The Shipping Corporation of India Ltd v Evdomon Corporation and Another

• Jurisdiction: South Africa
• Judge: Corbett CJ, Botha JA, Milne JA, Goldstone JA and Van den Heever JA
• Judgment Date: 12 November 1993
• Docket Number: 686/91
• Court: Appellate Division
• Hearing Date: 27 August 1993
• Citation: 1994 (1) SA 550 (A)

B Corbett CJ:

The first respondent, Evdomon Corporation of Liberia ('Evdomon'), carries on business, inter alia, as the owner and charterer of ships. In terms of a charterparty signed by the charterer in New Delhi, India, and dated 30 September 1988 second respondent, the President of India, acting on behalf of the Government of India, chartered the vessel C MV Kavo Peiratis from Evdomon, the latter acting as the disponent owner thereof. The purpose of the charter was to carry a cargo of bagged rice from Thailand to India. The vessel duly completed this voyage and fully discharged the cargo on 25 December 1988. The Government of India failed to pay portion of the freight due under the charterparty and, despite continuous pressure by the managers of the Kavo Peratis, remained in D default in the sum of US$109 962,47.

In September 1990 Evdomon ascertained that the MV Vallabhbhai Patel ('the vessel') was berthed in the port of Saldanha Bay where she had been undergoing repairs. Claiming that the vessel belonged to the Government of India and in the belief that the vessel was imminently due to depart Saldanha Bay, Evdomon on 9 September 1990 brought an urgent ex parte E application before the Cape of Good Hope Provincial Division, exercising its admiralty jurisdiction ('the CPD'), for the attachment of the vessel and certain property aboard the vessel in order to found or confirm the jurisdiction of that Court to entertain an action in personam to be F instituted by Evdomon against the Government of India for payment of the freight still due under the charterparty relating to the Kavo Peiratis. The application was brought in terms of s 3(2)(b) of the Admiralty Jurisdiction Regulation Act 105 of 1983 ('the Act').

In the founding affidavit filed in support of the application it was alleged, inter alia, that, although the charterparty provided for all G disputes thereunder to be settled by arbitration in India, the Government of India had employed what may be described as delaying tactics; that the arbitration proceedings were likely to take 'several years'; that in terms of a recent decision of the Supreme Court of India the arbitrators were not empowered to order the payment of interest on the sum awarded; and H that it was improbable that any favourable award which might eventually be made in first respondent's favour would be 'speedily settled' by the Indian Government. For these reasons, so Evdomon averred, it had no confidence in obtaining 'true commercial justice' should it proceed with an arbitration in India, whereas it was confident that, should the matter proceed before the CPD, both parties would be afforded a 'fair and I expeditious trial'.

On this application the Court made an order of attachment as prayed and ordered, inter alia, that a rule nisi should issue calling upon all persons interested to show cause why the attachment should not be confirmed. The order also authorised the release of the vessel and other property attached upon the furnishing of security to the satisfaction of J the Registrar

Corbett CJ

A of the CPD. Such security was indeed furnished and a release warrant was issued on 12 September 1990.

The Government of India did not respond to the rule nisi, but appellant did: it intervened as an interested party. Appellant is the Shipping Corporation of India Ltd ('SCI') and it intervened on the basis that the B vessel was owned 'as to all of its 64 shares' by it, and not by the Government of India. It accordingly asked for the discharge of the order of attachment, the effect of which would be the release of the security lodged, and the costs of its intervention.

The matter was heard by King J. Before him it was common cause that SCI was a private company registered under the Indian Companies Act, 1956, and C that the vessel was duly registered in the name of SCI and was its property; but that SCI's entire issued share capital was actually or beneficially owned by the Government of India. It was Evdomon's basic contention that, by reason of the fact that SCI was a wholly-owned subsidiary of the Government of India and of the degree of control D exercised by the Government of India over the policies, operations and business activities of SCI, the latter was in truth an 'organ, department or instrumentality' of the Government of India, with the result that SCI's property belonged to the Government of India and was, therefore, attachable in order to found or confirm jurisdiction for an action in personam against the Government of India in terms of s 3(2)(b) of the Act. E SCI disputed these averments and legal conclusions. King J found in favour of Evdomon on its basic contention and made an order confirming the attachment and ordering SCI to pay the costs of its intervention. With the leave of the Judge of first instance SCI now appeals to this Court.

It is clear, and not in dispute, that in order to obtain confirmation by F the Court of the order of attachment Evdomon had to establish on a balance of probabilities that the vessel and other goods were at the time of attachment the property of the Government of India (Lendalease Finance (Pty) Ltd v Corporacion de Merçadeo Agricola and Others 1976 (4) SA 464 (A) at 489B-C; cf Cargo Laden and Lately Laden on Board the MV Thalassini Avgi v MV Dimitris 1989 (3) SA 820 (A) at 834D-F). In this connection, no G distinction is to be drawn between the vessel and the other property attached and so for the sake of brevity I shall henceforth refer merely to the vessel.

The evidence placed before the Court on affidavit by both parties canvassed in considerable detail the political and constitutional H background to the formation of SCI and the nature of its relationship with the Government of India. The facts are for the most part common cause, but where they are not, there having been no resort to oral evidence, I shall apply the well-known principles enunciated in Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A) at 634E-635C. The facts are fully set forth in the careful judgment of King J and I shall I endeavour to give merely a précis thereof.

The State of India was founded in 1947. From the outset the Government of India pursued a policy of active State participation in industrial and economic development. Certain industries were earmarked as State monopolies; other 'basic industries of importance' were subjected to a large measure of central ownership, regulation and control. The latter J included sea transport.

Corbett CJ

A In 1956 the Companies Act 1 of 1956 was passed by the Indian Parliament. Section 396 of this Act empowered the Central Government, whenever it was satisfied that this was essential in the public interest, to order the amalgamation of two or more companies into a single company. In 1961 and in the exercise of this power the Government of India ordered the B amalgamation of the Eastern Shipping Corporation, a public company incorporated under the Indian Companies Act of 1913, and the Western Shipping Corporation Ltd, a private company incorporated under the Companies Act of 1956, both of which companies were engaged in the business of shipping goods to and from India. The order stated that the Central Government was satisfied that, for C

'the purpose of securing co-ordination in policy and the efficient economical expansion and the carrying on of the shipping business in the public sector in India',

it was essential in the public interest that the amalgamation take place. D SCI was the company which came into existence as a result of this amalgamation.

SCI is a wholly-owned subsidiary of the Government of India. All but 204 of the approximately 7 000 000 issued shares in SCI are held by the Government of India, through the President of India. These 204 shares are held by executives of SCI in their capacity as government servants. In E terms of the articles of association (as amended) invitation to the public to subscribe for shares in SCI is prohibited. The allotment of shares by the board of SCI is made subject to the directions of the President of India; and shares may be transferred only to persons approved by the President. The articles entitle the President to have a representative at F any meeting of the company and this representative is empowered to vote on his behalf. The President is further given wide powers in regard to the appointment, removal and substitution of directors and alternate directors of SCI and of the chairman of the board and the managing director. He also fixes their remuneration.

G The general management of the company is placed in the hands of the managing director, subject to the control and supervision of the board; certain matters relating to the working of the company may, on the initiative of the chairman or the managing director, be reserved for the consideration of the President of India; and the latter's prior approval H must be obtained in regard to, inter alia, certain appointments to posts within the company, schemes involving capital expenditure above a stipulated amount, the disposal of property other than ships for scrapping purposes over a certain value, the formation of subsidiaries and proposals for the raising or reduction of capital. The articles also give the President powers of approval of company budgets and there is a general I article (No 37) commencing:

'Notwithstanding anything contained in any of these articles, the President may from time to time issue such directions or instructions as he may consider necessary in regard to the affairs or the conduct of the business of the company or directors thereof and in like manner may vary J and annul any such directions or instructions.'

Corbett CJ

A In practice, according to the company secretary of SCI, Mr S Ramamurthy, the company, together with other wholly-owned Government...