CERTIORARI, RULE B - SHIPPING CORPORATION OF INDIA AND US SUPREME COURT

Can you connect Manu needhi Chozha to James Earle Fraser. ? Or do you know what is ‘Certiorari’ ?? .

Can you imagine a dispute between Company incorporated in India and one incorporated in Singapore over an accident that occurred in India, involving shipment of products to China, dispute was to be arbitrated in England being the subject matter of a law suit in US, with Supreme Court of United States in Washington DC pronouncing judgment.


To a common man, legal terms are always bemusing. In general parlance, to sue is the action of filing a law suit before a Court law. To make one appear in a Court is still considered humility in some forms. The law suit is a civil action in a Court of Law in which the plaintiff, i.e., the person who initiates action seeks legal or equitable remedy arising out of the defendant’s action.


For filing a suit, there is a basic requirement of jurisdiction. This term from latin ‘juris’ meaning law and ‘dicere’ meaning to speak is the practical authority granted to a formally constituted legal body to deal and make decisions on legal matters and to administer justice
To those of us, with no legal background ‘Certiorari’ is Greek and Latin. The word was in news recently and has an Indian connection. US Supreme Court recently denied a writ of certiorari brought by Shipping Corporation of India appealing against an order in case against Jaldhi Overseas Pte Ltd.

Earlier, in a landmark judgment dated 16 October 2009, the United States Court of Appeals for the Second Circuit held in The Shipping Corporation of India v. Jaldhi Overseas Pte Ltd. that claimants attaching electronic funds transfers (EFTs) passing through the New York banking system are no longer subject to attachment under Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure. The Second Circuit departed from its previous decision in Winter Storm Shipping v. TPI – the initial decision that sanctioned the restraint of an EFT.

The present writ certiorari was an attempt by SCI to restore the use of Rule B to attach electronic funds transfers associated with alleged defaulters as they passed through New York but failed to win the favour of the US Supreme Court, as the Court denied the writ this month (March 2010).

Here is the background of the impugned case :

In March 2008, SCI chartered its vessel M/V Rishikesh to Jaldhi Overseas Pte Ltd for transporting iron ore from India to China. Specifically, the charter provided that SCI was to deliver the vessel to Jaldhi on March 29, 2008. The vessel was delivered to Jaldhi on March 29, 2008, in compliance with the terms of the charter. While in port in Kolkata, India the next day, a crane on board the vessel collapsed, killing the crane operator, halting cargo operations, and causing Jaldhi to place the vessel “off hire,” i.e., to suspend the charter. On May 2, 2008, SCI issued an invoice to Jaldhi seeking payment of Jaldhi’s unpaid balance of $3,608,445. After not receiving payment, SCI filed a complaint in the District Court seeking an ex parte maritime attachment pursuant to Rule B of the Admiralty Rules on May 7, 2008 for the balance, interest, and attorneys’ fees for a total of $4,816,218. According to SCI, the vessel came back “on hire” on April 13, 2008, when its cranes passed safety inspections, and therefore Jaldhi owes payments under the charter from that date forward. On May 8, 2008, the District Court entered an ex parte order of Maritime Attachment and Garnishment in the amount of $4,816,218 and noted in its order that the attachment applied against all tangible or intangible property belonging to, claimed by or being held for the Defendant by any garnishees within this District, including but not limited to electronic fund transfers originated by, payable to, or otherwise for the benefit of Defendant, whether to or from the garnishee banks or any other electronic funds transfers. SCI then filed an amended complaint on May 15, 2008, to adjust the amount attached to reflect additional fees and a $1,260,585 payment from Jaldhi to SCI, bringing the total attachment to $4,689,247. ……………………..

In the plaint initiated by SCI in New York in Rule B action, initially they could obtain an order of attachment and garnishment from the District Court for the Southern District of New York. The order included EFTs held by any banks under the court's jurisdiction that were originated by or payable to the Defendant.

The landmark judgment of The United States Court of Appeals for the Second Circuit (the "2nd Circuit Court" or the "Court") put an end to the practice of claimants attaching electronic funds transfers ("EFTs") passing through the New York banking system pursuant to Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure "Rule B").

The Court held that EFTs being processed by an intermediary bank are not property subject to attachment under Rule B". In doing so, the Court overruled its 2002 decision in Winter Storm Shipping Ltd v TPI, 310 F.3d 263, 278 (2d Cir. 2002). The specific question on appeal before the Court was whether EFTs were attachable property of the defendant. By answering in negative, Court restated the issue in wider terms.

The Court took into consideration the growing body of case law in the lower courts of the Circuit, which have increasingly imposed limitations on the extent of the availability of Rule B as a tool in respect of EFTs. The Court noted that a number of judicial panels and commentators had called the Winter Storm decision into question, with some suggesting that it merited reconsideration. The banks themselves received numerous new attachment orders and over 700 supplementary services of existing orders each day. The banks alleged that the resulting strain on the New York banking system undermined the efficiency of New York's international funds transfer business.

This placed SCI on a disadvantageous footing as they are virtually denied of a potent tool which enabled obtaining security from litigant defendants easier. Still the decision does not eliminate the Rule B but perhaps puts an end to the use for attachment of EFTs and goes back to traditional roots of attachment of physical properties like ships, cargo, bunkers, etc., as security for maritime claims.   The judgment categorically asserted that EFTs in temporary possession of an intermediary bank are neither the property of the originator nor the beneficiary of the transfer and may not be the subject of an attachment under Rule B. Coming as it did after the affirmation twice earlier by the Circuit Court of the Winter Storm decision, this did surprise many. Seemingly there was no retroactive guidance.

Though Rule B is not done away with, the effectiveness stands eroded. It is welcome news for defendants with only connection to New York being the passing of funds through banks there.
That Shipping Corporation could not succeed in US Supreme Court does not augur well for them.

Some explanations which would help understand better:

 Certiorari : is a legal term (roman) referring to a type of writ seeking judicial review. The word would mean ‘to be more fully informed’. It is generally issued by a Higher Court directing a lower court, tribunal or Public authority to send the record in a given case for review.
 Rule B is a procedure unique in American federal law which permits a plaintiff, on a fairly basic showing in a maritime case, to obtain an order that authorizes prejudgment attachment of a defendant's property. Rule B of Admiralty Rules permit attachment of tangible or intangible personal property.
 This is filed ‘In Personam’ a Latin term which is suit directed towards a particular person i.e., against a specific individuals who would be served with summons to give the Court Jurisdiction to try.
 In Rem In Rem contrarily is ‘in a thing’. In rem is Latin for "in a thing". In a lawsuit, an action in rem is directed towards some specific piece of property, rather than being a claim for, say, monetary compensation against a person
 An important distinction is in ‘rem’ action, the jurisdiction would be where the property actually is but not so in - in personam
 EFT (Electronic Fund Transfer) is an instruction to transfer funds from one account to another. When the originator and the beneficiary each have accounts in the same bank that bank simply debits the originator’s account and credits the beneficiary’s account. When the originator and beneficiary have accounts in different banks, the method for transferring funds depends on whether the banks are members of the same wire transfer consortium. It not, then they use an intermediary bank. After the originator directs its bank to commence an EFT, the originator’s bank would instruct the intermediary to begin the transfer of funds. The intermediary bank would then debit the account of the bank where the originator has an account and credit the account of the bank where the beneficiary has an account. The originator’s bank and the beneficiary’s bank would then adjust the accounts of their respective clients.
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Now concluding the Q at the start : Manu Needhi Chozhan was a legendary Chozha King believed to have killed his own son to provide justice to a Cow following Manu Needhi or Manu's law. Legend has it that the king hung a giant bell in front of his courtroom for anyone needing justice to ring. One day, he came out on hearing the ringing of the bell by a Cow. On enquiry he found that the Calf of that Cow was killed under the wheels of his chariot. In order to provide justice to the cow, he killed his own son under the chariot as a punishment to himself i.e. make himself suffer as much as the cow. His name has since then been used as a metaphor for fairness and justice in literature. His capital was Thiruvarur. A statue of the King adorns the Chennai High Court, in Chennai, Tamilnadu.

The US Supreme Court is situated in Washington D.C – the building was designated as a National historic landmark on 4th May 1987. Alongside some is a statue located to the right of the front steps titled ‘authority of law’ sculpted by James Earle Fraser. A single tablet inscribed with "LEX" (Latin for "Law") is held by the figure.

Hope this made an interesting reading.  This post certainly does not intend to any commentary on the judgment. Merely an attempt to understand the latest judgment and some legal terms, rather than its interpretation and the far reaching attempts that the decision could have.


With regards – S Sampathkumar.