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1994 Supreme(Bom) 370
IN THE HIGH COURT OF BOMBAY
Agarwal Ashok, J.
State Bank of India .... Plaintiffs.
Versus
Official Liquidator others .... Defendants.
Notice of Motion No. 2630 of 1991 in Suit No. 1446 of 1986, decided on 27-7-1994.
Advocates appeared :
V.V. Tulzapurkar i/b Crawford Policy Bayley Co., for plaintiffs.
Umesh Shetty, for defendant No. 1
Mrs. K.V. Gautam, Official Liquidator present.
Important Points
Subject
Maritime Law - Wreck and Salvage
Act Referred
Headnote
MERCHANT SHIPPING ACT - SALE OF WRECK - SECTIONS 398, 399 - RIGHTS OF MORTGAGEE - LIMITATION - SECTION 120 OF MAJOR PORT TRUSTS ACT - APPLICABILITY - DELAY AND LACHES - EQUITY.
Fact of the Case:
The plaintiff, State Bank of India, filed a suit to recover dues from the defendant company, Universal Shipping Co. Pvt. Ltd., which had mortgaged its vessel, m.v. Unilaxmi, to the plaintiff as security. The vessel was abandoned by its crew and sank, turning into a wreck. The defendant, Board of Trustees of the Port of Tuticorin, sold the wreck and held the balance of the sale proceeds after deducting its costs and charges.
Finding of the Court:
The court held that the provisions of section 399 of the Merchant Shipping Act, 1958, which deal with the rights of the owner of a wreck, do not apply to a mortgagee. The court further held that the provisions of section 120 of the Major Port Trusts Act, 1963, which provide a limitation period for suits against a Board or its members or employees, do not apply to the present claim, as it was not filed for anything done or purported to have been done in pursuance of the Act.
Issues: 1. Whether the provisions of section 399 of the Merchant Shipping Act, 1958, which deal with the rights of the owner of a wreck, apply to a mortgagee? 2. Whether the provisions of section 120 of the Major Port Trusts Act, 1963, which provide a limitation period for suits against a Board or its members or employees, apply to the present claim?
Ratio Decidendi: 1. Section 398 of the Merchant Shipping Act, 1958, provides that the proceeds of the sale of a wreck shall be held by the receiver for the same purpose and subject to the same claims, rights and liabilities as if the wreck had remained unsold. This provision is intended to cover the rights of persons other than the owner of the wreck, such as mortgagees. 2. Section 120 of the Major Port Trusts Act, 1963, provides a limitation period for suits against a Board or its members or employees for anything done or purported to have been done in pursuance of the Act. The present claim is not for anything done or purported to have been done in pursuance of the Act, and therefore section 120 does not apply.
Final Decision: The court ordered the defendant to deposit the balance of the sale proceeds of the wreck in court within eight weeks. The amount was to be invested in a nationalized bank for a period of three years and renewed for further periods of three years each until the disposal of the suit. The costs of the notice of motion were to abide by the costs of the suit.
2. The plaintiffs is State Bank of India which has filed the present suit to recover from the defendants a sum of Rs. 2,78,35,092.57 on account of certain facilities offered by the plaintiff to the 1st defendant Universal Shipping Co. Pvt. Ltd. which has since gone in liquidation and the Official Liquidator has been impleaded as defendant No. 1. The defendants Nos. 2 to 7 are guarantors who are not concerned with the reliefs claimed in the present notice of motion. The respondent is the Board of Trustees of the Port of Tuticorin who is the contesting party to the present claim.
3. Towards the facilities offered by the plaintiff-bank to the 1st defendant-company which is now in liquidation, the company had offered the vessel m. v. Unilaxmi as security. The vessel was mortgaged by the company in favour of the plaintiff.
4. On the 5th November, 1985 the said vessel m.v. Unilaxmi was abandoned. As a consequence, the said vessel on 18-11-1985 sank and was turned into a wreck. Since the vessel had been insured, the plaintiffs raised a claim against the Insurance company. The Insurance company denied its liability and hence the plaintiff has filed a suit against the Insurance company and the suit is pending.
5. The plaintiff on the 7th April, 1986 has filed the present suit for recovery of the aforestated amount against the 1st defendant company being the principal borrower and the other defendants being the guarantors. On the 2nd December, 1988, the respondents sold the wreck. The details of the sale are mentioned by the respondents in its affidavit in reply in the following terms.
“I say that the said wreck was sold for Rs. 4.20 lacs against which the sums of Rs. 1,82,160.00 and Rs. 12,817/- and Rs. 42,000/- ……………, have been appropriated towards the Marine department and Port charges, Mechanical Engineers Charges and sales tax dues aggregating to Rs. 2,36,977.00 leaving a balance of Rs. 1,83,023/- ………….”
By notice dated 26-10-1990 the plaintiff called upon the respondents to pay over the balance of the sale proceeds lying with it after deducting all its costs, charges and expenses. Since there was no response, the plaintiff sent a reminder on 2-12-1990. The plaintiff thereafter on 27-11-1991 has taken out the present notice of motion for various reliefs against the respondents. Prayer Clause (b) which has been pressed by the plaintiff in the present notice of motion is as under:
“(b) The respondents be ordered and directed to deposit the sale proceeds lying in their hands in this Hon'ble Court to the credit of the above suit for the plaintiff's benefit;”
Since the other prayers are not pressed into service, it is not necessary to refer to them.
6. It is undisputed that the vessel m.v. Unilaxmi formed a security on the basis of which the plaintiff advanced facilities to the 1st defendant company. It is further not disputed that the crew of the vessel had abandoned the vessel, that the vessel sank and was turned into a wreck. The respondents being the Port Trust being the receiver of the wreck has sold the wreck and is now in possession of Rs. 1,83,023/- being the surplus amount after meeting all costs, charges and expenses. The question which has been agitated before me is whether the plaintiff can lay its claim over the said amount towards the discharge of the suit claim. The claim of the plaintiff is opposed by the respondent on the ground that the said amount is held by it for the benefit and to the credit of the Central Government. Reliance is placed on the provisions of section 399(1) and (3) of the Merchant Shipping Act, 1958. It is further contended that the claim raised by the plaintiff is barred by the Law of Limi
