1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ADMIRALTY AND VICE ADMIRALTY JURISDICTION NOTICE OF MOTION NO.3607 OF 2008 IN NOTICE OF MOTION NO.2112 OF 2008 IN ADMIRALTY SUIT NO.17 OF 2008 Jakhau Salt Company Pvt. Ltd. .... Plaintiff Vs. m.v. Dhanalakshmi .... Defendant Sarvasri Zarir Bharucha a/w Ashwin Shankar for the Plaintiff. Sarvasri Vasant Kotwal, Senior Counsel with Zal Andhyarujina i/b M/s. Singaporia & Dalvi for the Defendant. Shri Subhash K. i/b M/s. Umesh Shetty & Co. for the Intervenors. CORAM: SHRI A.V. NIRGUDE, J. DATED: MARCH 26, 2009 ORDER: 1. The owner of the defendant-barge has taken out this this notice of motion for the following reliefs: “(a) this Hon'ble Court be pleased to determine the adequate security, if any, that the defendant is required to furnish to this Hon'ble Court to release the defendant-vessel; (b) for ad-interim reliefs in terms of Prayer (a) 2 above; (c) for such other or further reliefs as the nature and circumstances of the case may require.” 2. The facts of the case are as under: The plaintiff is an Indian company carrying on business of charter vessel from various owners all over the world. The plaintiff filed this suit, inter alia, for recovery of collision damages and/or for seeking indemntity from the owner of the defendant-barge for security aggregating to USD 7,53,909.37, arising out of collision between the defendant-barge and another vessel MV STAR LEIKANGER (hereinafter referred to as “the vessel”) which was also chartered by the plaintiff. 3. The plaintiff agreed to charter the vessel in October, 2007 for loading salt from one port of India to one safe port in Vietnam. One of the clauses of the charter party was that the charterers (the plaintiff) would be held responsible for the damages caused to the vessel and that the charterers would indemnify the owner of all the costs, damages and liabilities resulting from the operation of the vessel. In September, 2007 the plaintiff also entered into an agreement with the owner of the defendant-barge for charter of the defendant-barge and other barges. The agreement contemplated that the owner of the barge would take 3 third party insurance cover for the damages to the barge, the vessel, the port properties, other barges, etc., of whatsoever nature for the entire charter period and he would hold the plaintiff fully indemnified against any claim howsoever arising and of whatsoever nature except one which was stated in Clause 13(b). 4. On 15-10-2007, at about 3:00 a.m., the vessel collided with the barge. Due to such collision, the vessel sustained certain damages. The vessel was detained. The owner of the vessel informed the plaintiff that they would be fully liable for the loss caused to the vessel. Ultimately, the Indian Coast Guard permitted the vessel to sail after it gave P & I Club Posted Security. There arose a dispute between the plaintiff and the owner of the vessel over the liability arising from the collision. The owner of the vessel then issued a notice in January, 2008 which was followed by a complaint for a Rule B attachment for an aggregate amount of USD 8,58,307.57 in New York in January, 2008 against the plaintiff. The plaintiff was required to give security for the said amount. On the other hand, arbitration proceedings began between the plaintiff and the owner of the vessel at London. Such proceedings are still pending. 5. On the other hand, the plaintiff continued to use the defendant-barge till the end of the charter party agreement. The 4 plaintiff then filed this suit for the above mentioned reliefs. This Court passed an ex parte order on 12-5-2008 for arresting the barge. As said above, it is the case of the plaintiff that they have maritime lien and/or maritime claim against the barge for collision damage and/or breach of agreement, etc.. 6. The owner of the defendant-barge took out their first notice of motion (Notice of Motion No.2112 of 2008) in this suit challenging the order dated 24-7-2008. The owner of the defendant-barge were, however, given liberty to file a fresh application for seeking appropriate relief for getting the barge released on giving a security. Pursuant to such liberty, the present notice of motion is taken out for the reliefs, as stated above. 7. The owner of the defendant-barge made the following submissions: (a) They alleged that the plaintiff failed to make fair and frank disclosure in the plaint and even suppressed facts making false representation. This allegation is made on the basis of the plaintiff's defence submissions which the plaintiff made in the arbitration proceedings which is pending in London against the owner of the vessel. The plaintiff in this defence submissions, made categorical statements that it was the negligence of the vessel and not the negligence of the barge which resulted into the collision. The plaintiff made detail statements as to how the collision 5 occurred and how it occurred only because of the negligence of the vessel. The defendant thus asserted that in view of this stand of the plaintiff in the arbitration proceedings, there was never a need for making a claim against the defendant-barge. (b) The defendant also asserted that while drafting the plaint the plaintiff made no reference to the fact that at the time of the collision the weather was rough and due to swell there was rolling of the vessel and the barge. They even did not mention that on 14-10-2007 the master of the vessel had complained in writing that the anchorage was unsafe for loading on account of the condition of the sea and the weather condition. (c) As regards the claim for off-hire, the defendant asserted that the claim was misconceived and misplaced. (d) The defendant further submitted that there was strong possibility of collusion between the plaintiffs and Master-bulk. The fact that the owner of the vessel made payment of USD 1,98,891.41 to Master-bulk was an eye- wash so the plaintiffs do not have genuine apprehension that they would not be able to recover the amount from the owner of the vessel. (e) The claim of the plaintiff is highly inflated and for the purpose of security it has to be scaled down. (f) The defendant further stated that the barge was covered with insurance policy of the Oriental Insurance Company Limited during the relevant period for a total value of Rs.4,80,00,000/-. So the plaintiff's case has been adequately indemnified. 6 (g) It is further stated that the insurance company had put on record a letter that in case the Court decides that the owner of the barge is liable for damages, the insurance company would indemnify such liability in accordance with the policy terms. This, according to the defendant, is sufficient indemnity and security for the claim. 8. As against this, the plaintiff submitted a reply in which they put forward the following case: (a) As regards the allegation that the plaintiff had failed to make fair and frank disclosure of their case, the plaintiff explained that the defence submissions were sent to the defendant without prejudice to their case against the defendant and so whatever is stated in the defence statements cannot be used against them. The plaintiff also asserted that they would certainly put forth their case and also the case of the defendant-barge before the arbitration proceedings against the owner of the vessel, but this claim through this suit is also legitimate. (b) The plaintiff asserted that the insurance policy and the insurance company's letter is not an adequate security. The plaintiff asserted that the only question that can be agitated in this notice of motion is whether the plaintiff's claim is excessive and so oppressive. The plaintiff also suggested that the challenge to the order of arrest was already rejected by the Court while deciding the earlier notice of motion. 9. Before I discuss the rival submissions, it must be 7 made clear that the present notice of motion is certainly maintainable in view of the liberty granted to the defendant through the earlier order passed in the Notice of Motion No.2112 of 2008. The relevant portion of the said order reads thus: "It is true that in this particular application, defendants have not given any particulars regarding the submission which has been made across the bar by the learned Counsel appearing on behalf of the defendants and, therefore, in this application, it would not be possible for this Court to consider the said request for reduction of the amount of security which is claimed by the plaintiff. However, liberty is given to the defendants to take out separate application and seek appropriate relief for the purpose of establishing that the barge could be released on giving an adequate security. This is evident from the rules which are framed under the admiralty jurisdiction on the Original Side of the High Court, Bombay and Rule 954 ...... ...... Defendants, therefore, are at liberty to file a fresh application for the said relief if so advised.” In view of the above mentioned observations, the limited purpose for which the defendant could have filed this notice of motion is to seek reduction in the amount of security. So the questions that arise for my consideration are (i) Whether the claim of the plaintiff is excessive and so the amount of security should be reduced? (ii) Whether the insurance policy and the insurance company's assurance is adequate security for the plaintiff? 10. Shri Kotwal, the learned senior counsel appearing for the plaintiff, took me through various assertions made by the 8 plaintiff in the defence submissions and also through the survey report. He asserted that the facts would reveal that it was the master of the vessel who was negligent in maneuvering the vessel when the collision took place. 11. He said he was aware of the indemnity clause in the agreement between the plaintiff and the defendant. But he said that this clause would not apply to the case because the master of the ship did not stop loading the ship in the rough weather; the plaintiff did not stop loading operation. 12. He placed reliance on the regulations framed under the Merchant Shipping Act amendment to deemed default under Section 285(2) of the Merchant Shipping Act. He then said that in view of the facts, the Court should consider the causative potency of the fault and blame-worthiness. He said this would warrant application of Section 345 of the Merchant Shipping Act and the Court should apportion the liability. He also suggested that if at this stage it is impossible to apportion the claim, in view of the worst case scenario, the apportion can only be 50:50. As against this, the plaintiff's counsel placed reliance on Clause 16 of the Agreement which reads as under: “16. Insurance: The owners will take third party insurance cover for the damages to barges, its hull and machinery, its crew, mother vessel, port properties, 9 other barges, and of whatsoever nature for the entire charter period and hold the Charterers fully indemnified against any claims howsoever arising and of whatsoever nature except as stated in clause 13 b. However, the owners are not responsible for the third party damages or any damage/loss or shortage of cargo carried due to negligence of stevedores for whatsoever reason. A copy of the insurance policy should be submitted to the Charterers on the 1st day of the Charter period.” He said this clause gave complete indemnity to the plaintiff. He particularly placed reliance on the words “howsoever arising and of whatsoever nature” in the clause to assert that the Court cannot go into the causative factors of the collision. He then placed reliance on the well-known judgment of the Court of Appeal in the case of Gillespie Brothers & Co. Ltd. v. Roy Bowles Transport Ltd. and another, reported in (1973) 1 All E.R. 193. The situation in the said case was similar. 13. A firm of forwarding agents entered into a contract with the carriers for the hire of a driver and van on a month-to- month basis. The forwarding agents were making use of the van for the purpose of their business. The contract incorporated the conditions whereby the forwarding agents agreed to keep the carriers indemnified against all claims or demands whatsoever, by whomsoever made in excess of the liability of the carriers, which was limited. Subject thereto the carriers were liable for any 10 loss or mis-delivery of or damage to goods occasioned during transit. In the course of his duties, the driver was instructed by the forwarding agents to collect a parcel containing three gold watches from a bonded warehouse at London airport. Owing to the negligence of the driver, the parcel was stolen from the van. On one hand, the owners of the watches recovered damages in respect of the loss against the carriers being the driver's employers. The carriers claimed indemnity against the forwarding agents. The question before the Court of Appeal was whether the carriers could claim indemnity. The Court of Appeal held that on its true construction the provision of Clause 3(4) that the forwarding agents should keep the carriers indemnified against “all claims or demands whatsoever” constituted an agreement in express terms to indemnify the carriers against all claims or demands without exception and including therefore those arising from the negligence of the carriers or their servants. The Court of Appeal further held that the words of an indemnity clause were to be construed in the same way as any other clause and such clause was to be given its ordinary meaning. So the clause was wide enough to cover the negligence of the carriers and when given that meaning, it was reasonable as between the parties for it gave effect to the provisions limiting the carriers' liability which were based 11 on the understanding that it was the duty of the owners of the goods or the forwarding agents to insure the goods for any sum in excess of the carriers liability. 14. This law, laid down by this judgment, is sought to be applied to the facts of this case. It is a common ground that the Clause 16, which is reproduced above, provides indemnity to the plaintiff. This indemnity clause is not subject to the finding of any fault/negligence on the part of the defendant. It is to provide protection to the plaintiff in case they receive a claim from a third party. The wordings of the clause make it clear that the plaintiff would be entitled to be indemnified the moment claim is made against them and the defendant cannot say that the claim should be ascertained and the liability should be fixed before indemnity. In this case, the plaintiff is facing a claim from the Star Ship, the despondent owner of the vessel for an aggregate sum of USD 8,58,307.57. The defendant, it seems, is quite aware of this liability and in the affidavit in support of the notice of motion, the defendant in clear terms mentioned that the defendant-barge was covered with insurance policy for the relevant period for a total value of Rs.4,80,00,000/-. The defendant further mentioned in the affidavit that the plaintiff is aware of this insurance cover and so the plaintiff is adequately indemnified by such policy. But this 12 statement of the defendant in the affidavit in support of the notice of motion is partly truthful. It has come on record in the form of Annexure-C to the notice of motion which is a letter of the insurance company. In this letter the insurance company assured the owner of the defendant-barge that they would “However, we would like to inform you that in case it is decided by the court of law after going through the various supporting documents and evidences that you are liable for the damages, we would indemnify the same, in accordance with our policy terms.” It is also on record that the plaintiff's Advocate through his letter dated 29-8-2008 requested the insurance company to confirm whether their letter addressed to the Court contained an undertaking to indemnify the plaintiff's losses. He wanted to get clarification from the insurance company as to whether the indemnity offered by the insurance company was subject to the policy terms. To this letter, the insurance company did not respond at all. Elsewhere the insurance company indicated that the defendant-barge did not have licence to sail in Jakhau harbour. This is a clear indication that the defendant-barge and its owner have not indemnified the plaintiff's loss. It is thus clear that the insurance company's assurance is rather qualified and subject to the police terms. 15. The argument of the defendant that the plaintiff in 13 their defence statements to the arbitration proceedings sought to put the blame on the Star Ship, the despondent owner of the vessel and the captain of the vessel and so the plaintiff impliedly admitted that the defendant-barge is not liable to indemnify the plaintiff for the loss. This argument is misleading. In the matter of arbitration whatever is stated by the plaintiff is certainly without prejudice to their case as against the defendant-barge. Whatever is stated by the plaintiff in the arbitration would ultimately be beneficial to both the plaintiff as well as the defendant-barge, but such defence statements of the plaintiff, in my view, have no relevance to the controversy before this Court. This argument is not available to the defendant. 16. It is clear from the indemnity clause that the defendant's liability under the clause is very wide. In view of this wide scope, the defendant cannot invite the Court to examine the merits of the claim between the plaintiff and the Star Ship. I think the Court need not go into the question as to whether the defendant-barge was negligent when the accident took place or whether the vessel was responsible for the mishap. 17. I am aware that Rule 946 of the Bombay High Court Admiralty Rules gives discretion to this Court to examine and moderate the security but in view of the wide scope of Clause 16, 14 there is hardly any scope to examine the extent and correctness of the claim. In view of this, the notice of motion would not succeed and the same is dismissed. Sd/- 4/4/09 (A.V. Nirgude, J.) ss/rnm3607.8