Bank must issue No Due Certificate after vessel confiscation under Section 115 extinguishes mortgage rights

Gujarat HC held that when a vessel is confiscated under Section 115 of the Customs Act, 1962, it vests in the Central Government per Section 126, thereby extinguishing any existing mortgage. The mortgagee bank was directed to issue a No Due Certificate to the auction purchaser. The court distinguished the Supreme Court's decision in O. Konavalov, noting it applied to pre-existing crew rights under Maritime Laws, not mortgage rights under Customs Act. The petition was allowed, directing the bank to issue the certificate enabling vessel transfer between ports.

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Issues involved:
The judgment involves issues related to the quashing of an impugned communication, issuance of a No Due Certificate for a vessel, refund of amounts, and award of costs, all under Article 226 of the Constitution of India.

Quashing of Impugned Communication:
The petitioner, engaged in marine parts supplies, participated in an auction for a vessel confiscated under Section 115 of the Customs Act, 1962. The petitioner was declared the successful buyer and made full payment. However, the Gujarat Maritime Board (GMB) declined to issue a No Due Certificate for shifting the vessel due to a mortgage issue. The petitioner contended that under Section 126 of the Act, once goods are confiscated, they vest in the Central Government, and the GMB was not justified in denying the certificate. The court held in favor of the petitioner, directing the GMB to issue the certificate.

Refund and Costs:
The petitioner also sought a refund of amounts paid and costs to be awarded. The court, after considering submissions from all parties, directed the GMB to issue the No Due Certificate to enable the petitioner to shift the vessel. The court made the rule absolute to this extent, without awarding any costs.

Legal Analysis:
The judgment referred to Sections 115 and 126 of the Customs Act, outlining the confiscation of conveyances and the vesting of confiscated goods in the Central Government. It emphasized that once a vessel is confiscated, any mortgage on it would cease, and the GMB was obligated to issue the No Due Certificate. The court differentiated the case from a Supreme Court decision related to maritime laws, stating that the principles applied in that case were not directly applicable here due to the absence of quantification of recoverable amounts by the GMB.

Conclusion:
In conclusion, the court allowed the petition, directing the GMB to issue the No Due Certificate for the vessel, enabling its transfer. The judgment did not award costs to any party and permitted direct service.

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