IN THE HIGH COURT OF GUJARAT AT AHMEDABAD. O.J.APPEAL NO. 52 of In ADMIRALITY SUIT NO. 34 of 2015

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1 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD O.J.APPEAL NO. 52 of 2015 In ADMIRALITY SUIT NO. 34 of 2015 With CIVIL APPLICATION (OJ) NO. 738 of 2015 In O.J.APPEAL NO. 52 of 2015 With CIVIL APPLICATION (OJ) NO. 801 of 2015 In O.J.APPEAL NO. 52 of 2015 With CIVIL APPLICATION (OJ) NO. 23 of 2016 In O.J.APPEAL NO. 52 of 2015 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI With HONOURABLE MR.JUSTICE R.M.CHHAYA and HONOURABLE MR.JUSTICE A.J. SHASTRI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment? 2 To be referred to the Reporter or not? 3 Whether their Lordships wish to see the fair copy of the judgment? Page 1 of 34 HC-NIC Page 1 of 34 Created On Sat Feb 18 20:37:33 IST 2017

2 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder? ================================================================ VITAL VENTURES LTD. THROUGH ITS CONSTITUTED ATTORNEY...Appellant(s) Versus M.V.INFINITY IMO A MOTOR VESSEL FLYING THE FLAT OF LIBERIA & 1...Opponent(s) ================================================================ Appearance: MR SN SOPARKAR, SR COUNSEL WITH MR DHAVAL M BAROT, ADVOCATE for the Appellant(s) No. 1 MR MIHIR THAKORE, SR COUNSEL WITH MS.RENU R.SINGH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE R.M.CHHAYA and HONOURABLE MR.JUSTICE A.J. SHASTRI Date : 17/02/2017 (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This reference to the larger Bench arises out of an order dated passed by the Division Bench of this Court in OJ Appeal No.52/2015 and connected proceedings. 2. Brief history to the reference is as follows. One Vital Ventures Ltd., the appellant herein, had filed Admiralty Page 2 of 34 HC-NIC Page 2 of 34 Created On Sat Feb 18 20:37:33 IST 2017

3 Suit before the High Court praying inter alia for a direction to defendant no.2 to pay to the plaintiff a sum of 33,09,000 USD with interest. The plaintiff had also prayed for arrest of the ship for satisfaction of the plaintiff's claim. The plaintiff is engaged in the business of shipping and also in purchasing ships for the purpose of recycling or breaking. Defendant no.1 is a foreign seagoing vessel flying the flag of Liberia. Defendant no.2 is a company incorporated under the laws of Turkey. According to the plaintiff, defendant no.2 had purchased the vessel from the plaintiff for an agreed sum of 75,00,000 USD. The defendant no.2 had paid only a part of such sale consideration. Under various agreements, the plaintiff handed over the possession of the ship to defendant no.2 on a promise of deferred payment of the remaining amount. 3. In the said suit the defendants raised a preliminary objection that the dispute raised by the plaintiff is purely in connection with the commercial transaction for the sale of vessel. The contract does not involve any public law character and, therefore, the claim of the plaintiff cannot be termed as a maritime claim. The suit was therefore, not maintainable. In this context heavy reliance was placed on the decision of the Division Bench of this Court in case of Croft Sales and Distribution Ltd. v. M.V. Bansil reported in 2011 GLHEL_HC Learned Single Judge by his judgment dated held that the Admiralty Suit was not maintainable. 4. The said judgment of the learned Single Judge was challenged by the plaintiff before the Division Bench, where Page 3 of 34 HC-NIC Page 3 of 34 Created On Sat Feb 18 20:37:33 IST 2017

4 also the defendants relied heavily on the decision of Croft Sales (supra). The Court was however, not in agreement with the view taken in case of Croft Sales (supra) and, therefore, by the above noted order dated referred the following two questions to the larger Bench : (i) Whether the ship can be arrested for any Maritime Claim, as defined under Article 1(1)(v) of the International Convention of Arrest of Ships (Geneva) 1999? (ii) Whether application of 1999 Convention would be subject to and it should be applied only for enforcement of a contract involving public law character? 5. We have heard learned counsel for both the sides who have referred to large number of decisions to which reference would be made at appropriate stages. 6. Learned counsel Shri S.N. Soparkar for the appellant plaintiff principally contended that the decision of this Court in case of Croft Sales (supra) does not lay down the correct position in law. The reliance of the Division Bench on a stray reference in the decision of the Supreme Court in case of Liverpool & London S.P. & I. Association Ltd. v. M.V. Sea Success I and another reported in (2004) 9 Supreme Court Cases 512, is misplaced. Neither in law nor in facts, in case of Liverpool (supra), such restricted meaning of the maritime claim was advocated. The view adopted by the High Court in case of Croft Sales (supra), would virtually destroy the admiralty jurisdiction of the High Court. This was neither the meaning nor the intention of the Supreme Court in case of Liverpool Page 4 of 34 HC-NIC Page 4 of 34 Created On Sat Feb 18 20:37:33 IST 2017

5 (supra). In fact, by the said judgment, the Supreme Court desired to expand the admiralty jurisdiction and did not in any manner intend to restrict or withal down the scope laid down by the Supreme Court in case of M.V. Elisabeth and others v. Harwan Investment and Trading Pvt. Ltd. Hanoekar House Swatontapeth, Vasco De Gama, Goa reported in 1993 Supp(2) Supreme Court Cases 433. Counsel submitted that what is binding in a judgment is its ratio and no sentence, remark or discussion can be picked out of context and be seen as the ratio of the judgment. Counsel pointed out that other High Courts have not seen the judgment of the Supreme Court in case of Liverpool (supra) in similar light as is done by this Court in case of Croft Sales (supra) and the Courts have noted their disagreement with the view of this Court. 7. On the other hand learned counsel Shir Mihir Thakore contended that the ratio in the decision in case of Croft Sales (supra) flows from the judgment of Supreme Court in case of Liverpool (supra) and thus lays down the correct position in law. Even an obiter remark of the Supreme Court is binding to the High Court. The observations made in the judgment of Liverpool (supra), therefore, cannot be ignored. 8. Admiralty jurisdiction in the country in addition to the statutory provisions is largely developed and governed by judge made law and various international conventions. As is well known, the leading judgment on the point was rendered by the Supreme Court in case of M.V. Elisabeth (supra). In the said case, vessel Elisabeth was a vessel of Page 5 of 34 HC-NIC Page 5 of 34 Created On Sat Feb 18 20:37:33 IST 2017

6 foreign nationality and was owned by foreign company carrying on business in Greece. The plaintiff was a private limited company having its registered office in Goa. According to the plaintiff, the defendants had acted in breach of duty by leaving the port of Marmagao on February 8, 1984 and delivering the goods to the consignee in breach of plaintiff's directions to the contrary. The suit was therefore, instituted in Andhra Pradesh High Court invoking its admiralty jurisdiction by means of action in rem. The vessel was arrested when it entered the port of Vishakapatnam. The owner of vessel after entering appearance provided security by furnishing bank guarantee for a sum of Rs lacs, upon which, the vessel was released from detention. The defendants moved an application before the High Court raising a preliminary objection to the jurisdiction of the Court. It was contended that the suit against foreign ship owned by a foreign company not having a place of residence or business in India, was not maintainable under the admiralty jurisdiction. This issue ultimately reached the Supreme Court when the learned Single Judge in the Division Bench overruled such preliminary objection. 9. The Supreme Court in the landmark judgment in case of M.V. Elisabeth (supra), observed that in tracing the history of admiralty law in India, it is incorrect to confine it to statutes. It was further observed that : 69. In equating the admiralty jurisdiction of the Indian High Court to that of the English High Court, the Colonial Court of Admiralty Act, 1890 significantly refers to the admiralty jurisdiction of the High Court in England Page 6 of 34 HC-NIC Page 6 of 34 Created On Sat Feb 18 20:37:33 IST 2017

7 `whether existing by virtue of any statute or otherwise'. This is an enabling statute, and not a statute of limitation of power. It aids, and does not fetter, the growth of jurisdiction. There is no reason why the words `statute or otherwise' should be so construed as to exclude the various sources from which the admiralty jurisdiction in England developed. Apart from statutes, the powers of that Court, as seen above, were derived from custom and practice and the principles developed by common law and equity as well as by the generally recognised principles of civil law developed and practised in Europe. There is no reason, as rightly stated by Westropp. C.J. of the Bombay High Court in Bardot [(1976) 1 All ER 920], why the expression `statute or otherwise' should be so construed as to exclude all these vast areas of legal principles which enriched and strengthened the maritime laws of England. Likewise, there is no reason why those principles should also not be drawn upon to enrich and strengthen the jurisprudence of this country, even if the jurisdiction of our courts were to be, by compulsions of history, considered to be curtailed and dovetailed to the colonial past a proposition which is neither correct nor consistent with our status as a sovereign republic. It is time to take a fresh look at the old precedents. 10. It was held that some international conventions and in particular, Arrest of Seagoing Ships, Brussels, 1952 (here in after referred to as Brussels Convention ) even though was not ratified in India, can be applied for enforcement of maritime claims against foreign ships. It was observed 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 Page 7 of 34 HC-NIC Page 7 of 34 Created On Sat Feb 18 20:37:33 IST 2017

8 Carriage of Goods by Sea Act, 1925, India never became a party to the International Convention laying down those rules (Internationl 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, The United Kingdom repealed the Carriage of Goods by Sea Act,, 1924 with a view to incorporating the Visby Rules adopted by the Brussels Protocol of The Hague Visby Rules were accordingly adopted by the Carriage of Goods by Sea Act, 1971 (United Kingdom). Indian legislation has not, however, progressed, notwithstanding the Brussels Protocol of 1968 adopting the Visby Rules or the United Nations Convention on the Carriage of Goods by Sea, 1978 adopting the Hamburg Rules. The Hamburg Rules prescribe the minimum liabilities of the carrier far more justly and equitably than the Hague Rules so as to correct the tilt in the latter in favour of the carriers. The Hamburg Rules are acclaimed to be a great improvement on the Hague Rules and far more beneficial from the point of view of the cargo owners. India has also not adopted the International Convention relating to the Arrest of Sea going Ships, Brussels, Nor has India adopted the Brussels Conventions of 1952 on civil and penal jurisdiction in matters of collision; nor the Brussels Conventions of 1926 and 1967 relating to maritime liens and mortgages. India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various conventions intended to facilitate international trade. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships. 11. It was observed that in absence of any statute in Page 8 of 34 HC-NIC Page 8 of 34 Created On Sat Feb 18 20:37:33 IST 2017

9 India comparable to the English statutes on admiralty jurisdiction, there is no reason why the words damage caused by a ship appearing in section 443 of the Merchant Shipping Act, 1958, should be so narrowly construed as to limit them to physical damage and exclude any other damage arising by reason of the operation of the vessel in connection with the carriage of goods. The expression is wide enough to include all maritime questions or claims. It was further observed as under : 84. No Indian statute defines a maritime claim. The Supreme Court Act, 1981 of England has catalogued claims with reference to the unified rules adopted by the Brussels Convention of 1952 on the Arrest of Seagoing Ships. Although India has not adopted the various Brussels Conventions, the provisions of these Conventions are the result of international unification and development of the maritime laws of the world, and can, therefore, be regarded as the international common law or transnational law rooted in and evolved out of the general principles of national laws, which, in the absence of specific statutory provisions, can be adopted and adapted by courts to supplement and complement national statutes on the subject. In the absence of a general maritime code, these principles aid the courts in filling up the lacunae in the Merchant Shipping Act and other enactments concerning shipping. "Procedure is but a handmaiden of justice and the cause of justice can never be allowed to be thwarted by any procedural technicalities." S.P. Gupta v. Union of India (1981 Supp SCC 87). 88. Admiralty jurisdiction is an essential aspect of judicial sovereignty which under the Constitution and the laws is exercised by the High Court as a superior court of record administering justice in relation to persons and things Page 9 of 34 HC-NIC Page 9 of 34 Created On Sat Feb 18 20:37:33 IST 2017

10 within its jurisdiction. Power to enforce claims against foreign ships is an essential attribute of admiralty jurisdiction and it is assumed over such ships while they are within the jurisdiction of the High Court by arresting and detaining them. 89. All persons and things within the waters of a State fall within its jurisdiction unless specifically curtailed or regulated by rules of international law. The power to arrest a foreign vessel, while in the waters of a coastal State, in respect of a respect of a maritime claim, wherever arising, is a demonstrable manifestation and an essential attribute of territorial sovereignty. This power is recognised by several international conventions. These conventions contain the unified rules of law drawn from different legal systems. Although many of these conventions have yet to be ratified by India, they embody principles of law recognised by the generality of maritime States, and can therefore be regarded as part of our common law It can thus be seen that the Supreme Court in case of M.V. Elisabeth (supra) specifically made the Brussels Convention applicable for arrest of ship in exercise of admiralty jurisdiction by the High Court even though the said convention was not ratified by India. 13. We may now refer to the decision of the Supreme Court in case of Liverpool (supra). Since this decision refers to the International Convention of Arrest of Ship, 1999 (here in after referred to as the Convention of 1999 ) and since both the sides have made detailed submissions Page 10 of 34 HC-NIC Page 10 of 34 Created On Sat Feb 18 20:37:33 IST 2017

11 on the contents of this convention, we may first take note of the relevant provisions of this convention. Article 1 of the Convention is the definition clause. Clause (1) thereof defines 'Maritime Claim as under : "Maritime Claim" means a claim arising out of one or more of the following: (a) loss or damage caused by the operation of the ship; (b) loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the ship; (c) salvage operations or any salvage agreement, including, if applicable, special compensation relating to salvage operations in respect of a ship which by itself or its cargo threatened damage to the environment; (d) damage or threat of damage caused by the ship to the environment, coastline or related interests; measures taken to prevent, minimize, or remove such damage; compensation for such damage; costs of reasonable measures of reinstatement of the environment actually 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; Page 11 of 34 HC-NIC Page 11 of 34 Created On Sat Feb 18 20:37:33 IST 2017

12 (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) disbursements incurred on behalf of the ship or its owners; (q) insurance premiums (including mutual insurance calls) in respect of the ship, payable by or on behalf of the shipowner or demise charterer; (r) any commissions, brokerages or agency fees payable in respect of the ship by or on behalf of the shipowner or demise charterer; (s) any dispute as to ownership or possession of the ship; (t) any dispute between co owners of the ship as to the employment or earnings of the ship; (u) a mortgage or a "hypothèque" or a charge of the same nature on the ship; Page 12 of 34 HC-NIC Page 12 of 34 Created On Sat Feb 18 20:37:33 IST 2017

13 (v) any dispute arising out of a contract for the sale of the ship. Clause (2) of Article 1 defines the term Arrest and reads as under : 2. "Arrest" means any detention or restriction on removal of a ship by order of a Court to secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction of a judgment or other enforceable instrument. under : Article 2 pertains to powers of arrest and reads as ARTICLE 2 Powers of arrest 1. A ship may be arrested or released from arrest only under the authority of a Court of the State Party in which the arrest is effected. 2. A ship may only be arrested in respect of a maritime claim but in respect of no other claim. 3. A ship may be arrested for the purpose of obtaining security notwithstanding that, by virtue of a jurisdiction clause or arbitration clause in any relevant contract, or otherwise, the maritime claim in respect of which the arrest is effected is to be adjudicated in a State other than the State where the arrest is effected, or is to be arbitrated, or is to be adjudicated subject to the law of another State. 4. Subject to the provisions of this Convention, the procedure relating to the arrest of a ship or its release shall be governed by the law of the State in which the arrest was effected or applied for. Page 13 of 34 HC-NIC Page 13 of 34 Created On Sat Feb 18 20:37:33 IST 2017

14 14. In case of Liverpool (supra), brief facts were that the appellant before the Supreme Court was an association of shipowners incorporated under the laws of United Kingdom, which provided insurance cover in respect of vessels entered with it for various third party risks associated with operation and trading of vessels. According to the appellant, no vessel could operate without protection and indemnity (P&I cover) which had been made compulsory to allow a ship to enter major ports in India. Respondent no.1 was a vessel owned by respondent no.2. The respondents had entered into a contract with the association but had not paid the insurance premium for which they were covered. According to the appellant, such unpaid insurance payment being necessaries were enforceable within the admiralty jurisdiction of the Bombay High Court. The suit was therefore, filed before the Bombay High Court for recovery of unpaid dues and for arrest of the vessel to secure such claim. The second respondent appeared and raised a preliminary contention of maintainability of the suit by filing application under Order 7 Rule 11 of the Code of Civil Procedure on the ground that the suit did not disclose the cause of action, as claim of unpaid insurance claim was not a necessary within the meaning of section 5 of the Admiralty Court Act, This issue ultimately reached the Supreme Court where Page 14 of 34 HC-NIC Page 14 of 34 Created On Sat Feb 18 20:37:33 IST 2017

15 one of the questions considered by the Supreme Court was whether arrears of insurance premium due and payable to the appellant by the second respondent would fall within the scope and ambit of Section 5 of the Admiralty Court Act, On behalf of the appellant original defendant, it was contended that the amount of arrears of insurance premium was not a maritime claim since such unpaid insurance money did not constitute necessaries within the meaning of section 5 of the Admiralty Court Act, On the other hand, on behalf of the plaintiff association, it was contended that necessaries are things which a prudent owner would provide to enable the ship to perform the functions for which she has been engaged and thus the provision of services would come within the definition of necessaries. Reliance was placed on Arrest Convention of 1999 and contended that By reason of the 1999 Arrest Convention inter alia unpaid insurance calls had been added and in absence of any codification and maritime claim by a statute in India the same should be taken into consideration for determination of the jurisdiction of the High Court. Several countries such as Canada, South Africa, Australia, China and Korea have given the claim for unpaid insurance premium in respect of a ship, the status Page 15 of 34 HC-NIC Page 15 of 34 Created On Sat Feb 18 20:37:33 IST 2017

16 of a maritime claim. 16. In the background of such controversy, the Supreme Court referred to section 5 of the Admiralty Court Act, 1861, which read as under : 5. AS TO CLAIMS FOR NECESSARIES: The High Court of Admiralty shall have jurisdiction over any claim for necessaries supplied to any ship elsewhere 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: Provided always, that if in any such cause the plaintiff do not recover twenty pounds, he shall not be entitled to. 17. The Supreme Court also referred to various provisions contained in Brussels Convention and traced the history of admiralty jurisdiction in the country. It was noticed that the term necessaries has not been defined in the Act of 1861, and, therefore, has been given the meaning by judicial pronouncements. Referring to various foreign Courts judgments, it was observed as under : 32. The question, however, is as to whether having regard to the changed situation unpaid insurance premium should be held to be a commercial necessity. With a view to answer the question it is necessary to consider as to whether a failure to insure the security is a matter which Page 16 of 34 HC-NIC Page 16 of 34 Created On Sat Feb 18 20:37:33 IST 2017

17 would have a bearing upon the security of the ship. 18. In this context, the Supreme Court stressed on the requirement of insurance cover particularly, for such activity as shipping. It was observed that necessity of a P&I cover is in commercial expediency. The P&I clubs are nonprofit making companies. The owner of the ship becoming the member of the P&I club undertakes to pay contribution towards the losses incurred by other members of the club which are payable by the company. Thus a new concept has been developed under which a reciprocal system has been evolved to the effect that each member is cast under a duty to refund the damage suffered by any one of them and pay on mutual basis each other's claim. A member thus plays a dual role of beneficiary and benefactor. It was observed that no ship having regard to the ramification in international law can sail without such insurance. Certain conventions also make insurance compulsory. It was also noticed that P&I insurance cover to call at major ports in India was a statutory requirement. 19. With this background, the Supreme Court took note of the International Convention of 1999 observing that in the said convention, significant changes to the law relating to in rem claims and arrest have been made. It was Page 17 of 34 HC-NIC Page 17 of 34 Created On Sat Feb 18 20:37:33 IST 2017

18 observed that : 47. What was expressly excluded in 1952 convention has been included in 1999 convention. The restrictions imposed under 1952 convention as regard 'Maritime claim' to operation of ship and maintenance thereof have been removed. 20. In paragraph 60 of the judgment, which is the focal point of entire controversy, it is observed as under : 60. Application of the 1999 convention in the process of interpretive changes, however, would be subject to : (1) domestic law which may be enacted by the Parliament; and (2) it should be applied only for enforcement of a contract involving public law character. 21. In paragraph 65, it was observed that : 65...With the change of time; from narrow and pedantic approach, the Court may resort to broad and liberal interpretation. What was not considered to be a necessity a century back, may be held to be so now. 22. The Court referred to various circulars issued by major ports in India by which such insurance was made compulsory for any ship to be granted anchorage at such ports. In this context, the Supreme Court concluded as under : 104. Some countries like Canada, Australia and South Page 18 of 34 HC-NIC Page 18 of 34 Created On Sat Feb 18 20:37:33 IST 2017

19 Africa as well as communist regimes like China and Korea have made statutes as a result whereof the maritime claims stand codified. The expression 'necessaries' is not used in the said statutes except the statutes of United States. The domestic legislation indisputably will prevail over any international convention irrespective of the fact as to whether the country concerned is a party thereto or not The rules for ship arrest in international fora are not uniform. Despite International Convention on the Arrest of Sea going Ships 1952 as amended in the year 1999 either having been adopted by some countries or adopted by others, the law is enforced by the concerned countries having regard to their own domestic legal system. Where, how and when can a maritime claimant most advisedly arrest a ship in pursuit of its claim either in rem or in personem had all along been a complicated question keeping in view the principles of 'lex fori' As a matter of policy legislation or otherwise England did not want that arrears of insurance premium should be included as a maritime claim, but the same would not imply that in other countries despite the unpaid insurance premium being maritime claim, the same would not be enforced. SUMMARY OF THE DISCUSSIONS: 107. The discussions made hereinbefore lead to the conclusion that having regard to the changing scenario and keeping in tune with the changes in both domestic and international law as also the statutes adopted by several countries, a stand, however, bold, may have to be taken that unpaid insurance premium of P&I Club would come within the purview of the expression "Necessaries supplied to any ship". Other types of insurance, keeping in view the existing statutes may not amount to a "necessary". In any event, such a question, we are not called upon to answer at present. The discussions made hereinbefore under different sub titles of this judgment separately and distinctly may not lead us to the said conclusion but the cumulative effect Page 19 of 34 HC-NIC Page 19 of 34 Created On Sat Feb 18 20:37:33 IST 2017

20 of the findings thereunder makes the conclusion inevitable. The question has not only been considered from the angle of history of the judicial decisions rendered by different Courts having great persuasive value but also from the angle that with the change in time interpretative changes are required to be made. We, therefore, in agreement with the judgment of the Bombay High Court, hold that unpaid insurance premium being a maritime claim would be enforceable in India. 23. The observations made by the Supreme Court in paragraph 60 in (2004) 9 SCC 512 in case of Liverpool (supra), first came up for consideration before the Learned Single Judge of this Court in case of Croft Sales and Distribution Ltd.v. M.V. Basil reported in 2011(2) GLR Learned Single Judge upheld the contention of the defendants that the plaintiff did not raise a maritime claim and that therefore, the admiralty suit was not maintainable. It was this decision of the Learned Single Judge which was carried in appeal by the plaintiff before the Division Bench. Brief facts of the case were that the defendant no.1 vessel was a foreign vessel. According to the plaintiff, such vessel was owned, managed and controlled by defendant no.2 who was her beneficial owner. Defendant no.2 was a foreign company. According to the plaintiff, the plaintiff had entered into memorandum of understanding for purchase of the vessel. Substantial amounts in terms of such MOU were paid over. Later on, Page 20 of 34 HC-NIC Page 20 of 34 Created On Sat Feb 18 20:37:33 IST 2017

21 multiple disputes between the parties arose for which the plaintiff issued a notice for arbitration. However, the concerned defendant did not cooperate with the arbitration, nor give a guarantee that if the plaintiff succeeds in the arbitration, the award would be satisfied. The plaintiff therefore, filed the admiralty suit for securing the dues. Prayer was also made for arrest of the vessel. This suit was dismissed by the learned Single Judge holding that no maritime claim had arisen. In appeal against such judgment, following questions considered by the Division Bench are of our interest : (a) The applicability of International Convention of Arrest of Ship (Geneva 1999) (hereinafter referred to as 'Geneva Convention/1999 Convention) and if yes, the limits of the jurisdiction of this Court. (b) Whether the available ship can be arrested even if the Geneva Convention is to apply. (d) If there is no right in rem qua available ship, whether suit can be maintained for invoking admiralty jurisdiction. 24. The Court referring to the decision of the Supreme Court in case of Liverpool (supra) held and observed as under : 15. In view of the aforesaid, even if the Convention of 1999 is to apply, but for the fact that the contract is not involving any public law character, the said condition as read by the Apex Court in the above referred decision of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra) is not satisfied. Page 21 of 34 HC-NIC Page 21 of 34 Created On Sat Feb 18 20:37:33 IST 2017

22 Further, the limitation as provided by the CPC for the order of arrest, which is akin to the power to be exercised by the Civil Court for arrest of the ship is not satisfied. As per the above referred decision of the Apex Court, if both the conditions are not satisfied 1999 Convention cannot be applied, nor the admiralty jurisdiction can be invoked based on the Convention of Apart from the above, as observed earlier, the Apex Court read at paragraph 60, the limitation for applicability of Convention of 1999, if one of it is not satisfied, 1999 Convention cannot be applied. Even if it is considered for the sake of examination that one may invoke the admiralty jurisdiction for securing the arbitration as observed by the Full Bench of Bombay High Court in the case of O.J. Ocean Liner LLC v. M.V. Golden Progress & Anr. (supra), then also the requirement of contract involving public law character as per our Constitution and law prevailing in our country is not satisfied. 18. In view of the aforesaid, we find that as per the aforesaid decision of the Apex Court in the case of Liverpool and London S.P. & I Association Limited v. M.V. Sea Success I and Another (supra), as the conditions are not satisfied, no relief can be granted to the plaintiff based on 1999 Convention. 25. From the above discussion, it can be seen that the Division Bench in case of Croft Sales (supra) understood and applied the observations of the Supreme Court in paragraph 60 of Liverpool (supra) as to put a limitation on applicability of Convention of In other words, the Court was of the opinion that unless and until the contract Page 22 of 34 HC-NIC Page 22 of 34 Created On Sat Feb 18 20:37:33 IST 2017

23 was one involving public law character, admiralty jurisdiction for arrest of the ship could not be exercised based on the Convention of In our view, this would be too restricted and too literal reading of the judgment of the Supreme Court in case of Liverpool (supra). We have noted at some length the controversy and discussion in the judgment in case of M.V. Elisabeth (supra) under which the Supreme Court substantially expanded the admiralty jurisdiction of the Courts in India by applying international convention though the same had not been ratified by India. It was observed that admiralty jurisdiction is an essential aspect of judicial sovereignty which under the Constitution and the laws is exercised by the High Court as a superior Court of record administering justice in relation to persons and things within its jurisdiction. Power to enforce claims against foreign ships is an essential attribute of admiralty jurisdiction and it is assumed over such ships while they are within the jurisdiction of the High Court by arresting and detaining them. 27. The Supreme Court in case of Liverpool (supra) was not oblivious to the decision in case of M.V. Elisabeth Page 23 of 34 HC-NIC Page 23 of 34 Created On Sat Feb 18 20:37:33 IST 2017

24 (supra). In fact, detail reference was made to the said decision. The Supreme Court in case of Liverpool (supra) was thus acutely conscious of the judgment in case of M.V. Elisabeth (supra) and in fact, relied upon the said judgment for expanding the width of admiralty jurisdiction with changing times. In the context of the question whether unpaid insurance was a necessary or not, it was observed that with change of time, from narrow and pedantic approach, the Court has to resort to broad and liberal interpretation. The proposition laid down by the Supreme Court in case of M.V. Elisabeth (supra) that international conventions, in maritime claims can be applied for exercising admiralty jurisdiction for arrest of vehicle, was adopted in case of Liverpool (supra). The Supreme Court noticed the growing importance and requirement of insurance cover for anchoring the ship at major ports in India, applied 1999 International Convention and held that unpaid insurance premium would be a necessary. 28. The entire judgment of the Supreme Court in case of Liverpool (supra) was thus based on the question whether unpaid insurance premium would be considered as a necessary. This claim itself did not have any public law character. The controversy at hand, the discussion in the Page 24 of 34 HC-NIC Page 24 of 34 Created On Sat Feb 18 20:37:33 IST 2017

25 judgment and the ultimate conclusion in the judgment nowhere suggest that there was any intention of the Supreme Court to restrict the application of 1999 Convention to only those cases which involve enforcement of a contract involving public law character. The entire flow of the judgment, the trend, the legal discussion and the ultimate conclusion, cannot be upset by reading one stray observation in paragraph 60 as to hold that the ratio of the judgment is that 1999 Convention would be applied only in cases for enforcement of contract involving public law character. The Division Bench in our opinion in case of Croft Sales (supra) committed an error in basing these observations to the level of limitation imposed by the Supreme Court for application of 1999 Convention. We may recall, in paragraph 60, the Supreme Court made observations to the effect that application of the said Convention would be subject to domestic law which may be enacted by the parliament and it should be applied only for enforcement of a contract involving public law character. First of these two references, do not pose any challenge. Any applicability of international convention particularly which has not been ratified by India would always be subject to the law which may be enacted by the parliament. In the later observation, however, if the entire judgment is read as a whole, the Supreme Court never Page 25 of 34 HC-NIC Page 25 of 34 Created On Sat Feb 18 20:37:33 IST 2017

26 meant to put a fetter or restriction on the application of 1999 Convention only to the cases for enforcement of contract involving public law character. 29. There are multiple reasons for coming to such a conclusion. As elaborated here in above, the said observation cannot be seen as a ratio of the judgement or even an obiter dicta. Entire discussion and flow of the judgment would suggest that the Supreme Court was expanding the concept of necessary in context of changing times and modern conventions. On one hand, the Supreme Court noticed the growing importance and almost compulsory nature of insurance premium for a ship to anchor at any major port in India. On the other hand, the Supreme Court relied heavily on 1999 International Convention where the definition of term maritime claim included claim of insurance premium. An uninsured vessel anchored at a port in India would pose a serious hazard to the third party since in case of any loss or any damage to the life or property, his claims would be unsecured. While therefore, expanding the concept of necessary in public interest and applying 1999 International Convention in the process, the above observations were made. 30. Accepting the view of the Division Bench in case of Page 26 of 34 HC-NIC Page 26 of 34 Created On Sat Feb 18 20:37:33 IST 2017

27 Croft Sales (supra), would lead to number of anomalies. Firstly, the judgment of Supreme Court in case of Liverpool (supra) itself, would be incongruent to the said observation since in the said case, the Supreme Court had upheld the admiralty jurisdiction of the High Court by applying 1999 International Convention in a case which did not concern a contract involving any public law character. Further, any such limitation or restriction on applicability of International Convention of 1999, would make the entire exercise negatory. We have reproduced clause (1) of Article 1 of the Convention which defines the term maritime claim. Virtually all the sub clauses of this clause do no involve public law character and are primarily in the nature of private contractual disputes such as loss or damage caused in operation of ship, loss of life or personal injury in connection with the operation of the ship and any dispute as to ownership or possession of the ship and so on. Clause (2) of Article 2 noted above provides that a ship may only be arrested in respect of a maritime claim but in respect of no other claim. Thus if the view of the High Court in case of Croft Sales (supra), were to be accepted, 1999 International Convention in the context of admiralty jurisdiction would become virtually inapplicable. Thirdly, the Supreme Court in case of Liverpool (supra), nowhere intended to reverse the trend set in case of M.V. Page 27 of 34 HC-NIC Page 27 of 34 Created On Sat Feb 18 20:37:33 IST 2017

28 Elisabeth (supra). In fact, it was in furtherance of this trend that the Supreme Court applied the 1999 International Convention. In case of M.V. Elisabeth (supra), the Supreme Court had put no fetters on applicability of various International Conventions and in particular, the Brussels Convention of 1952 for arrest of vehicles that the jurisdiction can be exercised only for enforcement of contract involving public law character. 31. Various Courts which were confronted with the said observations of the Supreme Court in case of Liverpool (supra), and judgment of this Court in case of Croft Sales (supra) have also taken a similar view. In case of Great Pacific Navigation (Holdings) Corporation Limited v. M.V. Tongli Yantai reported in 2011 SCC Online Bom 883, Learned Single Judge of Bombay High Court in this context held as under : 20. Mr. Narichania's submission was based essentially on a solitary statement in a judgment of the Supreme Court in Liverpool & London SP &I Assn. Ltd. v. M.V. Sea Success I, (2004) 9 SCC 512. Here again, it is important to note that the Government of India was not even a party to the litigation. It was not even contended that the 1999 Convention would apply only to contracts where the interests of the Government are involved. The parties before the Supreme Court were private parties. The admiralty jurisdiction in India was being considered. The Supreme Court referred to the judgment in m.v. Elisabeth Page 28 of 34 HC-NIC Page 28 of 34 Created On Sat Feb 18 20:37:33 IST 2017

29 (supra). The judgment deals at great length about the admiralty jurisdiction and the need to invoke principles of other jurisdictions. Mr. Narichania, however, relied only upon half a sentence in paragraph 60 of the judgment which reads as under : "60. Application of the 1999 Convention in the process of interpretive changes, however, would be subject to: (1) domestic law which may be enacted by Parliament; and (2) it should be applied only for enforcement of a con tract involving public law character." 21. The words "it should be applied only for enforcement of a contract involving public law character", certainly do not restrict the applicability of the 1999 Convention only to contracts where the interests of the Government are involved. If it were so, the entire judgment as well as the judgment in m.v. Elisabeth would be completely diluted if not rendered redundant. Even in this case, the Government was not a party to the litigation. The contention had not even been raised before the Supreme Court. The words "public law"are not to be understood as they are in administrative law. Neither of the judgments even remotely indicate the same. They dealt with cases of purely private commercial transactions. The words obviously refer only to the restricted cases which do not involve maritime claims and hence do not permit the invocation of the admiralty jurisdiction. Instances of such cases are those which affect only the internal order and economy of the ship which are generally left to the authority of the flag State. 24. Mr. Narichania, however, relied upon the judgment of a Division Bench of the Gujarat High Court in the case of Croft Sales & Distribution Limited v. M.V. Basil dated 17th February, 2011 in OJ Appeal No.6 of 2011 in Admiralty Page 29 of 34 HC-NIC Page 29 of 34 Created On Sat Feb 18 20:37:33 IST 2017

30 Suit No.10 of After referring to the judgement of the Supreme Court in Liverpool & London vs. M.V.Sea Success I (supra), the Division Bench held that the transaction there was purely a commercial one for the sale of the ship, not connected with our nation and there was no involvement of the State or any instrumentality of the State and that it, therefore, did not involve any public law character in any manner whatsoever. The Division Bench held that a contract may attract public law character if the State or instrumentality of the State is directly or indirectly connected therewith in enforcement of the contract or implementation thereof. The Division Bench further held that by virtue of such a contract if any question arises regarding the sovereignty of the Nation, environment, pollution, disputes of sea water etc., where public interest is involved, it could be said to be a contract that attracts public law character. The Division Bench, therefore, declined to grant any reliefs based on the 1999 Convention. 25. I am, with respect, unable to agree with the judgment of the Hon'ble Gujarat High Court. As stated above, in both the judgments of the Supreme Court, neither the State nor any instrumentality of the State was involved. The contracts were of a purely private nature. In m.v. Elisabeth (supra), the plaintiff i.e. the respondent was a private limited company. Defendant No.1 was a foreign vessel which was owned by defendant No.2, which was a foreign company. The dispute also involved only a breach of duty by leaving the Port and delivering the goods to the consignee in breach of the plaintiff's directions to the contrary, thereby committing the tort of conversion of the goods. 32. This conclusion of learned Single Judge in case of Great Pacific Navigation (supra) was approved by the Page 30 of 34 HC-NIC Page 30 of 34 Created On Sat Feb 18 20:37:33 IST 2017

31 Division Bench in case of Great Pacific Navigation (Holdings) Corporation Limited v. M.V. Tongli Yantai by judgment dated in Appeal No.559/2011 and connected matter making the following observations : The learned Judge has considered the case of M.V. Elizabeth vs. Harwan Investment and Trading Pvt. Ltd. as also J.S. Ocean Liner LLC Vs. M.V. Golden Progress & Anr. to which the learned Judge was also a party and disagreed with the Division Bench judgment of Gujarat High Court in the case of Croft Sales and Distribution Ltd. Vs. M V Basil dated 17 February 2011 in OJ Appeal No.6 of 2011 in Admiralty Suit No.10 of 2010, which were actions in rem upon which the learned Judge has rightly negatived the Defendant's contention that the 1999 Convention applies in the case only where the government interest is involved and with which this Court is in full agreement. 33. We must however record that the said judgment of the Division Bench of Bombay High Court was challenged by the opponents in the Supreme Court in Civil Appeal No.8988/2012 and connected appeals, wherein following order was passed : Leave granted. We have heard counsel on either side. Considering the fact that the Notice of Motion (L) No.2337/2012, Chamber Summons (L) No.1133/2012 and Counter Claim No.19/2012 are pending before the Bombay High Court, we are inclined to set aside the orders of the Page 31 of 34 HC-NIC Page 31 of 34 Created On Sat Feb 18 20:37:33 IST 2017

32 learned Single Judge as well as the Division Bench since they are passed at the interlocutory stage. Further, we are also informed that the vessel has already sailed because of the settlement entered into by the respondent with YDM Shipping Company Limited, DA Sin Shipping Pte Ltd., Great Pacific Navigation (Holdings) Corp. Ltd., and Tongli Shipping Co. Ltd., Samoa The High Court will dispose of the pending matters in accordance with law taking note of the fact that we have set aside the orders passed by the learned Single Judge and the Division Bench of the High Court. The appeals are, accordingly, disposed of. 34. It can thus be seen that learned Single Judge in the Division Bench of Bombay High Court had cited detailed reasons for not adopting the restrictive view of the judgment in case of Liverpool (supra). However, these judgments for other reasons came to be set aside by the Supreme Court. The fact remains that these judgments have been rendered ineffective. 35. In case of M.V. Nordlake v. Union of India reported in 2012 SCC Online Bom 361, the Division Bench of Bombay High Court once again came across such a situation and observed as under : 53. We must also deal with the submission made on behalf of the respondent plaintiff that in M.V.1 Sea Success case, the 1999 Convention would be subject to the domestic law which may be enacted by Parliament and that the Convention should be applied only for an enforcement Page 32 of 34 HC-NIC Page 32 of 34 Created On Sat Feb 18 20:37:33 IST 2017

33 of the contract involving public law character. The observations in the said decision would apply where the International Convention provides for a law which was not hitherto the principle in International Common Law. But where the International Convention merely adopts the preexisting International Common Law (as enunciated in Halsbury's Law of England and various commentaries on admiralty jurisdiction as referred to in this judgment), the caveat sounded in para 60 of the judgment in M.V.1 Sea Success case would not apply. 36. Before the learned Single Judge of the Madras High Court in case of MT Titan Vision v. KTV Health Food Pvt. Ltd reported in 2014 SCC Online Mad 12328, the judgment of Division Bench of this Court in case of Croft Sales (supra) was cited. Learned Judge however, followed the judicial trend adopted by Bombay High Court. 37. In the result, we answer the reference as under : The admiralty jurisdiction of the High Court can be exercised for arrest of a ship for any maritime claim defined under clause (1) of Article 1 of the International Convention of Arrest of Ships (Geneva) 1999 and the ship can be arrested for any maritime claim as defined under the said Convention and further that there is no restriction or limitation on application of the Convention that the same would be subject to and could be applied only for enforcement of a contract involving public law Page 33 of 34 HC-NIC Page 33 of 34 Created On Sat Feb 18 20:37:33 IST 2017