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Synopsis

A Single Judge Bench of the Bombay High Court comprising Justice NJ Jamdar has recently held that Merchant Vessel Nordlake (MV Nordlake) has the right to limit its liability for damages resulting from a collision with the Indian Naval Service (INS) vessel, INS Vindhyagiri in January 2011.

Justice NJ Jamdar held that the ship owner's right to limit liability for claims related to loss of property, damage, and loss of life under Section 352A of the Merchant Shipping Act, 1958 is absolute, regardless of fault.

In addition to affirming the right of the ship owner to limit their liability, the Bombay High Court found that it was permissible to order such limitation at an interim stage and in the notice of motion moved by MV Nordlake. The court declared that MV Nordlake was entitled to limit its liability for all losses and damages, including property claims and consequential losses resulting from the collision with INS Vindhyagiri in January 2011.

The collision between MV Nordlake and INS Vindhyagiri occurred on January 30, 2011, after the naval ship closed in on the approaching MV Nordlake. MV Nordlake, owned by a German company, sought to limit its liability for the collision and requested the constitution of a limitation fund to limit its liability. The company deposited security of ₹33,98,90,00 for the release of the vessel from arrest and sought to withdraw the security amount to constitute the limitation fund.

The Indian Navy filed a suit for arresting Nordlake, and later claimed ₹1,397.76 crores in damages due to negligence solely attributable to Nordlake. However, MV Nordlake argued that the ship owner's right to limit liability under Section 352A of the Merchant Shipping Act was absolute, and Nordlake was entitled to limit its liability for all losses and damages resulting from the collision.

The court ordered that the principal sum of Special Drawing Rights (SDR) carry interest at the rate of 12.75 percent per annum from the date of the collision till the date of the order.

Although the Indian Navy opposed Nordlake's claim, the court concluded that the Navy's case was based on an incorrect impression that the ship owner's right to limit liability was not absolute. The court, however, stayed the implementation of the order for six weeks, following the Navy's request and considering the potential ramifications on the Central government, so that the Navy may prefer an appeal.

In addition to allowing the merchant vessel to limit its liability, the court also permitted MV Nordlake to withdraw the amount it had earlier deposited as security with the Central government. This amount was directed to be used for the creation of a limitation fund. The order reads,

“Upon constitution of the limitation fund, as ordered above, the Defendants 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.”

Case Title: Ms M.V.Nordlake GmbH vs UOI & Anr