M/S NKD MARITIME LIMITED Versus THE BOARD OF TRUSTEES OF THE PORT OF MUMBAI & ORS.

M/S NKD MARITIME LIMITED Versus THE BOARD OF TRUSTEES OF THE PORT OF MUMBAI & ORS.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2022

(Arising out of SLP (C) NO. 4550 OF 2021)

M/S NKD MARITIME LIMITED ... Appellant

Versus

THE BOARD OF TRUSTEES OF

THE PORT OF MUMBAI & ORS. ... Respondents

J U D G M E N T

Indira Banerjee, J.

Leave granted.

2. This appeal is against a judgment and order dated 12th February 2021

passed by the Commercial Appeal Division of the Bombay High Court (Division

Bench) allowing Commercial Appeal (L) No. 1557 of 2021 filed by the

Respondent No.1, hereinafter referred to as the “Port Trust” and setting aside

an interim order dated 6th January 2021 passed by the Commercial Division

(Single Bench) of the same High Court disposing of Interim Application No.

2

6531 of 2020 filed by the Appellant M/s NKD Maritime Limited, hereinafter

referred to as “NKD”.

3. The Vessel M.V. Karnika, hereinafter referred to as the “Vessel” was

owned by Jalesh Cruises Mauritius Limited, hereinafter referred to as “Jalesh”

and had been sailing under the flag of the Bahamas.

4. At the request of Jalesh, Glander International Bunkering DMCC,

hereinafter referred to as “Glander”, had supplied bunkers to the Vessel. The

charges for the bunkers supplied by Glander to the Vessel were not paid.

5. On 24th September, 2020, Glander filed an Admiralty Suit being

Commercial Admiralty (L) Suit No. 3579 of 2020 against the owners and parties

interested in the Vessel for recovery of USD $2,213,320, being the charges for

the bunkers along with accrued interest before the Commercial Division of the

Bombay High Court.

6. By an order dated 7th October 2020, the Commercial Division of the High

Court directed the Sheriff of Mumbai to sell the Vessel through public auction

by issuing newspaper advertisements.

7. Pursuant to auction notices published in newspapers on 28th October

2020, on the directions of the High Court, 13 bidders including NKD submitted

their bids. NKD’s bid of Rs.11.65 million was the highest and the same was

accordingly accepted.

8. On or about 7th November 2020, NKD paid the purchase price for the

Vessel after which a Bill of Sale was drawn in favour of NKD on 9th November

3

2020 by the Prothonotary and Senior Master of the High Court. The Bill of Sale

clearly states that the Vessel was sold free from all encumbrances. On 11th

November 2020, delivery of the Vessel was given to NKD.

9. The Vessel had initially arrived at the Port of Mumbai on 23rd March 2020.

When NKD was going to remove the Vessel, the Respondent No.1 raised bills in

respect of Anchorage charges and Respondent No.4 raised bills in respect of

Light Dues Charges.

10. It is the case of NKD that NKD has purchased the Vessel in an auction

conducted through Sheriff Report No. 53 of 2020 in Commercial Admiralty Suit

(L) No. 3579 of 2020 for the purpose of demolition of the Vessel. The terms

and conditions of sale are set out in the order of the High Court, dated 28th

October 2020 on Sheriff Report No. 53 of 2020 in Commercial Admiralty Suit (L)

No. 3579 of 2020 are, inter alia, set out hereinbelow for convenience :-

“10. Needless to clarify that the sale of the defendant vessel

having confirmed in favour of M/s. NKD Maritime Limited, it shall be

handed over to the said M/s. NKD Maritime Limited, free from all

encumbrances. This, of course is subject to the entire sale

consideration being received by the office of the Sheriff of Mumbai

within the stipulated time as mentioned earlier.”

11. It is not in dispute that the Bill of Sale also mentions that the bill was

being sold free of all encumbrances. However, the successful bidder would be

liable to pay the costs, charges, fees and expenses of any kind involved in

removing the Vessel. According to NKD, the Respondent No.4, i.e., the Customs

Authorities raised a bill on NKD levying Light Dues Charges for the period from

23rd March 2020, i.e., the time when the Vessel arrived at Mumbai Port till the

date of its removal.

4

12. NKD contends that physical delivery of the Vessel was made over to the

Appellant on 11th November 2020. General Light Dues charges were payable

on and from 11th November 2020. NKD also disputed its liability to pay

Anchorage Charges as claimed by the Respondent No.1, hereinafter referred to

as the “Port Trust”.

13. In exercise of powers under Sections 48, 49 and 50 of the Major Port

Trusts Act, 1963, hereinafter referred to as Port Trusts Act, the Tariff Authority

for Major Port, hereinafter referred to as the “TAMP” issued a notification

notifying the scales of rate for major ports. Clause 2.15 of this notification

provides a schedule of anchorage fees.

14. As per Clause 2.15 of the notification, issued by the TAMP, the anchorage

fees is calculated as per the formula depending on the period of stay of the

Vessel at the harbour. The rates vary depending on the duration for which the

Vessel remains at the anchorage, herein anchorage points V-1 and Y. The rate

of anchorage for a foreign going vessel is USD $ 0.0047 GRT (Gross Registered

Tonnage) per hour or any part thereof from the first day on wards till the 30th

day. If the Vessel is docked at the anchorage for over 30 days, the applicable

rate beyond the 30th day is USD $ 0.0118. In this case, the vessel was at V-1

anchorage with effect from 13th June 2020. It is not in dispute that more than

30 days had elapsed since the Vessel had been brought to the anchorage. At

the time of sale, the Vessel was paying anchorage fees at the rate applicable

when a vessel is docked for more than 30 days.

5

15. Disputes arose between NKD and the Port Trust with regard to the

anchorage charges claimed by the Port Trust. The Port Trust charged

approximately Rs.15,00,000/- per day on the basis that the Vessel had been

docked at the anchorage for more than 30 days. If the vessel were to be

docked for less than 30 days, the anchorage charges would be approximately

Rs.5,00,000/- per day.

16. NKD filed an application in Commercial Admiralty Suit (L) No. 3579 of

2020 in the Commercial Division of the High Court seeking directions on the

Customs Authorities and the Mumbai Port Trust to raise revised bills, levying

Light Dues Charges and/or Anchorage Charges from the date on which physical

possession of the vessel was made over to NKD, i.e., 11th November 2020.

17. The main thrust of the arguments of NKD is based on the terms and

conditions of the Sale of the Vessel which is set out hereinbelow for

convenience :

“5. The above Vessel M.V. Kamika (IMG No.8521220) is being sold

on as is where is, what is there basis, free and clear of all existing liens

encumbrances and claims and no Purchasers) shall be to raise any

objection in respect of or on account of any damage thereto or defect

therein. All the costs, charges, fees and expenses of any kind of nature

involved in removing M.A. Karnika (IMO No.8521220) from her present

position will be solely to the account of the successful purchaser. The

successful bidder should take over the safety of the Vessel M/V. Karnika

(IMO No.8521220) within 24 hours of being declared the

highest/successful bidder and payment of the entire sale consideration

to be made in this Hon’ble Court.

xxx xxx xxx

10. The sale is subject to the sanction of the Hon’ble High Court

of Judicature at Bombay.

11. The offerer(s) or bidder(s) whose offer or bid will be accepted

by the Hon’ble High Court. Bombay (hereinafter referred to as “The

purchaser”) shall give an undertaking in the form annexed hereto and

6

complete the purchase according to these conditions and shall also pay

the purchase price in accordance with Term No.8 hereinabove,

otherwise, the said vessel shall be again put up for sale and re-sold and

Earnest Money Deposit of Rs.2,00,00,000/- (Rupees Two Crores only) or

equivalent US Dollars and any amount paid towards purchase price

shall be forfeited and the defaulting purchases, shall be liable for any

deficiency upon such resale together with costs, charges and expenses

attending the resale, but shall not be entitled to the benefit of any

increase in the purchase money on such resale. The Purchaser(s) shall

also subscribe his/their address including e-mail & fax to the said

Undertaking at the foot of these conditions. All communications shall

be deemed to have been served, upon such communication being sent

to the Purchaser(s) by e-mail and/or fax and/or post or upon such

communication left for the Purchaser(s) at such address, unless such

Purchaser(s) is/are to the knowledge of the Sheriff of Mumbai

represented by an Advocate or Advocates, in which case service on

such Advocate or Advocates shall be deemed to be sufficient.

12. Upon payment of the full purchase money in the manner

aforesaid, and on the sale being sanctioned by the Hon’ble High Court

of Judicature at Bombay, the Purchaser(s) shall take immediate steps

to take possession of the vessel purchased by him/them. The

Purchaser(s) shall at his/their expense take such steps as may be

necessary for the purpose of obtaining possession thereof and the

Sheriff of Mumbai shall not be responsible in that behalf.

xxx xxx xxx

14. The Purchaser(s) shall take delivery of the said vessel

forthwith after making payment of the full purchase price of the vessel

and with the sanction of the sale by the Hon’ble High Court of

Judicature at Bombay. The said vessel shall remain at the risk and

expense of such purchaser(s) from the date of sanction of sale by the

Hon’ble High Court of Judicature at Bombay in respect of the said

vessel.

xxx xxx xxx

16. The Purchaser(s) shall submit to the Sheriff of Mumbai for

approval a draft of the Certificate of Sale of the vessel immediately

from the date of confirmation of the file and the same will be approved

by and on behalf of the Sheriff of Mumbai and will be forwarded to the

Admiralty Registrar / Prothonotary and Senior Master High Court,

Bombay for issuance of the same. The costs of certificate of sale to be

issued by the Hon’ble High Court including stamp duty, registration

charges etc. Payable in respect thereof shall be borne and paid by the

Purchaser(s).

17. All charges, dues including Port dues, tariffs, taxes etc. in

respect of the vessel shall be borne and paid by the Purchaser(s) from

the date of the sanction of the sale by the Hon’ble High Court of

Judicature at Bombay.”

7

18. By an order dated 6th January 2021, the Commercial Division of the High

Court (Single Bench) allowed the application filed by the NKD.

19. While the Port Trust filed Commercial Appeal (L) No. 1577 of 2021 against

the order of the Commercial Division, NKD filed a Cross Objection (L) Nos. 2057

of 2021 in the Commercial Appeal.

20. Mr. Siddharth Bhatnagar, learned senior counsel appearing on behalf of

the Appellant referred to the terms and conditions of sale of the Vessel and

argued that the Vessel had been sold free from all encumbrances. Mr.

Bhatnagar also referred to Section 8 of the Admiralty (Jurisdiction and

Settlement of Maritime Claims) Act, 2017 which reads as under :-

“8. Vesting of rights on sale of vessels— On the sale of a vessel

under this Act by the High Court in exercise of its admiralty jurisdiction,

the vessel shall vest in the purchaser free from all encumbrances,

liens, attachments, registered mortgages and charges of the same

nature on the vessel.”

21. Mr. Bhatnagar argued that the Vessel having been sold on “as is, where

is” basis, free from all encumbrances, any liability in respect of Anchorage

Charges or Light Dues Charges which accrued prior to the date of sale would

have to be met by the erstwhile owners of the Vessel and/or met by the

Prothonotary and Senior Master of the High Court from out of the sale proceeds

of the Vessel lying with him. Such charges cannot be foisted upon NKD.

22. Mr. Jayant Bhushan, learned senior counsel appearing on behalf of the

Respondents agreed that the Vessel had been sold on “as is, where is” basis,

free from all encumbrances. Mr. Bhushan submits that no pre-sale liabilities in

respect of the Vessel have been foisted on NKD. Referring to the terms and

8

conditions of sale and in particular, the condition that all charges dues

including Port dues, tariffs, taxes, etc. in respect of the vessel, Mr. Jayant

Bhushan submits, that it would be borne and paid by the purchaser from the

date of sanction of the sale by the High Court. In this case, Mr. Bhushan

argued, NKD had only been charged anchorage charges from the date of

sanction of the sale till the date of removal of the vessel from the anchorage.

23. In our view, the Division Bench rightly held that the argument was

without merit. As held by the Division Bench, it is far-fetched to suggest that

prior anchorage was of the Vessel under sale and the rate that it attracts as a

result of such prior anchorage are in the nature of encumbrances for the

purposes of anchorage fees to be applied after the date of Bill of Sale and till

the Vessel sells at the instance of the purchaser. As held by the Division Bench,

NKD purchased the Vessel on ‘as is, where is’ basis free from encumbrances in

the instant case, anchorage charges have been levied from the date of the

sale. The rates were payable on the basis of the number of days for which the

Vessel was docked. NKD, in its cross objection, contended that anchorage

charges fall within the expression ‘port dues’ under Section 50-B of the Port

Trusts Act. Under Section 50-B, when a Vessel enters a port but does not

discharge or take in any cargo or passengers, she is charged with port dues at

a rate to be determined by the Authority, which, in any event, should not

exceed half the rate with which she otherwise would be chargeable. It is

submitted that the Port Trust could not have charged more than half the rate

under the Scale of Rates for anchorage charges.

9

24. Mr. Bhatnagar submits that port dues not having been defined in the

Major Port Trust Act, all charges payable within the premises of the Port fall

within the broad expression ‘port dues’. Whether port dues within the meaning

of Section 50-B of the Major Port Trust Act include other charges leviable within

the port premises, i.e., charges other than Port Entry charges is not in issue in

this case as held by the Division Bench. The issue was whether the rate would

be approximately Rs.5,00,000/- per day or Rs.15,00,000/- per day.

25. In our view, the Division Bench rightly allowed the appeal and set aside

the order of the Single Bench. The appeal is, therefore, dismissed.

...................................,J.

 [ INDIRA BANERJEE ]

...................................,J.

 [ J.K. MAHESHWARI ]

NEW DELHI;

SEPTEMBER 22, 2022