R.M. Lodha, J.
1. The learned Single Judge while dismissing Notice of Motion No. 2455/2000 with regard to prayer (a) taken out by the Vessel m.v. 'Sea Success I' and her owners S.S. Shipping Corporation Inc. in Admiralty Suit No. 32/2000 has referred to the Division Bench the following question for its decision:
'Whether a claim for unpaid insurance premia in respect of a ship amounts to 'necessary supplies' within the meaning of section 5 of the Admiralty Courts Act, 1861 so as to constitute maritime claim?
2. The aforesaid question is also involved in Appeal No. 739/2000 arising out of Notice of Motion No. 1376/1998 in Admiralty Suit No. 30/1998 and, therefore, both the aforesaid appeals were heard together and are being disposed of by this common judgment. Besides the aforesaid question common to both appeals, there are distinct and separate issues involved which we shall deal with at an appropriate stage.
3. At the outset, we may observe that we afforded extensive hearing to the learned Counsel appearing in the matter not because it was so required but the research done and the labour put by the learned Counsel justified such indulgence.
4. As the aforesaid question has been referred in Admiralty Suit No. 32/2000, we shall refer to the facts obtaining in that suit before we proceed to discuss the aforesaid question. The plaintiff in Admiralty Suit No. 32/2000 is a Protection & Indemnity Association incorporated under the laws of the United Kingdom which carries on business through its Managers, Liverpool & London P & I Management Ltd. at Liverpool, U.K. The plaintiff is mutual association of ship owners and offers insurance cover in respect of the vessels entered with it for diverse third party risks associated with the operation and trading of vessels. The defendant No. 1 vessel m.v. 'Sea Success I' is allegedly a sistership of vessels 'Sea Ranger and 'Sea Glory' which were entered for Protection & Indemnity (P & I) risks to the plaintiff Association. The said two vessels were entered into the plaintiff-Association for the policy year 1998-99 and 1999-2000 by defendant No. 2 viz. Singapore Soviet Shipping Co. Pte. According to the plaintiff Association, the defendant No. 1 vessel is owned and/or controlled by the defendant No. 2 through its wholly owned 100% subsidiary of S.S. Shipping Corporation Inc., Monrovia. The plaintiff's claim is in respect of insurance premium due and payable by the defendant No. 2 in respect of various P & I risks for which the defendant No. 2's vessels 'Sea Glory' and 'Sea Ranger' were insured by the plaintiff Association which according to them falls in the category of necessaries within the scope and ambit of section 5 of Admiralty Courts Act, 1861 (for short Act of 1861). The plaintiff has also averred that the defendant No. 1 vessel 'Sea Success I' is sistership of the two vessel 'Sea Glory' and 'Sea Ranger' in view of the beneficial ownership, management and control of all three vessels having vested in defendant No. 2. The averments made in the plaint are that pursuant to the request received by the plaintiff from defendant No. 2 as operators of the vessels 'Sea Glory' and 'Sea Ranger' for P & I as well as Freight, Demurrage and Defence (FDD) insurance cover for the said vessels, the plaintiff-Association accepted the said two vessels and covered them for P & I risks for the period 1998-1999 and 1999-2000 and plaintiff also accepted defendant No. 2 as member of plaintiff-Association. Pursuant to the insurance cover provided by the plaintiff to the two vessels-Sea Glory and 'Sea Ranger', certificates of entry of the said vessels into the plaintiff Association in accordance with its rules were issued. The cover commenced from 20th February of each policy year which is as per the practice of all P & I Associations worldwide. Upon the entry of the two vessels 'Sea Glory' and 'Sea Ranger' into the plaintiff Association defendant No. 2 became liable to pay all calls or premium levied by the plaintiff Association from time to time. It is the plaintiff's case that as per the rules of the Association the member is liable to contribute by way of calls such amounts as may be called upon by the directors of the plaintiff-Association. The insurance premium or calls that a member/owner is liable to pay to the plaintiff are:
(a) advance calls during the policy year:
(b) supplementary calls as may be determined by the Association after the closing of the policy year:
(c) release calls as may be determined by the Association on termination of the cover and
(d) overspill calls in respect of any overspill claim incurred by the Association.
For the policy year commencing on 20-2-2000 the plaintiff decided to stop offering insurance cover to all vessels entered with them and made arrangements for its existing members to obtain similar cover with other Associations. However, all existing members were liable to pay the premium as determined by the plaintiff for the previous policy years for which insurance cover had been effected. It is plaintiff's case that accordingly as per the rules of the Association, release calls which are part of the premium payable by the members after the expiry of the policy year were assessed and demanded by the plaintiff in respect of the vessels 'Sea Glory' and 'Sea Ranger' from defendant No. 2. The amount due in respect of 'Sea Glory' and 'Sea Ranger' aggregated to US $ 1,58,228.95 and debit notes dated 20-2-2000 were sent to defendant No. 2 in respect of the said amounts which were payable within 28 days from the date of debit notes but no payments were made and, therefore, plaintiff-Association by their fax dated 15-5-2000 conveyed to the intervening brokers that unless the outstanding amount of US $ 1,64,087,43 (increased for interest) was paid within that week, the Association shall take steps to obtain security and payment by arrest of defendant No. 2's vessel. Two payments of US $ 40,882.62 and US $ 2519.33 were made on 23-5-2000 and 31-5-2000 respectively leaving balance of US $ 1,13,394.22. As the balance remained unpaid by defendant No. 2 who were liable to make payments, the plaintiff-Association filed the present Admiralty suit praying for decree against defendant No. 1 vessel in the sum of US $ 1,18,194.89 together with interest at the rate of 12% per annum on the sum of US $ 1,13,394.20 from the date of the filing of the suit till the date of the decree and further interest on the said sum till payment and/or realisation. The plaintiff also has prayed for arrest of defendant No. 1 vessel m.v. 'Sea Success I' and her sale towards the satisfaction of the plaintiff's claim in the suit. The plaintiff-Association prayed for interim relief for arrest of defendant No. 1 vessel 'Sea Success I' along with her hull, engines, gears, tackle, machinery, bunkers, apparel, plant, furniture, fixtures, equipment and all other appurtenances. By way of ad interim order passed by this Court, defendant No. 1 vessel 'Sea Success I' was arrested. The defendant No. 2 viz. Singapore Soviet Shipping Co. Pvt. Ltd. initially appeared before this Court and undertook not to sell the vessel until posting of back/security. It appears that thereafter on 31-7-2000 the owners of the defendant No. 1 vessel viz. S.S. Shipping Corporation Inc. Monrovia, Liberia appeared before this Court and agreed to honour the undertaking of defendant No. 2 to furnish security and, accordingly, they were permitted to furnish security in the form of Bank Guarantee to be issued by Standard Chartered Bank, Bombay. On 1-8-2000 the learned Single Judge permitted the owners of defendant No. 1 vessel to furnish a rupee denominated Pay Order to be substituted by Bank Guarantee within two weeks and thus the Pay Order was furnished by the owners of the defendant No. 1 vessel 'Sea Success I' and defendant No. 1 vessel was thereafter free to sail. The owners of defendant No. 1 vessel on 11-8-2000 furnished a Bank Guarantee on the requisite terms placed on the Pay Order. On 22-8-2000 the defendant No. 1 vessel and her owners took out Notice of Motion No. 2455/2000 seeking rejection of the plaint for failure to disclose cause of action and/or dismissal of the suit for want of jurisdiction. The crux of the contentions raised by the owners of the defendant No. 1 vessel for rejection of the plaint for failure to disclose cause of action and dismissal of suit for want of jurisdiction is based on two grounds viz., (a) that a claim for unpaid release calls described by plaintiff as insurance premia does not constitute a 'necessary' within the meaning of section 5 of Act of 1861 and (b) that the vessel 'Sea Success I' is not a sistership of the vessel 'Sea Ranger' or 'Sea Glory'. The learned Single Judge by his order dated 1st/2nd February 2001 dismissed the notice of motion in so far as prayer Clause (a) viz. rejected of plaint for want of cause of action and/or non-disclosure of cause of action was concerned and referred the question which we have noted above for decision by Division Bench. In so far as alternative prayers made in prayer Clauses (b), (c) and (d) of the Notice of Motion were concerned, the learned Single Judge held that no order was necessary with regard to those prayers in view of the reference made by him to the Division Bench. Dissatisfied with the dismissal of Notice of Motion to the extent the learned Single Judge refused to reject the plaint for want of cause of action and/or non-disclosure of cause of action, defendant No. 1 vessel and her owners have preferred Appeal No. 226/2001.
5. Mr. Z.P. Bharucha, the learned Counsel appearing for the appellants in Appeal No. 226/2001 vehemently contended that a claim for unpaid insurance premium in respect of the ship does not constitute a 'necessary' as understood in maritime law. He submitted that insurance is meant primarily as a means of indemnifying and protecting the vessel owner against loss of his vessel and/or claims that may arise as a result of damage or loss caused by the vessel; an insurance is more concerned and connected with the financial operations and interest of the owner as distinct from that of a ship. The submission of Mr. Bharucha is that a perusal of maritime claim enumerated in Admiralty Court Act, 1840 and 1861, section 22 of the Supreme Court of Judicature Act, 1925, the 1952 Brussels Arrest Convention and the Administration of Justice Act, 1956 disclose one uniform feature viz. that if monetary claim qualifies for and is recognised as a maritime claim the same must bear a close and intimate connection with the ship in question and not its owner and, therefore, conceptually claim for unpaid insurance premia cannot be recognised as giving rise to maritime claim. The learned Counsel referred to section 5 of Act of 1861 and submitted that though the expression 'necessaries supplied' to any ship has not been defined statutorily but the expression 'necessaries' is a term of art and is used in the limited context of monetary claims made for goods or services supplied to a particular ship for her operation and maintenance. He submitted that claim for unpaid insurance premia cannot be regarded as 'necessaries' as a vessel may and indeed can operate and trade without insurance though it may be imprudent even to attempt it; in general on high seas no national law or conventional obliges a vessel owner to take out comprehensive P & I insurance. The learned Counsel heavily relied upon (The Heinrich Bjorn), 1883 (8) P.D. 151, (The Andre Theodore), 10, Aspinall 94, Stokes v. The Conference, 1887 NSWR 10, (The Emrald Transporter), 1985 (2) SALR 152. (The River 'Rima'), 1988 (2) LLR 193, (The Golden Petroleum), 1994 (1) SLR 92 and the provisions of aforesaid statutes and 1952 Brussels Arrest Convention and the Administration of Justice Act, 1956. Mr. Bharucha, the learned Counsel for the appellants also urged that amounts due towards unpaid insurance premia cannot be said to arise out of an agreement relating to the use or hire of a ship or an agreement relating to the carriage of goods in any ship and, also not a maritime claim under that head. In this connection, the learned Counsel referred to (Aifanourious), 1980 (2) LLR 403 and Gatoil International Inc. v. Arkwright-Boston . v. The Owners of the Ship 'Sea Friends', 1991 2 LLR 322. By extensively referring to the judgment of the Apex Court in m.v. 'Elisabeth' & others v. Harwan Investment and Trading Pvt. Ltd. Hanoekar House, Swatontapeth, Vasco-de-Gama, Goa : 1SCR1003 the learned Counsel urged that the entire endeavour of the Apex Court in m.v. 'Elisabeth' was to align and modernise the law by inter alia introducing into admiralty jurisprudence, the principles underlying the 1952 Brussels Arrest Convention. According to him, application of the Supreme Court judgment in m.v. 'Elisabeth' to the present case makes clear that amount allegedly due for unpaid insurance premia is not recognised as a maritime claim under Article 1 of 1952 Brussels Arrest Convention. The learned Counsel heavily criticised application of US Law to the contract of insurance which is governed by English Law and submitted that third system of law i.e. US Law to the arrest of vessel cannot be applied disregarding (i) the substantive law governing its contractual insurance viz. English law and (ii) the law of the forum i.e. lex fori viz. Indian Law. He would contend that 1999 Geneva Arrest Convention relating to the arrest of ships does not deserve to be made applicable to India as the said convention has not yet entered into force and presently only six countries viz. Bulgaria, Denmark, Ecuador, Finland, Norway and Pakistan have signed the same and out of these countries only Bulgaria has ratified it. According to him, vast majority of trading nations i.e. over 70 in number who command preponderant of word tonnage has given effect to the 1952 Brussels Arrest Convention and therefore 1952 Convention has near universal acceptance and can be regarded as international common law which does not include unpaid insurance premium as maritime claim. Mr. Bharucha also contended that the Regulations issued by Mumbai and Calcutta Port Trusts mandating all vessels entering at these ports to have P & I cover cannot be indicative of the fact that unpaid insurance premia is a 'necessary' under section 5 of the Admiralty Courts Act, 1861. Mr. Bharucha, thus, concluded that claim for unpaid insurance premia is not 'necessary'.
6. Mr. V.C. Kotwal, the learned Senior Counsel who appeared as an intervenor supported the submissions of Mr. Bharucha and additionally contended that the concept of 'necessaries' contemplated supply of goods or materials to a particular ship for her operation or maintenance and club cover is not comparable with the concept of 'necessaries' supplied to the ship because upon entering into a ship the owner becomes a member of the company, who pays the membership fee and undertakes to pay contribution towards the losses incurred by himself as well as other members of the club and his liability to pay these contributions is a liability collateral to the membership. Mr. Kotwal submitted that consideration for payment of the call is the undertaking to contribute towards losses of other members, management expenses, reinsurance losses etc. and the foundation of the contract is not the payment of a premium, but an agreement that each member should bear his aliquot share of the losses of the year covered by the policy. According to Mr. Kotwal, club cover merely postulates the ownership being indemnified by the club provided; (a) the managers in their absolute discretion decided to indemnify the member, (b) the member has fulfilled all the conditions of giving notice and complying with the directions etc. and (c) the member makes payment to the person claims against him the pay to be paid Clause. The learned Senior Counsel submitted that the contract between the member and a club is thus not a contract for traditional liability insurance much less a compulsory third party insurance similar to that under the Motor Vehicles Act or a employer's third party liability insurance under statutes and no third party can directly proceed against the club and, therefore, there is no basis for attributing to the P & I insurance policy the status of 'necessaries'.
7. Mr. Narichania, the learned Counsel appearing for respondents in Appeal No. 739/2000 adopted the arguments of Mr. Bharucha and Mr. Kotwal and further contended that the P & I call money required to be paid by ship owner to P & I club does not relate to cover for his particular ship which is entered with the P & I club. The call money is paid to indemnify his liability and liability of other members of the club and for the expenses of management, general expenses, outgoings, investment and reinsurance premium accrued or anticipated etc. He submitted that unpaid call money is in the nature of an unpaid contribution from the ship owner towards a common pool/fund from which liabilities of members are met. According to him, the unpaid P & I call monies are only unpaid contribution of the member and not the ship and the necessaries must be identified with the particular ship. He also relied upon The River 'Rima'. Mr. Narichania also contended that the circulars issued by Bombay Port Trust and Calcutta Port Trust making it mandatory for all vessels entering the respective port to have P & I cover does not make in any manner such P & I cover a necessary supplied to ship or its voyage because such circulars only relate to entry of vessel at the port but does not create any debt or monetary liability giving rise to a maritime claim. According to the learned Counsel such circulars have been issued by the Bombay Port Trust and Calcutta Port Trust for their own requirement and not for the benefit of the ship or the P & I club. He also submitted that in view of the 'pay to be paid' clause in all P & I clubs the third party has no recourse directly against the P & I club for recovery of any loss or damage caused to them and as the P & I cover is solely for the pecuniary benefit of the ship owner, a claim for unpaid insurance premia in respect of ship cannot be said to be covered by the expression 'necessary supplied' within the meaning of section 5 of the Admiralty Courts Act, 1861.
8. On the other hand Mr. Prashant Pratap, the learned Counsel appearing for plaintiff Association respondent No. 1 in Appeal No. 226/2001 strenuously urged that the expression 'necessaries' occurring in section 5 of the Admiralty Courts Act, 1861 must be construed in broad and liberal manner keeping in mind the ever changing requirement of a ship to be able to trade in commerce and in the present day context the insurance should be considered 'necessary' for the operation of the ship. He submitted that it is mandatory for a vessel to have a valid P & I insurance cover at major ports in India and consequently at least as far as India is concerned insurance is a 'necessary'. The learned Counsel would urge that the absence for valid P & I insurance cover as required by Port Regulations renders a vessel legally unseaworthy and consequently in breach of statutory requirements and hence P & I insurance is deemed to be mandatory and should be considered as a 'necessary' for a vessel. He referred to the Inland Vessels Act, 1917 (Amendment in 1977), the Merchant Shipping Act, 1956 (Amendment in 1983) and the Multimodal Transportation of Goods Act, 1993 (Amendment in 2000) to show the trend of domestic legislation in India towards making insurance compulsory and mandatory for ships and multimodal transport operators and submitted that there is no good reason for holding that insurance is not necessary by following restricted view of English courts. Mr. Pratap submitted that the provisions of 1999 Geneva Arrest Convention deserves to be applied in the light of the observations made by the Apex Court in m.v. 'Elisabeth', particularly in the absence of any codification of maritime claims by statutes in India and any domestic legislation to the contrary. He highlighted during the course of arguments that several common law countries such as Chanda, South Africa and Australia as well as communist regimes like China and Korea have given claim for insurance in respect of a ship, the status of a maritime claim and as the unpaid insurance premium is one of the maritime claims specified in 1999 Geneva Arrest Convention, there is no reason to not to hold unpaid insurance premium as a claim falling within the Admiralty jurisdiction of this Court. He referred to various circulars issued by Bombay Port Trust and Calcutta Port Trust and also the judgment of American Court in Fred S. James and Co. etc. Equilease Corporation et al., 793 F.d. 598 5th Cirlj. 1986.
9. Mr. G.A. Rebello, the learned Counsel appearing for appellants in Appeal No. 739/2000 supported the submissions of Mr. Pratap and further contended that a vast number of States have legislatively provided for unpaid premia as a maritime claim. According to him, the United States of America (U.S.A.) has expanded the definition of 'necessaries' to include unpaid premia in the absence of provision under the enactments. He cited several countries such as South Africa, China, Australia etc. having stipulated that unpaid premia constitutes into a maritime claim. Mr. Rebello would urge that P & I cover is in the nature of 'necessaries' supplied and/or services rendered if one looks into the ramifications of a vessel attempting to trade without protection and indemnity. By referring to the various services extended by the Association, Mr. Rebello submitted that without P & I cover vessel is not in a position to undertake any maritime adventure. He also submitted that P & I cover is far reaching as it caters to the eventualities in respect of the seamen liabilities, passenger liabilities and third party liabilities attending to the complement, stowaways, supernumeraries, life salvage and persons in distress and also liabilities arising as a result of collision, damage to the ships, damage to property, pollution, wreck removal, towage etc. and, therefore, what are 'necessaries' today are entirely different from what were necessaries during historical times where trading was relatively simple. The learned Counsel submitted that though India is not signatory to numerous international conventions, in view of the dictum in m.v. 'Elisabeth', the principles can be adopted into our local context. Mr. Rebello referred to the International Convention on a Civil Liability for oil pollution, Brussels which requires compulsory insurance. The Merchant Shipping (Oil Pollution) Act, 1961 which makes insurance compulsory, the Major Port Trusts Act which entitles the major Port Trusts to issue notifications having the force of law and such notifications issued by Bombay Port Trust and Calcutta Port Trust entitling only ships having a valid P & I cover to enter into harbour in exercise of the said power. The Indian Merchant Shipping Act, 1958 (particularly section 352N), The Inland Vessels Act which requires a compulsory third party risk insurance cover and the most standard format of charter-parties having printed clause making it mandatory for a vessel to have a valid protection and indemnity cover to buttress his argument that protection & indemnity club cover/marine insurance is necessary within the meaning of section 5 of the Act of 1861. Mr. Rebello relied upon the judgment in Caterpill Finance v. Alential Chalice, 1994 AMC 1767, m.v. Tiang Yung v. Shaw Wallace, : AIR1988AP331 , (m.v. Agios Nikolaos), A.I.R. 1985 Bom 281 and the order dated 18-10-1995 passed by the learned Single Judge of this Court in Admiralty Suit No. 60/1995 (m.v. 'Negotiator'). Mr. Rebello, thus, concluded that in today's modern shipping context and the expansive jurisdiction trend recommended by Supreme Court in m.v. 'Elisabeth' no doubt is left that claim for unpaid insurance premia is a claim towards necessary for a ship.
10. In England the jurisdiction of the High Court of Admiralty was exercised in rem in such matters as from their very nature would give rise to a maritime lien e.g. collision, salvage, bottomry and arrest of property other than the ship concerned did not enter into the question. After Admiralty Court Act, 1840, the jurisdiction of High Court of Admiralty in England was extended to cover certain matters in respect of which there was no maritime lien i.e. necessaries supplied to a foreign ship. The Supreme Court in m.v. 'Elisabeth' has noted English statues on admiralty jurisdiction and the power exercised by English Courts over foreign ships and being benefited thereby it would be sufficient, without ourselves tracing the history of admiralty jurisdiction and legislation, to refer to paragraphs 35, 36, 37, 38, 39, 40 and 41 which read thus:
'35. The Admiralty Court Act, 1840 was the first of a series of statutes extending and defining the jurisdiction of the High Court of Admiralty in England. This Act was followed by the Admiralty Court Act, 1861 conferring larger powers upon the High Court of Admiralty. Section 6 of this Act empowered the High Court of Admiralty to assume jurisdiction over foreign ships in respect of claims to cargo carried into any port in England or Wales. Significantly, the Act did not apply to outward cargo. Section 7 of the Act, however, conferred jurisdiction on the High Court of Admiralty 'over any claim for damage done by any ship'. This Act was followed by the judicature Act of 1873, which came into force in 1875 and which merged the High Court of Admiralty with the High Court of Justice resulting in a fusion of Admiralty law, common law and equity. It is of interest to note that the provision contained in section 6 of the Admiralty Court Act, 1861 limiting the jurisdiction of the Admiralty Court to claims respecting inward cargo was discarded by the Administration of Justice Act, 1920 which extended the jurisdiction of the High Court 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 Act thus applied to both inward and outward cargoes.
36. The Admiralty Court Act, 1861 and the subsequent enactments were consolidated by the Supreme Court of Judicature (Consolidation) Act, 1925. The admiralty jurisdiction of the English High Court was redefined by this Act to include various matters such as any claim 'for damage done by a ship', any 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'. This jurisdiction was, however, not available if 'at the time of the institution of the proceedings any owner or part owner of the ship was domiciled in England' (See section 22(i), (iv) and (vii). By the Administration of Justice Act, 1928, the jurisdiction vested in the High Court by the Supreme Court of Judicature (Consolidation) Act, 1925 was declared to belong to all divisions of the High Court. The Admiralty Court was thus empowered to entertain, apart from actions in rem, any claim in personam which could be brought in any other division of the High Court.
37. By the Administration of Justice Act, 1956, the admiralty jurisdiction of the High Court was further widened and redefined 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 the 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 or aircraft 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 this section removed the restriction based on the ownership of the ship. It says that the jurisdiction applied to all ships or aircraft, 'whether British or not and whether registered or not and wherever the residence or domicile of their owners may be' and 'in relation to all claims wheresoever arising'. The jurisdiction in regard to the questions or claims specified under section 1(i) includes any claim for damage done by a ship', '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'. See Clauses (d), (g) and (h).
38. These claims are now specifically mentioned under Clauses (e), (g) and (h) respectively of section 20(2) of the Supreme Court Act, 1981, amongst other claims, as falling under the Admiralty jurisdiction of the High Court. Part II of this Act is derived substantially form Part I of the 1956 Act which was enacted to give effect to the Brussels Convention of 1952 relating to the arrest of sea-going ships and the rules concerning civil jurisdiction in matters of collision (Cmd 8954).
39. Section 20 of the Supreme Court Act, 1981 enumerates various questions and claims falling under the admiralty jurisdiction of the English High Court. Apart from matters covered by the Merchant Shipping Acts, 1894 to 1979 (referred to in sub-section (3)) and certain other matters, various questions and claims are enumerated in sub-section (2). They include '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; any claim for damage received by a ship; and any claim for damage done by a ship.'
40. Sub-section (7) of this section specifically provides that the admiralty jurisdiction of the High Court extends to 'all ships or aircrafts, whether British or not and wherever the residence or domicile of their owners may be, and to all claims wherever arising'. It reads:
(a) in relating to all ships or aircraft, whether British or not and wherever the residence or domicile of their owners may be;
(b) in relation to all claims, wherever arising (including) in the case of cargo or wreck salvage, claims in respect of cargo or wreck found on land; and
(c) so far as they relate to mortgages and charges, to all mortgages or charges, whether registered or not and whether legal or equitable, including mortgages and charges created under foreign law;
Provided that nothing in this sub-section shall be construed as extending the cases in which money or property is recoverable under any of the provisions of the Merchant Shipping Acts, 1894 to 1979.'
This jurisdiction is wide enough to cover all claims in tort or contract arising out of any agreement for carriage of goods by sea.
41. The whole jurisdiction of the English High Court is now vested in all the divisions alike. All divisions of the High Court and all the Judges of that Court have equal power, authority and jurisdiction, although admiralty actions are assigned to the Queen's Bench Division and taken up by the Admiralty Court. The special requirements of an action in personam, namely, the habitual residence or place of business of the defendant or the cause of action having their nexus with England and Wales or the determination of a connected matter in the English High Court or the submission; of the defendant to the jurisdiction of that Court, are not applicable to a proceeding commenced, as an admiralty action in rem. See Order 75, Rule 4(3) of the Rules of the Supreme Court, 1965.'
11. Section 5 of the Admiralty Court Act, 1861 provides thus:
'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.'
12. The important question referred by the learned Single Judge to be decided by us and which is indeed a vexed and controversial one is as to what is real concept and purport of the term necessaries used in section 5 of the Act of 1861. Though the question is confined to whether claim for unpaid insurance premia in respect of ship amounts to 'necessaries supplied' within the meaning of section 5 of the Admiralty Courts Act, 1861 so as to constitute a maritime claim, but we find the ancillary question that also arises for determination is whether a claim for unpaid insurance premia in respect of a ship is otherwise maritime claim giving rise to admiralty cause?
13. Statutorily by the Admiralty Court Act, 1840 the Court of Admiralty acquired jurisdiction over claims for necessaries supplied to any foreign ship or seagoing vessel. By the Admiralty Court Act, 1861 in respect of claims for necessaries supplied to any ship elsewhere than in the port to which the ship belonged, unless it was shown to the satisfaction of the Court that no owner or part owner of the ship was domiciled in England or Wales was extended to the jurisdiction of Court of Admiralty. The expression 'necessaries' has not been defined in the Act of 1861. However, it seems in England the word 'necessaries' had acquired by and large definite meaning by judicial pronouncements. Per Abbott, C.J., in Webster v. Seekamp, 1821 (4) Ald. 352 the term necessaries has been defined to mean such as are fit and proper for the vessel upon her voyage and such as a prudent owner himself, if present, would order. In the 'Perla' (swab 352) it has been observed that the word 'necessaries' needs to be given a liberal meaning and where 'necessaries' are supplied for the use and benefit of foreign ship, the presumption is that ship is liable. The question whether the premium for insurance could be regarded as 'necessaries' directly arose in The Heinrich Bjorn. Lord Hannen opined.
'........I am however of opinion that premiums for insurance cannot be regarded as necessaries. The expression 'necessaries supplied' in 3 & 4 Vict. Clause 65, section 6, which gave the Admiralty Court jurisdiction over foreign ships, though it is not to be restricted to things absolutely and immediately necessary for a ship in order to put out to sea, see The Perla (1), must still be confined to things directly belonging to the ship's equipment necessary at the time, and under the then exiting circumstances for the services in which the ship is engaged see The Alexander. (2) But the insurance of a vessel is something quite extraneous to its equipment for sea, and however prudent it may be for an owner to insure it is a prudence exercised for his own protection and not for the requirements of the vessel, in the sense in which the word 'necessaries' is used in the statute.'
14. The Heinrich Bjorn was followed in the Andre Theodore (supra) and it was held by the Gorell Barnes, J., thus:
'.....Lord Hannen took, which seems to be to be quite right, was that there is a broad distinction between money expended on actually fitting the ship out and working her for the purpose of her navigation, and moneys which are merely expended for the purposes of protecting a shipowner in the event of her being lost. They are not in the least necessary for the ship; they are not supplied or furnished to the ship: they are mere moneys which are paid to insure the shipowner against his being out of pocket in case the ship is lost.'
15. The Heinrich Bajorn was also followed in Stokes & others v. The Conference (supra) and it was held that the insurance of a ship is not a necessary. The same view appears to have been taken by Court of Durban in M.V. Emerald Transporter with reference to the provisions contained in Admiralty Jurisdiction Regulation Act 105 of 1983 wherein it was held that services which injured solely to the benefit of the shipowner, as was the position with the contracts of insurance, could not be classed as 'necessaries'. It may be said that the observations were made by the Court in Durban in the context of ranking of claims against a fund comprising of sale proceeds of the vessel M.V. 'Emrald Transporter.'
16. Article 1(k) of 1952 Brussels Arrest Convention which incorporates 'goods or materials wherever supplied to a ship for her operation or maintenance' as a maritime claim came to be considered by the House of Lords in The River Rima. The House of Lord noted that Article 1(1) of the Convention listed 17 types of claims in paragraphs lettered (a) to (q) and the list of the types of the claims therein was derived as a whole from the list of types of claims in section 22 (1)(a) of 1992 Act which gave to the High Court of Admiralty jurisdiction over claims for 'necessaries' which had previously been given, though not in precisely the same terms, to the High Court of Admiralty, first, by section 6 of Admiralty Court Act, 1840 and later by section 5 of Admiralty Court Act, 1861. House of Lords held, 'In other words, what is now called a claim in respect of goods or material 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.'
17. The expression 'goods supplied to a ship for her operation and maintenance' occurring in Article 1(k) of 1952 Brussels Convention was dealt with by Singapore High Court in Golden Petroleum (supra) and it was held thus:
'Having regard to all the authorities referred to, I am of the view that the phrase operation of the ship even if construed liberally, would necessarily entail an aspect of consumption or an element of internal activity, function, utility or exploitation of the goods supplied, within or by the ship. Lest it is misunderstood. I hasten to add that by internal function or activity, et seq. I am not attempting to restrict the meaning of the word operation only to the ship's mechanical or motility aspects which enable her to move from port to port. I accept Mr. Selvadurai's contention that no distinction can 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 see William Fleming v. Equator, at pp. 2-3. Nevertheless, the historical background referred to by Lord Brandon in The River Rima and the observations by Sir John Donaldson MR and Nourse LJ in the Court of Appeal, connote that the goods supplied to the ship must be linked to the working or running of that ship. 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 the ship only to be unloaded or disposed of soon thereafter by sale.'
18. The question with which we are faced is whether the construction of the word 'necessaries' given in The Heinrich Bjorn, The Andre Theodore, Stokes etc. could be accepted and followed by us, albeit we are not bound by such view, in so far as the claim towards insurance premium is concerned in the changing times when shipping industry has grown tremendously. Whatever be the misgivings of the Admiralty jurisdiction of the Indian High Courts earlier and restrictions put by themselves, after the authoritative pronouncement by the Apex Court in m.v. 'Elisabeth', no doubt is left that though Colonial statutes continue to remain in force by reason of Article 372 of the Constitution of India but that does not stultify the growth of law or blinker its vision or fetter its arms. In m.v. 'Elisabeth' it has been held that the fact that the High Court continues to enjoy the same jurisdiction as it had immediately before the commencement of the constitution does not mean that a matter which is covered by Admiralty Court Act, 1861 cannot be otherwise dealt with by the High Court in exercise of its manifold jurisdiction which is unless barred, unlimited. The Supreme Court went on to observe that to the extent not barred expressly or by necessary implication, the judicial sovereignty of this country is manifested in the jurisdiction vested in the High Courts as superior courts. There is, therefore, neither reason nor logic in imposing a fetter on the jurisdiction of these High Courts by limiting it to the provisions of an imperial statute of 1861 and freezing any further growth of jurisdiction. This is all the more true because the Admiralty Court Act, 1861 was in substance repealed in England a long time ago. The Supreme Court went on to observe. 'Maritime law is as much a part of the general legal system as any other branch of the law. With the merger of the Admiralty and common Law Courts in England in 1875 and the fusion of their legal precepts and concepts, this branch of the law, despite its peculiarities about actions in rem, is no longer treated as a separate and independent branch. It is not the exclusive preserve of the English High Court, for certain country courts in that country are specially authorised to exercise this jurisdiction. This is much more true of the civil law system where no distinction is drawn between maritime law and other branches of the law, and they are administered alike by the same courts or tribunals.' In tracing the history of admiralty law in India, the Apex Court held, 'it is likewise misleading and incorrect to confine it to statutes. Statutes have been codifications of rules of law as developed by usage, practice and custom'. The Apex Court further held:
'64. Where statutes are silent and remedy has to be sought by recourse to basic principles, it is the duty of the Court to devise procedural rules by analogy and expediency. Actions in rem, as seen above, were resorted to by courts as a device to overcome the difficulty of personal service on the defendant by compelling him to enter appearance and accept service of summons with a view to furnishing security for the release of the res; or, in his absence, proceed against the res itself, by attributing to it a personality for the purpose of entering a decree and executing the same by sale of the res. This is a practical procedural decide developed by the courts with a view to rendering justice in accordance with substantive law not only in cases of collision and salvage, but also in cases of other maritime liens and claims arising by reason of breach of contract for the hire of vessels or the carriage of goods or other maritime transactions or tortious acts, such as conversion or negligence occurring in connection with the carriage of goods. Where substantive law demands justice for the party aggrieved and the statute has not provided the remedy, it is the duty of the Court to devise procedure by drawing analogy from other systems of law and practice. To the courts of the 'civil law countries' in Europe and other places, like problems seldom arise, for all persons and things within their territories (including their waters) fall within their competence to deal with. They do not have to draw any distinction; between an action in rem and an action in personam.
65. It is likewise within the competence of the appropriate Indian Courts to deal in accordance with the general principles of maritime law and the applicable provisions of statutory law, with all persons and things found within their jurisdiction. The power of the Court is plenary and unlimited unless it is expressly or by necessary implication curtailed. Absent such curtailment of jurisdiction, all remedies which are available to the courts to administer justice are available to a claimant against a foreign ship and its owner found within the jurisdiction of the High Court concerned. This power of the Court to render justice must necessarily include the power to make interlocutory orders for arrest and attachment before judgment.'
19. The Supreme Court did observe that Indian statutes leg behind any development of international law and though the Supreme Court Act, 1981 of England has catalogued maritime claims with reference to the unified rules adopted by the Brussels Convention of 1952 on the arrest of Seagoing ships and although India has not adopted the various conventions, the provisions of these conventions are the result of international unification and development of the maritime laws of the world and can, therefore, be regarded as the international common law or transitional law rooted in and evolved out of the general principles of national laws, which, in the absence of specific statutory provisions, can be adopted and adapted by courts to supplement and complement national statutes on the subject. In paragraph 89 of report the Apex Court observed thus:
'89. All persons and thing 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 claim, wherever arising, is a demonstrable manifestation and an essential attribute of territorial sovereignty. This power is recognised by several international conventions. 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 coordinating 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 this regard. Delay in the adoption of international conventions which are intended to facilitate trade hinders the economic growth of the nation.'
20. At this stage it would be advantageous to appreciate the nature of the P & I club and the insurance cover provided by such clubs. In the beginning P & I clubs were loose associations of shipowners with no collective rights or exposure to outside legal action but today P & I club is definitely a corporation. All P & I clubs in UK are registered companies limited companies with no share capital because essentially these are non-profit making companies. Upon entering the ship the owner becomes member of the P & I club and he pays the membership fee and undertakes to pay contribution towards the losses incurred by other members of the club which are payable by the Company. In other words the concept of guarantee is based upon a reciprocal system, that each member is cast under a duty to refund the damages suffered by any one of them and pay, on mutual basis, each other's claims. In mutual insurance association or P & I clubs each member would be both the assured and insurer. The member is insured as to his own property in the club by all other members in proportion to their respective properties in it and at the same time he would be an insurer in the proportion of his own property in the club for the property of each of others. Mutual insurance associations or P & I clubs indemnify the members against certain liabilities which are not covered by ordinary form of policy, such as, liabilities for claims by members of the crew, for life salvage, for the loss or damage to goods carried on their ships, for wreck removal, for damage to piers, jetties etc., Some Associations also undertake the conduct of legal proceedings in respect of such matters as the recovery of freight, dead freight and demurrage, and claims by cargo owners. The Associations also provide protection against war risks. These mutual insurance are made subject to memorandum and Articles of Association and to the mutual insurance association's rules and regulations which are usually by express reference incorporated in the policy. All clubs both with large tonnages and small have established a net work of correspondents (or representatives) familiar with P & I matters in all significant ports of the world. Under the principle of mutuality members share each others liabilities, contribute only towards the total cost of claims and cost of administration and reinsurance. The members, by supporting one another, have a direct interest in preventing and reducing claims. Each member is required to contribute to the funds of the club on the basis of an initial estimated total cost for a policy year. This contribution is made partly as advance call and partly as supplementary call or calls, determined by the directors as needed to meet the overall liabilities of the club.
21. In India, it may be noted that major ports like Bombay and Calcutta have issued circulars in exercise of the powers conferred upon them that all ships calling at the concerned port must have a valid P & I cover or equivalent cover and a certificate of the entry of the vessel with such P & I club should be submitted to the port and the vessel which does not have such cover will be denied entry to the port. Without multiplying such circulars, we reproduce one of such circulars issued by Mumbai Port Trust on 8-8-1996 and other by the Calcutta Port Trust on 26-6-2001. Mumbai Port Trust's circular dated 8-8-1996 read thus:
'MUMBAI PORT TRUST'
Deputy Conservator's Office
Port House, 1st floor,
Shoorji Vallabhdas Marg,
No. DC/C.SH/2/4455 8th August, 1996.CIRCULAR
Bombay & Nhave/Sheva Ship-Intermodel
3, Rex Chambers Ground floor,
Valchand Hirachand Marg,
Ballard Estate, Mumbai-400 001
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 time to ensure that such cargoes will be loaded on duly protected ships.
The Circular dated 26-06-2001 issued
by Calcutta Port Trust reads thus:
'CALCUTTA PORT TRUST'
HARBOUR MASTER (PORT) S OFFICE
CIRCULAR NO. 10 DATED 26-6-2001.
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. Claim 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).
Harbour Master (Port).
copy to: DMD/TMN/FA
& CAO/Secretary/H.M. (R).'
22. The P & I Association amongst others extend services like:-
(a) The club is immediately advised in respect of any incident which takes place in any port in any country either directly by the association or through their local correspondents who have been appointed in various parts of the world:
(b) The assistance to the Master and the complement in relation to the port, customs and other municipal regulations that may be prevalent in a particular port, by engaging legal advisors in the matter:
(c) Appointing experts, surveyors or inspectors as the case may be when the vessel is faced with problems with the port or other authorities or in her navigation such as in case of grounding etc. who inspect and/or take survey of the situation not only in respect of the vessel, but also in respect of the goods carried on board the vessel.
(d) Appointing lawyers, participating in the proceedings in various courts, such as enquiries and investigations under the provisions of Merchant Shipping Act, 1958, supervising all that is required to be supervised in the process of ships voyage and/or her employment in a particular port in any matter touching therewith and
(e) Rendering services to the complement on board viz. to the Master as and when he faces difficulties to assist him in lodging notes of protest before notaries or other legal advisors, arrange for the repatriation of stowaways, initiating release of vessels from arrest and give the clubs letter of indemnity which are accepted in various ports of the world, arrange for surveyors to attend to investigation, quantifying the damage that may be caused either to the cargo or to the vessel or in case of an accident to any of the crew members attend to hospitalisation and medical needs and variety of other situational exigencies that may arise from time to time as though the owners themselves were attending to these problems.
22-A. It has also been brought to our notice by the plaintiff association that the Western India Shippers Association which is an association of shippers to export cargo has issued directives to its members viz. shippers to ensure that only vessels which have been insured for hull and machinery and entered with the P & I Association are used for shipment of export cargo port and custom authorities also look to protection and indemnity clubs for giving indemnities on behalf of the vessels for all situational and potential claims against the vessel while she is in port and that the vessel which does not have P & I cover is reluctantly dealt with by charterers, shippers, consignors, consignees, traders and port and custom authorities.
23. In the aforesaid background and for a ship to be able to trade in commerce and in the present time context, we feel that the term 'necessaries' has to be given broad and liberal meaning. The maritime law has developed over a period of many centuries and is still in process of development. It cannot be confined to historical characteristic principles, rules and practices in fast developing international trade and commerce. The expression necessaries has to be given meaning within the modern context of shipping and commerce and commercial expedience cannot be over looked and ignored altogether. Maritime law, to a great extent is international law and it is important for commercial reasons that the courts in interpreting its principles and terms have regard to broader global view and felt necessities. The expression 'necessaries' or in other words 'goods and materials supplied or services rendered to a ship for her operation and maintenance' needs to be construed keeping aforesaid position in mind. The test to be applied, which we feel is a reasonable test, is that goods supplied or services rendered to the ship must be sufficiently and proximately connected with the operation of the ship. The words operation of the ship cannot be construed narrowly and must be viewed as a complete commercial operation. All things reasonably requisite for a voyage or maritime adventure on which the ship is bound to be covered and held to come within the term necessaries. The operation of the ship would necessarily include operation of ship necessary for voyage. Even in England no distinction is drawn between the necessaries for the ship and necessaries for the voyage. The said test when applied in the context of P & I insurance cover would leave no manner of doubt that P & I insurance, which is mandatorily required by some of the major ports in India to enable such ships to enter respective port, can be construed to be necessary within the meaning of section 5 of Admiralty Courts Act, 1861. It is true that in England the concept of cover given by P & I Association has not been accepted as necessary, but several other countries such as South Africa, China and Australia statutorily provide that unpaid premia constitutes into a maritime claim. So far as U.S.A. is concerned, it has expanded the definition of 'necessaries' to include unpaid premia in the absence of provisions under the enactments. In Equilease Corporation, in the appeals arising from United States Statutes District Court for the Eastern District of Louistana, the Circuit Judge held thus:
'(3) Equilease next argues that no maritime lien arises in favour 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 Gro v. Steel Gas Screw Lorraine K, 310 Fd 547 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.
As a mortgage creditor of the steamboat liberty, Learned argued to this Court in 1899 that policies of insurance on the Liberty were for the sole and exclusive benefit and use of the owners of the vessel, in no way inuring to the benefit of the ship itself. This Court agreed with Learned and held that no lien arose on the vessel for premiums due on the insurance policies. The Court reasoned that because the policies were solely for the benefit of the vessel's owners, they did not benefit the ship and 604 the ship could therefore not be held accountable for them.
Learned was based on an interpretation of State law prior to the passage of the Federal Maritime Lien Act, General Maritime Law in 1899 denied a lien for materials and services rendered in the waters of the vessel's home state. (The Roanoke), 189 U.S. 185, 23 S. Ct. 491, 47 L.Ed. 770. Since the Liberty travelled only in a Louisiana bayou, it fell within this 'home port' doctrine and no federal maritime lien could attach for insurance premiums or for any other supplies and materials furnished in the home port upon the credit of the owners. The learned Court also held that no lien arose in favour of the insurer's under either federal law or Louisiana law, because it deemed the insurance policy to be a contract 'written for the sole and exclusive benefit of the owners of the steamboat.' Learned, 94 F. at 883. See also (The Prilla), 21 Supp. 383; 279 F. 921. Equilease urges us to apply Learned and to find that marine insurance in 1986 inures solely to the benefit of a ship's owner, in no way aiding, the ship, and therefore that no federal lien can be held 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 Pennsylvania), 22 F. 109, aff 4 sub nom. Insurance Co. of Pennsylvania v. The Proceeds of the Sale of the Barge Waubauschene, 24 F. 559. 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. Equilease, 568 F. Supp. 1263. Equilease itself required all of its affiliate companies to carry adequate insurance and would not do business with any company that failed to do so. Equilease, 568 F. Supp. 1263. The Bareboat Charter Party entered into by the Equilease shelf' corporations with Dunnamis required that throughout the term of the charter 'the charterer shall, at his own expense, keep the vessel insured against ... risks .... in an amount ... not less than the greater of the initial cost of the vessel or the full commercial value of the vessel .... The agreement specifically required insurance coverage for property damage, personal injury and death to third parties and crew, breach of warrant, pollution, cargo and tower's liability, and provided that war risk hull and indemnity insurance would be required at the owner's discretion. The Charter Party also mandated that any insurance payments for losses greater than $ 10.000 (but less than total loss of the vessel) were to be made to the owner, or to a designated mortgagee, who was required to apply such funds directly for repairs, liabilities, salvage, claims or other charges and expenses, or to reimburse the charter for any money he had advanced for repairs and claims covered by the policy. In the light of this type of agreement, the nineteenth century view of marine insurance as an optional contract, entered into by a ship owner at his own discretion solely for his own personal indemnity, must fade into the shadows of history.
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.'
24. We feel persuaded by the reasoning in Equilease which is more in conformity with commercial expediency. The view which has been taken in the Heinrich Bjorn and followed in other cases cited supra that monies which are expended on the insurance of the ship is for the purpose of protecting the ship owner and not for the ship, can hardly be accepted in the present times, particularly in the Indian context where quite a few major port Trusts have notified that no ship shall be permitted to enter respective port without having P.& I cover to have a maritime adventure and the voyage and the ship is required by many agencies to have P & I cover and, therefore, such ship today needs, P.& I cover before they deal with the ship. The ships which are entered with P & I clubs are operated for commercial purposes and as pointed out above they need P & I cover to carry on its normal business and complete commercial operation and, therefore, it cannot be said that P & I cover is meant for the benefit of the ship owner alone and not for the ship. In growing trade and commerce and the changing requirement of the ship to have P & I cover by various agencies including statutory authorities as well as charterers, shippers, etc., P & I insurance is a must to keep vessel in commerce and, therefore, has to be held as a necessary to the ship also and not to the ship owner alone. The law must march ahead and the term 'necessary' as understood in maritime law cannot be left stagnant and has to be construed liberally and in a broad manner to meet the present needs and contexts particularly in the country like India where maritime claims are not catalogued. Even in England the definition of the word 'necessaries' which was earlier confined to indispensable repairs, cables, sales and provisions have been given wider significance and gradually amplified by modern requirements inasmuch as Canal dues, dock dues, custom house and immigration services fee etc., which prevent the ship from sailing have been treated as covered by the expression 'necessaries'; a fortiori in the Indian context where some of the major ports do not permit an entry to the vessel which do not have P & I cover, there is no reason why such insurance premium be not treated as 'necessaries' for the ship as only such insurance would enable the vessel to enter into some major ports in the country. In other words, P & I cover of a vessel seems to be not only an act of prudence of the ship owner, traditionally which had been the view in England, but without such cover the vessel is not in a position to undertake complete maritime adventure and, thus it can safely be said that what was considered earlier to be prudent act to have insurance of the ship centuries ago, has now in the changing time become necessity and, therefore, a necessary for the ship. Be it noted that the International Convention on a Civil Liability, Brussels requires compulsory insurance . The Merchant Shipping (Oil) Pollution Act, 1961 make insurance compulsory. The Indian Merchant Shipping Act, 1958 makes the insurance compulsory under section 352-N. 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. When the various legislations require insurance of the ship, in modern day connotation, it is not possible to hold that P & I cover is not necessary for a ship for her operation. As a matter of fact, the ship having been given legal personality, her rights and obligations many a time overlap the rights and obligations of her owner and what is for the benefit of the ship owner also become for the benefit of the ship as well.
25. Before the Division Bench of Andhra Pradesh High Court, inter alia, the question was whether the amount paid by the plaintiff towards the liability of a foreign owner of charterer towards income tax on freight, as contemplated by section 172(3)(6) of Income-tax Act to enable the ship to move out of the harbour can be recovered in a suit under admiralty jurisdiction akin to the 'necessaries supplied' for the ship. The Division Bench held that law on the subject in our country has been stagnating since 1890 and though section 1 of Administration of Justice Act, 1956 in England does not show that amount paid by agent to a charterer towards income-tax liability on a freight payable by the charterer can be recovered under that section, yet it is necessary for our law to keep abreast with the developments in the other fields of activity and, therefore, it will be unjust to deny the inclusion of such claim in a suit under the admiralty jurisdiction. The Andhra Pradesh High Court, thus, construed the expression 'necessaries' in a broad manner to make the maritime law in this country more effective by including even claim towards income-tax liability on a freight payable by the charterer covered under the expression 'necessaries' supplied to the ship. The Division Bench of Andhra Pradesh High Court held thus:
'The short controversy is whether such a payment of income tax by the plaintiffs as agents of the charterer could be recovered by them in an action; in admiralty jurisdiction as is akin to the supply of necessaries to keep the ship a float and moving. According to the law in England in the 19th century, various liens were being added to the list of the necessary supplied to the ship which could be recovered in an action in admiralty jurisdiction subsequently statutory provisions have been made specifying items which can be claimed under this head under the admiralty jurisdiction. Section 1 of the Administration of Justice Act, 1956 in England specify the various claims which can be entertained by the Court under admiralty jurisdiction. However, the law on this subject in our country has been stagnating since 1890. Though section 1 of the English Act does not show that an amount paid by an Agent to a Charterer towards income tax liability on a freight payable by the Charterer can be recovered under the section, but unless the various statutory provisions of that country are considered it will be difficult to say whether it can recover in England today or not. However, it is necessary that our law keeps abreast with the developments in the other fields of activity. It will be unjust to deny the inclusion of such claim in a suit under the admiralty jurisdiction. Otherwise the plaintiff will be left without an effective remedy against foreign owners or charters of the ship.'
26. The Geneva Arrest of Ship Convention, 1999, provides under Article 1(1)(q) claims for insurance premium (including mutual insurance calls) in respect of the ship payable by or on behalf of ship owner or demise charterer as maritime claim. The Geneva Arrest Convention, 1999 was adopted on March 12, 1999. Before its adoption a draft revision of Brussels Arrest Convention 1952 was adopted by the Committee Maritime International (CMI) at its Conference in Lisbon in 1985. Lisbon draft was submitted by CMI to the International Maritime Association (IMA) and United Nations Conference of Trade and Development (UNCTAD). The Joint Internal Group of Experts on maritime liens and mortgages and related subjects (JIGE) recommended in 1989 that further work on revising arrest Convention 1952 be postponed pending the adoption of new maritime lien and mortgages convention. Following the adoption of maritime mortgages and liens 1993, work resumed within JIGE on revising the Brussels Arrest Convention 1952. The JIGE concluded its consideration of revision to the Arrest Convention at its 9th Session held in Geneva on December 1 to 16, 1996 and requested the secretariat of IMA and UNCTAD in consolation with the JIGE Chairman to prepare a set of draft articles on the basis of the decision taken by the group. The draft articles for a Convention on Arrest of Ships dated April 14, 1997 were prepared for submission to diplomatic conference requested by JIGE, which was subsequently scheduled for March 1 to 12, 1999 in Geneva and accordingly text of the International Convention of the Arrest of Ships, 1999 was adopted at Geneva on March 12, 1999. The Convention remained open for signature from September 1, 1999 to August 31, 2000 and thereafter for accession and it would come into force six moths after the date ten States have expressed their consent to be bound by it. The Geneva Arrest Convention 1999 has not come into force as such but there cannot be any doubt that the 1999 Geneva Arrest Convention reflects the global view on the subject. In our view, what has been observed by the Apex Court regarding the applicability of International Convention relating to the Arrest of Sea-going Ships, Brussels 1952 to India is equally applicable to the Geneva Arrest Convention, 1999. India had not adopted the Brussels Arrest Convention, 1952 but the Apex Court observed that though India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various Conventions in India to facilitate international trade and have not adopted these conventions, yet the principles incorporated in the conference which are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common Law of India and applicable for the enforcement of maritime claims against foreign ships is equally applicable to the Geneva Arrest Convention, 1999 which embodies also necessities of the international trade and, therefore, is applicable for enforcement of maritime claims against foreign ships and can be regarded as a pat of our common law. Though Mr. Bharucha, the learned Counsel for the appellants, strenuously urged that the Geneva Arrest Convention 1999 has not been come into force as even 10 States have not give their consent to be bound by it and, therefore, cannot be said to embody the principles of law recognised by the generality of maritime States but we find it difficult to accept his submission. We have already given brief account of the exercise undertaken for about 14 years by various International Organisations including IMO and UNCTAD which does reflect the view and principles of law propounded by international community of maritime States and, thus, the basis for regarding the principles of law mentioned in Geneva Arrest Convention, 1999 as a part of our common law. It is true that the Geneva Arrest Convention, 1999 separately under Article 1(1)(q) provides for claim for insurance premiums (include mutual insurance calls) in respect of the ship, payable by or on behalf of the ship owner or demise charterer as maritime claim but that is to make such claim more specific and unambiguously maritime claim.
27. We may now turn to the judgment of the learned Single Judge in the United Kingdom Mutual Steamship Assurance Association (Bermuda) Ltd v. m.v. 'Humber' and another, decided on 23-12-1999. The learned Single Judge in m.v. Humber apparently proceeded on an erroneous premise and misread the judgment of the Apex Court in m.v. 'Elisabeth' when he observed. 'It is clear from the observations of the Supreme Court quoted above that the admiralty jurisdiction of this Court is to be exercised in consonance with the provisions of the Admiralty Courts Act, 1861'. The Apex Court in m.v. 'Elisabeth' on the other hand in an unequivocal terms held,' The High Court were declared to be competent to regulate their procedure and practice in exercise of admiralty jurisdiction in accordance with the rules made in that behalf. There is, therefore, neither reason nor logic in imposing a fetter on the jurisdiction of these High Courts by limiting it to the provisions of an imperial statute of 1861 and freezing any further growth of jurisdiction. This is all the more true because the Admiralty Courts Act, 1861 was in substance repealed in England a long time ago. .... There is no reason why jurisdiction of the Indian High Courts should have been considered to have frozen and atrophied on the date of the Colonial Courts Act on Admiralty Act, 1890 ..... Where statutes are silent and remedy has to be sought by recourse to basic principles, it is the duty of the Court to devise procedural rules by analogy and expediency. .....The High Courts in India are superior Courts of record. They have original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred and subject to the appellate or discretionary jurisdiction of this Court, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers. .... In equating the admiralty jurisdiction of the Indian High Court to that of English High Court the Colonial Court of Admiralty Act, 1890, significantly refers to the admiralty jurisdiction of the High Court in England whether existing by virtue of any statute or otherwise. This is an enabling statute, and not a statute of limitation of power. It aids, and does not fetter, the growth of jurisdiction. ......It is time to take a fresh look at the old precedents.' We are constrained to hold for what we have held above which we need not repeat that the judgment of the learned Single Judge in m.v. 'Humber' does not lay down the correct law in holding that a claim for unpaid insurance premium cannot be considered to be a necessary supplied to a ship.
28. The contention that call money to be paid by ship owner does not relate in a manner for coverage of the particular ship entered by a ship owner with the club and it is in the nature of an unpaid contribution from the ship owner towards a common pool/fund from which liabilities of member are met and, therefore, such unpaid call money cannot be construed to be necessaries supplied to a ship is too narrow and pedantic construction of the term 'necessaries' in the modern world of shipping industry which we have already highlighted above. As a matter of fact, the entire argument on behalf of the defendants that P & I claims are not 'necessaries' is based on English law, but in our view, and that is what has been held by the Apex Court in m.v. 'Elisabeth' that India being sovereign State is not bound by the laws of England on the basis of the laws which were enacted when India was in British possession and such laws continue to exist by virtue of Article 372 of the Constitution of India having not been repealed by appropriate law. The argument that P & I clubs also in their own rules have provided that British law is to apply for any dispute between the parties and, therefore, it does not lie in the mouth of British P & I club to plead that Indian Courts should widen the definition of the term 'necessaries' to protect the interest of P & I clubs for recovery of unpaid call money is also not meritorious as right to proceed in rem against a vessel is determined by Lex fori i.e. law of the forum. If the foreign ship is in territorial waters of India and a maritime claim is made under the admiralty jurisdiction of High Court, it is irrelevant where cause of action arose or defendant resides or carries on business or nationality of the ship, such maritime claim is triable by the concerned High Court and such maritime claim cannot be thrown out if not berried expressly or impliedly under the domestic laws of the country on the ground that such claim is not entertainable in the country where contract or insurance was entered into.
29. For the reasons discussed above, we do not find any difficulty and rather have no hesitation in holding that unpaid insurance premia in respect of the ship amounts to 'necessaries supplied' within the meaning of section 5 of the Admiralty Courts Act, 1861 so as to constitute maritime claim. In any case such claim is maritime claim giving rise to admiralty cause.
30. Having answered the question referred to us by the learned Single Judge, we now deal with the Appeal No. 226/2001 filed by the vessel m.v. 'Sea Success I' and her owner. Mr. Prashant Pratap, the learned Counsel appearing for the plaintiffs- P & I Association raised objection about the maintainability of Letters Patent Appeal. The submission of Mr. Pratap is that the order passed by the learned Single Judge refusing to reject the plaint for failure to disclose a cause of action under Order 7, Rule 11(a) of Code of Civil Procedure (C.P.C.) is not appealable as it is not a judgment within the meaning of Clause 15 of the Letters Patent. Mr. Pratap submitted that the impugned order does not conclusively or finally determine any of appellants rights and that no prejudice whatsoever is caused to the appellants by the impugned order of the learned Single Judge refusing to reject the plaint as all issues have been left open to be decided at the trial of the suit. To substantiate his submission about non-maintainability of appeal, Mr. Pratap relied upon, (i) Justices of the Peace for Calcutta v. The Oriental Gas Company (Limited), 1872 (8) BLR 433, (ii) Shri Goverdhanlalji Maharaj v. Shri Chandraprahavati, A.I.R. 1926 Bom 156, and (iii) Central Mine Planning and Design Institution Ltd. v. Union of India and another : (2001)ILLJ1069SC . Mr. Pratap also referred to the judgment of the Apex Court in Shah Babulal Khimji v. Jayaben D. Kania & another : 1SCR187 .
31. Mr. Z.P. Bharucha, per contra strenuously urged that the impugned order passed by the learned Single Judge refusing to reject plaint under Order 7, Rule 11(1) of C.P.C. is definitely a preliminary judgment one of the categories of the judgment carved out by the Apex Court in Shah B. Khimji's case (supra) and, therefore, appealable under Clause 15 of Letters Patent. According to him, the objection raised by the learned Counsel for respondent No. 1 about maintainability of appeal has no substance and squarely falls within the ratio Shah Babu Lal Khimji particularly enumerated in paragraph 113 read with paragraph 120.
32. Order 7, Rule 11 of the C.P.C. provides for rejection of the plaint and Clause (a) there of runs thus:
Rejection of plaint-the plaint shall be rejected in the following cases:-
(a) Where it does not disclose a cause of action;
33. The aforesaid provision empowers the Court to reject the plaint at threshold where cause of action is not disclosed. This is one of salutary provision made in C.P.C. to save the defendant from being harassed unnecessarily and put to trial in a cause which does not disclose cause of action against him. It serves the public purpose in ensuring that the litigation where the plaint even if non-traversed would not entitle the plaintiff to the relief should be thrown out without enquiry and Court as well as the defendant must be saved from meaningless exercise. With reference to Order 7, Rule 11(a) C.P.C. the Apex Court in Azhar Hussein v. Rajiv Gandhi, 1986 Supp. S.C. 315 observed. 'The powers in this behalf are meant to be exercised to serve the purpose for which the same have been conferred on the competent Court so that the litigation comes to an end at the earliest and the concerned litigants are relieved of the psychological burden of the litigation so as to be free to follow their ordinary pursuits and discharge their duties. And so that they can adjust their affairs on the footing that the litigation will not make demands on their time or resources, will not impede their future work, and they are free to undertake and fulfil other commitments.'. Thus, it would be seen that the order refusing to reject plaint for failure to disclose a cause of action can cause grave prejudice and loss to a defendant and if defendant's objection for rejection of plaint for failure to disclose the cause of action is accepted that would save the defendant from worry and expense of being put to trial.
34. In this backdrop, we straightway refer to the judgment of the Apex Court in Shah Babulal Khimji (supra). In paragraphs 80, 81 and 82 of the report, the Apex Court considered the judgment of Calcutta High Court in the case of The Justices of the Peace for Calcutta and held that the Division Bench of Calcutta High Court through its Chief Justice Couch, C.J. has taken very narrow view of the meaning of the expression 'judgment' within Clause 15 of the Letters Patent and the Court is not justified in interpreting a legal term which amounts to complete distortion of the word 'judgment'. Instead of discussing the judgment of the Calcutta High Court in the case of Justices of the Peace for Calcutta independently we feel the discussion of the said judgment by the Apex Court in Shah Babulal Khimji, particularly paragraphs 80, 81 and 82 would suffice which read thus:
80. We now proceed to deal with the main controversy as to what is the true scope, meaning and purport of the word 'judgment' used in Clause 15 of the Letters Patent. Numerous authorities on both sides were cited before us in the course of the very able arguments advanced by Counsel for the parties and it appears that there are three leading judgments which have spelt out certain tests to determine as to when an order passed by a trial Judge can be said to be a judgment within the meaning of Clause 15 of the Letters Patent. A very narrow view on this point, was taken by a Division Bench of the Calcutta High Court in the case of the Justices of the Peace for Calcutta where Sir Couch, C.J., on an interpretation of Clause 15 of the Letters Patent observed thus:
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 Court 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.
82. Thus, examining the tests laid down by Sir Richard Couch, C.J., it seems to us that the view taken by the learned Chief Justice appears to place a very strict and narrow interpretation on the word 'judgment' under which orders deciding matters of moment or valuable right of the parties without finally deciding the suit may not amount to a judgment and hence, not appealable. In giving this interpretation the learned Chief Justice was guided by two considerations:
(1) that a liberal interpretation may allow vexed litigants to carry any discretionary order of the trial Court in appeal; and
(2) that it would confer more extensive right to appeal against the Judge sitting on the Original Side than the right of appeal given to a trial Judge sitting in the mofussil.
We are doubtless impressed with the argument of the Chief Justice and fully appreciate the force of the reasons given by him but we feel that despite those considerations the law must be interpreted as it stands and 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 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 object of the statute and give the desired relief to the litigants, if possible. Although it is true that this decision is practically the locus classicus so far as the Calcutta High Court is concerned and has been consistently followed by later decisions at the same time it cannot be denied that in a number of cases the conscience of the Judges was so shocked that they tried to whittle down or soften the rigours of this decision so much so that in one case the observations of the Chief Justice were not only not followed but were described as antiquated and in other cases the Judges strongly expressed themselves laid down by the learned Chief Justice. It is not necessary for us to burden this judgment with later decisions of the Calcutta High Court in trying to comment on the correctness of the principles laid down by Sir Couch, C.J., but a few instances may be quite revealing.'
35. In Goverdhanlalji (supra) the Divisional Bench of this Court relied upon the Justices of the Peace for Calcutta and held that a decision on an issue to the effect that the trial of the suit should proceed, can never amount to judgment. However, in our view, the said decision of the Division Bench of this Court cannot be said to be good law to the extent it is inconsistent with the judgment of the Apex Court in Shah Babulal Khimji. In paragraph 113 of the report in Shah Babulal Khimji the Apex Court observed that the concept of the judgment under the C.P.C. which is narrow and limited cannot be imported into the definition of the word 'judgment within the meaning of Clause 15 of the Letters Patent.
36. The Supreme Court in paragraph 113 of the report held thus:
'113. Thus, under the Code of Civil Procedure, a judgment consists of the reasons and grounds for a decree passed by a Court. As a judgment constitutes the reasons for the decree it follows as a matter of course that the judgment must be a formal adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy.
The concepts of a judgment as defined by the Code of Civil Procedure seems to be rather narrow and the limitations engrafted by sub-section (2) of section 2 cannot be physically imported into the definition of the word judgment as used in Clause 15 of the Letters Patent because the Letters Patent has advisedly not used the terms order or decree anywhere. The intention, therefore, of the givers of the Letters Patent was that the word judgment should receive a much wider and more liberal interpretation than the word judgment used in the Code of Civil Procedure. At the same time, it cannot be said that any order passed by a trial Judge would amount to a judgment; otherwise there will be no end to the number of orders which would be appealable under the Letters Patent. It seems to us that the word judgment has undoubtedly a concept of finality in a broader and not a narrower sense. In other words, a judgment can be of three kinds:
(1) A final judgment.- A judgment which decides all the questions or issues in controversy so far as the trial Judge is concerned and leaves nothing else to be decided. This would mean that by virtue of the judgment, the suit or action brought by the plaintiff is dismissed or decreed in part or in full. Such an order passed by the trial Judge indisputably and unquestionably is a judgment within the meaning of the Letters Patent and even amounts to a decree so that an appeal would lie from such a judgment to a Division Bench.
(2) A preliminary judgment.---This kind of a judgment may take two forms---(a) where the trial Judge by an order dismisses the suit without going into the merits of the suit but only on a preliminary objection raised by the defendant or the party opposing on the ground that the suit is not maintainable. Here also, as the suit is finally decided one way or the other, the order passed by the trial Judge would be a judgment finally deciding the cause so far as the trial Judge is concerned and therefore appealable to the larger Bench, (b) Another shape which a preliminary judgment may take is that where the trial Judge passes an order after hearing the preliminary objections raised by the defendant relating to maintainability of the suit e.g. bar of jurisdiction, res judicata, a manifest defect in the suit, absence of notice under section 80 and the like, and these objections are decided by the trial Judge against the defendant, the suit is not terminated but continues and has to be tried on merits but the order of the trial Judge rejecting the objections doubtless adversely affects a valuable right of the defendant who, if his objections are valid, is entitled to get the suit dismissed on preliminary grounds. Thus, such an order even though it keeps the suit alive undoubtedly decides an important aspect of the trial which affects a vital right of the defendant and must, therefore, be construed to be a judgment so as to be appealable to a larger Bench.
(3) Intermediary or interlocutory judgment-Most of the interlocutory orders which contain the quality of finality are clearly specified in Clauses (a) to (w) of Order 43, Rule 1 and have already been held by us to be judgments within the meaning of the Letters Patent and, therefore appealable. There may also be interlocutory orders which are not covered by Order 43, Rule 1 but which also possess the characteristics and trappings of finality in that, the orders may adversely affect a valuable right of the party or decide an important aspect of the trial in an ancillary proceeding. Before such an order can be a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect or remote. For instance, where the trial Judge in a suit under Order 37 of the Code of Civil Procedure refuses the defendant leave to defend the suit, the order directly affects the defendant because he losses a valuable right to defend the suit and his remedy is confined only to contest the plaintiff's case on his own evidence without being given a chance to rebut that evidence. As such an order vitally affects a valuable right of the defendant it will undoubtedly be treated as a judgment within the meaning of the Letters Patent so as to be appealable to a larger Bench. Take the converse case in a similar suit where the trial Judge allows the defendant to defend the suit in which case although the plaintiff is adversely affected but the damage or prejudice caused to him is not direct or immediate but of a minimal nature and rather too remote because the plaintiff still possesses his full right to show that the defence is false and succeed in the suit. Thus, such an order passed by the trial Judge would not amount to a judgment within the meaning of Clause 15 of the Letters Patent but will be purely an interlocutory order. Similarly suppose the trial Judge passes an order setting aside an ex parte decree against the defendant, which is not appealable under any of the Clauses of Order 43 Rule 1 though an order rejecting an application to set aside the decree passed ex parte falls within Order 43, Rule 1 Clause (d) and is appealable, the serious question that arises is whether or not the order first mentioned is a judgment within the meaning of Letters Patent. The fact, however, remains that the order setting aside the ex parte decree puts the defendant to a great advantage and works serious injustice to the plaintiff because as a consequence of the order, the plaintiff has now to contest the suit and is deprived of the fruits of the decree passed in his favour. In these circumstances, therefore, the order passed by the trial Judge setting aside the ex parte decree vitally affects the valuable rights of the plaintiff and hence amounts to an interlocutory judgment and is therefore appealable to a larger Bench.
37. In paragraphs 119 and 120 in Shah Babulal Khimji, the Supreme Court held thus:
'119. Apart from the tests laid down by Sir White C.H. the following considerations must prevail with the Court:
(1) That the trial Judge being a Senior Court with vast experience of a various branches of law occupying a very high status should be trusted to pass discretionary or interlocutory orders with due regard to the well settled principles of civil justice. Thus, any discretion exercised or routine orders passed by the trial Judge in the course of the suit which may cause some inconvenience or, to some extent prejudice to one party or the other cannot be treated as a judgment otherwise the Appellate Court (Division Bench) will be flooded with appeals from all kinds of orders passed by the trial Judge. The courts must give sufficient allowance to the trial Judge and raise a presumption; that any discretionary order which he passes must be presumed to be correct unless it is ex facie legally erroneous or causes grave and substantial injustice.
(2) That the interlocutory order in order to be a judgment must contain the traits and trappings of finality either when the order decides the questions in controversy in an ancillary proceeding or in the suit itself or in a part of the proceedings.
(3) The tests laid down by Sir White, C.J., as also by Sir Couch C.J., as modified by later decisions of the Calcutta High Court itself which have been dealt with by us elaborately should be borne in mind.
120. Thus, these are some of the principles which might guide a Division Bench in deciding whether an order passed by the trial Judge amounts to a judgment within the meaning of the Letters Patent. We might, however, at the risk of repetition give illustrations of interlocutory orders which may be treated as judgments:
(1) An order granting leave to amend the plaint by introducing a new cause of action which completely alters the nature of the suit and takes away a vested right of limitation or any other valuable right accrued to the defendant.
(2) An order rejecting the plaint.
(3) An order refusing leave to defend the suit in an action under Order 37, Code of Civil Procedure.
(4) An order rescinding leave of the trial Judge granted by him under Clause 12 of the Letters Patent.
(5) An order deciding a preliminary objection to the maintainability of the suit on the ground of limitation, absence of notice under section 80, bar against competency of the suit against the defendant even though the suit is kept alive.
(6) An order rejecting an application; for a judgment on admission; under Order 12, Rule 6.
(7) An order refusing to add necessary parties in a suit under section 92 of the Code of Civil Procedure.
(8) An order varying or amending a decree.
(9) An order refusing leave to sue in forma pauperis.
(10) An order granting review.
(11) An order allowing withdrawal of the suit with liberty to file fresh one.
(12) An order holding that the defendants are not agriculturists within the meaning of the special law.
(13) An order staying or refusing to stay a suit under section 10 of the Code of Civil Procedure.
(14) An order granting or refusing to stay execution of the decree.
(15) An order deciding payment of Court fees against the plaintiff.'
38. Though Mr. Pratap, learned Counsel for original plaintiffs-respondent No. 1 in Appeal No. 226/2001 submitted that in paragraph 120 the Supreme Court has catalogued the interlocutory orders which may be treated as judgments and an order rejecting the plaint has been held to be judgment by the order refusing to reject the plaint does not find place therein, and, therefore, the impugned order is not a judgment, but we find that such reading of paragraph 120 of the Supreme Court judgment is misplaced. Paragraph 120 only gives illustration of interlocutory orders which may be treated as judgments but the said list is not exhaustive as the very terminology used by the Apex Court in paragraph 120 indicates that the list of interlocutory orders mentioned by the Apex Court in the said paragraph is only illustrative. Moreover paragraph 120 has to be read with earlier discussion made in the decision, particularly para 113. There cannot be any doubt that the word 'judgment' has a concept of finality in a broad and not narrow sense and that is what the Supreme Court held in Shah Babulal Khimji. In the words of the Supreme Court, judgment having concept of finality 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 the Apex Court. The Apex Court observed, 'Another shape which a preliminary judgment may take is that whether the trial Judge passes an order after hearing the preliminary objections raised by the defendant relating to maintainability of the suit e.g. bar of jurisdiction, res judicata a manifest defect in the suit, absence of notice under section 80 and the like, and these objections are decided by the trial Judge against the defendant, the suit is not terminated but continues and has to be tried on merits but the order of the trial Judge rejecting the objections doubtless adversely affects a valuable right of the defendant who, if his objections are valid, is entitled to get the suit dismissed on preliminary grounds. Thus, such an order even though it keeps the suit alive, undoubtedly decides an important aspect of the trial which affects a vital right of the defendant and must, therefore, be construed to be a judgment so as to be appealable to a larger Bench'. Refusing to reject the plaint which does not disclose cause of action though covered under Order 7, Rule 11(a) and which obligates the trial Court to do so definitely affects a very valuable right of the defendant since if such objection is upheld and lis is thrown out at the threshold, the defendant is spared from the agony of delay, expenses and mental torture. The decision by the trial Judge adversely to the defendant on the application made by him for rejection of plaint for want of disclosure of cause of action decides an important aspect of the trial affecting the very valuable right of the defendant and even though the suit is kept alive, such order has to be construed to be preliminary judgment and, therefore, appealable within the meaning of Clause 15 of Letters Patent. The judgment of the Apex Court in Central Mine Planning and Design Institute Ltd. v. Union of India and another (supra) cited by the learned Counsel for original plaintiff respondent No. 1 to buttress his argument that Letters Patent Appeal against the order refusing to reject the plaint is not maintainable, rather supporting him supports the view which we have taken. The Apex Court in that case was seized of the question; whether order passed by the Single Judge on application under section 17-B of Industrial Disputes Act directing the employer to pay full back wages is a judgment within the meaning of the Clause 10 of Letters Patent of Patna or not and by relying upon its earlier judgment of that Court in Shah Babulal Khimji held that such order was judgment for the purposes of Letters Patent. We, therefore, overrule the objection raised by the learned Counsel for original plaintiff-respondent No. 1 and hold that the Letter Patent Appeal attacking order passed by the learned Single Judge refusing to reject the plaint for want of disclosure of cause of action is maintainable under Clause 15 of Letters Patent as the impugned order is judgment within the meaning of the said clause.
39. Now we come to the question whether the learned Single Judge was justified in rejecting the application made by defendant No. 1 vessel m.v. 'Sea Success I' and her owners for rejection of plaint under Order 7, Rule 11(a) C.P.C. The learned Single Judge held that at this stage it is not possible to conclude that plaint does not disclose a cause of action. According to learned Single Judge the averments made in the plaint are sufficient to indicate existence of cause of action which need to be investigated at the trial and, therefore, the power under Order 7, Rule 11 of the C.P.C. cannot be exercised at the threshold and the suit cannot be regarded as vexatious or meritless in the sense of not disclosing a clear right to sue. Mr. Bharucha, the learned Counsel for the appellants submitted that plaint is required to be read in a meaningful rather than formal manner to ascertain whether in fact a cause of action has been disclosed and to probe the cause of action in order to ascertain whether the same gives rise to legally recognised claim and while probing the allegations at the threshold, Court has a duty to ascertain whether plaintiff's claim is bound to fail or not. By referring to the relevant pleadings made in paras 1 and 14 of the plaint, Mr. Bharucha submitted that upon meaningful reading of the said pleadings relating to the appellants vessel being sistership, reveal two averments central to plaintiff's case; (i) that the defendant No. 2 is, according to plaintiffs rules of Association, the owner of vessels 'Sea Ranger' and 'Sea Glory' viz. the two vessels in respect of which the original plaintiff-respondent No. 1 claims amount due towards unpaid release calls: and (ii) the defendant No. 2 is owner (beneficial or otherwise of the defendant No. 1 vessel 'Sea Success I'. Hence the deduction that the original plaintiff attempts to draw from the aforesaid averments is that the vessels 'Sea Ranger' and 'Sea Glory' are sisterships of the vessels 'Sea Success I' by virtue of being commonly owned by defendant No. 2. The submission of Mr. Bharucha is such deduction is rested on the assertion that the vessel 'Sea Success I' (defendant No. 1) is owned/controlled by defendant No. 2 through its 100% wholly owned subsidiary S.S. Shipping Corporation Inc. of Monrovia, Liberia but such deduction is wholly misconceived and erroneous as the shareholder has no assets of the company in which it owns shares. Mr. Bharucha submitted that the exercise of piercing the veil is undertaken only in specified circumstances and are exceptions to the rule of the doctrine of incorporation and such specified circumstances have to be pleaded and particularised which have not been made in the plaint at all. The learned Counsel for appellants submitted that the title/ownership of a vessel is recognised in a person described as a beneficial owner of the shares in the ship and expression 'beneficial owner' in the context of title to a vessel as being vested in a person having right to sell, dispose of or alienate the shares in the ship. Mr. Bharucha submitted that there is no averment in the plaint that the defendant No. 2 is the entity that has right to sell, dispose of or alienate the shares in the defendant No. 1 vessel 'Sea Success I'. Mr. Bharucha also argued that a person having complete control and management of a vessel is not deemed to be beneficial owner of such vessel unless it holds the shares in the vessel. He submitted that in the present case satisfying the Court on the beneficial ownership of the shares in the vessel 'Sea Success I' is an essential element to the invocation of the admiralty jurisdiction of the Court and the remedy of arrest and on the facts and material pleaded no cause of action cognisable under the admiralty jurisdiction is made out and, therefore, plaint is liable to be rejected. He also submitted that as plaint can always be rejected against one or some of the defendants to a suit and as the plaint fails to disclose a cause of action against the defendant No. 1 vessel, the plaint is liable to be rejected. In support of his contentions. Mr. Bharucha relied upon the judgment of the Apex Court in T. Arivandandam v. T.V. Satyapal : 1SCR742 , Shakthi Sugars v. Union of India, : AIR1981Delhi212 , I.T.C. Limited v. Debts Recovery Appellate Tribunal : AIR1998SC634 , Bacha Guzder v. CIT : 27ITR1(SC) , Saloman v. Saloman, 1897 A.C. 22, Freewheels India Ltd. v. Dr. Veda Mitra, : AIR1969Delhi258 , Spencer & Co. v. CWT, : 72ITR33(Mad) , the judgment delivered by the Supreme Court of New South Wales in James Hardie Coy Pty. Ltd. v. Putt, 1998 NSWLR 434, (The St. Merriel), 1963 Pro 247, (The Permina 3001), 1979 (1) LLR 327, (I Congresso Del Partido), 1978 QB 500., (Father Thames), 1979 (2) LLR 364, (The Union Darwin), 1983 HKLR 248, (The Looiersgracht), 1995 (2) LLR 411, Ramprasad Chimanlal v. Hazarimal Lalchand : AIR1931Cal458 , Phool Sundri v. Gurbans Singh, , National Insurance Co. v. Navrom Constkantza : AIR1988Cal155 . (The Aventicum), 1978 (1) LL R 184, (The Temasek Eagle), 1999 (4) SLR 250, the judgment of New Zealand Court of Appeal in Vastock Shipping v. Confederation Limited, 1999 NZ C.A. 22 and (The Beldis), 1936 Pro 51.
40. On the other hand Mr Pratap, the learned Counsel for original plaintiff-respondent No. 1 supported the view of the learned Single Judge and contended that paragraphs 1 and 14 of the plaint does disclose cause of action against the defendants. According to him, the pleadings made in paragraphs 1 and 14 clearly disclose cause of action for proceeding with the trial in the suit. Mr. Pratap argued that plea of want of cause of action is required to be taken at demurer i.e., on the basis that all averments made in the plaint are correct and treated as such and only when the Court finds that the said averments do not disclose any cause of action then Court can reject the plaint and not otherwise. Mr. Pratap submitted that the relationship between the defendant No. 2 and S.S. Shipping Company Inc. i.e., between the holding and subsidiary company respectively has to be seen by lifting the corporate veil to render justice irrespective of legal efficacy. He submitted that averments in the plaint cannot be examined on merits at this stage. It is the contention of Mr. Pratap that where there is a dispute as to beneficial ownership of the vessel the Court in all cases could and in some cases should look behind the registered owner to determine the true beneficial owner and where beneficial ownership is disputed, it has right to investigate the true beneficial ownership. He submitted that where the arrest of a ship beneficial owned is permitted, it is intended that the power of the Court shall not be the limited to a consideration of who is registered owner or who is the person having legal ownership of the shares in the ship but to find the beneficial ownership. According to Mr. Pratap when the law allows the arrest of sistership, then it is sufficient for the plaintiff to plead that the defendant-ship is a sistership in order for the plaint to disclose a cause of action. He also contended that 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. He submitted that purport failure of the pleading to disclose the cause of action is entirely distinct from the absence of full particulars. In support of his submissions Mr. Pratap relied upon D. Ramchandran v R.V. Janakiraman & others, : 1SCR983 , Mohan Rawale v. Damodar Tatyaba : (1994)2SCC392 , Ranjeet Mal v. Poonam Chand , State of Orissa v. Klockner & Company & others : AIR1996SC2140 Gaganmal Ramchand v. The Hongkong & Sanghai Banking Corporation, : AIR1950Bom345 , Vijay Pratap Singh v. Dukh Haran Nath Singh : AIR1962SC941 , British Airways v. Artworks Export Ltd., : AIR1986Cal120 , (Saudi Prince), 1982 (2) LLR 255 and State of U.P. & others v. Renusagar Power Company : AIR1988SC1737 .
41. The approach of the Court in consideration of the application for rejection of plaint for failure to disclose cause of action has come up for discussion in various cases but we deem proper to refer to some of the cases cited at bar in that regard. In T. Arivandandam v. T.V. Satyapal : 1SCR742 the Supreme Court observed thus:
'......If on a meaningful-not formal reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, the trial Court should exercise its power under Order 7, Rule 11, C.P.C. taking care to see that the ground mentioned therein is fulfilled.'
42. The Delhi High Court in M/s. Sakthi Sugars Limited v. Union of India and another, : AIR1981Delhi212 relying upon the aforesaid observations of the Supreme Court held thus:-
'12. But the law in this respect is laid down by the Supreme Court in T. Arivandandam v. T.V. Satyapal : 1SCR742 . It is laid down that if on a meaningful and not formal reading of a plaint it is manifest that the plaint is vexatious or meritless in the sense of not disclosing a clear right to sue trial Court should exercise its power under Order VII, Rule 11, Code of Civil Procedure, and should reject the plaint. So it is meaningful reading of the plaint which is required. It is to be seen if actually according to law, on the allegations contained in the plaint, defendant No. 2 was agent of the Union of India or not. Mere formal allegation of the plaintiff that defendant No. 2 was agent of the Union of India is not to be accepted. In view of the Supreme Court authority, it is the duty of the Court to probe whether allegations made in the plaint make defendant No. 2 as agent and the Union of India as the principal according to law. I have already held that according to law defendant No. 2 was not agent of the Union of India and that being so plaint does not disclose any cause of action against the latter.'
43. The Apex Court in Azhar Hussein v. Rajiv Gandhi : 2SCR782 , though while dealing with the question relating to rejection of an election petition with reference to Order 7, Rule 11 C.P.C. held that the purpose of conferment of power of rejection of plaint 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 the concerned litigants are relieved of the psychological burden of the litigation. The Apex Court observed that since the Court has the power to act at the threshold, the power must be exercised at the threshold itself in case the Court is satisfied that it is a fit case for the exercise of such power.
44. In a recent judgment the Apex Court in ITC Limited v. Debts Recovery Appellate Tribunal & others, : AIR1998SC634 while referring to its earlier judgment in T. Arivandandam observed. 'The question is whether a real cause of action has been set out in the plaint or something purely illusory has been stated with a view to get out of Order 7, Rule 11 C.P.C. Clever drafting creating illusions of cause of action are not permitted in law and a clear right to sue should be shown in the plaint.'
45. In Mohan Rawale v. Damodar Tatyaba, : (1994)2SCC392 , the Apex Court held that if some cause of action is disclosed, a pleading cannot be struck out merely because the case is weak and not likely to succeed. The Apex Court drew distinction between 'material facts' and 'full particulars' with reference to the provisions of section 83(1)(a) and (b) of the Representation of People Act, 1951 and further held that the distinction between 'material facts' and 'full particulars' is not sharp, but is one of degree. The material facts are those which a party relies upon and which, if he does not prove, he fails at that time.
46. In William v. Wilcox, 1838 (8) Ad E 331, Lord Denman, C.J., said thus:
'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 providing it, or the evidence sustaining the allegations.'
47. The learned Single Judge of Rajasthan High Court in Ranjeet Mal v. Poonam Chand and another, , held, 'what is to be determined by the Court at the stage of deciding as to whether the plaint discloses any cause of action or not, is to find out from the allegations of the plaint itself as to whether a bogus, wholly vexatious or frivolous litigation was sought to be initiated under the garb of ingenious drafting of the plaint and to guard against the mischief of a litigant misusing the process of the Court, by entering into a false litigation, merely for the purposes of harassing the other party and obtaining undue advantage of the process of the Court by adopting tactics and in starting sham and shady actions.'
48. The Apex Court in State of Orissa v. Klockner and Company and others. : AIR1996SC2140 , approved the view of the High Court holding that plea that plaint does not disclose cause of action is different from plea that there was no cause of action for the suit and that for determining that the suit deserves to be wiped out under Rule 11(a) of Order 7 C.P.C., the averments in the plaint are required to be looked into.
49. While dealing with the provisions of Order 33, Rule 5 Clause (a), the Apex Court in Vijay Pratap Singh v. Dukh Haran Nath Singh, : AIR1962SC941 , held in paragraph 9 of the report thus:
'(9).........By the express terms of Rule 5, Clause (d), the Court is concerned to 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. By the statute, the jurisdiction of the Court is restricted to ascertaining whether on the allegations a cause of action is shown the jurisdiction does not extend to trial of issues which must fairly be left for decision at the hearing of the suit.'
50. In British Airways v. Artworks Export Ltd. : AIR1986Cal120 , the Calcutta High Court followed the consistent view that ground embodied in Clause (a) of Rule 11 of Order 7 C.P.C. for rejection of plaint must appear on the face of the plaint and the correctness or otherwise of the allegation constituting cause of action is beyond the purview of Clause (b) of Order 7, Rule 11.
51. The cause of action has a well defined legal connotation, though not defined, which means bundle of essential facts, if traversed, has to be proved by the plaintiff to entitle him to the relief. It reflects to the media upon which the plaintiff asks the Court to arrive at a conclusion in his favour. It does not comprise every piece of evidence which is necessary to prove each fact, but every fact which is necessary to be proved to entitle the plaintiff to the decree. The consistent legal position which is also mandatorily enacted by Order 7, Rule 11(a) C.P.C. is, that the Court must reject the plaint which does not disclose cause of action. Obviously there is a difference between the nondisclosure of cause of action in the plaint and the absence of cause of action for the suit. The ground for rejection of plaint is failure to disclose a cause of action and not that there is no cause of action for the suit. It is not competent for the Court to go into the correctness or otherwise of the allegations constituting the cause of action. In other words, the correctness or otherwise of the allegations constituting the cause of action is beyond the purview of Order 7 Rule 11(a) C.P.C. However, to find out whether the plaint discloses cause of action or not, the Court has to consider the allegations made in the plaint intelligently and meaningfully and need not be influenced by ingenious and clever drafting creating illusion of cause of action. The ritual of repeating a word or creation of an illusion in the plaint can certainly be unravelled and exposed by the Court while dealing with an application under Order 7, Rule 11(a). The Court must scan and scrutinise the allegations made in the plaint to find out whether forensic cleverness while drafting the plaint has been employed to get out of clutches of Order 7 Rule 11 C.P.C. and if on a careful scan and scrutiny of the pleading the conclusion of the Court is in affirmative, the consequence of rejection of plaint must follow. The Court has to see while exercising its power for rejection of plaint, which it must, whether the allegations in the plaint as they stand, fail to prove the cause of action. While considering the question whether the plaint discloses any cause of action or not the Court has to find out from the allegations made in the plaint itself and not beyond it as to whether a bogus, wholly vexatious or frivolous litigation has been initiated by the plaintiff or that the claim made by the plaintiff is a legally recognisable claim. What is required to be disclosed by the plaintiff is a clear right to sue and failure to do so must necessarily entail in rejection of the plaint.
52. In the backdrop of the aforesaid legal position we have to see whether the plaint in Admiralty Suit No. 32 of 2000 discloses cause of action or not.
53. The two relevant paragraphs which have been highlighted by the Counsel for original plaintiff respondent No. 1 to show that plaint discloses cause of action are paragraphs 1 and 14 of the plaint. The material portion of paragraphs 1 and 14 runs thus:
'1...................... The 1st defendant vessel m.v. 'See Success I' sistership of the vessel '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. who, as per the terms of the insurance and rules of the Plaintiff Association, were recognised 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.
14. The plaintiff submits as more particularly stated in paragraph 1 above, that the 1st defendant vessel is a sistership of the two vessels 'Sea Glory' and 'Sea Ranger' in view of the beneficial ownership, management and control 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 its 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.'
54. A meaningful analysis of the aforesaid averments made in the plaint would reveal that according to the plaintiffs, defendant No. 2 is the owner of the vessels 'Sea Ranger' and 'Sea Glory' namely, the two vessels in respect of which the plaintiffs claim amounts due towards unpaid insurance premium (release calls) as per the Rules of Plaintiffs Association and that the defendant No. 2 is owner of defendant No. 1 vessel Sea Success I through its 100% wholly owned subsidiary S.S. Shipping Corporation Inc. of Monrovia, Liberia and, thus, the defendant No. 1 vessel Sea Success I is a sister ship of 'Sea Ranger' and 'Sea Glory'. The basis of the allegations that defendant No. 1 vessel Sea Success I is owned and/or controlled by defendant No. 2 is that the defendant No. 2 is holding company of the subsidiary company S.S. Shipping Corporation Inc., Monrovia. In other words, the basis on which plaintiff's case rests against the defendant No. 1 vessel Sea Success I is that the defendant No. 2 by virtue of being the sole and controlling shareholder of S.S. Shipping Corporation Inc. of Monrovia is the owner of defendant No. 1 vessel Sea Success-I. The defendant No. 1 vessel Sea Success-I is alleged to be sistership of two vessels 'Sea Glory' and 'Sea Ranger' in view of the beneficial ownership, management and control of all three vessels having vested in defendant No. 2. The question is whether the aforesaid allegations disclose the legal recognisable claim against the defendant No. 1 vessel Sea Success-I. Section 25(a) of the Indian Merchant Shipping Act, 1958 provides that property in a ship shall be divided into ten shares. In maritime law worldwide ownership of a ship denoted by the concept of the owner of the shares in a ship. The shares in the defendant No. 1 vessel 'Sea Success I' are not alleged in the plaint to be owned by defendant No. 2 viz. Singapore Soviet Shipping Co. Pte. Ltd. The ownership of the defendant No. 1 ship by defendant No. 2 is alleged to be on the basis of the defendant No. 2 wholly owning subsidiary S.S. Shipping Corporation Inc. Fundamentally each company incorporated in law is a distinct legal entity and mere incorporation of 100% subsidiary company by its parent company cannot lead to the conclusion that the assets of the former belong to and are owned by parent company. In Mrs. Bacha F. Guzdar v. Commissioner of Income Tax, : 27ITR1(SC) , the Apex Court observed, 'there is nothing in the Indian law to warrant the assumption that a shareholder who buys shares buys any interest in the property of the company which is juristic person entirely distinct from the sharesholders'. No doubt law recognises certain situations in which the corporate veil is pierced such as fraud, or trading with the enemy or when required by the particular words of a statute, but then there has to be specific pleading to that effect as veil piercing is not a rule, but an exception which is undertaken, only in certain specified circumstances. It is not that in all cases a subsidiary company must be treated as an asset of the holding company. If that be so, the subsidiary company shall have no independent identity and such subsidiary company will crack not under the pressure of its own uncongenial shareholders, but also of the pressure of the shareholders and creditors of the holding company. The view of Madras High Court in Spencer & Co. v. CWT : 72ITR33(Mad) , is to the same effect wherein it was held, 'Merely because a company purchases almost the entirety of the shares in another company, it will not serve as a means of putting an end to the corporate character of the other company or the controlling company acquiring the ownership of the controlled company, so as to treat them as one entity for purposes of right and liabilities'. The Madras High Court went on to hold further, 'It is well settled that an incorporated company is a legal person and it cannot equate to its shareholders. The position continues to be the same even if the number of the shareholders is reduced to one by accident or otherwise. The act of the company cannot, therefore, be regarded as that of any of the shareholder and vice versa. It is true that occasionally the corporate veil of a company is pierced though in order to find out the substance but that is only where it is permitted by a statute or in exceptional cases of fraud'. It can, therefore, be said that the distinction between the parent and subsidiary company in law is fundamental. Mr. Pratap, learned Counsel for the original plaintiff respondent No. 1 relied upon the judgment of the Apex Court in State of U.P. v. Renusagar Power Co., : AIR1988SC1737 , in support of his proposition for lifting the corporate veil in the context of a holding and subsidiary company. However, we are afraid the said judgment is of no help to the plaintiff as we find that the facts necessary for lifting corporate veil have not been pleaded in the plaint and at this stage we are only concerned with the question whether the plaint discloses cause of action or not and we have to go by the allegations made in the plaint only. Save and except the bald statement made in the plaint that the defendant No. 1 vessel is owned and/or controlled by defendant No. 2 through its wholly owned 100% subsidiary S.S. Shipping Corporation Inc. Monrovia, material facts have not been pleaded warranting exercise of piercing the corporate veil. When in law the S.S. Shipping Company Inc. Monrovia is separate and distinct entity which holds the shares in defendant No. 1 vessel Sea Success I, the inference drawn in paragraphs 1 and 14 of the plaint that defendant No. 2 by virtue of being the sole and controlling shareholder of S.S. Shipping Corporation Inc. of Monrovia is the owner of defendant No. 1 vessel cannot on the intelligent analysis of the plaint be held to be disclosing legally recognisable claim against the defendant No. 1 vessel Sea Success I.
55. Admittedly the defendant No. 1 vessel 'Sea Success I' is not the offending vessel or in other words claim of unpaid insurance premium is not towards the defendant No. 1 vessel. The action in rem under admiralty jurisdiction has been initiated by the plaintiffs against the defendant No. 1 vessel Sea Success-I on the basis of allegations of it being a sistership i.e. a ship in the same beneficial ownership as the ships 'Sea Glory' and 'Sea Ranger' in regard to which the claim arose. In case of m.v. Mariner IV, a Foreign Flag Vessel v. Videsh Sanchar Nigam Ltd., : 1998(5)BomCR312 , the Division Bench of this Court held. 'The admiralty jurisdiction could be invoked not only against the offending ship in question but also against a sistership in regard to which the claim arose', and this legal position is not disputed before us but the question is whether the allegations made in the plaint, particularly paragraphs 1 and 14 which are only relevant paragraphs in that regard by themselves prove that defendant No. 1 vessel 'Sea Success I' is the sister ship of the vessel 'Sea Glory' and 'Sea Ranger'. The answer is clearly no as the only pleading in respect of the defendant No. 1 vessel 'Sea Success I' being sister ship of 'Sea Ranger' and 'Sea Glory' is that vessel 'Sea Success I' is owned/controlled by defendant No. 2 through its 100% wholly owned subsidiary S.S. Shipping Corporation Inc. of Monrovia and we have already indicated above that on that basis defendant No. 2 cannot be held to be owner of the vessel 'Sea Success I' since the ownership of a vessel is denoted by the shares in the ship and there is no allegation worth the name in the entire plaint that the defendant No. 2 owns the shares in the defendant No. 1 vessel Sea Success I. The ships are deemed to be in the same ownership when all the shares are owned by the same person or persons (Article 3(2) of 1952 Brussels Arrest Convention). In paragraph 14 of the plaint it is averred that as stated in paragraph 1 of the plaint, the defendant No. 1 vessel is a sister ship of the two vessels 'Sea Glory' and 'Sea Ranger' in view of the beneficial ownership, management and control of all three vessels having vested in defendant No. 2. The basis of this deduction by the plaintiff in the plaint is that the defendant No. 1 vessel is owned by defendant No. 2 through its 100% subsidiary S.S. Shipping Corporation Inc., Monrovia. The contention of Mr. Pratap that when the law allows the arrest of sister ship then it is sufficient for the plaintiff to plead that the defendant ship is sister ship in order for the plaint to disclose a cause of action and as law also permits the plaintiff to arrest a ship which is beneficially owned by defendant No. 2, then it is sufficient for the plaintiff to plead that defendant No. 2 is a beneficially owner of defendant No. 1 ship in order for the plaint to disclose a cause of action and all other facts would be subordinate facts cannot be accepted in abstract. If the law allows the arrest of sister ship then it is required of the plaintiff to plead material facts sufficiently about the relationship of the offending ship and the ship against which admiralty jurisdiction is sought to be invoked on the basis of such defendant ship being sister ship of offending ship. A bald statement in the pleading that the defendant ship is the sister ship of offending ship or the inference that the defendant ship is a sistership for the reasons disclosed which is legally not sustainable cannot be held to be sufficient to disclose a cause of action. Similarly though the law permits the plaintiff to arrest a ship which is beneficially owned by the defendant No. 2 then the plaintiff is required to plead the material facts which discloses the beneficial ownership of the defendant No. 2 over the ship which is to be arrested and an inference drawn by itself in the pleading about beneficial ownership which is legally unsustainable cannot be said to disclose a cause of action. It is true that while ascertaining whether the plaint discloses a cause of action or not, the Court is not required to make any enquiry into doubtful or complicated questions of fact or law and that the Court proceeds with the assumption that the facts stated therein true but then those facts as they stand must disclose plaintiffs right to sue. In the present case the plaintiff has averred that the beneficial ownership, management and control of all three vessels viz., Sea Glory, Sea Ranger and Sea Success-I vest in the defendant No. 2, but the deduction drawn in the plaint in that regard is fundamentally bad in law. As a person to be recognised in law as a rightful owner of a ship, he must be the owner of the shares in the ship i.e. the person having a right to sell, dispose of or alienate the shares in the ship and not the beneficial owner of shares in a company which in turn owns the ship. The expression 'management and control' used by the plaintiff in paragraph 14 of the plaint on an intelligible reading of the said paragraph relate to management and control of defendant No. 2 over defendant No. 1 ship on the basis of defendant No. 2's holding 100% shares of its subsidiary S.S. Shipping Corporation Inc. Monrovia which we have already indicated is not legally tenable and cannot be said to be disclosing legally cognizable claim against the defendant No. 1 vessel. The expression 'management and control' as pleaded in paragraph 14 of the plaint as covering the case of managers/operators of the vessel 'Sea Success I' cannot help the plaintiff legally as the manager/operators of the vessel which is not the offending vessel cannot be deemed to be beneficial owner of such vessel. Though the plaintiff sought to rely upon the judgment of Brandon, J. in Medway Drydock & Engineering Company Ltd. v. The 'Andrea Ursule', 1971 (1) LLR 145, wherein the word 'beneficially owned' as occurring in section 3(4)(d) to (r) of Administration of Justice Act, 1956 was construed to mean owned by any person with complete possession and control of the vessel who might thereby become liable, we find that the said judgment of Brandon, J., was ex parte and has not been followed and rather clearly dissented as not laying down correct law in subsequent cases. In Congresso Del Partido, 1978 QB 500, Goff, J., while construing the expression 'beneficially owned as respects all the shares therein' in section 3(4) of the Administration of Justice Act, 1956 equated it to equitable ownership, whether or not accompanied by legal ownership but clearly held that the said expression did not include possession and control however complete without such ownership. Goff, J., in I Congresso Del Partido did not follow the judgment of Brandon J. in Andre Ursula and held that Andre Ursula does not lay down the correct law:
56. The view expressed in I Congresso Del Partido has been followed in the United Kingdom in the 'Father Thames' 1979 (2) LLR 364. The said view has also been followed by Singapore Court of Appeal in the The Permina 1979 (1) LR 327 and the Hong Kong High Court in the case of The Union: Darwin 1983 HKLR 248 and by the Federal Court of Canada in Canadian Case The Looiersgracht 1995 (2) LR 411. The broad consensual legal position seems to be that the concept of beneficial ownership of the shares in a ship does not include possession and control of the vessel and the test of the beneficial ownership is a right of that person to sell, dispose of or alienate the shares in the ship. On a proper analysis and scrutiny of the allegations made in the plaint, particularly paragraphs 1 and 14, appears, thus, that the deduction drawn by the plaintiff in the plaint that defendant No. 1 vessel Sea Success-I is sister ship of the vessels 'Sea Glory' and 'Sea Ranger' in respect of which the claim is made is not legally supported and cannot be said to be showing sustainable right of the plaintiff to sue against the defendant No. 1 vessel Sea Success-I even assuming the averments made therein to be true. We have not gone into the merits of the ownership 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. If 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 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 it discloses cause of action and wait for trial.
57. We do not find any legal bar under Order 7, Rule 11 in rejecting the plaint against some of the defendants. In ITC (supra) the Apex Court rejected plaint against one of the defendants. The Division Bench of Rajasthan High Court in Phool Sundri v. Gurbans Singh, also held that it is possible for the Court to reject the entire plaint so far as some of the defendants are concerned and that would be a proper order under Order 7, Rule 11(a). The Delhi High Curt in Sakthi Sugar (supra) rejected the plaint against one of defendants i.e. Union of India. The Calcutta High Court in National Insurance Company v. Navrom Constantza, : AIR1988Cal155 , also rejected the plaint against some of the defendants for failure to disclose a cause of action. We, therefore, hold that the plaint does not disclose a cause of action against the defendant No. 1 vessel and the plaint in its entirety deserves to be rejected against the defendant No. 1 vessel Sea Success-I.
58. In so far as Appeal No. 739/2000 is concerned, the learned Counsel for the appellants did not argue any other point save and except challenging the finding recorded by the learned Single Judge that the claim of unpaid insurance premium cannot be considered as a necessary or supply of necessaries to the vessel m.v. Allisa. We have already held that a claim towards unpaid insurance premium of a maritime vessel made by P & I Association is necessary as contemplated under section 5 of the Admiralty Courts Act, 1861 so as to constitute maritime claim and even otherwise is a maritime claim giving rise to admiralty cause.
59. In the result, we dispose of the two appeals by the following order:-
(a) The question referred to by the learned Single Judge while disposing of Notice of Motion No. 2455/2000 in Admiralty Suit No. 32/2000 as to whether a claim for unpaid insurance premia in respect of a ship amounts to necessaries supplied within the meaning of section 5 of Admiralty Courts Act, 1861 so as to constitute a maritime claim is answered in the affirmative and we further hold that even otherwise such claim for unpaid insurance premia in respect of a ship is a maritime claim giving rise to admiralty cause.
(b) The objection of the respondent No. 1 original plaintiff in Appeal No. 225/2001 about is maintainability is overruled and appeal is held maintainable.
(c) The order dated 1st/2nd February 2001 passed by the learned Single Judge in Notice of Motion No. 2455/2000 in Admiralty Suit No. 32/2000 impugned in Appeal No. 226/2001 to the extent, dismissed. Notice of Motion with reference to Clause (a) thereof is set aside and Notice of Motion No. 2455/2000 taken out by defendant No. 1 vessel Sea Success-I and her owner is granted in terms of prayer Clause (a) and, accordingly, the plaint is rejected against them for non-disclosure of cause of action.
(d) All interim orders passed against the defendant No. 1 vessel m.v. 'Sea Success I' in Admiralty Suit No. 32/2000 stand discharged and Bank of Guarantee dated 8-8-2000 furnished by the owners of defendant No. 1 vessel is cancelled and Prothonotary and Senior Master is directed to return the same to the owners of the defendant No. 1 vessel.
(e) Appeal No. 739/2000 arising out of Notice of Motion No. 1376/1998 in Admiralty Suit No. 30/1998 is dismissed and order dated 29-8-200 passed by the learned Single Judge in Notice of Motion No. 1376/1998 in Admiralty Suit No. 30/1998 is maintained, save and except the finding recorded therein that a claim of unpaid insurance premia is not necessaries supplied to the ship.
60. Parties to bear their own costs.