises. This provision in the Constitution has come up for consideration in a number of cases before this Court. In this regard, it would suffice for us to refer to the observations of this Court in the case of Oil and Natural Gas Commission Vs. Utpal Kumar Basu (SCC at P.713)wherein it was held : 'Under Article 226 a High Court can exercise the power to issue directions, orders or writs for the enforcement of any of the fundamental rights conferred by Part III of the Constitution or for any other purpose if the cause of action, wholly or in part, had arisen within the territories in relation to which it exercises jurisdiction, notwithstanding that the seat of the Government or authority or the residence of the person against whom the direction, order or writ is issued is not within the said territories. The expression 'cause of action' means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by the Court. Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. Thus the question of territorial jurisdiction must be decided on the facts pleaded in the petition, the truth or otherwise of the averments made in the petition being immaterial'. It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ