Case: ICICI Ltd Vs. Board of Trustees, Port of Calcutta

1. These appeals are against an order of the High Court dated 29-9-2000 by which an appeal against the judgment of a learned Single Judge dated 13-2-1998 in two admiralty suits has been dismissed. 2. Briefly stated, the facts are as follows:Two ships, namely, M. V. Charisma and M. V. Alexandra were owned by one Nilhaat Shipping Company Limited. The said Company had been advanced loans by the Shipping Development Fund Committee (SDFC) which had been established under the provisions of the Merchant Shipping Act. For repayment of the loans the abovementioned two ships were mortgaged to SDFC. The said SDFC had filed Admiralty Suit No. 32 of 1979 in the Bombay High Court, for enforcement of mortgage created in its favour by arrest and sale of vessel M.V. Charisma. The Bombay High Court had directed arrest. In breach of the order of the Bombay High Court, the vessel was sent to Haldia and was abandoned over there.3. SDFC also filed a suit in England seeking to enforce the mortgage created in its favour in respect of the vessel M. V. Alexandra. This suit was decreed against the owners.4. The ship crew/seamen filed Admiralty Suit No. 15 of 1984 in the Calcutta High Court in respect of the vessel M.V. Charisma. Similarly, the ship crew/Sheriff filed Admiralty Suit No. 16 of 1984 in the Calcutta High Court in respect of the vessel M. V. Alexandra.5. SDFC had also filed in the Calcutta High Court, Admiralty Suit No. 1 of 1983 for enforcement of mortgage created in its favour by arrest and sale of the vessel M. V. Alexandra. The said vessel M. V. Alexandra was lying in the premises of Calcutta Port Trust and was incurring port charges, berth hire and dock dues. Thus Calcutta Port Trust applied, in the said suit, for leave to intervene and proceed against the vehicle in terms of S.64(2) of the Major Port Trusts Act, 1963.6. The Bombay High Court had, by an order dated 17-11-1984, directed sale of the vessel M.V. Charisma. Similarly by an order dated 28-6-1985 the High Court of Calcutta directed sale of the vessel M. V. Alexandra. Pursuant to the orders both the vessels were sold. The Calcutta High Court by its order dated 9-12-1985 directed the Port Authorities to give possession of the vessel M. V. Alexandra to the purchaser. It appears that possession of the vessel M. V. Charisma was also given. 7. The question then arose as to how the sale proceeds were to be applied. By the impugned judgment it has been held that the priority has to be given firstly to the seamen, secondly, to the Port Authorities and thirdly, to the appellants herein. In these appeals, the priority given to the workmen is not challenged. 8. At this stage it must be mentioned that by the Shipping Development Fund Committee (Abolition) Act, 1986 SDFC has been abolished. All rights and privileges of the Committee have now become the rights and privileges of the Central Government. The said Act gave power to the Central Government, amongst others, to appoint receiver or directors and/or administrators without intervention of the court and to recover dues as if they were arrears of land revenue. S.17 of the said Act also provided that the provisions of this Act were to have effect notwithstanding anything inconsistent therewith contained in any other law or in the memorandum or articles of association of any company. The Central Government also has power to delegate some or all of its powers to some other authority. The appellants are the body whom the Central Government has notified as the designated authority. 9. It has been submitted that by virtue of the provisions of the Shipping Development Fund Committee (Abolition) Act, 1986 the Central Government has been given the power to recover its dues in a priority inasmuch as it has been given the power to recover dues as arrears of land revenue. It is submitted that as the provisions of this Act have an overriding effect the power to recover arrears of land revenue cannot be defeated even by any statutory lien or a right given to any other body under any other law. It is submitted that the appellants as the designated authority have a priority over all other creditors including the Port Trust.10. It was next submitted that in any event under S.51 and 52 of the Merchant Shipping Act, 1958, the mortgagees have a right to sell the ship and to receive the sale proceeds in satisfaction of their claim against the ship. It was submitted that the right of the mortgagee was not affected even by the insolvency of the mortgagor. It was submitted that the claim of the mortgagee stands in priority to any other right, claim or interest of any other creditor and even of the trustees or the assignees of the insolvent.11. It was further submitted that the only right under S.64 of the Major Port Trusts Act was a right of arrest and sale after such arrest. It was submitted that if the Port Trust did not exercise the right of arrest then they lost their right to claim any priority. It was submitted that the right of lien which the Port Trust had against the vessel does not get attached to the sale proceeds of the vessel. In support of this submission reliance was placed upon a judgment in the case of British Transport Docks Board v. Owners of Proceeds of Sale of the Steam Ships or Vessels Charger, Probe, Vigia, Dideki, Surveyor, Constellation, Errol and Regency (1966 (3) All ER 117) wherein it has been held that if the statutory right is not exercised then the same is lost. 12. In the case of Ashoke Arya v. M.V. "Kapitan Mitsos" (AIR 1988 Bom 329 ) a suit had been filed for declaration that the plaintiff (therein) had a priority for its decretal claim against the sale proceeds of a vessel and/or that in any case its claim ranked pari passu with the claim of the Port Trust. In that case the Port Trust had arrested the vessel but the sale had taken place pursuant to the orders of the Court. An argument that the Port Trust had lost its lien by not challenging the order of sale was negatived on the footing that the lien given by statute to a Dock or Harbour Authorities could not be extinguished by the court unless it was with the express or implied consent of the Dock Authorities. The Bombay High Court held that the Port Trust was bound not to get into a conflict with the Sheriff but to surrender the said vessel to the Sheriff as representative of the Court and to allow him to sell the vessel under the Courts directions. It was held that it was then the duty of the Court to protect the interests of the Port Trust and to put the Port Trust in the same position as if they had sold the vessel under the powers given to them under the Act. It was held that by permitting the sale of the said vessel the Port Trust did not forgo its lien on the vessel or its right to have the sale proceeds applied towards the satisfaction of its dues in priority to all other claims. It was held that the Port Trust, in allowing the sale, had followed a well established admiralty practice which was of immense advantage to all who had claims upon a vessel for it ensured a sale thereof at a fair price, by and under the directions of the Court. 13. The decision of the Bombay High Court was approved by this Court in the case of Board of Trustees, Port of Mumbai v. Indian Oil Corpn. (1998 (4) SCC 302 ) In this case the question was whether by virtue of the statutory rights, under S.64 of the Major Port Trusts Act, the Port Trust had a priority over secured creditors. This Court considered a large number of authorities including the authority of the Bombay High Court (AIR 1988 Bom 329 ) and held as follows: "8. The port authorities have a paramount right to arrest a vessel and detain the same until the amounts due to it in respect of extending the port facilities and services to the vessel are paid. Under sub-s.(2), in case any part of the said rates, charges, penalties or the cost of the distress or arrest or of the keeping of the same remain unpaid for a space of five days next after any such distress or arrest has been made, the Board may cause the vessel so distrained or arrested to be sold. The proceeds of such sale shall satisfy such rates or penalties and costs including the costs of sale remaining unpaid. The surplus, if any, is to be rendered to the master of such vessel on demand.9. The statutory right under S.64 embodies this overriding right of the harbour authority over the vessel for the recovery of its dues. This right stands above the rights of secured and unsecured creditors of a company in winding up -- in the present case, the shipping company which owns the vessel. The harbour authorities allow ships -- national or foreign to anchor and avail of the services provided by them. For payment they look to the vessel. The owner may be foreign or even unknown to the harbour authority. The latters right to recover its dues is not affected by any pending proceedings against the owner in any court -- whether in winding up or otherwise. The harbour authority can arrest the vessel while it is anchored in the harbour and recover its dues in respect of that vessel by sale of the vessel if the dues are not paid. This lien of the harbour authority over the vessel is paramount. The lien cannot be extinguished or the vessel sold by any other authority under the directions of the court or otherwise, unless the harbour authority consents to such sale. Thus, in the case of Ashoke Arya v. M.V. "Kapitan Mitsos" (AIR 1988 Bom 329 ) the Bombay High Court relied upon the decision in Emilie Millon, The (1905 (2) KB 817 : 75 LJKB 31 : 93 LT 692) and held that the lien given by statute to a dock or harbour authority cannot be extinguished by the court unless it be done with the authoritys express or implied consent." 14. The Calcutta High Court has based the impugned judgment on this authority. We are in agreement with the view that by virtue of this authority the Port Trust would have priority over the appellants. 15. It was, however, submitted that both, in the case before the Bombay High Court as well as in the abovementioned authority, the right of the Port Trust was upheld because they had already arrested the ship. It was submitted that if the ship had not been arrested and/or if the Port Trust allows the ship to be sold then on the principle laid down in Charger case (1966 (3) All ER 117) the Port Trust would have lost its remedy and rights under S.64. 16. We are unable to accept this submission. On facts of this case it cannot be said that the Port Trust had given up their right under S.64. As has been pointed out hereinabove, the Port Trust had intervened in the admiralty suit in Calcutta and had sought leave to exercise their rights under S.64(2) of the Major Port Trusts Act. This showed that the Port Trust had not given up their rights and were insisting on their rights. They had merely permitted sale and delivery of vessel in pursuance of the established admiralty practice. Merely because they did not enter into a conflict with the Court and surrendered the vessel to the representative of the Court did not mean that they lost their right. It then becomes duty of the Court to protect the interest of the Port Trust and to put it in the same position as if they had sold the vehicle themselves under their powers. 17. We are unable to accept submission that the provisions of the Shipping Development Fund Committee (Abolition) Act, 1986 and/or that S.51 and 52 of the Merchant Shipping Act, 1958 give the claims of the appellant a priority over the claims of the Port Trust.

Decision reasoning: 0[ds]14. The Calcutta High Court has based the impugned judgment on this authority. We are in agreement with the view that by virtue of this authority the Port Trust would have priority over thethe present case, the shipping company which owns the vessel. The harbour authorities allow ships -- national or foreign to anchor and avail of the services provided by them. For payment they look to the vessel. The owner may be foreign or even unknown to the harbour authority. The latters right to recover its dues is not affected by any pending proceedings against the owner in any court -- whether in winding up or otherwise. The harbour authority can arrest the vessel while it is anchored in the harbour and recover its dues in respect of that vessel by sale of the vessel if the dues are not paid. This lien of the harbour authority over the vessel is paramount. The lien cannot be extinguished or the vessel sold by any other authority under the directions of the court or otherwise, unless the harbour authority consents to such sale.We are unable to accept this submission. On facts of this case it cannot be said that the Port Trust had given up their right under S.64.We are unable to accept submission that the provisions of the Shipping Development Fund Committee (Abolition) Act, 1986 and/or that S.51 and 52 of the Merchant Shipping Act, 1958 give the claims of the appellant a priority over the claims of the Port Trust.