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Judgment
K.R. Shriram, J—On 7.8.2010 a collision took place between m.v.MSC Chitra and m.v.Khalijia-III in the Port & harbour of Mumbai. In the collision, fuel tanks of m.v.MSC Chitra got ruptured and there was spillage of bunker fuel of unknown quantity. Some containers from m.v.MSC Chitra also fell over board. m.v.MSC Chitra thereafter was towed to outside the exclusive economic zone of India where she eventually sank.
It is not in dispute that there was some spillage from m.v.MSC Chitra. It is not in dispute that containers with dangerous cargo were on board on m.v.MSC Chitra and many such containers, due to the collision, fell over board and were floating or even sank for that matter. When the incident happened, a monsoon ban on fishing was in place. Between April-15th to August 15th every year there is a ban/restriction on fishing activities. Even though the incident happened, admittedly the ban on fishing was not extended. In fact, the fishing activities restarted on 16.8.2010 but the plaintiffs issued an Advisory advising the fishermen to be careful regarding floating containers and also to avoid fishing wherever there was spillage.
Various co-operative/association of fishermen who fished for a livelihood, in or around Mumbai, at the request of the State Government, in identical fashion have given statements of alleged monetary losses suffered by fishermen, who are their members. The fishermen were actually looking for compensation for economic loss. At the relevant time, the then Chief Minister of State of Maharashtra is reported to have made a statement to the Press wherein he was advising people to refrain from eating fish because the fish sold in the market might have got contaminated or polluted due to the spillage from m.v.MSC Chitra. The fishermen have stated that due to this, people stopped eating fish and they also had to take back the fish from the market.
The plaintiffs, soon after the incident, appointed a Committee of experts for assessment of loss to fish sellers or compensation to be paid to fishermen. This Committee vide a report dated 20.9.2010 has recommended a sum of Rs. 8.05 crores be paid as compensation to the fishermen and fish sellers who have suffered loss and livelihood due to the spill from m.v. MSC Chitra. On 17.8.2013 this suit came to be lodged. Defendant No. 1 was introduced by way of an amendment on 19.8.2013. The plaintiff is the State of Maharashtra through the Commissioner of Fisheries, Department of Fisheries, Government of Maharashtra, the defendant No. 1 is alleged to be the sister ship of m.v.MSC Chitra, defendant No. 2 is the bareboat/demise charter of defendant No. 1 and m.v. MSC Chitra, defendant No. 3 are the managers of defendant No. 1 and were also the managers of m.v.MSC Chitra. Defendant No. 4 is the registered owner of m.v.MSC Chitra and the defendant No. 5 is the registered co-owner of defendant No. 1. However, it is yet to be decided whether m.v.MSC Chitra was to be blamed for the collision or not.
This suit has been filed by the plaintiffs due to the damage caused to the environment and consequent loss caused to fishermen who were alleged to be affected by the spillage from m.v. MSC Chitra. The entire foundation of the case is in one sentence in paragraph No. 1 of the plaint where the plaintiffs have averred "The plaintiff have a parens patriae locus standi to initiate the instant proceedings on behalf of the affected fishermen".
The plaintiffs moved to arrest defendant No. 1 on the basis that defendant No. 4 and defendant No. 5 are only shell companies which owned m.v.MSC Chitra and defendant No. 1 and both these companies are under beneficial ownership of defendant No. 2 who was the bareboat charterer of defendant No. 1 and m.v.MSC chitra and hence, defendant No. 1 is the sister ship of m.v.MSC Chitra.
By an ex-parte order dated 19.8.2013 the 1st defendant vessel came to be arrested. Upon the defendant No. 2 depositing in this Court a sum of Rs. 8,13,00,000/-, without prejudice to the rights and contentions or the defences of the defendant No. 2 including jurisdiction and limitation, the 1st defendant-vessel by an order dated 20.8.2013 came to be released.
After furnishing security, the defendant No. 2 has taken out this present Notice of Motion for rejection of the plaint under Order 7 Rule 11(a) and/or (d) of the Code of Civil Procedure 1908 and after vacating/setting aside the order of arrest, return the security of Rs. 8.13 crores and in the alternative, the amount of security be reduced to such amount as this Hon''ble court may deem just and proper.
The case of the applicant stands on 4 limbs. (1) the plaintiff has no locus standi to maintain this action; (2) the plaintiff has not made out a prima-facie or a reasonably best arguable case; (3) defendant No. 1 is not the sister ship of m.v.MSC Chitra and (4) in any event, the claim of the plaintiff is barred by limitation.
No locus standi
The counsel for the applicants submitted that the Courts have recognized the concept of parens patriae only in very few situations. What is parens patriae is extensively dealt with by the Apex Court in Charan Lal Sahu Vs. Union of India, AIR 1990 SC 1480 : (1990) 1 CompLJ 125 : (1989) 4 JT 582 : (1991) 2 SCALE 841 : (1990) 1 SCC 613 : (1989) 2 SCR 597 Supp . The counsel submitted that parens patriae is the inherent power and authority of the State to provide protection to the person and property of persons who are under some disability and who are not in a position to assert and secure their rights such as minors or people suffering from insanity or other incompetent persons who have no rightful protector. It is submitted that the Government is only within its duty to protect and control persons under disability. Otherwise the Government will have to enact a Legislation like the Bhopal Gas Leak (Processing of Claims) Act 1985 (Bhopal Gas Act) where the Central Government took over the responsibility of fighting litigation on behalf of victims of Bhopal Gas. By enacting the said Act the Government sought to create a locus standi in the Central Government to file suits on behalf of victims and by creating this locus-standi the Central Government became competent to institute judicial proceedings for payment of compensation on behalf of the victims. He submitted that the object of the Statute was itself because of the dimensions of the tragedy covering thousands of people, who would not be able to go to the Courts. It was felt necessary to create the locus standi in the Central Government to start the litigation for payment of compensation in the courts on their behalf. He submitted that if the Government would have had in every case to step in as parens patriae then there was no need to enact the said Act. Therefore, an inference should be drawn that unless there is a Legislation to that effect, the plaintiffs have no locus standi. He also submitted that even when the Statute itself was enacted, the object was because of the sheer dimension of the tragedy and the large number of people affected, most of whom were very poor who are unable to go to the Court. Mr. Pratap submitted that, that is not the case.
In the alternative, Mr. Pratap submitted that even assuming a claim could be made for environmental damage or this court agrees with the plaintiff that the claim is for environmental damage due to oil pollution, still the plaintiff cannot maintain this action. Mr. Pratap relying upon part 11A of the Merchant Shipping Act, Section 356(1)(B), Section 356(B)(D) and 356 (H), submitted that the action can be maintained only by the Director General of Shipping or the Central Government and not the State Government.
No prima-facie or reasonably arguable best case
The counsel submitted that the entire case of the plaintiffs is speculative. He submitted that the plaintiffs have placed reliance on the report of a Committee which report has based its findings on various newspaper reports and representations received from certain fishing co-operatives. Based on these representations, the committee has arrived at a figure of Rs. 8.05 crores, the amount claimed in the suit. He also submitted that it is not the plaintiffs'' case that the fishermen have suffered any loss because there is no evidence to the effect that they have suffered any loss. It is not the plaintiffs'' case also that they are going to recover these monies and distribute the amounts to the fishermen.
It is necessary to note that the plaintiffs, though have stated that the suit was being filed representing the fishermen, the averments in paragraph-20 reads as under:--
"The plaintiff state that the Defendant(s) are jointly and/or severally strictly and/or absolutely liable to compensate the plaintiff for all costs, losses, damages incurred as a result of the pollution caused without any exceptions".
Mr. Pratap also submitted, in the alternative, that in any event, the monsoon ban on fishing was operative till 15th August and the Shravan month also began and therefore, in any case the fishermen would not have been able to catch fish or sell fish to the extent they wanted to and therefore, there was no loss in fishing activities or loss to the fishermen caused due to the spillage from m.v.MSC Chitra. He also submitted that no fishermen has been identified and nobody is paid off by the Government. He further submitted that the data relied upon by the plaintiffs to arrive at the figure as mentioned in the particulars of claim are not available. Just because there is a pleading of loss, does not entitle the plaintiffs to obtain security or even claim.
Time bar:--
"The suit was lodged on 17.8.2013, i.e., 3 years after the incident which happened on 7.8.2010. He also submitted that the plaint to include defendant No. 1 was amended on 19.8.2013 and therefore, the claims are time barred. He submitted, in the alternative and without prejudice, that at the most the plaintiffs may claim security only for 3 days which, at about Rs. 54 lakhs per day that the plaintiffs are claiming, would amount to Rs. 1.62 crores."
On the defendants'' stand that under Article 110 of the Limitation Act the State Government has 30 years to sue, Mr. Pratap submitted that the same cannot be for a suit as contemplated in the present case. 30 years limitation will be applicable where the State interest requires to be protected. In this case, the State is not making any claim on its own behalf but is making claim on behalf of the fishermen based on a report submitted by an Expert Committee. He further submitted that the test on this is if the fishermen had sued, how many years they would have had to sue and when State is suing in a representative capacity they cannot be in a better position than the party on whose behalf the State is suing.
On the issue of sister ship:--
"Mr. Pratap submitted that the plaintiffs'' case is defendant No. 2 is the bareboat charterer of defendant No. 1 and m.v.MSC chitra, defendant No. 4 is the registered owner of m.v.MSC chitra and defendant No. 5 is the owner of defendant No. 1 and therefore, defendant No. 2 is the beneficial owner of defendant No. 1 and defendant No. 2. Hence, defendant No. 1 can be arrested for the plaintiffs'' claim. He further submitted that entire basis of the plaintiffs'' claim to show beneficial ownership is defendant Nos. 4 & 5 have common lawyers, common address, common managers for the two vessels and in the registration certificate of defendant No. 1 the address is shown as "c/o defendant No. 2". He relied on the two judgments of our Court in the matter of In Re: M.T. Hartati, (2014) 3 ABR 311 : (2014) 3 ALLMR 857 : (2014) 2 BomCR 854 and NOTICE OF MOTION No. 1597 OF 2013 IN ADMIRALTY SUIT No. 22 OF 2012 DECIDED ON 21.2.2014 Kimiya Shipping INC v. m.v.Western Light & Ors. to submit that this cannot be a reason for piercing corporate veil. He submitted that assuming for the sake of argument, both, defendant Nos. 4 & 5 are owned by defendant No. 2, still m.v. MSC Chitra and defendant No. 1 at the most could be called ships owned by sister companies and cannot be called sister ships. He also relied on the said judgments to state that there is nothing wrong in having one ship companies because that is the accepted norm. To buttress this point, he submitted that the plaintiffs have relied upon the annual report of another ship owner group where it is stated that the group owns thousand companies and most of them are one ship owning companies. He also submitted that in the Hartati (supra) & Western Star Light (supra) this court has held that there is nothing wrong in having ships in different names and to pierce corporate veil fraud has to be alleged and there has to be case of underlying dishonesty. He submitted that there is not even an averment to that effect in the plaint. He submitted that there is no basis for the averments in paragraph 31(e) where it is stated:--
"Defendant No. 4 and Defendant No. 5 companies have been deliberately registered in Panama by the Defendant No. 2 i.e., MSC Meditarian Shipping Company S.A. as the Panamanian corporate registry facilitates a party seeking to conceal his true interest in Defendant No. 4 and Defendant No. 5 companies as it assist in the transfer of shares."
On the issue of corporate veil, Mr. Pratap submitted that there is no distinction noted in Indian Law on the requirement to pierce corporate veil in a contract claim or in a tortuous claim. Mr. Pratap submitted that all judgments only referred to fraud or element of dishonesty. He also submitted that there is nothing wrong in setting up one ship owning companies to insulate the other companies and it was an accepted norm peculiar to shipping industry, as could be seen from the judgments in the matter of (1988) (2) LLR 411 Evpo Agnic and 2014 (SGHC 181) Manudhar Steel v. Star Pacific , of the Singapore court, where it says that one ship company have legitimacy. So also in 1988 (2 LLR 459) Mawan where it says that when the arrest convention was agreed upon by all the countries and signatories thereto, all new one ship companies were in existence and still the provisions were made as they are now.
Mr. Pratap also submitted that the averments in the plaint in paragraph 31(a) that defendant No. 2 deploys corporate personalities of defendant No. 4 & defendant No. 5 to perpetrate a fraud which they have perpetrated are baseless. He submitted that the companies owning defendant No. 4 & defendant No. 5 were registered way back much before the incident involving m.v.MSC chitra and therefore, these are nothing but baseless allegations in the plaint.
Per contra, Mr. Khambata submitted that the admitted position was there was collision and toxic substances have found its way into the sea from m.v. MSC Chitra. On the issue of locus, Mr. Khambata submitted that in the Charan Lal Sahu case (supra) the court has observed that it is a State''s duty to protect all the citizens. He also relied upon the judgment of the Apex court in the matter of Writ Petition (Criminal) No. 115 of 2009 decided on 7th March 2011 Aruna Ramchandra Shanbaug v. Union of India & ors. and Guruvayur Devaswom Managing Commit. and Another Vs. C.K. Rajan and Others, (2003) 7 JT 312 : (2003) 6 SCALE 401 : (2003) 7 SCC 546 : (2003) 2 SCR 619 Supp . Mr. Khambata submitted that the State can play the role of parens patriae without any legislation. According to him the Bhopal Gas Leak (Processing of Claims) Act 1985 (Bhopal Gas Leak Act) was enacted only to enable the Central Government to take over the responsibility of fighting the litigation on behalf of all victims in India and/or abroad and to defend any action or settle or compromise. He submitted that the act was enacted because the Central Government wanted to have the exclusive rights to represent and act in place of (within or outside India) every person who has made or is entitled to make a claim for all purposes connected with such claims in the same manner and to the same effect as such person. He submitted that this means that the Central Government substituted and vested with itself the exclusive right to act in place of the victims, i.e., eliminating victims, their heirs and their legal representatives, in respect of all such claims arising out of or connected with the Bhopal Gas Leak disaster. He submitted that but for this, the Government need not have enacted Bhopal Gas Leak Act. He submitted that this does not mean that the Government cannot file an action as parens patriae without a legislation to back them.
Mr. Khambata pitched his arguments by submitting that the role played by the petitioners in Public Interest Litigation should be imported into the role of the plaintiffs. He submitted that it is a protective measure to which the State is committed and the State has to ensure the fundamental rights in conjunction with directive principles of State policy to effectively discharge its obligation. Relying on the Charan Lal Sahu case (supra), he submitted that the preamble to the Constitution read with the directive principles in Articles-38, 39, 39-A and 48A enjoins the State to take up its responsibilities. He submitted that under Article-48A the State has a duty to protect the environment and under Article 39-A the State has to provide free legal aid by suitable legislation or scheme or in any other way. He further submitted that Bhopal Gas Leak Act was enacted not just to provide legal services which the Government could have in any event given, but the act was enacted because of the provisions like Section 3(1) which gives power to Central Government to represent all claimants in India or outside India including entering into compromise. The Central Government had to appoint a Commissioner and other officers and employees to assist him, the Central Government needed powers to delegate all or any of its power under the Act to which Government of Madhya Pradesh or an officer of the Central Government had and to exclude certain periods from the period of limitation from enforcement on institution of a suit or other proceedings etc. He also relied on the following 8 judgments:
"1) Suresh Ragho Desai and Another Vs. Vijaya Vinayak Ghag and Another, AIR 1988 SC 2026 : (1989) 1 ARBLR 33 : (1988) 3 JT 622 : (1988) 2 SCALE 549 : (1988) 4 SCC 591 : (1988) 2 SCR 641 Supp : (1988) 2 UJ 622
2) New Horizons Limited and Another Vs. Union of India (UOI) and Others, (1997) 89 CompCas 849 : (1995) 1 SCC 478 : (1994) 5 SCR 310 Supp
3) Kapila Hingorani Vs. State of Bihar, (2003) 116 CompCas 133 : (2003) 5 JT 1 : (2003) 3 LLJ 31 : (2003) 4 SCALE 712 : (2003) 6 SCC 1 : (2004) SCC(L&S) 586 : (2003) 44 SCL 429 : (2003) 1 SCR 175 Supp
4) Union Carbide Corporation Vs. Union of India, (1988) MPJR 233 : (1988) MPLJ 540
5) Tata Engineering and Locomotive Co. Ltd. Vs. State of Bihar and Others, AIR 1965 SC 40 : (1964) 34 CompCas 458 : (1964) 6 SCR 885
6) USA v. Jon T. Chemicals (768 F2d 686)
7) John B. Gentry v. Credit Plan Corporation of Houston (528 S.W. 2d 571)
8) Cascade Energy and Hellab Corporation v. Banks (843 F2d 145)"
to submit that the case the plaintiffs are pursuing is for the loss caused to the State and he is only using the fishermen co-operative data to quantify the loss for environmental damage caused to the plaintiffs coast. The plaintiffs are entitled to apply the doctrine of parens patriae and the principle of trusteeship, in the light of obligation of State as guardian and parents of its citizen, can have an application in the present case. He also submitted that in every case where there is an environment disaster, every Government has a role to play as a sovereign because the Government is a trustee of the environment for the benefit of the residents in the area and for the citizens of the community at large. He submitted that the ownership of such public rights like the coastal water which got polluted due to leakage of oil/fuel/toxic substances from m.v. MSC Chitra vested in the State. He submitted that the notion of the State as holder of public rights in the environment and certain common resources gave the State to sue for their protection as parens patriae. He submitted that the State has a common law parens patriae jurisdiction to represent the collective interest of the public and in various countries including USA, Canada & England this jurisdiction has historically been successfully exercised in relation to the environment claims. He submitted that the State is a proper party to sue for recovery of damages to the environment.
Mr. Khambata''s entire case was that the present suit, though it says it is representing the fishermen etc., actually is a suit in respect of environmental damages which had a consequent damage on fishermen and the cause of action of the plaintiffs is independent of the rights of fishermen and hence the parens patriae concept is applicable. He submitted that in a full reading of the plaint, the cause of action is quasi sovereign function for damage to State of Maharashtra and to the fishermen. He also clarified that it is not a case that the State is recovering for individual claim of fishermen. His case was based on the ground that here is a foreign ship from which oil, fuel and toxic chemicals had escaped into the water for whatever reason and has caused ecological/environmental disaster. The owner or demise charter of such a ship has to compensate for the loss caused to the environment. Anybody can see that loss has been caused due to contamination of sea water. He also relied on the Expert Committee Report to show that mangroves have got affected, beaches have got affected and livelihood of fishermen has also got affected. He submitted that calculation given by the fishermen for their loss was only used as a basis to indicate the quantum of damages and the same is only a guesstimate. He therefore, submitted that the plaintiff has locus to sue.
On reasonably arguable best case, Mr. Khambata submitted that the report of the Expert Committee is very elaborate and extensive. The committee which prepared the report consisted of 7/8 experts who were all authorities in their respective field. He relied on Government Notifications which are part of the report to show that there was a meeting which was held on 7.7.2010 in which it was resolved that non mechanical boats should be permitted to fish. He stated that those fishermen could not fish due to the ban and that there were notifications which show that the fishermen were prohibited to fish in some areas due to the pollution caused by the leakage from m.v.MSC Chitra. The report also contains a study in arriving at the claim in the suit. He submitted that as the plaintiff, he has to only show a prima-facie or reasonably arguable best case and the report certainly indicates the extensive study conducted for the environmental damage caused by m.v.MSC Chitra and how the amount has been worked out. On this topic, he concluded that this should be taken as the plaintiffs have established a prima-facie or reasonably arguable best case.
On the issue of sistership/piercing of corporate veil:--
"Mr. Khambata submitted that the documents indicate that defendant Nos. 4 & 5 are part of the same group and the beneficial ownership of defendant Nos. 4 & 5 is of defendant No. 2. He also submitted that (a) even if defendant No. 1 is taken to be not a sister ship of m.v.MSC Chitra because he conceded that under Article 3(2) of the 1999 Convention of Arrest of Ships provides only a vessel owned by demise charterer can be arrested, still defendant Nos. 4 & 5 being of the same group, defendant No. 1 and MSC Chitra should be termed as sister ships and the yardstick to pierce corporate veil in a situation arising out of the contract and in tortuous claim are different."
On the issue of sister ship and piercing of corporate veil, Mr. Khambata submitted that in a given case we can look beyond the veil. Mr. Khambata also submitted that the yardstick that would be applied for piercing of corporate veil in a contract dispute cannot be applied in a tortuous claim because in a contractual situation the plaintiff would have entered into a contract with the defendant with his eyes open whereas in a tortuous situation the plaintiff has no choice.
Relying on the judgment of the Apex Court in the matter of State of U.P. and Others Vs. Renusagar Power Co. and Others, AIR 1988 SC 1737 : (1991) 70 CompCas 127 : (1988) 3 CompLJ 1 : (1988) 3 JT 141 : (1988) 2 SCALE 238 : (1988) 4 SCC 59 : (1988) 1 SCR 627 Supp : (1988) 2 UJ 572 submitted that the horizon of doctrine of lifting of corporate veil is expanding and the frontiers are unlimited and based on the realities of the situation the court should pierce the corporate veil. To this extent, he also relied upon another judgment of the Apex Court in the matter of New Horizons Limited and Another Vs. Union of India (UOI) and Others, (1997) 89 CompCas 849 : (1995) 1 SCC 478 : (1994) 5 SCR 310 Supp . and submitted that the court should look at the business realities of the situation and not confine to a narrow legalistic view and this course has to be adopted when it is found that the principle of corporate personality is opposed to justice convenience or the interest of the revenue. He also relied on these two judgments to submit that fraud is not a necessity or element of dishonesty is not necessary in every case to pierce corporate veil. He also submitted that in this New Horizon''s case (supra) at paragraph-33, it is stated that "....... in certain exceptional cases the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade". He also relied upon the judgment of the Apex Court in the matter of Kapila Hingorani Vs. State of Bihar, (2003) 116 CompCas 133 : (2003) 5 JT 1 : (2003) 3 LLJ 31 : (2003) 4 SCALE 712 : (2003) 6 SCC 1 : (2004) SCC(L&S) 586 : (2003) 44 SCL 429 : (2003) 1 SCR 175 Supp to submit that the corporate veil can be pierced when the corporate personality is found to be opposed to justice convenience and interest of the revenue or workmen or against public interest. He submitted that the escape of fuel/oil & toxic substance from m.v.MSC Chitra has caused environmental damage and that is what the State of Maharashtra is asking to be compensated for and defendant No. 2 only brings in chartered vessel into India and does not own any ship and it will therefore, be in public interest to pierce the corporate veil.
He further relied on the judgment of a single Judge of the Madhya Pradesh High Court at Jabalpur in the matter of Manu-MP-0300-1988 Union Carbide Corporation v. Union of India to submit that when there are exceptional cases which are causing disaster to environment or in other words when a company is guilty of causing environmental or ecological disaster, the veil of the corporation can be lifted. He submitted that fraud is not always necessary to pierce corporate veil because in paragraph-2.03 of this judgment the court has quoted the Supreme Court in LIC v. Escort matter to say that corporate veil could be lifted where there is fraud in forming the entities or where improper conduct is intended to be prevented or a taxing statute is ought to be evaded or where associate companies are so inextricably connected as to be in reality part of one concern and that will necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of element to public interest etc.
He also relied on the judgment of the Apex Court in Tata Engineering and Locomotive Co. Ltd. Vs. State of Bihar and Others, AIR 1965 SC 40 : (1964) 34 CompCas 458 : (1964) 6 SCR 885 to suggest that fraud necessarily is not required to pierce corporate veil. He also relied on 3 judgments of American Courts viz. (1) (768 F2d 686) United States of America v. Jon-T Chemicals Inc., (2) (528 S.W. 2d 571 ) John B. Gentry Sr., et ux., v. Credit Plan Corporation of Houston et al., and (3) ( 843 F2d 145) Cascade Energy & Metals Corp. v. Banks to suggest that the fraud is an essential element only where there is an alter-ego finding or in contractual matters. In tortuous claims where there is injustice being caused corporate veil could be lifted without need to bring in the element of fraud. He relied on the following passage from Cascade Energy (supra):
"Hamilton, The Corporate Entit, 49 Tex. L. Rev. 979, 984-85 (1971). The obvious difference between consensual and nonconsensual transactions is that the claimants in consensual transactions generally have chosen the parties with whom they have dealt and have some ability, through personal guarantees, security agreements, or similar mechanisms, to protect themselves from loss. For example, the fact that a company is undercapitalized can be overcome in many contractual settings, because the parties can allocate the risk of financial failure as they see fit. But in non-consensual cases, there is "no element of voluntary dealing, and the question is whether it is reasonable for businessmen to transfer a risk of loss or injury to members of the general public through the device of conducting business in the name of a corporation that may be marginally financed".
He submitted that the judgment of this court in the matter of M.V. Hartati (supra) and Western Light (supra) do not really apply to the facts of the case because those are contractual claims and not tortuous claims.
On the 3 US courts judgments relied upon by the counsel for the plaintiff viz. USA v. Jon T Chemicals (supra), Gentry v. Credit Plan (supra) and Cascade Energy v. Banks (supra), Mr. Pratap, learned counsel for the defendant No. 2 submitted that the court agreed to pierce corporate veil by saying that fraud was not necessary because the Texas Law provided for it. He relied upon the judgment in the matter of 730 F2d 977 Edward Co. v. Monogram to buttress this point.
In short, what Mr. Pratap was submitting that unless there is fraud or an element of dishonesty, whether the claim arises in contract or tort, the court should not pierce the corporate veil.
In the alternative, Mr. Khambata submitted that defendant No. 2 was the demise charter of MSC Chitra and also the demise charter of defendant No. 1 and therefore, defendant No. 2 being liable and having brought in the money for security for release of defendant No. 1-vessel and having submitted to the jurisdiction of this court, the suit which commenced as an action in rem is now an action in personam and balance of convenience is also in favour of the plaintiff for the security to be continued. Relying on the passage from Halsbury''s Laws of England and International Convention for Civil Liabilities, the counsel for the plaintiffs submitted that it is the demise charter, defendant No. 2, who is liable. Relying on the judgment of this court in the matter of Notice of Motion No. 255 of 2011 in Admiralty Suit No. 20 of 2006 decided on 9..6.2014 m.v.Kew Bridge Mr. Khambata submitted that in this case there has been escape of toxic gas and fuel and therefore, defendant No. 2 is strictly and absolutely liable to compensate all those including the plaintiffs who are affected by the accident and such liability is not subject to any of the exception which operate vis-�-vis the tortuous principle of strict liability under the rule in Rylands v. Fletcher. He concluded by saying that there has been a escape of toxic substances, the environment of the plaintiff is harmed and it has escaped from within the ship m.v.MSC Chitra and therefore, all requirements to impose strict liability is available.
Mr. Khambata submitted that in paragraph-39 of the plaint it is stated that the incident happened on 7.8.2010 and continued until 17.4.2010. The suit was lodged on 17.8.2013 and hence within time. In the alternative, he also submitted that under Article-110 of the Limitation Act, the time provided is 30 years and as the suit is being filed to claim damages for loss caused to the environment the suit will certainly be within limitation.
The plaintiffs have relied upon a large number of judgments to support the parens patriae standing of the plaintiffs, in response to the stand of the counsel for defendant No. 2, that the doctrine of parens patriae can only be invoked through Legislation for the protection of persons suffering from disability. The counsel for the plaintiffs submitted that on a consideration of the case law in India and abroad, on the doctrine of parens patriae the State can invoke parens patriae doctrine to protect its quasi sovereign rights, to protect the rights of its citizens and on their behalf, there is no requirement that there be any special Legislation authorizing such action and there is no requirement that the citizens for whose benefits the State has invoked the doctrine be suffering from any disability. Relying on the various judgments as mentioned earlier, the counsel for the plaintiffs submitted that the State has a quasi sovereign interest in the environment that independent of and behind the title of the fishermen of the State and the State can invoke the parens patriae doctrine to protect its quasi sovereign rights and the rights of its citizens. The counsel also submitted that the State has quasi sovereign interest in the health and well being, both physical and economic of its citizens, and that by itself is also a quasi sovereign parens patriae interest. The counsel also submitted that the State can invoke doctrine of parens patriae to protect the rights of its citizens for class of citizens even if such citizens do not suffer from any physical or mental disability and the parens patriae doctrine can be applied by the State in the event of pollution caused by ships and to recover damages from the defendants. According to the counsel for the plaintiffs, the State is a trustee of Marine Aqua Cultural and environment within the territorial boundaries of State of Maharashtra and has a duty and obligation to protect environmental recovery and hence to recover damages to environment.
The defendant No. 2 relied upon the judgment of The State of California v. Frito-Lay, Inc., et al., 474 F.2d 774 That case dealt with the State of California initiating proceedings to safeguard commercial/business of the citizens on account of the defendant violating anti-trust law of the United States. Therefore, the State did not have a quasi sovereign interest. The defendant No. 2 also relied upon the judgment of Commonwealth of Pennsylvania v. State of New Jersey and State of marine et al. v. State of New Hampshire 426 U.S. 660 (1976) These judgments also indicate that State can invoke a parens patriae doctrine to protect its quasi sovereign interest.
We are at the interim stage. Before we proceed further it is necessary to reproduce the settled position that the relief that is claimed on the basis of order 7 Rule 11(d) of the Code of Civil Procedure 1908 is to be granted by taking into account the averments in the plaint and presuming that they are correct. It is also immaterial as to whether the points of defence or written statement is filed because the provisions enables this court to exercise its jurisdiction at any stage of the proceedings.
In the judgment of the Apex Court in the matter of Liverpool and London S.P. and I Asson. Ltd. Vs. M.V. Sea Success I and Another, (2003) 9 JT 218 : (2003) 10 SCALE 1 : (2004) 9 SCC 512 : (2003) 5 SCR 851 Supp . relied upon by the plaintiffs, it is held that in an application under Order-7, Rule-11, whether the plaint discloses any cause of action or limitation must be found from reading the plaint itself and for the said purpose, the averment made in the plaint in their entirety must be taken to be correct. Paragraph-139 of the said judgment which reads as under:--
"139. 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 their entirety, a decree would be passed."
We have to consider the averments in the plaint.
Limitation is a mixed question of law and fact. To examine whether plaint is barred by any law under Order 7 Rule 11(d) only averments in plaint has to be seen and assumed to be true. On plain reading of the plaint averments, there is nothing which would indicate that either the suit is barred by the law of limitation or any other law. Disputed question cannot be decided at the time of considering an application under Order 7 Rule 11 and the pleading as a whole has to be taken; and not cull out a sentence and read it in isolation. Even assuming, if ultimately it is held that some part of the plaint may not be granted as either being barred by law or the plaintiffs being unable to substantiate and prove their allegations, at this stage the whole suit cannot be dismissed.
Paragraphs 15 & 16 of the judgment of the Apex court in the matter of Kamala and Others Vs. K.T. Eshwara Sa and Others, AIR 2008 SC 3174 : (2009) 1 CLR 743 : (2008) 7 SCALE 436 : (2008) 12 SCC 661 : (2009) AIRSCW 373 : (2008) AIRSCW 5364 : (2008) 4 Supreme 204 : (2008) 7 Supreme 125 . read as under:
"15. Order VII, Rule 11(d) of the Code has limited application. It must be shown that the suit is barred under any law. Such a conclusion must be drawn from the averments made in the plaint. Different clauses in Order VII, Rule 11, in our opinion, should not be mixed up. Whereas in a given case, an application for rejection of the plaint may be filed on more than one ground specified in various subclauses thereof, a clear finding to that effect must be arrived at. What would be relevant for invoking clause (d) of Order VII, Rule 11 of the Code is the averments made in the plaint. For that purpose, there cannot be any addition or subtraction. Absence of jurisdiction on the part of a court can be invoked at different stages and under different provisions of the Code. Order VII, Rule 11 of the Code is one, Order XIV, Rule 2 is another.
For the purpose of invoking Order VII, Rule 11(d) of the Code, no amount of evidence can be looked into. The issues on merit of the matter which may arise between the parties would not be within the realm of the court at that stage. All issues shall not be the subject matter of an order under the said provision.
The principles of res judicata, when attracted, would bar another suit in view of Section 12 of the Code. The question involving a mixed question of law and fact which may require not only examination of the plaint but also other evidence and the order passed in the earlier suit may be taken up either as a preliminary issue or at the final hearing, but, the said question cannot be determined at that stage.
It is one thing to say that the averments made in the plaint on their face discloses no cause of action, but it is another thing to say that although the same discloses a cause of action, the same is barred by a law.
The decisions rendered by this Court as also by various High Courts are not uniform in this behalf. But, then the broad principle which can be culled out therefrom is that the court at that stage would not consider any evidence or enter into a disputed question of fact of law. In the event, the jurisdiction of the court is found to be barred by any law, meaning thereby, the subject matter thereof, the application for registration of plaint should be entertained".
The plaintiffs have filed the suit averring that they have filed in the parens patriae capacity on behalf of fishermen. Moreover, when read as a whole, the cause of action in the plaint gives a prima-facie indication that the claim is due to environmental damages caused to the State and consequently affecting the fishermen. The indisputable fact was m.v.MSC Chitra collided with m.v.Khalija in Mumbai Port and there was pollution from m.v.MSC chitra. The indisputable fact was that owning to winds and tides, the spilt oil entered several adjoining harbours and also spread along in the way between Mumbai port and Jawaharlal Nehru Port where several containers fallen over board were floating. In the plaint it is averred that canisters that were washed ashore had labels indicating that they contained aluminum phosphate and fumigating chemicals. In the plaint it is alleged that pollution was caused only by the negligence of the owners and/or demise charterers, crew or their servants or agents on board m.v. MSC Chitra and as polluters, in the present suit, the defendants are jointly and/or severally liable to pay to the plaintiffs for all losses, damages sustained under the Polluters Pay Principles. Everywhere the allegation is that as a result of the pollution, losses and damages have been incurred. Article 1(d) of the 1999 Arrest Convention provides that the claimant has a maritime claim for "damage or threat of damage caused by the ship to the environment, coast line or related interest; measures taken to prevent, minimize or remove such damages; compensation for such damage; cost of reasonable measures of reinstatement of the environment actually undertaken or to be undertaken; loss incurred or likely to be incurred by 3rd party in connection with damage; damage caused or loss of a similar nature."
It is trite that pleadings must be read in their entirety. On a holistic reading of the plaint, the plaintiffs'' claim under the doctrine of parens patriae and to recover damages is something that requires to be considered at the trial.
Under the Limitation Act 1963, the State Government is permitted to initiate legal proceedings within 30 years. The plaintiffs have also averred that the defendants are guilty of a continuing tort by failing to curtail pollution emanating from the vessel m.v.MSC Chitra. In paragraph-39 of the plaint, the plaintiffs have averred that the cause of action arose on 7.8.2010 when the vessel m.v.MSC Chitra grounded and caused pollution through 17.8.2010 when m.v.MSC Chitra was scuttled. The suit was instituted on 13.8.2003. The issue of limitation, it is settled, is a mixed question of law and fact. Therefore, this can be decided only at the time of trial and the plaintiffs cannot be shut out.
It is also well settled that the court, while deciding an application under Order-7 Rule-11, will proceed on the basis that the averments in the plaint are true. Therefore, this issue also can be decided only in a trial.
The test that needs to be made by the plaintiffs to be entitled to an order of arrest of a vessel is whether the plaintiffs have a reasonably arguable best case, as held by the Apex court in the matter of Videsh Sanchar Nigam Ltd. Vs. M.V. Kapitan Kud and others, AIR 1996 SC 516 : AIR 1995 SC 516 : (1995) 8 JT 166 : (1995) 6 SCALE 339 : (1996) 7 SCC 127 : (1995) 5 SCR 76 Supp The Division Bench of this court in the matter of Kimberly Clarke Lever Ltd. v. m.v.Eagle Excellance Appeal No. 240/2007 in Notice of Motion No. 2346/2006 in Admiralty Suit No. 12/2006 (unreported) delivered on 14.8.2008, equated the test of reasonably arguable best case in an admiralty action with prima-facie case. The plaintiffs have made out, in this case, a prima-facie case for arrest and security. This is particularly because the defendant No. 2 in its various statements have admitted that many containers broke lose from the deck of m.v.MSC chitra, some of the fuel tanks were ruptured from the m.v. MSC chitra, toxic gases have been emanating from the dangerous cargo and have been found washed up on the shore etc. Even in the report of the committee of experts on assessment of loss and compensation to the fishermen submitted to the Government of Maharashtra on 27.9.2010 relied upon by the plaintiffs, the pollution caused by the leakage of m.v.MSC Chitra bunker oil is, it is recorded, to be around 800 tones. Therefore, not only has there been pollution caused by the oil spill but also due to escape of dangerous cargo.
Admittedly, the defendant No. 2 is the demise charter/bareboat charterer of m.v.MSC Chitra as well as defendant No. 1 which was the arrested vessel. A charter party by demise/bareboat is essentially a charter party without the master or crew where the hull is a subject matter of the charter party. The charterer becomes for the time being or is deemed to be the owner of the ship and the master and crew are also his employees. The owner divest himself of all the control over the ship, the master and the crew. The owner only has the right to recover the hire specified in the charter party and take back the vessel when the charter party comes to an end. During the period of charter party, the owner is under no liability to 3rd parties and those persons must look only to the charterer who has stepped into the shoes of the owner. The defendant No. 2, being the demise/bareboat charter of m.v.MSC Chitra is only liable for the loss or damages caused due to the pollution. In fairness to defendant No. 2 it has to be mentioned that it is not yet established whether the collision was due to any act or negligence attributable to the demise charter viz. defendant No. 2 or master or the crew in the navigation and management of the vessel.
The counsel for the defendant No. 2 strongly opposed the arrest on the ground that there is nothing on record to show that the defendant No. 2 was the beneficial owner of defendant Nos. 4 & 5 that owned m.v.MSC Chitra and m.v.MSC Clemantia, i.e., defendant No. 1, respectively. The counsel also submitted that the corporate veil cannot be pierced.
In paragraph-31 it is averred that in the facts and circumstances of the present case, the corporate veil of defendant No. 2 is required to be lifted as the corporate of the MSC group is opposed to justice, convenience and against public interest of India not limited to the welfare of fishermen of State of Maharashtra. It is also alleged that defendant Nos. 4 & 5 are on paper shown to be registered owners of vessel in the MSC fleet whereas in reality, they are only nominal owner of the vessel MSC fleet. It is also averred that the real perpetrators of MSC fleet was defendant No. 2 who are trying to shield themselves behind the separate paper, shell or brass plate or one ship companies.
Of course there is nothing wrong in having one ship company or one dollar company as submitted by counsel for defendant No. 2. The fact that needs to be noted is that defendant Nos. 4 & 5 have common address, common agents, common shareholders, common telephone numbers and common directors. The address of defendant No. 1 in the registration certificate is c/o defendant No. 2. Defendant No. 3 is also the Manager of defendant No. 1 and m.v. MSC Chitra. It is alleged by the plaintiffs that Lloyd''s List Directories'' Search indicates that the defendant No. 1-vessel was part of the fleet of defendant No. 2 and the head office of defendant No. 5 is that of defendant No. 2. It is also alleged that the letter-head of defendant No. 4 states that defendant No. 3, i.e., MSC Ship Management (Hong Kong) Limited is an affiliate company of defendant No. 2. It is also alleged that defendant No. 2 and defendant No. 3 have been registered as joint interest with P&I club along with registered owner of m.v. MSC Chitra, i.e., defendant No. 4 and the registered owners of other vessels in the MSC fleet. It is also alleged that defendant No. 1-vessel is entered with UK P&I club and defendant No. 2 has been described as a member. Therefore, it is required to be established that the defendant No. 2 is the beneficial owner of defendant No. 4 and defendant No. 5 consequently defendant No. 1 and m.v. MSC Chitra are sister ships. That can be done only in the trial.
The defendant No. 2, as the demise charter of m.v.MSC Chitra, is liable for the damage caused by m.v.MSC Chitra. Therefore, if the collision was due to reasons attributable to m.v.MSC Chitra, defendant No. 2 in reality will be the party liable in personam. The defendant No. 2 has also provided security for the plaintiffs'' claim. The plaintiffs filed an additional affidavit dated 10.12.2014 in which it is alleged that the defendant No. 2 is not the registered owner of any of the vessels calling in India and are bare boat charterers of number of vessels and defendant No. 2 has no assets in India. To a query posed by the court, the counsel for the defendant No. 2 in fairness agreed to the fact that no vessel owned by defendant No. 2 calls in India and all vessels that defendant No. 2 brings into India are demise chartered. He was however, not able to answer whether defendant No. 2 owns any vessel at all. Therefore, the defendant No. 2 having furnished security in the matter, if the security is returned as prayed by defendant No. 2, there will be no asset whatsoever of defendant No. 2, should the plaintiffs succeed at the time of trial. Hence, the balance of convenience is also in favour of the plaintiffs for continuation of security by defendant No. 2.
Therefore, the plaintiffs having made out a prima-facie case that defendant No. 2 is liable for the pollution that emanated from m.v.MSC chitra, the present suit proceedings would be rendered infructuous if any decree is passed by this court against defendant No. 2. This is because the defendant No. 2 does not own any asset within India and admittedly none of the vessel that are brought in India by defendant No. 2 are owned by them.
In the circumstances, the prayers sought in the Notice of Motion cannot be granted at this stage. Notice of Motion therefore, is dismissed.
It is also stated by the plaintiffs that the corporate registry of Switzerland where defendant No. 2 is registered and Panama where defendant Nos. 4 & 5 are registered do not disclose any information and the plaintiffs therefore, are unable to obtain information relating to the existence or location of assets of defendant No. 2, defendant No. 4 and defendant No. 5 and other details. The defendant Nos. 2, 4 and 5 are, therefore, directed to disclose on oath their annual reports, share holding pattern and their assets and interest should they have in any other companies within three months from today.