GAC Shipping (India) Pvt Ltd & Ors v. MV Golden Pride & Ors

6. MV Golden Pride was in default once again. However, the Supreme Court permitted an extension on 5th March 2021 and allowed a deposit of three Demand Drafts aggregating to Rs. 1.[5] crore before the Registrar. That amount having been deposited, the Supreme Court then heard the parties.

7. Paragraphs 6 to 9 of the Supreme Court order read thus: “6. Counsel for the appellant has made strenuous efforts to raise various factual and legal contentions, most importantly the locus standi of the first respondent to institute a suit under the provisions of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017. We are, nevertheless, of the view that the Division Bench of the High Court has rightly observed that the contentions raised on behalf of the appellant cannot be effectively answered without diving deep into the factual issues. It is, thus, apposite and more appropriate for the appellant to avail the liberty granted by the Division Bench of the High Court, namely, to approach the learned Single Judge.

7. It goes without saying that the questions like, but not limited to, (a) whether GAC Shipping (India) Private Limited being a purported agent of the appellant has any locus standi to file Admiralty Suit?; (b) whether appellant is a ‘live vessel’s and entitled to be evaluated accordingly?; (c) whether the appellant – vessel could be sold on scrap value?; or (d) whether the appellant has been grossly under-valued etc., are mixed questions of law and facts and ought to be determined by the Admiralty Judge on consideration of the relevant material with reasons in support thereof.

8. Similarly, the claim of the Mumbai Port Trust to receive the requisite part of the security amount deposited by the appellant, during the interregnum, till all the questions are finally answered on merits, can also be considered by the learned Single Judge before deciding the contentions on merits. For us, suffice it is to direct the Registry of this Court to transfer the amount of Rs. 1.50 crore deposited by the appellant to the High Court of Judicature at Bombay in Commercial Admiralty Suit (L) No. 6807/2020 within a week. Ordered accordingly.

9. The parties shall be at liberty to raise their respective contentions before the Admiralty Court within two weeks and the same shall be determined expeditiously after hearing all concerned. The appellant is directed not to take unnecessary adjournments. If the appellant does not cooperate with the early disposal of the suit, the Court is at liberty to proceed with the matter on its merits. Till such time, status-quo as it exists today shall be maintained. We make it clear that we have not expressed any opinion on the merits of the case.”

8. This was the basis on which the Supreme Court SLP stood disposed of.

9. Obviously, therefore, the contentions raised by MV Golden Pride and canvassed before the Supreme Court, as set out in paragraph 7 need to be addressed. The claims of the Port Trust are also to be heard. In addition, there is now an Interim Application by Rajnish Steels which says that it has spent Rs. 2.25 crores as the auction price and another Rs. 80 lakhs towards custom duty and other charges. The vessel is still lying on Rajnish Steel’s breaking plot and Rajnish Steels incurs a cost of Rs. 25,000/- per day to keep the vessel there. Rajnish Steels has not been given what is called ‘hot work’ and ‘cutting’ permission to turn the vessel in to scrap. It has, therefore, filed this Interim Application seeking a reconfirmation of the sale in its favour: orders directing the Mumbai Port Trust to issue the necessary permissions; an order directing the erstwhile owners to pay an amount of Rs. 22,78,669/- or to have this amount adjusted from the deposit made before the Supreme Court. This is a calculation of the rent at Rs. 25,000/- per day and, in the alternative, an enforceable order in this amount is sought against the MV Golden Pride.

10. I am prepared to proceed at once although there are other matters scheduled before me today, in view of the directions of the Supreme Court. I must record that when I expressed my readiness to proceed, the Advocate for the 1st Defendant, MV Golden Pride, which has constantly been in an appeal, said he was not ready and sought time. At this stage, the learned Advocate for the 1st Defendant states that he is prepared to proceed with the mater tomorrow. That is acceptable.

11. List the matter on first on board tomorrow, 24th March 2021.

12. It is clarified that if the regular bench is available, the matter will be listed before that Court. There will be no adjournments under any circumstances.

13. This order will be Secretary/ Personal Assistant of this Court. All concerned

5. I inadvertently omitted to note that the last order of the Supreme Court by which the matter was sent back to this Court is dated 12th March 2021.

6. The dispute today, therefore, ranges over a number of issues. At the heart of all these, is the Vessel, Golden Pride. This is an allwelded twin screw anchor handling oil recovery utility vessel built some time in 2003 in Malaysia, with IMO No. 9308522. It flies a Dominican flag. Golden Pride arrived at the Mumbai Port, under the control of the Board of Trustees of the Mumbai Port Trust (“MPT”), governed by the Major Port Trusts Act 1963, sometime in June 2018. At that time — and there is no dispute about this since it finds place in the Supreme Court order of 12th March 2021 — the Vessel Owners apparently said that it needed anchorage at Mumbai Port for a few days. Golden Pride had a local agent, GAC Shipping (India) Pvt Ltd (“GAC”), the Plaintiff in the Admiralty suit. It is nobody’s case that the Vessel Owners did not request GAC, the agent, to arrange for an anchorage spot for the vessel with MPT. Such anchorage was indeed provided. From June 2018, until at least 12th- 14th January 2021, Golden Pride lay in anchorage at MPT.

7. It is also not disputed, and MPT, Defendant No.2 before me, confirms this, that the request for anchorage, though in the name of Golden Pride, came from GAC. While handling such matters as an agent, as all such agents are required to do, GAC gave an undertaking to MPT to pay MPT’s, including, of course, for anchorage. To clarify, there is no claim by GAC for other necessaries (victualling, fuel etc.), but only for unpaid MPT charges and dues, and its own costs. As of today, with interest computed at the rate of 15% per annum, MPT’s claim is to the tune of Rs. 1,16,90,958/-. In addition, from 10th February 2021 until today, an additional amount of Rs. 14,36,188/with interest is claimed by the MPT. There is also no doubt that the Vessel Owners did not pay the MPT charges at any time. The fact that MPT has pasted a notice of its claim on the vessel itself is also undisputed.

8. On 20th August 2020, GAC filed the instant Commercial Admiralty Suit No. 7 of 2021 against MV Golden Pride as the sole Defendant. The Board of Trustees of the MPT were added as Defendant No. 2 at a later date, by an order to which I will presently turn. The narrative in the plaint was precisely that the Vessel Owners approached GAC to provide agency services for her stay in Mumbai; that the Vessel Owners were told of the agency charges and the port charges; that the Vessel Owners did not pay off the MPT dues; and that GAC is entitled to be indemnified against the MPT claim. These are the relevant paragraphs of the plaint:

3. The Plaintiff was, around the end of May 2018, approached by the owner of the Defendant vessel, one Golden Star Marine FZE (“Owner”), to provide agency services to the Defendant vessel for her stay in Mumbai. The Plaintiff made known its agency charges to the owner of the Defendant vessel, as well as the prevailing port charges. It was made clear that the Plaintiff would be, at all times, acting on behalf of the vessel and would, under no circumstances, be liable for any dues relating to the vessel. Port charges were to be paid in advance. Consequently, it was an express/implied term of the agency that, if any party, such as the port, looked (untenably) to the Plaintiff for any dues incurred on behalf of the vessel, the Plaintiff would be indemnified and held harmless for the same by the Owner as soon as any such claim arose. The Owner was to put the Plaintiff in funds in advance for any port charges. The Owner accepted the terms and conditions of the agency. Annexed hereto as Exhibit A is a copy of the email dated 7 June 2018 by which the Plaintiff provided the terms of the agency to the Owner. The same was signed by the Owner through one of the Indian companies beneficially owned and controlled by it, and sent to the Plaintiff on/about 8 June 2018. Annexed hereto as Exhibit B is a copy of the signed contract.

4. The services to be rendered was limited to handling the formalities and filing the necessary applications with the port on behalf of the vessel for activities such as (a) inward and outward clearances, berthing and movement of the vessel within port, (b) sign on and off of crew members and

(c) supplying the vessel with food, water and other necessaries.

5. Accordingly, when the vessel first came in, the Plaintiff submitted an application to the Mumbai Port Trust on the Defendant vessel’s behalf for berthing. Annexed hereto as Exhibit C is a copy of this application dated 8 June

2018. Annexed hereto as Exhibit D are copies of the letters issued by the Owner and submitted to the port on 7/8 June

2018.

6. The Defendant vessel was allotted a stream berth (a spot in the P & V anchorage where vessels customarily anchor) on 9 June 2018. As per the Owner, she was scheduled to start a charter from Mumbai. Her initial stay there was expected to short, and not more than 30 days. The Plaintiff thus requested for an advance of INR 6,50,000which was paid by the Owner – out of which only INR 3,50,000 was paid by the Owner. However, she did not vacate the berth within the initial expected period. The vessel has, thereafter, been at the same spot till date. The Plaintiff has been submitting its invoices for its agency fees periodically. The same were accepted by the Owner without any protest. All invoices were raised, as per the Owner’s request, on an Indian company associated with the Owner and beneficially owned by the same interest. Annexed hereto as Exhibit E is a copy of this communication dated 15 June 2018 by which the Owner made this request.

7. When, after several months, the Plaintiff’s agency dues remained unpaid and the Plaintiff was not put in funds for port charges, it requested the owner of the Defendant vessel to transfer the agency. However, there was no response from the Owner.

8. Thereafter: (a) The owner of the Defendant vessel stopped paying the crew. The Plaintiff is unsure of the exact date as it was not involved with crew salary payments. (b) On 11 July 2019, police officers boarded the vessel, on hearing reports of crew unrest. They also discovered that the vessel’s certificates were not in order. The police officers called upon the Owner’s representatives to appear before them to resolve the situation.

(c) On 12 July 2019, the entire crew of the

9. There was no response to the Plaintiff’s several emails to the Owner concerning the situation. Neither did the Owner’s representatives appear before the police. Given that the vessel was unmanned and a hazard, the Plaintiff was constrained, on 13 July 2019, to escalate the issue to the Directorate General of Shipping. Thereafter, the crew situation was temporarily resolved. As of 14 July 2019, all the crew were on board.

11. However, since the vessel continued to stay at P & V anchorage, the Plaintiff repeatedly reminded the Owner that the port charges for the vessel also remained to be paid. The Owner failed to respond and, on the few occasions it did, it merely promised to clear the port charges and to take the vessel elsewhere. Nothing came of its several promises. Meanwhile, the vessel continued to stay at anchorage and the port charges continued to accrue.

16. Thereafter, the Owner went silent. It came to the Plaintiff’s notice that the Owner had again failed to make payment of the crew wages and that the condition of the crew was deteriorating. On 5 May 2020, the Plaintiff addressed a communication to the Directorate General of Shipping, bring the same to their notice. Annexed hereto as Exhibit G is a copy of the email dated 5 May 2020 sent by the Plaintiff to the Directorate General of Shipping.

17. On 18 June 2020, when there was no response from the Owner’s side, the Plaintiff again threatened legal action against the vessel. Follow up emails were sent in June and July 2020. On 28 July 2020, the Owner responded that the vessel had secured a new charter and that all payments would be made on priority. The Plaintiff responded in strong terms stating, “Mumbai port is not a lay-up area where you have parked your vessel since last 2 years. We are getting regular calls from Port to sail the Vessel which we have conveyed to you several times in the past.” The Plaintiff also informed the Owner that, as of 31 July 2020, the estimated port charges would be INR 46,08,948.27 (after giving credit for the amount of INR 4,47,302.70 then lying with it) and attached the computation thereof. Annexed hereto as Exhibit H is a copy of the email communications exchanged between the Plaintiff and the Owner during the period 13 February 2020 to 30 July 2020, along with the attachments to the email of 30 July 2020 (being the invoice relating to the port charges till 6 February 2020, the working of the port charges from 7 February 2020 to 31 July 2020 and the statement of accounts relating to the agency charges of the Plaintiff). It was also made clear that interest would be chargeable in case of non payment.

18. On 29 July 2020, a payment of INR 10,000 was made by the Owner.

19. Further emails were exchanged between the Owner and the Plaintiff during the period 1-10 August 2020. The Owner proposed a payment plan in instalments, which the Plaintiff outright rejected. The Plaintiff made it clear that legal proceedings were underway and that if the Owner wished to stop the same, the entire port dues would have to be paid. Annexed hereto as Exhibit I is a copy of the email communications exchanged in the period 1-10 August 2020 between the parties.

22. The port has raised its invoice for port charges accrued in respect of the Defendant vessel. There is a distinct possibility that the port will untenably look to the Plaintiff for payment thereof, though it is fully aware that the Plaintiff was only acting as an agent for the Defendant vessel.

23. The Plaintiff has a maritime claim against the Defendant, inter alia, under section 4(1)(n) and (p) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017. The Plaintiff’s claim arises out of port dues payable in respect of the Defendant vessel. It is the Plaintiff’s stand that it is not liable to the port for the same – however, the Plaintiff reasonably apprehends that the port will look to the Plaintiff directly for payment of the port dues (and not on the Owner, as it should). The Plaintiff states that it is not liable, even in the first instance for the port charges and any such claim will be misconceived and incorrect. In any view of the matter, the Owner is liable for the port charges incurred in respect of the Defendant vessel and the Plaintiff is entitled to be indemnified by the Owner in respect of the same. This indemnity can be invoked as soon as the claim (whether rightly or wrongly made) arises against the Plaintiff, which it has. The port has initially orally informed the Plaintiff that it will soon be raising an invoice for the same, and that the invoice will be in the Plaintiff’s name and, on 20 August 2020, raised a bill dated 13 August 2020 in the Plaintiff’s name for the sum of INR 76,63,975/-. The Plaintiff reserve its right to defend any claim the port may raise against it – and the present proceedings are without prejudice to such right of the Plaintiff. In any view of the matter, the Owner’s liability to the Plaintiff is absolute and unconditional. The Owner was the owner of the vessel when the claim arose and is the owner of the vessel when the arrest is being sought. A copy of the bill was sent to the Owner by the Plaintiff by an email dated 20 August 2020. Annexed hereto as Exhibit L. The bill is only till 27 July 2020 – the Plaintiff has, in the present suit, calculated port dues up to 15 August 2020.

24. The Plaintiff, being left with no other option, is presently entitled to proceed in rem against the Defendant vessel and seek the arrest and sale thereof. The Defendant vessel is the only asset within the admiralty jurisdiction of this Hon’ble Court that can be proceeded against as security for the Plaintiff’s undisputed maritime claim against the Defendant vessel. The Plaintiff respectfully submits that this Hon’ble Court invoke and exercise its admiralty jurisdiction to entertain, try and dispose of the present suit. (Emphasis added)

9. The prayers in the Suit are for an arrest of MV Golden Pride; that she along with her hull, tackle, machinery and appurtenant at present in MPT be sequestered, condemned and then sold under directions of the Court and the sale proceeds applied towards the Plaintiff’s claim in the Suit. Then there is a prayer for a decree that the Plaintiff is entitled to be indemnified by the 1st Defendant against MPT charges. This is consonant with the pleading in paragraph 3 of the plaint. Next, prayer (d) is for a decree in favour of the Plaintiff and against Golden Pride for an amount said to be due as on the date of the institution of the Suit in the amount of Rs. 85,07,323.42 with interest, and alternatively that this amount be brought into Court.

10. The action was, as paragraphs 23 and 24 of the plaint show, brought as a Maritime claim in rem. This claim is pegged to Section 4(1)(n) and Section 4(1)(p) of the Admiralty ( Jurisdiction and Settlement of Maritime Claims) Act 2017 (“Admiralty Act”).

4. Maritime Claim.—(1) The High Court may exercise jurisdiction to hear and determine any question on a maritime claim against any vessel, arising out of any— … … … (n) dues in connection with any port, harbour, canal, dock or light tolls, other tolls, waterway or any charges of similar kind chargeable under any law for the time being in force; … … (p) disbursements incurred on behalf of the vessel or its owners;

11. Section 2(f) defines a maritime claim as one arising under

12. There is no manner of doubt that the claim that GAC laid in the plaint was for recovery of the amounts due to MPT, in addition to its own agency charges.

3 A ‘maritime lien’ is defined in Section 2(n) as a maritime claim against the owner, demise charterer, manager or operator of the vessel referred to in clauses (a) to (e) of sub-section (1) of section 9, which shall continue to exist under sub-section (2) of that section. Section 9 deals with inter se priority on maritime liens. Thus, all maritime liens are also maritime claims, but not all maritime claims are maritime liens.

13. On 24th August 2020, a learned single Judge of this Court ordered the arrest of MV Golden Pride. This order was made on a Judge’s Order No. 211-A of 2020. The usual form and practice on the Original Side is that the presiding Judge will sign a pre-prepared socalled‘Judges Order’. But in the Admiralty Jurisdiction, it is the often the practice to pass a short reasoned order justifying the acceptance and signature on the formal Judge’s Order. There was such a brief, reasoned order. That this order of arrest was ex parte, there being no caveat, is undisputed. Paragraph 13 of the reasoned order said this:

13. After service of this order of arrest, if the arrested vessel is not released by furnishing security or bail amount or an application for vacating the order of arrest is not filed within 6 weeks of service, or the vessel is found abandoned by the person in-charge of the vessel or owner, or is found unmanned, then, in such an event, on a communication being sent by the Plaintiff, the office of the Sheriff of Mumbai shall present a Sheriff’s Report for auctioning the vessel within 14 days from the date of receiving such communication. The Plaintiff is also entitled to file an application for sale of the vessel even prior to the weeks, if it is apparent that the owner of the vessel will not be furnishing security or filing an application for vacating the order of arrest or if the circumstances are such that the sale of the vessel is justified.

14. An order in such terms is in line with the provisions of Section 11(3) of the Admiralty Act: Section 11. Protection of owner, demise charterer, manager or operator or crew of vessel arrested.— (1) The High Court may, as a condition of arrest of a vessel, or for permitting an arrest already effected to be maintained, impose upon the claimant who seeks to arrest or who has procured the arrest of the vessel, an obligation to provide an unconditional undertaking to pay such sums of money as damages or such security of a kind for an amount and upon such terms as may be determined by the High Court, for any loss or damage which may be incurred by the defendant as a result of the arrest, and for which the claimant may be found liable, including but not restricted to the following, namely:— (a) the arrest having been wrongful or unjustified; or (b) excessive security having been demanded and provided. (2) Where pursuant to sub-section (1), the person providing the security may at any time, apply to the High Court to have the security reduced, modified or cancelled for sufficient reasons as may be stated in the application. (3) If the owner or demise charterer abandons the vessel after its arrest, the High Court shall cause the vessel to be auctioned and the proceeds appropriated and dealt with in such manner as the court may deem fit within a period of forty-five days from the date of arrest or abandonment: Provided that the High Court shall, for reasons to be recorded in writing, extend the period of auction of the vessel for a further period of thirty days.

15. The warrant of arrest was served on Golden Pride on 19th October 2020. Again, there is no dispute about this.

16. In the routine course, following the order of arrest and the service of the ensuing warrant, the Vessel Owners had option, within six weeks (45 days) to furnish security to release the vessel, or to file an application for that purpose. They did neither. This led, as per the order of arrest, to office of the Sheriff making a report.

17. The Sheriff did just that. He filed Report No. 64 of 2020 for directions to conduct an auction sale because until that time nobody has sought to vacate the order of arrest, nor furnished security. At this stage, we revert to the averments in the plaint that show that the Vessel Owners had not paid crew wages (apart from not paying the port dues and agency charges at all, except for an amount of Rs.10,000/-). This Sheriff’s Report came up before the learned single Judge on 4th December 2020. The order made that day shows that MPT was present, though not yet formally joined as a party- Defendant to the Suit. MV Golden Pride was also represented. A valuation was directed to be made by a private surveyor, Ericson & Richards Surveyors Pvt Ltd. Paragraphs 2 and 3 of this order say this:

2 The learned advocate appearing on behalf of the defendant–vessel submitted that the suit filed by the plaintiff itself is not maintainable if the plaintiff is the agent of the defendant-vessel. The claim made in the suit is that the Board of Trustees of the Port of Mumbai are looking to the plaintiff as an agent of the defendant-vessel for payment of their dues. This being the case, the suit at the instance of the present plaintiff is not maintainable.

3 I cannot entertain these arguments at this stage. The order of arrest, and more particularly paragraph 13 thereof clearly sets out that if the security or bail amount or an application for vacating the order of arrest is not filed, the defendant-vessel should be sold as more particularly set out in the said order. Admittedly, the defendant-vessel has neither furnished any security nor bail amount and neither has filed any application for vacating the order of arrest though it had sufficient time to do so. In these circumstances, I do not think that it would be correct to entertain these arguments in the present Sheriff’s Report and that too at this stage. It has also been brought to my attention that even the dues of the crew members have not been paid by the owners of the defendantvessel. Hence taking an overall view of the matter, I have no hesitation in directing the office of the Sheriff of Mumbai to conduct the auction for sale of the defendant- vessel as per the schedule set out below;

18. On 12th December 2020, the Vessel Owners seem to have obtained a survey or valuation report from SV Gupte, Insurance Surveyor. A copy of this report (“the Gupte Report”) is annexed to Golden Pride’s Interim Application at page 94. The report says that the new construction cost of MV Golden Pride was Rs. 45 crores and its scrap value was Rs. 4.[5] crores.

19. There is another report by Inmartech, of 7th September 2018. I am leaving that from consideration for the time being, because by the time the events in question transpired, this report was already more than three years old.

20. The Gupte Report asserts that MV Golden Pride, built in 2003 had a total life of 30 years.

21. This becomes important because two days after the Gupte Report dated 12th December 2020, on 14th December 2020, Golden Pride filed Interim Application (L) No. 8874 of 2020 seeking a recall of the order of sale passed on 4th December 2020. I have seen a copy of that Interim Application in an appellate compilation given to me. That Interim Application seeks, first, a release of the vessel and the vacating of the order of arrest; second, an order setting aside the directions for auction sale and directions to implead MPT as a party to the proceedings; and, third, for a stay of the auction sale.

22. It will be noted that nowhere in this Interim Application is there a reference to the Gupte Report although Golden Pride and the Vessel Owner had it by then, nor is there even an assertion that the vessel was a ‘live’, i.e., sailing vessel. Paragraph 6(h) contains an express undertaking that Golden Pride / its Owners were willing to pay all expenses of the Sheriff and the dues of the crew. However, the Applicant disputed the correctness of the MPT charges.

23. On 18th December 2020 the Defendant’s Interim Application

(L) No. 8874 of 2020 was taken up but stood over to 22nd December

2020.

24. This now brings us to a critical stage in the proceedings. The order of 18th December 2020 notes that the Constituted Attorney of the owner of the vessel, one Mr Khairol Jabar, was present in Court. He stated that the Defendant would furnish a bank guarantee of Rs.

1.15 crores (Rs 85 lakhs or so as port charges, and the balance as agency charges) with interest at the rate of 15% per annum to secure the suit claim. Accordingly, the request was to postpone the auction sale scheduled at 3.00 pm on 21st December 2020. The Court agreed to this request, and the application was stood over to 3.00 pm on 22nd December 2020, it being made clear what the format of a bank guarantee was to be. The order of 18th December 2020 reads:

1 After this matter was argued for some time, the learned advocate appearing on behalf of the applicant / the owner of the defendant-vessel, on instructions of Mr. Khairol Jabbar who is the Constituted Attorney of the owner of the defendant – vessel and who is present in court, has stated that they will furnish a Bank Guarantee in the sum of Rs.1,15,00,000/- (Rs. One Crore Fifteen Lakhs) together with interest at the rate of 15 % p.a. from the date of furnishing of the bank guarantee till the date of its encashment, to secure the claim of the plaintiff. He submitted that the auction sale of the defendant – vessel is scheduled at 3.00 p.m. on 21st December, 2020. He requested that this auction sale be postponed by 24 hours to

3.00 p.m. on 22nd December, 2020 in order to enable him to furnish the Bank Guarantee as aforesaid.

2020. It is made clear that the Bank Guarantee (to be furnished to secure the claim of the plaintiffs) shall clearly state that it is given for the sum of Rs.1,15,00,000/- together with interest @ 15 % p.a. from the date of furnishing of the bank guarantee till its encashment. Only a Bank Guarantee in this format will be accepted so as to ensure that the claim along with the interest is adequately secured.

25. On 22nd December 2020, Golden Pride and her owners were represented by an advocate in Court. So were the Plaintiff and the MPT. The Deputy Sheriff was present, as was the constituted attorney of the Golden Pride/the Vessel Owners, Mr Jabar. The Court accepted the prayer for adding MPT as Defendant No.2 to the suit. No one objected. Then the Court noted the statement before it on 18th December 2020, and that at the hearing (of 22nd December 2020), the Advocate for the Defendant stated that the Defendant was not in a position to furnish any bank guarantee at all for release of the vessel. Therefore, at the end of paragraph 5, the learned Single Judge said that no question arose of releasing Golden Pride or of vacating the arrest warrant on 24th August 2020. The prayer was rejected and the Interim Application was thus disposed of. The order says:

1 This Interim Application has been fled seeking to release the defendant vessel and vacate the order of arrest dated 21st August, 2020 as well as to add and implead Mumbai Port Trust as a party defendant to the present proceedings.

2 As far as the prayer for adding Mumbai Port Trust is concerned, Mr Fernandes, the learned counsel appearing on behalf of Mumbai Port Trust as well as the learned advocate appearing on behalf of the plaintiff has stated that they have no objection if the Mumbai Port Trust is added as a party – defendant to the present suit. In these circumstances, the Mumbai Port Trust shall be added as defendant No.2 in the above suit. The amendment shall be carried out on or before 15th January, 2021 and a copy of the amended plaint shall be served on the advocates for the owner of the defendant vessel and newly joined defendant / Mumbai Port Trust. After joinder of Mumbai Port Trust, if any averments are required to be made in the plaint, the plaintiff is at liberty to file an application seeking those amendments.

3 As far as prayer for release of the defendant vessel is concerned, in the order dated 18th December, 2020, a statement was recorded on behalf of the applicant/ owner of the defendant – vessel that they would furnish a bank guarantee in the sum of Rs.1,15,00,000/- together with interest @ 15 % p.a. from the date of furnishing of the bank guarantee till a date of its encashment, to secure the claim of the plaintiff. To enable the applicant/ owner of the defendant vessel to furnish the aforesaid bank guarantee the matter was kept today.

5 Today, when the matter is called out, the learned advocate appearing on behalf of the applicant/ owner of the defendant vessel has fairly stated that they are not in a position to furnish any bank guarantee to release the defendant – vessel from the order of arrest or stall the auction sale of the defendant vessel which is also scheduled today. In these circumstances, the question of releasing the defendant vessel and vacating the order of arrest dated 24th August, 2020 does not arise. The said prayer is therefore rejected. The Interim Application is accordingly disposed of.

26. On the same day, 22nd December 2020, as the foregoing order shows, the Sheriff’s Report No. 69 of 2020 was also listed. There was, thus, a second order of 22nd December 2020, made on Sheriff’s Report No. 69 of 2020. This was an order made pursuant to the auction sale being conducted and auction bids being opened and examined. Totally five bids were received. This is where Rajnish Steels enters the frame. All bidders were invited to improve their bids. Rajnish Steels’ bid was the highest at Rs. 2.25 crores. Paragraph 5 of the order notes that Rajnish Steels stated that they were purchasing the vessel only for scrap. The Court went through the report of the Court-appointed valuer, M/s. Ericson & Richards Surveyors Pvt Ltd, which also gave a scrap value said to be commensurate with the bid put in by Rajnish Steels. That bid was thus accepted at Rs. 2.25 crores. Rajnish Steels had paid an EMD of Rs. 50 lakhs. It was to deposit the balance Rs. 1.75 crores before 21st January 2021.

27. The entirety of this crucial order of 22nd December 2020 is reproduced below.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ADMIRALTY AND VICE ADMIRALTY JURISDICTION IN ITS COMMERCIAL DIVISION SHERIFF’S REPORT NO. 69 OF 2020 IN COMM.

ADMIRALTY SUIT (L) NO. 6807 OF 2020 m.v. Golden Pride...Applicant. GAC Shipping (Ind) Pvt. Ltd. …Plaintiff Vs m.v. Golden Pride...Defendant. Mr. Bimal Rajshekhar for the plaintiff Mr. Ajay Fernandes i/b Motiwala and Co. for M.B.P.T. Mr. Gaurang Shah a/w Mr. Kunal S. Gaikwad for the owner of the defendant vessel. Mr. D.S.Chaudhari Dy. Sheriff is present. Mr. Ashok Jain for Om Namo Ventures present. Mr. Vishal Shah for M/s SMH Shipping Pvt. Ltd. present. Mr. Rajneesh Gupta for M/s Rajnish Steel present. Mr. Gaurav Jhaveri for Gaurav Worldwide Trading Pvt. Ltd. present. Mr. Osama Butt for M/s Holborn Shipping Inc. present. CORAM: B.P. COLABAWALLA, J. DATE: 22nd DECEMBER, 2020 P.C.:

1 The Present Sheriff’s Report has been moved seeking the permission to open the bids received from the bidders for the purchase of the defendant vessel m.v. Golden Pride (IMO No. 9308522). A further direction is sought to make the payment of Rs.1,82,044/- to M/s Eureka Advertising Agency towards the cost of advertisement as well as to M/s Ericson & Richards Surveyors Pvt. Ltd. in the sum of Rs.2,40,381/- for undertaking the task of valuing the defendant vessel.

2 As far as payment to M/s Eureka Advertising Agency as well as M/s Ericson & Richards Surveyors Pvt. Ltd. are concerned, the learned advocates appearing for the plaintiff and the owners of the defendant – vessel as well as the Mumbai Port Trust have no objection. In these circumstances, the Sheriff of Mumbai is directed to make the payment of Rs.1,82,044/- to M/s Eureka Advertising Agency and Rs.2,40,381/- to M/s Ericson & Richards Surveyors Pvt. Ltd. from the amount of Rs.[5] Lacs already deposited by the plaintiff.

3 There are total five bids that are received for the purpose of purchase of the defendant vessel. They are:- 1 M/s Om Namo Ventures 2 M/s Gaurav Worldwide Trading Pvt. Ltd. 3 M/s Holborn Shipping Inc. 4 M/s Rajnish Steels 5 M/s SMH Shipping Pvt. Ltd.

4 When these bids are opened in Court today, the highest bid is that of M/s Rajnish Steels in the sum of Rs.1,51,51,000/-. Thereafter all these five bidders bid in open court. All parties increased their bids and bid against each other. Finally, pursuant to the open bid conducted in Court, the highest bid was given by M/s Rajnish Steels in the sum of Rs.2.25 Crores. 5 M/s Rajnish Steels have also stated before the Court that they are purchasing the defendant vessel only for the purpose of scrap. I have also gone through the Valuation Report given by M/s Ericson & Richards Surveyors Pvt. Ltd. The scrap value of the defendant vessel given in the Valuation Report is commensurate with the highest bid received from M/s Rajnish Steels.

6 In these circumstances, the highest bid of M/s Rajnish Steels in the sum of R.2.25 Crores for the purchase of the defendant vessel is accepted and confirmed by this Court. The Sheriff of Mumbai has informed me that M/s Rajnish Steels have already deposited the EMD of Rs.50 Lacs with the office of the Sheriff of Mumbai. The office of Sheriff of Mumbai shall encash the said EMD forthwith and M/s Rajnish Steels shall deposit the balance amount of Rs.1.75 Crores with the office of the Sheriff of Mumbai on or before 4th January, 2021.

7 It is made clear that if the aforesaid payment is not made within the aforesaid time, the sale shall be cancelled and the EMD of M/s Rajnish Steels shall be forfeited by the Sheriff of Mumbai. Thereafter, the Sheriff shall move a fresh Report for reauctioning the Defendant vessel.

8 Once the Sheriff of Mumbai confirms the receipt of the entire sale consideration, the Prothonotary and Senior Master/ Admiralty Registrar of this Court shall sign the bill of sale in favour of M/s Rajnish Steels ( and no one else). No nominees will also be mentioned on the bill of sale. The bill of sale shall also specify that the vessel is sold to M/s Rajnish Steels only for the purpose of scrapping and not for trading purpose.

9 The EMDs by the unsuccessful bidders shall be returned by the Sheriff of Mumbai within a period of one week from today.

10 Needless to clarify that the sale of the 1st defendant vessel having been confirmed in favour of M/s Rajnish steels the 1st defendant vessel shall be handed over to the said M/s Rajnish Steels free from any encumbrances. This is of course, subject to the entire sale consideration being received by the office of the Sheriff of Mumbai within the stipulated time as mentioned earlier.

11 The Sheriff’s office shall communicate to the Port, Customs and other authorities informing them about the sale of the defendant vessel, pursuant to this order.

12 At this stage, the proprietor of M/s Rajnish Steels who is present in Court has requested that he be permitted, in the interregnum, to post three additional crew members on the defendant vessel at his own cost, so as to ensure the upkeep and safety of the defendant vessel. These three crew members shall be in addition to the crew members already on board the defendant vessel. The learned advocate appearing on behalf of the owner of the defendant vessel, on instructions, stated that they have no objection to this course of action being adopted. In these circumstances, the successful bidder (M/s Rajnish Steels) is allowed to deploy three crew members on-board the defendant vessel to ensure its upkeep on its own costs. It is made clear that these three crew members, if not paid by the successful bidder, will not be entitled to claim any lien or make any claim against the sale proceeds of the defendant vessel. It is needless to clarify that any port charges that are incurred by the defendant vessel after issuance of the bill of sale, will be to the account of the successful bidder. The Valuation Report of M/s Ericson & Richards Surveyors Pvt. Ltd. shall be re-sealed and shall not be disclosed to any party without the order of the Court.

28. In short, therefore, on 22nd December 2020, the Court put Golden Pride and its owners to the proof of its statement and claim. It gave them an opportunity to make good on the assurance to deposit Rs. 1.15 crores as security for the release of the vessel and for vacating the arrest order. Given that Golden Pride and the Vessel Owners failed to produce that security, and, in fact, said that they could not arrange for any such bank guarantee, the Court proceeded with the auction sale.

29. Golden Pride and the Vessel Owners were represented at the time of this auction by counsel, assisting junior counsel/advocate on record. Not once did they (i) show the Gupte Report; or (ii) contend that Golden Pride could not be sold for scrap because she was a‘live’, i.e., sailing vessel. On the contrary, the Vessel Owners assented to Rajnish Steels putting more crew on board; and assented to the courtappointed Surveyor, Ericson & Richards, being paid.

30. Further, all the bids received were for they purchase of the Vessel only as scrap. Nobody put in a bid for the vessel as a sailing vessel. The Vessel Owners did not do so either. They put in no bid at all. They furnished no security. They said they could not.

31. Interestingly, the Gupte report also gives the scrap value of the vessel and, therefore, there is nothing in that report to indicate that the vessel could not be scrapped.

32. On 28th December 2020, a mere six days later, Rajnish Steels deposited the entire balance purchase price (it had already paid a substantial Earnest Money Deposit of Rs. 50 lakhs). Two days after that, the Office of the Deputy Sheriff of Mumbai issued a letter to the Prothonotary and Senior Master of this Court confirming that a Bill of Sale for the vessel should be released to Rajnish Steels.

33. Golden Pride filed Commercial Appeal (L) No. 10068 of 2020 against the order of sale dated 22nd December 2020. There is no doubt that the appeal was directed against the order in the Sheriff’s Report No. 69 of 2020. as also the order of the same date on Golden Pride’s Interim Application (L) No. 8874 of 2020. In ground (K) of the memo of appeal, Golden Pride said that although it did not have funds available at the time before the learned Single Judge, it now had the necessary funds. In ground (N), it relied on the 2018 Inmartech report and disputed the valuation obtained three years later from Ericson and Richards. In ground (O) it said that the vessel ought not to be sold as scrap. It still made no mention at all of the Gupte Report.

34. In the meantime, even while this appeal was pending disposal, Golden Pride filed a second Interim Application (L) No. 10127 of 2020 before the learned Single Judge. This is important because now, in paragraph 6, there was a specific ground taken about the life of the vessel, that it had a remaining life of seven years and should not be sold as scrap. But there was still no reference to the Gupte Report. No copy was annexed, and there was no reference to the Inmartech report either. In paragraph 8, Golden Pride said it was willing to make payment of Rs. 1.15 crores and actually had a demand draft ready in favour of the Prothonotary and Senior Master. Paragraph 6 of the Interim Application says:

6 That the Applicant states that as per ministry Surface Transport Guideline, Vessel like Defendant can Trade in Indian Territorial water up to 25 years. The Defendant vessel was built 2003. Therefore, the life remain in the Defendant Vessel was approximately 7 years. Therefore, the said vessel cannot be sold on the Scrap basis. Permitting the Defendant Vessel to The Applicant states that if the prospective buy purchase the Vessel for Trading purpose the value ought to be Rs. 7,OO,OO,0OO/_ (Rupees Seven Crores Only). The Applicant states that the scrapping vessels of the Defendant would amount to loss of national Revenue and also loss employment.

35. On 1st January 2021, Golden Pride moved its second Interim Application before the Vacation Bench promising to furnish security by 4th January 2021. The Vacation Bench declined to proceed with the second Interim Application in view of the pendency of Golden Pride’s appeal. The Court also noted the submission of Golden Pride’s Advocate that it was ready to pay the entire dues of the MPT with interest, on a without prejudice basis, before 4th January 2021, to show its bona fides. The relevant part of the order says:

4. Both learned counsels fairly point out that by a subsequent order dated 22 December 2020 sale of vessel has already been confirmed in favour of M/s. Rajnish Steels by this Court. Today M/s. Rajnish Steels who is the highest and successful bidder is not present before the Court. This order dated 22 December 2020 passed in Sheriff's Report No. 69 of 2020 is also challenged by the Applicant in Appeal (L) No. 1068 of 2020 before the Division Bench and the same has been posted for admission / hearing on 4 January 2021.

5. In view of the pendency of the Appeal, the present urgent Application cannot be heard.

6. Mr. Khobragade, learned counsel for the Applicant submits that he has instructions from the Applicant to withdraw the said Appeal and that he would do so on 4 January 2021, so that the present application can be pressed before this Court. It is therefore urged that the present matter be kept on 4 January 2021.

7. Mr. Khobragade, learned counsel for the Applicant submits that he shall give notice to M/s. Rajnish Steels to remain present on 4 January 2021 when the Applicant shall press the present Interim Application in terms of praecipe dated 31 December 2020. Mr. Khobragade shall also inform the Deputy Sheriff and give notice to remain present on 4 January 2021. Mr.Khobragade on instructions taken in Court further submits that the Applicant is ready and willing to pay the entire charges of Mumbai Port Trust along with interest, as applicable, without prejudice to its rights and contentions in order to show its bonafides before 4 January 2021.

8. Stand over to 4 January 2021 before the regular Court.

36. On 4th January 2021, the matter was placed before the regular Bench (the learned Single Judge). This was an order on Golden Pride’s second Interim Application. Golden Pride withdrew this Interim Application, and it did so unconditionally, without seeking any leave. It also made no deposit. It had also not withdrawn its appeal, as it had assured the Vacation Bench it would do. On 4th January 2021, the Court noted that since Rajnish Steels had paid the entire sale consideration, the Bill of Sale must be issued to the Applicant. Here is paragraph 1 of the 4th January 2021 order:

1 The above Interim Application is filed seeking to recall the order passed by this Court on 18th December, 2020 as well as two orders dated 22nd December, 2020, one in Interim, Application (L) No. 8874 of 2020 and the other in Sheriff’s Report No. 69 of 2020. After this matter was argued for some time, the learned advocate appearing on behalf of the applicant/owners of the defendant-vessel, on instructions of Mr. Khairol Jabbar, the Constituted Attorney of the applicant/owners of the defendantvessel, seeks leave to unconditionally withdraw the above Interim Application.

37. On 7th January 2021, the Defendant’s previous or earlier appeal (against the order of 22nd December 2020 on Sheriff’s Report No. 69 of 2020 confirming the sale in favour of Rajnish Steels) was taken up. Apparently, as reflected in paragraph 4, Golden Pride argued points never urged before the learned Single Judge. The Division Bench noted this and then noted the statement made by the Advocate for Golden Pride withdrawing the appeal with liberty to approach the learned Single Judge. Here is the relevant part of the order of 7th January 2021. Heard the learned Counsel for the parties.

2. The Appellant has impugned the order passed by the learned Single Judge on 22 December 2020 on a Sheriff’s report No.69 of 2020. By the impugned order, the Sheriff’s Report No.69 of 2020 has been disposed of and sale in favour of M/s. Rajnish Steels has been confirmed subject to certain conditions.

3. The learned Counsel for the Appellant sought to urge various grounds to demonstrate how the impugned order is incorrect.

4. We do not find any of these grounds reflected as having been urged before the learned Single Judge in the impugned order. The assumption therefore would be that the Petitioner-Appellant did not urge the same before the learned Single Judge. The learned Counsel for the Appellant submitted that though the arguments are not reflected in the impugned order, in fact the Report was contested by the Appellant and contentions were advanced and also a compilation was filed. It is settled that in case any argument is not reflected in the order, the remedy is to approach the same court which has passed the order.

5. The learned Counsel for the Appellant states that the Appellant will withdraw the Appeal and approach the learned Single Judge.

6. The Appeal is disposed of accordingly. The Interim Application is also disposed of.

38. Notably, this conduct of Golden Pride is directly contrary to Golden Pride’s statement to the Vacation Court where it had agreed to withdraw the appeal before pressing its second Interim Application before the learned single Judge. Instead, just six days later, it went about arguing that appeal fully on merits — only to later seek a withdrawal, but now with liberty to approach the learned Single Judge to argue the grounds that it had raised in appeal.

39. Yet, despite this liberty, Golden Pride and the Vessel Owners did no such thing. They never approached the learned single Judge.

40. On 8th January 2021, a Bill of Sale was issued to Rajnish Steels, which took possession.

41. By this time, the Defendant had already defaulted in payment of wages to certain crew (this is mentioned in the Plaint itself). Now some crew members filed caveats in this Court. Rajnish Steels paid port charges of Rs. 4,14,398/-, customs dues, insurance premium and shifted the vessel from MPT’s Princess and Victoria anchorage to a berth off Darukhana anchorage. By 14th January 2021, the Maharashtra Pollution Control Board confirmed that the MPT could issue permission for beaching the vessel at the recycling yard.

42. On 15th January 2021, Golden Pride filed yet another appeal, Commercial Appeal (L) No. 1559 of 2021. This now challenged the order of the learned Single Judge of 4th January 2021 (permitting the withdrawal of Golden Pride’s second Interim Application). I have asked for an ordinary copy of that appeal and there is no doubt about where the challenge is directed. From the very first ground onwards, there is a material misstatement of facts because Golden Pride failed to mention in this Appeal Memo that it had committed to the Vacation Court to withdraw the earlier appeal before pressing its second Interim Application on 4th January 2021. It could not, therefore, have cited the pendency of the earlier appeal as a ground to assail the 4th January 2021 order. Grounds (A) and (B), entirely incorrect to the knowledge of Golden Pride, read thus:

Judge ought not to have proceeded to direct the Prothonotary & Senior Master to forthwith issue the Bills of Lading [sic: should read Bill of Sale] in favour of M/s Rajnish Steels in terms of the earlier Order dated 22/12/2020 particularly when the Court was apprised that the Order dated 22/12/2020 was challenged before the Division Bench in Commercial Appeal (L) No 10068/2020 and the same is pending. It is submitted that the learned single Judge ought to have adjourned the matter by at least a few days for the outcome of the decision in Commercial Appeal (L) No 100068 of 2020 with Interim Application

(L) No 10072 of 2020.

(L) No 10068/2020 with Interim Application (L) No 10072 of 2020, the appellant withdrew the Interim Application seeking to recall the order passed by this Hon’ble Court on 18th December, 2020 and the two orders dated 22/12/2020, on in Interim Application (L) No. 8874 of 2020 and the other in the Sheriff’s Report No. 69/2020.

43. Conspicuous by its absence in these grounds is any mention of the order of 1st January 2021 that Golden Pride itself had obtained, agreeing to withdraw its previous appeal so that it could proceed with its second Interim Application on 4th January 2021. Golden Pride could never have cited the pendency of an appeal it had itself agreed to withdrew as a reason to assail the 4th January 2021 order. It could not, either, have now backtracked to suggest that it would press its pending appeal. In any case, effectively, this fresh appeal by the Golden Pride sought the same reliefs as the previous two Interim Applications and the previous appeal that it had filed and withdrawn with liberty to approach the learned single Judge.

44. On 21st January 2021, Golden Pride’s fresh Appeal No. 1559 of 2021 came up before a Division Bench. It was again argued for some time and then Senior Counsel for Golden Pride sought leave to withdraw that appeal with liberty to approach the learned Single Judge for a redressal of grievances. The Appeal was dismissed as withdrawn with that liberty reserved. After the Commercial Appeal is heard at some length, learned Counsel for the Appellant seeks leave to withdraw this Commercial Appeal and approach the learned Single Judge for redressal of his client’s grievance. The Commercial Appeal is dismissed as withdrawn with liberty as prayed.

45. Once again, just as in the earlier appeal, MV Golden Pride never approached the learned Single Judge. Common to both Appeals filed by Golden Pride is that both were withdrawn with liberty to approach the learned Single Judge. In both matters, Golden Pride never availed of that liberty.

46. In the meantime, Rajnish Steels paid additional customs duty, obtained A NOC from the Customs, paid MPT charges for ship breaking and sought beaching permission.

47. On 22nd January 2021, MV Golden Pride was beached at Plot LBS-06. This is a crucial date for what happened just three days later. In operational terms, this means that the vessel had now been dragged out of the water and on to dry land. This is not a dry-docking procedure as followed for repairs of vessels. This is a much rougher handling of vessels, because it is preparatory to its dismantling and being turned into scrap. The ‘beaching’ process would, as Mr Seth for Rajnish Steels tells me on instructions, have damaged the ship’s keel, rudder and possibly propellers.

48. Golden Pride filed a Special Leave Petition to the Supreme Court challenging the first Division Bench order in Golden Pride’s second Commercial Appeal (L) No. 10072 of 2020.

49. On 25th January 2021, the Supreme Court stayed the proceedings in relation to Golden Pride. In the Special Leave Petition, for the first time, Golden Pride annexed a copy of the Gupte Report to contend that the vessel was still ‘live’. But three days earlier, the vessel had already been beached on land on Rajnish Steels’ hired plot. There is nothing to show that the vessel was, after beaching, still ‘live’, i.e., a sailing vessel. The Supreme Court was not informed, it seems, of this.

50. Before the Supreme Court, Golden Pride offered to furnish security of Rs. 1.[5] crores. It did not do so, and the stay stood vacated as on 9th February 2021.

51. On 12th and 13th February 2021, Customs granted permission to destroy the wireless equipment on board the Vessel. The Customs Authorities proceeded to do so.

52. On 22nd February 2021, the Supreme Court allowed Golden Pride was allowed another week’s time to bring in the security deposit of Rs. 1.[5] crores. Since it did so, there came to be passed the order dated 12th March 2021 with which I began this judgment.

53. With this as the factual background, there are three distinct aspects before me today. There is, first, the matter of taking up the questions framed by the Supreme Court, and to which I will turn immediately next. Although paragraph 7 of the Supreme Court order of 12th March 2021 lists four questions, Dr Mahashabde for Golden Pride/the Vessel Owners, has addressed herself to only two. But there is also the question that necessarily arises of the equities claimed by Rajnish Steels in the detailed factual scenario that I have set out above. Tied to this, again as a matter of equity, will be a consideration of Golden Pride’s conduct.

54. I will first begin with the two points on which Dr Mahashabde addressed me based on the questions framed in the Supreme Court’s order.

55. Dr Mahashabde’s first submission is that the Suit itself is not maintainable at the instance of the agent because the amount was not due to the agent but was due to MPT. She also submits that an Admiralty Suit is also governed by the provisions of the Code of Civil Procedure 1908 and, therefore, if there is no cause of action that vests in GAC, it cannot sustain such a relief. I understand her submission on locus to mean simply that GAC is not aggrieved and therefore has no cause of action to maintain such an action. In other words, to sustain the suit against Golden Pride, in her submission, its agent GAC would have to have first discharged the liability it incurred on behalf of Golden Pride to MPT.

56. There is no doubt that there is an indebtedness by Golden Pride / its owners to MPT for unpaid port charges. There is no doubt that GAC sought anchorage from MPT not for itself but specifically for Golden Pride. There is no doubt that GAC has an operative and functional undertaking to MPT to pay those charges. The argument seems to be that the agent must first suffer the loss — that is, it must first pay off MPT — and only then can it bring suit in rem against the vessel.

57. This is a complete misreading of the cause of action in the plaint. The suit is laid on an indemnity, explicit or necessarily implied in the agency agreement. The submission is presumably based on Section 230 of the Contract Act, but is a complete misreading of that provision.

230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal In the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them. Presumption of contract to the contrary: Such a contract shall be presumed to exit in the following cases— (1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad; (2) Where agent does not disclose the name of his principal; (3) Where the principal, though disclosed, cannot be sued.

58. Mulla’s commentary on Section 230, 14th edition, tells us: Where an agent makes a contract, solely on his capacity as agent, between his principal and a third party, he is not liable to the third party on it. This is a general rule: an agent who negotiates a contract makes his principal a party to the transaction and himself drops out. As the agent has not purported to undertake personal contractual liability, he cannot incur such liability.

59. From this, it follows that Section 230 was a possible defence available to GAC if MPT attempted to sue it for unpaid port charges. But this section tells us that GAC cannot sue a third party to enforce a contract it made on behalf of its principal. GAC has not sued a third party; it has sued its principal.

60. The suit is actually within the frame of Section 222 of the Contract Act:

222. Agent to be indemnified against consequences of lawful acts The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him. Illustrations (a) B, at Singapore under instructions from A of Calcutta, contracts with C to deliver certain goods to him. A does not send the goods to B, and C sues B for breach of contract. B informs A of the suit, and A authorizes him to defend the suit. B defends the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses. (b) B, a broker at Calcutta, by the orders of A, a merchant there, contracts with C for the purchase of 10 casks of oil for

61. This will have to be read with Sections 124 and 125 of the Contract Act:

124. “Contract of indemnity” defined A contract by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity”. Illustration A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 200 rupees. This is a contract of indemnity.

125. Right of indemnity-holder when sued The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor— (1) all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies; (2) all costs which he may be compelled to pay in any such suit, if in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorized him to bring or defend the suit; (3) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make in the absence of any contract of indemnity, or if the promisor authorized him to compromise the suit.

62. Mulla’s commentary tells us that: The agent’s right of indemnity arises and becomes enforceable immediately on his incurring the liability, and it is in no manner depending upon his discharging the same.

63. This commentary references the decisions in Ganges Valley Bone Mills Co Ltd v Kali Nath Datta;4 Kodusao Onkarlal Firm v and Baksiram Rodmal Akola v Jasroop Shrinath Harda.[6]

64. A more recent decision, albeit unreported, is by VM Kanade J in Jakhau Salt Company Pvt Ltd v MV Dhanlakshmi.[7] This was a Notice of Motion by a defendant in an admiralty action to release the arrested vessel. There again there was an indemnity. In a collision, the ship in question was damaged. After reviewing considerable precedent, the learned single Judge held:

25. A common thread which runs through all these judgments is as to when such a suit on the breach of indemnity can be filed and it has been held that, though, under common law, a suit on the indemnity can be filed only after plaintiff suffers an actual loss, in equity, the person entitled to be indemnified, may enforce his right as soon as the liability to the third party arises and, therefore, he can obtain relief before he has actually suffered a loss. The gravamen of the argument made by the learned Counsel appearing on behalf of the defendants was that the actual loss which was likely to be suffered by the plaintiff was not quantified since the arbitration proceedings were pending in London and as long as the said loss was not quantified by the order passed in the arbitration 4 (1945) ILR 1 Cal 565. 5 AIR 1936 Nag 37. 6 AIR 1948 Nag 173. Here, a pucca adatia was held entitled to recover the amount of liabilities he had suffered while settling the deals carried out by him according to his principal’s instructions, irrespective of whether he had actually discharged those liabilities.

7 Notice of Motion No. 2112 of 2008 in Admiralty Suit No. 17 of 2008. proceedings, the plaintiff was not entitled to file a suit under the admiralty jurisdiction since the time had not become ripe and it was, therefore, premature to file the suit under the admiralty jurisdiction based on such a claim and, therefore, the liability had not become absolute.

26. I am afraid that this submission cannot be accepted. The judgments on which reliance is placed by the learned Counsel for the defendants do not support this submission. Perusal of the judgments clearly indicate that the party who is relying on the indemnity could very well file a suit even before it had actually suffered a loss. In the facts of the present case, the plaintiff had to give security and the proceedings were taken out in New York under Rule 9(h) of the Federal Rules of Civil Procedure and, thereafter, arbitration proceedings were initiated in London and a definite claim had been made. Therefore, even otherwise, it cannot be said that the claim was premature and had not been crystalised. The plaintiff has come to this Court with a specific case that in view of clause 16 of the charter party agreement, the defendants had clearly indemnified and promised to bear losses which would be caused as a result of damage caused by the ship of the defendants. The wording of clause 16, therefore, clearly indicates that the liability is absolute and unconditional and, therefore, the plaintiff was entitled to file a suit under the admiralty jurisdiction and seek an order for arrest of the ship. The submission of the learned Counsel appearing on behalf of the defendants that this Court does not have jurisdiction to entertain the claim of the plaintiff on indemnity and that an action in rem should not be invoked on a claim of indemnity also cannot be accepted.

65. Clauses (iv) and (vii) of the present agency agreement say: iv. All statutory payments to the port/customs/other authorities need to be funded in advance, to make the payments on your behalf. If payment not received in advance, a service charge of 5% will be charged on actuals. vii. Golden Star Middle East shall indemnify GAC Shipping (India) Pvt Ltd against all consequences of all lawful acts performed by GAC Shipping (India) Pvt Ltd in exercise of the authority conferred on GAC Shipping (India) Pvt Ltd.

66. Clause (vii) is an express indemnity entirely within the frame of the Jakhau Salt Company decision; one that is, in any case, entirely binding on me on its pronouncement of law, and which cannot be distinguished by merely saying the facts were different. On the law regarding enforcement of indemnities, the decision is fully binding. It is also completely consistent with the analysis we see in Mulla’s commentary.

67. The very finely worded pronouncement by MC Chagla J (as he then was) in Gajanan Moreshwar Parelkar v Moreshwar Madan Mantri[8] was: It is true that under the English common law no action could be maintained until actual loss had been incurred. It was very soon realized that an indemnity might be worth very little indeed if the indemnified could not enforce his indemnity till he had actually paid the loss. If a suit was filed against him, he had actually to wait till a judgment was pronounced, and it was only after he had satisfied the judgment that he could sue on his indemnity. It is clear that this might under certain circumstances throw an intolerable 8 (1942) 44 Bom LR 703: AIR 1942 Bom 302: 1942 SCC OnLine Bom 29. burden upon the indemnity-holder. He might not be in a position to satisfy the judgment and yet he could not avail himself of his indemnity till he had done so. Therefore the Court of equity stepped in and mitigated the rigour of the Common Law. The Court of equity held that if his liability had become absolute then he was entitled either to get the indemnifier to pay off the claim or to pay into Court sufficient money which would constitute a fund for paying off the claim whenever it was made. As a matter of fact, it has been conceded at the bar by Mr. Tendolkar that in England the plaintiff could have maintained a suit of the nature which he has filed here; but, as I have pointed out, Mr. Tendolkar contends that the law in this country is different. I have already held that ss. 124 and 125 of the Indian Contract Act are not exhaustive of the law of indemnity and that the Courts here would apply the same equitable principles that the Courts in England do. Therefore, if the indemnified has incurred a liability and that liability is absolute, he is entitled to call upon the indemnifier to save him from that liability and to pay it off.

68. The Moreshwar decision has been consistently followed by this Court. See: Khetarpal Amamath v Madhukar Pictures (DB);9 Gujarat Urja Vikas Nigam Ltd & Ors vTata Motors Ltd,10 and Welspun Infratech Ltd v Ashok Khurana & Ors.11 Moreshwar and Khetarpal were both followed by Kanade J in Jakhau Salt Company. 9 AIR 1956 Bom 106: 1955 SCC OnLine 73, Gajendragadkar & Gokhale JJ, per Gajendragadkar J, expressly affirming the Moreshwar decision, paras 25–27. 10 2013 SCC OnLine Bom 818, per RD Dhanuka J. 11 (2014) 3 Bom CR 62: 2014 SCC OnLine Bom 39, per RD Dhanuka J.

69. As the Division Bench in Khetarpal Amamath put it:12

27. With respect, we agree with the view thus expressed by Chagla J. In our opinion, in dealing with the rights and obligations flowing from a contract of indemnity, the Court must always ask itself whether the indemnified party has incurred a liability, and if it shown that liability has been incurred and is absolute, then he has a cause of action to call upon the indemnifier to save him from that liability and to meet that obligation.

70. All these decisions bind me.

71. An agent is entitled to an indemnity, and, in fact, Dr Mahashabde draws attention to an email communication from GAC which has a standard form clause at the bottom speaking precisely of such a damnification. All that this says that the principal is bound by all acts of agent done in the course of the agency. That is the general law of contract anyway, and I do not see how it helps Mrs Mahashabde in the least. If a principal’s agent has thus incurred a liability, and the principal refuses to discharge it, I do not see why a claim cannot be made.

72. This puts an end to the argument that GAC has ‘no locus’ because it has not actually discharged the liability to MPT. Dr Mahashabde cannot show me any binding authority that says that such a claim for indemnity cannot be sustained unless and until the

12 Paragraph 27. person seeking indemnity has discharged the liability. The very considerable weight of judicial learning is entirely to the contrary.

73. The second level argument is that GAC has no locus because it has not even incurred the liability to MPT. That is also factually incorrect, simply because, as an agent operating in MPT’s command area, GAC has a subsisting undertaking to MPT which can be enforced against GAC for all liabilities to MPT. Factually, the liability is incurred. MPT has raised its invoices.

74. Mrs Mahashabde agrees that the very same action at the instance of MPT is perfectly maintainable. But this is a complete answer to her first point. MPT is a party before the Court, and this has been done at Golden Pride’s instance on an Interim Application that it filed. If MPT is simply transposed as a party-plaintiff, then whether or not GAC is correspondingly transposed as the 2nd defendant will make no difference; the suit will be maintainable.

75. There is no reason to accept the argument that GAC has no locus to file an Admiralty Suit. The liability that GAC incurred is on Golden Pride’s behalf and it is a liability to a Port Trust. Golden Pride cannot avoid its liability acting in this fashion. There is also no question of GAC ever being only a ‘purported’ agent. Nobody has once denied the agency or suggested that GAC acted on its own when requesting anchorage without being requested to do so by its principal, Golden Pride.

76. The next submission by Dr Mahashabde is that a claim like this by Golden Pride’s agent does not constitute a‘maritime claim’within the meaning of Section 4 of the Admiralty Act. Specifically, it does not fall within Sections 4(1)(n) or 4(1)(p) of the Admiralty Act. I fail to see why not. Section 4(1)(n) clearly speaks of ‘dues in connection with any port’. The fact that Golden Pride may be disputing the MPT charges is immaterial. Apart from Rs.10,000, nothing has been paid. MPT charges are port charges and fall entirely within Section 4(1)(n). And here, Golden Pride is hoist by its own petard. If it insists that GAC must first pay off MPT, then the claim would fall within 4(1)(p) — disbursements incurred on behalf of the vessel or its owners. Either way, the claim is emphatically a maritime claim.

77. Dr Mahashabde relies on Section 6 of the Admiralty Act to say that the claim made by GAC should have been treated as a claim in personam, presumably meaning that the agent would have to file a civil suit against the Defendant and not move in an action in rem as set out in Section 5. The submission is also wholly misconceived. Section 6 allows discretion to the Court — it uses the word ‘may’ — to arrest a vessel in personam. There is no requirement that it should do so. I do not see, in any case, what possible difference this could make to the ultimate outcome of arrest and subsequent actions. Section 6 says: Section 6. Admiralty jurisdiction in personam. Subject to section 7, the High Court may exercise admiralty jurisdiction by action in personam in respect of any maritime claim referred to in clauses (a) to (w) of sub-section (1) of section 4.

78. There is no need to read “may” as “shall”. The Admiralty Court is not bound to exercise an in personam jurisdiction. Dr Mahashabde did not elaborate on this submission further, and there is, therefore, no need for a longer discussion.

79. Then Dr Mahashabde submits that only MPT could maintain such an action in rem in admiralty for arrest of the vessel. MPT has no need to move for arrest for recovery of its port charges. It has power inter alia under Section 64 of the Major Port Trusts Act to effect a distraint of the vessel for recovery of its dues; and if these remain unpaid, to cause the vessel to be sold.

64. Recovery of rates and charges by distraint of vessel.—(1) If the master of any vessel in respect of which any rates or penalties are payable under this Act, or under any regulations or orders made in pursuance thereof, refuses or neglects to pay the same or any part thereof on demand, the Board may distrain or arrest such vessel and the tackle, apparel and furniture belonging thereto, or any part thereof, and detain the same until the amount so due to the Board, together with such further amount as may accrue for any period during which the vessel is under distraint or arrest, is paid. (2) In case any part of the said rates or penalties, or of the cost of the distress or arrest, or of the keeping of the same, remains unpaid for the space of five days next after any such distress or arrest has been so made, the Board may cause the vessel or other things so distrained or arrested to be sold, and, with the proceeds of such sale, shall satisfy such rates or penalties and costs, including the costs

80. Indeed, the argument is very strange, because on the one hand Golden Pride refuses to pay MPT, but it also refuses to pay its agent so that it can pay off MPT. In short, the owners of Golden Pride believe their vessel can continue to remain in anchorage almost indefinitely without making any payment to any one at all. They treat MPT as some sort of lay-up safe-haven area, with anchorage provided free of cost.

81. The second question to which Dr Mahashabde addressed herself is whether MV Golden Pride is a ‘live’ vessel and entitled to be evaluated accordingly? The answer, shortly stated, is no. Today, as things stand, the vessel is not seaworthy. The very process of beaching (and of allowing it to happen) is now irreversible. The blame for much of this — and perhaps even all of it — is to be laid at the Golden Pride’s door. From the time of the order of arrest of 24th August 2020, the one option that was always available to the owners of Golden Pride was to furnish security and release the vessel from arrest or show good cause why it should be released without security Until March 2021, before the Supreme Court, the owners repeatedly promised security, then expressed inability, cited the pandemic, but, at the end of the day, furnished no security at all until it was far too late. By the time they actually furnished security, the vessel was already beached; and, in that process, sufficiently disfigured to make it no longer a sailing vessel. Indeed, this happened before the very first order of the Supreme Court on 25th January 2021. This, therefore, militates against the owners even being entitled to argue that the vessel is today live.

82. Further, as noted above, at the time of the auction sale on 22nd December 2020, Golden Pride and its owners represented by an advocate and a Constituted Attorney. They failed to bid or furnish security to release the vessel. Instead, they actually assented to (i) Rajnish Steels putting three additional crew members on board, thus accepting the sale in favour of Rajnish Steels; and (ii) agreed that the report of Ericson & Richards, called for by the Court, could be paid off, thus accepting the valuation. Golden Pride must, therefore, by its conduct be deemed to have accepted the sale and the valuation, and cannot now question either. There is a form of estoppel in pais that will operate against Golden Pride.

83. The second ground to reject the argument is that no material was shown to the Courts between 24th August 2020 and the time of the SLP before the Supreme Court in January 2021 that the vessel was, in fact, seaworthy. The Gupte Report of 12th December 2020 was never disclosed in the Bombay High Court at all until the present Interim Application. It first found mention in the SLP before the Supreme Court. The Inmartech report is of March 2018 and, therefore, in 2021 of limited value.

84. In any case, I will turn to the Gupte Report, this being the most recent report. The report states the capacity, mentions the machinery and various equipment on board, and concludes on 12th December 2020, that it was structurally sound and in satisfactory condition for usage for off-shore duties. The opinion expressed on the present value of MV Golden Pride gave a new construction cost and then a scrap value along with a residual life. The true market value was assessed at Rs. 14,80,27,500/-. If Golden Pride had all this material with it, why it did not produce this before the sale was confirmed in favour of Rajnish Steels is a question that only Golden Pride and its owners can answer; and it is a question that they have routinely failed to answer at all.

85. Second, the fact that any object has an extendable life, whether a car or boat or an aeroplane, does not mean that it cannot be turned into scrap as well. The two are not inconsistent positions. and there is no law that says that perfectly good sailing vessel cannot be sold as scrap. One overriding factor would be whether there was a single bid received for the vessel as a sailing vessel. The bids that were received before the Hon’ble Mr Justice BP Colabawalla did not indicate that a single one was on the basis that Golden Pride was a sailing vessel. All the bids, I am told, were for scrap. But even if there was a bid for the vessel as a sailing vessel, it would have to be a higher bid than Rajnish Steels offered for her in scrap. There is certainly no such bid. More importantly, the owners’ representatives were present at the time of the auction bid and did nothing at all to put in a counter-bid or to outbid Rajnish Steels. Instead, as I have noted, they assented — or must be deemed to have assented — to the sale, and to the Ericson & Richards valuation report as well. This tells us that, at stage after stage, the owners of Golden Pride had the opportunity to release the vessel, obviously on payment of some amount, to hold off the sale by making a deposit or making a bid, but did nothing of the kind until, faced with a dismissal of their stay application in the Supreme Court, they had no choice to deposit Rs. 1.15 crores.

86. I asked Dr Mahashabde to show me a single binding decision that under no circumstances and in no situation would a suit lie by an agent against the principal. When she sought time, I made it clear that I would give her as much time as she required provided the claims of the MPT, other creditors (including crew), GAC and possibly even Rajnish Steels were both fully secured. On taking instructions after having the matter kept back briefly she once again confirmed that her clients even now do not have any funds or the wherewithal to make any deposit at all to secure any claim.

87. The long and short of this is that, time and again, Courts have been told that the owners of MV Golden Pride have no funds. There are already claims of seaman’s wages and some crew members have filed caveats in this Court against the release of the vessel.

88. The Supreme Court order of 12th March 2021 lists two other points. I believe point (c) on whether it could be sold at scrap value has been addressed as part of question (b), or as the opposite side of the same point, i.e. whether the vessel is ‘live’, i.e., a sailing vessel.

89. As to the question of valuation, there is nothing shown by Dr Mahashabde except the Gupte Report, which I have already addressed. There is no material whatsoever either the readiness to show of a gross undervaluation. The valuation accepted by the Hon’ble Mr Justice BP Colabawalla was after considering a report of a very recently Court-appointed valuer, Ericson & Richards. Merely because the Vessel Owners, who refused to put in a single penny when repeatedly asked to do so, say it is undervaluation does not make it so. The Vessel Owners agreed that Ericson & Richards could be paid off; thus accepting the report. The order to which I have referred clearly shows that not only were five competing bids received, but that these were the only while bids received, and all were for scrap. An attempt was made in Court to improve those bids and the bid of Rajnish Steels was ultimately found to be the highest. At no point in that auction sale did the Vessel Owners make their own bid, protest that the vessel was ‘live’, or complain of any undervaluation.

90. The conduct of the Golden Pride and the Vessel Owners merits the strongest possible censure. I do not see how, for instance, they could have told the Division Bench on 21st January 2021 that an appeal was pending and the learned single Judge ought not to have proceeded on 4th January 2021, when, on 1st January 2021, they had themselves assured another learned single Judge sitting in the Vacation Court that the very appeal would be withdrawn. I do not see how they could have even pressed the appeal. Repeatedly, they assured payment; repeatedly, they reneged. They did not, evidently, inform the Supreme Court on 25th January 2021 that, three days earlier, the vessel had been beached, was on dry land, and the process would undoubtedly have rendered her no longer a ‘live’ or sailing vessel. At every stage, the conduct of Golden Pride has been duplicitous and less than candid. Court after court has been sought to be actively misled.

91. In my view, there is absolutely no case made out by the 1st Defendant for the grant of any relief whatsoever. There is no equity on its side. There is no prima facie case, and no question of balance of convenience or irreparable prejudice arises. The 1st Defendant’s Interim Application (L) No. 8290 of 2021 is dismissed.

92. Rajnish Steels’ Interim Application (L) No. 7724 of 2021 is allowed. The sale in favour of Rajnish Steels is re-confirmed.

93. The MPT will process Rajnish Steel’s application for hot work and cutting of the 1st Defendant vessel in accordance with its usual practises and protocols at the earliest.

94. As to the right of Rajnish Steels to claim any reimbursement from the amount deposited by the 1st Defendant in the Supreme Court, I am presently leaving all contentions open for an appropriate application before this Court, for I believe the amount deposited in the Supreme Court is now being transmitted to this Court.

95. There is also the question of the claim of the Port Trust to receive the requisite part of the security. Now obviously the claim of the Port Trust must first be met out of the deposit of Rs. 1.50 crores. Dr Mahashabde’s submission that the amount of Rs. 1.50 crores should be returned to Vessel Owners is rejected. That simply cannot be, in the facts and circumstances of the case. There are now additional claims, all in rem, including caveats by crew against release of the vessel on the ground of unpaid dues. It is only if Golden Pride and its owners can show that all claims have been met and nothing remains payable from the deposit of Rs.1.[5] crores that such an application will lie, and only for the balance, if any. The alternative is inconceivable: that in the context of an in rem order of arrest, other claimants/creditors will forever remain unpaid. The deposit is security, not a competing purchase price, and it is security to meet the claim of GAC and now all other claims. These would include, as currently advised, the claim of MPT, the agency charges of GAC, other claims such as those from crew, and possibly claims by Rajnish Steels.

96. The deposit of Rs. 1.[5] crores made by the Vessel Owners in the Supreme Court is being transmitted to this Court. It is presently to be retained by the Prothonotary and Senior Master along with the sale proceeds deposited by Rajnish Steels. The purchase price paid by Rajnish Steels and lying with this Court, and the deposit by the Vessel Owners will first be used to pay off all MPT dues, now in the region of Rs. 1.30 crores. The remainder will be held to the credit of the suit to meet GAC’s remain claim for its charges, and to meet the claims of other creditors on an inter se priority yet to be decided. The surplus, if any, will only thereafter be returned to Vessel Owners.

97. The MPT will be entitled to withdraw an amount of Rs. 1,31,27,146/- from the amount in the hands of the Prothonotary and Senior Master in full and final satisfaction of its claim. This is the figure given to me by Mr Fernandes appearing on behalf of the MPT. The balance funds are to be retained by the Prothonotary and Senior Master and are to be invested in accordance with the usual practices of his office until further directions.

98. The usual procedure of issuing a notice regarding claims and assessing their priority will now start. The Sheriff will make a report as to claims received after issuing an advertisement inviting claims. The costs of the advertisement will be defrayed from the funds available. The Sheriff is to place a report once the process of inviting further claims is undertaken and proceeds.

99. On the Interim Application filed by the 1st Defendant, MV Golden Pride, since it has been dismissed and since this is a matter in the Commercial Division of this Court, an order of costs will have to be made under amended Section 35 of the Code of Civil Procedure,

1908. I will, for economy, combine the order of costs in both Interim Applications that are before me.

100. There will thus be an order of costs against the 1st Defendant and in favour of (i) Rajnish Steels in the amount of Rs. 1 lakh; and (ii) GAC Shipping in the amount of Rs. 50,000/-. These costs are to be paid within two weeks from today. If not paid within two weeks, both Rajnish Steels and GAC Shipping will be at liberty to withdraw the respective amount of costs from the amount deposited with the Prothonotary and Senior Master.

101. Both Interim Applications are disposed of accordingly.

102. This order will be copy of this order. (G. S. PATEL, J)