IN THE SUPREME COURT OF INDIA

Civil Appeal No. 7039 of 2002 Decided On: 29.10.2002

Epoch Enterrepots Vs. M.V. Won Fu

1. Issuance of warrant for the arrest of the vessel M.V. WON FU berthed at Madras Port
has been the principal controversy before the Madras High Court in its Admiralty
Jurisdiction.

[Admiralty jurisdiction refers to the authority of a special court, often called an admiralty
or maritime court, to hear and decide legal matters related to maritime activities and
navigation. This jurisdiction typically covers a wide range of cases involving maritime
law, including disputes arising from Ship collisions and Cargo damage or loss etc.]

2. The plaintiff being the appellant herein instituted a suit for recovery of damages of
11 lakhs for breach of contract with interest at the rate of 24% per annum by reason of
loss and damages suffered and caused by breach of contract by the defendant vessel.

3. Against the refusal to entertain the suit and the consequent dismissal of the same
before the learned trial judge, the plaintiff moved the appellant forum in the High
Court but having failed to obtain the relief, the petition for special leave under Article
136 has been moved before this Court.

FACTUAL BACKGROUND:
4. The plaintiff being a sole proprietor concern stands involved in the business of
export of mines and minerals especially in Feldspar.

5. In the usual course of events, the plaintiff entered into an agreement with M/s. SAN I.
Mining Company at Taiwan to export Feldspar and to complete the agreement between
the parties, the plaintiff entered into an agreement with said to be defendant's ship
disponent owner, [A PERSON WHO HAS RIGHT TO USE AND POSSESS A
VESSEL] to export the cargo of Feldspar from Tuticorin harbour to Taiwan.

6. The agreement is stated to be evidenced in a fixture note [ a document that outlines the
terms of a shipment between two parties] dated 20.10.1995. The relevant extract
whereof as below:

"It is this day mutually agreed between Taiyo Senpaku Kaisha, Ltd. Tokyo as deponent
owners and Epoch Entrrepots, Madras as charterers on the following terms and
conditions………”

7. On the factual matrix the learned Senior Advocate, Mr. ATM Sampath rather
emphatically contended that the contract stands completed by the signing of the
fixture note and the plaintiff has also acted in terms therewith by exporting stock
8400 MT of Feldspar to Taiwan through the defendant's vessel on 25.10.1995.
8. It has been the contention that the defendant's ship has failed to act in terms of the
fixture note by reason wherefore the plaintiff has not been able to send the cargo to
the purchaser as per the schedule thus exposing the plaintiff to suffer a loss of 11 lakhs
by reason of a deliberate act of default to ship the cargo on the vessel.

SINGLE JUDGE OF THE HIGH COURT OBSERVATION:

9. The learned single Judge dismissed the suit and recorded inter alia the following:

"The plaintiff sought for the claim of arrest of the vessel and for damages. The
arrest of the vessel can be sought only under the Admiralty Jurisdiction. Nothing
was performed with regard to loading of cargo in the ship. The plaintiff states that
since the contract for export of goods was dropped, the vessel must be arrested.
Since no shipment of the cargo has taken place, the Admiralty Jurisdiction of this
Court cannot be invoked. The fixture note Ex.P1 is between the plaintiff and Taiyo
Senpaku Kaisha Ltd. No contract has been entered into between the plaintiff and
the defendant, the owner of the vessel WON FU. Absolutely there is no disponent to
link the defendant with the alleged contract and that there was a concluded
contract between the plaintiff and the defendant.

In the absence of any specific evidence to prove that there was a contract between
the plaintiff and the defendant. I am quite unable to accept the case of the plaintiff.
I hold that there is no privity of contract between the plaintiff and defendant. If at
all there was a breach of contract, the plaintiff has to seek their remedy under the
proper forum for breach of contract. Since no shipment had taken place and as the
ship is not involved in the breach of contract by the DISPONENT owner or any
other party, the Admiralty Jurisdiction of this Court cannot be involved and the
arrest of the vessel cannot be sought for. The facts and circumstances of the case
do not come under the Admiralty Jurisdiction of this Court. Further, the suit is also
not filed against the proper party. The name of the owner of this ship is not
mentioned in the short-course title. It is not clear from the plaint as to against
whom the plaintiff sought the relief. The suit has not been properly framed."

DIVISION BENCH OF THE HIGH COURT OBSERVATION:

10. It is this conclusion and the finding of the learned Single Judge that stands accepted by
the Division Bench without however much elucidation on the same.

SUPREME COURT OBSERVATION:

11. In the appeal presently before us the cardinal issue that arise for consideration stands out
to be the applicability of the concept (SIC) Maritime Lien on the basis of the fixture
note as above stated and alternatively as to whether the fixture note by itself would
give rise to a right in rem thereby enabling the plaintiff to initiate proceedings under
Admiralty Jurisdiction of the High Court at Madras.

12. Before embarking on the discussions apropos above, certain notions as regards the
constituents of Maritime Liens ought to be noticed: the Encyclopedia Britannica has the
following to state as regards Maritime Lien and the same reads as below:
 "Maritime liens: although admiralty actions are frequently brought in personam,
against individual or corporate defendants only, the most distinctive feature of
admiralty practice is the proceeding in rem, against maritime property, that is, a
vessel, a cargo, or "freight", which in shipping means the compensation to which a
carrier is entitled to the carriage of cargo”.

13. Maritime liens can arise not only when the ship is charged with a maritime tort such as
a negligent collision or time tort, such as a negligent collision or personal injury, but
also for salvage services, for general average contributions and for breach of certain
maritime contracts."

14. In Halsbury's Laws of England, the nature of the action in rem and the nature of the
action in personam is stated to be as below:

310. Nature of actions in rem and actions in personam. -- An action in rem is an action
against the ship itself,

15. In M.V. AL Quamar (supra), this Court spoke of two attributes of maritime lien as
noticed herein before. The International Convention for Unification of Certain Rules
relating to Maritime Liens and Mortgages at Brussels in 1967 defined the maritime lien to
be as below:

a. wages and other sums due to the master, officers and other members of the vessel's
complement in respect of their employment on the vessel;

b. port, canal and other waterways and pilotage dues;

c. claims against the owner in respect of loss of life or personal injury occurring,
whether on land or on water, in direct connection with the operation of the vessel;

d. claims against the owner based on tort and not capable of being based on contract, in
respect of loss of or damage to property occurring, whether on land or on water in
direct connection with the operation of the vessel;

e. claims for salvage, wreck removal and contribution in general average.

16. Incidentally, the Admiralty Court Act, 1861, read with the International Convention for
Unification of Certain Rules relating to Maritime Liens and Mortgages, Brussels, 1926
read with Brussels Arrest (Of Seagoing Ships) Convention 1952 and Brussels Maritime
Liens Convention1967 clearly indicates that a claim arising out of an agreement
relating to the use and/or hire of the ship although a maritime claim would not be
liable to be classified as maritime lien.

17. Mr. C.A. Sundaram, Senior Advocate, appearing for the respondent, on the other hand
very strongly contended that even assuming that an agreement had come into effect
between the owner and the disponent owner but unless the charter was by demise,
whereby the possession and control of the vessel has to be given to the disponent
owner, question of enforcing the same is an action in rem and against the res would
be rather futile.
18. Even, however, assuming the agreement has in fact been entered into by the disponent
owner, unless sufficient evidence is laid that the charter was by demise, whereby the
possession and control of the vessel were given to the disponent owner, the question of
pursuing the cause of action against the vessel would not arise. Needless to add that
charter parties are of three kinds; (a) Demise Charter; (b) Voyage Charter; and (c) Time
Charter. Whereas in demise charter the vessel is given to the charterer who thereafter
takes complete control of the vessel including manning the same, in both voyage charter
and time charter, master and crew are engaged by the owner who act under owner's
instructions but under the charterer's directions. Simply put, voyage charter is making
available the vessel for use of carriage for a particular voyage and the time charter
correspondingly is where the vessel is made available for carriage of cargo for a fixed
period of time.

19. In the contextual facts, apart from the fixture note, no other documentary support is
available as to whether ownership arose through a charter by demise and possession
and control of the vessel has already been given to the disponent owner.

20. The facts disclose that the disponent was an intending charterer of the vessel from the
owner and it is on the expectancy of such a contract, the fixture note was issued. There
was as a matter of fact no charter party or agreement with the charterer and some
eventuality in future is stated to be the basis of the cause of action.

21. It is on this score we think it expedient to record that even upon assumption of the
appellant's case at its highest, no credence can be attached thereto. The disponent owner
was not a demise charterer.

22. In our view there is no sufficient evidence available as regards the action in rem
making the vessel liable in the contract said to have been entered into, as recorded in
the fixture note.

23. It is in the nature of a breach of contract and liability of the vessel would not arise,
however, we are not expressing any opinion as regards the maintainability of an
action in personam or its eventual success.

24. In as much as the claim in the present case arises out of contract dehors a maritime
lien, no action in rem is permissible, neither a suit in the original jurisdiction of the
Madras High Court can be maintained against the vessel.

25. In the wake of the aforesaid, this appeal fails and is dismissed.