TaxTMI 
TaxTMI 
2018 (5) TMI 1999
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....f is unable to satisfy its claim as against defendant 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....
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....hin jurisdiction. In the present case, plaintiff similarly did not array every vessel it had a cause of action against 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 t....
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.... sale proceeds of the other vessels as it has a judgment in rem only against defendant vessel. In the event of the sale proceeds of defendant vessel 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 par....
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....efore, where any Claimant seeks to arrest a 'Sister Ship' in order to secure its claim it is imperative that not only the 'Sister Ship' is made a party Defendant, but also 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 in....
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....the offending ship, but any other ship could be arrested only for the purpose of securing the Claimant's claim. (d) Article 5(1), Article 5(2) and Article 5(3) which refers 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 arr....
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....any is in liquidation there is no question of Claimant obtaining any security towards its claim. Secondly, once the ship owning company is in liquidation, the distribution of the assets could only be in consonance with the 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....
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....ary decree against sale proceeds of another vessel. (iii) The question of obtaining security by arresting the second ship do not arise in a case where the company is already in liquidation. (iv) All the properties including the ships vest with the 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 ent....
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....ally undertaken or to be undertaken; loss incurred or likely to be incurred by third parties in connection with such damage; and damage, costs, or loss of a similar nature to those identified in this subparagraph (d); (e) costs or expenses relating to the raising, removal, recovery, destruction or the rendering harmless of a ship 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) const....
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....ho is liable for the maritime claim and who was, when the claim arose: (a) owner of the ship in respect of which the maritime claim arose; or (b) demise charterer, time charterer or voyage charterer of that ship. This provision does not apply to claims in respect of ownership or possession of a ship. 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. 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 securi....
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....t is used to express an alternative as in the phrase "one or the other". It means that the Admiralty jurisdiction in rem may be invoked either against the offending ship or against any other ship in the same ownership, but not against both. This is the natural meaning of the word "or" in this context. It is the meaning which carries into effect the International Convention. It is the meaning which high authority we ought to give to it. 15 The position under the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, which came into force on 1st April, 2018, may also be noted. Section 5 of the said Act makes it clear that the High Court 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 notice....
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....rtion against other assets of the owner including the other ships of the fleet, then belonging to them. - see M.V. Elizabeth 1993 Supp(2) SCC 433 at 459 paragraph 45. Also see The Banco (Supra) at page 343 B per Lord Denning, M.R. 19 But in no case can plaintiff seek multiple arrest on the ground that the ship arrested is heavily encumbered by priority charges/claims and therefore the security is inadequate. If this was permitted a Claimant could at the outset arrest multiple ships of the same owner on the ground that each ship is mortgaged and therefore to obtain adequate security he should be permitted to arrest the entire fleet. This is what plaintiff, in 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 imp....
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.... Plaintiff relies on Order 1 Rule 3 and says he could have joined all ships as defendants to the Suit at the outset. That is true. However, plaintiff did not. Had plaintiff joined all sister ships as Defendants and arrested one of the ships as plaintiff has done by arresting M.T. PRATIBHA NEERA, the Court would have thereafter struck out the rest of the ships by exercising its power under Order 1 Rule 10(2). Thus what the Court have done then, the Court certainly has the power to do now by not allowing joinder. 23 I have not considered the effect of the order of winding up of the company and appointment of official liquidator or Smith India Marine Service (Supra) as 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 implead....