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Jalyan Udyog and anr. Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case Number Appeal No. 1195 of 1984 in Writ Petition No. 2326 of 1984 along with Appeal No. 158 of 1985 in Writ
Judge
Reported in1986(7)ECC90
AppellantJalyan Udyog and anr. ;director General of Shipping
RespondentUnion of India (Uoi) and ors. ; Jalyon Udyag and ors.
Excerpt:
imports and exports control - ships for breaking--'import' with respect to foreign ships acquired--meaning of--import of ships in 1968 for use as ocean-going vessels--sale of ships for breaking in 1984--mstc not canalising agency in 1968 when ships were acquired--'no objection certificate' from mstc not required from mstc for sale of such ships for breaking--approval of director general of shipping required for such sale--high court--grant of interim order subject to conditions--right of party seeking interim order to challenge imposition of conditions--customs act (52 of 1962), section 2(9), (18), (22)(a), (23), (27)--imports and exports (control) act (18 of 1947), sections 2(g), 3, 4e--import and export policy, 1983-84, chapter 10, paras. 66, 73(2), 74; app. 8, item 47; app......m.h. kania, ag. c.j.1. both these appeals arise from the interim order passed by a learned single judge of this court on 29th november, 1984 in writ petition no. 2326 of 1984. as both appeals arise from the same order and as the facts are common, we propose to dispose of both the appeals by this common judgment.2. as the appeals arise from the interim relief granted by the learned trial judge, it is necessary to set out only the facts necessary to appreciate the interim relief granted by the learned trial judge.3. as far as appeal no. 1195 of 1984 is concerned, the appellants are the two petitioners respectively in the writ petition no. 2326 of 1984, and respondents nos. 1 to 5 are respondents nos. 1 to 5 in the writ petition. the appellant no. 1 is partnership firm inter alia carrying on.....
Judgment:

M.H. Kania, Ag. C.J.

1. Both these appeals arise from the interim order passed by a learned single Judge of this Court on 29th November, 1984 in Writ Petition No. 2326 of 1984. As both appeals arise from the same order and as the facts are common, we propose to dispose of both the appeals by this common judgment.

2. As the appeals arise from the interim relief granted by the learned trial Judge, it is necessary to set out only the facts necessary to appreciate the interim relief granted by the learned trial Judge.

3. As far as Appeal No. 1195 of 1984 is concerned, the appellants are the two petitioners respectively in the Writ Petition No. 2326 of 1984, and respondents Nos. 1 to 5 are respondents Nos. 1 to 5 in the writ petition. The appellant No. 1 is partnership firm inter alia carrying on the business of ship-breaking. The petitioner No. 2 is a private limited company duly incorporated under the Companies Act and carries on the business of plying ships. Respondent No. 1 is the Union of India. Respondent Nos. 2 and 3 are the Collector and Assistant Collector of Customs respectively. Respondents No. 4, the main contensting party, is the Metal Scrap Trade Corporation Ltd., a Government of India Undertaking. The respondent No. 5 is the Director General of Shipping. The appellant No. 1 holds a no-objection certificate from the Bombay Port Trust for carrying on the business of breaking ships at the Bombay Port and is registered with respondent No. 4 as a ship-breaker at Bombay. The two ships in question, namely, m.v. Vijaya Vaibhav and m.v. Vijaya Jivan were originally purchased from foreign parties and brought to India by Shipping Corporation of India in the year 1968 for the purpose of plying as ocean-going vessels. Vijaya Vaibhav arrived in India in September, 1968 and was registered under the I.G.M. (Import General Manifest) No. 732 dated 9th September, 1968. It was registered under the Merchant Shipping Act, 1958, on 17th September, 1968. Vijaya Jivan arrived in India in August, 1968 and was registered under I.G.M. No. 628 on 22nd August, 1968 and registered under the Merchant Shipping Act on 23rd August, 1968. Since 1968, the said ships have been plying as ocean-going vessels under the Indian flag. Till 1980, they were used as aforesaid by the Shipping Corporation of India and thereafter sold in 1980 to Vijaya Lines Pvt. Ltd. Vijaya Lines Private Ltd., also used the said ships for plying as ocean-going vessels. In 1982, the said ships were sold to the 2nd appellant which continued to use them as ocean-going vessels. Sometime in 1983, it appears that the 2nd appellant decided to dispose of the said ships as they had outlived their usefulness for the purpose of plying and the 2nd appellant made an application under the Merchant Shipping Act to the 6th respondent for selling the said ships for scrapping. The 5th respondent, the Director General, by his letter dated 1st October, 1983 (Exh. 'A' to the petition), conveyed his approval in principle for the sale of the vessel Vijaya Vaibhav for scrapping in India subject to certain conditions. Briefly stated, the conditions were to the effect that the appellant No. 2 would have to communicate to the Director General the name of the buyer of the ship and the sale price; secondly, that the vessel should be free from all encumbrances and the necessary documents should be furnished and that all outstanding dues, if any, to seamen and the Provident Fund Commissioner should be settled. It has been made clear in this letter that the formal sanction for the sale would be granted after the aforesaid conditions were complied with. At the end of the letter, the respondent No. 5 directed appellant No. 2 to approach respondent No. 4 for getting their clearance in the matter. By his letter dated 9th March, 1984, similar permission was given by the respondent No. 5 in respect of Vijaya Jivan on more or less similar conditions, except that it was specifically provided that the amount payable to the Assistant Collector of Customs, Jamnagar which had remained outstanding should be settled and documentary proof produced before approaching for formal sanction. From the subsequent correspondence it is clear that by 19th October, 1984 appellant No. 2 conveyed to the Director General that both the said ships had been sold to appellant No. 1 for Rs. 20,00,000 each. By its letter dated 29th October, 1984, the appellant No. 2 informed the Director General that the ship Vijaya Vaibhav was free from all encumbrances. By the said letter, appellant No. 2 further pointed out to the Director General, the respondent No. 5 herein, that it did not agree that clearance was required from respondent No. 4 before the ship could be sold for scrapping. By the said letter, it was pointed out that if sanction was not given for the sale by respondent No. 5, the appellant No. 2 would take legal action. A similar letter was written on the same day by appellant No. 2 in respect of the ship Vijaya Jivan. Earlier, on 3rd July, 1984, certain guidelines were published by respondent No. 4 for the year 1984-85 and on 12th October, 1984, the appellant No. 2 entered into an agreement for the sale of the said two vessels to appellant No. 1. The petition was filed in the first week of November, 1984. By the impugned order of 29th November, 1984, the learned trial Judge admitted the petition and made it returnable on the second Tuesday of January, 1985 peremptorily. We may mention here that thereafter it appears that the petition has been directed to be heard by a Division Bench along with some other petitions pertaining to scrap matters. By the said order, the learned Judge inter alia declared that the appellant No. 1 would be entitled to have the said vessels beached forthwith and directed the respondents to furnish the requisite documents for that purpose. The learned trial Judge also directed the appellant No. 1 not to break the vessels or otherwise carry out any dismantling work on the same till the said vessels were cleared by respondents Nos. 1 to 3 and after approval of respondent No. 4 for breaking. There are certain further interim orders regarding payment of customs duty, execution of a personal bond and so on with which we are not concerned in these appeals. Appeal No. 1195 is directed against that part of the order of the learned trial Judge which prevents appellant No. 1 from breaking or dismantling the said ships without the approval of respondent No. 4 for breaking. Appeal No. 158, which is filed by the Director General of Shipping is directed against the impugned order, in so far it does not make any provision for the sanction of the Director General, respondent No. 6, being taken before the appellant No. 1 can carry out any breaking or dismantling work on the said ships as the owners thereof.

4. As far as Appeal No. 1195 of 1984 is concerned, as aforesaid, the appeal is against the interim order to the extent that the approval of the respondent No. 4 is required before any breaking or dismantling is carried out on the said ships. We quite agree with Mr. Bhatt in this connection that, if it is doubtful as to whether sanction or approval of the respondent No. 4 is required before the ships can be allowed to be broken or dismantled, the result would necessarily be that the appeal must be dismissed and the interim order to the extent aforesaid should not be disturbed. The question which we are required to consider is whether that is really the position.

5. In our view, it is respondent No. 4 which contends that it is the canalising agent for the import of ships similarly placed to the ships before us, and it is therefore, primarily for them to show prima facie that the import of such ships is canalised.

6. The claim of respondent No. 4 regarding canalisation is based on the Import Policy of 1983-84. We may, therefore, have a look at that policy. It may be mentioned in this regard that if the ships are regarded as imported at the time when the decision to scrap the same was taken by appellant No. 2, it is common ground that the Import and Export Policy for 1983-84 would govern the transactions. Chapter 10 of the said policy deals with canalisation of imports. Paragraph 66 in the said Chapter states inter alia that the items canalised for import through designated public sector agencies are listed in Appendices 8 and 9. The concerned agency will import them under Open Genera] Licence. The rest of that paragraph is not material for our consideration. Clause (2) of paragraph 73 provides that to a certain extent the actual users may be allowed to import directly the items required for their actual consumption, even though the items may be canalised. Paragraph 74 provides for a Monitoring Committee which is directed to review the import programmes of the canalising agencies and the arrangements made for meeting the registered demands of the actual users. To put it very briefly, a perusal of this chapter clearly shows that the scheme is basically that items which are canalised will be generally imported by the canalising agencies concerned for actual users. The heading of Appendix 8 runs as follows: 'List of items, import of which is canalised through public sector agencies'. Item 47 in that appendix is: 'old ships, vessels, etc., for breaking'. It is an undisputed position that in 1968 and for some years thereafter, there was no provision requiring canalisation of the import of old ships for scrapping and respondent No. 4 itself came into existence in 1973. In view of the fact that what is canalised is the import of certain items, as shown by the heading of Appendix 8, it would be useful to consider the relevant provisions of Imports and Exports (Control) Act, 1947. Sub-section (g) of Section 2, the definition section, runs as follows: ' 'Import' and 'export' means, respectively, bringing into, and taking out of India by sea, land or air.' The term 'India' is not defined in this Act, but (it) appears clear that the territorial waters of India would be included within the term 'India'. Section 3 of the Act specifically empowers the Central Government to make provisions for prohibiting, restricting or otherwise controlling the import or export or bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried. Section 4E provides that a conveyance or an animal used for transportation of imported goods or materials liable to confiscation are liable to be searched and even seized provided certain conditions are satisfied. Since the terms 'import' and 'export' are also used in the Customs Act, 1962, we may point out that definition of the terms 'export' and 'import' and contained respectively in Sub-sections (18) and (23) of Section 2 of the Customs Act are substantially similar to the definitions of the said terms under the Imports & Exports (Control) Act, 1947. In the Customs Act, 'India' is defined as including the territorial waters of India.

7. It is in the light of these provisions, we have to examine whether the aforesaid two ships could be said to be imported in 1983-84. In this regard, Mr. Bhatt has made several submissions on behalf of the respondent No. 4, and these submissions have been given to us in the form of written propositions. In our view, it is not necessary to set out all these submissions in detail, because the basic position taken up by respondent No. 4 has been summarised by Mr. Bhatt very briefly, and we will deal with that in detail. We may, however, note that it was submitted by Mr. Bhatt that a mere visit to an Indian Port or transit through Indian territorial waters of an ocean-going vessel whilst being plied as a conveyance engaged in the international carriage of goods does not constitute import of such vessel. It was urged by him that, if a vessel or a ship is brought into India to be used as an ocean-going vessel it cannot be regarded as imported into India at all. But if such a vessel is brought into the territorial waters of India for use in coastal trade, it would come in as goods, and not as a conveyance, and hence it would be imported. Similarly, if such a vessel is immobilised or beached for breaking in Indian territory, it would be deemed to be imported at that time. The sum and substance of this submission is that if a ship is brought into the territorial waters of India as a conveyance, it would not be imported into India, but in such a case when it ceases to be a conveyance, it would become 'goods' and be deemed to be imported at that point of time. Similarly, if a vessel is imported into India otherwise than for plying as an ocean going vessel, it would, in law, be imported into India. In this connection, the position taken up by respondent No. 4 was summarised by Mr. Bhatt thus: The second appellant was the owner of the vessels in question. Till 1984, on the averments in the petition, the said vessels were used for plying as oceangoing vessels and were, therefore, used as conveyances. It was when the appellant No. 1 decided to break the said vessels respectively that the said vessels ceased to be conveyances and became imported into India. The decision was taken sometime around October, 1983 and thus Import Policy of 1983-84 was applicable. What we have really to see is whether there is any substance in this contention. In our view, this contention is unsustainable. In the present case, the vessels or ships in question were brought into the territorial waters of India by the Shipping Corporation of India, a Government of India Undertaking, in 1968, after having purchased them from foreign parties. The said vessels were registered as Indian ships under the Merchant Shipping Act, and thereafter flew the Indian flag. It seems difficult for us to understand how in these circumstances it can be contended that the said vessels were not imported into India at that time. In our view, there is nothing on a plain reading of the provisions of the Imports and Exports (Control) Act, 1947, which would lead to a conclusion that a vessel which is imported as a conveyance is not to be regarded as imported at all. In fact no distinction between a vessel and a conveyance is drawn in that Act for this purpose. The only reference to a conveyance in that Act is in the sections to which we have referred to earlier and those sections have nothing to do which the question as to when a ship or vessel is supposed to be imported. In view of the plain language of the definition of the words 'import' and 'export', it appears to us that any vessel brought into the territorial waters of India and registered as an Indian ship must be regarded as imported at that stage. It may be that for the purposes of customs duty, such duty may not be payable on that vessel at that time in view of certain provisions of the Customs Act or notifications issued thereunder. But, that, in our view, does not govern the question of the point of time of import. The question as to when the said vessels were imported must be primarily decided in the light of the provisions of the Imports and Exports (Control) Act, and the question of payment of customs duty or import duty is a different question altogether. Even if one were to go through the provisions of the Customs Act, 1962, we find that Sub-section (9) of Section 2, the definition section defines 'conveyance' as including a vessel, aircraft and a vehicle. A perusal of Clause (a) of Sub-section (22) of Section 2 shows that vessels, aircraft and vehicles could also be goods. It is undoubtedly true that, for the purpose of levy of customs duty or import duty, a distinction may be drawn between ships imported as conveyances and ships imported as goods. But that, in our view, would not govern the question as to when the ships in question were imported. Similarly, the question as to whether a bill of entry was filed when the ships were brought into India in 1968 or whether any licence was taken for importing them in India are also questions which are not germane to the central question as to when the said ships were imported. Even articles brought into India without a licence or illegally are still imported.

8. On facts substantially similar to the facts before us, a Division Bench of the Calcutta High Court in F.M.A.T. No. 2502 and 2503 of 1984 (Ram Niwas Chaudhary v. Metal Scrap Trade Corporation Ltd. and Ors. [1985] 6 ECC 165) took the view that the ships in question were imported at the time when they were brought into India after having been purchased and registered as Indian flag vessels. In that case, we find from the judgment of the trial court that the ships in question were foreign ships which were manufactured in 1963. They were purchased by the Scindia Steam Navigation Co. Ltd., a company incorporated in India with the permission of the Reserve Bank of India and were brought to India in 1969. They were thereafter registered under the Merchant Shipping Act as Indian flag ships. The Metal Scrap Trade Corporation was constituted as a canalising agent by the Central Government long after the said ships were brought to India as aforesaid and registered as Indian ships. The approval of the Director General of Shipping for breaking the said ships was applied for on or about 15th March, 1984. The question was whether the canalisation provided under the Import and Export policy for 1984-85 was applicable to the said ships. As pointed out by the Division Bench, the first question which came up for their consideration was whether the said vessels were imported prior to the coming into existence of the Metal Scrap Trade Corporation as a canalising agent. The Division Bench categorically rejected the contention of the Metal Scrap Trade Corporation that there was no importation of the said ships when they were brought to India in 1968. The Division Bench observed that that contention was absurd on the face of the definition of the word 'import' as given in Clause (23) of Section 2 of the Customs Act, 1962. It was held that in view of the definition of the word 'import' given in the said Sub-clause read with the definition of the word 'India' given under Clause (27) of Section 2 of the Customs Act, there was no doubt whatever that the said two ships were imported into India in 1968 when M.S.T.C. was not the canalising agent, and hence canalisation could not be applied to the import of the said ships. Mr. Bhatt placed strong reliance on the decision of the Division Bench of this Court in Appeal No. 273 of 1979 (Union of India and Ors. v. Chowgule & Co. Pvt. Ltd. decided by K. Madhava Reddy, C.J., and B.C. Gadgil, J., on 13th December, 1984). In that case, the vessel in question was imported into Mormugaon Port on 15th October, 1969. At that time, it was an oil tanker. With some modifications, the vessel was converted for use in the operation known as 'the topping up operations'. It was then named as Maratha Tran-shipper and used to carry iron ore from the Port to the large vessels standing a bit away from the harbour and loading the iron ore in the said larger vessels. It was held that in such a case, a bill of entry was required to be filed for importing the said vessel. That question, we are afraid, is completely different from the question before us, and hence that decision is of little value in determining this case.

9. We must mention that in the written propositions tendered by Mr. Bhatt, it has been submitted, in alternative, that even if the said ships were held to be imported into India in 1968, it must follow that, as ocean-going vessels, they would, in law, be 'exported' from India each time they went out of the territorial waters of India and every entry by such ships into the Indian territorial waters would constitute a fresh import. In that case it was when the said ships were last brought into Indian territorial waters that they should be held to be imported and the question of canalisation considered at that stage. We may point out that this contention is inconsistent with the basic stand taken by the respondent No. 4. Moreover, the respondent No. 4 has not given any particulars as to when the said vessels were last brought into Indian territorial waters. There is only a bare allegation in the affidavit-in-reply that they were brought into India in 1983 after the decision to scrap them was taken. It was not as if it was not open to respondent No. 4 to make enquiries with the appellants or otherwise nor is it their case that any such enquiries were made. Again, although this contention is included in the written propositions, it was not urged by Mr. Bhatt in the course of his reply. In view of this, it is not necessary for us to consider at this stage this alternative argument advanced on behalf of respondent No. 4. Apart from this, we have no material at all to show as to when the said ships were brought into territorial waters of India after the decision was taken to scrap or break the same. Moreover considering the scheme of canalisation in the 1983-84 Import Export Policy, it appears to us that there is no question of that policy being applied to a vessel which was brought into India long before canalisation, having been purchased earlier from a foreign party and paid for and after it was registered under the Merchant Shipping Act as an Indian flag ship merely because during the pendency of the policy it is decided by the owners to bring it to India for scrapping. In view of this, it is not possible to take into account this submission.

10. As far as the submission that the said vessels must be held to be goods imported into India, when the decision to scrap the same was taken, which is the main submission urged on behalf of the respondent No. 4 is concerned, it appears to us that the acceptance of this submission would lead to very startling consequences. For example, if a decision is taken to scrap an oceangoing vessel, although nothing may be done to implement that decision for sometime and the vessel might continue to ply as an ocean-going vessel, yet it would cease to be a conveyance and become goods and deemed to be imported at that point of time. Morecover, let us take a case where permission is applied for to scrap an ocean-going vessel, it being assumed that such permission is required in law, and such permission is not granted, the result would be that in spite of the fact that the vessel cannot be scrapped and may continue to ply as an oceangoing vessel, it would cease to be a conveyance held to be imported. In our view, an argument which would lead to much startling consequences cannot be accepted.

11. It is true that the views which we have expressed above are prima facie and they cannot bind the Court which might dispose of the writ petition. However, merely on that consideration we do not see any reason to hold up the scrapping of the ships till the permission of the respondent No. 4 is obtained, because that would put the appellants to considerable loss, and in our view, on the materials shown to us, prima facie, it is difficult to come to a conclusion that the aforesaid ships were imported into India in 1983-84.

12. Apart from what we have said above, we may point out that the Learned Counsel for respondent No. 4 stated that the main considerations which would guide respondent No. 4 in granting approval for scrapping are that ships should not be allowed to be sold at an inadequate price and secondly that, if the permission for canalisation applies, respondent No. 4 would be entitled to a certain commission. As far as adequacy of the price is concerned, the Director General of Shipping respondent No. 5 herein, might be entitled to take the adequacy of the price into account in considering the application of the appellants for his sanction to the sale of the said vessels to appellant No. 1 for scrapping and we propose to provide adequate safeguards so that in case it is finally held that the aforesaid ships were liable to be canalised, the payment of the commission of respondent No. 4 is secured. In view of what we have observed earlier, we are of the view that the learned trial Judge was in error in imposing a condition that before breaking or dismantling work is undertaken of any of the ships, approval of respondent No. 4 must be obtained and that part of the order is hereby set aside.

13. We may mention at this stage that it was also argued by Mr. Bhatt that it was under the orders of the learned trial Judge that the ships were allowed to be beached and the appellants, having taken advantage of the said order and having beached the said ships under that order, were not entitled to challenge the said order at all. In our view, this contention also cannot be upheld, because, if interim relief is sought for and it is granted subject to certain conditions, it is generally open to a party in whose favour the interim relief is granted to challenge the same in so far as the imposition of the conditions is concerned. For example, if on the application of a plaintiff a receiver is appointed in a partnership suit with a direction that one of the defendants should be appointed as his agent, it would certainly be open to the plaintiff to challenge that part of the order which directs that one of the defendants should be appointed as the agent of the receiver, and it would be no answer in such a case to say that since the plaintiff got the receiver appointed and set the receiver in motion he is barred from challenging any part of the order.

14. With a view to safeguard the interest of respondent No. 4, in the event of the appeal ultimately being dismissed, we provide that before any breaking or dismantling operations are undertaken by the appellants, the appellants or either of them shall furnish to the Prothonotary and Senior Master of this Court a bank guarantee to her satisfaction amounting to four per cent, or such other percentage as might be then prescribed by the respondent No. 4, on the sum of Rs. 30,00,000 for each of the the aforesaid two ships. We may mention in this connection that, at an earlier auction, a bid of Rs. 33,50,000 was received for the ship Vijaya Vaibhav. But that sale could not go through, because there was some controversy as to whether the appellant No. 2 as the owner or the appellant No. 1, as the purchaser under the agreement to purchase, should file the bill of entry. It is common ground that both the ships are more or less similar. It is in view of this that we have provided for bank guarantee on the basis that the value of the ship might be estimated at Rs. 30,00,000 each.

15. We now come to Appeal No. 158 of 1985 which is also directed against the same interim order and relates to the question whether the consent of the Director General of Shipping who is the appellant in this appeal, was required before breaking or dismantling of the ships could be permitted. In this regard, the submission of Mr. Vyas, learned Counsel for the Director General is that in view of Sub-section (1) of Section 39 of the Merchant Shipping Act, 1958, no breaking up of the said ships could be permitted without the sanction of the Director General. We do not find substance in this contention, because a perusal of Sub-section (1) of Section 39 of that Act shows that all that the said Sub-section provides in this connection is, very briefly, that in the event of a registered Indian ship being taken by the enemy, burnt or broken up or ceasing to be Indian ship, the owner of the ship or of any share in the ship, must give notice thereof to the Registrar at her port of registry, if such notice has not already been given earlier, and the Registrar is required to make an entry of this in the register book and the ship's registry in that book shall be considered as closed, except for certain purposes. Under this section, therefore, no permission is required before breaking up of an Indian ship registered under that Act. All that is provided is that after such breaking up intimation or notice must be given to the Registrar so that an entry to that effect could be made in the register.

16. We find, however, that in this connection the relevant section of the Merchant Shipping Act is Section 42. Sub-section (i) of that section which forms part of Part V of that Act, runs as follows:

No person shall transfer or acquire any Indian ship or any share or interest therein without the previous approval of the Central Government and any transaction effected in contravention of this provision shall be void and unenforceable.

Under Sub-section (1) of Section 7 of the Act it is provided that the Central Government may, by notification in the Official Gazette, appoint a person to be the Director General of Shipping for the purpose of exercising or discharging the powers, authority or duties conferred or imposed upon the Director General by or under the Act. Sub-section (8) of Section 3 provides that the expression 'Director General' as used in the Act means the Director General of Shipping appointed under Section 7. It is common ground that the powers of the Central Government under Sub-section (1) of Section 42 have been conferred on the Director General by appropriate orders. In view of this, it appears to us prima facie, that for the sale of the aforesaid ships by West Asia Shipping Co. Pvt. Ltd. to Jalyan Udyog, the sanction of the Director General is required before the sale can be completed. It is Jalyan Udyog who have obtained a no objection certificate from the Bombay Port Trust for breaking up ships at Bombay Port and Jalyan Udyog would not be entitled to the ownership of the said ships until sanction of the Director General is received as aforesaid. In view of this, it would appear to us that no breaking operation on the ships could be carried out by Jalyan Udyog till the sanction of the Director General is received,

17. As against this, it was pointed out by Mr. Desai that the provisions of Section 42 would have had no application to this case, because the aforesaid two ships were not sea-going ships. According to him, as the West Asia Shipping Co. and Jalyan Udyog had taken a decision that the said ships should be broken up, they ceased to be sea-going vessels and under Section 20 of the Merchant Shipping Act, the provisions of Part V apply only to sea-going ships fitted with mechanical means of propulsion. As we have already pointed out, Section 42 forms part of Chapter V. However, the argument of Mr. Desai does not appeal to us. Sub-section (41) of Section 3 defines a 'sea-going' vessel as a vessel proceeding to sea beyond inland waters or beyond waters declared to be smooth or partially smooth waters by the Central Government. In the present case, as we have already pointed out earlier, in our view, the said ships did not cease to be sea-going vessels or ocean-going ships merely because a decision was taken to have the same broken. Until that decision was put into effect or the ships were permanently beached and rendered incapable of sea-going, it could not be said that they ceased to be sea-going vessels. It is the admitted position that they continued to be used for plying in the ocean as sea-going ships after the decision to scrap them was taken.

18. In view of what we have stated earlier it appears to us, prima facie, that before breaking up or dismantling the ships, Jalyan Udyog must obtain the sanction of the Director General.

19. It was next contended by Mr. Desai that, in fact, Jalyan Udyog and West Asia Shipping Co. had complied with all the requirements of the Director General for granting his sanction. Our attention was drawn to the letter from the Director General granting the permission in principle for sale of the ship Vijaya Vaibhav for scrapping and similar letter which pertains to the permission of sale for Vijaya Jivan for scrapping to which we have already referred earlier. Both the said letters are addressed by the Director General to West Asia Shipping Co. We have already summarised the conditions laid down by the Director General and his stipulation that these conditions must be fulfilled before formal or final sanction can be granted. According to Mr. Desai, all these requirements were fully satisfied by West Asia Shipping Co. and Jalyan Udyog, and hence the Director General was bound to give his sanction. It was contended by him that the question as to whether an adequate price has been realised for the said ships was not relevant for the consideration of the Director General. In order to satisfy us that all the conditions aforesaid have been satisfied, Mr. Desai wanted to tender before us an affidavit in rejoinder to the writ petition, and wanted us to go through certain documents, copies of which were annexed to that affidavit as well as some documents which are already on record. We have declined to examine those documents or to consider whether all the conditions were satisfied. In the first place, the appeal before us is from an interim order and the affidavit-in-rejoinder, which was sought to be tendered and relied upon was filed long after the interim order was passed and was by way of rejoinder to the affidavits filed by way of reply in the writ petition itself. In our view, it would not be proper to consider such an affidavit-in-rejoinder at this stage. Apart from this, it would appear to us that it is primarily for the Director General to consider whether the conditions have been satisfied, and it is open to him to examine the proofs required by him to satisfy himself that the conditions imposed are satisfied. If he fails to give his decision in the matter within a reasonable time or declines to give his sanction on grounds not permitted by law, that decision of his may be liable to be challenged in a court of law. That question, however, cannot be gone into in this appeal. We may point out that even in the petition itself, there is no relief asked for that the Director General must be required to give his sanction, and it would be utterly improper to give such a direction at the hearing of an appeal against an interim order like the one before us.

20. As far as the question of adequacy of price is concerned, we must point out that in Sub-section (1) of Section 42, there is nothing to show positively as to what are the considerations on which the Director General must act in granting or refusing his sanction. It is true that Sub-section (2) of Section 42 refers to the conservation of tonnage of Indian shipping, being one condition on which the Director General on behalf of the Central Government might refuse to give his sanction to the sale of a ship for scrapping. That, however, by itself does not show that it is not open to him not to take any other factor into account at all. In fact, in the aforesaid letters, the Director General has asked for information as to the prices at which the said ships were being sold or agreed to be sold, and it is not possible for us to say at this stage that this was an idle inquiry or that it is not open to the Director General to consider whether the prices obtained for the said ships are adequate in granting his sanction to the sales. All that can be said is that the Director General will have to dispose of the applications for sanction made to him in accordance with law and following such guidelines as are laid down for considering such cases.

21. We may of course point out that when the interim order was passed, in all probability no safeguard in this connection was provided for because of the carelessness on the part of the office of the Director General himself. It has been shown to us that a notice was given by the Advocates of Jalyan Udyog and West Asia Shipping Co. to the Director General that on the day in question, an application would be made for admission of the writ petition and for interim relief, and, in spite of this, no one appeared on behalf of the Director General to point out that before breaking of the ships was permitted to be done by Jalyan Udyog, the sanction of the Director General should be provided for. In our opinion, this would not preclude the Director General from coming here by way of this appeal. The only result would be that it might affect the orders for costs, in the appeal filed by the Director General.

22. The order passed by the learned trial Judge will be varied to the extent that it is specifically provided that no breaking or dismantling operations on the aforesaid ships shall be undertaken by Jalyan Udyog till the sanction of the Director General and clearance by Respondents Nos. 1 to 3 in Appeal No. 1195 of 1984 is received. In the event of the Director General refusing his sanction unlawfully or in a manner not permitted by law or imposing conditions which cannot be imposed in law, it will be for Jalyan Udyog or West Asia Shipping Co. to take such action as is open to them in law. We do, however, provide that it will not be open to the Director General or the aforesaid respondents Nos. 1 to 3 to require that the clearance of the Metal Scrap Trade Corporation should be obtained before the scrapping or breaking of the ships is permitted.

23. When this judgment was about to be concluded, it was pointed out by Mr. Chinoy on behalf of the appellants in Appeal No. 1195 of 1984 that although sanction of the Director General might be required before appellant No. 1, namely, Jalyan Udyog is permitted to scrap the aforesaid ships, no such permission would be required if West Asia Shipping Co. as the owners of the said ships, want to scrap the said ships themselves and that should be clarified.

24. We are afraid no such clarification is called for. Under the interim order, Jalyan Udyog was permitted to beach the said ships and on the footing that it was Jalyan Udyog, the appellant No. 1 in appeal No. 1195 of 1984, who intended to carry out the breaking or dismantling operations. Moreover, it is Jalyan Udyog who has the no objection certificate to carry on the business of breaking ships in the Bombay Port. It is in these circumstances that the interim order provided that such breaking up or dismantling work on the ships was not to be carried out by appellant No. 1 till certain conditions were satisfied. The interim relief applied for clearly contemplated that permission to beach was being asked for only on the footing that it was appellant No. 1 who is entitled to carry out the breaking up operations. It would not, therefore, be at all fair or proper now to permit the appellant No. 2, West Asia Shipping Co., to take advantage of this order in so far as beaching is concerned, and thereafter to break up the vessels or dismantle the vessels.

25. Looking to all the facts and circumstances, there will be no order as to the costs of these appeals.

26. On the application of Mr. Bhatt, the operation of this order is stayed for a period of two weeks from the date of the signing of this judgment.


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