Whether pure economic loss independent of physical damage is claimable?

Therefore, we fall back to the basic principle for a claim in
tort of negligence, i.e., duty of care and foreseeability. The
position has to be brought in two stages. The first one is whether,
as between the defendant and plaintiff there is a sufficient relation
of proximity such that, in the reasonable contemplation on the
defendant, carelessness on his part may be likely to cause
damage to the latter in which case a prima-facie duty of care
arises. Secondly, if the first question is answered affirmative, it is
necessary to consider whether there are any considerations which
ought to negate or to reduce or limit the scope of the duty or the
class of person to whom it is owed or the damages to which a

breach may give rise. The necessary ingredient for duty of care
is characterized by law by one of proximity and that the situation
should be one in which the Court considers it fair, just and
reasonable that the law should impose a duty to the given case
upon one of the party for the benefit of the others. The next point
is whether pure economic loss independent of physical damage is
claimable.
44. In this case, the defendant vessel had come to Ranpur Bay
to discharge a cargo of LPG to the account of BPCL in the Captive
jetty. Bad weather caused her to drift when she was being
berthed, and she ran aground 1.5/1.6 kms from the jetty. The
plaintiff is carrying on business of manufacture of PVC resin at a
plant which is further inside from the Port. It will not be reasonable
or fair or just to impose upon the defendant duty of care to the
plaintiff because like the plaintiff there will be multitude persons
who would have been remotely affected not as a rule by way of
physical damage to them or their property but by putting them to
inconvenience and sometimes economic loss. If claims for such
loss were permitted there would be no end to claims. Some might
be genuine, some might be inflated or even false. In such cases,
it is also not rightly capable of proof or easily checked and in my
view this claim for economic loss for the plaintiff, independent of

physical damage is not payable.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NOTICE OF MOTION NO. 255 OF 2011
IN
ADMIRALTY SUIT NO. 20 OF 2006
Finolex Industries Ltd
Versus
M.V. KEW BRIDGE, 
CORAM: K.R.SHRIRAM, J.

Pronounced on: 9th June
2014
Citation;2015(2) ALLMR823

1. The issue that is raised in this Notice of Motion taken out on
behalf of the applicant is whether a plaintiff could maintain an
MV

action only for recovery of pure economic loss independent of
physical damage?
The case of the applicant simply put is that economic loss
independent of physical damage is not recoverable on the ground
that the applicant will be under no duty of care to the plaintiff and
the loss will not be foreseeable and as a policy courts should not
allow such claims. To decide this issue we have to see what the
plaintiff is claiming in this suit.
2. Before I briefly narrate the plaintiff's claim in the suit, let us
look at the particulars of claim annexed to the plaint.
EXHIBIT “R”
PARTICULARS OF PLAINTIFF'S CLAIM
Sr. No. Description Amount
1. Production Loss Rs.12,28,72,520.00
2. Expenditure incurred in
connection with salvage of the
Defendant Vessel and legal
proceedings in the High Court and
Supreme Court
Rs. 54,28,001.00
3. Total Rs.12,83,00,521.00
4. Exposure for de-murrage claims
on account of detention of
Vessels
US $ 453,889.00
Total Claim = Rs.12,83,00,521+US $ 453,889.00
(Rupees Twelve Crores Eighty Three Lacs Five Hundred and Twenty
One and US Dollars Four Lac Fifty Three Thousand Eight Hundred
and Eighty Nine Only)
MV

3. As regards claim no.2 and claim no.3, Mr. Dhond, the
counsel for the plaintiff stated that the plaintiff is not pressing for
the same and to that extent, security furnished by the
applicant/defendant for release of the defendant vessel could be
returned. As regards claim no.2, he said the plaintiff has not
incurred any salvage cost and as regards claim no.3, he said they
have not received any claim for demurrage. The claim in the suit
therefore, will be restricted to production loss claim of Rs.
12,28,72,520.00.
4. The plaintiff carry on business of manufacture and sale of
P.V.C. resin. The plaintiff have a Captive Jetty for receiving raw
material required to manufacture PVC resin in its plant at Ranpur,
Ratnagiri. This jetty is in the area called Pawas Bay and is closed
during monsoon from mid- May until September/October
depending on the weather. At the relevant period, the jetty was
declared open by the Port Officer of Maharashtra Maritime Board
on 1st September, 2006.
5. On 13th September, 2006, less than two weeks of the jetty
being declared open, the defendant vessel m.v. Kew Bridge
arrived at Pawas Bay for discharge of 8798 M.T. of LPG on account

of Bharat Petroleum Corporation Limited (BPCL) at the Captive
Jetty. Though it was a private Captive Jetty of the plaintiff, it had
allowed BPCL to use the jetty. Prior to the arrival of the defendant
vessel, the only other vessel that had berthed at the captive jetty
after it was declared open post monsoon, was a smaller vessel
which was not carrying LPG.
6. On 14th September, 2006, Pilot boarded the defendant
vessel. The services of pilot are provided by the plaintiff. In the
process of berthing with the assistance of two tugs of maximum
Bollard Pull of 10 tons, as per the documents annexed to the plaint
and relied upon by the plaintiff, it seems, due to a sudden squall,
rain and swell, the defendant vessel drifted away from the jetty
and could not be controlled by the two tugs. The vessel drifted in
the area and grounded on soft sand and mud at a distance,
admittedly of 1.5 / 1.6 k.m. from the captive jetty. Though
elsewhere, prior to filing this suit, the plaintiff had also taken the
stand that the grounding was on account of bad weather, in the
plaint, the plaintiff allege it was due to inadequacies and/or
negligence of the defendant vessel and its master, and crew, the
defendant vessel grounded. There is no explanation in the plaint
for this change of stance and it is an averment with no details.
The vessel was finally removed from its grounded position late in

the night on 9th October, 2006 and she was safely navigated out
from Pawas Bay.
7. In the meanwhile, by an order dated 16th September, 2006,
the Port Officer, Ratnagiri, Maharashtra Maritime Board ordered
the operation of the Captive Jetty be temporarily suspended with
immediate effect. At the same time, the Port Officer, in order to
ensure that there was no delay in receiving cargo informed the
plaintiff that they could immediately revive operations at the
captive jetty provided the vessels to be piloted at the captive
jetty to/from the anchorage would be piloted only by one Captain
Ali Ibrahim Pawaskar and the plaintiff should have two tugs hired
by them with a minimum Bollard Pull of 35 tons each and the tugs
should also possess a valid Bollard Pull Test Certificate from
approved authority. It is necessary to mention here that the two
tugs that were rendering assistance to the defendant vessel to
berth at the Captive jetty, at which time she grounded were also
provided by the plaintiff.
8. The plaintiff by its letter of 16th September, 2006 informed
the Port Officer that it would comply with the directions to use
only Captain Pawaskar as pilot with immediate effect but tugs will
take time and, therefore, suggested using a third tug to continue

with its shipping activities. It also requested the Port Officer to
allow a smaller vessel carrying 5000 tons followed by another
smaller vessel carrying 3000 tons of raw material to be allowed to
be berthed. Following this the Sub Divisional Magistrate (SDM)
passed an order dated 22/09/2006 under Section 133 of the
Criminal Procedure Code, directing the plaintiff to shut the
plaintiff's plant. The reason given for this order is because the
defendant vessel had grounded about 1.5 km from the plaintiff's
captive jetty and efforts to re-float the vessel was yet not
successful and he had also heard that the cargo of LPG being
carried in the defendant vessel was likely to be transmitted to
another empty ship and there was a possible hazard which would
require the evacuation of people within a radius of 2.5 k.m. of the
plaintiff's plant and hence to avoid any untoward incident, until
the defendant vessel is re-floated, the plaintiff should shut its
plant. In the said order it is however, recorded that the defendant
vessel drifted and grounded due to bad weather.
9. While the rescue operations were on, a vessel by the name
Suzanne carrying the plaintiff's cargo berthed at the captive Jetty
on 23rd September, 2006 discharged and sailed on 24th
September, 2006 without any incident.

10. A local resident, thereafter, filed a Public Interest Litigation
in the Bombay High Court against the use of the jetty by the
plaintiff. It was also alleged that the plaintiff had illegally let out
the jetty to BPCL for handling LPG Cargo thereby violating all
statutory provisions and without having any safety measures
including a breakwater for protection of ships. On 28th September,
2006 a Division Bench of this Court restrained the plaintiff from
using the jetty. Neither the plaintiff nor the defendant were
parties to the Public Interest Litigation. On 29th September 2006,
the plaintiff filed a Civil Application wherein the plaintiff submitted
that there was no danger to vessels using the jetty and prayed for
vacating or modifying the order restraining the plaintiff from using
the jetty. However, the Court did not vacate or modify its order.
On 1st October 2006, the plaintiff filed a Special Leave Petition and
the Hon'ble Supreme Court allowed the plaintiff to use the jetty to
discharge cargo from another vessel by name Polar Endurance.
Later on as the defendant vessel was refloated without any
incident, the Public Interest Litigation came to be disposed of on
12th October, 2006. On 25th October, 2006, the plaintiff filed this
suit and the applicant as owner of the defendant vessel, without
prejudice to its rights and contentions, furnished security to the
credit of the suit.

11. That is how, this Notice of Motion came to be filed in which
the applicant, the owner of the defendant vessel prays for (a)
dismissal of the suit as not maintainable in law and/or in the
Admiralty jurisdiction of this Court; (b) in the alternative, the exparte
order of arrest be vacated and the bank guarantee furnished
in respect of the plaintiff's claim be discharged and returned; (c)
In the alternative, the bank guarantee furnished for release of the
defendant vessel be reduced to the extent, this Hon'ble Court may
deem fit and proper and (d) the plaintiff be directed to pay to the
defendant or deposit in this Court a sum of `2,53,32,212.50
(Rupees Two Crores Fifty Three Lacs Thirty Two Thousand Two
Hundred and Twelve and Fifty paise only) towards the bank
guarantee charges incurred by the applicant.
12. At the outset, in view of the concessions made by Mr.
Dhond, the learned Counsel for the plaintiff, the security provided
in the sum of ` 12,83,00,521.00 plus US$4,53,889.00 will get
reduced to only ` 12,28,72,520.00. What remains, therefore, is
the claim for production loss of ` 12,28,72,520.00 This according
to Mr. Pratap, is a claim for pure economic loss independent of
physical damage, which under any law cannot be claimed. Mr.
Pratap also submitted that admittedly there was no physical
damage and the cause of action averred in the plaint at paragraph

3 is :
“This loss and/ or damage and/ or liability resulted
and/ or arises from the grounding of the Defendant
Vessel carrying 8798 MT of LPG in Pawas bay, as a
consequence of the inadequacies and/ or negligence
of the Defendant vessel and its master and crew,
who lost control of the vessel and allowed her to drift
deep into Pawas bay, in an easterly direction for
more than a kilometer, while attempting to dock at
the Plaintiff's jetty at the mouth of Pawas bay.”
13. Mr. Pratap submitted that the cause of action alleged in the
plaint which was declared on 25th October 2006 is at variance with
all the documents annexed to the plaint and also the pleadings
filed by the plaintiff in the PIL as well as the SLP that the plaintiff
had filed in the Apex Court challenging the order of Division Bench
of this Court in the PIL. Mr. Pratap states that all these show that
the defendant vessel drifted and grounded due to bad weather.
He also submitted that the pilot was an employee of the plaintiff.
The two tugs that were being used to assist the defendant vessel
to berth were owned by the plaintiff. There was no fault or
omission that could be attributable to the defendant and the
averments in the plaint which are contrary to the documents
annexed to the plaint, the averments made by the plaintiff in their
affidavit in the PIL and in the SLP, are bald and baseless. Mr.
Pratap based his entire case in such a way that assuming for the
sake of argument the grounding of the vessel was due to reasons
attributable to the vessel or to the master or the crew still the

plaintiff cannot sue the defendant for pure economic loss,
independent of physical damage.
14. Mr. Pratap submitted that this is a case where the plaintiff is
suing in tort of negligence. He based his case on four legs, viz.,
(a) there has to be a duty of care to the plaintiff and the
defendant owed no such duty; (b) the loss was foreseeable and
not remote; (c) In any case the plaintiff cannot claim for pure
economic loss independent of physical damage; and (d) there was
no causal connection between the grounding of the defendant
vessel and the alleged loss suffered by the plaintiff.
He also submitted, relying on an extract from the 18th
edition of Clerk & Lindsell on Torts that there are four
requirements that the plaintiff has to meet in a claim in tort of
negligence. They are (a) the existence of a duty of care situation;
(b) breach of the duty of care by the defendant; (c) a casual
connection between the defendant's careless conduct and the
damage; and (d) that the particular kind of damage to the
particular claimant is not unforeseeable as to be too remote and
all these four requirements have to be satisfied. Requirement (c)
ascribes causal responsibility to the defendant, whereas the
function of requirement (d) is to limit actionability by the claimant
or by the plaintiff by determining whether he should be able to

hold the defendant legally responsible for the damage. Only when
these four requirements are satisfied, the defendant is liable for
negligence.
15. Concerning the existence of duty of care situation, the first
limb of his arguments, Mr. Pratap submitted that there is no
proximity or nearness in this case to attribute a duty of care to the
plaintiff particularly for a claim for pure economic loss
independent of physical damage. He first relied upon a judgment
of the House of Lords in the case of “Caparo Industries PLC.
and Dickman and others”1 This was a matter where the Court
dealt with a situation as to whether an auditor appointed by the
company to audit and survey company's accounts under a
statutory duty to make returns to the shareholders owes any duty
of care to another company making a takeover bid relying upon
the auditor's report.
Lord Bridge of Harwich at page 617-618 summarized the
outcome :-
"What emerges is that, in addition to the
foreseeability of damage, necessary ingredients in
any situation giving rise to a duty of care are that
there should exist between the party owing the duty
and the party to whom it is owed a relationship
characterised by the law as one of "proximity" or
"neighbourhood" and that the situation should be
1 [1990] A.C. 606

one in which the court considers it fair, just and
reasonable that the law should impose a duty of a
given scope on the one party for the benefit of the
other.”
16. Mr. Pratap also submitted that where pure economic loss
independent of physical damage is claimed there are public policy
considerations which is sometimes regarded as an additional test
to be applied once the three “Caparo” (supra) criteria quoted
above are satisfied. Mr. Pratap submitted that in this case the
plaintiff is a total stranger to the defendant and the view should
be that the public interest should be considered as an aspect of
justice and reasonableness. This point we will consider when the
third limb of Mr. Pratap's arguments on economic loss is dealt
with. The defendant vessel came to discharge a cargo of LPG at
the Captive Jetty to the account of BPCL. The cargo was
consigned to BPCL and had nothing to do with the plaintiff. The
plaintiff's plant was shut by orders of the authorities or the High
Court in proceedings to which the defendant was not a party. No
way a relationship characterised as one of 'proximity', or
'neighbourhood' could exist between the plaintiff and the
defendant vessel. Consequently, there can be no duty of care
that the defendant vessel owed to the plaintiff.
17. As regards the second limb, i.e., foreseeability, Mr. Pratap

submitted that an essential ingredient in determining liability in
consequence to the tortious act of negligence is whether the
damage is of such a kind as a reasonable man should foresee.
The test is objective. He also submitted that a man should not be
held liable for damage unpredictable by a reasonable man
because it was 'direct' or 'natural' and equally he should not
escape liability however 'indirect' the damage if he foresaw or
could reasonably have foreseen the intervening events which lead
to its being done. For this Mr. Pratap relied upon another
judgment of the House of Lords in the matter of “Overseas
Tankship (U.K.) Limited and Morts Dock and Engineering
Co. Ltd.” 2 (The Wagon Mound). In this judgment Viscount
Simonds, who delivered the judgment of their Lordships, while
considering the various authorities observed at page 421 as under
:
“Instances might be multiplied of deviation from the
rule in Polemis, but their Lordships think it sufficient
to refer to certain later cases in the House of Lords
and then to attempt to state what they conceive to
be the true principle. In Glasgow Corporation V. Muir
[1943] A.C. 448, 454, Lord Thankerton said that it
had long been held in Scotland that all that a person
can be bound to foresee are the reasonable and
probable consequences of the failure to take care
judged by the standard of the ordinary reasonable
man, while Lord Macmillan said (at page 457) that “It
is still left to the judge to decide what, in the
circumstances of the particular case, the reasonable
man would have had in contemplation, and what,
2 1961 AC 388

accordingly, the party sought to be made liable
ought to have foreseen.................
In considering whether a person owes to another a
duty a breach of which will render him liable to that
other in damages for negligence, it is material to
consider what the defendant ought to have
contemplated as a reasonable man.” Their
lordships at page 426 concluded as under :
“Their Lordships conclude this part of the case with
some general observations. They have been
concerned primarily to displace the proposition that
unforeseeability is irrelevant if damage is “direct.” In
doing so they have inevitably insisted that the
essential factor in determining liability is whether the
damage is of such a kind as the reasonable man
should have foreseen. This accords with the general
view thus stated by Lord Atkin in Donoghue V.
Stevenson, [1932] A.C. 562: “The liability of
negligence, whether you style it such or treat it as in
other systems as a species of 'culpa', is no doubt
based upon a general public sentiment of moral
wrongdoing for which the offender must pay.” It is a
departure from this sovereign principle if liability is
made to depend solely on the damage being the
“direct” or “natural” consequence of the precedent
act. Who knows or can be assumed to know all the
processes of nature ? But if it would be wrong that a
man should be held liable for damage unpredictable
by a reasonable man because it was “direct” or
“natural”, equally it would be wrong that he should
escape liability, however “indirect” the damage, if he
foresaw or could reasonably foresee the intervening
events which led to its being done :cf. Woods V.
Duncan,[]946]A.C. 401. Thus foreseeability becomes
the effective test. In reasserting this principle their
Lordships conceive that they do not depart from, but
follow and develop, the law of negligence as laid
down by Baron Alderson in Blyth V. Birmingham
Waterworks Co., [1856]11 Exch. 781.”
18. Since what can be contemplated or foreseen by a
reasonable man varies from situation to situation and person to

person, Mr. Pratap submitted that as a matter of principle and
policy Courts did not grant any claim for damages for pure
economic loss independent of physical damage. This is his third
limb of arguments. He relied upon the judgment delivered by
Lord Denning M.R., sitting in the Court of Appeal in the matter of
“Spartan Steel & Alloys Ltd. v/s. Martin & Co.
(Contractors) Limited”3 . He submitted that in most cases
where economic loss was held not to be recoverable, it has been
put on the ground that the defendant was under no duty to the
plaintiff nor to anyone else who suffers loss because he had a
contract with the injured man nor to anyone who only suffers
economic loss on account of the accident. He also submitted that
there were cases where the defendant might have been under a
duty to the plaintiff, but the economic loss has not been recovered
because it is too remote. He emphasized on the example of such
a situation given in the “Spartan Steel“ (supra) judgment at
page 36, where the defendant's ship negligently sank a ship which
was being towed by a tug, the owner of the tug lost his
remuneration, but he could not recover it from the negligent ship,
though the same duty ( of navigation with reasonable care) was
owed to both tug and tow [(1911) 1 K.B. 243, 248]. In such cases,
if the plaintiff or his property had been physically injured, he
would have recovered, but as he only suffered economic loss, he
3 1973 (1) Q.B. 27

is not entitled to recover, because the loss was regarded as too
remote. He also submitted that when a situation like in the
present case happens, though only the plaintiff has sued, it affects
a multitude of persons, not as a rule by way of physical damage to
them or their property, but by putting them to inconvenience, and
sometimes to economic loss. If claims for such economic loss
were permitted for this particular hazard like in the present case,
there would be no end of claims. Some might be genuine, but
many might be inflated, or even, false. Hence, it is better to
disallow economic loss altogether, at any rate when it stands
alone, independently of any physical damage.
19. Mr. Pratap also submitted, which is his fourth limb of
arguments, that when there are intervening factors, novus actus
interveniens, it can be regarded as breaking the causal connection
between the wrong and the damage. The defendant's conduct
may have satisfied the 'but for' test in the sense that without his
wrongful conduct the damage would not have occurred but this in
itself is not determinative of whether he should be held
responsible where other causally relevant events have played
role. He further submitted that on the grounds of equity and
policy, in the light of subsequent events, the defendant should not
be held answerable for consequences beyond his control. He also

submitted that the novus actus interveniens may take three forms
namely; (a) mere natural event independent of any human
agency; (b) an act (or omission) by a third party or; (c) the
conduct of the claimant himself. Mr. Pratap submitted that the
grounding of defendant vessel was not the cause for the alleged
stoppage of the plaintiff's plant because even after grounding one
vessel of the plaintiff entered and discharged cargo. The PIL that
was filed and the orders passed therein and the orders of the SDM
were responsible for the closure of the plaintiff's plant. Therefore,
the PIL and the orders of the SDM should be taken as the
intervening factor, i.e., novus actus interveniens, because the
impact of the orders passed in the PIL and by SDM obliterates the
wrong doing of the defendant, if at all there is any wrong doing.
20. Mr. Pratap concluded that as held by Lord Denning in the
“Spartan Steel “ (supra), as a matter of policy pure economic
loss should not be allowed because in a given situation if a vessel
runs aground and blocks the channel and port had to be closed for
sometime until the vessel was refloated, can all exporters and
importers and other port users other than the port itself claim for
economic loss? He submitted that though it could be foreseen
that if ship runs aground, in the port's channel, the entire port
activities may come to a standstill, still it is far too remote to

allow all the exporters/importers spread all over the country or the
ship owners who use the port or the transporters or contractors
who lost business or the labourers or labour contractors who are
unable to load/unload, sue the ship because it has run aground for
economic loss independently of any physical damage. That is
where the remoteness or proximity comes into play and hence as
a matter of policy, such claims should not be allowed. He also
submitted that the grounding of the defendant vessel did not
block the jetty or the channel. The ship was grounded 1.5/1.6 kms
from the jetty. Another vessel of the plaintiff came and discharged
cargo and went away while refloating efforts were on. Due to
some objections raised by the people living in that area by filing a
PIL where the main grievance was that the plaintiff wrongly and
without permission operates the captive jetty allowing the
discharge of dangerous cargo, that an order came to be passed
temporarily shutting the plant. Therefore, the plaintiff's claim is
not maintainable. Mr. Pratap consciously did not delve into the
quantum of the claim because that would be something that
cannot be decided at this stage. He restricted to the point of law -
the Court should hold that the plaintiff cannot maintain an action
for pure economic loss independent of any physical damage.
21.
21. Mr. Dhond, Counsel for the plaintiff at the outset submitted

thatthe principle of Rylands vs. Fletcher 4 has been disregarded
/ distinguished by our Apex Court and they have adopted the
principle of strict liability when somebody is carrying on an
activity which can be potentially dangerous. Mr. Dhond submitted
that the owner of the defendant vessel was knowing that he was
carrying a highly inflammable hazardous cargo, i.e., LPG and
therefore he had strict liability and such liability is not subject to
any of the exceptions which operate vis-a-vis the tortious principle
of strict liability under the rule in Rylands vs. Fletcher (supra).
22. Mr. Dhond pressed the concept of strict liability first by
relying upon the judgment of the Apex Court in the matter of
“M.C. Mehta and Another v/s Union of India and others ”5.
He submitted that the Supreme Court has said that we cannot be
constricted by reference to the law as it prevails in England and
held that an enterprise which is engaged in a hazardous and
inherently dangerous industry which poses a potential threat to
the health and safety of the persons working in the factory and
residing in the surrounding areas owes an absolute and nondelegable
duty to the community to ensure that no harm results
to anyone on account of hazardous or inherently dangerous nature
of the activity which it has undertaken. The enterprise must be
4 (1868) LR HL 330
5 (1987) 1 SCC 395

absolutely liable to compensate for such harm and it should be no
answer to the enterprise to say it had taken all reasonable care
and that the harm occurred without any negligence on its part.
He also submitted that the Supreme Court has held that measure
of compensation in the kind of cases referred to in the judgment
must be co-related to the magnitude and capacity of the
enterprise because such compensation must have a deterrent
effect.
23. Mr. Dhond also relied upon “Charan Lal Sahu V/s Union
of India6” (Bhopal Gas Tragedy case) where in paragraph 91, the
Supreme Court followed the rule of strict liability propounded in
the “M.C. Mehta case” (supra).
24. This was followed by a third judgment in the matter of
“Union Of India V/s. Prabhakaran Vijaya Kumar and
others ”7, in which the Apex Court was dealing with a claim by the
legal representatives of a lady who while trying to enter a train fell
on the railway track and was run over by the train. There also the
Supreme Court followed the same principle adopted in the “M.C.
Mehta's case” (supra) that is of strict liability. The Supreme Court
held that the decision in “M.C. Mehta's case” (supra) related to a
6 AIR 1990 SC 1480
7 (2008) 9 SCC 527

concern working for private profit and the same principle will also
be applied to statutory authorities ( like the railways), public
corporations or legal bodies which may be social utility
undertakings not working for private profit. The fourth judgment
Mr. Dhond relied upon was “M.P. Electricity Board v/s. Shail
Kumari and others ”8 where the Supreme Court followed the
strict liability principle adopted in “M.C. Mehta's case” (supra).
25. Mr. Dhond, thereafter, dealt with the submissions of Mr.
Pratap. Mr. Dhond submitted that Mr. Pratap's case that PIL was
the cause for the shutdown of the plant was incorrect. He
submitted that on 16th September,2006 , the Port Officer wrote to
the plaintiff to suspend operation of the jetty because of the
grounding of the defendant vessel and as attempts to refloat was
failing. He also submitted that the SDM on 22nd September, 2006
issued a notice under section 133 of Cr.P.C. for closure of plaintiff's
plant and the same SDM observed that since the operations to
transship the LPG from defendant vessel to the other vessel may
take 10-12 days, there was danger to people within 2.5 km radius.
He submitted that the PIL was filed only on or about 24th
September, 2006 and, therefore, the order to shut the plant had
nothing to do with PIL and PIL only added to the problem. He also
submitted that the PIL was filed only because the defendant
8 (2002) 2 SCC 162

vessel grounded. He, therefore, submitted that there was no
break in causation.
26. On the duty of the care submissions made by Mr. Pratap, Mr.
Dhond submitted that the Apex Court in the four judgments
referred above, has held that there is strict liability and, therefore,
the defendant owes a duty of care to the world at large when he is
transporting hazardous material.
27. As regards the foreseeability test, Mr. Dhond submitted that
where there is absolute or strict liability, requirements of
foreseeability are diluted. Therefore, the judgments which are
dealing with the foreseeability test relied upon by the applicants'
Counsel are of no use because all those judgments are not
relating to absolute or strict liability. He also submitted that
assuming for the sake of argument the strict liability principle is
obviated, however, the ship should have been able to foresee that
grounding of their vessel will affect the Port users. He also
submitted that physical damage to the jetty or blockage of the
jetty are not relevant because the plaintiff is claiming
consequential damages because of the grounding of the vessel
resulting in the SDM and High Court passing orders stopping the
plaintiff from operating the plant. He also submitted that the
arguments of the applicant's counsel on novus actus interveniens

cannot be accepted because the orders of the Court and SDM to
stop the plant was directly related to the grounding. Mr. Dhond
submits that the order of the Port Officer/SDM though in one way
may be termed as a panic order, it cannot be said to be not
reasonable to obliterate the risk created by grounding and hence
cannot be termed novus actus interveniens.
He also submitted that the plaintiff's claim was a maritime
claim. He relied upon the judgment of the English Court Queen's
Bench Division in the “Dagmara ” and “Ama Antxine” 9 to say
that a claim as in the present matter would be "damage done by a
ship".
28. In support of his submissions that economic loss was
claimable, Mr. Dhond also relied upon the judgment of the Apex
Court in the matter of “Liverpool and London Steamship
Protection and Indemnity Association Ltd. Vs. M.V. Sea
Success I” 10 where the Apex Court has mentioned as under :
“Article 1 of the Convention contemplates an
expansion of existing categories of arrestable claims
under the following headings, some of which,
namely, heading (c) and (d) are already reflected in
Section 20(2) of the Supreme Court Act, 1981:
(a) this refers to 'loss or damage caused by the
9 1988 (1) LLR 431
10 (2004) 9 SCC 512

operation of the ship' rather than 'damage done by a
ship' and would encompass claims for pure economic
loss...”
29. Thereafter, Mr. Dhond dealt with the judgments relied upon
by Mr. Pratap. Concerning the judgment in “Caparo” (supra) and
“The Wagon Mound ”, Mr. Dhond submitted that the judgments
are of no use because in those cases the House of Lords has
generally followed the principle of “Rylands vs. Fletcher” ,
which our Apex Court has not followed. He submitted that our
Courts have enumerated the strict liability principle and,
therefore, one need not even look into it. He added that in a case
similar to “Caparo” (supra), perhaps our Apex Court may also
have come to the same conclusion as the House of Lords but
when it comes to dealing with a case involving dangerous
substance, the yardstick to be applied is different and the
principle of strict liability comes into play without the exceptions
available under the rule in “Rylands V/s. Fletcher” .
30. On “Spartan Steel“ (supra), Mr. Dhond submitted that
though the Court of Appeal in that case said as a matter of policy
not to allow pure economic loss, by virtue of our Apex Court
evolving the principle of strict or absolute liability where
dangerous substance was involved, economic loss is payable in all
cases when somebody handles dangerous cargo. He also

submitted that in “Spartan Steel” case the Court did not award
damages because when a person directly affected could not have
claimed from the electric company, how can a person who has
indirectly suffered, claim? Therefore, on the facts of that case the
Court felt that economic loss should not be allowed to be claimed.
He also submitted that the other two judgments relied upon by
the defendant were covered by Lord Denning's judgment in the
“Spartan Steel“ (supra) case.
31. Mr. Dhond, thereafter, relied upon “Overseas Tankship
(UK) Ltd v The Miller Steamship Co Pvt. Ltd. and Anr.” or
Wagon Mound (No. 2) 11 where the Court held that where a
reasonable man having the knowledge and experience to be
expected of him may not foresee the entire extent of damage the
cargo being handled by him may cause but should certainly be
aware that such a damage was likely. He submitted that the
defendants should have known that a LPG carrier if it grounds, the
area grounded would get evacuated. Mr. Dhond also relied upon
the judgment of the Australian Hugh Court in the matter of
“Caltex Oil (Australia) Pty ltd. Vs. The Dredge
Willemstad”12 to submit that claim for damages for pure
economic loss has been allowed by the Australian Courts. The
11 [1967] 1 AC 617
12 Westlaw – 136 CLR 529

Australian Court had disagreed with the English Court of Appeal in
the matter of “Spartan Steel“ (supra). He submitted that pure
economic loss is recoverable depending on the proximity to the
incident. Therefore, as to whether a loss was reasonably
foreseeable or not or it was a direct consequence of failure in duty
of care or not or whether how proximate it was or not proximate at
all could be decided only at the trial. Hence, the notice of motion
should be rejected. Mr. Dhond also submitted that in this
judgment of “Caltex”(supra) and in another Australian judgment
in the matter of “Perre and others v/s. Apand Pty Limited ”13,
it is held that “Spartan Steel“ (supra) does not lay down any
hard and fast rule applicable to all cases, against the recovery of
economic loss by the plaintiff who suffers no injury to his property
or person. Mr. Dhond also relied upon a Canadian judgment in the
matter of “Canadian National Railway Company v/s. Norsk
Pacific Steamship Company Limited” 14, in which the
Canadian Court, in a majority judgment of 4:3 held ”Pure
economic loss is prima facie recoverable where, in addition to
negligence and foreseeable loss, there is sufficient proximity
between the negligent act and loss. Proximity is a controlling
concept, avoiding the spectre of unlimited liability. Proximity may
be established by variety of factors depending on the nature of
13 1999 Commonwealth Law Reports 180
14 (1992) 1 R.C.S. 1021

the case.” He submitted that this cannot be therefore decided at
the interim stage.
32. Mr. Dhond also submitted that the plaintiff had reasonably
arguable best case. He submitted that the plaintiff's case is not
vexatious or hopeless but was arguable. He submitted even if it is
a difficult case, it will not be appropriate at this stage to decide
this issue and the plaintiff is entitled for a trial. He submitted that
the admitted position was that the defendant vessel grounded and
the grounding was the cause for the orders to stop the plant being
passed by the SDM and the High Court in the PIL. He states that
the plaintiff was therefore entitled to trial and cannot be shut out
at this stage. For this Mr. Dhond relied upon the famous English
judgment of Brandon, J. in the “Moschanthy ”15, the judgment of
our Apex Court in “Videsh Sanchar Nigam Limited V/s. M.V.
Kapitan Kud and others ”16 and “M. V. Elizabeth and others
V/s. Harwan Investment and Trading Pvt. Ltd ”17
33. In rejoinder, Mr. Pratap, Counsel for the defendant
submitted that whether there is a question of reasonably arguable
best case or the plaintiff has any claim or not, even the public
authorities have observed that the grounding happened due to
bad weather which is an act of God. He submitted that even the
15 1971 (vol.I) LLR 37
16 (1996) 7 SCC 127
17 1993 Supp (2) SCC 433

plaintiff has (a) relied upon all those documents, and (b) in its
affidavit in the PIL in the High Court and in the SLP has taken a
stand that it was the bad weather which resulted in the grounding.
Moreover, the plaintiff has not even made an allegation in the
form of an e-mail or letter before the suit was filed. For the first
time, an allegation is made in paragraph no. 3 of the plaint.
Therefore, the plaintiff has no reasonably arguable best case. He
also submitted that the four cases cited by the plaintiff that is the
“M.C. Mehta ”, “Bhopal Gas Tragedy ”, “Prabhakaran Vijaya
Kumar ” and “M.P. State Electricity Board ”(all Supra), were
cases where the property was on land and there was escape of a
hazardous substance. In this case, there is no such escape. He
also submitted that the Apex Court has only said the exception for
Ryland vs. Fletcher that the government permission obtained
cannot be relied upon and hence absolute liability has to be
applied where there is harm and injury caused to humans due to
escape of toxious gases. In M.C. Mehta's case and in Bhopal gas
tragedy case, toxic fuel escaped and many people died or were
maimed and the Supreme Court held that when you are carrying
an activity in enclosed premises knowing that the activity you are
carrying on could possibly amount to dangerous situation which
could affect innumerable lives, you cannot go back and say at that
time I have all necessary permissions to carry on this business.

He submitted that there was no such situation in the present case
because no LPG had escaped, there was no loss of life or injury to
anybody nor did the plant of the plaintiff which was allegedly shut
down was due to any escape of LPG from the defendant vessel.
Bad weather caused the vessel to ground which had the plaintiff's
pilot and plaintiff's tug rendering services. When the vessel
grounded, the authorities feared while the vessel was being refloated,
people within a radius of 2.5 km have to be evacuated
and somebody filed a PIL due to the plaintiff allegedly illegally
operating the jetty. Hence the strict liability case is not applicable.
It was the same situation in the M.P. Electricity Board (supra)
case. All those cases were for compensation for loss of life or
injury due to escape of something dangerous from the factory. In
the “Prabhakaran Vijaya Kumar ” case the Railways Act
provided for that and in the “M.P. Electricity Board case” also
it was the electricity that escaped when a live wire got snapped
and fell on the public road which was inundated with rainwater.
That was also a case of compensation due to loss of life. Hence,
those cases are not applicable to the present matter. Mr. Pratap
submitted that if LPG had escaped from the defendant vessel and
caused fire in the plaintiff's plant, yes the plaintiff might have a
valid claim but not in a situation as in this case. Therefore, we
must use the ordinary principles of tort that is duty of care and

foreseeability.
34. Mr. Pratap relied upon one more judgment of the House of
Lords in the matter of “Read V/s. J. Lyons and Company
Limited” 18 where the court held that the respondents were not
liable to the appellants for damages since there had been no
escape of any dangerous thing from the premises and accordingly
an essential condition for the application of the rule in “Rylands
vs. Fletcher” was wanting. He also relied upon the Apex Court's
judgment in the matter of “Kaushnuma Begum (Smt.) and
others vs. New India Assurance Co. Ltd. and others ”19 to
submit that the “Rylands vs. Fletcher” rule could still be
followed in India and is acceptable to Indian jurisprudence.
35. As regards the “Caltex ” Judgment (supra) relied upon by
Mr. Dhond, Mr. Pratap mentioned that the Privy Council in the
“Mineral Transporter ”20 has criticized the same. Even “Norsk
Pacific ” (supra) and “Perre” (supra) that followed the “Caltex ”
judgment are deemed to have been criticized in the “Mineral
Transporter Case”. Similarly, the “M.V. Sea Success I “ where
there is a reference to the economic loss that was not the case in
dispute and there has been no debate or discussion on the point.
18 1947 AC 156
19 (2001) 2 SCC 9
20 1985 (Vol.II) L.L.R. 303

Mr. Pratap also relied upon the non-reported judgment of our
Division Bench in the matter of “M/s. Kimberly – Clark Lever
Pvt. Ltd v/s. M.V. 'Eagle Excellence'” in Admiralty Suit No. 12
of 2006 where the Division Bench held that for a Court to hold that
the plaintiff has made out a reasonable arguable best case what is
required is that the plaintiff must establish a prima-facie case in
relation to his right in such admiralty actions and in this case no
such prima facie case has been established.
36. Having considered the pleadings, the rival arguments of the
counsel and the various judgments cited in this case, I am
satisfied that this is not a case where the principle of strict
liability enumerated by our Apex Court in the case of “M.C.
Mehta”, “Bhopal Gas Tragedy”, “Prabhakaran Vijaya
Kumar” and “M.P. State Electricity Board”(all Supra) has to
be followed. The law that was established is that the person who,
for his own purpose brings on his land and collects and keeps
there anything likely to cause harm or injury if it escaped, he
himself keeps it in his peril and if he does not do so he is primarily
responsible. What the Apex Court has held in the “M.C. Mehta”
(supra) case is if an enterprise which is engaged in a hazardous
and inherently dangerous industry which poses a potential threat
to the health and safety of the persons working in the factory and

residing in the surrounding areas, it owes an absolute and non
delegable duty to the community to ensure that no harm results
to anyone on account of hazardous or inherently dangerous nature
of the activity which he has undertaken. In case of escape of toxic
gas, the enterprise is strictly and absolutely liable to compensate
all those who are affected by the accident and such liability is not
subject to any of the exceptions which operate vis-a-vis the
tortious principle of strict liability under the rule in “Rylands v.
Fletcher”. What the apex court in M.C. Mehta case said was:
31. We must also deal with one other question
which was seriously debated before us and that
question is as to what is the measure of liability of an
enterprise which is engaged in an hazardous or
inherently dangerous industry, if by reason of an
accident occurring in such industry, persons die or
are injured. Does the rule in Rylands v. Fletcher apply
or is there any other principle on which the liability
can be determined? The rule in Rylands v. Fletcher
was evolved in the year 1866 and it provides that a
person who for his own purposes being on to his land
and collects and keeps there anything likely to do
mischief if it escapes must keep it at his peril and, if
he falls to do so, is prima facie liable for the damage
which is the natural consequence of its escape. The
liability under this rule is strict and it is no defence
that the thing escaped without that person's wilful
act, default or neglect or even that he had no
knowledge of its existence. This rule laid down a
principle of liability that if a person who brings on to
his land and collects and keeps there anything likely
to do harm and such thing escapes and does damage
to another, he is liable to compensate for the
damage caused. Of course, this rule applies only to
non-natural user of the land and it does not apply to
things naturally on the land or where the escape is
due to an act of God and an act of a stranger or the
default of the person injured or where the thing

which escapes is present by the consent of the
person injured or in certain cases where there is
statutory authority. Vide Halsbury Laws of England,
Vol. 45 para 1305. Considerable case law has
developed in England as to what is natural and what
is non-natural use of land and what are precisely the
circumstances in which this rule may be displaced.
But it is not necessary for us to consider these
decisions laying down the parameters of this rule
because in a modern industrial society with highly
developed scientific knowledge and technology
where hazardous or inherently dangerous industries
are necessary to carry out part of the developmental
programme. This rule evolved in the 19th Century at
a time when all these developments of science and
technology had not taken place cannot afford any
guidance in evolving any standard of liability
consistent with the constitutional norms and the
needs of the present day economy and social
structure. We need not feel inhibited by this rule
which was evolved in this context of a totally
different kind of economy. Law has to grow in order
to satisfy the needs of the fast changing society and
keep abreast with the economic developments taking
place in the country. As new situations arise the law
has to be evolved in order to meet the challenge of
such new situations. Law cannot afford to remain
static. We have to evolve new principles and lay
down new norms which would adequately deal with
the new problems which arise in a highly
industrialised economy. We cannot allow our judicial
thinking to be constricted by reference to the law as
it prevails in England or for the matter of that in any
other foreign country. We no longer need the
crutches of a foreign legal order. We are certainly
prepared to receive light from whatever source it
comes but we have to build up our own jurisprudence
and we cannot countenance an argument that
merely because the new law does not recognise the
rule of strict and absolute liability in cases of
hazardous or dangerous liability or the rule as laid
down in Rylands v. Fletcher as is developed in
England recognises certain limitations and
responsibilities. We in India cannot hold our hands
back and I venture to evolve a new principle of
liability which English courts have not done. We have

to develop our own law and if we find that it is
necessary to construct a new principle of liability to
deal with an unusual situation which has arisen and
which is likely to arise in future on account of
hazardous or inherently dangerous industries which
are concomitant to an industrial economy, there is no
reason why we should hesitate to evolve such
principle of liability merely because it has not been
so done in England. We are of the view that an
enterprise which is engaged in a hazardous or
inherently dangerous industry which poses a
potential threat to the health and safety of the
persons working in the factory and residing in the
surrounding areas owes an absolute and nondelegable
duty to the community to ensure that no
harm results to anyone on account of hazardous or
inherently dangerous nature of the activity which it
has undertaken. The enterprise must be held to be
under an obligation to provide that the hazardous or
inherently dangerous activity in which it is engaged
must be conducted with the highest standards of
safety and if any harm results on account of such
activity, the enterprise must be absolutely liable to
compensate for such harm and it should be no
answer to the enterprise to say that it had taken all
reasonable care and that the harm occurred without
any negligence on its part. Since the persons harmed
on account of the hazardous or inherently dangerous
activity carried on by the enterprise would not be in a
position to isolate the process of operation from the
hazardous preparation of substance or any other
related element that caused the harm must be held
strictly liable for causing such harm as a part of the
social cost for carrying on the hazardous or
inherently dangerous activity. If the enterprise is
permitted to carry on an hazardous or inherently
dangerous activity for its profit, the law must
presume that such permission is conditional on the
enterprise absorbing the cost of any accident arising
on account of such hazardous or inherently
dangerous activity as an appropriate item of its
overheads. Such hazardous or inherently dangerous
activity for private profit can be tolerated only on
condition that the enterprise engaged in such
hazardous or inherently dangerous activity
indemnifies all those who suffer on account of the

carrying on of such hazardous or inherently
dangerous activity regardless of whether it is carried
on carefully or not. This principle is also sustainable
on the ground that the enterprise alone has the
resource to discover and guard against hazards or
dangers and to provide warning against potential
hazards. We would therefore hold that where an
enterprise is engaged in a hazardous or inherently
dangerous activity and harm results to anyone on
account of an accident in the operation of such
hazardous or inherently dangerous activity resulting,
for example, in escape of toxic gas the enterprise is
strictly and absolutely liable to compensate all those
who are affected by the accident and such liability is
not subject to any of the exceptions which operate
vis-a-vis the tortious principle of strict liability under
the rule in Rylands v. Fletcher (supra).
32. We would also like to point out that the
measure of compensation in the kind of cases
referred to in the preceding paragraph must be corelated
to the magnitude and capacity of the
enterprise because such compensation must have a
deferent effect. The larger and more prosperous the
enterprise, the greater must be the amount of
compensation payable by it for the harm caused on
account of an accident in the carrying on of the
hazardous or inherently dangerous activity by the
enterprise.”
37. I agree with the submissions of Mr. Pratap that in all these
cases, the enterprises have been engaged in the hazardous and
inherently dangerous activity. Moreover by virtue of being
engaged in such hazardous or inherently dangerous activity
someone must have come to harm on account of accident in the
operation of such hazardous or inherently dangerous activity. In
this case, no harm has been caused to anyone. In this case, there

is no escape of any toxic gas. Escape is necessary. The first
essential condition of escape in this case is not present at all. The
second requirement of escape from the premises of the defendant
also does not arise since there has been no escape. Thirdly the
strict liability is applicable only if someone is harmed. Strict
liability, in my view, as envisaged by the Apex Court cannot be
stretched to pure economic losses and that too where it is
independent of physical damage. Therefore, the strict liability
principle is not applicable to this case at all. Our Apex Court has
also held in the “Kaushnuma Begam” case (supra) that the rule
in Rylands vs. Fletcher is still acceptable to Indian Jurisprudence.
That was the case arising out of the negligent use of motor vehicle
and the Apex Court distinguished no fault liability envisaged in the
Motor Vehicle Act from the rule of strict liability of the “Bhopal
Gas Tragedy ” and “M.C. Mehta case ”. The Apex Court held
that the constitutional bench did not disapprove the “Rylands
vs. Fletcher” rule but only said that “we are certainly prepared
to receive light from whatever source it comes”. It means that the
Constitution Bench did not foreclose the application of the rule as
a legal proposition. Paras 16 and 19 read as under:
“16. It is pertinent to point out that the Constitution
Bench did not disapprove the Rule. On the contrary,
learned judges further said that we are certainly
prepared to receive light from whatever source it
comes. It means that the Constitution Bench did not
foreclose the application of the Rule as a legal

proposition.
17 …....
18.......
19. Like any other common law principle, which is
acceptable to our jurisprudence, the Rule in Rylands
vs. Fletcher can be followed at least until any other
new principle which excels the former can be
evolved, or until legislation provides differently.
Hence, we are disposed to adopt the Rule in claims
for compensation ...........”
38. The plaintiff's reliance on the Australian judgment in Caltex
Oil (supra) and Perre Vs. Apand (supra) and Canadian case of
Norsk Pacific (supra) to show that economic loss was held to be
recoverable are misplaced. The factors which distinguish those
cases from the present case and also the English judgments relied
upon by the defendants are (a) in those cases there was economic
loss consequent upon physical damage whereas in the present
case there is no physical damage and (b) in those cases the
plaintiff was not the owner of the property that was damaged but
if he had been then he would have recovered even under English
law as loss consequent upon physical damage to his property.
Hence the courts took the view that it would be unjust to deny
recovery merely because the plaintiff did not own the property
that was damaged. On the facts of each case the Court found it
just and fair that the defendant should bear the loss.

39. In Caltex Oil (supra) it was a case of economic loss
consequent upon physical damage. In that case, the dredge
damaged a pipeline which was used to carry products of the
refinery to the terminal. The owner of the pipeline was Australian
Oil Refining Pty Ltd. and the owner of the terminal was Caltex. The
owner of the pipeline succeeded in recovering damage because
there was physical damage caused to the pipeline. Caltex, which
was the owner of the terminal, claimed damages incurred in
providing alternative means of transporting the refined oil since
the pipeline which was used to transport the same was damaged
by the dredge.
The facts of that case were that the dredge was engaged in
dredging operations in that area and was aware of the location of
the pipeline and the fact that the pipeline was used to transport
oil from the refinery to Caltex’s terminal. Thus the owner of the
dredge would have had Caltex in contemplation as the persons
who would suffer loss if the pipes were broken. In the facts of the
case, the Court found that the loss suffered by Caltex was
recoverable because the dredge owed a duty of care not to
damage the pipeline and that the loss was foreseeable. If the
pipeline was owned by Caltex, then they would be entitled to
claim the loss incurred by them in using alternative mode of
transportation of their oil, consequent upon physical damage.

However, the pipeline was not owned by Caltex and hence
Caltex’s claim was considered to be for pure economic loss. It was
in these facts of the case that the Court found this to be a special
case where economic loss was recoverable by Caltex. What
prompted the Court to allow recoverability was also the fact that it
was one single identifiable person who has suffered loss, who
would have been in the contemplation of the dredge since they
knew about the pipeline and that it connected the refinery to the
Caltex terminal and was used for transportation of oil.
40. The Caltex judgment was criticized by the Privy Council in
the case of Mineral Transporter (supra) where the Privy Council
held (pg.311) that
“The test can hardly be whether the Plaintiff is
known by name to the wrongdoer. Nor does it seem
logical for the test to depend upon the Plaintiff being
a single individual. Further why should there be a
distinction for this purpose between a case where
the wrongdoer knows (or has the means of knowing)
that the persons likely to be affected by his
negligence consist of a definite number of persons
whom he can identify by name or in some other way
(for example as being the owners of particular
factories or hotels) and who may therefore be
regarded as an ascertained class.”
The view of the Privy Council was it is not practicable by reference
to an ascertained class to find a satisfactory control mechanism
which could be applied in such a way as to give reasonable

certainty in its results. This accords with the view taken by the
English Courts consistently that a claim for pure economic loss,
absent physical damage, is not recoverable as a matter of policy
whether the damage is occasioned to one or two persons or an an
ascertained class.
41. In the other Australian judgment Perre vs. Apand (supra)
the court followed Caltex Oil and allowed economic loss on the
basis that the wrongdoer knew and was aware of the
consequences of his supply of contaminated seed to Sparnon
leading to a form of potato disease would result in potatoes grown
on land within a 20-kilometre radius of the infected land of
Sparnon, being prohibited from importation into Western Australia.
In these circumstances, the Court held that Apand who supplied
the seed owed a duty of care not only to the person to whom it
supplied the seed, but also the owners of the land within a 20-
kilometres radius (the Plaintiff) who would be affected if the seed
was found infected and it was therefore reasonably foreseeable
that the Plaintiff, whose land was within the 20 kilometres area,
would suffer loss or damage. The Court held that the case clearly
came within the proximity or neighbourhood principle. It was not
disputed by the Defendant wrong-doer that they owed a duty of
care and that the loss was reasonably foreseeable. Again the

special facts and circumstances led the court to hold that
economic loss in such cases was recoverable. This again is a case
of physical damage to land and crop grown thereon and loss
consequent upon physical damage.
42. As regards the Canadian case of Norsk Pacific (supra),
where there was a split verdict 4: 3, once again it was a case of
economic loss consequent upon physical damage. The physical
damage was suffered by the owner of the bridge which was
damaged by the tug and the economic loss was suffered by the
user of the bridge, namely Canadian Railways. If the economic
loss which is loss of profit, had been suffered by the owner of the
bridge, then it would have been termed as a loss consequent upon
physical damage and recoverable. However, since the loss of
profit was not suffered by owner of the bridge but by the user
Canadian Railways it was termed as a case of pure economic loss.
Again this was a case of physical damage and loss consequent
thereon.
The majority judgment delivered by Mc Lachlin, J refers to a
comparative view of the position in different countries. The view
of the United Kingdom is set out as permitting recovery of
economic loss only where the Plaintiff has suffered physical
damage. The American position is the same where the

jurisprudence is still dominated by the fear of opening floodgates.
The need for certainty in the law is highlighted by the
observation of La Forest, J with reference to maritime law and I
reproduce the same with concurrence.
“I add one final consideration. This case is one of
maritime law which in large measure
encompasses a global system. The bright line
exclusionary rule against recovery has for nearly
a century been in effect in that system and
continues to be followed by the major trading
nations, in particular Great Britain and the United
States. In making arrangements for allocating
risks in essentially maritime matters, those
engaged in navigating and shipping should as
much as possible be governed by a uniform rule
so that they can plan their affairs ahead of time
whether by contract or insurance against possible
contingencies”.
43. Therefore, we fall back to the basic principle for a claim in
tort of negligence, i.e., duty of care and foreseeability. The
position has to be brought in two stages. The first one is whether,
as between the defendant and plaintiff there is a sufficient relation
of proximity such that, in the reasonable contemplation on the
defendant, carelessness on his part may be likely to cause
damage to the latter in which case a prima-facie duty of care
arises. Secondly, if the first question is answered affirmative, it is
necessary to consider whether there are any considerations which
ought to negate or to reduce or limit the scope of the duty or the
class of person to whom it is owed or the damages to which a

breach may give rise. The necessary ingredient for duty of care
is characterized by law by one of proximity and that the situation
should be one in which the Court considers it fair, just and
reasonable that the law should impose a duty to the given case
upon one of the party for the benefit of the others. The next point
is whether pure economic loss independent of physical damage is
claimable.
44. In this case, the defendant vessel had come to Ranpur Bay
to discharge a cargo of LPG to the account of BPCL in the Captive
jetty. Bad weather caused her to drift when she was being
berthed, and she ran aground 1.5/1.6 kms from the jetty. The
plaintiff is carrying on business of manufacture of PVC resin at a
plant which is further inside from the Port. It will not be reasonable
or fair or just to impose upon the defendant duty of care to the
plaintiff because like the plaintiff there will be multitude persons
who would have been remotely affected not as a rule by way of
physical damage to them or their property but by putting them to
inconvenience and sometimes economic loss. If claims for such
loss were permitted there would be no end to claims. Some might
be genuine, some might be inflated or even false. In such cases,
it is also not rightly capable of proof or easily checked and in my
view this claim for economic loss for the plaintiff, independent of

physical damage is not payable. I am inclined to follow the
principles laid down by Lord Denning in the “Spartan Steel“
(supra) where at pages 37,38 and 39, His Lordship has beautifully
explained as under :
“The second consideration is the nature of the
hazard, namely, the cutting of the supply of
electricity. This is a hazard which we all run. It may
be due to a short circuit, to a flash of lightning, to a
tree falling on the wires, to an accidental cutting of
the cable, or even to the negligence of someone or
other. And when it does happen, it affects a
multitude of persons: not as a rule by way of physical
damage to them or their property, but by putting
them to inconvenience, and sometimes to economic
loss. The supply is usually restored in a few hours, so
the economic loss is not very large. Such a hazard is
regarded by most people as a thing they must put up
with - without seeking compensation from anyone.
Some there are who install a standby system. Others
seek refuge by taking out an insurance policy against
breakdown in the supply. But most people are
content to take the risk on themselves. When the
supply is cut off, they do not go running round to
their solicitor. They do not try to find out whether it
was anyone's fault. They just put up with it. They try
to make up the economic loss by doing more work
next day. This is a healthy attitude which the law
should encourage.
The third consideration is this: If claims for economic
loss wore permitted for this particular hazard, there
would be no end of claims. Some might be genuine,
but many might be inflated, or even false. A machine
might not have been in use anyway, but it would be
easy to put it down to the cut in supply. It would be
well-nigh impossible to check the claims. If there was
economic loss on one day, did the applicant do his
best to mitigate it by working harder next day? And
so forth. Rather than expose claimants to such
temptation and defendants to such hard labour - on
comparatively small claims - it is better to disallow
economic loss altogether, at any rate when it stands

alone, independent of any physical damage.
The fourth consideration is that, in such a hazard as
this, the risk of economic loss should be suffered by
the whole community who suffer the losses - usually
many but comparatively small losses -rather than on
the one pair of shoulders, that is, on the contractor
on whom the total of them, all added together, might
be very heavy.
The fifth consideration is that the law provides for
deserving cases. If the defendant is guilty of
negligence which cuts off the electricity supply and
causes actual physical damage to person or property,
that physical damage can be recovered - see Baker v.
Crow Carrying Co. Ltd. (unreported) Feb. 1st., 1960
C.A., referred to by Lord Justice Buckley in 1971, 1
Q.B. at page 356; and also any economic loss truly
consequential on the material damage -see British
Celanese v. Hunt (1969) 1 W.L.R. 959; S.C.M. (United
Kingdom) Ltd. v. Whittall & Son Ltd. (1971) 1 Q.B.
337. Such cases will be comparatively few. They will
be readily capable of proof and will be easily
checked. They should be and are admitted.
These considerations lead me to the conclusion that
the plaintiff should recover for the physical damage
to the one melt (£368), and the loss of profit on that
melt consequent thereon (£400): but not for the loss
of profit on the four melts (£1,767), because that was
economic loss independent of the physical damage. I
would, therefore, allow the appeal and reduce the
damages to £768.”
45. I am also not inclined to go along with Mr. Dhond on his
submissions of reasonably arguable best case to prove its loss.
The plaintiff could have reasonably arguable best case only if it is
able to cross the barrier as to whether in law it is entitled to claim
economic loss independent of any physical damage. In my

opinion, since I have held that such economic loss independent of
physical damage is not payable, the question of plaintiff being
able to prove anything in trial also does not arise.
46. However, the plaintiff's stand as stated above, before filing
this suit is the vessel grounded due to bad weather. For the first
time they alleged inadequacies or negligence of the vessel in the
plaint. Moreover, these are averments without any particulars.
Therefore, at this stage, it is necessary also to quote the famous
paragraphs from the judgment of Justice V.R. Krishna Iyer, as he
then was in the matter of T. Arivandandam V/s. T. V.
Satyapal & Anr. 21
“5. We have not the slightest hesitation in
condemning the petitioner for the gross abuse of the
process of the court repeatedly and unrepentantly
resorted to. From the statement of the facts found in
the judgment of the High Court, it is perfectly plain
that the suit now, pending before the First Munsif's
Court, Bangalore, is a flagrant misuse of the mercies
of the law in receiving plaints. The learned Munsif
must remember that if on a meaningful-not formalreading
of the plaint it is manifestly vexatious, and
meritless, in the sense of not disclosing a clear right
to sue, he should exercise his power under O. VII R.
11, C.P.C. taking care to see that the ground
mentioned therein is fulfilled. And, if clever, drafting
has created the illusion of a cause of action, nip it in
the bud at the first hearing by examining the party
searchingly under O. X, C.P.C. An activist Judge is the
answer to irresponsible law suits. The trial court
should insist imperatively on examining the party at
the first bearing so that bogus litigation can be shot
21 AIR 1977 SC 2421

down at the earliest stage. The Penal Code is also
resourceful enough to meet such men, (Ch. XI) and
must be triggered against them. In this case, the
learned Judge to his cost realised what George
Bernard Shaw remarked on the assassination of
Mahatma Gandhi "It is dangerous to be too good."
6. The trial Court in this case will remind itself of S.
35-A, C.P.C. and take deterrent action if it is satisfied
that the litigation was inspired by vexatious motives
and altogether groundless. In any view, that suit has
no survival value and should be disposed of forthwith
after giving an immediate hearing to the parties
concerned.
7. We regret the infliction of the ordeal upon the
learned Judge of the High-Court by a callous party.
We more than regret the circumstance that the party
concerned has been able to prevail upon one lawyer
or the other to present to the court a case which was
disingenuous or worse. It may be a valuable
contribution to the cause of justice if counsel screen
wholly fraudulent and frivolous litigation refusing to
be beguiled by dubious clients. And remembering
that an advocate is an officer of justice he owes it to
society not to collaborate in shady actions. The Bar
Council of India, we hope will activate this obligation.
We are constrained to make these observations and
hope that the co-operation of the Bar will be readily
forthcoming to the Bench for spending judicial time
on worthwhile disputes and avoiding the distraction
of sham litigation such as the one we are disposing
of. Another moral of this unrighteous chain litigation
is the gullible grant of ex parte orders tempts
gamblers in litigation into easy courts. A judge who
succumbs to ex parte pressure in unmerited cases
helps devalue the judicial process. We must
appreciate Shri Ramasesh for his young candour and
correct advocacy. Petition dismissed.”
47. I am satisfied that in this matter, particularly after
considering the observations in the documents relied upon by the

plaintiff, the fact that the plaintiff has also stated earlier that the
cause of grounding of the defendant vessel was due to bad
weather which cannot be perceived as being within the control of
the vessel, the fact that the plaintiff had not even sent a letter of
demand or communication alleging the fault on the part of the
defendant and for the first time raising the issue in paragraph
no.3 of the plaint to show a semblance of cause of action, in my
opinion this claim in itself is a gamble taking advantage of the fact
that order of arrest of a vessel in an admiralty action in rem is
granted ex-parte.
48. Therefore the ex-parte order of arrest cannot be sustained
and has to be vacated and the bank guarantee in respect of the
plaintiff's claim be discharged and returned.
49. As regards the prayer clause (d) whereby the applicant is
claiming a sum of Rs.2,53,32,212.50 as bank guarantee charges
upto the date of the motion, in the affidavit in support, the
applicant states that the charges are 3.5% per annum for 5 years.
However, no document was filed to justify this figure. Two further
affidavits dated 10th April 2014 and 6th May 2014 of one Sunil
D'Zouza have been filed to which certain debit advices issued by
ING Bank N.V., London and a statement of bank guarantee
charges paid are annexed.
The plaintiff has taken security that it was not entitled to. In

any event, the plaintiff took excess security than it was entitled to
and never came forward to voluntarily have it reduced. The
plaintiff in such situations should voluntarily come forward and
ask for reduction in security particularly when applications
challenging the order of arrest take a long time due to
unavoidable circumstances to be heard and disposed. This
concession of reduction of security granted now could have
certainly been made earlier so that the defendant could have
saved costs incurred towards excessive security. That also shows
the conduct of the plaintiff. Obtaining excessive security in an exparte
order of arrest is oppressive. Certainly the applicant will be
entitled to damages for wrongful arrest.
However, the statement shows only US$ 3,47,398.48 as
charges paid as on 20th December 2013 whereas the amount
claimed is Rs.2,53,32,212.50 upto January 2011. Therefore, the
applicant can at the most claim only US$ 3,47,398.48 upto 20th
December 2013. It should be noted that this keeps increasing
until the Bank guarantee is cancelled and returned. As the order
of arrest is being set aside, the applicant is entitled to
compensation more so because the plaintiff took excessive
security and sat tight over it. The plaintiff has also given the
undertaking under Rule 941 of the Bombay High Court (O.S.) Rules
to pay such sum as damages as this Court would award to any

party having suffered prejudice due to the arrest of the defendant
vessel. Therefore, I am inclined to award to the applicant US$
3,50,000/- as compensation/damages.
50. The plaintiff is also directed to pay the applicant a sum of
US$ 3,50,000/- as compensation towards bank guarantee charges
incurred by the applicant.
51. It is also a fit case where costs have to be imposed on the
plaintiff. I direct the plaintiff to pay the applicant a sum of `
3,00,000/- (Rupees Three Lakhs only) as costs within two weeks
from today.
52. The Notice of Motion is disposed off as above.
53. On pronouncement of the judgment, Mr.Dhond, counsel for
the plaintiff requested for stay by two weeks. Stay refused.
K.R. SHRIRAM, J.

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