Shiv Iyer, Partner | Ankita Sen, Senior Associate | Anitta Varghese, Junior Associate
The Bombay High Court, in the recent case of Coastal Marine Construction and Engineering Ltd v MV Lima V & Ors.[1], inter alia, dealt with the issue of applicability of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (“Admiralty Act”) to a vessel registered under the Inland Vessels Act 1917 (“Inland Vessels Act”). The judgement came to be passed in an application filed by the vessel owners for vacating the order of arrest passed against the vessel MV Lima-I.
Brief of Facts:
Coastal Marine Construction and Engineering Ltd. (“Coastal Marine”) hired the Vessel MV Lima-I (“Vessel”) from Snexa Projects (“Owners”) under a Purchase Order. Coastal Marine alleged that Owners have breached the terms of the Purchase Order by delaying delivery of the Vessel and delivering a non-operational vessel despite payment of hire by Coastal Marine.
Coastal Marine sought arrest of the Vessel for the refund of the hire charges and recovery of expenses incurred by it to make the Vessel operative. Pursuant to the same, a Ld. Single Judge of Bombay High Court passed an ex-parte order of arrest against the Vessel. Subsequently, Owners preferred an application for setting aside the ex-parte order of arrest.
The following issues came to be considered by the Court:
1. Whether the Admiralty Act applies to the Vessel which was registered under the Inland Vessels Act?
2. Whether Coastal Marine’s claim for both return of the hire charges and expenses incurred to make the Vessel operational, is justifiable?
Owners’ Submissions:
1. The proviso to section 2(1) of the Admiralty Act excludes an inland vessel from the purview of the Act. The Vessel being registered under the Section 19F of the Inland Vessels Act, thus could not have been arrested by invoking the provisions of the Admiralty Act.
2. Coastal Marine, having utilized the services of the Vessel and that too beyond the contract period, cannot seek refund of both hire charges and expenses allegedly incurred for hiring tugs.
Coastal Marine’s Submissions:
1. Coastal Marine submitted that as per the definition of ‘inland vessel’ under section 2(1)(a) of the Inland Vessels Act, the sine qua non for designating a vessel as an inland vessel is that it ordinarily plies on inland waters. Owners have not specifically pleaded that the Vessel ordinarily plies in inland waters. Mere registration of the Vessel under the Inland Vessels Act has no consequence.
2. Owners have admitted and apologized for the delayed delivery. The utilization of tugs by Coastal Marine to functionalize the Vessel was essentially a measure in mitigation of damages. Therefore, refund of hire charges plus the expenses is justifiable.
Decision of the Court:
1. The Court perused the proviso to section 2(1) of the Admiralty Act which excludes the application of the said Act to an inland vessel ‘defined’ under section 2(1)(a) of the Inland Vessels Act. The Court interpreted the said proviso by giving effect to the legislative intent behind the term ‘defined’ instead of the term ‘registered’ in the said proviso. The Court observed that registration of a vessel under Inland Vessels Act is not determinative of the character of an inland vessel, but the defining element is that it ordinarily plies within inland waters.
2. The Court also observed that the question whether the Vessel plied ordinarily within the inland waters cannot be ruled on the basis of the abstract doctrine of onus of proof, without examining the details of previous voyages undertaken by the Vessel and the Vessel logbook. Such an issue is thus a triable issue. Hence, the Owners’ contention that the Vessel is outside the purview of Admiralty Act was rejected.
3. After considering the intent of the parties to the contract and the peculiar circumstances, the Court held that Coastal Marine would not be justified in claiming return of hire, along with with expenses incurred to make the Vessel operational. Once the performance of the contract is accepted and measures to mitigate damages is employed by the non-defaulting party, the remedy of that party would be restricted to damages.
Therefore, the interim application was partly allowed by scaling down the quantum of the security to the expenses incurred by Coastal Marine to make the Defendant Vessel functional.
[1] Interim Application No.105 of 2022 in Com. Admiralty Suit No.82 of 2021, Order dated 28th February 2023.