2003 (11) TMI 627 - SC - Indian Laws

Operation and trading of vessels - Unpaid insurance premium due to the club - territorial jurisdiction of waters of India - failure to insure the security - Whether arrears of insurance premium would come within the term necessaries - Maintainability of the Letters's patent appeal - rejection of plaint - HELD THAT - 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. 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 international 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 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. 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 - 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. It is true that in Shah Babulal Khimji 1981 (8) TMI 230 - SUPREME COURT 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. 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. We, therefore, are of the opinion that Letters Patent Appeal was maintainable. Rejection of plaint - 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. 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. Thus, 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.

Summary

Issues Involved:
1. 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.
2. 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.
3. Whether the averments made in paragraphs 1 and 14 of the plaint disclose sufficient cause of action for maintaining a suit.

Summary:

Issue 1: Arrears of Insurance Premium as Necessaries
The Supreme Court examined whether unpaid insurance premiums qualify as "necessaries" under Section 5 of the Admiralty Courts Act, 1861. The Court noted that the term "necessaries" has not been statutorily defined and has been interpreted through judicial pronouncements. Historically, English courts have not considered unpaid insurance premiums as necessaries. However, the Court acknowledged the changing global scenario and the necessity of insurance for the operation of ships. The Court concluded that unpaid insurance premiums of P&I Clubs should be considered "necessaries" due to their intrinsic connection with the operation of a ship, thus falling within the scope of Section 5 of the Admiralty Courts Act, 1861.

Issue 2: Refusal to Reject the Plaint as a 'Judgment'
The Court addressed whether an order refusing to reject a plaint under Order 7 Rule 11(a) is a 'judgment' under Clause 15 of the Letters Patent of the Bombay High Court. The Court referred to the decision in Shah Babulal Khimji v. Jayaben Kania, which defined 'judgment' as a decision affecting the merits of the question between the parties by determining some right or liability. The Court held that an order refusing to reject a plaint is a preliminary judgment as it determines the right of the plaintiff to proceed with the suit. Therefore, such an order is appealable under Clause 15 of the Letters Patent.

Issue 3: Disclosure of Cause of Action
The Court examined whether the averments in the plaint disclosed a cause of action. It emphasized that for the purpose of Order 7 Rule 11(a), the averments made in the plaint must be taken as true. The Court found that the plaint sufficiently disclosed a cause of action by alleging that the 1st respondent vessel is a sister ship of "Sea Glory" and "Sea Ranger," owned by the 2nd respondent. The Court held that the determination of beneficial ownership is a mixed question of law and fact, which should be decided during the trial. Therefore, the High Court's approach in rejecting the plaint was incorrect.

Conclusion:
The Supreme Court set aside the judgment of the High Court and remanded the matter for further proceedings. It directed the High Court to dispose of the matter expeditiously, preferably within three months. The appeal by the 'club' was allowed, and the appeal by the 'vessel' was dismissed.