TMI Blog1974 (1) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 5,51,856. This hire is strictly payable in advance at the commencement of the calendar month. (3) The ship was placed at the disposal of the charterers. In terms of the time charterparty it undertook some voyages. Hire was paid by the charterers in advance till July Ii, 1973. After the commencement of the charterparty the period of hire was altered by consent to the parties and began from 12th of each month and ended with the 11th of the following month. This happened in April, 1973, when advance rent was paid for the period from April 12 to May II. Everything went well till July 12, 1973. On July 6, 1973, the shipowners sent their bill for advance hire for the period from July 12, 1973, to August Ii, 1973, to the charterers. The bill was for ₹ 5,51,856 and for ₹ 6,000 on account of overtime; in all for ₹ 5,57,856. On July 12, 1973, the charterers gave a cheque to the representative of the shipowners for ₹ 2,05,506.13 after deducting the following amounts from the hire charges : Less: (1) Recovery on account of actual time being more than standard time as per charterparty agreement. ₹ 3,02,349.87 (2) Ad hoc recovery on account of value of 304.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause and the charterers have referred the dispute to arbitration. The arbitration clause (clause 39) is in the following terms: Any and all differences and disputes of whatsoever nature arising out of the charter shall be referred to arbitration in accordance with the provisions of the Indian Arbitration Act, 1940. All matters for arbitration shall be referred to the Central Board of Arbitration (Joint Consultative Machinery) Ministry of Labour, Employment and Rehabilation, Government of India. All arbitration proceedings shall be held in Delhi and Court in Delhi shall have the jurisdiction in respect of such disputes and differences . (8) On August 14, 1973, the charterers asked the Central Board of Arbitration to enter upon the reference. The Board declined. In their letter dated November 23, 1973, the Government of India did not agree to the Board entering upon the reference of this dispute. They, however, said that they had no objection if the reference is made to Shri K. N. Wanchoo, retired Chief Justice of the Supreme Court of India, in his individual capacity. Shri K. N. Wanchoo is the Chairman of the Central Board of Arbitration. The charterers then made an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be put at their command and disposal. (13) I propose to take up the second of the two questions first and examine the charterers' case. The controversy between the parties is about the deductions made by the charterers from the shipowners' bill. The shipowners' case is that the deduction of ₹ 3,52,349.87 on the two counts set out hereinabove is unlawful and in terms of the charterparty they were entitled to withdraw the ship in default of payment of hire due to them after service of seven days notice by telex. The charterers, on the other hand, claim that these deductions are valid and in any case the shipowners had no right to withdraw the ship. This is the main question which calls for my decision. (14) The right of withdrawal of the ship by the shipowners from the charterers' service is contained in clause 8 of the charterparty and is in these terms: CLAUSE 8 PAYMENT of Hire PAYMENT of the said hire shall be made in Delhi monthly in advance less any amounts disbursed on owners' behalf and less any hire paid or expenses incurred by Charterers as may reasonably be estimated by them to relate to off-hire periods, and less any amounts due or esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terparty commenced on November I, 1972. The charterparty was executed on February 5, 1973. In my opinion, the charterers are not entitled to say that the vessel came into their service on 4-12-72. If this had been so it would have been stated in so many words in the charterparty. The shipowners have pleaded that they never gave the ship to Caltex. There is no denial to this pleading. In the circumstances I should assume that the ship was in the service of the charterers as from November 1, 1972 and if she was doing any voyage for the Caltex it must be on account of the charterers and not the shipowners. (16) Clause 24 provides that in order to judge the performance of the ship there shall be a review at the end of six months and at that time it will be seen whether she has lost or gained time or account of her speed. This has to be done in a six monthly basis. If she lost time the charterers are entitled to make deduction from the 8th month's charter hire immediately after the last month of the review period. This means that the period of six months would have been taken into account for performance. This period would end on April 30, 1973 as the charterparty commenced, on N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion without the log book you cannot find out performance of the ship at the end of every six months. (18) Another corrollary of this argument is that the charterers have not taken into consideration 108 hours to which the shipowners are entitled per quarter in terms of clause 21 Clause 21 provides that the owners shall compensate the charterers for the lost time if it is in excess of 108 hours on a cumulative quarterly basis. Any time in excess of 108 hours has to be treated as off-hire. It may well be that by reason of deficiency of personnel, breakdown of machinery, accident, etc. the efficient performance of the vessel may have been prevented. The shipowners are entitled to the maximum 108 hours as an allowance and this loss of time cannot be deducted from them as off-hire. Only the logbook will show when was the ship in motion and when stationary. The joint statement will not give any indication of the loss of 108 hours or any part thereof. (19) The charterers' counsel submits that in judging the performance as to speed the span of 108 hours has not to be taken into account. He says that clauses 21 and 24 are separate and distinct and in the reading of clause 24 claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce test of white oil or black oil debited this loss of time to the account of the shipowners. The shipowners never guaranteed pumping performance in respect of crude in the charterparty at Bombay. (22) The charterparty provides for a review on a six monthly basis. Commencing from November 1, 1972, the period of six months would naturally end on April 30. The review period which was taken into account ended on May 12, 1973. The shipowners' complaint is that the period of six months could not be extended to May 12, 1973. The counsel for the charterers submits that since the period of billing had been changed from 12th of each inoath to 11th of the succeeding month, therefore, there was nothing improper in reviewing the performance for the period ending May 12, 1973. On a plain reading of the charterparty it appears to me that that cannot be title correct basis. The charterparty uses the term ''calendar month or six monthly basis . The period must end with April 30. 1973 and cannot be taken beyond that These are some of the glaring errors which were made in making the deduction from the monthly advance hire and these errors appear to me to be quite fundamental and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for settlement of disputes in respect of deductions is not to be postponed to another month. The clause provides for two things: (1) the quantum of .. deduction, namely, the allowable deduction and (2) time of adjustment. (25) The charterers styled their deduction as 'recovery'. They do not say that it is a provisional deduction subject to settlement. Another item of ₹ 50,000 is styled as ad hoc though there is no provision whereunder the charterers could make an ad hoc deduction. (26) Clause 8 clearly provides that in default of payment of hire the owners may withdraw the vessel from the service of the charterers. That is the clear right of a shipowner. If monthly hire in advance is not paid strictly in terms of clause 8 the only thing he has to do is to serve a notice of seven days and if the amount is not paid within that period the shipowner has a right to withdraw the vessel. The shipowner need not make a demand for payment before exercising his right of withdrawal) ; see Scrutton on Charterparties,. 17th edition, page 354). All that is required is (1) default of payment and (2) the service of notice. (27) The counsel for the charterers then argued tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oday needs ships and if injunction is refused the charterers will suffer irreparable injury as they will not be able to bring crude to India. (30) The cases cited by the learned counsel for the charterers are all cases where the ship had either been mortgaged or sold by the shipowners and injunction was granted after the sale of the ship though the vendor was in possession and was able to perform the charterparty. In this case it is an admitted fact that the ship has been withdrawn from the service of the charterers and is now on a voyage for Ganda Lines. The ship is no longer inpossession of the charterers. The counsel argues that I should grant injunction so that the shipowners may not put it to a use inconsistent with the terms of the charerparty and this, he says, will put economic pressure on them and they will be compelled to come to terms with the charterers. In my opinion it cannot be done for reasons more than one. (31) To understand the principles of law relating to injunctions in cases of ships three notable decisions have to be examined. (32) In De Mattos (1) (supra) in 1858 it was decided that, though a charterparty was incapable of specific enforcement, equit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med the basis of their decision in Lord Strathcona Ss Co. (supra) (2). (36) In the Privy Council decision A chartered B's ship. B sold the ship to C, who had notice of the charterparty. It was held tha,t C was bound to let A have the ship according to its terms. The Privy Council said that the charterers have, and continue to have, an interest in the subject-matter of the contract . Judges have looked askance at the principles laid down in the Strathcona case (2). This decision gave rise to much controversy and was subjected to much criticism. It was viewed with some misgiving by Lord Wright in Close v. Theatrical Properties, (1936) 3 All. E.R. 483, 490(6) and by Lord Greene M. R. in Greenheigh v. Mallard, (1943) 2 All. E.R. 234, 239(7). (37) In 1958 Diplock, J. in Port Line v. Ben Line Steamers (1958) 2 Q.B. 146(8) reviewed the earlier cases and repudiated the decision of the Judicial Committee in the Strathcona case (2). He thought that this case was wrongly decided and he refused to follow it. (38) Early in 1956, B sold to C a ship, which was under a time charter to A for a period of about 30 months, beginning on 9 March, 1955. Simultaneously, B and C made provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a certain period agrees to do certain work for the charterer. but. is not a contract under which the charterer has any interest in the ship except that it is the vehicle with which shipowner is to do the agreed work. (SCRUTTON-CHARTERPARTIES,17th Edition edited by Me-Nair and Mocatta JJ. and Mustill, page 43 and pp. 101-102). (40) It is plainly wrong to say that a charterer has an interest in the ship. In Carver on Carriage by Sea (11th edition), page 30, it is said regarding the decision of the Privy Council in Lord Strathcona Steamship Co.'s case (supra) (2) : THEBoard appears to have been misled by words of Knight Bruce L. J., speaking of the charterer o a trading ship as the possessor and having control of it. Except in the case of a charter by demise-and the charter in that case was not-the charterer has no interest in the vessel but only a contractual right to its services. (41) The Strathcona (2) and Port Line (8) cases both concerned time 'charterparties. Under such contracts the charterer does not get possession of the ship. The shipowner simply engages to carry cargo in the ship for the charterer for the stipulated time. Diplock, J. said in Port Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essel altogether out of the power and control of the owner and vest that power and control in the charterer, so that during the hiring the master and crew are servants of the charterer and the shipowner is under no liability with regard to the cargo carried under the demise. Baurnwool v. Fumess (1893 A.C. 8.) (10). The charterer here becomes for the time the owner of the vessel; the master and crew become to all intents his servants and through them the possession of the ship is in him. However, a charterparty by demise is uncommon and generally the ship remains in the possession of the owner, the charterer acquiring the right only to put his goods in the vessel, and to have them carried: See Sandeman v. Scurr (1867) L.R. I Q.B. 86, 96(11). It is a matter of construction whether the charterparty is one by demise or not. (46) The test, therefore, is : Whose servants are to be in charge ? Apply this test to the facts of this case. On the whole instrument taken together the shipowners' servants are to be in charge of her. They are not the servants of the charterers. owners' liability to pay the master, officers and crew is clearly provided in clause 5. The master was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that where one party to a contract containing mutual covenants fails to perform his part, the other party will not be restrained from committing a breach of a negative covenant on his part. (50) The proviso to Section 42, in my opinion, applies to this case. The charterers have failed to perform the contract so far as it is binding on them. The charterers are not entitled to injunction if they do not pay the advance hire in terms of clause 8 or make arbitrary and capricious deductions there from. Justice does not require that the charterers should not pay rent as well as have the ship at their service. He who seeks equity must do equity. An unlawful deduction or de- duction in violation of the terms of the charterparty is as good as refusal to pay though there may be a semblance of payment. I have already come to the conclusion that the deductions were unlawful and unjustified and the charterers' conduct amounted to default of payment as used in clause 8 and the shipowners were entitled to withdraw this ship from the service of the charterers. (51) The argument of irreparable injury is no less unsound. Crude is in short supply but not ships. One would have thought th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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