IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.04.2008 CORAM; THE HONOURABLE MR. JUSTICE P.JYOTHIMANI W.P.Nos.33899 and 37348 of 2007 and connected M.Ps. WP. No. 33899 of 2007 Exclusive Marine Inc., Trust Company Complex, Ajeltake Island, Majuro, Marshall Island, MH 96960 rep. by its Power of Attorney Agent Bijesh Thomas, No.B-6 Satheyam Homes, Jeganathapuram 2nd New Street, Chetpet, Chennai.31. ..Petitioner -Vs- The Board of Trustees of Port of Chennai Having its Administrative Office, At Rajaji Salai, Chennai 600 001 rep. by its Chairman ..Respondent WP. No. 37348 of 2007:- M/s. Olam International Limited, No. 9 Temasek Bouleward, 11-02, Suntee Tower Two, Singapore, 038989 rep. by its Manager Mr. S. Umesh, No. F 33, Spring Blossom, Anna Nagar East, Chennai.102. .. Petitioner -Vs- 1. Chennai Port Trust, rep. by its Chairman, having his office at Port Trust, Chennai-1. https://hcservices.ecourts.gov.in/hcservices/ 2. The Traffic Manager, Chennai Port Trust, Chennai-1. .. Respondents Writ Petition in W.P. No.33899 of 2007 is filed under Article 226 of the Constitution of India for the issuance of writ of Certiorarified Mandamus calling for the records of the respondent culminating in the communication dated 22.10.2007 bearing No. S2/1166/2007/M addressed to the Power of Attorney Agent of the Petitioner, quash the same and forbear them from demanding or recovering Additional Berth Hire Charges or any other penal charges in respect of the Vessel m.v.SAIN GIORGIO I Consequently direct the respondent their men, servants and agents to permit the petitioner to operate the vessel m.v. Sain Giorgio I in any manner they choose including by selling the said vessel or sail her out of Chennai after collecting Berth Hire Charges at the normal rate without insisting upon payment of Additional Berth Hire Charges or any other charges of penal nature. Writ Petition in W.P. No. 37348 of 2007 is filed under Article 226 of the Constitution of India for the issuance of writ of Certiorarified Mandamus calling for the records of the first respondent insofar as it pertains to the proceedings of the first respondent in his reference No.S2/1166/2007/M dated 18.5.2007 and quash the said order and direct the respondents to release the entire Cargo comprising of 12,800 Cubic Meters of Transport logs, discharged from the Vessel M/s. M.V.San Georgio and kept in the Chennai Port to the petitioner forthwith without any precondition any damages, rent, Berth Charges or claim towards demurrage. For petitioner in WP No.33899/2007 : Mr.S.Raghunathan For petitioner in WP No.37348/2007 : Mr.J.Raja Kalifullah For respondents in both Wps. : Mr.P.Wilson Asst. Solicitor General of India ..... C O M M O N O R D E R While the writ petitioner, in WP No. 33899 of 2007, is the owner of the ship called Vessel m.v. San Giorgio 1", the writ petitioner in WP No. 37348 of 2007 is the owner of the cargo comprising 12800 Cubic meters of timber logs stated to have been discharged from the Vessel M/s. M.V. San Giorgio and kept in the Chennai Port. https://hcservices.ecourts.gov.in/hcservices/ 2. According to the owner of the ship represented through his power agent, the petitioner is a company registered in Marshall Island and the vessel is now lying in Chennai Port under an order of arrest passed by the Bombay High Court. The respondent- Port Trust is a statutory authority created under the Major Port Trusts Act for rendering services like loading and discharging of cargo passing through the Chennai Port in the course of import and export of cargo as well as the various vessels calling at Chennai. The above said Vessel was a time chartered to one Azelie Corporation, Saint Helier, Jersey under a Charter party dated 26.5.2006 and in turn Sub chartered to a company called Olam International Limited, Singapore, which is the petitioner in WP No. 37348 of 2007. There was some dispute between the then owner on the one hand and the Azelie Corporation and Olam International Limited on the other hand. The mortgagee of the Vessel, who had a claim against the vessel, has filed A.S.No. 13 of 2007 in Bombay High Court in which the Bombay High Court passed an order of arrest on 22.3.2007. The petitioner in W.P.No. 37348 of 2007 M/s. Olam International Ltd., joined in the said proceedings and supported the mortgagee. It was consequent to the order of arrest passed in the above said proceedings, the vessel now lying at Chennai Port since March/April 2007. There was an agreement between the Mortgagee of the vessel viz., Bank of Beirut (UD) Ltd., M/s. Olam International Limited and Azelie corporation on 19.6.2007 agreeing to sell the vessel "as is where is" basis and the sale proceeds to be deposited in an interest bearing escrow account and the claims of all the parties would be referred to Arbitration. 3. When the petitioner through its representatives have met the chairman of the Chennai Port Trust, who was also interested in acting as per the agreement, the respondent has informed that Berth Hire Charges in respect of the vessel has been paid fully at the normal rate upto 10th August 2007 and the petitioner was willing to pay such charges for the subsequent period upto the date of sailing of the vessel from Chennai. The petitioner later understood that the respondent apart from collecting the Berth Hire Charges at the regular rate, would also demand additional Berth Hire Charges in the form of penal charge and that the vessel would not be permitted to sail out of Chennai, unless, the Additional Berth Hire Charges were paid. The Additional amount payable on such basis was more than US $ 700,000. 4. The case of the petitioner is that the vessel had to remain in the Chennai Port only pursuant to the orders of the Bombay High Court and the place where the vessel is in berth is of not in regular use and therefore, there was no justification on the part of the respondent in claiming Additional Berth Hire Charges. Since the respondent has not allowed the vessel to sail unless the Additional Berth Charges are paid, the petitioner filed W.P. 28588 of 2007, https://hcservices.ecourts.gov.in/hcservices/ which was disposed of by this Court on 30.8.2007 directing the petitioner to make a written representation on or before 3.9.2007 regarding waiver of Berth Hire Charges to the Board of Trustees of the respondent and also directing the respondent to consider the same and pass orders. Based on that order, the petitioner made a written representation on 11.9.2007 before the Chairman of the respondent explaining the circumstances under which the vessel is compelled to remain in the Chennai Port requested to give up the claim of Additional Berth Hire Charges and by the time, the petitioner has paid an amount of Rs.51,63,823/- as normal Berth Hire Charges and the claim of the respondent to pay penal Berth Hire Charges at the rate of US $ 330 per hour would be more than 50% of the value of the vessel itself. In addition to the representation of the petitioner, the Receiver of the Mortgagee – M/s. Olam International Limited, Singapore have also represented to the Chairman of the respondent on 11.10.2007 requesting waiver of Additional Berth Hire Charges. The petitioner received on 1.10.2007 a letter dated 29.9.2007 rejecting the request for waiver of Additional Berth Hire Charges without assigning any reason. 5. The petitioner has made a further proposal for settlement without prejudice and in the meantime, the petitioner understood that the respondent is taking steps to bring the vessel for sale by virtue of the power conferred under the provisions of the Major Port Trust Act. The petitioner has also written a letter to the Chairman of the respondent on 11.10.2007 stating that when the proposal for compromise is pending, it is not proper on the part of the respondent to bring the vessel for sale. By letter dated 22.10.2007, the respondent has demanded unconditional payment of Rs.2,55,72,000/- with an undertaking that the petitioner would not dispute the levy of Additional Berth Hire Charges by the respondent on a later date and the petitioner should also furnish an unconditional irrevocable bank guarantee for further claim towards Additional Berth Hire Charges payable up to the date of sailing of the vessel from Chennai. It was only on that payment, the petitioner's request for waiver will be considered. 6. The case of the petitioner is that while rejecting the request for waiver, the respondent has permitted the release of the cargo discharged from the said vessel although a large amount was also claimed towards demurrage charges in respect of the cargo. Therefore, according to the petitioner, the conduct of the respondent in taking two different stand between the owner of the vessel and the cargo is arbitrary. The claim of the respondent – port trust is more than 60% to 70% of the value of the vessel and therefore, admiralty proceedings in the Bombay High Court entered with other claimants by the petitioner will be disturbed. In these circumstances, the petitioner being the owner of the vehicle has filed the present writ petition challenging the communication of the https://hcservices.ecourts.gov.in/hcservices/ respondent dated 22.10.2007 and forbear the respondent from demanding or recovering Additional berth Hire Charges or any Penal charges in respect of the vessel m.v. Saint Giorgio I and also direct the respondent to permit the petitioner to operate the said Vessel including by selling the vessel or sail her out of Chennai after collecting Berth Hire Charges at the normal rate without insisting upon payment of Additional Berth Hire Charges. 7. The challenge to the impugned order is on various grounds including that it is arbitrary and illegal, that the berth of the vessel in Chennai was due to the order of arrest passed by the Bombay High Court and the place of berth is not used by the respondent – port trust, that in the public interest, the petitioner should be allowed to sail the vessel after paying normal berth hire charges, that the conduct of the respondent being statutory authority is discriminatory taking inconsistent stand with different port users apart from other legal grounds. 8. The respondent – port trust has filed the counter affidavit. While denying the various averments made by the petitioner, it is the case of the respondent – port trust that the writ petitioner in W.P.No. 37348 of 2007 M/s. Olam International Limited approached the respondent to berth the ship and discharge the cargo claiming themselves to be the representative of the vessel carrying cargo of 12800 CBM of timber logs and the owners of the cargo on board and assuring the port trust to pay all the charges and demurrages that would be incurred as a result of the berth of the vessel in the port of Chennai. M/s. Olam International Limited has also executed indemnity bond on 16.4.2007. On the basis of the same, the respondent has allowed to berth the ship. It was later informed to the respondent port trust that the ship was also arrested by the Bombay High Court's order dated 17.4.2007. 9. It is the case of the respondent that earlier, the Bombay High Court issued an order of arrest on 22.3.2007 when the ship was on the way to Tuticorin and subsequently, the ship was brought to Chennai, the writ petitioner in W.P. No. 37348 of 2007 viz., M/s. Olam International Limited has moved Bombay High Court and the Bombay High Court has permitted them from moving the Tuticorin Port authorities for discharge and permitted the port authorities to grant permission in accordance with law with liberty to obtain safeguard. Thereafter, when the vessel had a berth at Chennai Port Trust on 17.4.2007, a warrant was issued by the Bombay High Court for arrest of the vessel. All these facts were not brought to the notice of the Chennai port trust . Since the petitioner has admitted that M/s. Olam International Limited is a sub charterer, the petitioner being the owner, is equally liable along with M/s. Olam International Limited. According to the respondent – Port Trust, the fact of the arrest of the ship was suppressed by M/s. https://hcservices.ecourts.gov.in/hcservices/ Olam International Limited who is the representative of the petitioner and therefore, the order of the Bombay High Court is not an unexpected contingency and knowing fully well about the same, the ship was brought to Chennai Port Trust. The arrest of the vessel by the Bombay High Court does not take away the statutory duty imposed for recovering the port charges. The vessel related charges including Additional berth Hire Charges payable as on 20.1.2008 is Rs.11,62,23,218/-. When the vessel overstays more than a permitted time, the port trust is entitled to levy Additional Berth Hire Charges for the said overstay which is a statutory levy. 10. It is also the case of the respondent that the vessel is occupying the valuable commercial space but for which, the port trust normally will earn. The purpose of imposing Additional Berth Hire Charges is that the vessel operators/importers/exporters cannot use the space of the Chennai Port Trust as their godown or ware house and the concept of Additional Berth Charges has been approved by the Apex Court. The Additional Berth Charges are levied on the vessel at the rate of 378 US$ per hour or part thereof. It is, as per the Berth Hire Charges of the Trust's scale of rates, payable by the ship if she does not call for pilot for sailing within the period of four hours after completion of discharge of loading. There is no provision for exemption of Additional Berth Hire Charges. A reply was sent by the respondent on 29.9.2007. Only on completion of discharge of cargo on 5.5.2007, it has been shifted from one vacant berth to another. The power agent of the petitioner was informed by letter dated 5.10.2007 that (i) in order to consider the proposal of the approval of Competent Authority, the owner of the vessel should pay an amount of Rs.2,55,72,000/- (at the rate of Rs.42.62 per doller) in advance without the condition of reserving the right of the owners to dispute the levy of Additional Berth Hire Charges at a later date and for the balance amount payable till the sailing of the vessel, an unconditional irrevocable Bank guarantee valid for a period of six months, extendable for a further period may be given. (ii) To produce the release orders from the High Court of Bombay and complete the legal formalities; (iii) Compliance with requirements of the Mercantile Marine Department; and (iv) Submit valid documents of ownership of the vessel and authority from the Department with regard to the owners. 11. According to the respondent, M/s. Olam International Limited – petitioner in WP No. 37348 of 2007 have agreed to the conditions of port trust to pay the full vessel related charges, vacation of the berth by the vessel soon after completion of unloading the cargo and executed an indemnity bond to that effect https://hcservices.ecourts.gov.in/hcservices/ also to safeguard the interest of Port. Since the cargo owner has executed the indemnity bond as desired by the Port trust, the Steamer Agent of Olam International Limited viz., M/s. Hari & Co, Chennai remitted a sum of Rs.35 lakhs and thereafter, the vessel was permitted berth at WQ1 at 17.50 hrs. on 17.4.2007 to unload the cargo. The unloading process was started on 19.4.2007 and completed on 5.5.2007 and the entire cargo was discharged on 5.5.2007. A quantity of 621 logs out of 2865 logs was removed by the cargo owner from the port. Since the cargo owner has not adhered to the undertaking given by them, the delivery of cargo to the cargo owner was suspended from 5.5.2007. As against port dues, which works out to 41.17 lakhs, the steamer agent M/s. Hari & co deposited Rs.77.99 lakhs which includes a security deposit of Rs.30 lakhs. According to the respondent, it does not include the additional berth hire charge amount of Rs.3.31 crore as on 1.8.2007. 12. The petitioner in W.P. No. 37348 of 2007 M/s. Olam International Limited filed an application in A.No.6392 of 2007, in this Court to permit them to remove and transport 12800 Cubic Meter of cargo discharged from the vessel without any pre-condition or claim. This Court vide its order dated 11.10.2007 directed the Trust to release the cargo without pre-condition and directed to adjust an amount of Rs.9,57,273/- from the security amount of Rs.30 lakhs. The charges accrued on the cargo is Rs.9.75 crore which is called cargo related charges which includes demurrage and penal demurrage till 22.10.2007 payable by M/s. Olam International Limited. The trust filed an appeal on 22.10.2007 against the single Judge's order dated 11.10.2007. 13. It is the case of the respondent that taking advantage of the order of this Court, M/s. Olam International Limited – writ petitioner in WP No. 37348 of 2007 suggested the Trust to detain the cargo worth Rs.9.75 crore as a security deposit towards the total demurrage payable and release the balance cargo. The said M/s. Olam International Limited has also informed their inability to execute the bank guarantee and in the meantime, the Trust has allowed the cargo to M/s. Olam International Limited from 27.10.2007 by detaining the cargo worth 9.75 crore. According to the respondent, the respondent – Trust has not taken any inconsistent stand. The claim of Additional Berth Hire Charges is not arbitrary. 14. The case of the petitioner in WP No. 37348 of 2007, is that it is the owner of the cargo comprising 12800 CBM of timber logs. They have purchased the cargo from West Africa which was transported under a Charter Party agreement dated 26.5.2006. entered with one M/s. Sandele Navigation Corporation and M/s. Azeile Corporation for carrying the cargo from the port of Overndo to the Port of Tuticorin to be delivered to the consignee. The vessel sailed out on 15.7.2006 and the entire cargo was to be delivered https://hcservices.ecourts.gov.in/hcservices/ within 30 days at Tuticorin Port. However, M/s. Sandele Navigation Corporation sold the vessel to M/s. Exclusive Marine INC, Ajeltake road, Ajel Islands after the charter party agreement was entered into. When the vessel was on her way to Tuticorin, the vessel developed certain engine problem while in the mid-sea of Indian Ocean. The owners of the Vessel M/s. Sandele Navigation Corporation and subsequent purchaser M/s. Exclusive Marine INC Trust Company abandoned the said vessel and refused to take any steps to either repair the vessel or to bring the vessel to the nearest port. The vessel was towed to Port Victoria at Seychelles for repairs at the instances of the cargo owner – the petitioner in the above writ petition. There was a dispute between the master and crew against the owner of the vessel along with the financier Bank who obtained an order of attachment of the vessel in the Supreme Court of Seychelles. The petitioner filed intervening application in the Supreme Court of Seychelles which by its order dated 5.2.2007 directed the owners of the vessel to carry out the repairs and take steps to sail the vessel to Tuticorin and also directed that in the event of the owners failing to comply with the direction, it is open to the M/s. Azeile Corporation and the petitioner to carry out the repair. The owners did not take any step to get the vessel repaired. The petitioner, who was unable to rectify the defects, towed the vessel to Tuticorin port and thereafter at the instance of the port authorities towed it to Chennai Port. Owners of the vessel filed an application under Section 9 of the Arbitration Act before this Court in A.No. 3637 of 2007 claiming that the petitioners in both the writ petitions have taken the vessel stealthily without the knowledge of the owners and claimed exorbitant amount as damages and also obtained an order of attachment of Cargo in A.No. 561 of 2007 on 23.4.2007. Meanwhile, the Bank of Beirut, the martgagee of the vessel, who had advanced substantial amount on the security of the vessel, filed a suit before the High Court of Mumbai and obtained an order of attachment of the vessel on 22.3.2007. On information about the order, the petitioner moved the Mumbai High Court to permit them to move the Chennai Port Authorities for removal of the cargo. In the meantime, since this Court passed an order of attachment of cargo in A.No. 561 of 2007, the petitioner being the owner of the cargo, has filed the counter affidavit and prayed for raising the attachment order. After hearing the parties on 27.4.2007, the attachment order was raised and thereafter, the petitioner has requested the respondent- Port Trust to discharge the cargo. The port Trust has permitted the petitioner to discharge the cargo from 1.5.2007 and the same was completed on 10.5.2007. When the petitioner was making arrangement for transporting the cargo, the port trust by letter dated 5.5.2007 refused permission claiming that till the vessel is removed, the cargo cannot be removed. The Chennai Port Trust by letter dated 18.5.2007 informed that the vessel gained entry into the port on the written assurance to move the vessel outside the port limit soonafter unloading the https://hcservices.ecourts.gov.in/hcservices/ cargo, therefore, directed to retain the cargo and both the petitioners are liable to pay demurrage and other related charges. 15. According to the petitioner, the second respondent in WP No. 37348 of 2007 – Port trust having received the order of attachment from Bombay High Court and effected the attachment and took custody of the vessel has not imposed the condition to remove the vessel as pre-condition for removing the cargo and the said condition is in contempt of the order of the Bombay High Court. The petitioner in WP No. 37348 of 2007 stated that the respondents under threat of auctioning the cargo have coerced the petitioner to pay Berth charges, even though they are not liable to pay as the vessel is under attachment on orders of Court. In view of the threat, the petitioners are paying Rs.35,000/- every day towards berth charges for the vessel. Both the petitioners have paid Rs.90 lakhs towards berth charges apart from Rs.30 lakhs as security deposit and heavy amounts for unloading the cargo from the vessel. According to the petitioners, the respondents are bound to refund the entire amount with interest. As the cargo was getting deteriorated, the petitioners moved an application in A.No. 6392 of 2007 in O.A.No. 561 of 2007 to permit them to remove the cargo from the Chennai port without any precondition and an orders was passed on 11.10.2007 permitting to remove the cargo after notice to Chennai Port Trust, on certain conditions. Instead of allowing removal as per the order of the Court, the Port Trust has raised a new plea that on 16.4.2007 that when the vessel was berthed in the Chennai Port, the petitioner in WP No. 37348 of 2007 has agreed to remove the vessel before removing the cargo and hence they are bound to remove the vessel and pay vessel related charges before removing the cargo. Since the vessel is under the order of attachment of the Bombay High Court, there is no question of payment of vessel related charges by the petitioner. In the meantime, the Chennai Port Trust has also filed an application before the Bombay High Court claiming demurrage charges and vessel related charges and prayed for sale of vessel and recovery of the amount and the same is pending. After passing of the order dated 11.10.2007 by this Court directing the removal of cargo, the respondents were claiming 9.83 crore towards demurrage or bank guarantee for the said amount. After persuasion, the petitioners were permitted to remove the part of cargo viz., 50% of the cargo till the demurrage amount is paid, inspite of the fact that this Court by and order dated 27.4.2007 has lifted the attachment without any condition. Even after the direction of this Court to the respondents to retain 9.75 lakhs apart