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TMI Blog2024 (8) TMI 1156X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for convenience categorized as Supply-I, II & III : Supply I (Defendant No. 1-Vessel): (i) By an e-mail dated 28th February, 2019, the Plaintiff issued a confirmation to Defendant No. 3 for a supply of 110MT bunkers to be made to Defendant No. 1- Vessel. The Defendant No. 3 was the Ship Manager and Commercial Manager of Defendant No. 1-Vessel. The Bunker Confirmation recorded, "…Late receipt of funds will incur an interest charge of 2(two) percent per month pro-rated on a daily basis….". The Bunker Confirmation also recorded that it would be subject to the Plaintiff's standard terms and conditions of sale. (ii) On 2nd March 2019, the Plaintiff through its physical supplier (Shiny Shipping & Logistics P Ltd.) supplied 109.350MT of HF HSD to Defendant No. 1-Vessel at Mumbai Port. The supply was confirmed/acknowledged by the Chief Engineer of the Defendant-Vessel, as is reflected in the Bunker Delivery Receipt of even date. (iii) On 4th March, 2019, the Plaintiff raised an invoice (bearing No. S1901198) on Defendant No. 3 for the fuel supplied to Defendant No. 1-Vessel. The invoice was for a sum of USD 93,494.25/- and due date under the invoice was 1st May 2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laintiff raised an invoice (bearing no. S1901065) on Defendant No. 2 for the fuel supplied to the Vessel, AHT Sea Melody. (iv) The invoice was for a sum of USD 158,360/- and the due date under the invoice was 16th April 2019. The Defendant No. 2 failed to clear the dues owed under this invoice. * Other relevant dates and events: (i) By emails dated 29th May, 2019 and 30th January, 2020, the Plaintiff issued reminders for the sums overdue against the supply of bunker fuel made to Defendant No. 1- Vessel. (ii) By emails dated 02.05.2019 and 30.04.2020, the Plaintiff issued reminders for the sums overdue against the supply of bunker fuel made to M.V. Sea Jaguar and M.V. ATH Melody. (iii) In response to a reminder dated 08.08.2019, Mr. Navpreet Singh, the Managing Director of Defendant No. 3 by Letter dated 14th August, 2019 admitted that monies were payable to the Plaintiff against the three aforementioned supplies. It is relevant to note that Navpreet Singh is also shown as the Joint Managing Director of Defendant No. 2 in its Annual Returns. The Plaintiff has claimed that this is another factor which serves to establish that Defendant Nos. 2, 3 and 4 were a common group, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndant No. 2 is bad in law, could not have been instituted and is not maintainable in view of Section 14 of the IBC. This is because a Petition under Section 9 of the IBC was admitted against the Defendant No. 2 by the NCLT, Mumbai vide Order dated 16th July, 2020 and the moratorium under Section 14 of the IBC was ordered to commence and in fact commenced on the date of admission of the said Petition. He has submitted that it is pertinent to point out here that the erstwhile management and board of directors stood suspended and divested from the management of the Defendant No. 2 from this date. 8. Mr. Jumani has submitted that the Suit having been affirmed on 13th August, 2020 was lodged on 17 December, 2020 i.e. subsequent to the order of admission / commencement of the moratorium, and no proceedings could have been instituted by the Plaintiff against the Defendant No. 2 for in personam claims on or after 16 July, 2020. He has submitted that the Suit insofar as it pertains to in personam claims against Defendant No. 2 i.e. Supply II and Supply III was instituted in the teeth of Section 14 of the IBC and during the operation of the moratorium and is non est in law, a nullity and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reliance upon the decisions of the Supreme Court in Ghanashyam Mishra & Sons Pvt. Ltd. v. Edelweiss Asset Reconstruction Company Ltd. (2021) 9 SCC 657 at Paragraphs 67 to 69, 74, 93, 95 to 97, 102.1, 102.3, 138 & 139 ; Ruchi Soya lndustries v. Union of India & Ors. (2022) 6 SCC 343 at Paragraphs 11 & 12. 14. Mr. Jumani has submitted that for this reason alone, the Plaintiff's claims for Supply II and Supply III are liable to be dismissed forthwith, with costs. 15. Mr. Jumani has submitted strictly without prejudice to each of the above submissions, in any view of the matter, the Suit claims of the Plaintiff insofar as they pertain to Supply II and Supply III are not maritime claims and cannot be enforced as an in rem claim against the Defendant No. 1-Vessel and/or its sale proceeds. The Plaintiff has itself admitted in the Plaint that the claims on account of Supply II and Supply III are in personam claims against the Defendant No. 2. Therefore, the Plaintiff cannot turn around and seek to contend contrary to its Plaint that the said claims are in rem maritime claims and / or that they can be enforced against the Defendant No. 1- Vessel and / or its sale proceeds. He has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sea Jaguar is undisputed. Therefore, Sea Melody and Sea Jaguar are not sister ships of the Defendant No. 1-Vessel and any alleged claim in respect of supplies made to Sea Melody and Sea Jaguar cannot be recovered by arrest and sale of the Defendant No. 1-Vessel. He has placed reliance upon the Judgment of this Court in Continental Radiance Offshore Pvt. Lad. v. M. V. Lewek Altair2022 SCC Online Bom 931 at Paragraphs 2(b) & (d), 4, 18, 24, 30, 36, 43 & 44 in this context. 19. Mr. Jumani has submitted that the Plaintiff's entire case in the Plaint for seeking to enforce its alleged claim on account of Supply II and Supply III against the Defendant No. 1-Vessel is that the Defendant No. 2 placed the orders for Supply-II and III and the same can be enforced against Defendant No. 1-Vessel as the Defendant No. 2 is the real owner thereof (even though the Defendant No. 4 is the registered owner). He has submitted that to that end, the Plaintiff has alleged that the Defendant No. 4 is only a nominee owner and alter ego of Defendant No. 2 and prayed that this Court be pleased to lift the corporate veil and consider Defendant No. 2 as the real owner. He has submitted that the Plaint do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssel) in respect of a defined class of maritime claims (spelled out in Section 4). Just because a maritime claim originates as an in personam claim, does not mean that an admiralty action ceases to be an action in rem. 24. Mr. Gandhi has placed reliance upon the decision of this Court in Raj Shipping Agencies (supra) and in particular Paragraphs 12.1, 12.2, 12.4 and 12.5 thereof. He has submitted that in Paragraph 12.2, the learned Single Judge of this Court has held that although the owner must be liable in personam in respect of a maritime claim, the action in rem can proceed against the res independently of the owner and the claim can be adjudicated and decided without having to sue the owner in personam. He has submitted that the Plaintiff has in Paragraph 31 of the Plaint referred to the in personam liability of Defendant No. 2 only to establish as to how the pre-conditions for the invocation of Section 5 of the Admiralty Act are satisfied. 25. Mr. Gandhi has submitted that the Defendant No. 2's submission that the Plaintiff is wholly or in part pursuing an in personam claim against Defendant No. 2 is misconceived. He has placed reliance upon Paragraphs 39, 40, 43, 46, 47, 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Act permits arrest of any other Vessel other than the offending Vessel. This can arise in a plethora of circumstances. For instance, a time charterer may be in default of charter hire. This may give rise to a maritime claim under Section 4(1)(h) of the Admiralty Act. Likewise, a time charterer may be liable for bunkers supplied to a vessel taken by it on time charter (as in the facts of the present case). Situations such as these would give rise to a maritime claim wherein the time charterer is liable in personam. An arrest of the Vessel in respect of which the maritime claim arose would be counter-productive in these situations. It is to deal with such situations that the Admiralty Act permits the arrest of any other vessel under Section 5 (2). He has submitted that for invoking Section 5 (2), a plaintiff must establish a maritime claim under Section 4 of the Admiralty Act; Identify the time charterer who is liable for the maritime claim; Identify a vessel which is owned / beneficially owned by the said time charterer; establish that the vessel is owned by that time charterer when the arrest is affected. 29. Mr. Gandhi has submitted that in the facts and circumstances of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the consistent position of law at the time of enactment of the Admiralty Act was that a vessel owned by a time charterer could be arrested to secure a maritime claim for which the time charterer was liable. 33. Mr. Gandhi has submitted that the Plaintiff's contention in this regard is also supported by the decision of a Division Bench of this Court in Altus Uber v Siem Offshore Rederi AS 2019 (5) Bom CR 256. He has submitted that in the facts of that case, the Division Bench of this Court has observed that any vessel can also be arrested for the purpose set out in sub-Section (1) of Section 5 where this Court has reason to believe that it was on demise charter and its demise charterer was liable for the maritime claim when it arose and is the demise charterer of the said Altus Uber when the arrest is effected. The Court considered the provision of Section 5 (2) read with section 5 (1)(b) and has held that the Plaintiff is entitled to arrest a vessel which is either owned by or on demise charter to MEDS (the owner / demise charterer of the Vessel 'Altus Uber') when the arrest is effected. 34. Mr. Gandhi has submitted that to effect an arrest under Section 5 (1) (a) read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has recognized that an argument of beneficial ownership can in fact be canvassed under the Admiralty Act. The Division Bench of this Court in Paragraphs 56 and 57 has also considered whether in the facts of that case, beneficial ownership had been established. The Division Bench of this Court came to the conclusion that a plea of beneficial ownership had not been established. 38. Mr. Gandhi has submitted that the contention of the Defendant No. 2 that under the Admiralty Act only a Vessel under the registered ownership of an entity can be arrested, and not one under beneficial ownership is entirely misconceived. He has submitted that it has been a consistently recognized position of law that a Vessel which is under the beneficial ownership of an entity who is liable for a maritime claim can in fact be arrested. 39. Mr. Gandhi has submitted that the Defendant No. 2 has contended that a plea of beneficial ownership can be established and the corporate veil can only be lifted if the Plaintiff is able to assert and establish a case of fraud. He has submitted that this plea too deserves to be rejected. He has placed reliance upon Paragraph 46 of the decision of the Division Bench in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... email further goes on to state that the Plaintiff's outstandings would be cleared between August 2019 and October 2019. 42. Mr. Gandhi has submitted that the same gentleman, i.e. Mr. Navpreet Singh, had then addressed an email dated 7th January 2020 to the Plaintiff. However, this time around, he had signed off as the Joint Managing Director of Defendant No. 2. In this email, the said Mr. Navpreet Singh stated that dues were outstanding from Dolphin Offshore Enterprises and Dolphin Offshore Shipping, and that these dues would be cleared in two installments by 31st March 2020. These emails indicate that not only were the same personnel in charge of the operations of Defendant Nos. 2, 3 and 4, but they also indicate that there was no distinction drawn in the liabilities owed to the Plaintiff by Defendant No. 2 and/or Defendant No. 3 and/or Defendant No. 4. He has submitted that in the the light of these emails, it cannot be contended that there was no commonality/unity of identity amongst Defendant Nos. 2, 3 and 4. These emails establish that Defendant No. 2 was indeed the beneficial owner of Defendant No. 1-Vessel. 43. Mr. Gandhi has submitted that in the alternative, the Def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt to adjudicate the Plaintiff's case is already on record. There is no question of fact which has arisen that would require oral evidence to be led. He has submitted that if this Court were to send the dispute to trial, it would not only be disproportionate, but also unduly expensive. Given that there has been an admission of liability on the part of Defendant Nos. 2, 3, and 4, the Defendants clearly lack any real prospect of successfully defending the Plaintiff's claim, even if the matter is sent to trial. He has submitted that no genuine issue which requires a trial has been raised in the present case. He has submitted that for all these reasons, the plea on beneficial ownership put forth by Defendant No. 2 also deserves to be rejected. 46. Mr. Jumani has dealt with the Judgments relied upon by the Plaintiff. He has submitted that the Judgment of the Supreme Court in Sunil B Naik Vs. Geowave Commander (Supra) is of no assistance to the Plaintiff because it was under the old Act. The position has changed under the 2017 Act and this change is confirmed by the Division Bench of this Court in Altus Uber & Ors. v. Siem Offshore (supra) at Paragraph 139. Further, the 2017 Act does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maritime claim which is the subject of an admiralty proceeding, where under (a) the Court has reason to believe that the person who owned the vessel at the time when the maritime claim arose is liable for the claim and is the owner of the vessel when the arrest is effected. 49. 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. 50. It has been held by the learned Single Judge of this Court in paragraph 12.2 of Raj Shipping Agencies (Supra) that although the owner must be liable in personam in respect of a maritime claim (which is not a mariti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chi Soya Industries (Supra) are inapplicable in the present case. This is in view of the above finding that the Plaintiff has an independent action in rem and can proceed against the res, although the Plaintiffs' claim was initially instituted as an in personal claim against Defendant No. 2. 54. It has been held in Raj Shipping Agencies (Supra) 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. The Plaintiff has approached this Court under Section 5 of the Admiralty Act and not under Section 6 of the Admiralty Act and has thus clearly expressed its entitlement to proceed in rem against the Defendant No. 1 vessel for the in personam claim against Defendant No. 2 on the premise that the Defendant No. 2 is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time claim under Section 4 of the Admiralty Act; (b) Identify the time charterer who is liable for the maritime claim; (c) Identify a vessel which is owned by the said time charterer and (d) Establish that the vessel is owned by that time charterer when the arrest is affected. 57. Although, the contention was raised on behalf of the Defendant No. 2 that, Section 5 (2) does not contemplate a scenario wherein a vessel owned by a time charterer can be arrested. Such contention in my view is misconceived. There is nothing in Section 5 (2) of the Admiralty Act to exclude arrest of a vessel owned by a time charterer. Prior to the enactment of the Admiralty Act, arrest of ships was governed by the International Convention on Arrest of Ships, 1999. Article 3 (2) of this Convention inter alia states "...Arrest is also permissible of any other ship or ships which, when the arrest is affected, is or are owned by the person who is liable for the maritime claim and who was, when the claim arose…. (b) demise charterer, time charterer or voyage charterer of that ship." Although, under Article 3 (2) of the Convention, the arrest of a time charterers vessel was expressly permitted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2 that a vessel owned by a time charterer cannot be arrested is rejected. 60. The third defense raised by the Defendant No. 2 is that arrest of vessel under the beneficial ownership of an entity is not permissible under the Admiralty Act and a plea of beneficial ownership cannot be canvassed under Order 13A of the Code of Civil Procedure, 1908 as amended by the Commercial Courts Act, 2015. 61. In Section 5 (1) (a) of the Admiralty Act, the words used are "the person who owned the vessel at the time when the maritime claim arose is liable for the claim and is the owner of the vessel when the arrest is effected.". Thus, the issue which arises is whether the word used in that provision viz. 'owner' applies to a registered owner or a beneficial owner. In M/s. Universal Marine (Supra), the learned Single Judge of this Court has in the context of the Arrest Convention 1999 i.e. prior to the 2017 Admiralty Act, construed the expression 'owner' under Article 3 (2) of the Arrest Convention 1999 to be a "registered owner". The learned Single Judge has held that the reason why owner is meant registered owner is because the only person who could be held to be liable for a claim against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is alleged to be the beneficial owner as the real owner of the Defendant vessel. 66. Accordingly, I am of the considered view that 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. 67. Accordingly, 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. 68. In so far as supply I is concerned, the Plaintiff has a maritime claim against the Defendant Nos.3 and 4 for the bunkers supplied to Defendant No. 1 vessel of which the Defendant No. 3 is the Ship Manager and Defendant No. 4 is the Registered Owner. The maritime claim would fall under Section 4 (1) (h) of the Admiralty Act and which maritime claim has been admitted by Defendant Nos.3 and 4, through the email correspondence addressed by Mr. Navpreet Singh, Managing Director of the Defendant No. 3 on 14th August, 2019 that monies were payable to the Plaintiff against the Supply I. 69. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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