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Sauce for the goose is Sauce for the gander – Determining priority of Costs and Interests on Wages

Updated: Dec 15, 2022

Shiv Iyer, Partner | Ankita Sen, Senior Associate | Bodhisattwa Majumder, Associate

 

In a recent landmark decision in Slovesnov Vadym & Ors. v. OSV Beas Dolphin [1], the Bombay High Court ruled that the costs and interests associated with a claim for unpaid crew wages will be given same priority as a maritime claim for unpaid wages.


The ruling came to be passed by the High Court in an application filed by erstwhile crew members of the vessel OSV Beas Dolphin (“Vessel”) for payment out of their claim towards crew wages, interest and costs, out of the sale proceeds of the Vessel. The crew members had filed their respective suits for payment of their dues and had been granted decree under Order XIII-A of the Code of the Civil Procedure, 1908, for the principal sum, interest and costs. Hal Offshore, who was a rival claimant objected to the payment of costs and interest to the crew members. In any event, Hal Offshore pressed upon payment of wages to the crew members in Indian Rupees, by converting the Suit claim in US Dollars to Indian Rupees, taking the date of decree as the date for currency conversion.


In the aforesaid backdrop, the Court decided the following issues:


(1) Whether the interest awarded by a court on unpaid wages from the date of institution of the suit till payment/realization also commands the same priority as crew wages?


(2) Whether the costs awarded by a court on unpaid wages from the date of institution of the suit till payment/realization also commands the same priority as crew wages?


(3) In an event where monies are to be paid in INR, what should be the date for determining the rate of conversion?


Arguments made by parties concerned:

Applicants submitted that the decretal sum awarded by the Court cannot be divided into (a) the sum adjudicated by the Court and (b) the interest awarded by the Court. The legal position across jurisdictions entail that the interest and cost component of a claim for wages are entitled to the same priority as wages.


On the other hand, it was submitted on behalf of Hal Offshore that Section 9 (1) (a) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (“Admiralty Act”) covers only a claim for wages and not costs and interest. A distinction was attempted to be drawn between a stipulation for payment of interest under the contract of employment and award of interest by the court. It was argued that if costs and interests are treated as a priority, it will have cascading adverse effect on the claims of the other claimants who stand low on priority. Regarding the conversion of foreign currency to Indian Rupees, it was urged that the proper date for fixing the rate of exchange is the date of the decree.


Rulings of the Hon’ble Court:

The Hon’ble Court ruled that the costs and interest associated with a maritime claim would have the same priority as the claim and cannot be dissected from it. While doing so, the Court made the following key observations:


1. In an admiralty action, crew wages command the highest priority among other maritime claims. The same is reflected from Section 9(1)(a) of the Admiralty Act.


2. To ensure timely payment of crew wages, the legislature has provided a definite timeline for payment of crew wages, as is evident from the following:


a. Under Section 129(2) of the Merchant Shipping Act, 1958, in case the Master/Owner/Agent fails to pay the crew timely without reasonable cause, they are liable to remit twice the pay from the day of discharge (maximum up to 10 days).


b. Under Rule 9 of the Merchant Shipping (Maritime Labour) Rules, 2016, the shipowner shall make payment due to seafarers working on board their ships within monthly intervals.


3. Interest on unpaid crew wages arises because wages were not paid when they were due. While awarding interest, the court is aware of all circumstances for the claimant’s entitlement to interest. Therefore, the interest awarded by the court for unpaid wages will be considered a part of the wages.[2]


4. In the same vein, costs associated to bring an action for unpaid wages are awarded by the court to compensate the crew member who had to undergo the process of litigation. Such costs will be treated in the same manner as the claim for which the action has been initiated. Costs cannot be dissected and be treated as a separate maritime claim as the same would be contrary to Section 4(1) of the Admiralty Act.


Regarding the conversion of US Dollars into Indian Rupees, the Court[3] held that where money is payable in a foreign currency, the claimant has the option to claim the same in Indian Rupees or in foreign currency. In the present case, the decree was passed in US Dollars, since there is no impediment in receiving the decretal sum in US Dollars, there is no question of converting the same to Indian Rupees.


In any event, the Court held that where a crew member has agreed to receive wages in a specified currency, he shall be entitled to payment as the exchange rate current at the place where the payment is made and not at the time of decree.


Mr. Shiv Iyer (Partner), Capt. Vinod Kumar and Ms. Arpeeta Panvalkar (Junior Associates) from Renata Partners represented the Applicants/Plaintiffs and obtained the aforesaid order in Interim Application 9499 of 2020 in COMAS 30 of 2022.

 

[1]Interim Application (L) No. 9499 of 2020 in Commercial Admiralty Suit No. 30 of 2022, Order dated 29th November, 2022.

[2] Patrick Stevedores No. 2 Pty Ltd v. The Proceeds of Sale of the vessel MV “Skulptor Konenkov” No. NG 495 of 1995; The “Songa Venus” [2020] SGHC 74 at ¶22; Chrisomar Corporation v. MJR Steels Pvt. Ltd. and Anr. (2018) 16 SCC 117.

[3]Relying on the judgment in FORASOL v. Oil and Natural Gas Commission 1984 (Supp) SCC 263

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