PETROMARINE PRODUCTS LTD. Vs OCEAN MARINE SERVICES CO. LTD. & ANR
Bench: M.Y. EQBAL,SHIVA KIRTI SINGH
Case number: C.A. No.-006156-006156 / 2005
Diary number: 25774 / 2003
Advocates: B. VIJAYALAKSHMI MENON Vs
NIKHIL NAYYAR
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‘ REPORTABLE’
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.6156 OF 2005
Petromarine Products Ltd. …Appellant (s)
versus
Ocean Marine Services Company Ltd. and others … Respondent(s)
JUDGMENT
M.Y. Eqbal, J.:
This appeal is directed against the judgment and order
dated 27.11.2003 passed by a Division Bench of the High
Court of Madras in OSA No.175 of 1998, dismissing the
appeal of the appellant, upholding inter alia the
disbursements made by Single Judge of the sale proceeds
received by sale of the ship in question named as motor
vessel ‘Eleni’.
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2. The factual matrix of the case is that in February, 1997
Respondent No.1 filed a suit being C.S.No.97 of 1997 under
the Admiralty Jurisdiction of High Court of Madras, for
recovery of US$ 22,705.84 against Respondent No.3 herein
along with an application praying for an order of arrest of the
vessel which arrived at Port of Madras. The High Court in
terms of Order dated 27.2.1997 issued arrest warrant.
Whereas in the Bombay High Court, Appellant filed an
admiralty suit A.S.No.27 of 1997 in March, 1997 for recovery
of amount of US$ 39,712.97 i.e. the security of Appellant’s
suit claim. On 19.03.1997, Bombay High Court directed the
order of arrest of Vessel M.V. Eleni.
3. Meanwhile, High Court of Madras appointed Respondent
No. 2 as the Advocate Commissioner. On 25.04.1997, terms
and conditions for sale were approved by the Madras High
Court. Publications with respect to the sale of the said vessel
were made in various newspapers. Unaware of such
proceedings, Bombay High Court, on 11.09.1997, passed an
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ex-parte decree in the suit filed by the appellant for a sum of
US$ 50,081.74 with interest, which was communicated to
the Advocate Commissioner (Respondent No.2), appointed
by the Madras High Court, with a request to take note of
their claim against the Vessel. The Sheriff of Mumbai also
communicated to Respondent No.2 on 21.10.1997 that the
Vessel MV ELENI was arrested in due compliance of Warrant
of Arrest dated 18.03.1997 and 21.03.1997 passed by the
High Court of Bombay and requested them to take note of
the arrest order passed by Bombay High Court. Before the
aforesaid decree transmitted by the Bombay High Court was
received by the Madras High Court on 24.1.1998, learned
Single Judge of the Madras High Court confirmed the sale in
favour of M/s. Jansee Steel Industry Pvt. Ltd. on 24.10.1997.
In the execution petition moved by the appellant in
February, 1998, Bombay High Court issued notice under
Order 21 Rule 52 of the C.P.C., requesting the Madras High
Court to hold the decretal sum in an aggregate amount of
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US$ 58,325.64 from and out of the funds deposited by M/s.
Jansee Steel Industries.
4. It is worth to note here that the tender of M/s. Jansee
Steel Industries had been challenged by another company
M/s. Bancorex by way of another suit being O.S.A.No.15 of
1998, which ultimately was allowed on 23.4.1998 by Madras
High Court by setting aside the confirmation of sale made in
favour of M/s. Jansee and the matter was remanded to the
Single Judge to ensure that the best possible price is
secured. Consequently, learned Single Judge accepted the
only bid of M/s. Jansee Steel Industry Pvt. Ltd. for a sum of
US$ 4,70,000 and they were directed to pay the balance
consideration within three weeks, failing which the earnest
money deposited by them would stand forfeited. Advocate
commissioner was also directed to deposit the entire amount
to the credit of the suit. Madras High Court confirmed the
sale made in favour of M/s. Jansee Steel Industry Pvt. Ltd. on
05.10.1998 and ordered reimbursement of cost of sale,
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payment to the crew members and charges to the statutory
authorities.
5. On 25.09.1998, Bombay High Court informed the
passing of ex-parte decree in favour of appellant and asked
Registrar of the Madras High Court to remit the funds lying
attached pursuant to Order 21 Rule 52 Notice. On 7th
October 1998, Bombay High Court made a further order in
favour of the appellant who filed execution petition in the
Bombay High Court. The Registry of Bombay High Court
sent letters dated 28.01.1999, 09.03.1999 and 11.03.1999,
requesting the Registrar of the Madras High Court to give
reply for non-remittance of the attached funds. Finally, on
03.09.1999, Bombay High Court gave liberty to the
appellant, to obtain suitable orders from the Madras High
Court and closed the Execution Application.
6. Meanwhile after the confirmation of the sale, the sale
proceeds were disbursed to the crew members of statutory
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authorities and a direction was issued on 6.10.1998 to the
commissioner to deposit the balance amount of Rs.
12,38,164/-.
7. Thereafter, appellant challenged the order dated
06.10.1998 passed by single Judge in Application No.1217 of
1997 in C.S.No.97 of 1997, pleading before the Division
Bench of the Madras High Court that on the service of notice
issued by the Bombay High Court under Order 21 Rule 52
CPC, the appellant was entitled to the decretal amount alone
and the amount attached ought not to have been disbursed
to third parties and the custody court namely the Madras
High Court has no authority to make rateable distribution.
Per contra, it was submitted on behalf of the respondents
before the Madras High Court that the appellant failed to
bring to the notice of the Bombay High Court that the
Madras High Court was already seized with the matter. Had
the appellant brought to the notice of the Bombay High
Court about the proceedings entertained by the Madras High
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Court, which were much prior to the suit filed by them, the
Bombay High Court would not have passed the attachment
order.
8. After hearing learned counsel for the parties, Division
Bench of the Madras High Court dismissed the application
keeping it open for the appellant to lay their claim under
Order XLII Rule 11 of Original Side Rules. The Division Bench
held that once the suit is filed invoking admiralty jurisdiction
of the Madras High Court, the suit in rem, it decides the
interest of not only parties to the suit but also other parties
who are interested in the property under arrest or in the
fund. The High Court observed thus:-
“Madras High Court, while deciding the issues in the suit filed under admiralty jurisdiction has considered the interest and also priorities of all interveners and also parties to the suit. We follow the judgment of Apex Court in M.V. Elisabeth and others vs. Harwan Investment & Trading Pvt Ltd., Hanoekar House, Swatontapeth, Vasco- De-Gama, Goa, reported in AIR 1993 SC 1014. The catena of judgments relied on by the appellant are no way useful to them. The appellant ought to have made the claim under Rule 11 of Order XLII of O.S. Rules. In the ordinary course, no Court is so prestige-conscious that it will stand in the way of legitimate legal proceedings for redressal or
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relief sought for by the litigant. We find that necessary parties are not impleaded by the appellant herein and Jansee Steel Industries Pvt. Ltd., which is sought to be impleaded as seventh respondent in this appeal, is not a necessary party to resolve the disputes involved in this appeal. It is not open to the appellant to convert the appeal against the order dated 05.10.1998 instead of 06.10.1998, as the leave was granted to file the appeal only against the order dated 06.10.1998. Liberty was granted to Appellant to file their claim under Order XLII Rule 11 of O.S. Rules.”
9. Hence, this appeal by special leave by the appellant.
10. Ms. Vijaylaxmi Menon, learned counsel appearing for
the appellant, assailed the impugned order passed by the
Madras High Court on various grounds. At the very outset,
learned counsel submitted that the High Court erred in
holding that money lying with the Advocate Commissioner
was custodial legis. Learned counsel contended that the
High Court in the impugned judgment overlooked that the
appellant-execution creditor attempted to intervene in the
pending admiralty suit in the Madras High Court on 12th
December, 1997 leading to an order dated 24th January,
1998, whereby the appellant was directed to work out its
remedies in execution. In other words, the appellant was not
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allowed to intervene in the pending admiralty suit in the
Madras High Court. On the contrary, the High Court held
that the appellant ought to have been intervened in the suit
with its application under Order 42 Rule 11 of the Original
Side Rules of the Madras High Court.
11. Ms. Menon further contended that there is nothing in
the aforesaid O.S. Rules that requires a decree holder, who
has secured a valid attachment, to seek to intervene in the
pending admiralty suit, particularly, when in the previous
application filed by the decree holder, an order has already
been passed directing the decree holder to work out its
remedies in execution.
12. Learned counsel further contended that the High Court
overlooked the grievances of the appellant and failed to
appreciate the fact that the custody Court was acting in a
dual capacity of an admiralty Court vested with the higher
degree of responsibility and accountability upon both the
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Registrar of Madras High Court and the Advocate
Commissioner appointed in the pending admiralty suit.
13. Lastly, learned counsel submitted that the order of
Bombay High Court dated 3rd September, 1999 at no stage
ever ordered dismissal of the Appellant’s Execution
Application, either before or after the disbursal of monies by
the Madras High Court. Thus, no scope or requirement arose
for the Appellant to challenge the Order dated 3rd
September, 1999 of the Bombay High Court. The
surrounding circumstances preceding such order are
important, viz. that faced with a brazen silence and the lack
of explanation, since the Registrar of the Madras High Court
failed to respond despite order of the Bombay High Court,
the only restrained option left to the Bombay High Court was
to enable the appellant to urge matters before the Madras
High Court. Ordinary remedies of contempt of Court in
relation to non-compliance of orders of the Bombay High
Court by the Registrar of the Madras High Court were
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available, but were rather too harsh for the Appellant to
pursue, hence the Appellant pursued its Appeal already
pending before the Madras High Court.
14. Mr. P.B. Suresh, learned counsel appearing for the
respondent Nos. 1 to 4, firstly submitted that the Bombay
High Court by order dated 3.9.1999 had directed the
appellant to make its claim before the Madras High Court,
but the appellant had not challenged that order, which
attained the finality. Moreover, the High Court of Madras
by order dated 27.11.2003, had given liberty to the
appellant to lay the claim before it under Order 42 Rule 11
of the Rules of the Madras High Court. Learned counsel then
submitted that there are seven other creditors, whose claims
are pending before the Madras High Court. Those creditors
are parties to the suit and they have lost their claim before
the Madras high Court against the sale proceeds lying in the
High Court.
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15. Learned counsel then submitted that the Madras High
Court being the transferee Court had jurisdiction to
determine the inter-se priorities of all the creditors or the
claimants, in terms of proviso to Order 21 Rule 52 of the
Code of Civil Procedure, 1908 as the vessel/ ship was sold
free from all encumbrances, being a sale conducted in an
action in rem.
16. Learned counsel submitted that the appellant had
knowledge of the proceedings pending before the learned
Single Judge of the Madras High Court, where all the
creditors were seeking relief for disbursement of fund. The
appellant had chosen not to object to the said disbursement
and not participated in the proceeding. The appellant, who
is an unsecured creditor, by standing outside the Court
cannot claim exclusively on the basis of an order of
attachment.
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17. We have elaborately heard the learned counsel
appearing for the parties. It has been pleaded on behalf of
the appellant that the appellant had obtained a decree for a
sum of US$ 50,081.74 with interest from the Bombay High
Court in a suit against the judgment debtor and had also
obtained an order of sale of a ship of the judgment debtor
which was lying in the territorial waters of India at Madras.
The said ship had also been attached by the orders of the
Madras High Court in a suit filed by respondent No.1 for US$
15,975.04. The Division Bench of the Madras High Court on
17.4.1997 appointed an Advocate Commissioner in order to
bring the said ship to sale, with a view to preserve/prevent
her from deterioration and thereby protect her creditors. It
is further pleaded that in April, 1997 the ship was brought to
sale and on 26.5.1997 an earnest money of Rs.35,60,000/-
was received by the Advocate Commissioner from one M/s.
Jansee Steel Industries Pvt. Ltd. On 24.8.1997, the bid of
Jansee Steel Industries Pvt. Ltd was accepted and the Madras
High Court confirmed the sale in its favour and the balance
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amount was directed to be remitted. The Advocate
Commissioner was informed about the decree of the
appellant on 25.9.1997. On 24.1.1998, the Madras High
Court again confirmed the sale in favour of M/s. Jansee Steel
Industries Pvt. Ltd. In April 1998, however, the said sale was
set aside in appeal and a fresh sale was directed.
18. It is appellant’s case that in an execution application
filed by the appellant, Bombay High Court on 17.3.1998
issued an attachment order under Order 21 Rule 52 of the
CPC directing attachment of a sum of US$ 58,325.64
(approximately Rs.20 lakhs) from and out of the funds
deposited by M/s. Jansee Steel Industries Pvt. Ltd. until
further orders of the Madras High Court. The said order of
attachment was received by the Madras High Court on 16th
June, 1998. Meanwhile, on 23.4.1998, the sale was set aside
and a fresh tender was directed by the Division Bench of the
Madras High Court. However, the amount of earnest money
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lying with the Advocate Commissioner was not returned to
M/s. Jansee Steel Industries Pvt. Ltd. On 1.9.1998, Madras
High Court accepted the only bid of M/s. Jansee Steel
Industries Pvt. Ltd. and directed that the moneys be held
over to the account of the suit. On 7.9.1998, Registry of the
Madras High Court effected the attachment and returned the
notice of the Bombay High Court with a pro order to the
Bombay High Court confirming that the monies directed by
the Bombay High Court to be attached stood duly held to the
credit of the appellant. On 25.9.1998, Bombay High Court
passed an order directing the Registrar of the Madras High
Court to remit the funds lying pursuant to the Order 21 Rule
52 attachment.
19. The appellant’s case in a nutshell is that ignoring the
decree and the attachment of the Bombay High Court, the
Madras High Court on 5.10.1998 paid moneys to the crew
and other charges to other creditors who have no decree in
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their favour. On 6.10.1998, on an application filed by the
Advocate Commissioner showing the disbursements, the
Madras High Court confirmed the disbursements and
directed that the balance amount be placed in a fixed
deposit in view of the order of the Bombay High Court which,
it is specifically stated, was brought to its notice on
6.10.1998 only. Learned counsel vehemently contended
that the aforesaid events would show that even though the
appellant was a decree holder and had priority over all other
creditors, money was disbursed without there being any
adjudication of priority or dispute of title by the Madras High
Court, which disbursement could only have been done by
Bombay High Court. Learned counsel for the appellant also
contended that Madras High Court had no jurisdiction to deal
with the moneys once the same were attached under Rule
52 of Order 21 CPC.
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20. It is the case of the respondent that the appellant had
knowledge of the proceedings before the Madras High Court
right from its inception and despite this, the appellant did
not participate in any of the proceedings before the learned
Single Judge and allowed orders to be passed. Division
Bench of the Madras High Court vide impugned judgment
has, therefore, given liberty to the appellant to make its
claims before the learned Single Judge under Order XLII Rule
11 of O.S. Rules of the Madras High Court. It has been
further contended that the appellant specifically stated in its
suit filed before the Bombay High Court that the subject
vessel is lying in the port at Chennai and it is only to
conveniently avoid the contest with other creditors who have
all lodged their claims before the Madras High Court the suit
was filed in Bombay. Further, the appellant was the lone
claimant before the Bombay High Court whereas all the
other claimants were pursuing their claims before the
Madras High Court, which alone has jurisdiction to decide on
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the rights of the parties and the inter se priorities amongst
them.
21. Admittedly the vessel is berthed at the Madras harbor
and, therefore, the Madras High Court alone had jurisdiction
to entertain any claim against the subject vessel as per
provisions of Section 3(15) of the Merchant Shipping Act,
1958. The arrest of vessel by the Madras High Court being
the first arrest, the vessel and the sale proceeds are
custodial legis of the said court and no proceedings in
Bombay High Court can be maintained subsequently without
leave of the Madras High Court. It is also not in dispute that
after the decree got transmitted to the Madras High Court,
appellant had again moved Bombay High Court and obtained
attachment order without notice to the creditors and
claimants before the Madras High Court, which act of the
appellant clearly exposes that it conveniently wanted to
avoid any contest of its claim by other creditors/claimants.
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22. We have gone through the relevant provisions of Order
XLII of Madras High Court Original Side Rules: The said Rule
reads as under:-
“Rule 3. In suits in rem a warrant for the arrest of the property maybe issued at the instance either of the plaintiff or of the defendant at any time after the suit has been instituted, but no warrant of arrest shall be issued until an affidavit by the party or his agent has been filed, and the following provisions complied with:
A. The affidavit shall state the name and description of the party at whose instance the warrant is to be issued, the nature of the claim or counter-claim, the name and nature of the property to be arrested, and that the claim or counter- claim has not been satisfied. B. In a suit of wages or of possession, the affidavit shall state the national character of the vessel proceeded against; and if against a foreign vessel, that notice of the institution of the suit has been given to the consul of the State to which the vessel belongs, if there be one resident in Madras and a copy of the notice shall be annexed to the affidavit. C. In a suit of bottomry, the bottomry bond and if a foreign language also a notarial translation thereof, shall be produced for the inspection and perusal of the Registrar, and a copy of the bond, or of the translation thereof, certified to be correct shall be annexed to the affidavit.
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D. In a suit of distribution of salvage, the affidavit shall state the amount of salvage money awarded or agreed to be accepted, and the name and address and description of the party holding the same.
8. In suits in rem, sevice of summons or warrant against ship, freight or cargo on board is to effected by nailing or affixing the original writ or warrant for a short time on the main mast or on the single mast of the vessel and by taking off the process leaving a true copy of it nailed or affixed in its place.
11. In a suit in rem, any person not named in the writ may intervene and appear on filing an affidavit showing that he is interested in the property under arrest or in the fund in the Registry.”
23. Perusal of the aforesaid Rule would show that in a suit
in rem warrant of arrest of vessel is issued by the High
Court, all interested persons shall have a right to intervene
and lay their claim by filing an affidavit showing that he is
interested in the property under arrest.
24. In the impugned judgment, Madras High Court has
discussed elaborately the sequence of events and reasons of
disallowing the claim of the appellant.
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25. Indisputably in admiralty proceedings, where several
persons have lodged their claim, even the attachment made
by Bombay High Court has to be decided only if an
application for payment of attached amount is made.
Admittedly the appellant without approaching the admiralty
proceedings sought a declaration that it is not entitled to
priority. Being fully aware of the development of the
proceedings and suits in the Madras High Court, the
appellant did not raise any objection. In the result, the
learned Single Judge of the Madras High Court after hearing
all the parties, who had approached the Court, passed the
order. In our considered opinion, once the decree was
transferred and transmitted by the Bombay High Court to
the Madras High Court, the appellant could not have moved
the Bombay High Court and obtained an order without notice
to the creditors and claimants. We are further of the view
that when the property was in the custody of Madras High
Court, being the transferee court in question of title of
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priority arisen between the person having decree in his
favour and person not being the judgment debtor is to be
determined by the transferee court. We are unable to
accept the submission of the learned counsel for the
appellant that after order of attachment under Order XX1
Rule 52 CPC, the Registry of Madras High Court had to remit
the amount to Bombay High Court ignoring the pendency of
proceedings in the Madras High Court.
26. The decision in Shivshankar Gurgar vs. Dilip, (2014)
2 SCC 465 relied upon by Mrs. Menon, learned counsel
appearing for the appellant, for the proposition that the
executing court cannot go behind the decree is not at all
applicable in the facts of the present case. In the said
decision, while considering an order of modification of the
compromise decree by the executing court it was held that it
will amount to modification of decree and, therefore, the
same is without jurisdiction. Similarly, the decision in the
case of Oil and Natural Gas Corporation Limited vs.
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Modern Construction and Company, (2014) 1 SCC 648,
for the proposition that in the absence of any challenge to
the decree the executing court cannot go behind the decree,
will also be of no help to the appellant.
27. Further Mrs. Menon relied upon a decision in the case of
Shaukat Hussain alias Ali Akram and Others vs. Smt.
Bhuneshwari Devi (dead) by Lrs. and Others, (1972) 2
SCC 731 with regard to the power of the court which passed
the decree and the transferee court where the decree is
transferred will equally have no application in the present
case where the Madras High Court exercised admiralty
jurisdiction.
28. It is worth to mention here that the Bombay High Court
on 3.9.1999 gave liberty to the appellant to move the
Madras High Court for appropriate order for disbursement of
amount. The Bombay Court held that no further direction is
required. For better appreciation, the order dated 3.9.1999
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in the admiralty suit filed by the appellant is quoted
hereinbelow :-
“According to the office of the Prothonotary the position remains the same as 31st august, 1999. In other words, no communication has been received from the Madras High Court. However, Ms. Sethna, learned counsel appearing for the plaintiff, has very fairly brought to the notice of this Court an order passed by the Madras High Court on 6th October, 1998. After noticing the orders passed by this Court, the Madras High Court is directed that the amount of Rs.12,38,164/- should be deposited in a fixed deposit for a period of 46 days renewable periodically if necessary in the name of the Registrar, High Court, Madras to the credit of the suit. As noticed earlier, the plaintiff has already filed Appeal No.175 of 1998 in the Madras High Court. In view of the above the plaintiffs are at liberty to move the Madras High Court for appropriate orders for disbursement of the aforesaid amount on the basis of the decree passed by this Court.
In view of the above no further directions are required.
……..”
29. It has not been disputed by the appellant that the
Bombay High Court while passing the order of attachment
was not aware about the fact that the vessel was seized by
the Madras High Court much prior to the filing of the suit by
the appellant in Bombay High Court. The Division Bench in
the impugned order has recorded the finding that Madras
High Court while deciding the issues in the suit filed under
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admiralty jurisdiction had considered the interest and also
priorities of all interveners and also parties to the suit. It
was held that the appellant ought to have made claim under
Order XLII Rule 11 of the OS Rules. The Division Bench
rightly held that no court is so prestige conscious that it will
stand in the way of legitimate legal proceedings for redressal
or relief sought for by the litigant. The Court also took notice
of the fact that the necessary parties who had led their
claims had not been impleaded by the appellant in the
proceedings.
30. In the facts and circumstances of the case and having
regard to the law settled, so far the admiralty jurisdiction of
the Court is concerned, we do not find any reason to differ
with the findings recorded by the Division Bench of the High
Court in the impugned order. For the reason aforesaid, we
do not find any merit in this appeal, which is accordingly
dismissed, however with no order as to costs.
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…………………………….J. (M.Y. Eqbal)
…………………………….J. (Shiva Kirti Singh)
New Delhi February 17, 2015
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ITEM NO.1A COURT NO.11 SECTION XII S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Civil Appeal No(s). 6156/2005 PETROMARINE PRODUCTS LTD. Appellant(s) VERSUS OCEAN MARINE SERVICES CO. LTD. & ANR Respondent(s) [HEARD BY HON'BLE M.Y.EQBAL AND HON'BLE SHIVA KIRTI SINGH, JJ.] Date : 17/02/2015 This appeal was called on for judgment
today. For Appellant(s) Ms. Fereshte D. Sethna, Adv.
Mr. Kuber Dewan, Adv. Ms. Akriti, Adv.
for Ms. B. Vijayalakshmi Menon,AOR For Respondent(s) Mr. P.B. Suresh, Adv.
for M/s. Temple Law Firm Mr. Nikhil Nayyar,AOR Mr. Subramonium Prasad,AOR
Hon'ble Mr. Justice M.Y.Eqbal pronounced the judgment of the Bench comprising His Lordship and Hon'ble Mr. Justice Shiva Kirti Singh.
The appeal is dismissed in terms of the Reportable judgment, which is placed on the file.
(Parveen Kr. Chawla) (Indu Pokhriyal) Court Master Court Master
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