Limitation Of Liability – Whether The Right To Limit Liability Is Absolute – Dehors Fault On Part Of The Vessel Owner

The above issue was considered by the Bombay High Court in the case of Nordlake Gmbh V. Union of India through the Indian Navy.

Brief Facts:

The above issue was considered by the Bombay High Court in the case of Nordlake Gmbh V. Union of India through the Indian Navy¹. On 30 January 2011, a collision occurred between M.V. Nordlake and INS Vindhyagiri (naval ship). Following the collision, INS Vindhyagiri was taken to berth where she sank. In the year 2014, the owners of Nordlake filed an admiralty suit seeking to limit liability under S. 352 C of the Merchant Shipping Act, 1956 (MSA) based on the limits prescribed by the 1976 convention.

The owners of Nordlake contended that the right to limit liability is absolute dehors any act of omission on part of the owners. Owners defence was premised on the basis that though the 1976 convention was ratified by India, by a 2002 amendment to the MSA, the legislature removed reference to the exception to limit liability – even when the occurrence giving rise to a claim resulted from actual fault or privity of owners. As a result, the owners right to limit liability is absolute without any breaking point to limit liability. The fault of the owner is totally irrelevant.

The defence of the Indian navy:

The Indian Navy opposed the application for constitution of limitation fund on the following grounds (amongst others):

1. Owners do not have the right limit liability as an English Court judgment attributed 60% blame to Nordlake for the collision. The loss of INS Vindhyagiri was attributable to the negligence of Nordlake.
2. If a limitation fund was to be constituted, the fund ought to be constituted under the 1996 protocol and not under the 1976 limits. This was based on the premise that the when the application was for constitution of fund was filed, the 1996 protocol was in effect.

Issues framed by the Court:

1. First, whether the right to limit the liability under Section 352A of the Act, 1958 is absolute and de hors the question of fault on the part of the Vessel or its registered owner.
2. in the event the Court comes to the conclusion that the liability of the Plaintiff deserves to be limited, whether the quantum is to be fixed in accordance with the provisions of the Convention, 1976 or Protocol 1996

Decision of the Bombay High Court:

1. Neither the Court can lose sight of the conscious omission of the provisions of ‘breaking of limitation’, while amending Part XA by the Amendment Act 63 of 2002. Nor the Court can import the provisions contained in Article 4 of the Convention of 1976 providing for ‘Conduct barring limitation’, as it would amount to supplanting the legislation. From this standpoint, I do not find any justifiable reason to take a different view of the matter than the one which this Court was persuaded to take in the case of Murmansk Shipping Company. I am, therefore, impelled to hold that the right to limit liability under Part XA of the Act of 1958 is absolute and without reference to the question of fault or privity on the part of the person who is liable and seeks to limit the liability.
2. It is trite, treaty or 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 the acceptance.
3. Indisputedly, in the case at hand, Protocol 1996 came into force in India on 21 June 2011 i.e. after about six months of the date of occurrence. It would be contradiction in terms of the definition of ‘Convention’ under Section 352 is read to mean Convention 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 principle of incorporation of treaty obligations in domestic law.

Conclusion:

The Bombay High Court has correctly interpreted the provisions of the MSA on the premise that court cannot supplant legislation when statute has expressly excluded the breaking point for limitation. The right to limit liability is therefore absolute. As regards the applicability of the 76 convention or 96 protocol, the relevant tigger date will be the date of the incident and not the date on which the application is filed for constitution of limitation fund.

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