2024 (8) TMI 1156 - HC - Insolvency and Bankruptcy

Maintainability of the interim Application seeking Summary Judgment under Order XIII-A, Rule 1 read with Order XII Rule 6 of the Code of Civil Procedure, 1908 - seeking to enforce claims arising out of supplies of bunker made to the Defendant-Vessels - proceeding in rem against res - Section 14 of the IBC - HELD THAT - The Plaintiff though claiming Defendant No. 2 to be a party liable in personam in respect of the Plaintiff s claim has stated in paragraph 31 of the Plaint that the Plaintiff is entitled to arrest any vessel in the ownership of Defendant No. 2 as per the provisions of Section 5 (2) read with Section 5 (1) (a) of the Admiralty Act. Thus, the Plaintiff has proceeded in rem against a res i.e. against the Defendant No. 1 vessel claimed to be beneficially owned by Defendant No. 2 in respect of defined class of maritime claim against the vessels viz. M.V. Sea Jaguar and M.V. ATH Melody under Section 4 of the Admiralty Act. In the present case, the Plaintiff had supplied bunkers to the vessels M.V. Sea Jaguar and M.V. ATH Melody and which had not been paid for by Defendant No. 2 (the time charterer of the aforementioned vessels). Accordingly, the Plaintiff has sought to enforce its maritime claims under Section 4(1) (h) of the Admiralty Act, against the Defendant No. 1 Vessel, (against whom separate claim arises for bunker supplied) which the Plaintiff claims is beneficially owned by the Defendant No. 2. Thus, the contention of the Defendant No. 2 that the Plaintiffs claim is an in personam claim against Defendant No. 2 and that precludes the Plaintiff from proceeding in rem against the res cannot be accepted. It has been held in Raj Shipping Agencies 2020 (5) TMI 450 - BOMBAY HIGH COURT that an action in rem against the ship and / or sale proceeds thereof is not an action against the owner of the ship who may be corporate debtor as defined under the IBC. Further, the principle that an action in rem continues as an action in rem notwithstanding that the owner may have entered appearance, if the security is not furnished for release of the vessel. Thus, it is a settled position of law that Section 14 of the IBC does not prohibit an action in rem or continuation of in rem proceedings against the maritime vessel. In order to affect an arrest under Section 5 (1) (a) read with Section 5 (2), the owner of the vessel must be liable for a maritime claim and must be the owner of the vessel sought to be arrested when the arrest is effected. There is no restriction in so far as a time charterer is concerned who is liable for a maritime claim provided that the time charterer is the owner of the other vessel when the arrest is affected. Accordingly, the defence raised by the Defendant No. 2 that a vessel owned by a time charterer cannot be arrested is rejected. The Plaintiff cannot seek summary judgment in respect of supplies II and III without evidence being led and a full fledged trial for establishing that the Defendant No. 2 is the real owner of the Defendant No. 1 vessel - the Summary Judgment must fail against Defendant No. 2 in respect of Supplies II and III for which the Plaintiff has a maritime claim. The Suit shall continue against Defendant No. 2 in respect of Supplies II and III. Interim Application is accordingly disposed of.

Issues Involved:
1. Maintainability of the Interim Application seeking Summary Judgment against Defendant No. 2.
2. Applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) to the Plaintiff's claims.
3. Whether the Plaintiff's claims against Defendant No. 2 stood extinguished due to non-submission to the Interim Resolution Professional (IRP).
4. Validity of enforcing claims against the beneficial owner of the vessel.
5. Whether the Plaintiff can proceed in rem against the Defendant No. 1 vessel for claims against Defendant No. 2.
6. Whether the arrest of a vessel owned by a time charterer is permissible.
7. Whether the Plaintiff can seek Summary Judgment without a full-fledged trial.

Issue-wise Detailed Analysis:

1. Maintainability of the Interim Application seeking Summary Judgment against Defendant No. 2:
The Plaintiff sought Summary Judgment under Order XIII-A, Rule 1 read with Order XII Rule 6 of the CPC. The Defendant No. 2 raised a preliminary objection regarding the maintainability of the application, arguing that the Plaintiff's claims were in personam and thus subject to the IBC provisions. The Court found that the Plaintiff proceeded in rem against the Defendant No. 1 vessel, which is permissible under Section 5(2) of the Admiralty Act. The Plaintiff's claim against Defendant No. 2 as the beneficial owner of the vessel was valid for proceeding in rem.

2. Applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) to the Plaintiff's claims:
Defendant No. 2 argued that the Plaintiff's claims were barred by the moratorium under Section 14 of the IBC. The Court held that Section 14 of the IBC does not prohibit an action in rem against a maritime vessel. The Plaintiff's entitlement to proceed in rem against the Defendant No. 1 vessel was upheld, notwithstanding the moratorium under the IBC.

3. Whether the Plaintiff's claims against Defendant No. 2 stood extinguished due to non-submission to the Interim Resolution Professional (IRP):
The Defendant No. 2 contended that the Plaintiff's claims were extinguished as they were not submitted to the IRP. The Court found this argument unmeritorious, stating that the Plaintiff has an independent action in rem and can proceed against the vessel, even if the claims were initially in personam against Defendant No. 2. The decisions cited by Defendant No. 2 were deemed inapplicable.

4. Validity of enforcing claims against the beneficial owner of the vessel:
The Plaintiff argued that Defendant No. 2 was the beneficial owner of the Defendant No. 1 vessel. The Court noted that the Plaintiff must establish beneficial ownership beyond mere reliance on Lloyd's Report. A full-fledged trial was necessary to establish that Defendant No. 2 was the real owner of the Defendant No. 1 vessel. Hence, Summary Judgment without evidence was not permissible.

5. Whether the Plaintiff can proceed in rem against the Defendant No. 1 vessel for claims against Defendant No. 2:
The Court upheld the Plaintiff's right to proceed in rem against the Defendant No. 1 vessel based on the beneficial ownership claim against Defendant No. 2. The Plaintiff's maritime claim under Section 4(1)(h) of the Admiralty Act was valid, and the action in rem was independent of the owner's in personam liability.

6. Whether the arrest of a vessel owned by a time charterer is permissible:
The Court held that Section 5(2) of the Admiralty Act does not exclude the arrest of a vessel owned by a time charterer. The consistent position of law, as supported by past judgments, allowed for the arrest of a vessel owned by a time charterer to secure a maritime claim.

7. Whether the Plaintiff can seek Summary Judgment without a full-fledged trial:
The Court concluded that the Plaintiff could not seek Summary Judgment for Supplies II and III without leading evidence and a full-fledged trial to establish that Defendant No. 2 was the real owner of the Defendant No. 1 vessel. However, for Supply I, the Plaintiff was granted a Summary Judgment and decree against the sale proceeds of the Defendant No. 1 vessel, as the maritime claim was admitted by Defendant Nos. 3 and 4.

Conclusion:
The Interim Application for Summary Judgment was partially allowed. Summary Judgment was granted for Supply I against the sale proceeds of the Defendant No. 1 vessel. The claims for Supplies II and III would proceed to trial to establish the beneficial ownership of Defendant No. 2. The suit against Defendant No. 2 shall continue.

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