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CASE NO.: Appeal (civil)  5665 of 2002 Appeal (civil)  5666 of 2002

PETITIONER: Liverpool & London S.P. & I Asson. Ltd.   

RESPONDENT: M.V. Sea Success I & Anr.                                        

DATE OF JUDGMENT: 20/11/2003

BENCH: CJI & S.B. Sinha.

JUDGMENT: J U D G M E N T

S.B. SINHA, J :

THE BACKGROUND FACT:

The appellant (Club) herein is an association incorporated under  the laws of the United Kingdom.  It is a mutual association of ship  owners.  It offers insurance cover in respect of the vessels entered  with it for diverse third party risks associated with the operation and  trading of vessels.  According to the appellant, no vessel operates  without a Protection & Indemnity (P&I) cover and the same has been made  compulsory to allow a ship to enter major ports in India.   

’Sea Ranger’ and ’Sea Glory’ are the sister vessels of the 1st  respondent vessel and they are allegedly owned by the 2nd respondent. The  first two vessels entered into a contract with the appellant’s  association for the years 1998-1999 and 1999-2000 but they have not paid  the unpaid insurance premium due and payable by the 2nd respondent for  various P&I risks for which they had been insured.  These unpaid  insurance calls being "necessaries" was enforceable within the  "admiralty jurisdiction" of the Bombay High Court.  

For the arrest of the 1st respondent vessel which came to Mumbai  Port within the territorial waters of India, a suit was filed by the  club inter alia for the  prayers : "(a) for a decree against the  respondents in the sum of US$1,18,194.89 together with interest at the  rate of 12% per annum, which was the unpaid insurance premium amount due  to the club and payable by the 2nd respondent; and (b) for arrest of the  1st respondent vessel to secure the claim."

       On an application for arrest of the 1st respondent vessel having  been made, the 2nd respondent appeared and undertook to furnish security  in respect of the appellant’s claim and further gave an undertaking that  until the security is furnished the said vessel will not leave the Port  of Mumbai.  However, thereafter S.S. Shipping Corporation Inc., Liberia  claiming to be the registered owner of the 1st respondent furnished a  bank-guarantee in relation to the appellant’s claim in discharge of the  undertaking of security given by the second respondent.  The 1st  respondent thereafter took out a Notice of Motion for rejection of the  plaint purported to be under Order 7 Rule 11(a) of the Code of Civil  Procedure inter alia on the ground that the averments contained therein  do not disclose a cause of action as the claim of unpaid insurance  premium was not a "necessary" within the meaning of Section 5 of the

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Admiralty Courts Act, 1861.  A learned Single Judge of the High Court  after hearing the Notice of Motion by an order dated 1-2/2/2001 referred  the said question to a Division Bench as it could not agree with a  decision rendered by another learned Single Judge.  However, on the  other two grounds it discharged the Notice of Motion holding that the  averments made in paragraphs 1 and 14 of the plaint inter alia to the  effect that all the three ships are beneficially owned by the 2nd  respondent disclose a cause of action.

       An appeal thereagainst was preferred by the respondent herein.   The Division Bench took up the appeal preferred by the respondent herein  as also the reference made by the learned Single Judge and passed a  common judgment.  

ISSUES :   The questions which arose for consideration before the High Court  were:

(i)     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; (ii)    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; and (iii)   Whether the averments made in paragraphs 1 and 14 of the plaint  disclose sufficient cause of action for maintaining a suit.

       The Division Bench while answering the question No. 1 in favour of  appellant, answered question Nos. 2 and 3 against it.  Appeal No. 226 of  2001 has been filed by the ’club’ whereas Civil Appeal No. 5666 of 2002  has been filed by the ’vessel’.

Submissions :          Mr. Bharucha, the learned counsel appearing on behalf of the  "Vessel" would inter alia submit:

(i)     The amount of arrears of insurance premium alleged to be due to  the 1st respondent towards release calls is not a maritime claim  entitling the Club to invoke the admiralty jurisdiction of the  High Court as such unpaid insurance money does not constitute   ’necessaries’ within the meaning of Section 5 of the Admiralty  Courts Act, 1861. (ii)    Sufficiently direct and proximate connection between insurance  and the vessel is a prerequisite for bringing an action in rem.   Insurance is meant primarily as a means of indemnifying and  protecting the vessel owner against the loss of his vessel  and/or claims that that may arise as a result of damage or loss  caused by the vessel.  Although it may be a commercial  necessity but the same would not come within the purview of the  term ’necessaries’ within the meaning of the provisions of the  said Act.  The provisions contained in the Admiralty Courts Act  of 1840 and 1861, Section 22 of the Supreme Court of Judicature  Act, 1925, the 1952 Brussels Arrest Convention as also the  Administration of Justice Act, 1956 disclose one uniform  feature that in order that a monetary claim qualifies for and  is recognized as a maritime claim the same must be  necessary  for operation of the ship. (iii)   In United Kingdom, it has consistently been held for more than  a century that unpaid insurance premium is not a "necessary"  within the conventional meaning of the said term as understood  in maritime law. The said view has been reiterated by the  Courts of Australia, South Africa and Singapore. In support of

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the said contention, strong reliance has been placed on Queen  Vs. Judge of the City of London Court [1891 1 QB 273], The  Beldis [1936 P. 51], Webster Vs. Seekamp [1821 4B & Ald 352],  Heinrich Bjorn [1883 8 P.D. 151], The Andre Theodore [10  Aspinall 94], Stokes Vs. The Conference [1887 (8) NSWR 10], The  River Rima [1988 2 L Rep 193], a South African Court decision  in The Emerald Transporter [1985 2 SALR 152] as also a decision  of Singapore High Court in The Golden Petroleum [1994 1 SLR  92]. (iv)    The expression "necessaries supplied to any ship" although has  not statutorily been defined; over a long period of time, the  same had attained a definite connotation, i.e., goods or  services supplied to a specifically identified ship in order to  successfully prosecute the voyage in question, and, thus,  applying the said test unpaid insurance premium does not answer  the said definition.  The matter has furthermore to be looked  at from the point of view of physical necessity and  practicality and not from the viewpoint of prudence or sound  economics. (v)     There are a large number of categories of insurance from hull  and machinery insurance, to protection and indemnity (P&I)  cover, through war risks, to freight demurrage and defence  cover (FD&D), oil spill cover (TOVALOP), and strike cover etc  and in that view of the matter if P&I should be held to be a  necessary, others are not, the same would lead to an  incongruous situation.  (vi)    In view of the decision in  The Aifanourious [1980 2 L Reps.  403] as also  the decision rendered by the House of Lords in  Gatoil International Inc. Vs. Arwkright Boston Manufacturers  Mutual Insurance Co. & Other The Sandrina  [1985 (1) All ER  129], holding that claim for unpaid insurance has never been  recognized as maritime claim under any other head and the  Courts of England expressly held the same to have been excluded  as such under Article 1 of the Brussels Arrest Convention,  1952.  Such a claim, thus,  due to unpaid insurance premium  would not be a maritime claim also under the head  "disbursements made on account of a ship". (vii)   In the decision of this Court in M.V. Elisabeth [(1993) Supp. 2  SCC 433], it was merely held that the High Courts in India will  have an extended jurisdiction under the Admiralty Courts Act,  1861 and the said principle cannot be further extended. (viii)  As the maritime jurisdiction of the High Courts in India was  derived from the pre-independence statutes and as the High  Courts of India exercise the same jurisdiction as that of the  courts in England, it must necessarily be held that the  interpretation of the word "necessaries" rendered by the  English Courts and which has been followed by other courts  except by the American Court should prevail.

        Mr. Prashant S. Pratap, the learned counsel appearing on behalf  of the Club, on the other hand, would submit that: (i)     "necessaries" are the things which a prudent owner would  provide to enable a ship to perform the functions wherefor she  has been engaged and, thus, the provision of services would  come within the definition of necessaries. (ii)    The term "necessaries" must be construed in a broad and  liberal manner keeping in mind the ever changing requirements  of a ship to be able to trade in commerce. (iii)   Contemporary maritime statutes in England do not use the term  "necessaries" but the American Federal Maritime Liens Act does  and, thus, decision rendered by the American Courts that  insurance is a "necessary" should be held to be correct.  (Equilease Corp. Vs. M.V. Sampson 793 F.2d 598- U.S. Court of  Appeals). (iv)    A valid P&I insurance cover is necessary for a ship to call at

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major ports in India and consequently so far as India is  concerned, it is a necessity having regard to the fact that  Mumbai Port, JNPT and Kolkata Port have issued a statutory  direction in this behalf.   (v)     The domestic legislation in India also provide for a compulsory  insurance.  Reference in this connection has been placed on the  Inland Vessels Act, 1917 (as amended in the year 1977), the  Merchant Shipping Act, 1956 (as amended in 1983) and Multimodal  Transportation of Goods Act, 1993 (as amended in 2000) and in  that view of the matter the pedantic and regressive view should  be discouraged specially in the light of the judgment of this  Court in M.V. Elisabeth (supra).   (vi)    By reason of the 1999 Arrest Convention inter alia unpaid  insurance calls had been added and in absence of any  codification and maritime claim by a statute in India the same  should be taken into consideration for determination of the  jurisdiction of the High Court. Several countries such as  Canada, South Africa, Australia, China and Korea have given the  claim for unpaid insurance premium in respect of a ship, the  status of a maritime claim.   (vii)   Flexibilities being the virtue of law court, the High Court has  rightly held that the marine premium would come within the  purview of the term "necessaries" having regard to the global  change and outlook in trade and commerce.  Reliance in this  connection has been placed on M.V. Al Quamar Vs. Tsavliris  Salvage (International) Ltd. & Ors. [(2000) 8 SCC 278].

STATUTORY PROVISIONS :  

       The relevant provisions of Admiralty Court Act, 1840 are as  follows:

"3. WHENEVER A VESSEL SHALL BE ARRESTED, ETC.,  COURT TO HAVE JURISDICTION OVER CLAIMS OF  MORTGAGEES: Whenever any ship or vessel shall be  under arrest by process issuing from the said  High Court of Admiralty, or the proceeds of any  ship or vessel having been so arrested shall  have been brought into and be in the registry of  the said court, in either such case the said  court shall have full jurisdiction to take  cognizance of all claims and causes of action of  any person in respect of any mortgage of such  ship or vessel, and to decide any suit  instituted by any such person in respect of any  such claims or causes of action respectively.

4. COURT TO DECIDE QUESTIONS OF TITLE, ETC.: The  said Court of Admiralty shall have jurisdiction  to decide all questions as to the title to or  ownership of any ship or vessel, or the proceeds  thereof remaining in the registry, arising in  any cause of possession, salvage, damage, wages  or bottomry, which shall be instituted in the  said court after the passing of this Act.

6. THE COURT IN CERTAIN CASES MAY ADJUDICATE,  ETC.: The High Court of Admiralty shall have  jurisdiction to decide all claims and demands  whatsoever in the nature of salvage for services  rendered to or damage received by any ship or  sea-going vessel or in the nature of towage, or  for necessaries supplied to any foreign ship or  sea-going vessel, and to enforce the payment  thereof, whether such ship or vessel may have

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been within the body of a country, or upon the  high seas, at the time when the services were  rendered or damage received, or necessaries  furnished, in respect of which such claim is  made.

       The relevant provisions of Admiralty Court Act, 1861 are as under:

"4. AS TO CLAIMS FOR BUILDING, EQUIPPING, OR  REPAIRING OF SHIPS:  The High Court of Admiralty  shall have jurisdiction over any claim for the  building, equipping, or repairing of any ship,  if at the time of the institution of the cause  the ship or the proceeds thereof are under  arrest of the court.

5. AS TO CLAIMS FOR NECESSARIES: The High Court  of Admiralty shall have jurisdiction over any  claim for necessaries supplied to any ship  elsewhere than in the port to which the ship  belongs, unless it is shown to the satisfaction  of the court that at the time of the institution  of the cause any owner or part owner of the ship  is domiciled in England or Wales: Provided  always, that if in any such cause the plaintiff  do not recover twenty pounds, he shall not be  entitled to.

6. AS TO CLAIMS FOR DAMAGE TO CARGO IMPORTED:  The High Court of Admiralty shall have  jurisdiction over any claim by the owner or  consignee or assignee of any bill of lading of  any goods carried into any port in England or  Wales in any ship, for damage done to the goods  or any part thereof by the negligence or  misconduct of or for any breach of duty or  breach of contract on the part of the owner,  master, or crew of the ship, unless it is shown  to the satisfaction of the court that at the  time of the institution of the cause any owner  or part owner of the ship is domiciled in  England or Wales: Provided always, that if any  such cause the plaintiff do not recover twenty  pounds, he shall not be entitled to any costs,  charges, or expenses incurred by him therein,  unless the judge shall certify that the cause  was a fit one to be tried in the said court.

8. HIGH COURT OF ADMRILATY TO DECIDE QUESTIONS  AS TO OWNERSHIP, ETC. OF SHIPS: The High Court  of Admiralty shall have jurisdiction to decide  all questions arising between the co-owners, or  any of them, touching the ownership, possession,  employment, and earnings of any ship registered  at any port in England or Wales, or any share  thereof, and may settle all accounts outstanding  and unsettled between the parties in relation  thereto, and may direct the said ship or any  share thereof to be sold, and may make such  order in the premises as to it shall seem fit.

       Section 2 of Colonial Courts of Admiralty Act, 1890 reads thus:  "2. Colonial Courts of Admiralty. - (1) Every

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court of law in a British possession, which is  for the time being declared in pursuance of this  Act to be a Court of Admiralty, or which, if no  such declaration is in force in the possession,  has therein original unlimited civil  jurisdiction, shall be a Court of Admiralty,  with the jurisdiction in this Act mentioned, and  may for the purpose of that jurisdiction,  exercise all the powers which it possesses for  the purpose of its other civil jurisdiction, and  such Court in reference to the jurisdiction  conferred by this Act is in this Act referred to  as a Colonial Court of Admiralty....  (2) The jurisdiction of a Colonial Court of  Admiralty shall, subject to the provisions of  this Act, be over the like places, persons,  matters, and things, as the Admiralty  jurisdiction of the High Court in England,  whether existing by virtue of any statute or  otherwise, and the Colonial Court of Admiralty  may exercise such jurisdiction in like manner  and to as full an extent as the High Court in  England, and shall have the same regard as that  Court to international law and the comity of  nations.  

       Section 2 of The Colonial Courts of Admiralty (India) Act, 1891  reads as under:

2. APPOINTMENT OF COLONIAL COURTS OF ADMIRALTY:  The following Courts of unlimited civil  jurisdiction are hereby declared to be Colonial  Courts of Admiralty, namely:-

(1)     the High Court of Judicature at  Fort William in Bengal; (2)     the High Court of Judicature at  Madras, and (3)     the High Court of Judicature at  Bombay."

       Section 22(1) of Supreme Court of Judicature (Consolidation) Act,  1925 reads thus:

"22. ADMIRALTY JURISDICTION OF HIGH COURT: (1)  The High Court shall, in relation to admiralty  matters, have the following jurisdiction (in  this Act referred to as "admiralty  jurisdiction") that is to say -

(a)     Jurisdiction to hear and determine any of  the following questions or claims:

***             ***                     ***

(viii)  Any claim by a seaman of a ship for  wages earned by him on board the ship,  whether due under a special contract or  otherwise, and any claim by the master  of a ship for wages earned by him on  board the ship and for disbursements  made by him on account of the ship; (ix)    Any claim in respect of a mortgage of  any ship, being a mortgage duly

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registered in accordance with the  provisions of the Merchant Shipping  Acts, 1894 to 1923, or in respect of  any mortgage of a ship which is, or the  proceeds whereof are, under the arrest  of the court;" (x)     Any claim for building, equipping or  repairing a ship, if at the time of the  institution of the proceedings the ship  is, or the proceeds thereof are, under  the arrest of the court."

       Articles 1(k) and 2 of the 1952 Brussels Convention are as under:

"(1) "Maritime Claim" means a claim arising  out of one or more of the following:

***     ***     ***

(k)     goods or materials wherever supplied to  a ship for her operation or  maintenance;

2. A ship flying the flag of one of the  Contracting States may be arrested in the  jurisdiction of any of the Contracting States in  respect of any maritime claim, but in respect of  no other claim; but nothing in this Convention  shall be deemed to extend or restrict any right  or powers vested in any Governments or their  Departments, Public Authorities, or Dock or  Harbour Authorities under their existing  domestic laws or regulations to arrest, detain  or otherwise prevent the sailing of vessels  within their jurisdiction."

HISTORY OF JURISDICTION OF THE HIGH COURT :

       The jurisdiction of the High Court of Admiralty in England used to  be exercised in rem in such matters as from their very nature would give  rise to a maritime lien - e.g. collision, salvage, bottomry.  The  jurisdiction of the High Court of Admiralty in England was, however,  extended to cover matters in respect of which there was no maritime  lien, i.e., necessaries supplied to a foreign ship.  In terms of Section  6 of the Admiralty Act, 1861, the High Court of Admiralty was empowered  to assume jurisdiction over foreign ships in respect of claims to cargo  carried into any port in England or Wales.  By reason of Judicature Act  of 1873, the jurisdiction of the High Court of Justice resulted in a  fusion: of admiralty law, common law and equity.  The limit of the  jurisdiction of the Admiralty court in terms of Section 6 of the 1861  Act was discarded by the Administration of Justice Act, 1920 and the  jurisdiction of the High Court thereby was extended to (a) any claim  arising out of an agreement relating to the use or hire of a ship; (b)  any claim relating to the carriage of goods in any ship; and (c) any  claim in tort in respect of goods carried in any ship.

       The admiralty jurisdiction of the High Court was further  consolidated by the Supreme Court of Judicature (Consolidation) Act,  1925 so as to include various matters such as any claim "for damage  done by a ship", and claim ’arising out of an agreement relating to the  use or hire of a ship’; or ’relating to the carriage of goods in a  ship’; or "in tort in respect of goods carried in a ship".  

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       The admiralty jurisdiction of the High Court was further widened  by the Administration of Justice Act, 1956 so as to include not only the  claims specified under Section 1(i) of Part I but also any other  jurisdiction which either was vested in the High Court of Admiralty  immediately before the date of commencement of the Supreme Court of  Judicature Act, 1873 (i.e. November 1, 1875) or is conferred by or under  an Act which came into operation on or after that date on the High Court  as being a court with admiralty jurisdiction and any other jurisdiction  connected with ships vested in the High Court apart from this section  which is for the time being assigned by rules of court to the Probate,  Divorce and Admiralty Division.

       Sub-Section (4) of Section 1 removed the restriction based on the  ownership of the ship.  By reason of Clauses (d) (g) and (h) of the said  Section the jurisdiction in regard to question or claims specified under  Section 1(i) included any claim for loss of or damage to goods carried  in a ship, any claim arising out of any agreement relating to the  carriage of goods in a ship or to the use or hire of a ship.

       In the course of time the jurisdiction of the High Courts vested  in all the divisions alike.  The Indian High Courts after independence  exercise the same jurisdiction.

NECESSARIES - AS A MARITIME CLAIM:

The concept "as to claims for necessaries" is specified under  Section 5 of the Admiralty Court Act, 1861, which provides for the  jurisdiction of High Court as regard "Necessaries supplied to any ship  elsewhere than in the port to which the ship belongs, unless it is shown  to the satisfaction of the court that at the time of institution of the  cause an owner or part owner of the ship is domiciled in England or  Wales".

        The term "necessaries" had not been defined in the Act of 1861.   It was given a  meaning by judicial pronouncements.   

       It stands accepted that having regard to the legislative and  executive policy, England and Wales never considered the arrears of  insurance premium as a ’necessary’.  The Courts of England further  maintained a distinction between a maritime claim and maritime lien.   The decisions cited by Mr. Bharucha  go to show that the English Courts  proceeded on the premise that for the purpose of considering as to  whether any necessary has been supplied to a ship or not must have a  sufficient and direct connection with the operation of the ship.  It  held that unpaid insurance premium is not a maritime claim as it is not  needed to keep it going.  [See Queen Vs. Judge of the City of London  Court (supra), Heinrich Bjorn (supra), The Andre Theodore (supra), The  Aifanourious (supra).  The English Courts, thus,  refused to put a wide  construction on that term.

       A similar view was also adopted by an Australian High Court in  Gould Vs. Cornhill Insurance Co. Ltd. [1 DLR 4th Ed. 183].

       In The Riga [(1869-72) L.R. 3 A&E 516], it is stated:

       "The definition of the term  "necessaries" given by Lord Tenterden in  Webster v. Seekamp (4 B. & Ald. 352) adopted and  applied in proceedings in Admiralty.  Semble,  there is no distinction between necessaries for  the ship and necessaries for the voyage."

       In The Edinburgh Castle [(1999) Vol. 2 Lloyd’s Law Reports 362],  it has been held:

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       "To address these concerns, Mr. Charkham  helpfully invited my attention to a number of the  authorities and to such discussion as there is on  s.20(2)(m) and its predecessors.  Taking the matter  very shortly, for present purposes, the following  propositions emerge:

1.      The words "in respect of" are wide words which  should not be unduly restricted: The Kommunar,  [1997] 1 Lloyd’s Rep. 1, at p.5. 2.      Section 20(2)(m), which is derived from the  equivalent provision in the Administration of  Justice Act, 1956, contains a jurisdiction which  is no narrower than the predecessor jurisdiction  in respect of claims for "necessaries": The  Fairport (No. 5), [1967] 2 Lloyd’s Rep. 162; The  Kommunar, sup. 3.      No distinction is to be drawn: ...between necessaries for the ship and  necessaries for the voyage, and all things  reasonably requisite for the particular  adventure on which the ship is bound are  comprised in this category. [Roscoe, The  Admiralty Jurisdiction and Practice, 5th ed., at  p. 203: The Riga (1872) L.R. 3 Ad. & Ecc. 516]. 4.      The jurisdiction extends to the provision of  services: The Equator, (1921) 9 L1.L.Re. 1: The  Fairport (No. 5), sup.

       In the light of these propositions, I am  satisfied that the plaintiffs bring their claims  within s. 20(2)(m).  Provisions for the passengers  were "necessaries" for the particular adventure on  which this passenger vessel was engaged.  The  provision of services is capable of coming within the  sub-section and does so here, given the nature of the  services provided.  I should mention that I was  referred in addition to The River Rima, [1988] 2  Lloyd’s Rep. 193 (H.L.) and [1987] 2 Lloyd’s Rep. 106  (C.A.) but, as I understand it, nothing said there  precludes my decision in favour of the plaintiffs on  the facts of this case."

       In Nore Challenger and Nore Commander [(2001) Vol. 2 Lloyd’s Law  Reports 103] the claim relating to supply of crew was held to be  "necessary" stating:

"Before considering whether the concept of  necessaries encompasses the provision or supply  of crew, it is important to bear in mind that it  has long been established that no distinction  need be drawn between the supply of necessaries  and the payment for such supply."          

       Identical view has been taken by a Court of Durban in M.V. Emerald  Transporter [1985 2 SALR 448] with reference to the provisions contained  in Admiralty Jurisdiction Regulation Act 105 of 1983 wherein it was held  that services which are insured solely to the benefit of the ship owner  would not be classed as necessaries.  The said decision was, however,  rendered in the context of ranking of claims against a fund comprising  of sale proceeds of the vessel M.V. Emerald Transporter.

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       The House of Lords in The River Rima (supra) considered the  provisions of Article 1(1)(k) of the 1952 Brussels Arrest Convention  incorporating "goods or materials wherever supplied to a ship for her  operation or maintenance" as a maritime claim.  Having regard to the  provisions contained in Section 6 of Admiralty Court Act, 1840 and  Section 5 of Admiralty Court Act, 1861 it was held:

"In other words, what is now called a claim in  respect of goods or materials supplied to a ship  for her operation or maintenance is the  equivalent of what used to be called a claim for  necessaries, but without the restrictions which  formerly applied to such a claim."                                                 (Emphasis Supplied)

       The Singapore High Court also in Golden Petroleum (1994 1 SLR 92)  considered the expression "goods supplied to a ship for her operation  and maintenance" in the following terms:

"In my opinion, bunker oil supplied to the ship  for sale to other ships could not be conceived  as goods supplied for her operation.  The phrase  ’operation of the ship’ should not be equated  with the business activities of the shipowner  and the section as enacted could not cover goods  which are loaded onto two ship only to be  unloaded or disposed of soon thereafter by  sale."

       It appears that the matter is pending in appeal.

       Yet again in Gatoil International (supra), it was held:

"An agreement for the cancellation of a contract  for the carriage of goods in a ship or for the  use or hire of a ship would, I think, show a  sufficiently direct connection.  It is  unnecessary to speculate what other cases might  be covered.  Each case would require to be  decided on its own facts.  As regards the  contract of insurance founded on in the instant  appeal, I am of opinion that it is not connected  with the carriage of goods in a ship in a  sufficiently direct sense to be capable of  coming within para (e)."

       The question, however, is as to whether having regard to the  changed situation unpaid insurance premium should be held to be a  commercial necessity.  With a view to answer the question it is  necessary to consider as to whether a failure to insure the security is  a matter which would have a bearing upon the security of the ship.           Whether the provisions of insurance is to be considered to be a  service?  A further question which may arise is as to whether such  service is to the ship or not ?  

INSURANCE COVERS - EXTENT OF:

       The law of marine insurance rested almost entirely on common law.   Only a few isolated points were dealt with by statute.  Although, there  may be a plethora of authority on some points, the decisions may be  meagre on others.  The interpretative changes made from time to time  turned upon new commercial conditions, the old ones having become  obsolete.  Some countries enacted and codified marine laws while many  did not.  With the passage of time, the scope and ambit of the contracts

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of insurance increased not only having regard to the experience gathered  by the contracting parties but also by the legislators and the Court.  A  lot of  amendments in the statutes as also interpretive changes took  place.  The decisions rendered by different courts on marine insurance  law even frequently apply to non-marine insurance.  With the increase in  marine traffic, the insurance law also developed and new varieties of  insurance covers came into being.  There has been a considerable  expansion of the practice of insurance against various forums of legal  liabilities which the assured may incur to the third parties.

                P&I mutual insurances cover the liabilities of assured shipowner  incurred to third parties.  In Modern Admiralty Law by Aleka Mandaraka- Sheppard at page 642, it is stated:

"P&I mutual insurance (P&I associations) cover  the liabilities of their assured shipowner  incurred to third parties, which include cargo  claims, pollution liabilities, damage to  harbours, piers, etc., and personal injury or  loss of life claims, which are all excluded from  the RDC clause.  In addition the P&I association  insures the remaining one-fourth of the assured’  liability under the RDC clause.  Legal costs in  defending such claims are covered as well."

       The title of a claimant to sue the defendant as regard cargo claim  enquiry has been stated in Shipping Law by Simon Baughen, Second Edition  at page 16-17 in the following terms:

"Does the claimant have title to sue the  defendant?

’Title to sue’ means the claimant’s right to sue  the defendant, be it in contract, tort or  bailment, in respect of the transit losses it  will have borne as a buyer taking delivery at  the end of a chain of sale contracts.  If the  claimant has insured the goods and has been  indemnified, then the action may be brought in  its name by its insurers under the process of  subrogation.

       The defendant will usually be the  shipowner, but may also be a charterer or a  freight forwarder who has contracted as carrier.   If an inaccurate bill of lading is signed, the  defendant could also be the party who actually  signed the bill of lading.  The shipowner’s  liability in respect of cargo claims will  generally be covered by liability insurance,  known as ’P&I’ (protection and indemnity)  insurance.  Shipowners will not be covered in  respect of claims arising out of deviation,  misdelivery and the issuing of a ’clean’ bill of  lading for goods that were damaged prior to  loading."

                Apart from P&I club, there exists the Inter club Agreement (ICA).

       In Shipping Law by Simon Baughen, at page 183, it is stated :

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"Another very common clause in time charters is  the ’Inter-Club Agreement’ (ICA).  The agreement  began as an agreement between the P&I Clubs as  to how they would recommend settlement of cargo  claims as between shipowners and charterers  where the NYPE form time charter is used.  It is  now common for the agreement to be specifically  incorporated into the time charter.  Indeed the  NYPE 1993 form contains a printed cl 27 to this  effect."

       The Special Compensation P&I Club Clause (the SCOPIC clause)  enumerated from Article 14 remuneration after The Nagasaki Spirit, in  1999 as a result of discontent by salvors.  Although this provision  affected only the salvor and the shipowner, the international groups of  P&I Clubs have agreed a code of conduct giving their backing to the  clause whenever a ship enters with the International Group is salved by  a member of the International Salve Union.  The salient features of the  claim which received clarificatory amendment in 2000 are as under:

"For the clause to operate it needs to be  specifically incorporated into an LOF contract,  of whatever form.  LOF 2000 contains a box to be  ticked if the parties agree to the incorporation  of the SCOPIC clause.  If the clause is  incorporated it then needs to be invoked by  salvor.  This can be done even if there is no  threat to the environment.  Invoking the clause  completely replaces the right of the salvor to  claim under Art. 14, even in respect of services  performed before the invocation of the clause.   The provisions of Art. 14(5) and (6), however,  continue to remain effective.  Within two days  of the clause being invoked, cl 3 obliges the  shipowner to put up security for the salvor’s  claim under the clause in the amount of  US$3,000,000.  If the shipowner fails to do so,  cl 4 entitles the salvor to withdraw from the  SCOPIC clause, provided the security is still  outstanding at the date of withdrawal.

Clause 5 provides that SCOPIC remuneration is to  be calculated by reference to an agreed tariff  of rates that are profitable to salvors,  calculated by reference to the horsepower of the  salvage tug/s employed.  It also covers the  salvor’s out of pocket expenses.  An uplift of  25% is applied to both these heads of claim.   Clause 6 provides that SCOPIC remuneration is  payable only in the event that it exceeds the  amount of the award under Art 13.  To deter  salvors from invoking SCOPIC too readily, cl 7  provides that in the event of SCOPIC  remuneration falling below the amount of the Art  13 award, that award shall be discounted by 25%  of the difference between the award and the  SCOPIC remuneration.  Thus, where the Art 13  award is for $1,000,000 and the SCOPIC  remuneration is only $600,000, the Art 13 award  will be reduced by $100,000 being 25% of the  difference between the two sums, giving the  salvor a net award of $900,000.

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The SCOPIC clause also provides for the  termination of both the SCOPIC provisions and  the LOF in two situations.  First, the salvor  can terminate if the cost of its services less  any SCOPIC remunerations exceeds the value of  the salved property.  Secondly, the shipowner  can terminate by giving five days’ notice.   These termination provisions do not apply if the  contractor is restrained from demobilizing its  equipment by a public body with jurisdiction  over the area where the services are being  performed.  Once the clause has been invoked,  the shipowner is entitled to appoint a Special  Casualty Representative (SCR) to monitor the  salvage services.  The SCR does not impinge on  the authority of the salvage master but does  have the right to be kept fully informed about  the progress of the salvage operations.  This  provision improves the flow of information back  to the P&I Club whose interests will ultimately  be affected by the salvage services."

               [See Shipping Law by Simon Baughen - page 293]

NECESSITY OF INSURANCE COVER:

       The necessity of a P&I cover is in commercial expediency.  All P&I  clubs are non-profit making companies.  The owner upon entering the ship  becomes the member of the P&I club and he not only pays membership fee  but undertakes to pay contribution towards the losses incurred by other  members of the club which are payable by the company.  A new concept has  come into being in terms whereof a reciprocal system has been evolved to  the effect that each member is cast under a duty to refund the damage  suffered by any one of them and pay, on mutual basis, each other’s  claim.  Thus, the members play a dual role of both beneficiary and  benefactor.  We have noticed the concept of such clubs.  The Indian  statutes operating in the field are pointer to the fact that such  insurance has become more and more commercially expedient.  No ship  having regard to the ramification in international law can sail without  such insurance.  Apart from the 1952 Brussels Arrest Convention, the  Merchant Shipping (Oil) Pollution Act, 1961 makes insurance compulsory.   

       As would be noticed hereinafter, P&I insurance cover to call at  major ports in India is now a statutory requirement.

CHANGING SCENARIO :  

       The advancement in law would be evident from the 1999 Arrest  Convention whereby significant changes to the law relating to in rem  claims and arrest has been made.  Pursuant to Article 14 of the 1999  Arrest Convention, such changes would come into force six months after  ratification by the 10th State.

       The countries which have ratified the Convention are as follows:

"Algeria, Antigua and Barbuda, Bahamas, Belgium,  Belize, Benin, Burkina Faso, Cameroon, Central  African Republic, Comoros, Congo, Costa Rica,  Ctte d’Ivoire, Croatia, Cuba, Denmark, Djibouti,  Dominica, Republic of, Egypt, Fiji, Finland,

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France, Overseas Territories, Gabon, Germany,  Greece, Grenada, Guyana, Guinea, Haiti, Haute- Volta, Holy, Seat, Ireland, Italy, Khmere  Republic, Kiribati, Latvia, Luxembourg,  Madagascar, Marocco, Mauritania, Mauritius,  Netherlands, Niger, Nigeria, North Borneo,  Norway, Paraguay, Poland, Portugal, Romania, St.  Kitts and Nevis, St. Lucia, St. Vincent and the  Grenadines, Sarawak, Senegal, Seychelles,  Slovenia, Solomon Islands, Spain, Sudan, Sweden,  Switzerland, Syrian Arabic Republic, Tchad,  Togo, Tonga, Turks Isles and Caicos, Tuvalu,  United Kingdom of Great Britain, and Northern  Ireland, United Kingdom (Overseas Territories),  Gibraltar, Hong-Kong (1), British Virgin  Islands, Bermuda, Anguilla, Caiman Islands,  Montserrat, St. Helena, Guernsey, Falkland  Islands and dependencies, Zaire."

       Article 1 of the Convention contemplates an expansion of existing  categories of arrestable claims under the following headings, some of  which, namely, heading (c) and (d) are already reflected in Section  20(2) of the Supreme Court Act, 1981:

(a)     this refers to ’loss or damage caused by the operation of the  ship’ rather than ’damage done by a ship’ and would encompass  claims for pure economic loss... (c)     this extends the category of salvage to include claims arising  from salvage agreements or special compensation under Art. 14  of the 1989 Salvage Convention; (d)     this covers damage to environment, including threatened  damage... (l)     this extends the scope of claims in respect of supply of goods  and materials to a ship to cover ’provisions, bunkers,  equipment (including containers) supplied or services rendered  to the ship for its operation, management, preservation or  maintenance’; (m)     this extends the scope of claims against ships by shipyards to  cover ’construction, reconstruction, repair, converting or  equipping of the ship’... (o)     this extends the scope of claims in respect of port dues, and  also in respect of wages which will now cover repatriation  costs and social insurance contributions... (u)     this extends the scope of claims in respect of mortgages by  removing the reference to a registered or registrable mortgage,  thereby encompassing unregistered mortgages...

       The purpose of the 1952 Convention was to restrict the  possibilities of arrest with regard to seagoing vessels flying the flag  of a contracting State.  Such an arrest was allowed for maritime claims  against the vessel or against the sister ship belonging to the same  owners.  What would be the maritime claim is specified in Article 1 of  the Convention.  Other claims can only be secured if the vessel’s home  port is situated in a non-contracting State.   

       Apart from those restrictions resulting from the Convention, all  kinds of claims can be secured by an arrest and there is no need to  prove a connection with the operation of the vessel.  As for example, a  guarantee given by the owners for a subsidiary company or other  principal debtor is as suitable as a claim resulting from the purchase  of the ship or any other goods by the owners.  However, in terms of  Article 1(k) of the Convention claims for "goods or materials" supplied

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to a ship for her operation or maintenance are acknowledged as maritime  claims.

       What was expressly excluded in 1952 convention has been included  in 1999 convention.  The restrictions imposed under 1952 convention as  regard ’Maritime claim’ to operation of ship and maintenance thereof  have been removed.

                In Kapila Hingorani Vs. State of Bihar [JT 2003 (5) SC 1] this  Court observed:

"Justice Holmes expressed the following view  in  Missouri vs. Holland [252 US 416 (433)] :

"When we are dealing with words that also are a  constituent act, like the Constitution of the  United States, we must realise that they have  called into life a being the development of  which could not have been foreseen completely by  the most gifted of its begetters.  It was enough  for them to realise or to hope that they had  created an organism, it has taken a century and  has cost their successors must sweat and blood  to prove that they created a nation.  The case  before us must be considered in the light of our  whole experience and not merely in that of what  was said a hundred years ago."

               Justice Frankfurter elucidated the  interpretive role in "Some Reflections on the  Reading of Statutes" :

"There are varying shades of compulsion for  judges behind different words, differences that  are due to the words themselves, their setting  in a text, their setting in history.  In short,  judges are not unfettered glossators.  They are  under a special duty not to overemphasize the  episodic aspects of life and not to undervalue  its organic processes - its continuities and  relationships"

       In Jagdish Saran and Others  Vs. Union of  India [(1980) 2 SCC 768], it is stated:

"Law, constitutional law, is not an omnipotent  abstraction or distant idealization but a  principled, yet pragmatic, value-laden and  result-oriented, set of propositions applicable  to and conditioned by a concrete stage of social  development of the nation and aspirational  imperatives of the people. India Today - that is  the inarticulate major premise of our  constitutional law and life."

It is also well-settled that interpretation of  the Constitution of India or statutes would  change from time to time.  Being a living organ,  it is ongoing and with the passage of time, law  must change.  New rights may have to be found  out within the constitutional scheme.  Horizons  of constitutional law are expanding."

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       In the aforementioned judgment, this Court referred to a large  number of decisions for the purpose of interpreting the constitutional  provisions in the light of the international treaties and conventions.

       Further more in John Vallamattom and Anr. Vs. Union of India [JT  2003 (6) SC 37] while referring to an amendment made in U.K. in relation  to a provision which was in pari materia with Section 118 of the Indian  Succession Act, 1925, this Court observed:

"...The constitutionality of a provision, it is  trite, will have to be judged keeping in view  the interpretive changes of the statute effected  by passage of time."

       Referring to the changing scenario of the law having regard to the  declaration on the right to development adopted by the World Conference  on Human Rights and Article 18 of the United Nations Covenant on Civil  and Political Rights, 1966, it  was held:

"It is trite that having regard to Article 13(1)  of the Constitution, the constitutionality of  the impugned legislation is required to be  considered on the basis of laws existing on  26.11.1950, but while doing so the court is not  precluded from taking into consideration the  subsequent events which have taken place  thereafter.  It is further trite that that the  law although may be constitutional when enacted  but with passage of time the same may be held to  be unconstitutional in view of the changing  situation.  

Justice Cardoze said :

"The law has its epochs of ebb and flow,  the flood tides are on us.  The old order  may change yielding place to new; but the  transition is never an easy process".

Albert Campus stated :

"The wheel turns, history changes".   Stability and change are the two sides of  the same law-coin.  In their pure form  they are antagonistic poles; without  stability the law becomes not a chart of  conduct, but a gare of chance: with only  stability the law is as the still waters  in which there is only stagnation and  death."            In any view of the matter even if a provision  was not unconstitutional on the day on which it  was enacted or the Constitution came into force,  by reason of facts emerging out thereafter, the  same may be rendered unconstitutional."

       Yet again in Indian Handicrafts Emporium & Ors. Vs. Union of India  [2003 (6) SCALE 831] this Court considered the Convention on  International Trade in Endangered Species (CITES) and applied the  principles of purposive constructions as also not only the Directive  Principles as contained in Part IV of the Constitution but also

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Fundamental Duties as contained in Part IVA thereof.

       Referring to Motor General Traders and Another vs. State of Andhra  Pradesh and Others [(1984) 1 SCC 222],  Rattan Arya and Others vs. State  of Tamil Nadu and Another [(1986) 3 SCC 385] and Synthetics and  Chemicals Ltd. and Others vs. State of U.P. and Others [(1990) 1 SCC  109], this Court held:

"There cannot be any doubt whatsoever that a law  which was at one point of time was  constitutional may be rendered unconstitutional  because of passage of time.  We may note that  apart from the decisions cited by Mr. Sanghi,  recently a similar view has been taken in Kapila  Hingorani Vs. State of Bihar [JT 2003 (5) SC 1]  and John Vallamattom and Anr. Vs. Union of India  [JT 2003 (6) SC 37]."

       It was, however, held that India being a sovereign country is not  obligated to make law only in terms of CITES.  It may impose stricter  restrictions having regard to the local needs.  

       Legal history is a good guide for the purpose of appreciating the  legal development across the world particularly in the field of  international law, maritime law being a part of it.  While interpreting  such a situation, one must take into consideration the flexibility in  law as has been highlighted by this Court in m.v. Al Quamar (supra)  wherein it was opined: "43. The two decisions noted above in our view  deal with the situation amply after having  considered more or less the entire gamut of  judicial precedents. Barker, J’s judgment in the  New Zealand case ((1980) 1 NZLR 104 (NZSC)) very  lucidly sets out that the court has to approach  the modem problem with some amount of  flexibility as is now being faced in the modern  business trend. Flexibility is the virtue of the  law courts as Roscoe Pound puts it. The pedantic  approach of the law courts are no longer  existing by reason of the global change of  outlook in trade and commerce. The observations  of Barker, J. and the findings thereon in the  New Zealand case ((1980) 1 NZLR 104 (NZSC)) with  the longish narrations as above, depicts our  inclination to concur with the same, but since  issue is slightly different in the matter under  consideration, we, however, leave the issue  open, though the two decisions as above cannot  be doubted in any way whatsoever and we feel it  expedient to record that there exists sufficient  reasons and justification in the submission of  Mr. Desai as regards the invocation of  jurisdiction under Section 44-A of the Code upon  reliance on the two decisions of the New Zealand  and Australian Courts."  

       No statutory law in India operates in the field.  Interpretative  changes, if any, must, thus be made having regard to the ever changing  global scenario.

       This Court in M.V. Elisabeth (supra) observed that Indian statutes  lag behind any development of international law and further it had not  adopted the various conventions but opined that the provisions thereof

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having been made as a result of international unification and  development of the maritime laws of the world should be regarded as the  international common law or transnational law rooted in and evolved out  of the general principles of national laws, which, in the absence of any  specific statutory provisions can be adopted and adapted by courts to  supplement and complement national statutes on this subject.   

       This Court in M.V. Elisabeth (supra) observed: "30. The Exchequer Court of Canada was  established by the Admiralty Act R. S. Canada,  1906, c. 141, as a Colonial Court of Admiralty.  It is not clear whether that Court was in its  jurisdiction comparable to the Indian High  Courts. Assuming that it was comparable at the  relevant time, and whatever be the relevance of  Yuri Maru (1927 AC 906 : 43 TLR 698) to courts  like the Exchequer Court of Canada, we see no  reason why the jurisdiction of Indian High  Courts, governed as they now are by the  Constitution of India, should in any way be  subjected to the jurisdictional fetters imposed  by the Privy Council in that decision. Legal  history is good guidance for the future, but to  surrender to the former is to lose the latter."                                  (Emphasis supplied)      (See paras 78 and 99 also)         It was further observed: "89. All persons and things within the waters of  a State fall within its jurisdiction unless  specifically curtailed or regulated by rules of  international law. The power to arrest a foreign  vessel, while in the waters of a coastal State,  in respect of a maritime claims, wherever  arising, is a demonstrable manifestation and an  essential attribute of territorial sovereignty.  This power is recognised by several  international conventions (See the Conventions  referred to above. See also Nagendra Singh,  International Maritime Conventions, British  Shipping Laws, Vol. 4). These conventions  contain the unified rules of law drawn from  different legal systems. Although many of these  conventions have yet to be ratified by India,  they embody principles of law recognised by the  generality of maritime States, and can therefore  be regarded as part of our common law. The want  of ratification of these conventions is  apparently not because of any policy  disagreement, as is clear from active and  fruitful Indian participation in the formulation  of rules adopted by the conventions, but perhaps  because of other circumstances, such as lack of  an adequate and specialised machinery for  implementation of the various international  conventions by co-ordinating for the purpose the  Departments concerned of the Government. Such a  specialised body of legal and technical experts  can facilitate adoption of internationally  unified rules by national legislation. It is  appropriate that sufficient attention is paid to  this aspect of the matter by the authorities  concerned. Perhaps the Law Commission of India,  endowed as it ought to be with sufficient  authority, status and independence, as is the  position in England, can render valuable help in

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this regard. Delay in the adoption of  international conventions which are intended to  facilitate trade hinders the economic growth of  the nation."                                                  (Emphasis supplied)

       M.V. Elisabeth (supra) is an authority for the proposition that  the changing global scenario should be kept in mind having regard to the  fact that there does not exist any primary act touching the subject and  in absence of any domestic legislation to the contrary; if the 1952  Arrest Convention had been applied, although India was not a signatory  thereto, there is obviously no reason as to why the 1999 Arrest  Convention should not be applied.

       Application of the 1999 convention in the process of interpretive  changes, however, would be subject to : (1) domestic law which may be  enacted by the Parliament; and (2) it should be applied only for  enforcement of a contract involving public law character.         It is not correct to contend as has been submitted by Mr. Bharucha  that this Court having regard to the decision in M.V. Elisabeth (supra)  must follow the law which is currently prevalent in UK and confine  itself only to the 1952 Arrest Convention into Indian Admiralty  Jurisprudence. The question is as to if the 1952 Arrest Convention had  been applied keeping in view the changing scenario why not the 1999  Arrest Convention also?  A distinction must be borne in mind between a  jurisdiction exercised by the High Courts in India in terms of the  existing laws  and the manner in which such jurisdiction can be  exercised.  Once the Court opines that insurance is needed to keep the  ship going - it has to be construed as ’Necessaries’.  The jurisdiction  of the Courts in India, in view of the decision of this Court in M.V.  Elisabeth (supra)is akin to the jurisdiction of the English Courts but  the same would not mean that the Indian High Courts are not free to take  a different view from those of the English Courts.  As regard  application of a statute law the Indian High Courts would follow the  pre-independence statute but Indian Courts need not follow the judge- made law.           M.V. Eligabeth defines the jurisdiction of the Court but does not   limit or restrict it.

       Supply of necessaries is a maritime lien in U.S.A. in terms of the  relevant statute and has  been classified in the category of subordinate  to the Preferred Ship Mortgage.

In Benedict on Admiralty, 6th Edn., Vol.1, p. 22, it has been  stated :    

"Whenever a debt of a maritime nature is by law,  no matter what law, or by contract, a lien upon  the vessel, the vessel may be proceeded against  in rem.  The maritime lien, whether created by  actual hypothecation or by implication or  operation of law, may be enforced in the  admiralty."

It is true that this Court is not bound by the American decisions.   The American decisions have merely a persuasive value but this Court  would not hesitate in borrowing the principles if the same is in  consonance with the scheme of Indian law keeping in view the changing  global scenario.  Global changes and outlook in trade and commerce could  be a relevant factor.  With the change of time; from narrow and pedantic  approach, the Court may resort to broad and liberal interpretation.   What was not considered to be a necessity a century back, may be held to  be so now.

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INDIAN STATUTES OPERATING IN THE FIELD:          

       Section 352 N of the Indian Merchant Shipping Act, 1958 makes such  an insurance compulsory which reads as under:

"352-N. Compulsory insurance or other financial  guarantee. - (1) The owner of every Indian ship  which carries 2000 tons or more oil in bulk as  cargo, shall, in respect of such ship, maintain an  insurance or other financial security for an amount  equivalent to -  

(a)     one hundred and thirty-three Special  Drawing Rights for each ton of the ship’s  tonnage; or (b)     fourteen million Special Drawing Rights,         whichever is lower.

       The Inland Vessels Act requires a compulsory third party risk  insurance cover and the standard format charter parties mostly have  printed clauses making it mandatory for a vessel to have a valid  protection and indemnity cover for want of which such vessels are not  accepted for charter.   

       Chapter IV of the Inland Vessels Act provides for a compulsory  insurance in terms whereof Chapter VIII of the Motor Vehicles Act, 1939  has been incorporated by reference.  

       This Court while considering the question of third party insurance  in Motor Vehicles has noticed the development of law from the Road  Traffic Act, 1930 and Motor Vehicles Act, 1939 to Motor Vehicles Act,  1988 and the amendments carried out therein from time to time. [See  National Insurance Co. Ltd., Chandigarh vs. Nicolletta Rohtagi and  Others - (2002) 7 SCC 456].   

       The Multimodal Transportation of Goods (Amendment) Act 2000 inter  alia provides for responsibilities and liabilities of the multimodal  transport operator.  By reason of Act 44 of 2000 a proviso has been  added.  Section 5 of the said Act amends Section 7 of the Principal Act  of 1993 and reads as under:

"5. In Section 7 of the principal Act, in sub- section (1), the following proviso shall be  inserted, namely:-

"Provided that the multimodal transport  operator shall issue the multimodal  transport document only after obtaining  and during the subsistence of a valid  insurance cover."

CIRCULARS:

       The insurance association has issued a circular dated 20th  February, 2001 which is to the following effect:

"TO THE MEMBERS

Dear Sirs

NEW COMPULSORY INSURANCE REQUIREMENTS IN  AUSTRALIAN WATERS

Members should be aware that new Compulsory

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Insurance requirements for non tank vessels have  come into force in Australia.  Details are  available at the website of the AMSA -  http:/www.amsa.gov.au.  

From 6th April 2001 ships of 400gt or more  (excluding tankers covered by CLC Certificates)  will be required to carry a "relevant insurance  certificate" containing the following  information:

a)      the name of the ship b)      the name of the ship’s owner c)      the name and address of the insurer d)      the commencement date of the insurance e)      the amount of cover which must in any  event not be less than the limit of  liability under the 1976 Limitation  Convention.

The "relevant insurance certificate" will need  to be produced during Port State Control  inspections and by the Australian Customs  Service on entering or leaving Australian ports.

A six months period of grace will be allowed  before full enforcement action is undertaken;  ships without sufficient documentation on board  will be given a warning until 5th September,  2001.  Thereafter ships will be detained until  the requirement documentation is produced.

AMSA officials have indicated that although the  Notice requires that the amount of cover be set  out in the Certificate of Entry it will be  assumed if a dollar amount is not set out that  Club cover in any event extends at least to the  cover provided under the 1976 Convention as  amended.

AMSA officials have also indicated that if a  vessel does not carry any original certificate  of Entry they will be satisfied with the  provision of a photocopy on the vessel’s first  visit.  However on the second and subsequent  visits vessels will be expected to carry an  original Certificate of Entry.

Please contact the Club if you need further  information.

Yours faithfully,

THOMAS MILLER (BERMUDA) LTD."

       A circular has also been issued by the Insurance Association on  26.07.2000 regarding new legislation in U.S.A. (Alaska) which is to the  following effect:

"26 July 2000

TO ALL MEMBERS

Dear Sirs

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OIL POLLUTION: UNITED STATES  NEW LEGISLATION IN ALASKA FOR NON-TANK VESSELS FINANCIAL RESPONSIBILITY REQUIREMENTS: DRAFT  REGULATIONS

        In May 2000 the State of Alaska followed the  recent example of California in passing  legislation requiring non-tank self-propelled  vessels operating in Alaskan waters and  exceeding 400 gt to demonstrate proof of  financial responsibility for oil spills  occurring in Alaskan waters.  The effective date  of the Financial Responsibility Act is 1  September 2000.

Proof of financial responsibility must be  established for non-tank vessels operating in  Alaskan waters in the following amounts:

(a)     For vessels carrying predominately  persistent product, $300 per incident  for each barrel of oil storage  capacity, or $5,000,000, whichever is  greater. (b)     For vessels carrying predominately non- persistent product, $100 per incident  for each barrel of oil storage  capacity, or $1,000,000, whichever is  greater.

The Act applies to non-tank vessels over 400 gt  which by definition covers self-propelled  vessels including commercial fishing vessels,  passenger and cargo vessels.  Barges are  excluded, as are public vessels unless "engaged  in commerce".

The Alaska Department of Environmental  Conservation (ADEC) have proposed draft  regulations to implement the financial  responsibility requirements.  ADEC predicts that  their regulations will not become final until  September or early October 2000 but the  effective date for the new law remains 1  September 2000.  A summary of the draft  regulations is set out below:

Interim applications and Documentation for Proof  of Financial Responsibility

An interim application procedure is set out in  ADEC’s letter of 17 July 2000, which is  attached.  Owners or operators of non-tank  vessels covered by the new law must submit a  completed application and documentation of  financial responsibility in the appropriate  dollar amount not later than 31 August 2000.

Acceptable financial responsibility may include  the following:

a.      Affidavit of self-insurance and most  recent audited financial statement;

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b.      Insurance certificate and insurance  policy; c.      Surety bond; d.      Financial guarantee, accompanied by  guarantor’s evidence of self insurance; e.      Letter of credit; f.      Certificate of entry evidencing  coverage by a Protection and Indemnity  Club; or g.      Certificate of deposit with assignment  of negotiable interest.

Interim Approval

A completed application form and appropriate  documentation evidencing proof of financial  responsibility which is submitted by 31 August  2000 will be deemed approved by ADEC for  purposes of meeting the 1 September 2000  deadline.  Following adoption of final  regulations, ADEC will review each application  to ensure that it meets the requirements of the  statute and regulations.  A formal approval will  be given to those vessels which qualify, and  non-qualifying applicants will be given 30 days  to submit additional information as requested by  the Department.

Application Form

A copy of ADEC’s application form is attached.   In Section (c), paragraph 1(b), proof of  financial responsibility by entry in a P&I Club  must include a Certificate of Entry and must  include "all addenda pertaining to the amount  and applicability of oil pollution cover and  amount of deductibles."

Deductibles

With respect of deductibles, paragraph 1(c) of  the application asks for proof of financial  responsibility for any deductible, such as a  certificate of deposit, or other "financial  information."  It thus appears that ADEC will  require some evidence of financial  responsibility for any deductible as is  presently required by ADEC’s draft regulations.

ADEC is presently considering whether to allow  an interim application which does not have  separate proof of financial responsibility for a  deductible.  However, at this juncture Owners  and operators with insurance deductibles should  probably plan to submit separate proof of  financial responsibility for any deductible.   There are likely to be further developments on  this issue and Members will be kept advised.

The Managers intend to issue a further circular  when these regulations become final.

In the meantime, Members may contact Mr. Douglas  R Davis of the Association’s correspondents at  Anchorage, Alaska:

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       Kessal Young & Logan, Tel: +1(0)907 279  9696, Fax: +1(0)907 279 4239 for further  assistance.  Mr. Davis has filed submissions to  ADEC on behalf of the International Group in  relation to the draft regulations, and can  assist Members with applications.

Yours faithfully A BILBOUGH & CO. LTD (MANAGERS)"

       The major ports in India, namely, Mumbai and Kolkata had issued  circulars which are as under:

"MUMBAI PORT TRUST Deputy Conservator’s Office Port House, 1st Floor Shoorji Vallabhadas Marg Mumbai - 400 001

No. DC/C.SH/2/4455      8th August, 1996

CIRCULAR

To

Ship Owners/Stevedores/Vessel Agents

The Secretary Bombay & Nhave/Sheve Ship-Intermodel Agents Association 3, Rex Chambers, Ground Floor Valchand Hirachand Marg Ballard Estate, Mumbai - 400 001

The Secretary The Bombay Stevedores Association Ltd., Janmabhoomi Chambers, 2nd Floor, Valchand Hirachand Marg, Ballard Estate, Mumbai - 400 001

       Subsequent to the Circular Nos. DC/C- SH/7200 dated 4th October, 1995 and DC/C- SH/2/3661 dated 9th July, 1996 and in view of  recent experience gathered from the storm which  hit the harbour on 18th and 19th June, 1996.  It  has been decided that vessels which do not  possess valid P&I club cover or suitable  Insurance Cover will not be decked.  The  intention of the Port is to eliminate all sub- standard vessels or ships without insurance  cover, making Mumbai a port of call, because a  mishap to such a vessel will render the port  liable for expenses of wreck removal or other  damages caused.

2.      Therefore, notice is hereby given that  from 1st November, 1996, ships, which do not  possess valued insurance cover will not be given  an anchorage berth in the Mumbai Port for cargo  work or for any other purpose, this notice  period is given so that the owners, agents and  shippers proposing to load cargo have sufficient

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time to ensure that such cargoes will be loaded  on duly protected ships.

Sd/- Deputy Conservators

CALCUTTA PORT TRUST HARBOUR MASTER (PORT)’S OFFICE CIRCULAR NO. 10 DATED 26.6.2001

To

All Shipping Agents

       To safeguard Port interest for damage cost  of repairs due marine accident or otherwise, it  is mandatory for the Agents to declare along  with Berthing Application the details of P&I  Club Coverage including period of validity and a  declaration that insurance provides  comprehensive coverage, inter alia, the  following risks:

1)      3rd party liability claims 2)      Claims arising out of injury/ death etc. 3)      Claims arising out of damage to port  properties 4)      Claims against environmental damage owing  to pollution caused by the ship or its personnel 5)      Removal of the wreck comprehensively

       The above details required to be submitted  along with Berthing application to Harbour  Master (River) & Harbour Master (*Port).

Sd/- (D.K. Rao) Harbour Master (Port) Copy to: DMD/TMN/FA&CAO/Secretary/H.M.(R)"

Cochin Port Trust had also been contemplating to issue such  circular.  

       It may be true that some ports have not issued such circulars but  from a bare perusal of the circulars as referred to hereinbefore, it  would appear that such insurance cover has been considered to be a  service having regard to the cover extended to oil spill, damage to  port, salvage operation, etc.

       The circulars issued by the Port Trusts may not be determinative  but there cannot be any doubt whatsoever the same would also be a  relevant factor.

       The ’Vessel’ is also not correct in its submission that the ports  cannot take any direct action against the insurers.  The circulars  issued are pointers to the fact that development of law in other  countries is being taken note of for the purpose of taking insurance  cover in different fields as a compulsive measure.    A DRIFT IN THE CONCEPT?

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Whether arrears of insurance premium would come within the term  "necessaries" is the core question involved in these appeals.  The term  has not been statutorily defined.

The term ’necessaries’ as defined in Black’s Law Dictionary reads  as under:

"What constitutes "necessaries" for which an  admiralty lien will attach depends upon what is  reasonably needed in the ship’s business, regard  being had to the character of the voyage and the  employment in which the vessel is being used."

       In Bouvier’s Law Dictionary, the term ’necessaries’ has inter alia  been defined as follows:

"The term necessaries is not confined merely to  what is requisite barely to support life, but  includes many of the conveniences of refined  society.

A racing bicycle was held a necessary for an  apprentice earning 21s. a week and living with  his parents; 78 L.T. 296"

       In The Canadian Law Dictionary, the term ’necessaries’ has been  defined as follows:

"In the case of ships, the term denotes whatever  is fit and proper for the service on which the  ship is engaged, whatever the owner of that  vessel, as a prudent man would have ordered if  present at the time.  Victoria Machinery Depot  Co. Ltd. v. The ’Canada’ and the ’Triumph’,  (1913) 15 Ex.C.R. 136, 14 D.L.R. 318."

       In Ballentine’s Law Dictionary, the term ’necessaries’ has been  defined as follows:

"Under the maritime law permitting the master of  a ship to pledge the owner’s credit for  necessaries, the word does not import absolute  necessity, but the circumstances must be such  that a reasonable prudent owner, present, would  have authorized the expenditures, and it is  usually sufficient if they are reasonably fit  and proper, having regard to the exigencies and  requirements of the ship, for the port where she  is lying and the voyage on which she is bound.  48 Am J1st Ship ’ 133."

       In 70 American Jurisprudence 2d, at page 478, it is stated:

"The term "necessary" in this connection does  not mean indispensable to the safety of the  vessel and crew; necessaries which will create a  lien upon the ship are such as are reasonably  fit and proper for her under the circumstances,  and not merely such as are absolutely  indispensable for her safety or the  accomplishment of the voyage.  Whatever a

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prudent owner, if present, would be supposed to  have authorized, the master may order, and for  such expenditures the vessel will be held  responsible."  

       We may further notice that in Modern Admiralty Law by Aleka  Mandaraka-Sheppard at page 52, it is stated:

"However, the decision of the Scottish Court of  Session in The Aifanourios, mentioned above,  shattered the hopes of P&I clubs.  It took 19  years for the wheel to turn round and so to  include such claims in the list of claims  provided by the new Arrest Convention 1999.  The  new Arrest Convention 1999 has incorporated in  the list of maritime claims for insurance  premiums and brokerage, including claims by a  P&I club for unpaid calls.  Such claims will  qualify for an arrest of a ship to be made once  the Convention comes into force, or is enacted  by the UK."

       In Principles of Maritime Law by Susan Hodges and Christopher Hill  at page 364 it is stated:

"Failure to insure the ship: The authorities of  Laming v. Seater, The Heather Bell, and Law  Guarantee and Trust Society v. Russian Bank for  Foreign Trade and others have all confirmed that  a failure to insure the security is a matter  which would have a bearing upon the security of  the ship.  In such an event, the mortgagee may  enter into possession in order to make the ship  available as security for the debt.  It is to be  noted that, in the last two cases, the court had  also pointed out that a failure to insure the  vessel (though it may constitute the basis of a  right for the mortgagee to take possession) is  not itself a legitimate ground for interfering  with the performance of the charterparty."

       It is interesting to note that in P&I clubs  - Law and Practice by  Steven J. Hazelwood, it is stated:

"The defendant shipowners challenged the  competence of the court to deal with the action  as an action in rem.  The catalogue of claims  which entitle a claimant to proceed with an  action in rem in the courts of Scotland are  stated in section 47(2) of the Administration of  Justice Act 1956 which provides, inter alia:  "This section applies to any claim arising out  of one or more of the following, that is to say  ...(d) any agreement relating to the use or hire  of any ship whether by charter or otherwise;"."

       The learned author, however, noticed the shortcomings in the  statutes operating in United Kingdom and made a prophecy to the effect  that contract of maritime insurance may be included in the list of claim  giving the right of arrest in the following terms:

"The current position is, therefore, that claims

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arising out of contracts of marine insurance are  not claims which entitle a claimant to proceed  by way of action in rem and claimants in respect  of P.&I. Club membership are in no better  position than those claiming in respect of  traditional hull and cargo insurance.   

In this context there is one respect in which  the insurance cover offered by P.&I. Clubs  differs from hull and cargo insurance and which  has yet to receive the attention of the courts.   Certain heads of P.&I. Cover have ceased to be  matters which are, as Sir James Hannen P. once  described, merely prudence but have become  compulsory by law.  Compulsory liability  insurance was introduced in the area of oil  pollution liability by the International  Convention on Civil Liability for Oil Pollution  1969.  Under the regime thereby introduced a  shipowner is legally unable to trade or put to  sea without having effected oil pollution  indemnity insurance and having adequate  liability insurance is as ’necessary’ to a  shipowner as having fuel, stores, navigational  equipment or other well-recognised  "necessaries".  It is also arguable that as oil  cannot be lawfully transported without the  carrier having the required insurance cover, a  contract for the entry of the vessel in a P&I  Club could fairly be regarded as an agreement  closely "relating to the carriage of goods in a  ship or to the use of a ship".

       It may be that in any future review of the  1952 Arrest Convention, claims relating to  contracts of marine insurance will be included  in the list of claims giving the right of arrest  and provided the wording is framed appropriately  to include club entry it may be that members who  do not pay calls may one day find their vessels  liable to arrest in this country."

       The said prophecy has come true.  The learned author has also  noted the decision in Marazura Navegacion S.A. and Others v. Oceanus  Mutual Underwriting Association (Bermuda) Ltd. and John Laing  (Management) Ltd. [1977] 1 Lloyd’s Rep. 283 wherein it has been noticed:

"Clubs can and do arrest vessels for non-payment  of calls in jurisdictions which allow such  actions; for example, the United States;"

       In an interesting article "the International Convention on Arrest  of Ships 1999" by Richard Shaw, it was opined:

"The 1999 Arrest Convention has produced a set  of principles which are generally regarded as  reasonably balanced, between the interests of  legitimate claimants and those of shipping  organizations seeking to ensure freedom of world  trade without undue interference.  The 1952  Arrest Convention has achieved a widespread  degree of acceptance, and indeed there were

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those who argued that it was preferable to  retain its well-tried principles rather than  risk upsetting them while correcting its few  deficiencies.

The extension of the right of arrest to claims  for environmental damage, wreck removal,  insurance premiums, commissions, brokerage and  agency fees, and ship sale contracts are all  significant steps to correct those recognized  deficiencies, while still retaining the  exhaustive list of maritime claims which is the  heritage of the common law Admiralty  jurisdiction.  The remainder of the 1999  Convention contains nothing revolutionary, the  radical UK proposal on associated ship arrest  having been rejected by the conference, but  there are a number of provisions which provide  useful clarification of the law.  The active  participation in the conference of delegations  from China, Russia and the USA leads one to hope  that these major states may, despite their  relatively low rate of ratification of other  maritime conventions, find this one sufficiently  non-controversial to commend it to their  legislatures."

       The learned author further stated:

"The principles of international law relating  to jurisdiction have evolved significantly since  1952, in Europe in particular under the European  Convention on Jurisdiction and Judgments 1968,  but also with the development in English Law of  the doctrine of forum non conveniens in cases  such as the "ABDIN DAVER" [1984] A.C. 398.   The terms of Article 7 have therefore been  drafted to reflect the modern law, while  retaining the original principle in paragraph 1  that, in the absence of another rule of the lex  fori arresti, the courts of the state where the  ship has been arrested shall have jurisdiction  to decide the merits of the claim."

       In Project Gabcikovo-Nagymaros (Op. Ind. Weeramantry) the  International Court in its judgment dated 25.9.1997 at page 114 albeit in  a different context observed:

"As this Court observed in the Namibia case, "an  international instrument has to be interpreted  and applied within the framework of the entire  legal system prevailing at the time of the  interpretation" (Legal Consequences for States  of the Continued Presence of South Africa in  Namibia (South West Africa) notwithstanding  Security Council Resolution 276 (1970), Advisory  Opinion, I.C.J. Reports 1971, p. 31, para 53),  and these principles are "not limited to the  rules of international law applicable at the  time the treaty was concluded."

       In Equilease Corporation Vs. M.V. Sampson [793 F.2d 598] the Court  was considering interpretation of Ship Mortgage Act, 46 providing for  right to a federal maritime lien to "any person furnishing repairs,

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supplies, or other necessaries, to any vessel.  It was held:

"Equilease next argues that no maritime lien  arises in favor of James because insurance is  not a "necessary" and therefore neither  general admiralty law nor the Act provides a  maritime lien for unpaid insurance premiums.   Equilease relies on Learned and on Grow v. Steel  Gas Screw Lorrains K, 310 F.2d 547 (6th Cir.  1962), for this proposition.  The Grow court  stated in one sentence without elaboration that  there is no federal maritime lien for insurance  premiums, 310 F.2d at 549, and went on to grant  the plaintiff insurance broker a lien under  Michigan state law.  Grow is thus not of much  aid to us here.  We focus instead on Learned."

"Equilease urges us to apply Learned and to  find that marine insurance in 1986 insures  solely to the benefit of a ship’s owner, in no  way aiding the ship, and therefore, that no  federal lien can be had for unpaid insurance  premiums.  This we cannot do.

In the nineteenth century, an insurance policy  on a ship was viewed as a contract for the  personal indemnity of the insured ship’s owner.   Under this reasoning, no lien against the ship  itself could possibly arise as the result of an  insurance policy; "unless the ship is benefited  the ship should not pay."  In Re Petition of  Insurance Co. of Pennsylvanis, 22 F.109, 116  (N.D.N.Y.1884), aff’d sub non. Insurance Co. of  Pennsylvania v. The Proceeds of the Sale of the  Barge Waubauschene, 24 F. 559  (C.C.N.D.N.Y.1885).  It is no longer  appropriate, however, to view maritime insurance  this way.  Even a vessel that simply sits at a  dock without making any attempt to ply the  waters must today have hull protection and  indemnity insurance.  As the district court  noted, insurance is something that every vessel  today needs just to carry on its normal  business."

       It was further held

"We therefore hold that because insurance is  essential to keep a vessel in commerce,  insurance is a "necessary" under 46 U.S.C.  Sec. 971 and unpaid insurance premiums to give  rise to a maritime lien under the FMLA."

       Equilease Corp.(supra) has a greater persuasive value having  regard to the fact that contemporary maritime statutes in England and  other countries do not use the term "necessaries" but the American  Federal Maritime Liens Act does.

       The Indian courts need not follow the English judicial ideologies  blindly.  We must remind ourselves that in many fields, particularly, in  the matter of preservation of ’Human Rights’ and ’Ecology’, Indian  courts have gone far ahead than their English counterparts.

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       The decisions of the English Courts have been held to be a  departure by the American Courts with regard to the jurisdiction of the  admiralty but such departure is a well-known one.

       Equilease Corporation has been noticed in Trident Marine Managers  Inc. Vs. Serial No. CEBRF 0661586 [1988 American Maritime Cases 763].

       The question, however, is whether a prudent shipowner would  provide for an insurance.  A compulsory insurance regime has come into  being and keeping in view the changed situation the definition of the  expression "necessaries" should also undergo a change.            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.

       One of the relevant factors for arriving at a conclusion as to  whether anything would come within the expression "necessary" or not  will inter alia depend upon answer to the question as to whether the  prudent owner would provide to enable a ship to perform well the  functions for which she has been engaged.  If getting the vehicle  insured with P&I club would be one of the things which would enable a  prudent owner to sail his ship for the purposes for which she has been  engaged, the same would come within the purview of the said term.  The  matter must be considered having regard to the changing scenario  inasmuch as the field of insurance has undergone a sea change from  merely hull and machinery, the insurance companies cover various risks  including oil spill damage to the Port, damage to the cargo etc.  In  that sense the term must be construed in a broad and liberal manner.   The changing requirement of a ship so as to enable it to trade in  commerce must be kept in mind which would lead to the conclusion that P  & I Insurance cover would be necessary for operation of a ship.

       It may be true that there are a large number of insurance covers;  from hull and machinery insurance to protection and indemnity cover.   But the question is not what insurance would be ’necessary’ and what  would not be; as the issue has to be considered not only on a mere  hypothesis but having regard to the statutes framed by other countries  as also the 1999 Arrest Convention.

LEX FORI:

       In Benedict on Admiralty, 6th Edn., Vol.1, p. 19, it has been  stated :    

"A ship is, of necessity, a wanderer.  She  visits shores where her owners are not known or  are inaccessible.  The master is the fully  authorized agent of the distant owners but is  not usually of sufficient pecuniary ability to  respond to unforeseen demands of the voyage.   These and other kindred characteristics of  maritime commerce  underlie the practice of  finding in the ship itself security, in many   cases, for demands against the master or owners  in their conduct of the ship as an  instrumentality, whether commercial or not, or  in their contracts made on account of the ship."

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       In British Shipping Laws, Volume 14, while contrasting maritime  liens and statutory rights of action it is stated:

"Although maritime liens and statutory rights  of action in rem are similar in that they  involve the Admiralty process in rem, there  nonetheless exist fundamental differences  between the two categories.  These differences  may be categories as follows:

(1) Nature of the claim Although the point is not free of uncertainty it  is probably the case that a maritime lien is a  substantive right whereas a statutory right of  action in rem is in essence a procedural remedy.   The object behind the availability of a  statutory right of action in rem is to enable a  claimant to found a jurisdiction and to provide  the res as security for the claim."

       In Cheshire and North’s Private International Law, 12th Edition, it  is stated  

"At first sight the principle seems almost  self-evident.  A person who resorts to an  English court for the purpose of enforcing a  foreign claim cannot expect to occupy a  different procedural position from that of a  domestic litigant.  The field of procedure  constitutes perhaps the most technical party of  any legal system, and it comprises many rules  that would be unintelligible to a foreign judge  and certainly unworkable by a machinery designed  on different lines.  A party to litigation in  England must take the law of procedure as he  finds it.  He cannot by virtue of some rule in  his own country enjoy greater advantages than  other parties here; neither must he be deprived  of any advantages that English law may confer  upon a litigant in the particular form of  action.  To take an old example, an English  creditor who sued his debtor in Scotland could  not insist on trial by jury, nor, in the  converse case, could a Scottish creditor suing  in England refuse the intervention of a jury, on  the ground that in Scotland, where the debt  arose, the case would have been tried by a judge  alone."

       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 inter-national 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

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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.

       Some countries like Canada, Australia and South Africa as well as  communist regimes like China and Korea have made statutes as a result  whereof the maritime claims stand codified.  The expression  ’necessaries’ is not used in the said statutes except the statutes of  United States.  The domestic legislation indisputably will prevail over  any international convention irrespective of the fact as to whether the  country concerned is a party thereto or not.

       The rules for ship arrest in international fora are not uniform.   Despite International Convention on the Arrest of Sea-going Ships 1952  as amended in the year 1999 either having been adopted by some countries  or adopted by others, the law is enforced by the concerned countries  having regard to their own domestic legal system.  Where, how and when  can a maritime claimant most advisedly arrest a ship in pursuit of its  claim either in rem or in personem had all along been a complicated  question keeping in view the principles of ’lex fori’.

       As a matter of policy legislation or otherwise England did not  want that arrears of insurance premium should be included as a maritime  claim, but the same would not imply that in other countries despite the  unpaid insurance premium being maritime claim, the same would not be  enforced.

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:

       Submission of Mr. Pratap is that by refusing to exercise  discretion to reject a plaint by account, no right or liability of the  party is decided and by reason thereof the procedure for determining the  rights and obligations of the parties are only set in motion.  Such an  order would akin to an order admitting the plaint, Mr. Pratap would  submit.  Reliance in this connection has been placed on The Justices of  the Peace for Calcutta Vs. Oriental Gas Company [1872 Vol. VIII Bengal  Law Reports 433 at 452].         It was urged that by not rejecting the plaint the defences set out  by the defendant are not obliterated as they will be entitled to raise

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all such contentions at the trial.  Reliance in this connection has been  placed on Prahladrai Agarwalla Vs. Shri Renuka Pal [AIR 1982 Cal 259 at  page 266].

       Mr. Pratap would further contend that the High Court has misread  and misinterpreted the decision of this Court in Shah Babulal Khimji Vs.  Jayaben Kania [(1981) 4 SCC 8]  

       By way of an analogy, the learned counsel would argue that leave  to defend a suit granted in favour of the defendant under Order 37 of  the Code of Civil Procedure would not be a ’judgment’ within the meaning  of Clause 15 of the Letter Patent being an interlocutory order as   damage or prejudice in such a matter to the defendant must be a direct  and immediate one.   

       Clause 15 permits an appeal against the order passed by a Single  Judge of the High Court in the second forum.

       The relevant portion of Clause 15 of the Letters Patent reads  thus:

"And we do further ordain that an appeal shall  lie to the said High Court of Judicature at  Madras, Bombay, Fort William in Bengal from the  judgment ... of one Judge of the said High Court  or one Judge of any Division Court, pursuant to  Section 108 of the Government of India Act, and  that notwithstanding anything hereinbefore  provided, an appeal shall lie to the said High  Court from a judgment of one Judge of the said  High Court or one Judge of any Division Court,  pursuant to Section 108 of the Government of  India Act, made (on or after the first day of  February 1929) in the exercise of appellate  jurisdiction in respect of a decree or order  made in the exercise of appellate jurisdiction  by a court subject to the superintendence of the  said High Court where the Judge who passed the  judgment declares that the case is a fit one for  appeal."  

       The right of appeal which is provided under Clause 15 of the  Letters Patent cannot be said to be restricted.   

       In Subal Paul v. Malina Paul and Anr. [JT 2003 (5) SC 193] this  Court held:

"While determining the question as regards  Clause 15 of the Letters Patent the court is  required to see as to whether the order sought  to be appealed against is a judgment within the  meaning thereof or not. Once it is held that  irrespective of the nature of the order, meaning  thereby whether interlocutory or final, a  judgment has been rendered, Clause 15 of the  Letters Patent would be attracted. The Supreme Court in Shah Babulal Khimji’s case  (supra) deprecated a very narrow interpretation  on the word ’judgment’ within the meaning of  Clause 15. This Court said: "a court is not justified in interpreting  a legal term which amounts to a complete  distortion of the word ’judgment’ so as to  deny appeals even against unjust orders to

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litigants having genuine grievances so as  to make them scapegoats in the garb of  protecting vexatious appeals. In such  cases, a just balance must be struck so as  to advance the objection of the statute  and give the desired relief to the  litigants, if possible." In Shah Babulal Khimji’s case (supra), this  Court in no uncertain terms referred to the  judgment under the Special Act which confers  additional jurisdiction to the High Court even  in internal appeal from an order passed by the  Trial Judge to a larger Bench. Letters Patent  has the force of law. It is no longer res  integra. Clause 15 of the Letters Patent confers  a right of appeal on a litigant against any  judgment passed under any Act unless the same is  expressly excluded. Clause 15 may be subject to  an Act but when it is not so subject to the  special provision the power and jurisdiction of  the High Court under Clause 15 to entertain any  appeal from a judgment would be effective. The decision of this Court in Shah Babulal  Khimji’s case (supra) has been considered in  some details by a Special Bench of the Calcutta  High Court in Tanusree Art Printers and Anr. v.  Rabindra Nath Pal [2000 (2) CHN 213 and 2000 (2)  CHN 843]. It was pointed out: "If the right of appeal is a creature of a  statute, the same would be governed by the  said statute. Whether an appeal under  Clause 15 of the Letters patent will be  maintainable or not when the matter is  governed by a Special Statute will also  have to be judged from the scheme thereof.  (e.g. despite absence of bar, a Letters  Patent appeal will not be maintainable  from a judgment of the learned Single  Judge rendered under the Representation of  People Act.)" It was pointed out that in Shah Babulal Khimji’s  case (supra) this Court posed three questions  namely: "1) Whether in view of Clause 15 of the  Letters Patent an appeal under Section 104  of the Code of Civil Procedure would lie?  2) Whether Clause 15 of the Letters Patent  supersedes Order 43, Rule 1 of the Code of  Civil Procedure? 3) Even Section 104 of  the CPC has no application, whether an  order refusing to grant injunction or  appoint a receiver would be a judgment  within the meaning of Clause 15 of the  Letters Patent?" The Apex Court answered each of them from a  different angle: a) Section 104 of the Code of Civil  Procedure read with Order 43, Rule 1  expressly authorizes a forum of appeal  against orders falling under various  clauses of Order 43 Rule 1 to a Larger  Bench of a High Court without at all  disturbing interference with or overriding  the Letters Patent jurisdiction. b) Having regard to the provisions of

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Section 117 and Order 49 Rule 3 of the  Code of Civil Procedure which excludes  various other provisions from the  jurisdiction of the High Court, it does  not exclude Order 43 Rule 1 of the CPC. c) There is no inconsistency between  Section 104 read with Order 43 Rule 1 and  the appeals under Letters Patent, as  Letters Patent in any way does not exclude  or override the application under Section  104 read with Order 43 Rule 1 which shows  that these provisions would not apply in  internal appeals within the High Court." In Prataprai N. Kothari v. John Braganza [(1999)  4 SCC 403], even in a suit for possession only  not based on title, a letters patent appeal was  held to be maintainable. The decision of this Court in Sharda Devi v.  State of Bihar [(2002) 3 SCC 705] is also to the  same effect, wherein in para 9 it was held: "A Letters patent is the charter under which the  High Court is established. The powers given to a  High Court under the Letters Patent are akin to  the constitutional powers of a High Court. Thus  when a Letters Patent grants to the High Court a  power of appeal, against a judgment of a Single  Judge, the right to entertain the appeal would  not get excluded unless the statutory enactment  concerned excludes an appeal under the Letters  Patent." Section 54 of the Land Acquisition Act, 1894  provides for an appeal before the High Court and  thereafter to the Supreme Court and despite the  same it was held that a letters patent appeal  under Clause 15 would be maintainable."

       The view taken by the Calcutta and Bombay High Court that an order  passed in terms of Order 37 of the Code of Civil Procedure granting  leave to defend would not be a judgment within the meaning of Clause 15  of the Letters Patent may not be of much relevance.   

In M/s. Tanusree Art Printers & Anr. Vs. Rabindra Nath Pal [2000  (2) CHN 213] it has been noticed:

"In M/s. Merchants of Traders (P) Ltd. Vs. M/s.  Sarmon Pvt. Ltd., reported in 1997(1) CHN 287,  learned Division Bench although did not consider  this aspect of the matter but held that an order  passed in terms of Order 37 Rule 5 of the Code  of Civil Procedure will not be appealable."          

Reliance by Mr. Pratap  upon a decision of the Calcutta High Court  in Prahladrai Agarwalla and others Vs. Smt. Renuka Pal and Others [AIR  1982 Cal. 259] wherein it has been held that an order under Order 7 Rule  11 of the Code of Civil Procedure refusing to reject a plaint is not a  judgment, is not apposite.

       In the said judgment, however, the judgment of this Court in Shah  Babulal Khimji (supra) was not taken into consideration.  The ratio of  the decision of this Court in Shah Babulal Khimji, as regard scope and  ambit of the word "judgment" had not been noticed by the Calcutta High  Court.

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       The submission, however, to the effect that in the suit all  defences would be open to the defendant, in our opinion, is misconceived  inasmuch as, no evidence can be adduced in absence of any pleading.   There may not, furthermore be any requirement to go into the trial if  the plaint does not disclose a cause of action.  

       The contention that an order refusing to reject a plaint is one  akin to order amending the plaint would not be a correct proposition of  law.

       The question as to whether the defendant despite such an order  refusing to reject a plaint will have a right to show that the case is  false would again be of no consequence.  The said submission, in our  opinion, is based on a wrong premise.           An order refusing to grant leave to a defendant to defend the suit  would be passed when it is found that the defence is a moonshine.

       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.

       What would be a judgment is stated in Shah Babulal Khimji (supra)  as under:

"We think that "judgment" in Clause 15 means a  decision which affects the merits of the  question between the parties by determining some  right or liability. It may be either final, or  preliminary, or interlocutory, the difference  between them being that a final judgment  determines the whole cause or suit, and a  preliminary or interlocutory judgment determines  only a part of it, leaving other matters to be  determined.  81. An analysis of the observations of the Chief  Justice would reveal that the following tests  were laid down by him in order to decide whether  or not an order passed by the Trial Judge would  be a judgment :  (1) a decision which affects the merits of the  question between the parties;  (2) by determining some right or liability;  (3) the order determining the right or liability  may be final, preliminary or interlocutory, but  the determination must be final or one which  decides even a part of the controversy finally  leaving other matters to be decided later.                   In Lea Badin Vs. Upendra Mohan Roy [AIR 1935 Cal. 35], the  Calcutta High Court held that an order refusing to appoint a receiver is  determinative of a right of the plaintiff and would accordingly be a  judgment.

       Yet again in Chittaranjan Mondal Vs. Sankar Prosad Sahani [AIR  1972 Cal. 469] the Calcutta High Court held that an order refusing to  grant an injunction restraining execution of the judgment-debtor was a  judgment within the meaning of Clause 15.

       As by reason of an order passed under Order 7, Rule 11 of the Code

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of Civil Procedure, the rights conferred upon the parties are determined  one way or the other, stricto sensu it would not be an interlocutory  order but having regard to its traits and trappings would be a  preliminary judgment.  

       It is true that in Shah Babulal Khimji (supra) 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.

       Such observations have to be understood having regard to the  concept of finality which are of three types:

(1)     a final judgment (2)     a preliminary judgment and (3)     intermediary or interlocutory judgment.   

       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.  (See Azhar Hussain  Vs. Rajiv Gandhi 1986 Supp SCC 315 at 324-35).

       In Dhartipakar Aggarwal Vs. Rajiv Gandhi [1987 Supp SCC 93], this  court held: "9. In K. Kamaraja Nadar v. Kunju Thevar (1959  SCR 583 : AIR 1958 SC 687 : 14 ELR 270), the  Election Tribunal and the High Court both  refused to consider preliminary objections  raised by the returned candidate at the initial  stage on the ground that the same would be  considered at the trial of the election  petition. This Court set aside the order and  directed that the preliminary objection should  be entertained and a decision reached thereupon  before further proceedings were taken in the  election petition. Bhagwati, J. speaking for the  Court observed thus :  We are of opinion that both the Election  Tribunal and the High Court were wrong in the  view they took. If the preliminary objection was  not entertained and a decision reached  thereupon, further proceedings taken in the  election petition would mean a full-fledged  trial involving examination of a large number of  witnesses on behalf of the second respondent in  support of the numerous allegations of corrupt  practices attributed by him to the appellant,  his agents or others working on his behalf;  examination of a large number of witness by or  on behalf of the appellant controverting the

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allegations made against him; examination of  witness in support of the recrimination  submitted by the appellant against the second  respondent; and a large number of visits by the  appellant from distant places like Delhi and  Bombay to Ranchi resulting in not only heavy  expenses and loss of time and diversion of the  appellant from his public duty in the various  fields of activity including those in the House  of the People. It would mean unnecessary  harassment and expenses for the appellant which  could certainly be avoided if the preliminary  objection urged by him was decided at the  initial stage by the Election Tribunal.          It was opined that in a given case a full dressed trial need not  be undertaken.

       Yet again in Samar Singh Vs. Kedar Nath (1987 Suppl. SCC 224) it  has been held :

       "In substance, the argument is that the court must  proceed with the trial, record the evidence, and only  after the trial of the election petition is concluded  that the powers under the Code of Civil Procedure for  dealing appropriately with the defective petition  which does not disclose cause of action should be  exercised. With respect to the learned counsel, it is  an argument which it is difficult to comprehend. The  whole purpose of conferment of such powers is to  ensure that a litigation which is meaningless and  bound to prove abortive should not be permitted to  occupy the time of the court and exercise the mind of  the respondent."

       We may notice a converse case.  In Dipak Chandra Ruhidas Vs.  Chandan Kumar Sarkar [(2003) 7 SCC 66], in view of Section 98 (a) and  Section 116-A of the Representation of People Act, a question arose as  to whether dismissing an election petition at the threshold shall be  appealable.  This Court observed:

"13. Furthermore, Section 86 deals with trial of  election petitions, Sub-section (1) whereof is a  part of it. Trial has not been defined. In  Black’s Law Dictionary at page 1348 it is  stated: "A judicial examination and determination  of issues between parties to action, Gulf,  C. & S.F. Ry. Co. v. Smit, Okl., 270 P.2d  629, 633; whether they be issues of law or  of fact, Pulaski v. State, 23 Wis. 2d 138,  126 N.W. 2d 625, 628. A judicial  examination, in accordance with law of the  land, of a cause, either civil or  criminal, of the issues between the  parties whether of law or fact, before a  court that has proper jurisdiction". 14. It is, therefore, not necessary that the  trial must be a full dressed or a jury trial or  a trial which concludes only after taking  evidence of a parties in support of their  respective cases. 15. Section 116A provides for an appeal. The  said provision must be given a liberal and  purposive construction. The scope of an appeal

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should be held to be wider than an application  for judicial review or a petition under Article  136 of the Constitution of India. 16. Furthermore, the Representation of the  People Act provides for a complete machinery.  The right of appeal conferred upon a suitor must  be considered from that angle. When an order is  passed under Section 98 of the Act, the same may  be in terms of either Sub-section (1) of Section  86 or otherwise. An appeal lies against a final  order. An order passed under Sub-section (1) of  Section 86 is also final. It may be that in the  event an appeal therefrom is allowed, the matter  may be required to be sent back but that would  not render an order passed thereunder as an  interlocutory one. It does not take away the  concept of the finality attached therewith."

       In Central Mine Planning and Design Institute Ltd. Vs. Union of  India and Another [(2001) 2 SCC 588] this Court upon referring  Shah  Babulal Khimji (supra) held:

"Adverting to the facts of this case, Section  17-B of the ID Act confers valuable rights on  the workmen and correspondingly imposes onerous  obligations on the employer. The order in  question passed by the learned Single Judge  determines the entitlement of the workmen to  receive benefits and imposes an obligation on  the appellant to pay such benefits provided in  the said section. That order cannot but be  "judgment" within the meaning of clause 10 of  Letters Patent, Patna. The High Court is  obviously in error in holding that the said  order is not judgment within the meaning of  clause 10 of the Letters Patent of Patna."  

       We, therefore, are of the opinion that Letters Patent Appeal was  maintainable.

REJECTION OF PLAINT:

       Whether a plaint discloses a cause of action or not is essentially  a question of fact.  But whether it does or does not must be found out  from reading the plaint itself.  For the said purpose the averments made  in the plaint in their entirety must be held to be correct.  The test is  as to whether  if the averments made in the plaint are taken to be  correct in its entirety,  a decree would be passed.   

CAUSE OF ACTION:

       A cause of action is a bundle of facts which are required to be  pleaded and proved for the purpose of obtaining relief claimed in the  suit.  For the aforementioned purpose, the material facts are required  to be stated but not the evidence except in certain cases where the  pleading relies on any misrepresentation, fraud, breach of trust, wilful  default, or undue influence.

       Order 7 Rule 14 of the Code of Civil Procedure provides as  follows:

"14 PRODUCTION OF DOCUMENT ON WHICH PLAINTIFF  SUES OR RELIES.  (1) Where a plaintiff sues upon a document or  relies upon document in his possession or power

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in support of his claim, he shall enter such  documents in a list, and shall produce it in  Court when the plaint is presented by him and  shall, at the same time deliver the document and  a copy thereof, to be filed with the plaint.  (2) Where any such document is not in the  possession or power of the plaintiff, he shall,  where possible, state in whose possession or  power it is.  (3) Where a document or a copy thereof is not  filed with the plaint under this rule, it shall  not be allowed to be received in evidence on  behalf of the plaintiff at the hearing of the  suit.  (4) Nothing in this rule shall apply to document  produced for the cross-examination of the  plaintiff’s witnesses, or, handed over to a  witness merely to refresh his memory."  

       In the instant case the ’Club’ not only annexed certain documents  with the plaint but also filed a large number of documents therewith.   Those documents having regard to Order 7 Rule 14 of the Code of Civil  Procedure are required to be taken into consideration for the purpose of  disposal of application under Order 7 Rule 11(a) of the Code of Civil  Procedure.  The ’Club’ in its plaint pleaded:

"The Plaintiff is a Protection & Indemnity  Association incorporated under the laws of the  United Kingdom and carries on business through  its Managers, Liverpool & London P&I Management  Ltd. at Liverpool, UK.  The Plaintiff is a  mutual association of ship-owners and offers  insurance cover in respect of vessels entered  with it for diverse third party risks associated  with the operation and trading of vessels.  This  insurance is commonly known as Protection &  Indemnity (P&I) cover in respect of various  risks associated with the vessels in their  maritime adventure.  The 1st Defendant vessel  m.v. "Sea Success I" is a sistership of the  vessels "Sea Ranger" and "Sea Glory" which  were entered for P&I risks with the Plaintiff  Association.  The said two vessels were entered  into the Plaintiff’s Association for the policy  year 1999-2000 by Defendant No. 2, Singapore  Soviet Shipping Co. Pte. Ltd. who, as per the  terms of the insurance and Rules of the  Plaintiff Association, were recognized and  considered to be the owners of the said two  vessels and the assured under the policy of  insurance.  The 1st Defendant vessel is owned  and/ or controlled by Defendant No. 2 through  its wholly owned 100% subsidiary, Singapore  Soviet Shipping Corporation Inc., Monrovia.  The  1st Defendant vessel is presently at the port and  harbour of Mumbai within the territorial waters  of India and within the Admiralty jurisdiction  of this Hon’ble Court.  The 2nd Defendant is the  owner of the 1st Defendant and is also inter alia  the party liable in personam in respect of the  Plaintiff’s claim.

The Plaintiff submits as more particularly  stated in paragraph 1 above, that the 1st  Defendant vessel is a sistership of the two

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vessels "Sea Glory" and "Sea Ranger" in view  of the beneficial ownership, management of all  three vessels having vested in Defendant No. 2.   The Plaintiff further submits that Defendant No.  2 is liable in personam in respect of the unpaid  insurance premium in respect of the two vessels  "Sea Glory" and "Sea Ranger".  Consequently,  the Plaintiff is entitled to arrest any other  vessel in the ownership of Defendant No. 2.  The  1st Defendant vessel is owned by Defendant No. 2  through it’s 100% subsidiary S.S. Shipping Co.  Inc.  In the circumstances, the Plaintiff  submits that they are entitled to proceed  against the Defendant vessel in rem and are  entitled to an order of arrest, detention and  sale of the vessel for recovery of their  outstanding dues in respect of insurance premium  as more particularly stated above.  The  Plaintiff is, therefore, entitled to have the  Defendant vessel along with her hull, gear,  engines, tackle, machinery, bunkers, plant,  apparel, furniture, equipments and all  appurtenances thereto condemned and arrested  under a warrant of arrest of this Hon’ble Court  for realization of the Plaintiff’s dues.  The  Plaintiff is further entitled to have the  Defendant vessel sold under the orders and  directions of this Hon’ble Court and to have the  sale proceeds thereof applied towards the  satisfaction of the Plaintiff’s claim in the  suit.  The Plaintiff is entitled to an order of  arrest of the Defendant vessel as arrest is the  only method of proceeding against the said  vessel in rem.  The Plaintiff submits that if  such an order of arrest is not granted,  irreparable harm and injury will be caused to  the Plaintiff inasmuch as the Plaintiff’s suit  will be rendered infructuous.  There is no other  alternative efficacious remedy available to the  Plaintiff.          

       The Club has pleaded that the vessel is a sister ship of ’Sea  Ranger’ and ’Sea Glory’ owned and possessed by the second defendant. The  Club has also pleaded that the defendant No. 2 is beneficial owner of  the first defendant ship.  Determination on such assertions would amount  to determination of question of fact.  If the ’Vessel’ denies or  disputes the same;  an issue in that behalf will have to be framed and  decided.   

       Beneficial ownership of a ship is not a question of fact alone.   It is a mixed question of fact and law.  In William Vs. Wilcox [(1838) 8  Ad. & EL 331] it is held:

"It is an elementary rule in pleading that when  a state of facts is relied, it is enough to  allege it simply, without setting out the  subordinate facts which are the means of proving  it or the evidence sustaining the allegations."

                The aforementioned dicta has been quoted with approval in Mohan  Rawale Vs. Damodar Tatyaba & Ors. [(1994) 2 SCC 392].

       It may be true that Order 7 Rule 11(a) although authorises the

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court to reject a plaint on failure on the part of the plaintiff to  disclose a cause of action but the same would not mean that the  averments made therein or a document upon which reliance has been placed  although discloses a cause of action, the plaint would be rejected on  the ground that such averments are not sufficient to prove the facts  stated therein for the purpose of obtaining reliefs claimed in the suit.   The approach adopted by the High Court, in this behalf, in our opinion,  is not correct.

       In D. Ramachandran Vs. R.V. Janakiraman & Ors. [(1999) 3 SCC 267],  this Court held:

"It is well settled that in all cases of  preliminary objection, the test is to see  whether any of the reliefs prayed for could be  granted to the appellant if the averments made  in the petition are proved to be true.  For the  purpose of considering a preliminary objection,  the averments in the petition should be assumed  to be true and the court has to find out whether  those averments disclose a cause of action or a  triable issue as such.  The court cannot probe  into the facts on the basis of the controversy  raised in the counter."

       Furthermore a fact which is within the special knowledge of the  defendant need not be pleaded in the plaint.  In Punit Rai vs. Dinesh  Chaudhary [JT 2003 (Supp.1) SC 557], it is stated:

"...These are the material facts relating to the  plea raised by the appellant that the respondent  is not a Scheduled caste.  We don’t think if the  respondent means to say that the petitoner  should have stated in the petition that the  respondent is not born of Deo Kumari Devi said  to be married to Bhagwan Singh in village Adai.   If at all these facts would be in the special  knowledge of respondent, Bhagwan Singh and Deo  Kumari Devi hence not required to be pleaded in  the election petition.  It is not possible as  well.  In this connection, a reference may be  made to a decision of this Court in Balwan Singh  vs. Lakshmi Nrain and Ors {AIR 1960 SC 770).   This case also relates to election matter and it  was held that facts which are in the special  knowledge of the other party could not be  pleaded by the election petitioner.  It was  found that particulars of the arrangement of  hiring or procuring a vehicle would never be in  the knowledge of the petitioner, such facts need  not and cannot be pleaded in the petition."    

       In D. Ramachandran Vs. R.V. Janakiraman & Ors. [1999] 3 SCC 267,  it has been held that the Court cannot dissect the pleading into several  parts and consider whether each one of them discloses a cause of action.           

       In the aforementioned backdrop, the question as to whether the  Club had been able to show that the Respondent No. 1 is a sister ship of  "Sea Glory" and "Sea Ranger" admittedly belonging to the first  respondent is a matter which is required to be gone into in the suit.

       In ascertaining whether the plaint shows a cause of action, the  court is not required to make an elaborate enquiry into doubtful or

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complicated questions of law or fact.  By the statute the jurisdiction  of the court is restricted to ascertaining whether on the allegations a  cause of action is shown.  In Vijay Pratap Singh Vs. Dukh Haran Nath  Singh [AIR 1962 SC 941] this Court held:

"By the express terms of r. 5 clause (d), the  court is concerned the ascertain whether the  allegations made in the petition show a cause of  action. The court has not to see whether the  claim made by the petitioner is likely to  succeed: it has merely to satisfy itself that  the allegations made in the petition, if  accepted as true, would entitle the petitioner  to the relief he claims. If accepting those  allegations as true no case is made out for  granting relief no cause of action would be  shown and the petition must be rejected. But in  ascertaining whether the petition shows a cause  of action the court does not enter upon a trial  of the issues affecting the merits of the claim  made by the petitioner. It cannot take into  consideration the defences which the defendant  may raise upon the merits; nor is the court  competent to make an elaborate enquiry into  doubtful or complicated questions of law or  fact. If the allegations in the petition, prima  facie, show a cause of action, the court cannot  embark upon an enquiry whether the allegations  are true in fact, or whether the petitioner will  succeed in the claims made by him."

       So long as the claim discloses some cause of action or raises some  questions fit to be decided by a Judge, the mere fact that the case is  weak and not likely to succeed is no ground for striking it out.  The  purported failure of the pleadings to disclose a cause of action is  distinct from the absence of full particulars.  [See Mohan Rawale  (supra)]  

        Beneficial ownership is not a pure question of fact.  It is a  mixed question of law and fact.  In that view of the matter it was not  necessary for the Club to set out the subordinate facts which arte means  of proving it or the evidence sustaining the allegations.  The High  Court, however, in its order rejecting the plaint held:

"We have not gone into the merits of the  Defendant No. 1 ship, we clarify, on the basis  of any averments made by Defendant No. 1, to the  contrary, but we have proceeded to examine the  same on the basis of the averments made in the  plaint to find out whether, as they stand, prove  the Defendant No. 1 vessel Sea Success -I to be  sister ship of vessels - "Sea Glory" and "Sea  Ranger" being beneficially owned by Defendant  No. 2.  We have already indicated above that the  allegations made in the plaint by themselves do  not prove factum of Defendant No. 1 Sea Success- I being sister ship of vessels "Sea Glory" and  "Sea Ranger" in respect of whom the claim has  been raised in the suit, we find it difficult to  approve the view of the learned Single Judge in  this regard.  It cannot be overlooked that ship  is a valuable commercial chattel and her arrest  undeservingly severely prejudices third parties  innocently as well as affect the interest of

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owner, crew member, cargo owner, shipper etc.  adversely and, therefore, it is all the more  necessary to analyse the plaint meaningfully at  the threshold to find out whether it discloses  cause of action or not and not on technical and  formal reading that if discloses cause of action  and wait for trial."

       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.

       Furthermore, the question as to whether the asset of a 100%  subsidy can be treated as an asset of the parent company would again  depend upon the fact situation of each case.  

       In The Aventicum [1978] 1 Lloyd’s L.R. it has been held:

"I have no doubt that on a motion of this kind  it is right to investigate the true beneficial  ownership.  I reject any suggestion that it is  impossible "to pierce the corporate veil".  I of  course remember, as Mr. Howard urges, the case  of Saloman v. Saloman & Co., [1897] A.C. 22, but  of course it is plain that s.3(4) of the Act  intends that the Court shall not be limited to a  consideration of who is the registered owner or  who is the person having legal ownership of the  shares in the ship; the directions are to look  at the beneficial ownership.  Certainly in a  case where there is a suggestion of a  trusteeship or a nominee holding, there is no  doubt that the Court can investigate it.  I  think that it may well be, without having to  resolve the difference of opinion expressed by  Mr. Justice Brandon and Mr. Justice Goff in the  two cases to which I have referred that the  Court has the power and should in some cases  look even further."                  Yet again in The Andrea Ursula [1971] 1 Lloyd’s L.R. 145, the  Court opined:

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"There is no definition in the Act of the  expression "beneficially owned" as used in sect.  3(4).  It could mean owned by someone who,  whether he is the legal owner or not, is in any  case the equitable owner.  That would cover both  the case of a ship the legal and equitable title  to which are in one person, A, and also the case  of a ship the legal title to which is in one  person, A, but the equitable title to which is  in another person, B.  In the first case the  ship would be beneficially owned by A, and in  the second case by B.  Trusts of ships, express  or implied, are however, rare and the words seem  to me to be capable also of a different and more  practical meaning related not to title, legal or  equitable, but to lawful possession and control  with the use and benefit which are derived from  them.  If that meaning were right, a ship would  be beneficially owned by a person who, whether  he was the legal or equitable owner or not,  lawfully had full possession and control of her,  and, by virtue of such possession and control,  had all the benefit and use of her which a legal  or equitable owner would ordinarily have."

       Furthermore, the question as to whether the concept of ownership  of a ship which has been introduced in 18th Century when there had been  no joint stock companies and the concept of shares in a ship so as to  encourage the individuals to pool their resources by a sister ship so  that they may become co-owners is a matter which is required to be  considered at an appropriate stage.  We do not think that such a  question can justifiably be gone into at this stage.

       We do not intend to delve deep into the questions as to whether  the two ships named hereinabove are the sister ships of the respondent  No. 1 Vessel or whether the requirement of law as regard ownership of a  ship in the Respondent No. 1 as beneficial owner has been fulfilled or  not.  Such issues must be considered at an appropriate stage.

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.  Any observations made by us must be  considered to have been made only for the purpose of disposal of these  appeals and not for the purpose of determining the merit of the matter.   However, having regard to the facts and circumstances of this case, we  will request the High Court to consider the desirability of disposing of  the matter as expeditiously as possible and preferably within a period  of three months from the date of receipt of a copy of this order.

       For the reasons aforementioned, 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.