| SooperKanoon Citation | sooperkanoon.com/1144193 |
| Court | Mumbai High Court |
| Decided On | Jun-09-2014 |
| Case Number | Notice of Motion No. 255 of 2011 In Admiralty Suit No. 20 of 2006 |
| Judge | K.R. SHRIRAM |
| Appellant | Finolex Industries Ltd. |
| Respondent | M.V. Kew Bridge |
1. The issue that is raised in this Notice of Motion taken out on behalf of the applicant is whether a plaintiff could maintain an action only for recovery of pure economic loss independent of physical damage?
The case of the applicant simply put is that economic loss independent of physical damage is not recoverable on the ground that the applicant will be under no duty of care to the plaintiff and the loss will not be foreseeable and as a policy courts should not allow such claims. To decide this issue we have to see what the plaintiff is claiming in this suit.
2. Before I briefly narrate the plaintiff's claim in the suit, let us look at the particulars of claim annexed to the plaint.
EXHIBIT œR?
PARTICULARS OF PLAINTIFF'S CLAIM
| Sr. No. | Description | Amount |
| 1. | Production Loss | Rs.12,28,72,520.00 |
| 2. | Expenditure incurred in connection with salvage of the Defendant Vessel and legal proceedings in the High Court and Supreme Court | Rs. 54,28,001.00 |
| 3. | Total | Rs.12,83,00,521.00 |
| 4. | Exposure for de-murrage claims on account of detention of Vessels | US $ 453,889.00 |
(Rupees Twelve Crores Eighty Three Lacs Five Hundred and Twenty One and US Dollars Four Lac Fifty Three Thousand Eight Hundred and Eighty Nine Only)
3. As regards claim no.2 and claim no.3, Mr. Dhond, the counsel for the plaintiff stated that the plaintiff is not pressing for the same and to that extent, security furnished by the applicant/defendant for release of the defendant vessel could be returned. As regards claim no.2, he said the plaintiff has not incurred any salvage cost and as regards claim no.3, he said they have not received any claim for demurrage. The claim in the suit therefore, will be restricted to production loss claim of Rs. 12,28,72,520.00.
4. The plaintiff carry on business of manufacture and sale of P.V.C. resin. The plaintiff have a Captive Jetty for receiving raw material required to manufacture PVC resin in its plant at Ranpur, Ratnagiri. This jetty is in the area called Pawas Bay and is closed during monsoon from mid- May until September/October depending on the weather. At the relevant period, the jetty was declared open by the Port Officer of Maharashtra Maritime Board on 1st September, 2006.
5. On 13th September, 2006, less than two weeks of the jetty being declared open, the defendant vessel m.v. Kew Bridge arrived at Pawas Bay for discharge of 8798 M.T. of LPG on account of Bharat Petroleum Corporation Limited (BPCL) at the Captive Jetty. Though it was a private Captive Jetty of the plaintiff, it had allowed BPCL to use the jetty. Prior to the arrival of the defendant vessel, the only other vessel that had berthed at the captive jetty after it was declared open post monsoon, was a smaller vessel which was not carrying LPG.
6. On 14th September, 2006, Pilot boarded the defendant vessel. The services of pilot are provided by the plaintiff. In the process of berthing with the assistance of two tugs of maximum Bollard Pull of 10 tons, as per the documents annexed to the plaint and relied upon by the plaintiff, it seems, due to a sudden squall, rain and swell, the defendant vessel drifted away from the jetty and could not be controlled by the two tugs. The vessel drifted in the area and grounded on soft sand and mud at a distance, admittedly of 1.5 / 1.6 k.m. from the captive jetty. Though elsewhere, prior to filing this suit, the plaintiff had also taken the stand that the grounding was on account of bad weather, in the plaint, the plaintiff allege it was due to inadequacies and/or negligence of the defendant vessel and its master, and crew, the defendant vessel grounded. There is no explanation in the plaint for this change of stance and it is an averment with no details. The vessel was finally removed from its grounded position late in the night on 9th October, 2006 and she was safely navigated out from Pawas Bay.
7. In the meanwhile, by an order dated 16th September, 2006, the Port Officer, Ratnagiri, Maharashtra Maritime Board ordered the operation of the Captive Jetty be temporarily suspended with immediate effect. At the same time, the Port Officer, in order to ensure that there was no delay in receiving cargo informed the plaintiff that they could immediately revive operations at the captive jetty provided the vessels to be piloted at the captive jetty to/from the anchorage would be piloted only by one Captain Ali Ibrahim Pawaskar and the plaintiff should have two tugs hired by them with a minimum Bollard Pull of 35 tons each and the tugs should also possess a valid Bollard Pull Test Certificate from approved authority. It is necessary to mention here that the two tugs that were rendering assistance to the defendant vessel to berth at the Captive jetty, at which time she grounded were also provided by the plaintiff.
8. The plaintiff by its letter of 16th September, 2006 informed the Port Officer that it would comply with the directions to use only Captain Pawaskar as pilot with immediate effect but tugs will take time and, therefore, suggested using a third tug to continue with its shipping activities. It also requested the Port Officer to allow a smaller vessel carrying 5000 tons followed by another smaller vessel carrying 3000 tons of raw material to be allowed to be berthed. Following this the Sub Divisional Magistrate (SDM) passed an order dated 22/09/2006 under Section 133 of the Criminal Procedure Code, directing the plaintiff to shut the plaintiff's plant. The reason given for this order is because the defendant vessel had grounded about 1.5 km from the plaintiff's captive jetty and efforts to re-float the vessel was yet not successful and he had also heard that the cargo of LPG being carried in the defendant vessel was likely to be transmitted to another empty ship and there was a possible hazard which would require the evacuation of people within a radius of 2.5 k.m. of the plaintiff's plant and hence to avoid any untoward incident, until the defendant vessel is re-floated, the plaintiff should shut its plant. In the said order it is however, recorded that the defendant vessel drifted and grounded due to bad weather.
9. While the rescue operations were on, a vessel by the name Suzanne carrying the plaintiff's cargo berthed at the captive Jetty on 23rd September, 2006 discharged and sailed on 24th September, 2006 without any incident.
10. A local resident, thereafter, filed a Public Interest Litigation in the Bombay High Court against the use of the jetty by the plaintiff. It was also alleged that the plaintiff had illegally let out the jetty to BPCL for handling LPG Cargo thereby violating all statutory provisions and without having any safety measures including a breakwater for protection of ships. On 28th September, 2006 a Division Bench of this Court restrained the plaintiff from using the jetty. Neither the plaintiff nor the defendant were parties to the Public Interest Litigation. On 29th September 2006, the plaintiff filed a Civil Application wherein the plaintiff submitted that there was no danger to vessels using the jetty and prayed for vacating or modifying the order restraining the plaintiff from using the jetty. However, the Court did not vacate or modify its order. On 1st October 2006, the plaintiff filed a Special Leave Petition and the Hon'ble Supreme Court allowed the plaintiff to use the jetty to discharge cargo from another vessel by name Polar Endurance. Later on as the defendant vessel was refloated without any incident, the Public Interest Litigation came to be disposed of on 12th October, 2006. On 25th October, 2006, the plaintiff filed this suit and the applicant as owner of the defendant vessel, without prejudice to its rights and contentions, furnished security to the credit of the suit.
11. That is how, this Notice of Motion came to be filed in which the applicant, the owner of the defendant vessel prays for (a) dismissal of the suit as not maintainable in law and/or in the Admiralty jurisdiction of this Court; (b) in the alternative, the ex-parte order of arrest be vacated and the bank guarantee furnished in respect of the plaintiff's claim be discharged and returned; (c) In the alternative, the bank guarantee furnished for release of the defendant vessel be reduced to the extent, this Hon'ble Court may deem fit and proper and (d) the plaintiff be directed to pay to the defendant or deposit in this Court a sum of Rs.2,53,32,212.50 (Rupees Two Crores Fifty Three Lacs Thirty Two Thousand Two Hundred and Twelve and Fifty paise only) towards the bank guarantee charges incurred by the applicant.
12. At the outset, in view of the concessions made by Mr. Dhond, the learned Counsel for the plaintiff, the security provided in the sum of Rs. 12,83,00,521.00 plus US$4,53,889.00 will get reduced to only Rs. 12,28,72,520.00. What remains, therefore, is the claim for production loss of Rs. 12,28,72,520.00 This according to Mr. Pratap, is a claim for pure economic loss independent of physical damage, which under any law cannot be claimed. Mr. Pratap also submitted that admittedly there was no physical damage and the cause of action averred in the plaint at paragraph 3 is :
œThis loss and/ or damage and/ or liability resulted and/ or arises from the grounding of the Defendant Vessel carrying 8798 MT of LPG in Pawas bay, as a consequence of the inadequacies and/ or negligence of the Defendant vessel and its master and crew, who lost control of the vessel and allowed her to drift deep into Pawas bay, in an easterly direction for more than a kilometer, while attempting to dock at the Plaintiff's jetty at the mouth of Pawas bay.?
13. Mr. Pratap submitted that the cause of action alleged in the plaint which was declared on 25th October 2006 is at variance with all the documents annexed to the plaint and also the pleadings filed by the plaintiff in the PIL as well as the SLP that the plaintiff had filed in the Apex Court challenging the order of Division Bench of this Court in the PIL. Mr. Pratap states that all these show that the defendant vessel drifted and grounded due to bad weather. He also submitted that the pilot was an employee of the plaintiff. The two tugs that were being used to assist the defendant vessel to berth were owned by the plaintiff. There was no fault or omission that could be attributable to the defendant and the averments in the plaint which are contrary to the documents annexed to the plaint, the averments made by the plaintiff in their affidavit in the PIL and in the SLP, are bald and baseless. Mr. Pratap based his entire case in such a way that assuming for the sake of argument the grounding of the vessel was due to reasons attributable to the vessel or to the master or the crew still the plaintiff cannot sue the defendant for pure economic loss, independent of physical damage.
14. Mr. Pratap submitted that this is a case where the plaintiff is suing in tort of negligence. He based his case on four legs, viz., (a) there has to be a duty of care to the plaintiff and the defendant owed no such duty; (b) the loss was foreseeable and not remote; (c) In any case the plaintiff cannot claim for pure economic loss independent of physical damage; and (d) there was no causal connection between the grounding of the defendant vessel and the alleged loss suffered by the plaintiff. He also submitted, relying on an extract from the 18th edition of Clerk and Lindsell on Torts that there are four requirements that the plaintiff has to meet in a claim in tort of negligence. They are (a) the existence of a duty of care situation; (b) breach of the duty of care by the defendant; (c) a casual connection between the defendant's careless conduct and the damage; and (d) that the particular kind of damage to the particular claimant is not unforeseeable as to be too remote and all these four requirements have to be satisfied. Requirement (c) ascribes causal responsibility to the defendant, whereas the function of requirement (d) is to limit actionability by the claimant or by the plaintiff by determining whether he should be able to hold the defendant legally responsible for the damage. Only when these four requirements are satisfied, the defendant is liable for negligence.
15. Concerning the existence of duty of care situation, the first limb of his arguments, Mr. Pratap submitted that there is no proximity or nearness in this case to attribute a duty of care to the plaintiff particularly for a claim for pure economic loss independent of physical damage. He first relied upon a judgment of the House of Lords in the case of œCaparo Industries PLC. and Dickman and others? [1990] A.C. 606).This was a matter where the Court dealt with a situation as to whether an auditor appointed by the company to audit and survey company's accounts under a statutory duty to make returns to the shareholders owes any duty of care to another company making a takeover bid relying upon the auditor's report.
Lord Bridge of Harwich at page 617-618 summarized the outcome:-
"What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope on the one party for the benefit of the other.?
16. Mr. Pratap also submitted that where pure economic loss independent of physical damage is claimed there are public policy considerations which is sometimes regarded as an additional test to be applied once the three œCaparo? (supra) criteria quoted above are satisfied. Mr. Pratap submitted that in this case the plaintiff is a total stranger to the defendant and the view should be that the public interest should be considered as an aspect of justice and reasonableness. This point we will consider when the third limb of Mr. Pratap's arguments on economic loss is dealt with. The defendant vessel came to discharge a cargo of LPG at the Captive Jetty to the account of BPCL. The cargo was consigned to BPCL and had nothing to do with the plaintiff. The plaintiff's plant was shut by orders of the authorities or the High Court in proceedings to which the defendant was not a party. No way a relationship characterised as one of 'proximity', or 'neighbourhood' could exist between the plaintiff and the defendant vessel. Consequently, there can be no duty of care that the defendant vessel owed to the plaintiff.
17. As regards the second limb, i.e., foreseeability, Mr. Pratap submitted that an essential ingredient in determining liability in consequence to the tortious act of negligence is whether the damage is of such a kind as a reasonable man should foresee. The test is objective. He also submitted that a man should not be held liable for damage unpredictable by a reasonable man because it was 'direct' or 'natural' and equally he should not escape liability however 'indirect' the damage if he foresaw or could reasonably have foreseen the intervening events which lead to its being done. For this Mr. Pratap relied upon another judgment of the House of Lords in the matter of œOverseas Tankship (U.K.) Limited and Morts Dock and Engineering Co. Ltd.? (1961 AC 388)(The Wagon Mound). In this judgment Viscount Simonds, who delivered the judgment of their Lordships, while considering the various authorities observed at page 421 as under:
œInstances might be multiplied of deviation from the rule in Polemis, but their Lordships think it sufficient to refer to certain later cases in the House of Lords and then to attempt to state what they conceive to be the true principle. In Glasgow Corporation V. Muir [1943] A.C. 448, 454, Lord Thankerton said that it had long been held in Scotland that all that a person can be bound to foresee are the reasonable and probable consequences of the failure to take care judged by the standard of the ordinary reasonable man, while Lord Macmillan said (at page 457) that œIt is still left to the judge to decide what, in the circumstances of the particular case, the reasonable man would have had in contemplation, and what, accordingly, the party sought to be made liable ought to have foreseen.................
In considering whether a person owes to another a duty a breach of which will render him liable to that other in damages for negligence, it is material to consider what the defendant ought to have contemplated as a reasonable man.? Their lordships at page 426 concluded as under:
œTheir Lordships conclude this part of the case with some general observations. They have been concerned primarily to displace the proposition that unforeseeability is irrelevant if damage is œdirect.? In doing so they have inevitably insisted that the essential factor in determining liability is whether the damage is of such a kind as the reasonable man should have foreseen. This accords with the general view thus stated by Lord Atkin in Donoghue V. Stevenson, [1932] A.C. 562: œThe liability of negligence, whether you style it such or treat it as in other systems as a species of 'culpa', is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay.? It is a departure from this sovereign principle if liability is made to depend solely on the damage being the œdirect? or œnatural? consequence of the precedent act. Who knows or can be assumed to know all the processes of nature But if it would be wrong that a man should be held liable for damage unpredictable by a reasonable man because it was œdirect? or œnatural?, equally it would be wrong that he should escape liability, however œindirect? the damage, if he foresaw or could reasonably foresee the intervening events which led to its being done :cf. Woods V. Duncan,[]946]A.C. 401. Thus foreseeability becomes the effective test. In reasserting this principle their Lordships conceive that they do not depart from, but follow and develop, the law of negligence as laid down by Baron Alderson in Blyth V. Birmingham Waterworks Co., [1856]11 Exch. 781.?
18. Since what can be contemplated or foreseen by a reasonable man varies from situation to situation and person to person, Mr. Pratap submitted that as a matter of principle and policy Courts did not grant any claim for damages for pure economic loss independent of physical damage. This is his third limb of arguments. He relied upon the judgment delivered by Lord Denning M.R., sitting in the Court of Appeal in the matter of œSpartan Steel and Alloys Ltd. v/s. Martin and Co. (Contractors) Limited? (1973 (1) Q.B. 27). He submitted that in most cases where economic loss was held not to be recoverable, it has been put on the ground that the defendant was under no duty to the plaintiff nor to anyone else who suffers loss because he had a contract with the injured man nor to anyone who only suffers economic loss on account of the accident. He also submitted that there were cases where the defendant might have been under a duty to the plaintiff, but the economic loss has not been recovered because it is too remote. He emphasized on the example of such a situation given in the œSpartan Steelœ (supra) judgment at page 36, where the defendant's ship negligently sank a ship which was being towed by a tug, the owner of the tug lost his remuneration, but he could not recover it from the negligent ship, though the same duty (of navigation with reasonable care) was owed to both tug and tow [(1911) 1 K.B. 243, 248]. In such cases, if the plaintiff or his property had been physically injured, he would have recovered, but as he only suffered economic loss, he is not entitled to recover, because the loss was regarded as too remote. He also submitted that when a situation like in the present case happens, though only the plaintiff has sued, it affects a multitude of persons, not as a rule by way of physical damage to them or their property, but by putting them to inconvenience, and sometimes to economic loss. If claims for such economic loss were permitted for this particular hazard like in the present case, there would be no end of claims. Some might be genuine, but many might be inflated, or even, false. Hence, it is better to disallow economic loss altogether, at any rate when it stands alone, independently of any physical damage.
19. Mr. Pratap also submitted, which is his fourth limb of arguments, that when there are intervening factors, novus actus interveniens, it can be regarded as breaking the causal connection between the wrong and the damage. The defendant's conduct may have satisfied the 'but for' test in the sense that without his wrongful conduct the damage would not have occurred but this in itself is not determinative of whether he should be held responsible where other causally relevant events have played role. He further submitted that on the grounds of equity and policy, in the light of subsequent events, the defendant should not be held answerable for consequences beyond his control. He also submitted that the novus actus interveniens may take three forms namely; (a) mere natural event independent of any human agency; (b) an act (or omission) by a third party or; (c) the conduct of the claimant himself. Mr. Pratap submitted that the grounding of defendant vessel was not the cause for the alleged stoppage of the plaintiff's plant because even after grounding one vessel of the plaintiff entered and discharged cargo. The PIL that was filed and the orders passed therein and the orders of the SDM were responsible for the closure of the plaintiff's plant. Therefore, the PIL and the orders of the SDM should be taken as the intervening factor, i.e., novus actus interveniens, because the impact of the orders passed in the PIL and by SDM obliterates the wrong doing of the defendant, if at all there is any wrong doing.
20. Mr. Pratap concluded that as held by Lord Denning in the œSpartan Steel? (supra), as a matter of policy pure economic loss should not be allowed because in a given situation if a vessel runs aground and blocks the channel and port had to be closed for sometime until the vessel was refloated, can all exporters and importers and other port users other than the port itself claim for economic loss? He submitted that though it could be foreseen that if ship runs aground, in the port's channel, the entire port activities may come to a standstill, still it is far too remote to allow all the exporters/importers spread all over the country or the ship owners who use the port or the transporters or contractors who lost business or the labourers or labour contractors who are unable to load/unload, sue the ship because it has run aground for economic loss independently of any physical damage. That is where the remoteness or proximity comes into play and hence as a matter of policy, such claims should not be allowed. He also submitted that the grounding of the defendant vessel did not block the jetty or the channel. The ship was grounded 1.5/1.6 kms from the jetty. Another vessel of the plaintiff came and discharged cargo and went away while refloating efforts were on. Due to some objections raised by the people living in that area by filing a PIL where the main grievance was that the plaintiff wrongly and without permission operates the captive jetty allowing the discharge of dangerous cargo, that an order came to be passed temporarily shutting the plant. Therefore, the plaintiff's claim is not maintainable. Mr. Pratap consciously did not delve into the quantum of the claim because that would be something that cannot be decided at this stage. He restricted to the point of law - the Court should hold that the plaintiff cannot maintain an action for pure economic loss independent of any physical damage.
21. Mr. Dhond, Counsel for the plaintiff at the outset submitted that the principle of Rylands vs. Fletcher (1868) LR HL 330)has been disregarded / distinguished by our Apex Court and they have adopted the principle of strict liability when somebody is carrying on an activity which can be potentially dangerous. Mr. Dhond submitted that the owner of the defendant vessel was knowing that he was carrying a highly inflammable hazardous cargo, i.e., LPG and therefore he had strict liability and such liability is not subject to any of the exceptions which operate vis-a-vis the tortious principle of strict liability under the rule in Rylands vs. Fletcher (supra).
22. Mr. Dhond pressed the concept of strict liability first by relying upon the judgment of the Apex Court in the matter of œM.C. Mehta and Another v/s Union of India and others? (1987) 1 SCC 395). He submitted that the Supreme Court has said that we cannot be constricted by reference to the law as it prevails in England and held that an enterprise which is engaged in a hazardous and inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owes an absolute and non-delegable duty to the community to ensure that no harm results to anyone on account of hazardous or inherently dangerous nature of the activity which it has undertaken. The enterprise must be absolutely liable to compensate for such harm and it should be no answer to the enterprise to say it had taken all reasonable care and that the harm occurred without any negligence on its part. He also submitted that the Supreme Court has held that measure of compensation in the kind of cases referred to in the judgment must be co-related to the magnitude and capacity of the enterprise because such compensation must have a deterrent effect.
23. Mr. Dhond also relied upon œCharan Lal Sahu V/s Union of India (AIR 1990 SC 1480)? (Bhopal Gas Tragedy case) where in paragraph 91, the Supreme Court followed the rule of strict liability propounded in the œM.C. Mehta case? (supra).
24. This was followed by a third judgment in the matter of œUnion Of India V/s. Prabhakaran Vijaya Kumar and others? (2008) 9 SCC 527), in which the Apex Court was dealing with a claim by the legal representatives of a lady who while trying to enter a train fell on the railway track and was run over by the train. There also the Supreme Court followed the same principle adopted in the œM.C. Mehta's case? (supra) that is of strict liability. The Supreme Court held that the decision in œM.C. Mehta's case? (supra) related to a concern working for private profit and the same principle will also be applied to statutory authorities (like the railways), public corporations or legal bodies which may be social utility undertakings not working for private profit. The fourth judgment Mr. Dhond relied upon was œM.P. Electricity Board v/s. Shail Kumari and others? (2002) 2 SCC 162)where the Supreme Court followed the strict liability principle adopted in œM.C. Mehta's case? (supra).
25. Mr. Dhond, thereafter, dealt with the submissions of Mr. Pratap. Mr. Dhond submitted that Mr. Pratap's case that PIL was the cause for the shutdown of the plant was incorrect. He submitted that on 16th September, 2006, the Port Officer wrote to the plaintiff to suspend operation of the jetty because of the grounding of the defendant vessel and as attempts to refloat was failing. He also submitted that the SDM on 22nd September, 2006 issued a notice under section 133 of Cr.P.C. for closure of plaintiff's plant and the same SDM observed that since the operations to transship the LPG from defendant vessel to the other vessel may take 10-12 days, there was danger to people within 2.5 km radius. He submitted that the PIL was filed only on or about 24th September, 2006 and, therefore, the order to shut the plant had nothing to do with PIL and PIL only added to the problem. He also submitted that the PIL was filed only because the defendant vessel grounded. He, therefore, submitted that there was no break in causation.
26. On the duty of the care submissions made by Mr. Pratap, Mr. Dhond submitted that the Apex Court in the four judgments referred above, has held that there is strict liability and, therefore, the defendant owes a duty of care to the world at large when he is transporting hazardous material.
27. As regards the foreseeability test, Mr. Dhond submitted that where there is absolute or strict liability, requirements of foreseeability are diluted. Therefore, the judgments which are dealing with the foreseeability test relied upon by the applicants' Counsel are of no use because all those judgments are not relating to absolute or strict liability. He also submitted that assuming for the sake of argument the strict liability principle is obviated, however, the ship should have been able to foresee that grounding of their vessel will affect the Port users. He also submitted that physical damage to the jetty or blockage of the jetty are not relevant because the plaintiff is claiming consequential damages because of the grounding of the vessel resulting in the SDM and High Court passing orders stopping the plaintiff from operating the plant. He also submitted that the arguments of the applicant's counsel on novus actus interveniens cannot be accepted because the orders of the Court and SDM to stop the plant was directly related to the grounding. Mr. Dhond submits that the order of the Port Officer/SDM though in one way may be termed as a panic order, it cannot be said to be not reasonable to obliterate the risk created by grounding and hence cannot be termed novus actus interveniens.
He also submitted that the plaintiff's claim was a maritime claim. He relied upon the judgment of the English Court Queen's Bench Division in the œDagmara? and œAma Antxine? (1988 (1) LLR 431)to say that a claim as in the present matter would be "damage done by a ship".
28. In support of his submissions that economic loss was claimable, Mr. Dhond also relied upon the judgment of the Apex Court in the matter of œLiverpool and London Steamship Protection and Indemnity Association Ltd. Vs. M.V. Sea Success I? (2004) 9 SCC 512)where the Apex Court has mentioned as under:
œArticle 1 of the Convention contemplates an expansion of existing categories of arrestable claims under the following headings, some of which, namely, heading (c) and (d) are already reflected in Section 20(2) of the Supreme Court Act, 1981:
(a) this refers to 'loss or damage caused by the operation of the ship' rather than 'damage done by a ship' and would encompass claims for pure economic loss...?
29. Thereafter, Mr. Dhond dealt with the judgments relied upon by Mr. Pratap. Concerning the judgment in œCaparo? (supra) and œThe Wagon Mound ?, Mr. Dhond submitted that the judgments are of no use because in those cases the House of Lords has generally followed the principle of œRylands vs. Fletcher?, which our Apex Court has not followed. He submitted that our Courts have enumerated the strict liability principle and, therefore, one need not even look into it. He added that in a case similar to œCaparo? (supra), perhaps our Apex Court may also have come to the same conclusion as the House of Lords but when it comes to dealing with a case involving dangerous substance, the yardstick to be applied is different and the principle of strict liability comes into play without the exceptions available under the rule in œRylands V/s. Fletcher?.
30. On œSpartan Steelœ (supra), Mr. Dhond submitted that though the Court of Appeal in that case said as a matter of policy not to allow pure economic loss, by virtue of our Apex Court evolving the principle of strict or absolute liability where dangerous substance was involved, economic loss is payable in all cases when somebody handles dangerous cargo. He also submitted that in œSpartan Steel? case the Court did not award damages because when a person directly affected could not have claimed from the electric company, how can a person who has indirectly suffered, claim? Therefore, on the facts of that case the Court felt that economic loss should not be allowed to be claimed. He also submitted that the other two judgments relied upon by the defendant were covered by Lord Denning's judgment in the œSpartan Steel? (supra) case.
31. Mr. Dhond, thereafter, relied upon œOverseas Tankship (UK) Ltd v The Miller Steamship Co Pvt. Ltd. and Anr.? Or Wagon Mound (No. 2) [1967] 1 AC 617)where the Court held that where a reasonable man having the knowledge and experience to be expected of him may not foresee the entire extent of damage the cargo being handled by him may cause but should certainly be aware that such a damage was likely. He submitted that the defendants should have known that a LPG carrier if it grounds, the area grounded would get evacuated. Mr. Dhond also relied upon the judgment of the Australian Hugh Court in the matter of œCaltex Oil (Australia) Pty ltd. Vs. The Dredge Willemstad? (Westlaw “ 136 CLR 529)to submit that claim for damages for pure economic loss has been allowed by the Australian Courts. The Australian Court had disagreed with the English Court of Appeal in the matter of œSpartan Steelœ (supra). He submitted that pure economic loss is recoverable depending on the proximity to the incident. Therefore, as to whether a loss was reasonably foreseeable or not or it was a direct consequence of failure in duty of care or not or whether how proximate it was or not proximate at all could be decided only at the trial. Hence, the notice of motion should be rejected. Mr. Dhond also submitted that in this judgment of œCaltex? (supra) and in another Australian judgment in the matter of œPerre and others v/s. Apand Pty Limited? (1999 Commonwealth Law Reports 180), it is held that œSpartan Steelœ (supra) does not lay down any hard and fast rule applicable to all cases, against the recovery of economic loss by the plaintiff who suffers no injury to his property or person. Mr. Dhond also relied upon a Canadian judgment in the matter of œCanadian National Railway Company v/s. Norsk Pacific Steamship Company Limited? (1992) 1 R.C.S. 1021), in which the Canadian Court, in a majority judgment of 4:3 held ?Pure economic loss is prima facie recoverable where, in addition to negligence and foreseeable loss, there is sufficient proximity between the negligent act and loss. Proximity is a controlling concept, avoiding the spectre of unlimited liability. Proximity may be established by variety of factors depending on the nature of the case.? He submitted that this cannot be therefore decided at the interim stage.
32. Mr. Dhond also submitted that the plaintiff had reasonably arguable best case. He submitted that the plaintiff's case is not vexatious or hopeless but was arguable. He submitted even if it is a difficult case, it will not be appropriate at this stage to decide this issue and the plaintiff is entitled for a trial. He submitted that the admitted position was that the defendant vessel grounded and the grounding was the cause for the orders to stop the plant being passed by the SDM and the High Court in the PIL. He states that the plaintiff was therefore entitled to trial and cannot be shut out at this stage. For this Mr. Dhond relied upon the famous English judgment of Brandon, J. in the œMoschanthy? (1971 (vol.I) LLR 37), the judgment of our Apex Court in œVidesh Sanchar Nigam Limited V/s. M.V. Kapitan Kud and others? (1996) 7 SCC 127)and œM. V. Elizabeth and others V/s. Harwan Investment and Trading Pvt. Ltd? (1993 Supp (2) SCC 433).
33. In rejoinder, Mr. Pratap, Counsel for the defendant submitted that whether there is a question of reasonably arguable best case or the plaintiff has any claim or not, even the public authorities have observed that the grounding happened due to bad weather which is an act of God. He submitted that even the plaintiff has (a) relied upon all those documents, and (b) in its affidavit in the PIL in the High Court and in the SLP has taken a stand that it was the bad weather which resulted in the grounding. Moreover, the plaintiff has not even made an allegation in the form of an e-mail or letter before the suit was filed. For the first time, an allegation is made in paragraph no. 3 of the plaint. Therefore, the plaintiff has no reasonably arguable best case. He also submitted that the four cases cited by the plaintiff that is the œM.C. Mehta ?, œBhopal Gas Tragedy ?, œPrabhakaran Vijaya Kumar and œM.P. State Electricity Board ?(all Supra), were cases where the property was on land and there was escape of a hazardous substance. In this case, there is no such escape. He also submitted that the Apex Court has only said the exception for Ryland vs. Fletcher that the government permission obtained cannot be relied upon and hence absolute liability has to be applied where there is harm and injury caused to humans due to escape of toxious gases. In M.C. Mehta's case and in Bhopal gas tragedy case, toxic fuel escaped and many people died or were maimed and the Supreme Court held that when you are carrying an activity in enclosed premises knowing that the activity you are carrying on could possibly amount to dangerous situation which could affect innumerable lives, you cannot go back and say at that time I have all necessary permissions to carry on this business. He submitted that there was no such situation in the present case because no LPG had escaped, there was no loss of life or injury to anybody nor did the plant of the plaintiff which was allegedly shut down was due to any escape of LPG from the defendant vessel. Bad weather caused the vessel to ground which had the plaintiff's pilot and plaintiff's tug rendering services. When the vessel grounded, the authorities feared while the vessel was being refloated, people within a radius of 2.5 km have to be evacuated and somebody filed a PIL due to the plaintiff allegedly illegally operating the jetty. Hence the strict liability case is not applicable. It was the same situation in the M.P. Electricity Board (supra) case. All those cases were for compensation for loss of life or injury due to escape of something dangerous from the factory. In the œPrabhakaran Vijaya Kumar? case the Railways Act provided for that and in the œM.P. Electricity Board case? also it was the electricity that escaped when a live wire got snapped and fell on the public road which was inundated with rainwater. That was also a case of compensation due to loss of life. Hence, those cases are not applicable to the present matter. Mr. Pratap submitted that if LPG had escaped from the defendant vessel and caused fire in the plaintiff's plant, yes the plaintiff might have a valid claim but not in a situation as in this case. Therefore, we must use the ordinary principles of tort that is duty of care and foreseeability.
34. Mr. Pratap relied upon one more judgment of the House of Lords in the matter of œRead V/s. J. Lyons and Company Limited? (1947 AC 156)where the court held that the respondents were not liable to the appellants for damages since there had been no escape of any dangerous thing from the premises and accordingly an essential condition for the application of the rule in œRylands vs. Fletcher? was wanting. He also relied upon the Apex Court's judgment in the matter of œKaushnuma Begum (Smt.) and others vs. New India Assurance Co. Ltd. and others? (2001) 2 SCC 9)to submit that the œRylands vs. Fletcher? rule could still be followed in India and is acceptable to Indian jurisprudence.
35. As regards the œCaltex? Judgment (supra) relied upon by Mr. Dhond, Mr. Pratap mentioned that the Privy Council in the œMineral Transporter? (1985 (Vol.II) L.L.R. 303)has criticized the same. Even œNorsk Pacific (supra) and œPerre? (supra) that followed the œCaltex? judgment are deemed to have been criticized in the œMineral Transporter Case?. Similarly, the œM.V. Sea Success I œwhere there is a reference to the economic loss that was not the case in dispute and there has been no debate or discussion on the point. Mr. Pratap also relied upon the non-reported judgment of our Division Bench in the matter of œM/s. Kimberly “ Clark Lever Pvt. Ltd v/s. M.V. 'Eagle Excellence'? in Admiralty Suit No. 12 of 2006 where the Division Bench held that for a Court to hold that the plaintiff has made out a reasonable arguable best case what is required is that the plaintiff must establish a prima-facie case in relation to his right in such admiralty actions and in this case no such prima facie case has been established.
36. Having considered the pleadings, the rival arguments of the counsel and the various judgments cited in this case, I am satisfied that this is not a case where the principle of strict liability enumerated by our Apex Court in the case of œM.C. Mehta?, œBhopal Gas Tragedy?, œPrabhakaran Vijaya Kumar? and œM.P. State Electricity Board? (all Supra) has to be followed. The law that was established is that the person who, for his own purpose brings on his land and collects and keeps there anything likely to cause harm or injury if it escaped, he himself keeps it in his peril and if he does not do so he is primarily responsible. What the Apex Court has held in the œM.C. Mehta? (supra) case is if an enterprise which is engaged in a hazardous and inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas, it owes an absolute and non delegable duty to the community to ensure that no harm results to anyone on account of hazardous or inherently dangerous nature of the activity which he has undertaken. In case of escape of toxic gas, the enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-a-vis the tortious principle of strict liability under the rule in œRylands v. Fletcher?. What the apex court in M.C. Mehta case said was:
31. We must also deal with one other question which was seriously debated before us and that question is as to what is the measure of liability of an enterprise which is engaged in an hazardous or inherently dangerous industry, if by reason of an accident occurring in such industry, persons die or are injured. Does the rule in Rylands v. Fletcher apply or is there any other principle on which the liability can be determined? The rule in Rylands v. Fletcher was evolved in the year 1866 and it provides that a person who for his own purposes being on to his land and collects and keeps there anything likely to do mischief if it escapes must keep it at his peril and, if he falls to do so, is prima facie liable for the damage which is the natural consequence of its escape. The liability under this rule is strict and it is no defence that the thing escaped without that person's willful act, default or neglect or even that he had no knowledge of its existence. This rule laid down a principle of liability that if a person who brings on to his land and collects and keeps there anything likely to do harm and such thing escapes and does damage to another, he is liable to compensate for the damage caused. Of course, this rule applies only to non-natural user of the land and it does not apply to things naturally on the land or where the escape is due to an act of God and an act of a stranger or the default of the person injured or where the thing which escapes is present by the consent of the person injured or in certain cases where there is statutory authority. Vide Halsbury Laws of England, Vol. 45 para 1305. Considerable case law has developed in England as to what is natural and what is non-natural use of land and what are precisely the circumstances in which this rule may be displaced. But it is not necessary for us to consider these decisions laying down the parameters of this rule because in a modern industrial society with highly developed scientific knowledge and technology where hazardous or inherently dangerous industries are necessary to carry out part of the developmental programme. This rule evolved in the 19th Century at a time when all these developments of science and technology had not taken place cannot afford any guidance in evolving any standard of liability consistent with the constitutional norms and the needs of the present day economy and social structure. We need not feel inhibited by this rule which was evolved in this context of a totally different kind of economy. Law has to grow in order to satisfy the needs of the fast changing society and keep abreast with the economic developments taking place in the country. As new situations arise the law has to be evolved in order to meet the challenge of such new situations. Law cannot afford to remain static. We have to evolve new principles and lay down new norms which would adequately deal with the new problems which arise in a highly industrialised economy. We cannot allow our judicial thinking to be constricted by reference to the law as it prevails in England or for the matter of that in any other foreign country. We no longer need the crutches of a foreign legal order. We are certainly prepared to receive light from whatever source it comes but we have to build up our own jurisprudence and we cannot countenance an argument that merely because the new law does not recognise the rule of strict and absolute liability in cases of hazardous or dangerous liability or the rule as laid down in Rylands v. Fletcher as is developed in England recognises certain limitations and responsibilities. We in India cannot hold our hands back and I venture to evolve a new principle of liability which English courts have not done. We have to develop our own law and if we find that it is necessary to construct a new principle of liability to deal with an unusual situation which has arisen and which is likely to arise in future on account of hazardous or inherently dangerous industries which are concomitant to an industrial economy, there is no reason why we should hesitate to evolve such principle of liability merely because it has not been so done in England. We are of the view that an enterprise which is engaged in a hazardous or inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owes an absolute and non-delegable duty to the community to ensure that no harm results to anyone on account of hazardous or inherently dangerous nature of the activity which it has undertaken. The enterprise must be held to be under an obligation to provide that the hazardous or inherently dangerous activity in which it is engaged must be conducted with the highest standards of safety and if any harm results on account of such activity, the enterprise must be absolutely liable to compensate for such harm and it should be no answer to the enterprise to say that it had taken all reasonable care and that the harm occurred without any negligence on its part. Since the persons harmed on account of the hazardous or inherently dangerous activity carried on by the enterprise would not be in a position to isolate the process of operation from the hazardous preparation of substance or any other related element that caused the harm must be held strictly liable for causing such harm as a part of the social cost for carrying on the hazardous or inherently dangerous activity. If the enterprise is permitted to carry on an hazardous or inherently dangerous activity for its profit, the law must presume that such permission is conditional on the enterprise absorbing the cost of any accident arising on account of such hazardous or inherently dangerous activity as an appropriate item of its overheads. Such hazardous or inherently dangerous activity for private profit can be tolerated only on condition that the enterprise engaged in such hazardous or inherently dangerous activity indemnifies all those who suffer on account of the carrying on of such hazardous or inherently dangerous activity regardless of whether it is carried on carefully or not. This principle is also sustainable on the ground that the enterprise alone has the resource to discover and guard against hazards or dangers and to provide warning against potential hazards. We would therefore hold that where an enterprise is engaged in a hazardous or inherently dangerous activity and harm results to anyone on account of an accident in the operation of such hazardous or inherently dangerous activity resulting, for example, in escape of toxic gas the enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-a-vis the tortious principle of strict liability under the rule in Rylands v. Fletcher (supra).
32. We would also like to point out that the measure of compensation in the kind of cases referred to in the preceding paragraph must be co-related to the magnitude and capacity of the enterprise because such compensation must have a deferent effect. The larger and more prosperous the enterprise, the greater must be the amount of compensation payable by it for the harm caused on account of an accident in the carrying on of the hazardous or inherently dangerous activity by the enterprise.?
37. I agree with the submissions of Mr. Pratap that in all these cases, the enterprises have been engaged in the hazardous and inherently dangerous activity. Moreover by virtue of being engaged in such hazardous or inherently dangerous activity someone must have come to harm on account of accident in the operation of such hazardous or inherently dangerous activity. In this case, no harm has been caused to anyone. In this case, there is no escape of any toxic gas. Escape is necessary. The first essential condition of escape in this case is not present at all. The second requirement of escape from the premises of the defendant also does not arise since there has been no escape. Thirdly the strict liability is applicable only if someone is harmed. Strict liability, in my view, as envisaged by the Apex Court cannot be stretched to pure economic losses and that too where it is independent of physical damage. Therefore, the strict liability principle is not applicable to this case at all. Our Apex Court has also held in the œKaushnuma Begam? case (supra) that the rule in Rylands vs. Fletcher is still acceptable to Indian Jurisprudence. That was the case arising out of the negligent use of motor vehicle and the Apex Court distinguished no fault liability envisaged in the Motor Vehicle Act from the rule of strict liability of the œBhopal Gas Tragedy? and œM.C. Mehta case?. The Apex Court held that the constitutional bench did not disapprove the œRylands vs. Fletcher? rule but only said that œwe are certainly prepared to receive light from whatever source it comes?. It means that the Constitution Bench did not foreclose the application of the rule as a legal proposition. Paras 16 and 19 read as under:
œ16. It is pertinent to point out that the Constitution Bench did not disapprove the Rule. On the contrary, learned judges further said that we are certainly prepared to receive light from whatever source it comes. It means that the Constitution Bench did not foreclose the application of the Rule as a legal proposition.
17 ¦....
18.......
19. Like any other common law principle, which is acceptable to our jurisprudence, the Rule in Rylands vs. Fletcher can be followed at least until any other new principle which excels the former can be evolved, or until legislation provides differently. Hence, we are disposed to adopt the Rule in claims for compensation ...........?
38. The plaintiff's reliance on the Australian judgment in Caltex Oil (supra) and Perre Vs. Apand (supra) and Canadian case of Norsk Pacific (supra) to show that economic loss was held to be recoverable are misplaced. The factors which distinguish those cases from the present case and also the English judgments relied upon by the defendants are (a) in those cases there was economic loss consequent upon physical damage whereas in the present case there is no physical damage and (b) in those cases the plaintiff was not the owner of the property that was damaged but if he had been then he would have recovered even under English law as loss consequent upon physical damage to his property. Hence the courts took the view that it would be unjust to deny recovery merely because the plaintiff did not own the property that was damaged. On the facts of each case the Court found it just and fair that the defendant should bear the loss.
39. In Caltex Oil (supra) it was a case of economic loss consequent upon physical damage. In that case, the dredge damaged a pipeline which was used to carry products of the refinery to the terminal. The owner of the pipeline was Australian Oil Refining Pty Ltd. and the owner of the terminal was Caltex. The owner of the pipeline succeeded in recovering damage because there was physical damage caused to the pipeline. Caltex, which was the owner of the terminal, claimed damages incurred in providing alternative means of transporting the refined oil since the pipeline which was used to transport the same was damaged by the dredge.
The facts of that case were that the dredge was engaged in dredging operations in that area and was aware of the location of the pipeline and the fact that the pipeline was used to transport oil from the refinery to Caltexs terminal. Thus the owner of the dredge would have had Caltex in contemplation as the persons who would suffer loss if the pipes were broken. In the facts of the case, the Court found that the loss suffered by Caltex was recoverable because the dredge owed a duty of care not to damage the pipeline and that the loss was foreseeable. If the pipeline was owned by Caltex, then they would be entitled to claim the loss incurred by them in using alternative mode of transportation of their oil, consequent upon physical damage. However, the pipeline was not owned by Caltex and hence Caltexs claim was considered to be for pure economic loss. It was in these facts of the case that the Court found this to be a special case where economic loss was recoverable by Caltex. What prompted the Court to allow recoverability was also the fact that it was one single identifiable person who has suffered loss, who would have been in the contemplation of the dredge since they knew about the pipeline and that it connected the refinery to the Caltex terminal and was used for transportation of oil.
40. The Caltex judgment was criticized by the Privy Council in the case of Mineral Transporter (supra) where the Privy Council held (pg.311) that -
œThe test can hardly be whether the Plaintiff is known by name to the wrongdoer. Nor does it seem logical for the test to depend upon the Plaintiff being a single individual. Further why should there be a distinction for this purpose between a case where the wrongdoer knows (or has the means of knowing) that the persons likely to be affected by his negligence consist of a definite number of persons whom he can identify by name or in some other way (for example as being the owners of particular factories or hotels) and who may therefore be regarded as an ascertained class.?
The view of the Privy Council was it is not practicable by reference to an ascertained class to find a satisfactory control mechanism which could be applied in such a way as to give reasonable certainty in its results. This accords with the view taken by the English Courts consistently that a claim for pure economic loss, absent physical damage, is not recoverable as a matter of policy whether the damage is occasioned to one or two persons or an ascertained class.
41. In the other Australian judgment Perre vs. Apand (supra) the court followed Caltex Oil and allowed economic loss on the basis that the wrongdoer knew and was aware of the consequences of his supply of contaminated seed to Sparnon leading to a form of potato disease would result in potatoes grown on land within a 20-kilometre radius of the infected land of Sparnon, being prohibited from importation into Western Australia. In these circumstances, the Court held that Apand who supplied the seed owed a duty of care not only to the person to whom it supplied the seed, but also the owners of the land within a 20- kilometres radius (the Plaintiff) who would be affected if the seed was found infected and it was therefore reasonably foreseeable that the Plaintiff, whose land was within the 20 kilometres area, would suffer loss or damage. The Court held that the case clearly came within the proximity or neighbourhood principle. It was not disputed by the Defendant wrong-doer that they owed a duty of care and that the loss was reasonably foreseeable. Again the special facts and circumstances led the court to hold that economic loss in such cases was recoverable. This again is a case of physical damage to land and crop grown thereon and loss consequent upon physical damage.
42. As regards the Canadian case of Norsk Pacific (supra), where there was a split verdict 4: 3, once again it was a case of economic loss consequent upon physical damage. The physical damage was suffered by the owner of the bridge which was damaged by the tug and the economic loss was suffered by the user of the bridge, namely Canadian Railways. If the economic loss which is loss of profit, had been suffered by the owner of the bridge, then it would have been termed as a loss consequent upon physical damage and recoverable. However, since the loss of profit was not suffered by owner of the bridge but by the user Canadian Railways it was termed as a case of pure economic loss. Again this was a case of physical damage and loss consequent thereon.
The majority judgment delivered by Mc Lachlin, J refers to a comparative view of the position in different countries. The view of the United Kingdom is set out as permitting recovery of economic loss only where the Plaintiff has suffered physical damage. The American position is the same where the jurisprudence is still dominated by the fear of opening floodgates.
The need for certainty in the law is highlighted by the observation of La Forest, J with reference to maritime law and I reproduce the same with concurrence.
œI add one final consideration. This case is one of maritime law which in large measure encompasses a global system. The bright line exclusionary rule against recovery has for nearly a century been in effect in that system and continues to be followed by the major trading nations, in particular Great Britain and the United States. In making arrangements for allocating risks in essentially maritime matters, those engaged in navigating and shipping should as much as possible be governed by a uniform rule so that they can plan their affairs ahead of time whether by contract or insurance against possible contingencies?.
43. Therefore, we fall back to the basic principle for a claim in tort of negligence, i.e., duty of care and foreseeability. The position has to be brought in two stages. The first one is whether, as between the defendant and plaintiff there is a sufficient relation of proximity such that, in the reasonable contemplation on the defendant, carelessness on his part may be likely to cause damage to the latter in which case a prima-facie duty of care arises. Secondly, if the first question is answered affirmative, it is necessary to consider whether there are any considerations which ought to negate or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach may give rise. The necessary ingredient for duty of care is characterized by law by one of proximity and that the situation should be one in which the Court considers it fair, just and reasonable that the law should impose a duty to the given case upon one of the party for the benefit of the others. The next point is whether pure economic loss independent of physical damage is claimable.
44. In this case, the defendant vessel had come to Ranpur Bay to discharge a cargo of LPG to the account of BPCL in the Captive jetty. Bad weather caused her to drift when she was being berthed, and she ran aground 1.5/1.6 kms from the jetty. The plaintiff is carrying on business of manufacture of PVC resin at a plant which is further inside from the Port. It will not be reasonable or fair or just to impose upon the defendant duty of care to the plaintiff because like the plaintiff there will be multitude persons who would have been remotely affected not as a rule by way of physical damage to them or their property but by putting them to inconvenience and sometimes economic loss. If claims for such loss were permitted there would be no end to claims. Some might be genuine, some might be inflated or even false. In such cases, it is also not rightly capable of proof or easily checked and in my view this claim for economic loss for the plaintiff, independent of physical damage is not payable. I am inclined to follow the principles laid down by Lord Denning in the œSpartan Steel? (supra) where at pages 37,38 and 39, His Lordship has beautifully explained as under:
œThe second consideration is the nature of the hazard, namely, the cutting of the supply of electricity. This is a hazard which we all run. It may be due to a short circuit, to a flash of lightning, to a tree falling on the wires, to an accidental cutting of the cable, or even to the negligence of someone or other. And when it does happen, it affects a multitude of persons: not as a rule by way of physical damage to them or their property, but by putting them to inconvenience, and sometimes to economic loss. The supply is usually restored in a few hours, so the economic loss is not very large. Such a hazard is regarded by most people as a thing they must put up with - without seeking compensation from anyone. Some there are who install a standby system. Others seek refuge by taking out an insurance policy against breakdown in the supply. But most people are content to take the risk on themselves. When the supply is cut off, they do not go running round to their solicitor. They do not try to find out whether it was anyone's fault. They just put up with it. They try to make up the economic loss by doing more work next day. This is a healthy attitude which the law should encourage.
The third consideration is this: If claims for economic loss wore permitted for this particular hazard, there would be no end of claims. Some might be genuine, but many might be inflated, or even false. A machine might not have been in use anyway, but it would be easy to put it down to the cut in supply. It would be well-nigh impossible to check the claims. If there was economic loss on one day, did the applicant do his best to mitigate it by working harder next day? And so forth. Rather than expose claimants to such temptation and defendants to such hard labour “ on comparatively small claims - it is better to disallow economic loss altogether, at any rate when it stands alone, independent of any physical damage.
The fourth consideration is that, in such a hazard as this, the risk of economic loss should be suffered by the whole community who suffer the losses “ usually many but comparatively small losses -rather than on the one pair of shoulders, that is, on the contractor on whom the total of them, all added together, might be very heavy.
The fifth consideration is that the law provides for deserving cases. If the defendant is guilty of negligence which cuts off the electricity supply and causes actual physical damage to person or property, that physical damage can be recovered - see Baker v. Crow Carrying Co. Ltd. (unreported) Feb. 1st., 1960 C.A., referred to by Lord Justice Buckley in 1971, 1 Q.B. at page 356; and also any economic loss truly consequential on the material damage -see British Celanese v. Hunt (1969) 1 W.L.R. 959; S.C.M. (United Kingdom) Ltd. v. Whittall and Son Ltd. (1971) 1 Q.B. 337. Such cases will be comparatively few. They will be readily capable of proof and will be easily checked. They should be and are admitted.
These considerations lead me to the conclusion that the plaintiff should recover for the physical damage to the one melt (£368), and the loss of profit on that melt consequent thereon (£400): but not for the loss of profit on the four melts (£1,767), because that was economic loss independent of the physical damage. I would, therefore, allow the appeal and reduce the damages to £768.?
45. I am also not inclined to go along with Mr. Dhond on his submissions of reasonably arguable best case to prove its loss. The plaintiff could have reasonably arguable best case only if it is able to cross the barrier as to whether in law it is entitled to claim economic loss independent of any physical damage. In my opinion, since I have held that such economic loss independent of physical damage is not payable, the question of plaintiff being able to prove anything in trial also does not arise.
46. However, the plaintiff's stand as stated above, before filing this suit is the vessel grounded due to bad weather. For the first time they alleged inadequacies or negligence of the vessel in the plaint. Moreover, these are averments without any particulars. Therefore, at this stage, it is necessary also to quote the famous paragraphs from the judgment of Justice V.R. Krishna Iyer, as he then was in the matter of T. Arivandandam V/s. T. V. Satyapal and Anr. (AIR 1977 SC 2421).
œ5. We have not the slightest hesitation in condemning the petitioner for the gross abuse of the process of the court repeatedly and unrepentantly resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit now, pending before the First Munsif's Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that 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, he should exercise his power under O. VII R. 11, C.P.C. taking care to see that the ground mentioned therein is fulfilled. And, if clever, drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under O. X, C.P.C. An activist Judge is the answer to irresponsible law suits. The trial court should insist imperatively on examining the party at the first bearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men, (Ch. XI) and must be triggered against them. In this case, the learned Judge to his cost realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi "It is dangerous to be too good."
6. The trial Court in this case will remind itself of S. 35-A, C.P.C. and take deterrent action if it is satisfied that the litigation was inspired by vexatious motives and altogether groundless. In any view, that suit has no survival value and should be disposed of forthwith after giving an immediate hearing to the parties concerned.
7. We regret the infliction of the ordeal upon the learned Judge of the High-Court by a callous party. We more than regret the circumstance that the party concerned has been able to prevail upon one lawyer or the other to present to the court a case which was disingenuous or worse. It may be a valuable contribution to the cause of justice if counsel screen wholly fraudulent and frivolous litigation refusing to be beguiled by dubious clients. And remembering that an advocate is an officer of justice he owes it to society not to collaborate in shady actions. The Bar Council of India, we hope will activate this obligation. We are constrained to make these observations and hope that the co-operation of the Bar will be readily forthcoming to the Bench for spending judicial time on worthwhile disputes and avoiding the distraction of sham litigation such as the one we are disposing of. Another moral of this unrighteous chain litigation is the gullible grant of ex parte orders tempts gamblers in litigation into easy courts. A judge who succumbs to ex parte pressure in unmerited cases helps devalue the judicial process. We must appreciate Shri Ramasesh for his young candour and correct advocacy. Petition dismissed.?
47. I am satisfied that in this matter, particularly after considering the observations in the documents relied upon by the plaintiff, the fact that the plaintiff has also stated earlier that the cause of grounding of the defendant vessel was due to bad weather which cannot be perceived as being within the control of the vessel, the fact that the plaintiff had not even sent a letter of demand or communication alleging the fault on the part of the defendant and for the first time raising the issue in paragraph no.3 of the plaint to show a semblance of cause of action, in my opinion this claim in itself is a gamble taking advantage of the fact that order of arrest of a vessel in an admiralty action in rem is granted ex-parte.
48. Therefore the ex-parte order of arrest cannot be sustained and has to be vacated and the bank guarantee in respect of the plaintiff's claim be discharged and returned.
49. As regards the prayer clause (d) whereby the applicant is claiming a sum of Rs.2,53,32,212.50 as bank guarantee charges upto the date of the motion, in the affidavit in support, the applicant states that the charges are 3.5% per annum for 5 years. However, no document was filed to justify this figure. Two further affidavits dated 10th April 2014 and 6th May 2014 of one Sunil D'Zouza have been filed to which certain debit advices issued by ING Bank N.V., London and a statement of bank guarantee charges paid are annexed.
The plaintiff has taken security that it was not entitled to. In any event, the plaintiff took excess security than it was entitled to and never came forward to voluntarily have it reduced. The plaintiff in such situations should voluntarily come forward and ask for reduction in security particularly when applications challenging the order of arrest take a long time due to unavoidable circumstances to be heard and disposed. This concession of reduction of security granted now could have certainly been made earlier so that the defendant could have saved costs incurred towards excessive security. That also shows the conduct of the plaintiff. Obtaining excessive security in an ex-parte order of arrest is oppressive. Certainly the applicant will be entitled to damages for wrongful arrest.
However, the statement shows only US$ 3,47,398.48 as charges paid as on 20th December 2013 whereas the amount claimed is Rs.2,53,32,212.50 upto January 2011. Therefore, the applicant can at the most claim only US$ 3,47,398.48 upto 20th December 2013. It should be noted that this keeps increasing until the Bank guarantee is cancelled and returned. As the order of arrest is being set aside, the applicant is entitled to compensation more so because the plaintiff took excessive security and sat tight over it. The plaintiff has also given the undertaking under Rule 941 of the Bombay High Court (O.S.) Rules to pay such sum as damages as this Court would award to any party having suffered prejudice due to the arrest of the defendant vessel. Therefore, I am inclined to award to the applicant US$ 3,50,000/- as compensation/damages.
50. The plaintiff is also directed to pay the applicant a sum of US$ 3,50,000/- as compensation towards bank guarantee charges incurred by the applicant.
51. It is also a fit case where costs have to be imposed on the plaintiff. I direct the plaintiff to pay the applicant a sum of Rs. 3,00,000/- (Rupees Three Lakhs only) as costs within two weeks from today.
52. The Notice of Motion is disposed off as above.
53. On pronouncement of the judgment, Mr.Dhond, counsel for the plaintiff requested for stay by two weeks. Stay refused.