Very Important Point
The statutory lien of a harbour authority has paramountacy even over the claims of secured creditors in a winding-up petition under the Companies Act. In exercise of its right under Section 64 of the Major Port Trusts Act, 1963, the harbour authority is, therefore, entitle to sell the vessel without the intervention of the Court.

Headnote:Major Port Trusts Act, 1963-Section 64-Anchorage and other charges of vessel belonging to Shipping Company-Not paid-Vessel arrested by Port Authorities-Winding-up petition by creditor of Shipping Company-Requirement of leave of High Court u/s. 446 of Companies Act by Port Authorities before selling vessel-Not required -Statutory lien of Port Authorities u/s. 64 of Trusts Act over vessel -Is superior to claims of secured creditors under winding-up petition -Port Authorities entitle to sell vessel by auction and realise sale proceeds without intervention of Court.
       Held : the lien of a harbour authority over the vessel is a paramount lien and realization of its dues by the harbour authority by the sale of the vessel is above the priorities of secured creditors. In other words, the statutory lien of a harbour authority has paramountacy even over the claims of secured creditors in a winding up. In exercise of its right under Section 64 the appellant is, therefore, entitled to sell the vessel without the intervention of the court. In exercise of that paramount right which overrides the claims of all other creditors including secured creditors, the appellant has a right to arrest the vessel and sell it. Without the consent of the appellant, this right cannot be transferred to the sale proceeds of the vessel. (Para 12)
       In the present case the appellant is objecting to the directions given by the court in winding up directing the Official Liquidator to sell the vessel along with the appellant and to bring the sale proceeds into court. The appellant has a supervening priority in respect of its claims against the vessel. It has a right to sell that vessel and realise the sale proceeds. The appellant cannot be divested of this statutory right without its consent or be subjected to other priorities under the Companies Act. The appellant has also objected to any global advertisement being issued in respect of the said vessel since the vessel is lying at anchorage since 1987 and is in a very dilapidated condition. It is unlikely to attract international bidding. The sale proceeds are not likely to cover even the full statutory charges of the appellant. The appellant has also objected to its being equated to other secured creditors in winding up. Looking to the overriding priority statutorily given to the appellant, the impugned order passed by the High Court is set aside. The appellant shall be entitled to sell the vessel by auction in accordance with the procedure prescribed by its rules and regulations. Since the appellant has no objection to the Official Liquidator and/or a representative of the first-respondent (petitioning creditor) remaining present at the sale, it will be open to the Official Liquidator to depute its representative to remain present at the sale and the same right is given to the first-respondent as well. The appellant shall be entitled to realise its statutory dues as per law from the sale proceeds of the said vessel and the balance, if any, of the sale proceeds shall be deposited by the appellant with the Official Liquidator in winding up. The appellant shall also file an account of its dues and the realisation of the same from the sale proceeds of the vessel in the winding up proceedings before the Official Liquidator. The appellant has no objection to doing so. In respect of any short fall in the realisation of dues, the appellant may file its claim for the balance in winding up proceedings in accordance with law. (Paras 16, 17 & 18)

Judgment

Mrs. Sujata V. Manohar, J.-Leave granted.

This appeal is filed by the Board of Trustees of the Port of Mumbai in respect of an order passed by the Patna High Court in Company Petition No. 5 of 1990 for winding up M/s. Thakur Shipping Co. Ltd.

2. A vessel belonging to M/s. Thakur Shipping Co. Ltd. M.V. Varuna Kachhapi arrived at the Port of Mumbai in May 1985 and was laid up at anchorage. It became liable to pay anchorage and other charges leviable under the provisions of the Major Port Trusts Act, 1963 as amended by the Major Port Trust (Amendment) Act of 1974, and the Dock Scale of Rates framed thereunder by the appellant. In view of the Port Trust charges which remained unpaid, the appellant-Port Trust arrested the said vessel in exercise of its rights under Section 64 of the Major Port Trust Act, 1963. It issued a public notice on 14th of August, 1987 for the auction sale of the said vessel.

3. M/s. Thakur Shipping Co. Ltd. challenged the proposed auction sale by filing a writ petition in the Bombay High Court which was summarily dismissed. In appeal, however, as M/s. Thakur Shipping Co. Ltd. undertook to pay all the charges due and payable to the appellant, the auction was stayed. The charges, however, were not paid by M/s. Thakur Shipping Co. Ltd. Thereafter, further attempts were made by the appellant to sell the vessel which were again held up on account of the litigation initiated at the instance of M/s. Thakur Shipping Co. Ltd. While the said ship remained under arrest by the appellant, in 1990 a Company Petition No. 5 of 1990 was filed by the 1st respondent, petitioning creditor, in the Patna High Court against M/s. Thakur Shipping Co. Ltd. In the company petition, Official Liquidator was appointed. An order of winding up was passed in respect of M/s. Thakur Shipping Co. Ltd. in the said company petition on 5th of August, 1995.

4. In the meanwhile, the Official Liquidator directed the appellant to maintain status quo in respect of the said vessel and further directed that if the vessel was proposed to be sold, leave of the High Court under Section 446 of the Companies Act should be taken.

5. On 11th of April, 1996, the appellant made an application in the Patna High Court in the said company petition setting out that up to 30.6.1995, Port Trust charges amounting to Rs. 1,20,71,307 had become due and payable and the amount continued to grow at the rate of Rs. 9,003 per day. The appellant, therefore, prayed, inter alia, that it be permitted to recover its charges from the sale proceeds of the said vessel and claimed that the appellant had a right superior to that of others, in respect of the said vessel. This was the purport of the application though it was not clearly so worded. By an order dated 16th of August, 1996, a learned Single Judge of the Patna High Court held that an order had already been passed to permit the sale of the said vessel. It would be just and proper that the vessel is sold jointly by the appellant and the Official Liquidator. He directed that the sale proceeds be deposited with the Official Liquidator. Thereafter, the appellant made an application for modification of the order of 16th of August, 1996, praying that the appellant alone be allowed to sell the vessel and retain the sale proceeds towards its dues. They would remit the balance amount, if any, to the Official Liquidator. The High Court has passed the impugned order of 26th of November, 1996 disallowing such modification. The High Court has directed that the vessel be sold after issuing a global advertisement. The High Court has further directed that since M/s. Thakur Shipping Co. Ltd. do not have any money which could be utilised to meet the cost of advertisement or sale, the appellant shall meet the costs of such advertisement and sale and all incidental charges thereto which amounts, the appellant would be entitled to recover as a first charge on the sale proceeds. This order is being challenged in the present appeal.

6. Unde

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1998 Supreme(SC) 486

Cases Referred (1)