S.J. Kathawalla, J.@mdashThe present Notice of Motion is taken out by the Applicant--Rainbow Ace Shipping S.A. Panama, Owner of Defendant No. 1 Vessel M.V. Rainbow Ace for setting aside the order of arrest of Defendant No. 1 vessel dated 28th January, 2013. The claim of the Plaintiff-Lufeng Shipping Co. Ltd. in the above suit arises out of an Agreement entered into by the Plaintiff as owners of the vessel M.V.J. Tong with Defendant No. 2-Whim Star Chartering Co. Ltd., Hongkong, as charterers for the use or hire of the vessel for carriage of goods. Therefore the Plaintiff''s claim is a maritime claim against the Defendant No. 2 arising out of a voyage charter party evidenced by a Fixture Note dated 6th April 2011, which is annexed as Exhibit-A to the Plaint. The Plaintiff''s claim is for damages and losses purportedly suffered by it as a result of detention of its vessel at the port of loading as set out in paragraphs 4 to 9 of the Plaint. As per the particulars of the claim, the claim amount is US$ 1,68,658.07. The Plaintiff seeks to arrest the Defendant No. 1 vessel M.V. Rainbow Ace on the ground that it is in the same beneficial ownership as Defendant No. 2 who is the voyage charterer. The question therefore which falls for determination of this Court is that on the material placed on record by both the parties, and keeping in mind the elements of balance of convenience and irreparable injury involved in the matter, whether even a prima facie case has been made out that the Defendant No. 1 vessel is in the beneficial ownership of the Defendant No. 2.
2. It is an admitted position that Mr. Wang Wendong is the beneficial owner of the first Defendant vessel M.V. Rainbow Ace. Therefore, according to the Plaintiff, they have to prima facie show that Mr. Wang Wendong is also the beneficial owner of Defendant No. 2-Whim Star Chartering Co. Ltd. In support of its contention that there are various interconnections/links with the various entities and individuals involved, which goes to show that the Defendant No. 1 vessel is in the beneficial ownership of the Defendant No. 2, the Plaintiff has submitted a chart which is set out hereunder.
3. The Plaintiff thereafter proceeds to point out that the fact that Mr. Wang Wendong is also the beneficial owner of Defendant No. 2 Whim Star Chartering Co. Ltd. is demonstrable from the following:
3.1. Plaintiff''s personal knowledge of and contact with Mr. Wang Wendong.
The Plaintiff''s association with Mr. Wang Wendong goes back to the year 1998 when the Plaintiff negotiated with Whim Star Group, primarily with Mr. Wang Wendong who was its owner and operating also from Qingdao, China where the Plaintiff Company is based. Mr. Wang Wendong set up Whim Star Co. Ltd. in 2004 as majority owner (55 % shares) and all business dealings of the Plaintiff were with Whim Star Co. Ltd. The said Whim Star Co. Ltd. was de-registered on 12th February 2009. However, there were at least 8 voyage charters between the Plaintiff and Whim Star Co. Ltd. in 2010. The Whim Star Group started using Whim Star Chartering Co. Ltd.-Defendant No. 2 in their charter parties with the Plaintiff from December 2010 onwards. Mr. Yang Qing, who is the present Vice General Manager of the Plaintiff, has personally met Mr. Wang Wendong on several occasions at his office in Qingdao City and confirms that Mr. Wang Wendong is the owner of the Group. According to the Plaintiff, it is stated in the Plaint that Mr. Wang Wendong has migrated to Canada but continues to own, manage, operate and control the Whim Star Group. It is now confirmed by Defendant No. 1 that Mr. Wang Wendong lives in Canada because his affidavit dated 8th February 2013 is notarized in Canada. According to the Plaintiff, the above goes to show that the Plaintiff has had a long association with Mr. Wang Wendong and the Whim Star Group dating back to the year 1998 and they have known Mr. Wang Wendong personally over the years.
3.2. Common address from which all Companies and individuals operate:
(a) According to the Plaintiff, Whim Star Co. Ltd. and Whim Star Chartering Co. Ltd. (Defendant No. 2) have their operational address at Sunshine Towers, Qingdao, China (Vol. II page 134);
(b) The fax numbers appearing at the bottom of each of the Fixture Notes of Whim Star Co. Ltd. and Whim Star Chartering Co. Ltd. (Vol. I pages 1-5, Vol. II Pages 140-151) are of the Sunshine Tower, which address also appears on the business card of Mr. Shan Bing;
(c) The business card of Mr. Wang Wendong also shows the same address of Sunshine Tower (Exhibit-F Page 42);
(d) As per the Loan Agreement dated 22nd June 2010 (Vol. 1 Sr. No. 5, pages 8-101) entered into by the Applicant with China Minsheng Banking Corporation Ltd. for securing a loan for the construction of M.V. Rainbow Ace, it is stated that the Chief Executive Office and the chief place of business of the Applicant is located at Sunshine Tower, Qingdao, China. It is stated in clause 15 titled "Notices and Demand", that the notices or demand, addressed to the owners of Defendant No. 1 should be sent to Sunshine Tower, Qingdao, China address.
(e) Likewise, the Mortgage Agreement dated 22nd June 2010 executed by Rainbow Nice Shipping Ltd., owner of the vessel Rainbow Harmony also states that the address of the mortgagor viz. Rainbow Nice Shipping Ltd. is the same i.e. Sunshine Tower, Qingdao, China. The vessel Rainbow Harmony was mortgaged for the purpose of securing a loan for the construction of the Defendant vessel Rainbow Ace on which the Bank has a first charge. Hence the vessels Rainbow Harmony and Defendant vessel are cross-collateralised.
(f) The Mortgage Deed dated 17th March 2010 executed by Rainbow Wealth Shipping Ltd., owner of M.V. Rainbow Lucky also gives the address as Sunshine Tower, Qingdao, China.
(g) The Loan Agreement dated 22nd June 2010 executed by Defendant No. 1 states that Rainbow Ace Shipping Ltd., owner of M.V. Rainbow Harmony is a "borrower Affiliate" and the term "Affiliate" is defined as the person who controls the borrower (which is Rainbow Ace Shipping) or is under common control as the borrower. This indicates that both Rainbow Ace and Rainbow Harmony are under common control and that can only be of Mr. Wang Wendong because admittedly he is the beneficial owner of Defendant Vessel Rainbow Ace.
(h) Prior to the incorporation of Defendant No. 2 on 22nd November 2010, a Company by the name of Cartier Investment Co. Ltd. was set up in Samoa on 13th September 2010. The address of the officer of Cartier Investment Co. Ltd. as appearing in the application made by Cartier Investment Co. Ltd. for incorporation of Defendant No. 2 is sunshine Tower, Qingdao, China.
(i) All this goes to show that all the three vessels-Rainbow Ace, Rainbow Harmony and Rainbow Lucky operate from the same address i.e. Sunshine Tower, Qingdao, and all the three vessels are in the same beneficial ownership of Mr. Wang Wendong. As admittedly Mr. Wang Wendong is the beneficial owner of Rainbow Ace, he is also prima facie the beneficial owner of the other two ships.
3.3. Common signature:
(a) According to the Plaintiff, the Fixture Notes on behalf of Whim Star Co. Ltd. as well as Defendant No. 2 (Vol. I Pages 1-5; Vol. II pages 140-151) appear to be signed by the same person. This signature also appears to be the signature on the Mortgage Agreement dated 17th March 2010 entered into by Rainbow Wealth Shipping Ltd., owners of Rainbow Lucky. The operating address of Rainbow Wealth Shipping Ltd. in clause 20 is Sunshine Tower, Qingdao, China.
(b) It is submitted that the same signature appears on the Fixture Note of M.V. J Tong in respect of which the suit is filed (Plaint Pgs. 23-25).
3.4. Common Director Mr. Wang Wendong is the beneficial owner of Rainbow Ace Shipping Pte Ltd., Singapore, as this Company is 100% owned by Rainbow Ace Shipping S.A. Panama (Applicant). Mr. Li Hang is Director of Rainbow Ace Shipping Pte Ltd., Singapore and a nominee of Mr. Wang Wendong. Mr. Li Hang is also a Director of Defendant No. 2. Thus, Li Hang is a common Director of Defendant No. 2 as well as Rainbow Ace Shipping Pte Ltd. Singapore. It is submitted that it is therefore through his nominee Li Hang that Mr. Wang Wendong exercises day to day management control over Defendant No. 2.
3.5. Common Chartering.
(a) It is submitted on behalf of the Plaintiff that chartering of ships by the defunct Whim Star Co. Ltd., Whim Star Chartering Co. Ltd. i.e. Defendant No. 2, Rainbow Ace Shipping SA, Rainbow Nice Shipping and Rainbow Lucky Shipping is done from the Sunshine Tower, Qingdao address. This is also the registered address of ZJHX Shipping Co. Ltd., whose 95% owner is Mr. Shan Bing who is also a Director of Defendant No. 2.
(b) It is submitted that the fax number appearing on all Fixture Notes (Pages 23-25 of Plaint--Vol. I Pgs. 1-5, Vol. II Pages 140, 143, 145, 148 and 151) are of the Sunshine Tower address and show that the fixture notes were sent from this address by both the defunct Whim Star Co. Ltd. and Defendant No. 2. All the said Fixture Notes appear to be signed by the same person.
3.6. Resignation of Common Director, Li Hang and of XuRonghui, Officer of Cartier Investment:
(a) According to the Plaintiff, the link between Mr. Wang Wendong and Defendant No. 2 was Mr. Li Hang who was the common Director in Rainbow Ace Shipping Pte Ltd., Singapore-(beneficial owner-Mr. Wang Wendong) and Whim Star Chartering Co. Ltd., Defendant No. 2. This was a direct link between Defendant No. 1 and Defendant No. 2 which was sought to be severed by the resignation of Li Hang as Director of Defendant No. 2 on 7th February 2013, i.e. after the order of arrest of the vessel was granted on 28th January 2013 and after the Plaint was served on the Advocates of Defendant No. 1 on 30th January 2013. It is submitted that Mr. Li Hang''s resignation was nothing but an attempt by Mr. Wang Wendong to distance himself from Defendant No. 2.
(b) It is submitted that similarly Mr. XuRonghui resigned as a Director of Defendant No. 2 on the same day as the resignation of Mr. Li Hang i.e. on 7th February 2013. Mr. XuRonghui had signed the application filed on behalf of Cartier Investment Co. Ltd. for incorporation of Defendant No. 2, along with the Memorandum and Articles of Association. Mr. XuRonghui had signed as a witness and has identified himself as an Officer of Cartier Investment Co. Ltd. with the same address of Sunshine Tower Qingdao, China, which is also the address of all the three entities and individuals including Mr. Wang Wendong. According to the Plaintiff, Cartier Investment Co. Ltd. is 100% owned by Mr. Wang Wendong, but since it is a company registered in Samoa, the Plaintiff cannot get access to the details pertaining to the shareholders and Directors of the Company. It is submitted that the factum of the resignation of Mr. XuRonghui on 7th February 2013, after filing of the suit also indicates an attempt to sever the connection between Mr. Wang Wendong and Cartier Investment Co. Ltd. which is the sole shareholder of Defendant No. 2.
4. According to the Plaintiff, the Loan Agreement dated 22nd June 2010 (Vol. I Pages 8-101) and the operational address of the owner of Defendant No. 1 vessel being Sunshine Tower has been referred to by the Plaintiff in the plaint. This is denied by Defendant No. 1 in paragraph 19 of the affidavit in support of the Notice of Motion, wherein Defendant No. 1 has also gone on to deny that any loan agreement was executed by Defendant No. 1 and has further denied that Defendant No. 1 has the same address of Sunshine Tower as stated by the Plaintiff. It is submitted that this is a false statement made by Defendant No. 1 on oath. It is submitted that when the Plaintiff provided a copy of the Loan Agreement in their reply, Defendant No. 1 in its rejoinder stated that the reason they denied the Loan Agreement was because the Plaintiff did not produce the same. It is submitted on behalf of the Plaintiff that this clearly demonstrates the conduct of the Defendant No. 1 who denies the very Agreement it has entered into merely because the Plaintiff has not produced a copy, in the hope that a copy will not be produced.
5. It is submitted that Defendant No. 1 to explain this address which is common to Defendant No. 2 as well as the defunct Whim Star Co. Ltd., submitted that the address of Sunshine Tower, Qingdao, China was given in the Loan Agreement because it was the address of the agent of Defendant No. 1 ZJHX Shipping Co. Ltd. and in support of this, the Defendant No. 1 relies upon the Agency Agreement (Exhibit-C page 21 of the Notice of Motion). It is submitted that the explanation is incorrect since the Agency Agreement is dated 1st March 2012 whereas the Loan Agreement is dated 22nd June 2010, when no agency agreement was in existence. It is submitted that this goes to show that the explanation of Defendant No. 1 as to the address of Sunshine Tower, Qingdao, China is false. It is submitted that even the alleged Agency Agreement dated 1st March 2012 is false, fabricated and a got up document. By the alleged Agency Agreement, Defendant No. 1 purports to appoint the said ZJHX Shipping Co. Ltd. as the agent of the Defendant Vessel Rainbow Ace. However, the vessel was delivered by the Shipyard only on 4th September 2012 as evidenced by the Certificate of Registration of the vessel. However, ZJHX Shipping Co. Ltd. could not have been appointed as an agent of the vessel as the vessel was not in existence on 1st March 2012 and was still under construction at the Shipyard. It is submitted that the purported Agency Agreement is not even signed by the parties. The annual fee stated in clause 14 is US$ 10,000.00 only, which is a paltry sum considering the scope of work set out in the purported Agency Agreement. It is submitted that the conduct of Defendant No. 1 itself requires this Court to disbelieve and discard the assertion made by Mr. Wang Wendong in his affidavit that he has absolutely no connection with Cartier Investment Co. Ltd., and Defendant No. 2.
6. It is submitted on behalf of the Plaintiff that Mr. Wang Wendong cannot be believed because he has played a fraud by trading in the name of the defunct company Whim Star Co. Ltd., which he himself had de-registered on 12th February 2009 as will be evident from the fact that the Plaintiff has stated in paragraph 13 (b) of the Plaint that there were at least 8 voyage charters between the Plaintiff and Whim Star Co. Ltd. in 2010. This has not been denied in the affidavit-in-support of the Notice of Motion. The Plaintiff then provided copies of two such charters in their compilation of documents (Volume-1) served along with the affidavit in reply on 22nd February 2013, to show that Whim Star Co. Ltd. continued to enter into contracts even though it was de-registered by Mr. Wang Wendong on 12th February 2009. In answer to this, it was orally submitted by Defendant No. 1 that the Whim Star Co. Ltd. referred to in the Fixture Notes was a completely different Company from that which was de-registered in 2009. This is incorrect because Whim Star Co. Ltd. in 2009 prior to the deregistration was also operating from the same Sunshine Tower address as all other companies in the Whim Star Group (Plaint Exhibit-F Page 42). The Whim Star Co. Ltd. in 2010 also operated from the same address as will be evident from the fax numbers at the bottom of the Fixture Note which are the fax numbers of Mr. Shan Bing. Mr. Shan Bing also operates from the same Sunshine Tower, Qingdao address (Vol. 1 Page 6). It is submitted that as soon as Defendant No. 2 was incorporated on 22nd November 2010, all Fixture Notes were with Whim Star Chartering Co. Ltd. from December 2010 and until then the fixtures were with Whim Star Co. Ltd., the last being October 2010. It is submitted that the modus operandi was that the defunct Whim Star Co. Ltd. continued to enter into charter contracts (Fixture Notes) until Defendant No. 2 was set up. Once this was done, Defendant No. 2 started entering into charter contracts.
7. It is next contended on behalf of the Plaintiff that the contents of the affidavit of Mr. Wang Wendong dated 27th February 2013 is incorrect. Mr. Wang Wendong states in paragraph 2 that he has not revived the Whim Star Co. Ltd. which was de-registered on 12th February 2009. It is not the Plaintiff''s case that the Company was revived. It is the Plaintiff''s case that Mr. Wang Wendong continued to operate a de-registered Company until October 2010 and it was only when Defendant No. 2 was set up in November 2010 that Mr. Wang Wendong ceased to operate Whim Star Co. Ltd. This is evidenced by the various Fixture Notes produced by the Plaintiff forming part of Compilation Vol. I, pages 1-2 and Volume II, pages 140-143.
8. It is submitted that Mr. Wang Wendong in his affidavit states that the Fixture Notes relied on by the Plaintiff refer to a new Whim Star Co. Ltd. and not the same which was de-registered by him in February 2009. It is submitted that no evidence has been produced by Mr. Wang Wendong to show that Whim Star Co. Ltd. appearing in the Fixture Notes in 2010 is a new Company different from the one which was de-registered in 2009. It is submitted that no explanation is provided by Mr. Wang Wendong of the fact that fax numbers appearing at the bottom of each of the Fixture Notes of Whim Star Co. Ltd. are those of Sunshine Tower, Qingdao, China, which was the address from which Mr. Wang Wendong operated and from where his agent Mr. Shan Bing of ZJHX Shipping Co. Ltd. continues to operate as per their respective business cards. It is submitted that no explanation is forthcoming of the Sunshine Tower address of Rainbow Ace Shipping Panama SA in the Loan Agreement, especially when it is clear that there was no agency agreement in existence in 2010, nor is there any explanation about the Agency Agreement dated 1st March 2012 when the vessel was not even in existence and delivered only in September 2012. It is submitted that no explanation is provided by Mr. Wang Wendong as to the signature appearing on the Fixture Notes, which appears to be that of the same person who has signed the Mortgage Deed dated 17th March 2010 in respect of the vessel Rainbow Lucky, which according to the Plaintiff is also beneficially owned by Mr. Wang Wendong. It is therefore submitted that the bare denials of Mr. Wang Wendong of selective portions of the Plaint and affidavit in reply cannot be accepted and an opportunity should be given to the Plaintiff to deal with the new affidavit and to lead further evidence of the operation of a defunct company by Mr. Wang Wendong, which the Plaintiff can only do at the trial stage. It is submitted that prima facie it appears that there is nothing to indicate that Whim Star Co. Ltd. appearing in the Fixture Notes of 2010 is different from the defunct Whim Star Co. Ltd. of Mr. Wang Wendong.
9. It is next submitted on behalf of the Plaintiff that Defendant No. 2 is 100 per cent owned by Cartier Investment as its sole shareholder. The name of the Directors and shareholders of Cartier Investment are not disclosed by the Samoa Company Registry. The setting up of Defendant No. 2 was done by Cartier Investment Co. Ltd. Cartier Investment Co. Ltd. also operates from the same Sunshine Tower address, which is that of Defendant No. 2 as per the Loan Agreement and that of Mr. Wang Wendong as per his business card and even otherwise deemed to be his address as the owner of Defendant No. 1, whose address is also the same. It is submitted that Cartier''s address is also Sunshine Tower as appears from the application for setting up Defendant No. 2, which is witnessed by an Officer of Cartier. This Officer Mr. XuRonghui is also the Director of Defendant No. 2, who resigned on 7th February 2013.
10. It is therefore submitted that the above facts make out a strong prima facie case that on a balance of probabilities the beneficial owner of Defendant No. 2 is Mr. Wang Wendong who is admittedly the beneficial owner of the first Defendant vessel. Thus both Defendant Nos. 1 and 2 have a common beneficial owner. It is submitted that consequently the Plaintiff is entitled to maintain the arrest of first Defendant vessel to secure its claim against Defendant No. 2 and the matter should be allowed to proceed to trial, when the question can be finally decided on both witness evidence as well as documentary evidence.
11. It is next submitted on behalf of the Plaintiff that the first Defendant vessel is in the same beneficial ownership as Defendant No. 2. In other words, there is a common beneficial owner. Relying on Article 3 (2) of the Arrest Convention, 1999, it is submitted that the Plaintiff''s case falls under Article 3 (2) (b) because Defendant No. 2 is liable for the maritime claim and was, when the claim arose, the voyage charterer of the ship M.V.J. Tong, in respect of which the maritime claim arose. Thus the Plaintiff is entitled to arrest any ship which is owned by Defendant No. 2.
12. It is submitted that the words ''Owner'' and ''owned'' appearing in the International Convention on the Arrest of Ships, 1999 include beneficial owner and beneficially owned. It is submitted that there is nothing in the Convention or law that limits the use of the word "owner" to registered owner only. Thus "owned by" includes "beneficially owned by". This interpretative change was brought about for the purpose of permitting arrest of vessels in the same beneficial ownership. This then permitted a claimant to proceed in rem for arrest of a ship in the same beneficial ownership as the ship in question or in the same beneficial ownership as the party liable in personam. In support of this contention, the Plaintiff has relied on the decision of the Apex Court in m.v. Elizabeth (1993) 2 Supp SCC 433, the decision of the Division Bench of this Court in the case of
13. It is submitted on behalf of the Plaintiff that the test that needs to be met by a Plaintiff for the purpose of arrest of a vessel is whether the Plaintiff has a "reasonably arguable best case in an Admiralty action" as held by the Hon''ble Supreme Court in the case of
14. Mr. Pratap, the learned Senior Advocate appearing for the Plaintiff, has submitted that the decisions cited by the Applicant are not applicable to the facts and circumstances of the present case. Relying on paragraph 154 of the decision of the Hon''ble Supreme Court in the case of m.v. Sea Success (supra), it is submitted on behalf of the Plaintiff that this Court has therefore only to consider whether a prima facie case has been made out by the Plaintiff, and whether the matter ought to be allowed to proceed to trial when the question of beneficial ownership will be finally decided. It is therefore submitted that the Notice of Motion should be dismissed and the Defendant vessel be released only upon security being furnished in terms of the Judge''s order dated 28th January 2013. It is submitted that in the circumstances even assuming that this Court were to vacate the arrest, there is no case made out that the arrest was brought in crass a negligentia and/or in malice. Further, no evidence of the alleged damages of US $ 7,500.00 suffered per day, has been produced and neither is the charter party on which this claim is based. It is submitted that prayers (b) and (c) of the Notice of Motion ought not to be granted in any event. It is submitted that though Defendant No. 1 submitted that they are entitled to security for costs under Order XXV Rule 1 of the Code of Civil Procedure, 1908, there is no prayer made in the Notice of Motion for security for costs and in the circumstances it is open to the Defendant No. 1 to take out a separate application in this regard, if they so desire.
15. Mr. Virag Tulzapurkar, the Learned Senior Advocate appearing for the Applicant submitted that the Defendant No. 1 is not disputing the contention of the Plaintiff that the Plaintiff has a maritime claim arising out of its Fixture Note with Defendant No. 2. Under the 1952 Arrest Convention, claims arising out of an agreement relating to the use and hire of any vessel whether by charter party or otherwise is a maritime claim. The Applicant does not presently admit or comment on the merits of the Plaintiff''s claim on breach of charter party or the quantum of claim inasmuch as the Applicant has no connection at all with Defendant No. 2. It is submitted that the Applicant has filed the present application for vacating the interim order of arrest on the basis that there is no connection as between Defendant No. 2 and Defendant No. 1 vessel of which the Applicant is the registered owner and hence the Plaintiff not being able to establish that the Defendant No. 1 is in the beneficial ownership of the Defendant No. 2, the Plaintiff cannot arrest the Defendant No. 1 vessel.
16. The Applicant has next submitted that the following are the true and correct facts:
16.1. Defendant No. 1 vessel is owned by Rainbow Ace Shipping S.A., Panama. The registered owner of Defendant No. 1 therefore is the Applicant.
16.2. The Applicant is owned by another Company i.e. Rainbow Navigation Investment Co. Ltd., registered in the British Virgin Islands.
16.3. The said Rainbow Navigation Investment Co. Ltd. is fully owned by Mr. Wang Wendong.
16.4. Neither the Applicant nor Rainbow Navigation Investment Co. Ltd. nor Mr. Wang Wendong have any business relationship or connection with the Plaintiff and/or Defendant No. 2. Mr. Wang Wendong has filed his affidavit to this effect on 8th February 2013. Mr. Wang Wendong does not hold any shares in Defendant No. 2.
16.5. The Applicant entered into an Agency Agreement with ZJHX Shipping Co. Ltd. for managing, operating and marketing Defendant No. 1 vessel. ZJHX Shipping Co. Ltd. was also the agent of Rainbow Nice Shipping Limited, who executed the Mortgage Deed of its vessel m.v. Rainbow Harmony, to secure the loan for construction of Defendant No. 1 vessel. The ultimate shareholder of Rainbow Nice Shipping Ltd. is also owned by Mr. Wang Wendong.
16.6. ZJHX Shipping Co. Ltd. is only a Ship Manager and/or ship operator of Defendant No. 1 vessel and has no ownership rights in Defendant No. 1 vessel. Wand Wendong has no stake at all in ZJHX Shipping Co. Ltd.
16.7. Mr. Shan Bing, who according to the Plaintiff, owns 95% of the shares in ZJHX Shipping Co. Ltd. has no stake in Rainbow Ace Shipping S.A., Panama and/or Rainbow Navigation Investment Co. Ltd.
16.8. The shareholding of Mr. Shan Bing in ZJHX Shipping Co. Ltd. is irrelevant in the context of the dispute in the present suit.
16.9. In so far as Defendant No. 2 is concerned, Rainbow Ace Shipping S.A., Panama, Rainbow Navigation Investment Co. Ltd. and Mr. Wang Wendong have no stake in Defendant No. 2 and/or have no business connections or relationship with Defendant No. 2 (As per the affidavit of Mr. Wang Wendong dated 8th February 2013).
16.10. Defendant No. 2 is admittedly owned by a Company called Cartier Investment Co. Ltd. and Mr. Wang Wendong is not related to the said Cartier Investment Co. Ltd. nor holds any shares or any position as Director in the said Company Cartier (As per the affidavit of Mr. Wang Wendong dated 8th February 2013). No material has been produced by the Plaintiff to show any shareholding of Mr. Wang Wendong in Cartier or Defendant No. 2 or ZJHX Shipping Co. Ltd.
16.11. Rainbow Ace Shipping S.A., Panama, Rainbow Navigation Investment Co. Ltd. and/or Mr. Wang Wendong have nothing to do with Cartier Investment Co. Ltd. and have had no business connections and/or relations with Cartier Investment Co. Ltd. and therefore have no business connections and/or relationship with Defendant No. 2 through Cartier Investment Co. Ltd. or otherwise (As per the affidavit of Mr. Wang Wendong dated 8th February 2013).
16.12. That Whim Star Co. Ltd. of Hong Kong was deregistered from the Hong Kong Registry in 2009. This fact is not contested. Therefore Whim Star Co. Ltd. of which Mr. Wang Wendong was 55% shareholder before its de-registration, did not execute any of the alleged Fixture Note of 2010 relied on by the Plaintiff in its Plaint or Reply.
16.13 Mr. Wang Wendong, in his affidavit dated 27th February 2013 has categorically stated that after its de-registration, Whim Star Co. Ltd. of Hong Kong (in which Wang Wendong has held 55% shares), has not done any business; that the alleged Fixture Notes of 2010 have not been issued by the de-registered Whim Star Co. Limited; that the Whim Star Co. Ltd. which has allegedly issued the alleged Fixture Notes of 2010 is not the same as the de-registered Whim Star Co. Ltd.; that Wang Wendong is not concerned with and has no stake in the (NEW) Whim Star Co. Limited which has allegedly issued the alleged Fixture Notes in 2010.
17. It is submitted that the Plaintiff has made bald allegations in the Plaint and has not produced any material to show the connection between the Defendant No. 1''s owners and the Defendant No. 2''s owners. The Plaintiff has presented a flow chart (Paragraph 3 hereinabove). The Plaintiff through the flow chart attempts to link Defendant No. 1 with the Defendant No. 2 in the following manner:
17.1. That the Rainbow Companies namely Rainbow Navigation Investment Co., Ltd., BVI, the Applicant, Rainbow Ace Shipping Pte Ltd., Singapore are all owned 100% by Mr. Wang Wendong. The Plaintiff therefore admits that only Mr. Wang Wendong is the owner of the Rainbow Companies. The Plaintiff during its argument and affidavit-in-reply jettisons its case that the beneficial owner connection is through Mr. Wang Wendong and/or Shan Bing.
17.2. The Plaintiff then seeks to show commonality by stating that the Applicant, one Whim Star Co. Ltd., Whim Star Chartering Co. Ltd. (Defendant No. 2) and ZJHX Shipping Co. Ltd. all share the same address namely 620A Sunshine Tower, 61 Xiang Gang Zhong Road, Qingdao, China. In fact, the Plaintiff throughout its oral argument and in its Plaint has strongly relied on the commonality of the address and the fact that the Loan Agreement in relation to its Defendant No. 1 vessel, entered into by the Applicant also shows 620A Sunshine Tower, 61 Xiang Gang Zhong Road, Qingdao, China as the operating address. It was submitted that the fact that the Applicant and the Rainbow companies used the said address at 620A Sunshine Tower 61 Xiang Gang Zhong Road, Quingdao, China, was because the agent for all their vessels, namely Rainbow Ace, Rainbow Harmony and Rainbow Lucky is ZJHX Shipping Co. Ltd. and hence the address of the said ZJHX Shipping Co. Ltd. has been used as the local address in the said Loan Documents. The Plaintiff submitted that it was not permissible for the Applicant to have appointed ZJHX Shipping Co. Ltd. for its yet to be built vessel Defendant No. 2 in March 2012 or use their address in the Loan Agreement in 2010. This has not been the case of the Plaintiff in its plaint. However, the answer to this is clear and simple. The Applicant has shown that ZJHX Shipping Co. Limited, China has been the agent of the three Rainbow vessels. Rainbow Harmony which was the vessel which was mortgaged in the Loan Document for the Defendant No. 1, was built in 2009 and ZJHX had been its agents since then and hence the address of ZJHX as a local address, which is required by all Banks when entering into a loan document, was provided. It is pertinent to note that although the Plaintiff has chosen to argue the issue of common address at the time of hearing, this being its main connection as between Defendant No. 1 and Defendant No. 2, the Plaintiff in its reply at paragraphs 19 and 34 categorically states "It is denied that the Plaintiff has sought to establish beneficial ownership on the basis of the visiting card of Mr. Wang Wendong and the address mentioned in the visiting card of Mr. Shan Bing". The address referred to in the said visiting card is 620A Sunshine Tower, 61 Xiang Gang Zhong Road, Qingdao, China, which is the address which the Plaintiff has sought in its chart to show commonality between Defendant No. 1 and Defendant No. 2.
17.3. That Plaintiff contends that there is a common Director between Defendant No. 2 and the subsidiary company of Defendant No. 1, namely Rainbow Ace Shipping Pte Ltd. Such argument is inconceivable in that the Plaintiff is not suggesting any commonality of Director as between the Defendant No. 1 Company and the Defendant No. 2 Company, but is trying to show commonality through one common Director of a subsidiary of the Applicant. In any event, it is a settled law that common Directors do not make two Companies beneficially owned by the same person. Also the sole common Director (Mr. Li Hang) is not shown to be a shareholder of the Applicant at all.
17.4. The Plaintiff finally tries to link the Defendant No. 2 with Mr. Wang Wendong through a de-registered Company (de-registered in 2009) called Whim Star Co. Ltd. in which Mr. Wang Wendong (when the Company was still active till 2009) was 55% shareholder. Besides the fact that the said Company is deregistered is not in dispute and this is admitted by the Plaintiff. The Plaintiff now creates a fiction and presumes that some other Whim Star Co. Ltd. with which it is allegedly dealing in 2010, is the same as the de-registered company. The Plaintiff then produced certain payment receipts in Vol. II of its compilation, which also do not support its case that de-registered Whim Star Co. Limited was operating in 2010. Some fixtures with a stamp of one Whim Star Co. Limited have been produced, the payments all show payment to third party companies neither bearing the name of the Plaintiff or the Defendant No. 2 nor Whim Star Co. Limited. In any event an affidavit has been filed by Mr. Wang Wendong denying any connection with the alleged new Whim Star Co. Limited or the two companies who have been receiving and making payments under the said fixtures. Mr. Wang Wendong has clearly stated that the old, de-registered Whim Star Co. Limited, Hong Kong has not been revived; that Mr. Wang Wendong has no connection with the new Whim Star Co. Limited. Except for a fictitious allegation of the Plaintiff, unsupported by any material, that the de-registered Whim Star Co. Limited is the same as the new Company, no material to establish the allegation has been produced. It is submitted that the onus is on the Plaintiff to establish its allegation. In support of its contention, the Applicant has relied on the decision in The Aventicum (supra). It is therefore submitted on behalf of the Applicant that the Plaintiff has miserably failed to even prima facie establish that the owner of the Defendant No. 1 and the Defendant No. 2 are common.
18. Without prejudice to the above, it is submitted on behalf of the Applicant that the arrest based on beneficial ownership is not permissible under Indian law or the applicable Convention merely because (a) the Applicant Company and/or its agent and Defendant No. 2 share same address and/or a common Director; and (b) even assuming that Mr. Wang Wendong is the common shareholder of the Applicant and the Defendant No. 2, relying on the decision of the Hon''ble Supreme Court in
19. Without prejudice to the above, it is submitted on behalf of the Applicant that even applying the applicable Convention and the interpretation given to beneficial ownership by the Courts of England, which have been referred to and followed by the Indian Courts, the Plaintiff cannot seek arrest of the Applicant''s vessel to secure its alleged claim against Defendant No. 2. It is submitted that the Plaintiff in its Plaint and Synopsis only refers to "Convention" and rightly the applicable Convention for the nature of claim of the Plaintiff is the 1952 Arrest Convention, which has been brought into the Indian Common Law by virtue of the Apex Court judgment in the case of The Elizabeth (supra). Article 3 of the said Convention provides that "Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons". The said 1952 Convention has been adopted by the United Kingdom and the English Court of Appeal. Relying on the decision in the case of The Evop Agnic (1988) 2 LLR 411, it is submitted on behalf of the Applicant that the ratio of the judgment of the Court of Appeal in that case in fact mirrors the dicta of our Apex Court set out hereinabove in the case of Bacha F. Guzdar (supra).
20. Relying on the decisions in the case of M.V. Mawan (1988) 2 LLR 459 at 461 and in the case of
21. Without prejudice to the above contention, it is submitted on behalf of the Applicant that the Plaintiff has also not been able to provide a shred of evidence/material to show that the ultimate beneficial owner of the Applicant is the shareholder of Defendant No. 2. In fact, Mr. Wang Wendong, the ultimate beneficial owner of the Applicant does not hold any shares in Defendant No. 2. The Plaintiff has not been able to provide a single piece of evidence, save making vague allegations, to show that Mr. Wang Wendong was either the shareholder or Director of Whim Star Chartering Co. Ltd., Hong Kong (Defendant No. 2). Relying on the decision of this Court in Polestar Maritime Limited vs. M.V. Qi Lin Men and others, in Admiralty Suit (L) No. 3547 of 2008, the Applicant submitted that in the instant case similarly the Applicant Company and the Defendant No. 2 Company are two different independent companies and there being no maritime claim against either, the Applicant or the Defendant No. 1 being the vessel owned by the Applicant, the arrest of the Defendant No. 1 is not permissible for a claim against Defendant No. 2.
22. It is next contended on behalf of the Applicant that the Hon''ble Supreme Court while considering application of the Arrest Convention, 1999 has held in the case of Liverpool & London P & I Association vs. M.V. Sea Success 1 and another (supra) that the application of the 1999 Convention in the process of interpretive changes, however, would be subject to (i) domestic law which may be enacted by Parliament; and (ii) it should be applied only for enforcement of a contract involving public law character. It is submitted that the Division Bench of the Gujarat High Court followed the said ratio of the Apex Court in the case of Croft Sales and Distribution Ltd. vs. M.V. Basil and others OJ Appeal No. 6 of 2011 in Admiralty Suit No. 10 of 2010 decided on 17th February 2011. It is therefore submitted on behalf of the Applicant that the instant case is one arising out of a purely private, commercial contract for use and hire of a vessel entered into abroad and is also not of a public character at all. Hence the 1999 Convention does not apply to the facts of this case, as the conditions precedent for its applicability (in terms of the Supreme Court judgment) are not satisfied. Also, the domestic law enacted by the Parliament of India i.e. the Indian Companies Act, 1956 provides that shareholders of the Company are distinct and a shareholder has no right or interest in the Companies property. It is further submitted on behalf of the Applicant that although under Indian Law the 1999 Convention can only be applied on a conjoint reading with paragraphs 59 and 60 of the Apex Court''s judgment in Sea Success i.e. where it does not contravene domestic laws and is applied only in contracts of public nature, which makes it inapplicable to the disputes under the present suit, as they are disputes of a purely private nature, even if applied, the facts of the present case and the material produced by the Plaintiff, do not and cannot lead to a conclusion that the owner of Defendant No. 2 is in the same beneficial ownership as that of Defendant No. 1. It is submitted that in the present case, the Plaintiff has not been able to show from any material on record, that the Defendant No. 1 vessel which it has arrested is owned by the person who is the owner of Whim Star Chartering Co. Ltd.
23. It is submitted on behalf of the Applicant that in the above facts and circumstances, both as a matter of Indian Law, and in the facts of the present case, the Plaintiff cannot be allowed to arrest the Defendant No. 1 for the following reasons:
23.1. As per Indian Law as settled by the Apex Court, each Company is an independent juristic person and the shareholder of the said Company has no right in the assets of the Company;
23.2. For the Plaintiff to be able to rely on the Arrest Convention 1952, the Plaintiff would be required to show that the Defendant No. 2 Company itself is the owner of the Defendant No. 1, which admittedly is not the case;
23.3. No evidence has been provided after completion of affidavits to show that there are any common shareholders as between Defendant No. 1 and Defendant No. 2. The Plaintiff pins his best arguable case only on the basis of there being one common Director as between the Defendant No. 2 and the subsidiary Company of the Applicant, and that all parties are seen to be using a common address namely 620A Sunshine Tower, 61 Xiang Gang Zhong Road, Qingdao, China.
24. It is submitted that as has been borne out from the Apex Court decisions cited above, as also the English Judgments which have been followed by the Indian Courts, these factors are totally irrelevant and further in any event such trivial commonality such as a Director being common or the address being common cannot give rise to a presumption or inference (not even a prima facie) that Defendant No. 2 beneficially owns Defendant No. 1 vessel. It is submitted that the decisions relied on by the Plaintiff are of no assistance in view of the submissions of the Applicant set out herein and the case law cited by the Applicant. It is therefore submitted on behalf of the Applicant that the balance of convenience requires the order of arrest dated 28th January 2013 to be vacated and that there is no case at all made out by the Plaintiff for the arrest of Defendant No. 1 vessel M.V. Rainbow Ace, both in law and on facts. It is further submitted that the Applicant owners of the Defendant No. 1 vessel are entitled to security as prayed for. It is therefore submitted that the Notice of Motion filed by the Applicant be allowed.
25. I have considered the submissions advanced by the Learned Advocates appearing for the parties. I have considered the case law cited by them. The Plaintiff has a maritime claim against Defendant No. 2 arising out of a voyage charter party in respect of the vessel M.V.J. Tong owned by the Plaintiff. For this maritime claim, the Plaintiff has sought to arrest the vessel Rainbow Ace on the ground that it is in the same beneficial ownership as Defendant No. 2. The Plaintiff claims that Mr. Wang Wendong is admittedly the beneficial owner of Rainbow Ace and is also at least prima facie the beneficial owner of Defendant No. 2. The Plaintiff contends that the Arrest Convention 1999 is applicable in the present case; that Article 3(2) of the Arrest Convention 1999 provides for arrest of any other ship which, when the arrest is effected, is owned by the person who is liable for the maritime claim and who was, when the claim arose, the owner or demise charterer, time charterer or voyage charterer of the ship in respect of which the maritime claim arose; that the words ''owner'' and ''owned'' appearing in Article 3(2) include ''beneficial owner'' and ''beneficially owned''. The Plaintiff, thus, submits that Defendant No. 2, against whom the Plaintiff has a maritime claim, was the charterer of the ship in respect of which the maritime claim arose and by reason of the beneficial ownership of Mr. Wang Wendong of both Defendant No. 2 and the 1st Defendant Vessel Rainbow Ace, the vessel Rainbow Ace can be arrested for such maritime claim.
26. The Applicant, on the other hand, disputes the applicability of Arrest Convention 1999 to the present case. The Applicant contends that the application of 1999 convention would be subject to domestic law and it could be only applied for enforcement of a contract involving public law charter. The dispute in the present case does not involve enforcement of such a contract. The Applicant further contends that as per Indian Law, a company is an independent juristic person and shareholders of the company have no right in the assets of the company; that the Plaintiff would be required to show that Defendant No. 2 Company itself is the owner of Defendant No. 1 Vessel, namely, Rainbow Ace. The Applicant also vehemently disputes any common or beneficial ownership of Defendant No. 1 Vessel and Defendant No. 2 Company.
27. Having regard to the rival contentions of the parties in the present case, the following questions arise for consideration of the Court, namely,-
(i) Whether the International Convention on the Arrest of Ships, 1999 can be applied to the present dispute?
(ii) If yes, whether by virtue of Article 3(2) thereof, arrest of a ship beneficially owned by the person against whom there is a maritime claim in respect of another ship, is permissible?
(iii) Whether the 1st Defendant vessel is of the beneficial ownership of Defendant No. 2?
28. The Plaintiff relies on the judgment of the Supreme Court in the case of M.V. Elizabeth (supra) and the Judgment of the Full Bench of this Court in the case of
29. The Supreme Court in the case of M.V. Elizabeth held:-
64. Where statutes are silent and remedy has to be sought by recourse to basic principles, it is the duty of the court to devise procedural rules by analogy and expediency. Actions in rem, as seen above, were resorted to by courts as a device to overcome the difficulty of personal service on the defendant by compelling him to enter appearance and accept service of summons with a view to furnishing security for the release of the res; or, in his absence, proceed against the res itself, by attributing to it a personality for the purpose of entering a decree and executing the same by sale of the res. This is a practical procedural device developed by the courts with a view to rendering justice in accordance with substantive law not only in cases of collision and salvage, but also in cases of other maritime liens and claims arising by reason of breach of contract for the hire of vessels or the carriage of goods or other maritime transactions, or tortious acts, such as conversion or negligence occurring in connection with the carriage of goods. Where substantive law demands justice for the party aggrieved, and the statute has not provided the remedy, it is the duty of the court to devise procedure by drawing analogy from other systems of law and practice. To the courts of the "civil law countries" in Europe and other places, like problems seldom arise, for all persons and things within their territories (including their waters) fall within their competence to deal with. They do not have to draw any distinction between an action in rem and an action in personam.
74. All foreign merchant ships and persons thereon fall under the jurisdiction of a coastal State as they enter its waters. Subject to the right of ''innocent passage'', the coastal State is free to exercise jurisdiction over such ships in respect of matters the consequence of which extend beyond the ships. Such ships are subject to the local jurisdiction in criminal, civil and administrative matters. This jurisdiction is, however, assumed only when, in the opinion of the local authorities, the peace or tranquillity of the port is disturbed, when strangers to the vessel are involved or when the local authorities are appealed to. Questions which affect only the internal order and economy of the ship are generally left to the authorities of the flag State. Coastal States are entitled to assume jurisdiction in respect of maritime claims against foreign merchant ships lying in their waters. These ships are liable to be arrested and detained for the enforcement of maritime claims. The courts of the country in which a foreign ship has been arrested may determine the cases according to merits, provided they are empowered to do so by the domestic law of the country or in any of the cases recognised by the International Convention relating to the Arrest of Seagoing Ships, Brussels, 1952. The maritime claims in respect of which the power of arrest is recognised in law include claims relating to damage caused by any ship either in collision or otherwise; claims relating to carriage of goods in any ship whether by charter party or otherwise, loss of or damage to goods etc. These principles of international law, as generally recognised by nations, leave no doubt that, subject to the local laws regulating the competence of courts, all foreign ships lying within the waters of a State, including waters in ports, harbours, roadsteads, and the territorial waters, subject themselves to the jurisdiction of the local authorities in respect of maritime claims and they are liable to be arrested for the enforcement of such claims.
It is true that Indian statutes lag behind the development of international law in comparison to contemporaneous statutes in England and other maritime countries. Although the Hague Rules are embodied in the Carriage of Goods by Sea Act, 1925, India never became a party to the International Convention laying down those rules (International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, Brussels 1924). The Carriage of Goods by Sea Act, 1925 merely followed the (United Kingdom) Carriage of Goods by Sea Act, 1924. The United Kingdom repealed the Carriage of Goods by Sea Act, 1924 with a view to incorporating the Visby Rules adopted by the Brussels Protocol of 1968. The Hague-Visby Rules were accordingly adopted by the Carriage of Goods by Sea Act, 1971 (United Kingdom). Indian legislation has not, however, progressed, notwithstanding the Brussels Protocol of 1968 adopting the Visby Rules or the United Nations Convention on the Carriage of Goods by Sea, 1978 adopting the Hamburg Rules. The Hamburg Rules prescribe the minimum liabilities of the carrier far more justly and equitably than the Hague Rules so as to correct the tilt in the latter in favour of the carriers. The Hamburg Rules are acclaimed to be a great improvement on the Hague Rules and far more beneficial from the point of view of the cargo owners. India has also not adopted the International Convention relating to the Arrest of Sea-going Ships, Brussels, 1952. Nor has India adopted the Brussels Conventions of 1952 on civil and penal jurisdiction in matters of collision; nor the Brussels Conventions of 1926 and 1967 relating to maritime liens and mortgages. India seems to be lagging behind many other countries in ratifying and adopting the beneficial provisions of various conventions intended to facilitate international trade. Although these conventions have not been adopted by legislation, the principles incorporated in the conventions are themselves derived from the common law of nations as embodying the felt necessities of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships.
89. All persons and things within the waters of a State fall within its jurisdiction unless specifically curtailed or regulated by rules of international law. The power to arrest a foreign vessel, while in the waters of a coastal State, in respect of a respect of a maritime claim, wherever arising, is a demonstrable manifestation and an essential attribute of territorial sovereignty. This power is recognised by several international conventions. These conventions contain the unified rules of law drawn from different legal systems. Although many of these conventions have yet to be ratified by India, they embody principles of law recognised by the generality of maritime States, and can therefore be regarded as part of our common law. The want of ratification of these conventions is apparently not because of any policy disagreement, as is clear from active and fruitful Indian participation in the formulation of rules adopted by the conventions, but perhaps because of other circumstances, such as lack of an adequate and specialised machinery for implementation of the various international conventions by coordinating for the purpose the concerned Departments of the Government. Such a specialised body of legal and technical experts can facilitate adoption of internationally unified rules by national legislation. It is appropriate that sufficient attention is paid to this aspect of the matter by the authorities concerned. Perhaps the Law Commission of India, endowed as it ought to be with sufficient authority, status and independence, as is the position in England, can render valuable help in this regard. Delay in the adoption of international conventions which are intended to facilitate trade hinders the economic growth of the nation.
30. It is pertinent to note that the case of M.V. Elizabeth (supra) did not involve enforcement of a contract of a public law character. It was a dispute between two private parties and the court applied the principles set out in the 1952 Arrest Convention on the basis that, "although these conventions have not been adopted by legislation, the principles incorporated in the Conventions are themselves derived from the common law of nations as embodying the felt necessity of international trade and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships".
31. The Full Bench of our High Court in the case of J.S. Ocean Liner LLC (supra) was concerned with the question as to whether an action in rem (in admiralty jurisdiction) for arrest of the vessel by way of an interim measure in a case where the parties have agreed to submit the dispute to arbitration can be maintained and whether Arrest Convention 1999 (Chapter VII) applied to such an action. The Full Bench held as under:-
72. We find considerable force in the argument of the counsel for the Plaintiffs that it is unnecessary to apply Rena K principle in view of the Arrest Convention, 1999 which is as much part of our law and the statute in view of the decisions of the Supreme Court in M.V. Elizabeth, and M.V. Sea Success. As a matter of fact, Mr. Prashant Pratap also suggested and, in our view, rightly that the court can straightaway apply the principle set out in the Arrest Convention, 1999. The view of senior counsel Mr. V.C. Kotwal is also in line with the view of the counsel for the Plaintiffs and Mr. Prashant Pratap in this regard.
73. The application of Article VII of 1999 Arrest Convention, in admiralty jurisdiction in our view, would be purposive and preferable. The applicability of Arrest Convention, 1999 in the absence of any domestic law or inconsistency with the domestic law would be more in inconsistency with the domestic law would be more in regard to the international general principles and interaction between the arbitration agreement and in rem action. Such purposive interpretation would be in consonance with broadly accepted international procedure by which the security obtained by the arrest of the ship in the action in rem is retained to satisfy the judgment and award of arbitral tribunal. Such construction shall neither be in conflict with Section 45 of the Act of 1996 nor the judgment of the Supreme Court in P. Anand Gajapati Raju and Hindustan Petroleum Corporation Ltd. In the cases of P. Anand Gajapati Raju and Hindustan Petroleum Corporation Ltd., the subject matter did not relate to an action in rem nor the Supreme Court was concerned with the question of retention method, as provided in 1999, Arrest Convention. The observation made by the supreme Court in P. Anand Gajapati Raju that once the dispute has been referred to arbitration, nothing remains to be decided by the court has to be read to have been made in the context of Section 8 of the Act of 1996 and cannot be construed as wide as to cover action in rem or the retention method as provided in 1999 Arrest Convention. Rather, the application of Arrest Convention, particularly Article VII is in accord and in conformity with the observation made by the Supreme Court in M.V. Elizabeth and M.V. Sea Success I.
[emphasis supplied]
32. It is important to note that the matter before the Full Bench concerned a commercial dispute between private parties. There was no question of enforcement of a contract involving public law charter. The applicability of the 1999 convention was not restricted by the court to any particular type or character of contract.
33. The Applicant, however, relied on the judgment of the Supreme Court in the matter of Liverpool & London P.I. Association and particularly a part of paragraph 60 of that judgment which reads as follows:-
60. Application of the 1999 Convention in the process of interpretive changes, however, would be subject to: (1) domestic law which may be enacted by Parliament; and (2) it should be applied only for enforcement of a contract involving public law character.
34. Here again, it is important to note that the parties before the court were private parties agitating a commercial dispute and no contract involving a public law character was involved in the case. The judgment of the Supreme Court in Liverpool & London P.I. Association extensively refers to and affirms the law stated in M.V. Elizabeth. It deals at great length on the need to invoke international principles of common law of nations, which include the 1999 Arrest Convention. In fact, the immediately preceding paragraph 59 of the Judgment clarifies that "if the 1952 Arrest Convention had been applied although India was not a signatory thereto, there is obliviously no reason as to why the 1999 Arrest Convention should not be applied". As pointed out hereinabove, the case of M.V. Elizabeth also did not involve enforcement of a contract of public law character and yet the 1952 Arrest Convention was applied on the basis that the principles incorporated therein were "derived from the common law of nations as embodying the felt necessity of international trade" and as such were "part of common law of India". The applicability of the 1999 Convention being considered by the Supreme Court on the same footing as the 1952 Convention in the case of Liverpool & London P.I. Association, there is no reason why the 1999 Convention generally needs to be restricted in its application as suggested by the Applicant. The words "it should be applied only for enforcement of a contract involving public law character" in the judgment obviously refer to other cases not involving maritime claims where questions which affect only the internal order and economy of the ship arise, as distinguished from questions which involve the peace and tranquillity of the port or strangers to vessel or appeals to local authority etc. Paragraph 74 of the judgment of the Supreme Court in M.V. Elizabeth clarifies this as follows:-
This jurisdiction is, however, assumed only when, in the opinion of the local authorities, the peace or tranquillity of the port is disturbed, when strangers to the vessel are involved or when the local authorities are appealed to. Questions which affect only the internal order and economy of the ship are generally left to the authorities of the flag state. Coastal States are entitled to assume jurisdiction in respect of maritime claims against foreign merchant ships lying in their waters. These ships are liable to be arrested and detained for the enforcement of maritime claims
[emphasis supplied]
35. The Applicant, in this behalf, referred to the judgment of the Gujarat High Court in the case of Croft Sales & Distribution Ltd. (supra), where the Gujarat High Court refused to grant any relief based on the 1999 Convention holding that the matter before it did not involve a contract with public law character on the ground that (i) the State or instrumentality was not concerned with the enforcement of the contract and (ii) no question regarding sovereignty of the nation, environment, pollution, disputes of sea water etc., where public interest was involved, arose in the case.
36. I am, with respect, unable to agree with the judgment of the Hon''ble Gujarat High Court. As stated above, in both the judgments of the Supreme Court, namely, M.V. Elizabeth and Liverpool & London P.I. Association, neither the State nor any instrumentality of the State was involved. The contracts were of a purely private nature. In M.V. Elizabeth (supra), the Plaintiff was a private limited company. Defendant No. 1 was a foreign company. The dispute also involved only a breach of duty by leaving the Port and delivering the goods to the consignee in breach of the Plaintiff''s directions to the contrary, thereby committing the tort of conversion of goods. In Liverpool & London P.I. Association the case of the Appellant Liverpool & London P.I. Association was that the two vessels Sea Ranger and Sea Glory, which were sister vessels of the 1st Respondent vessel M.V. Sea Success and were allegedly owned by the 2nd Respondent, had not paid insurance premium due and payable by the 2nd Respondent and that these unpaid calls were "necessaries" leading to a maritime claim warranting arrest of the 1st Respondent vessel Sea Success. This again is a purely commercial dispute between private parties with no question of enforcement of contract having any public law character involved in it. Besides, I am bound by the Full Bench Judgment of this Court in J.S. Ocean Liner LLC, which itself is based on the judgments of the Supreme Court in the cases of M.V. Elizabeth and Liverpool London P.I. Association, as quoted above.
37. The next question, which falls for consideration, is, whether by virtue of Article 3(2) of the 1999 Convention, arrest of a ship beneficially owned by the person, against whom there is a maritime claim in respect of another ship, is permissible. It is submitted by the Applicant that Article 3(2) includes only the registered owner of the ship, whereas it is the case of the Plaintiff that it includes not merely the legal (i.e. registered) owner but also the equitable owner.
38. Now, going by the ordinary meaning of the expression "owned by the person" or the term "owner", the expression or term should include true/real owner and there is nothing in our law that restricts a person from being considered the true/real owner unless the vessel is registered in his name. Besides, the applicability of Article 3(2) of the 1999 Convention is not restricted to registered owner. In other words, the ambit of the expression in Article 3(2) "owned by the person" is not restricted to "registered owners" of ships. That it does not use the expression "beneficial owner" does not indicate its applicability being so restricted. The term "owner" refers to the true/real owner. If it were otherwise, the Article would have so provided for, barring possibly a statutory provision to the contrary, ownership is not dependent upon registration.
39. The concept of beneficial ownership is accepted by the law of this Country, particularly in regard to ships, by virtue of its express recognition in the Merchant Shipping Act, 1958. Section 71 of that Act provides that "where any person is beneficially interested otherwise than by way of mortgage in any ship or share in a ship registered in the name of some other person as owner, the person so interested shall, as well as a registered owner, be subject to all the pecuniary penalties imposed by this or any other Act on the owners of ships or shares therein, so nevertheless that proceedings for the enforcement of any such penalties may be taken against both or either of the said parties with or without joining the other of them". This shows that the concept of beneficial ownership of ships forms part of Indian law and statute and the court is entitled to look at who the real beneficial owner is.
40. That the word "owner" appearing in the Arrest Convention 1999 is not limited to "registered owner" and can and does include "beneficial owner", is also accepted by English Courts. In the case of The Aventicum (which is referred to in Liverpool & London P.I. Association) (at page 187 of the judgment) the Court has said that:-
where damages are claimed by cargo owners and there is a dispute as to the beneficial ownership of the ship, the court in all cases can, and in some cases should, look behind the registered owner to determine the true beneficial ownership";
and further that,
the court shall not be limited to a consideration of who is the registered owner or who is the person having legal ownership of the shares in the ship; the directions are to look at the beneficial owner.
41. The Applicant relies on the English cases of The Evpo Agnic and M.V. Mawan and the Division Bench judgment of the Calcutta High Court in the case of vessel M.V. Dong, as well as the judgment of a Learned Single Judge of this High Court in the case of M.V. Qi Lin Men, to contend that a ''beneficial owner'' is not included in the term ''owner'', in respect of a ship for the purposes of arrest.
42. The case of The Evpo Agnic involved a maritime claim arising out of loss or damage to goods carried on the M.V. Skipper 1. The Plaintiff in that case arrested M.V. Evpo Agnic stating that the beneficial owners of the two ships M.V. Skipper 1 and M.V. Evpo Agnic were one and the same, and hence for a claim against the Owner of M.V. Skipper 1 the Plaintiff was entitled to arrest the M.V. Evpo Agnic. The Court of Appeal while vacating the writ of arrest held as follows:
... for present purposes, what is in issue is what is meant by "owner". Does it refer to the registered owner, who necessarily is the legal owner, or to someone who has only an equitable property in the ship?
In answering this question I bear in mind three important considerations. First, it is a basic rule of construction that where a statute employs different terminology in different provisions, prima facie a different meaning is intended and this is particularly the case if the differing terminology occurs within a single sub-section. "Owner" in par. (b) thus falls to be contrasted with "beneficial owner" in pars. (i) and (ii). Second, all maritime nations maintain registers of shipping which record the names of the owners. These registers are of fundamental importance as establishing the flag of the vessel, thereby making it for some purposes part of the floating territory of that country and subjecting it to the laws of that country. I would therefore regard the concept of a registered owner as being a nominal owner as a contradiction. Third, the Convention clearly looks to ownership and registered ownership as one and the same, although as Mr. Justice Robert Goff pointed out in The I Congresso del partido (1977) 1 LLR 536 at p. 562; (1978) 1 Q.B. 500 at p. 541, the "trust" concept involving a dichotomy between legal and equitable ownership may be unknown to some, and perhaps most, other jurisdictions. My conclusion is that, in relation to a registered ship "owner" in Section 21 (4)(b) means "registered owner".
Mr. Kenneth Rokison, Q.C., appearing for the Plaintiffs, submits that this cannot be right because, if it were, even the particular ship could not be arrested if it could be shown that the registered owner was not the beneficial owner of all the shares in the ship. If this is so, it is an understandable casus omissus, because in real commercial life, thus far at least, registered owners, even when one-ship companies, are not bare legal owners. They are both legal and beneficial owners of all the shares in the ship and any division between legal and equitable interest occurs in relation to the registered owner itself, which is almost always a juridical person. The legal property in its shares may well be held by A and the equitable property by B, but this does not affect the ownership of the legal and equitable property of the company.
43. The case of The Evpo Agnic, on a close scrutiny, supports the case that the term "owner" is not restricted to the "registered owner", where the legal, i.e. registered, ownership of a ship is separated from the beneficial ownership of the shares in that ship.
44. The case of The Evpo Agnic considers the basis of the admiralty jurisdiction of the English High Court to be found in Ss. 20-24 of the Supreme Court Act, 1981, the power of arrest being contained in Section 21, which in turn brought the right of arrest in rem in the English Courts in conformity with the Arrest Convention 1952. Article 3 of the 1952 Convention, inter alia, provided as follows:-
(1) Subject to the provisions of paragraph (4) of this Article and of Article 10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail; but no ship other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claims enumerated in Article 1(1)(o), (p) or (q).
(2) Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons.
Section 21(1) to (4) of Supreme Court Act, 1981 is reproduced hereunder:
Mode of exercise of Admiralty jurisdiction:
21-(1) Subject to Section 22, an action in personam may be brought in the High Court in all cases within the Admiralty Jurisdiction of that court;
(2) In the case of any such claim as is mentioned in Section 20(2)(a), (c) or (s) or any such question as is mentioned in Section 20(2)(b), an action in rem may be brought in the High Court against the ship or property in connection with which the claim or question arises;
(3) In any case in which there is a maritime lien or other charge on any ship, aircraft or other property for the amount claimed, an action in rem may be brought in the High Court against that ship, aircraft or property;
(4) In the case of any such claim as is mentioned in Section 20(2)(e) to (r), where-
(a) the claim arises in connection with a ship; and
(b) the person who would be liable on the claim in an action in personam ("the relevant person") was, when the cause of action arose, the owner or charterer of, or in possession or in control of, ship.
an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against-
(i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respect all the shares in it or the charterer of it under a charter by demise; or
(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it.
45. The court, in that case, was concerned with the question: "who is ''the relevant person'' for the purposes of Section 21(4)(b)"? The court found that such a person has to meet two criteria. First, he must be the (or possibly a) person who would be liable in personam. Second, he must, at the time when the cause of action arose, have been the owner or charterer of, or in possession or control of, the ship. Then, the court considered: what is meant by "owner". Does it refer to the registered owner, who necessarily is the legal owner, or to a beneficial owner, who has an equitable property in the ship? It is this question, which was answered by the court by holding that in relation to a registered ship, owner in Section 21 (4)(b) means "registered owner". The court, inter alia, used the rule of construction that where a statute employs different terminology in different provisions, prima facie a different meaning is intended. The court in this context noted the different terminology occurring within the single Sub-section, namely, "owner" in clause (b) of Sub-section (4) and "beneficial owner" in paras (i) and (ii) of that Sub-section. Thus, while holding that "the particular ship" (i.e. the ship in connection with which the maritime claim arose) must be owned by the registered owner (as opposed to "beneficially owned"), the ship to be arrested may be "beneficially owned" by the registered owners of the "particular ship". This is what was meant by the Court of Appeal when it held in conclusion as follows:-
The purpose of Section 21(4) is to give rights of arrest in respect of "the particular ship", ships in the ownership of the owners of "the particular ship" and those who have been spirited into different legal, i.e. registered ownership, the owners of "the particular ship" retaining beneficial ownership of the shares in that ship. This was the situation in The Saudi Prince.
The court, in fact, noted that the latter situation was alleged to be the situation in The Aventicum (supra) i.e. the ship to be arrested was beneficially owned by the registered owners of the particular ship.
46. In the case of M.V. Mawan, when the cause of action arose the registered owner of the ship Stanley Bay was Chang Chun Shipping Co. Ltd., of Hong Kong. But at the time when the action was brought, that company did not own, and had never owned, any shares in the ship Mawan against which the action was brought. The court in fact noted that the counsel for the Plaintiffs (in support of their application for a warrant of arrest) "did not state, nor do the Plaintiffs contend, that Chang Chun Shipping Co. Ltd., was when the writ was issued or at any time the beneficial owner as respects all the shares in Mara" (i.e. Mawan as it was earlier known).
47. In the judgment of the Division Bench of Calcutta High Court in the case of M.V. Dong Do. the court held:
In the instant case the allegation made in the plant by the Plaintiff are absolutely vague. Excepting stating, inter alia;
The Vessel Dong Do is a sister vessel of the vessel M.V. Kim Dong. The said two vessels have common owners and both the vessels are owned and controlled in all respects by the Socialist Republic of Vietnam.
No statement had also been made as regard how and in what manner both the ships can be said to be the sisters ship. In the Plaint it is not stated that the ships although belonging to the different companies the companies were constituted with a view to commit fraud on its creditors. It has not been denied that the two ships belong to two different concerns but the Plaintiff proceeded on the basis that as both the companies belong to the Socialist Republic of Vietnam, the latter is the owner of both the ships. Such a concept can neither be countenanced under the Companies Act, 1956 nor under common law, much less in a Maritime action which is an action in rem".
The judgment turns on the facts of the case where the court found that the two ships belonged to sister companies and the averments were basically vague and no statement had been made as regards how and in what manner both the ships can be said to be sister ships. However, what is important is that the High Court in paragraph 8 of the judgment accepts that the law of the land is that, "a sister ship would include ships belonging to different concerns if there is a common beneficiary.
48. The Applicant relied on the judgment of a Single Judge of this Court in the case of Polestar Maritime Ltd. vs. M.V. QI LIN MIN. The facts of that case are entirely different. The maritime claim in that case arose out of an agreement for "sale" of a vessel. The Plaintiff was the aggrieved seller of the ship The Rewa. The Plaintiff therefore could not have arrested his own ship The Rewa under Article 3(1) nor could have arrested any other vessel owned by the defaulting buyer under Article 3(2) because the buyer was not the owner or demise charterer or time charterer or voyage charterer of The Rewa which was the ship in respect of which the maritime claim arose. Thus the claim did not exfacie satisfy the requirement of Article 3(2) of the 1999 Convention. The question of beneficial ownership simply did not arise. The Learned Single Judge in fact stated in paragraph 13, that even if Defendant Nos. 2 and 3 were the owners of the 1st Defendant Vessel, yet the Plaintiff could not arrest the vessel
49. The question as to whether the arrest of a ship beneficially owned by the person against whom there is a maritime claim in respect of another ship is permissible, must thus be answered in the affirmative.
50. The next question is the most crucial question and on its answer depends the fate of this case, namely, whether the 1st Defendant vessel is of the beneficial ownership of Defendant No. 2.
51. At the outset it may be noted that what the Plaintiff really argues here is not that the 1st Defendant vessel is beneficially owned by Defendant No. 2 against whom the Plaintiff has a maritime claim, but that the 1st Defendant vessel and Defendant No. 2 Company are beneficially owned by one and the same person. It is not the Plaintiff''s case that Defendant No. 2 beneficially owns the shares of the vessel Rainbow Ace, but that by reason of factors such as common address, common director etc. the vessel Rainbow Ace (the 1st Defendant vessel) and the company Defendant No. 2 are beneficially owned by Mr. Wang Wendong, and thus, the Plaintiff is entitled to arrest the vessel Rainbow Ace for its maritime claim against Defendant No. 2 who was the charterer of its ship M.V. J. Tong. This clearly involves lifting of the corporate veil in order to determine who is the real person liable on an action in personam, or who is the real person against whom the Plaintiff has a maritime claim (who is also the owner of the vessel "Rainbow Ace"). In my opinion, such an enquiry is completely different from an inquiry as to whether a ship can be arrested as a sister ship or a ship of the ownership (legal or beneficial) of the person against whom there is a maritime claim in respect of another ship. The weight of both Indian and English cases including the cases of The Evpo Agnic and Mawan is against the lifting of the corporate veil in such a manner.
52. Both Indian and English authorities are unanimous in holding that a shareholder has no property, legal or equitable, in the assets of a company.
53. In Evpo Agnic, the Plaintiffs'' case was that Mr. Evangelos Pothitos, who described himself as a Greek shipowner, or his company, Pothitos Shipping Co. S.A., was the real owner of both ships, namely, Skipper 1 (i.e. the particular ship in respect of which the maritime claim of the Plaintiffs arose) and Evpo Agnic (i.e. the ship sought to be arrested for such maritime claim). The argument on behalf of the Plaintiffs basically was that the two separate companies which were the registered owners of the two vessels, were part of an arrangement which had the effect of covering up the true ownership of those vessels and in such a case, the court should lift the corporate veil in order to determine the "relevant person" who would be liable on an action in personam. The Court of Appeal refused to lift the corporate veil as suggested by the Plaintiffs. The Court of Appeal concluded:-
The truth of the matter, as I see it, is that Section 21 does not go, and is not intended to go, nearly far enough to give the Plaintiffs a right of arresting a ship which is not "the particular ship" or a sister ship, but the ship of a sister company of the owners of "the particular ship.
54. In The Mawan, the Plaintiffs case was that the two ships, namely, Stanley Bay (against which the Plaintiffs had a maritime claim) and The Mawan (which was sought to be arrested), were built to the same design; Stanley Bay was sold to Chang Chun Shipping Co. Ltd. and The Mawan to Chang Bai Shan Shipping Co. Ltd., both of which companies had been registered in November 1981; their registered addresses were the same; they had the same directors. It was submitted that, "if one looks at all the connecting links between the shareholders, the directors and the management of Chang Chun and Chang Bai Shan, it becomes crystal clear that the beneficial ownership of these two ships is vested in the same person or company and that, therefore, they are truly sister ships despite the efforts of the owners to conceal that fact". The Queen''s Bench Division did not countenance this argument. It held:-
That approach involves not merely lifting a corporate veil but also sweeping aside all the corporate structure. In 1952 when the Convention Relating to the Arrest of Seagoing Ships was signed at Brussels the High Court Contracting Parties agreed that a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship. At the time when that agreement was reached, limited liability companies were well known. It must have been in the minds of all the parties to that agreement that shipowners would seek to reduce the possibility of the arrest of "their" ships by incorporating "one ship companies". They have done so.
Parliament has given effect to that Convention in words which I have already quoted. The evidence shows that this claim arose in connection with the ship Stanley Bay. The person who would be liable to the plaintiffs in personam is the registered owner, Chang Chun Shipping Co. Ltd. At the time when the action was brought that company did not own, and has never owned, any shares in the ship Mawan against which this action is brought.
55. In the case of M.V. Dong Do before the Calcutta High Court, the case of the Plaintiffs was:
The vessel" "M.V. Dong Do" and the vessel "M.V. Kim Dong" at all material times were and still are both owned in all respect by the Government of Socialist Republic of Vietnam. The Plaintiff further states that at time when the cause of action in the Instant suit arose both the vessels were in use or Intended for use for commercial purpose.
The vessel Dong Do is a sister vessel of the vessel M.V. Kim Dong. The said two vessels have common owners and both the vessels are owned and controlled in all respects by the Socialist Republic of Vietnam.
The court refused to lift the corporate veil and find by reason of the entire shareholding of the State in the two companies owning the two vessels, that the two vessels were sister ships.
56. The judgments of the Supreme Court in the cases of Bacha F. Guzder and Indowind Energy Limited clearly hold that a shareholder has got no interest in the property of the company and a company is a juristic person and is distinct from its shareholders and that the position of shareholders of a company is not analogous to that of partners of a partnership. This clearly supports the case of the Applicant. Absent a case of fraud which may call for lifting of a corporate veil in an appropriate case, a shareholder cannot be held to be the real persona of a company and equated with it.
57. However, on the material placed on record by both the parties and keeping in mind the elements of balance of convenience and irreparable injury involved in the matter, I now proceed to examine whether the Plaintiff has made out even a prima facie case that the Defendant No. 1 vessel is in the same beneficial ownership as Defendant No. 2.
58. Admittedly, Rainbow Navigation Investment Co. Ltd. BVI is owned by Mr. Wang Wendong. The Applicant Company-Rainbow Ace Shipping S.A. Panama is owned by Rainbow Navigation Investment Co. Ltd. BVI. The owner of the Defendant No. 1 vessel is the Applicant-Rainbow Ace Shipping S.A. Panama. Rainbow Ace Shipping Pte. Ltd., Singapore is a subsidiary Company of the Applicant. Therefore Mr. Wang Wendong is admittedly the beneficial owner of the Defendant No. 1 vessel and also owns the Applicant Company''s subsidiary Rainbow Ace shipping Pte Ltd., Singapore.
59. Mr. Wang Wendong was a 55 per cent shareholder and Director in the Company Whim Star Company Ltd., which was admittedly de-registered on 12th September 2009.
60. One Cartier Investment Co. Ltd., Samoa is the owner of the Defendant No. 2 Company-Whim Star Chartering Co. Ltd., Hong Kong. The Directors of the Defendant No. 2 Company are Shan Bing and Li Hang (who subsequently resigned) from the Defendant No. 2 Company. Mr. Li Hang apart from being a Director of Defendant No. 2 Company was also a Director in the subsidiary of the Applicant Company-Rainbow Ace Shipping Pte. Ltd. Singapore. ZJHX Shipping Co. Ltd., Qingdad, China, is a Chartering Company, 95 per cent owner of which is Mr. Shan Bing.
61. The Plaintiff, who contends that Mr. Wang Wendong apart from being the beneficial owner of Rainbow Navigation Investment Co. Ltd., BVI, the Applicant Company-Rainbow Ace Shipping, S.A. Panama, the subsidiary of the Applicant Company--Rainbow Ace Shipping Pte Ltd. and the Defendant No. 1 vessel also owns Whim Star Chartering Co. Ltd., Hong Kong--the Defendant No. 2 Company and also Whim Star Company Ltd. which stood de-registered on and from 12th September, 2009 and continued to illegally carry on its business upto October, 2010, has in support of its contention made the following submissions:
62.1. (a) According to the Plaintiffs, their association with Mr. Wang Wendong goes back to the year 1998 when the Plaintiff negotiated with ''Whim Star Group'' primarily with Mr. Wang Wendong who was its owner. Mr. Wang Wendong set up Whim Star Co. Ltd. in 2004 as majority owner (55 % shares) and all business dealings of the Plaintiff were with Whim Star Co. Ltd. The said Whim Star Co. Ltd. was de-registered on 12th February 2009. However, there were at least 8 voyage charters between the Plaintiff and Whim Star Co. Ltd. in 2010. The Whim Star Group started using Whim Star Chartering Co. Ltd.-Defendant No. 2 in their charter parties with the Plaintiff from December 2010 onwards. Mr. Yang Qing, who is the present Vice General Manager of the Plaintiff, has personally met Mr. Wang Wendong on several occasions at his office in Qingdao City and confirms that Mr. Wang Wendong is the owner of the Group. The Plaintiff has also stated in the Plaint that Mr. Wang Wendong has migrated to Canada but continues to own, manage, operate and control the Whim Star Group and it is now confirmed by Defendant No. 1 that Mr. Wang Wendong lives in Canada because his affidavit dated 8th February 2013 is notarized in Canada.
62.1. (b) However, the Plaintiff has not produced any evidence to show that since 1998 or for any other years, the Plaintiff negotiated with Mr. Wang Wendong or that there existed any group known as the ''Whim Star Group'' or that Mr. Wang Wendong was the owner of the purported ''Whim Star Group''. It therefore cannot be accepted that the purported ''Whim Star Group'' started using Whim Star Chartering Co. Ltd.-Defendant No. 2 in their charter parties with the Plaintiff from December 2010 onwards. Though it is alleged that Mr. Yang Qing, who is the Vice General Manager of the Plaintiff has personally met Mr. Wang Wendong on several occasions at his office in Qingdao City and confirms that Mr. Wang Wendong is the owner of the Group, Mr. Yang Qing has not filed any affidavit saying so. Nothing would turn on the fact that the Plaintiff has stated in its plaint that Mr. Wang Wendong has migrated to Canada, in the absence of their establishing that there existed the purported ''Whim Star Group'' and such group is owned, managed, operated and controlled by Mr. Wang Wendong.
62.2. (a) It is next submitted by the Plaintiff that all the Companies and individuals named in the Plaint and the Chart handed over by the Plaintiff have operated from a common address. According to the Plaintiff, Whim Star Co. Ltd. and Whim Star Chartering Co. Ltd. (Defendant No. 2) have their operational address at Sunshine Towers, Qingdao, China. In support of this submission, the Plaintiff has relied on a print out dated 23rd February, 2013 taken from the Website of Whim Star Company (Vol. II page 134). It is further submitted that the Fixture Notes issued by Whim Star Co. Ltd. and Whim Star Chartering Co. Ltd. during the period September to December 2010 (Vol. I pages 105, Vol. II Pages 140-151) bears fax numbers at the bottom of each Fixture Notes which are of the Sunshine Tower address as appearing on the business card of Mr. Shan Bing. It is submitted that the business card of Mr. Wang Wendong also shows the same Sunshine Tower address (Exhibit-F Page 42). It is also pointed out that as per the Loan Agreement dated 22nd June 2010 (Vol. 1 pages 8-101) entered into by the Applicant with China Minsheng Banking Corporation Ltd. for securing a loan for the construction of Defendant No. 1 vessel-M. V. Rainbow Ace, the Chief Executive Office and the chief place of business of Defendant No. 1 is located at Sunshine Tower, Qingdao, China. In clause 15 titled "Notices and Demand" of the said Agreement, it is provided that the notices or demand addressed to the owners of Defendant No. 1 should be sent to the Sunshine Tower, Qingdao, China address. Likewise, the Mortgage Agreement dated 22nd June 2010 executed by Rainbow Nice Shipping Ltd., owner of the vessel Rainbow Harmony also states that the address of the mortgagor viz. Rainbow Nice Shipping Ltd. is Sunshine Tower, Qingdao, China. The Mortgage Deed dated 17th March 2010 executed by Rainbow Wealth Shipping Ltd., owner of M.V. Rainbow Lucky also gives the address as Sunshine Tower, Qingdao, China. It is further pointed out that prior to incorporation of Defendant No. 2 on 22nd November 2010, a Company by the name of Cartier Investment Co. Ltd. was set up in Samoa on 13th September 2010. The address of the Officer of Cartier Investment Co. Ltd. as appearing in the application made by Cartier Investment Co. Ltd. for incorporation of Defendant No. 2 is Sunshine Tower, Qingdao, China. It is submitted that therefore all this goes to show that all the three vessels-Rainbow Ace, Rainbow Harmony and Rainbow Lucky operate from the same Sunshine Tower, Qingdao address, and all three vessels are in the same beneficial ownership of Mr. Wang Wendong. It is further submitted that as admittedly Mr. Wang Wendong is the beneficial owner of Rainbow Ace, he is also prima facie the beneficial owner of the other two ships.
62.2. (b) Whim Star Co. Limited in which Mr. Wang Wendong had 55 per cent shareholding is admittedly de-registered on 12th September, 2009. Mr. Wang Wendong has pointed out that the Whim Star Co. Limited which has carried on business with the Plaintiff upto the year 2010 has nothing to do with him and he is not concerned with the said Whim Star Ltd. either as a shareholder or a Director or in any manner whatsoever. The address at Sunshine Tower used by the said Whim Star Co. Ltd. in 2010 cannot be linked with Mr. Wang Wendong in the absence of any substantial evidence by way of shareholding or Directorship showing Mr. Wang Wendong''s connection with the said Whim Star Co. Ltd. The same reasoning applies to the fax numbers appearing at the bottom of the Fixture Notes with Whim Star Company Ltd. and Whim Star Chartering Co. Ltd. as the said Fixture Notes are prepared/issued during the period 20th September 2010 to 22nd December, 2010. It is true that in the Loan Agreement dated 22nd June 2010 executed between the Applicant with China Minsheng Banking Corporation Ltd. for securing a loan for the construction of M.V. Rainbow Ace, the Chief Executive Office and the Chief place of business of Defendant No. 1 vessel is shown as Sunshine Tower, Qingdao, China and it is also stated that the notices as well as the demand should be sent at the above Sunshine Tower, China address. Likewise, the Mortgage Agreement dated 22nd June 2010 executed by Rainbow Nice Shipping Ltd., owner of the vessel Rainbow Harmony, also states that the address of the Mortgagor viz. Rainbow Nice shipping Ltd. is the same i.e. Sunshine Tower, China. However, as explained by the Applicant, the vessel Rainbow Harmony was mortgaged for the purpose of securing a loan for the construction of the first Defendant vessel M.V. Rainbow Ace on which the Bank has a first charge. The agent for all the vessels viz. Rainbow Ace, Rainbow Harmony and Rainbow Lucky is ZJHX Shipping Co. Ltd. whose address is 620A, Sunshine Towers, 61 Xiang Gang Zhong Road, Qingdao, China. The Applicant and the Rainbow Companies used the said address of their agent as the local address, including in the said loan documents. Mr. Shan Bing was 95 % owner of ZJHX shipping Co. Ltd., Mr. Shan Bing is the Director of Whim Star Chartering Co. Ltd., Hong Kong-Defendant No. 2, the 100 % owner of which is Cartier Investment Co. Ltd., Samoa. Therefore there is nothing unusual if the address of the Officer of Cartier Investment Co. Ltd. in the application made by Cartier Investment Co. Ltd. for incorporation of Defendant No. 2 is shown at Sunshine Tower, China. Apart from the legitimate explanation given by the Applicant for the use of common address, it is not unusual for different Companies to use a common address. Even otherwise, if Mr. Wang Wendong and his Companies have used the address which is also used by Defendant No. 2, it can by no stretch of imagination imply or be presumed that Mr. Wang Wendong is the beneficial owner of all the Companies using the said common address.
62.3. (a) The Plaintiff has further submitted that the Fixture Notes on behalf of Whim Star Co. Ltd. as well as Whim Star Chartering Co. Ltd.-Defendant No. 2 appear to be signed by the same person. The signature on the Mortgage Agreement dated 17th March 2010 executed by Rainbow Wealth Shipping Ltd. and the signature on Fixture Notes also appear to be the same. The Plaintiff has also submitted that Mr. Li Hang is a common Director of the subsidiary of the Applicant Company and Defendant No. 2. Therefore Mr. Wang Wendong is exercising day to day management and control over Defendant No. 2 through Mr. Li Hang and that Defendant No. 2 is in the beneficial ownership of Mr. Wang Wendong.
62.3. (b) I have already observed above that these Fixture Notes pertain to the period after the Whim Star Co. Ltd. in which Mr. Wang Wendong had 55 per cent of the shareholding, stood deregistered. Mr. Wang Wendong has stated on oath that he has nothing to do with the Company named Whim Star Co. Ltd. which has carried on business after de-registration of his Company and therefore repeated reliance on documents executed by the Whim Star Co. Ltd. with which Mr. Wang Wendong is not connected with either as a Director or shareholder, will not lend any assistance to the case of the Plaintiff. The Defendant has stated that the signature on the Mortgage Agreement dated 17th March 2010 entered into by Rainbow Wealth Shipping Ltd., owners of Rainbow Lucky and the signature on the Fixture Notes is the same. No allegation pertaining to any signatures is made by the Plaintiff in the Plaint or even in response to the above Notice of Motion taken out by the Applicant though the Plaintiff has after filing of the Affidavit in reply has also filed an Additional Affidavit. For the first time some photostat copy of a mortgage agreement is tendered across the bar at the time of almost conclusion of the arguments by the learned Senior Advocate appearing for the Plaintiff which cannot be taken cognizance of. In any event, it is not unusual that when an office address is shared by more than one Company, the authorised person of such Companies may also be common. The Defendants have also submitted that the Director of the subsidiary of the Applicant Company is also a Director of Defendant No. 2 and therefore Mr. Wang Wendong is exercising day to day management control over Defendant No. 2 through the said common Director Li Hang. Merely because Li Hang is a common Director of the subsidiary of the Applicant Company in the Defendant No. 2, it cannot be said that Mr. Wang Wendong exercises day to day management control over Defendant No. 2 through Mr. Li Hang or that Defendant No. 2 is in the beneficial ownership of Mr. Wang Wendong. The resignation of Mr. Li Hang also lends no support to the case of the Plaintiff.
62.4. (a) It is submitted on behalf of the Plaintiff that initially the Applicant denied that any loan agreement was executed by Defendant No. 1 and further denied that Defendant No. 1 has its address at Sunshine Tower as stated by the Plaintiff and when the Plaintiff provided a copy of the Loan Agreement, Defendant No. 1 in its rejoinder stated that they denied that the Loan Agreement was because the Plaintiff did not produce the same. It is submitted that the Agency Agreement dated 1st March 2012 is false and fabricated and a got up document, as the Agency Agreement is dated 1st March 2012 whereas the Loan Agreement is dated 22nd June, 2010. Therefore, if the Agency Agreement was not in existence, the question of the Applicant using the address of the agent ZJHX Shipping Co. Ltd. did not arise. Again the vessel was delivered by the Shipyard only on 4th September 2012 as evidenced by the Certificate of Registration of the vessel. Consequently ZJHX Shipping Co. Ltd. could not have been appointed as an agent of the vessel when the vessel was not in existence on 1st March 2012 and was still under construction at the Shipyard. It is submitted that the conduct of Defendant No. 1 itself requires this Court to disbelieve and discard the assertion made by Mr. Wang Wendong in his affidavit that he has absolutely no connection with Cartier Investment Co. Ltd. and Defendant No. 2.
62.4. (b) The Applicant has submitted that initially they denied that any loan agreement was executed by Defendant No. 1 and further denied that Defendant No. 1 has the address at Sunshine Tower, as stated by the Plaintiff because the Plaintiff had not produced any copy of the loan agreement. The Applicant did not want to admit anything without going through the document. After going through the document, they have admitted the correct position. In my view, not accepting a fact without going through the document on the basis of which allegations are made, cannot be construed as dishonesty on the part of the Applicant as alleged by the Plaintiff. It is true that the Loan Agreement is dated 22nd June 2010 and the Agency Agreement is dated 1st March 2012. It is alleged by the Plaintiff that if the Agency Agreement was not in existence, the question of the Applicant using the address of the agent ZJHX Shipping Co. Ltd. did not arise on 22nd June 2010. The Applicant has shown ZJHX Shipping Co. Ltd., Qingdao, China as the agent of the three Rainbow vessels. Rainbow Harmony which was the vessel which was mortgaged in the loan document for the Defendant No. 1 was built in 2009 and ZJHX Shipping Co. Ltd. had been its agent since then and it is obvious that for this reason the address of ZJHX Shipping Co. Ltd. as a local address which according to the Applicant is required by all Banks when entering into a loan document, was provided. This does not make the document false or fabricated. Again though it is true that though the vessel was delivered by the Shipyard on 4th September 2012, the Agency Agreement has been executed on 1st March 2012. Since all the vessels of the Rainbow Group are managed/operated by ZJHX Shipping Co. Ltd. as Ship Managers/Ship operators, it appears that the Applicant has even in respect of the first Defendant vessel entered into an Agency Agreement on 1st March 2012 itself and keeping in mind the fact that the vessel would still take some time as regards the delivery, an amount of US $ 10,000 only is agreed to be paid. In fact, the Plaintiff has also pointed out that a Ship Manager cannot discharge the extensive function of Managing and Operating a ship of the size of m.v. Rainbow Ace (81.75 MT DWT) at a paltry rate of US $ 10,000 per year. In fact, if the Applicant wanted to fabricate an Agency Agreement, they could have fabricated the same by putting a date subsequent to 4th September 2012 instead of 1st March, 2012. Therefore, the submission advanced by the Plaintiff that the Agency Agreement dated 1st March 2012 between the Applicant and ZJHX Shipping Co. Ltd. is false, fabricated and got up cannot be accepted and is rejected. Therefore, it cannot also be held, as submitted by the Plaintiff, that the conduct of Defendant No. 1 requires this Court to disbelieve and discard the assertion made by Mr. Wang Wendong in his affidavit that he has no connection with Cartier Investment Co. Ltd. and Defendant No. 2.
62.5. (a) It is submitted on behalf of the Plaintiff that Mr. Wang Wendong cannot be believed because he has played a fraud by trading in the name of the defunct company Whim Star Co. Ltd. which he himself had de-registered on 12th September 2009 as will be evident from the fact that the Plaintiff has stated in para 13(b) of the Plaint that there were at least 8 voyage charterers between the Plaintiff and Whim Star Co. Ltd. in 2010. The Plaintiff has subsequently provided copies of two such charterers in their compilation of document in Vol. I to show that Whim Star Com. Ltd. continued to enter into contracts even though it was de-registered by Mr. Wang Wendong on 12th September 2009. The Plaintiff has also submitted that since Defendant No. 2 was incorporated on 22nd November 2010, all Fixture Notes were with Whim Star Chartering Co. Ltd.-Defendant No. 2 from December 2010 and until then the Fixture Notes were with Whim Star Co. Ltd., the last being October, 2010. According to the Plaintiff, the modus operandi was that the defunct Whim Star Co. Ltd. continued to enter into charter contracts (Fixture Notes) until Defendant No. 2 was set up. Once this was done Defendant No. 2 started entering into charter contracts.
62.5. (b) The aforestated allegations made by the Plaintiff cannot be accepted since Mr. Wang Wendong has in his affidavit denied any connection with the alleged new Whim Star Co. Ltd. or the two Companies who have been receiving and making payments under the said Fixture Notes. Mr. Wang Wendong has clearly stated that the old de-registered Whim Star Co. Ltd., Hong Kong has not been revived, that Mr. Wang Wendong has no connection with the new Whim Star Co. Ltd. except for a fictitious allegation of the Plaintiff unsupported by any material, no material to establish the allegation that the de-registered Whim Star Co. Ltd. is the same as the new Company has been produced. The Plaintiff has alleged that Mr. Wang Wendong has not produced any evidence to show that the Whim Star Co. Ltd. is a new Company. However, it is for the Plaintiff to establish that the Company which has operated as Whim Star Co. Ltd. after 12th September 2009 is the same Company which has continued to operate fraudulently and has continued to do business until Defendant No. 2 was incorporated.
63. In the facts and circumstances of the present case, what the Plaintiff has sought to do in support of its contention that Mr. Wang Wendong, the owner of the Applicant and the Defendant No. 1, is also the beneficial owner of the Defendant No. 2 Company, is to attempt to establish that Mr. Wang Wendong is also the majority shareholder in Cartier Investment Co. Ltd. However the Plaintiff has miserably failed to establish that Mr. Wang Wendong has any shares or is in any way connected with Cartier Investment Co. Ltd. The Plaintiff has therefore embarked upon the exercise of pointing out from the use of common address by Mr. Wang Wendong and/or his Companies which addresses were also used by Defendant No. 2. The Plaintiff has also tried to rely on the fact that there is a common Director between a subsidiary of the Applicant Company and Defendant No. 2 and that the signatures on certain documents are common. Apart from the fact that all these allegations have been dealt with by me hereinabove and rejected, and correctly dealt with by the Applicants as recorded in paragraphs 17 and 18 of this Judgment, these allegations do not help the Plaintiff in even prima facie establishing that Mr. Wang Wendong is a majority shareholder in Cartier Investment Co. Ltd. or in any way connected with Cartier Investment Co. Ltd. No connection of Mr. Wang Wendong with Cartier Investment Co. Ltd. is therefore even prima facie established by the Plaintiff. The Plaintiff has therefore failed to make out even a prima facie case in support of its contention that Mr. Wang Wendong is the beneficial owner of Defendant No. 2 Company which is 100% owned by Cartier Investment Co. Ltd. Therefore, the balance of convenience is also in favour of the Applicant and against the Plaintiff.
64. In view thereof, the following order is passed.
(i) The ex-parte order of arrest dated 28th January 2013 against the first Defendant vessel stands vacated and the first Defendant vessel stands released from arrest and is allowed to sail immediately.
(ii) Instrument of release to be dispensed with.
(iii) The Learned Advocate appearing for the Applicant makes a statement that there is no caveat against release of the vessel;
(iv) All parties including the Prothonotary and Senior Master, High Court, Bombay and the Sheriff of Bombay to act on an authenticated copy of the order.
(v) All concerned authorities, Port and Customs shall act on a fax/e-mail copy of authenticated copy of this order;
(vi) Plaintiff to pay poundage to the Sheriff of Bombay within a period of two weeks from today;
(vii) Prayer clauses (b) and (c) of the Notice of Motion are not granted since the said prayers are not supported by adequate particulars. However, liberty is granted to the Applicant to take out fresh Notice of Motion, setting out all necessary particulars and seeking appropriate reliefs in this behalf.
65. The Notice of Motion is accordingly disposed of. At the request of the Learned Senior Advocate appearing for the Plaintiff, the first Defendant shall not commence sail upto 10th May 2013.
