Statutory Port's Dues Deserve Priority In Distribution Over Other Claims, Including Those Of Secured Creditors: Bombay High Court

The Bombay High Court stated that the statutory port dues take precedence over all other claims, including those of secured creditors, by virtue of the paramount lien created under Section 64 of the Major Port Trusts Act, 1963 and such are to be treated as secured claims being entitled to be paid in priority, even before the secured creditors.The bench consists of Justice Abhay Ahuja allowed a series of Applications filed by the Mumbai Port Authority holding that the Port Authorities' dues for anchorage and related charges against vessels owned by GOL Offshore Limited (In Liquidation) qualify as secured claims under the Major Port Trusts Act, 1963 and must be accorded preference, even in winding-up proceedings.The Applications were filed seeking to set aside the adjudication of claims made by the Official Liquidator as “unsecured” with respect to the Port Authority's dues/claims made as overriding maritime lien with the Official Liquidator respectively in respect of four defendant vessels.In this case, the vessels belonged to GOL Offshore Ltd. which was ordered to be wound up by the Bombay High Court in December 2017. The Official Liquidator had taken control of the company's assets, including the 4 vessels which were then anchored at the Mumbai Port during liquidation.The Mumbai Port Authority had raised claims aggregating to over Rs. 1.10 crore towards anchorage and port-related charges for safeguarding these vessels. However, part of such claims was admitted as “unsecured claims” by the Official Liquidator.The Mumbai Port Authority contended that its claims are protected under Section 64 of the Major Port Trusts Act, 1963 by virtue of which the Applicant can distrain or arrest a vessel and the tackle, apparel and furniture belonging thereto and detain the same until the dues of the Port are paid, and further supported by Sections 4(1)(n) and (w) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, which confer maritime lien status to such charges. Per contra, the Official Liquidator argued that such maritime claims fall under the Admiralty jurisdiction and not within the winding-up Court's purview. It was further contended that the Port Authority failed to act under Section 64 of the Major Port Trusts Act, 1963 in time and that no valid lien had been exercised prior to the vessel sale. Moreover, enforcement of lien under the said Section was an action in rem against the subject vessels and such proceedings are restricted to the sale proceeds of the vessel and cannot extend to the other assets of the company and therefore the priority sought to be asserted is only so far as the vessel is concerned and does not extend to the general body of creditors. However, turning down Liquidator's argument, the Court held that even if the Official Liquidator had sold the vessels pursuant to orders of this Court, the claims filed with the Official Liquidator would be against the company in liquidation and not against the vessels. The Official Liquidator sold the vessels as the Official Liquidator of the ship owner company in liquidation and admittedly adjudicated the claims under the Companies Act, 1956 and the Companies (Court) Rules, 1959.The bench observed that the claims lodged with the Official Liquidator are actions in personam and not actions in rem even if the Official Liquidator has sold the vessels. The statutory port dues take precedence over all other claims, including those of secured creditors, by virtue of the paramount lien created under Section 64 of the Major Port Trusts Act, 1963 and such are to be treated as secured claims being entitled to be paid in priority, even before the secured creditors. The bench opined that “since this Court has held that the claims of the Port Authority are secured claims which ought to be paid in priority to all other claims, it would not be necessary to consider the submission that the claims would be expenses properly incurred in preserving the assets of the company under Section 476 of the Companies Act, 1956 or Rule 338 of the Companies Court Rules, 1959”.In view of the above, the bench allowed the Interim Applications filed by Mumbai Port Authority and held that the Official Liquidator erred in categorizing these claims as unsecured.The bench further directed that the Port's dues be treated as secured claims deserving priority in distribution to all other claims.Appearances:For Appellant (Mumbai Port Authority): Mr. Kanishk Kejriwal with Mr. Amit Meharia, Ms. Paramita Banerjee, Mr. Shubham Sawant, Mr. Harshit Trivedi, Mr. Tushar Awasthi and Ms. Mansi Deore (MCO Legals - Meharia & Company)For Official Liquidator - Mr. Mutahhar Khan, Advocate and Mr. Chandan Kumar (Official Liquidator) Case Title: The Board of Mumbai Port Authority Vs. Official Liquidator of GOL Offshore LimitedCase Number: Interim Application Nos. 3292, 3293,3294 and 3296 of 2023 in Company Petition No.756 of 2014Click Here To Read/Download Order

Statutory Port's Dues Deserve Priority In Distribution Over Other Claims, Including Those Of Secured Creditors: Bombay High Court

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Statutory Port's Dues Deserve Priority In Distribution Over Other Claims, Including Those Of Secured Creditors: Bombay High Court

Mehak Dhiman

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