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M/s NKD Maritime Limited vs The Board of Trustees of the Port of Mumbai

SLP(C) · 2022 INSC 1002Decided 22 Sept 2022
SLP(C) No. 4550 of 2021
Indira Banerjee · J.K. Maheshwari

Background

NKD Maritime bought a ship (M.V. Karnika) at a court-supervised auction conducted by the Bombay High Court to recover unpaid bunker fuel charges from the vessel's earlier owner. The Bill of Sale stated the vessel was sold "free from all encumbrances." After taking delivery, NKD disputed anchorage charges (port fees for a vessel staying docked) and light-dues charges billed by the Mumbai Port Trust and Customs authorities, arguing it should only be liable for these charges from the date it actually took possession of the vessel, not for the period before the sale. A Single Judge of the High Court agreed with NKD, but a Division Bench reversed that decision on appeal by the Port Trust, and NKD approached the Supreme Court.

Decision Breakdown

The Court held that "free from encumbrances" in the sale terms did not mean the buyer was exempt from anchorage charges accruing after the date of sale merely because the applicable per-day rate was higher (since the ship had already been docked over 30 days): the anchorage charges themselves were not an "encumbrance" carried over from before the sale. As per the sale terms, all port dues, tariffs and taxes from the date the sale was sanctioned by the Court were to be borne by the purchaser, and the charges here were calculated correctly on that basis. The Supreme Court agreed with the Division Bench's reasoning and dismissed NKD's appeal.

Lesson Learnt

Buying an asset "free from encumbrances" at a court auction clears prior liens and claims, but it does not exempt the buyer from ongoing statutory charges (like port anchorage fees) that continue to accrue after the sale simply because the rate is higher due to the asset's history: buyers must read the specific terms of sale carefully to know what costs they are taking on.

Official source (sci.gov.in)View Judgment (PDF)

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