Holding

The settlement did not effect a novation; s.63 applies, the original contract subsists, and because ownership at the time of arrest was not established, the appellant's maritime claim against the original owner survives.

Summary

Chrisomar Corporation supplied bunkers to the vessel M.V. Nikolaos‑S owned by Third Element Enterprises and sued for unpaid invoices, leading to the vessel's arrest. The parties entered a settlement on 18 January 2000, but the vessel was re‑arrested on 2 May 2000 when payment was still outstanding. Respondent No. 1 (MJR Steels) claimed to have acquired title to the vessel before the re‑arrest and argued that the settlement amounted to a novation under s.62 of the Contract Act, extinguishing the original claim. The Supreme Court held that the settlement did not constitute a novation but was a partial settlement governed by s.63, that a claim for necessaries is a maritime claim but not a maritime lien, and that ownership at the date of arrest was not proved. Consequently, the original contract remained enforceable and the decree in favour of the appellant was restored.

Issues considered

The settlement agreement of 18 Jan 2000 – does it amount to a novation under s.62 of the Contract Act or merely a settlement under s.63?
Whether a claim for necessaries supplied to a vessel creates a maritime lien or only a maritime claim.
On which date must ownership of the vessel be determined for the purpose of arrest – the date of suit institution or the date of arrest.
Whether the respondent proved change of ownership of the vessel on 2 May 2000.
Applicability of international conventions (1999 Arrest of Ships, Brussels Convention 1952) and the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 to the present facts.

Legislation cited

Admiralty Court Act, 1840
Admiralty Court Act, 1861
Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017s. 12, s. 17, s. 2(1)(f), s. 2(1)(g), s. 4, s. 5, s. 6, s. 9
Brussels Convention relating to the Arrest of Sea‑Going Ships, 1952
Code of Civil Procedure
Colonial Courts of Admiralty Act, 1890
Colonial Courts of Admiralty Act, 1891
Indian Contract Act, 1872s. 62, s. 63
International Convention on Maritime Lien and Mortgages, 1993
International Convention on the Arrest of Ships, 1999

Subjects

Admiralty lawMaritime claimMaritime lienNovationContract Act 1872Vessel arrestOwnership of vesselSection 62Section 63International Convention on Arrest of ShipsBrussels Convention

Judgment

[2017] 14 S.C.R. 17

CHRISOMAR CORPORATION A
v.
MJR STEELS PRIVATE LIMITED & ANR.
(Civil Appeal No. 1930 of2008)
SEPTEMBER 14,2017 B

[R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.]
Contract Act, I872 - ss.62, 63 - Applicability of.:.. Vessel in
question owned by one Third Element Enterprises, a Cyprus
company :-- Appellant-plaintiff supplied bunkers and other C
necessaries to the vessel and raised invoices which were not paid
bv Third Element - Admiralty suit filed by appellant praying for
arrest of the vessel - Vessel arrested - Subsequently, howeve1;
appellant did not proceed with the matter as the parties had reached
.an out of court settlement/agreement dtd. I 8. I .2000 - But, since
no payment was made to the appellant, the vessel was re-arrested D
on 2.5.2000 - Respondent no.I filed written statement in the suit
claiming that it had purchased the vessel through successive transfer
of title in the vessel hence, no cause of action survived against
Third Element, the original owner - Single Judge of High Court
held that the plaintiffs were entitled to recover their dues- Division E
Bench reversed the order - Whether on the day of arrest respondent
no.I was the owner of the vessel and hence, appellant's claim against
the original owner, Third Element on the date of institution of the
suit would not lie -Also, whether in view of s. 62 there was a novation
of the original agreement as the settlement dtd. I 8.1.2000 was acted
upon and therefore, the original agreement under which payment F
was due to the appellant need not be performed - Held: For a
contract that is altered in material particulars, to fall u/s.62 the
alieration must go to the very root of the original contract and
change its essential character, so that the modified contrac;t must
be read as doing away with the original contract - However, in the G
present case, the second agreement/settlement dealt with one leg of
the original transaction, i.e. the leg ofpayment which was not made,
while keeping the original transaction alive- Settlement read as a
whole does not amount to novation of the original agreement - s. 63
would apply to the facts of the present case - Further, respondent
H
17
18 SUPREME COURT REPORTS [2017] 14 S.C.R.

A no. I failed to prove that there was a change of ownership of the
vessel in its favour on the date of arrest i.e. on 2.5.2000 - Judgment
of High Court is set aside and the decree of trial court is restored -
Constitution of India - Art. 372 - The Admiralty (Jurisdiction and
Settlement of Maritime Claims) Act, 2017 - s.2(1)(/), (g) and ss. 4,
B 5, 6, 9, 12, 17 - Brussels Convention of 1952- Art. l (k) -
International Convention of Maritime Lien and Mortgages, 1993-
Arts.4, 8- Brussels Convention relating to the Arrest of Sea-Going
Ships, 1992- International Convention on the Arrest of Ships, 1999-
Art.3(J)(a) - Letters Patents of 1823, 1862 and 1865 - Admiralty
Court Acts, 1840 and 1861 - Colonial Courts of Admiralty Act,
C 1890 - Colonial Courts of Admiralty (India) Act,1891- Supreme
Court of Judicature (Consolidation) Act, 1925 -Administration of
Justice Act of 1956 - Supreme Court Act of 1981.
Admiralty law - Maritime claim and Maritime lien - Difference
between - Plea of appellant that the necessaries supplied by it to
D the vessel in question were not only maritime claim but also maritime
lien on the vessel - Held: Important materials wherever supplied to
a ship for her operation/maintenance would fall within the definition
of a maritime claim - A maritime lien, on the other hand, attaches to
the property of the vessel whenever the cause of action arises, and
travels with the vessel and subsists whenever and wherever the
E action may be commenced - A claim for necessaries supplied to a
vessel does not become a maritime lien which attaches to the
vessel - Brussels Convention of 1952 - Art.I (k).
Admiralty law - Of India and England - History of -
Discussed.
F
Admiralty law - Maritime claim - When can be asserted -Held:
A maritime claim can be asserted only at the time the arrest of the
vessel is effected and not at the time of the institution of the suit -
International Convention on the Arrest of Ships, 1999 -Art.3(l)(a).
G Allowing the appeal, the Court
HELD: 1.1 Admiralty law in England, as was held by Lord
Halsbury in Currie v. M'Knight, is derived from the laws ofOleron
and other ancient maritime codes like the Rhodian Sea Law, the
Basilika, the Assizes of Jerusalem, the Baltic Laws of Wisbuy
H and the Hanseatic Code. In England, the common law courts could
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 19
LIMITED & ANR.

not give effective redress to cases which arose in admiralty, which A
were then left to the jurisdiction of specialist admiralty Judges.
By the 18'& Century, the admiralty jurisdiction had fallen into "a
feeble and neglected condition, and for long its proceedings
excited no attention". The Admiralty Court Act, 1840 was the
first of a series of statutes extending and defining the jurisdiction B
of the High Court of Admiralty in England. This was followed by
the 1861 Admiralty Court Act and various subsequent enactments
which were consolidated by the Supreme Court of Judicature
(Consolidation) Act, 1925. By the Administration of Justice Act
of 1956, the admiralty jurisdiction of the High Court was further
widened and the Supreme Court Act of 1981 now defines what C
the admiralty jurisdiction of the High Court in England is. [Para
11) (34-B-D]
Currie v. M'Knight 1897 AC 97 - referred to.
1.2 Insofar as our law is concerned, the admiralty law of
the chartered High Courts has historically been traced to the · D
charters of 1774 and 1798 as subsequently extended and clarified
by the Letters Patents of 1823, 1862 and 1865. The Admiralty
Court Act, 1840 and 1861, and the Colonial Courts of Admiralty
Act, 1890 and 1891 essentially stated what the admiralty law in
this country is, and these enactments continued as existing laws E
under Article 372 of the Constitution of India. The Republic of
India has finally woken up to the need for updating its admiralty
law. The Admiralty (Jurisdiction and Settlement of Maritime
Claims) Act, 2017 has been made by Parliament and has received
the assent of the President on 9.8.2017, though it has not yet
been brought into force. In this Act, "maritime claim" is defined F
in Section 2(1)(t) as being a claim referred. to in Section 4 and a
"maritime lien" is defined in sub-section (g) of 2(1). [Paras 12, .
13) (34-E-F; 36~C-D]
1.3 Under Section 5 of the 2017 Act, the High Court may
order for the arrest of a vessel which is within its jurisdiction for ·G
the purpose of providing security against a maritime claim. Under
Section 6 of the said Act, the High Court may also exercise
admiralty jurisdiction by an order in personam in respect of the
maritime claims referred to in Section 4. Section 9 of the Act
sets out the inter se priority of maritime liens, but in so doing H
20 SUPREME COURT REPORTS [2017] 14 S.C.R.

A also informs that they are restricted to five subject matters only.
Section 12 states that the Code of Civil Procedure is to apply in
all proceedings before the High Court insofar as it is not
inconsistent or contrary to the provisions of the Act. By Section
17, the Admiralty Court Acts of 1840 and 1861 and the Colonial
B Courts of Admiralty Acts of 1890 and 1891 stand repealed. Also,
the Letters Patent of 1865, insofar as it applies to the admiralty
jurisdiction of the Bombay, Calcutta and Madras High Courts,
also stands repealed. An admiralty action in the courts of India
commences against a vessel to enforce what is called a "maritime
claim". Though India is not a signatory to the Brussels
C Convention of 1952, a long list of maritime claims is given in
Article 1 thereof. Sub-clause (k) of Article 1 states that important
materials wherever supplied to a ship for her operation or
maintenance would fall within the definition of a maritime claim.
A maritime lien, on the other hand, attaches to the property of
D the vessel whenever the cause of action arises, and travels with
the vessel and subsists whenever and wherever the action may
be commenced. [Paras 14-16) [39-B; 40-F-H; 41-AJ
1.4 The International Convention on Maritime Lien and
Mortgages, 1993 defines maritime liens in Article 4. Article 8
states the characteristics of such liens. It is clear that in our
E country at least claims for necessaries, though maritime claims,
do not raise a maritime lien. [Paras 21-23)[48-B-C, E-F; 47-C-D)
Bailey Petroleum Company v. Owners and parties
interested in the vessel M. V. Dignity (Decision of
Calcutta High Court) (1993) 2 CHN 208 - approved.
F
2.1 The next important aspect that was argued was that the
ownership of the vessel to enforce a maritime claim has to be
seen at the stage of institution of the suit and not at the stage of
arrest. The general rule in our country as to what crystallises on
the date of a suit is reflected in Rameshwar case. However, Article
G 3(l)(a), International Convention on the Arrest of Ships, 1999
which is in two parts states- First, arrest is only permissible of
any ship if a maritime claim is asserted against the person who
owned the ship at a time when the maritime claim arose for which
the owner is liable, and second, that the same ship owner should
H be the owner of the ship when the arrest is effected. India is not
'CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 21
LIMITED & ANR.

a signatory to the aforesaid Convention, yet following M.V. A
Elisabeth case, this Convention becomes part of our national law
and must, therefore, be followed by this Court. Thus, Article
3(l)(a) sets the controversy at rest because a maritime claim can
be asserted only at the time the arrest is effected and not .at the
time of the institution of the suit. It is, therefore, clear that the B
relevant date on which ownership of the vessel is to be
determined is the date of arrest and not the date of institution of
the suit.[Paras 26, 28) [53-B; 55-A-C]
Rameshwar and Others v. Jot Ram and others [1976] 1
SCR 847 - relied on.
c
M V. Elisabeth and Others v. Harwan Investment and
Trading Private Limited (1993) Suppl. 2 SCC 433 :
[1992] 1 SCR 1003 - relied on.
Monica S.(1967) 2 Lloyd's Rep. 113 ; Re, Aro Cop
Limited 1980 1 All ER 1067- held inapplicable. D
2.2 On facts, a perusal of the agreement would show that
so far as the appellant was concerned, performance was over-
namely that a certain quantity of bunkers had in accordance with
the original agreement been supplied. .Indeed this is expressly
recited in the later agreement. It is only performance under the E
original agreement that was lacking from the side of the owner of
the vessel, namely Third Element Enterprises. The very first
clause of the agreement shows that the ship owners confirm that
they owe to the appellant the original amount of the bunkers plus
interest plus legal costs, which amounts are parasitic on the
original invoice amount of US$ 94,611.25, and need. to be F
recovered in order to put the appellant in the same position as if
the original contract had been performed by Third Element
Enterprises. The agreement then goes on to state that since the
vessel was being chartered for a voyage from Bangkok and would
earn freight, the part of the freight amounting to the original G
in.voice amount plus interest plus legal costs would be paid directly
by the charterers of the vessel to the bank account of the
appellants. It is the appellant's case that Section 63 of the
Contract Act is attracted to the facts of the present case whereas
it is the respondent's case that Section 62 is so atti:acted, the
result being that the original agreement is substituted by a fresh H
22 SUPREME COURT REPORTS [2017] 14 S.C.R.

A · agreement. The respondent's case is that Section 62 applies,
since the original contract has been "altered". This being the
case, the original contract need not be performed. It is clear that
where parties to a contract agree to substitute a completely
different contract for the first, or to rescind a contract, the
B performance under the original contract and/or rescinded contract
comes to an end. When parties to a contract "alter" a contract,
the ciuestion that has to be answered is as to whether the original
contract is altered in such a manner that performance under it is
at an end. [Paras 29, 31-~3) [55-D-G; 56-C-E]
2.3 In order that a contract that is altered in material
C particulars fall under Section 62, it must be clear that the
alteration must go to the very root of the original contract and
change its essential character, so that the modified contract must
be read as doing away with the original contract. On the other
hand, Section 63 of the Contract Act would clearly apply to the
D facts of the present case. Illustration "c" to Section 63 is apposite.
The said illustration makes it clear that a promisee may accept
satisfaction from a third party which then discharges the promisor
from further performance of the original contract. [Paras 35-37)
[57-E, F-C, HJ
E 2.4 In the present case the original contract was performed
only by one party to the contract and not by the other, the second
agreement was entered into so that the promisee (i.e. the
appellant herein) may accept, instead of the original performance
of the agreement, any satisfaction which it thinks fit. Thus, the
agreement deals with one leg of the original transaction, the leg
F of payment which has not yet been made while keeping the original
transa.ction alive. The other clauses of the agreement buttress
this conclusion. Under clause 4, the ship owner would not sell
the vessel prior to the satisfaction of the aforesaid claim. And,
above all, under clause (6), if for any reason the said payment is
G not made, the appellant would be entitled to take all appropriate
legal steps, which included arrest of the vessel, for recovery of
the said amount. Even by clause (8), the original agreement was
kept alive. In the event that the ship was unable to proceed to
Bangkok, the appellant maintained its rights of recovery against
the shipowner and the vessel. If the original agreement had
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE . 23
LIMITED & ANR.

disappeared by novatio, there was no question of taking A
appropriate steps to arrest the vessel which was owned by the
ship owner who was the promisee and who had not yet performed
his part of the contract. A guarantee clause contained in clauses
7 an.d 8 was again only an additional string to the bow of payment.·
The fact that exclusive jurisdiction was given to the courts at B
Piraeus, Greece has to be read with clause 6 of the agreement.
Obviously, arrest of the vessel for recovering the af(lresaid
amount in case payment was not made could be at any port, and
not merely at Piraeus. For all these reasons, the aforesaid
agreement read as a whole does not amount to a novatio of the
original agreement, but was in fact entered into keeping the C·
original agreement alive in order to ensure that payment under
the original agreement was made to the appellants. In fact, the
agreement dated 18.1.2000 was not a settlement of the original
claim at a lesser amount. It was only a means of enforcing the
payment leg of the original transaction through a thifd party
0
charterer. Consequent upon the vessel not sailing to Bangkok
or the third party charterer failing to make payment, the original
obligation of the appellant continued, and was enforceable by the
arrest of the vessel. (Para 40] [59-C-H; 60-A-B]
2.5 It is settled law that an agreement such as the
agreement dated 18.1.2000 is not to be construed legalistically E
but is to be construed as ordinary businessmen would construe
it. Reading the agreement through the prism of a businessman's
eye, it is clear that all that the agreement does is to reinforce the
original agreement by seeing that the payment under the said
agreement is made. Therefore, the view taken by the Division F
a
Bench that there is novatio of the original agreement in the fact
circumstance of the present case is not acceptable. It is important
to remember that when Section 63 of the Contract Act is to be
applied, the High Courts in India have cautioned that, being a
wide departure from English law, the Section alone should be
enforced according to its terms and not in accordance with English G
law. (Paras 40, 42 and 44] (60-B; 61-D; 62-A-B)
Satya Jain and Others v. Anis Ahmed Rushdie and others
(2013) 8 SCC 131 : [2013) 3 SCR 319 - relied on.
New Standard Bank, Ltd. v. Probodh Chandra
H
24 SUPREME COURT REPORTS [2017] 14 S.C.R.

A Chakravarty AIR 1942 Cal 87; Anandram Mangturam
v. Bholaram Tanumal AIR 1946 Born 1 - approved.
Hi/las v. Arcos [1932) All ER 494 - referred to.
3. Even if the passage in Halsbury, cited by respondents,
is to be applied, it is obvious that the settlement terms spoken of
B must be made for good consideration, which is absent under
Section 63. Also, for such settlement to constitute a new and
independent agreement, it must put an end to the proceeding
which is thereby spent and exhausted; and it is for this reason
that the original cause of action is superseded altogether. On
c the facts of the present case by the order dated 25.1.2000, the
application in Suit No.1 of 2000 alone was dismissed for non-
prosecution, only interim orders were vacated and it was stated
that "the vessel shall cease to be under arrest as of now." It is
clear, therefore, that in accordance with the agreement dated
18.1.2000, the proceedings were riot put an end to. Neither was
D the original cause of action superseded. The moment there is a
breach of the settlement agreement, the appellants would be
entitled to take appropriate legal steps against the ship owner,
including the arrest of the vessel, which can only be if the original
contract still subs.ists. [Para 46) [62-G-H; 63-A-B]
E 4. On the facts of the present case, the very sum due under
the original contract continued to be due and payable under the
settlement agreement. The fact that interest and legal costs were
added would not amount in itself to superseding the original
contract, as these relate to payments under the original contract
F and put the promisee in the same position as if the contract had
originally been performed. The original agreement was also not
superseded but was only sought to be enforced, the manner of
performance being different. This being the case, the High Court's
conclusion that there was a novatio of the original agreement on
the facts of the present case is incorrect. [Para 50) [64-B-D)
G
5.1 Whether, on the date of arrest i.e. 2.5.2000, respondent
no. l happened to be the owner of the vessel, as was found by the
impugned judgment. The High Court strongly relied upon an
oral admission of PWl to the effect that respondent no.1 had
become the owner of the vessel sometime in April 2000. On
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 25
LIMITED & ANR.

going through the deposition of Mr. Stephen Livanos, it is clear A
that no such admission was ever made. The answers to questions
257 to 262 would clearly show that the witness's statement that
respondent no.I was the end buyer of the vessel was equivocal
at best, and was obviously hearsay as the answer to question 260
states that a lawyer in Greece had at some point of time told Mr. B
Livanos what happened with the vessel. To therefore conclude
from this oral evidence that the vessel had changed hands in
April, 2000 does not take the respondent's case very far.
However, the High Court also relied upon a notarized bill of sale
dated 14.4.2000, the notice of readiness of 15.4.2000, which was
accepted by the respondent at 11.00 A.M, and was followed by C
the delivery of possession of the vessel at 2.00 P.M. What is
important to note is that the signatory to the physical delivery
certificate was on behalf of Pennon Shipping Corporation, which
was only an agent of Third Element Enterprises, and not an agent
of Fairsteel. The High Court then went on to state that payment D
under the Letter of Credit was also made on 26.4.2000 and since
this would show that the property in the vessel was transferred
in April, 2000, no cause of action would survive against the new
O'\Yner of the vessel namely respondent no.I. The High Court
also went on to state that the transfers pleaded in the written
statement of respondent no.I, namely from Third Element E
Enterprises to Eastern Wealth Investment Limited and thereafter
to Fairsteel Corporation Limited after which Fairsteel sold and
transferred the vessel to respondent no.I, had not been proved
by respondent no.I, but that this did not affect the respondent's
c.ase. A bill of sale dated 27.4.2000 has been shown by which
Third Element Enterprises effected the first of these four sales F
to Eastern Wealth Investment Limited, only on 27.4.2000. This
sale has for its consideration "one US Dollar and/or other valuable
consideration" casting grave doubts about its efficacy in law. Be
. that as it may, since this sale is the first sale in the chain of sales
made ultimately to respondent no.I, it is obvious that the sale G
made by Fairsteelto respondent no.I could only have been after
this date. It is necessary to prove and explain each back to back
sale from which respondent no.I ultimately derives its title, in
accordance with its pleading in the written statement filed by it.
As has correctly been held by the High Court, there is no proof
H
26 SUPREME COURT REPORTS [2017] 14 S.C.R.

A of any of these back to back sales, and in point of fact the very
first sale from the original owner has taken place in favour of
Eastern Wealth after the High Court has found that the vessel
has been sold by Fairsteel to respondent no.1, which goes contrary
to the pleaded case of respondent no.1 itself. [Paras 52-54) [64-.
B D-F; 65-A-F]
5.2 With regard to the High Court finding that full payment
had been made under the Letter of Credit on 26.4.2000, the
respondent's own suit that was filed by it against Fairsteel on
9.5.2000 shows that no such payment had been made by the date
C of the filing of the said suit. Thus, it is clear that the High Court
was not correct in its view that it was proved by respondent no.1
that sale had taken place in April, 2000 by Fairsteel Corporation
to respondent no.1 by which respondent no.1 became the owner
of the vessel. It is clear, therefore, that respondent no. 1 has
failed to prove that there was a change of ownership of the vessel
D in its favour on the date of arrest i.e. on 2.5.2000. [Paras 55, 57)
(66-C; 67-A-Bl
The Di/mun Fu/mar (Decision of Singapore High
Court) (2003) SGHC 270 - distinguished.
Saba International Shipping and Project Investment
E Private Limited v. Owners and parties interested in the
Vessel M V. Brave Eagle, previously known as M V.
Lima-I and Others (Decision of Calcutta High Court)
(2002) 2 CHN 280; Juggilal Kamlapat v. N. V.
Internationale Crediet-En-Handels Vereeninging
'Rotter-dam', AIR 1955 Cal 65- approved.
F
Epoch Enterrepots v. M V. Won Fu (2003) 1 SCC 305 :
(2002) 3 Suppl. SCR 507 ; M V. Al Quamar v. Tsavliris
Salvage (International) Ltd. and Others (2000) 8 SCC
278 : (2000) 2 Suppl. SCR 440 ; Chand Godha v. Mir
Nawab Himayatalikhan Azamjah, (1963) 2 SCR 168 -
G relied on.
The Bold Buccleugh (1852) 7 Moo PCC 267
- referred to.
Roscoe s Admiralty Practice, 51h Edn. at Page 14
- referred to.
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 27
LIMITED & ANR.

Case Law Reference A
[1992) 1 SCR 1003 relied on Para 17
[2002) 3 Suppl. SCR 507 relied on Para 17
[2000) 2 Suppl. SCR 440 relied on Para 17
(1993) 2 CHN 208 approved Para 19
(2002) ·2 CHN 280 approved Para 20 B
. [1976) 1 SCR 847 referred to Para26
AIR 1955 Cal 65 approved Para 34
[1963) 2 SCR 168 . relied on Para 38
[2013) 3 SCR 319 relied on Para 41
AIR 1942 Cal 87 approved Para 44
AIR 1946 Born 1 approved Para45
c
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1930
of2008.
From the Judgment and Order dated 13 .09 .2006 of the High Court
at Calcutta in APD No. 244 of2005 arising out of Admiralty Suit No. 1
of2000. D
Shyam Divan, Sr. Adv., Shatadru Chakraborty, Ms. Surbhi Anand,
Ms. Harshita Verma, Ms. Sonia Dube (for Mis. Victor Moses &
Associates), Advs. for the Appellant.
Ratnanko Banerji, Sr. Adv., Amitava Majumdar, Ms. Damayanti,
Sen, Siddhartha Dave, Ms. Jemtiben A. 0, Senthil Jagadeesan, Ashok E
Mathur, Ad vs. for the Respondents.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. The present appeal raises several
interestfug questions which arise in admiralty law. The vessel, M.V;
Nikolaos-S, was owned by one Third Element Enteiprises, a Cyprus F
company, and was flying the flag ofthe Republic of Cyprus. The plaintiff
in the admiralty suit, who is the appellant before us, supplied bunkers
and other necessaries to the said vessel at the port of Durban on terms
and conditions agreed between the parties in November, 1999. According
to the plaintiff, the bunkers were received by the master of the vessel G
and services were rendered to the vessel as acknowledged by the master.
The plaintiff raised invoices on 26.11.1999 for US$ 94,611.25 which
have not yet been paid.
2. When the vessel docked in the port ofHaldia, the plaintiff filed
admiralty suit No.1 of 2000 in the Calcutta High Court praying for an
H
28 SUPREME COURT REPORTS [2017) 14S.C.R.

A arrest of the vessel because, according to the plaintiff, the necessaries
supplied to the vessel would not only amount to a maritime claim but
would also be a maritime lien on the vessel. By an order dated 6.1.2000,
the vessel was so arrested but nobody came forward for release of the
vessel at that point of time. It is only on 25.1.2000 that learned counsel
B appearing on behalf of the plaintiff approached the learned admiralty
Judge expressing the plaintiff's intention not to proceed with the
application for arrest as, according to him, the parties had reached an
out ofcourt settlement. The order passed on 25.1.2000 reads as follows:-
"The Court by an order dated January 6, 2000 directed that the
vessel known as M.V.Nikolaos - S was to be arrested. On the
c returnable date no one appeared on behalf of the respondents.
The directions for affidavits had been given on January l 0, 2000.
Today when the matter was called on for hearing, counsel
appearing for the petitioner submitted that an out of court
settlement has been reached between the parties and the
D petitioner was not inclined to proceed with the matter any further.
For these reasons, this application is dismissed for non prosecution.
All interim orders are vacated.
The vessel shall cease to be under arrest as of now."
E 3. It is important at this stage to advert to the agreement that was
entered into on 18.1.2000. Since both sides have argued extensively on
the aforesaid agreement, it is necessary to set it out completely. The
said agreement reads as follows:-
"AGREEMENT GUARANTEE
F In·Piraeus and at the offices of "LALLIS OUTSINOS
ANAGNOSTOPOULOS" Lawyers Maritime Consultants of
100, Kololotroni Street, Piraeus, this Tuesday the 18'11 January
2000, by and between:
A. CHRISOMAR CORPORATION, a company duly
G established and operating under the laws of Liberia,
maintaining an office in Greece (5 Solomou Str. Kifissia)
(hereinafter called Chrisomar), duly represented, for the
purpose of this agreement by its authorized lawyer Mr.
Dimitrios Voutsinos,
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 29
LIMITED & ANR. [R. F. NARIMAN, J.]

B. THIRD ELEMENT ENTERPRISES LTD, a company duly A
established and operating under the laws of Cyprus
(hereinafter called "THE SHIPOWNERS"), duly
represented for the purpose of this agreement by the
President of the Board of Directors, Mr. Sotirios Soulkas,
who also declared that he has the necessary authorization
B
and capacity to bind the company to this agreement by his
sole signature.
c. Sotirios Soukas, of 145 Filonos Str, Piraeus, the following
were stated and agreed.
WHEREAS c
1. The shipowners are the legal owners of the Cyprus flag
vessel Nikolaos S, Int. Sign: P 3 KT 6 ("the vessel") managed
in Greece by Suter Shipping and Trading Ltd.
2. Chrisomar has sold and delivered to the vessel in the port
of Durban a certain quantity of bunkers, on or about 26th D
November, 1999, Chrisomar has issued its invoice no. 99232/
15.12.1999 for the amount ofUSD 94,611.25, payable on
261h November, 1999 (Copy of the invoice is attached
herewith as app. I).
3. The owners have failed to pay the amount of the above E
invoice by the 26 1h November 1999 and consequently,
Chrisomar arrested the vessel in the port of Haldia, India
for security of the above claim.
THE PARTIES AGREE AS FOLLOWS
F
1. The shipowners hereby confirm that they owe to Chrisomar
USD 104,688.60, analysed as follows: USD 94,611.25 for
the invoice amount + USD 2, 177.3 5 for interest accrued +
USD 7,900.00 for legal costs.
2. The shipowners, through their President Mr. Sotirios Soukas,
represent to Chrisomar that (a) their vessel is due to be G
chartered out for a voyage from Bangkok, Thailand to ports
of West Africa as against a freight of about USD 35. 00 per
metric ton of cargo; (b) that if Chrisomar releases their
vessel from the above arrest shall be able to proceed to
H
30 SUPREME COURT REPORTS [2017] 14 S.C.R.

A Bangkok for loading and to perform the intended charter
voyage; (c) that the shipowners as soon as their vessel is
released from its arrest by Chrisomar shall include in their
recap and charter party with the intended charterers of their
vessel a clause that part of the freight amounting to USD
104,668.60 shall be paid directly by the charterers to
B
Chrisomar's bank account as follows:
ANZ GRINDLAYS BANK
21,AktiMiaouli, 18535 Piraeus
Swift: GRNDGRAA,
c
AIC No. 815142 USD 40632
In favour ofChrisomar Corp.
3. The above recap shall be faxed by the shipowners to
Chrisomar one ( l) working day after its conclusion.
D
4. The shipowners will not sell their vessel prior to the
satisfaction ofChrisomar's above claim and shall provide
Chrisomar with a report by fax of the movements of their
vessel every five (5) days.
5. The above payment shall be made in full and final settlement
E of Chrisomar's above claim per capital and costs.
6. If, for any reason the above amount is not paid to Chrisomar
within ten ( l 0) working days after the ships sailing from
the port of loading Bangkok or, the shipowners are in breach
of any of the representations and obligations set out in paras
F 2, 3 and 4 above then Chrisomar will be entitled to take all
the appropriate legal steps including the arrest of the vessel
for recovering the above amount or any higher one which
they may be entitled to.
7. Sotirios Soukas hereby guarantees to Chrisomar and in
G favour of the shipowner the due payment of the above
amount, working the right of division and exclusion i.e. he
adlnits that he will pay amounts due to Chrisomar without
the latter having first to enforce its claim against the
shipowners and their vessel.
H
- '
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE '31
LTh,1ITED & ANR. [R. F. NARIMAN, J.]

8. If the vessel is lost, for any reason or if the mortgagee bank A
or any other claimant arrests the vessel before reaching
Bangkok and as a result, the shipowners are unable to
proceed for loading to Bangkok, and thus execute the above
stated charter voyage, the above obligations of the guarantor
shall cease to exist but Chrisomar will maintain its rights of B
recovery only against the shipowners and the vessel but
not against the guarantor.
9. This agreement is subject to Greek law and the exclusive
jurisdiction of the Piraeus Courts."
4. It appears that nothing in the meanwhile happened. At no point c
of time did the vessel sail for the port of Bangkok - it remained
continuously in Haldia. It is only on 2.5.2000 that the vessel was re-
arrested. The Court recorded that no payment had yet been made and
that the claim of the plaintiff continued to remain unsatisfied. It is this
re-arrest that is the bone of contention between the parties in the present
matter. D

5. A written statement was filed on behalf ofrespondent no.1,
MJR Steels, an Indian company who allegedly purchased the vessel
from one Fairsteel Corporation, Singapore. Apparently, an agreement
was entered into between Fairsteel and respondent no.1 on 21.1.2000.
The written statement filed by respondent no. 1 alleged: · E
"The said vessel was originally owned by The Third Element
Enterprises Shipping Ltd. Third Element Enterprises Shipping
Ltd. sold and transferred the said vessel to. Eastern Wealth
Investment Ltd. Eastern Wealth Investment Ltd. sold and
transferred the said vessel to Fairsteel Corporation. Fairsteel F
Corporation sold and transferred the said vessel to this defendant.
This defendant acquired the right, title or interest in respect of
the said vessel from the said Fairsteel Corporation."
6. The learned single Judge by his judgment and order dated
28.4.2005 listed as many as seven issm;s and adverted to the fact that G
three witnesses were called on behalf of the plaintiffs, who not only
deposed and were cross-examined, but also produced various documents.
The defendants, however, did not produce any witness but tendered as
their evidence six exhibits which were produced only through the
plaintiff's witnesses.
H
32 SUPREME COURT REPORTS [2017] 14 S.C.R.

A 7. According to the learned single Judge, the order of 25 .1.2000
made it clear that suit No. l of 2000 was kept alive and remained alive
on the date of the re-arrest, namely, 2.5.2000. All that was done by the
order dated 2.5.2000 was to recall the order dated 25.1.2000, and when
that was done, the original order of arrest was automatically revived.
This being the case, it is clear that the plaintiffs were entitled to recover
B their dues. The learned single Judge further went on to hold that
respondent no.l's claim that ownership had changed and that they had
become owners of the vessel in April, 2000, was not conclusively proved.
The single Judge referred, among other documents, to a suit filed by
respondent no.l against Fairsteel Corporation on 9.5.2000 in which
C respondent no. I prayed for a decree for rescission of the agreement for
sale dated 21.1.2000, as also for cancellation of the said agreement, and
perpetual injunction restraining Fairsteel from claiming any money under
the Letter of Credit furnished by respondent no. l. It recorded that the
said suit was dismissed for non-prosecution on 12.10.2004, and from the
averments made in the said suit, it was clear that there was no concluded
D
sale in favour of respondent no. I.
8. An app~l to the Division Bench by respondent no. I however
succeeded. By the impugned judgment dated 13. 9.2006, it was held that
the plaintiff's first witness admitted the fact that the vessel's ownership
changed hands and that on the date of re-arrest, i.e. 2.5 .2000, it was
E respondent no.1 who was the owner. It also examined various documents
to arrive at the conclusion that the vessel physically changed hands on
15 .4.2000 and payments under the Letter of Credit were made pursuant
to the agreement dated 21.1.2000 on 26.4.2000. The Division Bench
further went on to hold that though the allegation as regards the successive
F transfers of title had not been proved by the defendant, the said fact
would make no difference. It also went on to hold that there could be a
good title by estoppel. The Division Bench further went on to apply
Section 62 of the Indian Contract Act, 1872 to the out of court settlement
dated 18.1.2000 and stated that as there was a novatio of the original
agreement in law, the original cause of action pleaded in admiralty Suit
G No. l of2000 no longer subsisted. Therefore, the claim made in the suit
was held to have been abandoned when the settlement dated 18.1.2000
was acted upon.· In this view of the case, the Division Bench reversed
the single Judge's decision and held that the suit was liable to be dismissed
on all these grounds.
H
CHRISOMARCORPORATION v. MJR STEELS PRIVATE 33
LIMITED & ANR. [R. F. NARIMAN, J.]
- ,.,_' ..
9. Shri Shyam Divan, learned senior counsel appearing on behalf A
of the appellants, has argued before us that the agreement dated 18.1.2000
would not amount to a novatio of the original agreement. According to
him, the original agreement continued and was in fact enforced by the
second order of arrest dated 2.5.2000. According to him, the right that
was vested in the appellant on 5.1.2000, i.e. the date of the institution o'f B
the suit, is alone material, and it is on that date, and not the date of arrest
on 2.5.2000, that th~ ownership of the vessel has to be seen. For this
purpose, he cited certain English precedents. He also cited an American
judgment to buttress his submission that the present was a case not
merely of a maritime claim but also of a maritime lien in that necessaries
supplied to the vessel would amount to a maritime lien. According to C
him, in any event, on facts, the Division Bench was completely wrong in
arriving at a conclusion that there was a concluded sale in April, 2000 in
favour of respondent no.1 inasmuch as several documents produced by
the plaintiff's witnesses would show that no such sale had, in fact,. taken
place.
D
10.. Shrl Banerjee, learned senior counsel appearing on behalf of
the respondents, has countered each of these submissions. According
to Shri Banerjee, the Division Bench is absolutely correct. The present
is the case of enforcement of a maritime claim, but there is no maritime
lien in law for necessaries supplied to the vessel. This being the case, it
is important to know who the owner of the vessel is on the date of E
arrest, i.e. on 2.5.2000. If the owner is respondent no. l; then a claim for
necessaries against the original owner, Third Element, on the date of
institution ofthe suit would not lie against the respondent on the date of
. arrest. According to learned counsel, English authorities cited by Shri
Divan would not apply to the present case as in England there is a F
completely different procedure for arresting a vessel. A writ of summons
,··.·
is issued under Order 53 of the U.K. Civil Procedure Code for service
outside the jurisdiction of the court which is kept alive for a period of six
months. Further, according to learned counse~ Section 62 of the Contract
Act is squarely attracted inasmuch as the settlement dated 18.1.2000
completely replaced the original agreement as a result of which the G
original cause of action pleaded in the suit has disappeared. Le.arned
counsel also painstakingly took us through various documents to show
that the sale of the ve_ssel to respondent no. l had indeed taken place in
April, 2000 and that, therefore, on the date ofarrest, i.e. 2.5.2000, since
H
34 SUPREME COURT REPORTS [2017] 14 S.C.R.

A his client was the owner of the vessel, the amounts could not be recovered
from respondent no.1.
11. Admiralty law in England, as was held by Lord Halsbury in
Currie v. M'Knight 1897 AC 97, is derived from the laws of Oleron 1
and other ancient maritime codes like the Rhodian Sea Law, the Basil ika,
B the Assizes of Jernsalem, the Baltic Laws ofWisbuy and the Hanseatic
Code. In England, the common law courts could not give effective redress
to cases which arose in admiralty, which were then left to the jurisdiction
of specialist admiralty Judges. By the l81h Century, the admiralty
jurisdiction had fallen into "a feeble and neglected condition, and for long
its proceedings excited no attention" 2• The Admiralty Court Act, 1840
C was the first of a series of statutes extending and defining the jurisdiction
of the High Court of Admiralty in England. This was followed by the
1861 Admiralty Court Act and various subsequent enactments which
were consolidated by the Supreme Court of Judicature (Consolidation)
Act, 1925. By the Administration of Justice Act of 1956, the admiralty
D jurisdiction of the High Court was further widened and the Supreme
Court Act of 1981 now defines what the admiralty jurisdiction of the
High Court in England is.
12.Insofar as our iaw is concerned, the admiralty law of the
chartered High Courts has historically been traced to the charters of
E 1774 and 1798 as subsequently extended and clarified by the Letters
Patents of 1823, 1862 and 1865. The Admiralty Court Act, 1840 and
1861, and the Colonial Courts ofAdmiralty Act, 1890 and 1891 essentially
stated what the admiralty law in this country is, and these enactments
continued as existing laws under Article 372 of the Constitution oflndia.
Some of the relevant provisions of these Acts are set out hereinbelow:-
F
"Admiralty Court Act, 1840
6. The court in certain cases may adjudicate, etc.-The High
Court of Admiralty shall have jurisdiction to decide all claims
' The rolls ofOleron are associated with the island ofOleron, off the coast of Western
G France, which was the site of an ancient maritime court associated with a seaman's guild
of the Atlantic. In England, they were promulgated by Eleanor of Aquitaine, wifo of
Henry 11, as vice-regent for her son King Richard I, while the latter was fighting the
Saracens on the Third Crusade. King Henry VIII later published these rolls as, "The
judgment of the sea, of Masters, of Mariners and Merchants, and all their doings".
They are expressly included in the compilation of English admiralty law, the "Black
Book of the Admiralty".
H 2
See, Roscoe's Admiralty Practice, 5" edn. at Pg. 14.
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 35
LIMITED & ANR. [R. F. NARIMAN, J.]

and demands whatsoever in the nature of salvage for services A
rendered to or damage received by any ship or seagoing 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 B
services were rend\:red or damage received, or necessaries
furnished, in respect of which such claim is made.
Admiralty Court Act, 1861
5. As to claims/or necessaries.-The High Court of Admiralty
shall have jurisdiction over any claim for necessaries supplied to C
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 D
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.
Colonial Courts of Admiralty Act, 1890 E
2·. Colonial Courts ofAdmiralty.-(!) Every court of law in a
British possession, which is for the time being declared in
pursuance of this Act to be a Court ofAdmiralty, or which, if no
such declaration is in force in the possession, has there.in original
unlimited civil jurisdiction, shall be a Court ofAdmiralty, with the F
jurisdiction in this Act mentioned, and may for the purpose of
that juri~diction, exercise all the powers which it poss·esses 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....
G
(2) The jurisdiction of a Colonial Court ofAdmiralty 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 ofAdmiralty may exercise such jurisdiction
in like manner and to as full an extent as the High Court in H
36 SUPREME COURT REPORTS [2017) 14 S.C.R.

A England, and shall have the same regard as that Court to
international law and the comity of nations.
. P'

Colonial Courts of Admiralty (India) Act, 1891
2. Appointment of Colonial Courts of Admiralty.-The
following courts ofunlimited civil jurisdiction are hereby declared
ir to be Colonial Courts ofAdmiralty, namely:
(J) the High Court of Jtidicature at Fort William in Bengal,
(2) the High Court of Judicature at Madras, and
''J:

(3) the High Court of Jtidicature at Bombay."
C . · · 13. The Republic of Indi~ hiis finally woken up to the need for
up'Clating its admiralty law. TheAdtUrralty (Jurisdiction and Settlement of
· Maritime Claims) Act, 2017 has been made by Parliament and has
· re~~ived the assent of the President' on 9.8.2017, though it has not yet
j}~en brought into force. In this· Act, "maritime claim" is defined in
,. D ·• .S¢cticin 2( I )(f) as being a claim referred to in Section 4 and a "maritime
· · lien'' is defined in sub-section (g) of2(1) as follows:

._.
· J'2. Definitions
. .
. ....
···. : , >(l)In this Act,__:_
' \

· ·;: 0. " (g) "maritime lien" means a· maritime claim against the owner,
· ·· · , , ·,demise charterer, manager or operator of the vessel referred to
·.•· iil clauses (a) to (e) ofsub~se.ction (I) of section 9, which shall
. . cdntinue to exist under sub-s~c~icin (2) of that section;"
Se~ti~ri4·r~ads ~s follows: . ·.: :· ·
'·. ·. "4.M,aritime Claim ·.,,
. .;. i(t)The High Court mayex~tcise jurisdiction to hear and
a
detertr1ine any question on rnaiitime claim, against any vessel,
. arising out ofany- . .. .
(a) dI~puti: regarding the poss~ssion or ownership of a vessel or
the ownership of any share therein; .
(bf dispute between the c~~.owners ofa vessel as to the
· employmenfor.earnings of the vessel; ..
(c) mortg~ge or acharge of the sa~e nature on a vessel;
(d) loss or damage caused by the operation of a vessel;
H
'? <]!-WSO.M/..R CORPORATION,v. fyt'~(STE;ELS PJlNATE 37
' LIMITED & ANR. [R, F. NARI.MAN, J.]
.. ....... ,.: ---- :• .
-

, (e) loss oflife or personal injury occiirring whetheron land or on A
water, in direct connection with the operation of a vessel;
(t) loss or damage to or in connection with any goods;
.. ... (g) agreement relating to the carriage of goods or passengers on . .'
. , . board a vessel, whether contained in a charter party or otherwise;
' B
(h) agreement relating to the use or hire of the vessel, whether
contained in a charter party or otherwise; ·
(i) salvage services, including, ifapp!icable, sp~bial compensation
relating to salvage services in respect of a vessel which by itself
or its cargo threatens damage to the environment; c
. ~t:
(j)towage;
f'.... -.'1 ; (kl pilotage;.
• ' 1 · (1) .goods, materials, perishable cir non-perishable provisions1·..
bunker fuel, equipment (including containers), supplied or services.-· D
rendered to the vessel fo'r its operation, management, preservation
or maintenance including any fee payable or leviable;
(m) construction, reconstruction, repair, converting or equipping
of the vessel;
,.,,, · (n) dues in connection with any port, harbour, canal, dock orlight E
•.1J > · tolls, other tolls, Waterway or any charges of similar kind
1;,,,;, chargeable under any law for the tinie being in force;
(o) claim by a master or member of the crew of a vessel or their
heirs and dependents for wages or any sum due out of wages or
adjudged to be due which may be recoverable as wages or cost F
., .-fl .. . ofrepatriation or social insurance contribution payable on their
lJ : . . . . . ' • - .

. . . . behal( or. any amount
.. ·'.. ·f-':",'''' __ .·
'"·,~·~..-,,,,,::.,,:10.>.·..,~.,-
an employer
.··."'•, .,
is under' an obligation
.,.,_'•:··_.~ :i.·:·.·i._.~,-
... . ''
to pay
> •..• ·;,·::to~ perso11 as an emplciyee, whether the obligation arose out of
' . ' a: ~cmtract .(;f employment or by operation of a law (including
'' '' ' operation of a law ofany countl'Y) for the time being in force,
and includes any claim arising under a manning and crew G
:; 1 · · • agreement relating to a vessel, notwithstanding anything contained
in the provisions ofsections 150 and 151 of the Merchant Shipping
Act, 1958;
(p) disbursements incurred on behalfof the vessel or its owners;
H
38 SUPREME COURT REPORTS (2017] 14 S.C.R.

A (q) particular average or general average;
(r) dispute arising out of a contract for the sale of the vessel;
(s) insurance premium (including mutual insurance calls) in
respect of the vessel, payable by or on behalf of the vessel owners
or demise charterers;
B
(t) commission, brokerage or agency fees payable in respect of
the vessel by or on behalf of the vessel owner or demise charterer;
(u) damage or threat of damage caused by the vessel to the
environment, coastline or related interests; measures taken to
c prevent, minimise, or remove such damage; compensation for
such damage; costs of reasonable measures for the restoration
of the environment actually undertaken or to be undertaken; loss
incurred or likely to be incurred by third parties in connection
with such damage; or any other damage, costs, or loss of a similar
nature to those identified in this clause;
D
(v) costs or expenses relating to raising, removal, recovery,
destruction or the rendering harmless of a vessel which is sunk,
wrecked, stranded or abandoned, including anything that is or
has been on board such vessel, and costs or expenses relating to
the preservation of an abandoned vessel and maintenance of its
E crew; and
(w) maritime lien.
Explanation.-For the purposes of clause (q), the expressions
"particular average" and "general average" shall have the same
meanings as assigned to them in sub-section (I) of section 64
F
and sub-section (2) of section 66 respectively of the Marine
Insurance Act, 1963.
(2) While exercising jurisdiction under sub-section (I), the High
Court may settle any account outstanding and unsettled between
the parties in relation to a vessel, and direct that the vessel, or
G any share thereof, shall be sold, or make such other order as it
may think fit
(3) Where the High Court orders any vessel to be sold, it may
hear and determine any question arising as to the title to the
proceeds of the sale.
H
CHRISOMAR CORPORATION v. MJR STEELS PRNATE 39
LIMITED & ANR. [R. F. NARIMAN, J.]

(4) Any vessel ordered to be arrested or any proceeds of a vessel A
on sale under this Act shall be held as security against any claim
pending final outcome of the admiralty proceeding."
14. Under Section 5 of the Act, the High Court may order for the
arrest of a vessel which is within its jilrisdiction for the· purpose of
providing security against a maritime claim. Under Section 6 of the said B
Act, the High Court may also exercise admiralty jurisdiction by an order . ·
in personam in respect of the maritime claims referred to in Section 4.
Section 9 of the Act sets out the inter se priority of maritime liens, but in
so doing also informs us that they are restricted to five subject matters
only. Section 9 reads as follows:
c
"Sec. 9 Inter se priority on maritime lien
( 1) Every maritime lien shall have. the following order of inter se
priority, namely:-
(a) claims for wages and other sums due to the master, officers
and other members of the vessel's complement in respect of D
their employment on the vessel, including costs of repatriation
and social insurance contributions payable on their behalf;
(b) claims in respect ofloss oflife or personal injury occurring,
whether on land or on water, in direct connection with the operation
of the vessel; E.
_.(c) claims for reward for salvage services including special
compensation relating thereto;
(d) claims for port, canal, and other waterway dues and pilotage
dues and any other statutory dues related to the vessel;
F
(e) claims based on tort arising out of loss or damage caused by
the operation of the vessel other than loss or damage to cargo
and containers carried on the vessel.
(2) The maritime lien specified in sub-section (1) shall continue
to exist on the vessel notwithstanding any change of ownership G
or of registration or of flag and shall be extinguished after expiry
of a period of one year unless, prior to the expiry of such period,
the vessel has been arrested or seized and such arrest or seizure
has led to a forced sale by th_e High Court:

H
40 SUPREME COURT REPORTS [2017] 14 S.C.R.

A Provided that for a claim under clause (a) of sub-section ( l ), the
period shall be two years from the dat.e on which the wage, sum,
cost of repatriation or social insurance contribution, falls due or
becomes payable.
(3) The maritime lien referred to in this section shall commenct}-
B (a) in relation to the maritime lien under clause (a) of sub-section
( 1), upon the claimant's discharge from the vessel;
(b) in relation to the maritime liens under clauses (b) to (e) of
sub-section ( 1), when the claim arises,
c and shall run continuously without any suspension or interruption:
Provided that the period during which the vessel was under arrest
or seizure shall be excluded.
-(4) No maritime lien shall attach to a vessel to secure a claim
which arises out of or results from-
D
(a) damage in connection with the carriage of oil or other
hazardous or noxious substances by sea for which compensation
is payable to the claimants pursuant to any law for the time being
in force;
(b) the radioactive properties or a combination of radioactive
E properties with toxic, explosive or other hazardous properties of
nuclear fuel or of radioactive products or waste."
IS.Section 12 states that the Code of Civil Procedure is to apply
in all proceedings before the High Court insofar as it is not inconsistent
or contrary to the provisions of the Act. By Section 17, the Admiralty
F Court Acts of 1840 and 1861 and the Colonial Courts of Admiralty Acts
of 1890 and 1891 stand repealed. Also, the Letters Patent of 1865,
insofar as it applies to the admiralty jurisdiction of the Bombay, Calcutta
and Madras High Courts, also stands repealed.
16. An admiralty action in the courts of India commences against
G a vessel to enforce what is called a "maritime claim". Though India is
not a signatory to the Brussels Convention of 1952, a long list of maritime
claims is given in Article 1 thereof. Suffice it to say that sub-clause (k)
of Article 1 states that important materials wherever supplied to a ship
for her operation or maintenance would fall within the definition of a
H maritime claim. Amaritime lien, on the other hand, attaches to the property
CHRISOMAR CORPORATIQN.v. MJRSTEELS PRl\'A'.I'E. 41
LIMITED & ANR. [R. F. NARIMAN, J.]
.·
of the vessel whenever the cause of action arise~, ~nd travels with the A .
vessel and subsists whenever and wherever the action may be
commenced. In The Bold Buccleugh, (1852) 7 Moo PCC 267, Sir
John Jervis defined maritime lien as follows:-
> "[A) maritime lien is well defined ... to mean a claimorprivilege
upon a thing to be carried into effect by legal process . . . that B
prcicess to be a proceeding in rem .... This claim or privilege
travels with the·thing into whosesoeverpossession it may come.
It is inchoate from the rnoment the claim or privilege attaches,
and, when carried into effect by legal process by a proceeding in.
rem, relates ·back to the period when it first attached."
c
17. This judgment was referred to in M. V. Elisabeth and others
v. Harwan Investment and Trading Private Limited, 1993 Supp.
(2) SCC 433 at 462, paragraph 56 and Epoch Enterrepots v. M.V.
Won Fu (2003) l SCC305 at3ll,paragraph 13. lnM.V.AIQuamarv.
Tsavliris Salvage (International) Ltd. and others, (2000) 8 SCC
278 at 301, the Supreme Court observed as follows:- D
"33. Be it noted that there are two attributes to maritime lien: (a)
a right to a part of the property in the res; and (b) a privileged
claim upon a ship, aircraft or other maritime property in respect
of services rendered to, or injury. caused by that property.
Maritime lien thus attaches to the property in the event the cause E
of action arises and remains attached. It is, however, inchoate
and very little positive in value unless it is enforced by an action.
It is a right which springs from general maritime law and is based·
on the concept as if the ship itself has caused the harm, loss or
damage to others or to their property and thus must itself1'1ake p
good that loss. (See in this context Maritime Law byChristopher
Hill,2rid Edn.)."
. ..··:lg;' 'only a s~l1'ri~t;'~; ~f ~l~ihis give ris~ 't6 iri~rltime liens as ' .... '
was noted in M'.V. Won Fu (supra). Paragraph 19 of the saidjudgment
states as follows:- G
"19. We have in this judgment·hereinbefore dealt with the ·
attributes of maritime lien. But simply stated, maritime lien can
be said to exist or restricted to in the event of (a) damage done
by a ship; (b) salvage; (c),seamen's and master's wages; (d)
master's disbursement; and (e) bottomry; and in the eyent a H
42 SUPREME COURT REPORTS [2017] 14 S.C.R.

A maritime lien exists in the aforesaid five circumstances, a right
in rem is said to exist. Otherwise, a right in personam exists for
any claim that may arise out of a contract."
(at pages 314-315)
19. In an illuminatingjudgment of the Calcutta High Court Justice
B Mrs. Ruma Pal, as she then was, dealt with an action in rem filed in the
admiralty court jurisdiction in Calcutta. With respect to the plaintiffs claim
ofthe price of bunkers supplied to the ship owners, the Court held that
the supply of necessaries to a vessel does not create a maritime lien. In
Bailey Petroleum Company v. Owners and parties interested in
c the ves$el M.V. Dignity, (1993) 2 CHN 208 at 213-214, the learned
Judge held:
"16. It has been established by a wealth of decisions that the
supply of necessaries does not create a maritime lien. Indeed
the point was conceded by the counsel for the plaintiff at the
D hearing. It is only necessary to refer to two authorities on the
point to emphasize the fact that this Court does not base its
conclusion on the concession of the plaintiff's counsel but on the
authorities cited.
17. It is not disputed that the jurisdiction of this court is governed
E by the Admiralty Court Act 1861 (Imp). Section 5 of the 1861
Act provides:
"5. The High Court of Admiralty 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
F
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 plaintiffdo not recover twenty pounds, he shall not be entitled
to any costs, charges, or expe~ses incurred by him therein,
unless the judge shall certify that the cause was a fit one to be
G tried in the said Court."
18. In the case of Laws and others and Smith: the "Rio Tinto":
9 PD 356, the plaintiff had supplied necessaries to the vessel.
The Trial Court held that the necessaries were supplied on the
credit of the vessel and that the plaintiff had a right to a maritime
H lien and that, therefore, in spite of the fact that the vessel had
CHRISOMAR CORPORATION v. MJR STEELS PRNATE . 43
LIMITED & ANR. [R. F. NARIMAN, J.]

been transferred subsequent to the supply of necessaries, the· A
ship was liable. Sir James Hannen who delivered the opinion of
the Privy Council held that the phrase "the court shall have
jurisdiction'' simply gave the Court jurisdiction but did not create
any lien. A distinction was drawn between a provision for
proceedings by arrest of the ship and the express creation of a B
lien. The Court held:
"The Admiralty Court Act, 1861 (24 Viet. c. 10) and the
decisions upon it must next be considered. By the 5th section it
is enacted that the High Court shall have jurisdiction over a
claim for necessaries supplied to any ship elsewhere than in C
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.
The words 'the High Court ofAdmiralty sh,all have jurisdiction',
mean only what they purport to say, neither more nor less, that · D
is; that the court shall take judicial cognizance of the cases
provided for.
. The conclusion [is] that there is nothing from which it can be
inferred that by the use of the words "the court shall have
jurisdiction" the Legislature intended to create a maritime lien E
with respect to necessaries supplied within the possession."
19. In Shell Oil Co. v. The Ship "Lastrigoni" 3 ALR 399 the
. plaintiff had filed a suit for enforcement of the claim on the ground of
bunkers provided by the plaintiff under a contract between the plaintiff
and the agents of the time charterer. The contract provided that the sale F
and delivery of inter alia necessaries would be made on the faith and
credit of the vessel. The arguments before the Court were that the supply
·of fuel itself created maritime lien to which the ship was subject and
which could be enforced by an action in rein in admiralty. The second
was that, in the circumstances, an action in rem lay notwithstanding the G
absence of any contractual liability on the part of the owners to pay for
the bunkers supplied and that this was so by virtue of section 6 of the
Admiralty Court Act 1840 (Imp}, and section 5 of the Admiralty Court
Act 1861 (Imp}, either with or without the aid of cl. 6.4 of the Bunker
Fuel Oil Contract. Menzies, J. held:
H
44 'SUPREME COURT REPORTS [2017] 14 S.C.R.

A "Tbe matter was, I think, put at rest by the decision of the
Privy Council in the Rio Tinto (1884) 9 APP Cas 356, by which
it was decided that no maritime lien attaches to a ship in respect
of coals or other necessaries supplied to it."
20. In Saba International Shipping and Project Investment
B Private Limited v. Owners and parties interested in the Vessel
M.V. Brave Eagle, previously known as M.V. Lima-I and others,
(2002) 2 CHN 280 at 287-288 and 289-290, another single Judge of the
same High Court differentiated between a maritime claim and a maritime
lien and held as follows:
c "20. Now the issue is what is a maritime claim and what is a
maritime lien. These questions are to be answered in this
proceeding before continuation of the interim order or passing
any further interim order.
21. All cases of maritime lien are based on maritime claims but
D all maritime claims do not give rise to a maritime lien on the ship.
Normally a lien in the general law is a rathet: limited right over
some one else's property. It is a right to retain possession of that
property usually to receive a claim. But a maritime lien differs
from other liens in one very important respect. Liens generally
require possession of the 'res' before they can come into effect.
E As an example an innkeeper has a lien over his guest's luggage
against the payment of the bill, but ifthe guest is smart enough to
remove his luggage, the innkeeper is left without a lien. But a
maritime lien does not require prior possession for its creation. •
In a fit and proper case a claimant on the strength of his maritime
F lien can secure the arrest of a ship which then comes under the
possession of the court and she cannot be moved without the
court's order.
22. 'No Indian Statute defines a maritime claim' is the clear
finding of Supreme Court in M V. Elisabeth (AIR 1993 SC 1014,
G para 85, page 1040). But our Supreme Court followed the
provisions of the Supreme Court Act 1981 of England where
maritime claims have been listed on the basis of Brussels
Convention of 1952 on the Arrest of Sea Going Ships. Under
Article 1 of the said Convention various maritime claims have
been catalogued. Out of which l{k} answers the description of
H
.CHRISOMAR CORPORATION v. MJR STEELS PRNATE 45
LIMITED & ANR. [R. F. NARIMAN, J.]

the claims of the plaintiff in this proceeding. Article I (k) reads A
"goods or materials whether supplied to a ship for her operation
or maintenance". Even though India is not a signatory to the
Brussels Convention, but the Supreme Court held that the
provisions of these Conventions should be regarded as part of
International Common Law and these provisions 'supplement'
B
and 'complement' our maritime laws and fill up the lacunae in
The Merchant Shipping Act.
23. But in Elisabeth, the Hon'ble Supreme Court did not notice
any convention on maritime lien. However the Hon 'ble Supreme
Court accepted in para 57 of Elisabeth the judicial determination
of the concept of 'maritime lien' by English courts and which I c
quote as follows:
"A maritime lien is a privileged claim against the ship or a right
to a part of the property in the ship, and it "travels" with the
ship. Because the ship has to "pay for the wrong it has done",
it can be compelled to do so by a forced sale. (See The Bold D
Buccleugh, ( 1852) 7 Moo PCC 267)."
24. A definition of maritime lien has also been given in Stroud's
Judicial Dictionary, 5th Edition page 1466 to the following effect:
"A maritime lien may be defined as a right specifically binding E
a ship, her furniture, tackle, cargo, and freight, or any of them,
for payment of a claim founded upon the maritime law and
entitling the claimant to take judicial proceedings against the
property bound to enforce, or to ascertain and enforce,
satisfaction of his demand; thus, a salvor has a maritime lien
on the property saved for such an amount as a court exercising F
admiralty jurisdiction shall award Maritime lien are distinguished
from all other liens in these two chief particulars: (i) they are in
no way founded on possession or property in the claimant, (ii)
they are exercised by taking proceedings against the property
itself in a form of action styled an action in rem (The Glasgow G
Packet, 2 Rob. W. 312; The Repulse, 4 Notes of Cas. 170),
and, from this and their secret nature, they closely resemble
the species of security known to Roman law under the name
ofhypotheca (Dig. xiii). Interest, if any allowed, and the costs
of enforcing a claim for which a maritime lien exists, will be
included in such lien (The Margaret, 3 Hagg. Adm. 240)." H
46 SUPREME COURT REPORTS [2017) 14 S.C.R.

A 25. According to the well known treatise of Thomas on maritime
lien, the following claims may give rise to maritime lien namely:
"(a) Damage done by a ship
(b) Salvage
B (c) Seamen's wages
(d) Master's wages and disbursements
.•
(e) Bottomry and respondentia".
26. The aforesaid passage from Thomas has been approved by
the Division Bench of Calcutta High Court in Mohammed Saleh
c Behbehani & Company v. Bhoja Trader, reported in (1983) 2
Calcutta Law Journal 334. At 344 of the report, the learned
Judges of the Division Bench referred to maritime liens as
representing 'a small cluster of claims' and referred to the
aforementioned passage from Thomas.
D
(27) and (28) xxx xxx xxx
29. Counsel for the respondent also relies on a passage from
Roscoe on The Admiralty Jurisdiction and Practice, 5th Edition.
While dealing with necessaries, the learned author has stated as
follows:
E
"Persons who have supplied a ship, whether British or foreign,
with necessaries have not a maritime lien upon her, and the
vessel does not become chargeable with the debt till the suit is
actually instituted; consequently there can be no claim against
a ship which has been sold, even with notice of such a claim in
F respect of which an action has not been commenced, and a
want of caution in supplying the necessaries may, it would seem,
cause a postponement of claims to others more carefully begun.
The necessaries claimant is not a secured ·creditor until the
moment of arrest."
G 30. There is a direct judgment on this point by a learned Judge of
this court in Bailey Petroleum, referred to above.
31. Relying on the judgment of the Privy Council in Rio Tinto,
reported in 1884 (9) Appeal Cases 356 and the judgment in Shell
Oil Co. v. The Ship Lastrigoni, reported in 1974 (3) All England
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 47
LIMITED & ANR. [R. F. NARIMAN, J.]

. Reports 399, the learned single Judge held in Bailey Petroleum A
that a claim arising out of the supply of necessaries may give
· rise to a statutory right of action 'in rem' under section 5 of
Admiralty Court Act, 1861 but it does not give rise to maritime
lien. Paragraphs 23 and 24 of the judgment in Bailey Petroleum
make it clear and I quote them in extenso:
B
"23. Whereas a maritime lien attaches to the res and travels with
it and may be enforced against a subsequent purchaser of the res,
a statutory right of action in rem is defeated by a change of
ownership. This later principle follows· from the nature of the
right describecf in the preceding paragraph.
c
24. This view of the law is supported by a catena of decisions."
21. In fact, the International Convention on Maritime Lien and
Mortgages, 1993 defines maritime liens in Article 4 as follows:-
"Article 4: Maritime liens
I. Each of.the following claims against the owner, demise
D '
charterer, manager or operator of the vessel shall be secured by
a maritime lien on the vessel:
(a) claims for wages and other sums due to the master, officers
and other members of the vessel's complement in respect of E
their employment on the vessel, including costs of repatri :Hwn
and social insurance contributions payable on their behalf:
(b) claims in respect ofloss oflife or personal injury occurring,
whether on land or on water, in direct connection with the operation
of the vessel;
F
(c) claims for reward for the salvage of the vessel;
.(d) claims for port, canal, and other waterway dues and pilotage
dues;
·(e) claims based on tort arising out of physical loss or damage
caused by the operation of the vessel other than loss ofor damage G
to cargo, containers and passengers' effects carried.on the vessel.
2. No maritime lien shall attach to a vessel to secure claims as
set out iffsubparagraphs (b) and (e) of paragraph 1 which arise
out of or result from:
H
48 SUPREME COURT REPORTS [2017) 14 S.C.R.

A (a) damage in connection with the carriage of oil or other
hazardous or noxious substances by sea for which compensation
is payable to the claimants pursuant to international conventions
or national law providing for strict liability and compulsory
insurance or other means of securing the claims; or
B (b) the radioactive properties or a combination of radioactive
properties with toxic, explosive or other hazardous properties of
nuclear fuel or of radioactive products or waste."
22. Article 8 then states that the characteristics of such liens are
as follows:-
c "Article ·8: Characteristics of maritime liens
Subject to the provisions of article 12, the maritime liens follow
the vessel, notwithstanding any change of ownership or of
registration or of flag."

D It is, thus, clear that a claim for necessaries supplied to a vessel
does not become a maritime lien which attaches to the vessel.
23. Shri Divan, however, cited U.S. case law in support of his
submission that a claim for necessaries raises a maritime lien. We are
afraid that given the Indian case law on the subject read with the various
international Conventions referred to above, the U.S. seems to stand
E
alone in considering that claims for necessaries would amount to maritime
lien enforceable against the vessel as such wherever it goes. It is clear
that in our country at least claims for necessaries, though maritime claims,
do not raise a maritime lien.
24. What arises next, therefore, is the manner of enforcement of
F maritime claims in our Courts. In M.V. Elisabeth (supra) at 459-462,
this Court laid down, in some detail, the basic features of the admiralty
jurisdiction in this country, and how maritime claims are to be enforced.
The Court held:
"Admiralty Law confers upon the claimant a right in rem to
G proceed against the ship or cargo as distinguished from a right in
personam to proceed against the owner. The arrest of the ship
is regarded as a mere procedure to obtained security to satisfy
judgment. A successful plaintiff in an action in rem has a right to
recover damages against the property of the defendant. "The
H liability of the shipowner is not limited to the value of
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 49
LIMITED & ANR. [R. F. NARIMAN, J.]

the res primarily proceeded against .... An action ... though A
originally commenced in rem, becomes a personal action against
a defendant upon appearance, and he becomes liable for the full
amount of a judgment unless protected by the statutory provisions
for the limitation of liability".' (Roscoe's Admiralty Practice,
5th ed. p. 29)
,, B
The foundation ofan action in rem, which is a peculiarity of the
Anglo-American law, arises from a maritime lien or claim
imposing a personal liability upon the owner of the vessel. A
defendant in an admiralty action in personam is liable for the
full amount of the plaintiff's established claim. Likewise, a C.
defendant acknowledging service in an action in remis liable to
be saddled with full liability even when the amount of the judgment
exceeds the value of.the res or of the bail provided. An action in
rem lies in the English High Court in respect of matters regulated
by the Supreme Court Act 1981, and in relation to a number of
claims the jurisdiction can be invoked not only against the D
offending ship in question but also against a 'sistership' i.e., a
. ship in the same beneficial ownership as the ship in regard to
which the claim arose. ·
"The vessel which commits the aggression is treated as the
offender, as the guilty instrument or thing to which the forfeiture E
attaches, without any reference whatsoever to the character
or conduct of the owner ...." (Per Justice Story, The United
. States v. The Big Malek Adhel [4~ US (2 How) 210, 233
(1844)))."
xxxxxxxxx F
A ship may be arrested (i) to acquire jurisdiction; or (ii) to obtain
· security for satisfaction of the claim when decreed; or (iii) in
execution of a decree. In the first two cases, the court has the
discretion to insist upon security being furnished by the plaintiff
to compensate the defendant in the event of it being found that G
the arrest was wrongful and was sought and obtained maliciously
or in bad faith. The claimant is liable in damages for wrongful
arrest. This practice of insisting upon security being furnished·
by the party seeking arrest of the ship is followed in the United
States, Japan and other countries. The reason for the rule is that ....
a wrongful arrest can cause irreparable loss and damagesto the H
50 SUPREME COURT REPORTS [2017) 14 S.C.R.

A shipowner; and he should in that event be compensated by the
arresting party. (See Arrest of Ships by Hill, Soehring, Hosoi
and Helmer, 1985).
The attachment by arrest is only provisional and its purpose is
merely to detain the ship until the matter has been finally settled
B by a competent court. The attachment of the vessel brings it
under the custody of the Marshal or any other authorized officer.
Any interference with his custody is treated as a contempt of
the court which has ordered the arrest. But the Marshal's right
under the attachment order is not one of possession, but only of
custody. Although the custody of the vessel has passed from the
c ·defendant to the Marshal, all the possessory rights which
previously existed continue to exist, including all the remedies
which are based on possession. The warrant usually contains a
monition to all persons interested to appear before the court on a
particular day and show cause why the property should not be
D condemned and sold to satisfy the claim of the plaintiff.
The attachment being only a method of safeguarding the interest
of the plaintiff by providing him with a security, it is not likely to
be ordered if the defendant or his lawyer agrees to "accept
service and to put in bail or to pay money into court in lieu of
bail". (See Halsbury 's Laws of England, 4th edn., Vol. l, p.
E
375 etc.).
xxxxxxxxx
A personal action may be brought against the defendant ifhe is
either present in the country or submits to jurisdiction. If the
foreign owner of an arrested ship appears before the court and
F deposits security as bail for the release of his ship against which
proceedings in rem have been instituted, he submits himself to
jurisdiction.
An action in rem is directed against the ship itself to satisfy the
claim of the plaintiff out of the res. The ship is for this purpose
G treated as a person. Such an action may constitute an inducement
to the owner to submit to the jurisdiction of the court, thereby
making himselfliable to be proceeded against by the plaintiff in
personam. It is, however, imperative in an action in rem that the
ship should be within jurisdiction at the time the proceedings are
started. A decree of the court in such an action binds not merely
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 51
LIMITED & ANR. [R. F. NARIMAN, J.]

the parties to the writ but everybody in the world who might A
dispute the plaintiff's claim.
It is by means of an action in rem that the arrest of a particular
ship is secured by the plaintiff. He does not sue the owner directly
and by name; but the owner or any one interested in the
proceedings may appear and defend. The writ is issued to "owners B
and parties interested in the property proceeded against". The
proceedings can be started in England oi: in the United States in
respect of a maritime lien, and in England in respect of a statutory
right in rem. A maritime lien is a privileged claim against the ship
or a right to a part of the property in the ship, and it "travels"
with the ship. Because the ship has to "pay for the wrong it has C
done'', it can be compelled to do so by a forced sale. [See Bold
Buccleaugh (The) [Harmer v. Bell, (1851) 7 Moo PC 267: 13
ER 884)). In addition to maritime liens, a ship is liable to be
arrested in England in enforcement of statutory rights in
rem (Supreme Court Act 1981). If the owner does not submit to D
the jurisdic.tion and appear before the court to put in bail and
release the ship, it is liable to be condemned and sold to satisfy
the claims against her. If, however, the owner submits to
jurisdiction and obtains the release of the ship by depositing
security, he becoines personally liable to be proceeded against in
personam in execution of the judgment if the amount decreed E
exceeds the amount of the bail. The arrest of the foreign ship by.
means of an action in rem is thus a means of assumingjurisdiction ·
by the competent court."
25. The Court went on to hold that though Indian statutes lag
behind international law in this context, the principles in these Conventions · F ·
derived from the common law of nations, will be treated as a part of the
common law of India. Paragraph 76 in this behalf reads as under:-
"76. It is true that Indian statutes lag behind the development of
international law in comparison to contemporaneous statutes in
England and other maritime countries. Although the Hague Rules G
• ilre embodied in the Carriage of Goods by Sea Act, 1925, India
never became a party to the International Convention laying down
those rules (International Convention for the Unification of
Certain Rules of Law relating to Bills of Lading, Brussels, 1924).
The Carriage of Goods by Sea Act, 1925 merely followed the
H
52 SUPREME COURT REPORTS [2017) 14 S.C.R.

A (United Kingdom) Carriage of Goods by Sea Act, 1924. The
United Kingdom repealed the Carriage of Goods by Sea Act,
1924 with a view of incorporating the Visby Rules adopted by
the Brussels Protocol of 1968. The Hague-Visby Rules were
accordingly adopted by the Carriage of Goods by Sea Act I 971
(United Kingdom). Indian legislation has not, however,
B
progressed, notwithstanding the Brussels Protocol of 1968
adopting the Visby Rules or the United Nations Convention on
the Carriage of Goods by Sea, I978 adopting the Hamburg Rules.
The Hamburg Rules prescribe the minimum liabilities of the
carrier far more justly and equitably than the Hague Rules so as
c to correct the tilt in the latter in favour of the carriers. The
Hamburg Rules are acclaimed to be a great improvement on the
Hague Rules and far more beneficial from the point of view of
the cargo owners. India has also not adopted the International
Convention relating to the Arrest of Seagoing Ships, Brussels,
1952. Nor has India adopted the Brussels Conventions of 1952
D
on civil and penal jurisdiction in matters of collision; nor the
Brussels Conventions of 1926 and 1967 relating to maritime liens
and mortgages [(a) International Convention relating to the Arrest
of Seagoing Ships, Brussels, May IO, 1952 (IMC); (b)
International Convention on Certain Rules concerning Civil
E Jurisdiction in Matters of Collision, Brussels, May 10, 1952
(IMC); (c) International Convention for the Unification ofCertain
Rules relating to Penal Jurisdiction in Matters of Collision,
Bmssels, May 10, 1952 (IMC); and (d) International Conventions
for the Unification of Certain Rules of Law relating to Maritime
Liens and Mortgages, Brussels, April l 0, 1926, and the Revised
F
Convention on Maritime Lines and Mortgages, Brussels, May
29, 1967 (IMC).] India seems to be lagging behind many other
countries in ratifying and adopting the beneficial provisions of
various conventions intended to facilitate international trade.
Although these conventions have not been adopted by legislation,
G the principles incorporated in the conventions are themselves
derived from the common law of nations as embodying the felt
necessities of international trade and are as such part of the
common law of India and applicable for the enforcement of
maritime claims against foreign ships."
H (at pages 469-470)
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 53
LIMITED & ANR. [R. F. NARIMAN, J.]

A list of maritime claims was then referred to in paragraph 84 and A
the Brussels Convention relating to the Arrest of Sea-Going Ships, 1992
was referred to and followed.
26. The next important aspect that was argued was that the
.ownership of the vessel to enforce a maritime claim has to be seen at
the stage of institution oft' 1e suit and not at the stage of arrest. The B
general rule that is contained in our country as to what crystallises on
the date of a suit is reflected in Rameshwar and others v. Jot Ram
and others, 1976 1 SCR 847 at 851-52. This Court held:-
"ln P. Venkateswarlu v. Motor & General Traders [(1975) 1
SCC770, 772:AIR1975SC1409, 1410] this Court dealt with C
the adjectival activism relating to post-institution circumstances.
Two propositions were laid down. Firstly, it was held that [SCC
p. 772, para 4] 'it is basic to our processual jurisprudence that
the right to relief must be judged to exist as on the date a suitor
institutes the legal proceeding.' This is an emphatic statement
that the right of a party is determined by the facts as they exist on D
the date the action is instituted. Granting the presence of such
facts, then he is entitled to its enforcement. Later developments
cannot defeat his right because, as explained earlier, had the
court found his facts to be true the day he sued he would have
got his decree. The Court's procedural delays cannot deprive E
him of legal justice or rights crystallised in the initial cause of
action. This position finds -support in Bhajan Lal v. State of
Punjab [(1971) 1 SCC 34].
The impact of subsequent happenings may now be spelt out.
First, its bearing on the right of action, second, on the nature of F
. the relief and third, on its impotence to create or destroy
substantive rights. Where the nature of the relief, as originally
sought, has become obsolete or unserviceable or a new form of
relief will be more efficacious on account of developments
subsequent to the suit or even during the appellate stage, it is but
fair that the relief is moulded, varied or reshaped in the light of G
updated facts. Patterson [Patterson v. State ofAlabama, (1934)
294 US 600, 607] illustrates this position. It is important that the
party claiming the relief or change of relief must have the same
right from which either the first or the modified remedy may
. flow. Subsequent events in the course of the case cannot be H
54 SUPREME COURT REPORTS [2017] 14 S.C.R.

A - constitutive of substantive rights enforceable in that very
litigation except in a narrow category (later spelt out) but may
influence the equitable jurisdiction to mould relieft. Conversely,
where rights have already vested in a party, they cannot be
nullified or negated by subsequent events save where there is a
change in the law and it is made applicable at any
B
stage. Lachmeshwar Prasad Shukul v. Keshwar Lal
Chaudhuri [ 1940 FCR 84: AIR 1941 FC 5] falls in this category.
Courts of justice may, when the compelling equities of a case
oblige them, shape relieft- cannot deny rights - to make them
justly relevant in the updated circumstances. Where the relief is
c discretionary, courts may exercise this jurisdiction to avoid
injustice. Likewise, where the right to the remedy depends, under
the statute itself, on the presence or absence of certain basic
facts at the time the relief is to be ultimately granted, the Court,
even in appeal, can take note of such supervening facts with
fundamental impact. Venkateswarlu, read in its statutory setting,
D
falls in this category."
27. However, the International Convention on the Arrest of Ships,
1999, in which India participated, states as follows:-
"Article 3: Exercise of right of arrest
E 1. Arrest is permissible of any ship in respect of which a maritime
claim is asserted if:
(a) the person who owned the ship at the time when the maritime
claim arose is liable for the claim and is owner of the ship when
the arrest is effected; or
F
(b)-(e) xxx xxx xxx
(2) xxx xxx xxx
3. Notwithstanding the provisions of paragraphs 1 and 2 of this
article, the arrest of a ship which is not owned by the person
G liable for the claim shall be permissible only if, under the law of
the State where the arrest is applied for, a judgment in respect of
that claim can be enforced against that ship by judicial or forced
sale of that ship." ·
28.India is not a signatory to the aforesaid Convention, yet
H following M. V. Elisabeth (supra), this Convention becomes part of
CHRISOMAR CORPORATION v. MJR STEELS PRNATE 55.,;.'
LIMITED & ANR. [R. F. :NARIMAN, J.]

our national law and must, therefore, be followed by this Court. Article A
3(1 )(a) is in two parts. First, arrest is only permissible of any ship if a
maritime claim is asserted against the person who owned the ship at a
time when the maritime claim arose for which the owner is liable, and
second, that the same ship owner should be the owner of the ship when
the arrest is effected. Thus, article 3(l)(a) sets the controversy at rest B
because a maritime claim can be asserted only at the time tl;ie arrest is
effected and not at the time of the institution of the suit. This being so,
Shri Divan's reliance on English judgments to the contrary, namely
Monica S. (1967) 2 Lloyd's Rep. 113 as followed in Re, Aro Co
Limited 1980 l All ER l 067, cannot be followed. Both judgments were
prior to the 1999 Convention and it is this Convention that must be C
followed. It is, therefore, clear that the relevant date on which ownership
of the vessel is to be determined is the date of arrest and not the date of
institution of the suit.
29. At this stage it becomes important to refer to the agreement
dated 18.1.2000 entered into between the petitioner and the original owner D
of the vessel, Third Element Enterprises. The agreement has been set
out fully earlier in this judgment. A perusal of the agreement would show ·
that so far as the appellant is concerned, performance is over - namely
that a certain quantity of bunkers has in accordance with the original
agreement been supplied. Indeed this is expressly recited in the later
agreement. It is only performance under the original agreement that is E
lacking from the side of the owner of the vessel, namely Third Element
Enterprises. The very first clause of the agreement shows that the ship
owners confirm that they ow~ to the appellant the original amount of the
bunkers plus interest plus legal costs, which amounts are parasitic on the
original invoice amount of US$ 94,611.25, and need to be recovered in p
order to put the appellant in the same position as ifthe original contract
had been performed by Third Element Enterprises. The agreement then
goes on to state that since the vessel is being chartered for a voyage
from Bangkok and will earn freight, the part of the freight amounting to
the original invoice amount plus interest plus legal costs will be paid
directly by the charterers of the vessel to the bank account of the G
appellants.
30. Sections 62 and 63 of the Contract Act read as follows:-
"62. Effect of novation, rescission, and alteration of
contract.-Ifthe parties to a contract agree to substitute a new H
56 SUPREME COURT REPORTS [2017] 14 S.C.R.

A contract for it, or to rescind or alter it, the original contract need
not be performed.
63. Promisee may dispense with or remit performance of
promise.- Every promisee may dispense with or remit, wholly
or in part, the performance of the promise made to him, or may
B extend the time for such performance, or may accept instead of
it any satisfaction which he thinks fit."
31.It is the appellant's case that Section 63 of the Contract Act is
attracted to the facts of the present case whereas it is the respondent's
case that Section 62 is so attracted, the result being that the original
c agreement is substituted by a fresh agreement.
32. The respondent's case is that Section 62 applies, since the
original contract has been "altered". This being the case, the original
contract need not be performed.
33.It is clear that where parties to a contract agree to substitute a
D completely different contract for the first, or to rescind a contract, the
performance under the original contract and/or rescinded contract comes
to an end. When parties to a contract "alter" a contract, the question
that has to be answered is as to whether the original contract is altered
in such a manner that performance under it is at an end.
E 34.In Juggilal Kamlapat v. N.V. Internationale Crediet-En-
Handels Vereeninging 'Rotter-dam', AIR 1955 Cal 65, the original
contract dated 10.8.1950 contained an arbitration clause. In paragraph
11 of the judgment, it was found as a fact that the original contract was
modified in certain material particulars. Despite this, it was found that
F since the modifications do not go to the root of the original contract and
do not change its essential character, the facts do not warrant the
inference that the parties intended to rescind the original contract. The
High Court held:-
" 14. In the present case the modifications do not go to the very
root of the first contract and do not change its essential character.
G
The facts do not warrant the inference that the parties intended
to rescind the contract, dated l 0-8-1950. The April arrangement
was entered into in response to pressing demands for delivery
under that contract and with a view to implement it. The
arrangement has no independent contractual force, no meaning
H
CH~SOMAR CORPORATION v. MJR STEELS PRIVATE 57
LIMITED & ANR. [R. E NARIMAN, J.]

and content separately from and independently of the original A
contract.
15. The effect of the alterations or modifications is that there is
a new arrangement; in the language ofViscount Haldane in 1918
A. C. 1 at p. 17 (A),
"a new contract containing as an entirety the old terms together . B
· with and as modified by the new terms incorporated."
The modifications are read into and become part and parcel of
the original contract. The original terms also continue to be part
of the contract and are not rescinded and/or superseded except
in so far as they are inconsistent with the modifications. Those C
of the original terms which cannot make sense when read with
the alterations must be rejected. In my view the arbitration clause
in this case is in no way inconsistent with the subsequent
modifications and continues to subsist."
(at page 67) D
35. We approve of the said judgment as laying down the correct
Jaw on the expression "alter" in Section 62 of the Contract Act. In order
that a contract that is altered in material particulars fall under Section
62, it must be clear that the alteration must go to the very root of the
original contract and change its essential character, so that the modified E
contract must be read as doing away with the original contract. If the
modified contract has no independent contractual force, in that it has no
meaning and content separately from and independently of the original
contract, it is clear that there is no new contract which comes into being.
The original terms continue to be part of the modified contract except to
F
the extent that they are inconsistent with the modifications made.
36. On the other hand, Section 63 of the Contract Act would clearly
apply to the facts of the present case. Illustration "c" to Section 63 is
apposite, and reads as follows:-
"(c) A owes B 5,000 rupees. C pays to B 1,000 rupees and B G
accepts them, in satisfaction of his claim on A. This payment is
. a discharge of the whole claim."
37. The aforesaid illustration makes it clear that a promisee may
accept satisfaction from a third party which then discharges the promisor
from further performance of the original contract. H
58 SUPREME COURT REPORTS [2017] 14 S.C.R.

A 38. In Kapur Chand Godha v. Mir Nawab Himayatalikhan
Azamjah, (1963) 2 SCR 168, one Baboo Mull and Company sold and
delivered to the Prince of Berar various articles of jewellery. The
jewellery was, in fact, delivered by the appellants to the Prince. Several
payments were made by a Princes Debts Settlement Committee.
B Ultimately, a payment for a sum ofRs.27, 79,078/-was made which was
received by the appellant stating that payment had been made in full.
39. Since a balance ofRs.9,99,940/- still remained, the appellants
filed a suit against the respondent-Prince. The suit was allowed by the
trial court but dismissed by the first Appellate Court which came to a
contrary conclusion. The Supreme Court agreed with the Appellate
C Court in dismissing the suit. It was, therefore, held:
"There was some difference of evidence as to whether Ex. C
bore the signature ofKapurchand when it was first presented to
Madhava Rao or whether the signature was later put on it. With
that difference we are not now concerned. Nor are we concerned
D with certain minor discrepancies between the evidence of the
two witnesses referred to above. The substantial result of the
evidence of the two witnesses to whom we have referred is that
whatever reluctance Kapurchand might have had in accepting
Rs. 20 lacs in full satisfaction of the claim of the appellants, he
E ultimately agreed to do so. Not only did he agree, but he actually
endorsed full satisfaction and payment on all the promissory notes
and thereafter he received payment of the second instalment of
Rs. 8, 75,000/ which along with the first instalment of
Rs.11,25,000i'- made up the sum of Rs. 20 lacs. On these facts
which are established by the evidence given on behalf of the
F appellants themselves, the only conclusion is that there was full
satisfaction of the claim of the appellants.
The legal position is clear enough. Section 63 of the Indian
Contract Act reads:
"Every promisee may dispense with or remit, wholly or in part,
the performance of the promise made to him, or may extend
the time for such performance or may accept instead of it any
satisfaction which he thinks fit.;'
Illustration (c) to the section says
"A owes B 5000 rupees. C pays to B l 000 rupees, and B
accepts them in satisfaction of his claim on A. This payment is
H a discharge of the whole claim."
. CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 59
LIMITED & ANR. [R: F. NARIMAN, J.]

It seems to us that this case is completely covered by s. 63 and A
illustrationJc) thereof. The appellants having accepted payment
in full satisfaction of their claim, are not now entitled to sue the
respondent for the balance."
(at pages 178-179)
This Court further went on to hold that the niceties of English Law in the B
matter of accord and satisfaction do not concern Indian Courts in view
of Section 63 of the Act.
40.It is clear that on the facts in the present case as the original
contract has been performed only by one pa~ty to the contract and not
by the other, the second agreement is entered into so that the promisee C
(i.e. the appellant lrerein) may accept, instead of the original performance
of the agreement, any satisfaction which it thinks fit. Thus, the agreement
deals with one leg of the original transaction, the leg of payment which
has not yet been made while keeping the original transaction alive. The
other clauses of the agreement buttress this conclusion. Under clause D
· 4, the ship owner will not sell the vessel prior to the satisfaction of the
aforesaid claim. And, above all, under clause (6), if for any reason the
said payment is not made, the appellant will be entitled to take all
appropriate legal steps, which include arrest of the vessel, for recovery
of the said amount. Even by clause (8), the original agreement is kept
alive. In the event that the ship is unable to proceed to Bangkok, the E
appellant maintains its rights of recovery against the shipowner and the
vessel. If the original agreement had disappeared by novatio, there is no
· question of taking appropriate steps to arrest the vessel which is owned
by the ship owner who is the promisee and who has not yet performed
his part of the contract. A guarantee clause contained in clauses 7 and 8 F
· is again only an additional string to ihe bow of payment. The fact that
exclusive jurisdiction is given to the courts at Piraeus, Greece has to be
read with clause 6 of the agreement. Obviously, arrest of the vessel for
recovering the aforesaid amount in case paY.ffient is not made can be at
any port, and not merely at Piraeus. For all these reasons, we are of the
· view that the aforesaid agreement read as awhole does not amount to a G
novatio of the original agreement, but was in fact entered into keeping
the original agreement alive in order to ensure that payment under the
original agreement is made to the appellants. In fact, the agreement
dated 18.1.2000 is not a settlement of the original claim at a lesser amount.
As has been held by us, it is only a means of enforcing the payment leg H
60 SUPREME COURT REPORTS [2017] 14 S.C.R.

A of the original transaction through a third party charterer: Consequent
upon the vessel not sailing to Bangkok or the third party charterer failing
to make payment, the original obligation of the appellant continued, and
was enforceable by the arrest of the vessel. It is settled Jaw that an
agreement such as the agreement dated 18.1.2000 is not to be construed
B legalistically but is to be construed as ordinary businessmen would
construe it. In words which have become classic, Lord Wright in Hillas
v. Arcos, [1932] All ER 494 at 503-504, has stated:-
"Business men often record the most important agreements in
crude and summary fashion; modes of expression sufficient and
clear to them in the course of their business may appear to those
c unfamiliar with the business far from complete or precise. It is,
accordingly, the duty of the court to construe such documents
fairly and broadly, without being too astute or subtle in finding
defects; but, on the contrary, the court should seek to apply the
old maxim of English Jaw, verba ita sunt intelligenda ut res
D magis valeat quam pereat. That maxim, however, does not
mean that the court is to make a contract for the parties, or to go
outside the words they have used, except insofar as there are
appropriate implications of Jaw, as, for instance, the implication
of what is just and reasonable to be ascertained by the court as
matter of machinery where the contractual intention is clear but
E the contract is silent on some detail. Thus in contracts for future
performance over a period, the parties may not be able nor may
they desire to specify many matters of detail, but leave them to
be adjusted in the working out of the contract."
41. Equally in Satya Jain and others v. Anis Ahmed Rushdie
F and others (2013) 8 SCC 131 at 143, this Court has held:-
"The principle of business efficacy is normally invoked to read a
term in an agreement or contract so as to achieve the result or
the consequence intended by the parties acting as prudent
businessmen. Business efficacy means the power to produce
G intended results. The classic test of business efficacy was
proposed by Bowen, L.J. in Moorcock [(1889) LR 14 PD 64
(CA)]. This test requires that a term can only be implied if it is
necessary to give business efficacy to the contract to avoid such
a failure of consideration that the parties cannot as reasonable
H
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 61
LIMITED & ANR. [R. F. NARIMAN, J.)

businessmen have intended. But only the most limited term should A
then be implied- the bare minimum to achieve this goal. If the
contract makes business sense without the term, the coUrts will
not imply the same. The following passage from the opinion of
Bowen, L.J. in Moorcock[(l889) LR 14 PD 64 (CA)] sums up
the position: (PD p. 68) · ·
B
" ... In business transactions such as this, what the law desires
to effect by the implication is to give such business efficacy to ·
0
the transaction as must have been intended at all events by
both parties who are businessmen; not to impose on one side
all the perils of the transaction, or to emancipate one side from C
all the chances of failure, but to make each party promise in
law as much, at all events, as it must have been in the
contemplation ofboth parties that he should be responsible for
in respect of those perils or chances."
42. Reading the agreement through the prism of a businessinan 's
eye, it is clear that all that the agreement does is to reinforce the original D
agreement by seeing that the payment under the said agreement is made.
We, therefore, disagree with the view taken by the Division Bench that
· there is a novatio of the original agreement in the fact circumstance of
the present case.
43. However, Mr. Banerjee cited a passage from Halsbury's Laws E
of England and strongly relied upon a Singapore High Court judgment to
argue otherwise. The passage from Halsbury (Vol. 37, 4th ed., p. 287)
reads as follows:- ·
"391. Effect of settlement or compromise. Where the parties
settle or compromise pending proceedings, whether before, at F
or during the trial, the settlement or compromise constitutes a
r1ew and independent agreement between them made for good
consideration. Its effects are (1) to put an end to the proceedings,
for they are thereby spent and exhausted; (2) to preclude the
parties from taking any further steps in the action, except where G
they have provided for liberty to apply to enforce the agreed
terms; and (3) to supersede the original cause of action altogether.
A judgment or order made by consent is binding unless and until
it has been set aside in proceedings instituted for that purpose
and it acts, moreover, as an estoppel by record."
H
62 SUPREME COURT REPORTS [2017] 14 S.C.R.

A 44. It is important to remember that when Section 63 of the
Contract Act is to be applied, the High Courts in India have cautioned
. that, being a wide departure from English law, the Section alone should
be enforced according to its terms and not in accordance with English
law. Thus, in New Standard Bank, Ltd. v. Probodh Chandra
B Chakravarty, AIR 1942 Cal 87 at 90-91, the Calcutta High Court held:-
"By s. 63, Contract Act, every promisor may dispense with or
remit wholly or in part the performance of the promise made to
him or may accept instead of it any satisfaction which he thinks
fit. This section makes a wide departure from the English law,
inasmuch as it does not refer to any agreement and valuable
c consideration. It should not therefore, be enlarged by any
implication of English doctrine: Chunna Mal Ram Nath v. Moo/
Chand-Ram Bhagat [(1928) I.L.R. 9 Lah. 510 (518): L.R. 55
I.A. 154 (160)]."
45. To similar effect is a judgment of the Bombay High Court
D reported as Anand ram Mangturam v. Bholaram Tanumal, AIR 1946
Born I at 6, in which Chagla, J. stated:-
"But the learned Judge expresses his opinion that time can be
extended even though the promisee may not bind himself to do
so. With great respect to the learned Judge, I cannot accept that
E part of the statement of the law. The learned Judge's judgment
is based on English decisions to which he has referred in his
judgment. The Privy Council has repeatedly warned Courts in
India not to import doctrines of common law when construing
the plain sections of the Contract Act and the danger of relying
F on principles of Common Law is all the greater in this case when
one remembers that s. 63, Contract Act constitutes a wide
departure from the principles of the English common law."
46.Even if the passage in Halsbury is to be applied, it is obvious
that the settlement terms spoken of must be made for good consideration,
G which is absent under Section 63. Also, for such settlement to constitute
a new and independent agreement, it must put an end to the proceeding
which is thereby spent and exhausted; and it is for this reason that the
original cause of action is superseded altogether. We have seen on the
facts of the present case how, by the order dated 25.1.2000, the application
in Suit No.1 of2000 alone was dismissed for non-prosecution, only interim
H orders were vacated and it was stated that "the vessel shall cease to be
CHRISOMAR CORPORATION v. MJR STEELS PRIVATE 63
LIMITED & ANR. [R. F. NARIMAN, J.]

under arrest as of now." It is clear, therefore, that in accordance with A
the agreement dated 18.1.2000, the proceedings were not put an end to.
Neither was the original cause of action superseded, as we have stated
earlier. The moment there is a breach of the settlement agreement, the
appellants would be entitled to take appropriate legal steps against the
ship owner, including the arrest of the vessel, which can only be ifthe B
original contract still subsists.
47. Mr. Banerjee laid great reliance on a judgment of the Singapore
High Court in The Dilmun Fulmar, (2003)' SGHC 270. On the facts of
that case, the ship repairers repaired the vessel and supplied material to ·
the vessel. The ship owner paid a sum of $650,000 for repairs, leaving C
an outstanding balance sum of$770,822.28 as at 8.5.200 l. A subsequent
settlement agreement was entered into in which the ship repairer agreed
. to accept a total sum of$3 l0,000, inclusive of$25,000 interest and $25,000
· as legal costs in full and final settlement of their claim in the admiralty
suit, which was for a sum of$1,154,916.78. Paragraph 7 of the said
judgment is important and reads as under: D
"7. The issue raised by this appeal touched on the true construction
and effect of the SettlementAgreement. In corning to my decision
to set aside the writ and warrant of arrest, I had to construe the
accord. Generally, an agreement of compromise would discharge
all original claims and counterclaims unless it expressly provides E
for their revival in the event of breach. The Settlement Agreement
was worded in such a way that there was by its terms an
immediate binding compromise of the claim amount of
$1,154,916.78. By .::11, the plaintiff agreed to accept a sum of
$310,000 inclusive of interest and legal costs in. full and final.
settlement of a larger claim..." F
48. From this paragraph, it is clear that the plaintiffs agreed to
accept a lesser sum in full and final settlement of a larger claim and this
was the amount stated in the settlement agreement. Indeed, in paragraphs
11 and 13 of the judgment, it is stated:
G
".l l. .. The plaintiffs' solicitors in a fax dated l August2002 wrote:
"[Tj he sum due is in fact S$170, 000 as stated in the
Settlement Agreement together with interest thereon up to
23'd January 2002 ... " .
"13 ... There was no explanation as to where the figure of H
64 SUPREME COURT REPORTS [2017] 14 S.C.R.

A $170,000 had come from if it was not from the Settlement
Agreement. .. "
49. On the facts of that case it was, therefore, held that the original
cause of action had been superseded and that the Court had no jurisdiction
in respect of the original claim.
B 50. This case is wholly distinguishable in that, on the facts of the
present case, the very sum due under the original contract continued to
be due and payable under the settlement agreement. The fact that interest
and legal costs were added would not amount in itself to superseding the
original contract, as these relate to payments under the original contract
c and put the promisee in the same position as ifthe contract had originally
been performed. We have also seen that the original agreement was not
superseded but was only sought to be enforced, the manner of
performance being different. This being the case, we are of the view
that the High Court's conclusion that there was a novatio of the original
agreement on the facts of the present case is incorrect.
D
51. It only remains to be considered as to whether, on the date of
arrest i.e. 2.5.2000, respondent no. 1 happened to be the owner of the
vessel, as was found by the impugned judgment.
52. The High Court strongly relied upon an oral admission of PW 1
E to the effect that respondent no. I had become the owner of the vessel
sometime in April 2000. On going through the deposition of Mr. Stephen
Livanos, we are clearly of the view that no such admission was ever
made. The answers to questions 257 to 262 would clearly show that the
witness's statement that respondent no. I was the end buyer of the vessel
was equivocal at best, and was obviously hearsay as the answer to
F question 260 states that a lawyer in Greece had at some point of time
told Mr. Livanos what happened with the vessel. To therefore conclude
from this oral evidence that the vessel had changed hands in April, 2000
does not take the respondent's case very far.
53. However, the High Court also relied upon a notarized bill of
G sale dated 14.4.2000, the notice of readiness of 15.4.2000, which was
accepted by the respondent at 11.00 A.M, and was followed by the
delivery of possession of the vessel at 2.00 P.M. What is important to
note is that the signatory to the physical delivery certificate was on behalf
of Pennon Shipping Corporation, which was only an agent of Third
H Element Enterprises, and not an agent of Fairsteel. The High Court
CHRISOMAR CORPORATION v. MJR STEELS PRNATE 65
LIMITED & ANR. [R. F. NARIMAN, J.]

then went on to state that payment under the Letter of Credit was also A
made on 26.4.2000 and since this would show that the property in the
vessel was transferred in April, 2000, no cause of action would survive
against the new owner of the vessel namely respondent no. I. The High
Court also went on to state that the transfers pleaded in the written
statement of respondent no. 1, namely from Third Element Enterprises B
to Eastern Wealth Investment Limited and thereafter to Fairsteel
Corporation Limited after which Fairsteel sold and transferred the vessel .
to respondent no.1, had not been proved by respondent no.1, but that this
did not affect the respondent's case.
54. We have been shown a bill of sale dated 27.4.2000 by which C
Third Element Enterprises effected the first of these four sales to Eastern
Wealth Investment Limited, only on 27.4.2000. This sale has for its
consideration "one US Dollar and/or other valuable consideration" casting
grave doubts about its efficacy in law. Be that as it may, since this sale
is the first sale in the chain of sales made ultimately to respondent no. l,
it is obvious that the sale made by Fairsteel to respondent no.1 could D
only have been after this date. Shri Banerjee cited before us authorities
to the effect that it is well known that back to back sales of this nature
take place between different parties for the same vessel. That may well
be so, but it is still necessary to prove and explain each back to back sale
from which respondent no. I ultimately derives its title; in accordance
with its pleading in the written statement filed by it. As. has correctly E
been held by the High Court, there is no proof of any of these back to
back sales, and in point of fact the very first sale from the original owner
has taken place in favour of Eastern Wealth after the High Court has
found that the vessel has been sold by Fairsteel to respondent no.I,
which goes contrary to the pleaded case of respondent no.1 itself. We F
were also referred to a document dated 26.4.2000 by which a new clause
8 was to be added to the Letter of Credit which read as follows:-
"COPY OF FREE OF ENCUMBRANCES CERTIFICATE
ISSUED BY EMBASSY OF REPUBLIC OF CYPRUS,
MARITIME SECTION, PIRAEUS, CERTIFYING THAT G
THE MOTOR VESSEL "NIKOLAS S" PERMANENTLY .
REGISTERED IN THE CYPRUS REGISTER OF SHIPS,
OWNED BY 'THIRD ELEMENT ENTERPRISES SHIPPING
LTD." OF CYPRUS IS FREE OF MORTGAGE AND ANY
OTHER ENCUMBRANCES."
H
66 SUPREME COURT RE~ORTS [2017) 14 S.C.R.

A Further, as per clause no.8 we confirm that the Buyers have
received the Notice of Readiness (NOR) on 15.04.2000 from
the Sellers or their Agents in Calcutta and authorize you to
negotiate the L/C as per the terms."
This clause would again go to show that even on 26.4.2000 the
B owner of the vessel was Third Element Enterprises and not respondent
no.I.
55."With regard to the High Court finding that full payment had
been made under the Letter of Credit on 26.4.2000, the respondent's
own suit that was filed by it against Fairsteel on 9.5,2000 shows that no
c such payment had been made by the date of the filing of the said suit.
The suit was for the relief ofrescission of the agreement between Fairsteel
and respondent no. I dated 21.1.2000 on the ground of fraud. Para 27 of
the suit is important and states as follows:-
"27. In the facts and circumstances aforestated, the defendant
D no. l has fraudulently induced the plaintiff to issue/open the said
L/C through the defendant no.2 in favour of the defendant no.1.
The defendant no. I is not entitled to receive and should be
restrained from receiving any payment under the said L/C and
the plaintiff claims a decree of perpetual injunction in that regard."

E 56. The relief claimed in the other suit is also important and prayers
"C" and "D" are material and read as under:-
"(c) Decree of perpetual injunction restraining the defendant no. I
whether by itself or through its servants or agents from
receiving any money under the Letter of Credit No.CAL/
24006 dated 8'11 April 2000, issued by the defendant no.2 in
F
favour of the defendant no. l.
(d) Decree of perpetual injunction restraining the defendant no.2
from making any payment under the Letter of Credit
No.CAL/24006 dated 81h April 2000 issued/opened by it in
favour of the defendant no.I."
G
57. This would show, on the respondent's own admission made in
the plaint dated 9.5.2000, that monies were not yet received under the
LetterofCredit even on 9.5.2000 and that, therefore, an injunction should
be granted restraining defendant no.I from receiving this money and
against the Bank of Baroda - plaintiff's bank - from making any such
H
CH.RISOMAR CORPORATION v. MJR STEELS PRIVATE 67
LIMITED & ANR. [R. F. NARIMAN, J.]

payment to defendant no. I. Thus, it is clear that the High Court was not A
correct in its view that it was proved by respondent no. I that sale had
taken place in April, 2000 by Fairsteel Corporation to respondent no. I by
which respondent no. I became the owner of the vessel. It is clear,
therefore, that respondent no. I has failed to prove that there was a
change of ownership of the vessel in its favour on the date of arrest i.e. B
on 2.5.2000. This being the case, we set aside the judgment of the High
Court and restore the decree of the trial court which reads as under:-
"In the result, the suit succeeds. There would be a decree as
against the vessel M.V. Nikolaos-S ofUS$ 94,611.25 equivalent
to Rs.42,57,500.00 in Indian currency. The plaintiff would be
entitled to recover the said sum from the cash security furnished C
to the Registrar, High Court, Original Side together with accrued
interest thereon. The Registrar, Original Side, High Court,
however, is entitled to deduct necessary commission applicable
thereto." ·
58. The appeal is, accordingly, allowed in the aforesaid terms. D

Divya Pandey Appeal allowed.