The Hindu Business Line : One PSU pays for deeds of another

ON September 11, Greece-based Foresight Shipping Co Ltd impounded Shipping Corporation of India (SCI) vessel m.v. Lok Rajeshwari at the Canadian port of Sorel. Ordinary event or big deal, one may say... but herein hangs an interesting tale of how one public sector company has to pay for the wrong committed by another public sector company!

Foresight Shipping seized Lok Rajeshwari on the basis of a seizure-and-sale order passed by the Federal Court of Canada to recover its dues from the Food Corporation of India (FCI). Lok Rajeshwari is currently deployed on time-charter basis with Korea's S K Shipping.

SCI on Monday (September 16) was forced to issue a bank guarantee from State Bank of India (SBI) worth $ 6,00,000 or 1 million Canadian dollars (about Rs 3 crore) to get the vessel released. "SCI gave the bank guarantee in protest and with the full knowledge that the money can be safely written off as unrecoverable from FCI '', Government sources said. To go back to the tale... FCI had hired a vessel owned by Foresight to transport wheat cargo from the US to India in July 1988 and the charter party ended in dispute. The case went into litigation and the arbitration award passed in 1993 required FCI to pay $ 1,50,000 (now $ 6,00,000 cost plus interest) to Foresight.

When an Indian charterer enters into a charter party with a foreign ship owner, it is always subject to Indian laws and arbitration. The Act allows for challenging the arbitration award and FCI had used this clause to challenge the arbitration in the Delhi High Court where the case is being heard since 1993.

In the meanwhile, countries like South Africa, France, Singapore, China and Canada have liberalised their relevant laws which grants permission to anybody to arrest anybody irrespective of whether they are the citizens of these countries.

"No proof is required for such actions which can be done with a simple request to the court '', the sources said.

Foresight arrested Lok Rajeshwari in Sorel when the vessel was about to sail to Hamilton on the ground that the vessel was owned by SCI, a state-owned company, to recover the dues of FCI, another public sector company.

At this rate, the sources said that SCI vessels would dread going to South Africa, France, Singapore, China and Canada for fear of being arrested by ship owners based anywhere in the world to get their dues from state-owned firms like FCI, STC and MMTC.

With SCI headed for privatisation what would happen if the state-owned line is acquired by a private shipping company with the Government holding a residual stake of 26 per cent.

Though this kind of incident is not covered under the protection and indemnity insurance, the P&I clubs based in London can give an exemption given the track record of shipping lines. "Courts all over the world accept the guarantees given by P&I clubs. But in this case, such a guarantee is of no use since it is not accepted in Canada where the law allows for auctioning the vessel if payment is not made in 30 days'', the source said.

Send this article to Friends by E-Mail

Stories in this Section
VSNL dials wrong number for MEA dues

One PSU pays for deeds of another

Big fish defaults sink banks

Grasim raises L&T stake to 14.15 pc

Howzaat?... Hawk-Eye

US `dictates' India on Coke divestment