Security For Maritime Claim Must Be Supported By Evidence, Should Not Be Harsh & Oppressive: Calcutta High Court

The Calcutta High Court has allowed a plea for revision of security payable by “MT TSM Pollux” a Liberian vessel which had allegedly damaged a significant portion of a Haldia Oil Jetty.

Earlier, a co-ordinate bench had directed for the vessel to be “arrested” conditionally, pending the payment of security to the tune of approx. Rs 88 crores.

In allowing the plea for revision of security by the applicant upon noting that the quantum of security directed to be paid is harsh and unreasonable, a single-bench of Justice Moushumi Bhattacharya held:

The law on compensation and damages for economic loss turns more on logic and rational thinking than a sympathy for the sufferer of loss. A claim for loss / compensation must be proximate to the occurrence as well as to the consequences of the loss and must not be unreasonable. An exorbitant claim can never be an automatic fallout to invocation of admiralty jurisdiction. The above considerations persuade this Court to hold that the reasonably best arguable case put forward by the plaintiff should be fixed at Rs. 4,77,70,265.93/- on account of a claim in tort for negligence.

Brief Facts

The applicant vessel had been directed to furnish a security of approx. 88 crores, or remain arrested due to its alleged action of damaging a Haldia oil jetty (“HOJ-I”).

The applicants complained against the quantum of security and modification of the order of arrest on the grounds that the amount of security fixed on the material facts shown to the Court were influenced by “suppression of material facts.”

Applicants counsel argued that they were most aggrieved by the “economic loss” component in the quantum since the plaintiff must not only show that there was negligence on part of the applicant, but also that the applicant owed a duty of care to the plaintiff.

It was submitted that the numbers presented for the calculation of quantum of security by the plaintiffs were “imaginary and inflated.”

Plaintiff’s counsel argued that the estimate of loss of income was reasonable and that the same was calculated on the basis of income which would be lost due to the damaged “loading arm” in the course of one year.

Findings of the Court

Court noted that the order of arrest and deposit of security was passed by a coordinate bench pursuant to the damage caused to the Twin Marine Loading /Unloading Arms of the plaintiff installed at Haldia Oil Jetty Port I (HOJ-I) by the crane of the applicant’s vessel being MT TSM Pollux on 14^th September 2023.

The Bench went through the break-up for calculation of damages by the coordinate bench and noted that the entire cause of action of the defendant against the plaintiff was based on the tort of negligence.

It was noted that the applicants had contended that the port authorities were liable for negligence damage caused to the applicant’s property.

Court further observed from the statements of the applicants that the plaintiff had two twin-arms for each oil jetty and that while one was damaged, the other remained fully functional.

It was noted that the plaintiff had claimed economic loss amounting to approx. Rs 83 crores, but did not disclose any evidence to substantiate the figure.

The entire projected loss of income for one year consequential to the damage of the loading / unloading arm at HOJ-I where the accident occurred is based on unsubstantiated figures, it was held.

It was observed that not only did the applicant not owe a duty of care directly to the plaintiff, there was no privity of contract between the plaintiff and defendant and that in the absence of any contractual relations between the parties, a claim for special damages could not arise.

It was therefore accepted by the Court that the quantum of security directed to be paid is harsh and unreasonable.

Court also observed that a joint inspection of the jetty would be essential to prevent a unilateral assessment of loss.

A claim for loss / compensation must be proximate to the occurrence as well as to the consequences of the loss and must not be unreasonable. The need for evidence to substantiate economic loss or at least a reasonable pre-estimate of economic loss hence assumes utmost importance, it was held.

It concluded that in the present case, the plaintiff’s claim for security was unsupported by the pleadings, and that there was no documentary evidence to prove the same either.

In such circumstances, the Court observed that ordering the arrest of vessel would tantamount to exacting security under duress, and that a court must not use such power oppressively and must see whether the plaintiff who claims security has the evidence to support the claim.

Accordingly, the Court held that the reasonably best arguable case put forward by the plaintiff should be fixed at Rs. 4,77,70,265.93/- on account of a claim in tort for negligence, and directed the applicant to deposit such amount with the Registrar, Original Side for vacating the order of arrest.

It disagreed to any further claims for security under the head of economic loss, and directed for a joint survey of the damage to take place following which it would consider the revision of security.

Case: Hindustan Aegis LPG Ltd. V The Owners And Parties Interested In The Vessel MT TSM Pollux

Case No: AS/5/2023

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