The Updated Admiralty Rules Of The Bombay High Court.

The Updated Admiralty Rules Of The Bombay High Court.
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The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (“the Act”), is the first post-independence codified legislation dealing with admiralty laws in India. The Act re-enacts and updates British era laws, rules, procedures and principles governing admiralty jurisdiction of courts, admiralty proceedings on maritime claims, arrest of vessels and related issues, to bring these in uniformity with modern trends and prevalent international practices. In line with this objective, the Act [see: Section 17] repeals certain age- old legislations such as the (a) the Admiralty Court Act, 1840 (3 and 4 Vict., c. 65); (b) the Admiralty Court Act, 1861 (24 and 25 Vict., c.10); (c) the Colonial Courts of Admiralty Act, 1890 (53 and 54 vict., c. 27); (d) the Colonial Courts of Admiralty (India) Act, 1891 (16 of 1891). Further, the Act [see: Section 16] also allows respective High Courts (having admiralty jurisdiction) to frame their own rules to regulate the admiralty practice and procedure.

The Bombay High Court has recently (in February 2020) amended the Bombay High Court (Original Side) Rules 1980 by deleting Rules 927 to 968 as contained in Part III therein (“the Former Rules”) which regulated the practice and procedure to be followed for cases instituted under the (now repealed) Colonial Courts of Admiralty Act, 1890 (53 and 54 vict., c. 27). Instead, a new chapter i.e. Chapter-LX has been inserted in the Rules by way of which, the High Court has revamped the rules regulating the practice and procedure on the Admiralty side of the Court (“the New Admiralty Rules”).

In this update, we seek to highlight the changes ushered in and the practical effects of the New Admiralty Rules on the Admiralty practice in the Bombay High Court.

1. PROCEDURAL REQUIREMENTS FOR GRANT OF ARREST ORDER FOR SUITS IN REM:

An admiralty action is instituted by way of a Suit (in rem or otherwise) which is commenced by filing a plaint as per the provisions of the Code of Civil Procedure, 1908 (“CPC”) [see: Rule 1064]. All suits filed in the admiralty jurisdiction of the Court shall be recorded in the Admiralty Suit Register [see: Rule 1065]. In addition to the Plaint, the New Admiralty Rules also require an application for the arrest of the ship to be made for a suit in rem. This application, supported by an affidavit, shall state the nature of the claim and a statement declaring that such claim has not been satisfied. The affidavit should also state the nationality of the ship to be arrested, the port at which it is to be arrested and whether a valid caveat against the arrest has been filed [see: Rule 1066].

Possible Issues: The procedure followed earlier was that in addition to the Plaint, a Judge’s Order with an Affidavit in support thereof was filed seeking the arrest of the Vessel, which contained most if not all particulars required under this Rule [Former Rule 941]. We note that the New Admiralty Rules do not specifically mention a Judge’s Order (unlike the Former Rule 941) even though Admiralty Form No. 141 sets out the revised format of the Judge’s Order [see also: Rule 1109]. Accordingly, it is our understanding that the “application for the arrest of the ship” referred to in the new Rule 1066 does not require a completely different application in the form of an Interim Application (“IA”) to effect the arrest, but actually refers to the Judge’s Order, as per the old procedure (in fact, we have also effected an arrest in the Bombay High Court after the New Admiralty Rules were notified, following the old procedure of filing a Judge’s Order along with the Plaint).

NB (Practice): It is relevant to note for practitioners that the format of the Judge’s Order has changed slightly and old formats used may need to be revisited to comply with procedural formalities of the Registry.

Form: Admiralty Form No. 141 sets out the new format of the Judge’s Order [see also: Rule 1109].

2. UNDERTAKING FOR DAMAGES

[see: Rule 1067]– This requirement incorporates Section 11 of the Act in its wording and spirit and stipulates that a party applying for an arrest shall give an unconditional and irrevocable undertaking in writing to pay such sum of money or kind of security in such sum and upon such terms as may be determined by the court for any loss or damage which may be incurred by or caused to the defendant or any other party as a result of the wrongful arrest of the ship and for which the plaintiff may be found liable. It is relevant to note that the scope of the undertaking has been widened to also include within its ambit not just the defendant but also other parties that may affected by the wrongful arrest of the vessel. This undertaking shall not stand discharged or released notwithstanding any order permitting the suit to be withdrawn. The New Admiralty Rules also provide that a claim for damages can be made either by way of an IA or a separate suit or a counter-claim in the existing suit [see: Rule 1101].

NB (Practice): Whilst the Former Rule 941, permitted such an undertaking to be provided through an Advocate, this new Rule does away such dispensation. Additionally, the Rule clarifies that the said undertaking shall not stand discharged or released even if an order for withdrawal of the suit is passed.

Form: The new format of the Undertaking is provided in Admiralty Form No. 140 [see also: Rule 1109].

3. ARREST OF SHIP NOT TO PREVENT LOADING/DISCHARGE, ETC.-

[see: Rule 1069]-The newly inserted rule clarifies that the arrest of a ship will not hinder loading/discharging operations nor shifting of the ship under directions of the Port.

4. PROCEDURAL RULES RELATING TO WARRANT OF ARREST AND WRIT OF SUMMONS-

The New Admiralty Rules specifically provide for the arrest of a ship through a Warrant of Arrest to be issued pursuant to an order of arrest by the Court and to be executed by the Sheriff, unless the Court otherwise orders [see: Rule 1068]. However, the Rule also provides that the Court may dispense with the service of the Warrant of Arrest if required, in which case, the ship is deemed to be arrested upon service of the Order of Arrest made by the Court. The New Admiralty Rules also provide for dispensation with the service of the Writ of Summons and warrant of arrest, if the advocate for the defendant accepts service having entered a caveat or agrees to give security or to pay money into court or warrant of arrest/order of arrest is served on the ship [see: Rule 1070]. This is somewhat similar to the old position [Former Rule 945].

Possible Issues: The New Admiralty Rules seem to follow the position laid down in the judgement of the Bombay High Court in Suresh Exports vs Orient Shreyas Others, AIR 1999 Bom 20 (“Orient Shreyas Judgement”) ,where whilst interpreting the Former Rules 945 and 946, the Court held that “once the warrant of arrest is issued and executed against a vessel, there is no need to again serve a writ of summons separately”. However, from a practical perspective, given the quantum in most Admiralty Suits, these would also be governed by the Commercial Courts Act,2015 which has provided a mandatory timeline of 120 days (including extension/s) for a Defendant to file its written statement, with this time to count from the date of service of writ of summons.

Failure to adhere to this timeline shall mean that the Defendant shall forfeit its right to file a defence to the Suit [see: M/s SCG Contracts India Pvt. Ltd. V/s. K.S. Chamankar Infrastructure Pvt. Ltd. & Ors., AIR 2019 SC 2691]. It remains to be seen how the Court will deal with such mandatory timelines as set down in the Commercial Courts Act, 2015 in cases where the service of the writ of summons has been dispensed with under the New Admiralty Rules. The position of law in the Orient Shreyas Judgment as followed by the New Admiralty Rules may also need to be revisited in light of the fact that recent judgments [see for eg: Axis Bank Ltd. v. Mira Gehani, 2019 SCC OnLine Bom 358] have held that the provisions of the Commercial Courts Act have primacy over the Bombay High Court (Original Side) Rules. To further muddy the waters, is the fact that the Act i.e. the Admiralty Act, under which the New Admiralty Rules have been framed provides that the provisions of the CPC (which are amended in part by the Commercial Courts Act, 2015) shall apply in all the proceedings before the High Court in so far as they are not inconsistent with or contrary to the provisions of the Act or the rules made thereunder [see: Section 12]. There are of course other ancillary issues which are bound to arise to further compound the confusion in this regard.

Failure to adhere to this timeline shall mean that the Defendant shall forfeit its right to file a defence to the Suit [see: M/s SCG Contracts India Pvt. Ltd. V/s. K.S. Chamankar Infrastructure Pvt. Ltd. & Ors., AIR 2019 SC 2691]. It remains to be seen how the Court will deal with such mandatory timelines as set down in the Commercial Courts Act, 2015 in cases where the service of the writ of summons has been dispensed with under the New Admiralty Rules. The position of law in the Orient Shreyas Judgment as followed by the New Admiralty Rules may also need to be revisited in light of the fact that recent judgments [see for eg: Axis Bank Ltd. v. Mira Gehani, 2019 SCC OnLine Bom 358] have held that the provisions of the Commercial Courts Act have primacy over the Bombay High Court (Original Side) Rules. To further muddy the waters, is the fact that the Act i.e. the Admiralty Act, under which the New Admiralty Rules have been framed provides that the provisions of the CPC (which are amended in part by the Commercial Courts Act, 2015) shall apply in all the proceedings before the High Court in so far as they are not inconsistent with or contrary to the provisions of the Act or the rules made thereunder [see: Section 12]. There are of course other ancillary issues which are bound to arise to further compound the confusion in this regard.

NB (Practice): The procedure of effecting the arrest stands simplified [see: Rule 1071]. The earlier rules stipulated that service would be effected by affixing the original Writ of Summons or the original Warrant of Arrest (and not the order of arrest) on the mast of the ship or any suitable part of the ship’s superstructure for a short time to be eventually replaced by a duplicate [Former Rule 946]. However, under the New Admiralty Rules, the service can simply be effected by serving the order of arrest on the Master of the ship. Further, the Plaint and other documents can be served on the advocate claiming to represent the ship. An affidavit of service is to be filed by the Plaintiff within two (2) weeks of service of writ of summons specifically setting out the names and addresses of the defendants who have been served with the writ of summons along with proof of service attached thereto [see: Rule 1106].

Form: The format of the Warrant of Arrest is provided in Admiralty Form No. 142 [see also: Rule 1109].

5. CAVEATS: PROCEDURE & PRACTICE-

As earlier, three (3) types of caveats are allowed to be lodged namely: (a) Caveats against Arrest [see: Rule 1072]; (b) Caveats against Release [see: Rule 1073]; and (c) Caveats against Payment Out of Sale Proceeds [see: Rule 1074]. The duration of each caveat will be six months from date of entry of the caveat into the respective Caveat Books [see: Rule 1076]. Even though validity of caveats cannot be extended, the expiry of a caveat will not prevent entering of successive caveats. A caveat may be withdrawn by the party who caused it to be entered [see: Rule 1077].

Apart from the above, specific points to note for each type of caveat are set out below:

(a) Caveat Against Arrest- The general procedure in relation to the filing of the caveat remains the same under the New Admiralty Rules. It is important to note that merely because a valid Caveat Against Arrest is lodged against a vessel, does not automatically forfeit the right of an arresting party to seek an order of arrest or a warrant of arrest, against the vessel, without notice to the caveator. However, it is then open for the caveator to file an IA for discharging the warrant/order of arrest and for damages [see: Rule 1072 (b)]. In general cases however, if a valid Caveat Against Arrest is lodged against a vessel sought to be arrested, a copy of the Plaint is to be served upon the caveator/his advocate, prior to moving the arrest and a statement that this requirement has been complied with will have to be included in the affidavit in support of the application for the arrest of the ship [see: Rule 1079]. A caveator has to provide security within three (3) working days of service of the Plaint and other proceedings upon it [see: Rule 1080]. This time to furnish security may be extended by the Court on such terms and on payment of such costs as it deems proper. Should security not be paid/ furnished within the time provided, it is open to the Plaintiff to apply to have the Suit transferred to the undefended list and proceeded with ex-parte [see: Rule 1081.

Possible Issues: There seems to seem some ambiguity on the need to give notice to a caveator under the New Admiralty Rules. The settled position earlier [Former Rule 939] was that if the amount of security mentioned in the Caveat was so low that it did not secure its interest, the Plaintiff was entitled to move Court for dispensing with the requirement of serving notice on the caveator [see: Mr. Bernardo de Souza vs. MV Seven Island & Anr., NOM 11 of 2006].This position seems to have been diluted somewhat in the New Admiralty Rules, which sees a marked departure in respect of the amount to be furnished as security by the caveator. Under the old rules, the caveator upon being served a copy of the Plaint prior to arrest had three days’ time to either furnish security or pay into Court, the sum for which the suit came to be instituted [Former Rule 936]. The New Admiralty Rules however state that the security to be furnished or paid into Court would be the lower of the two amounts being (a) the amount specified while filing the Caveat or (b) the sum claimed in the suit [see: Rule 1080]. An important question then is how this would protect the interests of a Plaintiff in situations where the amount claimed in the Suit is substantially higher than the amount specified in the caveat. Another question which also arises is whether in such cases (i.e. where the Plaintiff’s claim is substantially higher than the amount specified in the caveat book), there is still an obligation to give notice to the caveator. In such a scenario, clarity would also be required on whether the Plaintiff can still sustain its arrest for the part of the claim which remains unsecured by the caveator. As such, this provision is akin to a double-edged sword, and we expect the guidance of the Court will soon be required to clarify these issues.

NB (Practice): The New Admiralty Rules require the Caveat Against Arrest to be in the specified format and should include the name, address and email address of the caveator and/or his advocate, as the case may be. Further, the Caveat Warrant Book (a record maintained by the Registry of all caveats against arrest lodged in the Court) shall now also specify the amount that the caveator undertakes to either pay into court or furnish security for in case of an arrest of a vessel.

Form: The format of the Caveat Against Arrest is provided in AdmiraltyForm No. 139 [see also: Rule 1109]. This also includes the format for the Admiralty Registrar’s Certificate to be issued certifying that no Caveat Against Arrest is recorded in the Caveat Book at the time of moving the arrest.

(b) Caveat Against Release- The general procedure in relation to the filing of the caveat remains the same under the New Admiralty Rules. The Rules provide for notice of two (2) working days to be given to a caveator with a valid Caveat Against Release against a vessel, before the order of release of the vessel is passed [see: Rule 1075 and Rule 1092]. Unlike the old rules [Former Rule 952] this is a welcome development, as a set timeline has been provided within which the caveator will have to file its claim, whereas earlier the vessel sought to be released would remain under arrest (pending the caveator filing its action) for such period as the Court would, in its discretion, determine. A Caveat Against Release would stand discharged/ set aside on (a) the ship being released by an order of release; or (b) an application for setting aside the caveat being made by way of an IA [see: Rule 1078]. The rules also clarify that a party delaying the release of any ship by entry of a caveat shall be liable to pay costs and damages in respect of the loss suffered by reason of the delay, unless he is able to show, to the satisfaction of the Court, good and sufficient reason for having entered the caveat.

NB (Practice): The New Admiralty Rules require the Caveat Against Release to be in the specified format and should include the name, address and email address of the caveator and/or his advocate, as the case may be along with the nature and amount of the claim of the caveator.

Form: The format of the Caveat Against Release is provided in AdmiraltyForm No. 143 [see also: Rule 1109].

(c) Caveat Against Payment Out of Sale Proceeds- The general procedure in relation to the filing of the caveat remains the same under the New Admiralty Rules. The Rules provide for notice of two (2) working days to be given to a caveator with a valid Caveat Against Payment Out of Sale Proceeds, before the order of payment out is passed [see: Rule 1075]. The Rules clarify that money shall not be paid out of Court except by an order of the Court [see: Rule 1099].

NB (Practice): The New Admiralty Rules require the Caveat Against Payment Out of Sale Proceeds to be in the specified format and should include the amount, nature and details of the claim of the caveator and the details of any suit or proceedings in respect of the sale proceeds.

Form: Whilst the Rules states that the format of the Caveat Against Payment Out of Sale Proceeds is provided in Admiralty Form No. 144 [see also: Rule 1109(6)], the said Form 144 seems to be the format for an Instrument of Release

6. SHERIFF’S EXPENSES/ CUSTODIA LEGIS [see: Rule 1084]- In a much needed addition, the New Admiralty Rules specifically provide for monies disbursed towards maintenance of the vessel during arrest to be reimbursed as Sheriffs expense as first priority from the sale proceeds. Additionally, even in cases where the vessel is not sold but is released, the Court may order reimbursement of these expenses towards maintenance by the party seeking to release the vessel.

7. APPLICATION FOR SALE OF ARRESTED SHIP [see: Rule 1085]- The New Admiralty Rules stipulate that an IA for sale of the vessel can be made upon service of writ of summons or warrant of arrest or order of arrest upon the defendant. Earlier, such an application could only be preferred upon service of writ of summons on the defendant. Thus,the overall time for making such an interim application now stands reduced. This is in keeping with the Act [see: Section 11(3)] which specifies that the auction of a vessel which has been abandoned must be conducted within a period of forty-five (45) days (extendable by another thirty (30) days) from the date of the abandonment or order of arrest.

8. NOTICE INVITING CLAIMS AND DETERMINATION OF PRIORITY OF CLAIMS [see: Rule 1087 and 1088]- In another important and necessary addition, the New Admiralty Rules incorporate the order of priorities as set out in the Act [see:Sections 9 and 10]. As per the procedure set out, an IA for such determination of priorities may be filed by a party who has obtained a decree against the vessel or sale proceeds thereof, after the sale proceeds of the vessel are deposited in Court. The Rules also specify that all persons who have filed Caveats Against Payment Out of Sale Proceeds of the ship are to be joined as a party to the IA for such determination of priorities. Upon such application for determination of priorities being filed, the Court will also direct the Sheriff to publish a Notice Inviting Claims as per the procedure laid down in the Rules. Interestingly, the Rules now clarify that such Notice Inviting Claims may be made by any party having a claim against the vessel or the sale proceeds thereof without first having to obtain a decree for causing such notice to be published [see: Rule 1088]. This follows the legal position affirmed by the Court in Sparebanken v. MV Bos Angler, 2013 (3) SCC Mh.L.J. 898, whilst interpreting the previous rules in this regard [Former Rule 951]. The Notice will specify the time within which all other claims are to be lodged (by way of a Suit) in Court. The earlier regime has a fixed period of ninety (90) days (extendable by the Court) within which such claims were to be lodged, but the New Admiralty Rules leave this to the discretion of the Court. The Rules also clarify that the expenses towards sale of the vessel shall include expenses towards publication of the Notice Inviting Claims, and are to be paid at the first instance by the party making such application, to be reimbursed as per the Court’s orders. Importantly, the Rules also provide that upon determination of priorities, the party who has obtained a decree and is entitled to be paid in priority over all other claims against the sale proceeds, shall be at the liberty to file an IA for payment out of the sale proceeds.

Possible Issues: Whilst these Rules are indeed a step in the right direction, there are still a few issues which need clarification. In the first place, Rule 1087 (b) specifies that parties who have filed Caveats Against Payment Out of Sale Proceeds of the ship are to be joined as a party to the IA for determination of priorities, but is silent on other parties who may have filed their own independent suits against the vessel or sale proceeds thereof but not filed a Caveat Against Payment Out of Sale Proceeds (but who are also fundamentally interested in disbursement of such sale proceeds). Clarity is required on whether this Rule thereby implies that filing of such a caveat is mandatory to be made a party to the IA for determination of priorities. Another issue which may be faced is the question of the stage at which priorities are in fact to be determined by the Court. That is to say, whether priorities can be determined as soon as any claimant to the sale proceeds has obtained a decree or does this need to necessarily await all claimants obtaining their respective decrees, since this will mean that a claimant with a decree may have to wait for years whilst other claimants complete trial and obtain their individual decrees.

9. RELEASE OF ARRESTED SHIP - A vessel under arrest may only be released upon an order of release being passed by the Court (after appropriate notice is provided to caveators and the Sheriff) [see: Rule 1092]. The procedure now laid down provides that a vessel may be released upon (a) the request of the Plaintiff, and after notice to all caveators with valid Caveats Against Release, even before the defendant enters appearance; or (b) upon security being furnished in the form and manner required by the Court by the defendant or an intervenor who has interest in the arrested ship; or (c) upon an application being made, on any other ground that the court may deem fit and proper [see: Rule 1089]. The order of release will then be lodged with the Sheriff who shall take appropriate steps to have the vessel released [see: Rule 1093].

10. RULES REGARDING SECURITY TO BE FURNISHED- The New Admiralty Rules specify that security furnished should be by way of payment into court (i.e. cash security) or bank guarantee unless otherwise ordered by the Court [see: Rule 1102]. This follows the general understanding that Indian Courts do not as a matter of course accept other forms of security (such as Club LOU), unless parties agree and the court is satisfied that it is valid security. The Rules further allow a defendant to make an application for return and/or reduction of any amount deposited in court or for return and/or reduction of security provided for release of the arrested ship at any stage of the proceedings [see: Rule 1091].

Possible Issues: The Rules provide that security furnished by an intervenor shall also be available to the arresting party upon succeeding in the suit for claims against the ship/owners [see: Rule 1090}. This may lead to a situation where a third party is made liable for the claims unrelated to it merely because it has furnished security on a without prejudice basis. This Rule may have to be closely examined from the perspective of privity to understand the practical ramifications.

11. POUNDAGE [see: Rule 1100]- Previously, poundage to be paid to the Sheriff of Bombay was calculated at 1% of the claim amount or if the matter was settled then at 1% of the settlement sum (i.e. on the basis of recovery made by the Plaintiff). Given the quantum of claims in Admiralty Suits, this would often lead to parties having to bear excessive costs towards poundage. The New Admiralty Rules have done away with such pro-rata calculation and have capped the poundage payable at INR 500/- (approx. USD 7/-) for each service provided by the Sheriff (i.e. for service of summons or notice to a defendant or a witness; or for executing a warrant of arrest or order of arrest; or for serving any injunction, order or process not otherwise provided for).

12. CLAIM FOR SALVAGE OF CARGO [see: Rule 1103]- The New Admiralty Rules clarify that in case a suit is instituted for recovery of claims arising out of salvage services, the claimant may institute a suit in rem against the cargo (salved cargo) and these rules shall apply mutatis mutandis to such a suit as if the property to be arrested is cargo in place of the ship. While the Act only applies to vessels and arrests to be made in relation to vessels, there is no explicit bar in the Act against the arrest of cargo. That said, the Bombay High Court in the case of Pacific Gulf Shipping Pte. Ltd. V. S.R.K. Chemicals Ltd & Anr. Comm Admiralty Suit (L) No. 51/2017 had clarified that an arrest of cargo is not permissible de hors an underlying claim against the vessel. However, given the express qualification given in the language of the Rule, it appears that this Rule will only apply to cargo salved by salvors and seeks to provide reliefs to salvors for the services provided in case the vessel is lost, beached or declared a constructive total loss by the assessors and is a positive step towards securing salvor dues. In fact, the New Admiralty Rules also provide for assessors to be appointed to assist the Court in hearing any suit or cause relating to salvage, towage, or collision [see: Rule 1096]. This is in keeping with the Act [see: Section 13].

13. RULES FOR LIMITATION OF LIABILITY- The New Admiralty Rules specifically state that they are applicable also to actions instituted under the Merchant Shipping Act, 1958 [see: Rule 1104].Specifically the Rules incorporate and lay down procedure in respect of actions instituted for Limitation of Liability (as per Part XA of the Merchant Shipping Act, 1958) [see: Rule 1105]. This is a notable development since this is the first time that any Admiralty High Court in India has framed rules in respect of limitation of liability claims.

14. RETROSPECTIVE EFFECT?[see: Rule 1110]- Whilst the New Admiralty Rules provide for supersession of the earlier rules in this regard, it is unclear whether these Rules would also govern Admiralty Suits instituted under the Former Rules, there being no clear savings clause.

Whilst the New Admiralty Rules are indeed noteworthy and are most definitely a step in the right direction, having incorporated the changes brought about by the Act and streamlining the procedure for admiralty actions in one of the oldest and busiest Admiralty Courts in India, there are a few gray areas, which will require clarification. The Court will no doubt, be called upon to interpret quite a few interesting issues in the future.

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