INS Vindhyagiri-MV Nordlake Collision | Govt Seeks Damages Of Over ₹1300 Cr: Bombay High Court Limits German Company’s Liability To About ₹30 Crore

In a big setback to the Indian government, the Bombay High Court has limited German company MV Nordlake GmbH's liability for the losses and damages resulting from a collision between its merchant ship MV Nordlake and Naval warship INS Vindhyagiri on January 30, 2011 to about Rs. 30 crore.

Justice N. J. Jamadar limited the liability of the company for all claims to 27,89,234 Special Drawing Rights (SDR), equivalent to approximately Rs. 30 crore against Central government's claim of Rs. 1397.76 crore. This principal amount of liability will carry an interest at 12.75% per annum since the date of the incident. However, considering the ramifications on the government's claim, the court stayed the operation of this order for six weeks.

An SDR is an international reserve asset created by the International Monetary Fund to supplement the official reserves of its member countries. It is a potential claim on the freely usable currencies of IMF members, and not a currency in itself. SDRs can provide a country with liquidity.

“Plaintiff is entitled to limit its liability in respect of all losses and damages in respect of all property claims and consequential losses resulting from the collision between INS Vindhyagiri and M. V. Nordlake on 30 January 2011 under the provisions of the Merchant Shipping Act, 1958.”

The merchant ship was flying the flag of Cyprus and both India and Cyprus are signatories to the Convention on Limitation of Liability for Maritime Claims, 1976. The limit to the liability of the company has been calculated as per the carrying capacity (tonnage) of the vessel according to a formula provided under Article 6 of the Convention prior to its amendment in 1996.

Section 352A of the Merchant Shipping Act, 1958, provides for limitation of the vessel owner's liability and section 352B provides for calculation of amount of limited liability as per Article 6 of the Convention. The court held that under section 352A, right to limit liability is absolute, irrespective of whether the party seeking to limit its liability is at fault or not.

On January 30, 2011, merchant ship MV Nordlake was exiting the Mumbai port. At the same time, a convoy of 14 Naval ships including warship INS Vindhyagiri was entering the harbour. INS Vindhyagiri collided with M.V. Nordlake and was berthed at the port. It sank the next day.

MV Nordlake GmbH, owner company of the merchant ship, claimed that INS Vindhyagiri and another ship in the convoy did not move to their left and were about to pass MV Nordlake from the eastern side, which was contrary to the agreed plan. Meanwhile, another vessel MV Seaeagle was also entering the harbour and was contacting each naval ship seeking permission to overtake. MV Nordlake was being closed upon by three approaching vessels – the third vessel in the Naval convoy, INS Vindhyagiri (fourth ship in the convoy) and MV Seaeagle. MV Nordlake claimed that the confusion due to the passage of vessels resulted in the collision.

The Central government filed an Admiralty Suit for the arrest of vessel MV Nordlake and claimed damages of about Rs. 1,000 crore which was later increased to Rs. 1,397.76 crore via an amendment to the suit. MV Nordlake was released from custody after its owner company deposited Rs. 33.989 crore as security. The company filed a Suit in 2014 seeking to limit its liability as per the 1976 Convention. It filed the present Notice of Motion in that Suit.

The Central government opposed the Notice of Motion holding MV Nordlake responsible for the collision. It further claimed that if the liability is limited, it will be deprived of an opportunity to show that MV Nordlake acted recklessly with the knowledge or intention to cause damage.

The court noted that the purpose of limitation of liability was to protect the vessel owner against large claims exceeding the value of the ship and the cargo in case the vessel was involved in an accident, causing damage to cargo, another vessel or loss of any other property or personal life or personal injury.

The court directed that the security amount deposited by the plaintiff and the interest accrued be included in the limitation fund created under the order. If this amount falls short of the maximum liability decided by the court, the plaintiff will have to pay the remaining amount with interest at 12.75% per annum from February 17 till the date of deposit.

The court restrained all persons having claims arising out of the collision from exercising any right against any property or assets of the plaintiff except the limitation fund.

SDR is defined as a weighted average the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. On February 17, i.e. the date of this judgment, 1 Rupee equaled just over Rs. 0.009 SDR.

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