TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1999
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....endant vessel m. t. Pratibha Neera, which according to plaintiff's information is heavily encumbered, plaintiff will be able to look for satisfaction of its maritime claim against any sister ship of defendant vessel and/or sale proceeds of sister vessels, as well as any other asset belonging to the owner, Pratibha Shipping Company Limited (in Liquidation). The proposed defendants are as under : 1. Sale proceeds of m.t. Pratibha Indrayani 2. Sale proceeds of m.t. Pratibha Tapi 3. Sale proceeds of m.t. Pratibha Bheema 4. m.t. Pratibha Koyna and/or its sale proceeds 5. m.t. Pratibha Chandrabhaga and/or its sale proceeds 6. m.t. Pratibha Warna and/or its sale proceeds 7. Sale proceeds of m.t. Pratibha Cauvery 8. Pratibha Shipping Company Limited, represented by the Official Liquidator, a company incorporated under the Companies Act 1956, having its office at 1201/1202, Arcadia, 12th Floor, NCPA Road, Nariman Point, Mumbai - 400 021. Perhaps the vessels at serial nos.4,5 and 6 may have been sold after filing of this chamber summons. 3 In normal circumstances a new party could be added under the provisions of Order 1 Rule 10 of the Code of Civil Procedure (CPC) prov....
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....t but now circumstances makes it do that; (e) various banks to whom the vessels have been mortgaged have filed suits against vessels belonging to Pratibha Shipping Co. Ltd. (in Liquidation). Axis Bank has filed Admiralty Suit No.77 of 2013 against m.t. Pratibha Neera. Therefore, the sale proceeds of m.t. Pratibha Neera may not be sufficient to satisfy plaintiff's claim, in view of Axis Bank's claim ranking higher in priority compared to plaintiff's claim; (f) even though the sister vessels are not necessary parties as an effective order can be made even without them, however, they have a direct interest in the subject matter of the litigation since plaintiff can execute its decree against them as well and therefore, to that extent, the sister vessels are proper parties. Under admiralty law, plaintiff is entitled to proceed against all vessels belonging to the owner of the offending Vessel. Though it can arrest only one in the first instance, it has a right to arrest other vessels as well in certain circumstances. The impleading of sister vessels ought to be permitted so as to protect plaintiff's said right; (g) parties who have arrested the sister vessels sought to be im....
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....el being unable to satisfy plaintiff's claim or in the event of plaintiff having a lower priority over other claimants, plaintiff may not recover its claim. (ii) On the other hand, in the event of plaintiff obtaining a decree against the other vessels or her sale proceeds, plaintiff may have a chance to recover its claim in full or atleast in part. (d) One should not confuse between the right to arrest only one ship as opposed to obtaining a decree against sister ships or sale proceeds of sister ships. (e) There is no impediment to the chamber summons for amendment being allowed subject to caveats that any decree passed against sister ships or sale proceeds of sister ships would be subject to priorities being determined in accordance with law. By this, other creditors, who have direct claims against the ship in question, will not be prejudiced. (f) Another fact which arises for consideration is that creditors having claims against the "other ships" may be prejudiced if plaintiff is allowed to make other vessels a party to the present suit. The response to this argument is that the issue of priority is still open for determination and these creditors will not lose priority.....
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....so its owner is made a party Defendant. The reason to implead necessarily the owner of such 'Sister Ship' in admiralty action is to ensure that Decree is passed against the owner inasmuch as the 'Sister Ship' is impleaded as Defendant only to secure plaintiff's claim. A monetary Decree cannot be passed against the 'Sister Ship' since it is impleaded only for the purpose of securing plaintiff's claim and the vessel itself is treated as a person 'or a party' in such action. As pointed hereinabove, not only no maritime claim extends to a 'Sister Ship' but even a maritime lien of a Claimant is only against the offending ship and no other ship. (b) In England, Administration of Justice Act, 1956 was enacted repealing the earlier statutes on admiralty. The English Court of Appeal had occasion to consider whether a Claimant in admiralty action is entitled to arrest more than one ship in order to secure its claim. In the case of The Banco (1971) 2 WLR 334 Claimant commenced the admiralty action against six ships including its owner. The offending ship was only 'The Banco'. The owners applied to set aside the service of the writ and warrants of arrest in respect of all the vessels sa....
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.... to right of rearrest and multiple arrest would make it clear a rearrest is permitted subject to the aggregate value of the security do not exceed the value of the ship and right to arrest any other ship is permitted provided the security already provided is inadequate. Therefore, it may be possible to secure an arrest of another ship only if the owner is a 'going concern' and not when a ship owing company itself is under liquidation. As it would be noted that under Article 5(1)(a) rearrest is permitted subject to the condition the aggregate amount of security do not exceed the value of the ship. A perusal of Article 5(2)(a) would make it clear that a subsequent arrest is permitted only if the amount of security already provided in respect of the same claim is inadequate. This again would presuppose that the ship owning company is still doing business and that the same is not in liquidation. (e) Article 3 (3) of the 1952 Arrest Convention could be divided into three parts. 'The first is a prohibition to arrest a ship or obtain a security for its release more than once in respect of the same maritime claim; the second provides the remedy if the prohibition is infringed; the third s....
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....provisions of the Companies Act, 2013. (h) If a Claimant has executed the warrant of arrest against the ship prior to the commencement of winding up proceedings, in such an event the liquidator's right to distribute the sale proceeds is subject to plaintiff's chargere: Aro Co. Ltd. W.L.R. (1980) pg. 453. (i) Once the winding up proceedings had commenced, the distribution of the sale proceeds could only be in terms of Section 529/529(a) of the Indian Companies Act, 1956. In this case, the Supreme Court has elaborately dealt with the powers of the Debt Recovery Tribunal acting under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 when the company is in liquidation and also when a State Financial Corporation proposes to sell an asset under the State Financial Corporation Act when the company is in liquidation and has held that in both the cases the distribution of the assets amongst the creditors in terms of Section 529A and Section 529 of the Companies Act. (Rajasthan State Financial Corporation and Anr. Vs. The Official Liquidator and Anr. (2005) 8 SCC 190) (j) The Judgment of Madras High Court in the case of Smith India Marine Service Vs. Shanmugam Rajase....
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....official liquidator once the winding up proceedings had commenced and no Claimant would have a preferential claim over any vessel subsequent to the commencement of winding up, unless the Claimant is a secured creditor by way of mortgage, or the Claimant has a maritime lien like salvage. Moreover, in the present case Plaintiff has not obtained leave from the Company Court to proceed against another ship which is already under the control of the official liquidator. (v) If the vessel cannot be arrested subsequent to the commencement of winding up proceedings, there is no question of impleading the sale proceeds of the vessel of a company which is in liquidation. 8 Mr. Pratap's submissions were also in the same lines as that of Mr. Ramabhadran. Hence, I am not reproducing the same. Mr. Pratap also added that the effect of winding up of the company will have no bearing because plaintiff would still not be entitled to arrest or proceed against other sister vessels or their sale proceeds having already obtained an order of arrest in respect of one of the sister vessels in respect of its claim. 9 I have considered the submissions of plaintiff, Mr. Narichania, Mr. Ramabhadran and M....
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....p which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship, and costs or expenses relating to the preservation of an abandoned ship and maintenance of its crew; (f) any agreement relating to the use or hire of the ship, whether contained in a charter party or otherwise; (g) any agreement relating to the carriage of goods or passengers on board the ship, whether contained in a charter party or otherwise; (h) loss of or damage to or in connection with goods (including luggage) carried on board the ship; (i) general average; (j) towage; (k) pilotage; (l) goods, materials, provisions, bunkers, equipment (including containers) supplied or services rendered to the ship for its operation, management, preservation or maintenance; (m) construction, reconstruction, repair, converting or equipping of the ship; (n) port, canal, dock, harbour and other waterway dues and charges; (o) wages and other sums due to the master, officers and other members of the ship's complement in respect of their employment on the ship, including costs of repatriation and social insurance contributions payable on their behalf; (p) disbursemen....
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....t is applied for, a judgment in respect of that claim can be enforced against that ship by judicial or forced sale of that ship. Article 5 Right of rearrest and multiple arrest "5(1) Where in any State a ship has already been arrested and released or security in respect of that ship has already been provided to secure a maritime claim, that ship shall not thereafter be rearrested or arrested in respect of the same maritime claim unless: (a) the nature or amount of the security in respect of that ship already provided in respect of the same claim is inadequate, on condition that the aggregate amount of security may not exceed the value of the ship; or (b) the person who has already provided the security is not, or is unlikely to be, able to fulfil some or all of that person's obligations; or (c) the ship arrested or the security previously provided was released either: (i) upon the application or with the consent of the claimant acting on reasonable grounds, or (ii) because the claimant could not by taking reasonable steps prevent the release. 5(2) Any other ship which would otherwise be subject to arrest in respect of the same maritime claim shall not be arrested ....
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.... may order arrest of any vessel in respect of a maritime claim if the person who owned vessel is liable for the claim and is the owner of the vessel when arrested. This means the particular vessel in question. Section 5(2) provides that the High Court may also order arrest of any other vessel in lieu of the vessel against which a maritime claim has been made. Thus, under this Act too, plaintiff can arrest either the particular vessel or a sister vessel. Only one vessel can be arrested and not multiple vessels. This act has been noticed by the Apex Court in Chrisomar Corporation vs. MJR Steels Pvt. Ltd. AIR 2017 SC 5530 16 Considering the position under the Brussels Convention 1952, as explained by the English Court of Appeal in the case of The Banco (Supra) and also under the position under the Admiralty Act, 2017 it is clear that it is not open to plaintiff to arrest more than one vessel in respect of its claim. plaintiff has already arrested the vessel MT PRATIBHA NEERA. Consequently, plaintiff is not entitled to arrest any of the other sister vessels. The purpose of impleadment is only to assert a claim against the sister vessels and seek a decree against the vessels and/or the....
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....effect, is seeking to do in the present case by this Chamber Summons. 20 Thus even applying provision of 1999 Geneva Arrest Convention, in the facts of the present case, plaintiff is not entitled to multiple arrest or to proceed against multiple ships. Multiple arrest is not permissible under the 1952 Convention and the new Admiralty Act, 2017. If multiple arrest is not permissible then plaintiff cannot implead other sister ships or their sale proceeds and seek a decree against them. Hence plaintiff is not entitled to implead the various sister vessels with a view to obtaining an order of arrest in respect of the said vessels or a decree against their sale proceeds. 21 To say that plaintiff is only seeking impleadment and not arrest is akin to, as submitted by Mr. Pratap, missing the wood for the trees. Impleadment of the ships is with a view to arrest and this is made quite clear as plaintiff seeks a decree against all parties it seeks to implead. It also goes without saying that if you cannot arrest multiple ships you cannot seek a decree against multiple ships or the sale proceeds of multiple ships. Plaintiff, however, says that it is seeking only impleadment at this stage and....
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....submitted by Mr. Ramabhadran and whether this would have any bearing on plaintiffs application because even assuming that there was no order of winding up, plaintiff would still not be entitled to arrest or proceed against other sister vessels and/or their sale proceeds having already obtained an order of arrest in respect of one of the sister vessels in respect of its claim. However, there is merit in the submission of Mr. V.K. Ramabhadran that leave under Section 446 of the Companies Act is necessary before impleadment can be allowed since the purpose of impleadment is to seek a decree. If a Suit cannot be commenced or proceeded with unless leave is obtained of the Company Court under Section 446 of the Companies Act, then it is equally necessary that such leave be obtained before seeking to implead sister ships or their sale proceeds in the present Suit for the purpose of obtaining a decree. The judgment of the English Court in In re Aro Co. Ltd. supports this position. Leave was necessary even though proceedings were filed before the order of winding up. 24 This of course does not preclude plaintiff from laying claim to the sale proceeds of the other vessels or other assets of....