1999 (9) TMI 891 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the arrest of the ship M.V. Kim Dong.
2. Determination of whether M.V. Kim Dong and M.V. Dong Do are sister ships.
3. Applicability of the Brussels Convention on the arrest of ships.
4. Lifting the corporate veil to determine ownership.
5. Admissibility and relevance of evidence presented.

Detailed Analysis:

1. Legality of the Arrest of the Ship M.V. Kim Dong:
The appeal is directed against an order dated July 29, 1999, in Admiralty Suit No. 16 of 1999, where the ship M.V. Kim Dong was ordered to be arrested. The plaintiff-respondent had certain claims against the owners of M.V. Kim Dong, which allegedly belonged to the Socialist Republic of Vietnam. The ship was carrying rice from Paradeep in India to Chittagong, but the Ministry of Food of the Government of Bangladesh did not take delivery, leading to the ship leaving Chittagong for Hanoi without discharging the cargo. The arrest was based on the allegation that M.V. Kim Dong and M.V. Dong Do were sister ships owned by the Vietnamese government.

2. Determination of Whether M.V. Kim Dong and M.V. Dong Do are Sister Ships:
The plaintiff claimed that both ships were sister vessels owned and controlled by the Socialist Republic of Vietnam. The trial judge relied on the Maritime Directory, which listed both ships under the heading "Vietnam, Government of Socialist Republic." However, the appellant argued that the ships had different registered owners, as per certificates of registration and other documents, thus they could not be considered sister ships. The court noted that a sister ship would include ships belonging to different concerns only if there is a common beneficiary, but this is not absolute and must be considered based on the factual backdrop.

3. Applicability of the Brussels Convention on the Arrest of Ships:
The appellant referred to the Brussels Convention, particularly Article 3(i), which allows the arrest of a ship owned by the person liable for a maritime claim, and Article 3(4), which limits arrest to ships owned by the charterer by demise. The court emphasized that the certificate of registration is the relevant document for determining ownership. The concept of sister ships would mean both ships must belong to the same owner, which was not the case here.

4. Lifting the Corporate Veil to Determine Ownership:
The court discussed the principle of lifting the corporate veil, which is not absolute under Indian law. The shareholders of a juristic person are not the owners of its assets. The court cited several cases, including Dr. S.L. Agarwal v. Hindustan Steel Ltd., and Rustom Cavasjee Cooper v. Union of India, to support this view. The court concluded that the plaintiff's allegations were vague and did not establish how the ships could be considered sister ships. The companies owning the ships were not shown to have been constituted to commit fraud on creditors.

5. Admissibility and Relevance of Evidence Presented:
The appellant produced various documents, including certificates of registration, letters, and bills of lading, to show that M.V. Kim Dong belonged to Eastern Dragon Shipping Co. Ltd. and M.V. Dong Do belonged to Hanoi Maritime Transportation Co. These documents indicated that the ships were owned by different concerns and transacted business separately. The trial judge did not consider these documents adequately. The court noted that while the Lloyds Directory is admissible, it must be considered with other evidence. The court found that no prima facie case was established to arrest the ship.

Conclusion:
The appeal was allowed, and the order under appeal was set aside. The court held that the ships in question were not sister ships, and no prima facie case was established for the arrest of M.V. Kim Dong. There was no order as to costs.