| SooperKanoon Citation | sooperkanoon.com/1144548 |
| Court | Mumbai High Court |
| Decided On | Mar-18-2014 |
| Case Number | Notice of Motion No. 319 of 2012 In Admiralty Suit No. 51 of 2011 |
| Judge | K.R. SHRIRAM |
| Appellant | Dreymoor Fertilizers Overseas Pte. Ltd. |
| Respondent | M.V.theoforos-1, a Vessel Flying the Flag of Panama |
1. On 30.08.2011 the plaintiff obtained an ex-parte order of arrest of the defendant-vessel when she was in the port and harbour of Mundra. On 9.9.2011 the defendant-vessel was ordered to be released when on behalf of the defendant security in the sum of US$ 335,000.00 was furnished. This amount was deposited with Incisive Law LLC, Singapore, as the escrow agent.
2. The reason why the plaintiff filed the suit and obtained the ex-parte order of arrest was that the plaintiff suffered a loss in the sum of Rs.1,31,12,080/- being the cost of 520.300 MT of urea which was allegedly short delivered by the defendant-vessel. It is the case of the plaintiff that pursuant to an agreement dated 25.7.2011, the plaintiff had sold to State Trading Corporation of India Ltd., New Delhi (STC) 50,000/- MT + 10% granular bulk urea at the price of AED 1859.13 per MT C and F FO Mundra. In order, for the plaintiff, to supply this cargo to STC, the plaintiff entered into a contract dated 27.7.2011 with one Indagro SA Geneva for purchase of urea on CFR basis. To supply this cargo, Indagro Contractors S.A., Geneva a group company of Indagro SA Geneva entered into a charter party with one General Shipping Services Limited, the disponent owners of the defendant-vessel. Upon the completion of loading, the master of the vessel issued a bill of lading dated 12.8.2011 covering 54003.121 MT of granular bulk urea for discharge at Mundra. As per the bill of lading, the shipper was one Kermanshah Petro Chemical Industries Limited, Tehran; the consignee was Ministry of Chemical and Fertilizers (department of fertilizers), Government of India and notify party was State Trading Corporation of India Limited, New Delhi, i.e., STC.
3. It appears that the consignee, Ministry of Chemical and Fertilizers issued a letter of authority dated 12.8.2011 authorizing Indian Potash Limited (IPL) to take delivery of the cargo from the vessel. IPL had been appointed as handling agents. The defendant-vessel completed discharge at Mundra on 21.8.2011. On the same day, the final draft survey was done and the survey showed discharged quantity as 53483.021 MT as against the loaded quantity, as per the bill of lading of 54003.121 MT. On this basis, it is alleged by the plaintiff that there was a short fall of 520.30 MT. The plaintiff's claim as stated in the plaint is for short landing of 520.30 MT of granular bulk urea under the bill of lading dated 12.8.2011 issued by the Master of the defendant-vessel.
4. The original bill of lading was endorsed by the consignee viz. Ministry of Chemical and Fertilizers with instructions to deliver the cargo to IPL who in turn endorsed the bill of lading for delivery of the cargo to Mundra port and S.E.Z. Limited, Mundra. It is necessary to mention that the plaintiff was neither the shipper nor the consignee nor the notify party nor the endorsee nor the holder of the bill of lading.
5. It is for this reason the defendant has taken out the Notice of Motion for vacating the order of arrest dated 30.8.2011 and for return of security. It is the defendant's case that the plaintiff had no title to sue and is not entitled to maintain the present suit and the plaintiff has made false statement in the plaint that the plaintiff had authority to sue. It is also the defendant's case that the plaintiff has no maritime claim against the defendant and hence the plaintiff cannot maintain or continue with this action.
6. The plaintiff's case as averred in the plaint to maintain this action is that the plaintiff had the necessary authority to sue on their behalf and also on behalf of the buyers and receivers of the cargo and the plaintiff has a maritime lien/claim against the defendant-vessel for short landing of cargo arising out of an agreement of carriage of goods. Para 11 of the plaint reads as under :
œPara-11.........
The plaintiffs have the necessary authority to sue on their behalf and also on behalf of the buyers and receivers of the cargo.
¦.......
Para-14 The plaintiff thus has a maritime lien/claim against the defendant vessel for short landing of cargo, arising out of an agreement for carriage of goods.?
It is pertinent to mention that the plaintiff has very cleverly not disclosed that the plaintiff was not a party to this œagreement of carriage of goods?. An order of arrest has been obtained by suppressing this. During the hearing of the Notice of Motion, however, the counsel for the plaintiff conceded that it could not have sued in contract as per the bill of lading. The counsel for the plaintiff made a statement that he was dropping the bill of lading route. However, though it is not stated anywhere in the plaint, the counsel for the plaintiff stated that IPL had assigned to the plaintiff the right to sue, in the alternative, the plaintiff could sue under Section 69 of the Contract Act and in the alternative the defendant is liable to the plaintiff being guilty of tort of conversion, tort of bailment and the plaintiff is entitled to make the claim on the basis of equity of restitution.
7. The counsel for the defendant submitted that though in paragraph-11 the plaintiff states that they have necessary authority to sue, they have not mentioned anywhere in the plaint what was that authority. The plaintiff was duty bound to show in the plaint which is the œdocument? basis on which the plaintiff is claiming authority. The plaintiff's claim is entirely silent about this 'authority'. The plaintiff has simply made bald averments that it had the necessary authority to sue on their behalf and also on behalf of the buyers and receivers of the cargo. It is pertinent to note that the plaintiff has nowhere stated in the plaint that the plaintiff is the consignee or endorsee or receiver or holder of the bill of lading. The plaintiff could not have made this averment because plaintiff was never the consignee or endorsee or receiver or holder of the bill of lading. After the Notice of Motion was taken out, the plaintiff claims that the documents at pages-51, 52, 57 and 58 of the compilation of documents that the plaintiff filed constitute authority from the receiver of the cargo IPL to sue on behalf of IPL. This cannot be true because if the plaintiff had the authority to sue then the suit should have been filed in the name of the party giving such authority, i.e., IPL. I have considered the documents which the plaintiff claims to be the œauthority? in its favour. None of these documents which are actually emails state that the plaintiff has been authorized to sue on behalf of IPL. The plaintiff has not produced any letter of authority or a formal power of attorney or a resolution passed by the Board of Directors of IPL authorizing the plaintiff to sue. It must not be forgotten that IPL is a Government of India undertaking and any authority from a Government of India undertaking will be properly documented and executed. Even assuming that the plaintiff had all the necessary authority, the plaintiff could have sued only in the name of IPL and not in its own name.
8. It is also necessary to note that if the plaintiff had a proper authority, the plaintiff would atleast refer to the specific document that conferred authority on the plaintiff in the plaint. Since the plaintiff did not have the proper authority, the plaintiff cleverly worded its cause of action as under:-
œThe plaintiffs have the necessary authority to sue on their behalf and also on behalf of the buyers and receivers of the cargo.?
Based on this vague averment, the plaintiff obtained an ex-parte order of arrest from this Court. It could also be stated that the plaintiff has made a false statement that the plaintiff had authority to sue from the Receiver, IPL. The Hon'ble Delhi High Court in the matter of SugenInc and Ors. V/s. A.Rao and Anr. (2013(54)PTC 560 (Del.) at paragraph-22 has held that the basis on which ex-parte interim relief was granted when disappears there can be no justification for continuing the ex-parte interim relief. The Court also has held that œheavens are not going to fall?, argument is not enough to sustain injunction and interim relief without the ingredients of prima-facie case.
9. It is also settled law that one who comes to Court must come with clean hands. The tendency of litigants to approach Court to somehow or the other obtain interim orders without full disclosure of material facts or by clever drafting is on constant increase. Such persons and particularly those persons, who obtained ex-parte orders and that too, drastic orders like arrest of ships by making incorrect statements or not disclosing the entire material facts, should be summarily thrown out at any stage of the litigation. Had the plaintiff while obtaining the order of arrest disclosed to the court that it had no title to sue and that it had no authority to sue in its own name or that it was not party to the contract of carriage or it was not the shipper or consignee or endorsee or holder of the Bill of Lading, the Court would not have passed the ex-parte order of arrest. It is quite obvious that the plaintiff has suppressed these material facts. In the matter of S.P.ChengalVaraya Naidu Vs. Jagannath (1994) 1 SCC), the Apex Court at paragraph-5 has observed as under:-
œ5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that "there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal-gains indefinitely. We have no hesitation to say that a person, whose case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.? (emphasis supplied)
10. In the matter of SeemaxConstruction (P) Ltd., Vs. State Bank of India and Anr. (AIR 1992 Delhi 197) the Hon'ble Court at paragraphs-10 and 12 observed as under:-
œ10. The suppression of material fact by itself is a sufficient ground to decline the discretionary relief of injunction. A party seeking discretionary relief has to approach the court with clean hands and is required to disclose all material facts which may, one way or the other, affect the decision. A person deliberately concealing material facts from court is not entitled to any discretionary relief. The court can refuse to hear such person on merits. A person seeking relief of injunction is required to make honest disclosure of all relevant statements of facts otherwise it would amount to an abuse of the process of the court.......
11. ¦.................
12. The tendency of the litigants to approach different courts to somehow or the other obtain interim orders without full disclosure of the earlier judicial proceedings and without full disclosure of all material facts is on constant increase and it is necessary for due administration of justice to reiterate the legal proposition that such a person may be refused a hearing on merits. As the plaintiff, as noticed above, has suppressed material facts from this court. I would dismiss this application without going into the merits.
(emphasis supplied)
11. I would also say that the assertion in paragraphs-11 and 14 are misleading. In another judgment of the Supreme Court in the case of UdaiChand Vs. Shankar Lal and Ors (1978)2 SCC 209)., the Apex Court stated that the Courts while passing ex-parte orders naturally takes the statement of fact and grounds of fact contained in the petitions at their face value and it would be unfair to betray the confidence of the Court by making statements which are untrue and misleading. The Court in that matter further stated that the party who approached the Court must come with clean hands and if there appears on the part of the party, any attempt to over-reach or mislead the Court by false or by untrue statements or by withholding true information, the Court would be justified in refusing to
exercise its discretion or if the discretion has been exercised in revoking
the same.
12. The Court of appeal in England in the case of the œthe œVASSO? (formerly œANDRIA?) (1984 Vo.1, Lloyd's Law Reporter 235) has stated as under:-
œ........ It is axiomatic that in ex-parte proceedings there should be full and frank disclosure to the Court of facts known to the applicant, and that failure to make such disclosure may result in the discharge of any order made upon the ex-parte application, even though the facts were such that, with full disclosure, an order would have been justified.
........ Accordingly, the Court having in the present case issued the warrant of arrest on the basis of an affidavit which failed to disclose material facts, the appropriate course was to make an unconditional order for the discharge of the security obtained by reason of the arrest.?
13. The documents relied upon by the plaintiff on the contrary state that the buyers are not interested with the arrest or release of the defendant-vessel. The documents also do not show that any authority has been given to the plaintiff as averred by the plaintiff in the plaint. In the present case, the plaintiff knew that it had no authority to sue but still made a statement that it had authority to sue to obtain an ex-parte order. Even the plaintiff's case in the plaint that the plaintiff had a maritime lien/claim against the defendant-vessel for short landing of cargo arising out of an agreement of carriage of goods, is also false. The plaintiff was not the shipper nor the holder nor the endorsee nor the consignee in the bill of lading which is the contract of carriage. The plaintiff by clever drafting created an illusion of title or authority or claim against the defendant-vessel to sue. Therefore, the plaintiff has not been able to produce any authority to sue on behalf of those who could have otherwise sued.
His Lordship Hon'ble Mr. Justice V.R. Krishna Iyer as he then was, in the matter of T. Arivandandam Vs. T.V. Satyapal and Anr. (1977) 4 SCC 467), in his inimitable style has observed in paras-5 and 7 as under:-
œ5...... 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 Order X, C.P.C. An activist Judge is the answer to irresponsible law suits. The trial Courts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage.
6 ¦
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 .................
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.?
14. In any event, the plaintiff has no maritime claim or lien against the defendant-vessel. Only if the plaintiff has maritime claim or lien against the defendant-vessel, can the plaintiff file an action in rem for arrest of the defendant-vessel and not otherwise. The plaintiff has stated in paragraph-14 of the plaint that they have a maritime claim/lien against the defendant-vessel arising out of an agreement for carriage of goods. This is the specific case of the plaintiff and with which the plaintiff has come to court and obtained ex-parte relief. There is no 'agreement for carriage of goods' to which the plaintiff is a party nor has the plaintiff any authority to sue on behalf of the person lawfully entitled to sue under the said agreement. Consequently the plaintiff can have no maritime claim or lien against the defendant and hence is not entitled to invoke the Admiralty jurisdiction of this Court and is not entitled to arrest the defendant vessel. At the hearing of the Notice of Motion, the plaintiff's counsel expressly abandoned its claim in contract and accepted that the plaintiff has no title to sue under the Bill of Lading. Thus the plaintiff has abandoned its specific case œon the basis of the agreement for carriage of goods? which is the Bill of Lading dated 12th August, 2011. This makes the ex-parte order of arrest which was obtained on the basis of a maritime claim/lien arising out of the said agreement, unsustainable. In my opinion, the suit itself is ex-facie not maintainable. Therefore, the ex-parte order of arrest should be set aside and the security provided for release of the defendant-vessel must be returned to the Defendants and the Notice of Motion allowed with exemplary costs reserving the Defendants rights to claim damages for wrongful arrest. I would want to impose exemplary costs because (a) the cost of litigation has drastically increased in India over the years; (b) because the tendency of litigants to approach courts and somehow or the other obtain interim ex-parte orders without full disclosure is on constant increase; and (c) gamblers in litigation obtaining ex-parte orders should be shown the door to prevent devaluing the judicial process.
15. After the Notice of Motion was taken out by the defendant, in the reply to the Notice of Motion and during the arguments, the plaintiff expanded hugely its cause of action to say that it is entitled to sue. The plaintiff's counsel submitted that the plaintiff was entitled to sue (a) in tort for negligence, (b) as it had assignment of the right to sue from IPL, (c) in bailment in tort, (d) in restitution under Section 69 of the Indian Contract Act (e) under American Law, (f) due to incorporation of sale contract in the bill of lading, (g) as the plaintiff was the owner of the short landed goods, (h) as the plaintiff was without a remedy, etc.etc. When the plaintiff's counsel was told that none of the points are in the plaint and when an ex-parte order was obtained by the plaintiff, the counsel also submitted that the plaintiff can amend the plaint at any time because the defendants are yet to even file the written statement.
16. The plaintiff's counsel submitted that the plaintiff is entitled to amend the plaint to set up various alternative pleas in order to establish a cause of action against the defendants and amendments are liberally allowed by the courts particularly when trial is yet to begin. The plaintiff also liberally cited various judgments. There is no doubt that the courts are liberal in granting amendment until the commencement of trial or when no prejudice would be caused to the defendant. That would be the case in a normal situation where the plaintiffs have simply filed the suit and left the matter for defendants to file written statement and then to proceed further. Moreover, no amendment which lacks bona-fides will be permitted. As mentioned above, the plaintiff was economical with truth in the plaint.
17. The plaintiff's reliance upon the matter of SurajPrakash Bhasin vs. Smt. Raj Rani Bhasin and ors. (AIR 1981 SC 485) is of no use. Certainly Courts do take a lenient view when it comes to an amendment before the trial has begun. But here is a case where the plaintiff has obtained an ex-parte Order by arresting the defendant-Vessel and that too by suppressing true facts. In such situations an amendment to continue the arrest Order cannot be granted. The plaintiff has obtained an ex-parte Order based on averments made in the plaint. When the notice of motion is taken out and the plaintiff's case is exposed in as much as, the plaintiff has misled the Court while making incorrect statement in the plaint to snatch an ex-parte Order of arrest of the defendant-Vessel, the lenient approach which is normally taken cannot be adopted. The scope of the plaintiff's claim in the Suit will be totally altered and prejudice will be caused to the defendant. The plaintiff's reliance, therefore, in the matter of State of Andhra Pradesh (A.P.) vs. Pioneer Builders (AIR 2007 SC 113),will also be of no use to the plaintiff. In fact in the said Judgment the Hon'ble Supreme Court has categorically stated œ..... but nonetheless no power has yet been given to enable one distinct cause of action to be substituted for another, nor to change, by means of amendment, the subject matter of the Suit.? The plaintiff's reliance in the matters of Ganesh Trading Co. vs. Moji Ram (A.I.R. 1971 SC 484) and Gaganmal Ramchand vs. The Hongkong and Shanghai Bank Corporation (A.I.R. 1950 Bom. 345) will also be of no use to the plaintiff for reasons mentioned above.
18. The issue here is not whether the plaintiff's amendment should be allowed or not. The issue here is that the plaintiff has obtained an Order of arrest by stating certain facts which when appears to be untrue, the plaintiff wants to amend the plaint. Certainly, the Court will consider whether the amendment should be allowed or not but when an ex-parte Order has been obtained, the pleadings as on that date has to be seen. If those pleadings are going to be changed, certainly an ex-parte Order also must go. The Court having in the present case issued the warrant of arrest on the basis of a plaint and affidavit in support which failed to disclose material facts, the appropriate course will be to make an unconditional order for the discharge of the security obtained by reason of arrest.
19. In this case the plaintiff has obtained an ex-parte order and that too an order of arrest of the defendant-vessel on the basis of a specific case which has turned out to be untrue and which now the plaintiff has decided not to pursue, the plaintiff cannot at this stage ask for continuance of the interim order of arrest and security. As mentioned earlier, the plaintiff expressly abandoned its claim in contract and accepted that it has no title to sue under the bill of lading. The plaintiff who has come with unclean hands and obtained an ex-parte order of arrest cannot be allowed to wash the dirt off its hands by bringing about an amendment and ask for continuance of security. In fact such a plaintiff should be shown the door. It is necessary for due administration of justice to reiterate the legal proposition that such a person may be even refused the hearing on merits. Such a person should not be even allowed to amend the plaint to bring out an alternative plea in order to establish a cause of action against the defendants. It pains the judicial conscience if gamblers in litigation like the plaintiff are allowed to devalue the judicial process. The order of arrest of the defendant-vessel therefore, deserves to be vacated and the security should be returned to the defendant.
20. The plaintiff having taken the alternative pleas that the plaintiff's counsel made during the hearing and the plaintiff has taken in its reply to the Notice of Motion as mentioned above, I shall deal with the same. None of them has been raised in the plaint. None of them, in my opinion, as explained below are in any case sustainable in law to enable the plaintiff to file the present suit and obtain an order of arrest of the defendant-vessel.
PLAINTIFF'S ALTERNATIVE PLEAS:
21 Claim in tort for negligence :
21.1 The leading authority in regard to a claim in negligence for loss or damage to cargo is the case of Aliakmon (1986) Vol. 2 Lloyds Law ReportsPg.1) in which the House of Lords has on page 4 set out the legal position :
œMy Lords, there is a long line of authority for the principle of law that in order to enable a person to claim in negligence for loss caused to him by reason of loss or damage to property, he must have had either the legal ownership or possessory title to the property concerned at the time when the loss or damage occurred and it is not enough for him to have only had contractual right in relation to such property which has been adversely affected by the loss of or damage to it.?
21.2 Thus, for the plaintiff to maintain a claim in negligence, he must show that he either had legal ownership of or a possessory title to the property or goods or cargo, whatsoever one may call, at the time when the loss or damage occurred. During the course of submissions, counsel for the plaintiff accepted that the test set out above in the Aliakmon (supra) is the correct test to be applied in order to determine whether the plaintiff can make a claim in tort. Counsel for the plaintiff further accepted that the plaintiff does not have possessory title to the property but has legal ownership and is entitled to maintain a claim in tort.
21.3 Let us examine whether the plaintiff had legal ownership of the goods at the time when the alleged loss or damage occurred? Clause 17 of the Contract of Sale entered into between the plaintiff and the State Trading Corporation of India provides: œTitle to the goods and risk shall pass from Seller to Buyer on material crossing the ship rails at loading port.?
Thus, as regards the Sale contract between the plaintiff and the Buyer, the title and legal ownership of the entire 54,003.021 metric tons of urea under the Sale Contract passed to the Buyer, State Trading Corporation of India, upon shipment on board the defendant vessel. In view of the alleged shortanding, the loss could have occurred only after shipment on board the vessel and before discharge at Mundra.
The plaintiff is not the shipper or the consignee or holder of the Bill of lading. Therefore, the plaintiff had no legal ownership even under the Bill of lading at the time when the loss occurred. In fact, as mentioned earlier, the plaintiff has also given up its claim in contract under the Bill of lading.
Therefore, the plaintiff could not have legal ownership of the goods under the sale contract at the time the alleged loss occurred.
21.4 Though the counsel for the plaintiff accepted later that the plaintiff did not have possessory title to the goods when the loss or damage occurred, the plaintiff in any event could not have had possessory title. Only the holder of the Bill of Lading can claim possession of the goods and delivery thereof. The plaintiff was not shipper or the consignee or the holder of the Bill of Lading or the endorsee and therefore had no right to possession of the goods. The counsel for the plaintiff fairly accepted that the plaintiff had no possessory title to the goods in question.
The plaintiffs contractual rights in relation to the goods under the Sale Contract between the plaintiff and State Trading Corporation were adversely affected by the loss of the goods as claimed by the plaintiff by itself is not sufficient for the plaintiff to maintain an action in negligence. This is what the House of Lords says in the Aliakmon (supra). The law was and always had been that an action for negligence in respect of loss or damage to goods could not succeed unless plaintiff was, at the time of tort complained of, owner of goods or person entitled to possession of them. The duty of care is owed only to the owner of the goods or the person entitled to possession [The Wear Breeze] (1967) Vol 2 Lloyds Law Reports Pg 315). As mentioned above, the plaintiff was neither the owner nor entitled to possession. Accordingly defendant owed no duty of care to the plaintiff at the time when goods were damaged.
21.5 In paragraph 5-111, Page 236 from the book œCarver on Bills of Lading 1st Ed.? relied upon by the plaintiff, it reads as under:
œ....Having no proprietary or possessory rights in the goods, the buyers were simply in the position of persons whose contractual rights to the goods against the seller had been adversely affected by the negligence of the carrier in damaging the goods; and many authorities establish that prejudice of this kind is not sufficient to give rise to a cause of action in negligence.?
Thus the plaintiff is not entitled to maintain a claim for loss or damage to the goods on grounds of negligence.
22 Assignment of the right to sue from STC/IPL :
22.1 The counsel for the plaintiff submitted that their authority to sue could also be read as assignment of right to sue. He submitted that the plaintiff has filed the suit as assignee on behalf of the shippers/receivers of the cargo. There is no such averment in the plaint.
22.2 For the plaintiff to sue as an assignee, the plaintiff is required to produce a Deed of Assignment or any other writing showing the assignment of the interest of the consignee/receiver/endorsee, rights and remedies in respect of the goods in favour of the plaintiff. Admittedly, no such document has been produced. Mr. Shanker submitted that the email at page 51, 52 and 58 of the compilation of documents should be read as œassignment to sue? in favour of the plaintiff and according to him by virtue of the email at page 55, and 59 of the plaintiff's compilation of documents, the defendant is deemed to be aware of the assignment. By no stretch of imagination the documents can show any assignment. It cannot even show that there was even an intention to assign any right in favour of the plaintiff. In any event, assuming that the consignee was entitled to transfer its actionable claim in favour of the plaintiff and a mere right to sue was capable of being transferred, the requirements of Section 130 of the Transfer of Property Act are not met and there is no instrument in writing executed by the consignee in favour of the plaintiff and signed by the consignee as required by the said section.
22.3 The plaintiff's counsel then argued that there is an equitable assignment of rights under the Bill of Lading by the receiver IPL in favour of the plaintiff. There is no such plea either in the plaint or in the affidavit-in-reply and it is not the basis of the Suit claim. The plaintiff failed to show (a) what constitutes an equitable assignment, (b) how the plaintiff claims an 'equitable assignment' of the rights under the Bill of Lading and (c) whether such a purported equitable assignment is recognized under Indian law.
22.4 The case of WillianBrandts Sons and Co. v/s. Dunlop Rubber Co. [1905]A.C. 454) relied upon by the plaintiff does not assist the plaintiff. In that case the facts were completely different and it is on facts that the court found that there was an equitable assignment. The Merchant had agreed with the bank who had financed the Merchant that upon sale, the bank will be paid directly by the purchaser and the Bank had put the purchaser on notice of this agreement to pay to the bank directly. This according to English law constituted an equitable assignment of the debt to the bank with notice to the Purchaser. Here there is no assignment of any sort of any debt by IPL or STC or any party to the plaintiff, let alone with notice to the defendant.
22.5 The counsel for the plaintiff submitted that though the plaintiff did not use the word assignment anywhere in the plaint, so long as ingredients of assignment are made out there should be deemed an assignment. Counsel for the plaintiff relied on the Apex Court Judgment in the matter of Ram Sarup Gupta vs. Bishun Narain Inter College and Ors. (AIR 1987 SC 1242) to submit that the object and purpose of pleading is to enable the adversary party to know the case it has to meet. He further submitted that the ingredients of assignment can be found in the affidavit in reply, another Chamber Summons which is yet to be heard and para 11 of the plaint. According to him in para 11, the plaintiff has used the expression œauthority? and the defendant should assume that the 'authority' would include 'assignment.' I find this to be the most absurd argument that could have ever been made. For the plaintiff to claim assignment to sue in his own name, the plaint should expressly state his case that the plaintiff has been assigned the right to sue by STC or IPL as the case may be. Moreover even the documents on which the plaintiff placed reliance upon, viz. the emails at pages 51, 52 and 58 of the compilation of documents shows that even an intention to assign any rights is not their case. As stated in the Ram Sarup Gupta vs. Bishun Narain Inter College and Ors. (Supra), the object and purpose of pleading is to enable the adversary party to know the case it has to meet. The pleading in the plaint does not meet this object and purpose. The plaint as pleaded does not enable anybody to know that it has to meet a case where the authority is arising from an assignment. The plaintiff's reliance on Ram Sarup Gupta (supra) is no use. Likewise, plaintiff's reliance on Bhagwati Prasad vs. Shri Chandramau (AIR 1966 SC 735), is also, therefore, of no use.
23. To sue in Bailment :
23.1 The plaintiff is not entitled to sue in bailment because the plaintiff was not the bailor of the goods nor was the plaintiff entitled to immediate possession of the goods. The extract from Carvers Carriage of Goods by Sea, Vol. I, 1982 edition (para 422 pg. 270/271) relied upon by the plaintiff is totally different from the facts and circumstances of the present case. The extract refers to the liability of a carrier in the performance of a through contract of carriage to be sued by the owner of the goods. That is not the plaintiff's case here. The reliance by the plaintiff on this extract, therefore, is totally misplaced.
24. Claim in restitution “ Section 69 of the Indian Contract Act :
24.1 This is not the pleaded case of the plaintiff either in the Plaint or in the Affidavit-in-Reply.
24.2 In any case, such a claim under Section 69 of the Contract Act can never be a maritime claim. The claim under Section 69 cannot be a claim arising out of an agreement for carriage of goods, which is the specific case of the plaintiff in paragraph 14 of the plaint and on the basis of which the Admiralty jurisdiction of this Honble Court has been invoked and an ex-parte order of arrest was obtained. Section 69 is of no assistance to the plaintiff.
24.3 Even the judgments relied upon by the plaintiff do not support the plaintiffs case. Under Section 69, the plaintiff has to discharge the liability of a third party to claim against the third party. In this case, the plaintiff has allegedly discharged its (the plaintiff's) liability to STC under the sale contract. Whether it was discharged or not itself has to be proved. The difference between all the cases referred to by the plaintiff and the facts of the present case is that in the present case, the plaintiff has not discharged the alleged liability of the defendant to a third-party but has discharged its own contractual obligation under its Sale Contract with the STC. The plaintiff has not even discharged any alleged liability of defendant to IPL. The defendants liability, if any, for any alleged breach of the terms and conditions of the Bill of Lading is towards the party to whom property in goods has passed upon or by reason of endorsement on the Bill of Lading and the plaintiff was not an endorsee.
24.4 Further, the claim under the Bill of Lading is a claim in damages in an unliquidated amount for breach of contract. For a case to fall under Section 69, it has to be where the liability of the defendant is such as can be termed as liability which the defendant is œbound by law to pay?. Arrears of Land Revenue is given in the illustration to Section 69 in the Contract Act. In the cases relied upon by the plaintiff, Brooks Wharf and Bull Wharf Ltd. vs. Goodman Brothers (1937 KB 534) it was Customs duty and arrears of Land Revenue in the case of M.T. Mulabai and anr. Vs. Balakdas Bhagwat Prasad (AIR 1938 Nagpur 459). That is not the case here.
24.5 The case of Moulevs. Garrett (1872 (Vol.VII) EC 101) also does not assist the plaintiff. That was the case of assignment of lease from the plaintiff to B and from B to the defendant and covenant to indemnify against all subsequent breaches. In the present case, there is no contract between the plaintiff and defendant. Further and in any event, the Bill of Lading also did not contain any covenants obliging the defendant to indemnify any third party. The defendant also did not owe a duty of care to the plaintiff as in MouleV/s Gerrett where the Court found that the defendant as ultimate lessee owed a duty to the original lessee. Absent contract and/or duty, there can be no claim in restitution.
24.6 The plaintiff also relied upon extracts from the 14th Edition of Pollock and Mulla on Indian Contract Act and Specific Relief Acts. At page 1052, the requirements for the application of the provisions of Section 69 are mentioned as under:
(i) the plaintiff must have made an actual or virtual payment of money;
(ii) the plaintiff must have been compelled to pay this money to a third party ; and
(iii) the defendant must have been legally liable to pay the third party. Though the plaintiff would usually stand in some kind of relationship to the person for whom he paid, no relationship of privity is necessary to give a right of action.
In this case, both, requirements nos. (ii) and (iii) are not met. The plaintiff has not been compelled to pay the money to STC. The plaintiff had allegedly undertaken a contractual obligation to pay STC and has merely discharged its contractual liability to STC. It also requires that the defendant must have been 'legally liable' to pay to STC. This, in my view, pre-supposes a claim in debt. It cannot be damages or unliquidated sum, the liability for which is disputed. The defendant has not admitted shortage or breach of the terms of the contract of carriage or liability. In fact, the defendant says it is not liable. In such circumstances, I am afraid, Section 69 is not applicable at all to the present case.
24.7 Although for the purpose of fulfilling the requirement of Section 69, no relationship of privity is necessary to give a right of action, I feel requirement (ii) as mentioned above, indicates that the plaintiff might have had some kind of relationship to the person on whose behalf he has paid. The plaintiff in the present case would therefore have to show some kind of relationship to the defendant. The plaintiff has no relationship to the defendant. The plaintiff is not the shipper. The plaintiff is not the consignee or the endorsee or the holder of the bill of lading and cannot claim to stand in any kind of relationship to the defendant. The defendant owes no duty of care to the plaintiff. As far as the defendant is concerned, the plaintiff is a complete stranger.
24.8 The plaintiff's counsel also relied upon a chapter, viz., chapter 6-Recoupment by Craig Rotherham in Butterworths Common Law Series an extract from the Law of Restitution. This also is of no assistance to the plaintiff. Paragraph 6.2 sets out the circumstances in which the right of recoupment arises. It reads as under:
œ6.2 While the basis of contribution is a common liability, the right to recoupment arises from the defendant's obligation to the claimant to discharge the obligation in its entirety. The right arises in a number of circumstances. Firstly, a claimant is entitled to be indemnified by the defendant where the claimant has discharged the defendant's liability in order to recover goods held by the third-party. Secondly, the right similarly arises where the claimant has paid a debt owed by the defendant in order to preserve rights in land that is subject to a charge securing the debt in question. Thirdly, the right arises where the claimant discharges an obligation for which the defendant is primarily liable and the claimant is only secondarily liable. None of these apply to the present case. The circumstances enumerated above clearly show the situations where a plaintiff can recover in restitution. In each of the cases there is either a contractual right or a duty of care. In the present case there is none. The present case is completely different.
25 American Law:
25.1 The reference by the plaintiff's counsel to American law the U.S. Federal Rules of Civil Procedure and cases decided under the said Rules is equally misconceived. U.S. Law does not apply to the contract of carriage. Even otherwise, the United States of America has no connection whatsoever to the parties to the contract or even to the parties involved in the transaction. The specific case of the plaintiff as stated in paragraph 9 of the affidavit-in-reply is that the contract is governed by English law. Judgments of American Courts applying American Civil Procedure Rules can be of no assistance to the plaintiff. In any event the Civil Procedure Rules of the United States of America cannot be considered as these are not applicable to the present proceedings filed in the Admiralty Jurisdiction of this Court.
25.2 Even the extract from Fourth Edition, Vol.1 of œMarine Cargo Claims? by William Tetley, Chapters 1 to 31 relied upon by the plaintiff at Page 175 says as under:
œ7) the claimant must be a œreal party in interest :
Rule 17(a) of the Federal Rules of Civil Procedure states :
Every action shall be prosecuted in the name of the real party in interest...[A] party with whom or in whose name a contract had been made for the benefit of another, or a party authorized by statute may sue in him own name without joining with him the party for whose benefit the action is brought;... No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or rejoinder or substitution of, the real party in interest;...
There is a danger of interpreting Rule 17(a) of the Federal Rules of Civil Procedure as constituting the legal basis for the substantive right to take suit against the carrier. It is however merely a rule of procedure. It does not and cannot create rights of suit which do not otherwise exit under the substantive law described above. The purpose of Rule 17(a) is to require that actions be prosecuted in the name of the real party in interest so that the carrier may know against whom he must defend himself and so that the carrier may be protected against a subsequent action by another party. Rule 17(a) is meant to ensure that any eventual judgment will have its proper res judicata effect. If the party who takes suit against the carrier is not the real party in interest, the action will however not necessarily be dismissed. Rule 17(a) requires that reasonable time be given to permit joinder or substitution.? (emphasis supplied)
Even here it says it does not and cannot create right of suit which do not otherwise exist under substantive law. As stated earlier, the plaintiff did not have any right to sue.
25.3 The judgment relied upon by the plaintiff in the case of Sumitomo Corporation of America vs. m.v. St. Venture (Delivered on 19.4.1988 by the United States District Court for the middle District of Florida, Tampa Division), deals with the case of non-joinder of a necessary party. That is not the case here.
25.4 The case of CompagnieDe Navigation Fraissinet and Cyprien Fabre, S. A Vs. Mondial United Corporation Vs. S.S. Exmoor (Decided on 4.4.1963 by the United States Courts of Appeals Fifth Circuit)also relied upon by the plaintiff also turned on its own facts and the applicability of the Rules of Civil Procedure of the United States. In that case too, for the claimant to recover since it was not the Shipper or Consignee, the Court required authenticated assignment, transfers, releases from the consignee showing that the Claimant was now the owner of all claims under the Bill of Lading or all others having any substantial basis or a claim have relinquished them. That is not the case here.
26. Incorporation of Sale Contract in Bill of Lading :
26.1 The plaintiff also submitted that the Bill of Lading incorporated the terms of the Sale Contract dated 23/7/2011 between the plaintiff and STC. This is incorrect. The Bill of Lading does not incorporate the terms and conditions of the sale contract. The Sale contract is mentioned but its terms and conditions are not incorporated. Where the intention of the parties was to incorporate the terms and conditions of another contract they have expressly stated so and this is evident from the incorporation of the Charter-party terms and conditions by an express incorporating clause which states œall terms and conditions of the relevant charter-party are deemed to have been incorporated.?
This also goes to show that the parties never intended for the terms and conditions of the Sale Contract to be incorporated in the Bill of Lading. In fact this is never done as the carrier is not concerned with any sale contract of the cargo that it carries.
26.2 Further the Sale Contract not being germane to the carriage of goods, it would require very clear words of incorporation to find that the terms and conditions of a Sale Contract are incorporated in a contract for carriage of goods. The Sale Contract happens to be mentioned only because Clause 7(A) of the Sale Contract between the plaintiff and STC states that the contract number and date must be mentioned on all Bills of Lading, the certificates of origin, quality certificates and commercial invoices. It is for this reason that the Sale Contract has been mentioned on the Bill of Lading. Mere mention does not amount to incorporating the terms of the Sale Contract in the Bill of Lading.
26.3 It was expressly conceded by the plaintiff's counsel that there was no evidence that the defendant had any knowledge of the Sale Contract or a copy of the same was provided to the defendant. Consequently, the defendant had no notice of any of the terms and conditions of the Sale Contract. There is also no pleading in the Plaint that the defendant had any knowledge of the terms and conditions of the Sale Contract or that a copy of the same was provided to the defendant.
27. Was the plaintiff the owner of the shortlanded goods?
27.1 The plaintiff's contentions that it was the owner of the shortlanded cargo, cannot be accepted. The plaintiff had no ownership rights in regard to the shortlanded cargo because title to the goods and risk in the entire quantity of 54,003.321 MT passed to the Buyer, as per clause 17 of the Sale Contract, upon the goods crossing the ship rails of the loading Port. There was no question of re-vesting of ownership rights in the goods in the plaintiff after discharge. This is because there were no goods in respect of which the plaintiff could acquire any rights after discharge. Thus the question was only about entitlement to sue in respect of the goods which were allegedly shortlanded.
27.2 In my opinion, the only person who had ownership rights over the alleged shortlanded quantity was the Buyer or the receiver or the endorsee to whom the title in the goods passed upon or by reason of endorsement and not the plaintiff. Admittedly, the Buyer STC also paid the plaintiff for the full value of 54,003.321 metric tons. But the plaintiff's case is that it was liable to compensate the Buyer STC for the shortlanded quantity on account of clause 9(d) of the Sale Contract between the plaintiff and the STC. This would not make the plaintiff the owner of the shortlanded cargo or confer ownership rights to the goods on the plaintiff. For a person to claim in tort, he must have had title to the goods at the time the negligence complained of was committed. Any person who acquires title after discharge can have no cause of action in tort because he was neither the owner when the tort was committed nor entitled to possession as held in the Aliakmon (supra) and The Wear Breeze (Supra). In the Wear Breeze, Roskil J. held any person who acquires title in the goods after they had been discharged from the vessel can have no cause of action against the ship-owner in respect of negligence committed after loading and before discharge. He further held (a) That the law was and always had been that an action for negligence in respect of loss or damage to goods could not succeed unless plaintiff was, at time of tort complained of, owner of goods or person entitled to possession of them; and that, accordingly, defendants owed no duty to plaintiffs at time when goods were damaged and (b) And that, in circumstances, such as in present (that) case, there was no direct cause of action in tort by person who only acquired title to goods after they had been discharged from vessel against ship-owner in respect of negligence committed either before goods were loaded on board or not later than time of unloading. Any purported re-vesting of rights does not assist the plaintiff because any title acquired after the loss does not give the plaintiff any cause of action to sue the ship-owner in negligence.
28. Was the plaintiff without a remedy and can it sue claiming so ?
28.1 The plaintiff's counsel also submitted that if the defendant's contentions are accepted, then the plaintiff will be rendered without any remedy. For shortage, the defendant has to pay somebody. So when the defendant has to pay somebody, why not that the plaintiff.
28.2 In a Standard CIF contract where title in the goods passes from the Seller to the Buyer upon shipment and the Buyer becomes the lawful holder of the Bill of Lading, it is the Buyer as the holder of the Bill of Lading who suffers a loss in the event there is any shortage of cargo. The Buyer would then have the right to sue the carrier under the Bill of Lading. The Buyer would also be entitled to claim in negligence having legal ownership and/or possessory title to the goods. In the present case, however, the plaintiff took upon himself the liability for any shortage of goods by varying the terms of a standard CIF contract and providing for the Buyer to claim from the plaintiff (seller) for any shortage based on the out turn quantity. Having done so, the plaintiff ought to have ensured that the Buyer assigned the rights to sue under the Bill of Lading to the plaintiff by a deed of assignment or the plaintiff ought to have provided in his sale contract for the Buyer and/or holder of the Bill of Lading (if not the Buyer) to sue in his own name for the benefit of the plaintiff for any loss on account of shortlanding of cargo or for the Buyer/holder of the bill of lading to execute an appropriate authorisation in favour of the plaintiff authorising the plaintiff to file a suit in the name of the person who alone has title to sue. The plaintiff did neither and therefore by its own actions took on the liability without availing of the remedy.
28.3 This is exactly what the House of Lords said in the Aliakmon (supra) in response to a submission made that the plaintiff would have no remedy even though it is the plaintiff who has suffered a loss. The House of Lords did not accept this submission. The observations on page 10 are apposite. It reads as under:
œMy Lords, under this head Mr. Clarke submitted that any rational system of law ought to provide a remedy for persons who suffered the kind of loss which the buyers suffered in the present case, with the clear implication that, if your Lordships' House were to hold that the remedy for which he contended was not available, it would be lending its authority to an irrational feature of English law. I do not agree with this submission for, as I shall endeavour to show, English law does, in all normal cases, provide a fair and adequate remedy for loss of or damage to goods the subject-matter of a c.i.f. or c. and f. contract, and the buyers in this case could easily, if properly advised at the time when they agreed to the variation of the original c. and f. contract, have secured to themselves the benefit of such a remedy.
As I indicated earlier, under the usual c.i.f. or c. and f. contract the bill of lading issued in respect of the goods is endorsed and delivered by the seller to the buyer against payment by the buyer of the price. When that happens, the property in the goods passes from the sellers to the buyers upon or by reason of such endorsement, and the buyer is entitled, by virtue of section 1 of the Bills of Lading Act 1855, to sue the shipowners for loss of or damage to the goods on the contract contained in the bill of lading. The remedy so available to the buyer is adequate and fair to both parties, and there is no need for any parallel or alternative remedy in tort for negligence. In the present case, as I also indicated earlier, the variation of the original c. and f. contract agreed between the sellers and the buyers produced a hybrid contract of an extremely unusual character. It was extremely unusual in that what had originally been an ordinary c. and f. contract became, in effect, a sale ex-warehouse at Immingham, but the risk in the goods during their carriage by sea remained with the buyers as if the sale had still been or a c. and f. basis. In this situation the persons who had a right to sue the shipowners for loss of or damage to the goods on the contract contained in the bill of lading were the sellers, and the buyers, if properly advised, should have made it a further term of the variation that the sellers should either exercise this right for their account or assign such right to them to exercise for themselves. If either of these two precautions had been taken, the law would have provided the buyers with a fair and adequate remedy for their loss.
These considerations show, in my opinion, not that there is some lacuna in English law relating to these matters, but only that the buyers, when they agreed to the variation of the original contract of sale, did not take the steps to protect themselves which, if properly advised, they should have done. To put the matter quite simply the buyers, by the variation to which they agreed, were depriving themselves of the right of suit under section 1 of the Bills of Lading Act 1855 which they would otherwise have had, and commercial good sense required that they should obtain the benefit of an equivalent right in one or other of the two different ways which I have suggested.?
28.4 The plaintiff ought to have secured itself the remedy when the plaintiff agreed to take on the liability for shortage under the contract and made appropriate provisions that would make it incumbent upon the Buyer STC under the contract to either file a suit for the benefit of the plaintiff or to assign its rights under the Bill of Lading to the plaintiff or authorise the plaintiff to file a suit on behalf of the Buyer STC or the receiver or the endorsee to whom upon or by reason of endorsement in the bills of lading the title and right to sue and be sued had passed. The plaintiff otherwise should have entered into an agreement with its suppliers in terms identical with STC, like a back to back agreement. If either of these precautions had been taken by the plaintiff, the law would have provided the plaintiff with a fair and appropriate remedy for their alleged loss. The plaintiff by virtue of his own contractual provisions has deprived itself of the right to sue which it could have easily ensured by obtaining an equivalent right to protect itself if properly advised.
28.5 In addition, Section 2(4) of the English Carriage of Goods by Sea Act, 1992, which the plaintiff state in the affidavit-in-reply applies to the contract of carriage, expressly provides the remedy and the plaintiff knew or ought to have known having subjected the contract to English law. The holder of the Bill of lading shall be entitled to exercise right of suit for the benefit of the person who sustained the loss. Thus the holder of the Bill of lading was entitled to file a suit for the benefit of the plaintiff but not the plaintiff who had no rights of suit as these vested in the holder of the Bill of lading. The plaintiff has suffered a loss, if any, is on account of its own contract with the Buyer STC under which the plaintiff assumed liability for any shortage without securing to itself under the contract or with its supplier, the appropriate remedy available in law. For this, the plaintiff alone is to be blamed.
29. Equity :
29.1 This submission is akin to saying that the court must invoke its jurisdiction under Section 151 of the CPC to grant relief to the plaintiff, ignoring all provisions of law that disentitle the plaintiff to any relief. Such a submission cannot be accepted. The law provides a remedy. The plaintiff on its own volition has taken on the obligation to compensate its buyers, STC, for shortage. The plaintiff has not availed of the remedy available by either ensuring that the Buyer arranges for the consignee to sue the carrier for the shortage or obtain an appropriate authorisation in favour of the plaintiff thereby enabling the plaintiff to sue in the name of the consignee or receiver or endorsee or execute an assignment of the rights under the bill of lading in favour of the plaintiff. When such a remedy was available, the plaintiff chose not to avail of it by making appropriate provisions in its Sale Contract. When the law itself provides for the remedy but the plaintiff has not availed of it because of its own ignorance of law and/or contractual compulsions, inherent jurisdiction vested in Court to grant any relief cannot be invoked.
30. In the circumstances, the arrest is required to be set aside and the security returned to the defendant. The notice of motion is allowed in terms of prayer clauses (a) and (b). For reasons mentioned earlier, I am inclined to award substantial costs against the plaintiff. The plaintiff to pay to the defendant costs in the sum of Rs.5,00,000/- (Rupees Five lakh only) within two weeks from today by cheque drawn in favour of the defendant's advocate.
31. The Escrow agent, Incisive Law LLC, Singapore is directed to return the amount of US$335,00/- deposited by the defendant as security towards plaintiff's claim in the suit together with accumulated interest, if any, to the defendant not later than two weeks from today.