Supreme Court clarifies appealability of order for adding a party in Admiralty Suit: Owners and Parties Interested in the Vessel M.V. Polaris Galaxy vs. Banque Cantonale De Geneve (23 September 2022)

Introduction

Date of the Judgment: 23 September 2022
Citation: (2022) INSC 820
Judges: Indira Banerjee, J. and A. S. Bopanna, J.

Can a High Court’s order to include a party in an admiralty suit be challenged in a higher court? The Supreme Court of India recently addressed this important question, clarifying the scope of appeals in admiralty cases. This judgment revolves around a dispute over the delivery of marine fuel and whether a party involved in the transaction should be included in the suit.

The Supreme Court, in this case, examined whether an order by a single judge of the High Court to add a party to an admiralty suit could be appealed before a division bench of the same High Court. The court considered the interplay between the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, and the Commercial Courts Act, 2015, to clarify the appeal process in such cases.

The judgment was authored by Justice Indira Banerjee, with Justice A. S. Bopanna concurring.

Case Background

The case involves a dispute arising from a transaction for the purchase and delivery of marine fuel oil. M/s Galaxy Marine Services Limited, the owner of the vessel M.V. Polaris Galaxy, had chartered the vessel to Profitable Wealth Inc., who in turn sub-chartered it to Gulf Petroleum FZC. Gulf Petroleum FZC contracted with Indian Oil Corporation Limited (IOC) to purchase marine fuel, which was to be financed by Banque Cantonale de Geneve (the Respondent Bank). The fuel was to be delivered to Aramco at Singapore.

The Respondent Bank issued a Letter of Credit to IOC for USD 6,050,000.00. The Bill of Lading, issued on 21st May 2020, named the Respondent Bank as the consignee and Gulf Petrochem FZC as the ‘Notify Party’. The cargo was discharged at Singapore between 9th and 10th June 2020 to Chevron, as instructed by Gulf Petroleum FZC. However, the Respondent Bank did not receive payment for the fuel, leading to the dispute.

The Respondent Bank filed an admiralty suit against the vessel’s owners, claiming mis-delivery of cargo and seeking compensation. The Commercial Division of the Madras High Court ordered the inclusion of Gulf Petroleum FZC as a necessary party to the suit. This order was then challenged in the Commercial Appellate Division of the High Court, which set aside the single judge’s order.

Timeline

Course of Proceedings

The Respondent Bank initiated an admiralty suit in the Commercial Division of the Madras High Court, seeking to recover losses due to the alleged mis-delivery of cargo. The Commercial Division (Single Bench) of the High Court ordered the Respondent Bank to include Gulf Petroleum FZC as a necessary party, noting that the delivery of goods was based on instructions from Gulf Petrochem, the customer of the plaintiff. The Single Bench reasoned that Gulf Petrochem was a key player in the transaction and its presence was necessary for proper adjudication of the suit.

The Respondent Bank appealed this order to the Commercial Appellate Division (Division Bench) of the High Court, which overturned the Single Bench’s decision. The Division Bench held that Gulf Petrochem was not a necessary party, emphasizing that the primary document was the Bill of Lading, which named the Respondent Bank as the consignee. The Division Bench stated that the carrier was obligated to deliver the goods to the consignee or as per the consignee’s instructions. The Division Bench also imposed costs of Rs. 1,50,000 on the Appellant.

The owners of the vessel appealed to the Supreme Court, challenging the decision of the Division Bench.

Legal Framework

The Supreme Court considered the following legal provisions:

• Section 4(1)(g) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017: This section defines maritime claims and includes agreements relating to the carriage of goods on a vessel.
• Section 5 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017: This section allows the High Court to order the arrest of a vessel to secure a maritime claim.
• Section 12 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017: This section states that the provisions of the Code of Civil Procedure, 1908, apply to proceedings before the High Court under the Admiralty Act, unless they are inconsistent with the Act.
• Section 14 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017: This section provides for an appeal from any judgment, decree, final order, or interim order of a single judge of the High Court to a division bench of the High Court.
• Section 2(c) of the Commercial Courts Act, 2015: Defines ‘commercial dispute’ to include admiralty and maritime law issues.
• Section 7 of the Commercial Courts Act, 2015: This section states that all suits and applications relating to commercial disputes of a specified value filed in a High Court having ordinary original civil jurisdiction shall be heard and disposed of by the Commercial Division of that High Court.
• Section 13 of the Commercial Courts Act, 2015: This section governs appeals from the orders of Commercial Courts and Commercial Divisions, restricting appeals to orders specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908.
• Section 16 of the Commercial Courts Act, 2015: This section states that the provisions of the Code of Civil Procedure, 1908, shall apply to suits in respect of commercial disputes, as amended by the Commercial Courts Act.
• Order I Rule 10(2) of the Code of Civil Procedure, 1908: This rule allows the court to add any person as a party at any stage of the proceedings if their presence is necessary for effective adjudication.

The court also discussed the Hague Rules, Hague-Visby Rules, Hamburg Rules, and Rotterdam Rules, which are international conventions governing the liability of carriers in respect of cargo covered by bills of lading.

The court noted that the Bill of Lading serves as a receipt for the goods, evidence of the contract of carriage, and a document of title.

Arguments

Appellant’s Submissions:

• The Appellant argued that Gulf Petrochem is a necessary party since the delivery of goods was based on their instructions.
• The Appellant contended that Gulf Petrochem, being the customer of the Respondent Bank, is a key player in the transaction.
• The Appellant submitted that whether the Respondent Bank received any payment from Gulf Petrochem is an issue that can only be determined at trial, requiring Gulf Petrochem’s presence.
• The Appellant argued that Section 14 of the Admiralty Act provides for appeals from an interim order of a Single Judge of a High Court under the Admiralty Act which means an interim order in relation to an action in rem. Once the owner of the Vessel enters appearance and submits to the jurisdiction and provides security for release of the Vessel, the Admiralty Action proceeds to trial as an action in personam as in any other suit.

Respondent’s Submissions:

• The Respondent Bank argued that the Bill of Lading is the primary document, and as the named consignee, they are entitled to delivery of the goods.
• The Respondent Bank contended that the carrier was obligated to deliver the goods to the consignee or as per the consignee’s instructions.
• The Respondent Bank submitted that transactions between them and Gulf Petrochem, or between Gulf Petrochem and other parties, are irrelevant to their claim against the carrier.
• The Respondent Bank argued that Gulf Petrochem was neither a necessary nor a proper party to the suit.
• The Respondent Bank argued that Section 14 read with Section 12 of the Admiralty Act, 2017 demonstrates legislative intent to permit appeals from any interim order passed by the Single Judge of a High Court exercising admiralty jurisdiction to a Division Bench of that High Court without any restriction or limitation.

Innovativeness of the argument: The Appellant’s argument that the Admiralty action proceeds as an action in personam after the vessel owner enters appearance is a nuanced point that challenges the notion that all interim orders in admiralty cases are appealable.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. Whether an appeal lies to the Commercial Appellate Division of the High Court from an order of the Commercial Division (Single Bench) of the same High Court for addition of a party, in an Admiralty Suit governed by the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.
2. If it is held that, an order in an Admiralty Suit, for addition of party, passed by the Commercial Division of the High Court, is appealable to the Commercial Appellate Division, the question which would follow is, whether the Commercial Appellate Division of the High Court (Division Bench) should have allowed the appeal and set aside the order of the Commercial Division (Single Bench) adding Gulf Petroleum FZC as defendant in the suit?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court relied on MV Elizabeth v. Harwan Investment and Trading Pvt. Ltd. [1993 Supp (2) SCC 433] to support the view that admiralty actions proceed as actions in personam after the vessel owner enters appearance.
• The Court cited Kandla Corporation v. OCI Corp. [2018) 14 SCC 715] to emphasize that appeals under the Commercial Courts Act are restricted to orders enumerated under Order XLIII of the CPC.
• The Court distinguished the facts of Magic Frames v. Radiance Media P Ltd [2019 SCC Online Mad 38929], noting that a practice note cannot restrict a statutory enactment.
• The Court referred to Ashoka Marketing Ltd. v. Punjab National Bank [(1990) 4 SCC 406] to discuss the resolution of conflicts between two special enactments having non-obstante clauses.
• The Court cited CTO vs. Binani Cements [2014 SCC Online SC 140] to explain the principle of harmonious construction between general and special laws.
• The Court relied on Anil Kumar Singh vs. Shivnath Mishra [(1995) 3 SCC 147] to support the view that a person can be added as a party if their presence is necessary for a complete decision.
• The Court referred to Cho Yang Shipping Co. Ltd. v. Coral (UK) Ltd. [(1997) 2 Lloyd’s Rep 641] to highlight that the Bill of Lading is excellent evidence of the terms of the contracts.
• The Court cited Carver on Bills of Lading (2005) to define a bill of lading.
• The Court cited Scrutton on Charterparties and Bills of Lading (1984) to highlight that the Bill of Lading is excellent evidence of the terms of contract and in the hands of an endorsee, is the only evidence.
• The Court cited Sir Richard Aikens “Bills of Lading” (2006) to highlight that a Bill of Lading is generally easier to recognize than to define.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure effective adjudication of the dispute and to prevent unnecessary delays in admiralty proceedings. The Court recognized that Gulf Petrochem was not a stranger to the transaction and that its presence was necessary for a complete and final decision. The Court also emphasized the importance of adhering to the statutory framework for appeals under the Commercial Courts Act, which restricts appeals to specific types of orders. The Court also noted that the Division Bench had imposed costs of Rs.1,50,000/- on the Appellant, who had not even made any formal application for addition of Gulf Petrochem as party.

Fact:Law

The Court’s reasoning process can be summarized as follows:

Ratio Decidendi

The Supreme Court held that an order for adding a party under Order 1 Rule 10(2) of the Code of Civil Procedure, 1908, in an admiralty suit is not appealable under Section 13 of the Commercial Courts Act, 2015. The Court clarified that Section 14 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, does not override the limitations on appeals imposed by the Commercial Courts Act. The Court also held that Gulf Petrochem was a proper party to the suit, whose presence was necessary for effective adjudication.

Conclusion

The Supreme Court’s judgment clarified the appealability of orders for adding a party in admiralty suits, emphasizing the need to adhere to the statutory framework for appeals under the Commercial Courts Act. The Court’s decision also highlighted the importance of ensuring that all necessary parties are present for effective adjudication of disputes. The judgment provides valuable guidance for admiralty proceedings and clarifies the interplay between the Admiralty Act and the Commercial Courts Act.