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High Court Of Calcutta
Baboo Lall Jain
AL-AMIN SEATRANS LTD - Appellant
Versus
OWNERS AND PARTY INTERESTED IN VESSEL M.V.LOYAL BIRD - Respondent
ADMIRALTY SUIT 2 Of 1994
Decided On : 09/07/1994
ADMIRALTY SUIT - ARREST OF VESSEL - VALIDITY OF ARREST ORDER - AUTHORITY OF MANAGING DIRECTOR TO INSTITUTE SUIT - DISPUTES BETWEEN DIRECTORS - SUPPRESSION OF MATERIAL FACTS - JURISDICTION OF COURT - DAMAGES FOR WRONGFUL ARREST. In an admiralty suit for arrest of a vessel, the court held that the arrest order was obtained by suppression of material facts and false allegations. The managing director of the plaintiff company, who instituted the suit, did not have the authority to do so without the approval of the board of directors. There were serious disputes between the directors of the plaintiff company, and the managing director knew that he could not get any resolution passed in the board meeting or in a general meeting. The plaintiff also failed to disclose that it had obtained full control of the defendant company, Loyal Shipping Pvt. Ltd., and that the defendant was not obliged to transfer the ship to the plaintiff. The court further held that it should not exercise its admiralty jurisdiction in the matter, as the entire cause of action arose in Bangladesh and the municipal laws applicable were the laws of Bangladesh. The court dismissed the suit, vacated the arrest order, and ordered the release of the vessel. The court also appointed a special referee to determine the quantum of losses and damages suffered by the defendant as a consequence of the interim order of arrest.
Fact of the Case:
The plaintiff, Al-Amin Seatrans Ltd., instituted an admiralty suit against the defendant, Loyal Shipping Pvt. Ltd., and obtained an order for arrest of the vessel M. V. 'loyal Bird'. The defendant challenged the arrest order on the grounds that the managing director of the plaintiff did not have the authority to institute the suit, that the plaintiff had suppressed material facts, and that the court should not exercise its admiralty jurisdiction in the matter.
Finding of the Court:
The court held that the managing director of the plaintiff did not have the authority to institute the suit without the approval of the board of directors. There were serious disputes between the directors of the plaintiff company, and the managing director knew that he could not get any resolution passed in the board meeting or in a general meeting. The plaintiff also failed to disclose that it had obtained full control of the defendant company, Loyal Shipping Pvt. Ltd., and that the defendant was not obliged to transfer the ship to the plaintiff. The court further held that it should not exercise its admiralty jurisdiction in the matter, as the entire cause of action arose in Bangladesh and the municipal laws applicable were the laws of Bangladesh.
Issues: 1. Whether the managing director of the plaintiff had the authority to institute the suit without the approval of the board of directors? 2. Whether the plaintiff had suppressed material facts? 3. Whether the court should exercise its admiralty jurisdiction in the matter?
Ratio Decidendi: 1. The managing director of the plaintiff did not have the authority to institute the suit without the approval of the board of directors. This is because the Articles of Association of the plaintiff company provided that the powers of the managing director were subject to the control and supervision of the board of directors, and that the management by the managing director had to be carried on in consultation with the chairman. 2. The plaintiff had suppressed material facts. This is because the plaintiff failed to disclose that it had obtained full control of the defendant company, Loyal Shipping Pvt. Ltd., and that the defendant was not obliged to transfer the ship to the plaintiff. 3. The court should not exercise its admiralty jurisdiction in the matter. This is because the entire cause of action arose in Bangladesh and the municipal laws applicable were the laws of Bangladesh.
Final Decision: The court dismissed the suit, vacated the arrest order, and ordered the release of the vessel. The court also appointed a special referee to determine the quantum of losses and damages suffered by the defendant as a consequence of the interim order of arrest.
( 1 ) THE instant application has been made by M/s. Loyal Shipping Pvt. Ltd, (hereinafter also referred to as 'the defendant') a company incorporated under the laws of the republic of Bangladesh, who is the owner of M. V. Loyal Bird, (hereinafter referred as to the 'said vessel' ). M/s. Al-Amin Seatrans Ltd, which is also a company incorporated under the laws of Bangladesh, instituted the above Admiralty Suit and obtained an order dated 7th July, 1994, for arrest of the said vessel M. V. 'loyal Bird'. Pursuant to the said order the said vessel was arrested while lying at the Haldia Docks. The said vessel was thereafter allowed by this court to be shifted to the Port at Calcutta.
( 2 ) ONE of the salient features of this case is that the chairman of the Board of Directors of the plaintiff is also the Chairman of the Board of Directors of the defendant. The Managing Director of the Plaintiff is also the Managing Director of the defendant. The only other two Directors of the plaintiff are also the Directors of the defendant. All the directors of the plaintiff including its chairman and managing director are the directors of the defendant. All the directors of the plaintiff including its chairman and managing director are the director of the defendant. Plaintiffs four directors who are the only directors are the only four members of the plaintiff and they hold 85% of the share holding of the defendant. The defendant has only one extra fifth share holder, who is also the fifth director of the defendant and the said fifth share-holder and director of the defendant holds 153 of the shares of the defendant. The prayers in the above Admiralty Suit are as follows :" (A) A Declaration that the plaintiff is the absolute beneficial owner of the Vessel M. V. Loyal Bird now lying at the Port of Haldia and is entitled to be registered as the legal owner of the same; (b) An order that the defendant to execute a bill and/or Memorandum of Sale transferring ownership of the said Vessel M. V. Loyal Bird to the plaintiff; (c) Alternatively, judgment against the said Vessel M. V. Loyal Bird and each of its tackle apparel and furniture for U. S. Dollars 8,03,534,77 equivalent to Bangladeshi Taka 321,41,340. 45 equivalent to Rs. 2,51, 50,639. 41 mentioned in paragraph 12 hereof; (d) Judgment against the Vessel M. V. Loyal Bird and each of its tackle apparel and furniture for U. S. Dollars 8,03,534. 77 equivalent to Bangladeshi Taka 3,21,41,390. 94 equivalent to Rs. 2,51,50,639. 41 mentioned in paragraph 15 hereof; (e) Arrest of the said Vessel M. V. Loyal Bird and an order for appraisement of the same its tackle apparel and furniture; (f) Sale of the said Vessl M. V. Loyal Bird and payment out of the proceeds thereof to the plaintiff in protanto satisfaction of its claim in the suit; (g) Interim interest and interest of judgment; (h) Costs; (i)Further and other reliefs. "
( 3 ) IN the affidavit of Mohan Sen affirmed by him on the 6th July, 1994 the case made out is inter alia as follows :
( 4 ) THAT an agreement dated 30th April, 1988 was made between the plaintiff and the defendant owner of the Vessel M. V. Loyal Bird (hereinafter referred to as 'the said vessel') represented by Khondkar Golamuddin Ahmed and Akmal Yusuf Chowdhury the then 100% shareholders of Loyal Shipping Pvt. Ltd. 4. A copy of the agreement is annexed to the said affidavit of Mohan Sen. The said agreement provides that the purchasers have agreed to buy and the sellers have agreed to sell 100% shares of Loyal Shipping Pvt. Ltd. together with Vessel M. V. 'loyal Bird' on as it is where it is basis for a total sum of U. S. Dollars 1. 2 million dollars for the said ship to Taka 20,000/- as value of the said shares. Clause 7 of the said agreement provides that on payment of only the then mortgaged bank liabilities of U. S. Dollars 3,17,415. 39 approximately and Taka 20,000/- for the shares, the sellers shall transfer all shares in the said company in favour of the
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