IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.J.CHELAMESWAR & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON FRIDAY, THE 18TH FEBRUARY 2011 / 29TH MAGHA 1932 W.A.No.1994 of 2010(E) -------------------------------------- AGAINST THE ORDER IN I.A.NO.435 OF 2010 IN Sp.J.C.2/2010 Dated 26/10/2010. .................... APPELLANTS/PETITIONERS/RESPONDENTS 1 & 2:- ----------------------------------------------------------------------------- 1. 'M.V.FREE NEPTUNE', A FOREIGN VESSEL BERTHED AT CHENNAI PORT, REPRESENTED BY HER MASTER. 2. ADVENTURE TWELVE SA, 89, AKTI MIAOULI & 4 MAVROKORDATRU STREET, PIRAEUS, GREECE. BY ADVS.SRI.V.J.MATHEW SRI.BIJISH B.TOM SRI.VIPIN P.VARGHESE RESPONDENTS/RESPONDENTS/PETITIONER & RESPONDENTS 3 TO 6:- ----------------------------------------------------------------------------------------------------------- 1. DLF SOUTHERN TOWNS PRIVATE LIMITED, 1E, JHANDEWALAN EXTENSION, NAZZ CINEMA COMPLEX, NEW DELHI - 110 055, REPRESENTED BY ITS EXECUTIVE VICE PRESIDENT, LT. GEN.(RETD.) M.G. GIRISH. W.A.NO.1994/2010. - 2 - 2. J.M.BAXI & CO., SHIPPING SUPPORT SERVICES, REPRESENTED BY ITS MANAGING DIRECTOR, XXIV/1566, SUBRAMANIAN ROAD, WILLINGTON ISLAND, KOCHI - 682 003. 3. CHENNAI PORT TRUST, REPRESENTED BY ITS CHAIRMAN, CENTENARY BUILDING, RAJAJI SALAI, CHENNAI - 600 001. 4. COSMOSTRANS NAVIGATION S.A, REPRESENTED BY ITS AGENT, M/S.J.M.BAZI & CO., SHIPPING SUPPORT SERVICES, XXIV/1566, SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI - 682 003, REPRESENTED BY ITS MANAGING DIRECTOR. 5. COCHIN PORT TRUST, REPRESENTED BY ITS CHAIRMAN, WILLINGDON ISLAND, KOCHI - 682 009. R1 BY ADV.SRI.P.K.SURESH KUMAR. R2 & R4 BY ADV.SRI.PAUL MATHEW. R3 BY ADV.SMT.ANITHA THOMAS. R5 BY ADVS.SRI.E.K.NANDAKUMAR, SRI.A.K.JAYASANKAR NAMBIAR SRI.P.GOPINATH. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 19/01/2011, ALONG WITH W.A.NO.2064 OF 2010 AND Sp.J.C NO.2 OF 2010, THE COURT ON 18/02/2011 DELIVERED THE FOLLOWING:- J.Chelameswar,C.J. & P.R.Ramachandra Menon,J. -------------------------------------------------------- W.A.Nos.1994 of 2010-E & 2064 of 2010 (arising out of Sp.J.C.No.2 of 2010) & Sp.J.C.No.2 of 2010 --------------------------------------------------------- Dated, this the 18th day of February, 2011 JUDGMENT J.Chelameswar, C.J.: Sp.J.C.No.2 of 2010 is filed invoking Section 443 of the Merchant Shipping Act, 1958 and the Admiralty Jurisdiction of this Court read with Article 226 of the Constitution of India. 2. The parties are referred to in the order as they are arrayed in Sp.J.C.2 of 2010. The petition was originally filed with four respondents. Subsequently, two more respondents were added by way of amendment of the petition. 3. The petitioner is a private limited Company, engaged in the business of construction of buildings, etc. In connection with its business, the petitioner claims to have purchased 5002.900 metric tonnes of steel (Reinforcing Steel Bars) from M/s.Arcelor Mittal. It is not clear from the materials on record whether the said vendor is an individual or a corporate entity. It is stated in the petition that the W.A.No.1994/2010 & connected cases - 2 - abovementioned commodity was sought to be transported from the Port of Oktyabrsk in Ukraine by a vessel (respondent No.1) called M/V “Free Neptune”, owned by the 2nd respondent. It is the case of the petitioner that the said quantity of steel was received on board of the abovementioned vessel as evidenced by Exhibit P1, which is a copy of the Bill of Lading. It appears from the said copy that shipper of the material covered by the said Bill of Lading is one “OJSC Arcelormittal Kryviy Rih, 1, Ordzhonikidze Street, Kryviy Rih, 50095, Ukraine” and against the name of consignee, it is noted as “To Order”. The Bill of Lading also states that the Port of discharge is Cochin in India. The 3rd respondent herein is shown to be the “Discharge Port Agent”. 4. The 5th respondent is said to be the Charterer of the abovementioned vessel, M/V “Free Neptune”. The nature of the Charter party is not specified in the petition. 5. The vessel admittedly reached the Cochin Port on February 22, 2010. The cargo was discharged between 22.02.2010 and 27.02.2010. It was noticed that there was a short delivery of the material by 228.531 metric tonnes (55 bundles out of 1163 bundles that were allegedly put on board). It is alleged that the factum of short W.A.No.1994/2010 & connected cases - 3 - landing was brought to the notice of the Master of the Ship and also the Port authorities along with the 3rd respondent. The value of the short landed material is estimated by the petitioner at `.63,81,858/-. 6. The 1st respondent sailed off the Cochin Port on February 27, 2010. While it was berthed at Chennai Port, the instant Sp.J.C. came to be filed in this Court with prayers as follows:- “(i) issue an order or writ or direction for the arrest and detention of the 1st respondent Vessel by name M/V “Free Neptune” which is now berthed at the Chennai Port till sufficient security for the amount of Rs.63,81,585/- (US Dollars 140000/-) is furnished by respondents 1 to 3 in favour of the petitioner in order to satisfy the claim of the petitioner raised as per Ext.P9 letter; (ii) pass an order or decree or writ directing respondents 1 to 3 to forthwith compensate the loss suffered by the petitioner on account of the shortage in the cargo covered by Ext.P1 Bill of Lading by paying the amount as claimed in Ext.P9 letter by the petitioner; (iii) issue such other orders as are deemed fit and proper in the circumstances of the case”. Along with the main prayers, the petitioner also sought an interim prayer of the arrest and detention of the 1st respondent ship which, at W.A.No.1994/2010 & connected cases - 4 - that point of time, was berthed at the Chennai Port. The interim prayer is as follows:- “For the reasons stated in the foregoing paragraphs, it is respectfully prayed that this Hon'ble Court may be pleased to pass an interim direction for the arrest and detention of the 1st respondent Vessel by name M/V “Free Neptune” which is now berthed at the Chennai Port till sufficient security for the amount of Rs.63,81,585/- (US Dollars 140000/-) is furnished by respondents 1 to 3 in favour of the petitioner in order to satisfy the claim of the petitioner raised as per Ext.P9 letter”. 7. By order dated March 4, 2010, a learned Judge of this Court admitted the case and granted an interim order for the arrest and detention of the 1st respondent Vessel. The relevant portion of the interim order is as follows:- “There will be an interim order as prayed for, for the arrest and detention of the 1st respondent vessel by name M/V “Free Neptune” which is now berthed at the Chennai Port till sufficient security for the amount of Rs.63,81,585/- (US Dollars 140000) is furnished by respondents 1 to 3 in favour of the petitioner in order to satisfy the claim of the petitioner raised as per Ext.P9 letter. The order will be communicated by fax at the expense of the petitioner to the 4th respondent for implementation”. W.A.No.1994/2010 & connected cases - 5 - Subsequently, appearance on behalf of respondents 1 and 2 was made. The said respondents submitted a bank guarantee for the amount specified in the interim order dated March 4, 2010 towards the security of the claim of the petitioner. Therefore, the interim order dated March 4, 2010 was modified, directing the 4th respondent to release the 1st respondent Vessel. 8. Subsequently, I.A.No.435 of 2010 came to be filed by respondents 1 and 2 with a prayer as follows:- “For the reasons stated in the accompanying affidavit, it is humbly prayed that this Hon'ble Court may be pleased to direct to return back to the respondents 1 and 2, the Bank Guarantee No.171020266171-HO dated 17/03/2010 for Rs.64,00,000/- drawn on Standard Chartered Bank, Chennai and dismiss the above Sp.J.C., in the interest of justice”. The reasons for such a prayer are set out in the affidavit filed in the said I.A. 9. The said I.A. was rejected by order dated October 26, 2010, which reads as follows:- “Prayer in this IA is to return the Bank Guarantee furnished by the petitioner for an amount of Rs.64 lacs, in compliance with the order dated 04-03-2010. The main averment in the IA is that the cargo which was short landed in Cochin was discharged at the Chennai Port and that the cargo was transported and is now stored in the Cochin W.A.No.1994/2010 & connected cases - 6 - Port Trust. It is also the prayer of the petitioner herein that the petitioner's claim can only be against the additional fifth respondent, the charter of the vessel. 2. Admittedly, the vessel carried the cargo and there was short landing in Cochin. Although it is true that the cargo was discharged at the Chennai Port and has now been transported and stored at Cochin Port, the case of the petitioner is that the cargo, which is now kept at the Cochin Port, is not the cargo which was consigned to them. It is also their case that even the weight of the cargo does not tally with the weight of the cargo which was short landed at the Cochin Port Trust. 3. In view of the issues now raised, necessarily, the claim of the petitioner needs to be adjudicated. However, the question as to whether it is the petitioner or the additional fifth respondent is liable to make good the claim of the petitioner cannot be determined at this stage. Therefore, at this stage, it will be premature for the petitioner to seek unconditional release of the Bank Guarantee and, for that reason, I am not persuaded to pass the order as prayed for. The I.A. will stand rejected”. Another I.A., No.603 of 2010, was filed by the petitioner praying that the petitioner may be permitted to amend the Sp.J.C. as set out in the said petition. I.A.No.604 of 2010 was filed seeking impleadment of additional 6th respondent. Both the I.As were allowed by order dated October 26, 2010. W.A.No.1994/2010 & connected cases - 7 - 10. Aggrieved by the order in I.A.No.435 of 2010, the first two respondents filed W.A.No.1994 of 2010 and aggrieved by the order in I.A.Nos.603 of 2010 and 435 of 2010 referred to above, W.A.No.2064 of 2010 is filed by respondents 3 and 5. 11. Both the Writ Appeals were admitted on 24.11.2010 and 8.12.2010 respectively. In view of the important questions of law involved in these appeals, all the three matters were directed to be listed for hearing. Accordingly, they were listed. 12. It is asserted by the petitioner that the petitioner has a 'maritime claim' against the 1st respondent Vessel. The petitioner also asserts that in view of the declaration of law made by the Supreme Court in M.V.Elisabeth v. Harwan Investment and Trading [1993 Supp (2) SCC 433 = AIR 1993 SC 1014] the High Courts in India have inherent admiralty jurisdiction. At para 6 of the petition, it is stated as follows:- “The Vessel is now berthed at Chennai Port. The petitioner has a maritime claim against the vessel which can be enforced by the arrest of the said vessel. International Convention for the Unification of Certain Rules relating to the Arrest of Sea going Ships, Brussels, May 10th 1952 explains what is a maritime claim in the following words: W.A.No.1994/2010 & connected cases - 8 - “(6) International Convention for the Unification of Certain Rules relating to the Arrest of Seagoing Ships, Brussels, May 10th 1952. Article 1 of this Convention reads: (1) “Maritime Claim” means a claim arising out of one or more of the following: (a) damage caused by any ship either in collision or otherwise; (b) loss of life or personal injury caused by any ship or occurring in connection with the operation of any ship; (c) salvage; (d) agreement relating to the use or hire of any ship whether by charterparty or otherwise (e) agreement relating to the carriage of goods in any ship whether by charterparty or otherwise; (f) loss of or damage to goods including baggage carried in any ship; (g) general average; (h) bottomry; (i) towage; (j) pilotage; (k) goods or materials wherever supplied to a ship for her operation or maintenance; (l) construction, repair or equipment of any ship or dock charges and dues; (m) wages of Masters, Officers, or Crew; (n) Master's disbursements, including disbursements made by shippers, charterers or agents on behalf of a ship or her owner; (o) disputes as to the title to or ownership of any ship; (p) dispute between co-owners of any ship as to the ownership, possession employment or earnings of that ship; (q) the mortgage or hypothecation of any ship”. Thus a claim based on loss of goods carried in a vessel is a maritime claim enforceable by the arrest of the vessel. The Supreme Court of India in the decision reported in M/V.Elizabeth (AIR 1993 SC 1014) has made the above position abundantly clear. It has been further held in that decision that the High Courts in India have inherent admiralty jurisdiction and can invoke the same for the enforcement of a maritime claim”. W.A.No.1994/2010 & connected cases - 9 - 13. For the sake of indicating the scope of the amended Sp.J.C., it may be mentioned here that it was allegedly noticed by the respondents while the 1st respondent was berthed at Chennai Port that the material said to have been short landed at Cochin was still available on board of the 1st respondent. Therefore, the same was discharged at Chennai Port and allegedly transported to Cochin by road after some correspondence with petitioner and all other appropriate authorities. The petitioner now claims that the said material “does not form part of the cargo covered by Exhibit P1 Bill of Lading”. There is a dispute regarding the identity, quality and quantity of the said material. 14. The right of the petitioner to seek the various reliefs claimed in the Sp.J.C. depend upon the existence of various facts asserted by the petitioner and the rights and obligations arising out of the various contracts between the shipper and the petitioner, the vessel and its owner on one side and the charter on the other, and the petitioner and respondents 1 and 2 and the charterer (respondent No.5). The examination of the interface of all the abovementioned rights will necessarily require recording of evidence. W.A.No.1994/2010 & connected cases - 10 - 15. The following questions are required to be examined to decide these matters: (i) Whether the claim such as the one made by the petitioner is a “maritime claim” as understood in law in this country? (ii) If it is a “maritime claim”, whether this Court is the appropriate forum for adjudicating such maritime claims? (iii) In the absence of any law structuring the admiralty jurisdiction of this Court [which has been declared to be inherent in this Court in M.V.Elisabeth's case (supra)], what are the limits and contours of the said jurisdiction? and (iv) What is the procedure to be followed in exercising such jurisdiction? 16. It may be stated here that there is no statute or any other instrument known to law structuring the admiralty jurisdiction of the High Court of Kerala. No Rules are framed by this Court regarding the regulation of the admiralty proceedings before this Court. It is in the said background, we though it fit to withdraw the Sp.J.C. also for a comprehensive examination of these various issues for the purpose of not adjudicating the questions involved in the Sp.J.C., but for the purpose of settling the ambit of the admiralty W.A.No.1994/2010 & connected cases - 11 - jurisdiction of this Court and the procedure to be followed in exercising such jurisdiction. 17. The nature and scope of the law of admiralty* and the jurisdiction of the High Courts in India to deal with matters which can be described as falling under the admiralty jurisdiction of the Court fell for the consideration of the Supreme Court in M.V.Elisabeth's case (supra), a judgment which instantly attained the status of “classic”. At paras 86 to 89, the Supreme Court dealt with the judicial power of the High Courts, which read as follows:- “86. The judicial power of this country, which is an aspect of national sovereignty, is vested in the people and is articulated in the provisions of the Constitution and the laws and is exercised by courts empowered to exercise it. It is absurd to confine that power to the provisions of imperial statutes of a bygone age. Access to court which is an important right vested in every citizen implies the existence of the power of the Court to render justice according to law. Where statute is silent and judicial intervention is required, Courts strive to redress grievances according to what is perceived to be principles of justice, equity and good conscience. ------------------------------------------------------------------------------------------------------------------- * “The law of admiralty, or maritime law, .... (is the) corpus of rules, concepts, and legal practices governing .... the business of carrying goods and passengers by water” (Gilmore and Black, The Law of Admiralty, page 1) W.A.No.1994/2010 & connected cases - 12 - 87. In the words of Chief Justice Marshall: “The jurisdiction of courts is a branch of that which is possessed by the nation as an independent sovereign power. The jurisdiction of the nation within its own territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself ......” (Schooner Exchange (The) v. M'Faddon). 88. Admiralty jurisdiction is an essential aspect of judicial sovereignity which under the Constitution and the laws is exercised by the High Court as a superior court of record administering justice in relation to persons and things within its jurisdiction. Power to enforce claims against foreign ships is an essential attribute of admiralty jurisdiction and it is assumed over such ships while they are within the jurisdiction of the High Court by arresting and detaining them. 89. All persons and things within the waters of a State fall within its jurisdiction unless specifically curtailed or regulated by rules of international law. The power to arrest a foreign vessel, while in the waters of a coastal State, in respect of a maritime claim, wherever arising, is a demonstrable manifestation and an essential attribute of territorial sovereignty. This power is recognised by several international conventions. These conventions contain the unified rules of law drawn from different legal systems. Although many of these conventions have yet to be ratified by India, they embody principles of law recognised by the generality of maritime States, and can therefore be regarded as part of our common law”. The Supreme Court at para 66 of the said judgment took note of the fact that the High Courts in this country are superior courts of unlimited jurisdiction and, therefore, declared that no matter is W.A.No.1994/2010 & connected cases - 13 - beyond the jurisdiction of the superior Courts. It was held: “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, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers. (See Naresh Shridar Mirajkar v. State of Maharashtra (AIR 1967 SC 1). As stated in Halsbury's Laws of England, 4th edn., Vol.10, para 713: “Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown to be so, while nothing is within the jurisdiction of an inferior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court”.” 18. The question therefore is, what are the matters which fall within the admiralty jurisdiction of the High Court. In the said judgment, the Supreme Court took note of the history of the admiralty jurisdiction in England and the limitations on such jurisdiction which existed at some point of time or the other and held at para 30: “............. we see no reason why the jurisdiction of the Indian High Courts, governed as they now are by the Constitution of India, should in any way be subjected to the jurisdictional fetters imposed by the Privy Council in that decision. Legal history is good guidance for the future, but to surrender to the former is to lose the latter”. W.A.No.1994/2010 & connected cases - 14 - The Supreme Court noticed the changes that were brought about from time to time in the admiralty jurisdiction of the High Court of England by various statutory provisions including the Supreme Court Act 1981. It also took note of the various enactments which deal with various aspects of the law of admiralty in India. At paras 75 and 76, dealing with the various enactments on the subject, the Supreme Court held that Indian legislation has not progressed in tune with the various international conventions, but declared that these conventions though not incorporated into Indian law, embodied the “felt necessities of international trade and are as such part of the common law of India”. It was held as follows:- “75. In India, carriage of goods by sea is governed by the Indian Bills of Lading Act, 1856, the Indian Carriage of Goods by Sea Act, 1925, the Merchant Shipping Act, 1958, and general statutes, such as the Marine Insurance Act, 1963, the Contract Act, 1872, the Evidence Act, 1872, the Indian Penal Code, 1860, the Transfer of Property Act, 1882, the Civil Procedure Code, 1908, the Criminal Procedure Code, 1973, the Companies Act, 1956, etc. etc. as well as the general principles of law such as the law of tort, public and private international law, etc. In this connection, reference may also be made to the Indian Ports Act, 1908 and the Major Port Trusts Act, 1963 concerning the administration of the port and jurisdiction over ships in W.A.No.1994/2010 & connected cases - 15 - port, the Customs Act, 1962 containing various regulatory measures affecting ships, goods and persons in connection with importation or exportation of goods, as well as the provisions governing employment of labour. The Indian Bills of Lading Act, 1856 emphasises the negotiable and other characteristics of a bill of lading. The Carriage of Goods by Sea Act, 1925, contains the Hague Rules regulating the respective rights and liabilities of the parties to a contract governed by bills of lading or similar documents of title for carriage of goods by sea “from any port in India to any other port whether in India or outside India”. The Merchant Shipping Act embodies rules regarding registration of Indian ships; transfers or mortgages of ships or shares; national character and flag; employment of seamen; safety, nuclear ships; collisions, accidents at sea and liability; limitation of liability; navigation; prevention of pollution; investigation and enquiries; wreck and salvage; coasting trade; sailing vessels; penalties and procedure, etc. Many of these provisions have been adopted from rules formulated by various international conventions. 76. It is true that Indian statutes lag behind the development of international law in comparison to contemporaneous statutes in England and other maritime countries. Although the Hague Rules are embodied in the Carriage of Goods by Sea Act, 1925, India never became a party to the International Convention laying down those rules (International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, Brussels, 1924). The Carriage of Goods by Sea Act, 1925 merely followed the (United Kingdom) W.A.No.1994/2010 & connected cases - 16 - Carriage of Goods by Sea Act, 1924. The United Kingdom repealed the Carriage of Goods by Sea Act, 1924 with a view to incorporating the Visby Rules adopted by the Brussels Protocol of 1968. The Hague-Visby Rules were accordingly adopted by the Carriage of Goods by Sea Act 1971 (United Kingdom). Indian legislation has not, however, progressed, notwithstanding the Brussels Protocol of 1968 adopting the Visby Rules or the United Nations Convention on the Carriage of Goods by Sea, 1978 adopting the Hamburg Rules. The Hamburg Rules prescribe the minimum liabilities of the carrier far more justly and equitably than the Hague Rules so as to correct the tilt in the latter in favour of the carriers. The Hamburg Rules are acclaimed