Angre Port Private Limited (the plaintiff) sought a summary judgment through an interim application (the interim application)(1) in a commercial admiralty suit before the Bombay High Court (the suit)(2) under Order XIII-A read with Order XII Rule 6 of the Code of Civil Procedure against TAG 15(3) (the defendant vessel). The suit was filed to recover, among other things, port charges and berth hire charges, aggregating to a sum of 93,719,098 Indian rupees along with 18% interest plus poundage (the claim amount). The Court passed an order on 3 January 2022 in favour of the plaintiff.
On 13 February 2019, the defendant vessel entered the Angre Port to occupy the berth space. The plaintiff supplied the tariff booklet to the defendant vessel. Accordingly, the plaintiff raised invoices. On 4 March 2019, the owners of the defendant vessel, Tag Offshore Ltd (Tag Offshore), received an order of arrest from a secured creditor. Due to the arrest, the defendant vessel incurred berth and port charges as it was occupying a berth at the Angre Port. On 24 April 2019, the National Company Law Tribunal, Mumbai (NCLT) passed an order to initiate the corporate insolvency resolution process (CIRP) of Tag Offshore under the Insolvency and Bankruptcy Code 2016 (IBC). Mr Sudip Bhattacharya was appointed as the resolution professional by the committee of creditors of Tag Offshore.
Around 16 June 2019, on account of strong winds and currents brought by the monsoon, the defendant vessel drifted away, causing serious hazard and danger to life and property. The plaintiff salvaged the defendant vessel to bring it back to safe harbour and raised an invoice for such action. Subsequently, on 26 September 2019, the NCLT ordered the liquidation of Tag Offshore and appointed Bhattacharya as the liquidator. As the plaintiff's claim remained unpaid, on 20 January 2020 it filed a suit by invoking admiralty jurisdiction against the defendant vessel for the claim amount. On the same date, the Court also ordered the arrest of the defendant vessel. On 28 January 2020, Bhattacharya filed an application in the suit to modify and recall the order of arrest. He stated that if the defendant vessel was not sold, its value would diminish and it would incur various charges. In the order dated 29 January 2020, the Court joined the owners, Tag Offshore, and permitted Bhattacharya, as the liquidator of Tag Offshore, to sell the defendant vessel. However, Bhattacharya was unable to sell the defendant vessel.
On 9 March 2020, an order was passed where Tag Offshore's undertaking was recorded. It stated that all the costs and expenses incurred by the plaintiff should be treated as a liquidation or CIRP cost as contemplated under section 53(1)(a) of the IBC 2016. The berth and port charges were accepted; however, with respect to the salvage charges, Tag Offshore stated that these should be treated as a liquidation or CIRP cost subject to scrutiny. On 9 July 2020, the Court directed the sale of the defendant vessel. Subsequently, after obtaining the bids, the Court confirmed the sale of the defendant vessel for consideration of 107,500,000 Indian rupees in favour of JT Marine Services Pvt Ltd, which was the highest bidder. However, even after receipt of the monies, Bhattacharya did not make a payment to the plaintiff. In light of this, the plaintiff filed an interim application by seeking a judgment and decree in favour of the plaintiff and against the sale proceeds of the defendant vessel in the sum of 93,719,098 Indian rupees and 18% interest from 18 December 2020 till payment and/or realisation.
Counsel for the plaintiff submitted the following:
- The plaintiff had been raising invoices on the defendant vessel from time to time and, though there was no dispute, no payment had been made by Tag Offshore.
- Even in the order dated 9 March 2020, Tag Offshore's statement recorded that the berth and port charges of the plaintiff were not disputed and the salvage value would be treated as a liquidation cost after scrutiny.
Counsel for Tag Offshore objected to the interim application by making the following submissions:
- In light of the bar contained in section 33(5) of the IBC 2016 (ie, a moratorium during the liquidation process), the suit was not maintainable.
- As the plaintiff had already filed its claim before the liquidator, the plaintiff could not prosecute the suit as both arose from the same cause of action and thus it was barred by the principle of res judicata.
- In terms of section 74 of the Contract Act 1872, the plaintiff was required to prove the actual loss for which reasonable compensation could be claimed and thus the plaintiff was not entitled to penal berth charges, which were by nature a penalty.
- The claim towards salvage charges was adjudicated and rejected by Tag Offshore and thus could not be challenged under the suit without challenging the adjudication under the IBC 2016.
The Court relied on the judgment passed in the case of Raj Shipping Agencies v Barge Madhwa & Anr,(4) where the court had opined that the bar of moratorium under section 33(5) of the IBC 2016 applies to a suit in personam – that is, against the corporate debtor itself. In the present case, the suit had been filed against action in rem – that is, against the defendant vessel. The Court observed that the defendant vessel was a distinct juridical entity and the rights in rem given to a maritime claimant under the Admiralty Act would be defeated by not permitting the action in rem and the arrest of the vessel. Further, by arrest of the vessel, the plaintiff would become a secured creditor to the extent of the value of the defendant vessel and not a secured creditor of Tag Offshore's other assets. In light of this, the Court rejected the objection of maintainability raised by Tag Offshore under the bar of section 33(5) of the IBC Code 2016.
In relation to the objection raised on the principle of res judicata, the Court observed that Tag Offshore only adjudicated the claim of the plaintiff pertaining to one invoice for the period 24 April 2019 to 26 September 2019. However, the claim with reference to other periods was neither submitted nor adjudicated by Tag Offshore. Further, the claim made in the suit was only against the sale proceeds of the defendant vessel, which continued to be an action in rem. Thus, this should not be hit by the principle of res judicata.
In relation to the penal charges, the Court observed that the defendant vessel had contractually agreed to pay the additional charges that fell under the scope of penal berth hire charges and that these could not be categorised as a penalty as they were nothing but additional charges in the event that the contingencies as laid down in the contract were triggered. Further, Tag Offshore had accepted these amounts by undertaking that there were no disputes in relation to berth charges, which included the penal charges. Thus, the Court rejected this argument as no distinction could be carved out between berth charges and penal berth hire charges.
The Court observed that the claim in relation to the salvage operation was not supported with enough documents to prove it and had no correlation with the salvage report. Thus, the Court rejected the salvage claim under the provision of Order XIII-A and directed the plaintiff to prove it at the time of the trial.
In light of the above, the Court passed a judgment and decree in favour of the plaintiff against the sale proceeds of the defendant vessel to the sum of 55,100,016 Indian rupees out of the total claim of 93,719,098 Indian rupees.
For further information on this topic please contact Nihal Shaikh or Dev Motta at Clasis Law by telephone (+91 11 4213 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at www.clasislaw.com.
(1) Interim application (L) No. 112 of 2021
(2) Commercial admiralty suit (L) No. 4 of 2020.