17 February, 2023

Shipowner’s Right to Limit Liability is Absolute and Unqualified

The judgment, M.V. Nordlake GmBH vs. Union of India and Anr., delivered by a single judge of the Bombay High Court on 17 February 2023, ruled on the shipowners’ absolute and indefeasible right to limit liability in accordance with the provisions of Part XA of the Merchant Shipping Act, 1958 (the Act, 1958) and the Convention on Limitation of Liability for Maritime Claims 1976 (“LLMC-76”) in respect of all losses and damages in respect of all property claims and consequential losses resulting from the collision between M.V.Nordlake and INS Vindhyagiri on 30 January 2011 at Mumbai Port.

ISSUES THAT WERE BROUGHT TO THE FOREFRONT:

• Whether the right to limit the liability under Section 352A of the Act, 1958 is absolute and de hors the question of fault on the part of the Vessel or its registered owner.
• Whether the prayer to limit the liability and constitute the limitation fund can be entertained at an interim stage and decided without a full-fledged trial.
• Whether the quantum is to be fixed in accordance with the provisions of the Convention, 1976 or Protocol 1996 and what should be the date to be reckoned for the purpose of conversion of SDR into USD or Indian currency.

THE JUDGMENT:

Ruling in favour of the owners of M.V. Nordlake, the Bombay High Court compared the disparities between the relevant provisions of the Act, 1958, the LLMC-76 and the Protocol 1996. It ruled that:

• The right to limit liability under Part XA of the 1958 Act is absolute and does not depend on the question of fault or privity on the part of the person who is liable and seeks to limit the liability. This is because the conscious omission of the provisions of 'breaking of limitation' incorporated in Article 4 of the LLMC-76 was done while amending Part XA of the Act resulting in the inapplicability of the ‘conduct barring limitation’ in India.
• The Court is not precluded from passing a decree at an intermediate stage without the trial running its full course and there is no impediment in ordering limitation of liability at an interim stage.
• The limit of liability needs to be computed in accordance with the provisions of Article 6 of the LLMC-76 since Article 9.3 of the 1996 Protocol provides that the Convention amended by the Protocol, shall apply to claims arising out of the occurrences which took place after the entry into force of the said Protocol for the concerned State.
• The relevant date for determining the applicable regime for creating a limitation fund should be the date on which the claim against the Shipowner arose, rather than the date on which the Shipowner decides to file a lawsuit. This judgment has relied on the previous ruling of the Bombay High Court in Murmansk Shipping vs. Adani Power.

Our firm successfully represented the vessel M.V. Nordlake.