1988 (7) TMI 228 - HC - Indian Laws

Court Upholds Auction Sale of M.V. 'Varuna Kachhapi' by Bombay Port Trust

The court upheld the legality of the auction sale of the vessel M.V. 'Varuna Kachhapi' by the Bombay Port Trust, finding it conducted in accordance with ... Vessel’s auction sale Issues Involved:1. Legality of the auction sale of the vessel M.V. 'Varuna Kachhapi.'2. Compliance with the instructions of the Controller of Stores, Bombay Port Trust.3. Applicability of Section 42 of the Merchant Shipping Act, 1988.4. Allegations of mala fide actions by the 1st respondent.5. Valuation and sale price of the vessel.6. Involvement of M/s. Vishwanath Rupa and Co. as a necessary party.Detailed Analysis:1. Legality of the Auction Sale of the Vessel M.V. 'Varuna Kachhapi':The petitioners challenged the auction sale of the vessel held by the Bombay Port Trust on 13th May 1988. The vessel, mortgaged to the Shipping Credit and Investment Corporation Limited (SCICI), was anchored at the Bombay port since May 1985, accruing unpaid anchorage fees. The 1st respondent notified the auction sale through public notices due to non-payment of dues by the petitioners. The auction sale was held as per Section 64(2) of the Major Port Trust Act, 1963, which allows the sale of distrained or arrested vessels to recover unpaid charges. The court found that the auction was conducted legally under the powers conferred by Section 64(2).2. Compliance with the Instructions of the Controller of Stores, Bombay Port Trust:The petitioners argued that the auction sale was contrary to the instructions of the Controller of Stores, which required bidders to be registered with the Small Scale Industries and MSTC and have an Income-tax clearance certificate and bank reference. The court found that the public notice of the auction sale did not specify that the vessel was meant for scrapping and that the 4th respondent intended to renovate and ply the vessel, not scrap it. Therefore, the registration requirement for ship-breakers did not apply, and the contention was dismissed.3. Applicability of Section 42 of the Merchant Shipping Act, 1988:The petitioners contended that the sale was void under Section 42 of the Merchant Shipping Act, 1988, which prohibits the transfer of any Indian ship without the previous approval of the Central Government. The court held that Section 42 applies only to voluntary sales and not to sales conducted under Section 64 of the Major Port Trust Act. Therefore, this contention was also dismissed.4. Allegations of Mala Fide Actions by the 1st Respondent:The petitioners alleged that the 1st respondent's confirmation of the sale on the same day was mala fide. The court found no supporting evidence for this allegation. The vessel had been anchored since 1985, and the charges were mounting. The petitioners had failed to comply with demand notices, and the court found no mala fides in the 1st respondent's actions.5. Valuation and Sale Price of the Vessel:The petitioners argued that the vessel was sold for a low price and that M/s. Vishwanath Rupa and Co. had offered a higher price of Rs. 93,21,150/-. The court noted that the 1st respondent had obtained a valuation certificate from Metcalfe & Hodgkinson (Pvt.) Ltd., valuing the vessel at Rs. 40,00,000/-. The court found no evidence to support the claim that the vessel was sold for a song and dismissed the contention.6. Involvement of M/s. Vishwanath Rupa and Co. as a Necessary Party:M/s. Vishwanath Rupa and Co. sought to be impleaded as a party to the writ petition, claiming their rights were affected. The court found that their alleged contract with the petitioners could not be investigated in the writ petition and rejected the Chamber Summons with costs.Conclusion:The court found no substance in any of the contentions raised by the petitioners. The writ petition was summarily rejected. The court also directed the 4th respondent to reimburse the petitioners for 50% of the costs incurred for beaching the vessel. The petitioners' application for a stay of the order was granted for two weeks. The 4th respondent was allowed to place their guard on the vessel, and the petitioners were permitted to keep their guard outside the vessel.