Rainbow Ace judgment July 2013.pdf

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ASN 1/24 Appeal(L)228-13 (copy).doc

INTHEHIGHCOURTOFJUDICATUREATBOMBAYADMIRALTYANDVICEADMIRALTYJURISDICTION

APPEALLODGINGNO.228OF2013

INNOTICEOFMOTIONNO.235OF2013

INADMIRALTYSUITNO.29OF2013

LufengShippingCompanyLtd.AcompanyincorporatedunderthelawsofthePeople'sRepublicofChina,havingitsregisteredofficeatNo.24,PuJiShiRoad,Qingdao,China.

..Appellant/Orig.Plaintiff.Vs.

1.M.V.RAINBOWACE,aforeignflatvesselflyingtheflagofPanamaalongwithherhull,gear,tackle,engine,machinery,bunkers,apparel,furnitureandfixturesandallappurtenancesandparaphernalia,presentlylyingattheportofPipavav,Gujarat,withintheterritorialwatersofIndiaandwithintheAdmiraltyJurisdictionofthisHon'bleCourt,andallpersonsinterestedinthesaidvessel;

2.WhimStarCharteringCo.Ltd.ACompanyincorporatedunderthelawsofHongKong,havingitsRegisteredofficeatRoomNo.904,9/FWaysumCommercialBuilding,28,ConnaughtRoad,WestHongKong.

..Respondent/Orig.Defendants

Mr.PrashantPratap,SeniorAdvocatewithMr.AshwiniSinha,Ms.TruptiAgarwali/byManojKhatri,AdvocatefortheAppellant.

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Mr. Virag Tulzapurkar, Senior Advocate with Mr. NikhilSakhardande, Mr. Amitava Majumdar, Mr. Shiv Kumar Iyer, Mr.SujanMalhotra, Mr. Nihal Shaikh i/byBose &Mitra &Co. forRespondentNo.1/DefendantNo.1.

CORAM:MOHITS.SHAH,C.J.AND M.S.SANKLECHA,J.

DATE:Reservedon17June2013 Pronouncedon02July2013

JUDGMENT:(PerM.S.SANKLECHA,J.)

Thisappealchallengestheorderdated6May2013of

the learnedSingle Judgevacatingthe orderdated28January

2013(passedonanapplicationbytheappellant)arrestingM.V.

RainbowAcerespondentNo.1vessel.Theimpugnedorderdated6

May2013vacatingthearrestofrespondentNo.1vesselwasonan

applicationtakenoutbythe ownerM/s.RainbowAceShipping

S.A.Panama(applicant)ofrespondentNo.1vessel.

2) Factsleadingtothisappeal:

a) TheappellantadmittedlyhasamaritimeclaimofUS$

1,628,658.07 against the Whim Star Chartering Co. Ltd.

(respondent No.2 company). This claimarises out of a voyage

charterpartyagreementdated6April2011enteredintobetween

theappellantasownersofavesselM.V.JTong andrespondent

No.2companyasacharterer.

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b) Theappellant's maritimeclaimon respondent No. 2

companyis coveredbyArticle 1(f)and(g)of theInternational

ConventionofArrest of Ships1999(ArrestConvention1999).

Consequently, the appellant was entitled to secure its maritime

claimbyproceedingagainstanyvesselintheregistered and/or

beneficialownershipofrespondentNo.2Companyintermsofthe

ArrestConvention,1999.

c) Theappellant's claim is that the beneficial ownerof

respondentNo.1vesselisalsothebeneficialownerofrespondent

No.2Company. It is the case of the appellant that one Wang

Wendong is the common beneficial owner of respondent No.1

vesselaswellasrespondentNo.2company.Theappellantshave

sought to establish the common beneficial ownership of

respondent No.1 vessel and respondent No.2 company in one

WangWendongbysubmittingthefollowingchart:

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d) On 28 January 2013, respondent No.1 vessel was

arrested attheinstanceoftheappellantforitsmaritimeclaim

against respondent No.2company. Thecaseof theappellant as

madeoutintheplaintforthearrestofrespondentNo.1vesselwas

that it was in the beneficial ownership of respondent No. 2

companyand that bothrespondent No.1 vessel andrespondent

No.2 company are in the commonbeneficial ownership of one

WangWendongand/oroneShanBing.

e) On11February,2013,theapplicanttookoutanotice

ofmotionbeforethelearnedsinglejudgeseekingthatthearrestof

respondent No.1 vessel by order dated 28 January 2013 be

vacated. In the application the applicant admit that it is

beneficiallyownedbyWangWendong.However,itisdeniedthat

respondent No.1 vessel is in the beneficial ownership of

respondentNo.2companyandthatitsbeneficialowner Wang

WendonghasanyinterestinrespondentNo.2companyandmuch

lessbeingitsbeneficialowner.Thus,theallegedmaritimeclaimof

theappellantonrespondentNo.2companycouldnotbesecured

bythearrestofrespondentNo.1vessel.

f)On6May2013,thelearnedSingleJudge,bytheimpugned

ordervacatedtheorderofarrestdated28January2013inrespect

ofrespondentNo.1vessel.Theimpugnedorderholdsthatthough

respondentNo.1vesselwasbeneficiallyownedbyWangWendong

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the respondent No. 2 company was not. Therefore respondent

No.1 vessel and respondent No.2 company were not in the

commonbeneficialownershipofWangWendong.Thusthearrest

of respondent No.1 vessel was not warranted. The impugned

Order while disposing the application for vacation of arrest of

respondent No.1vessel framed the following issues as arising

beforehim:

i) WhethertheInternationalConvention

ontheArrestofShips,1999canbeappliedtothe

presentdispute?

ii) If yes, whether by virtue of Article

3(2)thereof,arrestofashipbeneficiallyownedby

thepersonagainstwhomthereisamaritimeclaim

inrespectofanothership,ispermissible?

iii) Whetherthe1stDefendantvesselisof

thebeneficialownershipofdefendantNo.2?

f) Sofarasissues(i)and(ii)areconcerned,theywere

answeredintheaffirmativeandacceptedbyallthepartiestothe

presentproceedings.Theonlyissuewhichhasbeenraisedinthe

present appeal is with regard to question (iii) above being

answered in thenegative i.e. in favourof the respondent No.1

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vessel andagainst the appellant. The learned single judge also

records the fact that the case canvassed before him by the

appellant was not as raised in the plaint as formulated in

question(iii)abovebutthesubmissionbeforehimwasthatthe

respondentNo.1vesselandtherespondentNo.2companyarein

the commonbeneficial ownership of one Wang Wendong. This

submissionwhichisafacetoftheissueraisedin(iii)abovewas

alsoansweredinthenegativei.e.respondentNo.2companyisnot

inthebeneficialownershipofWangWendong.

Submissions:

3) Mr. Prashant Pratap, the learned Senior Counsel

appearing for the appellant challenges the impugned order

vacatingthearrestofrespondentNo.1vesselandrespondentNo.

2companybyholdingthattheyarenotinthecommonbeneficial

ownershipofWangWendong.Insupportoftheabovechallenge

followingsubmissionsaremade:

(a) Admitted position is that respondent No. 1 vessel is

beneficially owned by Wang Wendong. Similarly, though not

admittedbytherespondentsWangWendongisalsothebeneficial

owner of respondent No.2 company. The respondent No. 2

company is owned 100% by one Cartier Investment Co. Ltd,

Samoa(Cartier)whichinturnis100%ownedbyWangWendong.

This beneficial ownership can be established by lifting the

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corporate veil of Respondent No. 2 companyand thereafter by

liftingthecorporateveilofCartierasrespondentNo.2company

wasestablishedbyCartier;

(b) InviewofthelawsintheStateofSamoa,thenames

ofshareholdersanddirectorsofacompanyincorporatedinSamoa

arenotavailablefordisclosure.HowevertheownershipofWang

Wendongof Cartier and in turn of respondent No. 2 company

alongwiththeownershipofrespondentNo.1vesselisestablished

bythefollowingfactors:

(i) Commonaddressi.e.SunshineTowerQingdao,China

ofCartier, respondentNo.2company,WangWendong(as

evident from his business card), of the applicant and its

agent ZJHX Shipping Co. Ltd. as well as common fax

numbers.

(ii) Company called WhimStar Co. ltd. in which Wang

Wendongheld55%shareholdingwhichwasderegisteredon

12February2009 andtherespondentNo.2companyhad

thesameaddressviz.SunshineTowers,Qingdao,China;

(iii) ACommondirectorbythenameofLiHangwasinthe

subsidiary of the applicant company and also in the

respondentNo.2company;

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(iv) CommonSignatureonvariousfixtureNoteswhichare

contracts of carriage entered into by the appellant with

respondentNo.2companyaswellasWinStarCo.Ltd.The

samepersonhasalsosignedmortgagedocumentsonbehalf

ofoneRainbowShippingLtd.whichisapartof Rainbow

GroupCompaniesofwhichWangWendongistheowner.

(v) The appellant has a long association with Wang

Wendongsince1998.Theappellantshavestatedthatthey

had met Wang Wendong at his office at China and

whenever theynegotiatedwithWhimStar Group, it was

withWangWendong,itsowner.

(vi) The defunct WhimStar Co. Ltd., respondent No.2

company and the applicants along with its other group

companieswereallhavingoneZJHXShippingCo.Ltd.as

theircommonagent.Theagencyagreemententeredintoby

thefirstrespondentvesselwithM/s.ZJHXShippingCo.Ltd.

isdated1March2012wheninfactrespondentno.1vessel

wasdeliveredon4September2012isalsoevidenceofthe

factthattheyarealloneandthesame;

(c) ReliancewasplaceduponthedecisionoftheDivision

Bench of this Court in the matter of Great Pacific Navigation

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(Holdings)CorporationLtd.vs.M.V.TongliYantairenderedon14

October2011tocontendthatinalmostsimilarfactstheDivision

BenchofthisCourthadreversedtheorderofthelearnedSingle

Judgevacatingthearrestofavesselinthatcase.Thustheabove

casesshouldbeappliedtothepresentcasealso;and

(d) That for purposes of the arrest of respondent No.1

vessel, the appellant has merely to establish ana reasonably

arguablecasei.e.primafaciecasetobetriedatthefinalhearing.

Inthemeantime,respondentNo.1shouldbekeptunderarresttill

therespondentssecurethemaritimeclaimtobetriedatthefinal

hearing.

4) On the other hand, Mr. Tulzapurkar, Senior Counsel

appearingforrespondentNo.1vesselinsupportoftheimpugned

ordersubmitsasunder:

a) The arrest of the vessel in terms of Article3 of the

Arrest Convention1999 is subject to the samebeingpermitted

underthe lawsof thestate inwhichthearrest of thevessel is

beingsought.Thereforethearrestofthevesselnotownedbythe

personliableforthemaritimeclaimwouldbepermissibleonlyif

thearrestissoughtofthevesselwhichisbeneficiallyownedby

anotherperson.However,todeterminethebeneficialownershipit

is not open to lift the corporate veil and contend that the

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shareholderofthecompanyisthe ownerofthepropertyofthe

companyasisbeingsoughttobedonebytheappellant.Itishis

submissionthatasamatterofCorporatelawasexistinginIndia,

the identity of a company is different and distinct from the

identify of its shareholder. In the circumstances, the maritime

claimavailableagainstrespondentNo.2doesnotbecomemaritime

claimpayablebyitsallegedbeneficialownerWangWendong;

b) The entirecaseoftheappellantis thatrespondent

No.2isownedbyCartier whichinturnis ownedbyMr.Wang

Wendong,thusmakingWangWendong thebeneficialownerof

respondentNo.2company.ThisissoasWangWendonghasfiled

anaffidavitdated8February2013statingonoaththatheowns

nointerestdirectlyorindirectlyinCartiernorinrespondentNo.2

companyandheisnotadirectorinanyofthetwocompaniesi.e.

CartierandrespondentNo.2.Ontheface ofit,itisnotopento

the appellant to allege that Wang Wendong is the ultimate

beneficialownerofrespondentNo.2companyintheabsenceof

theaffidavitbeingfoundtobefalse.

c) The variouscircumstancesbeingrelieduponbythe

appellant such as common director, common address, common

agent etc. allegedby theapplicant donot establish that that

Wang Wendong is the beneficial owner of respondent No. 2

company.Allthesefactorswereexplainedbytheappellantandthe

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learnedSingleJudgewassatisfiedwiththeexplanationofferedby

the applicant to conclude prima facie that the arrest of

respondentNo.1vesselisnotwarranted.

d) Therelianceplacedbytheappellantuponthedecision

oftheDivisionBenchofthisCourtinthematterofGreatPacific

Navigation (Holdings) Corporation Ltd. vs. M.V. Tongli Yantai

renderedon14October2011ismisplacedasthesamehasbeen

setasidebytheApexCourtbyorderdated12December2012.

Consideration:

5) Wehaveconsideredthesubmissions. Wefindthatthough

theappellanthadmovedtheCourtseekingtoarrestrespondent

No.1vesselprimarily onthegroundthatit is inthebeneficial

ownershipofrespondentNo.2company,ithadalsoallegedinits

plaint that the common beneficial owner of respondent No. 1

vessel andrespondent No.2company is WangWendongand/or

ShanBing. Therefore,theissueofcommonbeneficialownership

ofWangWendongwasraisedbytheappellantwhilecomingtothe

Courtanditwasnotanewcasemadeoutduringargumentsas

contended by Mr. Tulzapurkar. The issue examined by the

learned Single Judge was whether the common beneficial

ownershipof therespondentNo.1vesselandrespondentNo.2

Company vest in one and the same person namely Wang

Wendong. This is borneout in para 58of the impugnedorder

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whereinitisrecorded:

I nowproceedtoexaminewhethertheplaintiffhas made out even a prima facie case thatdefendant No.1 vessel is in the same beneficialownershipofdefendantNo.2.

6) There is no dispute between the parties that the

appellanti.e.theownerofrespondentNo.1vesselisbeneficially

ownedbyWangWendong.HoweverWangWendongwhile not

disputinghisbeneficialownershipofrespondentNo.1vesselhas

filedanaffidavitdated8February,2013beforethelearnedsingle

judge denying that he is in any manner directly or indirectly

throughthemediumofCartierorotherwisethebeneficialowner

of respondent No.2 company. Notwithstanding the affidavit of

WangWendong(which is not proved to be false/incorrect) the

appellant seeks to establish the beneficial ownership of Wang

Wendong in respondent No. 2 by seeking to lift not only the

corporateveilofrespondentNo.2CompanybutalsoofCartier.

7) Beforeexaminingtheissueonfactsonewouldneedto

examineasapurequestionoflaw,whetheritispermissibleunder

theIndianlawtoupholdthesubmissionoftheappellantthatthe

shareholderofanincorporatedcompanyhasproprietaryrightsin

theassetsofanincorporatedcompanypermittingtheignoringof

theseparateidentityofaCorporateentity.

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8) Article 3 of the Arrest Convention 1999 and in

particular,insubArticle1and2ofArticle3permitsthearrestof

vehicleandalsoprovidesinsubArticle3thereofasunder:

3. Notwithstanding the provisions ofparagraphs1and2ofthisarticlethearrestofashipwhichisnotownedbythepersonliablefortheclaimshall bepermissibleonly if, under thelawoftheStatewherethearrest appliedfor,ajudgmentinrespectofthatclaimcanbeenforcedagainstthatshipbyjudicialofforcedsaleofthatship.

9) Whileinterpretingtheaboveprovision,the Supreme

Court in Liverpool andLondonS.P. &I AssociationLtd. v.Sea

Success2004(9)SCC512whileholdingthatArrestConvention

1999would be applicable to India even though India is not a

signatorytheretohasheldthatthesamewouldbesubjecttoa)

domestic law which may be enacted by Parliament and b) for

enforcement of the contract involving public law character.

Therefore the issue to be examined is whether the Indian

corporate law accepts the proposition that in the absence of

allegationoffraud,itisopentoignoretheindependentcorporate

identity of a limited company and to lift the corporate veil to

identifytheshareholderasownerofthepropertyofthelimited

company.

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10) The Supreme Court in Indo wind Energy Ltd. V.

Wescare (India) Ltd. 2010(5) SCC 306 has held that each

company incorporatedunder theCompanies Act hasa separate

and distinct legal entity from its shareholders and other

companies.Therefore,themerefactthatthetwocompanieshave

common shareholders or common Board of Directors will not

convert thetwocompaniesintoasingleentity.Similarlyasfar

backasin1955SupremeCourtin BachaF.Guzdar,BombayVs.

CommissionerofIncomeTax,BombayAIR1955SC74heldthat

thereisnowarranttoassumethatshareholderwhobuyssharesof

thecompaniesbuysanyinterestinthepropertyofthecompany.

This was on the basis that an incorporated company has an

identitydifferentanddistinctfromthatof itsshareholders.The

submissionoftheappellantthattheconceptofbeneficialownerby

itself implies the concept of lifting the corporate veil and in

supportofwhichrelianceisplaceduponthedecisionoftheApex

Court in M.V. Elisabeth andors. Vs. Harwan Investment and

TradingPvt.Ltd.1993Supp.(2)SCC433aswellasthedecision

inLiverpoolandLondonS.P.&IAssociationLtd.v.SeaSuccess

(supra)andtheCalcuttaHighCourtdecisioninOwners&Parties

InterestedintheVesselM.V.DongDoandanr.v.RameshKumar

&Co.Ltd.2001(2000)1CALLT367(H.C.).

11) We findthat thesubmissionof theappellant on the

abovebasisisnotsustainableasinnoneofthecasesdidthecourt

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permittheliftingofthecorporateveiltomaketheshareholderof

an corporate entity the owner of a property belonging to the

incorporatedcompany.InthecaseofM.V.Elisabeth(supra)the

issuewhicharoseforconsiderationwasthequestionofjurisdiction

viz.whetherAndharaPradeshHighCourthadjurisdictioninits

admiraltyjurisdictiontoproceedagainstaforeignshipownedbya

foreign company not having a place of business in India. The

arrestedvesselviz.M.V.Elizabethwasthevesselagainstwhicha

maritimeclaimhadarisenandnoissueofliftingthecorporateveil

arose.InthecourseofJudgmenttheApexCourthadobservedin

Para46thereofthatthejurisdictioncanbeinvokedagainstasister

shipi.e.ashipinthesamebeneficialownership.Inthepresent

casethearrestisbeingsoughtnotofasistershipi.e.ashipinthe

ownershipofthesamepersonbutaship/vesselownedbyasister

companyofthecompanyagainstwhichmaritimeclaimarose.In

Liverpool and LondonS.P. & I Association Ltd. v. Sea Successc

(supra) the issue for consideration was whether the non

paymentofinsurancepremiumgaverisetoamaritimeclaim.The

premiumwasnotpaidinrespectofvesselsSeaRangerandSea

Glory. Thevessels SeaRanger, SeaGloryandSeaSuccess were

ownedbythesameowner.Thevesselarrestedwas SeaSuccess.

Noissueofliftingthecorporateveilforthepurposeofarresting

SeaSuccessarose. InthecaseofM.V.DongDo(supra)Calcutta

High Court held that under the Indian Law, shareholders of a

companyarenottheownersoftheassetsofthecorporateentity.

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TheCourtsetasidethearrestof thevesseleventhoughit was

alleged that both the vessels were ultimately owned by the

SocialistRepublicofVietnamthroughthemediumoftwolimited

companies. The Calcutta High Court negatived the aspect of

beneficial ownership as extending to shareholders of an

incorporatedentityandasanillustrationpointedoutthatinIndia

various Government Companies are in existence who are

independentofeachotherhavingadistinctidentity.Thereforea

shipbelongingtoShippingCorporationofIndiacannotbesaidto

be a sister ship of a ship belonging to Oil & Natural Gas

Commissiontoenablethearrestofshipownedbyonecompany

forthemaritimeclaimarisinginrespectofanothercompany.

12) LearnedSingleJudgeofthisCourtinAdmiraltySuit

(L)No.3547of2008renderedon22December2008inPolestar

MaritimeLimitedVs.M.V.QILINMenandothersobservedthat

merelybecausetheshareholdersarecommonortheirholdingin

twodifferentcompaniesarecommon/identicalwouldnotmake

thetwocompaniesoneandthesameentity.Similarly,theGujarat

HighCourtinthematterofCroftSalesandDistributionLtd.v.M.V.

Basiland17ors.inCivilApplicationNo.73of2011inAdmiralty

Suit No.10of 2010renderedon17February2011theGujarat

HighCourtheldthatshareholdersaredistinctanddifferentfrom

the corporate entity and the two separate legal entities are so

regardedasindependentofeachother,anditisonlyinexceptional

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circumstancessuchasfraudetc.thattheCourtwould examine

questionofliftingthecorporateveil.

13) Inthiscaseitisnotthecaseoftheappellantthatthe

applicant company has been created so as to only defeat the

maritime claims against the respondent No.2 company. In the

presentfactsitisnotthecaseoftheappellantthattheapplicant

companyis asubsidiaryof therespondentNo.2companywhen

possibly it could be said that that the holding company is the

beneficial ownerofthesubsidiarycompany.Incaseswheretwo

independentcompaniesareboth100%subsidiaryof acommon

holding company then it may be possible to contend that the

beneficial ownerof boththecompanies is thecommonholding

company. These are not the facts in the present case as the

applicant company and the respondent No.2 company are not

subsidiariesofonecommonholdingcompanyorhavesubsidiary

andholdingcompanyrelationshipinterse.

14) The above principle of a corporate identity being

distinct from its shareholders and its shareholders not being

owners of the property of the company has been consistently

followed/applied in Admiralty proceedings by British Courts as

well. In thematterof TheEVPOAGNIC (1988)2LloydsLaw

Report411thecaseoftheplaintiffwasthatoneEvangelosorhis

companyPothicosShippingCompanywastherealowneroftwo

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shipsoneSkipper1(maritimeclaimarose)andEvpoAgnic(ship

soughttobearrested).Theownershipofthetwoshipswereintwo

independent companies though having the same mangers and

shareholders with the ultimate ownership of both the limited

companiesbeing foundtobeinEvangelosorhiscompany.The

argumentoftheplaintiffwasthatonliftingthecorporateveilit

wouldbefoundthatoneandthesamepersonwasthebeneficial

ownerofthetwocompanies.Thissubmissionwasrejectedonthe

groundthatthearrestcouldnotbemadeoftheshipofasister

companybutarrestcouldonlybemadeofthesistershipi.e.ship

ofwhichtheownerswasthesameastheshipinrespectofwhich

the maritimeclaimarose. Thecourt vacated the arrest of the

vessel Evpo Agnic holding that the ships are owned by two

different limitedcompanies whichownthem. Itisthelimited

companyandnotitsshareholderswhoarethelegalandequitable

ownersoftheship.

15) Theappellantplacedrelianceuponthedecisionofthe

Division Bench of this Court in Great Pacific Navigation

(Holdings)CorporationLtd.V.M.V.TongliYantairenderedon14

October2011onthegroundthatonsimilarfacts,thisCourthad

allowed the appeal of the appellant therein and set aside the

vacation of the arrest of the vessel. The aforesaid decision

renderedbythisCourton14October2011hasbeensetasideby

theApexCourtinCivilAppealNo.8988of2012inM.V.TongliVs.

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Great Pacific Navigation (Holdings) Corporation Ltd. on 12

December 2012. In view of the fact that the decision of the

DivisionBenchofthisCourtdated14October2011hasbeenset

aside,noreliancecanbeplaceduponthejudgment whichhas

been set aside. It is as though it never existed. In fact in

RamchandraVishnuTendulkarandors.Vs.StateofMaharashtra

andors.(1993)1Mah.L.J.892 thisCourthasheldthatoncea

JudgmentoftheDivisionBenchwassetasidebytheApexCourt

thenneithertheobservationsand/orconclusionofthejudgment

thathasbeensetasidecanbereliedupon.Consequently,reliance

upontheaforesaiddecisioninthematterofM.V.Tongli(supra)

renderedon14October2011iscompletelymisplaced.Therefore,

nooccasiontoconsiderthesameforthedisposalofthisappealcan

arise.

16) Inthesecircumstances,thearrestofrespondentNo.1

vesselisnotjustifiedasamatteroflawandtheorderpassedby

theleanedSingleJudgecannotbefoundfaultwith.

17) Inviewofourabovefindingthatarrestofrespondent

No.1vesselinthepresentfactsisnotwarrantedonan issueof

lawtheconsiderationoftheothersubmissionsuchasacommon

directorbetweentherespondentNo.2companyandasubsidiaryof

the applicant company, commonagent andcommonsignature

wouldallwarrantliftingthecorporateveiloftherespondentNo.

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2companytodetermineitsbeneficialownerwouldnotarise.The

entire basis for looking at surrounding circumstances arises

according to the appellant in view of the fact that 100%

shareholdingofrespondentNo.2companyisheldbyCartierwhich

isacompanyincorporatedinSamoa.Howeverunderthelawsof

Samoathenamesofthedirectors,shareholdersarenotrequiredto

bedisclosed.Itissubmittedbytheappellantthatinviewofthe

aforesaidpeculiar situationthatappellant is unable toestablish

beyonddoubttheownershipoftheWangWendonginCartierand

throughitinrespondentNo.2company.Howeverthenecessityto

examinethesurroundingcircumstancesandproceedonsuspicion

thatWangWendongisthebeneficialownerofrespondentNo.2

companyisobviatedforthereasonthatWangWendongwhois

allegedbytheappellanttobethebeneficialownerofrespondent

No.2companyhasfiledanaffidavitdated8February2013before

thelearnedSingleJudgewherein,heinteraliastatesasunder:

4.I state that I was never and I amnot theDirectornorholdanysharesofM/s.WhimStarCharteringCo.Ltd., theDefendantNo.2inthecaptioned proceedings, at any given point oftime.IfurtherstatethatIwasneverandIamnot the Director nor hold any shares of M/s.ZJHXShipping Co. Ltd. at any given point oftime.

5. IalsostatethatIwasneverandIamnottheDirectornorholdanysharesofM/s.CartierInvestmentCo.Ltd.atanygivenpointoftime.

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InviewoftheabovecategoricalstatementsonoathofMr.Wang

Wendong the reason to act on suspicious surrounding

circumstances cannot be sustained. In the face of the above

affidavititisimpossibletoacceptthesubmissionsoftheappellant

thatthearrestofthevesselwhichadmittedlyisbeneficiallyowned

byWangWendonghastobecontinuedtosecuretheappellants

maritimeclaimagainst respondent No.2company.The learned

singlejudgehasexaminedthevarioussurroundingcircumstances

andreachedafindingthatthesamedoesnotestablishthatWang

WendongisthebeneficialownerofrespondentNo.2.

18) InfactinthedecisionofQueen'sBenchDivision in

Mawan (1988)2LLYODLawReports 459, theargumenton

behalfoftheplaintiffwasthatifonelooksatalltheconnecting

links between the shareholders, the directors, and the

managementofthetwolimitedcompaniesitwouldbeclearthat

thebeneficial ownershipofthetwoships isvestedinthesame

personandtheyaretrulysistershipsevenifattemptismadeto

concealthefact.TheCourtnegativedtheaforesaidsubmissionby

holdingthattheapproachsuggestedinvolvesnotmerelyliftinga

corporateveilbutalsosweepingasideallthecorporatestructure.

Therefore, in the present facts, no fault can be found in the

impugnedorderdated6May2013.

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19) The appellant had also submitted that while

consideringtheapplicationforvacationofsaidarrestofthevessel,

theCourtisrequiredtoconsidernotonlytheprimafaciecasebut

balance of convenience and irreparable injury involved in the

matter.Theabovepropositionisindisputable.However,aprima

faciecasecannotbebuiltmerelyonsuspicion.Thearrestofthe

vesselonthebasisofthesuspicionraised certainlycausesmore

injury toa third party thantheplaintiff. Thus, the balanceof

conveniencewouldbeagainstthearrestofthevessel.Inthecase

ofAventicum1978Vol.ILLOYD'sLawReports184Queen'sBench

Division(AdmiraltyCourt)hasheldthatonusisupontheplaintiff

to show that the person against whom it is sought to invoke

Admiraltyjurisdictionisthepersonwhobeneficiallyownsboththe

vesselinrespectofwhichmaritimeclaimhasarisenaswell as

thevesselwhichissoughttobearrested. TheCourtfoundthat

therewereanumberoffactorstoindicatethatthereisveryclose

connectionbetweentwocompaniessuchascommonaddressetc.

yettheCourtonthebasisoftheevidencebeforeitheldthatthere

wasnopositiveevidenceproducedbytheplaintiff whichcould

establish the beneficial ownership of the vessel sought to be

arrestedisinthesamepersonasinrespectofthevesselinwhich

maritimeclaimarose.Theappellanthasnotbeenabletoestablish

that even prima facie that respondent No.2 vessel is in the

beneficialownershipofWangWendong.Inthecircumstancesthe

impugnedorderhastobeupheld.

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Conclusion:

20) Inviewoftheabove,weseenoreasontointerferewith

thewellreasonedorderofthelearnedSingleJudgedated6May

2013 setting aside the arrest done on 28 January 2013 of

respondentNo.1vessel.Accordingly,theappealis,dismissedwith

noorderastocosts.

CHIEFJUSTICE

M.S.SANKLECHA,J.

Afterpronouncementofthejudgment,learnedCounsel

fortheappellantpraysforcontinuingtheadinterimstaygranted

earlierinordertoenabletheappellanttohavefurtherrecoursein

accordancewithlaw.

In the facts and circumstances of the case, the ad

interimstaygrantedearlierwillcontinueforaperiodof2weeks

fromtoday.

CHIEFJUSTICE

M.S.SANKLECHA,J.

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Documents

Rainbow Ace judgment July 2013.pdf