Holding

Unpaid P&I insurance premiums are "necessaries" for a ship, and an order refusing to reject a plaint under Order 7 Rule 11 is a preliminary judgment appealable under Clause 15 of the Letters Patent.

Summary

The Supreme Court considered an Admiralty suit filed by a UK Protection & Indemnity (P&I) club seeking arrears of insurance premiums from the owners of the vessel M.V. Sea Success I, alleging the premiums were "necessaries" under the Admiralty Courts Act, 1861. The vessel moved to reject the plaint under Order 7 Rule 11 of the CPC, arguing the claim did not disclose a cause of action and that unpaid premiums were not "necessaries". The High Court had refused to reject the plaint and held the premiums were "necessaries", but later found the plaint did not disclose a cause of action, leading to appeals. The Supreme Court held that unpaid P&I insurance premiums are "necessaries" for a ship, that the order refusing to reject the plaint is a preliminary judgment appealable under Clause 15 of the Letters Patent, and that the plaint does disclose a cause of action. Consequently, the appeal by the club was allowed and the cross‑appeal dismissed, setting aside the High Court judgment and remitting the matter for further disposal.

Issues considered

Whether arrears of P&I insurance premiums fall within the definition of "necessaries" under Section 5 of the Admiralty Courts Act, 1861.
Whether an order refusing to reject a plaint under Order 7 Rule 11 CPC constitutes a "judgment" within the meaning of Clause 15 of the Letters Patent and is therefore appealable.
Whether the plaint as drafted discloses a cause of action sufficient to maintain the suit.

Legislation cited

Administration of Justice Act, 1956
Code of Civil Procedure, 1908s. Order 7 Rule 11(a), s. Order 7 Rule 14

Subjects

Admiralty jurisdictionNecessariesProtection & Indemnity insuranceLetters Patent appealOrder 7 Rule 11 CPCCause of actionMaritime claimShip arrestBeneficial ownershipStatutory interpretationInternational conventions

Judgment

LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. A
v
M.V. SEA SUCCESS I AND ANR.

NOVEMBER 20, 2003
f' .... '

[V.N. KHARE, CJ. AND S.B. SINHA, J.] B

I
Admiralty Court Act, 1861-Sections 4, 5, 6 and 8-Protection and
Indemnity Insurance cover-Admiralty Suit for recovery of unpaid insurance
claims treating it to be 'necessaries supplied to a ship'-Validity of-Held C
Insurance is 'necessaries'- 'Necessaries' should be construed in a broad and
liberal manner with changing scenario and the changes in both domestic
and international law-Admiralty Court Act, 1840; Sections 3, 4 and 6-
Supreme Court of Judicature {Consolation) Act, 1925; Section 22(I)-
Brussels Arrest Convention, 1952; Article l{k) and 2-1999 Arrest convention;
Article 14. D
Code of Civil Procedure, 1908-0rder 7 Rules //, //A and 14-
Application for rejection .of plaint on the ground that cause of action is not
disclosed-Order rejitsing rejection ofplaint-Letters Patent Appeal on such
Order-Validity of-Held, is valid, since the order is a preliminary judgment
and not an interlocutory order-Letters Patent; Clause 15. E
Code of Civil Procedure, 1908-0rder 7 Rules// and 14-Disclosure
of cause of action in a plaint-Documents annexed with the plaint-Held, the
documents must be read into to find out the cause of action.

Appellant- club, an association incorporated in United Kingdom, offers F
insurance cover in respect of vessels entered with it for third party risks
associated with operation and trading of vessels. According to the appellant,
the protection and Indemnity (P & I) cover is compulsory to allow a ship to
enter major ports in India. Respondent no. 1- vessel has two sister vessels
and all the vessels are owned by respondent no. 2. The respondent no. 2 did G
not pay the insurance premium due for the two sister vessels for two years.
The appellant, treating the unpaid insurance calls as 'necessaries' under
section 5 of the Admiralty Courts Act, 1861, filed an Admiralty Suit before
High Court for a decree against the respondents for payment of unpaid
insurance amounts with interest and for the arrest ofrespondent no. 1- vessel
851 H
852 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A to secure the claim. Respondent no. I took out a Notice of motion under order
7 Rule 11 (a) CPC for rejection of the plaint of the appellant on the ground
that it does not disclose a cause of action and that the claim of unpaid
insurance premium was not 'necessaries' within the meaning of the Act.
Single Judge of the High Court refused to reject the plaint holding that the
plaint discloses sufficient cause of action for maintaining a suit. The Single
B Judge, however, referred the question whether the unpaid insurance premium
is 'necessaries' to a Division Bench of the High Court. Respondent no. I filed
a Letters patent appeal before Division Bench against the refusal by the Single
Judge to reject the plaint. The High Court held that unpaid insurance
premium is 'necessaries' under the Act. The High Court, however, held that
C the plaint of the appellant does not disclose a cause of action. Hence the appeals.

The appellant, in the main appeal, contended that the order of refusal
by Single Judge to reject the plaint under order 7 Rule 11 (a) CPC is an
interlocutory order and not a judgment for invoking Letters Patent Appeal;
and that the order is akin to an order granting leave to defend a suit under
D order 37 CPC or an order amending the plaint, which are not 'judgments'
under clause 15 of the Letters Patent.

In the cross appeal, it was contended that the unpaid insurance premium
is not a maritime claim entitling the appellant to invoke admiralty jurisdiction
of the High Court since it does not ccnstitute 'necessaries' under section 5
E of the Admiralty Courts Act, 1861; that the United Kingdom and some other
countries have held consistently for more than a century that the unpaid
insurance premium is not 'necessaries'; that the necessities should be looked
from the view point of physical necessity and practically and not from the view
point of prudence or sound economics; that if the P & I insurance is held to
p be 'necessaries', it will lead to incongruous situation when other forms of
insurance are not 'necessaries', and that the interpretation of the word
'necessaries' rendered by the English Courts should be followed since the
High Courts in India derive maritime jurisdiction from the pre-independence
statutes and have the same jurisdiction as that of the courts in England.

G In reply the appellant in the main appeal contended that the term
'necessaries' must be construed in a broad and liberal manner keeping in
mind the ever changing requirements of a ship to be able to trade in commerce;
that a valid P & I insurance cover has been made compulsory for the vessels
entering Indian ports; and that the domestic legislation also provides for a
H compulsory insurance cover; that the term 'necessaries' must be flexible
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I 853
having regard to the global change and outlook in trade and commerce. A
Allowing the main appeal and dismissing the cross appeal, the court

HELD: 1.1. The term 'necessaries' is a term of art but it cannot be used
in a limited context of mandatory claims made for goods or services supplied
to a particular ship for her physical necessity as opposed to commercial B
operation and maintenance. Physical necessity and practicality would be a
relevant factor for determination of the said question. Taking insurance cover
would not only be a commercial prudence but almost a must in the present
day context. The third party insurance may not be compulsory in certain
jurisdiction but having regard to the present day scenario such an insurance
cover must be held to be intrinsically connected with the operation of a ship. C
(895-E-F]

1.2. One of the relevant factors for arriving at a conclusion as to whether
anything would come within the expression 'necessary' or not will inter alia
depend upon answer to the question as to whether the prudent owner would D
provide to enable a ship to perform well the functions for which she has been
engaged. If getting the vehicle insured P & I club would be one of the things
which could enable a prudent owner to sail his ship for the purposes for which
she has been engaged, the same would come within the purview of the said
term. The matter must be considered having regard to the changing scenario
in as much as the field of insurance has undergone a sea change from merely E
hull and machinery, the insurance companies cover various risks including
oil spill damage to the port, damage to the cargo etc. In that sense, the term
must be construed in a broad and liberal manner. The changing requirement
of a ship so as to enable it to trade in commerce must be kept in mind which
would lead to the conclusion that P & I insurance cover would be necessary F
for operation of a ship. There are a large number of insurance covers. But
the question is not what insurance would be 'necessary' and what would be
not as the issue has to be considered not only on a mere hypothesis but having
regard to the statutes framed by other countries as also the 1999 Arrest
Convention. (895-F-H; 896-A-CI
G
1.3. Appellant Club would be entitled to enforce its claims against the
vessel keeping in view t~e law prevailing in India within whose jurisdiction
the ship is found. Only because, the claim can be enforced in India and not in
some other countries, by itself would not lead to the conclusion that it cannot
be enforced at all irrespective to the domestic law. The domestic legislation
will prevai• over any international convention irrespei!tive of the fact as to H
854 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A whether the country concerned is a party thereto or not. As a matter of policy
legislation or otherwise, England did not want that arrears of insurance
premium should be included as a maritime claim, but the same would not imply
that in other countries despite the unpaid insurance premium being maritime
claim, the same would not be enforced. [897-G-H; 898-A-DI

B 1.4. Having regard to the changing scenario and keeping in tune with
the changes in both domestic and international law as also the statutes adopted
by several countries, a stand, however bold, may have to be taken that unpaid
insurance premium of P & I clilb would come within the purview of the of the
expression 'necessaries supplied to the ship'. The question has not only been
C considered from the angle of history of the judicial decisions rendered by
different courts having great persuasive value but also from the angle that
with the change in time interpretative changes are required to be made.
(898-F-H; 899-A)

M V. Elisabeth, (1993[ Supp. 2 SCC 433; M V. Al Quamar v. Isavliris
D Salvage (International) Ltd. and Ors., [2000) 8 SCC 278; Kapila Hingorani
v. State of Bihar, JT [2003) 5 SCC I; John Val/amattom and Anr. v. Union of
India, JT (2003) 6 SC 37; Indian Handicrafts Emporium and Ors. v. Union of
India, (2003[ 6 SCALE 831; Motor General Traders and Anr. v. State ofAndhra
Pradesh and Ors., (1984) I SCC 222; Rattan Arya and Ors. v. State of Tamil
Nadu and Anr., (1986) 3 SCC 385; Synthetic & Chemicals Ltd. and Ors. v.
E State of U.P. and Ors., (1990[ l SCC 109 and National Insurance Co. Ltd.,
Chandigarh v. Nicolletta Rohtagi and Ors., [2002[ 7 SCC 456 referred to.

Queen v. Judge of the City of London Court, (1891) 1 QB 273; The
Beldis (1936 P. 51); Webster v. Seekamp, [1821 4B & Aid 352[; Heinrich
F Bjorn (1883 8 P.O. 151 ); The Andre Theodre (10 Aspinall 94); Stokes v. The
Conference, (18878NSWR10); The River Rima (1988 2 L Rep 193); The
Emerald Transporter [1985 2 SALR 152); The Golden Petroleum [1994 l
SLR 92[; The Aifanourious [1980 2 L Reps. 403); Gatoil International Inc.
v. Arwkright Boston Manufacturers Mutual lns,,rance Co. and other, The
Sandrina, [1985[ 1 All ER 129; Equilease Corp. v. M V. Sampson, (793 F.2d
G 598- U.S. Court of Appeals(; Gouldv. Cornhill Insurance Co. Ltd., (l DLR
4th Edition 183[; The Riga ((1869-72) L.R. 3 A & E 516[; The Edinburgh
Castle (1999 F Vol. 2 Lloyd's Reports 362[; Nore Challenger and Nore
Commander (2001Vol.2 Lloyd's Report 103[; M.V. Emerald Transporter
(1985) 2 SALR 448; Marazura Navegacion S.A. and Ors. v. Oceanus Mutual
H Underwriting Association (Bermuda) Ltd. & John Laing (Management) Ltd.
LIVERPOOL AND LONDON SP.AND I ASSON LTD. v. M.V. SEA SUCCESS I 855
(1977) I Lloyd's Rep. 283; Equilease Corporation v. M V. Sampson, (793 F.2d A
598); Trident Marine Managers Inc. v. Serial No. CEBRF 0661586, (1988)
American Maritime Cases 763), referred to.

Modern Admiralty Law by Aleka M,;ndaraka-Sheppard; Shipping Law
by Simon Baughen (Second Edition); Benedict on Admiralty (6th Edition, vol.
I); Principles of Maritime Law by Susan Hodges and Christopher Hill; Law B
and Practice by Steven J. Hazelwood; British Shipping Laws (Vol. 14);
Cheshire and North's Private International Law (12th Edition I; Black's Law
Dictionary; Bouvier's Law Dictionary; Canadian Law Dictionary; Ballentine's
Law Dictionary; 70 American Jurisprudence 2d; International Convention
on Arrest ofShips 1999 by Richard Shaw; Project Gabcikovo-Nagymaros (Op. C
Ind. Weeramantry), referred to.

2.1. The contention of the appellant that in the suit, all defences would
be open to the defendant is misconceived in as much as, no evidence can be
adduced in the absence of any pleading. There may not, furthermore be any
requirement to go into the trial if the plaint does not disclose a cause of action. D
The contention that an order refusing to reject a plaint is one akin to an order
amending the plaint would not be a correct proposition of law. The question
as to whether the defendant despite such an order refusing to reject a plaint
will have a right to show that the case is false would again be of ..no
consequence.(903-8-D)
E
2.2. An order passed under Order 7 Rule 11 CPC would determine the
rights conferred on the parties one way or the other. Hence, stricto sensu, it
would not be an interlocutory order but having regard to its trails and
trappings would be a preliminary judgment. It is trite that a party should not
be necessarily harassed in a suit. An order refusing to reject a plaint will F
finally determine his right in terms of Order 7 Rule 11 CPC. 1904-E; 905-A)

2.3. The idea underlying Order 7 Rule llA is that when no cause of
action is disclosed, the courts will not unnecessarily protract the hearing of
a suit. Having regard to the changes in the legislative policy as adumbrated
by the amendments carried out in the CPC, the Courts would interpret the G
provisions in such a manner so as to save expenses, achieve expedition, avoid
the court's resources being used up on cases which will serve no useful
purpose. A litigation, which in the opinion of the court is doomed to fail, would
not further be allowed to be used as a device to harass a litigant. Hence, the
Letters Patent Appeal against the order refusing to reject the plaint is
maintainable. (905-B-C; 907-D( H
856 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A '
Shah BabulalKhimjiv.Jayaben Kania, 1198114 SCC 8; Subal Paulv.
Malina Paul and Anr., JT (2003) 5 SC 193; Azhar Hussain v. Rajiv Gandhi,
11986] Supp. SCC 315; Dhartipakar Aggarwal v. Rajiv Gandh~ 119871 Supp.
SCC 93; Samar Singh v. Kedar Nath, 119871 Suppl SCC 224; Dipak Chandra
Ruhidas v. Chandan Kumar Sarkar;l200317 SCC 66; Central Mine Planning
B _&Design Institute Ltd v. Union o/lndiaandAnr.; 1200112 SCC 588, referred
to.

The Justices ofthe Peace/or Calcutta v. Oriental Gas Comparry, 118721 .
Vol VIII Bengal Law Reports 433; Prahladraj Agarwal/av. Shri. Renuka Pal,
AIR (1982) Cal 259; Mis Tanusree Art Printers and Anr. v. Rabindra Nath
C Pal, 1200012 CHN 213; lea Badin v. Upendra Mohan Roy, AIR (1935) cal
35 and Chittaranjan Monda/ v. Sankar Prosad Sahani, AIR (1972) Cal 469,
referred to.

3.1. The documents annexed with the plaint by the appellant having
regard to Order 7 Rule 14 CPC are required to be taken into consideration
D for the purpose or disposal ofapplicatio~ under'on1er 7 Rule ll(a) CPC. Under
the Order, the court is authorised to reject a plaint on failure on the part of
the plaintiff to disClose a cause of action but the same would not mean that
the averments made therein or a document upon which reliance bas been
placed which discloses a cause of action, the plaint would be rejected on the
ground that such averments are not sufficient to prove the facts stated therein
E for the purpose or obtaining reliefs claimed in the suit. The approach adopted
by the High Court in this behalf is not correct. [908-G-H; 910.G-HI

3.2. In ascertaining whether the plaint shows a cause of action, the court
is not required to make an elaborate enquiry into doubtful or complicated
F questions of law or fact. By the statute, the jurisdiction of the court is
restricted to ascertain whether on the allegations, a cause or action is shown..
So long as the claim discloses some cause of action or raises some questions
lit to be decided by a Judge, the mere fact that the case is weak and not likely
to succeed is not ground for striking it out. The purported failure of the
pleadings to disclose a cause of action is distinct from the absence of full
G particulars.1912-A-B; F)

3.3. For the purpose of rejecting the plaint, it is not necessary to consider
whether the averments made in the plaint prove the facts. The reasons which
have been assigned in support of the finding that the ship is a valuable
commercial chattle and her arrest ulideservingly p~ejudices thinl parties as
H well as affect the interest of owner and others is a question which must be
LIVERPOOL AND LONDON SP. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 857

gone into when passing a final order as regard interim arrest of ship or A
otherwise. For the purpose, the respondent vessel could file an application
for stay. While considering such an application, the Court could consider not
only a prima facie case but also elements of balance of convenience and
irreparable injury in the matter. The reason is that if a legal question is raised
by the defendant in the written statement, it does not mean that the same has
to be decided only by way of an application under Order 7 Rule 11 CPC which B
may amount to pre-judging the matter. (913-D-H; 914-A)

Mohan Rawale v. Damodar Tatyaba and Ors,. [199412SCC392; D.
Ramachandran v. R. V. Janakiraman and Ors., (199913 SCC 267; Punit Rai
v. Dinesh Chaudhary, JT(2003) Supp. I SC 557 and Vijay Pratap Singh v. C
Dukh Haran Nath Singh, AIR (1962) SC 941, referred to.

William v. Wilcox, (183818 Ad. & EL 331 and The Aventicum; (197811
Lloyd's L.R. and The Andrea Ursula, (197111 Lloyd's L.R. 145, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5665 of 2002.
D
From the Judgment and Order dated 28.11.2001 of the Bombay High
Court in A. No. 226/2001 in Notice of Motion No. 2455/2000 in Admiralty Suit
No.32 of2000.

WITH
E
C.A. No. 5666 of2002

Prashant S. Pratap, Siddhartha Dave, Ms.Vibha Datta Makhija, Zarir P.
Bharucha, Ms. Reetu Sharma, R.N. Karanjawala, Ms.Manik Karanjawala,
Ms.Avantika Keswani, R.K. Agarwal, Sanjay Dua, Arun K. Sinha and Rakesh F
Singh for the Appearing parties.

The Judgment of the Court was delivered by

S.8. SINHA,J. THE BACKGROUND FACT:

The appellant (Club) herein is an association incorporated under the G
laws of the United Kingdom. It is a mutual association of ship owners. It
offers insurance cover in respect of the vessels entered with it for diverse
third party risks associated with the operation and trading of vessels. According
to the appellant, no vessel operates without a Protection & Indemnity (P&I)
cover and the same has been made compulsory to allow a ship to enter major H
858 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A ports in India.
'Sea Ranger' and 'Sea Glory' are the sister vessels of the 1st respondent
vessel and they are allegedly owned by the 2nd respondent. The first two
vessels entered into a contract with the appellant's association for the years
1998-1999 and 1999-2000 but they have not paid the unpaid insurance premium
B due and payable by the 2nd respondent for various P&I risks for which they
had been insured. These unpaid insurance calls being "necessaries" was
enforceable within the "admiralty jurisdiction" of the Bombay High Court.

For the arrest of the 1st respondent vessel which came to Mumbai Port
within the territorial waters of India, a suit was filed by the club inter a/ia
C for the prayers : "(a) for a decree against the respondents in the sum of
US$ I, 18, 194.89 together with interest at the rate of 12% per annum, which was
the unpaid insurance premium amount due to the club and payable by the 2nd
respondent; and (b) for arrest of the Ist respondent vessel to secure the
claim."
D
On an application for arrest of the Ist respondent vessel having been
made, the 2nd respondent appeared and undertook to furnish security in
respect of the appellant's claim and further gave an undertaking that until the
security is furnished the said vessel will not leave the Port of Mumbai.
However, thereafter S.S. Shipping Corporation Inc., Liberia claiming to be the
E registered owner of the Ist respondent furnished a bank-guarantee in relation
to the appellant's claim in discharge of the undertaking of security given by
the second respondent. The I st respondent thereafter took out a Notice of
Motion for rejection of the plaint purported to be under Order 7 Rule I l(a)
of the Code of Civil Procedure inter alia on the ground that the averments
F contained therein do not disclose a cause of action as the claim of unpaid
insurance premium was not a "necessary" within the meaning of Section 5 of
the Admiralty Courts Act, 1861. A learned Single Judge of the High Court
after hearing the Notice of Motion by an order dated 1-212/200 I referred the
said question to a Division Bench as it could not agree with a decision
rendered by another leanied Single Judge. However, on the other two grounds
G it discharged the Notice of Motion holding that the averments made in
paragraphs I and 14 of the plaint inter alia to the effect that all the three .
ships are beneficially owned by the 2nd respondent disclose a cause of
action.

An appeal thereagainst was preferred by the respondent herein. The
H Division Bench took up the appeal preferred by the respondent herein as also
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA, J.l 859

the reference made by the learned Single Judge and passed a common judgment. A

ISSUES:

The questions which arose for consideration before the High Court
were:

(Q whether arrears of insurance premium due and payable to the
B
appellant by the 2nd respondent would fall within the scope and
ambit of Section 5 of the Admiralty Courts Act, 1861;
(iI) whether refusing to reject the plaint under Order 7 Rule 11 (a)
upon holding that the plaint discloses a cause of action is a C
'judgment' within the meaning of Clause 15 of the Letters Patent
of the Bombay High Court and was, thus, appealable; and
(iit) Whether the averments made in paragraphs 1 and 14 of the
plaint disclose sufficient cause of action for maintaining a suit.

The Division Bench while answering the question No. I in favour of D
appellant, answered question Nos. 2 and 3 against it. Appeal No. 226 of2001
has been filed by the 'club' whereas Civil Appeal No. 5666 of 2002 has been
filed by the 'vessel'.

Submissions :
E
Mr. Bharucha, the learned counsel appearing on behalf of the "Vessel"
would inter alia submit:

(i) The amount of arrears of insurance premium alleged to be due
to the 1st respondent towards release calls is not a maritime
claim entitling the Club to invoke the admiralty jurisdiction of the F
High Court as such unpaid insurance money does not constitute
'necessaries' within the meaning of Section 5 of the Admiralty
Courts Act, I861.
(ii) Sufficiently direct and proximate connection between insurance
and the vessel is a prerequisite for bringing an action in rem. G
Insurance is meant primarily as a means of indemnifying and
protecting the vessel owner against the loss of his vessel and/
or claims that that may arise as a result of damage or loss caused
by the vessel. Although it may be a commercial necessity but
the same would not come within the purview of the term H
860 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A 'necessaries' within the meaning of the provisions of the said
Act. The provisions contained in the Admiralty Courts Act of
1840 and 1861, Section 22 of the Supreme Court of Judicature
Act, 1925, the 1952 Brussels Arrest Convention as also the
Administration of Justice Act, 1956 disclose one uniform feature
that in order that a monetary claim qualifies for and is recognized
B as a maritime claim the same must be necessary for operation of
the ship.
(iii) In United Kingdom, it has consistently been held for more than
a century that unpaid insurance premium is not a "necessary"
within the conventional meaning of the said term as understood
c in maritime law. The said view has been reiterated by the Courts
of Australia, South Africa and Singapore. In support of the said
contention, strong reliance has been placed on Queen v. Judge
of the City of London Court (1891) QB 273, The Be/dis [1936 P.
51], Webster v. Seekamp (1821) 4B & Aid 352, Heinrich Bjorn
D (1883) 8 P.O. 151, The Andre Theodore [10 Aspinall 94], Stokes
v. The Conference (1887) 8 NSWR 10, The River Rima (1988) 2
L Rep 193, a South African Court decision in The Emerald
Transporter ( 1985) 2 SALR 152 as also a decision of Singapore
High Court in The Golden Petroleum, (1994) 1SLR92.
(iv) The expression "necessaries supplied to any ship" although has
E
not statutorily been defined; over a long period of time, the same
had attained a definite connotation, i.e., goods or services
supplied to a specifically identified ship in order to successfully
prosecute the voyage in question, and, thus, applying the said
test unpaid insurance premium does not answer the said
F definition. The matter has furthermore to be looked at from the
point of view of physical necessity and practicality and not from
the viewpoint of prudence or sound economics.
(v) There are a large number of categories. of insurance from hull
and machinery insurance, to protection and indemnity (P&I)
'
G cover, through war risks, to freight demurrage and defence cover
(FD&D), oil spill cover (TOV ALOP), and strike cover etc and in
that view of the matter if P&I should be held to be a necessary,
others are not, the same would lead to an incongruous situation.
(vi) In view of the decision in The Aifanourious ( 1980) 2 L Reps. 403
H as also the decision rendered by the House of Lords in Gatoil
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA,J.J 86 J

International Inc. v. Arwkright Boston Manufacturers·Mutual A
Insurance Co. & Other The Sandrina, (1985] 1 All ER 129,
holding that claim for unpaid insurance has never been
recognized as maritime claim under any other head and the
Courts of England expressly held the same to have been excluded
as such under Article 1 of the Brussels Arrest Convention, 1952.
Such a claim, thus, due to unpaid insurance premium would not B
be a maritime claim also under the head "disbursements made on·
account ·of a ship".
(vii) In the decision of this Court in M V. Elisabeth, [1993] Supp. 2
SCC 433, it was merely held that the High Courts in India will
have an extended jurisdiction under the Admiralty Courts Act, C
1861 and the said principle cannot be further extended.
(viii) As the maritime jurisdiction of the High Courts in India was
derived from the pre-independence statutes and as the High
Courts of India exercise the same jurisdiction as that of the
courts in England, it must necessarily be held that the D
interpretation of the word "necessaries" rendered by the English
Courts and which has been followed by other courts except by
the American Court should prevail.
Mr. Prashant S. Pratap, the learned counsel appearing on behalf of the
Club, on the other hand, would submit that: E
(i) "necessaries" are the thiiigs which a prudent owner would provide
to enable a ship to perform the functions wherefor she has been
engaged and, thus, the provision of services would come within
the definition of necessaries.
F
(u') The term "necessaries" must be construed in a broad and liberal
manner keeping in mind the ever changing requirements of a
ship to be able to trade in commerce.
(iii') Contemporary maritime statutes in England do not use the term
"necessaries" but the American Federal Maritime Liens Act does G
and, thus, decision rendered by the American Courts that
insurance is a "necessary" should be held to be correct.
Equilease Corp. v. M V. Sampson 793 F.2d 598 - U.S. Court of
Appeals.
(iv) A valid P&l insurance cover is necessary for a ship to call at H
862 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A major ports in India and consequently so far as India is concerned,
it is a necessity having regard to the fact that Mumbai Port,
JNPT and Kolkata Port have issued a statutory direction in this
behalf.
(v) The domestic legislation in India also provide for a compulsory
B insurance. Reference in this connection has been placed on the
Inland Vessels Act, 1917 (as amended in the year 1977), the
Merchant Shipping Act, 1956 (as amended in 1983) and
Multimodal Transportation of Goods Act, 1993 (as amended in
2000) and in that view of the matter the pedantic and regressive
view should be discouraged specially in the light of the judgment
c of this Court in M V. Elisabeth (supra).
(vi) By reason of the 1999 Arrest Convention inter alia unpaid
insurance calls had been added and in absence of any codification
and maritime claim by a statute in India the same should be taken
into consideration for determination of the jurisdiction of the
D High Court. Several countries such as Canada, South Africa,
Australia, China and Korea have given the claim for unpaid
insurance premium in respect of a ship, the status of a maritime
claim.
(vii) Flexibilities being the virtue of law court, the High Court has
E rightly held that the marine premium would come within the
purview of the term "necessaries" having regard to the global
change and outlook in trade and commerce. Reliance in this
connection has been placed on M V. Al Quamar v. Tsavliris
Salvage (International) Ltd. and Ors., [2000) 8 SCC 278.

F STATUTORY PROVISIONS:
The relevant provisions of Admiralty Court Act, 1840 are as follows:

"3. WHENEVER A VESSEL SHALL BE ARRESTED, ETC., COURT TO
HAVE JURISDICTION OVER CLAIMS OF MORTGAGEES: Whenever
G any ship or vessel shall be under arrest by process issuing from the
said High Court of Admiralty, or the proceeds of any ship or vessel
having been so arrested shall have been brought into and be in the
registry of the said court, in either such case the said court shall have
full jurisdiction to take cognizance of all claims and causes of action
H of any person in respect of any mortgage of such ship or vessel, and
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA, J.J 863

to decide any suit in~tituted by any such person in respect of any A
such claims or causes of action respectively.

4. COURT TO DECIDE QUESTIONS OF TITLE, ETC.: The said Court
of Admiralty shall have jurisdiction to decide all questions as to the
title to or ownership of any ship or vessel; or the proceeds thereof
remaining in the registry, arising in any cause of possession, salvage, B
damage, wages or bottomry, which shall be instituted in the said courf
after the passing of this Act.

6. THE COURT IN CERTAIN CASES MAY ADJUDICATE, ETC.: The
High Court of Admiralty shall have jurisdiction to decide all claims
and demands whatsoever in the nature of salvage for services rendered c
to or damage received by any ship or sea-going vessel or in the nature
of towage, or for necessaries supplied to any foreign ship or sea-
going 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 services were rendered or damage
received, or necessaries furnished, in respect of which such claim is
D
made.

The relevant provisions of Admiralty Court Act, 1861 are as under:

"4. AS TO CLAIMS FOR BUILDING, EQUIPPING, OR REPAIRING OF
SHIPS: The High Court of Admiralty shall have jurisdiction over any E
claim for the building, equipping, or repairing of any ship, if at the time
of the institution of the cause the ship or the proceeds thereof are
under arrest of the court.

5. AS TO CLAIMS FOR NECESSARIES: The High Court of Admiralty
shall have jurisdiction over any claim for necessaries supplied to any F
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 recover twenty pounds, he shall not be G
entitled to.

6. AS TO CLAIMS FOR DAMAGE TO CARGO IMPORTED: The High
Court of Admiralty shall have jurisdiction over any daim by the \iwner
or consign~e or assignee of any bill of lading of any goods carried
into any p'ort in England or Wales in any ship, for damage done to H
864 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A the goods or any part thereof by the negligence or misconduct of or
for any breach of duty or breach of contract on the part of the owner,
master, or crew of the ship, 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 any such cause the plaintiff do not recover twenty
B 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.

8. HIGH COURT OF ADMIRALTY TO DECIDE QUESTIONS AS TO
OWNERSHIP, ETC. OF SHIPS: The High Court of Admiralty shall
c have jurisdiction to decide all questions arising between the co-.
owners, or any of them, touching the' ownership, possession,
employment, and earnings of any ship registered at any port in England
or Wales, or any share thereof, and may settle all accounts outstanding
and unsettled between the parties in relation thereto, and may direct
D the said ship or any share thereof to be sold, and may make such
order in the premises as to it shall seem fit.

Section 2 of Colonial Courts of Admiralty Act, 1890 reads thus:

"2. Colonial Courts of Admiralty. - (I) Every court oflaw in a British
E possession, which is for the time being declared in pursuance of this
Act to be a Court of Admiralty, or which, if no such declaration is in
force in the possession, has therein original unlimited civil jurisdiction,
shall be a Court of Admiralty, with the jurisdiction in this Act mentioned,
and may for the purpose of that jurisdiction, exercise all the powers
which it possesses for the purpose of its other civil jurisdiction, and
F such Court in reference to the jurisdiction conferred by this Act is in
this Act referred to as a Colonial Court of Admiralty ....
(2) The jurisdiction of a Colonial Court of Admiralty 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,
G whether existing by virtue of any statute or otherwise, and the Colonial
Court of Admiralty may exercise such jurisdiction in like manner and
to as full an extent as the High Court in England, and shall have the
same regard as that Court to international law and the comity of
nations.
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.8. SINHA, J.J 865

Section 2 of The Colonial Courts of Admiralty (India) Act, 1891 reads A
as under:

2. APPOINTMENT OF COLONIAL COURTS OF ADMIRALTY: The
following Courts of unlimited civil jurisdiction are hereby declared to
be Colonial Courts of Admiralty, namely:-
B
(1) the High Court of Judicature at Fort William in Bengal;

(2) the High Court of Judicature at Madras, and

(3) the High Court of Judicature at Bombay."

Section 22(1) of Supreme Court of Judicature (Consolidation) Act, 1925 C
reads thus:

"22. ADMIRALTY JURISDICTION OF HIGH COURT: (I) The High
Court. shall, in relation to admiralty matters, have the following
jurisdiction (in this Act referred to as "admiralty jurisdiction") that is
to say - D
(a) Jurisdiction to hear and determine any of the following
questions or claims:

*** *** ***
(viii) Any claim by.a seaman of a ship for wages earned by him on. E
board the ship, whether due under a special contract or otherwise,
and any claim by the master of a ship for wages earned by him
on board the ship and for disbursements made by him on account
of the ship;
(IX) Any claim in respect ofa mortgage of any ship, being a mortgage F
duly registered in accordance with the provisions of the Merchant
Shipping Acts, 1894 to 1923, or in respect of any mortgage of
a ship which is, or the proceeds whereof are, under the arrest
of the court;"
(x) Any claim for building, equipping or repairing a ship, if at the G
time of the institution of the proceedings the ship is, or the
proceeds thereof are, under the arrest of the court."

Articles I(k) and 2 of the 1952 Brussels Convention are as under:

H
866 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A "(I) "Maritime Claim" means a claim arising out of one or more of the
following:
... ••• ***
(k) goods or materials wherever supplied to a ship for her
operation or maintenance;
B
2. A ship flying the flag of one of the Contracting States may be
arrested in the jurisdiction of any of the Contracting States in respect
of any maritime claim, but in respect of no other claim; but nothing
in this Convention shall be deemed to extend or restrict any right or
powers vested in any Governments or their Departments, Public
c Authorities, or Dock or Harbour Authorities under their existing
domestic laws or regulations to arrest, detain or otherwise prevent the
sailing of vessels within their jurisdiction."

HISTORY OF JURISDICTION OF THE HIGH COURT:
D The jurisdiction of the High Court of Admiralty in England used to be
exercised in rem in such matters as from their very nature would give rise to
a maritime lien - e.g. collision, salvage, bottomry. The jurisdiction of the High
Court of Admiralty in England was, however, extended to cover matters in
respect of which there was no maritime lien, i.e., necessaries supplied to a
E foreign ship. In terms of Section 6 of the Admiralty Act, 1861, the High Court
of Admiralty was empowered to assume jurisdiction over foreign ships in
respect of claims to cargo carried into any port in England or Wales. By
reason of Judicature Act of 1873, the jurisdiction of the High Court of Justice
resulted in a fusion: of admiralty law, common law and equity. The limit of the
jurisdiction of the Admiralty court in terms of Section 6 of the 1861 Act was
F discarded by the Administration of Justice Act, 1920 and the jurisdiction of
the High Court thereby was extended to (a) any claim arising out of an
agreement relating to the use or hire of a ship; (b) any claim relating to the
carriage of goods in any ship; and (c) any claim in tort in respect of goods
carried in any ship.
G
The admiralty jurisdiction of the High Court was further consolidated
by the Supreme Court of Judicature (Consolidation) Act, 1925 so as to include
va~ious matters such as any claim "for damage done by a ship", and claim
'arising out of an agreement relating to the use or hire of a ship'; or 'relating
to the carriage of goods in a ship'; or "in tort in respect of goods carried in
H a ship".
LIVERPOOL AND LONDON S.P. ANO I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 867

The admiralty jurisdiction of the High Court was further widened by the A
Administration of Justice Act, I956 so as to include not only the claims
specified under Section I(i) of Part I but also any other jurisdiction whkh
either was vested in the High Court of Admiralty immediately before the date
of commencement of the Supreme Court of Judicature Act, 1873 (i.e. November
I, I 875) or is conferred by or under an Act which came into operation on or
after that date on the High Court as being a court with admiralty jurisdiction B
and any other jurisdiction connected with ships vested in the High Court
apart from this section which is for the time being assigned by rules of court
to the Probate, Divorce and Admiralty Division.

Sub-Section (4) of Section I removed the restriction based on the C
ownership of the ship. By reason of Clauses (d) (g) and (h) of the said Section
the jurisdiction in regard to question or claims specified under Section I(i)
included any claim for loss of or damage to goods carried in a ship, any claim
arising out of any agreement relating to the carriage of goods in a ship or to
the use or hire of a ship.
D
In the course of time the jurisdiction of the High Courts vested in all
the divisions alike. The Indian High Courts after independence exercise the
same jurisdiction.

NECESSARIES - AS A MARITIME CLAIM:
E
The concept "as to claims for necessaries" is specified under Section
5 of the Admiralty Court Act, 186 I, wh:ch provides for the jurisdiction of High
Court as regard "Necessaries supplied to 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 institution of the cause an owner or part owner of the ship
is domiciled in England or Wales". F
The term "necessaries" had not been defined in the Act of 1861. It was
given a meaning by judicial pronouncements.

It stands accepted that having regard to the legislative and executive
policy, England and Wales never considered the arrears of insurance premium G
as a 'necessary'. The Courts of England further maintained a distinction
between a maritime claim and maritime lien. The decisions cited by Mr. Bharucha
go to show that the English Courts proceeded on the premise that for the
. purpose of considering as to whether any necessary has been supplied to a
ship or not must haye a sufficient and direct connection with the operation H
868 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A of the ship. It held that unpaid insurance premium is not a maritime claim as
it is not needed to keep it going. See Queen v. Judge of the City of London
Court (supra), Heinrich Bjorn (supra), The Andre Theodore (supra). The
Aifanourious (supra). The English Courts, thus, refm'!d to put a wide
construction on that term.

B A similar view was also adopted by an Australian High Court in Gould
v. Cornhil/ /nsurance Co. Ltd., [1 DLR 4th Ed. 183].

In The Riga (1869-72) L.R. 3 A&E 516], it is stated:

"The definition of the term "necessaries" given by Lord Tenterden
C in Webster v. Seekamp (4 B. & Aid. 352) adopted and applied in
proceedings in Admiralty. Semble, there is no distinction between
necessaries for the ship and necessaries for the voyage."

In The Edinburgh Castle (1999) Vol. 2 Lloyd's Law Reports 362], it has
been held:
D
"To address these concerns, Mr. Charkham helpfully invited my
attention to a number of the authorities and to such discussion as
there is on s.20(2)(m) and its predecessors. Taking the matter very
shortly, for present purposes, the following propositions emerge:
E I. The words "in respect of" are wide words which should not be
unduly restricted: The Kommunar, [1997] 1 Lloyd's Rep. 1, at p.5.
2 Section 20(2)(m), which is derived from the equivalent provision
in the Administration of Justice Act, 1956, contains a jurisdiction
which is no narrower than the predecessor jurisdiction in respect
p of claims for "necessaries": The Fairport (No. 5), [1967] 2 Lloyd's
Rep. 162; The Kommunar, sup.
3. No distinction is to be drawn: ...
between necessaries for the ship and necessaries for the voyage, .
and all things reasonably requisite for the particular adventure
G on which the ship is bound are comprised in this category.
[Roscoe, The Admiralty Jurisdiction and Practice, 5th ed., at p.
203: The Riga (1872) L.R. 3 Ad. & Ecc. 516].
4. The jurisdiction extends to the provision of services: The
Equator, (1921) 9 L1.L.Re. I: The Fairport (No. 5), sup.
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. MV. SEA SUCCESS I [S.B. SINHA, J.] 869

In the light of these propositions, I am satisfied that the plaintiffs bring A
their claims within s. 20(2)(m). Provisions for the passengers were "necessaries"
for the particular adventure on which this passenger vessel was engaged. The
provision of services is capable of coming within the sub-section and does
so here, given the nature of the services provided. I should mention that I
was referred in addition to The River Rima, [I 988] 2 Lloyd's Rep. 193 (H.L.)
and [1987] 2 Lloyd's Rep. 106 (C.A.) but, as I uriderstand it, nothing said there B
precludes my decision in favour of the plaintiffs on the facts of this case."

In Nore Challenger and Nore Commander (2001) Vol. 2 Lloyd's Law
Reports I 03 the claim relating to supply of crew was held to be "necessary"
stating: C
"Before considering whether the concept of necessaries encompasses
the provision or supply of crew, it is important to bear in mind that
it has long been established that no distinction need be drawn between
the supply of necessaries and the payment for such supply."

Identical view has been taken by a Court of D..irban in M V Emerald D
Transporter (1985) 2 SALR 448 with reference to the provisions contained in
Admiralty Jurisdiction Regulation Act 105 of 1983 wherein it was held that
services which are insured solely to the benefit of the ship owner would not
be classed as necessaries. The said decision was, however, rendered in the
context ofranking of claims against a fund comprising of sale proceeds of the E
vessel M.V. Emerald Transporter.

The House of Lords in The River Rima (supra) considered the provisions
of Article l(l)(k) of the 1952 Brussels Arrest Convention incorporating "goods
or materials wherever supplied to a ship for her operation or maintenance" as
a maritime claim. Having regard to the provisions contained in Section 6 of F
Admiralty Court Act, 1840 and Section 5 of Admiralty Court Act, 1861 it was
held:

"In other words, what is now called a claim in respect of goods or
materials supplied to a ship for her operation or maintenance is the
equivalent of what used to be called a claim for necessaries, but G
without the restrictions which formerly applied to such a claim."

(Emphasis Supplied)

The Singapore High Court also in Golden Petroleum (1994) I SLR 92
H
870 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A considered the expression "goods supplied to a ship for her operation and
maintenance" in the following terms:

"In my opinion, bunker oil supplied to the ship for sale to other ships
could not be conceived as goods supplied for her operation. The
phrase 'operation of the ship' should not be equated with the business
B activities of the shipowner and the section as enacted could not cover
goods which are loaded onto two ship only to be unloaded or disposed
of soon thereafter by sale."

It appears that the matter is pending in appeal.

C Yet again in Gatoil International (supra), it was held:

"An agreement for the cancellation of a contract for the carriage of
goods in a ship or for the use or hire of a ship would, I think, show
a sufficiently direct connection. It is unnecessary to speculate what
other cases might be covered. Each case would require to be decided
D on its own facts. As regards the contract of insurance founded on in
the instant appeal, I am of opinion that it is not connected with the
carriage of goods in a ship in a sufficiently direct sense to be capable
of coming within para (e)."

The question, however, is as to whether having regard to the changed
E situation unpaid insurance premium should be held to be a commercial
necessity. With a view to answer the question it is necessary to consider as
to whether a failure to insure the security is a matter which would have a
bearing upon the security of the ship.

F Whether the provisions of insurance is to be considered to be a service?
A further question which may arise is as to whether such service is to the
ship or not ?

INSURANCE COVERS - EXTENT OF:

G The law of marine insurance rested almost entirely on common law. Only
a few isolated points were dealt with by statute. Although, there may be a
plethora of authority on some points, the decisions may be meagre on others.
The interpretative changes made from time to time turned upon new commercial
conditions, the old ones having become obsolete. Some countries enacted
· and codified marine laws while many did not. With the passage of time, the
H scope and ambit of the contracts of insurance increased not only having
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. MY SEA SUCCESS I [S.B. SINHA,J.J 87]

regard to the experience gathered by the contracting parties but also by the A
legislators and the Court. A lot of amendments in the statutes as also
interpretive changes took place. The decisions rendered by different courts
on marine insurance law even fre<;11-1ently apply to non-marine insurance. With
the increase in marine traffic, the 'insurance law also developed and new
varieties of insurance covers came into being. There has been a considerable
expansion of the practice oJ;nsurance against various forums of legal liabilities B
which the assured may incur to the third parties.

P&I mutual insurances cover the liabilities of assured shipowner incurred
to third parties. In Modern Admiralty Law by Aleka Mandaraka-Sheppard at
page 64 2, it is stated:
c
"P&I mutual insurance (P&I associations) cover the liabilities of their
assured shipowner incurred to third parties, which include cargo claims,
pollution liabilities, damage to harbours, piers, etc., and personal injury
or loss of life claims, which are all excluded from the RDC clause. In
addition the P&I association insures the remaining one-fourth of the D
assured' liability under the RDC clause. Legal costs in defending such
claims are covered as well."

The title of a claimant to sue the defendant as regard cargo claim
enquiry has been stated in Shipping Law by Simon Baughen, Second Edition
at page 16-17 in the following terms: E
"Does the claimant have title to sue the defendant?

'Title to sue' means the claimant's right to sue the defendant, 1;., it
in contract, tort or bailment, in respect of the transit losses it will have
borne as a buyer taking delivery at the end of a chain of sale contracts. F
If the claimant has insured the goods and has been indemnified, then
the action may be brought in its name by its insurers under the
process of subrogation.

The defendant will usually be the shipowner, but may also be a
charterer or a freight forwarder who has contracted as carrier. II an G
inaccurate bill of lading is signed, the defendant cou Id also be the
party who actually signed the bill of lading. The shipowner's liability
in respect of cargo claims will generally be covered by liability
insurance, known as 'P&I' (protection and indemnity) insurance.
Shipowners will not be covered in respect of claims arising out of
H
872 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A deviation, misdelivery and the issuing of a 'clean' bill of lading for
goods that were damaged prior to loading."

Apart from P&I club, there exists the Inter club Agreement (!CA).

In Shipping Law by Simon Baughen, at page 183, it is stated :
B "Another very common clause in time charters is the 'Inter-Club
Agreement' (ICA). The agreement began as an agreement between the
P&I Clubs as to how they would recommend settlement of cargo
claims as between shipowners and charterers where the NYPE form
time charter is used. It is now common for the agreement to be
c specifically incorporated into the time charter. Indeed the NYPE 1993
form contains a printed cl 27 to this effect."

The Special Compensation P&I Club Clause (the SCOPIC clause)
enumerated from Article I4 remuneration after The Nagasaki Spirit, in I999 as
a result of discontent by salvors. Although this provision affected only the
D salvor and the shipowner, the international groups of P&I Clubs have agreed
a code of conduct giving their backing to the clause whenever a ship enters
with the International Group is salved by a member of the International Salve
Union. The salient features of the claim which received clarificatory amendment
in 2000 are as under:
E "For the clause to operate it needs to be specifically incorporated into
an LOF contract, of whatever form. LOF 2000 contains a box to be
ticked if the parties agree to the incorporation of the SCOPIC clause.
If the clause is incorporated it then needs to be invoked by salvor.
This can be done even if there is no threat to the environment.
F Invoking the clause completely replaces the right of the salvor to
claim under Art. 14, even in respect of services performed before the
invocation of the clause. The provisions of Art. 14(5) and (6), however,
continue to remain effective. Within two days of the clause being
invoked, cl 3 obliges the shipowner to put up security for the salvor's
claim under the clause in the amount ofUS$3,000,000. If the shipowner
G fails to do so, cl 4 entitles the salvor to withdraw from the SCOPIC
clause, provided the security is still outstanding at the date of
withdrawal.

Clause 5 provides that SCOPIC remuneration is to be calculated by
reference to an agreed tariff of rates that are profitable to salvors,
H calculated by reference to the horsepower of the salvage tug/s
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA,J] 873

employed. It also covers the salvor's out .of pocket expenses. An A
uplift of 25% is applied to both these heads of claim. Clause 6 provides
that SCOPIC remuneration is payable only in the event that it exceeds
the amount of the award under Art 13. To deter salvors from invoking
SCOPIC too readily, cl 7 provides that in the event of SCOPIC
remuneration falling below the amount of the Art 13 award, that award
shall be discounted by 25% of the difference between the award and B
the SCOPIC remuneration. Thus, where the Art 13 award is for
$1,000,000 and the SCOP!C remuneration is only $600,000, the Art· 13
award will be reduced by $I 00,000 being 25% of the difference between
the two sums, giving the salvor a net award of $900,000.

The SCOPIC clause also provides for the termination of both the C
SCOPIC provisions and the LOF in two situations. First, the salvor
can terminate if the cost of its services less any SCOPIC remunerations
exceeds the value of the salved property. Secondly, the shipowner can
terminate by giving five days' notice. These termination provisions do
not apply ifthe contractor is restrained from demobilizing its equipment D
by a public body with jurisdiction over the area where the services
are being performed. Once the clause has been invoked, the shipowner
is entitled to appoint a Special Casualty Representative (SCR) to
monitor the salvage services. The SCR does not impinge on the
authority of the salvage master but does have the right to be kept
fully informed about the progress of the salvage operations. This E
provision improves the flow of information back to the P&I Club
whose interests will ultimately be affected by the salvage services."

[See Shipping Law by Simon Baughen - page 293]

NECESSITY OF INSURANCE COVER: F

The necessity of a P&I cover is in commercial expediency. All P&I clubs
are non-profit making companies. The owner upon entering the ship becomes
the member of the P&I club and he not only pays membership fee but
undertakes to pay contribution towards the losses incurred by other members G
of the club which are payable by the company. A new concept has come into
being in terms whereof a reciprocal system has been evolved to the effect that
each member is cast under a duty to refund the damage suffered by any one
of them and pay, on mutual basis, each other's claim. Thus, the members play
a dual role of both beneficiary and benefactor. We have noticed the concept
of such clubs. The Indian statutes. operating in the field are pointer to the fact H
874 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A that such insurance has become more and more commercially expedient. No
ship having regard to the ramification in international law can sail without
such insurance. Apart from the 1952 Brussels Arrest Convention, the Merchant
Shipping (Oil) Pollution Act, 1961 makes insurance compulsory.

As would be noticed hereinafter, P&I insurance cover to call at major
B ports in India is now a statutory requirement.
CHANGING SCENARIO :

The advancement in law would be evident from the 1999 Arrest
Convention whereby significant changes to the law relating to in rem claims
C and arrest has been made. Pursuant to Article 14 of the 1999 Arrest Convention,
such changes would come into force six months after ratification by the I 0th
State.

The countries which have ratified the Convention are as follows:

D "Algeria, Antigua and Barbuda, Bahamas, Belgium, Belize, Benin,
Burkina Faso, Cameroon, Central African Republic, Comoros, Congo,
Costa Rica, Cote d'Ivoire, Croatia, Cuba, Denmark, Djibouti, Dominica,
Republic of, Egypt, Fiji, Finland, France, Overseas Territories, Gabon,
Germany, Greece, Grenada, Guyana, Guinea, Haiti, Haute-Volta, Holy,
Seat, Ireland, Italy, Khmere Republic, Kiribati, Latvia, Luxembourg,
E Madagascar, Marocco, Mauritania, Mauritius, Netherlands, Niger,
Nigeria, North Borneo, Norway, Paraguay, Poland, Portugal, Romania,
St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sarawak,
Senegal, Seychelles, Slovenia, Solomon Islands, Spain, Sudan, Sweden,
Switzerland, Syrian Arabic Republic, Tchad, Togo, Tonga, Turks Isles
F and Caicos, Tuvalu, United Kingdom of Grest Britain, and Northern
Ireland, United Kingdom (Overseas Territories), Gibraltar, Hong-Kong
(I), British Virgin Islands, Bermuda, Anguilla, Caiman Islands,
Montserrat, St. Helena, Guernsey, Falkland Islands and dependencies,
Zaire."

G Article 1 of the Convention contemplates an expansion of existing
categories of arrestable claims under the following headings, some of which,
namely, heading (c) and (d) are already reflected in Section 20(2) of the
Supreme Court Act, 1981:

(a) this refers to 'loss or damage caused by the operation of the ship'
H rather than 'damage done by a ship' and would encompass
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 875

claims for pure economic loss ... A
(c) this extends the category of salvage to include claims arising
from salvage agreements or special compensation under Art. 14 •
of the 1989 Salvage Convention;

(d) this covers damage to envirort~ent, including.threltened damage ...
B
(I) this extends the scope of claims in respect of supply of goods
and materials to a ship to cover 'provisions, bunkers, equipment
(including containers) supplied or services rendered to the ship
for its operation, management, preservation or maintenance';

(m) this extends the scope of claims against ships by shipyards to C
cover 'construction, reconstruction, repair, converting or
equipping of the ship' ...

(o) this extends the scope of claims in respect of port dues, and also
in respect of wages which will now cover repatriation costs and
social insurance contributions... D
(u) this extends the scope of claims in respect of mortgages by
removing the reference to a registered or registrable mortgage,
thereby encompassing unregistered mortgages ...

The purpose of the 1952 Convention was to restrict the possibilities of
arrest with regard to seagoing vessels flying the flag of a contracting State. E
Such an arrest was allowed for maritime claims against the vessel or against
the sister ship belonging to the same owners. What would be the maritime
claim is specified in Article I of the Convention. Other claims can only be
secured if the vessel's home port is situated in a non-contracting State.
F
Apart from those restrictions resulting from the Convention, all kinds
of claims can be secured by an arrest and there is no need to prove a
connection with the operation of the vessel. As for example, a guarantee
given by the owners for a subsidiary company or other principal debtor is as
suitable as a claim resulting from the purchase of the ship or any other goods
by the owners. However, in terms of Article I (k) of the Convention claims for G
"goods or materials" supplied to a ship for her operation or maintenance are
acknowledged as maritime claims.

What was expressly excluded in 1952 convention has been included in
1999 convention. The restrictions imposed under 1952 convention as regard
'Maritime claim' to operation of ship and maintenance thereof have been H
876 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A removed.
In Kapila Hingorani v. State of Bihar, JT (2003) 5 SC I this Court
observed:

"Justice Holmes expressed the following view in Missouri v. Holland
B [252 us 416 (433)]:

"When we are dealing with words that also are a constituent act, like
the Constitution of the United States, we must realise that they have
called into life a being the development of which could not have been
foreseen completely by the most gifted of its begetters. It was enough
c for them to realise or to hope that they had created an organism, it
has taken a century and has cost their successors must sweat and
blood to .prove that they created a nation. The case before us must
be considered in the light of our whole experience and not merely in
that of what was said a hundred years ago."
D Justice Frankfurter elucidated the interpretiv1! role in "Some
Reflections on the Reading of Statutes" :

"There are varying shades of compulsion for judges behind different
words, differences that are due to the words themselves, their setting
in a text, their setting in history. In short, judges are not unfettered
E glossators. They are under a special duty not to overemphasize the
episodic aspects of life and not to undervalue its organic processes
-its continuities and relationships"

In Jagdish Saran and Ors., v. Union of India, [1980] 2 SCC 768,
it is stated:
F
"Law, constitutional law, is not an omnipotent abstraction or distant
idealization but a principled, yet pragmatic, value-laden and result-
oriented, set of propositions applicable to and conditioned by a
concrete stage of social development of the nation and aspirational
imperatives of the people. India Today-that is the inarticulate major
G premise of our constitutional law and life."

It is also well-settled that interpretation of the Constitution of India
or statutes would change from time to time. Being a living organ, it
is ongoing and with the passage of time, law must change. New rights
may have to be found out within the constitutional scheme. Horizons
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SJNHA,J] 877

of constitutional law are expanding." A
In the aforementioned judgment, this Court referred to a large number
of decisions for the purpose of interpreting the constitutional provisions in
the light of the international treaties and conventions.

Further more in John Valla mallom and Anr. v. Union ofIndia, JT (2003) B
6 SC 37 while referring to an amendment made in U.K. in relation to a
provision which was in pari materia with Section 118 of the Indian Succession
Act, 1925, this Court observed:

" ... The constitutionality of a provision, it is trite, will have to be
judged keeping in view the interpretive changes of the statute effected C
by passage of time."

Referring to the changing scenario of the law having regard to the
declaration on the right to development adopted by the World Conference on
Human Rights and Article 18 of the United Nations Covenant on Civil and
Political Rights, 1966, it was held: D
"It is trite that having regard to Article 13(1) of the Constitution, the
constitutionality of the impugned legislation is required to be
considered on the basis of laws existing on 26.11.1950, but while
doing so the court is not precluded from taking into consideration the
subsequent events which have taken place thereafter. It is further trite E
that that the law although may be constitutional when enacted but
with passage of time the same may be held to be unconstitutional in
view of the changing situation.

Justice Cardoze said :
F
"The law has its epochs of ebb and flow, the flood tides are on us.
The old order may change yielding place to new; but the transition
is never an easy process".

Albert Campus stated :
G
"The wheel turns, history changes". Stability and change are the two
sides of the same law-coin. In their pure form they are antagonistic
poles; without stability the law becomes not a chart of conduct, but
a gare of chance: with only stability the law is as the still waters in
which there is only stagnation and death."
H
878 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A In any view of the matter even if a provision was not unconstitutional
on the day on which it was enacted or the Constitution came into
force, by reason of facts emerging out thereafter, the same may be
rendered unconstitutional."

Yet again in Indian Handicrafts Emporium and Ors. v. Union of India
B (2003) 6 SCALE 831 this Court considered the Convention on International
Trade in Endangered Species (CITES) and applied the principles of purposive
constructions as also not only the Directive Principles as contained in Part
IV of the Constitution but also Fundamental Duties as contained in Part IV A
thereof.

c Referring to Motor General Traders and Anr. v. State ofAndhra Pradesh
and Ors., [1984] I SCC 222, Rattan Arya and Ors., v. State a/Tamil Nadu and
Anr., [1986] 3 SCC 385 and Synthetics and Chemicals Ltd. and Ors. v. State
of U.P. and Ors., [1990] I SCC 109, this Court held:

"There cannot be any doubt whatsoever that a law which was at one
D point of time was constitutional may be rendered unconstitutional
because of passage of time. We may note that apart from the decisions
cited by Mr. Sanghi, recently a similar view has been taken in Kapila
Hingorani v. State of Bihar JT (2003) 5 SC I and John Vallamattom
and Anr. v. Union of India JT (2003) 6 SC 37."
E
It was, however, held that India being a sovereign country is not
obligated to make law only in terms of CITES. It may impose stricter restrictions
having regard to the local needs.

Legal history is a good guide for the purpose of appreciating the legal
p development across the world particularly in the field of international law,
maritime law being a part of it. While interpreting such a situation, one must
take into consideration the flexibility in law as has been highlighted by this
Court in m. v. Al Quamar (supra) wherein it was opined:

"43. The two decisions noted above in our view deal with.the situation
G amply after having considered more or less the entire gamut of judicial
precedents. Barker, J's judgment in the New Zealand case ((1980) I
NZLR I 04 (NZSC)) very lucidly sets out that the court has to approach
the modem problem with some amount of flexibility as is now being
faced in the modem business trend. Flexibility is the virtue of the law
courts as Roscoe Pound puts it. The pedantic approach of the law
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,J.] 879

courts are no longer existing by reason of the global change of A
outlook in trade and commerce. The observations of Barker, J. and the
findings thereon in the New Zealand case (( 1980) 1 NZLR 104 (NZSC))
with the longish narrations as above, depicts our inclination to concur
with the same, but since issue is slightly different in the matter under
consideration, we, however, leave the issue open, though the two
decisions as above cannot be doubted in any way whatsoever and B
we feel it expedient to record that there exists sufficient reasons and
justification in the submission of Mr. Desai as regards the invocation
of jurisdiction under Section 44-A of the Code upon reliance on the
two decisions of the New Zealand and Australian Courts."

No statutory law in India operates in the field. Interpretative changes,
c
if any, must, thus be made having regard to the ever changing global scenario.

This Court in M V. Elisabeth (supra) observed that Indian statutes lag
behind any development of international law and further it had not adopted
the various conventions but opined that the provisions thereof having been D
made as a result of international unification and development of the maritime
laws of the world should be regarded as the international common law or
transnational law rooted in and evolved out of the general principles of
national laws, which, in the absence of any specific statutory provisions can
be adopted and adapted by courts to supplement and complement national
statutes on this subject. E
This Court in M V. Elisabeth (supra) observed:

'~30. The Exchequer Court of Canada was established by the Admiralty
Act R. S. Canada, 1906, c. 141, as a Colonial Court of Admiralty. It is
not clear whether that Court was in its jurisdiction comparable to the F
Indian High Courts. Assuming that it was comparable at the relevant
time, and whatever be the relevance of Yuri Maru (1927 AC 906: 43
TLR 698) to courts like the Exchequer Court of Canada, we see no
reason why the jurisdiction of Indian High Courts, governed as they
now are by the Constitution of India, should in any way be subjected G
to the jurisdictional fetters imposed by the Privy Council in that
decision. Legal history is good guidance for the future, but to
surrender to the former is to lose the latter. "

(Emphasis supplied)
H
880 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A (See paras 78 and 99 also)

It was further observed:

"89. All persons and things within the waters of a State fall within its
jurisdiction unless specifically curtailed or regulated by rules of
B international law. The power to arrest a foreign vessel, while in the
waters of a coastal State, in respect of a maritime claims, wherever
arising, is a demonstrable manifestation and an essential attribute of
territorial sovereignty. This power is recognised by several international
conventions (See the Conventions referred to above. See also Nagendra
Singh, International Maritime Conventions, British Shipping Laws,
c Vol. 4). These conventions contain the unified rules of law drawn from
different legal systems. Although many of these conventions have yet
to be ratified by India, they embody principles of law recognised by
the generality of maritime States, and can therefore be regarded as
part of our common law. The want of ratification of these conventions
D is apparently not because of any policy disagreement, as is clear from
active and fruitful Indian participation in the formulation of rules
adopted by the conventions, but perhaps because of other
circumstances, such as lack of an adequate and specialised machinery
for implementation of the various international conventions by co-
ordinating for the purpose the Departments concerned of the
E Government. Such a specialised body of legal and technical experts
can facilitate adoption of internationally unified rules by national
legislation. It is appropriate that sufficient attention is paid to this
aspect of the matter by the authorities concerned. Perhaps the Law
Commission of India, endowed as it ought to be with sufficient
authority, status and independence, as is the position in England, can
F
render valuable help in this regard. Delay in the adoption of
international conventions which are intended to facilitate trade hinders
the economic growth of the nation."

(Emphasis supplied)
G M. V. Elisabeth (supra) is an authority for the proposition that the
changing global scenario should be kept in mind having regard to the fact
that there does not exist any primary act touching the subject and in absence
of any domestic legislation to the contrary; if the 1952 Arrest Convention had
been applied, although India was not a signatory thereto, there is obviously
H no reason as to why the 1999 Arrest Convention should not be applied.
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 881

Application of the 1999 convention in the process of interpretive A
changes, however, would be subject to : ( 1) domestic law which may be
enacted by the Parliament; and (2) it should be applied only for enforcement
of a contract involving public law character.

It is not correct to contend as has been submitted by Mr. Bharucha that
this Court having regard to the decision in M. V. Elisabeth (supra) must follow B
the law which is currently prevalent in UK and confine itself only to the 1952
Arrest Convention into Indian Admiralty Jurisprudence. The question is as
to if the 1952 Arrest Convention had been applied keeping in view the
changing scenario why not the 1999 Arrest Convention also? A distinction
must be borne in mind between a jurisdiction exercised by the High Courts C
in India in terms of the existing laws and the manner in which such jurisdiction
can be exercised. Once the Court opines that insurance is needed to keep the
ship going - it has to be construed as 'Necessaries'. The jurisdiction of the
Courts in India, in view of the decision of this Court in M V. Elisabeth (supra)
is akin to the jurisdiction of the English Courts but the same would not mean
that the Indian High Courts are not free to take a different view from those D
of the English Courts. As regard application of a statute law the Indian High
Courts would follow the pre-independence statute but Indian Courts need not
follow the judge-made law.

M V. Eligabeth defines the jurisdiction of the Court but does not limit
or restrict it. E

Supply of necessaries is a maritime lien in U.S.A. in terms of the relevant
statute and has been classified in the category of subordinate to the Preferred
Ship Mortgage.

In Benedict on Admiralty, 6th Edn., Vol.I, p. 22, it has been stated : F
"Whenever a debt of a maritime nature is by law, no matter what law,
or by contract, a lien upon the vessel, the vessel may be proceeded
against in rem. The maritime lien, whether created by actual
hypothecation or by implication or operation of law, may be enforced G
in the admiralty."

It is true that this Court is not bound by the American deci;ions. The
American decisions have merely a persuasive value but this Court would not
hesitate in borrowing the principles if the same is in consonance with the
scheme of Indian law keeping in view the changing global scenario. Global H
882 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A changes and outlook in trade and commerce could be a relevant factor. With
the change of time; from narrow and pedantic approach, the Court may resort
to broad and liberal interpretation. What was not considered to be a necessity
a century back, may be held to be so now.

INDIAN STATUTES OPERATING IN THE FIELD:
B
Section 352 N of the Indian Merchant Shipping Act, 1958 makes such
an insurance compulsory which reads as under:

"352-N. Compulsory insurance or other financial guarantee. - (I) The
owner of every Indian ship which carries 2000 tons or more oil in bulk
C as cargo, shall, in respect of such ship, maintain an insurance or other
financial security for an amount equivalent to -

(a) one hundred and thirty-three Special Drawing Rights for each
ton of the ship's tonnage; or
(b) fourteen million Special Drawing Rights,
D
whichever is lower.

The Inland Vessels Act requires a compulsory third party risk insurance
cover and the standard format charter parties mostly have printed clauses
making it mandatory for a vessel to have a valid protection and indemnity
E cover for want of which such vessels are not accepted for charter.

Chapter IV of the Inland Vessels Act provides for a compulsory insurance
in terms whereof Chapter VIII of the Motor Vehicles A1ct, 1939 has been
incorporated by reference.
F This Court while considering the question of third party insurance in
Motor Vehicles has noticed the development of law from the Road Traffic Act,
1930 and Motor Vehicles Act, 1939 to Motor Vehicles Act, 1988 and the
amendments carried out therein from time to time. See National Insurance Co.
ltd., Chandigarh v. Nicolletta Rohtagi and Ors.. [2002] 7 SCC 456.
G
The Multimodal Transportation of Goods (Amendment) Act 2000 inter
alia provides for responsibilities and liabilities of the multimodal transport
operator. By reason of Act 44 of 2000 a proviso has been added. Section 5
of the said Act amends Section 7 of the Principal Act of 1993 and reads as

H
under:
,,
1.1
•
., LIVERPOOL AND LONDON S.P. AND l ASSON. LTD. v. M. V. SEA SUCCESS l [S.B. SINHA, J.] 883

"5. In Section 7 of the principal Act, in sub-section (I), the following A
proviso shall be inserted, namely:-

"Provided that the multimodal transport operator shall issue the
multimodal transport document. only after obtaining and during the
subsistence of a valid insurance cover."
B
CIRCULARS:

The insurance association has issued a circular dated 20th February,
2001 which is to the following effect:

"TO TIIE MEMBERS c
Dear Sirs

NEW COMPULSORY INSURANCE REQUIREMENTS IN
AUSTRALIAN WATERS

Members should be aware that new Compulsory Insurance D
requirements for non tank vessels have come into force in Australia.
Details are available at the website ·of the AMSA - http:/
www.amsa.gov.au·.

From 6th April 2001 ships of 400gt or more (excluding tankers covered
by CLC Certificates) will be required to carry a "relevant insurance E
certificate" containing the following information:

(a) the name of the ship
(b) the name of the ship's owner

(c) the name and address of the insurer F
(d) the commencement date of the insurance
(e) the amount of cover which must in any event not be less than
the limit of liability under the 1976 Limitation Convention:
The "relevant insurance certificate" will need to be produced during G
Port State Control inspections and by the Australian Customs Service
on entering or leaving Australian ports.

A six months period of grace will be allowed before full enforcement
action is undertaken; ships without sufficient documentation on board
H
884 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A will be given a warning until 5th September, 200 I. Thereafter ships will
be detained until the requirement documentation is produced.

AMSA officials have indicated that although the Notice requires that
the amount of cover be set out in the Certificate of Entry it will be
assumed if a dollar amount is not set out that Club cover in any event
B extends at least to the cover provided under the 1976 Convention as
amended.

AMSA officials have also indicated that if a vessel does not carry any
original certificate of Entry they will be satisfied with the provision of
a photocopy on the vessel's first visit. However on the second and
c subsequent visits vessels will be expected to carry an original Certificate
of Entry.

Please contact the Club if you need further information.

Yours faithfully,
D
THOMAS MILLER (BERMUDA) LTD."

A circular has also been issued by the Insurance Association on
26.07.2000 regarding new legislation in U.S.A. (Alaska) which is to the following
effect:
E "26 July 2000

TO ALL MEMBERS

Dear Sirs
OIL POLLUTION: UNITED STATES
F NEW LEGISLATION IN ALASKA FOR NON-TANK VESSELS
FINANCIAL RESPONSIBILITY REQUIREMENTS:
DRAFT REGULATIONS
In May 2000 the State of Alaska followed the recent example of
California in passing legislation requiring non-tank self-propelled
G vessels operating in Alaskan waters and exceeding 400 gt to
demonstrate proof of financial responsibility for oil spills occurring in
Alaskan waters. The effective date of the Financial Responsibility Act
is I September 2000.

Proof of financial responsibility must be established for non-tank
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.1885

vessels operating in Alaskan waters in the following amounts: A
(a) For vessels carrying predominately persistent product, $300 per
incident for each barrel of oil storage capacity, or $5,000,000,
whichever is greater.

(b) For vessels carrying predominately non-persistent product, $100
per incident for each barrel of oil storage capacity, or $1,000,000, B
whichever is greater.

The Act applies to non-tank vessels over 400 gt which by definition
covers self-propelled vessels including commercial fishing vessels,
passenger and cargo vessels. Barges are excluded, as are public
vessels unless "engaged in commerce". c
The Alaska Department of Environmental Conservation (ADEC) have
proposed draft regulations to implement the financial responsibility
requirements. ADEC predicts that their regulations will not become
final until September or early October 2000 but the effective date for D
the new law remains I September 2000. A summary of the draft
regulations is set out below:

Interim applications and Documentation for Proof of Financial
Responsibility

An interim application procedure is set out in ADEC's letter of 17 July E
2000, which is attached. Owners or operators of non-tank vessels
covered by the new law must submit a completed application and
documentation of financial responsibility in the appropriate dollar
amount not later than 31 August 2000.

Acceptable financial responsibility may include the following: F
(a) Affidavit of self-insurance and most recent audited financial
statement;

(b) Insurance certificate and insurance policy;

(c) Surety bond; G
(d) Financial guarantee, accompanied by guarantor's evidence of
self insurance;

(e) Letter of credit;

(f) Certificate of entry evidencing coverage by a Protection and H
886 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A Indemnity Club; or
(g) Certificate of deposit with assignment of negotiable interest.

Interim Approval

A completed application form and appropriate documentation
B evidencing proof of financial responsibility which is submitted by 31
August 2000 will be deemed approved by ADEC for purposes of
meeting the 1 September 2000 deadline. Following adoption of final
regulations, ADEC will review each application to ensure that it meets
the requirements of the statute and regulations. A formal approval will
be given to those vessels which qualify, and non-qualifying applicants
c will be given 30 days to submit additional information as requested
by the Department.

Application Form

A copy of ADEC's application form is attached. In Section (c),
D paragraph I (b), proof of financial responsibility by entry in a P&I Club
must include a Certificate of Entry and must include "all addenda
pertaining to the amount and applicability of oil pollution cover and
amount of deductibles."

Deductibles
E
With respect of deductibles, paragraph I(c) of the application asks for
proof of financial responsibility for any deductible, such as a certificate
of deposit, or other "financial iii formation." It thus appears that ADEC
will require some evidence offinancial responsibility for any deductible
as is presently required by ADEC's draft regulations.
F
ADEC is presently considering whether to allow an interim application
which does not have separate proof of financial responsibility for a
deductible. However, at this juncture Owners and operators with
insurance deductibles should probably plan to submit separate proof
of financial responsibility for any deductible. There are likely to be
G further developments on this issue and Members will be kept advised.

The Managers intend to issue a further circular when these regulations
become final.

In the meantime, Members may contact Mr. Douglas R Davis of the
H Association's correspondents at Anchorage, Alaska:
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 887

Kessal Young& Logan, Tel: +1(0)907 279 9696, Fax: +1(0)907 2794239 A
for further assistance. Mr. Davis has filed submissions to ADEC on
behalf of the International Group in relation to the draft regulations,
and can assi~t Members with applications.
Yours faithfully
A BILBOUGH & CO. LTD
B
(MANAGERS)"
The major ports in India, namely, Mumbai and Kolkata had issued
circulars which are as under:

"MUMBAI PORT TRUST
Deputy Conservator's Office
c
Port House, lst Floor
Shoorji Vallabhadas Marg
Mumbai - 400 00 I
No. DC/C.SH/2/4455 8th August, 1996
D
CIRCULAR

To

Ship Owners/StevedoresNessel Agents
The Secretary E
Bombay & Nhave/Sheve Ship-Intermodel
Agents Association
3, Rex Chambers, Ground Floor
Valchand Hirachand Marg
Ballard Estate, Mumbai - 400 00 I
F
The Secretary
The Bombay Stevedores Association Ltd.,
Janmabhoomi Chambers, 2nd Floor,
Valchand Hirachand Marg,
Ballard Estate, Mumbai - 400 00 l
G
Subsequent to th.: Circular Nos. DC/C-SH/7200 dated 4th October,
1995 and DC/C-SH/2/3661 dated 9th July, 1996 and in view of recent
experience gathered from the storm which hit the harbour on 18th and
19th June, 1996. It has been decided that vessels which do not
possess valid P&l club cover or suitable Insurance Cover will not be
H
888 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A decked. The intention of the Port is to eliminate all sub-standard
vessels or ships without insurance cover, making Mumbai a port of
call, because a mishap to such a vessel will render the port liable
for expenses of wreck removal or other damages caused.

2. Therefore, notice is hereby given that from 1st November, 1996,
B ships, which do not possess valued insurance cover will not be given
an anchorage berth in the Mumbai Port for cargo work or for any other
purpose, this notice period is given so that the owners, agents and
shippers proposing to load cargo have sufficient time to ensure that
such cargoes will be loaded on duly protected ships.
c ~
Deputy Conservators
CALCUTTA PORT TRUST
HARBOUR MASTER (PORT)'S OFFICE
CIRCULAR NO. I0 DATED 26.6.200 I
To
D
All Shipping Agents

To safeguard Port interest for damage cost of repairs due marine
accident or otherwise, it is mandatory for the Agents to declare along
with Berthing Application the details of P&I Club Coverage including
E period of validity and a declaration that insurance provides
comprehensive coverage, inter alia, the following risks:

(I) 3rd party liability claims

(2) Claims arising out of injury/ death etc.
F (3) Claims arising out of damage to port properties

(4) Claims against environmental damage owing to pollution caused
by the ship or its personnel

(5) Removal of the wreck comprehensively
G
The above details required to be submitted along with Berthing
application to Harbour Master (River) & Harbour Master (*Port).
Sd/-
(D.K. Rao)
Harbour Master (Port)
H
LIVERPOOL AND LONDON S.P. AND l ASSON. LTD. v. M. V. SEA SUCCESS l [S.B. SINHA, J.] 889

Copy to: A
DMDffMN/FA&CAO/Secretary/H.M.(R)"

Cochin Port Trust had also been contemplating to issue such circular.

It may be true that some ports have not issued such circulars but from
a bare perusal of the circulars as referred to hereinbefore, it would appear that B
such insurance cover has been considered to be a service having regard to
the cover extended to oil spill, damage to port, salvage operation, etc.

The circulars issued by the Port Trusts may not be determinative but
there cannot be any doubt whatsoever the same would also be a relevant
factor. C
The 'Vessel' is also not correct in its submission that the ports cannot
take any direct action against the insurers. The circulars issued are pointers
to the fact that development of law in other countries is being taken note of
for the purpose of taking insurance cover in different fields as a compulsive
measure. D

A DRIFT IN THE CONCEPT?

Whether arrears of insurance premium would come within the term
"necessaries" is the core question involved in these appeals. The term has
not been statutorily defined. J;:
The term 'necessaries' as defined in Black's Law Dictionary reads as
under:

"What constitutes "necessaries" for which an admiralty lien will attach
depends upon what is reasonably needed in the ship's business, F
regard being had to the character of the voyage and the employment
in which the vessel is being used."

In Bouvier's Law Dictionary, the term 'necessaries' has inter alia been
defined as follows:
G
"The term necessaries is not confined merely to what i> requisite
barely to support life, but includes many of the conveniences of
refined society.

A racing bicycle was held a necessary for an apprentice earning 2ls.
a week and living with his parents; 78 L.T. 296" H
890 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A In The Canadian Law Dictionary, the tenn 'necessaries' has been defined
as follows:

"In the case of ships, the term denotes whatever is fit and proper for
the service on which the ship is engaged, whatever the owner of that
vessel, as a prudent man would have ordered if present at the time.
B Victoria Machinery Depot Co. Ltd v. The 'Canada' and the 'Triumph',
(1913) 15 Ex.C.R. 136, 14 D.L.R. 318."

In Ballentine's Law Dictionary, the term 'necessaries' has been defined
as follows:

c "Under the maritime law permitting the master of a ship to pledge the
owner's credit for necessaries, the word does not import absolute
necessity, but the circumstances must be such that a reasonable
prudent owner, present, would have authorized the expenditures, and
it is usually sufficient if they are reasonably fit and proper, having
regard to the exigencies and requirements of the ship, for the port
D where she is lying and the voyage on which she is bound. 48 Am JI st
Ship' 133."

In 70 American Jurisprudence 2d, at page 478, it is stated:

'The term "necessary" in this connection does not mean indispensable
E to the safety of the vessel and crew; necessaries which will create a
lien upon the ship are such as are reasonably fit and proper for her
under the circumstances, and not merely such as are absolutely
indispensable for her safety or the accomplishment of the voyage.
Whatever a prudent owner, if present, would be supposed to have
F authorized, the master may order, and for such expenditures the vessel
will be held responsible."

We may further notice that in Modern Admiralty Law by Aleka
Mandaraka-Sheppard at page 52, it is stated:

"However, the decision of the Scottish Court of Session in The
G Aifanourios, mentioned above, shattered the hopes of P&I clubs. It
took 19 years for the wheel to tum round and so to include such
claims in the list of claims provided by the new Arrest Convention
1999. The new Arrest Convention 1999 has incorporated in the list of
maritime claims for insurance premiums and brokerage, including claims
H by a P&l club for unpaid calls. Such claims will qualify for an arrest
LIVERPOOL AND LONOON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,l] 89 J

of a ship to be made once the Convention comes into force, or is A
enacted by the UK."

In Principles of Maritime Law by Susan Hodges and Christopher Hill at
page 364 it is stated:

"Failure to insure the ship: The authorities of Laming v. Seater, The B
Heather Bell, and Law Guarantee and Trust Society v. Russian Bank
for Foreign Trade and others have all confirmed that a failure to
insure the security is a matter which would have a bearing upon the
security of the ship. In such an event, the mortgagee may enter into
possession in order to make the ship available as security for the
debt. It is to be noted that, ·in the last two cases, the court had also C
pointed out that a failure to insure the vessel (though it may constitute
the basis of a right for the mortgagee to take possession) is not itself
a legitimate ground for interfering with the performance of the
charterparty."

It is interesting to note that in P&I clubs - Law and Practice by Steven D
J. Hazelwood, it is stated:

"The defendant shipowners challenged the competence of the court
to deal with the action as an action in rem. The catalogue of claims
which entitle a claimant to proceed with an action in rem in the courts E
of Scotland are stated in section 47(2) of the Administration of Justice
Act 1956 which provides, inter a/ia: "This section applies to any
claim arising out of one or more of the following, that is to say ... (d)
any agreement relating to the use or hire of any ship whether by
charter or otherwise;"."
F
The learned author, however, noticed the shortcomings in the statutes
operating in United Kingdom and made a prophecy to the effect that contract
of maritime insurance may be included in the list of claim giving the right of
arrest in the following terms:

"The current position is, therefore, that claims arising out of contracts G
of marine insurance are not claims which entitle a claimant to proceed
by way of action in rem and claimants in respect of P.&I. Club
membership are in no better position than those claiming in respect
of traditional hull and cargo insurance.

In this context there is one respect in which the insurance cover H
892 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A offered by P.&J. Clubs differs from hull and cargo insurance and which
has yet to receive the attention of the courts. Certain heads of P.&I.
Cover have ceased to be matters which are, as Sir James Hannen P.
once described, merely prudence but have become compulsory by
law. Compulsory liability insurance was introduced in the area of oil
pollution liability by the International Convention on Civil Liability for
B Oil Pollution 1969. Under the regime thereby introduced a shipowner
is legally unable to trade or put to sea without having effected oil
pollution indemnity insurance and having adequate liability insurance
is as 'necessary' to a shipowner as having fuel, stores, navigational
equipment or other well-recognised "necessaries". It is also arguable
c that as oil cannot be lawfully transported without the carrier having
the required insurance cover, a contract for the entry of the vessel in
a P&I Club could fairly be regarded as an agreement closely "relating
to the carriage of goods in a ship or to the use of a ship".

It may be that in any future review of the 1952 Arrest Convention,
D claims relating to contracts of marine insurance will be included in the
list of claims giving the right of arrest and provided the wording is
framed appropriately to include club entry it may be that members who
do not pay calls may one day find their vessels liable to arrest in this
country."

E The said prophecy has come true. The learned author has also noted
the decision in Marazura Navegacion S.A. and Ors. v. Oceanus Mutual
Underwriting Association (Bermuda) Ltd. and John Laing (Management)
Ltd, (1977) 1 Lloyd's Rep. 283 wherein it has been noticed:

"Clubs can and do arrest vessels for non-payment of calls in
F jurisdictions which allow such actions; for example, the United States;"

In an interesting article "the International Convention on Arrest of
Ships 1999" by Richard Shaw, it was opined:

"The 1999 Arrest Convention has produced a set of principles which
G are generally regarded as reasonably balanced, between the interests
of legitimate claimants and those of shipping organizations seeking to
ensure freedom of world trade without undue interference. The 1952
Arrest Convention has achieved a widespread degree of acceptance,
and indeed there were those who argued that it was preferable to
retain its well-tried principles rather than risk upsetting them while
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M. V. SEA SUCCESS I [S.B. SINHA, J.J 893

correcting its few deficiencies. A
The extension of the right of arrest to claims for environmental damage,
wreck removal, insurance premiums, commissions, brokerage and
agency fees, and ship sale contracts are all significant steps to correct
those recognized deficiencies, while still retaining the exhaustive list
of maritime claims which is the heritage of the common law Admiralty B
jurisdiction. The remainder of the 1999 Convention contains nothing
revolutionary, the radical UK proposal on associated ship arrest having
been rejected by the conference, but there are a number of provisions
which provide useful clarification of the law. The active participation
in the conference of delegations from China, Russia and the USA
leads one to hope that these major states may, despite their relatively C
low rate of ratification of other maritime conventions, find this one
sufficiently non-controversial to commend it to their legislatures."

The learned author further stated:

"The principles of international law relating to jurisdiction have evolved D
significantly since 1952, in Europe in particular under the European
Convention on Jurisdiction and Judgments 1968, but also with the
development in English Law of the doctrine of forum non conveniens
in cases such as the "ABDIN DA VER" [1984) A.C. 398. The terms of
Article 7 have therefore been drafted to reflect the modem law, while E
retaining the original principle in paragraph I that, in the absence of
another rule of the lex Jori arresti, the courts of the state where the
ship has been arrested shall have jurisdiction to decide the merits of
the claim."

In Project Gabcikovo-Nagymaros (Op. Ind. Weeramantry) the International F
Court in its judgment dated 25.9.1997 at page I 14 albeit in a different context
observed:

"As this Court observed in the Namibia case, "an international
instrument has to be interpreted and applied within the framework of
the entire legal system prevailing at the time of the interpretation" G
(Legal Consequences for States of the Continued Presence of South
Africa in Namibia (South West Africa) notwithstanding Security Council
Resolution 276 ( 1970), Advisory Opinion, l.C.J. Reports 1971, p. 31,
para 53), and these principles are "not limited to the rules of international
law applicable at the time the treaty was concluded."
H
894 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A In Equilease Corporation v. M. V. Sampson 793 F.2d 598 the Court was
considering interpretation of Ship Mortgage Act, 46 providing for right to a
federal maritime lien to "any person furnishing repairs, supplies, or other
necessaries, to any vessel. It was held:

"Equilease next argues that no maritime lien arises in favor of James
B because insurance is not a "necessary" and therefore neither general
admiralty law nor the Act provides a maritime lien for unpaid insurance
premiums. Equilease relies on Learned and on Grow v. Steel Gas
Screw Lorrains K, 310 F.2d 547 (6th Cir. 1962), for this proposition.
The Grow court stated in one sentence without elaboration that there
is no federal maritime lien for insurance premiums, 310 F.2d at 549, and
c went on to grant the plaintiff insurance broker a lien under Michigan
state law. Grow is thus not of much aid to us here. We focus instead
on Learned."

"Equilease urges us to apply Learned and to find that marine insurance
in 1986 insures solely to the benefit of a ship's owner, in no way
D
aiding the ship, and therefore, that no federal lien can be had for
unpaid insurance premiums. This we cannot do.

In the nineteenth century, an insurance policy on a ship was viewed
as a contract for the personal indemnity of the insured ship's owner.
Under this reasoning, no lien against the ship itself could possibly
E
arise as the result of an insurance policy; "unless the ship is benefited
the ship should not pay." In Re Petition of Insurance Co. of
Pennsylvanis, 22 F.109, 116 (N.D.N.Y.1884), aff'd sub non. Insurance
Co. of Pennsylvania v. The Proceeds of the Sale of the Barge
Waubauschene, 24 F. 559 (C.C.N.D.N.Y.1885). It is no longer
F appropriate, however, to view maritime insurance this way. Even a
vessel that simply sits at a dock without making any attempt to ply
the waters must today have hull protection and indemnity insurance.
As the district court noted, insurance is something that every vessel
today needs just to carry on its normal business."
G It was further held

"We therefore hold that because insurance is essential to keep a
vessel in commerce, insurance is a "necessary" under 46 U.S.C. Sec.
971 and unpaid insurance premiums to give rise to a maritime lien
under the FMLA."
H
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,J.] 895

Equilease Corp.(supra) has a greater persua!live value having regard to A
the fact that contemporary maritime statutes in England and other countries
do not use the term "necessaries" but the American Federal Maritime Liens
Act does.

The Indian courts need not follow the English judicial ideologies blindly.
We must remind ourselves that in many fields, particularly, in the matter of B
preservation of 'Human Rights' and 'Ecology', Indian courts have gone far
ahead than their English counterparts.

The decisions of the English Courts have been held to be a departure
by the American Courts with regard to the jurisdiction of the admiralty but C
such departure is a well-known one.

Equilease Corporation has been noticed in Trident Marine Managers
Inc. v. Serial No. CEBRF 0661586 (1988) American Maritime Cases 763.

The question, however, is whether a prudent shipowner would provide
for an insurance. A compulsory insurance regime has come into being and D
keeping in view the changed situation the definition of the expression
"necessaries" should also undergo a change.

The term "necessary" is a term of art but the same cariilot, in our
opinion, be used in a limited context of mandatory claims made for goods or E
services supplied to a particular ship for her physical necessity as opposed
to commercial operation and maintenance. Physical necessity and practicality
would be a relevant factor for determination of the said question. Taking
insurance cover would not only be a commercial prudence but almost a must
in the present day context. The third party insurance may not be compulsory
F

-
in certain jurisdiction but having regard to the present day scenario such an
insurance cover must be held to be intrinsically connected with the operation
of a ship.

One of the relevant factors for arriving at a conclusion as to whether
anything would come within the expression "necessary" or not will inter a/ia
depend upon answer to the question as to whether the prudent owner would G
provide to enable a ship to perform well the functions for which she has been
engaged. If getting the vehicle insured with P&I club would be one of. the
things which would enable a prudent owner to sail his ship for the purposes
for which she has been engaged, the same would come within the purview
of the said term. The matter must be considered having regard to the changing H
896 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A scenario inasmuch as the field of insurance has undergone a sea change from
merely hull and machinery, the insurance companies cover various risks
including oil spill damage to the Port, damage to the cargo etc. In that sense
the term must be construed in a broad and liberal manner. The changing
requirement of a ship so as to enable it to trade in commerce must be kept
in mind which would lead to the conclusion that P & I Insurance cover would
B be necessary for operation of a ship.

It may be true that there are a large number of insurance covers; from
hull and machinery insurance to protection and indemnity cover. But the
question is not what insurance would be 'necessary' and what would not be;
C as the issue has to be considered not only on a mere hypothesis but having
regard to the statutes framed by other countries as also the 1999 Arrest
Convention.

LEX FOR/:

D In Benedict on Admiralty, 6th Edn., Vol.I, p. 19, it has been stated:

"A ship is, of necessity, a wanderer. She visits shores where her
owners are not known or are inaccessible. The master is the fully
authorized agent of the distant owners but is not usually of sufficient
pecuniary ability to respond to unforeseen demands of the voyage.
E These and other kindred characteristics of maritime commerce underlie
the practice of finding in the ship itself security, in many cases, for
demands against the master or owners in their conduct of the ship as
an instrumentality, whether commercial or not, or in their contracts
made on account of the ship."

F In British Shipping Laws, Volume 14, while contrasting maritime liens
and statutory rights of action it is stated:

"Although maritime liens and statutory rights of action in rem are ·
similar in that they involve the Admiralty process in rem, there
nonetheless exist fundamental differences between the two categories.
G These differences may be categories as follows:

(I) Nature of the claim Although the point is not free of uncertainty
it is probably the case that a maritime lien is a substantive right
whereas a statutory right of action in rem is in essence a procedural
remedy. The object behind the availability of a statutory right of
H action in rem is to enable a claimant to found a jurisdiction and to
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.J 897

provide the res as security for the claim." A
In Cheshire and North's Private International Law, 12th Edition, it is
stated

"At first sight the principle seems almost se If-evident. A person who
resorts to an English court for the purpose of enforcing a foreign B
claim cannot expect to occupy a different procedural position from
that of a domestic litigant. The field of procedure constitutes perhaps
the most technical party of any legal system, and it comprises many
rules that would be unintelligible to a foreign judge and certainly
unworkable by a machinery designed on different lines. A party to
litigation in England must take the law of procedure as he finds it. He C
cannot by virtue of some rule in his own country enjoy greater
advantages than other parties here; neither must he be deprived of
any advantages that English law may confer upon a litigant in the
particular form of action. To take an old example, an English creditor
who sued his debtor in Scotland could not insist on trial by jury, nor, D
in the converse case, could a Scottish creditor suing in England
refuse the intervention of a jury, on the ground that in Scotland,
where the debt arose, the case would have been tried by a judge
alone."

An insurance transaction more often than not have links with more than E
one country. In a given case for resolution of a complex question the principles
of private inter-national law or the conflict of laws may have to be turned to
but with a view to determine the same, disputes have to be resolved by
reference to the system of law which governs the contract of insurance. The
jurisdiction to deal with an action by or against insurers in England and EC
Member States except Denmark are now governed by EC Council Regulation F
No. 44/200 I. In other countries, however, the law which is prevailing therein
would govern the field. It may be true that some conventions like Brussels
and Lugano are no longer relevant in most cases involving EC Member States
but they form an important part of the background to the current jurisdictional
regime. For defending the limits of the jurisdiction of the case of a particular G
company the same must, therefore, be governed by the law prevailing therein.
The claim may be a maritime claim in a non-contracting country but not in
others. The 'Club' in law, therefore, would be entitled to enforce its claims
against the 'Vessel' keeping in view the law prevailing in India within whose
territorial jurisdiction the ship is found. Only because, the claim can be
H
898 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A enforced in our country and not in some other countries, by itself would not
lead to the conclusion that it cannot be enforced at all irrespective of the
domestic law.

Some countries like Canada, Australia and South Africa as well as
communist regimes like China and Korea have made statutes as a result
B whereof the maritime claims stand codified. The expression 'necessaries' is
not used in the said statutes except the statutes of United States. The
domestic legislation indisputably will prevail over any international convention
irrespective of the fact as to whether the country concerned is a party thereto
or not.
c The rules for ship arrest in international fora are not uniform. Despite
International Convention on the Arrest of Sea-going Ships 1952 as amended
in the year 1999 either having been adopted by some c:ountries or adopted
by others, the law is enforced by the concerned countries having regard to
their own domestic legal system. Where, how and when can a maritime
D claimant most advisedly arrest a ship in pursuit of its claim either in rem or
in personem had all along been a complicated question keeping in view the
principles of 'lex Jori'.

As a matter of policy legislation or otherwise England did not want that
arrears of insurance premium should be included as a maritime claim, but the
E same would not imply that in other countries despite the unpaid insurance
premium being maritime claim, the same would not be enforced.

SUMMARY OF THE DISCUSSIONS:

The discussions made hereinbefore lead to the conclusion that having
F regard to the changing scenario and keeping in tune with the changes in both
domestic and international law as also the statutes adopted by several countries,
a stand, however, bold, may have to be taken that unpaid insurance premium
of P&I Club would come within the purview of the expression "Necessaries
supplied to any ship''. Other types of insurance, keeping in view the existing
G statutes may not amount to a "necessary''. In any event, such a question, we
are not called upon to answer at present. The discussions made hereinbefore
under different sub-titles of this judgment separately and distinctly may not
lead us to the said conclusion but the cumulative effect of the findings
thereunder makes the conclusion inevitable. The question has not only been
considered from the angle of history of the judicial decisions rendered by
H different Courts having great persuasive value but also from the angle that
LIVERPOOL AND LONDON SP AND I ASSON. LTD. r. M.V. SEA SUCCESS I [S.B. SINHA.JJ899

with the change in time interpretative changes are required to be made. We, A
therefore, in agreement with the judgment of the Bombay High Court, hold
that unpaid insurance premium being a maritime claim would be enforceable
in India.

MAINTAINABJLIY OF THE LETTERS PATENT APPEAL:
B
Submission of Mr. Pratap is that by refusing to exercise discretion to
reject a plaint by account, no right or liability of the party is decided and by
reason thereof the procedure for determining the rights and obligations of the
parties are only set in motion. Such an order would akin to an order admitting
the plaint, Mr. Pratap would submit. Reliance in this connection has been C
placed on The Justices of the Peace for Calcutta v. Oriental Gas Company,
(1872) Vol. VIII Bengal Law Reports 433 at 452.

It was urged that by not rejecting the plaint the defences set out by the
defendant are not obliterated as they will be entitled to raise all such
contentions at the trial. Reliance in this connectio:i has been placed on D
Prahladrai Agarwal/av. Shri Renuka Pal, AIR (1982) Cal 259 at page 266.

Mr. Pratap would further contend that the High Court has misread and
misinterpreted the decision of this Court in Shah Babula/ Khim) i v. Jayaben
Kania, [1981] 4 SCC 8.
E
By way of an analogy, the learned counsel would argue that leave to
defend a suit granted in favour of the defendant under Order 37 of the Code
of Civil Procedure would not be a 'judgment' within the meaning of Clause
15 of the Letter Patent being an interlocutory order as damage or prejudice
in such a matter to the defendant must be a direct and immediate one.
F
Clause 15 permits an appeal against the order passed by a Single Judge
of the High Court in the second forum.

The relevant portion of Clause 15 of the Letters Patent reads thus:

"And we do further ordain that an appeal shall lie to the said High G
Court of Judicature at Madras, Bombay, Fort William in Bengal from
the-judgment ... of one Judge of the said High Court or one Judge of
any Division Court, pursuant to Section 108 of the Government of
India Act, and that notwithstanding anything hereinbefore provided,
an appeal shall lie to the said High Court from a judgment of one
Judge of the said High Court or one Judge of any Division Court, H
f

900 SUPREME COURT REPORTS [2003] SUPP. 5 S.C.R.

A pursuant to Section I 08 of the Government of India Act, made (on or
after the first day of February 1929) in the exercise of appellate
jurisdiction in respect of a decree or order made in the exercise of
appellate jurisdiction by a court subject to the superintendence of the
said High Court where the Judge who passed the judgment declares
that the case is a fit one for appeal."
B
The right of appeal which is provided under Clause 15 of the Letters
Patent cannot be said to be restricted.

In Suba/ Paul v. Malina Paul and Anr., JT (2003) 5 SC 193 this Court
held:
c
"While determining the question as regards Clause 15 of the Letters
Patent the court is required to see as to whether the order sought to
be appealed against is a judgment within the meaning thereof or not.
Once it is held that irrespective of the nature of the order, meaning
thereby whether interlocutory or final, a judgment has been rendered,
D Clause 15 of the Letters Patent would be attracted.

The Supreme Court in Shah Babula/ Khimji 's case (supra) deprecated
a very narrow interpretation on the word 'judgment' within the meaning
of Clause 15.

E This Court said:

"a court is not justified in interpreting a legal term which amounts
to a complete distortion of the word 'judgment' so as to deny
appeals even against unjust orders to litigants having genuine
grievances so as to make them scapegoats in the garb of
F protecting vexatious appeals. In such cases, a just balance must
be struck so as to advance the objection of the statute and give
the desired relief to the litigants, if possible."

In Shah Babula/ Khimji 's case (supra), this Court in no uncertain
terms referred to the judgment under the Special Act which confers
G additional jurisdiction to the High Court even in internal appeal from
an order passed by the Trial Judge to a larger Bench. Letters Patent
has the force of law. It is no longer res integra. Clause 15 of the
Letters Patent confers a right of appeal on a litigant against any
judgment passed under any Act unless the same is expressly excluded.
H Clause 15 may be subject to an Act but when it is not so subject to
LIVERPOOL AND LONDON SP AND I ASSON. LTD. v. M.V SEA SUCCESS I [S.B. SINHA, J.]90 J

the special provision the power and jurisdiction of the High Court A
a
under Clause 15 to entertain any appeal ,from judgment would be
effective.

The decision of this Court in Shah Babula/ Khimji 's case (supra) has
been considered in some details by a Special Bench of the Calcutta
High Court in Tanusree Art Printers and Anr. v. Rabindra Nath Pal, B
(2000) 2 CHN 213 and 2000 (2) CHN 843. It was pointed out:

"If the right of appeal is a creature of a statute, the same would
be governed by the said statute. Whether an appeal under
Clause 15 of the Letters patent will be maintainable or not when
the matter is governed by a Special Statute will also have to be C
judged from the scheme thereof. (e.g. despite absence of bar, a
Letters Patent appeal will not be maintainable from a judgment
of the learned Single Judge rendered under the Representation
of People Act.)"

It was pointed out that in Shah Babula/ Khimji 's case (supra) this D
Court posed three questions namely:

(I) Whether in view of Clause 15 of the Letters Patent an appeal
under Section I 04 of the Code of Civil Procedure would lie? 2)
Whether Clause 15 of the Letters Patent supersedes Order 43,
Rule I of the Code of Civil Procedure? 3) Even Section I 04 of E
the CPC has no application, whether an order refusing to grant
injunction or appoint a receiver would be a judgment within the
meaning of Clause 15 of the Letters Patent?"

The Apex Court answered each of them from a different angle:
F
(a) Section I04 of the Code of Civil Procedure read with Order
43, Rule I expressly authorizes a forum of appeal against orders
falling under various clauses of Order 43 Rule I to a Larger
Bench of a High Court without at all disturbing interference with
or overriding the Letters Patent jurisdiction.
G
(b) Having regard to the provisions of Section 117 and Order 49
Rule 3 of the Code of Civil Procedure which excludes various
other provisions from the jurisdiction of the High Court, it does
not exclude Order 43 Rule I of the CPC.
(c) There is no inconsistency between Section 104 read with H
902 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A Order 43 Rule I and the appeals under Letters Patent, as Letters
Patent in any way does not exclude or override the application
under Section I04 read with Order 43 Rule I which shows that
these provisions would not apply in internal appeals within the
High Court."

B In Prataprai N. Kothari v. John Braganza, (1999] 4 SCC 403, even in
a suit for possession only not based on title, a letters patent appeal
was held to be maintainable.

The decision cf this Court in Sharda Devi v. State of Bihar, [2002] 3
sec 705 is also to the same effect, wherein in para 9 it was held:
c "A Letters patent is the charter under which the High Court is
established. The powers given to a High Court under the Letters
Patent are akin to the constitutional powers of a High Court. Thus
when a Letters Patent grants to the High Court a power of appeal,
against a judgment of a Single Judge, the right to entertain the appeal
D would not get excluded unless the statutory enactment concerned
excludes an appeal under the Letters Patent."

Section 54 of the Land Acquisition Act, I 894 provides for an appeal
before the High Court and thereafter to the Supreme Court and despite
the same it was held that a letters patent appeal under Clause 15
E would be maintainable."

The view taken by the Calcutta and Bombay High Court that an order
passed in tenns of Order 37 of the Code of Civil Procedure granting leave to
defend would not be a judgment within the meaning of Clause 15 of the
Letters Patent may not be of much relevance.
F
In M/s. Tanusree Art Printers and Anr. v. Rabindra Nath Pal (2000) 2
CHN 213 it has been noticed:

"In Mis. Merchants of Traders (P) Ltd. v. Mis. Sarmon Pvt. ltd.,
reported in (1997) I CHN 287, learned Division Bench although did not
G consider this aspect of the matter but held that an order passed in
tenns of Order 37 Rule 5 of the Code of Civil Procedure will not be
appealable."

Reliance by Mr. Pratap upon a decision of the Calcutta High Court in
H Prahladrai Agarwal/a and Ors. v. Smt. Renuka Pal and Ors., AIR (1982) Cal.
LIVERPOOL AND LONDON SP AND I ASSON. LTD. v. MV SEA SUCCESS I [S.B. SINHA, J.]903

259 wherein it has been held that an order under Order 7 Rule 11 of the Code A
of Civil Procedure refusing to reject a plaint is not a judgment, is not apposite.

In the said judgment, however, the judgment of this Court in Shah
Babula/ Khimji (supra) was not taken into consideration. The ratio of the
decision of this Court in Shah Babula/ Khimji, as regard scope and ambit of
the word "judgment" had not been noticed by the Calcutta High Court. B
The submission, however, to the effect that in the suit all defences
would be open to the defendant, in our opinion, is misconceived inasmuch
as, no evidence can be adduced in absence of any pleading. There may not,
furthermore be any requirement to go into the trial if the plaint does not C
disclose a cause of action.

The contention that an order refusing to reject a plaint is one akin to
order amending the plaint would not be a correct proposition of law.

The question as to whether the defendant despite such an order refusing
to reject a plaint will have a right to show that the case is false would again D
be of no consequence. The said submission, in our opinion, is based on a
wrong premise.

An order refusing to grant leave to a defendant to defend the suit
would be passed when it is found that the defence is a moonshine. E
Clause 15 of the Letters Patent is not a special statute. Only in a case
where there exists an express prohibition in the matter of maintainability of
an intra court appeal, the same may not be held to be maintainable. But in
the event there does not exist any such prohibition and if the Order will
otherwise be a 'judgment' within the meaning of Clause 15 of the Letters F
Patent, an appeal shall be maintainable.

What would be a judgment is stated in Shah Babula/ Khimji (supra) as
under:

"We think that "judgment" in Clause 15 means a decision which G
affects the merits 0f the question between the parties by determining
some right or liability. It may be either final, or preliminary, or
interlocutory, the difference between them being that a final judgment
determines the whole cause or suit, and a preliminary or interlocutory
judgment determines only a part of it, leaving other matters to be
determined. H
904 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A 81. An analysis of the observations of the Chief Justice would reveal
that the following tests were laid down by him in order to decide
whether or not an order passed by the Trial Judge would be a judgment:

(I) a decision which affects the merits of the question between the
parties;
B
(2) by determining some right or liability;

(3) the order detennining the right or liability may be final, preliminary
or interlocutory, but the determination must be final or one which
decides even a part of the controversy finally leaving other matters
c to be decided later.

In lea Badin v. Upendra Mohan Roy, AIR (1935) Cal. 35, the Calcutta
High Court held that an order refusing to appoint a receiver is detenninative
of a right of the plaintiff and would accordingly be a judgment.

D Yet again in Chittaranjan Monda/ v. Sankar Prasad Sahani, AIR (1972)
Cal. 469 the Calcutta High Court held that an order refusing to grant an
injunction restraining execution of the judgment-debtor was a judgment within
the meaning of Clause 15.

As by reason of an order passed under Order 7, Rule 11 of the Code
E of Civil Procedure, the rights conferred upon the parties are determined one
way or the other, stricto sensu it would not be an interlocutory order but
having regard to its traits and trappings would be a preliminary judgment.

It is true that in Shah Babula/ Khimji (supra) it is stated that an order
rejecting the plaint would be appealable but does not expressly state that an
F order refusing to reject would not be appealable. Therein this Court gave 15
instances where an order would be appealable which are only illustrative in
nature.

Such observations have to be understood having regard to the concept
of finality which are of three types:
G
(I) a final judgment

(2) a preliminary judgment and
(3) intermediary or interlocutory judgment.

H In our opinion the order refusing to reject the plaint falls in the category
LIVERPOOL AND LONDON SP. AND I ASSON LTD. v. M.V SEA SUCCESS I [SB. SINHA,J.J 905

of a preliminary judgment and is covered by the second category carved out A
by this Court.

It is trite that a party should not be unnecessarily harassed in a suit.
An order refusing to reject a plaint will finally determine his right in terms of
Order 7 Rule 11 of the Code of Civil Procedure.
B
The idea underlying Order 7 Rule I IA is that when no cause of action
is disclosed, the courts will not unnecessarily protract the hearing of a suit.
Having regard to the changes in the legislative policy as adumbrated by the
amendments carried out in the Code of Civil Procedure, the Courts would
interpret the provisions in such a manner so as to save expenses, achieve
expedition, avoid the court's resources being used up on cases which will C
serve no useful purpose. A litigation which in the opinion of the court is
doomed to fail would not further be allowed to be used as a device to harass
a litigant. (See Azhar Hussain v. Rajiv Gandhi, [1986) Supp SCC 315 at 324-
35).
D
In Dhartipakar Aggarwal v. Rajiv Gandhi, [1987) Supp SCC 93, this
court held:

"9. In K. Kamaraja Nadar v. Kunju Thevar, [1959) SCR 583 : AIR
(I 958) SC 687 : I4 ELR 270, the Election Tribunal and the High Court
both refused to consider preliminary objections raised by the returned E
candidate at the initial stage on the ground that the same would be
considered at the trial of the election petition. This Court set aside the
order and directed that the preliminary objection should be entertained
and a decision reached thereupon before further proceedings were
taken in the election petition. Bhagwati, J. speaking for the Court
observed thus : F
We are of opinion that both the Election Tribunal and the High Court
were wrong in the view they took. If the preliminary objection was not
entertained and a decision reached thereupon, further proceedings
taken in the election petition would mean a full-fledged trial involving
examination of a large number of witnesses on behalf of the second G
respondent in support of the numerous allegations of corrupt practices
attributed by him to the appellant, his agents or others working on his
behalf; examination of a large number of witness by or on behalf of
the appellant controverting the allegations made against him;
examination of witness in support of the recrimination submitted by H
906 SUPREME COURT REPORTS [2003) SUPP. 5 S.C.R.

A the appellant against the second respondent; and a large number of
visits by the appellant from distant places like Delhi and Bombay to
Ranchi resulting in not only heavy expenses and loss of time and
diversion of the appellant from his public duty in the various fields
of activity including those in the House of the People. It would mean
unnecessary harassment and expenses for the appellant which could
B certainly be avoided if the preliminary objection urged by him was
decided at the initial stage by the Election Tribunal.

It was opined that in a given case a full dressed trial need not be
undertaken.
c Yet again in Samar Singh v. Kedar Nath, (1987] Suppl. SCC 224 it has
been held :

"In substance, the argument is that the court must proceed with
the trial, record the evidence, and only after the trial of the election
petition is concluded that the powers under the Code of Civil Procedure
D for dealing appropriately with the defective petition which does not
disclose cause of action should be exercised. With respect to the
learned counsel, it is an argument which it is difficult to comprehend.
The whole purpose of conferment of such powers is to ensure that
a litigation which is meaningless and bound to prove abortive should
E not be permitted to occupy the time of the court and exercise the mind
of the respondent."

We may notice a converse case. In Dipak Chandra Ruhidas v. Chandan
Kumar Sarkar, (2003] 7 SCC 66, in view of Section 98 (a) and Section 116-
A of the Representation of People Act, a question arose as to whether
F dismissing an election petition at the threshold shall be appealable. This
Court observed:

"13. Furthermore, Section 86 deals with trial of election petitions, Sub-
section (I) whereof is a part of it. Trial has not been defined. In
Black's Law Dictionary at page 1348 it is stated:
G
"A judicial examination and determination of issues between
parties to action, Gulf, C. & S.F. Ry. Co. v. Smit, Oki., 270 P.2d
629, 633; whether they be issues of law or of fact, Pulaski v.
State, 23 Wis. 2d 138, 126 N.W. 2d 625, 628. Ajudicial examination,
in accordance with law of the land, of a cause, either civil or
H
LIVERPOOL AND LONDON SP. ANDI ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,J.]907

criminal, of the issues between the parties whether of law or fact, A
before a court that has proper jurisdiction''.
14. It is, therefore, not necessary that the trial must be a full dressed
or a jury trial or a trial which concludes only after taking evidence of
a parties in support of their respective cases.

15. Section 116A provides for an appeal. The said provision must be B
given a liberal and purposive construction. The scope of an appeal
should be held to be wider than an application for judicial review or
a petition under Article 136 of the Constitution of India.

16. Furthermore, the Representation of the People Act provides for a C
complete machinery. The right of appeal conferred upon a suitor must
be considered from that angle. When an order is passed under Section
98 of the Act, the same may be in tenns of either Sub-section (1) of
Section 86 or otherwise. An appeal lies against a final order. An order
passed under Sub-section (I) of Section 86 is also final. It may be that
in the event an appeal therefrom is allowed, the matter may be required D
to be sent back but that would not render an order passed thereunder
as an interlocutory one. It does not take away the concept of the
finality attached therewith."

In Central Mine Planning and Design Institute Ltd. v. Union of India
and Anr., [2001] 2 SCC 588 this Court upon referring Shah Babula/ Khimji E
(supra) held:

"Adverting to the facts of this case, Section 17-B of the ID Act
confers valuable rights on the workmen and correspondingly imposes
onerous obligations on the employer. The order in question passed
by t~e learned Single Judge detennines the entitlement of the workmen F
to receive benefits and imposes an obligation on the appellant to pay
such benefits provided in the said section. That order cannot but be
"judgment" within the meaning of clause 10 of Letters Patent, Patna.
The High Court is obviously in error in holding that the said order is
not judgment within the meaning of clause I0 of the Letters Patent of G
Patna."

We, therefore, are of the opinion that Letters Patent Appeal was
maintainable.

REJECTION OF PLAINT:
H
908 SUPREME COURT REPORTS (20031 SUPP. 5 S.C.R.

A Whether a plaint discloses a cause of action or not is essentially a
question of fact. But whether it does or does not must be found out from
reading the plaint itself. For the said purpose the averments made in the plaint
in their entirety must be held to be correct. The test is as to whether if the
averments made in the plaint are taken to be correct in its entirety, a decree
would be passed.
B
CAUSE OF ACTION:

A cause of action is a bundle of facts which are required to be pleaded
and proved for the purpose of obtaining relief claimed in the suit. For the
aforementioned purpose, the material facts are required to be stated but not
C the evidence except in certain cases where the pleading relies on any
misrepresentation, fraud, breach of trust, wilful default, or undue influence.

Order 7 Rule 14 of the Code of Civil Procedure provides as follows:

"14 PRODUCTION OF DOCUMENT ON WHICH PLAINTIFF SUES
D OR RELIES.

(I) Where a plaintiff sues upon a document or relies upon document
in his possession or power in support of his claim, he shall enter such
documents in a list, and shall produce it in Court when the plaint is
presented by him and shall, at the same time deliver the document and
E a copy thereof, to be filed with the plaint.

(2) Where any such document is not in the possession or power of
the plaintiff, he shall, where possible, state in whose possession or
power it is.

F (3) Where a document or a copy thereof is not filed with the plaint
under this rule, it shall not be allowed to be received in evidence on
behalf of the plaintiff at the hearing of the suit.

(4) Nothing in this rule shall apply to document produced for the
cross-examination of the plaintiffs witnesses, or, handed over to a
G witness merely to refresh his memory."

In the instant case the 'Club' not only annexed certain documents with
the plaint but also filed a large number of documents therewith. Those
documents having regard to Order 7 Rule 14 of the Code of Civil Procedure
are required to be taken into consideration for the purpose of disposal of
H application under Order 7 Rule I l(a) of the Code of Civil Procedure. The
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,J.]909

'Club' in its plaint pleaded: A
"The Plaintiff is a Protection & Indemnity Association incorporated
under the laws of the United Kingdom and carries on business through
its Managers, Liverpool & London P&I Management Ltd. at Liverpool,
UK. The Plaintiff is a mutual association of ship-owners and offers
insurance cover in respect of vessels entered with it for diverse third B
party risks associated with the operation and trading of vessels. This
insurance is commonly known as Protection & Indemnity (P&I) cover
in respect of various risks associated with the vessels in their maritime
adventure. The !st Defendant vessel m.v. "Sea Success I" is a sistership
of the vessels "Sea Ranger" and "Sea Glory" which were entered for C
P&I risks with the Plaintiff Association. The said two vessels were
entered into the Plaintiff's Association for the policy year 1999-2000
by Defendant No. 2, Singapore Soviet Shipping Co. Pte. Ltd. who, as
per the terms of the insurance and Rules of the Plaintiff Association,
were recognized and considered to be the owners of the said two
vessels and the assured under the policy of insurance. The I st D
Defendant vessel is owned and/ or controlled by Defendant No. 2
through its wholly owned I 00% subsidiary, Singapore Soviet Shipping
Corporation Inc., Monrovia. The I st Defendant vessel is presently at
the port and harbour of Mumbai within the territorial waters of India
and within the Admiralty jurisdiction of this Hon 'ble Court. The 2nd
Defendant is the owner of the I st Defendant and is also inter alia E
the party liable in personam in respect of the Plaintiff's claim.

The Plaintiff submits as more particularly stated in paragraph I above,
that the !st Defendant vessel is a sistership of the two vessels "Sea
Glory" and "Sea Ranger" in view of the beneficial ownership, F
management of all three vessels having vested in Defendant No. 2.
The Plaintiff further submits that Defendant No. 2 is liable in personam
in respect of the unpaid insurance premium in respect of the two _
vessels "Sea Glory" and "Sea Ranger". Consequently, the Plaintiff is
entitled to arrest any other vessel in the ownership of Defendant No.
2. The !st Defendant vessel is owned by Defendant No. 2 through it's G
I00% subsidiary S.S. Shipping Co. Inc. In the circumstances, the
Plaintiff submits that they are entitled to proceed against the Defendant
vessel in rem and are entitled to an order of arrest, detention and sale
of the vessel for recovery of their outstanding dues in respect of
insurance premium as more particularly stated above. The Plaintiff is, H
910 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A therefore, entitled to have the Defendant vessel along with her hull,
gear, engines, tackle, machinery, bunkers, plant, apparel, furniture,
equipments and all appurtenances thereto condemned and arrested
under a warrant of arrest of this Hon 'ble Court for realization of the
Plaintiff's dues. The Plaintiff is further entitled to have the Defendant
vessel sold under the orders and directions of this Hon 'ble Court and
B to have the sale proceeds thereof applied towards the satisfaction of
the Plaintiffs claim in the suit. The Plaintiff is entitled to an order of
arrest of the Defendant vessel as arrest is the only method of
proceeding against the said vessel in rem. The Plaintiff submits that
if such an order of arrest is not granted, irreparable harm and injury
c will be caused to the Plaintiff inasmuch as the Plaintiff's suit will be
rendered infructuous. There is no other alternative efficacious remedy
available to the Plaintiff.

The Club has pleaded that the vessel is a sister ship of 'Sea Ranger'
and 'Sea Glory' owned and possessed by the second defendant. The Club
D has also pleaded that the defendant No. 2 is beneficial owner of the first
defendant ship. Determination on such assertions would amount to
determination of question of fact. If the 'Vessel' denies or disputes the same;
an issue in that behalf will have to be framed and decided.

Beneficial ownership of a ship is not a question of fact alone. It is a
E mixed question of fact and law. In William v. Wilcox, (1838) 8 Ad. & EL 331
it is held:

"It is an elementary rule in pleading that when a state of facts is relied,
it is enough to allege it simply, without setting out the subordinate
facts which are the means of proving it or the evidence sustaining the
F allegations."

The aforementioned dicta has been quoted with approval in Mohan
Rawale v. Damodar Tatyaba and Ors., (1994] 2 SCC 392.

It may be true that Order 7 Rule 1l(a) although authorises the court to
G reject a plaint on failure on the part of the plaintiff to disclose a cause of
action but the same would not mean that the averments made therein or a
document upon which reliance has been placed although discloses a cause
of action, the plaint would be rejected on the ground that such averments are
not sufficient to prove the facts stated therein for the purpose of obtaining
H reliefs claimed in the suit. The approach adopted by the High Court, in this
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA, J.]911

behalf, in our opinion, is not correct. A
In D. Ramachandran v. R. V. Janakiraman and Ors., [1999] 3 SCC 267,
this Court held:

"It is well settled that in all cases of preliminary objection, the test is
to see whether any of the reliefs prayed for could be granted to the B
appellant if the averments made in the petition are proved to be true.
For the purpose of considering a preliminary objection, the averrnents
in the petition should be assumed to be true and the court has to find
out whether those averrnents disclose a cause of action or a triable
issue as such. The court cannot probe into the facts on the basis of
the controversy raised in the counter." C
Furthermore a fact which is within the special knowledge of the defendant
need not be pleaded in the plaint. In Punit Rai v, Dinesh Chaudhary, JT
(2003) Supp. I SC 557, it is stated:

" ... These are the material facts relating to the plea raised by the D
appellant that the respondent is not a Scheduled caste, We don't
think if the respondent means to say that the petitioner should have
stated in the petition that the respondent is not born of Deo Kumari
Devi said to be married to Bhagwan Singh in village Adai. If at all
these facts would be in the special knowledge of respondent, Bhagwan E
Singh and Deo Kumari Devi hence not required to be pleaded in the
election petition. It is not possible as well. In this connection, a
reference may be made to a decision of this Court in Ba/wan Singh
v, Lakshmi Nrain and Ors., AIR ( 1960) SC 770. This case also relates
to election matter and it was held that facts which are in the special
knowledge of the other party could not be pleaded by the election F
petitioner. It was found that particulars of the arrangement or hiring
or procuring a vehicle would never be in the knowledge of the petitioner,
such facts need not and cannot be pleaded in the petition."

In D. Ramachandran v. R. V. Janakiraman and Ors., [1999] 3 SCC 267,
it has been held that the Court cannot dissect the pleading into several parts G
and consider whether each one of them discloses a cause of action.

In the aforementioned backdrop, the question as to whether the Club
had been able to show that the Respondent No. I is a sister ship of "Sea
Glory" and "Sea Ranger" admittedly belonging to the first respondent is a H
912 SUPREME COURT REPORTS (2003] SUPP. 5 S.C.R.

A matter which is required to be gone into in the suit.
In ascertaining whether the plaint shows a cause of action, the court
is not required to make an elaborate enquiry into doubtful or complicated
questions of law or fact. By the statute the jurisdiction of the court is
.restricted to ascertaining whether on the allegations a cause of action is
B shown. In Vijay Pratap Singh v. Dukh Haran Nath Singh. AIR (1962) SC 941
this Court held:

"By the express terms of r. 5 clause (d), the court is concerned the
ascertain whether the allegations made in the petition show a cause
of action. The court has not to see whether the claim made by the
c petitioner is likely to succeed: it has merely to satisfy itself that the
allegations made in the petition, if accepted as true, would entitle the
petitioner to the relief he claims. If accepting those allegations as true
no case is made out for granting relief no cause of action would be
shown and the petition must be rejected. But in ascertaining whether
D the petition shows a cause of action the court does not enter upon
a trial of the issues affecting the merits of the claim made by the
petitioner. It cannot take into consideration the defences which the
defendant may raise upon the merits; nor is the court competent to
make an elaborate enquiry into doubtful or complicated questions of
law or fact. If the allegations in the petition, prima facie, show a cause
E of action, the court cannot embark upon an enquiry whether the
allegations are true in fact, or whether the petitioner will succeed in
the claims made by him."

So long as the claim discloses some cause of action or raises some
questions fit to be decided by a Judge, the mere fact that the case is weak
F and not likely to succeed is no ground for striking it out. The purported failure
of the pleadings to .disclose a cause of action is distinct from the absence of
full particulars. See Mohan Rawale (supra).

Beneficial ownership is not a pure question of fact. It is a mixed question
G of law and fact. In that view of the matter it was not necessary for the Club
to set out the subordinate facts which arte means of proving it or the
evidence sustaining the allegations. The High Court, however, in its order
rejecting the plaint held:

"We have not gone into the merits of the Defendant No. 1 ship, we
H clarify, on the basis of any averments made by Defendant No. 1, to
LIVERPOOLANDLONDONS.P.AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,J.J 9) 3

the contrary, but we have proceeded to examine the same on the basis A
of the averments made in the plaint to find out whether, as they stand,
prove the Defendant No. I vessel Sea Success -I to be sister ship of
vessels - "Sea Glory" and "Sea Ranger" being beneficially owned by
Defendant No. 2. We have already indicated above that the allegations
made in the plaint by themselves do not prove factum of Defendant
No. I Sea Success-I being sister ship of vessels "Sea Glory" and "Sea B
Ranger" in respect of whom the claim has been raised in the suit, we
find it difficult to approve the view of the learned Single Judge in this
regard. It cannot be overlooked that ship is a valuable commercial
chattel and her arrest undeservingly severely prejudices third parties
innocently as well as affect the interest of owner, crew member, C
cargo owner, shipper etc. adversely and, therefore, it is all the more
necessary to analyse the plaint meaningfully at the threshold to find
out whether it discloses cause of action or not and not on technical
and formal reading that if discloses cause of action and wait for
trial."
D
The approach of the High Court, in our considered opinion, is not
correct. For the purpose of rejecting a plaint it is not necessary to consider
whether the averments made in the plaint prove the factum that the defendant
No. I "Sea Success-I" is a sister ship of "Sea Glory" and "Sea Ranger" or
the said two ships are beneficially owned by the defendant No. 2. The reasons E
which have been assigned in support of the said aforementioned finding that
that the ship is a valuable commercial chattel and her arrest undeservingly
prejudices third parties as well as affect the interest of owner and others is
a question which must be gone into when passing a final order as regard
interim arrest of ship or otherwise. For the aforementioned purpose the Vessel
herein could file an application for vacation of stay. While considering such F
an application, the Court was entitled to consider not only a prima facie case
but also the elements of balance of convenience and irreparable injury involved
in. the matter. In such a situation and particularly when both the parties
disclose their documents which are in their possession, the Court would be
in a position to ascertain even prima facie as to whether the Club has been G
able to make out that "Sea Glory" and "Sea Ranger" are sister vessels of the
"Vessel".

The reason for the aforementioned conclusiqn is that if a legal question
is raised by the defendant in the written statement, it does not mean that the
same has to be decided only by way of an application under Order 7 Rule H
914 SUPREME COURT REPORTS (2003) SUPP. 5 S.C.R.

A 11 of the Code of Civil Procedure which may amount to pre-judging the
matter.

Furthermore, the question as to whether the asset of a I 00% subsidy
can be treated as an asset of the parent company ..,.would again depend upon
the fact situation of each case.
B
In The Aventicum [1978] I Lloyd's L.R. it has been held:

"I have no doubt that on a motion of this kind it is right to investigate
the true beneficial ownership. I reject any suggestion that it is
impossible "to pierce the corporate veil". I of course remember, as
c Mr. Howard urges, the case of Saloman v. Saloman & Co., (1897]
A.C. 22, but of course it is plain that s.3(4) of the Act intends that
the Court shall not be limited to a consideration of who is the registered
owner or who is the person having legal ownership of the shares in
the ship; the directions are to look at the beneficial ownership. Certainly
in a case where there is a suggestion of a trusteeship or a nominee
D
holding, there is no doubt that the Court can investigate it. I think that
it may well be, without having to resolve th1: difference of opinion
expressed by Mr. Justice Brandon and Mr. Justice Goff in the two
cases to which I have referred that the Court has the power and
should in some cases look even further."
E
Yet again in The Andrea Ursula, (1971] I Lloyd's L.R. 145, the Court
opined:

"There is no definition in the Act of the expression· "beneficially
owned" as used in sect. 3(4). It could mean owned by someone who,
F whether he is the legal owner or not, is in any case the equitable
owner. That would cover both the case of a ship the legal and equitable
title to which are in one person, A, and also the case of a ship the
legal title to which is in one person, A, but the equitable title to which
is in another person, B. In the first case the ship would be beneficially
owned by A, and in the second case by B. Trusts of ships, express
G or implied, are however, rare and the words seem to me to be capable
also of a different and more practical meaning related not to title,
legal or equitable, but to lawful possession and control with the use
and benefit which are derived from them. If that meaning were right,
a ship would be beneficially owned by a person who, whether he was
H the legal or equitable owner or not, lawfully had full possession and
LIVERPOOL AND LONDON S.P. AND I ASSON. LTD. v. M.V. SEA SUCCESS I [S.B. SINHA,J.J 9 J 5

control of her, and, by virtue of such possession and control, had all A
the benefit and use of her which a legal or equitable owner would
ordinarily have."

Furthermore, the question as to whether the concept of ownership of a
ship which has been introduced in 18th Century when there had been no joint
stock companies and the concept of shares in a ship so as to encourage the B
individuals to pool their resources by a sister ship so that they may become
co-owners is a matter which is required to be considered at an appropriate
stage. We do not think that such a question can justifiably be gone into at this
stage.

We do not intend to delve deep jnto the questions as to whether the two C
ships named hereinabove are the sister ships of the respondent No. 1 Vessel
or whether the requirement of law as regard ownership of a ship in the
Respondent No. I as beneficial owner has been fulfilled or not Such issues
must be considered at an appropriate stage.

CONCLUSION :
D

We, therefore, direct that in the event, a proper application is filed
either for dissolution of the interim order of injunction passed by the learned
Single Judge or if the High Court in its wisdom thinks fit to decide any issue
as a preliminary issue such questions may be gone into in greater details. Any E
observations made by us must be considered to have been made only for the
purpose of disposal of these appeals and not for the purpose of determining
the merit of the matter. However, having regard to the facts and circumstances
of this case, we will request the High Court to consider the desirability of
disposing of the matter as expeditio_usly as possible and preferably within a
period of three months from the date of receipt of a copy of this order. F
For the reasons aforementioned, the judgment under challenge is set
aside and the matter is sent back to the High Court. Civil Appeal No. 5665
of 2002 is accordingly allowed and Civil Appeal No. 5666 of 2002 is
dismissed. No costs.

B.S. C.A.No. 5665/02 allowed.
C.A.No. 5666/02 dismissed.