AI Structured Summary
Not yet generated for this judgment
Judgment
M. Chockalingam, J.—This appeal is directed against the judgment of the learned Single Judge dismissing a suit in C.S. No. 1344 of 1995.
2.The case of the appellant/plaintiff is as follows:
(a) They are manufacturers of steel billets and allied products. They are regularly importing steel melting scrap as raw material. They placed a
purchase order for the purchase of a consignment of 2369.40 metric tonnes of steel melting scrap on M/s. Cheval International Limited, London,
through their Indian Agents M/s. V.B. Mercantile Pvt. Limited, Calcutta, on 1.3.1995. The cargo was to be loaded at the Port of Sudan. The
delivery was to be effected within 45 days of the receipt of the workable letter of credit. An invoice was raised on the plaintiff on 23.7.1995 for a
sum of US$ 418749.72 equivalent to Rs. 1,34,00,000/-. The shipper had entrusted the cargo at the Port of Sudan, and evidencing such
entrustment, the defendant issued a bill of lading dated 20.7.1995, to the plaintiff which clearly stated that the cargo was to be carried on liner
terms and the freight was prepaid. It seems that the sellers had entered into a charterparty with the defendant agreeing to certain terms for which
the plaintiff was not a party. The vessel after loading the cargo, sailed from the Port of Sudan and arrived at the Port of Madras on or about
27.8.1995. The plaintiff had appointed M/s. South India Corporation (Agencies) Ltd., Madras, as their clearing agents for the clearance of the
cargo. They sent the original bill of lading to the local steamer agents of the defendant on 31.8.1995, calling upon them to issue a delivery order.
But, they have not yet issued the delivery order and have also not made endorsements to berth the vessel. On 2.9.1995, the plaintiff called upon
the local steamer agents of the defendant to issue delivery order failing which they threatened to take legal action. The steamer agents have sent a
letter on 4.9.1995, enclosing a message sent to the charterers that unless the dues under the charterparty terms are settled, the cargo could not be
released. On further enquiry, the plaintiff came to know that the charterers owe an alleged demurrage liability at the load port to the extent of US$
72500/-. Under the contract of carriage, there was no liability on the plaintiff to pay any demurrage charges to the defendant or to the sellers of the
cargo, and they are entitled to have delivery of cargo without any conditions.
(b) On 2.9.1995, the plaintiff put on notice calling upon the defendant''s steamer agents to arrange for berthing of the vessel and discharge the
cargo; but, the defendant failed and neglected to arrange the berthing of the vessel and discharge the cargo. Thus, there is a breach of contract, and
it amounts to conversion. In terms of the purchase order, the letter of credit opened by them, has been encashed by the sellers and thus, the title to
the goods has passed on to the plaintiff to claim the cargo as their own. They apprehend that the vessel will sail away without discharging the
cargo. As per the contract of carriage, the defendant has to discharge the cargo, and they have no lien on the cargo for any default committed by
the charterers. The defendant has no defence to the suit as the plaintiff has a right in rem and a maritime lien on the vessel for the cargo. The vessel
is now lying in the Port of Madras within the Admiralty jurisdiction of this Court. If an order of arrest is not granted, the defendant''s vessel which is
a foreign vessel, would sail beyond the jurisdiction of this Court, and the only effective remedy available to the plaintiff to discharge the cargo
would be lost. Hence, the suit.
The defendant filed a written statement alleging that he is not aware of the business of the plaintiff or the alleged contract dated 1.3.1995,
between the plaintiff and M/s. Cheval International Ltd; that the vessel M.V. Meera was chartered by M/s. Cheval International Ltd, who is none
other than a contracting party with the plaintiff; that the charterparty is dated 11.6.1995; that the terms and conditions of carriage of goods
contained in the charterparty had been duly incorporated in the bill of lading dated 20.7.1995; that it is a specific term of the charterparty that the
conditions contained in the charterparty shall prevail over the bill of lading in any matter of conflict; that under the circumstances, the plaintiff cannot
claim any right under the bill of lading excluding the terms and conditions contained in the charterparty for carriage of goods; that on the face of the
bill of lading, it is clear that it is used with charter parties; that it is also a deliberate attempt made by the plaintiff to mislead this Court for obtaining
an ex-parte order of arrest of the vessel; that the cargo had to be discharged in accordance with the terms contained in the charterparty; that as per
Clause 24, the defendant''s agent gave a notice of readiness dated 28.8.1995, to the plaintiff''s clearing agent soon after the arrival of the vessel at
the post of Madras on 27.8.1995; that after receipt of notice, instead of contacting their sellers who chartered the vessel, the plaintiff was insisting
upon issue of delivery order; that the plaintiff has deliberately omitted to implead M/s. Cheval International Ltd, with whom the plaintiff entered into
contract for purchase of cargo and who had entered into charterparty with the defendant and issued bill of lading; that the suit is bad for non-
joinder; that the defendant wrote a letter to the plaintiff dated 4.9.1995, informing that the defendant had taken up the matter with the charterer and
requesting the plaintiff to contact them; that apart from that, the charterparty provides for lien; that when lien is created under the terms of carriage,
the plaintiff claiming delivery of cargo cannot escape liability; and that the collusion between the charterer/shipper and the plaintiff is evidenced from
the fact that the cost of discharge was met by the charterer/shipper and not the plaintiff as between them.
It is further alleged by the defendant that though the plaintiff undertook to discharge the cargo which is their responsibility not only as per the
terms of charterparty but also as per the order of the Court dated 14.9.1995 made in Application No. 4645/95, the plaintiff deliberately delayed
the process of discharge and the Port Trust did not permit the vessel which lead to prolonged occupation of berth and vessel had to be shifted to
outer anchorage; that though the charter party provides the rate of discharge, the plaintiff did not complete the discharge until 8.12.1995; that it is
clear from the conduct of the plaintiff that the order of arrest obtained by the plaintiff, is nothing but wrongful, and delaying of vessel even after the
order directing them to discharge at its cost, is nothing but vindictive; that as per the charterparty, the defendant is entitled to demurrage US$ 2500
for every day''s delay; that the charterparty provides for lien on cargo for freight and dead freight, demurrage and damages for detention; that the
net demurrage due comes to US$ 312,500; that the plaintiff is liable to pay interest at 18% per annum from 8.12.1995; that on 18.11.1995, the
plaintiff sent to the defendant''s agent at Chennai by fax a draft agreement dated 17.9.1995, by which the plaintiff sought a settlement of the
defendant''s dues of US $ 1,75,000 to avoid even according to the plaintiff ""vexatious litigation""; that in order to avoid huge ware housing cost, the
cargo was sold with the permission of this Court by order dated 26.4.1996, and sale proceeds had been deposited in the Housing Development
Finance Corporation (HDFC); that the suit is not maintainable in law or on facts, and hence, the same was to be dismissed.
On the above pleadings, the trial Court framed three issues. The parties went on trial. The plaintiff examined P.W.1 and marked Exs.A1 to A10.
One witness was examined as D.W.1 on the side of the defendant, and Exs.D1 to D9 were marked. The learned trial Judge after hearing the
submissions made and considering the materials available, dismissed the suit. Hence, this appeal at the instance of the plaintiff.
The following questions would arise for consideration in this appeal:
(1) Whether this Court has got jurisdiction to entertain the suit in exercise of the admiralty jurisdiction?
(2) Whether the respondent/defendant has got a right of lien on the cargo for the payment of freight and demurrage as alleged?
(3) Whether the appellant is entitled to the reliefs asked for?
Advancing the arguments on behalf of the appellant, the learned Counsel would submit that the plaintiff has proved its claim by adducing
sufficient and acceptable evidence both oral and documentary; that despite the same, the learned trial Judge has dismissed the suit; that it cannot be
disputed that the plaintiff is the owner of the cargo, which was entrusted with the defendant at the Port of Sudan and which also reached the
Madras Port; that in order to prove the same, the plaintiff produced Ex.A1, purchase order, and Ex.A2, bill of lading, and also documentary
evidence to show that the invoice which was raised on 23.7.1995 for the entire value of the cargo namely Rs. 1,34,00,000/- was encashed; that it
is evident from the bill of lading Ex.A2 dated 20.7.1995, that the cargo was to be carried on liner terms and the freight was prepaid, and hence, it
would be indicative of the fact that the plaintiff as the purchaser of the cargo, has performed its part and hence, the defendant was duty bound to
deliver its cargo unconditionally; that it is not in controversy that the clearing agent of the plaintiff placed the bill of lading to the agents of the
defendant on 31.8.1995, calling upon them to issue a delivery order; but, no arrangements were made either to berth the vessel or to deliver the
cargo; that on the contrary, the defendant gave a reply on 4.9.1995, stating that there was a charterparty agreement and unless the dues under the
terms of the said agreement were settled, the cargo could not be released; that according to the communication, the alleged demurrage liability at
the load port was to the extent of US $ 72500; that as far as the charterparty agreement was concerned, the plaintiff was not a party; that it was
only in between the charterer namely M/s. Cheval International Limited, London, the seller of the cargo, and the defendant; that apart from that,
under the contract of carriage, there was no liability on the appellant/plaintiff to pay any demurrage charges to the defendant or to the seller of the
cargo; that as the owner of the property, the plaintiff was entitled to have the delivery of the cargo without any condition whatsoever; that as far as
the charterparty agreement was concerned, the plaintiff was a stranger and hence, they were not bound by the various clauses contained therein;
and that there was no privity in respect of the said contract since the appellant was neither a signatory nor a party to the same.
Added further the learned Counsel that that as regards the plaintiff, regarding the transportation of the cargo from the port of Sudan to Madras,
the plaintiff was governed only by Ex.A2, bill of lading, which was admittedly issued by the respondent; that the learned trial Judge should have
rejected the defence plea put forth by the respondent that the bill of lading issued was subject to the terms and conditions of Ex.D1, charterparty
agreement and ought not to have held that the same would prevail over the bill of lading, and hence, the plaintiff was liable to pay demurrage
charges, and without the said payment, the cargo could not be delivered to the plaintiff; that from the very reading of Ex.A2, bill of lading, it would
be clear that the shipment was on liner-out terms C&F; that it is true that a reference was made in Ex.A2 to a charterparty agreement dated
11.6.1995; but, it did not indicate any further details thereof; that as per Ex.A2, bill of lading, the entire freight was prepaid even at the Port of
Sudan; that the liner out terms referred to a freight rate which signified that it consisted of the ocean carriage and the cost of cargo handling at the
loading and discharging ports according to the customs of those Ports; that since the freight charges have already been paid, it was the duty of the
respondent to incur all the costs of loading and discharging of the cargo from the vessel, and hence, the contention that the respondent has got a
lien which it could exercise for the freight or demurrage suffered at the Port of Sudan or at Madras should have been rejected; that the learned trial
Judge should have rejected the defence plea that they have got a lien Clause incorporated in Ex.D1, charterparty, and it was also exercisable
against the appellant/plaintiff; that the lien clause in the charterparty might give a contractual lien only on the cargo owned by the charterers and not
on the cargo owned by the third party consignee; that unless the consignee was also a charterer, the lien cannot be exercised; that the respondent
was well aware that it did not have the right of lien under the bill of lading, and hence, they were not to exercise their right as specifically provided
in the provisions of the Major Port Trust Act.
Placing reliance on Section 60 of the Major Port Trusts Act, 1963, the learned Counsel would further add that the said provision expressly
confer the right on the ship owner to exercise its lien for freight and other charges; that if that lien has got to be exercised, the said right should have
been exercised prior to the discharge; that no such right has been exercised by the respondent in the instant case; that even assuming that the
respondent had a right of lien, it has not exercised procedurally, the reason being that the respondent/defendant was very aware that it did not have
the right of lien over the cargo in question; that the respondent had no right to exercise the right of lien on the cargo of the appellant for the dues of
the charterer since the title of the cargo had already got transferred to the appellant; that the letters of credit were honored; and that the appellant
as the consignee was a bonafide purchaser of the cargo for a valuable consideration.
Relying on the decision of the House of Lords reported in (1984) 2 LLR 129 (Miramar Maritime Corporation v. Holborn Oil Trading Ltd.),
the learned Counsel would further add that the consignee could not be called upon to pay the dues of the charterer, and the reference could be
made only to the obligations of the charterer and not that of the consignee namely the appellant; that it cannot be disputed that the respondent as a
career was the custodian of the cargo until the same was discharged into the custody of the Madras Port; that the lien could not be exercised since
the title of the cargo has already passed on to the appellant, and hence, the respondent/defendant cannot in law call upon the appellant/plaintiff to
pay the dues of the seller or the charterer; that since the bill of lading would clearly indicate that the entire freight was prepaid, the respondent
should not be allowed to say that the freight has not been paid or it could exercise the right of lien on that ground; that the stand that was taken by
the respondent was thoroughly inconsistent to the contents of the express terms in Ex.A2, bill of lading; that the trial Court while dismissing the suit,
has observed that Clause 34 of Ex.D1, charterparty, provides for arbitration in case of disputes arising between the parties, and according to
Clause 8 of the charterparty, there was a dispute and hence, it was a case where the matter has got to be referred to arbitration; that it is pertinent
to point out that either in their reply notices or in the written statement, the defendant has nowhere whispered about the arbitration clause; that
apart from that, the charterparty as found under Ex.D1, was between the defendant and the charterer namely the seller and hence, the terms found
therein and in particular, the arbitration clause, would bind only those charterers and not the plaintiff; and that under such circumstances, the
findings recorded by the learned trial Judge that there is a dispute between the parties, and it has got to be resolved before an arbitrator as
envisaged under Clause 34 of Ex.D1 was not correct.
Added further the learned Counsel that the only witness examined on the side of the defendant namely D.W.1, has categorically admitted that
the proof of service of the notice of readiness at the Port of Sudan by the respondent on the charterer has not been filed; that Ex.D2, the statement
of facts, did not contain the remarks of the respondent and the charterer; that the statement of facts if any prepared at the Port of Madras signed
by the respondent and the charterers, has not been filed; that no quantification was made on the basis of the laytime calculations which should have
been done; that above all, though there was an arbitration clause, the same has not been invoked; that the respondent was well aware that it could
not make a claim even before the arbitrators in the absence of documents, and hence, the respondent has even committed breach of the
charterparty terms; that the only document relied on by the respondent for quantification, was the invoice raised by the respondent on the charterer
which was a self-serving document; that the trial Court has held that the appellant was aware of the existence of the charterparty since it was
referred to in Ex.A2, bill of lading, and hence, the terms of the charterparty would be binding on the appellant; that mere knowledge of the
appellant regarding the existence of the charterparty would not be sufficient enough to state that the appellant was bound by the said terms, since
the appellant was neither a party to the charterparty, nor has he expressly agreed to comply with the terms anywhere; that it is pertinent to point
out that Ex.A1, purchase order, was between the plaintiff purchaser and M/s. Cheval International Limited, London, the seller; that equally, Ex.D1,
charter party, was between the defendant and the charterer who was the seller, in which the appellant was neither a party nor would it bind on him,
and thus, it would be quite clear that there was no arbitration agreement in writing and signed by the parties; that under such circumstances, when
the plaintiff has proved that they are the owner of the cargo and are not liable to answer the claim of the defendant who could not exercise the lien,
and it is a case in which the parties could not be referred to arbitration, it is a fit case where a decree should have been granted, and hence, the
judgment of the trial Court has got to be set aside, and the appeal be allowed.
Contrary to the above contentions, the learned Counsel for the respondent would submit that as far as the terms and conditions found in the
contract between the seller M/s. Cheval International Limited, London, and the plaintiff were concerned, it would not be binding on the defendant;
that it is not in controversy that the vessel in question was chartered by the seller, and there was a charterparty agreement which has been clearly
referred to in Ex.A2, bill of lading; that the purpose of annexing a copy as one of the documents along with the bill of lading was to make it clear
that the holder of the bill of lading was also bound by the terms of the charterparty agreement; that it was not the case of the plaintiff that they had
no knowledge about the charterparty agreement; that even at the earliest, the plaintiff had the knowledge; that the charter party agreement was duly
incorporated in the bill of lading dated 20.7.1995; that it was found in the plaint; that it has been clearly stated that ""all terms and conditions,
liberties and exceptions of the charter party dated over leaf are herewith incorporated"" which would be indicative of the fact that the plaintiff had
not only the knowledge of the charterparty, but also the terms and conditions would be binding on the plaintiff; that the plaintiff has claimed the
relief resting its entire case on the bill of lading; that forgetting for a while, the conditions contained in the charterparty, would prevail over the bill of
lading in all matters of conflict; that the terms of the charterparty would clearly reveal that the cargo should be discharged by the charterer or the
agents free from any risk, liability and expenses whatever to the owners; that it is true that the cargo was to be discharged in accordance with the
terms contained in the charterparty; that the suit itself was an attempt by the plaintiff as the result of the collusion between the plaintiff and the
charterer to take delivery of the cargo without settlement of the amounts by way of freight and demurrage due to the defendant as per the terms of
the charterparty; and that the defendant has written a letter on 4.9.1995 itself informing the plaintiff that the defendant had taken up the matter with
the charterer namely the seller of the cargo, and also requested the plaintiff to contact them; but, the plaintiff never did so and on the contrary, has
filed the instant suit to take delivery of the cargo even without settling the dues.
Added further the learned Counsel that despite the averments were made in the written statement that the plaintiff has deliberately omitted to
implead M/s. Cheval International Ltd, as a party to the suit, the plaintiff did not take any steps to implead the seller as a party in whose absence
the question which arose in the suit, could not be decided; and that apart from that, the charterparty clearly provided for the lien. Pointing to Part II
� 8 found in the charterparty, the learned Counsel would submit that the owners should have a lien on the cargo for freight and dead freight,
demurrage and damages for the detention; that the charterer should remain responsible for dead freight and demurrage including damages for
detention incurred at port of loading and also responsible for the freight and demurrage incurred at the post of discharge, but only to such extent as
owners have been unable to obtain payment thereof by exercising the lien on the cargo; that the very reading of the clause would clearly indicate
that the ship owners, the defendant herein, had the right over the cargo; that they have actually in exercise of their right of lien, denied the delivery
which has been rightly done; that the contention put forth by the appellant''s side that under the contract of carriage, there was no liability on the
plaintiff to pay any demurrage charges to the defendant or to the seller of cargo and hence, they were entitled to the delivery of cargo without any
condition whatsoever was absolutely untenable when the lien was created under the terms of the carriage; that the plaintiff by filing a suit has made
an attempt to escape its liability; that the trial Court in appreciation of the documentary evidence relied on by the plaintiff under Exs.A1 and A2,
and also the defendant under Ex.D1, charterparty, has found that the plaintiff cannot plead ignorance of the existence of a charterparty and has also
held that the bill of lading relied on by the plaintiff, should be subject to all terms and conditions found in the charterparty; that the trial Court has
pointed out that Clause 35 of the charterparty agreement would read that when there was a conflict between the provisions of the charter party
and that of the bill of lading, then the provisions of the charter party were to prevail, and hence, the contentions put forth by the plaintiff that they
were entitled to get the delivery of the cargo as per Ex.A2, bill of lading, and they were not bound by the terms and conditions of the charterparty
was rightly rejected by the trial Court.
The learned Counsel for the respondent would further submit that even in the bill of lading much relied on by the appellant''s side, there was a
clear term stating that all terms and conditions, liberties and exceptions of the charter party dated over leaf are incorporated; that since the bill of
lading in clear terms referred to the existence of a charter party and even as per the admission made by P.W.1 that he had the knowledge of the
charter party and a copy of which was also served upon the plaintiff, then the appellant/plaintiff could not escape the liability by stating that they
were not bound by the terms and conditions of the charter party; and that a combined reading of the bill of lading and the charter party would
clearly reveal that the appellant was liable for the freight and demurrage. Attributing malifides to the appellant, the learned Counsel would submit
that even before the ship was berthed and exercise of the lien available to the defendant under the charter party and also u/s 60 of the Major Port
Trusts Act by issuance of notice, the appellant has approached the Court seeking arrest of the ship and in Application No. 603 of 1996, a joint
memo was filed agreeing to sell the cargo by the plaintiff in the open market and the sale proceeds realised would be deposited with the Housing
Development Finance Corporation Limited; that though communications were addressed making a demand to the charterer, there was no
response from them, and under such circumstances, the defendant had no option than to exercise the lien; but, even before the notice for exercise
of the lien was served, the plaintiff has approached the Court invoking the admiralty jurisdiction of this Court for the arrest of the vessel and having
neglected to pay the freight and demurrage which the appellant agreed to pay, and in the absence of payment, the plaintiff has come to the Court
with unclean hands.
Pointing to Clause 9 in Ex.A1, purchase order, the learned Counsel for the respondent would submit that the plaintiff has already agreed that at
the port of loading the seller will be responsible to deliver the materials on liner terms and the seller would engage the services of a particular
Company at Madras to undertake the discharge operation at his own cost; that the materials available would indicate that after the vessel reached
Madras, there was 90 days delay on the part of the plaintiff to take delivery; that even as per the agreement between the parties, if there was any
delay, upto 7 days, the charterer was responsible; but, in the instant case, there was a delay of 90 days, which would be indicative of the utter
negligence on the part of the appellant/plaintiff; that the respondent/defendant apart from the contract entered into between the parties, could
exercise the ship owner''s lien for freight and other charges; that according to Section 60 of the Major Port Trusts Act, a notice in writing that the
cargo were to remain subject to a lien for freight and other charges was to be served either by the master or by the owner of the vessel; and that in
the instant cast, even before the time of the landing of the cargo, the plaintiff has approached the Court thereby prevented the defendant from
exercising the ship owner''s lien for the freight and demurrage to which they are entitled.
The learned Counsel would further add that the decisions relied on by the plaintiff''s side were not applicable to the present facts of the case;
and hence, the trial Court did not apply them; that not only the clauses in the charterparty agreement, but also in Ex.A1, purchase order, would
clearly provide that any dispute in connection with the contract, should be settled through mutual negotiation or to be referred to arbitration to be
held in India, and thus, in view of the said clause also, the plaintiff should not have filed the suit; that the learned trial Judge relied on those clauses in
both the purchase order, Ex.A1, and also Ex.D1, charterparty agreement, has observed that the disputes have got to be resolved in arbitral
proceedings; that in such circumstances, the trial Court has rightly dismissed the suit, and hence, the judgment of the trial Court has got to be
affirmed.
From the perusal of the pleadings, evidence adduced both oral and documentary, the following are noticed as facts admitted:
The plaintiff company which is engaged in manufacture of steel billets and other allied products, effected a purchase order for the purchase of a
consignment of 2369.440 metric tonnes of steel melting scrap on 1.3.1995 on M/s. Cheval International Limited, London, through their Indian
agent in Calcutta. As per the purchase order, the cargo was to be loaded at Port of Sudan for the discharge at Port of Madras under C&F liner
terms and delivery was to be effected within 45 days. The invoice was raised on the plaintiff on 23.7.1995, for a sum of Rs. 1,34,00,000/- which
was the value of the cargo. The defendant shipper was entrusted with the cargo at the port of Sudan. A bill of lading dated 20.7.1995, was issued
by the defendant which indicated that the cargo was to be carried on liner terms and the freight was prepaid. The vessel arrived at the port of
Madras on 27.8.1995. Before the statutory period, the plaintiff''s agent at Madras namely M/s. South India Corporation (Agencies) Ltd., who
acted as the clearing agent of the cargo, sent the original bill of lading to the local agent of the defendant on 31.8.1995. Since the delivery order
was not issued, the plaintiff sent a communication on 2.9.1995, calling upon the defendant to issue delivery order. On 4.9.1995, the defendant''s
agent sent a letter stating that unless the dues under the charterparty terms which were to the extent of US$ 72500, were settled, the cargo could
not be released. Following the exchange of notices, the plaintiff has filed the suit for recovery of Rs. 1,34,00,000/- which would represent the value
of the cargo.
As could be seen above, the case of the appellant seeking such a claim before the trial Court was that the plaintiff was the owner of the cargo;
that the freight for transportation of the cargo was prepaid; that the defendant cannot exercise any lien on the cargo; and that the terms and
conditions of the charterparty would not bind the plaintiff. The defence plea on the contrary was that there was a charterparty agreement between
the charterer namely the seller, and the defendant ship owner as found in Ex.D1; that the charterparty agreement was also incorporated in the bill
of lading, Ex.A2, and hence, it would be binding on the plaintiff for the payment of freight and demurrage; that in exercise of the lien, the defendant
had the right to retain the goods and not to deliver till the dues were settled, and hence, the claim of the plaintiff was unsustainable. The trial Court
after analyzing the evidence has found that the terms and conditions of the charterparty agreement as found under Ex.D1, would prevail over
Ex.A2, bill of lading; that the plaintiff had the clear knowledge of the same; that they were also bound by the terms and conditions of the charter
party agreement; that however, in the agreement, there is a arbitration clause; and that both the parties were to resolve the dispute in the arbitral
proceedings.
At the outset, the Court has to record its disagreement with the finding of the learned Single Judge that it is left open to the parties to invoke the
arbitration clause available under Ex.A1 or Ex.D1, and in the said view of the matter, the suit was liable to be dismissed, and accordingly, it was
dismissed. As could be seen from the available materials, three agreements are noticed. The first agreement as found in the purchase order, Ex.A1,
dated 1.3.1995, between the plaintiff, the purchaser and M/s. Cheval International Limited, London, the seller of the cargo, in which the defendant
was not a party. The second agreement is one evidenced under Ex.A2, bill of lading, which was between the plaintiff company and the defendant
ship owner in which the said seller namely M/s. Cheval International Limited, London, was not a party. Third one is the charterparty agreement
under Ex.D1 in which the charterer namely the seller, and the ship owner were parties, and the plaintiff was not a party to that. It is not in
controversy that both under Ex.A1 and Ex.D1, there are specific clauses to the effect that the parties were to resolve the disputes before the
arbitrator. As far as Ex.A1, purchase order, was concerned, it is quite clear that any dispute that arose between the parties to the agreement, could
be resolved by arbitration. Clause 18 reads that any dispute in connection with the contract should be settled through mutual negotiation or to be
referred to arbitration to be held in India. Needless to say that the said arbitration clause could bind only the purchaser, the plaintiff and the seller
M/s. Cheval International Limited at London. As far as that agreement is concerned, the defendant was a third party stranger.
Equally, Clause 34 of Ex.D1, charterparty agreement, reads ""Should a dispute arose under this charterparty, the same to be referred for
arbitration in London, as per English Law. One arbitrator to be appointed by the owner and one to be appointed by the charterers and in case
both the arbitrators cannot agree, then an Umpire is to be appointed by them and the award of the Umpire to be final and binding on the parties.
The arbitration and umpires to be shipping men."" This agreement which included the above clause, was entered into between the defendant
shipping owner and the charterer namely the seller, to which the plaintiff was not a party. Thus, it would be quite clear that as far as the agreement
in Ex.A1, purchase order, was concerned, the defendant was not a party, and as regards Ex.D1, the plaintiff was not a party. In such
circumstances, any dispute that has arisen between the plaintiff and the defendant, cannot be referred to arbitration invoking either Ex.A1 or Ex.D1
document. Hence, that part of the judgment of the trial Court recording a finding that the parties should have resolved their disputes in the arbitral
proceedings, and hence, the suit required an order of dismissal has got to be necessarily set aside. Accordingly, it is set aside.
The learned Counsel for the respondent questioning the very jurisdiction of the trial Court, would submit that a memo was filed stating that the
jurisdiction of the admiralty Court was very limited; that the law on the subject has also been settled by the Apex Court in 2002 4 CTC 554; that
the Apex Court has enumerated the circumstances under which a suit under the admiralty jurisdiction could be tried; that in the instant case, no one
circumstance is available; that evidently the suit was filed invoking the admiralty jurisdiction, and the appellant/plaintiff has also sought for the arrest
of the ship; and that the law laid down by the Supreme Court in the said case if applied, the trial Court should have dismissed the suit as one
without jurisdiction.
Concededly, the plaintiff has filed the suit under the admiralty jurisdiction of this Court for recovery of the amount and also for the arrest of the
defendant''s vessel. The learned Counsel for the appellant made elaborate deliberations to the effect that the scope of the admiralty jurisdiction is
very limited and in the instant case, it was only a money claim made on the strength of a contract; that the present case arose out of contract
adherence maritime lien; that no action in rem was permissible, and now, a suit in the original jurisdiction of this Court can be maintained against the
vessel; that it is pertinent to point out that the defendant nowhere has disputed the jurisdiction of this Court to entertain the suit, and hence, no
issues were framed, and at the time of arguments, it could be seen from the judgment under challenge that a memo was filed that the suit could not
be maintained under the admiralty jurisdiction of this Court.
The learned Counsel for the appellant placed reliance on a decision of the Apex Court reported in 2002 4 CTC 554 (Epoch Enterrepots v.
M.V. Won Fu)
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.
Further on the issue, we find Thomas on Maritime Liens stated it to represent a small cluster of claims which arise either out of services
rendered to a maritime res or from damage done to a res and listed five several heads of maritime liens as under:
(a) Damage done by a ship
(b) Salvage
(c) Seamen�s wages
(d) Master�s wages and disbursements
(e) Bottomry and respondentia
The learned Counsel for the appellant also relied on a decision of the Apex Court reported in 2004 1 Supreme 365 (Liverpool & London S.P.
& I. Asson. Ltd. v. M.V. Sea Success I and Anr.) The Hon''ble Apex Court had an occasion to consider the scope of the admiralty jurisdiction
and has laid down as follows:
AS TO CLAIMS FOR DAMAGE TO CARGO IMPORTED:
The High Court of Admiralty shall have jurisdiction over any claim by the owner or consignee or assignee of any bill of lading of any goods carried
into any port in England or Wales in any ship, for damage done to the goods or any part thereof by the negligence or misconduct of or for any
breach of duty or breach of contract on the part of the owner, master, or crew of the ship, 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 any costs, charges, or expenses incurred by him therein, unless the
judge shall certify that the cause was a fit one to be tried in the said court.
CHANGING SCENARIO:
The advancement in law would be evident from the 1999 Arrest Convention whereby significant changes to the law relating to in rem claims
and arrest have been made. Pursuant to Article 14 of the 1999 Arrest Convention, such changes would come into force six months after
ratification by the 10th State.
Apart from those restrictions resulting from the Convention, all kinds of claims can be secured by an arrest and there is no need to prove a
connection with the operation of the vessel. As for example, a guarantee given by the owners for a subsidiary company or other principal debtor is
as suitable as a claim resulting from the purchase of the ship or any other goods by the owners. However, in terms of Article 1(k) of the
Convention claims for ""goods or materials"" supplied to a ship for her operation or maintenance are acknowledged as maritime claims.
This Court in M.V. Elisabeth(supra) observed that Indian statutes lag behind any development of international law and further it had not
adopted the various conventions but opined that the provisions thereof having been made as a result of international unification and development of
the maritime laws of the world should 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 any specific statutory provisions can be adopted and adapted by courts to supplement and
complement national statutes on this subject.
M.V.Elisabeth(supra) is an authority for the proposition that the changing global scenario should be kept in mind having regard to the fact that
there does not exist any primary act touching the subject and in absence of any domestic legislation to the contrary; if the 1952 Arrest Convention
had been applied, although India was not a signatory thereto, there is obviously no reason as to why the 1999 Arrest Convention should not be
applied.
SUMMARY OF THE DISCUSSIONS:
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 subtitles of this judgment separately and distinctly may not lead us to the said conclusion but the
cumulative effect 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.
In a case reported in M.V. Elisabeth and Others Vs. Harwan Investment and Trading Pvt. Ltd., Hanoekar House, Swatontapeth, Vasco-De-
Gama, Goa, , the Apex Court has held that the admiralty jurisdiction of the High Courts is not limited by Admiralty Court Act (1861) and Colonial
Courts of Admiralty Act (1890), and the High Court can order arrest and detention of a foreign ship.
The defendants moved an application in the High Court raising a preliminary objection to the jurisdiction of that court. They contended that the
plaintiff�s suit against a foreign ship owned by a foreign company not having a place of residence or business in India was not liable to be
proceeded against on the admiralty side of the High Court by an action in rem in respect of a cause of action alleged to have arisen by reason of a
tort or a breach of obligation arising from the carriage of goods from a port in India to a foreign port. They did not, however, contend that the
alleged cause of action not having arisen in Andhra Pradesh, the suit ought not to have been filed in Andhra Pradesh. Their sole contention on the
question of jurisdiction was as regards the lack of admiralty jurisdiction of any court in Andhra Pradesh or any other State in India to proceed in
rem against the ship on the alleged cause of action concerning carriage of goods from an Indian port to a foreign port. The preliminary objection
was overruled by the learned Single Judge and his order was confirmed by the learned Judges of the Division Bench by their order which is
challenged in SLP (C) No. 10542 of 1985. The suit was finally decreed by the learned Single Judge and appeal therefrom is the subject-matter of
the case transferred to this Court.
These claims are now specifically mentioned under Clauses (e), (g) and (h) respectively of Section 20(2) of the Supreme Court Act 1981,
amongst other claims, as falling under the Admiralty jurisdiction of the High Court. Part II of this Act is derived substantially from Part I of the
1956 Act which was enacted to give effect to the Brussels Convention of 1952 relating to the arrest of sea-going ships and the rules concerning
civil jurisdiction in matters of collision (Cmd 8954).
Section 20 of the Supreme Court Act 1981 enumerates various questions and claims falling under the admiralty jurisdiction of the English High
Court. Apart from matters covered by the Merchant Shipping Acts 1894 to 1979 [referred to in Sub-section (3)] and certain other matters,
various questions and claims are enumerated in Sub-section
(2). They include: ""any claim for loss of or damage to goods carried in a ship; any claim arising out of any agreement relating to the carriage of
goods in a ship or to the use or hire of a ship; any claim for damage received by a ship; and any claim for damage done by a ship3.
(3) The specific questions and claims enumerated in Sub-section (2) of Secction 20 of the Supreme Court Act, 1981 are:
(a)...(h)any claim arising out of any agreement relating to the carriage of goods in a ship or to the use of hire of a ship;
Sub-section (7) of this section specifically provides that the admiralty jurisdiction of the High Court extends to ""all ships or aircrafts, whether
British or not and wherever the residence or domicile of their owners may be, and to all claims wherever arising"". It reads:
(7) The preceding provisions of this section apply
(a) in relation to all ships or aircraft, whether British or not and wherever the residence or domicile of their owners may be;
(b) in relation to all claims, wherever arising (including, in the case of cargo or wreck salvage, claims in respect of cargo or wreck found on land);
and
(c) so far as they relate to mortgages and charges, to all mortgages or charges, whether registered or not and whether legal or equitable, including
mortgages and charges created under foreign law: Provided that nothing in this Sub-section shall be construed as extending the cases in which
money or property is recoverable under any of the provisions of the Merchant Shipping Acts 1894 to 1979."" This jurisdiction is wide enough to
cover all claims in tort or contract arising out of any agreement for carriage of goods by sea [See the Principal stated in The Fehmarn,(1958) 1 All
ER 333].
In tracing the history of admiralty law in India, it is likewise misleading and incorrect to confine it to statutes. Statutes have been codifications of
rules of law as developed by usage, practice and custom. As stated by Westropp, C.J., of the Bombay High Court in Bardot v. The American
Ship or Vessel �Augusta� (1873) 10 Bom HCR 110 :
...If we have jurisdiction to entertain this suit, it must be sought for in the general maritime law administered by Courts of Admiralty...we must hold
it to be quite clear that the Statutes 3 and 4 Vict. c. 65 (1840), 24 Vict. c. 10 (1861), and 26 and 27 Vict. c. 24 (1863), do not increase or in any
wise affect our jurisdiction either in Admiralty or Vice-Admiralty, and that if we have jurisdiction to entertain this cause, that jurisdiction must be
sought for outside those Statutes.
Where statutes are silent and remedy has to be sought by recourse to basic principles, it is the duty of the court to devise procedural rules by
analogy and expediency. Actions in rem, as seen above, were resorted to by courts as a device to overcome the difficulty of personal service on
the defendant by compelling him to enter appearance and accept service of summons with a view to furnishing security for the release of the res;
or, in his absence, proceed against the res itself, by attributing to it a personality for the purpose of entering a decree and executing the same by
sale of the res. This is a practical procedural device developed by the courts with a view to rendering justice in accordance with substantive law
not only in cases of collision and salvage, but also in cases of other maritime liens and claims arising by reason of breach of contract for the hire of
vessels or the carriage of goods or other maritime transactions, or tortious acts, such as conversion or negligence occurring in connection with the
carriage of goods. Where substantive law demands justice for the party aggrieved, and the statute has not provided the remedy, it is the duty of the
court to devise procedure by drawing analogy from other systems of law and practice. To the courts of the ""civil law countries"" in Europe and
other places, like problems seldom arise, for all persons and things within their territories (including their waters) fall within their competence to deal
with. They do not have to draw any distinction between an action in rem and an action in personam.
This Court is of the considered opinion that the decision relied on by the appellant''s side and referred to above would make it clear that the
claim made by the plaintiff invoking the admiralty jurisdiction of this Court could be maintained.
From the available evidence, it is quite clear that following the purchase order placed by the plaintiff on M/s. Cheval International Limited,
London, for the purchase of 2369.440 metric tonnes of steel melting scrap which is the cargo in the instant case, the invoice was raised on the
plaintiff on 23.7.1995, for the value of the cargo namely US$ 418749.72 equivalent to Rs. 1,34,00,000/-, and they were actually encashed by the
vendor. The value of the cargo and the payment of consideration are facts admitted. Under the circumstances, by payment of the entire value of the
goods purchased, the plaintiff has become the owner of the said movable property. Concededly, a bill of lading was issued to the plaintiff under
Ex.A2 dated 20.7.1995, wherein it is stated in clear terms that ""the cargo was to be carried on liner terms and the freight was prepaid"". The words
freight was prepaid"" would not have been incorporated in the bill of lading issued by the defendant to the plaintiff, unless the entire freight for the
transportation of the cargo in the defendant''s ship was prepaid, and hence, a claim as if there is a balance due towards the freight charge itself is
unsustainable. The defendant had no explanation to offer how there was a balance due in the freight charge when the bill of lading, Ex.A2,
indicated that the freight was prepaid. The word ""liner term"" has been defined in The Marine Encyclopaedic dictionary, by Eric Sullivan, FICS,
Second Edition, 1988 at page 254 as ""Liner Terms Qualification to a freight rate which signifies that it consists of the ocean carriage and the cost
of cargo handling at the loading and discharging ports according to the custom of those ports. This varies widely from country to country, and
within countries, from port to port; in some ports, the freight excludes all cargo handling costs while in others the cost of handling between the hold
and the ship''s rail or quay is included."" Hence, it would be quite clear that the word ""liner term"" included as could be seen from Ex.A2 would
indicate that it would refer only to the cost of cargo handling at the loading and discharging ports. Therefore, on that ground also, the defendant
could not lay a claim.
While the plaintiff was able to prove that they are the owner of the cargo and the entire freight has also been prepaid, they are entitled to take
delivery of the cargo. Since it was not delivered in time despite reminders and legal notices, the plaintiff has filed the suit claiming the value of the
cargo which, according to them, was the sale price paid by them. The only defence plea that was put forth by the respondent/defendant before the
trial Court was that there was a charterparty agreement on 11.6.1995 as evidenced by Ex.D1; that the same was also duly incorporated in the bill
of lading, Ex.A2, and the plaintiff was bound by the charterparty agreement; that as per the terms and conditions of the charterparty agreement,
unless and until the dues towards the demurrage at loading port and freight and expenses for unloading at the discharge port were not settled, the
goods could not be released; that as per the charterparty agreement, the defendant could exercise its lien over the cargo, and so long as it is not
paid, it had a right to retain the cargo. In order to sustain its claim, the plaintiff rested its case on Ex.A2, bill of lading. Equally, the defendant rested
its defence on Ex.D1, charterparty agreement. It is not in controversy that Ex.D1, charterparty agreement, is referred to in the bill of lading. In para
3 of the plaint it is specifically averred that ""all terms and conditions, liberties and exceptions of the charter party dated over leaf are herewith
incorporated"". It is true that at the time when the bill of lading was given, a copy of the charterparty agreement was not given to the plaintiff; but,
from the admission made by P.W.1, it is clear that a copy of the charterparty agreement was handed over to him, and he had got the knowledge of
the charterparty. It is also true that the charterparty agreement part II Clause 8 reads as follows:
Lien Clause: Owners shall have a lien on the cargo for freight, dead freight, demurrage and damages for detention. Charerers shall remain
responsible for debt freight and demurrage (including damages for detention) incurred at Port of Loading. Charterers shall also remain responsible
for freight and demurrage (including damages for detention) incurred at Port of Discharge but only to such extent as the owners have been unable
to obtain payment thereof by exercising the lien on the cargo.
The plaintiff has relied on the above clause of the charterparty. It is contended by the respondent''s side that they had a lien over the cargo, and
since the dues in respect of the freight and demurrage were not settled, in exercise of their right under lien on the cargo, they could retain the same.
In such circumstances, the only question that would arise for consideration is whether the defendant has got a lien over the cargo. As stated above,
as far as Ex.D1, charterparty agreement, was concerned, the plaintiff was the third party. It is true that though a copy of the charterparty
agreement was not furnished along with the bill of lading, there was a reference to the charterparty agreement, and the copy of the same has also
been furnished to the plaintiff subsequently. Hence, it could be well stated that the plaintiff cannot plead ignorance of the charterparty agreement.
But, the mere knowledge of the purchaser namely the plaintiff, who is the owner of the cargo, would not be sufficient to hold that he is liable under
the charterparty agreement to which he was not at all a party either, or a lien available to the defendant under Ex.D1, charterparty agreement, and
exercisable as against the charterer could be exercised against the plaintiff. Before The House of Lords, a question whether the provision in the bill
of lading which purports to incorporate the terms of the charter party renders the respondents namely the consignees as holders of the bill of lading
when the cargo was discharged, personally liable to the appellants, the owners, for demurrage payable under the terms of the charter party to the
owners came up for consideration. The Hon''ble Division Bench of the Apex Court has relied on the said judgment of the House of Lords in
paragraph 11 in a case reported in The Owners and Parties Interested in the Vessel M.V. Baltic Confidence and Another Vs. State of Trading
Corportion of India Ltd. and Another, as follows:
In Miramar Maritime Corporation v. Holborn Oil Trading Ltd. 1984 AC 676, House of Lords considered the case where the owners entered
into a Tanker Voyage Charter Party in the Exxonvoy 1969 standard form with charterers and the Bill of Lading purported to incorporate all the
terms of the Charter (except the rate and payment of freight), including a demurrage clause rendering the charterers liable for demurrage, and the
owners claimed that the demurrage clause thereby incorporated into the bill rendered the consignees of the cargo, as holders of the Bill of Lading,
directly liable for the demurrage incurred and held that on the true construction of the language of the Bill of Lading, it was the intention of the
parties to the Bill of Lading contract that the charterer alone should be liable for demurrage. In that connection Lord Diplock observed:
...I regard it, however, as more important that this House should take this opportunity of stating unequivocally that, where in a Bill of Lading there
is included a clause which purports to incorporate the terms of a specified Charter Party, there is not any rule of construction that clauses in that
Charter Party which are directly germane to the shipment, carriage or delivery of goods and impose obligations on the �charterer� under that
designation are presumed to be incorporated in the Bill of Lading with the substitution of (where there is a cesser clause), or inclusion in or
inclusion in (where there is no cesser clause), the designation �charterer�, the designation �consignee of the cargo� or �bill-of-lading
holder�.
Apart from the above, in the instant case, the defence plea was that the cargo was not delivered, but retained in exercise of the lien under
Ex.D1, charterparty. It would be clear that it was a contractual lien. Hence, the question would arise whether in exercise of the contractual lien, the
ship owner can enforce the same as against the cargo of a third party shipped under a bill of lading. The answer is negative. Speaking of the
characteristics of contractual lien in Carriage of Goods by Sea II Edition, Mr. John F Wilson would say in 13.2.1 thus:
As with the common law lien, exercise of a contractual lien depends on the ship owner retaining possession of the goods and consequently the right
is lost as soon as the cargo comes into the hands of a consignee or assignee of the bill. Being a contractual lien, however, it is only enforceable
against a party to the contract of carriage. Thus a lien incorporated in a time charter to provide security for unpaid hire is not enforceable against
cargo of third parties shipped under a bill of lading even where such third parties have notice of the existence of the charterparty at the time their
cargo was shipped. In refusing to enforce a lien clause in the head charter against cargo shipped by a sub-charterer, Lord Lindley held that such a
clause did not ''entile the shipowners to a lien on the goods of persons who have come under no contract with them.... A right to seize one
person''s goods for another person''s debt must be clearly and distinctly conferred before a Court of justice can be expected to recognise it.
At this juncture, it would be better to refer to Payne and Ivamy''s Carriage of Goods by Sea 12th Edition dealing on liens. He has stated thus:
The position of holders of a bill of lading, other than the charterer himself or his agent, where the bill of lading contains a lien clause, may be
summarised by saying that ''unless the language used in the bill of lading is wide enough to extend the shipowner''s rights, the holder of the bill of
lading is entitled to have its goods delivered to him upon payment of the freight reserved by the bill of lading; as against him there is no lien for
freight payable under the charter-party in respect of the same or other goods, or for the difference, if any, between the bill of lading freight and the
(charter-party) freight, or for dead freight, or for demurrage at the port of loading.
The States which were parties to the International Convention on Arrest of Ships have agreed to articles found therein where Clause 1 deals
with maritime claim as follows:
""Maritime Claim"" means a claim arising out of one or more of the following:
a....
g. any agreement relating to the carriage of goods or passengers on board the ship, whether contained in a charter party or otherwise;
In view of all the above, this Court is afraid whether it could accept the contention put forth by the respondent''s side that in exercise of the lien
it could retain the cargo which belonged to the plaintiff who shipped the same under the bill of lading even though the plaintiff had knowledge as to
the existence of the charterparty at the time when the cargo was shipped.
Apart from the above, the defendant has not strictly adhered to the procedure as envisaged u/s 60 of the Major Port Trusts Act, 1963. The
said provision speaking on the ship owner''s lien for freight and other charges reads thus:
(1)If the master or owner of any vessel or his agent, at or before the time of landing from such vessel any goods at any dock, wharf, quay, stage,
jetty, berth, mooring or pier belonging to or in the occupation of a Board, gives to the Board a notice in writing that such goods are to remain
subject to a lien for freight or other charges payable to the ship-owner, to an amount to be mentioned in such notice, such goods shall continue to
be liable to such lien to such amount.
In the instant case, there is no material pointing to the fact that the master of the ship had given to the buyer a notice in writing in order to
exercise the lien over the cargo. All would go to show that the plea that the defendant had got a lien over the cargo cannot be countenanced in law,
and hence, it should have been rejected. Since the defendant has retained the cargo of the plaintiff against the agreement entered into between the
parties, the defendant was liable to pay the value of the cargo namely Rs. 1,34,00,000/-.
Pending the suit, pursuant to the orders of the Court, the entire cargo was sold and the amount was deposited in Housing Development
Finance Corporation, which is accrued. The learned Counsel for the plaintiff would submit that the plaintiff was entitled to interest at the rate of
24% on the value of the cargo; but, the defendant''s Counsel would submit that the plaintiff was not entitled to any interest at all. However, the
original value of the cargo as per the suit claim was Rs. 1,34,00,000/-. But, as on today, the amount is in bank deposit. At this juncture, it is
pertinent to point out that since it has been held by the Court that the property belonged to the appellant/plaintiff, and the suit property was sold,
and the sale proceeds have been deposited in the bank, and the plaintiff is entitled to the accrued interest thereon, no question of interest on the
claim would arise. The above points are, accordingly, answered.
In the result, this appeal is allowed setting aside the judgment of the trial Court and leaving the parties to bear their costs. The plaintiff/appellant
is permitted to withdraw the amounts accrued in the bank deposit after a period of eight weeks herefrom.