The plaintiff shipowner sought a declaration that it was entitled to limit its liability for claims arising from a collision between its vessel, the MV Nordlake, and the INS Vindhyagiri on 30 January 2011 at Mumbai Port, in accordance with the provisions of Pt XA of the Merchant Shipping Act 1958 (the Act). The plaintiff also sought directions for the constitution of a limitation fund of SDR 2,789,234, and for appropriation of this amount out of the security deposited by the plaintiff, a refund of the balance, and an injunction restraining the defendants and other claimants from exercising any right against any assets of the plaintiff.

The plaintiff asserted that the gross tonnage of the MV Nordlake was 16,202 mts. The vessel was registered in Cyprus, which is a State party to the LLMC 1976. The plaintiff was thus entitled to invoke the right to limit its liability under s 352A of the Act. The plaintiff's entitlement to limit its liability was indefeasible and absolute at Indian law.

The first defendant contended that the application manifested a dishonest intent on the part of the plaintiff to withdraw the security deposited under the order of the Court. The provisions contained in Pt XA of the Act did not apply to naval warships. A party who was guilty of causing loss resulting from its personal act or omission with intent to cause such loss, or committed recklessly with knowledge that such loss will probably result, loses the right to limit liability under LLMC 1976. A shipowner can never have an absolute right to limit the liability. In the event that the plaintiff is permitted to limit its liability, the first defendant would suffer an irreparable loss.

Held: The plaintiff's motion is granted. The plaintiff is entitled to limit its liability resulting from the collision between the INS Vindhyagiri and the MV Nordlake on 30 January 2011 under the provisions of the Act. The aggregate principal liability of the plaintiff for all claims arising from the collision shall be SDR 2,789,234 converted into INR at the date of the order. That sum deposited as security stands appropriated towards the constitution of the limitation fund. Upon constitution of the limitation fund, the defendants and all other claimants who may have a claim arising from the collision, stand restrained from exercising any right against any property or assets of the plaintiff.

Article 4 of the LLMC 1976 incorporates the principle of 'breaking of limitation', to provide that a person on account of whose personal act or omission, committed with intent to cause loss, or recklessly and with knowledge that such loss would probably result, will not be entitled to limit its liability. Being a signatory to the Brussels Limitation Convention 1957, the precursor of the LLMC 1976, India introduced Pt XA of the Act to provide for limitation of liability. Section 352A of the Act originally provided for an exception to the right to limit liability by providing that the owner of a seagoing vessel may limit its liability in respect of the claims arising from named occurrences unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner. It also provided that the burden of proving that the occurrence did not result from its actual fault or privity shall be on the owner. After the 2002 amendment, the italicised words and the burden of proof provision were deleted. The distinction in the matter of the nature of fault on the part of the owner and on whom the onus lay under the LLMC 1976 and the unamended provisions of the Act is of critical salience. The LLMC 1976, while providing for conduct barring limitation, casts a very high degree of proof to deprive a liable person of the right to limit the liability. Under the unamended Act, a liable person would be deprived of the right to limit liability if the occurrence giving rise to the claim resulted from the actual fault or privity of the owner. In contrast, the LLMC 1976 incorporates a higher degree of culpability. The latter part of art 4 of the LLMC 1976 touching upon the mental element or recklessness bordering on wantonness coupled with knowledge, in effect casts an almost impossible onus to prove to the contrary. Secondly, the onus is on the claimant who opposes the limitation of liability.

If considered through the prism of the rationale behind incorporating the statutory provisions providing for limits of liability, the omission by the Indian Parliament to provide for an exception to the right to limit the liability becomes crystal clear. On first principles, the omission to incorporate a provision breaking limitation deserves to be given due weight. The first defendant argues that, notwithstanding the omission of the exception incorporating a provision for breaking limitation, art 4 of the LLMC 1976 must be deemed to have been incorporated into the Act and there is no absolute right to limit liability. However, the plain language of s 352B of the Act does not suggest incorporation of art 4.

The decision reached in Murmansk Shipping Co v Adani Power Rajasthan Ltd 2016 SCC Online Bom 167 (CMI156) that the owner's right to limit liability is absolute as long as the claims in respect of which limitation is sought are claims capable of limitation under s 352A of the Act, and is without reference to any proof of loss resulting from personal act or omission, is correct. The Court cannot lose sight of the conscious omission of the provisions on breaking limitation of liability when amending Part XA of the Act. Nor can the Court import the provisions contained in art 4 of the LLMC 1976, as it would amount to supplanting the legislation.

As to quantum of limited liability, on the date of the collision, the 1996 Protocol, which amended art 6.1 of the LLMC 1976, was not yet in force in India. The first defendant argued that the date of application, and not the date of the collision, governs the quantum of limit of liability. Since the action for limitation of liability was filed in January 2014, after the 1996 Protocol came into effect, the latter limits should apply. However, it is trite that an International Protocol or Convention does not become effective or operative on its own force, unless it is brought into force in the manner known to law either by domestic legislation or executive instructions certifying its acceptance. Here, the 1996 Protocol came into force in India on 21 June 2011, ie about six months after the collision. It would be a contradiction in terms if the definition of 'Convention' under s 352 of the Act is read to mean the LLMC 1976 as amended from time to time, irrespective of its acceptance and enforcement by India in the manner known to law. Such an interpretation would run counter to well-settled principles of incorporation of treaty obligations into domestic law. The first defendant's submission that it is the date of the application which should determine the quantum to which liability is to be limited, is fraught with infirmities. It would introduce an artificial element into determination. In contrast, the date of occurrence has an element of definitiveness. For this reason, art 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 limit of liability in this case therefore needs to be computed in accordance with the provisions of art 6 of the LLMC 1976.