# LIVERPOOL AND LONDON S.P. AND I ASSON. LTD v. M.V. SEA SUCCESS I AND ANR

- **Citation:** [2003] Supp. 5 S.C.R. 851
- **Court:** Supreme Court of India
- **Decided:** 2003-11-20
- **Case number:** Civil Appeal No. 5665 of 2002
- **Bench:** V.N. Khare, S.B. Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/liverpool-and-london-s-p-and-i-asson-ltd-v-m-v-sea-success-i-and-anr-19625
- **Pages:** 65

## Headnote

I
Admiralty Court Act, 1861-Sections 4, 5, 6 and 8-Protection and
Indemnity Insurance cover-Admiralty Suit for recovery of unpaid insurance
claims treating it to be 'necessaries supplied to a ship'-Validity of-Held C
Insurance is 'necessaries'-'Necessaries' should be construed in a broad and
liberal manner with changing scenario and the changes in both domestic
and international law-Admiralty Court Act, 1840; Sections 3, 4 and 6Supreme Court of Judicature {Consolation) Act, 1925; Section 22(I)-
Brussels Arrest Convention, 1952; Article l{k) and 2-1999 Arrest convention;
Article 14.
D
Code of Civil Procedure, 1908-0rder 7 Rules //, //A and 14Application for rejection .of plaint on the ground that cause of action is not
disclosed-Order rejitsing rejection of plaint-Letters Patent Appeal on such
Order-Validity of-Held, is valid, since the order is a preliminary judgment
and not an interlocutory order-Letters Patent; Clause 15.
Code of Civil Procedure, 1908-0rder 7 Rules// and 14-Disclosure
of cause of action in a plaint-Documents annexed with the plaint-Held, the
documents must be read into to find out the cause of action.
E
Appellant- club, an association incorporated in United Kingdom, offers F
insurance cover in respect of vessels entered with it for third party risks
associated with operation and trading of vessels. According to the appellant,
the protection and Indemnity (P & I) cover is compulsory to allow a ship to
enter major ports in India. Respondent no. 1- vessel has two sister vessels
and all the vessels are owned by respondent no. 2. The respondent no. 2 did G
not pay the insurance premium due for the two sister vessels for two years.
The appellant, treating the unpaid insurance calls as 'necessaries' under
section 5 of the Admiralty Courts Act, 1861, filed an Admiralty Suit before
High Court for a decree against the respondents for payment of unpaid
insurance amounts with interest and for the arrest ofrespondent no. 1- vessel
851
H
852
SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.
A to secure the claim. Respondent no. I took out a Notice of motion under order
7 Rule 11 (a) CPC for rejection of the plaint of the appellant on the ground
that it does not disclose a cause of action and that the claim of unpaid
insurance premium was not 'necessaries' within the meaning of the Act.
Single Judge of the High Court refused to reject the plaint holding that the
plaint discloses sufficient cause of action for maintaining a suit. The Single
B Judge, however, referred the question whether the unpaid insurance premium
is 'necessaries' to a Division Bench of the High Court. Respondent no. I filed
a Letters patent appeal before Division Bench against the refusal by the Single
Judge to reject the plaint. The High Court held that unpaid insurance
premium is 'necessaries' under the Act. The High Court, however, held that
C the plaint of the appellant does not disclose a cause of action. Hence the appeals.
The appellant, in the main appeal, contended that the order of refusal
by Single Judge to reject the plaint under order 7 Rule 11 (a) CPC is an
interlocutory order and not a judgment for invoking Letters Patent Appeal;
and that the order is akin to an order granting leave to defend a suit under
D order 37 CPC or an order amending the plaint, which are not 'judgments'
under clause 15 of the Letters Patent.
In the cross appeal, it was contended that the unpaid insurance premium
is not a maritime claim entitling the appellant to invoke admiralty jurisdiction
of the High Court since it does not ccnstitute 'necessaries' under section 5
E of the Admiralty Courts Act, 1861; that the United Kingdom and some other
countries have held consistently for more than a century that the unpaid
insurance premium is not 'necessaries'; that the necessities should be looked
from the view point of physical necessity and practically and not from the view
point of prudence or sound economics; that if the P & I insurance is held to
p be 'necessaries', it will

## Text

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LIVERPOOL AND LONDON S.P. AND I ASSON. LTD.
A
v
M.V. SEA SUCCESS I AND ANR.
NOVEMBER 20, 2003
f' .... '
B
[V.N. KHARE, CJ. AND S.B. SINHA, J.]
I
Admiralty Court Act, 1861-Sections 4, 5, 6 and 8-Protection and
Indemnity Insurance cover-Admiralty Suit for recovery of unpaid insurance
claims treating it to be 'necessaries supplied to a ship'-Validity of-Held C
Insurance is 'necessaries'-'Necessaries' should be construed in a broad and
liberal manner with changing scenario and the changes in both domestic
and international law-Admiralty Court Act, 1840; Sections 3, 4 and 6Supreme Court of Judicature {Consolation) Act, 1925; Section 22(I)-
Brussels Arrest Convention, 1952; Article l{k) and 2-1999 Arrest convention;
Article 14.
D
Code of Civil Procedure, 1908-0rder 7 Rules //, //A and 14Application for rejection .of plaint on the ground that cause of action is not
disclosed-Order rejitsing rejection of plaint-Letters Patent Appeal on such
Order-Validity of-Held, is valid, since the order is a preliminary judgment
and not an interlocutory order-Letters Patent; Clause 15.
Code of Civil Procedure, 1908-0rder 7 Rules// and 14-Disclosure
of cause of action in a plaint-Documents annexed with the plaint-Held, the
documents must be read into to find out the cause of action.
E
Appellant- club, an association incorporated in United Kingdom, offers F
insurance cover in respect of vessels entered with it for third party risks
associated with operation and trading of vessels. According to the appellant,
the protection and Indemnity (P & I) cover is compulsory to allow a ship to
enter major ports in India. Respondent no. 1- vessel has two sister vessels
and all the vessels are owned by respondent no. 2. The respondent no. 2 did G
not pay the insurance premium due for the two sister vessels for two years.
The appellant, treating the unpaid insurance calls as 'necessaries' under
section 5 of the Admiralty Courts Act, 1861, filed an Admiralty Suit before
High Court for a decree against the respondents for payment of unpaid
insurance amounts with interest and for the arrest ofrespondent no. 1- vessel
851
H
852
SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.
A to secure the claim. Respondent no. I took out a Notice of motion under order
7 Rule 11 (a) CPC for rejection of the plaint of the appellant on the ground
that it does not disclose a cause of action and that the claim of unpaid
insurance premium was not 'necessaries' within the meaning of the Act.
Single Judge of the High Court refused to reject the plaint holding that the
plaint discloses sufficient cause of action for maintaining a suit. The Single
B Judge, however, referred the question whether the unpaid insurance premium
is 'necessaries' to a Division Bench of the High Court. Respondent no. I filed
a Letters patent appeal before Division Bench against the refusal by the Single
Judge to reject the plaint. The High Court held that unpaid insurance
premium is 'necessaries' under the Act. The High Court, however, held that
C the plaint of the appellant does not disclose a cause of action. Hence the appeals.
The appellant, in the main appeal, contended that the order of refusal
by Single Judge to reject the plaint under order 7 Rule 11 (a) CPC is an
interlocutory order and not a judgment for invoking Letters Patent Appeal;
and that the order is akin to an order granting leave to defend a suit under
D order 37 CPC or an order amending the plaint, which are not 'judgments'
under clause 15 of the Letters Patent.
In the cross appeal, it was contended that the unpaid insurance premium
is not a maritime claim entitling the appellant to invoke admiralty jurisdiction
of the High Court since it does not ccnstitute 'necessaries' under section 5
E of the Admiralty Courts Act, 1861; that the United Kingdom and some other
countries have held consistently for more than a century that the unpaid
insurance premium is not 'necessaries'; that the necessities should be looked
from the view point of physical necessity and practically and not from the view
point of prudence or sound economics; that if the P & I insurance is held to
p be 'necessaries', it will lead to incongruous situation when other forms of
insurance are not 'necessaries', and that the interpretation of the word
'necessaries' rendered by the English Courts should be followed since the
High Courts in India derive maritime jurisdiction from the pre-independence
statutes and have the same jurisdiction as that of the courts in England.
G
In reply the appellant in the main appeal contended that the term
'necessaries' must be construed in a broad and liberal manner keeping in
mind the ever changing requirements of a ship to be able to trade in commerce;
that a valid P & I insurance cover has been made compulsory for the vessels
entering Indian ports; and that the domestic legislation also provides for a
H compulsory insurance cover; that the term 'necessaries' must be flexible
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I
853
having regard to the global change and outlook in trade and commerce.
A
Allowing the main appeal and dismissing the cross appeal, the court
HELD: 1.1. The term 'necessaries' is a term of art but it cannot be used
in a limited context of mandatory claims made for goods or services supplied
to a particular ship for her physical necessity as opposed to commercial B
operation and maintenance. Physical necessity and practicality would be a
relevant factor for determination of the said question. Taking insurance cover
would not only be a commercial prudence but almost a must in the present
day context. The third party insurance may not be compulsory in certain
jurisdiction but having regard to the present day scenario such an insurance
cover must be held to be intrinsically connected with the operation of a ship. C
(895-E-F]
1.2. One of the relevant factors for arriving at a conclusion as to whether
anything would come within the expression 'necessary' or not will inter alia
depend upon answer to the question as to whether the prudent owner would D
provide to enable a ship to perform well the functions for which she has been
engaged. If getting the vehicle insured P & I club would be one of the things
which could enable a prudent owner to sail his ship for the purposes for which
she has been engaged, the same would come within the purview of the said
term. The matter must be considered having regard to the changing scenario
in as much as the field of insurance has undergone a sea change from merely E
hull and machinery, the insurance companies cover various risks including
oil spill damage to the port, damage to the cargo etc. In that sense, the term
must be construed in a broad and liberal manner. The changing requirement
of a ship so as to enable it to trade in commerce must be kept in mind which
would lead to the conclusion that P & I insurance cover would be necessary F
for operation of a ship. There are a large number of insurance covers. But
the question is not what insurance would be 'necessary' and what would be
not as the issue has to be considered not only on a mere hypothesis but having
regard to the statutes framed by other countries as also the 1999 Arrest
Convention. (895-F-H; 896-A-CI
1.3. Appellant Club would be entitled to enforce its claims against the
vessel keeping in view t~e law prevailing in India within whose jurisdiction
the ship is found. Only because, the claim can be enforced in India and not in
some other countries, by itself would not lead to the conclusion that it cannot
G
be enforced at all irrespective to the domestic law. The domestic legislation
will prevai• over any international convention irrespei!tive of the fact as to H
854
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
A whether the country concerned is a party thereto or not. As a matter of policy
legislation or otherwise, England did not want that arrears of insurance
premium should be included as a maritime claim, but the same would not imply
that in other countries despite the unpaid insurance premium being maritime
claim, the same would not be enforced. [897-G-H; 898-A-DI
B
1.4. Having regard to the changing scenario and keeping in tune with
the changes in both domestic and international law as also the statutes adopted
by several countries, a stand, however bold, may have to be taken that unpaid
insurance premium of P & I clilb would come within the purview of the of the
expression 'necessaries supplied to the ship'. The question has not only been
C considered from the angle of history of the judicial decisions rendered by
different courts having great persuasive value but also from the angle that
with the change in time interpretative changes are required to be made.
(898-F-H; 899-A)
M V. Elisabeth, (1993[ Supp. 2 SCC 433; M V. Al Quamar v. Isavliris
D Salvage (International) Ltd. and Ors., [2000) 8 SCC 278; Kapila Hingorani
v. State of Bihar, JT [2003) 5 SCC I; John Val/amattom and Anr. v. Union of
India, JT (2003) 6 SC 37; Indian Handicrafts Emporium and Ors. v. Union of
India, (2003[ 6 SCALE 831; Motor General Traders and Anr. v. State of Andhra
Pradesh and Ors., (1984) I SCC 222; Rattan Arya and Ors. v. State of Tamil
Nadu and Anr., (1986) 3 SCC 385; Synthetic & Chemicals Ltd. and Ors. v.
E State of U.P. and Ors., (1990[ l SCC 109 and National Insurance Co. Ltd.,
Chandigarh v. Nicolletta Rohtagi and Ors., [2002[ 7 SCC 456 referred to.
Queen v. Judge of the City of London Court, (1891) 1 QB 273; The
Beldis (1936 P. 51); Webster v. Seekamp, [1821 4B & Aid 352[; Heinrich
F Bjorn (1883 8 P.O. 151 ); The Andre Theodre (10 Aspinall 94); Stokes v. The
Conference, (18878NSWR10); The River Rima (1988 2 L Rep 193); The
Emerald Transporter [1985 2 SALR 152); The Golden Petroleum [1994 l
SLR 92[; The Aifanourious [1980 2 L Reps. 403); Gatoil International Inc.
v. Arwkright Boston Manufacturers Mutual lns,,rance Co. and other, The
Sandrina, [1985[ 1 All ER 129; Equilease Corp. v. M V. Sampson, (793 F.2d
G 598- U.S. Court of Appeals(; Gouldv. Cornhill Insurance Co. Ltd., (l DLR
4th Edition 183[; The Riga ((1869-72) L.R. 3 A & E 516[; The Edinburgh
Castle (1999 F Vol. 2 Lloyd's Reports 362[; Nore Challenger and Nore
Commander (2001Vol.2 Lloyd's Report 103[; M.V. Emerald Transporter
(1985) 2 SALR 448; Marazura Navegacion S.A. and Ors. v. Oceanus Mutual
H Underwriting Association (Bermuda) Ltd. & John Laing (Management) Ltd.
LIVERPOOL AND LONDON SP.AND I ASSON LTD. v. M.V. SEA SUCCESS I
855
(1977) I Lloyd's Rep. 283; Equilease Corporation v. M V. Sampson, (793 F.2d A
598); Trident Marine Managers Inc. v. Serial No. CEBRF 0661586, (1988)
American Maritime Cases 763), referred to.
Modern Admiralty Law by Aleka M,;ndaraka-Sheppard; Shipping Law
by Simon Baughen (Second Edition); Benedict on Admiralty (6th Edition, vol.
I); Principles of Maritime Law by Susan Hodges and Christopher Hill; Law B
and Practice by Steven J. Hazelwood; British Shipping Laws (Vol. 14);
Cheshire and North's Private International Law (12th Edition I; Black's Law
Dictionary; Bouvier's Law Dictionary; Canadian Law Dictionary; Ballentine's
Law Dictionary; 70 American Jurisprudence 2d; International Convention
on Arrest of Ships 1999 by Richard Shaw; Project Gabcikovo-Nagymaros (Op. C
Ind. Weeramantry), referred to.
2.1. The contention of the appellant that in the suit, all defences would
be open to the defendant is misconceived in as much as, no evidence can be
adduced in the absence of any pleading. There may not, furthermore be any
requirement to go into the trial if the plaint does not disclose a cause of action. D
The contention that an order refusing to reject a plaint is one akin to an order
amending the plaint would not be a correct proposition of law. The question
as to whether the defendant despite such an order refusing to reject a plaint
will have a right to show that the case is false would again be of .. no
consequence.(903-8-D)
2.2. An order passed under Order 7 Rule 11 CPC would determine the
rights conferred on the parties one way or the other. Hence, stricto sensu, it
would not be an interlocutory order but having regard to its trails and
trappings would be a preliminary judgment. It is trite that a party should not
E
be necessarily harassed in a suit. An order refusing to reject a plaint will F
finally determine his right in terms of Order 7 Rule 11 CPC. 1904-E; 905-A)
2.3. The idea underlying Order 7 Rule llA is that when no cause of
action is disclosed, the courts will not unnecessarily protract the hearing of
a suit. Having regard to the changes in the legislative policy as adumbrated
by the amendments carried out in the CPC, the Courts would interpret the G
provisions in such a manner so as to save expenses, achieve expedition, avoid
the court's resources being used up on cases which will serve no useful
purpose. A litigation, which in the opinion of the court is doomed to fail, would
not further be allowed to be used as a device to harass a litigant. Hence, the
Letters Patent Appeal against the order refusing to reject the plaint is
maintainable. (905-B-C; 907-D(
H
856
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
'
A
Shah BabulalKhimjiv.Jayaben Kania, 1198114 SCC 8; Subal Paulv.
Malina Paul and Anr., JT (2003) 5 SC 193; Azhar Hussain v. Rajiv Gandhi,
11986] Supp. SCC 315; Dhartipakar Aggarwal v. Rajiv Gandh~ 119871 Supp.
SCC 93; Samar Singh v. Kedar Nath, 119871 Suppl SCC 224; Dipak Chandra
Ruhidas v. Chandan Kumar Sarkar;l200317 SCC 66; Central Mine Planning
B _&Design Institute Ltd v. Union o/lndiaandAnr.; 1200112 SCC 588, referred
to.
The Justices of the Peace/or Calcutta v. Oriental Gas Comparry, 118721 .
Vol VIII Bengal Law Reports 433; Prahladraj Agarwal/av. Shri. Renuka Pal,
AIR (1982) Cal 259; Mis Tanusree Art Printers and Anr. v. Rabindra Nath
C Pal, 1200012 CHN 213; lea Badin v. Upendra Mohan Roy, AIR (1935) cal
35 and Chittaranjan Monda/ v. Sankar Prosad Sahani, AIR (1972) Cal 469,
referred to.
3.1. The documents annexed with the plaint by the appellant having
regard to Order 7 Rule 14 CPC are required to be taken into consideration
D for the purpose or disposal ofapplicatio~ under'on1er 7 Rule ll(a) CPC. Under
the Order, the court is authorised to reject a plaint on failure on the part of
the plaintiff to disClose a cause of action but the same would not mean that
the averments made therein or a document upon which reliance bas been
placed which discloses a cause of action, the plaint would be rejected on the
ground that such averments are not sufficient to prove the facts stated therein
E for the purpose or obtaining reliefs claimed in the suit. The approach adopted
by the High Court in this behalf is not correct. [908-G-H; 910.G-HI
3.2. In ascertaining whether the plaint shows a cause of action, the court
is not required to make an elaborate enquiry into doubtful or complicated
F questions of law or fact. By the statute, the jurisdiction of the court is
restricted to ascertain whether on the allegations, a cause or action is shown..
So long as the claim discloses some cause of action or raises some questions
lit to be decided by a Judge, the mere fact that the case is weak and not likely
to succeed is not ground for striking it out. The purported failure of the
pleadings to disclose a cause of action is distinct from the absence of full
G particulars.1912-A-B; F)
H
3.3. For the purpose of rejecting the plaint, it is not necessary to consider
whether the averments made in the plaint prove the facts. The reasons which
have been assigned in support of the finding that the ship is a valuable
commercial chattle and her arrest ulideservingly p~ejudices thinl parties as
well as affect the interest of owner and others is a question which must be
LIVERPOOL AND LONDON SP. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 857
gone into when passing a final order as regard interim arrest of ship or A
otherwise. For the purpose, the respondent vessel could file an application
for stay. While considering such an application, the Court could consider not
only a prima facie case but also elements of balance of convenience and
irreparable injury in the matter. The reason is that if a legal question is raised
by the defendant in the written statement, it does not mean that the same has
to be decided only by way of an application under Order 7 Rule 11 CPC which B
may amount to pre-judging the matter. (913-D-H; 914-A)
Mohan Rawale v. Damodar Tatyaba and Ors,. [199412SCC392; D.
Ramachandran v. R. V. Janakiraman and Ors., (199913 SCC 267; Punit Rai
v. Dinesh Chaudhary, JT(2003) Supp. I SC 557 and Vijay Pratap Singh v. C
Dukh Haran Nath Singh, AIR (1962) SC 941, referred to.
William v. Wilcox, (183818 Ad. & EL 331 and The Aventicum; (197811
Lloyd's L.R. and The Andrea Ursula, (197111 Lloyd's L.R. 145, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5665 of 2002.
From the Judgment and Order dated 28.11.2001 of the Bombay High
Court in A. No. 226/2001 in Notice of Motion No. 2455/2000 in Admiralty Suit
No.32 of2000.
WITH
C.A. No. 5666 of2002
Prashant S. Pratap, Siddhartha Dave, Ms.Vibha Datta Makhija, Zarir P.
D
E
Bharucha, Ms. Reetu Sharma, R.N. Karanjawala, Ms.Manik Karanjawala,
Ms.Avantika Keswani, R.K. Agarwal, Sanjay Dua, Arun K. Sinha and Rakesh F
Singh for the Appearing parties.
The Judgment of the Court was delivered by
S.8. SINHA,J. THE BACKGROUND FACT:
The appellant (Club) herein is an association incorporated under the G
laws of the United Kingdom. It is a mutual association of ship owners. It
offers insurance cover in respect of the vessels entered with it for diverse
third party risks associated with the operation and trading of vessels. According
to the appellant, no vessel operates without a Protection & Indemnity (P&I)
cover and the same has been made compulsory to allow a ship to enter major H
858
SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
A ports in India.
'Sea Ranger' and 'Sea Glory' are the sister vessels of the 1st respondent
vessel and they are allegedly owned by the 2nd respondent. The first two
vessels entered into a contract with the appellant's association for the years
1998-1999 and 1999-2000 but they have not paid the unpaid insurance premium
B due and payable by the 2nd respondent for various P&I risks for which they
had been insured. These unpaid insurance calls being "necessaries" was
enforceable within the "admiralty jurisdiction" of the Bombay High Court.
For the arrest of the 1st respondent vessel which came to Mumbai Port
within the territorial waters of India, a suit was filed by the club inter a/ia
C for the prayers : "(a) for a decree against the respondents in the sum of
US$ I, 18, 194.89 together with interest at the rate of 12% per annum, which was
the unpaid insurance premium amount due to the club and payable by the 2nd
respondent; and (b) for arrest of the I st respondent vessel to secure the
claim."
D
On an application for arrest of the I st respondent vessel having been
made, the 2nd respondent appeared and undertook to furnish security in
respect of the appellant's claim and further gave an undertaking that until the
security is furnished the said vessel will not leave the Port of Mumbai.
However, thereafter S.S. Shipping Corporation Inc., Liberia claiming to be the
E registered owner of the I st respondent furnished a bank-guarantee in relation
to the appellant's claim in discharge of the undertaking of security given by
the second respondent. The I st respondent thereafter took out a Notice of
Motion for rejection of the plaint purported to be under Order 7 Rule I l(a)
of the Code of Civil Procedure inter alia on the ground that the averments
F contained therein do not disclose a cause of action as the claim of unpaid
insurance premium was not a "necessary" within the meaning of Section 5 of
the Admiralty Courts Act, 1861. A learned Single Judge of the High Court
after hearing the Notice of Motion by an order dated 1-212/200 I referred the
said question to a Division Bench as it could not agree with a decision
rendered by another leanied Single Judge. However, on the other two grounds
G it discharged the Notice of Motion holding that the averments made in
paragraphs I and 14 of the plaint inter alia to the effect that all the three .
ships are beneficially owned by the 2nd respondent disclose a cause of
action.
An appeal thereagainst was preferred by the respondent herein. The
H Division Bench took up the appeal preferred by the respondent herein as also
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA, J.l 859
the reference made by the learned Single Judge and passed a common judgment. A
ISSUES:
were:
The questions which arose for consideration before the High Court
(Q
whether arrears of insurance premium due and payable to the
appellant by the 2nd respondent would fall within the scope and
ambit of Section 5 of the Admiralty Courts Act, 1861;
B
(iI) whether refusing to reject the plaint under Order 7 Rule 11 (a)
upon holding that the plaint discloses a cause of action is a C
'judgment' within the meaning of Clause 15 of the Letters Patent
of the Bombay High Court and was, thus, appealable; and
(iit) Whether the averments made in paragraphs 1 and 14 of the
plaint disclose sufficient cause of action for maintaining a suit.
The Division Bench while answering the question No. I in favour of D
appellant, answered question Nos. 2 and 3 against it. Appeal No. 226 of2001
has been filed by the 'club' whereas Civil Appeal No. 5666 of 2002 has been
filed by the 'vessel'.
Submissions :
Mr. Bharucha, the learned counsel appearing on behalf of the "Vessel"
would inter alia submit:
(i)
The amount of arrears of insurance premium alleged to be due
E
to the 1st respondent towards release calls is not a maritime
claim entitling the Club to invoke the admiralty jurisdiction of the F
High Court as such unpaid insurance money does not constitute
'necessaries' within the meaning of Section 5 of the Admiralty
Courts Act, I 861.
(ii)
Sufficiently direct and proximate connection between insurance
and the vessel is a prerequisite for bringing an action in rem. G
Insurance is meant primarily as a means of indemnifying and
protecting the vessel owner against the loss of his vessel and/
or claims that that may arise as a result of damage or loss caused
by the vessel. Although it may be a commercial necessity but
the same would not come within the purview of the term H
860
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A
'necessaries' within the meaning of the provisions of the said
Act. The provisions contained in the Admiralty Courts Act of
1840 and 1861, Section 22 of the Supreme Court of Judicature
Act, 1925, the 1952 Brussels Arrest Convention as also the
Administration of Justice Act, 1956 disclose one uniform feature
B
that in order that a monetary claim qualifies for and is recognized
as a maritime claim the same must be necessary for operation of
the ship.
(iii) In United Kingdom, it has consistently been held for more than
a century that unpaid insurance premium is not a "necessary"
c
within the conventional meaning of the said term as understood
in maritime law. The said view has been reiterated by the Courts
of Australia, South Africa and Singapore. In support of the said
contention, strong reliance has been placed on Queen v. Judge
of the City of London Court (1891) QB 273, The Be/dis [1936 P.
51], Webster v. Seekamp (1821) 4B & Aid 352, Heinrich Bjorn
D
(1883) 8 P.O. 151, The Andre Theodore [10 Aspinall 94], Stokes
v. The Conference (1887) 8 NSWR 10, The River Rima (1988) 2
L Rep 193, a South African Court decision in The Emerald
Transporter ( 1985) 2 SALR 152 as also a decision of Singapore
High Court in The Golden Petroleum, (1994) 1SLR92.
E
(iv) The expression "necessaries supplied to any ship" although has
not statutorily been defined; over a long period of time, the same
had attained a definite connotation, i.e., goods or services
supplied to a specifically identified ship in order to successfully
prosecute the voyage in question, and, thus, applying the said
test unpaid insurance premium does not answer the said
F
definition. The matter has furthermore to be looked at from the
point of view of physical necessity and practicality and not from
the viewpoint of prudence or sound economics.
(v) There are a large number of categories. of insurance from hull
and machinery insurance, to protection and indemnity (P&I)
'
G
cover, through war risks, to freight demurrage and defence cover
(FD&D), oil spill cover (TOV ALOP), and strike cover etc and in
that view of the matter if P&I should be held to be a necessary,
others are not, the same would lead to an incongruous situation.
(vi) In view of the decision in The A ifanourious ( 1980) 2 L Reps. 403
H
as also the decision rendered by the House of Lords in Gatoil
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA,J.J 86 J
International Inc. v. Arwkright Boston Manufacturers·Mutual A
Insurance Co. & Other The Sandrina, (1985] 1 All ER 129,
holding that claim for unpaid insurance has never been
recognized as maritime claim under any other head and the
Courts of England expressly held the same to have been excluded
as such under Article 1 of the Brussels Arrest Convention, 1952.
Such a claim, thus, due to unpaid insurance premium would not B
be a maritime claim also under the head "disbursements made on·
account ·of a ship".
(vii) In the decision of this Court in M V. Elisabeth, [1993] Supp. 2
SCC 433, it was merely held that the High Courts in India will
have an extended jurisdiction under the Admiralty Courts Act, C
1861 and the said principle cannot be further extended.
(viii) As the maritime jurisdiction of the High Courts in India was
derived from the pre-independence statutes and as the High
Courts of India exercise the same jurisdiction as that of the
courts in England, it must necessarily be held that the D
interpretation of the word "necessaries" rendered by the English
Courts and which has been followed by other courts except by
the American Court should prevail.
Mr. Prashant S. Pratap, the learned counsel appearing on behalf of the
Club, on the other hand, would submit that:
E
(i)
"necessaries" are the thiiigs which a prudent owner would provide
to enable a ship to perform the functions wherefor she has been
engaged and, thus, the provision of services would come within
the definition of necessaries.
(u')
The term "necessaries" must be construed in a broad and liberal
manner keeping in mind the ever changing requirements of a
ship to be able to trade in commerce.
F
(iii') Contemporary maritime statutes in England do not use the term
"necessaries" but the American Federal Maritime Liens Act does G
and, thus, decision rendered by the American Courts that
insurance is a "necessary" should be held to be correct.
Equilease Corp. v. M V. Sampson 793 F.2d 598 - U.S. Court of
Appeals.
(iv) A valid P&l insurance cover is necessary for a ship to call at H
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SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
major ports in India and consequently so far as India is concerned,
it is a necessity having regard to the fact that Mumbai Port,
JNPT and Kolkata Port have issued a statutory direction in this
behalf.
(v) The domestic legislation in India also provide for a compulsory
insurance. Reference in this connection has been placed on the
Inland Vessels Act, 1917 (as amended in the year 1977), the
Merchant Shipping Act, 1956 (as amended in 1983) and
Multimodal Transportation of Goods Act, 1993 (as amended in
2000) and in that view of the matter the pedantic and regressive
view should be discouraged specially in the light of the judgment
of this Court in M V. Elisabeth (supra).
(vi) By reason of the 1999 Arrest Convention inter alia unpaid
insurance calls had been added and in absence of any codification
and maritime claim by a statute in India the same should be taken
into consideration for determination of the jurisdiction of the
High Court. Several countries such as Canada, South Africa,
Australia, China and Korea have given the claim for unpaid
insurance premium in respect of a ship, the status of a maritime
claim.
(vii) Flexibilities being the virtue of law court, the High Court has
E
rightly held that the marine premium would come within the
purview of the term "necessaries" having regard to the global
change and outlook in trade and commerce. Reliance in this
connection has been placed on M V. Al Quamar v. Tsavliris
Salvage (International) Ltd. and Ors., [2000) 8 SCC 278.
F STATUTORY PROVISIONS:
The relevant provisions of Admiralty Court Act, 1840 are as follows:
"3. WHENEVER A VESSEL SHALL BE ARRESTED, ETC., COURT TO
HA VE JURISDICTION OVER CLAIMS OF MORTGAGEES: Whenever
G
any ship or vessel shall be under arrest by process issuing from the
said High Court of Admiralty, or the proceeds of any ship or vessel
having been so arrested shall have been brought into and be in the
registry of the said court, in either such case the said court shall have
full jurisdiction to take cognizance of all claims and causes of action
H
of any person in respect of any mortgage of such ship or vessel, and
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA, J.J 863
to decide any suit in~tituted by any such person in respect of any A
such claims or causes of action respectively.
4. COURT TO DECIDE QUESTIONS OF TITLE, ETC.: The said Court
of Admiralty shall have jurisdiction to decide all questions as to the
title to or ownership of any ship or vessel; or the proceeds thereof
remaining in the registry, arising in any cause of possession, salvage, B
damage, wages or bottomry, which shall be instituted in the said courf
after the passing of this Act.
6. THE COURT IN CERTAIN CASES MAY ADJUDICATE, ETC.: The
High Court of Admiralty shall have jurisdiction to decide all claims
and demands whatsoever in the nature of salvage for services rendered c
to or damage received by any ship or sea-going vessel or in the nature
of towage, or for necessaries supplied to any foreign ship or seagoing vessel, and to enforce the payment thereof, whether such ship
or vessel may have been within the body of a country, or upon the
high seas, at the time when the services were rendered or damage D
received, or necessaries furnished, in respect of which such claim is
made.
The relevant provisions of Admiralty Court Act, 1861 are as under:
"4. AS TO CLAIMS FOR BUILDING, EQUIPPING, OR REPAIRING OF E
SHIPS: The High Court of Admiralty shall have jurisdiction over any
claim for the building, equipping, or repairing of any ship, if at the time
of the institution of the cause the ship or the proceeds thereof are
under arrest of the court.
5. AS TO CLAIMS FOR NECESSARIES: The High Court of Admiralty F
shall have jurisdiction over any claim for necessaries supplied to any
ship elsewhere than in the port to which the ship belongs, unless it
is shown to the satisfaction of the court that at the time of the
institution of the cause any owner or part owner of the ship is
domiciled in England or Wales: Provided always, that if in any such
cause the plaintiff do not recover twenty pounds, he shall not be G
entitled to.
6. AS TO CLAIMS FOR DAMAGE TO CARGO IMPORTED: The High
Court of Admiralty shall have jurisdiction over any daim by the \iwner
or consign~e or assignee of any bill of lading of any goods carried
into any p'ort in England or Wales in any ship, for damage done to H
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SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.
the goods or any part thereof by the negligence or misconduct of or
for any breach of duty or breach of contract on the part of the owner,
master, or crew of the ship, unless it is shown to the satisfaction of
the court that at the time of the institution of the cause any owner
or part owner of the ship is domiciled in England or Wales: Provided
always, that if any such cause the plaintiff do not recover twenty
pounds, he shall not be entitled to any costs, charges, or expenses
incurred by him therein, unless the judge shall certify that the cause
was a fit one to be tried in the said court.
8. HIGH COURT OF ADMIRAL TY TO DECIDE QUESTIONS AS TO
OWNERSHIP, ETC. OF SHIPS: The High Court of Admiralty shall
have jurisdiction to decide all questions arising between the co-.
owners, or any of them, touching the' ownership, possession,
employment, and earnings of any ship registered at any port in England
or Wales, or any share thereof, and may settle all accounts outstanding
and unsettled between the parties in relation thereto, and may direct
the said ship or any share thereof to be sold, and may make such
order in the premises as to it shall seem fit.
Section 2 of Colonial Courts of Admiralty Act, 1890 reads thus:
"2. Colonial Courts of Admiralty. - (I) Every court oflaw in a British
possession, which is for the time being declared in pursuance of this
Act to be a Court of Admiralty, or which, if no such declaration is in
force in the possession, has therein original unlimited civil jurisdiction,
shall be a Court of Admiralty, with the jurisdiction in this Act mentioned,
and may for the purpose of that jurisdiction, exercise all the powers
which it possesses for the purpose of its other civil jurisdiction, and
such Court in reference to the jurisdiction conferred by this Act is in
this Act referred to as a Colonial Court of Admiralty ....
(2) The jurisdiction of a Colonial Court of Admiralty shall, subject to
the provisions of this Act, be over the like places, persons, matters,
and things, as the Admiralty jurisdiction of the High Court in England,
whether existing by virtue of any statute or otherwise, and the Colonial
Court of Admiralty may exercise such jurisdiction in like manner and
to as full an extent as the High Court in England, and shall have the
same regard as that Court to international law and the comity of
nations.
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.8. SINHA, J.J 865
Section 2 of The Colonial Courts of Admiralty (India) Act, 1891 reads A
as under:
2. APPOINTMENT OF COLONIAL COURTS OF ADMIRALTY: The
following Courts of unlimited civil jurisdiction are hereby declared to
be Colonial Courts of Admiralty, namely:-
(1) the High Court of Judicature at Fort William in Bengal;
(2) the High Court of Judicature at Madras, and
(3) the High Court of Judicature at Bombay."
B
Section 22(1) of Supreme Court of Judicature (Consolidation) Act, 1925 C
reads thus:
"22. ADMIRALTY JURISDICTION OF HIGH COURT: (I) The High
Court. shall, in relation to admiralty matters, have the following
jurisdiction (in this Act referred to as "admiralty jurisdiction") that is
to say -
(a) Jurisdiction to hear and determine any of the following
questions or claims:
***
***
***
D
(viii) Any claim by.a seaman of a ship for wages earned by him on. E
board the ship, whether due under a special contract or otherwise,
and any claim by the master of a ship for wages earned by him
on board the ship and for disbursements made by him on account
of the ship;
(IX) Any claim in respect ofa mortgage of any ship, being a mortgage F
duly registered in accordance with the provisions of the Merchant
Shipping Acts, 1894 to 1923, or in respect of any mortgage of
a ship which is, or the proceeds whereof are, under the arrest
of the court;"
(x)
Any claim for building, equipping or repairing a ship, if at the G
time of the institution of the proceedings the ship is, or the
proceeds thereof are, under the arrest of the court."
Articles I (k) and 2 of the 1952 Brussels Convention are as under:
H
866
SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.
A
"(I) "Maritime Claim" means a claim arising out of one or more of the
following:
B
c
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...
•••
***
(k) goods or materials wherever supplied to a ship for her
operation or maintenance;
2. A ship flying the flag of one of the Contracting States may be
arrested in the jurisdiction of any of the Contracting States in respect
of any maritime claim, but in respect of no other claim; but nothing
in this Convention shall be deemed to extend or restrict any right or
powers vested in any Governments or their Departments, Public
Authorities, or Dock or Harbour Authorities under their existing
domestic laws or regulations to arrest, detain or otherwise prevent the
sailing of vessels within their jurisdiction."
HISTORY OF JURISDICTION OF THE HIGH COURT:
The jurisdiction of the High Court of Admiralty in England used to be
exercised in rem in such matters as from their very nature would give rise to
a maritime lien - e.g. collision, salvage, bottomry. The jurisdiction of the High
Court of Admiralty in England was, however, extended to cover matters in
respect of which there was no maritime lien, i.e., necessaries supplied to a
E foreign ship. In terms of Section 6 of the Admiralty Act, 1861, the High Court
of Admiralty was empowered to assume jurisdiction over foreign ships in
respect of claims to cargo carried into any port in England or Wales. By
reason of Judicature Act of 1873, the jurisdiction of the High Court of Justice
resulted in a fusion: of admiralty law, common law and equity. The limit of the
jurisdiction of the Admiralty court in terms of Section 6 of the 1861 Act was
F discarded by the Administration of Justice Act, 1920 and the jurisdiction of
the High Court thereby was extended to (a) any claim arising out of an
agreement relating to the use or hire of a ship; (b) any claim relating to the
carriage of goods in any ship; and (c) any claim in tort in respect of goods
carried in any ship.
G
The admiralty jurisdiction of the High Court was further consolidated
by the Supreme Court of Judicature (Consolidation) Act, 1925 so as to include
va~ious matters such as any claim "for damage done by a ship", and claim
'arising out of an agreement relating to the use or hire of a ship'; or 'relating
to the carriage of goods in a ship'; or "in tort in respect of goods carried in
H a ship".
LIVERPOOL AND LONDON S.P. ANO I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 867
The admiralty jurisdiction of the High Court was further widened by the A
Administration of Justice Act, I 956 so as to include not only the claims
specified under Section I (i) of Part I but also any other jurisdiction whkh
either was vested in the High Court of Admiralty immediately before the date
of commencement of the Supreme Court of Judicature Act, 1873 (i.e. November
I, I 875) or is conferred by or under an Act which came into operation on or
after that date on the High Court as being a court with admiralty jurisdiction B
and any other jurisdiction connected with ships vested in the High Court
apart from this section which is for the time being assigned by rules of court
to the Probate, Divorce and Admiralty Division.
Sub-Section (4) of Section I removed the restriction based on the C
ownership of the ship. By reason of Clauses (d) (g) and (h) of the said Section
the jurisdiction in regard to question or claims specified under Section I(i)
included any claim for loss of or damage to goods carried in a ship, any claim
arising out of any agreement relating to the carriage of goods in a ship or to
the use or hire of a ship.
In the course of time the jurisdiction of the High Courts vested in all
the divisions alike. The Indian High Courts after independence exercise the
same jurisdiction.
NECESSARIES - AS A MARITIME CLAIM:
D
E
The concept "as to claims for necessaries" is specified under Section
5 of the Admiralty Court Act, 186 I, wh:ch provides for the jurisdiction of High
Court as regard "Necessaries supplied to any ship elsewhere than in the port
to which the ship belongs, unless it is shown to the satisfaction of the court
that at the time of institution of the cause an owner or part owner of the ship
is domiciled in England or Wales".
F
The term "necessaries" had not been defined in the Act of 1861.