2018 Supreme(Bom) 1287

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. GUPTE, J.
m.v. Tongli Yantai and Anr. - Plaintiffs
Versus
Great Pacific Navigation (Holdings) Corporation Ltd. - Defendant
Notice of Motion No. 2202 of 2015 In Counter Claim No. 19 of 2012 In Admiralty Suit No. 3 of 2011 With Notice of Motion No. 1770 of 2015 In Admiralty Suit No. 66 of 2015
Decided On : 17-09-2018

Headnote:

The Court held that the arrest of a ship is a seizure of property and not an injunction. The limitation period for a suit for compensation for wrongful arrest is one year from the date of the arrest, as provided under Article 80 of the Limitation Act, 1963. The Court further held that the undertaking given by the plaintiff in an admiralty suit to compensate any party who may have sustained prejudice by the order of arrest is a means for the court to do complete justice between the parties and is not a separate cause of action. Therefore, a suit to enforce the undertaking must be filed within the limitation period prescribed for a suit for compensation for wrongful arrest.

Fact of the Case:

The Plaintiff filed an admiralty suit against the Defendant vessel for damages for wrongful arrest. The Defendant vessel was arrested in the present admiralty suit by an order passed by the Court on 9/10 December 2010. A notice of motion was, thereupon, taken out by one Halcyon Ocean Shipping Ltd. ("Halcyon"), who claim to be registered owners of the Defendant vessel, to vacate the order of arrest and claim damages for wrongful arrest. By an order dated 12 July 2011, the Court vacated the order of arrest, but granted liberty to Halcyon to pursue its claim for damages by a separate application. The order of release of the vessel was challenged by the Plaintiff in an appeal (Appeal No.559 of 2011). A notice of motion was taken out by Halcyon in that appeal (Notice of Notion No.2429 of 2011), seeking security for damages for wrongful arrest. By an order dated 14 October 2011, the Division Bench allowed the appeal and reinstated the order of arrest. A review petition filed in respect of the appellate order was dismissed by the Division Bench. A special leave petition filed by Halcyon from that order was disposed of by the Supreme Court. In the meantime, another notice of motion was filed by Halcyon (Notice of Motion No.1439 of 2012) seeking damages for wrongful arrest in the sum of USD 9.3 Million (approx.) This motion was filed in pursuance of the liberty reserved by the Court in its order dated 12 July 2011. On or about 22 June 2012, in pursuance of a settlement agreement between the Plaintiff and the beneficial owner of the vessel, the vessel was ordered to be released by the Court. The notice of motion seeking damages/release order filed by Halcyon (Notice of Motion No.1439 of 2011) was ordered to be kept for hearing on the next date. On 13 July 2012, a counter claim was filed by Halcyon in Admiralty Suit No.3 of 2011 (Counter Claim No.19 of 2012), seeking damages in the sum of USD 13.282 Million (approx.) for wrongful arrest against the Plaintiff. It is the case of Halcyon that this counter claim was also filed in pursuance of the liberty granted by the Court in its order dated 12 July 2011. The notice of motion was, thereafter, heard by the Court. During the course of the hearing, Halcyon offered to withdraw the notice of motion and instead pursue its counter-claim in the admiralty suit. By an order dated 3 September 2014, the Court permitted Halcyon to do so upon payment of costs. On 19 June 2015, Eastshine Ltd. ("Eastshine") filed the companion admiralty suit, namely, Admiralty Suit No.66 of 2015, against the Plaintiff in Admiralty Suit No.3 of 2011 for damages for wrongful arrest of the Defendant vessel. This suit was filed by Eastshine in its capacity as the demise charterer of the Defendant vessel.

Finding of the Court:

The Court held that the arrest of a ship is a seizure of property and not an injunction. The limitation period for a suit for compensation for wrongful arrest is one year from the date of the arrest, as provided under Article 80 of the Limitation Act, 1963. The Court further held that the undertaking given by the plaintiff in an admiralty suit to compensate any party who may have sustained prejudice by the order of arrest is a means for the court to do complete justice between the parties and is not a separate cause of action. Therefore, a suit to enforce the undertaking must be filed within the limitation period prescribed for a suit for compensation for wrongful arrest.

Issues: 1. Whether the arrest of a ship is a seizure of property or an injunction? 2. What is the limitation period for a suit for compensation for wrongful arrest? 3. Whether the undertaking given by the plaintiff in an admiralty suit to compensate any party who may have sustained prejudice by the order of arrest is a separate cause of action?

Ratio Decidendi: 1. The Court held that the arrest of a ship is a seizure of property and not an injunction. The Court relied on the definition of "arrest" under the Arrest Convention of 1999, which defines arrest as "any detention or restriction on removal of a ship by order of a Court to secure a maritime claim but does not include the seizure of a ship in execution or satisfaction of a judgment or other enforceable instrument." The Court also relied on the decision of the House of Lords in The Arantzazu Mendi, which held that the arrest of a ship does not pass possession of the ship from the owner to the Marshal of the Court, but only custody. 2. The Court held that the limitation period for a suit for compensation for wrongful arrest is one year from the date of the arrest. The Court relied on Article 80 of the Limitation Act, 1963, which provides that a suit for compensation for wrongful seizure of movable property under legal process must be filed within one year from the date of the seizure. 3. The Court held that the undertaking given by the plaintiff in an admiralty suit to compensate any party who may have sustained prejudice by the order of arrest is not a separate cause of action. The Court held that the undertaking is a means for the court to do complete justice between the parties and is not a contract between the plaintiff and the party who has suffered prejudice.

Final Decision: The Court held that the counterclaim filed by Halcyon (Counter Claim No.19 of 2012) is within time, but the companion admiralty suit filed by Eastshine (Admiralty Suit No.66 of 2015) is barred by the law of limitation. The Court accordingly dismissed Admiralty Suit No.66 of 2015 and directed that Counterclaim No.19 of 2012 be placed before the regular court hearing admiralty matters for directions in the trial.