J.S.Ocean Liner LLC v m.v. Golden Progress and another.
The Plaintiffs were a Dubai based company and time charterers of the “Golden Progress”. The “Golden Progress” was chartered to the plaintiffs on Baltime 1939 form on period charter. Disputes arose between the charterers and the owners with regard to alleged breaches by the owners of the speed and bunker consumption warranties contained in the charterparty. The charterparty contained the standard Baltime arbitration clause, making the disputes arbitrable in London and subject to English Law.
Shortly after the expiry of the charter period and redelivery of the vessel to the owners at Mumbai, charterers commenced in rem proceedings against the “Golden Progress” and her owners and obtained a warrant of arrest of the vessel. The proceedings were filed to secure charterers’ claim for the amount due at the foot of their final hire statement.
When the charterers arrested the “Golden Progress” the arbitration clause of the charterparty was not invoked. The owners, after obtaining release of the vessel by furnishing cash security in the Court, took out a motion seeking that the parties be directed to refer their disputes to arbitration in London and the suit in the meantime be unconditionally stayed.
The dispute was initially assigned to a single judge. However, in light of conflicting Division Bench judgments on the legal issues raised, the judge directed the proceedings to be placed before the Chief Justice for constitution of a larger Bench.
The two conflicting decisions were the “Mehrab”1 and the “IndurvaValley”2. In the “Mehrab” the single Judge’s refusal to grant an order for arrest of the vessel to secure a future arbitration award was overturned by the Division Bench; which held that the Court in its Admiralty Jurisdiction had the power to arrest a vessel to secure a claim in pending or future arbitration proceedings.
As against this, the Division Bench in the “IndurvaValley” held that a suit in Admiralty Jurisdiction for securing a claim in arbitration was not maintainable. The only remedy available to the claimant was to make an application for interim relief under section 9 of Arbitration and Conciliation Act 1996. The reasoning was that the Arbitration and Conciliation Act 1996 was a complete code and section 5 of the Act provided that in matters governed by Part 1 no judicial authority could intervene except where so provided in that Part. In light of these conflicting decisions the dispute was referred to a three person bench for consideration of the following questions of law:
(a) Whether an application under section 9 of the Arbitration and Conciliation Act 1996 (Indian) was maintainable for arrest of a vessel for obtaining security for an award that may be made in arbitration proceedings?
(b) If the answer to (a) was in the negative, whether a suit solely for arresting a ship to obtain security for an award in pending arbitration could be maintained
Section 9 of the Arbitration and Conciliation Act 1996 is akin to Article 9 of UNCITRAL Model Law On International Commercial Arbitration and confers upon the Court powers to grant interim measures, including interim measures for securing the amount in dispute in arbitration.
Since the above questions of law were of public importance the Court, through a circular, invited interested parties and their advocates to intervene in the proceedings and advance arguments to assist the Court.
Plaintiffs submitted that prior to the enactment of section 26 of the Civil Jurisdiction and Judgements Act 1982 in England there was no specific legal provision that empowered the English High Court to retain an arrested vessel as security for satisfaction of an arbitral award. In the “Rena K”3it was held that it was not the purpose of arresting a ship in rem to provide security for an arbitration award which may be obtained, therefore the Court had no jurisdiction to arrest a ship or keep a ship arrested for such purpose. Further, it was held that even if a suit was liable to be stayed in favour of the arbitration clause in the charterparty, the vessel arrested or security furnished would not be liable to be released unconditionally. It was held that a cause of action in rem, being different in character from an action in personam, did not merge in a judgment in personam but remained available to any person who had the right so long as and to the extent that the judgment remained unsatisfied. Plaintiffs argued that the “Rena K” judgment was not in accord with the scheme of the Arbitration and Conciliation Act 1996 and was therefore inapplicable. Alternatively, it was argued that the Arrest Conventions of 1952 and 1999 were a part of Indian Common law (despite India not being a signatory) and under Article VII of Arrest Convention 1999 in rem actions only for security in aid of pending arbitral proceedings were permitted. Interveners arguments were in support of the plaintiffs’ arguments.
The defendants argued that the suit itself was not maintainable for want of jurisdiction, in view of the arbitration clause in the charterparty and that the suit simplicitor for security pending arbitration in a foreign country was also not maintainable. The defendants also relied on the judgment of the Supreme Court in P. Anand Gajapati Raju4wherein it was held that once a dispute is referred to arbitration, nothing remains to be decided in the original action and such proceedings are required to be terminated. Reliance was also placed on section 45 of the Arbitration and Conciliation Act 1996, which empowered the Court to refer the parties to arbitration, when a valid arbitration agreement existed.
The Court, after hearing lengthy arguments of several Counsel, finally held that, in view of the Arrest Convention 1999, it was not necessary to apply “Rena K” principles. It was considered that the application of Article VII of the 1999 Arrest Convention to admiralty jurisdiction would be purposive and preferable and would be more in line with accepted international procedure, by which security obtained by the arrest of the ship in the action in rem was retained to satisfy the judgment and award of the arbitration tribunal.
The Court accordingly articulated its conclusions as follows:
(i) An application under Section 9 of the Arbitration and Conciliation Act 1996 was not maintainable for arrest of a vessel for obtaining security of an award that may be made in arbitration proceedings. In finding thus the Court overruled the decision in the “IndurvaValley”.
(ii) An action in rem for recovery of a claim and arrest of the vessel where parties had agreed to submit their disputes to arbitration was maintainable and, in such a case, if by way of an interim measure the vessel was arrested or security provided the matter was to proceed in accordance with Article VII of the Arrest Convention 1999.
(iii) If the proceedings were brought within the time prescribed by the Court before the Arbitral Tribunal, any final decision therefrom was to be enforced against the arrested ship or the security provided in order to obtain its release provided the Defendant was given reasonable notice of such proceedings and a reasonable opportunity to present the case for defence in accordance with the provisions contained in the Arbitration and Conciliation Act 1996.
(iv) Retention of security under (ii) and (iii) above was to remain at the discretion of the Court which could pass appropriate orders having taken into consideration all relevant circumstances.
With thanks to Raman Walawalker of Bhatt & Saldanha for preparing this article.
1. 2002(4)Mh.LJ584 2. Lodging No. 503 of 2003 3. (1978) Lloyd’s Rep 545 4. AIR 2000 SC 1886
