MUMBAI:In a landmark judgment, that will smoothen waters for crews of abandoned ships, Bombay high court held that Admiralty Law, a special law, which prevails over Companies Act and no prior permission is required under the company law to commence proceedings including sale of ship under the Admiralty jurisdiction.The HC held that priority of claims would also abide by Admiralty law over Company law.
Under Admiralty law, "maritime liens" have first priority in claims and within these maritime lien holders, the crew have been given highest priority in respect of their wages.The court essentially settled a vexed legal issue of primacy of laws between Admiralty law and Company law. The ruling was in a bunch of nearly 50 matters involving objections to proceeding with suits against ships without permission first under the Companies Act when ship owning companies were facing insolvency issues.
Justice KR Shriram held that no nod is required under the Companies Act to commence proceedings against the ship under Admiralty law in maritime claims or to proceed with a pending suit against the Company owning the ship when a winding up order has been made or liquidator appointed.
"The court which is winding up the company would not have the jurisdiction to entertain an action in rem (against the ship) filed in high courts conferred with Admiralty Jurisdiction," the HC held.
Essentially, a moratorium will not affect admiralty proceedings under a special provision of arrest and auction of a ship to settle maritime claims including claims of the crew. Pointing to a "stark example as to how banks which are secured creditors function once it is clear to them that corporate debtor is insolvent and leave crew on board to fend for themselves" in the judgment, Justice Shriram mentioned a case where in insolvency proceedings a committee of creditors opposed sale of a vessel, even when it was recorded that crew members were left stranded on ship without adequate food, drinking water, fuel for survival after arrest of the ship.Eventually months later the ship was sold at a scrap value by the admiralty court.
"The crew members are also considered to be workmen in a broader sense and their claims indeed get topmost priority and rank the highest in the order of priorities under Section 10 of the Admiralty Act which provides for a special right given to this category of workmen and special machinery for recovery of their wages," said the high court.
Only certain high courts can exercise the Admiralty jurisdiction and decree against a ship, doesnt bind the owner, unless he has submitted to jurisdiction, the HC ruled.
Under Admiralty Act provision for 'action in rem' is action against property, in this case, the ship within the territorial waters of such court. The HC held that the ship has its own independent juridical identity, separate from that of the owner of the ship. Such action is not against the ship owning company and the action against the ship can proceed without presence of its owners.
The HC held that since cases against ships are not against the ships owner, even if the owner is a company in liquidation, it will not impact the proceedings against the vessel.
Admiralty Act, thus, is a special act and a later act whereas the Companies Act is a general act. The Admiralty Act is also a consolidating act and a complete code as regards Admiralty jurisdiction, arrest of ships, maritime claims, sale of ships and determination of priorities," noted the HC after hearing a plethora of counsel including amicus curiae Prashant Pratap and Abhinav Chandrachud, Rahul Narichania and Sharan Jagtiani.
While Pratap, Chandarchud and Narichania and advocate Read More – Source
MUMBAI:In a landmark judgment, that will smoothen waters for crews of abandoned ships, Bombay high court held that Admiralty Law, a special law, which prevails over Companies Act and no prior permission is required under the company law to commence proceedings including sale of ship under the Admiralty jurisdiction.The HC held that priority of claims would also abide by Admiralty law over Company law.
Under Admiralty law, "maritime liens" have first priority in claims and within these maritime lien holders, the crew have been given highest priority in respect of their wages.The court essentially settled a vexed legal issue of primacy of laws between Admiralty law and Company law. The ruling was in a bunch of nearly 50 matters involving objections to proceeding with suits against ships without permission first under the Companies Act when ship owning companies were facing insolvency issues.
Justice KR Shriram held that no nod is required under the Companies Act to commence proceedings against the ship under Admiralty law in maritime claims or to proceed with a pending suit against the Company owning the ship when a winding up order has been made or liquidator appointed.
"The court which is winding up the company would not have the jurisdiction to entertain an action in rem (against the ship) filed in high courts conferred with Admiralty Jurisdiction," the HC held.
Essentially, a moratorium will not affect admiralty proceedings under a special provision of arrest and auction of a ship to settle maritime claims including claims of the crew. Pointing to a "stark example as to how banks which are secured creditors function once it is clear to them that corporate debtor is insolvent and leave crew on board to fend for themselves" in the judgment, Justice Shriram mentioned a case where in insolvency proceedings a committee of creditors opposed sale of a vessel, even when it was recorded that crew members were left stranded on ship without adequate food, drinking water, fuel for survival after arrest of the ship.Eventually months later the ship was sold at a scrap value by the admiralty court.
"The crew members are also considered to be workmen in a broader sense and their claims indeed get topmost priority and rank the highest in the order of priorities under Section 10 of the Admiralty Act which provides for a special right given to this category of workmen and special machinery for recovery of their wages," said the high court.
Only certain high courts can exercise the Admiralty jurisdiction and decree against a ship, doesnt bind the owner, unless he has submitted to jurisdiction, the HC ruled.
Under Admiralty Act provision for 'action in rem' is action against property, in this case, the ship within the territorial waters of such court. The HC held that the ship has its own independent juridical identity, separate from that of the owner of the ship. Such action is not against the ship owning company and the action against the ship can proceed without presence of its owners.
The HC held that since cases against ships are not against the ships owner, even if the owner is a company in liquidation, it will not impact the proceedings against the vessel.
Admiralty Act, thus, is a special act and a later act whereas the Companies Act is a general act. The Admiralty Act is also a consolidating act and a complete code as regards Admiralty jurisdiction, arrest of ships, maritime claims, sale of ships and determination of priorities," noted the HC after hearing a plethora of counsel including amicus curiae Prashant Pratap and Abhinav Chandrachud, Rahul Narichania and Sharan Jagtiani.
While Pratap, Chandarchud and Narichania and advocate Read More – Source
