Addressing  conflict between Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 , Insolvency and Bankruptcy Code, 2016 (IBC) , Companies Act, 1956                            

Facts of the case :

• Admiralty Suits were filed and Orders of Arrest obtained against GOL Offshore Ltd.in several admiralty suits filed before Bombay High Court.                                         
• Official Liquidator of GOL Offshore Ltd. (Company in liquidation), through his assistant, objected to the Suit proceeding further without obtaining leave under S. 446 of the Companies Act, 1956
• Further National Company Law Tribunal, New Delhi, in the meanwhile, admitted a Petition under S. 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), additionally further a Moratorium under S. 14 of the IBC was also declared.

The legal contentions raised were as follows :

• Whether a  conflict between actions in rem filed under the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 and the provisions of Insolvency and Bankruptcy Code, 2016 and if so, how is the conflict to be resolved?                                                                                                                                                 
• Whether leave under Section 446(1) of the Companies Act, 1956 is required for the commencement or continuation of an Admiralty action in rem where a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator of the company that owned the ship?

Firstly , Stressing upon the need for identifying the  origin of a maritime claim i.e. whether the claim arose as a result of maritime lien or statutory lien is critical . Maritime claim has a wide layer from  where the existing subcutaneous lien has to be identified ,as the underlying cause of the lien is synthesized in a maritime claim. A Term with much wider ambit requires dissection to eventually discover the nature of lien existing which forms the fundamental guide to decide further action.                                                            

Secondly , When an action is brought against the vessel in rem, the Court exercises its jurisdiction treating the vessel which is sued as an entity in itself or as a juristic person . When the Court orders the sale of the vessel, it has the inherent power in the exercise of its Admiralty jurisdiction to convey upon the purchaser a valid title to the res that is sold free of all charges and encumbrances. This principle was established in common law as one fundamental to public policy since it would be manifestly contrary to the evolution of maritime law if a Court of competent jurisdiction which effected the sale of a ship were unable to convey a valid title to an innocent purchaser. Maritime claimants have a right to proceed against particular res, i.e., ship, as opposed to a general creditor who has no such right against particular res. A ship against whom a maritime claimant can proceed in an action in rem does not fall within the definition of a corporate debtor under the IBC and neither is the ship being proceeded against as an asset of the corporate debtor. It is the ship itself which is liable as an independent juridical entity de-hors the status of its owner and without reference to its owner. However in event a moratorium is declared under section 14 of the IBC then an action in rem if instituted prior to or after the declaration of the moratorium, cannot be continued during the corporate insolvency resolution process as this would defeat the very purpose of insolvency resolution under the IBC.

Thirdly , The Admiralty Act will be a special act which deals with Admiralty matters whilst the IBC is a general act which deals with corporate insolvency.       An action in rem is not against the property of the Corporate Debtor but an action against a juristic person, namely, the ship.                                                                                                                           As ruled by the Apex Court in Ashoka Marketing Ltd. & Anr. V/s. Punjab National Bank & Ors. and submitted that if there are two special acts, then the later act shall prevail as even though the prior act contains a non-obstante clause, the later act impliedly bars the jurisdiction of Civil Courts and vests exclusive jurisdiction in certain High Courts to entertain actions in rem .

Fourthly, Even if a moratorium is ordered under Section 14 of the IBC , it would not affect an action in rem filed under the Admiralty Act. If the owner of the ship who may be the Corporate Debtor deposits security and obtains release of the ship, then, on a declaration of moratorium under Section 14 of the IBC, the proceedings would have to be stayed but in the event of liquidation, Plaintiff in such a suit would be allowed to realise his security under Section 52 of the IBC.      

Thus, where there are two special enactments, one of which contains a non- obstante provision and bars the jurisdiction of the Civil Court and the other which does not contain a non-obstante provision, the clear legal position is that in the event of conflict the former Act will prevail. The principal of interpretation that the later Act overrides the earlier Act is not applicable in such a situation.                                                                               

Lastly , Applying the ratio of the judgment in Damji Valji , in view of Section 3 of the Admiralty Act which confers Admiralty jurisdiction exclusively on certain High Courts as defined in Section 2(1) (e) to the exclusion of all other High Courts and Civil Courts, the Company Court does not have jurisdiction to entertain and adjudicate upon any matter which the High Court vested with Admiralty jurisdiction is empowered to decide or determine under the Act. It must follow that provisions of Section 446(1) of the Companies Act will not operate on the proceedings which are pending before the High Court or which may be sought to be commenced before it.                                                     

In this view of the matter on a macro basis the Admiralty Act which is a special act prevails over the Companies Act which is a general act and no leave is required under Section 446(1) of the Companies Act for commencing a suit under the Admiralty Act or proceeding with a pending suit against the Company under the Admiralty Act when a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator.                                                         

Conclusively :                                                                                                                              A maritime claimant ought to be permitted to enforce his right in rem and obtain an order of arrest of the ship in question. This will enable him to perfect and / or crystallize his maritime lien or maritime claim as available to him under the Admiralty Act. The action in rem will not proceed till the moratorium is in place. This will ensure that the rights under the Admiralty Act are not defeated and at the same time this does not create any conflict with the provisions of the IBC. The action in rem will proceed if the corporate debtor is ordered to be liquidated. As the action in rem will proceed in accordance with the applicable law namely the Admiralty Act, the priorities for payment out of the sale proceeds will also be determined in accordance with the said Act. Section 53 of the IBC will not apply.

An action in rem against the ship is not an action against the owner of the ship who may be the corporate debtor as defined under the IBC. Neither is the action in rem considered as a proceeding against the asset of the owner / corporate debtor.

Thus held that no leave is required under Section 446 of the Companies Act, 1956 for the commencement or continuation of an Admiralty Suit in rem where a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator of the company.

References :

-Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017                   

-Companies Act, 1956

-Damji Valji Shah & Ors. V/s. Life Insurance Corporation of India & Ors., (1966) AIR(SC) 135                                                                                                                                

-Board of Trustees of Port Mumbai Vs. Barge Madhwa and anr.                           

-Ashoka Marketing Ltd. & Anr. V/s. Punjab National Bank, (1990) 4 SCC 406 August 8, (1983) 2 AC 450