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An admiralty court in Mumbai has ruled that expenses incurred by the fleet manager — including wages to crew — should be accorded “top most priority whether in the insolvency jurisdiction or in the admiralty jurisdiction” while apportioning proceeds from the sale of ships of debt-laden Varun Resources Ltd.
The order came on a batch of petitions filed by the crew employed on the eight LPG ships of Varun Resources and the ship manager — Fleet Ship Management Inc — seeking recovery of their dues from the sale of the ships. The ships are currently under arrest by the admiralty court at the behest of the crew and the ship manager.
India’s biggest LPG ship owner is separately facing bankruptcy proceedings following an order of the National Company Law Tribunal (NCLT). The petition for this was brought by Indian Bank, as part of a 12-bank consortium.
Opposing the sale of the vessels, bankers led by State Bank of India argued that “insolvency proceedings will have precedence over the present admiralty proceedings and that the vessels may not be sold in the admiralty jurisdiction of the court.”
The lenders cited the 180-day moratorium on legal actions extended to stressed firms under NCLT to oppose the arrest and potential sale of the ships. Banks and Varun Resources have challenged the arrest of the ships in the Bombay High Court, which is yet to decide on the issue.
“Maritime jurisdiction is very different from NCLT,” said a lawyer representing the crew and the ship manager in the case. In the admiralty court, the crew have filed a case by way of an action in rem. They have a claim against the ships they worked on, but they don’t have a claim against the person or the company. The two are entirely different, the lawyer explained.
Vessel maintenance“Our main issue was that the crew should be paid and the vessels should be properly maintained. We have got those orders from the court. They will get paid first whether Varun is liquidated under NCLT or the ships are sold under admiralty law,” the lawyer said.
Besides, the ship manager’s contract was not with Varun Resources, which is under NCLT. It is with Varun Global Ltd, which oversees the technical supervision and commercial management of the company’s ships.
Not Varun employees: CMD’Yudhishthir Khatau, CMD of Varun Resources, told BusinessLine that “the crew were not an employee of Varun Resources at all”. “The crew are employees of Fleet Ship Management. It is their primary responsibility to look after the crew. Of course, Fleet Ship Management has a recovery from Varun for which it has arrested the vessels. Our contract with Fleet Ship Management does not say that the crew will be paid subject to Varun paying,” he said.
Fleet Ship Management said that it has paid wages to the crew till October, at the request of DG Shipping, even after terminating the contract with Varun Global on August 30.
“Khatau wants everybody else to pay for running his ships — he has got vendors not paid, crew not paid and ship manager not paid. We keep on pouring money to run his ships. That’s why we want the ships to be sold and the proceeds to be used to recover our dues,” an executive with Fleet Ship Management said.
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