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2017 (9) TMI 1883 - SC - Indian LawsAdmiralty Law - arrest of vessel - maritime claim - HELD THAT - Section 12 states that the Code of Civil Procedure is to apply in all proceedings before the High Court insofar as it is not inconsistent or contrary to the provisions of the Act. By Section 17 the Admiralty Court Acts of 1840 and 1861 and the Colonial Courts of Admiralty Acts of 1890 and 1891 stand repealed. Also the Letters Patent of 1865 insofar as it applies to the admiralty jurisdiction of the Bombay Calcutta and Madras High Courts also stands repealed - An admiralty action in the courts of India commences against a vessel to enforce what is called a maritime claim . Though India is not a signatory to the Brussels Convention of 1952 a long list of maritime claims is given in Article 1 thereof. Suffice it to say that Sub-clause (k) of Article 1 states that important materials wherever supplied to a ship for her operation or maintenance would fall within the definition of a maritime claim. A maritime lien on the other hand attaches to the property of the vessel whenever the cause of action arises and travels with the vessel and subsists whenever and wherever the action may be commenced. A claim for necessaries supplied to a vessel does not become a maritime lien which attaches to the vessel. The High Court was not correct in its view that it was proved by Respondent No. 1 that sale had taken place in April 2000 by Fairsteel Corporation to Respondent No. 1 by which Respondent No. 1 became the owner of the vessel. It is clear therefore that Respondent No. 1 has failed to prove that there was a change of ownership of the vessel in its favour on the date of arrest i.e. on 2.5.2000 - The suit succeeds.
Issues Involved:
1. Whether the supply of necessaries to the vessel amounted to a maritime lien. 2. Whether the original contract was novated by the agreement dated 18.1.2000. 3. Determination of the relevant date for assessing the ownership of the vessel. 4. Whether the vessel was owned by Respondent No. 1 at the time of its re-arrest on 2.5.2000. 5. The effect of the settlement agreement on the original cause of action. Detailed Analysis: 1. Maritime Lien for Necessaries: The court examined whether the supply of bunkers and other necessaries to the vessel M.V. Nikolaos-S amounted to a maritime lien. It was established that under Indian law, claims for necessaries supplied to a vessel do not constitute a maritime lien. The court referred to various judgments, including M.V. Elisabeth and M.V. Won Fu, which clarified that maritime liens are limited to specific claims such as damage done by a ship, salvage, seamen’s wages, master’s disbursements, and bottomry. The court concluded that the supply of necessaries, though a maritime claim, does not create a maritime lien enforceable against the vessel. 2. Novation of the Original Contract: The court analyzed whether the agreement dated 18.1.2000 constituted a novation of the original contract. It was argued by the appellant that Section 63 of the Indian Contract Act applied, allowing the promisee to accept satisfaction from a third party without extinguishing the original contract. The court agreed, stating that the agreement did not replace the original contract but was meant to enforce the payment leg of the original transaction. The court emphasized that the agreement should be construed in a business context, aiming to ensure payment under the original contract. The court rejected the Division Bench’s view that there was a novation, holding that the original contract remained enforceable. 3. Relevant Date for Ownership Determination: The court addressed the issue of the relevant date for determining the ownership of the vessel. It referred to the International Convention on the Arrest of Ships, 1999, which India follows as part of its national law. According to Article 3(1)(a) of the Convention, the ownership of the vessel must be assessed at the time of arrest, not at the time of the institution of the suit. This clarified that the ownership on the date of re-arrest (2.5.2000) was crucial for the case. 4. Ownership of the Vessel on 2.5.2000: The court examined the evidence to determine if Respondent No. 1 owned the vessel on 2.5.2000. It found that the High Court had incorrectly relied on an oral admission and documents that did not conclusively prove the ownership transfer. The court noted discrepancies in the chain of sales and the lack of proof for the back-to-back sales claimed by Respondent No. 1. It highlighted that the first sale from Third Element Enterprises to Eastern Wealth Investment Limited occurred only on 27.4.2000, casting doubt on subsequent sales. The court also referred to a suit filed by Respondent No. 1 on 9.5.2000, which indicated that the payment under the Letter of Credit had not been completed by that date. Thus, the court concluded that Respondent No. 1 had not proven ownership of the vessel on the date of arrest. 5. Effect of the Settlement Agreement: The court analyzed the settlement agreement dated 18.1.2000 to determine its effect on the original cause of action. It held that the agreement did not supersede the original contract but was intended to ensure the payment of the original claim. The court pointed out that the settlement terms did not put an end to the proceedings or supersede the original cause of action. Instead, the agreement reinforced the original contract by specifying a different mode of performance. The court disagreed with the Division Bench’s view that the settlement constituted a novation, maintaining that the original claim remained enforceable. Conclusion: The Supreme Court set aside the judgment of the High Court and restored the decree of the trial court, allowing the appellant to recover the claimed amount from the cash security furnished. The court held that the supply of necessaries did not create a maritime lien, the original contract was not novated by the settlement agreement, the ownership of the vessel should be assessed on the date of arrest, and Respondent No. 1 had not proven ownership of the vessel on 2.5.2000.
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