REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1930 OF 2008

CHRISOMAR CORPORATION …APPELLANT

VERSUS

MJR STEELS PRIVATE LIMITED & ANR. ...RESPONDENT

J U D G M E N T

R.F. Nariman, J.

1.The present appeal raises several interesting questions

which arise in admiralty law. The vessel, M.V. Nikolaos-S, was

owned by one Third Element Enterprises, a Cyprus company,

and was flying the flag of the Republic of Cyprus. The plaintiff

in the admiralty suit, who is the appellant before us, supplied

bunkers and other necessaries to the said vessel at the port of

Durban on terms and conditions agreed between the parties in

November, 1999. According to the plaintiff, the bunkers were

1

received by the master of the vessel and services were

rendered to the vessel as acknowledged by the master. The

plaintiff raised invoices on 26.11.1999 for US$ 94,611.25 which

have not yet been paid.

2.When the vessel docked in the port of Haldia, the plaintiff

filed admiralty suit No.1 of 2000 in the Calcutta High Court

praying for an arrest of the vessel because, according to the

plaintiff, the necessaries supplied to the vessel would not only

amount to a maritime claim but would also be a maritime lien on

the vessel. By an order dated 6.1.2000, the vessel was so

arrested but nobody came forward for release of the vessel at

that point of time. It is only on 25.1.2000 that learned counsel

appearing on behalf of the plaintiff approached the learned

admiralty Judge expressing the plaintiff’s intention not to

proceed with the application for arrest as, according to him, the

parties had reached an out of court settlement. The order

passed on 25.1.2000 reads as follows:-

“The Court by an order dated January 6, 2000

directed that the vessel known as M.V.Nikolaos – S

was to be arrested. On the returnable date no one

appeared on behalf of the respondents. The

2

directions for affidavits had been given on January

10, 2000. Today when the matter was called on for

hearing, counsel appearing for the petitioner

submitted that an out of court settlement has been

reached between the parties and the petitioner was

not inclined to proceed with the matter any further.

For these reasons, this application is dismissed for

non prosecution.

All interim orders are vacated.

The vessel shall cease to be under arrest as of

now.”

3.It is important at this stage to advert to the agreement that

was entered into on 18.1.2000. Since both sides have argued

extensively on the aforesaid agreement, it is necessary to set it

out completely. The said agreement reads as follows:-

“AGREEMENT GUARANTEE

In Piraeus and at the offices of “LALLIS

OUTSINOS ANAGNOSTOPOULOS” Lawyers

Maritime Consultants of 100, Kololotroni Street,

Piraeus, this Tuesday the 18

th

January 2000, by and

between:

A.CHRISOMAR CORPORATION, a company duly

established and operating under the laws of

Liberia, maintaining an office in Greece (5

Solomou Str. Kifissia) (hereinafter called

Chrisomar), duly represented, for the purpose of

this agreement by its authorized lawyer Mr.

Dimitrios Voutsinos,

3

B.THIRD ELEMENT ENTERPRISES LTD, a

company duly established and operating under

the laws of Cyprus (hereinafter called “THE

SHIPOWNERS”), duly represented for the

purpose of this agreement by the President of

the Board of Directors, Mr. Sotirios Soulkas, who

also declared that he has the necessary

authorization and capacity to bind the company

to this agreement by his sole signature.

C.Sotirios Soukas, of 145 Filonos Str, Piraeus, the

following were stated and agreed.

WHEREAS

1.The shipowners are the legal owners of the Cyprus flag

vessel Nikolaos S, Int. Sign: P 3 KT 6 (“the vessel”)

managed in Greece by Suter Shipping and Trading Ltd.

2.Chrisomar has sold and delivered to the vessel in the port

of Durban a certain quantity of bunkers, on or about 26

th

November, 1999, Chrisomar has issued its invoice no.

99232/15.12.1999 for the amount of USD 94,611.25,

payable on 26

th

November, 1999 (Copy of the invoice is

attached herewith as app. I).

3.The owners have failed to pay the amount of the above

invoice by the 26

th

November 1999 and consequently,

Chrisomar arrested the vessel in the port of Haldia, India

for security of the above claim.

THE PARTIES AGREE AS FOLLOWS

1.The shipowners hereby confirm that they owe to

Chrisomar USD 104,688.60, analysed as follows: USD

94,611.25 for the invoice amount + USD 2,177.35 for

interest accrued + USD 7,900.00 for legal costs.

2.The shipowners, through their President Mr. Sotirios

Soukas, represent to Chrisomar that (a) their vessel is

4

due to be chartered out for a voyage from Bangkok,

Thailand to ports of West Africa as against a freight of

about USD 35.00 per metric ton of cargo; (b) that if

Chrisomar releases their vessel from the above arrest

shall be able to proceed to Bangkok for loading and to

perform the intended charter voyage; (c) that the

shipowners as soon as their vessel is released from its

arrest by Chrisomar shall include in their recap and

charter party with the intended charterers of their vessel a

clause that part of the freight amounting to USD

104,668.60 shall be paid directly by the charterers to

Chrisomar’s bank account as follows:

ANZ GRINDLAYS BANK

21, Akti Miaouli, 18535 Piraeus

Swift: GRNDGRAA,

A/C No. 815142 USD 40632

In favour of Chrisomar Corp.

3.The above recap shall be faxed by the shipowners to

Chrisomar one (1) working day after its conclusion.

4.The shipowners will not sell their vessel prior to the

satisfaction of Chrisomar’s above claim and shall provide

Chrisomar with a report by fax of the movements of their

vessel every five (5) days.

5.The above payment shall be made in full and final

settlement of Chrisomar’s above claim per capital and

costs.

6.If, for any reason the above amount is not paid to

Chrisomar within ten (10) working days after the ships

sailing from the port of loading Bangkok or, the

shipowners are in breach of any of the representations

and obligations set out in paras 2, 3 and 4 above then

Chrisomar will be entitled to take all the appropriate legal

5

steps including the arrest of the vessel for recovering the

above amount or any higher one which they may be

entitled to.

7.Sotirios Soukas hereby guarantees to Chrisomar and in

favour of the shipowner the due payment of the above

amount, working the right of division and exclusion i.e. he

admits that he will pay amounts due to Chrisomar without

the latter having first to enforce its claim against the

shipowners and their vessel.

8.If the vessel is lost, for any reason or if the mortgagee

bank or any other claimant arrests the vessel before

reaching Bangkok and as a result, the shipowners are

unable to proceed for loading to Bangkok, and thus

execute the above stated charter voyage, the above

obligations of the guarantor shall cease to exist but

Chrisomar will maintain its rights of recovery only against

the shipowners and the vessel but not against the

guarantor.

9.This agreement is subject to Greek law and the exclusive

jurisdiction of the Piraeus Courts. ”

4.It appears that nothing in the meanwhile happened. At no

point of time did the vessel sail for the port of Bangkok – it

remained continuously in Haldia. It is only on 2.5.2000 that the

vessel was re-arrested. The Court recorded that no payment

had yet been made and that the claim of the plaintiff continued

to remain unsatisfied. It is this re-arrest that is the bone of

contention between the parties in the present matter.

6

5.A written statement was filed on behalf of respondent

no.1, MJR Steels, an Indian company who allegedly purchased

the vessel from one Fairsteel Corporation, Singapore.

Apparently, an agreement was entered into between Fairsteel

and respondent no.1 on 21.1.2000. The written statement filed

by respondent no. 1 alleged:

“The said vessel was originally owned by The Third

Element Enterprises Shipping Ltd. Third Element

Enterprises Shipping Ltd. sold and transferred the

said vessel to Eastern Wealth Investment Ltd.

Eastern Wealth Investment Ltd. sold and transferred

the said vessel to Fairsteel Corporation. Fairsteel

Corporation sold and transferred the said vessel to

this defendant. This defendant acquired the right,

title or interest in respect of the said vessel from the

said Fairsteel Corporation.”

6.The learned single Judge by his judgment and order

dated 28.4.2005 listed as many as seven issues and adverted

to the fact that three witnesses were called on behalf of the

plaintiffs, who not only deposed and were cross-examined, but

also produced various documents. The defendants, however,

did not produce any witness but tendered as their evidence six

exhibits which were produced only through the plaintiff’s

7

witnesses.

7.According to the learned single Judge, the order of

25.1.2000 made it clear that suit No.1 of 2000 was kept alive

and remained alive on the date of the re-arrest, namely,

2.5.2000. All that was done by the order dated 2.5.2000 was to

recall the order dated 25.1.2000, and when that was done, the

original order of arrest was automatically revived. This being

the case, it is clear that the plaintiffs were entitled to recover

their dues. The learned single Judge further went on to hold

that respondent no.1’s claim that ownership had changed and

that they had become owners of the vessel in April, 2000, was

not conclusively proved. The single Judge referred, among

other documents, to a suit filed by respondent no.1 against

Fairsteel Corporation on 9.5.2000 in which respondent no.1

prayed for a decree for rescission of the agreement for sale

dated 21.1.2000, as also for cancellation of the said agreement,

and perpetual injunction restraining Fairsteel from claiming any

money under the Letter of Credit furnished by respondent no.1.

It recorded that the said suit was dismissed for non-prosecution

8

on 12.10.2004, and from the averments made in the said suit, it

was clear that there was no concluded sale in favour of

respondent no.1.

8.An appeal to the Division Bench by respondent no.1

however succeeded. By the impugned judgment dated

13.9.2006, it was held that the plaintiff’s first witness admitted

the fact that the vessel’s ownership changed hands and that on

the date of re-arrest, i.e. 2.5.2000, it was respondent no.1 who

was the owner. It also examined various documents to arrive at

the conclusion that the vessel physically changed hands on

15.4.2000 and payments under the Letter of Credit were made

pursuant to the agreement dated 21.1.2000 on 26.4.2000. The

Division Bench further went on to hold that though the

allegation as regards the successive transfers of title had not

been proved by the defendant, the said fact would make no

difference. It also went on to hold that there could be a good

title by estoppel. The Division Bench further went on to apply

Section 62 of the Indian Contract Act, 1872 to the out of court

settlement dated 18.1.2000 and stated that as there was a

9

novatio of the original agreement in law, the original cause of

action pleaded in admiralty Suit No. 1 of 2000 no longer

subsisted. Therefore, the claim made in the suit was held to

have been abandoned when the settlement dated 18.1.2000

was acted upon. In this view of the case, the Division Bench

reversed the single Judge’s decision and held that the suit was

liable to be dismissed on all these grounds.

9.Shri Shyam Divan, learned senior counsel appearing on

behalf of the appellants, has argued before us that the

agreement dated 18.1.2000 would not amount to a novatio of

the original agreement. According to him, the original

agreement continued and was in fact enforced by the second

order of arrest dated 2.5.2000. According to him, the right that

was vested in the appellant on 5.1.2000, i.e. the date of the

institution of the suit, is alone material, and it is on that date,

and not the date of arrest on 2.5.2000, that the ownership of the

vessel has to be seen. For this purpose, he cited certain

English precedents. He also cited an American judgment to

buttress his submission that the present was a case not merely

10

of a maritime claim but also of a maritime lien in that

necessaries supplied to the vessel would amount to a maritime

lien. According to him, in any event, on facts, the Division

Bench was completely wrong in arriving at a conclusion that

there was a concluded sale in April, 2000 in favour of

respondent no.1 inasmuch as several documents produced by

the plaintiff’s witnesses would show that no such sale had, in

fact, taken place.

10.Shri Banerjee, learned senior counsel appearing on

behalf of the respondents, has countered each of these

submissions. According to Shri Banerjee, the Division Bench is

absolutely correct. The present is the case of enforcement of a

maritime claim, but there is no maritime lien in law for

necessaries supplied to the vessel. This being the case, it is

important to know who the owner of the vessel is on the date of

arrest, i.e. on 2.5.2000. If the owner is respondent no.1, then a

claim for necessaries against the original owner, Third Element,

on the date of institution of the suit would not lie against the

respondent on the date of arrest. According to learned counsel,

11

English authorities cited by Shri Divan would not apply to the

present case as in England there is a completely different

procedure for arresting a vessel. A writ of summons is issued

under Order 53 of the U.K. Civil Procedure Code for service

outside the jurisdiction of the court which is kept alive for a

period of six months. Further, according to learned counsel,

Section 62 of the Contract Act is squarely attracted inasmuch

as the settlement dated 18.1.2000 completely replaced the

original agreement as a result of which the original cause of

action pleaded in the suit has disappeared. Learned counsel

also painstakingly took us through various documents to show

that the sale of the vessel to respondent no.1 had indeed taken

place in April, 2000 and that, therefore, on the date of arrest,

i.e. 2.5.2000, since his client was the owner of the vessel, the

amounts could not be recovered from respondent no.1.

11.Admiralty law in England, as was held by Lord Halsbury in

Currie v. M’Knight 1897 AC 97, is derived from the laws of

Oleron

1

and other ancient maritime codes like the Rhodian Sea

1 The rolls of Oleron are associated with the island of Oleron, off the coast of

Western France, which was the site of an ancient maritime court associated with a seaman’s

guild of the Atlantic. In England, they were promulgated by Eleanor of Aquitaine, wife of

Henry II, as vice-regent for her son King Richard I, while the latter was fighting the Saracens

12

Law, the Basilika, the Assizes of Jerusalem, the Baltic Laws of

Wisbuy and the Hanseatic Code. In England, the common law

courts could not give effective redress to cases which arose in

admiralty, which were then left to the jurisdiction of specialist

admiralty Judges. By the 18

th

Century, the admiralty jurisdiction

had fallen into “a feeble and neglected condition, and for long

its proceedings excited no attention”

2

. The Admiralty Court Act,

1840 was the first of a series of statutes extending and defining

the jurisdiction of the High Court of Admiralty in England. This

was followed by the 1861 Admiralty Court Act and various

subsequent enactments which were consolidated by the

Supreme Court of Judicature (Consolidation) Act, 1925. By the

Administration of Justice Act of 1956, the admiralty jurisdiction

of the High Court was further widened and the Supreme Court

Act of 1981 now defines what the admiralty jurisdiction of the

High Court in England is.

on the Third Crusade. King Henry VIII later published these rolls as, “The judgment of the

sea, of Masters, of Mariners and Merchants, and all their doings”. They are expressly

included in the compilation of English admiralty law, the “Black Book of the Admiralty”.

2 See, Roscoe’s Admiralty Practice, 5

th

edn. at Pg. 14.

13

12.Insofar as our law is concerned, the admiralty law of the

chartered High Courts has historically been traced to the

charters of 1774 and 1798 as subsequently extended and

clarified by the Letters Patents of 1823, 1862 and 1865. The

Admiralty Court Act, 1840 and 1861, and the Colonial Courts of

Admiralty Act, 1890 and 1891 essentially stated what the

admiralty law in this country is, and these enactments

continued as existing laws under Article 372 of the Constitution

of India. Some of the relevant provisions of these Acts are set

out hereinbelow:-

“Admiralty Court Act, 1840

6. The court in certain cases may adjudicate, etc.—

The High Court of Admiralty shall have jurisdiction

to decide all claims and demands whatsoever in the

nature of salvage for services rendered to or

damage received by any ship or seagoing vessel or

in the nature of towage, or for necessaries supplied

to any foreign ship or seagoing vessel, and to

enforce the payment thereof, whether such ship or

vessel may have been within the body of a country,

or upon the high seas, at the time when the services

were rendered or damage received, or necessaries

furnished, in respect of which such claim is made.

Admiralty Court Act, 1861

14

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 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.

Colonial Courts of Admiralty Act, 1890

2. Colonial Courts of Admiralty.—(1) Every court of

law in a British possession, which is for the time

being declared in pursuance of this Act to be a

Court of Admiralty, or which, if no such declaration

is in force in the possession, has therein original

unlimited civil jurisdiction, shall be a Court of

Admiralty, with the jurisdiction in this Act mentioned,

and may for the purpose of that jurisdiction,

exercise all the powers which it possesses for the

purpose of its other civil jurisdiction and such Court

in reference to the jurisdiction conferred by this Act

is in this Act referred to as a Colonial Court of

Admiralty. …

(2) The jurisdiction of a Colonial Court of Admiralty

shall, subject to the provisions of this Act, be over

the like places, persons, matters, and things, as the

admiralty jurisdiction of the High Court in England,

whether existing by virtue of any statute or

otherwise and the Colonial Court of Admiralty may

15

exercise such jurisdiction in like manner and to as

full an extent as the High Court in England, and

shall have the same regard as that Court to

international law and the comity of nations.

Colonial Courts of Admiralty (India) Act, 1891

2. Appointment of Colonial Courts of Admiralty.—

The following courts of unlimited civil jurisdiction are

hereby declared to be Colonial Courts of Admiralty,

namely:

(1) the High Court of Judicature at Fort William in

Bengal,

(2) the High Court of Judicature at Madras, and

(3) the High Court of Judicature at Bombay.”

13.The Republic of India has finally woken up to the need for

updating its admiralty law. The Admiralty (Jurisdiction and

Settlement of Maritime Claims) Act, 2017 has been made by

Parliament and has received the assent of the President on

9.8.2017, though it has not yet been brought into force. In this

Act, “maritime claim” is defined in Section 2(1)(f) as being a

claim referred to in Section 4 and a “maritime lien” is defined in

sub-section (g) of 2(1) as follows:

“2. Definitions

(1) In this Act,—

16

(g) “maritime lien” means a maritime claim against

the owner, demise charterer, manager or operator of

the vessel referred to in clauses (a) to (e) of sub-

section (1) of section 9, which shall continue to exist

under sub-section (2) of that section;”

Section 4 reads as follows:

“4. Maritime Claim

(1) The High Court may exercise jurisdiction to hear

and determine any question on a maritime claim,

against any vessel, arising out of any—

(a) dispute regarding the possession or ownership

of a vessel or the ownership of any share therein;

(b) dispute between the co-owners of a vessel as to

the employment or earnings of the vessel;

(c) mortgage or a charge of the same nature on a

vessel;

(d) loss or damage caused by the operation of a

vessel;

(e) loss of life or personal injury occurring whether

on land or on water, in direct connection with the

operation of a vessel;

(f) loss or damage to or in connection with any

goods;

(g) agreement relating to the carriage of goods or

passengers on board a vessel, whether contained in

a charter party or otherwise;

(h) agreement relating to the use or hire of the

vessel, whether contained in a charter party or

otherwise;

(i) salvage services, including, if applicable, special

compensation relating to salvage services in

17

respect of a vessel which by itself or its cargo

threatens damage to the environment;

(j) towage;

(k) pilotage;

(l) goods, materials, perishable or non-perishable

provisions, bunker fuel, equipment (including

containers), supplied or services rendered to the

vessel for its operation, management, preservation

or maintenance including any fee payable or

leviable;

(m) construction, reconstruction, repair, converting

or equipping of the vessel;

(n) dues in connection with any port, harbour, canal,

dock or light tolls, other tolls, waterway or any

charges of similar kind chargeable under any law for

the time being in force;

(o) claim by a master or member of the crew of a

vessel or their heirs and dependents for wages or

any sum due out of wages or adjudged to be due

which may be recoverable as wages or cost of

repatriation or social insurance contribution payable

on their behalf or any amount an employer is under

an obligation to pay to a person as an employee,

whether the obligation arose out of a contract of

employment or by operation of a law (including

operation of a law of any country) for the time being

in force, and includes any claim arising under a

manning and crew agreement relating to a vessel,

notwithstanding anything contained in the provisions

of sections 150 and 151 of the Merchant Shipping

Act, 1958;

(p) disbursements incurred on behalf of the vessel

or its owners;

(q) particular average or general average;

18

(r) dispute arising out of a contract for the sale of

the vessel;

(s) insurance premium (including mutual insurance

calls) in respect of the vessel, payable by or on

behalf of the vessel owners or demise charterers;

(t) commission, brokerage or agency fees payable

in respect of the vessel by or on behalf of the vessel

owner or demise charterer;

(u) damage or threat of damage caused by the

vessel to the environment, coastline or related

interests; measures taken to prevent, minimise, or

remove such damage; compensation for such

damage; costs of reasonable measures for the

restoration of the environment actually undertaken

or to be undertaken; loss incurred or likely to be

incurred by third parties in connection with such

damage; or any other damage, costs, or loss of a

similar nature to those identified in this clause;

(v) costs or expenses relating to raising, removal,

recovery, destruction or the rendering harmless of a

vessel which is sunk, wrecked, stranded or

abandoned, including anything that is or has been

on board such vessel, and costs or expenses

relating to the preservation of an abandoned vessel

and maintenance of its crew; and

(w) maritime lien.

Explanation.—For the purposes of clause (q), the

expressions “particular average” and “general

average” shall have the same meanings as

assigned to them in sub-section (1) of section 64

and sub-section (2) of section 66 respectively of the

Marine Insurance Act, 1963.

(2) While exercising jurisdiction under sub-section

(1), the High Court may settle any account

outstanding and unsettled between the parties in

19

relation to a vessel, and direct that the vessel, or

any share thereof, shall be sold, or make such other

order as it may think fit.

(3) Where the High Court orders any vessel to be

sold, it may hear and determine any question

arising as to the title to the proceeds of the sale.

(4) Any vessel ordered to be arrested or any

proceeds of a vessel on sale under this Act shall be

held as security against any claim pending final

outcome of the admiralty proceeding.”

14.Under Section 5 of the Act, the High Court may order for

the arrest of a vessel which is within its jurisdiction for the

purpose of providing security against a maritime claim. Under

Section 6 of the said Act, the High Court may also exercise

admiralty jurisdiction by an order in personam in respect of the

maritime claims referred to in Section 4. Section 9 of the Act

sets out the inter se priority of maritime liens, but in so doing

also informs us that they are restricted to five subject matters

only. Section 9 reads as follows:

“Sec. 9 Inter se priority on maritime lien

(1) Every maritime lien shall have the following

order of inter se priority, namely:—

(a) claims for wages and other sums due to the

master, officers and other members of the vessel’s

complement in respect of their employment on the

vessel, including costs of repatriation and social

20

insurance contributions payable on their behalf;

(b) claims in respect of loss of life or personal injury

occurring, whether on land or on water, in direct

connection with the operation of the vessel;

(c) claims for reward for salvage services including

special compensation relating thereto;

(d) claims for port, canal, and other waterway dues

and pilotage dues and any other statutory dues

related to the vessel;

(e) claims based on tort arising out of loss or

damage caused by the operation of the vessel other

than loss or damage to cargo and containers carried

on the vessel.

(2) The maritime lien specified in sub-section (1)

shall continue to exist on the vessel notwithstanding

any change of ownership or of registration or of flag

and shall be extinguished after expiry of a period of

one year unless, prior to the expiry of such period,

the vessel has been arrested or seized and such

arrest or seizure has led to a forced sale by the

High Court:

Provided that for a claim under clause (a) of sub-

section (1), the period shall be two years from the

date on which the wage, sum, cost of repatriation or

social insurance contribution, falls due or becomes

payable.

(3) The maritime lien referred to in this section shall

commence—

(a) in relation to the maritime lien under clause (a)

of sub-section (1), upon the claimant’s discharge

from the vessel;

(b) in relation to the maritime liens under clauses (b)

to (e) of sub-section (1), when the claim arises,

21

and shall run continuously without any suspension

or interruption:

Provided that the period during which the vessel

was under arrest or seizure shall be excluded.

(4) No maritime lien shall attach to a vessel to

secure a claim which arises out of or results from—

(a) damage in connection with the carriage of oil or

other hazardous or noxious substances by sea for

which compensation is payable to the claimants

pursuant to any law for the time being in force;

(b) the radioactive properties or a combination of

radioactive properties with toxic, explosive or other

hazardous properties of nuclear fuel or of

radioactive products or waste.”

15.Section 12 states that the Code of Civil Procedure is to

apply in all proceedings before the High Court insofar as it is

not inconsistent or contrary to the provisions of the Act. By

Section 17, the Admiralty Court Acts of 1840 and 1861 and the

Colonial Courts of Admiralty Acts of 1890 and 1891 stand

repealed. Also, the Letters Patent of 1865, insofar as it applies

to the admiralty jurisdiction of the Bombay, Calcutta and Madras

High Courts, also stands repealed.

16.An admiralty action in the courts of India commences

against a vessel to enforce what is called a “maritime claim”.

Though India is not a signatory to the Brussels Convention of

22

1952, a long list of maritime claims is given in Article 1 thereof.

Suffice it to say that sub-clause (k) of Article 1 states that

important materials wherever supplied to a ship for her

operation or maintenance would fall within the definition of a

maritime claim. A maritime lien, on the other hand, attaches to

the property of the vessel whenever the cause of action arises,

and travels with the vessel and subsists whenever and

wherever the action may be commenced. In The Bold

Buccleugh, (1852) 7 Moo PCC 267, Sir John Jervis defined

maritime lien as follows:-

“[A] maritime lien is well defined … to mean a claim

or privilege upon a thing to be carried

into effect by legal process … that process to be a

proceeding in rem…. This claim or privilege travels

with the thing into whosesoever possession it may

come. It is inchoate from the moment the claim or

privilege attaches, and, when carried into effect by

legal process by a proceeding in rem, relates back

to the period when it first attached.”

17.This judgment was referred to in M.V. Elisabeth and

others v. Harwan Investment and Trading Private Limited,

1993 Supp. (2) SCC 433 at 462, paragraph 56 and Epoch

Enterrepots v. M.V. Won Fu (2003) 1 SCC 305 at 311,

paragraph 13. In M.V. Al Quamar v. Tsavliris Salvage

23

(International) Ltd. and others, (2000) 8 SCC 278 at 301, the

Supreme Court observed as follows:-

“33.Be it noted that there are two attributes to

maritime lien: (a) a right to a part of the property in

the res; and (b) a privileged claim upon a ship,

aircraft or other maritime property in respect of

services rendered to, or injury caused by that

property. Maritime lien thus attaches to the property

in the event the cause of action arises and remains

attached. It is, however, inchoate and very little

positive in value unless it is enforced by an action.

It is a right which springs from general maritime law

and is based on the concept as if the ship itself has

caused the harm, loss or damage to others or to

their property and thus must itself make good that

loss. (See in this context Maritime Law by

Christopher Hill, 2

nd

Edn.).”

18.Only a small number of claims give rise to maritime liens

as was noted in M.V. Won Fu (supra). Paragraph 19 of the

said judgment states as follows:-

“19.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.”

(at pages 314-315)

24

19.In an illuminating judgment of the Calcutta High Court

Justice Mrs. Ruma Pal, as she then was, dealt with an action in

rem filed in the admiralty court jurisdiction in Calcutta. With

respect to the plaintiffs claim of the price of bunkers supplied to

the ship owners, the Court held that the supply of necessaries

to a vessel does not create a maritime lien. In Bailey

Petroleum Company v. Owners and parties interested in the

vessel M.V. Dignity, (1993) 2 CHN 208 at 213-214, the learned

Judge held:

“16. It has been established by a wealth of

decisions that the supply of necessaries does not

create a maritime lien. Indeed the point was

conceded by the counsel for the plaintiff at the

hearing. It is only necessary to refer to two

authorities on the point to emphasize the fact that

this Court does not base its conclusion on the

concession of the plaintiff’s counsel but on the

authorities cited.

17. It is not disputed that the jurisdiction of this court

is governed by the Admiralty Court Act 1861 (Imp).

Section 5 of the 1861 Act provides:

“5. 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

25

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.”

18. In the case of Laws and others and Smith: the

“Rio Tinto”: 9 PD 356, the plaintiff had supplied

necessaries to the vessel. The Trial Court held that

the necessaries were supplied on the credit of the

vessel and that the plaintiff had a right to a maritime

lien and that, therefore, in spite of the fact that the

vessel had been transferred subsequent to the

supply of necessaries, the ship was liable. Sir

James Hannen who delivered the opinion of the

Privy Council held that the phrase “the court shall

have jurisdiction” simply gave the Court jurisdiction

but did not create any lien. A distinction was drawn

between a provision for proceedings by arrest of the

ship and the express creation of a lien. The Court

held:

“The Admiralty Court Act, 1861 (24 Vict.

c. 10) and the decisions upon it must

next be considered. By the 5th section it

is enacted that the High Court shall

have jurisdiction over a 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

26

England or Wales.

The words ‘the High Court of Admiralty

shall have jurisdiction’, mean only what

they purport to say, neither more nor

less, that is, that the court shall take

judicial cognizance of the cases

provided for.

The conclusion [is] that there is nothing

from which it can be inferred that by the

use of the words “the court shall have

jurisdiction” the Legislature intended to

create a maritime lien with respect to

necessaries supplied within the

possession.”

19. In Shell Oil Co. v. The Ship “Lastrigoni” 3 ALR

399 the plaintiff had filed a suit for enforcement of

the claim on the ground of bunkers provided by the

plaintiff under a contract between the plaintiff and

the agents of the time charterer. The contract

provided that the sale and delivery of inter

alia necessaries would be made on the faith and

credit of the vessel. The arguments before the Court

were that the supply of fuel itself created maritime

lien to which the ship was subject and which could

be enforced by an action in rem in admiralty. The

second was that, in the circumstances, an action in

rem lay notwithstanding the absence of any

contractual liability on the part of the owners to pay

for the bunkers supplied and that this was so by

virtue of section 6 of the Admiralty Court Act 1840

(Imp), and section 5 of the Admiralty Court Act 1861

(Imp), either with or without the aid of cl. 6.4 of the

Bunker Fuel Oil Contract. Menzies, J. held:

27

“The matter was, I think, put at rest by

the decision of the Privy Council in the

Rio Tinto (1884) 9 APP Cas 356, by

which it was decided that no maritime

lien attaches to a ship in respect of

coals or other necessaries supplied to

it.”

20.In Saba International Shipping and Project Investment

Private Limited v. Owners and parties interested in the

Vessel M.V. Brave Eagle, previously known as M.V. Lima-I

and others, (2002) 2 CHN 280 at 287-288 and 289-290,

another single Judge of the same High Court differentiated

between a maritime claim and a maritime lien and held as

follows:

“20. Now the issue is what is a maritime claim and

what is a maritime lien. These questions are to be

answered in this proceeding before continuation of

the interim order or passing any further interim

order.

21. All cases of maritime lien are based on maritime

claims but all maritime claims do not give rise to a

maritime lien on the ship. Normally a lien in the

general law is a rather limited right over some one

else’s property. It is a right to retain possession of

that property usually to receive a claim. But a

maritime lien differs from other liens in one very

important respect. Liens generally require

possession of the ‘res’ before they can come into

effect. As an example an innkeeper has a lien over

28

his guest’s luggage against the payment of the bill,

but if the guest is smart enough to remove his

luggage, the innkeeper is left without a lien. But a

maritime lien does not require prior possession for

its creation. In a fit and proper case a claimant on

the strength of his maritime lien can secure the

arrest of a ship which then comes under the

possession of the court and she cannot be moved

without the court’s order.

22. ‘No Indian Statute defines a maritime claim’ is

the clear finding of Supreme Court in M.V.

Elisabeth (AIR 1993 SC 1014, para 85, page 1040).

But our Supreme Court followed the provisions of

the Supreme Court Act 1981 of England where

maritime claims have been listed on the basis of

Brussels Convention of 1952 on the Arrest of Sea

Going Ships. Under Article 1 of the said Convention

various maritime claims have been catalogued. Out

of which 1(k) answers the description of the claims

of the plaintiff in this proceeding. Article 1(k) reads

“goods or materials whether supplied to a ship for

her operation or maintenance”. Even though India is

not a signatory to the Brussels Convention, but the

Supreme Court held that the provisions of these

Conventions should be regarded as part of

International Common Law and these provisions

‘supplement’ and ‘complement’ our maritime laws

and fill up the lacunae in The Merchant Shipping

Act.

23. But in Elisabeth, the Hon’ble Supreme Court did

not notice any convention on maritime lien.

However the Hon’ble Supreme Court accepted in

para 57 of Elisabeth the judicial determination of the

concept of ‘maritime lien’ by English courts and

which I quote as follows:

29

“A maritime lien is a privileged claim

against the ship or a right to a part of the

property in the ship, and it “travels” with

the ship. Because the ship has to “pay

for the wrong it has done”, it can be

compelled to do so by a forced sale.

(See The Bold Buccleugh, (1852) 7 Moo

PCC 267).”

24. A definition of maritime lien has also been given

in Stroud’s Judicial Dictionary, 5th Edition page

1466 to the following effect:

“A maritime lien may be defined as a

right specifically binding a ship, her

furniture, tackle, cargo, and freight, or

any of them, for payment of a claim

founded upon the maritime law and

entitling the claimant to take judicial

proceedings against the property bound

to enforce, or to ascertain and enforce,

satisfaction of his demand; thus, a

salvor has a maritime lien on the

property saved for such an amount as a

court exercising admiralty jurisdiction

shall award. Maritime lien are

distinguished from all other liens in

these two chief particulars: (i) they are in

no way founded on possession or

property in the claimant, (ii) they are

exercised by taking proceedings against

the property itself in a form of action

styled an action in rem (The Glasgow

Packet, 2 Rob. W. 312; The Repulse, 4

Notes of Cas. 170), and, from this and

their secret nature, they closely

resemble the species of security known

to Roman law under the name of

30

hypotheca (Dig. xiii). Interest, if any

allowed, and the costs of enforcing a

claim for which a maritime lien exists,

will be included in such lien (The

Margaret, 3 Hagg. Adm. 240).”

25. According to the well known treatise of Thomas

on maritime lien, the following claims may give rise

to maritime lien namely:

“(a) Damage done by a ship

(b) Salvage

(c) Seamen’s wages

(d) Master’s wages and disbursements

(e) Bottomry and respondentia”.

26. The aforesaid passage from Thomas has been

approved by the Division Bench of Calcutta High

Court in Mohammed Saleh Behbehani &

Company v. Bhoja Trader, reported in (1983) 2

Calcutta Law Journal 334. At 344 of the report, the

learned Judges of the Division Bench referred to

maritime liens as representing ‘a small cluster of

claims’ and referred to the aforementioned passage

from Thomas.

(27) and (28) xxx xxx xxx

29. Counsel for the respondent also relies on a

passage from Roscoe on The Admiralty Jurisdiction

and Practice, 5

th

Edition. While dealing with

necessaries, the learned author has stated as

follows:

“Persons who have supplied a ship,

whether British or foreign, with

necessaries have not a maritime lien

upon her, and the vessel does not

become chargeable with the debt till the

31

suit is actually instituted; consequently

there can be no claim against a ship

which has been sold, even with notice of

such a claim in respect of which an

action has not been commenced, and a

want of caution in supplying the

necessaries may, it would seem, cause

a postponement of claims to others

more carefully begun. The necessaries

claimant is not a secured creditor until

the moment of arrest.”

30. There is a direct judgment on this point by a

learned Judge of this court in Bailey Petroleum,

referred to above.

31. Relying on the judgment of the Privy Council

in Rio Tinto, reported in 1884 (9) Appeal Cases 356

and the judgment in Shell Oil Co. v. The Ship

Lastrigoni, reported in 1974 (3) All England Reports

399, the learned single Judge held in Bailey

Petroleum that a claim arising out of the supply of

necessaries may give rise to a statutory right of

action ‘in rem’ under section 5 of Admiralty Court

Act, 1861 but it does not give rise to maritime lien.

Paragraphs 23 and 24 of the judgment in Bailey

Petroleum make it clear and I quote them in

extenso:

“23. Whereas a maritime lien attaches to

the res and travels with it and may be

enforced against a subsequent

purchaser of the res, a statutory right of

action in rem is defeated by a change of

ownership. This later principle follows

from the nature of the right described in

32

the preceding paragraph.

24. This view of the law is supported by

a catena of decisions.”

21.In fact, the International Convention on Maritime Lien and

Mortgages, 1993 defines maritime liens in Article 4 as follows:-

“Article 4: Maritime liens

I. Each of the following claims against the owner,

demise charterer, manager or operator of the vessel

shall be secured by a maritime lien on the vessel:

(a) claims for wages and other sums due to the

master, officers and other members of the vessel’s

complement in respect of their employment on the

vessel, including costs of repatriation and social

insurance contributions payable on their behalf;

(b) claims in respect of loss of life or personal injury

occurring, whether on land or on water, in direct

connection with the operation of the vessel;

(c) claims for reward for the salvage of the vessel;

(d) claims for port, canal, and other waterway dues

and pilotage dues;

(e) claims based on tort arising out of physical loss

or damage caused by the operation of the vessel

other than loss of or damage to cargo, containers

and passengers’ effects carried on the vessel.

2. No maritime lien shall attach to a vessel to secure

claims as set out in subparagraphs (b) and (e) of

33

paragraph 1 which arise out of or result from:

(a) damage in connection with the carriage of oil or

other hazardous or noxious substances by sea for

which compensation is payable to the claimants

pursuant to international conventions or national law

providing for strict liability and compulsory insurance

or other means of securing the claims; or

(b) the radioactive properties or a combination of

radioactive properties with toxic, explosive or other

hazardous properties of nuclear fuel or of

radioactive products or waste.”

22.Article 8 then states that the characteristics of such liens

are as follows:-

“Article 8: Characteristics of maritime liens

Subject to the provisions of article 12, the maritime

liens follow the vessel, notwithstanding any change

of ownership or of registration or of flag.”

It is, thus, clear that a claim for necessaries supplied to a

vessel does not become a maritime lien which attaches to the

vessel.

23.Shri Divan, however, cited U.S. case law in support of his

submission that a claim for necessaries raises a maritime lien.

We are afraid that given the Indian case law on the subject read

with the various international Conventions referred to above,

34

the U.S. seems to stand alone in considering that claims for

necessaries would amount to maritime lien enforceable against

the vessel as such wherever it goes. It is clear that in our

country at least claims for necessaries, though maritime claims,

do not raise a maritime lien.

24.What arises next, therefore, is the manner of enforcement

of maritime claims in our Courts. In M.V. Elisabeth (supra) at

459-462, this Court laid down, in some detail, the basic features

of the admiralty jurisdiction in this country, and how maritime

claims are to be enforced. The Court held:

“Admiralty Law confers upon the claimant a right in

rem to proceed against the ship or cargo as

distinguished from a right in personam to proceed

against the owner. The arrest of the ship is regarded

as a mere procedure to obtained security to satisfy

judgment. A successful plaintiff in an action in

rem has a right to recover damages against the

property of the defendant. “The liability of the

shipowner is not limited to the value of

the res primarily proceeded against …. An action …

though originally commenced in rem, becomes a

personal action against a defendant upon

appearance, and he becomes liable for the full

amount of a judgment unless protected by the

statutory provisions for the limitation of liability”.’

(Roscoe’s Admiralty Practice, 5th ed. p. 29)

35

The foundation of an action in rem, which is a

peculiarity of the Anglo-American law, arises from a

maritime lien or claim imposing a personal liability

upon the owner of the vessel. A defendant in an

admiralty action in personam is liable for the full

amount of the plaintiff’s established claim. Likewise,

a defendant acknowledging service in an action in

rem is liable to be saddled with full liability even

when the amount of the judgment exceeds the

value of the res or of the bail provided. An action in

rem lies in the English High Court in respect of

matters regulated by the Supreme Court Act 1981,

and in relation to a number of claims the jurisdiction

can be invoked not only against the offending ship

in question but also against a ‘sistership’ i.e., a ship

in the same beneficial ownership as the ship in

regard to which the claim arose.

“The vessel which commits the

aggression is treated as the offender, as

the guilty instrument or thing to which

the forfeiture attaches, without any

reference whatsoever to the character

or conduct of the owner ….” (Per Justice

Story, The United States v. The Big

Malek Adhel [43 US (2 How) 210, 233

(1844)]).”

xxx xxx xxx

A ship may be arrested (i) to acquire jurisdiction; or

(ii) to obtain security for satisfaction of the claim

when decreed; or (iii) in execution of a decree. In

the first two cases, the court has the discretion to

insist upon security being furnished by the plaintiff

to compensate the defendant in the event of it being

found that the arrest was wrongful and was sought

and obtained maliciously or in bad faith. The

claimant is liable in damages for wrongful arrest.

36

This practice of insisting upon security being

furnished by the party seeking arrest of the ship is

followed in the United States, Japan and other

countries. The reason for the rule is that a wrongful

arrest can cause irreparable loss and damages to

the shipowner; and he should in that event be

compensated by the arresting party. (See Arrest of

Ships by Hill, Soehring, Hosoi and Helmer, 1985).

The attachment by arrest is only provisional and its

purpose is merely to detain the ship until the matter

has been finally settled by a competent court. The

attachment of the vessel brings it under the custody

of the Marshal or any other authorized officer. Any

interference with his custody is treated as a

contempt of the court which has ordered the arrest.

But the Marshal’s right under the attachment order

is not one of possession, but only of custody.

Although the custody of the vessel has passed from

the defendant to the Marshal, all the possessory

rights which previously existed continue to exist,

including all the remedies which are based on

possession. The warrant usually contains a

monition to all persons interested to appear before

the court on a particular day and show cause why

the property should not be condemned and sold to

satisfy the claim of the plaintiff.

The attachment being only a method of

safeguarding the interest of the plaintiff by providing

him with a security, it is not likely to be ordered if the

defendant or his lawyer agrees to “accept service

and to put in bail or to pay money into court in lieu

of bail”. (See Halsbury’s Laws of England, 4th edn.,

Vol. 1, p. 375 etc.).

xxx xxx xxx

37

A personal action may be brought against the

defendant if he is either present in the country or

submits to jurisdiction. If the foreign owner of an

arrested ship appears before the court and deposits

security as bail for the release of his ship against

which proceedings in rem have been instituted, he

submits himself to jurisdiction.

An action in rem is directed against the ship itself to

satisfy the claim of the plaintiff out of the res. The

ship is for this purpose treated as a person. Such an

action may constitute an inducement to the owner to

submit to the jurisdiction of the court, thereby

making himself liable to be proceeded against by

the plaintiff in personam. It is, however, imperative

in an action in rem that the ship should be within

jurisdiction at the time the proceedings are started.

A decree of the court in such an action binds not

merely the parties to the writ but everybody in the

world who might dispute the plaintiff’s claim.

It is by means of an action in rem that the arrest of a

particular ship is secured by the plaintiff. He does

not sue the owner directly and by name; but the

owner or any one interested in the proceedings may

appear and defend. The writ is issued to “owners

and parties interested in the property proceeded

against”. The proceedings can be started in

England or in the United States in respect of a

maritime lien, and in England in respect of a

statutory right in rem. A maritime lien is a privileged

claim against the ship or a right to a part of the

property in the ship, and it “travels” with the ship.

Because the ship has to “pay for the wrong it has

done”, it can be compelled to do so by a forced

sale. [See Bold Buccleaugh (The) [Harmer v. Bell,

(1851) 7 Moo PC 267 : 13 ER 884]]. In addition to

maritime liens, a ship is liable to be arrested in

England in enforcement of statutory rights in

38

rem (Supreme Court Act 1981). If the owner does

not submit to the jurisdiction and appear before the

court to put in bail and release the ship, it is liable to

be condemned and sold to satisfy the claims

against her. If, however, the owner submits to

jurisdiction and obtains the release of the ship by

depositing security, he becomes personally liable to

be proceeded against in personam in execution of

the judgment if the amount decreed exceeds the

amount of the bail. The arrest of the foreign ship by

means of an action in rem is thus a means of

assuming jurisdiction by the competent court.”

25.The Court went on to hold that though Indian statutes lag

behind international law in this context, the principles in these

Conventions derived from the common law of nations, will be

treated as a part of the common law of India. Paragraph 76 in

this behalf reads 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 Carriage of Goods by Sea Act,

1925, India never became a party to the

International Convention laying down those rules

(International 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, 1924. The United

Kingdom repealed the Carriage of Goods by Sea

Act, 1924 with a view of incorporating the Visby

Rules adopted by the Brussels Protocol of 1968.

39

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

Seagoing Ships, Brussels, 1952. 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 [(a) International

Convention relating to the Arrest of Seagoing Ships,

Brussels, May 10, 1952 (IMC); (b) International

Convention on Certain Rules concerning Civil

Jurisdiction in Matters of Collision, Brussels, May

10, 1952 (IMC); (c) International Convention for the

Unification of Certain Rules relating to Penal

Jurisdiction in Matters of Collision, Brussels, May

10, 1952 (IMC); and (d) International Conventions

for the Unification of Certain Rules of Law relating to

Maritime Liens and Mortgages, Brussels, April 10,

1926, and the Revised Convention on Maritime

Lines and Mortgages, Brussels, May 29, 1967

(IMC).] 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

40

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.”

(at pages 469-470)

A list of maritime claims was then referred to in paragraph

84 and the Brussels Convention relating to the Arrest of Sea-

Going Ships, 1992 was referred to and followed.

26.The next important aspect that was argued was that the

ownership of the vessel to enforce a maritime claim has to be

seen at the stage of institution of the suit and not at the stage

of arrest. The general rule that is contained in our country as to

what crystallises on the date of a suit is reflected in

Rameshwar and others v. Jot Ram and others, 1976 1 SCR

847 at 851-52. This Court held:-

“In P. Venkateswarlu v. Motor & General

Traders [(1975) 1 SCC 770, 772 : AIR 1975 SC

1409, 1410] this Court dealt with the adjectival

activism relating to post-institution circumstances.

Two propositions were laid down. Firstly, it was held

that [SCC p. 772, para 4] ‘it is basic to our

processual jurisprudence that the right to relief must

be judged to exist as on the date a suitor institutes

the legal proceeding.’ This is an emphatic statement

that the right of a party is determined by the facts as

they exist on the date the action is instituted.

41

Granting the presence of such facts, then he is

entitled to its enforcement. Later developments

cannot defeat his right because, as explained

earlier, had the court found his facts to be true the

day he sued he would have got his decree. The

Court’s procedural delays cannot deprive him of

legal justice or rights crystallised in the initial cause

of action. This position finds support in Bhajan

Lal v. State of Punjab [(1971) 1 SCC 34].

The impact of subsequent happenings may now be

spelt out. First, its bearing on the right of action,

second, on the nature of the relief and third, on its

impotence to create or destroy substantive rights.

Where the nature of the relief, as originally sought,

has become obsolete or unserviceable or a new

form of relief will be more efficacious on account of

developments subsequent to the suit or even during

the appellate stage, it is but fair that the relief is

moulded, varied or reshaped in the light of updated

facts. Patterson [Patterson v. State of Alabama,

(1934) 294 US 600, 607] illustrates this position. It is

important that the party claiming the relief or change

of relief must have the same right from which either

the first or the modified remedy may flow.

Subsequent events in the course of the case cannot

be constitutive of substantive rights enforceable in

that very litigation except in a narrow category (later

spelt out) but may influence the equitable

jurisdiction to mould reliefs. Conversely, where

rights have already vested in a party, they cannot be

nullified or negated by subsequent events save

where there is a change in the law and it is made

applicable at any stage. Lachmeshwar Prasad

Shukul v. Keshwar Lal Chaudhuri [1940 FCR 84 :

AIR 1941 FC 5] falls in this category. Courts of

justice may, when the compelling equities of a case

oblige them, shape reliefs — cannot deny rights —

to make them justly relevant in the updated

42

circumstances. Where the relief is discretionary,

courts may exercise this jurisdiction to avoid

injustice. Likewise, where the right to the remedy

depends, under the statute itself, on the presence or

absence of certain basic facts at the time the relief

is to be ultimately granted, the Court, even in

appeal, can take note of such supervening facts

with fundamental impact. Venkateswarlu, read in its

statutory setting, falls in this category.”

27.However, the International Convention on the Arrest of

Ships, 1999, in which India participated, states as follows:-

“Article 3: Exercise of right of arrest

1. Arrest is permissible of any ship in respect of

which a maritime claim is asserted if:

(a) the person who owned the ship at the time when

the maritime claim arose is liable for the claim and

is owner of the ship when the arrest is effected; or

(b) – (e) xxx xxx xxx

(2) xxx xxx xxx

3. Notwithstanding the provisions of paragraphs 1

and 2 of this article, the arrest of a ship which is not

owned by the person liable for the claim shall be

permissible only if, under the law of the State where

the arrest is applied for, a judgment in respect of

that claim can be enforced against that ship by

judicial or forced sale of that ship.”

28.India is not a signatory to the aforesaid Convention, yet

following M.V. Elisabeth (supra), this Convention becomes part

43

of our national law and must, therefore, be followed

by this Court. Article 3(1)(a) is in two parts. First, arrest is only

permissible of any ship if a maritime claim is

asserted against the person who owned the ship at a time when

the maritime claim arose for which the owner is liable, and

second, that the same ship owner should be the owner of the

ship when the arrest is effected. Thus, article 3(1)(a) sets the

controversy at rest because a maritime claim can be asserted

only at the time the arrest is effected and not at the time of the

institution of the suit. This being so, Shri Divan’s reliance on

English judgments to the contrary, namely Monica S. (1967) 2

Lloyd’s Rep. 113 as followed in Re, Aro Co Limited 1980 1 All

ER 1067, cannot be followed. Both judgments were prior to the

1999 Convention and it is this Convention that must be

followed. It is, therefore, clear that the relevant date on which

ownership of the vessel is to be determined is the date of arrest

and not the date of institution of the suit.

29.At this stage it becomes important to refer to the

agreement dated 18.1.2000 entered into between the petitioner

44

and the original owner of the vessel, Third Element Enterprises.

The agreement has been set out fully earlier in this judgment. A

perusal of the agreement would show that so far as the

appellant is concerned, performance is over — namely that a

certain quantity of bunkers has in accordance with the original

agreement been supplied. Indeed this is expressly recited in

the later agreement. It is only performance under the original

agreement that is lacking from the side of the owner of the

vessel, namely Third Element Enterprises. The very first clause

of the agreement shows that the ship owners confirm that they

owe to the appellant the original amount of the bunkers plus

interest plus legal costs, which amounts are parasitic on the

original invoice amount of US$ 94,611.25, and need to be

recovered in order to put the appellant in the same position as if

the original contract had been performed by Third Element

Enterprises. The agreement then goes on to state that since the

vessel is being chartered for a voyage from Bangkok and will

earn freight, the part of the freight amounting to the original

invoice amount plus interest plus legal costs will be paid directly

by the charterers of the vessel to the bank account of the

45

appellants.

30.Sections 62 and 63 of the Contract Act read as follows:-

“62. Effect of novation, rescission, and alteration

of contract.—If the parties to a contract agree to

substitute a new contract for it, or to rescind or alter

it, the original contract need not be performed.

63. Promisee may dispense with or remit

performance of promise.— Every promisee may

dispense with or remit, wholly or in part, the

performance of the promise made to him, or may

extend the time for such performance, or may

accept instead of it any satisfaction which he thinks

fit.”

31.It is the appellant’s case that Section 63 of the Contract

Act is attracted to the facts of the present case whereas it is the

respondent’s case that Section 62 is so attracted, the result

being that the original agreement is substituted by a fresh

agreement.

32.The respondent’s case is that Section 62 applies, since

the original contract has been “altered”. This being the case,

the original contract need not be performed.

33.It is clear that where parties to a contract agree to

substitute a completely different contract for the first, or to

46

rescind a contract, the performance under the original contract

and/or rescinded contract comes to an end. When parties to a

contract “alter” a contract, the question that has to be answered

is as to whether the original contract is altered in such a

manner that performance under it is at an end.

34.In Juggilal Kamlapat v. N.V. Internationale Crediet-En-

Handels Vereeninging ‘Rotter-dam’, AIR 1955 Cal 65, the

original contract dated 10.8.1950 contained an arbitration

clause. In paragraph 11 of the judgment, it was found as a fact

that the original contract was modified in certain material

particulars. Despite this, it was found that since the

modifications do not go to the root of the original contract and

do not change its essential character, the facts do not warrant

the inference that the parties intended to rescind the original

contract. The High Court held:-

“14. In the present case the modifications do not go

to the very root of the first contract and do not

change its essential character. The facts do not

warrant the inference that the parties intended to

rescind the contract, dated 10-8-1950. The April

arrangement was entered into in response to

pressing demands for delivery under that contract

and with a view to implement it. The arrangement

47

has no independent contractual force, no meaning

and content separately from and independently of

the original contract.

15. The effect of the alterations or modifications is

that there is a new arrangement; in the language of

Viscount Haldane in 1918 A. C. 1 at p. 17 (A),

“a new contract containing as an entirety the

old terms together with and as modified by the

new terms incorporated.”

The modifications are read into and become part

and parcel of the original contract. The original

terms also continue to be part of the contract and

are not rescinded and/or superseded except in so

far as they are inconsistent with the modifications.

Those of the original terms which cannot make

sense when read with the alterations must be

rejected. In my view the arbitration clause in this

case is in no way inconsistent with the subsequent

modifications and continues to subsist.”

(at page 67)

35.We approve of the said judgment as laying down the

correct law on the expression “alter” in Section 62 of the

Contract Act. In order that a contract that is altered in material

particulars fall under Section 62, it must be clear that the

alteration must go to the very root of the original contract and

change its essential character, so that the modified contract

must be read as doing away with the original contract. If the

48

modified contract has no independent contractual force, in that

it has no meaning and content separately from and

independently of the original contract, it is clear that there is no

new contract which comes into being. The original terms

continue to be part of the modified contract except to the extent

that they are inconsistent with the modifications made.

36.On the other hand, Section 63 of the Contract Act would

clearly apply to the facts of the present case. Illustration “c” to

Section 63 is apposite, and reads as follows:-

“(c)A owes B 5,000 rupees. C pays to B 1,000

rupees and B accepts them, in satisfaction of his

claim on A. This payment is a discharge of the whole

claim.”

37.The aforesaid illustration makes it clear that a promisee

may accept satisfaction from a third party which then

discharges the promisor from further performance of the original

contract.

38.In Kapur Chand Godha v. Mir Nawab Himayatalikhan

Azamjah, (1963) 2 SCR 168, one Baboo Mull and Company

sold and delivered to the Prince of Berar various articles of

jewellery. The jewellery was, in fact, delivered by the appellants

49

to the Prince. Several payments were made by a Princes

Debts Settlement Committee. Ultimately, a payment for a sum

of Rs.27,79,078/- was made which was received by the

appellant stating that payment had been made in full.

39.Since a balance of Rs.9,99,940/- still remained, the

appellants filed a suit against the respondent-Prince. The suit

was allowed by the trial court but dismissed by the first

Appellate Court which came to a contrary conclusion. The

Supreme Court agreed with the Appellate Court in dismissing

the suit. It was, therefore, held:

“There was some difference of evidence as to

whether Ex. C bore the signature of Kapurchand

when it was first presented to Madhava Rao or

whether the signature was later put on it. With that

difference we are not now concerned. Nor are we

concerned with certain minor discrepancies

between the evidence of the two witnesses referred

to above. The substantial result of the evidence of

the two witnesses to whom we have referred is that

whatever reluctance Kapurchand might have had in

accepting Rs. 20 lacs in full satisfaction of the claim

of the appellants, he ultimately agreed to do so. Not

only did he agree, but he actually endorsed full

satisfaction and payment on all the promissory

notes and thereafter he received payment of the

second instalment of Rs. 8,75,000/ which along with

the first instalment of Rs.11,25,000/- made up the

sum of Rs. 20 lacs. On these facts which are

50

established by the evidence given on behalf of the

appellants themselves, the only conclusion is that

there was full satisfaction of the claim of the

appellants.

The legal position is clear enough. Section 63 of the

Indian Contract Act reads:

“Every promisee may dispense with or

remit, wholly or in part, the performance

of the promise made to him, or may

extend the time for such performance or

may accept instead of it any satisfaction

which he thinks fit.”

Illustration (c) to the section says

“A owes B 5000 rupees. C pays to B

1000 rupees, and B accepts them in

satisfaction of his claim on A. This

payment is a discharge of the whole

claim.”

It seems to us that this case is completely covered

by s. 63 and illustration (c) thereof. The appellants

having accepted payment in full satisfaction of their

claim, are not now entitled to sue the respondent for

the balance.”

(at pages 178-179)

This Court further went on to hold that the niceties of English

Law in the matter of accord and satisfaction do not concern

Indian Courts in view of Section 63 of the Act.

51

40.It is clear that on the facts in the present case as the

original contract has been performed only by one party to the

contract and not by the other, the second agreement is entered

into so that the promisee (i.e. the appellant herein) may accept,

instead of the original performance of the agreement, any

satisfaction which it thinks fit. Thus, the agreement deals with

one leg of the original transaction, the leg of payment which has

not yet been made while keeping the original transaction alive.

The other clauses of the agreement buttress this conclusion.

Under clause 4, the ship owner will not sell the vessel prior to

the satisfaction of the aforesaid claim. And, above all, under

clause (6), if for any reason the said payment is not made, the

appellant will be entitled to take all appropriate legal steps,

which include arrest of the vessel, for recovery of the said

amount. Even by clause (8), the original agreement is kept

alive. In the event that the ship is unable to proceed to

Bangkok, the appellant maintains its rights of recovery against

the shipowner and the vessel. If the original agreement had

disappeared by novatio, there is no question of taking

appropriate steps to arrest the vessel which is owned by the

52

ship owner who is the promisee and who has not yet performed

his part of the contract. A guarantee clause contained in

clauses 7 and 8 is again only an additional string to the bow of

payment. The fact that exclusive jurisdiction is given to the

courts at Piraeus, Greece has to be read with clause 6 of the

agreement. Obviously, arrest of the vessel for recovering the

aforesaid amount in case payment is not made can be at any

port, and not merely at Piraeus. For all these reasons, we are

of the view that the aforesaid agreement read as a whole does

not amount to a novatio of the original agreement, but was in

fact entered into keeping the original agreement alive in order

to ensure that payment under the original agreement is made to

the appellants. In fact, the agreement dated 18.1.2000 is not a

settlement of the original claim at a lesser amount. As has

been held by us, it is only a means of enforcing the payment leg

of the original transaction through a third party charterer.

Consequent upon the vessel not sailing to Bangkok or the third

party charterer failing to make payment, the original obligation

of the appellant continued, and was enforceable by the arrest of

the vessel. It is settled law that an agreement such as the

53

agreement dated 18.1.2000 is not to be construed legalistically

but is to be construed as ordinary businessmen would construe

it. In words which have become classic, Lord Wright in Hillas v.

Arcos, [1932] All ER 494 at 503-504, has stated:-

“Business men often record the most important

agreements in crude and summary fashion; modes

of expression sufficient and clear to them in the

course of their business may appear to those

unfamiliar with the business far from complete or

precise. It is, accordingly, the duty of the court to

construe such documents fairly and broadly, without

being too astute or subtle in finding defects; but, on

the contrary, the court should seek to apply the old

maxim of English law, verba ita sunt intelligenda ut

res magis valeat quam pereat. That maxim,

however, does not mean that the court is to make a

contract for the parties, or to go outside the words

they have used, except insofar as there are

appropriate implications of law, as, for instance, the

implication of what is just and reasonable to be

ascertained by the court as matter of machinery

where the contractual intention is clear but the

contract is silent on some detail. Thus in contracts

for future performance over a period, the parties

may not be able nor may they desire to specify

many matters of detail, but leave them to be

adjusted in the working out of the contract.”

41.Equally in Satya Jain and others v. Anis Ahmed

Rushdie and others (2013) 8 SCC 131 at 143, this Court has

held:-

54

“The principle of business efficacy is normally

invoked to read a term in an agreement or contract

so as to achieve the result or the consequence

intended by the parties acting as prudent

businessmen. Business efficacy means the power

to produce intended results. The classic test of

business efficacy was proposed by Bowen, L.J.

in Moorcock [(1889) LR 14 PD 64 (CA)]. This test

requires that a term can only be implied if it is

necessary to give business efficacy to the contract

to avoid such a failure of consideration that the

parties cannot as reasonable businessmen have

intended. But only the most limited term should then

be implied—the bare minimum to achieve this goal.

If the contract makes business sense without the

term, the courts will not imply the same. The

following passage from the opinion of Bowen, L.J.

in Moorcock [(1889) LR 14 PD 64 (CA)] sums up

the position: (PD p. 68)

“… In business transactions such as

this, what the law desires to effect by the

implication is to give such business

efficacy to the transaction as must have

been intended at all events by both

parties who are businessmen; not to

impose on one side all the perils of the

transaction, or to emancipate one side

from all the chances of failure, but to

make each party promise in law as

much, at all events, as it must have

been in the contemplation of both

parties that he should be responsible for

in respect of those perils or chances.”

55

42.Reading the agreement through the prism of a

businessman’s eye, it is clear that all that the agreement does

is to reinforce the original agreement by seeing that the

payment under the said agreement is made. We, therefore,

disagree with the view taken by the Division Bench that there is

a novatio of the original agreement in the fact circumstance of

the present case.

43.However, Mr. Banerjee cited a passage from Halsbury’s

Laws of England and strongly relied upon a Singapore High

Court judgment to argue otherwise. The passage from

Halsbury (Vol. 37, 4

th

ed., p. 287) reads as follows:-

“391. Effect of settlement or compromise. Where

the parties settle or compromise pending

proceedings, whether before, at or during the trial,

the settlement or compromise constitutes a new and

independent agreement between them made for

good consideration. Its effects are (1) to put an end

to the proceedings, for they are thereby spent and

exhausted; (2) to preclude the parties from taking

any further steps in the action, except where they

have provided for liberty to apply to enforce the

agreed terms; and (3) to supersede the original

cause of action altogether. A judgment or order

made by consent is binding unless and until it has

been set aside in proceedings instituted for that

purpose and it acts, moreover, as an estoppel by

record.”

56

44.It is important to remember that when Section 63 of the

Contract Act is to be applied, the High Courts in India have

cautioned that, being a wide departure from English law, the

Section alone should be enforced according to its terms and not

in accordance with English law. Thus, in New Standard Bank,

Ltd. v. Probodh Chandra Chakravarty, AIR 1942 Cal 87 at

90-91, the Calcutta High Court held:-

“By s. 63, Contract Act, every promisor may

dispense with or remit wholly or in part the

performance of the promise made to him or may

accept instead of it any satisfaction which he thinks

fit. This section makes a wide departure from the

English law, inasmuch as it does not refer to any

agreement and valuable consideration. It should not

therefore, be enlarged by any implication of English

doctrine: Chunna Mal Ram Nath v. Mool Chand-

Ram Bhagat [(1928) I.L.R. 9 Lah. 510 (518) : L.R.

55 I.A. 154 (160)].”

45.To similar effect is a judgment of the Bombay High Court

reported as Anandram Mangturam v. Bholaram Tanumal,

AIR 1946 Bom 1 at 6, in which Chagla, J. stated:-

“But the learned Judge expresses his opinion that

time can be extended even though the promisee

may not bind himself to do so. With great respect to

the learned Judge, I cannot accept that part of the

statement of the law. The learned Judge’s judgment

57

is based on English decisions to which he has

referred in his judgment. The Privy Council has

repeatedly warned Courts in India not to import

doctrines of common law when construing the plain

sections of the Contract Act and the danger of

relying on principles of Common Law is all the

greater in this case when one remembers that s. 63,

Contract Act constitutes a wide departure from the

principles of the English common law.”

46.Even if the passage in Halsbury is to be applied, it is

obvious that the settlement terms spoken of must be made for

good consideration, which is absent under Section 63. Also, for

such settlement to constitute a new and independent

agreement, it must put an end to the proceeding which is

thereby spent and exhausted; and it is for this reason that the

original cause of action is superseded altogether. We have

seen on the facts of the present case how, by the order dated

25.1.2000, the application in Suit No.1 of 2000 alone was

dismissed for non-prosecution, only interim orders were

vacated and it was stated that “the vessel shall cease to be

under arrest as of now.” It is clear, therefore, that in

accordance with the agreement dated 18.1.2000, the

proceedings were not put an end to. Neither was the original

58

cause of action superseded, as we have stated earlier. The

moment there is a breach of the settlement agreement, the

appellants would be entitled to take appropriate legal steps

against the ship owner, including the arrest of the vessel, which

can only be if the original contract still subsists.

47.Mr. Banerjee laid great reliance on a judgment of the

Singapore High Court in The Dilmun Fulmar, (2003) SGHC

270. On the facts of that case, the ship repairers repaired the

vessel and supplied material to the vessel. The ship owner

paid a sum of $650,000 for repairs, leaving an outstanding

balance sum of $770,822.28 as at 8.5.2001. A subsequent

settlement agreement was entered into in which the ship

repairer agreed to accept a total sum of $310,000, inclusive of

$25,000 interest and $25,000 as legal costs in full and final

settlement of their claim in the admiralty suit, which was for a

sum of $1,154,916.78. Paragraph 7 of the said judgment is

important and reads as under:

“7. The issue raised by this appeal touched on the

true construction and effect of the Settlement

Agreement. In coming to my decision to set aside

the writ and warrant of arrest, I had to construe the

59

accord. Generally, an agreement of compromise

would discharge all original claims and

counterclaims unless it expressly provides for their

revival in the event of breach. The Settlement

Agreement was worded in such a way that there

was by its terms an immediate binding compromise

of the claim amount of $1,154,916.78. By cl 1, the

plaintiff agreed to accept a sum of $310,000

inclusive of interest and legal costs in full and final

settlement of a larger claim...”

48.From this paragraph, it is clear that the plaintiffs agreed to

accept a lesser sum in full and final settlement of a larger claim

and this was the amount stated in the settlement agreement.

Indeed, in paragraphs 11 and 13 of the judgment, it is stated:

“11…The plaintiffs’ solicitors in a fax dated 1 August

2002 wrote: “[T]he sum due is in fact S$170,000 as

stated in the Settlement Agreement together with

interest thereon up to 23

rd

January 2002 …”

“13…There was no explanation as to where the

figure of $170,000 had come from if it was not from

the Settlement Agreement...”

49.On the facts of that case it was, therefore, held that the

original cause of action had been superseded and that the

Court had no jurisdiction in respect of the original claim.

60

50.This case is wholly distinguishable in that, on the facts of

the present case, the very sum due under the original contract

continued to be due and payable under the settlement

agreement. The fact that interest and legal costs were added

would not amount in itself to superseding the original contract,

as these relate to payments under the original contract and put

the promisee in the same position as if the contract had

originally been performed. We have also seen that the original

agreement was not superseded but was only sought to be

enforced, the manner of performance being different. This

being the case, we are of the view that the High Court’s

conclusion that there was a novatio of the original agreement

on the facts of the present case is incorrect.

51.It only remains to be considered as to whether, on the

date of arrest i.e. 2.5.2000, respondent no. 1 happened to be

the owner of the vessel, as was found by the impugned

judgment.

52.The High Court strongly relied upon an oral admission of

PW1 to the effect that respondent no.1 had become the owner

61

of the vessel sometime in April 2000. On going through the

deposition of Mr. Stephen Livanos, we are clearly of the view

that no such admission was ever made. The answers to

questions 257 to 262 would clearly show that the witness’s

statement that respondent no.1 was the end buyer of the vessel

was equivocal at best, and was obviously hearsay as the

answer to question 260 states that a lawyer in Greece had at

some point of time told Mr. Livanos what happened with the

vessel. To therefore conclude from this oral evidence that the

vessel had changed hands in April, 2000 does not take the

respondent’s case very far.

53.However, the High Court also relied upon a notarized bill

of sale dated 14.4.2000, the notice of readiness of 15.4.2000,

which was accepted by the respondent at 11.00 A.M, and was

followed by the delivery of possession of the vessel at 2.00 P.M.

What is important to note is that the signatory to the physical

delivery certificate was on behalf of Pennon Shipping

Corporation, which was only an agent of Third Element

Enterprises, and not an agent of Fairsteel. The High Court then

62

went on to state that payment under the Letter of Credit was

also made on 26.4.2000 and since this would show that the

property in the vessel was transferred in April, 2000, no cause

of action would survive against the new owner of the vessel

namely respondent no.1. The High Court also went on to state

that the transfers pleaded in the written statement of

respondent no. 1, namely from Third Element Enterprises to

Eastern Wealth Investment Limited and thereafter to Fairsteel

Corporation Limited after which Fairsteel sold and transferred

the vessel to respondent no.1, had not been proved by

respondent no.1, but that this did not affect the respondent’s

case.

54.We have been shown a bill of sale dated 27.4.2000 by

which Third Element Enterprises effected the first of these four

sales to Eastern Wealth Investment Limited, only on 27.4.2000.

This sale has for its consideration “one US Dollar and/or other

valuable consideration” casting grave doubts about its efficacy

in law. Be that as it may, since this sale is the first sale in the

chain of sales made ultimately to respondent no.1, it is obvious

63

that the sale made by Fairsteel to respondent no.1 could only

have been after this date. Shri Banerjee cited before us

authorities to the effect that it is well known that back to back

sales of this nature take place between different parties for the

same vessel. That may well be so, but it is still necessary to

prove and explain each back to back sale from which

respondent no.1 ultimately derives its title, in accordance with

its pleading in the written statement filed by it. As has correctly

been held by the High Court, there is no proof of any of these

back to back sales, and in point of fact the very first sale from

the original owner has taken place in favour of Eastern Wealth

after the High Court has found that the vessel has been sold by

Fairsteel to respondent no.1, which goes contrary to the

pleaded case of respondent no.1 itself. We were also referred

to a document dated 26.4.2000 by which a new clause 8 was to

be added to the Letter of Credit which read as follows:-

“COPY OF FREE OF ENCUMBRANCES

CERTIFICATE ISSUED BY EMBASSY OF

REPUBLIC OF CYPRUS, MARITIME SECTION,

PIRAEUS, CERTIFYING THAT THE MOTOR

VESSEL “NIKOLAS S” PERMANENTLY

REGISTERED IN THE CYPRUS REGISTER OF

64

SHIPS, OWNED BY “THIRD ELEMENT

ENTERPRISES SHIPPING LTD.” OF CYPRUS IS

FREE OF MORTGAGE AND ANY OTHER

ENCUMBRANCES.”

Further, as per clause no.8 we confirm that the

Buyers have received the Notice of Readiness

(NOR) on 15.04.2000 from the Sellers or their

Agents in Calcutta and authorize you to negotiate

the L/C as per the terms.”

This clause would again go to show that even on

26.4.2000 the owner of the vessel was Third Element

Enterprises and not respondent no.1.

55.With regard to the High Court finding that full payment

had been made under the Letter of Credit on 26.4.2000, the

respondent’s own suit that was filed by it against Fairsteel on

9.5.2000 shows that no such payment had been made by the

date of the filing of the said suit. The suit was for the relief of

rescission of the agreement between Fairsteel and respondent

no.1 dated 21.1.2000 on the ground of fraud. Para 27 of the

suit is important and states as follows:-

“27.In the facts and circumstances aforestated,

the defendant no.1 has fraudulently induced the

plaintiff to issue/open the said L/C through the

defendant no.2 in favour of the defendant no.1. The

defendant no.1 is not entitled to receive and should

65

be restrained from receiving any payment under the

said L/C and the plaintiff claims a decree of

perpetual injunction in that regard.”

56.The relief claimed in the other suit is also important and

prayers “C” and “D” are material and read as under:-

“(c)Decree of perpetual injunction restraining the

defendant no.1 whether by itself or through its

servants or agents from receiving any money

under the Letter of Credit No.CAL/24006

dated 8

th

April 2000, issued by the defendant

no.2 in favour of the defendant no.1.

(d)Decree of perpetual injunction restraining the

defendant no.2 from making any payment

under the Letter of Credit No.CAL/24006

dated 8

th

April 2000 issued/opened by it in

favour of the defendant no.1.”

57.This would show, on the respondent’s own admission

made in the plaint dated 9.5.2000, that monies were not yet

received under the Letter of Credit even on 9.5.2000 and that,

therefore, an injunction should be granted restraining defendant

no.1 from receiving this money and against the Bank of Baroda

– plaintiff’s bank – from making any such payment to defendant

no.1. Thus, it is clear that the High Court was not correct in its

view that it was proved by respondent no.1 that sale had taken

66

place in April, 2000 by Fairsteel Corporation to respondent no.1

by which respondent no.1 became the owner of the vessel. It is

clear, therefore, that respondent no. 1 has failed to prove that

there was a change of ownership of the vessel in its favour on

the date of arrest i.e. on 2.5.2000. This being the case, we set

aside the judgment of the High Court and restore the decree of

the trial court which reads as under:-

“In the result, the suit succeeds. There would be a

decree as against the vessel M.V. Nikolaos-S of

US$ 94,611.25 equivalent to Rs.42,57,500.00 in

Indian currency. The plaintiff would be entitled to

recover the said sum from the cash security

furnished to the Registrar, High Court, Original Side

together with accrued interest thereon. The

Registrar, Original Side, High Court, however, is

entitled to deduct necessary commission applicable

thereto.”

58.The appeal is, accordingly, allowed in the aforesaid terms.

…………………………......J.

(R.F. Nariman)

…………………………......J.

(Sanjay Kishan Kaul)

New Delhi;

September 14, 2017.

67