TaxTMI 
TaxTMI 
2017 (9) TMI 1883
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....nowledged by the master. The Plaintiff raised invoices on 26.11.1999 for US$ 94,611.25 which have not yet been paid. 2. When the vessel docked in the port of Haldia, the Plaintiff filed admiralty suit No. 1 of 2000 in the Calcutta High Court praying for an arrest of the vessel because, according to the Plaintiff, the necessaries supplied to the vessel would not only amount to a maritime claim but would also be a maritime lien on the vessel. By an order dated 6.1.2000, the vessel was so arrested but nobody came forward for release of the vessel at that point of time. It is only on 25.1.2000 that learned Counsel appearing on behalf of the Plaintiff approached the learned admiralty Judge expressing the Plaintiff's intention not to proceed with the application for arrest as, according to him, the parties had reached an out of court settlement. The order passed on 25.1.2000 reads as follows: The Court by an order dated January 6, 2000 directed that the vessel known as M.V. Nikolaos - S was to be arrested. On the returnable date no one appeared on behalf of the Respondents. The directions for affidavits had been given on January 10, 2000. Today when the matter was called on for he....
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....USD 94,611.25 for the invoice amount + USD 2,177.35 for interest accrued + USD 7,900.00 for legal costs. 2. The shipowners, through their President Mr. Sotirios Soukas, represent to Chrisomar that (a) their vessel is due to be chartered out for a voyage from Bangkok, Thailand to ports of West Africa as against a freight of about USD 35.00 per metric ton of cargo; (b) that if Chrisomar releases their vessel from the above arrest shall be able to proceed to Bangkok for loading and to perform the intended charter voyage; (c) that the shipowners as soon as their vessel is released from its arrest by Chrisomar shall include in their recap and charter party with the intended charterers of their vessel a Clause that part of the freight amounting to USD 104,668.60 shall be paid directly by the charterers to Chrisomar's bank account as follows: ANZ GRINDLAYS BANK 21, Akti Miaouli, 18535 Piraeus Swift: GRNDGRAA, A/C No. 815142 USD 40632 In favour of Chrisomar Corporation 3. The above recap shall be faxed by the shipowners to Chrisomar one (1) working day after its conclusion. 4. The shipowners will not sell their vessel prior to the satisfaction of Chrisomar's above c....
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....prises Shipping Ltd. sold and transferred the said vessel to Eastern Wealth Investment Ltd. Eastern Wealth Investment Ltd. sold and transferred the said vessel to Fairsteel Corporation. Fairsteel Corporation sold and transferred the said vessel to this Defendant. This Defendant acquired the right, title or interest in respect of the said vessel from the said Fairsteel Corporation. 6. The learned single Judge by his judgment and order dated 28.4.2005 listed as many as seven issues and adverted to the fact that three witnesses were called on behalf of the Plaintiffs, who not only deposed and were cross-examined, but also produced various documents. The Defendants, however, did not produce any witness but tendered as their evidence six exhibits which were produced only through the Plaintiff's witnesses. 7. According to the learned single Judge, the order of 25.1.2000 made it clear that suit No. 1 of 2000 was kept alive and remained alive on the date of the re-arrest, namely, 2.5.2000. All that was done by the order dated 2.5.2000 was to recall the order dated 25.1.2000, and when that was done, the original order of arrest was automatically revived. This being the case, it is cle....
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....0 would not amount to a novatio of the original agreement. According to him, the original agreement continued and was in fact enforced by the second order of arrest dated 2.5.2000. According to him, the right that was vested in the Appellant on 5.1.2000, i.e. the date of the institution of the suit, is alone material, and it is on that date, and not the date of arrest on 2.5.2000, that the ownership of the vessel has to be seen. For this purpose, he cited certain English precedents. He also cited an American judgment to buttress his submission that the present was a case not merely of a maritime claim but also of a maritime lien in that necessaries supplied to the vessel would amount to a maritime lien. According to him, in any event, on facts, the Division Bench was completely wrong in arriving at a conclusion that there was a concluded sale in April, 2000 in favour of Respondent No. 1 inasmuch as several documents produced by the Plaintiff's witnesses would show that no such sale had, in fact, taken place. 10. Shri Banerjee, learned senior Counsel appearing on behalf of the Respondents, has countered each of these submissions. According to Shri Banerjee, the Division Bench i....
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....Act of 1956, the admiralty jurisdiction of the High Court was further widened and the Supreme Court Act of 1981 now defines what the admiralty jurisdiction of the High Court in England is. 12. Insofar as our law is concerned, the admiralty law of the chartered High Courts has historically been traced to the charters of 1774 and 1798 as subsequently extended and clarified by the Letters Patents of 1823, 1862 and 1865. The Admiralty Court Act, 1840 and 1861, and the Colonial Courts of Admiralty Act, 1890 and 1891 essentially stated what the admiralty law in this country is, and these enactments continued as existing laws Under Article 372 of the Constitution of India. Some of the relevant provisions of these Acts are set out hereinbelow: Admiralty Court Act, 1840 6. The court in certain cases may adjudicate, etc.- The High Court of Admiralty shall have jurisdiction to decide all claims and demands whatsoever in the nature of salvage for services rendered to or damage received by any ship or seagoing vessel or in the nature of towage, or for necessaries supplied to any foreign ship or seagoing vessel, and to enforce the payment thereof, whether such ship or vessel may have been w....
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....Republic of India has finally woken up to the need for updating its admiralty law. The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 has been made by Parliament and has received the assent of the President on 9.8.2017, though it has not yet been brought into force. In this Act, "maritime claim" is defined in Section 2(1)(f) as being a claim referred to in Section 4 and a "maritime lien" is defined in Sub-section (g) of 2(1) as follows: 2. Definitions (1) In this Act,- (g) "maritime lien" means a maritime claim against the owner, demise charterer, manager or operator of the vessel referred to in Clauses (a) to (e) of Sub-section (1) of Section 9, which shall continue to exist Under Sub-section (2) of that section; Section 4 reads as follows: 4. Maritime Claim (1) The High Court may exercise jurisdiction to hear and determine any question on a maritime claim, against any vessel, arising out of any- (a) dispute regarding the possession or ownership of a vessel or the ownership of any share therein; (b) dispute between the co-owners of a vessel as to the employment or earnings of the vessel; (c) mortgage or a charge of the same nature on a vessel....
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....erer; (u) damage or threat of damage caused by the vessel to the environment, coastline or related interests; measures taken to prevent, minimise, or remove such damage; compensation for such damage; costs of reasonable measures for the restoration of the environment actually undertaken or to be undertaken; loss incurred or likely to be incurred by third parties in connection with such damage; or any other damage, costs, or loss of a similar nature to those identified in this clause; (v) costs or expenses relating to raising, removal, recovery, destruction or the rendering harmless of a vessel which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such vessel, and costs or expenses relating to the preservation of an abandoned vessel and maintenance of its crew; and (w) maritime lien. Explanation.-For the purposes of Clause (q), the expressions "particular average" and "general average" shall have the same meanings as assigned to them in Sub-section (1) of Section 64 and Sub-section (2) of Section 66 respectively of the Marine Insurance Act, 1963. (2) While exercising jurisdiction Under Sub-section (1), the High Court may settle any ....
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....nder Clause (a) of Sub-section (1), the period shall be two years from the date on which the wage, sum, cost of repatriation or social insurance contribution, falls due or becomes payable. (3) The maritime lien referred to in this Section shall commence- (a) in relation to the maritime lien under Clause (a) of Sub-section (1), upon the claimant's discharge from the vessel; (b) in relation to the maritime liens under Clauses (b) to (e) of Sub-section (1), when the claim arises, and shall run continuously without any suspension or interruption: Provided that the period during which the vessel was under arrest or seizure shall be excluded. (4) No maritime lien shall attach to a vessel to secure a claim which arises out of or results from- (a) damage in connection with the carriage of oil or other hazardous or noxious substances by sea for which compensation is payable to the claimants pursuant to any law for the time being in force; (b) the radioactive properties or a combination of radioactive properties with toxic, explosive or other hazardous properties of nuclear fuel or of radioactive products or waste. 15. Section 12 states that the Code of Civil Procedure is ....
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.... it is enforced by an action. It is a right which springs from general maritime law and is based on the concept as if the ship itself has caused the harm, loss or damage to others or to their property and thus must itself make good that loss. (See in this context Maritime Law by Christopher Hill, 2nd Edn.). 18. Only a small number of claims give rise to maritime liens as was noted in M.V. Won Fu (supra). Paragraph 19 of the said judgment states as follows: 19. We have in this judgment hereinbefore dealt with the attributes of maritime lien. But simply stated, maritime lien can be said to exist or restricted to in the event of (a) damage done by a ship; (b) salvage; (c) seamen's and master's wages; (d) master's disbursement; and (e) bottomry; and in the event a maritime lien exists in the aforesaid five circumstances, a right in rem is said to exist. Otherwise, a right in personam exists for any claim that may arise out of a contract. (at pages 314-315) 19. In an illuminating judgment of the Calcutta High Court Justice Mrs. Ruma Pal, as she then was, dealt with an action in rem filed in the admiralty court jurisdiction in Calcutta. With respect to the Plaintiffs c....
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....ere than in the port to which the ship belongs, unless it is shown to the satisfaction of the court that, at the time of the institution of the cause, any owner or part owner of the ship is domiciled in England or Wales. The words 'the High Court of Admiralty shall have jurisdiction', mean only what they purport to say, neither more nor less, that is, that the court shall take judicial cognizance of the cases provided for. The conclusion [is] that there is nothing from which it can be inferred that by the use of the words "the court shall have jurisdiction" the Legislature intended to create a maritime lien with respect to necessaries supplied within the possession. 19. In Shell Oil Co. v. The Ship "Lastrigoni" 3 ALR 399 the Plaintiff had filed a suit for enforcement of the claim on the ground of bunkers provided by the Plaintiff under a contract between the Plaintiff and the agents of the time charterer. The contract provided that the sale and delivery of inter alia necessaries would be made on the faith and credit of the vessel. The arguments before the Court were that the supply of fuel itself created maritime lien to which the ship was subject and which could be e....
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.... of the Supreme Court Act 1981 of England where maritime claims have been listed on the basis of Brussels Convention of 1952 on the Arrest of Sea Going Ships. Under Article 1 of the said Convention various maritime claims have been catalogued. Out of which 1(k) answers the description of the claims of the Plaintiff in this proceeding. Article 1(k) reads "goods or materials whether supplied to a ship for her operation or maintenance". Even though India is not a signatory to the Brussels Convention, but the Supreme Court held that the provisions of these Conventions should be regarded as part of International Common Law and these provisions 'supplement' and 'complement' our maritime laws and fill up the lacunae in The Merchant Shipping Act. 23. But in Elisabeth, the Hon'ble Supreme Court did not notice any convention on maritime lien. However the Hon'ble Supreme Court accepted in para 57 of Elisabeth the judicial determination of the concept of 'maritime lien' by English courts and which I quote as follows: A maritime lien is a privileged claim against the ship or a right to a part of the property in the ship, and it "travels" with the ship. Becaus....
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....ve not a maritime lien upon her, and the vessel does not become chargeable with the debt till the suit is actually instituted; consequently there can be no claim against a ship which has been sold, even with notice of such a claim in respect of which an action has not been commenced, and a want of caution in supplying the necessaries may, it would seem, cause a postponement of claims to others more carefully begun. The necessaries claimant is not a secured creditor until the moment of arrest. 30. There is a direct judgment on this point by a learned Judge of this Court in Bailey Petroleum, referred to above. 31. Relying on the judgment of the Privy Council in Rio Tinto, reported in 1884 (9) Appeal Cases 356 and the judgment in Shell Oil Co. v. The Ship Lastrigoni, reported in 1974 (3) All England Reports 399, the learned single Judge held in Bailey Petroleum that a claim arising out of the supply of necessaries may give rise to a statutory right of action 'in rem' Under Section 5 of Admiralty Court Act, 1861 but it does not give rise to maritime lien. Paragraphs 23 and 24 of the judgment in Bailey Petroleum make it clear and I quote them in extenso: 23. Whereas a mari....
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....come a maritime lien which attaches to the vessel. 23. Shri Divan, however, cited U.S. case law in support of his submission that a claim for necessaries raises a maritime lien. We are afraid that given the Indian case law on the subject read with the various international Conventions referred to above, the U.S. seems to stand alone in considering that claims for necessaries would amount to maritime lien enforceable against the vessel as such wherever it goes. It is clear that in our country at least claims for necessaries, though maritime claims, do not raise a maritime lien. 24. What arises next, therefore, is the manner of enforcement of maritime claims in our Courts. In M.V. Elisabeth (supra) at 459-462, this Court laid down, in some detail, the basic features of the admiralty jurisdiction in this country, and how maritime claims are to be enforced. The Court held: Admiralty Law confers upon the claimant a right in rem to proceed against the ship or cargo as distinguished from a right in personam to proceed against the owner. The arrest of the ship is regarded as a mere procedure to obtained security to satisfy judgment. A successful Plaintiff in an action in rem has a righ....
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.... should in that event be compensated by the arresting party. (See Arrest of Ships by Hill, Soehring, Hosoi and Helmer, 1985). The attachment by arrest is only provisional and its purpose is merely to detain the ship until the matter has been finally settled by a competent court. The attachment of the vessel brings it under the custody of the Marshal or any other authorized officer. Any interference with his custody is treated as a contempt of the court which has ordered the arrest. But the Marshal's right under the attachment order is not one of possession, but only of custody. Although the custody of the vessel has passed from the Defendant to the Marshal, all the possessory rights which previously existed continue to exist, including all the remedies which are based on possession. The warrant usually contains a monition to all persons interested to appear before the court on a particular day and show cause why the property should not be condemned and sold to satisfy the claim of the Plaintiff. The attachment being only a method of safeguarding the interest of the Plaintiff by providing him with a security, it is not likely to be ordered if the Defendant or his lawyer agre....
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....eeded against in personam in execution of the judgment if the amount decreed exceeds the amount of the bail. The arrest of the foreign ship by means of an action in rem is thus a means of assuming jurisdiction by the competent court. 25. The Court went on to hold that though Indian statutes lag behind international law in this context, the principles in these Conventions derived from the common law of nations, will be treated as a part of the common law of India. Paragraph 76 in this behalf reads as under: 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) Carriage of Goods by Sea Act, 1924. The United Kingdom repealed the Carriage of Goods by Sea Act, 1924 with a view of incorporating the Visby Rules adopted by the....
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.... of the vessel to enforce a maritime claim has to be seen at the stage of institution of the suit and not at the stage of arrest. The general Rule that is contained in our country as to what crystallises on the date of a suit is reflected in Rameshwar and Ors. v. Jot Ram and Ors. 1976 1 SCR 847 at 851-52. This Court held: In P. Venkateswarlu v. Motor & General Traders [(1975) 1 SCC 770, 772 : AIR 1975 SC 1409, 1410] this Court dealt with the adjectival activism relating to post-institution circumstances. Two propositions were laid down. Firstly, it was held that [SCC p. 772, para 4] 'it is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding.' This is an emphatic statement that the right of a party is determined by the facts as they exist on the date the action is instituted. Granting the presence of such facts, then he is entitled to its enforcement. Later developments cannot defeat his right because, as explained earlier, had the court found his facts to be true the day he sued he would have got his decree. The Court's procedural delays cannot deprive him of legal justice or ri....
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....owner of the ship when the arrest is effected; or (b) - (e) xxx xxx xxx (2) xxx xxx xxx 3. Notwithstanding the provisions of paragraphs 1 and 2 of this article, the arrest of a ship which is not owned by the person liable for the claim shall be permissible only if, under the law of the State where the arrest is applied for, a judgment in respect of that claim can be enforced against that ship by judicial or forced sale of that ship. 28. India is not a signatory to the aforesaid Convention, yet following M.V. Elisabeth (supra), this Convention becomes part of our national law and must, therefore, be followed by this Court. Article 3(1)(a) is in two parts. First, arrest is only permissible of any ship if a maritime claim is asserted against the person who owned the ship at a time when the maritime claim arose for which the owner is liable, and second, that the same ship owner should be the owner of the ship when the arrest is effected. Thus, Article 3(1)(a) sets the controversy at rest because a maritime claim can be asserted only at the time the arrest is effected and not at the time of the institution of the suit. This being so, Shri Divan's reliance on English judgments....
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....ct is attracted to the facts of the present case whereas it is the Respondent's case that Section 62 is so attracted, the result being that the original agreement is substituted by a fresh agreement. 32. The Respondent's case is that Section 62 applies, since the original contract has been "altered". This being the case, the original contract need not be performed. 33. It is clear that where parties to a contract agree to substitute a completely different contract for the first, or to rescind a contract, the performance under the original contract and/or rescinded contract comes to an end. When parties to a contract "alter" a contract, the question that has to be answered is as to whether the original contract is altered in such a manner that performance under it is at an end. 34. In Juggilal Kamlapat v. N.V. Internationale Crediet-En-Handels Vereeninging 'Rotter-dam' AIR 1955 Cal 65, the original contract dated 10.8.1950 contained an arbitration clause. In paragraph 11 of the judgment, it was found as a fact that the original contract was modified in certain material particulars. Despite this, it was found that since the modifications do not go to the root of th....
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....ion 63 is apposite, and reads as follows: (c) A owes B 5,000 rupees. C pays to B 1,000 rupees and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim. 37. The aforesaid illustration makes it clear that a promisee may accept satisfaction from a third party which then discharges the promisor from further performance of the original contract. 38. In Kapur Chand Godha v. Mir Nawab Himayatalikhan Azamjah, (1963) 2 SCR 168, one Baboo Mull and Company sold and delivered to the Prince of Berar various articles of jewellery. The jewellery was, in fact, delivered by the Appellants to the Prince. Several payments were made by a Princes Debts Settlement Committee. Ultimately, a payment for a sum of Rs. 27,79,078/- was made which was received by the Appellant stating that payment had been made in full. 39. Since a balance of Rs. 9,99,940/- still remained, the Appellants filed a suit against the Respondent-Prince. The suit was allowed by the trial court but dismissed by the first Appellate Court which came to a contrary conclusion. The Supreme Court agreed with the Appellate Court in dismissing the suit. It was, therefore, held: There was some....
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.... yet been made while keeping the original transaction alive. The other clauses of the agreement buttress this conclusion. Under Clause 4, the ship owner will not sell the vessel prior to the satisfaction of the aforesaid claim. And, above all, under Clause (6), if for any reason the said payment is not made, the Appellant will be entitled to take all appropriate legal steps, which include arrest of the vessel, for recovery of the said amount. Even by Clause (8), the original agreement is kept alive. In the event that the ship is unable to proceed to Bangkok, the Appellant maintains its rights of recovery against the shipowner and the vessel. If the original agreement had disappeared by novatio, there is no question of taking appropriate steps to arrest the vessel which is owned by the ship owner who is the promisee and who has not yet performed his part of the contract. A guarantee Clause contained in clauses 7 and 8 is again only an additional string to the bow of payment. The fact that exclusive jurisdiction is given to the courts at Piraeus, Greece has to be read with Clause 6 of the agreement. Obviously, arrest of the vessel for recovering the aforesaid amount in case payment i....
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....term in an agreement or contract so as to achieve the result or the consequence intended by the parties acting as prudent businessmen. Business efficacy means the power to produce intended results. The classic test of business efficacy was proposed by Bowen, L.J. in Moorcock [(1889) LR 14 PD 64 (CA)]. This test requires that a term can only be implied if it is necessary to give business efficacy to the contract to avoid such a failure of consideration that the parties cannot as reasonable businessmen have intended. But only the most limited term should then be implied-the bare minimum to achieve this goal. If the contract makes business sense without the term, the courts will not imply the same. The following passage from the opinion of Bowen, L.J. in Moorcock [(1889) LR 14 PD 64 (CA)] sums up the position: (PD p. 68) ... In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are businessmen; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party p....
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.... 510 L.R. 55 I.A. 154 (160)]. 45. To similar effect is a judgment of the Bombay High Court reported as Anandram Mangturam v. Bholaram Tanumal AIR 1946 Bom 1 at 6, in which Chagla, J. stated: But the learned Judge expresses his opinion that time can be extended even though the promisee may not bind himself to do so. With great respect to the learned Judge, I cannot accept that part of the statement of the law. The learned Judge's judgment is based on English decisions to which he has referred in his judgment. The Privy Council has repeatedly warned Courts in India not to import doctrines of common law when construing the plain Sections of the Contract Act and the danger of relying on principles of Common Law is all the greater in this case when one remembers that Section 63, Contract Act constitutes a wide departure from the principles of the English common law. 46. Even if the passage in Halsbury is to be applied, it is obvious that the settlement terms spoken of must be made for good consideration, which is absent Under Section 63. Also, for such settlement to constitute a new and independent agreement, it must put an end to the proceeding which is thereby spent and exhaus....
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.... it is stated: 11...The Plaintiffs' solicitors in a fax dated 1 August 2002 wrote: "[T]he sum due is in fact S$170,000 as stated in the Settlement Agreement together with interest thereon up to 23rd January 2002 ... 13...There was no explanation as to where the figure of $170,000 had come from if it was not from the Settlement Agreement... 49. On the facts of that case it was, therefore, held that the original cause of action had been superseded and that the Court had no jurisdiction in respect of the original claim. 50. This case is wholly distinguishable in that, on the facts of the present case, the very sum due under the original contract continued to be due and payable under the settlement agreement. The fact that interest and legal costs were added would not amount in itself to superseding the original contract, as these relate to payments under the original contract and put the promisee in the same position as if the contract had originally been performed. We have also seen that the original agreement was not superseded but was only sought to be enforced, the manner of performance being different. This being the case, we are of the view that the High Court's co....
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....le has for its consideration "one US Dollar and/or other valuable consideration" casting grave doubts about its efficacy in law. Be that as it may, since this sale is the first sale in the chain of sales made ultimately to Respondent No. 1, it is obvious that the sale made by Fairsteel to Respondent No. 1 could only have been after this date. Shri Banerjee cited before us authorities to the effect that it is well known that back to back sales of this nature take place between different parties for the same vessel. That may well be so, but it is still necessary to prove and explain each back to back sale from which Respondent No. 1 ultimately derives its title, in accordance with its pleading in the written statement filed by it. As has correctly been held by the High Court, there is no proof of any of these back to back sales, and in point of fact the very first sale from the original owner has taken place in favour of Eastern Wealth after the High Court has found that the vessel has been sold by Fairsteel to Respondent No. 1, which goes contrary to the pleaded case of Respondent No. 1 itself. We were also referred to a document dated 26.4.2000 by which a new Clause 8 was to be add....