Hsh Nordbank Ag v. M.V. Dainthe And ANR.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ADMIRALTY AND VICE-ADMIRALTY JURISDICTION ADMIRALTY SUIT NO. 2 OF 2012 WITH JUDGES ORDER NO. 64 OF 2014 WITH NOTICE OF MOTION (LODG.) NO. 1767 OF 2018 IN ADMIRALTY SUIT NO. 2 OF 2012 HSH NORDBANK AG .. Plaintiff Vs.

M.V. DAINTHE & Anr.

.. Defendants Mr.Rahul Narichania, senior advocate a/w. Ms.Komal Joshi, Mr.Harsh Buch and Ms.Aditi Bajaj i/b ALMT Legal for plaintiff. Mr.Bimal Rajasekhar for defendant No.2.

Mr.Ralf Schmidt, General Manager/Constituted Attorney of plaintiff present.

Mr.Christian Reinert, German Attorney of plaintiff present in Court.

Mr.Mahmoud Pishbin, authorized representative of defendant No.2 present in Court.

CORAM : K.R.SHRIRAM, J.

DATE : 14TH AUGUST 2018 P.C.

Parties have resolved their dispute and defendant No.2 has submitted to a decree as per the draft Minutes of Order which reads as under :- "DRAFT MINUTES OF THE ORDER It is submitted by the Parties that:

A. On 27 June 2003, the Islamic Republic Iranian Shipping Lines ("Defendant No. 2") entered into a shipbuilding contract dated 27 June 2003 (the "Shipbuilding Contract") with a shipyard in China for the building, construction, launching and equipping of the vessel MV "Golafruz" (ex-names MV "Dianthe", MV "Iran Bam" and MV "Horsham") bearing IMO number 9323833 (the "Vessel"). B. During the construction of the Vessel, in / around December 2004, Defendant No. 2 transferred its rights and liabilities under the Shipbuilding Contract to one Horsham Shipping Company Limited, a body corporate then registered in the Isle of Man ("Horsham") by way of a novation agreement dated 22 December 2004 (the "Novation Agreement").

C. On 16 March 2005, the Plaintiff (via its Singapore Branch) and Horsham entered into a secured loan agreement pursuant to which the Plaintiff agreed to make available to Horsham a secured floating interest rate pre-delivery term loan of up to USD 14,950,000.00 and a secured floating interest rate postdelivery term loan of up to USD 29,900,000.00 in respect of the Vessel (the "Loan Agreement"), which Loan Agreement was subsequently supplemented and amended by a First Supplemental Agreement dated 06 June 2005 and a Second Supplemental Agreement dated on or around July 2009 (collectively the "Loan Agreements").

D. The Loan Agreements were secured by the following documents (collectively the "Security Documents"):

(i) Deed of Guarantee and Indemnity provided by Defendant No. 2 to the Plaintiff dated 16 March 2005 pursuant to which Defendant No. 2 undertook to act as primary obligor and guarantor of any and all obligations of Horsham under the Loan Agreements (the "Guarantee");

(ii) Deposit Agreement and Pledge of Accounts between the Plaintiff and Horsham dated 06 June 2005;

(iii) First priority Maltese mortgage "A" for the Vessel in favour of the Plaintiff dated 18 August 2006 (the "Maltese Mortgage");

(iv) Deed of Covenants for the Vessel between Horsham and the Plaintiff dated 18 August 2006;

(v) Assignment of Earnings and Charters between Horsham and the Plaintiff dated 18 August 2006;

(vi) Assignment of Insurances and Requisition Compensation between Horsham and the Plaintiff dated 18 August 2006;

(vii) Tripartite Agreement between Defendant No. 2, Horsham and the Plaintiff dated 18 August 2006; and (viii) Pledge Agreement between Horsham and the Plaintiff dated 28 May 2009.

E. Horsham made a number of utilisation requests under the Loan Agreements and the Plaintiff remitted the sums requested as follows: An amount of USD 14,950,000.00 was used to cover the outstanding pre-delivery loan principal under the pre-delivery financing; and A further USD 14,950,000.00 was remitted to the Plaintiff of China as payment of the remaining balance of the purchase price under the Shipbuilding Contract, following which the Vessel was delivered to Horsham upon successful construction and launching.

F. The principal sum owed to the Plaintiff under the Loan Agreements was therefore USD 29,900,000.00, which was to be repaid in accordance with the terms of the Loan Agreement. G. The Plaintiff asserts, but the Defendant No. 2 does not admit, that within 2010, various Events of Default under the Loan Agreement occurred, principally due to the US and EU sanctions enacted against Iran, which were notified to Horsham and Defendant No. 2 by way of a letter from the Plaintiff dated 14 October 2010. H. The Plaintiff asserts, but the Defendant No. 2 does not admit, that since these Events of Default were not rectified, the Plaintiff proceeded to declare the Outstanding Indebtedness of the loan (as defined in the Loan Agreements) on 11 November 2010, requesting repayment of all sums remaining unpaid under the Loan Agreements, (i.e. approximately USD 21,055,938.68 at that time) plus interest and costs, as applicable.

I.

Furthermore, in August 2011, the Plaintiff learned from the Department of Economic Development of the Isle of Man Government (via its lawyers in Germany and the Isle of Man) that Horsham had been struck off the Register in the Isle of Man and dissolved, which the Plaintiff asserts in itself constituted an Event of Default under the Loan Agreements.

J.

As a result of the aforementioned, the Plaintiff asserts, but the Defendant No. 2 does not admit, that it had a maritime claim against the Vessel as a matter of Indian law and that it was entitled to proceed against the Vessel in rem for recovery of the Outstanding Indebtedness under the Loan Agreements and the Security Documents.

K. On 06 November 2011, the Plaintiff filed Admiralty Suit (No. 2 of 2012) before the Bombay High Court for recovery of the Outstanding Indebtedness under the Loan Agreements in the (original) sum of USD 18,146,989.21 (USD 17,809,562.09 principal and USD 271,901.26 interest) and enforcement costs of USD 65,625.86 (the "Indian Proceedings"). Pending final disposal of the Indian Proceedings the Plaintiff sought and obtained an adinterim order from the Bombay High Court in India for the arrest of the Vessel, which order of arrest was then confirmed by a further order of the Bombay High Court on 09 November 2011 (the "Arrest Order").

L. After the Arrest Order was issued, the Plaintiff and Defendant No. 2 filed interim applications seeking, respectively, the sale of the Vessel and furnishing security for release of the Vessel. On 13 December 2012, Defendant No. 2 was directed by the Bombay High Court to furnish security in respect of the Plaintiff's claim. Before the Defendant No. 2 could furnish security in terms of the Order of 13 December 2012 the Plaintiff's sale application came up for hearing and, on 24 December 2013, the Plaintiff obtained an order for sale of the Vessel. Thereafter, Defendant No. 2 complied with the order of 13 December 2012 and arranged for remittance of the relevant security amount of INR 114,50,00,000.

00 which amount was deposited in the account of the Prothonotary and Senior Master, Canara Bank, Nariman Point Branch on 27 January 2014 (as updated from time to time, the "Principal Amount"). The order of sale of the Vessel was accordingly set aside. M. Following deposit of the aforementioned amount with the Bombay High Court, at the end of Quarter 1 of 2014, an amount of INR 38,30,916.00 was deducted from the aforementioned amount by way of Indian 'Tax Deducted at Source' (as updated from time to time, the "TDS Amount"). However, pursuant to an internal circular issued shortly thereafter, Indian banks were directed not to deduct TDS and hence the TDS Amount of Rs. 52,84,677.00 was reinvested by the Bombay High Court. This amount forms part of the principal amount.

N. As of 29 December 2017, the amount of the Plaintiff's claim under the Loan Agreements amounted to a total sum of USD 25,234,377.31 (based on the exchange rate as on 29 December 2017 of 1.00 EUR = 1.1993 USD and consists of: (i) principal: USD 17,809,562.09;

(ii) interest (06.06.2011 - 29.12.2017): USD 4,614,645.72; (iii) enforcement costs: USD 2,565,094.09; and (iv) Sheriff's poundage on 1) to 3): USD 245,075. 41. O. As of the date mentioned below, the current amounts held with the Bombay High Court aggregate:

Amount Date of Payment into Court Aggregate Current Amount (INR) Total Amount 27 January 2014 154,75,03,250.00 Hereafter the total amounts lying with this Court are referred to as the "Total Security Amount".

P.

In view of the admission of liability made by the Defendant No. 2 (as subsequently set out) Parties are agreeable to a final Decree being passed, in full and final settlement of all claims arising under or in connection with the Loan Agreements, the Security Documents and the Indian Proceedings.

Q. Against the backdrop of the foregoing, the following Order is passed.

1. Judgement on Admission 1.1. Defendant No. 2 has admitted to the Plaintiff in writing (the "Admission") vide a letter dated 15 June 2018 addressed by the Defendant No. 2's attorneys ("Admission Letter") of its liability in relation to the Total Security Amount less an amount equivalent to EUR 680,000. The said amount of EUR 680,000 is hereinafter referred to as "The Share of Defendant No. 2". The Plaintiff has annexed the said Admission Letter to the Notice of Motion in the captioned suit being Notice of Motion (L) 1767 of 2018 at Exhibit A. The same is taken on record and is marked as "X-1" for identification. There shall accordingly be a Decree on Admission in favour of the Plaintiff and against Defendant No. 2 for the Total

Security Amount, less the Share of Defendant No. 2 of EUR 680,000. This amount, for which a Decree is passed in favour the Plaintiff, shall hereinafter be referred to as "the Decretal Amount".

1.2. At the first instance the Share of Defendant No. 2 of EUR 680,000 (net) shall be remitted by the Prothonotary & Senior Master of this Court without any deduction whatsoever to Defendant No. 2 as per the bank details set out in clause 1.5, at the currency exchange rate prevailing on the date of remittance. It is clarified that any bank and other charges attendant to remittance of the Share of Defendant No. 2 will be deducted from the Decretal Amount and not from the Share of Defendant No. 2. Upon receipt by the Defendant No. 2 of EUR 680,000 (net) and subject to conditions contained hereinbelow having been met, the Prothonotary shall remit the Decretal Amount to the Plaintiff, as per the bank details set out in clause 1.6. When remitting the Decretal Amount, the Prothonotary & Senior Master shall deduct therefrom: (a) Remittance charges, bank charges and other charges / expenses; and (b) Poundage of 1% on the Decretal Amount, which poundage shall be paid by the Prothonotary & Senior Master to the Sheriff of Mumbai in accordance with the High Court [OS] Rules.

1.3. Though a Decree is being passed, the Suit shall be disposed only once the amounts as abovesaid are received by the Plaintiff and Defendant No. 2. If the amounts as abovesaid are not received by either the Plaintiff or Defendant No. 2, and subject to the Decretal Amount being available with the Court or being brought back to the Court, this Order shall stand recalled and both Parties shall be at liberty to pursue their claims as they stood before. However, in such an event the Plaintiff shall not be entitled to rely on this Order, the Admission or the Admission Letter for any purpose, all of which shall be treated as void.

1.4. On a Decree being passed and provided this Order is not recalled, Defendant No. 2 shall no longer have any proprietary rights or claims of any kind in the Total Security Amount save and except as specifically mentioned herein i.e. to the extent of the Share of Defendant No. 2.

1.5. From out of the Total Security Amount, a sum equivalent to EUR 680,000 net of all bank and statutory charges will be remitted

by the Prothonotary in EUR currency at the exchange rate prevailing on the date of remittance to the bank account nominated by the Defendant No. 2, details of which are set out below: BANK MELLI HAMBURG ("Recipient Bank") Account No. 2581013008 IBAN: DE37 2021 0200 2581 0130 08 BIC/Swift: MELIDEHH Beneficiary: Islamic Republic of Iran Shipping Lines 1.6. After the Share of the Defendant No. 2 is received by it, the Decretal Amount (less deductions mentioned in clause 1.2)] shall be remitted by the Prothonotary & Senior Master in Singapore Dollar currency to the Plaintiff in full to the following bank account of the Plaintiff:

Bank Account (NOSTRO) of the Plaintiff (BIC: HSHNSGSG) No. 0010734288 at DBS Bank Ltd. in Singapore, BIC: DBSSSGSG 1.7. All statutory charges and charges relating to remittance of the Share of Defendant No. 2 and the Decretal Amount shall be borne by the Plaintiff alone and shall be deducted from the Decretal Amount.

2. Full & Final Settlement / Discharge of Mortgage 2.1. Upon receipt of payments by the Plaintiff and the Defendant No. 2, in terms of this Order, parties will have no claims of any kind or nature against each other in respect of the transactions which form the subject matter of the Suit. For avoidance of doubt, it is clarified that upon receipt by the Plaintiff, of amounts in terms of this Order, the Maltese Mortgage will stand forthwith discharged. 2.2. The Plaintiff undertakes, through its advocates and/or agents, file a declaration to discharge the Mortgage with the Maltese Ship Registry in the duly executed form ("Discharge Deceleration") within ten working days from receipt of the Decretal Amount failing which the Plaintiff will be liable for losses suffered by the Defendant No.

2, if any, arising out of the Plaintiff's failure to file such discharge declaration with the Maltese Registry. Once such Discharge Declaration is filed, the Plaintiff through its advocates and/or agents, shall forthwith forward to the advocate of the Defendant No. 2 a simple copy of such executed Discharge Declaration.

photocopy of the confirmation of discharge of Mortgage ("Discharge Confirmation") as and when the same is received by it from the Maltese Registry, latest within 40 days from the date on which the Plaintiff filed the Discharge Declaration. However, the Plaintiff shall not be responsible for delays (even beyond 40 days) in obtaining a copy of the Discharge Confirmation if such delays are not caused by fault of the Plaintiff and in such circumstances, the Plaintiff will use its best endeavours to obtain the Discharge Confirmation as swiftly as possible.

3. Consequential Directions 3.1. The Prothonotary & Senior Master is hereby directed to encash the fixed deposits forthwith which have been invested by the Prothonotary & Senior Master.

3.2. Once the fixed deposits are encashed, the Prothonotary & Senior Master is directed to first remit the Share of Defendant No. 2 as set out in clause 1.5. The Prothonotary & Senior Master is directed to thereafter deduct all statutory dues including Sheriff's poundage at 1% from the Decretal Amount as set out in clause 1.2 and to remit the resultant balance to the Plaintiff as per the procedure set out in clauses 1.6 and 3.3. Any bank charges shall be deducted and paid out from the resultant / remaining balance prior to remittance. 3.3. The Prothonotary & Senior Master is hereby directed to first initiate remittance of the amount equivalent to EUR 680,000 (conversion as stated above), i.e. the Share of Defendant No. 2.

Once remittance is effected the Prothonotary & Senior Master shall collect the SWIFT confirmation of remittance from the State Bank of India (SBI) and issue a certificate / letter to the advocates appearing for the Plaintiff and the Defendant No. 2, confirming remittance of the Share of the Defendant No. 2 (i.e. EUR 680,000). Within 7 court working days from the Prothonotary & Senior Master issuing a certificate / letter as provided for above, the Defendant No. 2 shall either directly or through its advocate inform the Plaintiff in writing whether its share of EUR 680,000 has been received or not. If no such written intimation is issued by the Defendant No. 2 / its advocate, the Defendant No.

2 shall be deemed to have received its share of EUR 680,000 and in which case the Decretal Amount shall be remitted to the Plaintiff in terms of clause 1.6.

3.4. In any event, if Defendant No. 2 does not receive its share of EUR 680,000 by 27 September 2018 as a final cut-off date, this Order shall stand recalled and the Plaintiff shall be at liberty to pursue its claim as stood before, provided always that the Decretal Amount is still available with the Hon'ble High Court or can be

brought back to the Hon'ble High Court. For the avoidance of doubt, this shall apply regardless of whether or not the Share of the Defendant No. 2 can be brought back to the account of the Prothonotary & Senior Master or be returned into this Court's sphere of control. However, in such an event the Plaintiff shall not be entitled to rely on this Order, the Admission or the Admission Letter for any purpose, all of which shall be treated as void. 3.5. Parties can act upon receipt of authenticated copies of this Order to secure statutory approvals, if any, without prejudice to the rights and liberties granted vide this Order.

3.6. The Suit shall stand disposed on the receipt of the amount by the Plaintiff and Defendant No. 2 in terms of this Order. 3.7. There shall be no order as to costs.

3.8. All concerned authorities including but not limited to the Prothonotary, SBI and the RBI shall act on a copy of this Order duly authenticated by an Associate of this Court." The consent minutes of order signed by the authorized representatives of plaintiff, defendant No.2 and their respective advocates is taken on record and marked 'X' for identification. The counsels state that the persons who have signed the consent terms for plaintiff and for defendant no.2 are present in Court and identify them.

Order in terms of the consent terms. All undertakings accepted.

For ease of reference, a scanned copy of minutes of order is reproduced hereinbelow :-

Shri Narichania seeks leave to withdraw the original documents which have been received in evidence and marked exhibits and those documents which have been taken on record

and marked 'X' for identification. Shri Narichania, on instructions from plaintiff, undertakes to replace those original with photocopies duly certified as true copy by the advocate on record.

In view of this undertaking given, the Prothonotary and Senior Master, High Court Bombay, on being satisfied that the photocopies being filed as 'true copy' are the photocopies of the documents on record, shall return all originals to plaintiff's advocate.

All to act on authenticated copy of this order. Certified copy expedited.

Liberty to apply.

All pending applications stand disposed.

(K.R. SHRIRAM, J.) Digitally signed by Shraddha Kamlesh Talekar Date:

2018.08.14 18:23:11 +0530 Shraddha Kamlesh Talekar