MV Nordlake entitled to limit damages payable for collision with INS Vindhyagiri to ₹20 crore: Bombay High Court

The Bombay High Court recently declared that Merchant Vessel Nordlake (MV Nordlake) is entitled to limit its liability in respect of losses and damages resulting from its collision with the Indian Naval Service (INS) vessel, INS Vindhyagiri in January 2011. [MV Nordlake GmBH v. Union of India].Justice NJ Jamdar passed the order last week after finding that the right of a ship owner to limit his liability (in certain claims for loss of property, life, damage, etc in connection with ship operations) under Section 352A of the Merchant Shipping Act, 1958 was absolute, and regardless of whether the ship owner was at fault or not. .The judge placed substantial reliance on an earlier single-judge ruling of the Bombay High Court in Murmansk Shipping Company v. Adani Power Rajasthan Ltd & Ors before holding:"I am, therefore, impelled to hold that the right to limit liability under Part XA of the Act of 1958 is absolute and without reference to the question of fault or privity on the part of the person who is liable and seeks to limit the liability.".The Court also found that there was no impediment in ordering such limitation of liability at an interim stage and in the notice of motion moved by MV Nordlake. As such, it declared that Nordlake was entitled to limit its liability in respect of all losses and damages, property claims and consequential losses resulting from the collision. "... the aggregate principal liability of the Plaintiff (MV Nordlake) for all claims in respect of all losses and damages in respect of all property claims and consequential losses resulting from the aforesaid collision shall be in the sum of Special Drawing Rates (SDR) 27,89,234/," the Court ordered. .The judge added that the principal sum of SDR shall carry an interest at the rate of 12.75 per cent per annum from January 30, 2011 (date of the collision) till the date of the order. .However, on the Navy's request, and considering the ramifications of the order on the Central government, the Court has stayed the implementation of the order for six weeks so that the Navy may prefer an appeal. .On January 30, 2011, MV Nordlake, owned by a German company, was being closed upon by three approaching vessels. In the confusion that ensued and while contacting each ship vessel, there was a collision between MV Nordlake and INS Vindhyagiri. The naval ship was taken to the port and it sank at her berth after the collision. The Indian Navy filed a suit for arresting Nordlake. However, after MV Nordlake deposited ₹33,98,90,00 as security, the vessel was released from arrest. MV Nordlake filed a cross suit seeking to limit its liability for the said collision. It also sought for the constitution of a limitation fund to limit its liability in the sum of Special Drawing Rights (SDR) 27,89,234, which is equivalent to ₹20,01,86,113 (over ₹20 crore). For this, it sought to withdraw the security amount deposited in the Central government's earlier suit.MV Nordlake contended that the damages sought by the Navy in their suit (₹1,397.76 crores) was in excess of the sum which it should pay since it had an absolute right to limit its liability under Section 352A of the Merchant Shipping Act. It added that, apart from the Navy, no other person had made such claims in any other court in India or elsewhere for loss or damages arising out of a collision between the two vessels. The Indian Navy opposed the application, contending that the collision was due to negligence solely attributable to MV Nordlake, which had no entitlement to limit its liability. The Navy added that it would suffer irreparable loss if the merchant vessel's claim were allowed..The Court, however, has concluded that the Navy's case was primarily founded on an incorrect impression that the ship owner's right to limit liability in the circumstances mentioned under Section 352A of the Merchant Shipping Act was not absolute. .Among other directions, the Court also allowed the merchant vessel to withdraw an amount earlier deposited by it with the Central government as security. The said amount is to be utilised for the constitution of a limitation fund, the Court ordered. "Upon constitution of the limitation fund, as ordered above, the Defendants (Navy) and all other claimants, who may have a claim arising from the aforesaid collision, stand restrained from exercising any right against any property or assets of the Plaintiff (MV Nordlake)", the Court added. .Senior Advocate Atul Rajyadhayksha with Advocates Sunip Sen, Ashwini Sinha, Adil Patel, and Sanika Kulkarni, briefed by Bhatt and Saldanha appeared for MV Nordlake..Senior Advocate Rahul Narichania with Advocates Ashish Mehta, Aarya More, Shiny Rey, and Komal Bhail, briefed by Ethos Legal Alliance appeared for the Indian Navy. .[Read order]