M.V. Leonis thro. her Master, Prominent Shipping Pte. Ltd. vs Libra Shipping Services LLC and Others

Jayant Patel, J.—The present application has been preferred by the applicant - original defendant No. 1 for rejection of the plaint and also consequentially for return of the demand draft submitted to this Court for release of the vessel.

In order to examine the real cause for the plaintiff of the suit, the parties shall be addressed as per their original status in the suit herein after. The plaintiff has invoked the admiralty jurisdiction of this Court by submitting the plaint and the averments made in the plaint can at best be said as the real cause of action for the plaintiff to invoke the jurisdiction. The relevant averments in the plaint as will have to be examined can be reproduced as under:

At para 2 it has been stated as under:

Defendant No. 1 is the vessel M.V. Leonis having St. Vince and the Grenadineas Flag, built in 1979. Defendant No. 2 is Vasteast International Pte. Ltd., Singapore, which has entered into a charter party agreement for voyage charter with the plaintiff and is a disponent owner of defendant No. 1 whereas the Head Owner of the defendant No. 1 is Prominent Shipping Pte. Ltd., Singapore.

The aforesaid shows that even as per the plaintiff, defendant No. 2 has entered into a charter party agreement for a voyage charter.

At para 6 it has been stated as under:

Thereafter, on 27.12.2006 the defendant No. 1, through agent of the plaintiff and broker of defendant No. 2, conveyed non-willingness to load the cargo for Japan under a false pretext that Japan was in excluded trading area which was protested strongly by the plaintiff and conveyed that the defendant No. 2 would be responsible for all costs and consequences arising due to breach of charter party agreement.

Then at para 10 it has been stated as under:

The plaintiff submits that until the drawing of the present pliant, the defendant No. 1 has not conveyed willingness to load the goods for Japan, leaving the plaintiff in a quandary. The plaintiff submits that in fact, Adani Global Pte. Ltd. who have opted to use services of the plaintiff have purchased goods from its sellers and have also entered into further contracts for sale of the same.

At para 14 it has been stated as under:

The plaintiff, therefore, approaches this Hon''ble Court in its original jurisdiction praying for suitable orders pertaining to arrest of bunkers on board defendant No. 1 and accordingly, defendant No. 1 be not allowed to sail from Kandla until such time defendant No. 1 or 2 puts forth security of Rs. 12.77 crores in the form of cash or bank guarantee and the aforesaid cargo is shipped to Japan and the plaintiff is compensated for the damages caused due to delay in shipping and delivering the cargo to the buyers in Japan. In fact, in view of the aforesaid approach of the defendant No. 1 and its Head Owners M/s. Prominent Shipping Pte. Ltd., Singapore and defendant No. 2, the plaintiff is likely to face several litigations from the sellers of the cargo.

If pursuant to an order passed by this Hon''ble Court, defendants No. 1 and 2 agree to load the cargo for Japan, defendant No. 2 may be ordered to pay the costs and expenses incurred by the plaintiff in obtaining such order.

The pertinent aspect is that the prayer made at para 16 reads as under:

(A) Order that the bunkers on the defendant No. 1 be arrested and detained together with defendant No. 1 vessel, with her hull, engines, machinery, equipments, spares, gears, appurtenances and her other paraphernalia by a warrant of arrest of the Hon''ble Court.

(B) Order and direct the defendants, jointly and severally, to pay over to the plaintiff, the costs and expenses of the arrest of the bunkers and cost of present proceedings.

The aforesaid shows that in the prayer clause there is no claim made for recovery of any damages or monetary relief for recovery of a particular amount either from the properties of defendant No. 1 i.e. ship or from defendant No. 2.

The aforesaid averment in the plaint if considered in light of the other averments in the plaint, it appears that as per the plaintiff, defendant No. 1 ship has entered into a charter party agreement for voyage charter with the defendant No. 2. The plaintiff has entered into agreement with defendant No. 2 and through defendant No. 2 the plaintiff is claiming the rights in the ship - defendant No. 1. As per the plaintiff, since loading of cargo for Japan is denied, there is a cause of action for the plaintiff against the defendant No. 2 and also defendant No. 1. As stated by the plaintiff in the plaint, defendant No. 2 has the bunkers in defendant No. 1 and therefore the prayer was made for arrest of the bunkers. But the surprising aspect is that additionally the prayer is also made for arrest of the ship itself.

Aforesaid goes to show that for invoking the admiralty jurisdiction of this Court, the basis of the plaintiff is through defendant No. 2 upon defendant No. 1.

As regards the question of adjudication of the dispute with defendant No. 2 is concerned, this Court (Coram: M.R. Shah, J.) vide order dated 01.05.2007 in Civil Application No. 163 of 2007 inter alia observed at para 7, 8 and 9 and thereafter direction was given at para 10, all read as under:

It is not in dispute that there is a charter party agreement between the applicant - original defendant No. 2 and the respondent No. 1 herein - original plaintiff dated 30.10.2006. It is also not in dispute that Admiralty Suit No. 1 of 2007 is filed alleging breach of the terms & conditions of the aforesaid charter party dated 30.10.2006. In paragraph - 11 of the plaint, the original plaintiff has submitted that the acts of defendants No. 1 and 2 have made the plaintiff to believe that the defendants No. 1 and 2 may not honour arbitration award should it go in plaintiff''s favour. It is to be noted that admittedly the charter party is between the plaintiff and the original defendant No. 2 only and considering the above, in paragraph - 11, it is submitted as under:

The plaintiff submits that to the best of its understanding as far as the defendant No. 2 is concerned, with whom plaintiff has entered into a charter party agreement, has on board only assets of bunkers valued at US $ 232800 presumably purchased by defendant No. 2. The aforesaid acts of defendants No. 1 and 2 have made the plaintiff to believe that the defendants No. 1 and 2 may not honour arbitration award should it go in plaintiff''s favour.

Thus, it is not disputed by the plaintiff that there is no arbitration clause in the charter party which provides that dispute if any between them to be referred to arbitration. The only apprehension on the part of the plaintiff in the suit was that the plaintiff is likely to face litigation from one Adani Global Private Limited, Singapore and that as far as the defendant No. 2 is concerned with whom the plaintiff has entered into a charter party has on board only assets of bunkers valued at US $ 232800 presumably purchased by the defendant No. 2 and therefore, it was the apprehension on the part of the plaintiff that the defendant Nos. 1 and 2 may not honour arbitration award should it go in plaintiff''s favour. Thus, the plaintiff has admitted the arbitration clause and therefore, the dispute is to be referred to the arbitration as per the arbitration clause of the charter party. It is required to be noted that there is no other prayer in the plaint claiming any decree of any loss and/or damage either against the defendant No. 1 and/or defendant No. 2.

Even in the proposed amendment also, no decree of any loss and/or damages is sought against either defendant No. 1 and/or defendant No. 2. As such, considering arbitration clause in the charter party, the dispute between the applicant - original defendant No. 2 and the respondent No. 1 herein - original plaintiff is required to be referred to the arbitration. Considering the above and in absence of any other relief and/or decree sought against the original defendant Nos. 1 and/or 2 towards any loss or damages, the contention on behalf of the respondent No. 1 - original plaintiff that two disputes cannot be separated and therefore, the dispute between the applicant and the respondent No. 1 is not required to be referred to arbitration cannot be accepted as such there is no other dispute with regard to any loss and/or damages prayed in the suit.

Under the circumstances and considering the arbitration agreement, more particularly, Box No. 25 and Clause 35, the dispute between the applicant - original defendant No. 2 and the respondent No. 1 - original plaintiff is required to be referred to arbitration. Accordingly, this application is allowed and the dispute between the applicant and the respondent No. 1 is referred to arbitration in London under the provisions of the English Arbitration Act; 1996 as per the relevant terms and conditions of the charter party agreement dated 30.10.2006. It is observed that the question with regard to return of Rs. 40 Lacs deposited and/or the bank guarantee furnished by the defendant No. 1, on referring the dispute to the arbitration and whether the suit is to be dismissed, all the questions are kept open and the same shall be dealt with in an appropriate application to be filed by the applicant herein - original defendant No. 2 and/or respondent No. 2 - original defendant No. 1. This application is accordingly allowed, however, there shall be no order as to costs.

The aforesaid order has become final inasmuch as it is an admitted position that the order is not challenged and the matter is referred for arbitration. The question of the adjudication of the dispute between the plaintiff and the defendant No. 2 is by the aforesaid order kept outside the suit and referred to the arbitrator. Further, as observed earlier no relief for monetary claim is prayed in the plaint by the plaintiff.

The factum of referring the dispute between the plaintiff and the defendant No. 2, who is the party with whom the agreement as stated by the plaintiff was entered into, would result into creating a situation of no relief available against the defendant No. 1 even if the averments made in the plaint are considered as it is read with the order dated 01.05.2007 passed by this Court in Civil Application No. 163 of 2007 and the parties having accepted the said order.

Further there is no agreement produced on record by the plaintiff which has been entered into by the defendant No. 1 with defendant No. 2. As per the defendant No. 1 there was a draft agreement prepared on behalf of the plaintiff with CPM Corporation Ltd. for time charter with the duration of 6 months. The pertinent aspect is that neither CPM Corporation Ltd. is joined as the party nor the plaintiff has pleaded for such purpose. If the suit is to be considered as it is, it must come on record that there was any contract by CPM Corporation Ltd. with defendant No. 2. But, neither there is any averment in the plaint pleaded nor such agreement between the CPM Corporation Ltd. and defendant No. 2 is produced by the plaintiff. Even if the defence of the defendant No. 1 is excluded for examining the cause of action for maintainability of the plaint of the plaintiff of agreement with CPM Corporation Ltd., then also no agreement worth the name is produced between the defendant No. 1 and defendant No. 2 nor the same is substantiated further. Under these circumstances, it can be said that the cause pleaded in the plaint would not attract the admiralty jurisdiction of this Court more particularly when the dispute between the plaintiff and the defendant No. 2 is referred to the arbitration as per the Clause contained in the agreement for arbitration between the plaintiff and defendant No. 2.

Further, if as per the averments made in the plaint the charter agreement was for a voyage it does not create any demise nor Mr. Joshi, learned Counsel appearing for the plaintiff, during the course of the hearing, was in a position to show any material for creating a demise in the ship to enforce the right in rem against the ship as the beneficiary of the charterer. Even if it is accepted for the sake of examination that the defendant No. 2 was the charterer without demise, there is no agreement or material whatsoever produced by the plaintiff.

If there is no privity of contract between the plaintiff and the defendant No. 1 either directly or as an agent of the charterer, the right at the most can be termed as in personem against the defendant No. 2 and not in rem which can be enforced against the defendant No. 1. The reference may be made to the decision of the Apex Court in case of Epoch Enterrepots Vs. M.V. WON FU, and more particularly the observations made at para 35 and 36 and also the decision of Bombay High Court in case of Sierra International Shipping Corpn. Vs. M.V. Umka and Others, and more particularly the observations made at para 7, 8 and 9. Therefore, if the claim is only by way of an agreement against the defendant No. 2, such right would be in personnel and for which the reference is already made to the arbitration as per the above referred order of this Court and there is no right in rem available to the plaintiff against the defendant No. 1.

On the aspect of approach of the trial Court at the stage of rejection of the plaint, the reference can be made to the decision of the Apex Court in case of T. Arivandandam Vs. T.V. Satyapal and Another, wherein the Apex Court has decided the question of rejection of the plaint under Order 7, Rule 11 of the Code of Civil Procedure. The observations were made by the Apex Court at para 5 as under:

We have not the slightest hesitation in condemning the petitioner for the gross abuse of the process of the court repeatedly and unrepentantly resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit now, pending before the First Munsif''s Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that if on a meaningful-not formal-reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, he should exercise his power under Or. VII Rule 11, C.P.C. taking care to see that the ground mentioned therein is fulfilled. And, if clever, drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order X, C.P.C. An activist Judge is the answer to irresponsible law suits. The trial courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men, (Cr.XI) and must be triggered against them. In this case, the learned Judge to his cost realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi.

It is dangerous to be too good.

In subsequent decision of the Apex Court in case of I.T.C. Limited Vs. Debts Recovery Appellate Tribunal and Others, at para 12 and 13 it was observed as under:

The first point here is whether the power to reject the plaint under Order 7 Rule 11 C.P.C. can be exercised even after the framing of issues, and when the matter is posted for evidence. This point has arisen because the Division Bench of the High Court has referred to this aspect while dismissing the appeal.

We may state that in the context of Order 7 Rule 11 C.P.C., a contention that once issues have been framed, the matter has necessarily to go to trial has been clearly rejected by this Court in Azhar Hussain v. Rajiv Gandhi (SCC p.324) as follows: (SCC para 12)

In substance, the argument is that the Court must proceed with the trial, record the evidence, and only after the trial....is concluded that the powers under the CPC for dealing appropriately with the defective petition which does not disclose cause of action should be exercised. With respect to the learned Counsel, it is an argument which is difficult to comprehend. The whole purpose of conferment of such powers is to ensure that a litigation which is meaningless and bound to prove abortive should not be permitted to occupy the time of the Court....

The above said judgment which related to an election petition is clearly applicable to suits also and was followed in Samar Sing v. Kedar Nath. We therefore hold that the fact that issues have been framed in the suit cannot come in the way of consideration of this application filed by the appellant under Order 7 Rule 11 C.P.C.

Further, at para 16 it was observed as under:

The question is whether a real cause of action has been set out in the plaint or something purely illusory has been stated with a view to get out of Order 7 Rule 11 C.P.C. Clever drafting creating illusions of cause of action are not permitted in law and a clear right to sue should be shown in the plaint. (see T. Arivandandam v. T.V. Satyapal)

Therefore even if the case of the plaintiff is considered as it is on the basis of the averments made in the plaint together with the documents produced by the plaintiff, coupled with the circumstances of making reference by this Court for adjudication of dispute between the plaintiff and the defendant No. 2 to the arbitration, it appears to the Court that the suit against the defendant No. 1 in view of the present circumstances cannot be maintained under admiralty jurisdiction to exercise the right in rem against the ship - defendant No. 1. Hence, the suit deserves to be rejected against the defendant No. 1. Hence order accordingly.

As a consequence of the aforesaid order, the amount deposited will be required to be returned to the defendant No. 1 or its authorized agent or attorney.

OJCA is allowed accordingly.

At this stage Mr. Mehta, learned Counsel for the plaintiff prays that the operation of this order be stayed for some time so as to enable the plaintiff to approach before the higher forum. Considering the facts and circumstances the status quo as on today shall be maintained up to 5th October, 2009.