Admiralty Jurisdiction after the World Tanker Case
by Madhavi Divan*
Cite as : (2000) 2 SCC (Jour) 33
The short question which arose before the Supreme Court in the World Tanker Carrier Corpn. case1 was whether the foreign owners of a foreign vessel which collided with another foreign vessel in international waters could invoke the jurisdiction of the Indian courts for the purpose of setting up a limitation fund in India.
To answer this question, the Supreme Court had to examine two issues:
(a) Are actions for the setting up of a limitation fund actions in rem or actions in personam?
(b) Is there a legal principle which could preclude forum-shoppers from approaching the Indian courts in respect of actions that have no connection with India?
The case arose out of a collision between two foreign vessels in international waters off the coast of Portugal resulting in the loss of life and damage to property. A number of proceedings ensued between the various affected parties in different parts of the world, including Portugal, the USA, Hong Kong, the UK, and South Africa. While some of these proceedings were pending, a suit was instituted in the Bombay High Court by SNP Shipping Services Pvt. Ltd., the managers of one of the vessels, the Ya Mawlaya, seeking to limit their liability under Part X-A of the Merchant Shipping Act. Although the accident had, ostensibly at least, little or no connection with India, it was the case of SNP, a company registered in India, that since the ship had been managed in India, the crew trained in India and all certificates relating to the seaworthiness of the vessel issued by Indian authorities, a part of the cause of action had arisen in India, and that, therefore, the Indian courts would have jurisdiction to try the suit.
While this suit was pending in the Bombay High Court, the Ya Mawlaya was brought to the port of Bombay under ballast and arrested on an application by SNP. Subsequently, the owners of the Ya Mawlaya, the Karamara Shipping Company, a company registered in Cyprus, filed a suit in the Bombay High Court, seeking to limit its liability against all claimants. It was Karamara's case that since the vessel was within the territorial waters of India at the time the jurisdiction of the Court was invoked, the Court would have the jurisdiction to try the suit. While the High Court, upheld this view, the Supreme Court took the contrary view.
In arriving at this decision, the Supreme Court examined the peculiar nature of an action by a ship-owner to limit his liability. The Court assessed the nature of a limitation action as being a defensive action aimed at protecting an owner against any number of claims that could be made in any part of the world. A decree, in the form of a limitation fund, would thus bind all claimants, both actual and potential. The Court, in fact, accepted the principle as laid down in the English case of Volvox Hollandia2 which recognised that the purpose of limitation proceedings is to obtain a decree in rem against all claimants for a single sum limited to the amount of the limitation fund. However, after having recognised and relied upon this principle underlying limitation actions, it is difficult to understand why the Court went on to hold that a limitation action is an action in personam simply because it deals with the personal right of a shipowner to limit his liability. The Court went on to hold that actions in personam such as limitation actions are governed by the rules of private international law under which the court cannot entertain an action against a foreigner resident outside the country or a foreigner not carrying on business within the country, unless he submits to the jurisdiction of the Indian court.
It is submitted that to hold that a limitation action is a right in personam as opposed to a right in rem is contrary to the very essence of the concepts of rights in rem and rights in personam. Salmond on Jurisprudence3 defines the concepts and explains the distinction between the two thus:
"A right in rem, sometimes called a real right, corresponds to duty imposed upon persons in general; a right in personam, sometimes called a personal right, corresponds to a duty imposed upon determinate individuals. A right in rem is available against the world at large; a right in personam is available only against particular persons.... Almost all rights in rem are negative, and most rights in personam are positive.... The essence of a right in rem is that it avails against an open or indefinite class of persons, whereas a right in personam avails against a specific person or persons."
This distinction has been recognised by our own Supreme Court in the case of Sankaran Govindan v. Lakshmi Bharathi4 which followed the dictum of Chief Justice Holmes in the American case of Tyler v. Judges5 of the Court of Registration. In that case, the distinction between in rem and in personam actions was defined thus:
"If the technical object of the suit is to establish a claim against some particular person, with a judgment which generally, in theory at least, binds his body, or to bar some individual claim or objection, so that only certain persons are entitled to be heard in defence, the action is in personam, although it may concern the right to, or possession of, a tangible thing. If, on the other hand, the object is to bar indifferently all who might be minded to make an objection of any sort against the right sought to be established, and if anyone in the world has a right to be heard on the strength of alleging facts which, if true, show an inconsistent interest, the proceeding is in rem. All proceedings, like all rights, are really against persons. Whether they are proceedings or rights in rem depends on the number of persons affected. Hence, the res need not be personified and made a party defendant, as happens with the ship in the Admiralty. It need not even be a tangible thing at all, as sufficiently appears by the case of the probate of wills. Personification and naming of the res as defendant are merely symbols, not be essential matter."
A limitation action, by its very nature, is intended at putting a cap or limit on multitudinous and consequently unwieldy claims that a ship-owner may anticipate against himself or his vessel. It would be difficult for a ship-owner to determine precisely, the identity of potential claimants, the number of claims as also the jurisdictions from which the claims could emanate. In a limitation action, therefore, there can never be a determinate class of defendants. The action, by its very nature and intent is a declaratory, defensive action that seeks to bind the entire world i.e. all those claimants and potential claimants who may not be named in the suit itself and who cannot be named because their identity cannot be ascertained at the time of filing the suit.
Perhaps the Court was guided by the common but misconceived perception that an action in rem must be against a physical, tangible res or property and therefore it is only actions that are directed against the vessel itself - an action for assets of a ship - that constitute in rem actions. It is now well settled that such res need not be physical, tangible property such as a vessel. A commentary from Cheshire and North on Private International Law6 reads as follows:
"But a ship is not the only res whose status may be changed against all persons. A marriage, for instance is not strictly a res, but, as Lord Dunedin remarked, it has always been treated as savouring of a res. If, therefore, in matrimonial proceedings, the court adjudges that a marriage shall be dissolved or annulled, its judgment amounts to a declaration that the status of the parties, i.e. their legal position in or with regard to the rest of the community, rather than just inter se, is now changed."
The judgment of a Court of Probate establishing a will, an adjudication order or an order of discharge made in the course of bankruptcy proceedings, and an order for the dissolution of a company etc. now constitute judgments in rem.
There should therefore, be little doubt that the res in an in rem action could be abstract and intangible and could indeed include a limitation fund. In this view it is difficult to come to terms with the reasoning of the Court that Part X-A of the Merchant Shipping Act which pertains to limitation of liability confers a right in personam. It is based largely on this doubtful conclusion that the Court went on to hold that Sections 2 and 3(15) of the Merchant Shipping Act which relate to the jurisdiction did not apply to the case.
Section 2(2) of the Merchant Shipping Act extends the applicability of the Act to foreign vessels when such vessel is in India or in Indian territorial waters. The sub-section reads as follows:
"2. (2) Unless otherwise expressly provided, the provisions of this Act which apply to vessels other than those referred to in sub-section (1) shall so apply only when any such vessel is within India, including the territorial waters thereof."
Sub-section (1) of Section 2 applies to vessels which are registered in India or required to be registered in India and also, vessels which are wholly owned by Indian parties.
Section 3(15) defines the "High Court in relation to vessels" thus:
3. (15) 'High Court', in relation to a vessel, means the High Court within the limits of whose appellate jurisdiction
(b) the vessel is for the time being; or
The expression "for the time being" appearing in Section 3(15)(b) has been interpreted by the Supreme Court in case of M.V. Elisabeth v. Harwan Investment & Trading (P) Ltd.7 as the time when the jurisdiction of the Court was invoked.
If Sections 2(2) and 3(15)(b) were to be read with Part X-A of the Act which deals with limitation of liability, it would mean that a foreign vessel would fall within Indian jurisdiction if the vessel was present within Indian territorial waters at the time the jurisdiction of the High Court was invoked.
The Court however, declined to accept such an interpretation by holding that Section 2(2) and Section 3(15) could not be read with Part X-A of the Act. The Court excluded the applicability of Sections 2(2) and 3(15) from Part X-A of the Act on two grounds. Firstly, as stated above, because according to the Court, a limitation action is an action in personam which would be governed by the principles of private international law, and secondly, because both Sections 2(2) and 3(15) apply to vessels only. the Court appears to have taken a very narrow view of the expressions "apply to vessels" and "in relation to vessels" that appear in the above-quoted two sub-sections and has interpreted them to mean being confined to actions against vessels, such as actions for the arrest of a vessel. The Court was of the view that limitation actions were not in relation to vessels and therefore Sections 2(2) and 3(15) would have no application to Part X-A. However, any such interpretation belies the plain language of the statute. The phrases do not evince any such qualification or confinement and on the contrary, in the absence of any such express qualification must be given the widest possible meaning. It is hard to understand how an action for limitation of liability can have no relation to a vessel. After all, liability is being sought to be limited by a ship-owner in respect of an occurrence to his vessel. Liability is sought to be limited in respect of claims that have arisen or may arise against that vessel. To conclude that such an action is not in relation to a vessel, appears to be unjustifiable.
The language of some other Sections of Part X-A itself cuts against the reasoning of the Court. Part X-A contains provisions specifically "in relation to vessels". For instance, Section 352(c) of Part X-A defines the word "fund" as follows:
"352. (c) fund, in relation to a vessel, means the limitation fund constituted under Section 352-C;" (emphasis supplied)
Similarly the term "liability in relation to the owner of a vessel" has been defined in Section 352(d) as follows:
"352. (d) 'liability', in relation to owner of a vessel, includes liability of the vessel herself." (emphasis supplied)
What must not be ignored, however, and what probably quite naturally weighed in the minds of the learned Judges was the fact that the vessel in question, the Ya Mawlaya was brought into Indian waters nearly a year after the collision. And it was this subsequent presence of the vessel in Indian territorial waters that was relied upon by the owners of the Ya Mawlaya for invoking Indian jurisdiction. Section 2(2) read with Section 3(15) and Part X-A would inevitably mean that any foreign party could have recourse to the jurisdiction of the Indian courts merely by bringing their vessel within Indian territorial waters even after the collision. This would be so irrespective of whether the ship-owner or his vessel or the occurrence had any other connection whatsoever with India. To endorse such an interpretation was naturally regarded by the Court as throwing open the floodgates with an enormous potential for abuse of the Indian system. The Indian legal system is known the world over for its delays and a ship-owner from any part of the world would be tempted to make use of such delays by first invoking the jurisdiction of the Indian courts by bringing his vessel into Indian territorial waters and then obtaining a stay on proceedings brought against him in any other part of the world on the ground that the matter was already pending in India. The result could, needless to say, be disastrous. However, a careful examination of the judgment reveals that it fails to provide a foolproof solution against attempts at forum-shopping. The Court observed as follows: (SCC p. 326, para 41)
"The fortuitous presence of the ship in the Bombay harbour will not entitle the owner to file a limitation action in the Bombay High Court in the absence of any claim being made or apprehended against him or the vessel in that court." (emphasis supplied)
Does this mean that a foreign ship-owner who wishes to bring a limitation action in India even when no part of the cause of action arises in India, would only need to ensure that a claim is filed against him or apprehended against him in an Indian court? If the answer is in the affirmative, anyone could ensure jurisdiction of the Indian court by simply arranging the filing of a claim in this country. Ironically, then, a decision that was aimed at discouraging forum-shopping has opened the floodgates for abuse.
It has been an internationally-recognised principle that where a collision occurs in international waters, there is no natural forum where disputes may be brought by the parties. The result of this is, inevitably, a scramble for competing jurisdictions, commonly known as forum-shopping. It was under these circumstances that the English courts evolved the Scottish doctrine of forum non conveniens in order to ensure that proceedings were tried in a forum with which the matter had the most real and substantial connection.8 Under the doctrine of forum non conveniens, the court is empowered to stay proceedings brought before it even though it may have jurisdiction, on the ground that there is some other available forum having jurisdiction which is distinctly more appropriate to try the dispute. In ascertaining whether there is a clearly more appropriate forum abroad, the search is for the country with which the action has the most real and substantial connection.9 Under this doctrine, the court will look for connecting factors which include factors over and above factors affecting convenience or expense, such as the law governing the relevant transaction and the place where the parties reside or carry on business.
The present case presented the Supreme Court with an opportunity to develop the law on forum non conveniens, a concept relatively unknown in India. The Court could have held that the Indian courts had jurisdiction under the Merchant Shipping Act but ought not to exercise that jurisdiction since the better or more appropriate forum was elsewhere. Instead, the Supreme Court adopted a strained interpretation of the Merchant Shipping Act and left the gateway open for forum-shoppers.
- World Tanker Carrier Corpn. v. SNP Shipping Services (P) Ltd., (1998) 5 SCC 310
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- (1988) 2 Lloyds Law Reports 361
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- 12th Edn. (1966), pp. 234 to 238
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- (1975) 3 SCC 351
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- (1900) 175 Mass 71
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- 12th Edn. (1992), p. 216
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- 1993 Supp (2) SCC 433 at 470, para 77
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- Spiliada Maritime Corpn. v. Cansulex Ltd., 1987 AC 460
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- Ibid Return to Text