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Bombay High Court · body

2015 DIGILAW 5 (BOM)

Bharat Singh v. M. V. Kamal XLVI

2015-01-05

K.R.SHRIRAM

body2015
Judgment 1. These are a group of suits in which the plaintiffs are crew members who worked onboard different vessels mentioned in each suit. The vessel on which the plaintiffs worked as crew are shown as defendant no.1. One of the defendant in all the suits is Jaisu Shipping Pvt. Ltd. The crew members were engaged by Jaisu Shipping Pvt. Ltd. (hereinafter referred to as "Jaisu") mainly through their manning agents and the obligation to pay the wages was also of Jaisu. Jaisu not having paid the wages, the crew members, viz., the plaintiffs have filed the suit to recover their wages claiming maritime lien over the vessel. 2. The vessels were arrested pursuant to order of this Court and some have been sold pursuant to orders passed by this court as the owners/Jaisu did not put up the bail or furnished security for release of the vessels. The sale proceeds are in the custody of the Prothonotary & Senior Master/Admiralty Registrar. The vessels yet to be sold are in the custody of the Sheriff of Mumbai. 3. In all the suits the Board of Trustees of the Port of Mumbai (Port) has taken out the above mentioned chamber summons for the amounts payable to them by Jaisu towards port charges. Jaisu also had a contract with the port for dredging and as part of the contract the vessels were kept in the port. I am not at this moment, in this chamber summons, going into the issue as to whether the claims of the port relating to the vessels would technically amount to a statutory claim or not. I am proceeding on the assumption that those charges would be statutory claims. 4. I am not at this moment, in this chamber summons, going into the issue as to whether the claims of the port relating to the vessels would technically amount to a statutory claim or not. I am proceeding on the assumption that those charges would be statutory claims. 4. The admitted position is that the Port has not exercised their rights and powers under Section 64 of the Major Port Trusts Act, 1963, which reads as under :- "(1) Recovery of rates and charges by distraint of vessel- (1) If the master of any vessel in respect of which any rates or penalties are payable under this Act, or under any regulations or orders made in pursuance thereof, refuses or neglects to pay the same or any part thereof on demand, the Board may distrain or arrest such vessel and the tackle, apparel and furniture belonging thereto, or any part thereof, and detain the same until the amount so due to the Board, together with such further amount as may accrue for any period during which the vessel is under distraint or arrest, is paid. (2) In case any part of the said rates or penalties, or of the cost of the distress or arrest, or of the keeping of the same, remains unpaid for the space of five days next after any such distress or arrest has been so made, the Board may cause the vessel or other thing so distrained or arrested to be sold, and, with the proceeds of such sale, shall satisfy such rates or penalties and costs, including the cost of sale remaining unpaid, rendering the surplus (if any) to the master of such vessel on demand." 5. The reason according to the Port as to why they have not exercised the powers under Section 64(2) can be found in the affidavit dated 15.3.2014 filed by Capt. Shailendra Kohli, Deputy Conservator of Port, filed on behalf of the applicant. Paragraph 7 of the said affidavit reads as under :- "I further say that during my employment with the MbPT, I have observed as under :- (a) Sale by MbPT does not fetch a good price as the sale by MbPT under Section 64 is not free of encumbrances in contrast to a court sale. Paragraph 7 of the said affidavit reads as under :- "I further say that during my employment with the MbPT, I have observed as under :- (a) Sale by MbPT does not fetch a good price as the sale by MbPT under Section 64 is not free of encumbrances in contrast to a court sale. I submit that this is apparent from the reading of the Section itself which requires the MbPT to hand over the balance of the sale proceeds to the owner of the vessel. If the sale was free of encumbrances the section would have provided the balance of the sale to be deposited in this Hon'ble Court for determining priorities of other creditors as is done in England as per my knowledge. (b) The internal procedure for the sale of the vessel is extremely cumbersome as listed below : i) After issuing notices in form Nos.I & II, and prior to the sale of a vessel, the vessel has to be valued. ii) No objection of the Customs and DG have to be obtained prior to the sale of the vessel under Section 64. It normally takes a very long time for the Customs to give their no objection. In fact, on an earlier occasion for the sale of the vessel Seaspan III & Yacht Monarch. A notice had to be addressed to the Customs giving an ultimatum to them that if the no objection was not received within a stipulated period, MbPT shall treat that the Customs have no objection for the sale of that vessel. iii) A committee is appointed to lay down the reserve price/reserve bid. iv) Advertisements are then issued for the sale of the vessel. v) A committee is appointed to open a bid in the presence of the bidders. vi) Most of the bids received are conditional bids requiring MbPT to deliver the vessel free of encumbrances. vii) The value of the bid is generally far below the reserve price. viii) As the bid prices are below the reserve price, as the vessel is sold with the existing liens and encumbrances, the internal procedures requires the tender to be discharged and a fresh tender to be floated. The internal procedure requires that the bids received below the reserve price are to be discharged and the tender to be re-floated minimum thrice. This itself takes more than two years. The internal procedure requires that the bids received below the reserve price are to be discharged and the tender to be re-floated minimum thrice. This itself takes more than two years. ix) In the past as per available records, MbPT has only sold under Section 64 two barges i.e., Dredger Sunder-I and M.T.Nand Anita. x) In the recent past, i.e., last year, MbPT tried to sell, vessel Seaspan III twice. However the bids received were below the reserve price and hence the said vessel could not be sold. The 5th Defendants also tried to sell Yacht Monarch. However the 5th Defendants have received only a conditional bid and hence the said yacht could not be sold by exercising powers under Section 64. Both these vessels have not been sold as the 5th Defendants tried to sell these vessels subject to the existing liens and encumbrances. These vessels are still lying with the 5th Defendants." The Port, at the same time, is wanting its claim to be paid out of the sale proceeds lying with the Admiralty Registrar without being required to prove its claim and establish its tenability. The issue that arises therefore is, whether the Port not having exercised its rights and powers under Section 64 of the Major Port Trusts Act 1963 can approach the Court and seek payment out of its claim from the sale proceeds of the vessel lying with the Admiralty Registrar (pursuant to a court auction) without being required to file a suit and prove its claim and establish its tenability. 6. It is the case of the Port that the power of arrest and sale of a vessel by the Port is enumerated in section 64 of the Major Port Trusts Act, 1963 and there is no need of the Port authorities having to resort to legal proceedings for that purpose. Therefore, the lien of the port over the vessel is one of possessory lien which is paramount and realization of its dues is above the priorities of all other creditors. In other words, what the counsel for the Port submitted was that the Port has a statutory possessory lien and that lien has priority even over the claims of secured creditors including a mortgagee bank. (Board of Trustees of the Port of Mumbai Vs. Indian Oil Corporation, AIR 1998 SC 1878 ). In other words, what the counsel for the Port submitted was that the Port has a statutory possessory lien and that lien has priority even over the claims of secured creditors including a mortgagee bank. (Board of Trustees of the Port of Mumbai Vs. Indian Oil Corporation, AIR 1998 SC 1878 ). It was also submitted by the counsel for the Port that by permitting sale and delivery of the vessel pursuant to orders of this court, did not mean that the port has lost their rights. The port surrendered the vessel to the representatives of the Court only because it did not want to enter into a conflict with the Port and therefore, it becomes the duty of the court to protect the interest of the Port trust and to put it in the same position as if the Port had sold the vessel themselves under Section 64 of the Major Port Trusts Act (ICICI Ltd. Vs. Board of Trustees Port of Calcutta, 2005 (10) SCC 284 ). The counsel also submitted that in permitting the vessel to be sold by the Sheriff, the Port did not forgo its lien thereon or its rights to have the sale proceeds applied towards the satisfaction of its dues in priority to all other claims thereon. The Port in acting as it did only followed an established admiralty practice which is of immense advantage to all those who have claim upon a vessel for it ensures a sale thereof, at a fair price, by and under the directions of the Admiralty Court. (Ashok Arya Vs. Kapaton Mitsos & Ors. & BPT & Union of India, AIR 1988 Bom. 329 ). 7. The Port also relied on various judgments viz. (1) Corps and Corps vs. The Queen of the South, 1968 LLR 182; (2) M/s.Raj Shipping Agencies vs. M.V.Kinship Prosperity & Ors. (Ashok Arya Vs. Kapaton Mitsos & Ors. & BPT & Union of India, AIR 1988 Bom. 329 ). 7. The Port also relied on various judgments viz. (1) Corps and Corps vs. The Queen of the South, 1968 LLR 182; (2) M/s.Raj Shipping Agencies vs. M.V.Kinship Prosperity & Ors. (Order dated 4.5.2012 passed by learned single Judge of this Court in Admiralty Suit No.38 of 2011); (3) Det Norske Veritas vs. M.T.Pratibha Indrayani (Order dated 13.9.2013 passed by learned single Judge of this Court in Admiralty Suit No.34 of 2013); (4) ICICI Limited vs.The Board of Trustees, Port of Calcutta, 2005 10 SCC 284 ; (5) The Board of Trustees of the Port of Mumbai vs. Indian Oil Corporation, AIR 1998 SC 1878 ; (6) Anrand Winston Gregory Vaz vs. Trustees, Port of Vizagapatnam & Ors., 1987 Company Cases Vol.61; (7) Ashok Arya vs. Kapitan Mitsos & Ors. & BPT and Union of India, AIR 1988 Bom. 329 . 8. In all these judgments relied upon by the Port, the courts have come to a conclusion that by permitting the sale of vessel, the Port did not forgo its lien or its rights to have the sale proceeds applied towards the satisfaction of its dues in priority to all other claims thereon. Here, however, we are not deciding the priority. What we are deciding is whether the Port can simply take away the money without even filing a suit, proving its claim and establishing its tenability. 9. Certainly under Section 64 of the Major Port Trusts Act the Port could have distrained the ship or arrested the ship and sold the ship and apply the sale proceeds towards satisfaction of its claim. But that is not the situation today. Admittedly, the Port has not taken steps under Section 64 and the Port has also confessed that it did not take any steps for the reasons mentioned in the affidavit of Capt. S. Kohli, Deputy Conservator of Port. What the Port is adopting now is a short cut. In the present bunch of cases, a crew member is the plaintiff, he has engaged a lawyer for exercising his maritime lien over the vessel, filed a suit, obtained an order of arrest, and in view of the defendants not securing his claim and applying for release of the vessel, got the vessel appraised and sold. In the present bunch of cases, a crew member is the plaintiff, he has engaged a lawyer for exercising his maritime lien over the vessel, filed a suit, obtained an order of arrest, and in view of the defendants not securing his claim and applying for release of the vessel, got the vessel appraised and sold. The plaintiff has expended substantial amount of time, money, effort and labour. Once the sale proceeds have come into the court, the port takes a very self serving approach and tells the court that now the money has come into the court, pay the money to us because the monies represents the vessel over which the port has a lien. The issue is can the Port do this? The court had put specific queries to the counsel for the Port. Can't anybody challenge the port's demand on the ground that they were either un-justified or excessive or that the port did not take steps to mitigate its losses and the port should not have waited doing nothing or the port being a State, as held by the Apex Court in the matter of Dwarkadas Marfatia & Sons Vs. Board of Trustees of the Port of Mumbai, AIR 1989 SC 1642 , the Port should have taken steps within a reasonable time? The counsel Mr. Bharucha replied that certainly the parties are entitled to question but that can be done after the Port takes away the money and the parties can file a fresh suit against the Port and proving that the port was not entitled to the claim that it had lodged. This, in my view, is absolutely un-acceptable and a very unfair stand the State, i.e., the Port can take. In effect, what the port is saying that the plaintiff who is a crew member in these suits or some other plaintiff who may be a necessaries supplier or even a mortgagee bank will file a suit, get the vessel arrested, have the vessel sold by the court and give the money to the port and file another suit against the port to get their money back by proving that the port was not entitled to take away the money. In my opinion, the port is not entitled to take this stand. It defies principles of natural justice and reasoning. In my opinion, the port is not entitled to take this stand. It defies principles of natural justice and reasoning. Had the port exercised its powers under Section 64 of the Major Port Trusts Act, the plaintiff would not have filed this suit. The plaintiff might have given up his claim or would have filed only one suit against the port as suggested by Mr. Bharucha. 10. Even in the matter of ICICI Limited Vs. Board of Trustees Port of Calcutta (supra) this was not the issue. The issue therein was relating to priority between the port dues and dues of secured creditors. It is pertinent to note that this is a judgment which was passed in an Appeal filed by ICICI Ltd. from a judgment passed by the Division Bench of the Hon'ble Calcutta High Court. The said judgment of the Division Bench of Calcutta High Court has not been cited by the Port. But in that judgment it is clearly held that the claim of crew wages ranks prior in authority over that of the Calcutta Port Trust. Paragraph 16 of the said judgment reads as follows:- "For the foregoing reasons therefore the appeals are dismissed. The judgment of the learned single Judge is upheld. It is directed that the claim of the three parties involved in this appeal shall rank priority wise as hereunder (i) Crew members : (ii) CPT : (iii) ICICI" It is therefore, evident that the Division Bench of the Calcutta High Court has held that crew wages rank higher in priority over that of the Calcutta Port Trust (which is a major port under the Major Port Trusts Act, 1963 just like the applicant herein). It is to be noted that Calcutta Port Trust did not challenge the judgment of the Division Bench of the Calcutta High Court. But ICICI Ltd. however, challenged the said judgment in the Hon'ble Supreme Court. 11. In my view, the judgment of the Hon'ble Supreme Court is distinguishable for the following reasons :- (a) The judgment of the Supreme Court only decides the issue of priorities between ICICI Ltd. (secured creditor) and the Calcutta Port Trust (claiming to have unpaid port dues). The issue of crew wages was not before the Hon'ble Supreme Court. The Hon'ble Supreme Court could not therefore decide the priority of port dues over that of the claim for wages. The issue of crew wages was not before the Hon'ble Supreme Court. The Hon'ble Supreme Court could not therefore decide the priority of port dues over that of the claim for wages. There is no observation in the Hon'ble Supreme Court's judgment that the Port dues ranks higher than a maritime lien holder. (b) The Division Bench of the Calcutta High Court had already decided this issue. By not challenging the order of the Calcutta High Court, the Calcutta Port Trust had accepted the judgment of the Division Bench of the Calcutta High Court which attained finality. It is therefore evident from the above that the judgment of the Supreme Court in ICICI Ltd's case cannot be an authority for the proposition that port can take away the sale proceeds from the court without having to prove its claim or port dues rank higher than that of a Maritime Lien. It must also be noted that if the Port does not exercise its rights and powers under Section 64 of the Major Port Trusts Act, 1963 and allows the vessel to sail away from the Port, and in the meanwhile, if the vessel meets with collision or runs aground and requires salvage assistance, then can the Port authority submit that their claim ranks higher in priority to even that of the salvor, who will have a maritime lien? or If the ship had sunk, would the Port receive any of its dues? A maritime lien holder, may in a given circumstance have a higher priority. 12. The next judgment relied upon by the Port, Board of Trustees of the Port of Mumbai vs. IOC (supra) also deals with the issue of priorities between the port authority and secured creditors. Thus, in none of the judgment relied upon by the Port has it been held that a port that has not exercised its rights under Section 64 of the Major Port Trust Act for years and also states it cannot for various reasons, can take away from the court proceeds of sale pursuant to a court auction, without being required to file a suit and prove its claim and all rival claimants including the plaintiff in whose suit the vessel was sold should file another suit against the Port and prove that the Port was not entitled to the entire money that it received from the court. 13. 13. The Port certainly has rights and powers under Section 64 of the Major Port Trusts Act, 1964 to recover its port dues by arresting/distraining and selling the vessel. If the port follows this procedure and retains the sale proceeds, any other creditor having a rival claim would ordinarily be deprived of the monies because before the rival claimant could take legal action for arrest of the vessel (through the Admiralty jurisdiction of the court), the port had already distrained/arrested the vessel and sold it for recovery of its dues. In fact the port can do this if the charges remained unpaid for five days next after any such distrain or arrest. In such a situation the sale proceeds would lie with the port. Any claimant disputing the claim of the port would then be required to file a suit for recovery of the amounts if it believes has been realized by the port authority in excess of its entitlement in law. 14. The port does not have the right to come before the court without having exercised its power under Section 64 of the Major Port Trusts Act and claim payment out of the claims without such claims being examined or adjudicated by a court of law. The Major Port Trusts Act contains no provision which entitles the port to straight away come to court and seek payment of the dues claimed by it. The port is not a privileged claimant who is above the law and whose claim cannot be challenged by other rival claimants when it seeks payment out of the sale proceeds from the court. In the face of vehement objections by rival claimants would the Court allow the port to take away the sale proceeds from court and relegate other rival claimants to the civil suit against the port, means a separate proceeding, for recovering of any excess amounts received by the Port from the court. 15. Court is not powerless to put the port to strict proof of its claim by calling upon it to either lead evidence or respond to the objections raised by rival claimants. 15. Court is not powerless to put the port to strict proof of its claim by calling upon it to either lead evidence or respond to the objections raised by rival claimants. In other words, the port cannot expect the court to turn a blind eye to the objections of rival claimants and allow the port to take away the monies with the rival claimants including the plaintiff in whose suit the vessel has been sold being required to institute a fresh suit for repayment of amounts excessively collected by the port authority. There is no explanation from the port as to why do they have a reluctance to file a suit particularly when they have reluctance to exercise their statutory powers under Section 64 of the Major Port Trusts Act. 16. What happens if the court exfacie finds several claims to be untenable and/or inflated and/or unproved. Would the court sit as a silent spectator and allow the port to take away the entire money? In the present set of suits, it is found that the dues that the port claims are for periods in excess of 2 or 3 years. Why did the port keep quiet all these days? Section 64(2) says if, after 5 days of issuing the distrainment/arrest order the dues are not paid port could sell the vessel. If the ports stand is accepted that they did not take steps under Section 64(2) because they don't fetch good price then there was no bar in the port filing a suit in this court and applying for sale of the vessel. Certainly rival claimants are entitled to question as to why the port did not mitigate by moving the court and applying for sale of the vessel. The Hon'ble High Court is a Court of record under the constitution having plenary powers which are not curtailed. The High Court has inherent powers to do justice and is not rendered "helpless" to right a wrong which the port seeks to perpetrate. In my view, a reading of the Major Port Trusts Act or a reading of the judgments of the Supreme Court as submitted by Port would not only be stretching the law but breaking it. The High Court has inherent powers to do justice and is not rendered "helpless" to right a wrong which the port seeks to perpetrate. In my view, a reading of the Major Port Trusts Act or a reading of the judgments of the Supreme Court as submitted by Port would not only be stretching the law but breaking it. Therefore, where the port has not sold the vessel under Section 64 of the Major Port Trust Act, 1964 and retained the sale proceeds, but has come before the court for payment out of the sale proceeds in a suit that has been filed by a rival claimant in these cases being crew members who have not been paid wages to satisfy the port dues, the court in the face of objections by rival claimants is required to put the Port to strict proof its claim. Port would be required to prove its claim in accordance with law by filing a suit before it can take the monies in priority over claimants whose claims rank lower in priority over that of the port. 17. The unreported judgment of this Court in the case of Bank of Beirut v/s. mv. San Giorgio & Ors. (Notice of Motion No.2918 of 2010 in Admiralty Suit No.13 of 2007 dated 8.12.2010) does not consider the position whether a port authority that has power under Section 64 of the Major Port Trusts Act fails to exercise its power then can it be heard to say that it is not required to prove its claim before the court prior to the monies being paid out to it. It does not appear that this point was ever raised. Relying on the judgment of the Apex Court in the ICICI Limited Vs. Board of Trustees Port of Calcutta (supra) the learned Judge in para-16 has held as under :- "16. We are unable to accept this submission. On facts of this case it cannot be said that the Port Trust had given up their right under Section 64. As has been pointed out hereinabove, the Port Trust had intervened in the admiralty suit in Calcutta and had sought leave to exercise their rights under Section 64(2) of the major Port Trusts Act. This showed that the Port Trust had not given up their rights and were insisting on their rights. As has been pointed out hereinabove, the Port Trust had intervened in the admiralty suit in Calcutta and had sought leave to exercise their rights under Section 64(2) of the major Port Trusts Act. This showed that the Port Trust had not given up their rights and were insisting on their rights. They had merely permitted sale and delivery of vessel in pursuance of the established admiralty practice. Merely because they did not enter into a conflict with the Court and surrendered the vessel to the representative of the Court did not mean that they lost their right. It then becomes duty of the Court to protect the interest of the Port Trust and to put it in the same position as if they had sold the vehicle themselves under their powers." Whilst the judgment of the Supreme Court undoubtedly holds that merely because the port has not exercised its rights under Section 64, it must be put in the same position as if it has sold the vessel under powers under Section 64 does not mean that the port authority can take away the monies lying in court without even filing a suit and/or proving its claim. With due respect to the learned Judge, the Hon'ble Supreme Court does not make any such observation in the judgment in ICICI Limited Vs. Board of Trustees Port of Calcutta case (supra). The Hon'ble Supreme Court was only considering the issue of priorities of the claim of the port authority over that of ICICI Ltd. and was not concerned with the issue of payment out of sale proceeds. The Hon'ble Supreme Court only held that merely because the port authority had not sold the vessel under Section 64, it had not lost its right to contend that it had not given up its rights and privileges conferred under Section 64. This observation was made because ICICI Ltd. contended before the Hon'ble Court that the Calcutta Port Trust by not exercising their right under Section 64 of the Major Port Trusts Act, 1963 had waived their lien over the vessel and consequently the claim of ICICI Ltd. as mortgagees ranked higher over that of the Calcutta Port Trust. This observation was made because ICICI Ltd. contended before the Hon'ble Court that the Calcutta Port Trust by not exercising their right under Section 64 of the Major Port Trusts Act, 1963 had waived their lien over the vessel and consequently the claim of ICICI Ltd. as mortgagees ranked higher over that of the Calcutta Port Trust. With due respect to the Judge in the San Giorgio case, the Hon'ble Supreme Court does not hold that the monies realized from the sale of the vessel which are lying with the Admiralty Registry can be paid over to the port authority without the Port filing a suit and proving their claim in court. 18. Such an interpretation which is sought to be placed by the Port is misconceived and will have far reaching consequences. That would encourage the port also to do nothing. It will encourage indolence. The port will sit with its hands tied and the moment a rival claimant files a suit, obtains an order of arrest, spends large sums on legal costs including court fees and gets the vessel sold, the port will come and take away the money without having to prove its claim or its claim being challenged. It would be contrary to the provisions of the Code of Civil Procedure, 1908 and well settled law that a claimant seeking to agitate his claim must prove his claim in accordance with law. What the Port seeks to do is steal a march over other creditors by not being required to prove its claim and relegating the other creditors to suits to challenge the tenability and quantum of the port's claims. This is clearly impermissible. 19. In the circumstances aforesaid, in my view, where the port authority does not sell after distraining/arresting the vessel under Section 64(2) of the Major Port Trusts Act for recovery of its dues or does not do anything under Section 64 of Major Port Trusts Act and approaches the court for payment out of its claim from the sale proceeds lying to the credit of a suit filed by a rival claimant, whether it can take away the money or not without filing a suit, proving its claim and establishing its tenability in accordance with law has to be re-examined. I find considerable force in the submissions of Mr.Narichania, who appeared for the plaintiff. 20. I find considerable force in the submissions of Mr.Narichania, who appeared for the plaintiff. 20. Taking overall view of the matter, therefore, in my opinion, considering that this question would arise frequently before this court, that is, the Port wanting to take away the money without having to prove its claim and without taking any action under Section 64(1) & (2) or under Section 64(2) which would result in prejudice to the interest of its rival claimants, it would be appropriate if the question is considered by a larger bench. 21. In my opinion, therefore, the following question can be referred for consideration to a larger bench :- "Whether a port that did not exercise its rights and powers under Section 64 or under Section 64(2) of the Major Port Trusts Act 1963 can approach the court and seek payment of its claim from the sale proceeds of a vessel lying with the Admiralty Registrar pursuant to a court auction in suit filed by a rival claimant, without being required to prove its claim in a suit and establish its tenability"? 22. Office is, therefore, directed to place the papers before the Hon'ble the Chief Justice for appropriate orders.