Case: Liverpool &amp; London S.P.&amp; I. Asson. Ltd Vs. M.V. Sea Success I

The appellant (Club) herein is an association incorporated under the laws of the United Kingdom. It is a mutual association of ship owners. It offers insurance cover in respect of the vessels entered with it for diverse third party risks associated with the operation and trading of vessels. According to the appellant, no vessel operates without a Protection & Indemnity (P & I) cover and the same has been made compulsory to allow a ship to enter major ports in India.2. Sea Ranger and Sea Glory are the sister vessels of the 1st respondent vessel and they are allegedly owned by the 2nd respondent. The first two vessels entered into a contract with the appellants association for the years 1998-1999 and 1999-2000 but they have not paid the unpaid insurance premium due and payable by the 2nd respondent for various P & I risks for which they had been insured. These unpaid insurance calls being necessaries was enforceable within the admiralty jurisdiction of the Bombay High Court.3. For the arrest of the 1st respondent vessel which came to Mumbai Port within the territorial waters of India, a suit was filed by the club inter alia for the prayers: "(a) for a decree against the respondents in the sum of US@ 1,18,194.89 together with interest at the rate of 12% per annum, which was the unpaid insurance premium amount due to the club and payable by the 2nd respondent; and (b) for arrest of the 1st respondent vessel to secure the claim".4. On an application for arrest of the 1st respondent vessel having been made, the 2nd respondent appeared and undertook to furnish security in respect of the appellants claim and further gave an undertaking that until the security is furnished the said vessel will not leave the Port of Mumbai. However, thereafter S.S. Shipping Corporation Inc., Liberia claiming to be the registered owner of the 1st respondent furnished a bank-guarantee in relation to the appellants claim in discharge of the undertaking of security given by the second respondent. The 1st respondent thereafter took out a Notice of Motion for rejection of the plaint purported to be under Order 7 Rule 11(a) of the Code of Civil Procedure inter alia on the ground that the averments contained therein do not disclose a cause of action as the claim of unpaid insurance premium was not a necessary within the meaning of Section 5 of the Admiralty Courts Act, 1861. A learned Single Judge of the High Court after hearing the Notice of Motion by an order dated 1-2/2/2001 referred the said question to a Division Bench at it could not agree with a decision rendered by another learned Single Judge. However, on the other two grounds it discharged the Notice of Motion holding that the averments made in paragraphs 1 and 14 of the plaint inter alia to the effect that all the three ships are beneficially owned by the 2nd respondent disclose a cause of action.5. An appeal thereagainst was preferred by the respondent herein. The Division Bench took up the appeal preferred by the respondent herein as also the reference made by the learned Single Judge and passed a common judgment.The question which arose for consideration before the High Court were:(i) whether arrears of insurance premium due and payable to the appellant by the 2nd respondent would fall within the scope and ambit of Section 5 of the Admiralty Courts Act, 1861;(ii) whether refusing to reject to plaint under Order 7 Rule 11(a) upon holding that the plaint discloses a cause of action is a judgment within the meaning of Clause 15 of the Letters Patent of the Bombay High Court and was, thus, appealable; and(iii) Whether the averments made in paragraphs 1 and 14 of the plaint disclose sufficient cause of action for maintaining a suit.7. The Division Bench while answering the question No.1 in favour of appellant, answered question Nos. 2 and 3 against it. Appeal No. 226 of 2001 has been filed by the club whereas Civil Appeal No. 5666 of 2002 has been filed by the

Reasoning:
Some countries like Canada, Australia and South Africa as well as communist regimes like China and Korea have made statutes as a result whereof the maritime claims stand codified. The expression necessaries is not used in the said statutes except the statutes of United States. The domestic legislation indisputably will prevail over any international convention irrespective of the fact as to whether the country concerned is a party thereto or not.The rules for ship arrest in international fora are not uniform. Despite International Convention on the Arrest of Sea-going Ships 1952 as amended in the year 1999 either having been adopted by some countries or adopted by others, the law is enforced by the concerned countries having regard to their own domestic legal system. Where, how and when can a maritime claimant most advisedly arrest a ship in pursuit of its claim either in rem or in personem had all along been a complicated question keeping in view the principles of lex fori.As a matter of policy legislation or otherwise England did not want that arrears of insurance premium should be included as a maritime claim, but the same would not imply that in other countries despite the unpaid insurance premium being maritime claim, the same would not beregard to the changing scenario and keeping in tune with the changes in both domestic and international law as also the statutes adopted by several countries, a stand, however, bold, may have to be taken that unpaid insurance premium of P&I Club would come within the purview of the expression "Necessaries supplied to any ship". Other types of insurance, keeping in view the existing statutes may not amount to a "necessary". In any event, such a question, we are not called upon to answer at present. The discussions made hereinbefore under different sub-titles of this judgment separately and distinctly may not lead us to the said conclusion but the cumulative effect of the findings thereunder makes the conclusion inevitable. The question has not only been considered from the angle of history of the judicial decisions rendered by different Courts having great persuasive value but also from the angle that with the change in time interpretative changes are required to be made. We, therefore, in agreement with the judgment of the Bombay High Court, hold that unpaid insurance premium being a maritime claim would be enforceable inapproach of the High Court, in our considered opinion, is not correct. For the purpose of rejecting a plaint it is not necessary to consider whether the averments made in the plaint prove the factum that the defendant No. 1 "Sea Success-I" is a sister ship of "Sea Glory" and "Sea Ranger" or the said two ships are beneficially owned by the defendant No. 2. The reasons which have been assigned in support of the said aforementioned finding that that the ship is a valuable commercial chattel and her arrest undeservingly prejudices third parties as well as affect the interest of owner and others is a question which must be gone into when passing a final order as regard interim arrest of ship or otherwise. For the aforementioned purpose the Vessel herein could file an application for vacation of stay. While considering such an application, the Court was entitled to consider not only a prima facie case but also the elements of balance of convenience and irreparable injury involved in the matter. In such a situation and particularly when both the parties disclose their documents which are in their possession, the Court would be in a position to ascertain even prima facie as to whetherthe Club has been able to make out that "Sea Glory" and "Sea Ranger" are sister vessels of the"Vessel".The reason for the aforementioned conclusion is that if a legal question is raised by the defendant in the written statement, it does not mean that the same has to be decided only by way of an application under Order 7 Rule 11 of the Code of Civil Procedure which may amount to pre-judging the matter.