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CASE NO.:

Appeal (civil) 5665 of 2002

Appeal (civil) 5666 of 2002

PETITIONER:

Liverpool & London S.P. & I Asson. Ltd.

RESPONDENT:

M.V. Sea Success I & Anr.

DATE OF JUDGMENT: 20/11/2003

BENCH:

CJI & S.B. Sinha.

JUDGMENT:

J U D G M E N T

S.B. SINHA, J :

THE BACKGROUND FACT:

The appellant (Club) herein is an association incorporated under

the laws of the United Kingdom. It is a mutual association of ship

owners. It offers insurance cover in respect of the vessels entered

with it for diverse third party risks associated with the operation and

trading of vessels. According to the appellant, no vessel operates

without a Protection & Indemnity (P&I) cover and the same has been made

compulsory to allow a ship to enter major ports in India.

'Sea Ranger' and 'Sea Glory' are the sister vessels of the 1st

respondent vessel and they are allegedly owned by the 2nd respondent. The

first two vessels entered into a contract with the appellant's

association for the years 1998-1999 and 1999-2000 but they have not paid

the unpaid insurance premium due and payable by the 2nd respondent for

various P&I risks for which they had been insured. These unpaid

insurance calls being "necessaries" was enforceable within the

"admiralty jurisdiction" of the Bombay High Court.

For the arrest of the 1st respondent vessel which came to Mumbai

Port within the territorial waters of India, a suit was filed by the

club inter alia for the prayers : "(a) for a decree against the

respondents in the sum of US$1,18,194.89 together with interest at the

rate of 12% per annum, which was the unpaid insurance premium amount due

to the club and payable by the 2nd respondent; and (b) for arrest of the

1st respondent vessel to secure the claim."

On an application for arrest of the 1st respondent vessel having

been made, the 2nd respondent appeared and undertook to furnish security

in respect of the appellant's claim and further gave an undertaking that

until the security is furnished the said vessel will not leave the Port

of Mumbai. However, thereafter S.S. Shipping Corporation Inc., Liberia

claiming to be the registered owner of the 1st respondent furnished a

bank-guarantee in relation to the appellant's claim in discharge of the

undertaking of security given by the second respondent. The 1st

respondent thereafter took out a Notice of Motion for rejection of the

plaint purported to be under Order 7 Rule 11(a) of the Code of Civil

Procedure inter alia on the ground that the averments contained therein

do not disclose a cause of action as the claim of unpaid insurance

premium was not a "necessary" within the meaning of Section 5 of the

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Admiralty Courts Act, 1861. A learned Single Judge of the High Court

after hearing the Notice of Motion by an order dated 1-2/2/2001 referred

the said question to a Division Bench as it could not agree with a

decision rendered by another learned Single Judge. However, on the

other two grounds it discharged the Notice of Motion holding that the

averments made in paragraphs 1 and 14 of the plaint inter alia to the

effect that all the three ships are beneficially owned by the 2nd

respondent disclose a cause of action.

An appeal thereagainst was preferred by the respondent herein.

The Division Bench took up the appeal preferred by the respondent herein

as also the reference made by the learned Single Judge and passed a

common judgment.

ISSUES :

The questions which arose for consideration before the High Court

were:

(i) whether arrears of insurance premium due and payable to the

appellant by the 2nd respondent would fall within the scope and

ambit of Section 5 of the Admiralty Courts Act, 1861;

(ii) whether refusing to reject the plaint under Order 7 Rule 11(a)

upon holding that the plaint discloses a cause of action is a

'judgment' within the meaning of Clause 15 of the Letters

Patent of the Bombay High Court and was, thus, appealable; and

(iii) Whether the averments made in paragraphs 1 and 14 of the plaint

disclose sufficient cause of action for maintaining a suit.

The Division Bench while answering the question No. 1 in favour of

appellant, answered question Nos. 2 and 3 against it. Appeal No. 226 of

2001 has been filed by the 'club' whereas Civil Appeal No. 5666 of 2002

has been filed by the 'vessel'.

Submissions :

Mr. Bharucha, the learned counsel appearing on behalf of the

"Vessel" would inter alia submit:

(i) The amount of arrears of insurance premium alleged to be due to

the 1st respondent towards release calls is not a maritime claim

entitling the Club to invoke the admiralty jurisdiction of the

High Court as such unpaid insurance money does not constitute

'necessaries' within the meaning of Section 5 of the Admiralty

Courts Act, 1861.

(ii) Sufficiently direct and proximate connection between insurance

and the vessel is a prerequisite for bringing an action in rem.

Insurance is meant primarily as a means of indemnifying and

protecting the vessel owner against the loss of his vessel

and/or claims that that may arise as a result of damage or loss

caused by the vessel. Although it may be a commercial

necessity but the same would not come within the purview of the

term 'necessaries' within the meaning of the provisions of the

said Act. The provisions contained in the Admiralty Courts Act

of 1840 and 1861, Section 22 of the Supreme Court of Judicature

Act, 1925, the 1952 Brussels Arrest Convention as also the

Administration of Justice Act, 1956 disclose one uniform

feature that in order that a monetary claim qualifies for and

is recognized as a maritime claim the same must be necessary

for operation of the ship.

(iii) In United Kingdom, it has consistently been held for more than

a century that unpaid insurance premium is not a "necessary"

within the conventional meaning of the said term as understood

in maritime law. The said view has been reiterated by the

Courts of Australia, South Africa and Singapore. In support of

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the said contention, strong reliance has been placed on Queen

Vs. Judge of the City of London Court [1891 1 QB 273], The

Beldis [1936 P. 51], Webster Vs. Seekamp [1821 4B & Ald 352],

Heinrich Bjorn [1883 8 P.D. 151], The Andre Theodore [10

Aspinall 94], Stokes Vs. The Conference [1887 (8) NSWR 10], The

River Rima [1988 2 L Rep 193], a South African Court decision

in The Emerald Transporter [1985 2 SALR 152] as also a decision

of Singapore High Court in The Golden Petroleum [1994 1 SLR

92].

(iv) The expression "necessaries supplied to any ship" although has

not statutorily been defined; over a long period of time, the

same had attained a definite connotation, i.e., goods or

services supplied to a specifically identified ship in order to

successfully prosecute the voyage in question, and, thus,

applying the said test unpaid insurance premium does not answer

the said definition. The matter has furthermore to be looked

at from the point of view of physical necessity and

practicality and not from the viewpoint of prudence or sound

economics.

(v) There are a large number of categories of insurance from hull

and machinery insurance, to protection and indemnity (P&I)

cover, through war risks, to freight demurrage and defence

cover (FD&D), oil spill cover (TOVALOP), and strike cover etc

and in that view of the matter if P&I should be held to be a

necessary, others are not, the same would lead to an

incongruous situation.

(vi) In view of the decision in The Aifanourious [1980 2 L Reps.

403] as also the decision rendered by the House of Lords in

Gatoil International Inc. Vs. Arwkright Boston Manufacturers

Mutual Insurance Co. & Other The Sandrina [1985 (1) All ER

129], holding that claim for unpaid insurance has never been

recognized as maritime claim under any other head and the

Courts of England expressly held the same to have been excluded

as such under Article 1 of the Brussels Arrest Convention,

1952. Such a claim, thus, due to unpaid insurance premium

would not be a maritime claim also under the head

"disbursements made on account of a ship".

(vii) In the decision of this Court in M.V. Elisabeth [(1993) Supp. 2

SCC 433], it was merely held that the High Courts in India will

have an extended jurisdiction under the Admiralty Courts Act,

1861 and the said principle cannot be further extended.

(viii) As the maritime jurisdiction of the High Courts in India was

derived from the pre-independence statutes and as the High

Courts of India exercise the same jurisdiction as that of the

courts in England, it must necessarily be held that the

interpretation of the word "necessaries" rendered by the

English Courts and which has been followed by other courts

except by the American Court should prevail.

Mr. Prashant S. Pratap, the learned counsel appearing on behalf

of the Club, on the other hand, would submit that:

(i) "necessaries" are the things which a prudent owner would

provide to enable a ship to perform the functions wherefor she

has been engaged and, thus, the provision of services would

come within the definition of necessaries.

(ii) The term "necessaries" must be construed in a broad and

liberal manner keeping in mind the ever changing requirements

of a ship to be able to trade in commerce.

(iii) Contemporary maritime statutes in England do not use the term

"necessaries" but the American Federal Maritime Liens Act does

and, thus, decision rendered by the American Courts that

insurance is a "necessary" should be held to be correct.

(Equilease Corp. Vs. M.V. Sampson 793 F.2d 598- U.S. Court of

Appeals).

(iv) A valid P&I insurance cover is necessary for a ship to call at

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major ports in India and consequently so far as India is

concerned, it is a necessity having regard to the fact that

Mumbai Port, JNPT and Kolkata Port have issued a statutory

direction in this behalf.

(v) The domestic legislation in India also provide for a compulsory

insurance. Reference in this connection has been placed on the

Inland Vessels Act, 1917 (as amended in the year 1977), the

Merchant Shipping Act, 1956 (as amended in 1983) and Multimodal

Transportation of Goods Act, 1993 (as amended in 2000) and in

that view of the matter the pedantic and regressive view should

be discouraged specially in the light of the judgment of this

Court in M.V. Elisabeth (supra).

(vi) By reason of the 1999 Arrest Convention inter alia unpaid

insurance calls had been added and in absence of any

codification and maritime claim by a statute in India the same

should be taken into consideration for determination of the

jurisdiction of the High Court. Several countries such as

Canada, South Africa, Australia, China and Korea have given the

claim for unpaid insurance premium in respect of a ship, the

status of a maritime claim.

(vii) Flexibilities being the virtue of law court, the High Court has

rightly held that the marine premium would come within the

purview of the term "necessaries" having regard to the global

change and outlook in trade and commerce. Reliance in this

connection has been placed on M.V. Al Quamar Vs. Tsavliris

Salvage (International) Ltd. & Ors. [(2000) 8 SCC 278].

STATUTORY PROVISIONS :

The relevant provisions of Admiralty Court Act, 1840 are as

follows:

"3. WHENEVER A VESSEL SHALL BE ARRESTED, ETC.,

COURT TO HAVE JURISDICTION OVER CLAIMS OF

MORTGAGEES: Whenever any ship or vessel shall be

under arrest by process issuing from the said

High Court of Admiralty, or the proceeds of any

ship or vessel having been so arrested shall

have been brought into and be in the registry of

the said court, in either such case the said

court shall have full jurisdiction to take

cognizance of all claims and causes of action of

any person in respect of any mortgage of such

ship or vessel, and to decide any suit

instituted by any such person in respect of any

such claims or causes of action respectively.

4. COURT TO DECIDE QUESTIONS OF TITLE, ETC.: The

said Court of Admiralty shall have jurisdiction

to decide all questions as to the title to or

ownership of any ship or vessel, or the proceeds

thereof remaining in the registry, arising in

any cause of possession, salvage, damage, wages

or bottomry, which shall be instituted in the

said court after the passing of this Act.

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

sea-going vessel or in the nature of towage, or

for necessaries supplied to any foreign ship or

sea-going vessel, and to enforce the payment

thereof, whether such ship or vessel may have

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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.

The relevant provisions of Admiralty Court Act, 1861 are as under:

"4. AS TO CLAIMS FOR BUILDING, EQUIPPING, OR

REPAIRING OF SHIPS: The High Court of Admiralty

shall have jurisdiction over any claim for the

building, equipping, or repairing of any ship,

if at the time of the institution of the cause

the ship or the proceeds thereof are under

arrest of the court.

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.

6. AS TO CLAIMS FOR DAMAGE TO CARGO IMPORTED:

The High Court of Admiralty shall have

jurisdiction over any claim by the owner or

consignee or assignee of any bill of lading of

any goods carried into any port in England or

Wales in any ship, for damage done to the goods

or any part thereof by the negligence or

misconduct of or for any breach of duty or

breach of contract on the part of the owner,

master, or crew of the ship, unless it is shown

to the satisfaction of the court that at the

time of the institution of the cause any owner

or part owner of the ship is domiciled in

England or Wales: Provided always, that if 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.

8. HIGH COURT OF ADMRILATY TO DECIDE QUESTIONS

AS TO OWNERSHIP, ETC. OF SHIPS: The High Court

of Admiralty shall have jurisdiction to decide

all questions arising between the co-owners, or

any of them, touching the ownership, possession,

employment, and earnings of any ship registered

at any port in England or Wales, or any share

thereof, and may settle all accounts outstanding

and unsettled between the parties in relation

thereto, and may direct the said ship or any

share thereof to be sold, and may make such

order in the premises as to it shall seem fit.

Section 2 of Colonial Courts of Admiralty Act, 1890 reads thus:

"2. Colonial Courts of Admiralty. - (1) Every

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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 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.

Section 2 of The Colonial Courts of Admiralty (India) Act, 1891

reads as under:

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."

Section 22(1) of Supreme Court of Judicature (Consolidation) Act,

1925 reads thus:

"22. ADMIRALTY JURISDICTION OF HIGH COURT: (1)

The High Court shall, in relation to admiralty

matters, have the following jurisdiction (in

this Act referred to as "admiralty

jurisdiction") that is to say -

(a) Jurisdiction to hear and determine any of

the following questions or claims:

*** *** ***

(viii) Any claim by a seaman of a ship for

wages earned by him on board the ship,

whether due under a special contract or

otherwise, and any claim by the master

of a ship for wages earned by him on

board the ship and for disbursements

made by him on account of the ship;

(ix) Any claim in respect of a mortgage of

any ship, being a mortgage duly

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registered in accordance with the

provisions of the Merchant Shipping

Acts, 1894 to 1923, or in respect of

any mortgage of a ship which is, or the

proceeds whereof are, under the arrest

of the court;"

(x) Any claim for building, equipping or

repairing a ship, if at the time of the

institution of the proceedings the ship

is, or the proceeds thereof are, under

the arrest of the court."

Articles 1(k) and 2 of the 1952 Brussels Convention are as under:

"(1) "Maritime Claim" means a claim arising

out of one or more of the following:

*** *** ***

(k) goods or materials wherever supplied to

a ship for her operation or

maintenance;

2. A ship flying the flag of one of the

Contracting States may be arrested in the

jurisdiction of any of the Contracting States in

respect of any maritime claim, but in respect of

no other claim; but nothing in this Convention

shall be deemed to extend or restrict any right

or powers vested in any Governments or their

Departments, Public Authorities, or Dock or

Harbour Authorities under their existing

domestic laws or regulations to arrest, detain

or otherwise prevent the sailing of vessels

within their jurisdiction."

HISTORY OF JURISDICTION OF THE HIGH COURT :

The jurisdiction of the High Court of Admiralty in England used to

be exercised in rem in such matters as from their very nature would give

rise to a maritime lien - e.g. collision, salvage, bottomry. The

jurisdiction of the High Court of Admiralty in England was, however,

extended to cover matters in respect of which there was no maritime

lien, i.e., necessaries supplied to a foreign ship. In terms of Section

6 of the Admiralty Act, 1861, the High Court of Admiralty was empowered

to assume jurisdiction over foreign ships in respect of claims to cargo

carried into any port in England or Wales. By reason of Judicature Act

of 1873, the jurisdiction of the High Court of Justice resulted in a

fusion: of admiralty law, common law and equity. The limit of the

jurisdiction of the Admiralty court in terms of Section 6 of the 1861

Act was discarded by the Administration of Justice Act, 1920 and the

jurisdiction of the High Court thereby was extended to (a) any claim

arising out of an agreement relating to the use or hire of a ship; (b)

any claim relating to the carriage of goods in any ship; and (c) any

claim in tort in respect of goods carried in any ship.

The admiralty jurisdiction of the High Court was further

consolidated by the Supreme Court of Judicature (Consolidation) Act,

1925 so as to include various matters such as any claim "for damage

done by a ship", and claim 'arising out of an agreement relating to the

use or hire of a ship'; or 'relating to the carriage of goods in a

ship'; or "in tort in respect of goods carried in a ship".

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The admiralty jurisdiction of the High Court was further widened

by the Administration of Justice Act, 1956 so as to include not only the

claims specified under Section 1(i) of Part I but also any other

jurisdiction which either was vested in the High Court of Admiralty

immediately before the date of commencement of the Supreme Court of

Judicature Act, 1873 (i.e. November 1, 1875) or is conferred by or under

an Act which came into operation on or after that date on the High Court

as being a court with admiralty jurisdiction and any other jurisdiction

connected with ships vested in the High Court apart from this section

which is for the time being assigned by rules of court to the Probate,

Divorce and Admiralty Division.

Sub-Section (4) of Section 1 removed the restriction based on the

ownership of the ship. By reason of Clauses (d) (g) and (h) of the said

Section the jurisdiction in regard to question or claims specified under

Section 1(i) included any claim for loss of or damage to goods carried

in a ship, any claim arising out of any agreement relating to the

carriage of goods in a ship or to the use or hire of a ship.

In the course of time the jurisdiction of the High Courts vested

in all the divisions alike. The Indian High Courts after independence

exercise the same jurisdiction.

NECESSARIES - AS A MARITIME CLAIM:

The concept "as to claims for necessaries" is specified under

Section 5 of the Admiralty Court Act, 1861, which provides for the

jurisdiction of High Court as regard "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 institution of the

cause an owner or part owner of the ship is domiciled in England or

Wales".

The term "necessaries" had not been defined in the Act of 1861.

It was given a meaning by judicial pronouncements.

It stands accepted that having regard to the legislative and

executive policy, England and Wales never considered the arrears of

insurance premium as a 'necessary'. The Courts of England further

maintained a distinction between a maritime claim and maritime lien.

The decisions cited by Mr. Bharucha go to show that the English Courts

proceeded on the premise that for the purpose of considering as to

whether any necessary has been supplied to a ship or not must have a

sufficient and direct connection with the operation of the ship. It

held that unpaid insurance premium is not a maritime claim as it is not

needed to keep it going. [See Queen Vs. Judge of the City of London

Court (supra), Heinrich Bjorn (supra), The Andre Theodore (supra), The

Aifanourious (supra). The English Courts, thus, refused to put a wide

construction on that term.

A similar view was also adopted by an Australian High Court in

Gould Vs. Cornhill Insurance Co. Ltd. [1 DLR 4th Ed. 183].

In The Riga [(1869-72) L.R. 3 A&E 516], it is stated:

"The definition of the term

"necessaries" given by Lord Tenterden in

Webster v. Seekamp (4 B. & Ald. 352) adopted and

applied in proceedings in Admiralty. Semble,

there is no distinction between necessaries for

the ship and necessaries for the voyage."

In The Edinburgh Castle [(1999) Vol. 2 Lloyd's Law Reports 362],

it has been held:

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"To address these concerns, Mr. Charkham

helpfully invited my attention to a number of the

authorities and to such discussion as there is on

s.20(2)(m) and its predecessors. Taking the matter

very shortly, for present purposes, the following

propositions emerge:

1. The words "in respect of" are wide words which

should not be unduly restricted: The Kommunar,

[1997] 1 Lloyd's Rep. 1, at p.5.

2. Section 20(2)(m), which is derived from the

equivalent provision in the Administration of

Justice Act, 1956, contains a jurisdiction which

is no narrower than the predecessor jurisdiction

in respect of claims for "necessaries": The

Fairport (No. 5), [1967] 2 Lloyd's Rep. 162; The

Kommunar, sup.

3. No distinction is to be drawn:

...between necessaries for the ship and

necessaries for the voyage, and all things

reasonably requisite for the particular

adventure on which the ship is bound are

comprised in this category. [Roscoe, The

Admiralty Jurisdiction and Practice, 5th ed., at

p. 203: The Riga (1872) L.R. 3 Ad. & Ecc. 516].

4. The jurisdiction extends to the provision of

services: The Equator, (1921) 9 L1.L.Re. 1: The

Fairport (No. 5), sup.

In the light of these propositions, I am

satisfied that the plaintiffs bring their claims

within s. 20(2)(m). Provisions for the passengers

were "necessaries" for the particular adventure on

which this passenger vessel was engaged. The

provision of services is capable of coming within the

sub-section and does so here, given the nature of the

services provided. I should mention that I was

referred in addition to The River Rima, [1988] 2

Lloyd's Rep. 193 (H.L.) and [1987] 2 Lloyd's Rep. 106

(C.A.) but, as I understand it, nothing said there

precludes my decision in favour of the plaintiffs on

the facts of this case."

In Nore Challenger and Nore Commander [(2001) Vol. 2 Lloyd's Law

Reports 103] the claim relating to supply of crew was held to be

"necessary" stating:

"Before considering whether the concept of

necessaries encompasses the provision or supply

of crew, it is important to bear in mind that it

has long been established that no distinction

need be drawn between the supply of necessaries

and the payment for such supply."

Identical view has been taken by a Court of Durban in M.V. Emerald

Transporter [1985 2 SALR 448] with reference to the provisions contained

in Admiralty Jurisdiction Regulation Act 105 of 1983 wherein it was held

that services which are insured solely to the benefit of the ship owner

would not be classed as necessaries. The said decision was, however,

rendered in the context of ranking of claims against a fund comprising

of sale proceeds of the vessel M.V. Emerald Transporter.

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The House of Lords in The River Rima (supra) considered the

provisions of Article 1(1)(k) of the 1952 Brussels Arrest Convention

incorporating "goods or materials wherever supplied to a ship for her

operation or maintenance" as a maritime claim. Having regard to the

provisions contained in Section 6 of Admiralty Court Act, 1840 and

Section 5 of Admiralty Court Act, 1861 it was held:

"In other words, what is now called a claim in

respect of goods or materials supplied to a ship

for her operation or maintenance is the

equivalent of what used to be called a claim for

necessaries, but without the restrictions which

formerly applied to such a claim."

(Emphasis Supplied)

The Singapore High Court also in Golden Petroleum (1994 1 SLR 92)

considered the expression "goods supplied to a ship for her operation

and maintenance" in the following terms:

"In my opinion, bunker oil supplied to the ship

for sale to other ships could not be conceived

as goods supplied for her operation. The phrase

'operation of the ship' should not be equated

with the business activities of the shipowner

and the section as enacted could not cover goods

which are loaded onto two ship only to be

unloaded or disposed of soon thereafter by

sale."

It appears that the matter is pending in appeal.

Yet again in Gatoil International (supra), it was held:

"An agreement for the cancellation of a contract

for the carriage of goods in a ship or for the

use or hire of a ship would, I think, show a

sufficiently direct connection. It is

unnecessary to speculate what other cases might

be covered. Each case would require to be

decided on its own facts. As regards the

contract of insurance founded on in the instant

appeal, I am of opinion that it is not connected

with the carriage of goods in a ship in a

sufficiently direct sense to be capable of

coming within para (e)."

The question, however, is as to whether having regard to the

changed situation unpaid insurance premium should be held to be a

commercial necessity. With a view to answer the question it is

necessary to consider as to whether a failure to insure the security is

a matter which would have a bearing upon the security of the ship.

Whether the provisions of insurance is to be considered to be a

service? A further question which may arise is as to whether such

service is to the ship or not ?

INSURANCE COVERS - EXTENT OF:

The law of marine insurance rested almost entirely on common law.

Only a few isolated points were dealt with by statute. Although, there

may be a plethora of authority on some points, the decisions may be

meagre on others. The interpretative changes made from time to time

turned upon new commercial conditions, the old ones having become

obsolete. Some countries enacted and codified marine laws while many

did not. With the passage of time, the scope and ambit of the contracts

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of insurance increased not only having regard to the experience gathered

by the contracting parties but also by the legislators and the Court. A

lot of amendments in the statutes as also interpretive changes took

place. The decisions rendered by different courts on marine insurance

law even frequently apply to non-marine insurance. With the increase in

marine traffic, the insurance law also developed and new varieties of

insurance covers came into being. There has been a considerable

expansion of the practice of insurance against various forums of legal

liabilities which the assured may incur to the third parties.

P&I mutual insurances cover the liabilities of assured shipowner

incurred to third parties. In Modern Admiralty Law by Aleka Mandaraka-

Sheppard at page 642, it is stated:

"P&I mutual insurance (P&I associations) cover

the liabilities of their assured shipowner

incurred to third parties, which include cargo

claims, pollution liabilities, damage to

harbours, piers, etc., and personal injury or

loss of life claims, which are all excluded from

the RDC clause. In addition the P&I association

insures the remaining one-fourth of the assured'

liability under the RDC clause. Legal costs in

defending such claims are covered as well."

The title of a claimant to sue the defendant as regard cargo claim

enquiry has been stated in Shipping Law by Simon Baughen, Second Edition

at page 16-17 in the following terms:

"Does the claimant have title to sue the

defendant?

'Title to sue' means the claimant's right to sue

the defendant, be it in contract, tort or

bailment, in respect of the transit losses it

will have borne as a buyer taking delivery at

the end of a chain of sale contracts. If the

claimant has insured the goods and has been

indemnified, then the action may be brought in

its name by its insurers under the process of

subrogation.

The defendant will usually be the

shipowner, but may also be a charterer or a

freight forwarder who has contracted as carrier.

If an inaccurate bill of lading is signed, the

defendant could also be the party who actually

signed the bill of lading. The shipowner's

liability in respect of cargo claims will

generally be covered by liability insurance,

known as 'P&I' (protection and indemnity)

insurance. Shipowners will not be covered in

respect of claims arising out of deviation,

misdelivery and the issuing of a 'clean' bill of

lading for goods that were damaged prior to

loading."

Apart from P&I club, there exists the Inter club Agreement (ICA).

In Shipping Law by Simon Baughen, at page 183, it is stated :

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"Another very common clause in time charters is

the 'Inter-Club Agreement' (ICA). The agreement

began as an agreement between the P&I Clubs as

to how they would recommend settlement of cargo

claims as between shipowners and charterers

where the NYPE form time charter is used. It is

now common for the agreement to be specifically

incorporated into the time charter. Indeed the

NYPE 1993 form contains a printed cl 27 to this

effect."

The Special Compensation P&I Club Clause (the SCOPIC clause)

enumerated from Article 14 remuneration after The Nagasaki Spirit, in

1999 as a result of discontent by salvors. Although this provision

affected only the salvor and the shipowner, the international groups of

P&I Clubs have agreed a code of conduct giving their backing to the

clause whenever a ship enters with the International Group is salved by

a member of the International Salve Union. The salient features of the

claim which received clarificatory amendment in 2000 are as under:

"For the clause to operate it needs to be

specifically incorporated into an LOF contract,

of whatever form. LOF 2000 contains a box to be

ticked if the parties agree to the incorporation

of the SCOPIC clause. If the clause is

incorporated it then needs to be invoked by

salvor. This can be done even if there is no

threat to the environment. Invoking the clause

completely replaces the right of the salvor to

claim under Art. 14, even in respect of services

performed before the invocation of the clause.

The provisions of Art. 14(5) and (6), however,

continue to remain effective. Within two days

of the clause being invoked, cl 3 obliges the

shipowner to put up security for the salvor's

claim under the clause in the amount of

US$3,000,000. If the shipowner fails to do so,

cl 4 entitles the salvor to withdraw from the

SCOPIC clause, provided the security is still

outstanding at the date of withdrawal.

Clause 5 provides that SCOPIC remuneration is to

be calculated by reference to an agreed tariff

of rates that are profitable to salvors,

calculated by reference to the horsepower of the

salvage tug/s employed. It also covers the

salvor's out of pocket expenses. An uplift of

25% is applied to both these heads of claim.

Clause 6 provides that SCOPIC remuneration is

payable only in the event that it exceeds the

amount of the award under Art 13. To deter

salvors from invoking SCOPIC too readily, cl 7

provides that in the event of SCOPIC

remuneration falling below the amount of the Art

13 award, that award shall be discounted by 25%

of the difference between the award and the

SCOPIC remuneration. Thus, where the Art 13

award is for $1,000,000 and the SCOPIC

remuneration is only $600,000, the Art 13 award

will be reduced by $100,000 being 25% of the

difference between the two sums, giving the

salvor a net award of $900,000.

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The SCOPIC clause also provides for the

termination of both the SCOPIC provisions and

the LOF in two situations. First, the salvor

can terminate if the cost of its services less

any SCOPIC remunerations exceeds the value of

the salved property. Secondly, the shipowner

can terminate by giving five days' notice.

These termination provisions do not apply if the

contractor is restrained from demobilizing its

equipment by a public body with jurisdiction

over the area where the services are being

performed. Once the clause has been invoked,

the shipowner is entitled to appoint a Special

Casualty Representative (SCR) to monitor the

salvage services. The SCR does not impinge on

the authority of the salvage master but does

have the right to be kept fully informed about

the progress of the salvage operations. This

provision improves the flow of information back

to the P&I Club whose interests will ultimately

be affected by the salvage services."

[See Shipping Law by Simon Baughen - page 293]

NECESSITY OF INSURANCE COVER:

The necessity of a P&I cover is in commercial expediency. All P&I

clubs are non-profit making companies. The owner upon entering the ship

becomes the member of the P&I club and he not only pays membership fee

but undertakes to pay contribution towards the losses incurred by other

members of the club which are payable by the company. A new concept has

come into being in terms whereof a reciprocal system has been evolved to

the effect that each member is cast under a duty to refund the damage

suffered by any one of them and pay, on mutual basis, each other's

claim. Thus, the members play a dual role of both beneficiary and

benefactor. We have noticed the concept of such clubs. The Indian

statutes operating in the field are pointer to the fact that such

insurance has become more and more commercially expedient. No ship

having regard to the ramification in international law can sail without

such insurance. Apart from the 1952 Brussels Arrest Convention, the

Merchant Shipping (Oil) Pollution Act, 1961 makes insurance compulsory.

As would be noticed hereinafter, P&I insurance cover to call at

major ports in India is now a statutory requirement.

CHANGING SCENARIO :

The advancement in law would be evident from the 1999 Arrest

Convention whereby significant changes to the law relating to in rem

claims and arrest has been made. Pursuant to Article 14 of the 1999

Arrest Convention, such changes would come into force six months after

ratification by the 10th State.

The countries which have ratified the Convention are as follows:

"Algeria, Antigua and Barbuda, Bahamas, Belgium,

Belize, Benin, Burkina Faso, Cameroon, Central

African Republic, Comoros, Congo, Costa Rica,

Ctte d'Ivoire, Croatia, Cuba, Denmark, Djibouti,

Dominica, Republic of, Egypt, Fiji, Finland,

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France, Overseas Territories, Gabon, Germany,

Greece, Grenada, Guyana, Guinea, Haiti, Haute-

Volta, Holy, Seat, Ireland, Italy, Khmere

Republic, Kiribati, Latvia, Luxembourg,

Madagascar, Marocco, Mauritania, Mauritius,

Netherlands, Niger, Nigeria, North Borneo,

Norway, Paraguay, Poland, Portugal, Romania, St.

Kitts and Nevis, St. Lucia, St. Vincent and the

Grenadines, Sarawak, Senegal, Seychelles,

Slovenia, Solomon Islands, Spain, Sudan, Sweden,

Switzerland, Syrian Arabic Republic, Tchad,

Togo, Tonga, Turks Isles and Caicos, Tuvalu,

United Kingdom of Great Britain, and Northern

Ireland, United Kingdom (Overseas Territories),

Gibraltar, Hong-Kong (1), British Virgin

Islands, Bermuda, Anguilla, Caiman Islands,

Montserrat, St. Helena, Guernsey, Falkland

Islands and dependencies, Zaire."

Article 1 of the Convention contemplates an expansion of existing

categories of arrestable claims under the following headings, some of

which, namely, heading (c) and (d) are already reflected in Section

20(2) of the Supreme Court Act, 1981:

(a) this refers to 'loss or damage caused by the operation of the

ship' rather than 'damage done by a ship' and would encompass

claims for pure economic loss...

(c) this extends the category of salvage to include claims arising

from salvage agreements or special compensation under Art. 14

of the 1989 Salvage Convention;

(d) this covers damage to environment, including threatened

damage...

(l) this extends the scope of claims in respect of supply of goods

and materials to a ship to cover 'provisions, bunkers,

equipment (including containers) supplied or services rendered

to the ship for its operation, management, preservation or

maintenance';

(m) this extends the scope of claims against ships by shipyards to

cover 'construction, reconstruction, repair, converting or

equipping of the ship'...

(o) this extends the scope of claims in respect of port dues, and

also in respect of wages which will now cover repatriation

costs and social insurance contributions...

(u) this extends the scope of claims in respect of mortgages by

removing the reference to a registered or registrable mortgage,

thereby encompassing unregistered mortgages...

The purpose of the 1952 Convention was to restrict the

possibilities of arrest with regard to seagoing vessels flying the flag

of a contracting State. Such an arrest was allowed for maritime claims

against the vessel or against the sister ship belonging to the same

owners. What would be the maritime claim is specified in Article 1 of

the Convention. Other claims can only be secured if the vessel's home

port is situated in a non-contracting State.

Apart from those restrictions resulting from the Convention, all

kinds of claims can be secured by an arrest and there is no need to

prove a connection with the operation of the vessel. As for example, a

guarantee given by the owners for a subsidiary company or other

principal debtor is as suitable as a claim resulting from the purchase

of the ship or any other goods by the owners. However, in terms of

Article 1(k) of the Convention claims for "goods or materials" supplied

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to a ship for her operation or maintenance are acknowledged as maritime

claims.

What was expressly excluded in 1952 convention has been included

in 1999 convention. The restrictions imposed under 1952 convention as

regard 'Maritime claim' to operation of ship and maintenance thereof

have been removed.

In Kapila Hingorani Vs. State of Bihar [JT 2003 (5) SC 1] this

Court observed:

"Justice Holmes expressed the following view in

Missouri vs. Holland [252 US 416 (433)] :

"When we are dealing with words that also are a

constituent act, like the Constitution of the

United States, we must realise that they have

called into life a being the development of

which could not have been foreseen completely by

the most gifted of its begetters. It was enough

for them to realise or to hope that they had

created an organism, it has taken a century and

has cost their successors must sweat and blood

to prove that they created a nation. The case

before us must be considered in the light of our

whole experience and not merely in that of what

was said a hundred years ago."

Justice Frankfurter elucidated the

interpretive role in "Some Reflections on the

Reading of Statutes" :

"There are varying shades of compulsion for

judges behind different words, differences that

are due to the words themselves, their setting

in a text, their setting in history. In short,

judges are not unfettered glossators. They are

under a special duty not to overemphasize the

episodic aspects of life and not to undervalue

its organic processes - its continuities and

relationships"

In Jagdish Saran and Others Vs. Union of

India [(1980) 2 SCC 768], it is stated:

"Law, constitutional law, is not an omnipotent

abstraction or distant idealization but a

principled, yet pragmatic, value-laden and

result-oriented, set of propositions applicable

to and conditioned by a concrete stage of social

development of the nation and aspirational

imperatives of the people. India Today - that is

the inarticulate major premise of our

constitutional law and life."

It is also well-settled that interpretation of

the Constitution of India or statutes would

change from time to time. Being a living organ,

it is ongoing and with the passage of time, law

must change. New rights may have to be found

out within the constitutional scheme. Horizons

of constitutional law are expanding."

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In the aforementioned judgment, this Court referred to a large

number of decisions for the purpose of interpreting the constitutional

provisions in the light of the international treaties and conventions.

Further more in John Vallamattom and Anr. Vs. Union of India [JT

2003 (6) SC 37] while referring to an amendment made in U.K. in relation

to a provision which was in pari materia with Section 118 of the Indian

Succession Act, 1925, this Court observed:

"...The constitutionality of a provision, it is

trite, will have to be judged keeping in view

the interpretive changes of the statute effected

by passage of time."

Referring to the changing scenario of the law having regard to the

declaration on the right to development adopted by the World Conference

on Human Rights and Article 18 of the United Nations Covenant on Civil

and Political Rights, 1966, it was held:

"It is trite that having regard to Article 13(1)

of the Constitution, the constitutionality of

the impugned legislation is required to be

considered on the basis of laws existing on

26.11.1950, but while doing so the court is not

precluded from taking into consideration the

subsequent events which have taken place

thereafter. It is further trite that that the

law although may be constitutional when enacted

but with passage of time the same may be held to

be unconstitutional in view of the changing

situation.

Justice Cardoze said :

"The law has its epochs of ebb and flow,

the flood tides are on us. The old order

may change yielding place to new; but the

transition is never an easy process".

Albert Campus stated :

"The wheel turns, history changes".

Stability and change are the two sides of

the same law-coin. In their pure form

they are antagonistic poles; without

stability the law becomes not a chart of

conduct, but a gare of chance: with only

stability the law is as the still waters

in which there is only stagnation and

death."

In any view of the matter even if a provision

was not unconstitutional on the day on which it

was enacted or the Constitution came into force,

by reason of facts emerging out thereafter, the

same may be rendered unconstitutional."

Yet again in Indian Handicrafts Emporium & Ors. Vs. Union of India

[2003 (6) SCALE 831] this Court considered the Convention on

International Trade in Endangered Species (CITES) and applied the

principles of purposive constructions as also not only the Directive

Principles as contained in Part IV of the Constitution but also

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Fundamental Duties as contained in Part IVA thereof.

Referring to Motor General Traders and Another vs. State of Andhra

Pradesh and Others [(1984) 1 SCC 222], Rattan Arya and Others vs. State

of Tamil Nadu and Another [(1986) 3 SCC 385] and Synthetics and

Chemicals Ltd. and Others vs. State of U.P. and Others [(1990) 1 SCC

109], this Court held:

"There cannot be any doubt whatsoever that a law

which was at one point of time was

constitutional may be rendered unconstitutional

because of passage of time. We may note that

apart from the decisions cited by Mr. Sanghi,

recently a similar view has been taken in Kapila

Hingorani Vs. State of Bihar [JT 2003 (5) SC 1]

and John Vallamattom and Anr. Vs. Union of India

[JT 2003 (6) SC 37]."

It was, however, held that India being a sovereign country is not

obligated to make law only in terms of CITES. It may impose stricter

restrictions having regard to the local needs.

Legal history is a good guide for the purpose of appreciating the

legal development across the world particularly in the field of

international law, maritime law being a part of it. While interpreting

such a situation, one must take into consideration the flexibility in

law as has been highlighted by this Court in m.v. Al Quamar (supra)

wherein it was opined:

"43. The two decisions noted above in our view

deal with the situation amply after having

considered more or less the entire gamut of

judicial precedents. Barker, J's judgment in the

New Zealand case ((1980) 1 NZLR 104 (NZSC)) very

lucidly sets out that the court has to approach

the modem problem with some amount of

flexibility as is now being faced in the modern

business trend. Flexibility is the virtue of the

law courts as Roscoe Pound puts it. The pedantic

approach of the law courts are no longer

existing by reason of the global change of

outlook in trade and commerce. The observations

of Barker, J. and the findings thereon in the

New Zealand case ((1980) 1 NZLR 104 (NZSC)) with

the longish narrations as above, depicts our

inclination to concur with the same, but since

issue is slightly different in the matter under

consideration, we, however, leave the issue

open, though the two decisions as above cannot

be doubted in any way whatsoever and we feel it

expedient to record that there exists sufficient

reasons and justification in the submission of

Mr. Desai as regards the invocation of

jurisdiction under Section 44-A of the Code upon

reliance on the two decisions of the New Zealand

and Australian Courts."

No statutory law in India operates in the field. Interpretative

changes, if any, must, thus be made having regard to the ever changing

global scenario.

This Court in M.V. Elisabeth (supra) observed that Indian statutes

lag behind any development of international law and further it had not

adopted the various conventions but opined that the provisions thereof

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having been made as a result of international unification and

development of the maritime laws of the world should be regarded as the

international common law or transnational law rooted in and evolved out

of the general principles of national laws, which, in the absence of any

specific statutory provisions can be adopted and adapted by courts to

supplement and complement national statutes on this subject.

This Court in M.V. Elisabeth (supra) observed:

"30. The Exchequer Court of Canada was

established by the Admiralty Act R. S. Canada,

1906, c. 141, as a Colonial Court of Admiralty.

It is not clear whether that Court was in its

jurisdiction comparable to the Indian High

Courts. Assuming that it was comparable at the

relevant time, and whatever be the relevance of

Yuri Maru (1927 AC 906 : 43 TLR 698) to courts

like the Exchequer Court of Canada, we see no

reason why the jurisdiction of Indian High

Courts, governed as they now are by the

Constitution of India, should in any way be

subjected to the jurisdictional fetters imposed

by the Privy Council in that decision. Legal

history is good guidance for the future, but to

surrender to the former is to lose the latter."

(Emphasis supplied)

(See paras 78 and 99 also)

It was further observed:

"89. All persons and things within the waters of

a State fall within its jurisdiction unless

specifically curtailed or regulated by rules of

international law. The power to arrest a foreign

vessel, while in the waters of a coastal State,

in respect of a maritime claims, wherever

arising, is a demonstrable manifestation and an

essential attribute of territorial sovereignty.

This power is recognised by several

international conventions (See the Conventions

referred to above. See also Nagendra Singh,

International Maritime Conventions, British

Shipping Laws, Vol. 4). These conventions

contain the unified rules of law drawn from

different legal systems. Although many of these

conventions have yet to be ratified by India,

they embody principles of law recognised by the

generality of maritime States, and can therefore

be regarded as part of our common law. The want

of ratification of these conventions is

apparently not because of any policy

disagreement, as is clear from active and

fruitful Indian participation in the formulation

of rules adopted by the conventions, but perhaps

because of other circumstances, such as lack of

an adequate and specialised machinery for

implementation of the various international

conventions by co-ordinating for the purpose the

Departments concerned of the Government. Such a

specialised body of legal and technical experts

can facilitate adoption of internationally

unified rules by national legislation. It is

appropriate that sufficient attention is paid to

this aspect of the matter by the authorities

concerned. Perhaps the Law Commission of India,

endowed as it ought to be with sufficient

authority, status and independence, as is the

position in England, can render valuable help in

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this regard. Delay in the adoption of

international conventions which are intended to

facilitate trade hinders the economic growth of

the nation."

(Emphasis supplied)

M.V. Elisabeth (supra) is an authority for the proposition that

the changing global scenario should be kept in mind having regard to the

fact that there does not exist any primary act touching the subject and

in absence of any domestic legislation to the contrary; if the 1952

Arrest Convention had been applied, although India was not a signatory

thereto, there is obviously no reason as to why the 1999 Arrest

Convention should not be applied.

Application of the 1999 convention in the process of interpretive

changes, however, would be subject to : (1) domestic law which may be

enacted by the Parliament; and (2) it should be applied only for

enforcement of a contract involving public law character.

It is not correct to contend as has been submitted by Mr. Bharucha

that this Court having regard to the decision in M.V. Elisabeth (supra)

must follow the law which is currently prevalent in UK and confine

itself only to the 1952 Arrest Convention into Indian Admiralty

Jurisprudence. The question is as to if the 1952 Arrest Convention had

been applied keeping in view the changing scenario why not the 1999

Arrest Convention also? A distinction must be borne in mind between a

jurisdiction exercised by the High Courts in India in terms of the

existing laws and the manner in which such jurisdiction can be

exercised. Once the Court opines that insurance is needed to keep the

ship going - it has to be construed as 'Necessaries'. The jurisdiction

of the Courts in India, in view of the decision of this Court in M.V.

Elisabeth (supra)is akin to the jurisdiction of the English Courts but

the same would not mean that the Indian High Courts are not free to take

a different view from those of the English Courts. As regard

application of a statute law the Indian High Courts would follow the

pre-independence statute but Indian Courts need not follow the judge-

made law.

M.V. Eligabeth defines the jurisdiction of the Court but does not

limit or restrict it.

Supply of necessaries is a maritime lien in U.S.A. in terms of the

relevant statute and has been classified in the category of subordinate

to the Preferred Ship Mortgage.

In Benedict on Admiralty, 6th Edn., Vol.1, p. 22, it has been

stated :

"Whenever a debt of a maritime nature is by law,

no matter what law, or by contract, a lien upon

the vessel, the vessel may be proceeded against

in rem. The maritime lien, whether created by

actual hypothecation or by implication or

operation of law, may be enforced in the

admiralty."

It is true that this Court is not bound by the American decisions.

The American decisions have merely a persuasive value but this Court

would not hesitate in borrowing the principles if the same is in

consonance with the scheme of Indian law keeping in view the changing

global scenario. Global changes and outlook in trade and commerce could

be a relevant factor. With the change of time; from narrow and pedantic

approach, the Court may resort to broad and liberal interpretation.

What was not considered to be a necessity a century back, may be held to

be so now.

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INDIAN STATUTES OPERATING IN THE FIELD:

Section 352 N of the Indian Merchant Shipping Act, 1958 makes such

an insurance compulsory which reads as under:

"352-N. Compulsory insurance or other financial

guarantee. - (1) The owner of every Indian ship

which carries 2000 tons or more oil in bulk as

cargo, shall, in respect of such ship, maintain an

insurance or other financial security for an amount

equivalent to -

(a) one hundred and thirty-three Special

Drawing Rights for each ton of the ship's

tonnage; or

(b) fourteen million Special Drawing Rights,

whichever is lower.

The Inland Vessels Act requires a compulsory third party risk

insurance cover and the standard format charter parties mostly have

printed clauses making it mandatory for a vessel to have a valid

protection and indemnity cover for want of which such vessels are not

accepted for charter.

Chapter IV of the Inland Vessels Act provides for a compulsory

insurance in terms whereof Chapter VIII of the Motor Vehicles Act, 1939

has been incorporated by reference.

This Court while considering the question of third party insurance

in Motor Vehicles has noticed the development of law from the Road

Traffic Act, 1930 and Motor Vehicles Act, 1939 to Motor Vehicles Act,

1988 and the amendments carried out therein from time to time. [See

National Insurance Co. Ltd., Chandigarh vs. Nicolletta Rohtagi and

Others - (2002) 7 SCC 456].

The Multimodal Transportation of Goods (Amendment) Act 2000 inter

alia provides for responsibilities and liabilities of the multimodal

transport operator. By reason of Act 44 of 2000 a proviso has been

added. Section 5 of the said Act amends Section 7 of the Principal Act

of 1993 and reads as under:

"5. In Section 7 of the principal Act, in sub-

section (1), the following proviso shall be

inserted, namely:-

"Provided that the multimodal transport

operator shall issue the multimodal

transport document only after obtaining

and during the subsistence of a valid

insurance cover."

CIRCULARS:

The insurance association has issued a circular dated 20th

February, 2001 which is to the following effect:

"TO THE MEMBERS

Dear Sirs

NEW COMPULSORY INSURANCE REQUIREMENTS IN

AUSTRALIAN WATERS

Members should be aware that new Compulsory

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Insurance requirements for non tank vessels have

come into force in Australia. Details are

available at the website of the AMSA -

http:/www.amsa.gov.au.

From 6th April 2001 ships of 400gt or more

(excluding tankers covered by CLC Certificates)

will be required to carry a "relevant insurance

certificate" containing the following

information:

a) the name of the ship

b) the name of the ship's owner

c) the name and address of the insurer

d) the commencement date of the insurance

e) the amount of cover which must in any

event not be less than the limit of

liability under the 1976 Limitation

Convention.

The "relevant insurance certificate" will need

to be produced during Port State Control

inspections and by the Australian Customs

Service on entering or leaving Australian ports.

A six months period of grace will be allowed

before full enforcement action is undertaken;

ships without sufficient documentation on board

will be given a warning until 5th September,

2001. Thereafter ships will be detained until

the requirement documentation is produced.

AMSA officials have indicated that although the

Notice requires that the amount of cover be set

out in the Certificate of Entry it will be

assumed if a dollar amount is not set out that

Club cover in any event extends at least to the

cover provided under the 1976 Convention as

amended.

AMSA officials have also indicated that if a

vessel does not carry any original certificate

of Entry they will be satisfied with the

provision of a photocopy on the vessel's first

visit. However on the second and subsequent

visits vessels will be expected to carry an

original Certificate of Entry.

Please contact the Club if you need further

information.

Yours faithfully,

THOMAS MILLER (BERMUDA) LTD."

A circular has also been issued by the Insurance Association on

26.07.2000 regarding new legislation in U.S.A. (Alaska) which is to the

following effect:

"26 July 2000

TO ALL MEMBERS

Dear Sirs

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OIL POLLUTION: UNITED STATES

NEW LEGISLATION IN ALASKA FOR NON-TANK VESSELS

FINANCIAL RESPONSIBILITY REQUIREMENTS: DRAFT

REGULATIONS

In May 2000 the State of Alaska followed the

recent example of California in passing

legislation requiring non-tank self-propelled

vessels operating in Alaskan waters and

exceeding 400 gt to demonstrate proof of

financial responsibility for oil spills

occurring in Alaskan waters. The effective date

of the Financial Responsibility Act is 1

September 2000.

Proof of financial responsibility must be

established for non-tank vessels operating in

Alaskan waters in the following amounts:

(a) For vessels carrying predominately

persistent product, $300 per incident

for each barrel of oil storage

capacity, or $5,000,000, whichever is

greater.

(b) For vessels carrying predominately non-

persistent product, $100 per incident

for each barrel of oil storage

capacity, or $1,000,000, whichever is

greater.

The Act applies to non-tank vessels over 400 gt

which by definition covers self-propelled

vessels including commercial fishing vessels,

passenger and cargo vessels. Barges are

excluded, as are public vessels unless "engaged

in commerce".

The Alaska Department of Environmental

Conservation (ADEC) have proposed draft

regulations to implement the financial

responsibility requirements. ADEC predicts that

their regulations will not become final until

September or early October 2000 but the

effective date for the new law remains 1

September 2000. A summary of the draft

regulations is set out below:

Interim applications and Documentation for Proof

of Financial Responsibility

An interim application procedure is set out in

ADEC's letter of 17 July 2000, which is

attached. Owners or operators of non-tank

vessels covered by the new law must submit a

completed application and documentation of

financial responsibility in the appropriate

dollar amount not later than 31 August 2000.

Acceptable financial responsibility may include

the following:

a. Affidavit of self-insurance and most

recent audited financial statement;

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b. Insurance certificate and insurance

policy;

c. Surety bond;

d. Financial guarantee, accompanied by

guarantor's evidence of self insurance;

e. Letter of credit;

f. Certificate of entry evidencing

coverage by a Protection and Indemnity

Club; or

g. Certificate of deposit with assignment

of negotiable interest.

Interim Approval

A completed application form and appropriate

documentation evidencing proof of financial

responsibility which is submitted by 31 August

2000 will be deemed approved by ADEC for

purposes of meeting the 1 September 2000

deadline. Following adoption of final

regulations, ADEC will review each application

to ensure that it meets the requirements of the

statute and regulations. A formal approval will

be given to those vessels which qualify, and

non-qualifying applicants will be given 30 days

to submit additional information as requested by

the Department.

Application Form

A copy of ADEC's application form is attached.

In Section (c), paragraph 1(b), proof of

financial responsibility by entry in a P&I Club

must include a Certificate of Entry and must

include "all addenda pertaining to the amount

and applicability of oil pollution cover and

amount of deductibles."

Deductibles

With respect of deductibles, paragraph 1(c) of

the application asks for proof of financial

responsibility for any deductible, such as a

certificate of deposit, or other "financial

information." It thus appears that ADEC will

require some evidence of financial

responsibility for any deductible as is

presently required by ADEC's draft regulations.

ADEC is presently considering whether to allow

an interim application which does not have

separate proof of financial responsibility for a

deductible. However, at this juncture Owners

and operators with insurance deductibles should

probably plan to submit separate proof of

financial responsibility for any deductible.

There are likely to be further developments on

this issue and Members will be kept advised.

The Managers intend to issue a further circular

when these regulations become final.

In the meantime, Members may contact Mr. Douglas

R Davis of the Association's correspondents at

Anchorage, Alaska:

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Kessal Young & Logan, Tel: +1(0)907 279

9696, Fax: +1(0)907 279 4239 for further

assistance. Mr. Davis has filed submissions to

ADEC on behalf of the International Group in

relation to the draft regulations, and can

assist Members with applications.

Yours faithfully

A BILBOUGH & CO. LTD

(MANAGERS)"

The major ports in India, namely, Mumbai and Kolkata had issued

circulars which are as under:

"MUMBAI PORT TRUST

Deputy Conservator's Office

Port House, 1st Floor

Shoorji Vallabhadas Marg

Mumbai - 400 001

No. DC/C.SH/2/4455 8th August, 1996

CIRCULAR

To

Ship Owners/Stevedores/Vessel Agents

The Secretary

Bombay & Nhave/Sheve Ship-Intermodel

Agents Association

3, Rex Chambers, Ground Floor

Valchand Hirachand Marg

Ballard Estate, Mumbai - 400 001

The Secretary

The Bombay Stevedores Association Ltd.,

Janmabhoomi Chambers, 2nd Floor,

Valchand Hirachand Marg,

Ballard Estate, Mumbai - 400 001

Subsequent to the Circular Nos. DC/C-

SH/7200 dated 4th October, 1995 and DC/C-

SH/2/3661 dated 9th July, 1996 and in view of

recent experience gathered from the storm which

hit the harbour on 18th and 19th June, 1996. It

has been decided that vessels which do not

possess valid P&I club cover or suitable

Insurance Cover will not be decked. The

intention of the Port is to eliminate all sub-

standard vessels or ships without insurance

cover, making Mumbai a port of call, because a

mishap to such a vessel will render the port

liable for expenses of wreck removal or other

damages caused.

2. Therefore, notice is hereby given that

from 1st November, 1996, ships, which do not

possess valued insurance cover will not be given

an anchorage berth in the Mumbai Port for cargo

work or for any other purpose, this notice

period is given so that the owners, agents and

shippers proposing to load cargo have sufficient

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time to ensure that such cargoes will be loaded

on duly protected ships.

Sd/-

Deputy Conservators

CALCUTTA PORT TRUST

HARBOUR MASTER (PORT)'S OFFICE

CIRCULAR NO. 10 DATED 26.6.2001

To

All Shipping Agents

To safeguard Port interest for damage cost

of repairs due marine accident or otherwise, it

is mandatory for the Agents to declare along

with Berthing Application the details of P&I

Club Coverage including period of validity and a

declaration that insurance provides

comprehensive coverage, inter alia, the

following risks:

1) 3rd party liability claims

2) Claims arising out of injury/ death etc.

3) Claims arising out of damage to port

properties

4) Claims against environmental damage owing

to pollution caused by the ship or its personnel

5) Removal of the wreck comprehensively

The above details required to be submitted

along with Berthing application to Harbour

Master (River) & Harbour Master (*Port).

Sd/-

(D.K. Rao)

Harbour Master (Port)

Copy to:

DMD/TMN/FA&CAO/Secretary/H.M.(R)"

Cochin Port Trust had also been contemplating to issue such

circular.

It may be true that some ports have not issued such circulars but

from a bare perusal of the circulars as referred to hereinbefore, it

would appear that such insurance cover has been considered to be a

service having regard to the cover extended to oil spill, damage to

port, salvage operation, etc.

The circulars issued by the Port Trusts may not be determinative

but there cannot be any doubt whatsoever the same would also be a

relevant factor.

The 'Vessel' is also not correct in its submission that the ports

cannot take any direct action against the insurers. The circulars

issued are pointers to the fact that development of law in other

countries is being taken note of for the purpose of taking insurance

cover in different fields as a compulsive measure.

A DRIFT IN THE CONCEPT?

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Whether arrears of insurance premium would come within the term

"necessaries" is the core question involved in these appeals. The term

has not been statutorily defined.

The term 'necessaries' as defined in Black's Law Dictionary reads

as under:

"What constitutes "necessaries" for which an

admiralty lien will attach depends upon what is

reasonably needed in the ship's business, regard

being had to the character of the voyage and the

employment in which the vessel is being used."

In Bouvier's Law Dictionary, the term 'necessaries' has inter alia

been defined as follows:

"The term necessaries is not confined merely to

what is requisite barely to support life, but

includes many of the conveniences of refined

society.

A racing bicycle was held a necessary for an

apprentice earning 21s. a week and living with

his parents; 78 L.T. 296"

In The Canadian Law Dictionary, the term 'necessaries' has been

defined as follows:

"In the case of ships, the term denotes whatever

is fit and proper for the service on which the

ship is engaged, whatever the owner of that

vessel, as a prudent man would have ordered if

present at the time. Victoria Machinery Depot

Co. Ltd. v. The 'Canada' and the 'Triumph',

(1913) 15 Ex.C.R. 136, 14 D.L.R. 318."

In Ballentine's Law Dictionary, the term 'necessaries' has been

defined as follows:

"Under the maritime law permitting the master of

a ship to pledge the owner's credit for

necessaries, the word does not import absolute

necessity, but the circumstances must be such

that a reasonable prudent owner, present, would

have authorized the expenditures, and it is

usually sufficient if they are reasonably fit

and proper, having regard to the exigencies and

requirements of the ship, for the port where she

is lying and the voyage on which she is bound.

48 Am J1st Ship ' 133."

In 70 American Jurisprudence 2d, at page 478, it is stated:

"The term "necessary" in this connection does

not mean indispensable to the safety of the

vessel and crew; necessaries which will create a

lien upon the ship are such as are reasonably

fit and proper for her under the circumstances,

and not merely such as are absolutely

indispensable for her safety or the

accomplishment of the voyage. Whatever a

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prudent owner, if present, would be supposed to

have authorized, the master may order, and for

such expenditures the vessel will be held

responsible."

We may further notice that in Modern Admiralty Law by Aleka

Mandaraka-Sheppard at page 52, it is stated:

"However, the decision of the Scottish Court of

Session in The Aifanourios, mentioned above,

shattered the hopes of P&I clubs. It took 19

years for the wheel to turn round and so to

include such claims in the list of claims

provided by the new Arrest Convention 1999. The

new Arrest Convention 1999 has incorporated in

the list of maritime claims for insurance

premiums and brokerage, including claims by a

P&I club for unpaid calls. Such claims will

qualify for an arrest of a ship to be made once

the Convention comes into force, or is enacted

by the UK."

In Principles of Maritime Law by Susan Hodges and Christopher Hill

at page 364 it is stated:

"Failure to insure the ship: The authorities of

Laming v. Seater, The Heather Bell, and Law

Guarantee and Trust Society v. Russian Bank for

Foreign Trade and others have all confirmed that

a failure to insure the security is a matter

which would have a bearing upon the security of

the ship. In such an event, the mortgagee may

enter into possession in order to make the ship

available as security for the debt. It is to be

noted that, in the last two cases, the court had

also pointed out that a failure to insure the

vessel (though it may constitute the basis of a

right for the mortgagee to take possession) is

not itself a legitimate ground for interfering

with the performance of the charterparty."

It is interesting to note that in P&I clubs - Law and Practice by

Steven J. Hazelwood, it is stated:

"The defendant shipowners challenged the

competence of the court to deal with the action

as an action in rem. The catalogue of claims

which entitle a claimant to proceed with an

action in rem in the courts of Scotland are

stated in section 47(2) of the Administration of

Justice Act 1956 which provides, inter alia:

"This section applies to any claim arising out

of one or more of the following, that is to say

...(d) any agreement relating to the use or hire

of any ship whether by charter or otherwise;"."

The learned author, however, noticed the shortcomings in the

statutes operating in United Kingdom and made a prophecy to the effect

that contract of maritime insurance may be included in the list of claim

giving the right of arrest in the following terms:

"The current position is, therefore, that claims

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arising out of contracts of marine insurance are

not claims which entitle a claimant to proceed

by way of action in rem and claimants in respect

of P.&I. Club membership are in no better

position than those claiming in respect of

traditional hull and cargo insurance.

In this context there is one respect in which

the insurance cover offered by P.&I. Clubs

differs from hull and cargo insurance and which

has yet to receive the attention of the courts.

Certain heads of P.&I. Cover have ceased to be

matters which are, as Sir James Hannen P. once

described, merely prudence but have become

compulsory by law. Compulsory liability

insurance was introduced in the area of oil

pollution liability by the International

Convention on Civil Liability for Oil Pollution

1969. Under the regime thereby introduced a

shipowner is legally unable to trade or put to

sea without having effected oil pollution

indemnity insurance and having adequate

liability insurance is as 'necessary' to a

shipowner as having fuel, stores, navigational

equipment or other well-recognised

"necessaries". It is also arguable that as oil

cannot be lawfully transported without the

carrier having the required insurance cover, a

contract for the entry of the vessel in a P&I

Club could fairly be regarded as an agreement

closely "relating to the carriage of goods in a

ship or to the use of a ship".

It may be that in any future review of the

1952 Arrest Convention, claims relating to

contracts of marine insurance will be included

in the list of claims giving the right of arrest

and provided the wording is framed appropriately

to include club entry it may be that members who

do not pay calls may one day find their vessels

liable to arrest in this country."

The said prophecy has come true. The learned author has also

noted the decision in Marazura Navegacion S.A. and Others v. Oceanus

Mutual Underwriting Association (Bermuda) Ltd. and John Laing

(Management) Ltd. [1977] 1 Lloyd's Rep. 283 wherein it has been noticed:

"Clubs can and do arrest vessels for non-payment

of calls in jurisdictions which allow such

actions; for example, the United States;"

In an interesting article "the International Convention on Arrest

of Ships 1999" by Richard Shaw, it was opined:

"The 1999 Arrest Convention has produced a set

of principles which are generally regarded as

reasonably balanced, between the interests of

legitimate claimants and those of shipping

organizations seeking to ensure freedom of world

trade without undue interference. The 1952

Arrest Convention has achieved a widespread

degree of acceptance, and indeed there were

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those who argued that it was preferable to

retain its well-tried principles rather than

risk upsetting them while correcting its few

deficiencies.

The extension of the right of arrest to claims

for environmental damage, wreck removal,

insurance premiums, commissions, brokerage and

agency fees, and ship sale contracts are all

significant steps to correct those recognized

deficiencies, while still retaining the

exhaustive list of maritime claims which is the

heritage of the common law Admiralty

jurisdiction. The remainder of the 1999

Convention contains nothing revolutionary, the

radical UK proposal on associated ship arrest

having been rejected by the conference, but

there are a number of provisions which provide

useful clarification of the law. The active

participation in the conference of delegations

from China, Russia and the USA leads one to hope

that these major states may, despite their

relatively low rate of ratification of other

maritime conventions, find this one sufficiently

non-controversial to commend it to their

legislatures."

The learned author further stated:

"The principles of international law relating

to jurisdiction have evolved significantly since

1952, in Europe in particular under the European

Convention on Jurisdiction and Judgments 1968,

but also with the development in English Law of

the doctrine of forum non conveniens in cases

such as the "ABDIN DAVER" [1984] A.C. 398.

The terms of Article 7 have therefore been

drafted to reflect the modern law, while

retaining the original principle in paragraph 1

that, in the absence of another rule of the lex

fori arresti, the courts of the state where the

ship has been arrested shall have jurisdiction

to decide the merits of the claim."

In Project Gabcikovo-Nagymaros (Op. Ind. Weeramantry) the

International Court in its judgment dated 25.9.1997 at page 114 albeit in

a different context observed:

"As this Court observed in the Namibia case, "an

international instrument has to be interpreted

and applied within the framework of the entire

legal system prevailing at the time of the

interpretation" (Legal Consequences for States

of the Continued Presence of South Africa in

Namibia (South West Africa) notwithstanding

Security Council Resolution 276 (1970), Advisory

Opinion, I.C.J. Reports 1971, p. 31, para 53),

and these principles are "not limited to the

rules of international law applicable at the

time the treaty was concluded."

In Equilease Corporation Vs. M.V. Sampson [793 F.2d 598] the Court

was considering interpretation of Ship Mortgage Act, 46 providing for

right to a federal maritime lien to "any person furnishing repairs,

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supplies, or other necessaries, to any vessel. It was held:

"Equilease next argues that no maritime lien

arises in favor of James because insurance is

not a "necessary" and therefore neither

general admiralty law nor the Act provides a

maritime lien for unpaid insurance premiums.

Equilease relies on Learned and on Grow v. Steel

Gas Screw Lorrains K, 310 F.2d 547 (6th Cir.

1962), for this proposition. The Grow court

stated in one sentence without elaboration that

there is no federal maritime lien for insurance

premiums, 310 F.2d at 549, and went on to grant

the plaintiff insurance broker a lien under

Michigan state law. Grow is thus not of much

aid to us here. We focus instead on Learned."

"Equilease urges us to apply Learned and to

find that marine insurance in 1986 insures

solely to the benefit of a ship's owner, in no

way aiding the ship, and therefore, that no

federal lien can be had for unpaid insurance

premiums. This we cannot do.

In the nineteenth century, an insurance policy

on a ship was viewed as a contract for the

personal indemnity of the insured ship's owner.

Under this reasoning, no lien against the ship

itself could possibly arise as the result of an

insurance policy; "unless the ship is benefited

the ship should not pay." In Re Petition of

Insurance Co. of Pennsylvanis, 22 F.109, 116

(N.D.N.Y.1884), aff'd sub non. Insurance Co. of

Pennsylvania v. The Proceeds of the Sale of the

Barge Waubauschene, 24 F. 559

(C.C.N.D.N.Y.1885). It is no longer

appropriate, however, to view maritime insurance

this way. Even a vessel that simply sits at a

dock without making any attempt to ply the

waters must today have hull protection and

indemnity insurance. As the district court

noted, insurance is something that every vessel

today needs just to carry on its normal

business."

It was further held

"We therefore hold that because insurance is

essential to keep a vessel in commerce,

insurance is a "necessary" under 46 U.S.C.

Sec. 971 and unpaid insurance premiums to give

rise to a maritime lien under the FMLA."

Equilease Corp.(supra) has a greater persuasive value having

regard to the fact that contemporary maritime statutes in England and

other countries do not use the term "necessaries" but the American

Federal Maritime Liens Act does.

The Indian courts need not follow the English judicial ideologies

blindly. We must remind ourselves that in many fields, particularly, in

the matter of preservation of 'Human Rights' and 'Ecology', Indian

courts have gone far ahead than their English counterparts.

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The decisions of the English Courts have been held to be a

departure by the American Courts with regard to the jurisdiction of the

admiralty but such departure is a well-known one.

Equilease Corporation has been noticed in Trident Marine Managers

Inc. Vs. Serial No. CEBRF 0661586 [1988 American Maritime Cases 763].

The question, however, is whether a prudent shipowner would

provide for an insurance. A compulsory insurance regime has come into

being and keeping in view the changed situation the definition of the

expression "necessaries" should also undergo a change.

The term "necessary" is a term of art but the same cannot, in our

opinion, be used in a limited context of mandatory claims made for goods

or services supplied to a particular ship for her physical necessity as

opposed to commercial operation and maintenance. Physical necessity and

practicality would be a relevant factor for determination of the said

question. Taking insurance cover would not only be a commercial

prudence but almost a must in the present day context. The third party

insurance may not be compulsory in certain jurisdiction but having

regard to the present day scenario such an insurance cover must be held

to be intrinsically connected with the operation of a ship.

One of the relevant factors for arriving at a conclusion as to

whether anything would come within the expression "necessary" or not

will inter alia depend upon answer to the question as to whether the

prudent owner would provide to enable a ship to perform well the

functions for which she has been engaged. If getting the vehicle

insured with P&I club would be one of the things which would enable a

prudent owner to sail his ship for the purposes for which she has been

engaged, the same would come within the purview of the said term. The

matter must be considered having regard to the changing scenario

inasmuch as the field of insurance has undergone a sea change from

merely hull and machinery, the insurance companies cover various risks

including oil spill damage to the Port, damage to the cargo etc. In

that sense the term must be construed in a broad and liberal manner.

The changing requirement of a ship so as to enable it to trade in

commerce must be kept in mind which would lead to the conclusion that P

& I Insurance cover would be necessary for operation of a ship.

It may be true that there are a large number of insurance covers;

from hull and machinery insurance to protection and indemnity cover.

But the question is not what insurance would be 'necessary' and what

would not be; as the issue has to be considered not only on a mere

hypothesis but having regard to the statutes framed by other countries

as also the 1999 Arrest Convention.

LEX FORI:

In Benedict on Admiralty, 6th Edn., Vol.1, p. 19, it has been

stated :

"A ship is, of necessity, a wanderer. She

visits shores where her owners are not known or

are inaccessible. The master is the fully

authorized agent of the distant owners but is

not usually of sufficient pecuniary ability to

respond to unforeseen demands of the voyage.

These and other kindred characteristics of

maritime commerce underlie the practice of

finding in the ship itself security, in many

cases, for demands against the master or owners

in their conduct of the ship as an

instrumentality, whether commercial or not, or

in their contracts made on account of the ship."

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In British Shipping Laws, Volume 14, while contrasting maritime

liens and statutory rights of action it is stated:

"Although maritime liens and statutory rights

of action in rem are similar in that they

involve the Admiralty process in rem, there

nonetheless exist fundamental differences

between the two categories. These differences

may be categories as follows:

(1) Nature of the claim

Although the point is not free of uncertainty it

is probably the case that a maritime lien is a

substantive right whereas a statutory right of

action in rem is in essence a procedural remedy.

The object behind the availability of a

statutory right of action in rem is to enable a

claimant to found a jurisdiction and to provide

the res as security for the claim."

In Cheshire and North's Private International Law, 12th Edition, it

is stated

"At first sight the principle seems almost

self-evident. A person who resorts to an

English court for the purpose of enforcing a

foreign claim cannot expect to occupy a

different procedural position from that of a

domestic litigant. The field of procedure

constitutes perhaps the most technical party of

any legal system, and it comprises many rules

that would be unintelligible to a foreign judge

and certainly unworkable by a machinery designed

on different lines. A party to litigation in

England must take the law of procedure as he

finds it. He cannot by virtue of some rule in

his own country enjoy greater advantages than

other parties here; neither must he be deprived

of any advantages that English law may confer

upon a litigant in the particular form of

action. To take an old example, an English

creditor who sued his debtor in Scotland could

not insist on trial by jury, nor, in the

converse case, could a Scottish creditor suing

in England refuse the intervention of a jury, on

the ground that in Scotland, where the debt

arose, the case would have been tried by a judge

alone."

An insurance transaction more often than not have links with more

than one country. In a given case for resolution of a complex question

the principles of private inter-national law or the conflict of laws may

have to be turned to but with a view to determine the same, disputes

have to be resolved by reference to the system of law which governs the

contract of insurance. The jurisdiction to deal with an action by or

against insurers in England and EC Member States except Denmark are now

governed by EC Council Regulation No. 44/2001. In other countries,

however, the law which is prevailing therein would govern the field. It

may be true that some conventions like Brussels and Lugano are no longer

relevant in most cases involving EC Member States but they form an

important part of the background to the current jurisdictional regime.

For defending the limits of the jurisdiction of the case of a particular

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company the same must, therefore, be governed by the law prevailing

therein. The claim may be a maritime claim in a non-contracting country

but not in others. The 'Club' in law, therefore, would be entitled to

enforce its claims against the 'Vessel' keeping in view the law

prevailing in India within whose territorial jurisdiction the ship is

found. Only because, the claim can be enforced in our country and not

in some other countries, by itself would not lead to the conclusion that

it cannot be enforced at all irrespective of the domestic law.

Some countries like Canada, Australia and South Africa as well as

communist regimes like China and Korea have made statutes as a result

whereof the maritime claims stand codified. The expression

'necessaries' is not used in the said statutes except the statutes of

United States. The domestic legislation indisputably will prevail over

any international convention irrespective of the fact as to whether the

country concerned is a party thereto or not.

The rules for ship arrest in international fora are not uniform.

Despite International Convention on the Arrest of Sea-going Ships 1952

as amended in the year 1999 either having been adopted by some countries

or adopted by others, the law is enforced by the concerned countries

having regard to their own domestic legal system. Where, how and when

can a maritime claimant most advisedly arrest a ship in pursuit of its

claim either in rem or in personem had all along been a complicated

question keeping in view the principles of 'lex fori'.

As a matter of policy legislation or otherwise England did not

want that arrears of insurance premium should be included as a maritime

claim, but the same would not imply that in other countries despite the

unpaid insurance premium being maritime claim, the same would not be

enforced.

SUMMARY OF THE DISCUSSIONS:

The discussions made hereinbefore lead to the conclusion that

having regard to the changing scenario and keeping in tune with the

changes in both domestic and international law as also the statutes

adopted by several countries, a stand, however, bold, may have to be

taken that unpaid insurance premium of P&I Club would come within the

purview of the expression "Necessaries supplied to any ship". Other

types of insurance, keeping in view the existing statutes may not amount

to a "necessary". In any event, such a question, we are not called upon

to answer at present. The discussions made hereinbefore under different

sub-titles of this judgment separately and distinctly may not lead us to

the said conclusion but the cumulative effect of the findings thereunder

makes the conclusion inevitable. The question has not only been

considered from the angle of history of the judicial decisions rendered

by different Courts having great persuasive value but also from the

angle that with the change in time interpretative changes are required

to be made. We, therefore, in agreement with the judgment of the Bombay

High Court, hold that unpaid insurance premium being a maritime claim

would be enforceable in India.

MAINTAINABILIY OF THE LETTERS PATENT APPEAL:

Submission of Mr. Pratap is that by refusing to exercise

discretion to reject a plaint by account, no right or liability of the

party is decided and by reason thereof the procedure for determining the

rights and obligations of the parties are only set in motion. Such an

order would akin to an order admitting the plaint, Mr. Pratap would

submit. Reliance in this connection has been placed on The Justices of

the Peace for Calcutta Vs. Oriental Gas Company [1872 Vol. VIII Bengal

Law Reports 433 at 452].

It was urged that by not rejecting the plaint the defences set out

by the defendant are not obliterated as they will be entitled to raise

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all such contentions at the trial. Reliance in this connection has been

placed on Prahladrai Agarwalla Vs. Shri Renuka Pal [AIR 1982 Cal 259 at

page 266].

Mr. Pratap would further contend that the High Court has misread

and misinterpreted the decision of this Court in Shah Babulal Khimji Vs.

Jayaben Kania [(1981) 4 SCC 8]

By way of an analogy, the learned counsel would argue that leave

to defend a suit granted in favour of the defendant under Order 37 of

the Code of Civil Procedure would not be a 'judgment' within the meaning

of Clause 15 of the Letter Patent being an interlocutory order as

damage or prejudice in such a matter to the defendant must be a direct

and immediate one.

Clause 15 permits an appeal against the order passed by a Single

Judge of the High Court in the second forum.

The relevant portion of Clause 15 of the Letters Patent reads

thus:

"And we do further ordain that an appeal shall

lie to the said High Court of Judicature at

Madras, Bombay, Fort William in Bengal from the

judgment ... of one Judge of the said High Court

or one Judge of any Division Court, pursuant to

Section 108 of the Government of India Act, and

that notwithstanding anything hereinbefore

provided, an appeal shall lie to the said High

Court from a judgment of one Judge of the said

High Court or one Judge of any Division Court,

pursuant to Section 108 of the Government of

India Act, made (on or after the first day of

February 1929) in the exercise of appellate

jurisdiction in respect of a decree or order

made in the exercise of appellate jurisdiction

by a court subject to the superintendence of the

said High Court where the Judge who passed the

judgment declares that the case is a fit one for

appeal."

The right of appeal which is provided under Clause 15 of the

Letters Patent cannot be said to be restricted.

In Subal Paul v. Malina Paul and Anr. [JT 2003 (5) SC 193] this

Court held:

"While determining the question as regards

Clause 15 of the Letters Patent the court is

required to see as to whether the order sought

to be appealed against is a judgment within the

meaning thereof or not. Once it is held that

irrespective of the nature of the order, meaning

thereby whether interlocutory or final, a

judgment has been rendered, Clause 15 of the

Letters Patent would be attracted.

The Supreme Court in Shah Babulal Khimji's case

(supra) deprecated a very narrow interpretation

on the word 'judgment' within the meaning of

Clause 15.

This Court said:

"a court is not justified in interpreting

a legal term which amounts to a complete

distortion of the word 'judgment' so as to

deny appeals even against unjust orders to

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litigants having genuine grievances so as

to make them scapegoats in the garb of

protecting vexatious appeals. In such

cases, a just balance must be struck so as

to advance the objection of the statute

and give the desired relief to the

litigants, if possible."

In Shah Babulal Khimji's case (supra), this

Court in no uncertain terms referred to the

judgment under the Special Act which confers

additional jurisdiction to the High Court even

in internal appeal from an order passed by the

Trial Judge to a larger Bench. Letters Patent

has the force of law. It is no longer res

integra. Clause 15 of the Letters Patent confers

a right of appeal on a litigant against any

judgment passed under any Act unless the same is

expressly excluded. Clause 15 may be subject to

an Act but when it is not so subject to the

special provision the power and jurisdiction of

the High Court under Clause 15 to entertain any

appeal from a judgment would be effective.

The decision of this Court in Shah Babulal

Khimji's case (supra) has been considered in

some details by a Special Bench of the Calcutta

High Court in Tanusree Art Printers and Anr. v.

Rabindra Nath Pal [2000 (2) CHN 213 and 2000 (2)

CHN 843]. It was pointed out:

"If the right of appeal is a creature of a

statute, the same would be governed by the

said statute. Whether an appeal under

Clause 15 of the Letters patent will be

maintainable or not when the matter is

governed by a Special Statute will also

have to be judged from the scheme thereof.

(e.g. despite absence of bar, a Letters

Patent appeal will not be maintainable

from a judgment of the learned Single

Judge rendered under the Representation of

People Act.)"

It was pointed out that in Shah Babulal Khimji's

case (supra) this Court posed three questions

namely:

"1) Whether in view of Clause 15 of the

Letters Patent an appeal under Section 104

of the Code of Civil Procedure would lie?

2) Whether Clause 15 of the Letters Patent

supersedes Order 43, Rule 1 of the Code of

Civil Procedure? 3) Even Section 104 of

the CPC has no application, whether an

order refusing to grant injunction or

appoint a receiver would be a judgment

within the meaning of Clause 15 of the

Letters Patent?"

The Apex Court answered each of them from a

different angle:

a) Section 104 of the Code of Civil

Procedure read with Order 43, Rule 1

expressly authorizes a forum of appeal

against orders falling under various

clauses of Order 43 Rule 1 to a Larger

Bench of a High Court without at all

disturbing interference with or overriding

the Letters Patent jurisdiction.

b) Having regard to the provisions of

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Section 117 and Order 49 Rule 3 of the

Code of Civil Procedure which excludes

various other provisions from the

jurisdiction of the High Court, it does

not exclude Order 43 Rule 1 of the CPC.

c) There is no inconsistency between

Section 104 read with Order 43 Rule 1 and

the appeals under Letters Patent, as

Letters Patent in any way does not exclude

or override the application under Section

104 read with Order 43 Rule 1 which shows

that these provisions would not apply in

internal appeals within the High Court."

In Prataprai N. Kothari v. John Braganza [(1999)

4 SCC 403], even in a suit for possession only

not based on title, a letters patent appeal was

held to be maintainable.

The decision of this Court in Sharda Devi v.

State of Bihar [(2002) 3 SCC 705] is also to the

same effect, wherein in para 9 it was held:

"A Letters patent is the charter under which the

High Court is established. The powers given to a

High Court under the Letters Patent are akin to

the constitutional powers of a High Court. Thus

when a Letters Patent grants to the High Court a

power of appeal, against a judgment of a Single

Judge, the right to entertain the appeal would

not get excluded unless the statutory enactment

concerned excludes an appeal under the Letters

Patent."

Section 54 of the Land Acquisition Act, 1894

provides for an appeal before the High Court and

thereafter to the Supreme Court and despite the

same it was held that a letters patent appeal

under Clause 15 would be maintainable."

The view taken by the Calcutta and Bombay High Court that an order

passed in terms of Order 37 of the Code of Civil Procedure granting

leave to defend would not be a judgment within the meaning of Clause 15

of the Letters Patent may not be of much relevance.

In M/s. Tanusree Art Printers & Anr. Vs. Rabindra Nath Pal [2000

(2) CHN 213] it has been noticed:

"In M/s. Merchants of Traders (P) Ltd. Vs. M/s.

Sarmon Pvt. Ltd., reported in 1997(1) CHN 287,

learned Division Bench although did not consider

this aspect of the matter but held that an order

passed in terms of Order 37 Rule 5 of the Code

of Civil Procedure will not be appealable."

Reliance by Mr. Pratap upon a decision of the Calcutta High Court

in Prahladrai Agarwalla and others Vs. Smt. Renuka Pal and Others [AIR

1982 Cal. 259] wherein it has been held that an order under Order 7 Rule

11 of the Code of Civil Procedure refusing to reject a plaint is not a

judgment, is not apposite.

In the said judgment, however, the judgment of this Court in Shah

Babulal Khimji (supra) was not taken into consideration. The ratio of

the decision of this Court in Shah Babulal Khimji, as regard scope and

ambit of the word "judgment" had not been noticed by the Calcutta High

Court.

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The submission, however, to the effect that in the suit all

defences would be open to the defendant, in our opinion, is misconceived

inasmuch as, no evidence can be adduced in absence of any pleading.

There may not, furthermore be any requirement to go into the trial if

the plaint does not disclose a cause of action.

The contention that an order refusing to reject a plaint is one

akin to order amending the plaint would not be a correct proposition of

law.

The question as to whether the defendant despite such an order

refusing to reject a plaint will have a right to show that the case is

false would again be of no consequence. The said submission, in our

opinion, is based on a wrong premise.

An order refusing to grant leave to a defendant to defend the suit

would be passed when it is found that the defence is a moonshine.

Clause 15 of the Letters Patent is not a special statute. Only in

a case where there exists an express prohibition in the matter of

maintainability of an intra court appeal, the same may not be held to be

maintainable. But in the event there does not exist any such

prohibition and if the Order will otherwise be a 'judgment' within the

meaning of Clause 15 of the Letters Patent, an appeal shall be

maintainable.

What would be a judgment is stated in Shah Babulal Khimji (supra)

as under:

"We think that "judgment" in Clause 15 means a

decision which affects the merits of the

question between the parties by determining some

right or liability. It may be either final, or

preliminary, or interlocutory, the difference

between them being that a final judgment

determines the whole cause or suit, and a

preliminary or interlocutory judgment determines

only a part of it, leaving other matters to be

determined.

81. An analysis of the observations of the Chief

Justice would reveal that the following tests

were laid down by him in order to decide whether

or not an order passed by the Trial Judge would

be a judgment :

(1) a decision which affects the merits of the

question between the parties;

(2) by determining some right or liability;

(3) the order determining the right or liability

may be final, preliminary or interlocutory, but

the determination must be final or one which

decides even a part of the controversy finally

leaving other matters to be decided later.

In Lea Badin Vs. Upendra Mohan Roy [AIR 1935 Cal. 35], the

Calcutta High Court held that an order refusing to appoint a receiver is

determinative of a right of the plaintiff and would accordingly be a

judgment.

Yet again in Chittaranjan Mondal Vs. Sankar Prosad Sahani [AIR

1972 Cal. 469] the Calcutta High Court held that an order refusing to

grant an injunction restraining execution of the judgment-debtor was a

judgment within the meaning of Clause 15.

As by reason of an order passed under Order 7, Rule 11 of the Code

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of Civil Procedure, the rights conferred upon the parties are determined

one way or the other, stricto sensu it would not be an interlocutory

order but having regard to its traits and trappings would be a

preliminary judgment.

It is true that in Shah Babulal Khimji (supra) it is stated that

an order rejecting the plaint would be appealable but does not expressly

state that an order refusing to reject would not be appealable. Therein

this Court gave 15 instances where an order would be appealable which

are only illustrative in nature.

Such observations have to be understood having regard to the

concept of finality which are of three types:

(1) a final judgment

(2) a preliminary judgment and

(3) intermediary or interlocutory judgment.

In our opinion the order refusing to reject the plaint falls in

the category of a preliminary judgment and is covered by the second

category carved out by this Court.

It is trite that a party should not be unnecessarily harassed in

a suit. An order refusing to reject a plaint will finally determine his

right in terms of Order 7 Rule 11 of the Code of Civil Procedure.

The idea underlying Order 7 Rule 11A is that when no cause of

action is disclosed, the courts will not unnecessarily protract the

hearing of a suit. Having regard to the changes in the legislative

policy as adumbrated by the amendments carried out in the Code of Civil

Procedure, the Courts would interpret the provisions in such a manner so

as to save expenses, achieve expedition, avoid the court's resources

being used up on cases which will serve no useful purpose. A litigation

which in the opinion of the court is doomed to fail would not further be

allowed to be used as a device to harass a litigant. (See Azhar Hussain

Vs. Rajiv Gandhi 1986 Supp SCC 315 at 324-35).

In Dhartipakar Aggarwal Vs. Rajiv Gandhi [1987 Supp SCC 93], this

court held:

"9. In K. Kamaraja Nadar v. Kunju Thevar (1959

SCR 583 : AIR 1958 SC 687 : 14 ELR 270), the

Election Tribunal and the High Court both

refused to consider preliminary objections

raised by the returned candidate at the initial

stage on the ground that the same would be

considered at the trial of the election

petition. This Court set aside the order and

directed that the preliminary objection should

be entertained and a decision reached thereupon

before further proceedings were taken in the

election petition. Bhagwati, J. speaking for the

Court observed thus :

We are of opinion that both the Election

Tribunal and the High Court were wrong in the

view they took. If the preliminary objection was

not entertained and a decision reached

thereupon, further proceedings taken in the

election petition would mean a full-fledged

trial involving examination of a large number of

witnesses on behalf of the second respondent in

support of the numerous allegations of corrupt

practices attributed by him to the appellant,

his agents or others working on his behalf;

examination of a large number of witness by or

on behalf of the appellant controverting the

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allegations made against him; examination of

witness in support of the recrimination

submitted by the appellant against the second

respondent; and a large number of visits by the

appellant from distant places like Delhi and

Bombay to Ranchi resulting in not only heavy

expenses and loss of time and diversion of the

appellant from his public duty in the various

fields of activity including those in the House

of the People. It would mean unnecessary

harassment and expenses for the appellant which

could certainly be avoided if the preliminary

objection urged by him was decided at the

initial stage by the Election Tribunal.

It was opined that in a given case a full dressed trial need not

be undertaken.

Yet again in Samar Singh Vs. Kedar Nath (1987 Suppl. SCC 224) it

has been held :

"In substance, the argument is that the court must

proceed with the trial, record the evidence, and only

after the trial of the election petition is concluded

that the powers under the Code of Civil Procedure 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 it 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 and exercise the mind of

the respondent."

We may notice a converse case. In Dipak Chandra Ruhidas Vs.

Chandan Kumar Sarkar [(2003) 7 SCC 66], in view of Section 98 (a) and

Section 116-A of the Representation of People Act, a question arose as

to whether dismissing an election petition at the threshold shall be

appealable. This Court observed:

"13. Furthermore, Section 86 deals with trial of

election petitions, Sub-section (1) whereof is a

part of it. Trial has not been defined. In

Black's Law Dictionary at page 1348 it is

stated:

"A judicial examination and determination

of issues between parties to action, Gulf,

C. & S.F. Ry. Co. v. Smit, Okl., 270 P.2d

629, 633; whether they be issues of law or

of fact, Pulaski v. State, 23 Wis. 2d 138,

126 N.W. 2d 625, 628. A judicial

examination, in accordance with law of the

land, of a cause, either civil or

criminal, of the issues between the

parties whether of law or fact, before a

court that has proper jurisdiction".

14. It is, therefore, not necessary that the

trial must be a full dressed or a jury trial or

a trial which concludes only after taking

evidence of a parties in support of their

respective cases.

15. Section 116A provides for an appeal. The

said provision must be given a liberal and

purposive construction. The scope of an appeal

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should be held to be wider than an application

for judicial review or a petition under Article

136 of the Constitution of India.

16. Furthermore, the Representation of the

People Act provides for a complete machinery.

The right of appeal conferred upon a suitor must

be considered from that angle. When an order is

passed under Section 98 of the Act, the same may

be in terms of either Sub-section (1) of Section

86 or otherwise. An appeal lies against a final

order. An order passed under Sub-section (1) of

Section 86 is also final. It may be that in the

event an appeal therefrom is allowed, the matter

may be required to be sent back but that would

not render an order passed thereunder as an

interlocutory one. It does not take away the

concept of the finality attached therewith."

In Central Mine Planning and Design Institute Ltd. Vs. Union of

India and Another [(2001) 2 SCC 588] this Court upon referring Shah

Babulal Khimji (supra) held:

"Adverting to the facts of this case, Section

17-B of the ID Act confers valuable rights on

the workmen and correspondingly imposes onerous

obligations on the employer. The order in

question passed by the learned Single Judge

determines the entitlement of the workmen to

receive benefits and imposes an obligation on

the appellant to pay such benefits provided in

the said section. That order cannot but be

"judgment" within the meaning of clause 10 of

Letters Patent, Patna. The High Court is

obviously in error in holding that the said

order is not judgment within the meaning of

clause 10 of the Letters Patent of Patna."

We, therefore, are of the opinion that Letters Patent Appeal was

maintainable.

REJECTION OF PLAINT:

Whether a plaint discloses a cause of action or not is essentially

a question of fact. But whether it does or does not must be found out

from reading the plaint itself. For the said purpose the averments made

in the plaint in their entirety must be held to be correct. The test is

as to whether if the averments made in the plaint are taken to be

correct in its entirety, a decree would be passed.

CAUSE OF ACTION:

A cause of action is a bundle of facts which are required to be

pleaded and proved for the purpose of obtaining relief claimed in the

suit. For the aforementioned purpose, the material facts are required

to be stated but not the evidence except in certain cases where the

pleading relies on any misrepresentation, fraud, breach of trust, wilful

default, or undue influence.

Order 7 Rule 14 of the Code of Civil Procedure provides as

follows:

"14 PRODUCTION OF DOCUMENT ON WHICH PLAINTIFF

SUES OR RELIES.

(1) Where a plaintiff sues upon a document or

relies upon document in his possession or power

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in support of his claim, he shall enter such

documents in a list, and shall produce it in

Court when the plaint is presented by him and

shall, at the same time deliver the document and

a copy thereof, to be filed with the plaint.

(2) Where any such document is not in the

possession or power of the plaintiff, he shall,

where possible, state in whose possession or

power it is.

(3) Where a document or a copy thereof is not

filed with the plaint under this rule, it shall

not be allowed to be received in evidence on

behalf of the plaintiff at the hearing of the

suit.

(4) Nothing in this rule shall apply to document

produced for the cross-examination of the

plaintiff's witnesses, or, handed over to a

witness merely to refresh his memory."

In the instant case the 'Club' not only annexed certain documents

with the plaint but also filed a large number of documents therewith.

Those documents having regard to Order 7 Rule 14 of the Code of Civil

Procedure are required to be taken into consideration for the purpose of

disposal of application under Order 7 Rule 11(a) of the Code of Civil

Procedure. The 'Club' in its plaint pleaded:

"The Plaintiff is a Protection & Indemnity

Association incorporated under the laws of the

United Kingdom and carries on business through

its Managers, Liverpool & London P&I Management

Ltd. at Liverpool, UK. The Plaintiff is a

mutual association of ship-owners and offers

insurance cover in respect of vessels entered

with it for diverse third party risks associated

with the operation and trading of vessels. This

insurance is commonly known as Protection &

Indemnity (P&I) cover in respect of various

risks associated with the vessels in their

maritime adventure. The 1st Defendant vessel

m.v. "Sea Success I" is a sistership of the

vessels "Sea Ranger" and "Sea Glory" which

were entered for P&I risks with the Plaintiff

Association. The said two vessels were entered

into the Plaintiff's Association for the policy

year 1999-2000 by Defendant No. 2, Singapore

Soviet Shipping Co. Pte. Ltd. who, as per the

terms of the insurance and Rules of the

Plaintiff Association, were recognized and

considered to be the owners of the said two

vessels and the assured under the policy of

insurance. The 1st Defendant vessel is owned

and/ or controlled by Defendant No. 2 through

its wholly owned 100% subsidiary, Singapore

Soviet Shipping Corporation Inc., Monrovia. The

1st Defendant vessel is presently at the port and

harbour of Mumbai within the territorial waters

of India and within the Admiralty jurisdiction

of this Hon'ble Court. The 2nd Defendant is the

owner of the 1st Defendant and is also inter alia

the party liable in personam in respect of the

Plaintiff's claim.

The Plaintiff submits as more particularly

stated in paragraph 1 above, that the 1st

Defendant vessel is a sistership of the two

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vessels "Sea Glory" and "Sea Ranger" in view

of the beneficial ownership, management of all

three vessels having vested in Defendant No. 2.

The Plaintiff further submits that Defendant No.

2 is liable in personam in respect of the unpaid

insurance premium in respect of the two vessels

"Sea Glory" and "Sea Ranger". Consequently,

the Plaintiff is entitled to arrest any other

vessel in the ownership of Defendant No. 2. The

1st Defendant vessel is owned by Defendant No. 2

through it's 100% subsidiary S.S. Shipping Co.

Inc. In the circumstances, the Plaintiff

submits that they are entitled to proceed

against the Defendant vessel in rem and are

entitled to an order of arrest, detention and

sale of the vessel for recovery of their

outstanding dues in respect of insurance premium

as more particularly stated above. The

Plaintiff is, therefore, entitled to have the

Defendant vessel along with her hull, gear,

engines, tackle, machinery, bunkers, plant,

apparel, furniture, equipments and all

appurtenances thereto condemned and arrested

under a warrant of arrest of this Hon'ble Court

for realization of the Plaintiff's dues. The

Plaintiff is further entitled to have the

Defendant vessel sold under the orders and

directions of this Hon'ble Court and to have the

sale proceeds thereof applied towards the

satisfaction of the Plaintiff's claim in the

suit. The Plaintiff is entitled to an order of

arrest of the Defendant vessel as arrest is the

only method of proceeding against the said

vessel in rem. The Plaintiff submits that if

such an order of arrest is not granted,

irreparable harm and injury will be caused to

the Plaintiff inasmuch as the Plaintiff's suit

will be rendered infructuous. There is no other

alternative efficacious remedy available to the

Plaintiff.

The Club has pleaded that the vessel is a sister ship of 'Sea

Ranger' and 'Sea Glory' owned and possessed by the second defendant. The

Club has also pleaded that the defendant No. 2 is beneficial owner of

the first defendant ship. Determination on such assertions would amount

to determination of question of fact. If the 'Vessel' denies or

disputes the same; an issue in that behalf will have to be framed and

decided.

Beneficial ownership of a ship is not a question of fact alone.

It is a mixed question of fact and law. In William Vs. Wilcox [(1838) 8

Ad. & EL 331] it is held:

"It is an elementary rule in pleading that when

a state of facts is relied, it is enough to

allege it simply, without setting out the

subordinate facts which are the means of proving

it or the evidence sustaining the allegations."

The aforementioned dicta has been quoted with approval in Mohan

Rawale Vs. Damodar Tatyaba & Ors. [(1994) 2 SCC 392].

It may be true that Order 7 Rule 11(a) although authorises the

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court to reject a plaint on failure on the part of the plaintiff to

disclose a cause of action but the same would not mean that the

averments made therein or a document upon which reliance has been placed

although discloses a cause of action, the plaint would be rejected on

the ground that such averments are not sufficient to prove the facts

stated therein for the purpose of obtaining reliefs claimed in the suit.

The approach adopted by the High Court, in this behalf, in our opinion,

is not correct.

In D. Ramachandran Vs. R.V. Janakiraman & Ors. [(1999) 3 SCC 267],

this Court held:

"It is well settled that in all cases of

preliminary objection, the test is to see

whether any of the reliefs prayed for could be

granted to the appellant if the averments made

in the petition are proved to be true. For the

purpose of considering a preliminary objection,

the averments in the petition should be assumed

to be true and the court has to find out whether

those averments disclose a cause of action or a

triable issue as such. The court cannot probe

into the facts on the basis of the controversy

raised in the counter."

Furthermore a fact which is within the special knowledge of the

defendant need not be pleaded in the plaint. In Punit Rai vs. Dinesh

Chaudhary [JT 2003 (Supp.1) SC 557], it is stated:

"...These are the material facts relating to the

plea raised by the appellant that the respondent

is not a Scheduled caste. We don't think if the

respondent means to say that the petitoner

should have stated in the petition that the

respondent is not born of Deo Kumari Devi said

to be married to Bhagwan Singh in village Adai.

If at all these facts would be in the special

knowledge of respondent, Bhagwan Singh and Deo

Kumari Devi hence not required to be pleaded in

the election petition. It is not possible as

well. In this connection, a reference may be

made to a decision of this Court in Balwan Singh

vs. Lakshmi Nrain and Ors {AIR 1960 SC 770).

This case also relates to election matter and it

was held that facts which are in the special

knowledge of the other party could not be

pleaded by the election petitioner. It was

found that particulars of the arrangement of

hiring or procuring a vehicle would never be in

the knowledge of the petitioner, such facts need

not and cannot be pleaded in the petition."

In D. Ramachandran Vs. R.V. Janakiraman & Ors. [1999] 3 SCC 267,

it has been held that the Court cannot dissect the pleading into several

parts and consider whether each one of them discloses a cause of action.

In the aforementioned backdrop, the question as to whether the

Club had been able to show that the Respondent No. 1 is a sister ship of

"Sea Glory" and "Sea Ranger" admittedly belonging to the first

respondent is a matter which is required to be gone into in the suit.

In ascertaining whether the plaint shows a cause of action, the

court is not required to make an elaborate enquiry into doubtful or

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complicated questions of law or fact. By the statute the jurisdiction

of the court is restricted to ascertaining whether on the allegations a

cause of action is shown. In Vijay Pratap Singh Vs. Dukh Haran Nath

Singh [AIR 1962 SC 941] this Court held:

"By the express terms of r. 5 clause (d), the

court is concerned the ascertain whether the

allegations made in the petition show a cause of

action. The court has not to see whether the

claim made by the petitioner is likely to

succeed: it has merely to satisfy itself that

the allegations made in the petition, if

accepted as true, would entitle the petitioner

to the relief he claims. If accepting those

allegations as true no case is made out for

granting relief no cause of action would be

shown and the petition must be rejected. But in

ascertaining whether the petition shows a cause

of action the court does not enter upon a trial

of the issues affecting the merits of the claim

made by the petitioner. It cannot take into

consideration the defences which the defendant

may raise upon the merits; nor is the court

competent to make an elaborate enquiry into

doubtful or complicated questions of law or

fact. If the allegations in the petition, prima

facie, show a cause of action, the court cannot

embark upon an enquiry whether the allegations

are true in fact, or whether the petitioner will

succeed in the claims made by him."

So long as the claim discloses some cause of action or raises some

questions fit to be decided by a Judge, the mere fact that the case is

weak and not likely to succeed is no ground for striking it out. The

purported failure of the pleadings to disclose a cause of action is

distinct from the absence of full particulars. [See Mohan Rawale

(supra)]

Beneficial ownership is not a pure question of fact. It is a

mixed question of law and fact. In that view of the matter it was not

necessary for the Club to set out the subordinate facts which arte means

of proving it or the evidence sustaining the allegations. The High

Court, however, in its order rejecting the plaint held:

"We have not gone into the merits of the

Defendant No. 1 ship, we clarify, on the basis

of any averments made by Defendant No. 1, to the

contrary, but we have proceeded to examine the

same on the basis of the averments made in the

plaint to find out whether, as they stand, prove

the Defendant No. 1 vessel Sea Success -I to be

sister ship of vessels - "Sea Glory" and "Sea

Ranger" being beneficially owned by Defendant

No. 2. We have already indicated above that the

allegations made in the plaint by themselves do

not prove factum of Defendant No. 1 Sea Success-

I being sister ship of vessels "Sea Glory" and

"Sea Ranger" in respect of whom the claim has

been raised in the suit, we find it difficult to

approve the view of the learned Single Judge in

this regard. It cannot be overlooked that ship

is a valuable commercial chattel and her arrest

undeservingly severely prejudices third parties

innocently as well as affect the interest of

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owner, crew member, cargo owner, shipper etc.

adversely and, therefore, it is all the more

necessary to analyse the plaint meaningfully at

the threshold to find out whether it discloses

cause of action or not and not on technical and

formal reading that if discloses cause of action

and wait for trial."

The approach of the High Court, in our considered opinion, is not

correct. For the purpose of rejecting a plaint it is not necessary to

consider whether the averments made in the plaint prove the factum that

the defendant No. 1 "Sea Success-I" is a sister ship of "Sea Glory" and

"Sea Ranger" or the said two ships are beneficially owned by the

defendant No. 2. The reasons which have been assigned in support of the

said aforementioned finding that that the ship is a valuable commercial

chattel and her arrest undeservingly prejudices third parties as well as

affect the interest of owner and others is a question which must be gone

into when passing a final order as regard interim arrest of ship or

otherwise. For the aforementioned purpose the Vessel herein could file

an application for vacation of stay. While considering such an

application, the Court was entitled to consider not only a prima facie

case but also the elements of balance of convenience and irreparable

injury involved in the matter. In such a situation and particularly

when both the parties disclose their documents which are in their

possession, the Court would be in a position to ascertain even prima

facie as to whether the Club has been able to make out that "Sea Glory"

and "Sea Ranger" are sister vessels of the "Vessel".

The reason for the aforementioned conclusion is that if a legal

question is raised by the defendant in the written statement, it does

not mean that the same has to be decided only by way of an application

under Order 7 Rule 11 of the Code of Civil Procedure which may amount to

pre-judging the matter.

Furthermore, the question as to whether the asset of a 100%

subsidy can be treated as an asset of the parent company would again

depend upon the fact situation of each case.

In The Aventicum [1978] 1 Lloyd's L.R. it has been held:

"I have no doubt that on a motion of this kind

it is right to investigate the true beneficial

ownership. I reject any suggestion that it is

impossible "to pierce the corporate veil". I of

course remember, as Mr. Howard urges, the case

of Saloman v. Saloman & Co., [1897] A.C. 22, but

of course it is plain that s.3(4) of the Act

intends that the Court shall not be limited to a

consideration of who is the registered owner or

who is the person having legal ownership of the

shares in the ship; the directions are to look

at the beneficial ownership. Certainly in a

case where there is a suggestion of a

trusteeship or a nominee holding, there is no

doubt that the Court can investigate it. I

think that it may well be, without having to

resolve the difference of opinion expressed by

Mr. Justice Brandon and Mr. Justice Goff in the

two cases to which I have referred that the

Court has the power and should in some cases

look even further."

Yet again in The Andrea Ursula [1971] 1 Lloyd's L.R. 145, the

Court opined:

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"There is no definition in the Act of the

expression "beneficially owned" as used in sect.

3(4). It could mean owned by someone who,

whether he is the legal owner or not, is in any

case the equitable owner. That would cover both

the case of a ship the legal and equitable title

to which are in one person, A, and also the case

of a ship the legal title to which is in one

person, A, but the equitable title to which is

in another person, B. In the first case the

ship would be beneficially owned by A, and in

the second case by B. Trusts of ships, express

or implied, are however, rare and the words seem

to me to be capable also of a different and more

practical meaning related not to title, legal or

equitable, but to lawful possession and control

with the use and benefit which are derived from

them. If that meaning were right, a ship would

be beneficially owned by a person who, whether

he was the legal or equitable owner or not,

lawfully had full possession and control of her,

and, by virtue of such possession and control,

had all the benefit and use of her which a legal

or equitable owner would ordinarily have."

Furthermore, the question as to whether the concept of ownership

of a ship which has been introduced in 18th Century when there had been

no joint stock companies and the concept of shares in a ship so as to

encourage the individuals to pool their resources by a sister ship so

that they may become co-owners is a matter which is required to be

considered at an appropriate stage. We do not think that such a

question can justifiably be gone into at this stage.

We do not intend to delve deep into the questions as to whether

the two ships named hereinabove are the sister ships of the respondent

No. 1 Vessel or whether the requirement of law as regard ownership of a

ship in the Respondent No. 1 as beneficial owner has been fulfilled or

not. Such issues must be considered at an appropriate stage.

CONCLUSION :

We, therefore, direct that in the event, a proper application is

filed either for dissolution of the interim order of injunction passed

by the learned Single Judge or if the High Court in its wisdom thinks

fit to decide any issue as a preliminary issue such questions may be

gone into in greater details. Any observations made by us must be

considered to have been made only for the purpose of disposal of these

appeals and not for the purpose of determining the merit of the matter.

However, having regard to the facts and circumstances of this case, we

will request the High Court to consider the desirability of disposing of

the matter as expeditiously as possible and preferably within a period

of three months from the date of receipt of a copy of this order.

For the reasons aforementioned, the judgment under challenge is

set aside and the matter is sent back to the High Court. Civil Appeal

No. 5665 of 2002 is accordingly allowed and Civil Appeal No. 5666 of

2002 is dismissed. No costs.