The court affirmed that a breach of contract under the Admiralty Act justifies a maritime claim, requiring the defendant to furnish security for damages due to failure in contractual obligations.

ORDER :

For the sake of convenience and clarity, the parties are referred to by their respective ranks in the main suit.

The issues that arise for consideration in these applications are as follows:-

(a) Whether the claim of the plaintiff is a maritime claim falling under Section 4 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (in short “the Admiralty Act, 2017”)?

(b) Whether the owners of the defendant vessel have committed breach of contract under Memorandum of Agreement (MoA) dated 31.10.2023?

(c) Whether the defendant is required to furnish security to vacate the order of arrest dated 08.01.2024 passed against the defendant vessel?

2. The suit has been filed under the admiralty jurisdiction of this Court. The plaintiff had entered into a MoA dated 31.10.2023 with M/s.Arcadia Shipping Limited, the owner of the defendant vessel. Under the MoA, the plaintiff agreed to purchase the defendant vessel-MV Navdhenu Purna for a total consideration of USD 8.3 million. As per the terms and conditions of MoA, the plaintiff by way of security deposit lodged a deposit of 15% of the total sale consideration amounting to USD 1.245 million with the Escrow Agent, namely, Theo Sioufas Escrow Services LLP. On making the security deposit, an Escrow Agreement dated 09.11.2023 was entered into amongst the plaintiff, M/s.Arcadia Shipping Limited, owner of the defendant vessel, and Theo Sioufas Escrow Services LLP, the Escrow Agent.

3. As per Clause 8 of the MoA dated 31.10.2023, the owners of the defendant vessel are required to obtain delivery documentation in the nature of statutory clearances, governmental permissions and certificates for legal transfer of ownership of the vessel in favour of the plaintiff.

4. According to the plaintiff, the owners of the defendant vessel committed breach of MoA dated 31.10.2023 by not complying with their requirements as per the terms and conditions contained therein. According to the plaintiff, the owners of the defendant vessel failed to obtain the statutory clearances, governmental permission and statutory certificates for legal transfer of ownership of the defendant vessel in favour of the plaintiff. According to the plaintiff, the owners of the defendant vessel repeatedly sought time for issuing the notice of readiness and also sought for extensions for postponing the cancellation date. In the MoA dated 31.10.2023, the date on which the notice of readiness has to be issued and cancellation date has been specifically fixed. According to the plaintiff, the owners of the defendant vessel have committed breach of Clause 5 of the MoA dated 31.10.2023 and therefore, they have rightly terminated the contract and rightly entitled to the suit claim comprising the following:-

(a) The security deposit paid by the plaintiff at USD 12,45,000 (received subsequent to the order of arrest passed by this Court after deduction of USD 10000 towards fees payable to the Escrow Agent)

(b) Interest on deposit -- USD 15,963.29/-

(c) Expenses incurred by the plaintiff - USD 40,322.2/-

(d) Loss of profit/business opportunity – USD 13,50,000/-

(e) Legal costs - USD 2,00,000/-

(f) Interest @ 8% per annum from the date of filing of the suit till payment/realization.

5. According to the plaintiff, the default/breach of the owners of the defendant vessel is evident from the following:-

Sl. No. Date Particulars Extension whether granted or not

1. 21.11.2023 Respondent through its brokers addressed an email to the plaintiff, 3 days prior to the original cancellation date (i.e., 25th November 2023) to extend the cancellation date upto 7th December 2023. Reason for extension: The reason offered was to complete the procedure of Class and Flag from IRS and DG Shipping. Submission: By this time, the defendant vessel was in fact under arrest under the orders of this Hon'ble Court. This fact was suppressed by the respondent while it was seeking extensions for other reasons. The said extension was granted by the plaintiff vide it