corporate laws – Maritime claims =Sunil B. Naik issued a demand notice to Reflect Geophysical for payment of outstanding dues on 16.3.2013. Yusuf Abdul Gani is also said to have raised various invoices to Reflect Geophysical in respect of the dues arising out of the contract, between 16.11.12 and 16.2.13. – Yusuf Abdul Gani, moved the Bombay High Court by filing a suit against the respondent vessel as an admiralty suit and obtained an order on 15.3.2013 for arrest of the vessel. Similarly, on Reflect Geophysical expressing its inability to make payments on account of lack of funds, Sunil B. Naik, filed an admiralty suit and obtained an order of arrest of vessel on 12.4.2013. As noted, the vessel was already under arrest in pursuance of the order passed in Yusuf Abdul Gani’s case.- The owners of the respondent vessel, Master and Commander AS Norway, filed a notice of motion in the two proceedings for vacation of the ex parte arrest of vessel. On hearing being held, the learned single Judge on 17.4.2013 vacated the ex parte stay. The two appellants, as aggrieved parties, moved the Division Bench of the Bombay High Court, which dismissed the appeal on 10.5.2013. = apex court held that A maritime claim against the charterer of a ship, who is not the de jure owner of the ship, and the endeavor to recover that amount through a restraint order against the ship owned by a third party – not maintainable = There is a clear distinction between a beneficial ownership of a ship and the charterer of a ship. = Reflect Geophysical is not the owner of the respondent ship and the owner cannot be made liable for a maritime claim, which is against the trawlers and Orion Laxmi.- The expression “the vessel”, “owner” and “demise charterer”, thus, must be read in the aforesaid context and the maritime claims in respect of 16 trawlers and Orion Laxmi cannot be converted into a maritime claim against the respondent ship not owned by Reflect Geophysical. The appellants have neither any agreement with the owners of the respondent vessel nor any claim against the respondent vessel but their claim is on account of their own vessels hired by the charterer of the respondent vessel. There is no claim against the owners of the respondent vessel. The result of the aforesaid is that the appeals are dismissed leaving the parties to bear their own costs. The interim order dated 17.5.2013 stands dissolved and the amount along with accrued interest thereon is to be remitted back to the owners of the respondent vessel, who deposited the same before the Bombay High Court in pursuance of the interim order.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 2617 of 2018

(Arising out of SLP(C) No. 18845/2013)

SUNIL B. NAIK ….Appellant

versus

GEOWAVE COMMANDER ..…Respondent

And:

CIVIL APPEAL No. 2618 of 2018

(Arising out of SLP(C) No. 18899/2013)

J U D G M E N T

SANJAY KISHAN KAUL, J.

1. Leave granted.

2. A maritime claim against the charterer of a ship, who is not the

de jure owner of the ship, and the endeavor to recover that amount

through a restraint order against the ship owned by a third party has

Page 1 of 57

given rise to the present appeal.

3. Oil and Natural Gas Corporation Limited (for short ‘ONGC’)

awarded a contract to one Reflect Geophysical Pte. Ltd., Singapore (for

short ‘Reflect Geophysical’) for carrying out seismic survey operations

off the coast of Gujarat near the Okha Port in the year 2012. In order

to facilitate the carrying out of its obligations, Reflect Geophysical in

turn entered into a Charter Party Agreement vide contract dated

29.6.2012 to charter the vessel ‘Geowave Commander’, the registered

owner being Master and Commander AS Norway,(for short ‘Geowave

Commander’) for a period of three years. The said vessel is stated to

be a specialized ship equipped to carry out seismic survey operations.

In terms of the said contract, it is defined as a ‘Bareboat Charter’. The

charterer also has the option to purchase the vessel and the owners’

seismic equipment provided the purchase option is declared by the

charterers to the owners in writing latest on 18.1.2015 being six

months prior to the end of the charter period.

4. In order to fully appreciate the terms of the charter, it is

necessary to discuss/reproduce some of the clauses of the Charter

Page 2 of 57

Agreement:

“10. Maintained and Operation

(a)(i) Maintenance and Repairs: – During the Charter Period the

Vessel shall be in the full possession and at the absolute disposal

for all purposes of the Charters and under their complete control

in every respect. The Charterers shall maintain the Vessel, her

machinery, boilers, appurtenances and spare parts in a good state

of repair. In efficient operating condition and in accordance with

good commercial maintenance practice and except as provided

for in Clause 14(1) if applicable at their own expense they shall

at all times keep the Vessel’s class fully upto date and free of

overdue recommendations and/or conditions with the

classification.”

xxxx xxxx xxxx xxxx xxxx

“(ii) New Class and Other Safety Requirements – In the event of

any improvement, structural changes or new equipment

becoming necessary for the continued operation of the Vessel by

reason of new class requirements or by compulsory legislation

costing (excluding the Charterer’s loss of time) more than the

percentage stated in Box 23 or if Box 23 is left blank, 5 per cent

of the Vessel’s insurance value as stated in Box 29 then the

extent, if any, to which the rate of hire shall be varied and the

ratio in which the cost of compliance shall be shared between

the parties concerned in order to achieve a reasonable

distribution thereof as between the Owners and the Charterers

having regard, inter alia to the length of the period remaining

under this Charter shall, in the absence of agreement, be referred

to dispute resolution method agree in Clause 30.

(iii) Financial Security: The Charterers shall maintain financial

security or responsibility in respect of third party liabilities as

required by any government including federal state or municipal

or other division or authority thereof to enable the Vessel

without penalty or charge, lawfully to enter, remain at or leave

Page 3 of 57

any port, place territorial or contiguous waters of any country,

state or municipality in performance of this Charter without any

delay. This obligation shall apply whether or not such

requirements have been lawfully imposed by such government

or division or authority thereof. The Charterers shall make and

maintain all arrangements by bond or otherwise as may be

necessary to satisfy such requirements at the Charterers’ sole

expenses and the Charterers shall indemnify the Owners against

all consequences whatsoever (including loss of time) for any

failure or inability to do so.

(b) Operation of the Vessel: The Charterers shall at their own

expense and by their own procurement man, victual, navigate,

operate, supply fuel and whenever required, repair the Vessel

during the Charter Period and they shall pay all charges and

expenses of every kind and nature whatsoever incidental, to their

use and operation of the Vessel under this Charter, including

annual flag State fees and any foreign general municipality

and/or state taxes. The master officers and crew of the Vessel

shall be the servants of the Charterers for all purpose

whatsoever, even for any reason appointed by the Owners.”

xxxx xxxx xxxx xxxx xxxx

“(d) Flag and Name of Vessel: During the Charter period, the

Charterers shall have the liberty to paint the Vessel in their own

colours, install and display their funnel insignia and fly their

own house flag. The Charterer shall also have the liberty, with

the Owners’ and Mortgagee’s prior written consent, which shall

not be unreasonably withheld to change the flag and/or the name

of the Vessel during the Charter Period. Painting and repainting,

installment and re-installment, registration and reregistration

if required by the Owners shall be at the Mortgage(s)

bearing on the Vessel that would be required as a result of a

change of flag initiated by the Charterers shall be Charterer’s

cost.

Page 4 of 57

(e) Changes to the Vessel: Subject to Clause 10(a)(ii) the

Charterers shall make no structural changes in the Vessel or

changes the machinery, boilers, appurtenances or spare parts

thereof without in each instance first securing the Owners

approval thereof, if the Owners so agree, the Charterers shall, if

the Owners so require, restore the Vessel to its former condition

before the termination of this Charter.”

…. …. …. …. ….

“11. Hire

(a) The charterers shall pay hire due to the Owners punctually in

accordance with the terms of this Charter in respect of which

time shall be of the essence.”

…. …. …. …. ….

“17. Indemnity

(a) The Charterers shall indemnify the Owners against any loss,

damage or expenses incurred by the Owners arising out of or in

relation to the operation of the Vessel by the Charterers, and

against any lien of whatsoever nature arising out of an event

occurring during the Charter Period. If the Vessel be arrested or

otherwise detained by reason of claims or liens arising out of her

operation hereunder by the Charterers, the Charterers shall at

their own expense take all reasonable steps to secure that within

a reasonable time the Vessel is released, including the provision

of bail.

Without prejudice to the generality of the foregoing, the

Charterers agree to the indemnify the Owners against all

consequences or liabilities arising from the Master, officers or

agents signing Bills of Lading or other documents.

(b) If the Vessel be arrested or otherwise detained by reason of a

claim or claims against the Owners the Owners shall at their

own expenses take all reasonable steps to secure that within a

reasonable time the Vessel is released, including the provision of

bail.

Page 5 of 57

In such circumstances the Owners shall indemnify the Charterers

against any loss, damage or expense incurred by the Charterers

(including hire paid under this Charter) as a direct consequence

of such arrest or detention.”

5. Reflect Geophysical entered into a Charter Hire Agreement on

30.10.2012 with M/s. Sunil B. Naik, the appellant in SLP(C)

No.18845/2013, in terms whereof the said appellant agreed to supply

24 fishing trawlers being the chase vessels to assist in survey

operations to be conducted by the charterers seismic vessel Geowave

Commander. The charter was initially for 16 chase vehicles out of 24

fishing trawlers. The said agreement contained a dispute resolution

clause 18 providing for arbitration, which reads as under:

“18. All disputes arising out of or in connection with this

Charter Hire Agreement shall be finally settled in Mumbai

under the rules of India Arbitration Act before three arbitrators

appointed in accordance with the said Rules. Each party shall

appoint one such arbitrator and the two so appointed by the

parties shall jointly appoint the third.”

6. It is the case of the appellant that the 16 vessels were made

ready for Reflect Geophysical to ensure that fishing vessels were kept

well clear of the towed in water seismic equipment so that their fishing

equipment is not damaged. The daily hiring rate, as per the agreement,

Page 6 of 57

varies for the different nature of vehicles. The said appellant also

claims that the vessels were mobilized at Okha port but the fact

remains that the respondent ship never went to Okha and was at the

Pipavav port from where it went to Mumbai.

7. Similarly Yusuf Abdul Gani, appellant in SLP(C)

No.18899/2013, agreed to give on hire the ‘Orion Laxmi’ to Reflect

Geophysical to work in support with the survey vessel ‘Geowave

Commander’ vide contract dated 1.10.2012. The purpose was to

supply standby and emergency towing duties. The two appellants

claim to have raised invoices on Reflect Geophysical from time to

time, which are stated not to have been paid. Reflect Geophysical also

failed to pay the owners of the respondent vessel and consequently the

owners gave a notice of default dated 4.3.2013 to the charterers,

Reflect Geophysical, for non-payment of charter hire aggregating to

US$ 4,36,790 (approximately Rs.2.23 crore). Reflect Geophysical,

however, filed an application in the Singapore Court for placing the

company under judicial management, which was published in a

notification dated 15.3.2013 in the Singapore Gazette.

Page 7 of 57

8. Sunil B. Naik issued a demand notice to Reflect Geophysical for

payment of outstanding dues on 16.3.2013. Yusuf Abdul Gani is also

said to have raised various invoices to Reflect Geophysical in respect

of the dues arising out of the contract, between 16.11.12 and 16.2.13.

9. Yusuf Abdul Gani, moved the Bombay High Court by filing a

suit against the respondent vessel as an admiralty suit and obtained an

order on 15.3.2013 for arrest of the vessel. Similarly, on Reflect

Geophysical expressing its inability to make payments on account of

lack of funds, Sunil B. Naik, filed an admiralty suit and obtained an

order of arrest of vessel on 12.4.2013. As noted, the vessel was already

under arrest in pursuance of the order passed in Yusuf Abdul Gani’s

case.

10. The owners of the respondent vessel, Master and Commander

AS Norway, filed a notice of motion in the two proceedings for

vacation of the ex parte arrest of vessel. On hearing being held, the

learned single Judge on 17.4.2013 vacated the ex parte stay. The two

appellants, as aggrieved parties, moved the Division Bench of the

Bombay High Court, which dismissed the appeal on 10.5.2013. That is

Page 8 of 57

how the present appeals were filed.

11. In the present appeals while issuing notice on 17.5.2013 an

interim arrangement was made whereby the respondent was directed to

deposit a sum of Rs.1 crore in each case as security before the Bombay

High Court and on such deposit the vessels were permitted to sail. The

amounts were directed to be kept in fixed deposits. We were informed

that these amounts were accordingly deposited and are lying in fixed

deposits. The ship set sail. The question, thus, would be whether the

appellants are entitled to appropriate this amount along with interest

against their dues or whether the respondent is entitled to release of the

amount so deposited in Court.

The Legal Conundrum:

12. We are faced with the aforesaid factual position where there are

actually three creditors of Reflect Geophysical, being the owners of the

respondent ship and the appellants, who entered into contracts with

Reflect Geophysical to provide assistance in the operation of the task

for which the ship was engaged.

Page 9 of 57

13. The first question, thus, which would arise is whether a maritime

claim could be maintained under the admiralty jurisdiction of the High

Court for an action in rem against the respondent ship in respect of the

dues of the appellants when the charterer himself is in default of the

payment to the owner. The case of the appellants, on the one hand, is

that there is a liability of the respondent vessel on account of the

charter agreement and the rights and obligations of the charterer while

the respondent, who has succeeded before both the forums, seeks to

establish that the claim of the appellants cannot be categorized as a

maritime claim for invoking the admiralty jurisdiction of the High

Court and that the vessel, thus, could not be arrested to secure such a

claim of the appellants.

Bareboat Charter:

14. The charter party is defined as a contract by which an entire

ship, or some principal part thereof, is let by the owner to another

person for a specified time or use. The Charter can be of two kinds –

(i) Charter of demise; and (ii) Contract of affreightment. In the present

case, we are concerned with the charter of demise by which the whole

vessel is let to the charterer with the transfer to him of its entire

Page 10 of 57

command and possession and consequent control over its navigation.

Such a charter is called a bareboat charter. It would be apposite at this

stage to refer to the Mark Davis’ Commentary on “Bareboat Charters”

2

nd Edition where the nature and character of demised charters has been

explained as follows:

“A fundamental distinction is drawn under English law

between charter parties which amount to a demise or lease of a

ship, and those which do not. The former category, known as

charters by demise, operate as a lease of the ship pursuant to

which possession and control passes from the owners to the

charterers whilst the latter, primarily comprising time and

voyage charters, are in essence contracts for the provision of

services, including the use of the chartered ship. Under a lease,

it is usual for the owners to supply their vessel “bare” of

officers and crew, in which case the arrangement may correctly

be termed a “bareboat” charter. The charterers become for the

duration of the charter the de facto “owners” of the vessel, the

master and crew act under their orders, and through them they

have possession of the ship.

A statement of the hallmarks of a demise charter can be found

in the judgment of Evans LJ in The Giuseppe di Vittorio

[1998] 1 Lloyd’s Rep 136 at p 156:

“What then is the demise charter? Its hallmarks, as it

seems to me, are that the legal owner gives the charterer

sufficient of the rights of possession and control which

enable the transaction to be regarded as a letting – a lease,

or demise, in real property terms – of the ship. Closely

allied to this is the fact that the charterer becomes the

employer of the master and crew. Both aspects are

combined in the common description of a ‘bareboat’ lease

or hire arrangement.”

Page 11 of 57

As indicated, charter parties which do not amount to a demise

or lease of a ship (Including time charters and voyage charters)

are classified in English law as contracts of affreightment,

pursuant to which the owners agree to carry goods by sea in

return for a sum of money. Although the charterers have a

right as against the owners to have their goods carried on the

vessel, the ownership and the possession of the ship remains

with the owners through the master and crew who remain their

servants.

Whether or not a charter party amounts to a demise charter

depends in every case upon the precise terms of the charter,

taking the instrument as a whole. The test has been

summarized as follows:

“The question depends, where other things are not in the

way, upon this: whether the owner has by the charter,

where there is a charter, parted with the whole possession

and control of the ship, and to this extent, that he has

given to the charterer a power and right independent of

him, and without reference to him to do what he pleases

with regard to the captain, the crew, and the management

and employment of the ship. That has been called a letter

or demise of the ship. The right expression is that it is a

parting with the whole possession and control of the

ship.”

Thus, although time charters almost always contain words such

as “let”, “hire”, “delivery” and “redelivery”, the use of such

words are inapt in such a context, and are not in any sense to

be regarded as conclusive, when determining the nature of the

charter.

In Sea and Land Securities v. William Dickinson MacKinnon

LJ traced the origin of these words to demise charters, and at

page 163 emphasised the difference between demise and time

charters thus: “there is all the difference between hiring a boat

Page 12 of 57

in which to row yourself about, in which case the boat is

handed over to you, and contracting with a man on the beach

that he shall take you for a row, in which case he merely

renders services in rowing you about.”

15. A demised charterer, like Reflect Geophysical, who is the owner

for services stipulated, assumes in large measures the customary rights

and liabilities of vessel owners in relation to third persons, who have

dealt with him or with the ship, illustratively, repairs and supplies

ordered for the vessel, wages of seamen, etc.

Maritime Claims & Admiralty Jurisdiction in India:

16. This Court in M.V. Elisabeth &Ors. v. Harwan Investment &

Trading Pvt. Ltd.1

had an opportunity to discuss the scope of exercise

of the admiralty jurisdiction and consequently of an action in rem. The

Admiralty Court Act, 1861, was referred to in this behalf but that was

stated not to inhibit the exercise of jurisdiction by the High Court

subject to its own rules, in exercise of its maritime jurisdiction. The

fact that the High Court continues to enjoy the same jurisdiction as it

had immediately before the commencement of the Constitution

(Article 225 of the Constitution of India) was to be read in the context

of the judicial sovereignty of the country manifested in the jurisdiction

1 AIR 1993 SC 1014

Page 13 of 57

of the High Courts as superior courts, thus, though the colonial statutes

may remain in force, by virtue of Article 372 of the Constitution of

India, that was observed not to stultify the growth of law or blinker its

vision or fetter its arms. The latter Admiralty Act of 1890 was said not

to incorporate any particular English statue into the Indian law for the

purpose of conferring admiralty jurisdiction, but to assimilate the

competent courts in India to the position of the English High Court.

The lack of legislative exercise was noted with regret. The said lament

apparently has still not had its full impact!

17. The draft Admiralty Act of 1987, did not see the light of the day.

Section 3 of that Act seeks to define the admiralty jurisdiction of the

court. The fate was no different for the draft Admiralty Act of 1999,

Section 5 of which defines the admiralty jurisdiction. Finally, we have

The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act,

2017, which was passed by the Parliament and received the assent of

the President of India on 9.8.2017 and was duly published in the

Gazette on the said date but the date of its coming into force has still

not been notified. Interestingly, the statement of object and reasons of

this Act itself refers to the desirability of the codifying and clarifying

Page 14 of 57

the admiralty law in view of the observations of this Court in M.V.

Elisabeth &Ors.2

. The present dispute is, once again, a reminder to the

Government of the necessity of bringing into force the said Act!

18. We may note that these Acts were referred to by Mr. Shekhar

Naphade, learned Senior Advocate appearing for the appellant, Sunil

B. Naik, for purposes of elucidating the expanding admiralty

jurisdiction as observed in M.V. Elisabeth &Ors.3

. Thus, Section 3(1)

(h),( j) & (l) of the 1987 Act was referred, which reads as under:

“3. Admiralty Jurisdiction of the Court. – (1) The Admiralty

Jurisdiction of the Court shall be as follows, that is to say

Jurisdiction to hear and determine any of the following questions

or claims:

xxxx xxxx xxxx xxxx xxxx

(h) Any claim arising out of any Agreement relating to the

carriage of goods in a ship or to the use or hire of a ship;

xxxx xxxx xxxx xxxx xxxx

(j) Any claim in the nature of towage in respect of a ship or any

aircraft;

xxxx xxxx xxxx xxxx xxxx

(l) Any claim in respect of goods, materials, bunker or other

necessaries supplied to a ship for her operation of maintenance.”

2 supra

3 supra

Page 15 of 57

19. The claim of the appellants was sought to be brought within the

expression “or to use or hire of a ship”. The same aforesaid clause of

1999 Act was also referred to state that the expression “operation or

maintenance” was specified “operation or maintenance.” The object, it

was, thus, pleaded, in the expanding jurisdiction was to include any

services rendered to the ship and it was claimed that the appellants had

actually rendered those services in the form of the agreement with

Reflect Geophysical. Insofar as 2017 Act is concerned, the provision

of Section 4(1)(j) & (l) were referred to, which read as under:

“4. Maritime claim. – (1) The High Court may exercise

jurisdiction to hear and determine any question on a maritime

claim, against any vessel, arising out of any –

xxxx xxxx xxxx xxxx xxxx

(j) towage;

xxxx xxxx xxxx xxxx xxxx

(l) goods, materials, perishable or non-perishable provisions,

bunker fuel, equipment (including containers), supplied or

services rendered to the vessel for its operation, management,

preservation or maintenance including any fee payable or

leviable.”

20. In respect of the aforesaid clause (l), once again, it is claimed

Page 16 of 57

that the appellant rendered services to the vessel for its operation and

management. Section 6 of that Act also provides for admiralty

jurisdiction in personam in respect of a maritime claim.

21. Mr. Prashant S. Pratap, learned Senior Advocate appearing for

the respondent referred to the same judgment in M.V. Elisabeth &Ors.4

to emphasise that despite the expanding jurisdiction of the courts,

certain fundamentals have to be kept in mind as reflected in the

observations made in the said judgment. As to what is the object of

exercise of jurisdiction in rem and the manner of exercise is discussed

in the following paragraphs:

“44. “The law of admiralty, or maritime law, …. (is the) corpus

of rules, concepts, and legal practices governing … the business

of carrying goods and passengers by water.” (Gilmore and

Black, The Law of Admiralty, page 1). The vital significance and

the distinguishing feature of an admiralty action in rem is that

this jurisdiction can be assumed by the coastal authorities in

respect of any maritime claim by arrest of the ship, irrespective

of the nationality of the ship or that of its owners, or the place of

business or domicile or residence of its owners or the place

where the cause of action arose wholly or in part.

45.… In admiralty the vessel has a juridicial personality, an

almost corporate capacity, having not only rights but liabilities

(sometimes distinct from those of the owner) which may be

enforced by process and decree against the vessel, binding upon

all interested in her and conclusive upon the world, for admiralty

4 supra

Page 17 of 57

in appropriate cases administers remedies in rem, i.e., against the

property, as well as remedies in personam, i.e., against the party

personally ….” (Benedict, The Law of American Admiralty, 6th

ed., Vol. I p. 3.)

46. Admiralty Law confers upon the claimant a right in rem to

proceed against the ship or cargo as distinguished from a right in

personam to proceed against the owner. The arrest of the ship is

regarded as a mere procedure to obtained security to satisfy

judgment. A successful plaintiff in an action in rem has a right to

recover damages against the property of the defendant. “The

liability of the ship owner is not limited to the value of the res

primarily proceeded against …. An action … though originally

commenced in rem, becomes a personal action against a

defendant upon appearance, and he becomes liable for the full

amount of a judgment unless protected by the statutory

provisions for the limitation of liability”.’ (Roscoe’s Admiralty

Practice, 5th ed. p. 29)

47. The foundation of an action in rem, which is a peculiarity of

the Anglo-American law, arises from a maritime lien or claim

imposing a personal liability upon the owner of the vessel. A

defendant in an admiralty action in personam is liable for the full

amount of the plaintiff’s established claim. Likewise, a defendant

acknowledging service in an action in rem is liable to be saddled

with full liability even when the amount of the judgment exceeds

the value of the res or of the bail provided. An action in rem lies

in the English High Court in respect of matters regulated by the

Supreme Court Act 1981, and in relation to a number of claims

the jurisdiction can be invoked not only against the offending

ship in question but also against a ‘sistership’ i.e., a ship in the

same beneficial ownership as the ship in regard to which the

claim arose.

“The vessel which commits the aggression is treated as the

offender, as the guilty instrument or thing to which the forfeiture

attaches, without any reference whatsoever to the character or

Page 18 of 57

conduct of the owner ….” (Per Justice Story, The United States

v. The Big Malek Adhel [43 US (2 How) 210, 233 (1844)] ).

xxxx xxxx xxxx xxxx xxxx

59. The real purpose of arrest in both the English and the Civil

Law systems is to obtain security as a guarantee for satisfaction

of the decree, although arrest in England is the basis of

assumption of jurisdiction, unless the owner has submitted to

jurisdiction. In any event, once the arrest is made and the owner

has entered appearance, the proceedings continue in personam.

All actions in the civil law — whether maritime or not — are in

personam, and arrest of a vessel is permitted even in respect of

non-maritime claims, and the vessel is treated as any other

property of the owner, and its very presence within jurisdiction

is sufficient to clothe the competent tribunal with jurisdiction

over the owner in respect of any claim. [See D.C. Jackson,

Enforcement of Maritime Claims, (1985) Appendix 5] [ See

D.C. Jackson, Enforcement of Maritime Claims, (1985)

Appendix 5, p. 437 et seq.] . Admiralty actions in England, on

the other hand, whether in rem or in personam, are confined to

well defined maritime liens or claims and directed against the

res(ship, cargo and freight) which is the subject-matter of the

dispute or any other ship in the same beneficial ownership as the

res in question.”

xxxx xxxx xxxx xxxx xxxx

“99. What then was the jurisdiction that the Court of England

exercised in 1890? The law of Admiralty was developed by

English courts both as a matter of commercial expediency and

due to equity and justice. Originally it was a part of common law

jurisdiction, but the difficulty of territorial limitations,

constraints of common law and the necessity to protect the rights

and interests of its own citizens resulted in growth of maritime

lien a concept distinct from common law or equitable lien as it

represents a charge on maritime property of a nature unknown

alike to the common law or equity. The Privy Council explained

Page 19 of 57

it as ‘a claim or privilege upon a thing to be carried into effect

by legal process’ [Harmer v. Bell, (1851) 7 Moo PC 267 : 13 ER

884] . Law was shaped by exercise of discretion to what

appeared just and proper in the circumstances of the case.

Jurisdiction was assumed for injurious act done on high seas and

the scope was extended, ‘not only to British subjects but even to

aliens’ [Hailey (The), LR 2 PC 193] . Maritime law has been

exercised all over the world by Maritime powers. In England it

was part of Municipal law but with rise of Britain as empire the

law grew and it is this law, that is, ‘Maritime Law that is

administered by the Admiralty Court’ [Halsbury’s Laws of

England, 4th Edn., Vol. 1] . From the Maritime law sprang the

right known as Maritime lien ascribing personality to a ship for

purposes of making good loss or damage done by it or its master

or owner in tort or contract. In England it grew and was

developed in course of which its scope was widened from

damage done by a ship to claims of salvor, wages, bottomry,

supply of necessaries and even to bills of lading. Its effect was to

give the claimant a charge on res from the moment the lien arose

which follows the res even if it changed hands. In other words a

maritime lien represented a charge on the maritime property. The

advantage which accrued to the maritime lienee was that he was

provided with a security for his claim up to the value of the res.

The essence of right was to identify the ship as wrongdoer and

compel it by the arrest to make good the loss. Although the

historical review in England dates back to the 14th Century but

its statutory recognition was much later and ‘maritime law came

to jurisprudential maturity in the first half of the 19th Century’

[Maritime Liens by D.R. Thomas]. And the first statutory

recognition of such right came in 1840 when the Admiralty

Court Act of 1840 was enacted empowering the admiralty court

to decide all questions as to the title or ownership of any ship or

vessel or the procedure thereof remaining in the territory arising

in any cause of possession, salvage, damage, wages or bottomry.

By clause (6) of the Act jurisdiction was extended to decide all

claims and demands whatsoever in the nature of salvage for

services rendered to or damage received by any ship or seagoing

vessel or in the nature of towage or for necessaries

Page 20 of 57

supplied to any foreign ship or sea-going vessel and the payment

thereof whether such ship or vessel may have been within the

body of a country or upon the high seas at the time when the

services were rendered or damage received or necessary

furnished in respect of such claims. But the most important Act

was passed in 1861 which expanded power and jurisdiction of

courts and held the field till it was replaced by Administration of

Justice Act, 1920. The importance of the Act lay in introducing

the statutory right to arrest the res on an action in rem. Section

35 of the 1861 Act provided that the jurisdiction by the High

Court of Admiralty could be exercised either by proceedings in

rem or proceedings in personam. “The essence of the rem in

procedure is that ‘res’ itself becomes, as one might say, the

defendant, and ultimately the ‘res’ the ship may be arrested by

legal process and sold by the Court to meet the plaintiff’s claim.

The primary object, therefore, of the action in rem is to satisfy

the claimant out of the res” [Maritime Lawby Christopher Hill] .

If the 1840 Act was important for providing statutory basis for

various types of claims then 1861 Act was a step forward in

expanding the jurisdiction to claims of bill of lading. Section 6

of the Act was construed liberally so as to confer jurisdiction and

the expression ‘carried into any port was’ was expanded to mean

not only when the goods were actually carried but even if they

were to be carried [(The) Ironsides, 167 ER 205(The) St. Cloud,

167 ER 29(The) Norway, 167 ER 347] . Further the section was

interpreted as providing additional remedy for breach of contract

[ Carter: History of English Courts] . By the Jurisdiction Act of

1873 the court of Admiralty was merged in High Court of

Justice. Result was that it obtained jurisdiction over all maritime

cases. Therefore what was covered by enactments could be taken

cognisance of in the manner provided in the Act but there was no

bar in respect of any cause of action which was otherwise

cognizable and arose in Admiralty. Section 6 of 1861 Act was

confined to claim by the owner or consignee or assignee of any

bill of lading of any goods carried into any port in England or

Wales (to be read as India). But it did not debar any action or

any claim by the owner or consignee or assignee of any bill of

lading in respect of cargo carried out of the port. Even if there

Page 21 of 57

was no provision in 1861 Act, as such, the colonies could not be

deprived under 1890 Act from exercising jurisdiction on those

matters which were not provided by 1861 Act but could be

exercised or were otherwise capable of being exercised by the

High Court of England. ‘The theory was that all matters arising

outside the jurisdiction of common law i.e. outside the body of a

country were inside the jurisdiction of Admiralty’ [Carter:

History of English Courts]. ‘That this Court had originally

cognizance of all transaction civil and criminal, upon the high

seas, in which its own subjects were concerned, is no subject of

controversy’ [ Lord Stowell in ‘The Hercules’ 2 Dod. 371] . To

urge, therefore, that the Admiralty court exercising jurisdiction

under 1890 Act could not travel beyond 1861 Act would be

going against explicit language of the Statute. Even now, the

Admiralty jurisdiction of the High Court of Justice in England is

derived ‘partly from Statute and partly from the inherent

jurisdiction of Admiralty’ [Maritime Liens by D.R. Thomas] .

Observations of Lord Diplock in Jade (The) [ See D.C. Jackson,

Enforcement of Maritime Claims, (1985) Appendix 5, p. 437 et

seq.] that Admiralty jurisdiction was statutory only have to be

understood in the context they were made. By 1976 the statutory

law on Admiralty had become quite comprehensive. Brother

Thommen, J., has dealt with it in detail. Therefore those

observations are not helpful in deciding the jurisdiction that was

exercised by the High Court in England in 1890.”

(emphasis supplied)

22. The emphasis of the respondent is, thus, on the maritime claim

being maintained against the owner of the ship and detention of a ship

as a sequitur thereto as security for a decree liable to be passed against

the owners of the ship in personam. Since the claim is stated to be one

against Reflect Geophysical and not against the owners, such a

Page 22 of 57

detention could not have been made, it was contended. Reflect

Geophysical, in fact, has not even been made a party to the suit, the

entity, which would be liable in personam.

International Convention on Arrest of ship, 1999:

23. The provisions of the aforesaid Convention have been referred

to especially keeping in mind the observations of this Court in

Liverpool & London S.P. & I Association Limited v. M.V. Sea

Success I & Anr.5

,which read as under:

“57. This Court in M.V. Elisabeth [M.V. Elisabeth v. Harwan

Investment and Trading (P) Ltd., 1993 Supp (2) SCC 433]

observed that Indian statutes lag behind any development of

international law and further it had not adopted the various

conventions but opined that the provisions thereof having been

made as a result of international unification and development

of the maritime laws of the world should be regarded as the

international common law or transnational law rooted in and

evolved out of the general principles of national laws, which,

in the absence of any specific statutory provisions can be

adopted and adapted by courts to supplement and complement

national statutes on this subject.”

xxxx xxxx xxxx xxxx xxxx

“59.M.V. Elisabeth [M.V. Elisabeth v. Harwan Investment and

Trading (P) Ltd., 1993 Supp (2) SCC 433] is an authority for

the proposition that the changing global scenario should be

kept in mind having regard to the fact that there does not exist

any primary act touching the subject and in absence of any

5 (2004) 9 SCC 512

Page 23 of 57

domestic legislation to the contrary; if the 1952 Arrest

Convention had been applied, although India was not a

signatory thereto, there is obviously no reason as to why the

1999 Arrest Convention should not be applied.

60. Application of the 1999 Convention in the process of

interpretive changes, however, would be subject to: (1)

domestic law which may be enacted by Parliament; and (2) it

should be applied only for enforcement of a contract involving

public law character.”

24. Therefore, in the interest of international comity, though India is

not a signatory to the Convention of 1999, the principles of the same

are utilized and applied to appropriate situations to determine whether

a ‘maritime claim’, as understood in the international context has

arisen and whether the same warrants the arrest of the vessel in

question as per its provisions.

25. Article 1 of the Convention defines ‘Maritime Claim to include:

“Article 1

Definitions

For the purposes of this Convention:

1. “Maritime Claim” means a claim arising out of one or more of

the following:

xxxx xxxx xxxx xxxx xxxx

“(f) any agreement relating to the use or hire of the ship, whether

contained in a charter party or otherwise;”

Page 24 of 57

xxxx xxxx xxxx xxxx xxxx

“(l) goods, materials, provisions, bunkers, equipment (including

containers) supplied or services rendered to the ship for its

operation, management, preservation or maintenance;”

26. Article 2 stipulates the powers of arrest and sub-clause (2)

clarifies that the ship may be arrested only respect a maritime claim.

Sub-clause (3) stipulates that ship may be arrested for purposes of

obtaining security notwithstanding that by virtue of a jurisdiction

clause or arbitration clause, it has to be adjudicated in a State other

than the State where it has been arrested. For an elucidation we

reproduce the said clauses:

“Article 2

Powers of arrest

xxxx xxxx xxxx xxxx xxxx

2. A ship may only be arrested in respect of a maritime claim

but in respect of no other claim.

3. A ship may be arrested for the purpose of obtaining security

notwithstanding that, by virtue of a jurisdiction clause or

arbitration clause in any relevant contract, or otherwise, the

maritime claim in respect of which the arrest is effected is to be

adjudicated in a State other than the State where the arrest is

effected, or is to be arbitrated, or is to be adjudicated subject to

the law of another State.”

Page 25 of 57

27. Article 3 deals with the exercise of right of arrest, which reads as

under:

“Article 3

Exercise of right of arrest

1. Arrest is permissible of any ship in respect of which a

maritime claim is asserted if:

(a) the person who owned the ship at the time when the

maritime claim arose is liable for the claim and is owner of the

ship when the arrest is effected; or

(b) the demise charterer of the ship at the time when the

maritime claim arose is liable for the claim and is demise

charterer or owner of the ship when the arrest is effected; or

(c) the claim is based upon a mortgage or a “hypothèque” or a

charge of the same nature on the ship; or

(d) the claim relates to the ownership or possession of the ship;

or

(e) the claim is against the owner, demise charterer, manager or

operator of the ship and is secured by a maritime lien which is

granted or arises under the law of the State where the arrest is

applied for.

2. Arrest is also permissible of any other ship or ships which,

when the arrest is effected, is or are owned by the person who

is liable for the maritime claim and who was, when the claim

arose:

(a) owner of the ship in respect of which the maritime claim

arose; or

(b) demise charterer, time charterer or voyage charterer of that

Page 26 of 57

ship.

This provision does not apply to claims in respect of ownership

or possession of a ship.

3. Notwithstanding the provisions of paragraphs 1 and 2 of this

article, the arrest of a ship which is not owned by the person

liable for the claim shall be permissible only if, under the law

of the State where the arrest is applied for, a judgment in

respect of that claim can be enforced against that ship by

judicial or forced sale of that ship.”

28. We may note that the claim of the appellant, Sunil B. Naik, is

based on the definition clause of the maritime claim clause (f) & (l) as

discussed even in the impugned order while the claim of Yusuf Abdul

Gani is restricted to clause (f).

29. The endeavour of the appellants to bring the claim within the

aforesaid provisions is naturally opposed by the respondent on the

ground that the agreement between the appellants and Reflect

Geophysical is actually a charter hire agreement between Reflect

Geophysical and the two appellants. It was contended that there were

neither any goods supplied nor services rendered and, in fact, the

survey operations never commenced as the ships remained stationed at

the port at Okha whereas the respondent vessel never arrived at Okha.

Reflect Geophysical is stated to have actually engaged the vessels of

Page 27 of 57

the appellant through a charter hire agreement and this cannot form a

part of the maritime claim against the respondent ship. In this behalf,

reference has been made to the judgment in The “Eschersheim”6

. The

relevant portion, which is also reproduced in the impugned judgment is

extracted as under:

“In my opinion there is no good reason for excluding from the

expression “an agreement for the use or hire of a ship” any

agreement which an ordinary ASN 12/14 Appeal-209-13.doc

business man would regard as being within it. If which an

ordinary business man would regard as being within it. If A and

B make an agreement for A’s ship to be used for carrying out any

operation for B, I consider that the agreement is one for the use,

if not for the hire of the ship. Thus an agreement for a ship to be

employed for dredging, towing, cable laying and salvage would

be an agreement for the use of the ship. But is an agreement for

dredging or towage or cable laying or salvage an agreement for

the use of a ship if there is no express reference in the agreement

to any such use. If the operation can only be carried by means of

a ship. I consider that the agreement must be one for the use or

hire of a ship. A towage agreement would therefore always come

within the words. Dredging or cable laying could conceivably be

performed by other means but in the great majority of cases it

would be so obvious that the use of a ship must be intended that

this would be implied…..”

30. Thus, the plea is that the charter hire agreement is for use of the

appellant’s vessel by Reflect Geophysical. The respondent is not liable

personally for the maritime claim and, thus, there can be no arrest of

the ship since the ship is not owned by Reflect Geophysical. The

6 [1976] Vol. I Lloyd’s Law Reports 81

Page 28 of 57

charter agreement provisions were referred to (extracted aforesaid) to

substantiate that at present, at best Reflect Geophysical was only a de

facto owner and not a de jure owner and that in order for Reflect

Geophysical to be de jure owner the provisions provided how six

months in advance of the expiry of the contract recourse could be had

to the same. That occasion never arose.

31. A reference was, thus, made to Article 3(3) of the aforesaid

Convention, which provides for arrest of the ship only if the judgment

in respect of that claim can be enforced against the ship by judicial or

forced sale of that ship and in the absence of any provision under the

Indian law by which the ship not owned by a person could be made

liable for a maritime claim, the arrest of the ship could not take place.

The judgment could be obtained only under the contract which would

be against Reflect Geophysical.

32. Mr. Naphade, learned Senior Advocate for the appellants has

referred to the judgment in Medway Drydock & Engineering Co. Ltd.

v. M.V. Andrea Ursula7

dealing with the action in rem on the question

whether the ship under a demised charter is “beneficially owned as

7[1973] QB 265

Page 29 of 57

respects all the shares therein” by the charterer, within the meaning of

the expression in Section 3(4) of the Administration of Justice Act,

1956. It was observed that “a ship would be beneficially owned by the

person who, whether or not he was the legal or equitable owner or not,

lawfully had full possession and control of her, and, by virtue of such

possession and control, had all the benefit and use of her which a legal

or equitable owner would ordinarily have.”

33. In the aforesaid context it may be noticed that in Section 1 of the

Administration of Justice Act, 1956, the Admiralty jurisdiction could

be invoked inter alia in the following case:

“1. Admiralty jurisdiction of the High Court

(I) The Admiralty jurisdiction of the High Court shall be as

follows, that is to say, jurisdiction to hear and determine any of

the following questions or claims –

xxxx xxxx xxxx xxxx xxxx

(h) any claim arising out of any agreement relating to the

carriage of goods in a ship or to the use or hire of a ship;”

34. A reference, has, thus, also been made to the decision in The

“Permina 3001”8

of the Singapore Court of Appeal, the relevant

8 (1979) Vol. 1 Lloyd’s Law Reports 327

Page 30 of 57

portion of which reads as under:

“The question is what do the words “beneficially owned as

respects all the shares therein” mean in the context of the Act.

These words are not defined in the Act. Apart from authority,

we would construe them to refer only to such ownership of a

ship as is vested in a person who has the right to sell, dispose

of or alienate all the shares in that ship. Our construction

would clearly cover the case of a ship owned by a person, who

whether he is the legal owner or not, is in any case the

equitable owner of all the shares therein. It would not, in our

opinion, cover the case of a ship which is in the full possession

and control of a person who is not also the equitable owner of

all the shares therein. In our opinion, it would be a misuse of

language to equate full possession and control of a ship with

beneficial ownership as respects all the shares in a ship. The

word “ownership” connotes title, legal or equitable whereas the

expression “possession and control”, however full and

complete, is not related to title. Although a person with only

full possession and control of a ship, such as a demise

charterer, has the beneficial use of her, in our opinion he does

not have the beneficial ownership as respects all the shares in

the ship and the ship is not “beneficially owned as respects all

the shares therein” by him within the meaning of s.4(4).”

35. In an ex parte case in The “Leoborg”9

the Admiralty Judge dealt

with a claim of escorting services provided by a tug from outside a port

into a port for services in the nature of towage.

36. The Appellants have also placed reliance on the case of Epoch

Enterrepots v. M.V. Won Fu10to differentiate between different types

9 (1962) Vol.. 2. Lloyd’s List Law Reports 146

10(2003) 1 SCC 305

Page 31 of 57

of charter parties and to assert that in the case of a demise charter, the

charterer has complete control of the vessel.

The Legal view which prevailed with the Courts below:

37. The bedrock of the submissions of Mr. Prashant S. Pratap,

learned Senior Advocate, who appeared even in the proceedings before

the Courts below would show that the plea of no right of arrest of the

respondent vessel was based on Reflect Geophysical not being the

owner but only a charterer of the vessel. The essential ingredients for

maintaining a maritime claim for which a vessel may be detained were

specified as under:

“In order to ascertain whether in an action in rem filed in the Admiralty

jurisdiction of the court, the Plaintiff is entitled to an order of arrest of

the Defendant vessel, the following needs to be established:

(a) The plaintiff has a maritime claim;

(b) The vessel in respect of which the plaintiff has a maritime

claim;

(c) The party liable in personam in respect of the maritime

claim; and

(d) The party liable in personam is the owner of the vessel

sought to be arrested.”

Page 32 of 57

38. The learned single Judge opined that the claim in Yusuf Abdul

Gani’s case was in respect of use or hire of another ship Orion Laxmi

and the claim, thus, could not be maintained against the respondent

vessel. It was stated to be a claim in personam against Reflect

Geophysical and thus, only a vessel owned by Reflect Geophysical

could have been restrained. The learned single Judge also records that

it has not been the case of Yusuf Abdul Gani that Reflect Geophysical

is a de facto owner of the ship sought to be arrested and the position of

an owner of a ship is different from a demised charter when it comes to

the arrest of a vessel owned or chartered. In this behalf a reference has

been made to the case of Polestar Maritime Ltd. v. M.V. Qi Lin Men

& Ors.11 where Article 3(2) of the Arrest Convention was elucidated

specifying that a ship can be arrested in respect of a maritime claim

against another ship only in the following circumstances:

(a) The owner of both the ships is one and the same.

(b) In case a maritime claim exists qua the owner of a ship,

which is taken on a demised charter then the liability can be

recovered by restraint of the ship owned by the charterer.

11Admiralty Suit (Lodging) No.3547/2008 decided on 22.10.2008

Page 33 of 57

This view originally elucidated by the learned single

Judge of the Bombay High Court found favour with the

Division Bench when the appeal was dismissed vide order

dated 6.1.2009 in Appeal (Lodging) No.772/2008. The Special

Leave Petition filed against the same was also dismissed vide

order dated 23.1.2009.

39. The conclusion, thus, was that there was no principle or

authority for proposition that a maritime claim for unpaid charter hire

in respect of vessel ‘A’ against the hirer thereof can be enforced by

arresting vessel ‘B’, which is on bareboat charter of the hirer of the

former vessel vis-à-vis vessel ‘A’.

40. The order passed by the learned single Judge in Sunil B. Naik’s

case merely referred to the said view adopted in Yusuf Abdul Gani’s

case to vacate the injunction. The Division Bench affirmed the orders

of the learned single Judge by passing two separate orders in the

appeals filed. The orders are of the same date, i.e. 10.5.2013, which

have been assailed in the two appeals.

41. The Division Bench took note of the fact that though India is not

Page 34 of 57

a signatory to the Arrest Convention, the same principles would apply

while determining whether a maritime claim has arisen causing for

such detention of the vessel. The Division Bench referred to the

judgment in Epoch Enterrepots12 to conclude that the distinction

sought to be drawn between a bareboat charter and a demised charter

was an issue no more res integra. A reference was also made to the

Commentary on “Maritime Law” 5th Edition by Christopher Hill,

which explained that in a demised charter or bareboat charter the ship

owner fades into the background and merely collects its hire payment

for the period of the charter. It was stated to be akin to a lease of a

ship, similar to a hire purchase arrangement rather than a simple

agreement for hire or use of the ship. Thus, the so-called de facto

ownership of Reflect Geophysical qua the respondent vessel was held

to be immaterial in respect of a maritime claim arising from an

agreement for use or hire of another vessel, which is the situation in

both the cases.

42. Insofar as the respondent vessel is concerned, there is no

agreement entered into by either of the two appellants and, thus, it

12 supra

Page 35 of 57

cannot be a maritime claim in respect of Article 1(1)(f) of the Arrest

Convention. Consequently, there would be no occasion to arrest the

vessel under Article 3(1)(b) of the Arrest Convention as no maritime

claim has resulted in the hands of the demised charterer with regard to

the demised vessel. The maritime claim by either of the appellants

could, thus, be enforced only by arresting another vessel owned by

Reflect Geophysical and the de facto ownership, could not be

converted into a de jure ownership. In respect of Article 1(1)(l), it was,

once again, held that there was no supply of goods to the vessel or of

supply of services to the vessel in question, which was the respondent

vessel. Insofar as the reasoning in Sunil B. Naik’s case, so far as

Article 1(1)(l) is concerned, it has been categorically found that it was

not a case where goods had been given on hire or for use of the

respondent vessel.

Conclusion:

43. On giving our thoughtful consideration to the issue at hand, we

are in full agreement with the view taken by the Courts below and find

no reason to interfere in appeal.

Page 36 of 57

44. We have referred to the various terms of the bareboat charter

which make it quite clear that Reflect Geophysical had the status of a

de facto owner. The charter agreement did contain a clause for

conversion of the status into a de jure owner but the occasion for the

same never arose. The option to purchase was to be exercised by an

advance intimation of six months prior to the end of the charter period

and the purchase price was also specified as US$ 3,01,50,000. The

charterer could not make any structural changes in the vessel or in the

machinery, boilers, appurtenances or space parts thereof without first

securing the owner’s approval and the vessel had to be restored to its

former condition before the termination of the charter, if so required by

the owners. This was, thus, a deed between the owner of the

respondent and Reflect Geophysical.

45. The contracts entered into with the appellants by Reflect

Geophysical are completely another set of charter hire

agreements/contracts. The unpaid amounts under these contracts

amount to claims against Reflect Geophysical. Thus, if there was

another vessel owned by Reflect Geophysical, the appellants would

have been well within their rights to seek detention of that vessel as

Page 37 of 57

they have a maritime claim but not in respect of the respondent vessel.

The maritime claim is in respect of the vessels which are owned by the

appellants and the party liable in personam is Reflect Geophysical.

Were the respondent vessel put under the de jure ownership of Reflect

Geophysical, the appellants would have been within their rights to seek

a detention order against that vessel for recovery of their claims.

46. In the facts of the present case the owners of the respondent

vessel, in fact, also have a claim against Reflect Geophysical for

unpaid charter amount. Thus, unfortunately it is both the owner of the

respondent vessel on the one hand and the appellants on the other, who

have a maritime claim against Reflect Geophysical, which has gone

into liquidation. The appellants quite conscious of the limitations of

any endeavour to recover the amount from Reflect Geophysical, have

ventured into this litigation to somehow recover the amount from, in

effect, the owners of the respondent vessel by detention of the

respondent vessel. That may also be the reason why the appellants did

not even think it worth their while to implead Reflect Geophysical

against whom they have their claim in personam, possibly envisaged

as a futile exercise.

Page 38 of 57

47. It is in the aforesaid context that while discussing this issue in

the impugned order, the essential ingredients for detention of a vessel

in a maritime claim were specified (para 37 aforesaid).

48. The aforesaid issue has also been discussed in Polestar

Maritime Ltd.13 while dealing with Article 3(2) of the Arrest

Convention. The test of the ownership of both the ships as one and the

same is not satisfied in the present case. The second situation

envisaged is where another ship owned by the charterer is detained,

i.e., he has taken ‘A’ ship on charter where he has only de facto

ownership and his ship ‘B’ is detained where charterer has de jure

ownership. It cannot be countenanced that where no in personam

claim lies against an entity, still the ship of that entity taken on

bareboat charter can be detained to recover the dues. The owner of the

respondent vessel is as much a creditor of Reflect Geophysical as the

appellants.

49. Mr. Naphade, learned Senior Advocate while relying on the

13 supra

Page 39 of 57

judgment in M.V. Elisabeth &Ors.14 had referred to the expanding

jurisdiction of a maritime claim. However, the observations made in

the said judgment reproduced hereinabove in para 21 would show that

the arrest of the ship is regarded as a mere procedure to obtain security

to satisfy the judgment. To that extent it is distinguished from a right

in personam to proceed against the owner but there has to be a liability

of the ship owner and in that eventuality the legal proceedings

commenced in rem would become a personal action in personam

against the defendant when he enters appearance. There cannot be a

detention of a ship as a security and guarantee arising from its owner

for a claim which is in respect of a non-owner or a charterer of the

ship.

50. On turning to the provisions of the Convention, a maritime claim

is specified as relating to use or hire of a ship whether contained in a

charter party or otherwise [clause (f)]. Insofar as clause (l) is

concerned they relate inter alia to services rendered to the ship. The

question, however, is – which is the ship in question? Such an order of

detention can be in respect of a ship where there is identity of the

14 supra

Page 40 of 57

owner against whom the claim in personam lies and the owner of the

ship. It cannot be used to arrest a ship of a third party or a non-owner.

51. As an illustrative example if we consider the principles of a

garnishee order where amounts held by a third party on behalf of a

defendant can be injuncted or attached to satisfy the ultimate claim,

which may arise against the defendant. It is not as if somebody else’s

money is attached in pursuance to a garnishee’s order. Similarly for a

claim against the owner of the vessel, a vessel may be detained and not

that somebody else’s vessel would be detained for the said purpose.

The crucial test would be of ownership, which in the present case

clearly does not vest with Reflect Geophysical and the de facto

ownership under their bareboat charter cannot be equated to a de jure

owner, which is necessary for an action in personam.

52. We may note that for the purposes of determining the

controversy, it is not really of much relevance that effectively no work

was carried out under the agreements between the appellants and

Reflect Geophysical as the chartered ship never commenced its task

and never reached the port from where the task was to be commenced.

Page 41 of 57

53. One of the contentions advanced by the learned Senior Advocate

for the appellant recorded by us relates to the plea of “beneficial

ownership” of the respondent ship by Reflect Geophysical and, thus,

the enforceability of a claim by the appellants against the respondent

ship. In support of this plea reliance is placed on the judgment in

Medway Drydock & Engineering Co. Ltd.15. We must record at the

inception itself that this issue appears not to have been raised either

before the learned single Judge or the Division Bench as there is no

discussion on this aspect. We, however, still feel necessary to deal

with this aspect and in some detail largely based on our own foray into

this area of law rather than simply relying on the judgment referred to

aforesaid.

54. United Kingdom became a signatory to two international

conventions – ‘International Convention relating to Arrest of Sea

Going Ships’ and ‘International Convention on certain Rules

concerning Civil Jurisdiction in matters of Collision’ signed at Brussels

on 10.5.1952. Article 3 of the former in sub-clause (2) states that

“Ships shall be deemed to be in the same ownership when all the

15 supra

Page 42 of 57

shares therein are owned by the same person or persons.” The context

is, thus, the ownership of the ship when a reference is made to “shares

therein” and whether they are owned by the same person or not.

“Shares” in a ship owes its origination to sailing vessels being

expensive items and subject to unexpected loss and thus, were not

owned by one person. Thus, more than one person could own a share

in a ship on the basis of capital tied up in the vessel. Such shares were

fairly random but by mid 19th century it was usual for shares to be in

multiples of 64 parts and, thus, ownership by 64th is still the norm in

England. The various requirements of a ship, for example, rope-maker,

sail maker, etc. were parts of a share owner and such shares could be

sold or bought like any other commodity. Normally there would be a

main owner who would have a large investment and be responsible for

the sail and working of the ship called “ship’s husband” while other

owners were simply cash investors. The profits and liabilities were

accordingly shared in the same ratio. This concept finds mention in

The Merchant Shipping Act, 1958 under Section 25, which deals with

‘Register Book’ as under:

“25. Register book.―Every registrar shall keep a book to be

called the register book and entries in that book shall be made

Page 43 of 57

in accordance with, the following provisions:―

xxxx xxxx xxxx xxxx xxxx

(b) subject to the provisions of this Act with respect to joint

owners or owners by transmission, not more than ten

individuals shall be entitled to be registered at the same time as

owners of any one ship; but this rule shall not affect the

beneficial interest of any number of persons represented by or

claiming under or through any registered owner or joint

owner;”

55. In view of United Kingdom signing the two Conventions

referred to aforesaid and giving legislative backing, Section 3 of The

Administration of Justice Act, 1956, incorporated the same. In subsection

(4) of Section 3, while dealing with the invocation of an action

in rem, the concept of “beneficially owned” vis-à-vis a ship was

introduced and the right to invoke it against the same.

56. The observations in Medway Drydock & Engineering Co. Ltd.16

referred to while recording the submissions of Mr. Naphade, have to be

appreciated in that context. However, a deeper study of the issue

shows that this judgment has been dissented from even by the Queen’s

Bench itself in I Congreso Del Partido17 by Robert Goff, J. This

judgment debates the concept of “beneficially owned” in respect of

16 supra

17[1978] Q.B. 500

Page 44 of 57

shares therein within the meaning of Section 3(4) of The

Administration of Justice Act, 1956. There is a respectful

disagreement with the line adopted by Brandon, J. in the Medway

Drydock & Engineering Co. Ltd.18. Thus, it is noticed that Brandon, J.

construed the words “beneficially owned as respects all the shares

therein” as not being restricted to legal or equitable ownership, but as

being wide enough to include such “ownership” as is conferred by a

demise charter. Robert Goff, J. recorded the reasoning of Brandon, J.

for doing so as under:

“The reasoning of Brandon J. which led him to reach this

conclusion was as follows: (1) The expression “beneficially

owned” in section 3 (4) is capable of more than one meaning:

either owned by someone who, whether he is the legal owner or

not, is in any case the equitable owner; or beneficially owned by

a person who, whether he was the legal or equitable owner or

not, lawfully had full possession and control of her, and, by

virtue of such possession and control, had all the benefit and use

of her which a legal or equitable owner would ordinarily have.

An example of the latter would be such “ownership” as was

conferred by a demise charter. A demise charterer has, because

of the extent of his possession and control, often been described

as the owner pro hac vice or the temporary owner. (2) Since the

meaning of the words “beneficially owned” is not clear the court

can and should look at the terms of the Brussels Convention of

1952, section 3 of the Act of 1956 being intended to give effect

to article 3 of the Convention; and having done so the court

should so construe the statute as to give effect, so far as possible,

to the presumption that Parliament intended to fulfil, rather than

18 supra

Page 45 of 57

to break, its international obligations. If section 3 (4) of the Act

is to give full effect to article 3, the expression “beneficially

owned” in the section must be given the second of the two

meanings of which it is capable, which embraces not only a

demise charterer, but also any other person with similar

complete possession and control. (3) Although Hewson J. had

reached a different conclusion in The St. Merriel [1963] P. 247,

Brandon J. felt justified in declining to follow that decision

having regard in particular to two points. First, Hewson J. had

not been invited to look at the Brussels Convention, because at

that time it was commonly thought that it was not permissible to

do so unless the Act contained an express reference to the

Convention. Second, the view accepted by Hewson J. in The St.

Merriel was no different in principle from one which was

discussed and rejected by Lord Atkinson in Sir John Jackson

Ltd. v. Steamship Blanche (Owners) (The Hopper No. 66)

[1908] A.C. 126, 135–136.”

57. Robert Goff, J. then records the significant factor, i.e., that

Medway Drydock & Engineering Co. Ltd.19 was decided on a motion

by plaintiffs for judgment in an ex parte proceedings while he had the

benefit of submissions of both the sides and Robert Goff, J. sought to

be persuaded by the counsel appearing for the ship Mr. Davenport in

the following manner:

“Mr. Davenport, for Mambisa, to whose argument I am much

indebted, has however urged me not to follow The Andrea

Ursula [1973] Q.B. 265. The decision in that case is not

binding upon me and, while of course I have the greatest

respect for any decision of Brandon J., I have reconsidered the

matter and, having done so, I have reached the conclusion that

the words “beneficially owned as respects all the shares

19 supra

Page 46 of 57

therein” refer only to cases of equitable ownership, whether or

not accompanied by legal ownership, and are not wide enough

to include cases of possession and control without ownership,

however full and complete such possession and control may

be. Since I have reached a different conclusion to Brandon J., I

think it right to point out that I have had the benefit of a full

argument by counsel for the defendants in this case, whereas

The Andrea Ursula came before Brandon J. on a motion by

plaintiffs for judgment in default of appearance, on which the

defendants were not represented.”

(emphasis supplied)

58. Thereafter Robert Goff, J. records his conclusion in the

following manner:

“My approach to the case before me is as follows. I start with

the statute, and the words with which I am particularly

concerned, and which I have to construe in the context of the

statute, are “beneficially owned as respects all the shares

therein.” In my judgment, the natural and ordinary meaning of

these words is that they refer only to such ownership as is

vested in a person who, whether or not he is the legal owner of

the vessel, is in any case the equitable owner, in other words,

the first of the two meanings of which Brandon J. thought the

words to be capable. Furthermore, on the natural and ordinary

meaning of the words, I do not consider them apt to apply to

the case of a demise charterer or indeed any other person who

has only possession of the ship, however full and complete

such possession may be, and however much control over the

ship he may have.

Generally speaking, the essential characteristic of a demise

charter is that it constitutes a contract of hire of the ship, under

which the possession of the ship passes to the charterer, the

master of the ship being the servant of the charterer, not of the

owner. It is to be compared with the ordinary form of time

Page 47 of 57

charter, which is not a contract of hire but a contract of

services, under which the possession remains in the owner and

the master is the servant of the owner: see Sea & Land

Securities Ltd. v. William Dickinson & Co. Ltd . [1942] 2 K.B.

65, 69–70 per Mackinnon L.J. and Scrutton on Charterparties,

18th ed. (1974), articles 24–26. It is true that a demise

charterer has in the past been described variously as “owner

pro hac vice:” see, for example, Frazer v. Marsh (1811) 13 East

238, 239, per Lord Ellenbrough C.J., The Lemington (1874) 2

Asp.M.L.C. 475, 478, per Sir Robert Phillimore, and The

Tasmania (1888) 13 P.D. 110, 118, per Sir James Hannen P.; or

as a person who is “for the time the owner of the vessel:” see

Sandeman v. Scurr (1866) L.R. 2 Q.B. 86, 96, per Cockburn

C.J.; or as a person with “special and temporary ownership:”

see The Hopper No. 66 [1908] A.C. 126, 136, per Lord

Atkinson. I doubt however if such language is much in use

today; and its use should not be allowed to disguise the true

legal nature of a demise charter. Furthermore, no case has been

drawn to my attention, and I am aware of more, in which a

demise charterer has been described as a “beneficial owner,”

still less as a “beneficial owner as respects all the shares in the

vessel.” Indeed, any reference in this context to ownership “as

respects all the shares in the vessel” is, in my judgment, inapt

to describe the possession of a demise charterer; such words

are only appropriate when describing ownership in the

ordinary sense of the word, and not possession which is

concerned with a physical relationship with the vessel founded

upon control and has nothing to do with shares in the vessel. A

demise charterer has, within limits defined by contract, the

beneficial use of the ship; he does not, however, have the

beneficial ownership as respects all the shares in the ship.

Furthermore, I can find nothing in the remainder of the statute

to cause me to reject the natural and ordinary meaning of the

words; certainly, I would not construe other references in the

statute to “ownership” — as in section 1 (1) ( a ) — or “coowner”

— as in section 1 (1) ( b ) — as referring in any way to

demise charterers. Indeed in Part V of the Act, which is

Page 48 of 57

concerned with Admiralty jurisdiction and arrestment of ships

in Scotland, the equivalent provision, section 47 (1) ( b ),

requires that “all the shares in the ship are owned by the

defendant.” This provision, to which I can properly have

regard: see The Eschersheim [1976] 1 W.L.R. 430, 436 per

Lord Diplock, reinforces my conclusion that section 3 (4) of

the Act is concerned with title, the word “beneficial” being

introduced to allow for the peculiar English institution of the

trust.”

xxxx xxxx xxxx xxxx xxxx

“Accordingly, I do not regard the words “beneficially owned as

respects all the shares therein” as being capable of more than

one meaning; in the absence of ambiguity this is not, on the

principles established by the Court of Appeal in Salomon v.

Customs and Excise Commissioners [1967] 2 Q.B. 116, Post

Office v. Estuary Radio Ltd . [1968] 2 Q.B. 740 and by the

House of Lords in the Convention The Eschersheim [1976] 1

W.L.R. 430, an appropriate case in which to have recourse to

the Convention. Even so, out of respect for the views of

Brandon J., I propose to examine the Convention. The relevant

provisions of article 3 of (the International Convention

Relating to the Arrest of Sea-going Ships 1952) are as follows:

“(1) Subject to the provisions of paragraph (4) of this

article and of article 10, a claimant may arrest either the

particular ship in respect of which the maritime claim

arose, or any other ship which is owned by the person

who was, at the time when the maritime claim arose, the

owner of the particular ship, even though the ship arrested

be ready to sail; but no ship, other than the particular ship

in respect of which the claim arose, may be arrested in

respect of any of the maritime claims enumerated in

article 1, (1), ( o ), ( p ) or ( q ), (2) Ships shall be deemed

to be in the same ownership when all the shares therein

are owned by the same person or persons …. (4) When in

the case of a charter by demise of a ship the charterer and

not the registered owner is liable in respect of a maritime

Page 49 of 57

claim relating to that ship, the claimant may arrest such

ship or any other ship in the ownership of the charterer by

demise, subject to the provisions of this Convention, but

no other ship in the ownership of the registered owner

shall be liable to arrest in respect of such maritime claims.

The provisions of this paragraph shall apply to any case in

which a person other than the registered owner of a ship is

liable in respect of a maritime claim relating to that ship.”

As I read the Convention, article 3 (1), which is expressed to

be subject to article 3 (4), provides for the arrest of either the

particular ship in respect of which the maritime claim arose, or

(except in certain specified cases) any other ship which is

owned by the person who was, at the time when the maritime

claim arose, owner of the particular ship. Furthermore, despite

the argument of Mr. Alexander for the plaintiffs to the contrary,

in this context I read the word “owner” as bearing its ordinary

meaning, that is, the person with title to the ship; am confirmed

in this view by the provision relating to ownership in article 3

(2) and by the fact that article 3 (4), to which article 3 (1) is

expressed to be subject, makes special provision for the case of

the demise charterer and others. It is to be observed that, if one

puts article 3 (4) on one side, the draftsman of the Act of 1956

appears to have been seeking to give effect to article 3 (1) and

(2) of the Convention, subject to the fact that he appears to

have been concerned to extend the word “ownership” by the

addition of the adjective “beneficial,” very possibly to take

account of the special English institution of the trust which

may form no part of the domestic laws of other signatories to

the Convention.”

(emphasis supplied)

59. We have been persuaded to extract in extensio from the

judgment in I Congreso Del Partido20 on account of the clarity of the

20supra

Page 50 of 57

view expressed by Robert Goff, J. finding it difficult to be put in better

words. Thus, mere possession of the ship, however, complete and

whatever be the extent of the control was not found good enough to

confer the status of ownership. The “beneficial use” of a chartered

ship would not ipso facto convert the status of a charterer into a

“beneficial owner.” The attention to the word “beneficial” in the Act

of 1956 was, thus, attributed to the requirement to take into account the

special English Institution of Trust which forms no part of domestic

law of other signatories to the Convention.

60. In The “Father Thames”21 Sheen J. also declined to follow

Medway Drydock & Engineering Co. Ltd.22 and followed

I Congreso Del Partido23 and held that the phrase “beneficially

owned” in the 1956 Act did not apply to a demise charter.

61. Similarly Wee Chong Jin, C.J. of the Singapore Court of Appeal

in the decision of The “Permina 3001”24 has adopted the similar view

that a ship in full possession and control of a person, who is also not an

21 [1979] 2 Lloyd’s Rep. 364

22 supra

23supra

24 supra

Page 51 of 57

owner of all the shares therein cannot be utilized for the purposes of

restraint of the ship.

62. Even in Canada, the Federal Court of Appeal has taken the same

view on the import of the words “beneficial owner” in the context of

the Canadian ‘Federal Court Act 1985’ which confers courts with the

jurisdiction to arrest a ship. In Mount Royal/Walsh Inc. v. The Ship

Jensen Star el al,

25 Marceau, J, writing on behalf of the Bench, stated

as follows :

“The problem, however, is that I simply do not see how a

court could suppose that Parliament may have meant to

include a demise charterer in the expression ‘beneficial

owner’ as it appears in s-s. 43(3). Whatever be the meaning

of the qualifying term ‘beneficial’, the word owner can only

normally be used in reference to title in the res itself, a title

characterized essentially by the right to dispose of the res.

The French corresponding word ‘proprietaire’ is equally clear

in that regard. These words are clearly inapt to describe the

possession of a demise charterer…. In my view, the

expression ‘beneficial owner’ was chosen to serve as an

instruction, in a system of registration of ownership rights, to

look beyond the register in searching for the relevant person.

But such search cannot go so far as to encompass a demise

charterer who has no equitable or proprietary interest which

could burden the title of the registered owner of the

registered owner. As I see it, the expression ‘beneficial

owner’ serves to include someone who stands behind the

registered owner in situations where the latter functions

merely as an intermediary, like a trustee, a legal

25[1990] 1 F.C 199.

Page 52 of 57

representative or an agent. The French corresponding

expression ‘veritable proprietaire’ leaves no doubt to that

effect.”

63. The Supreme Court of Canada in Antares Shipping

Corporation v. The Ship ‘Capricorn’ et al.26 also referred to the

concept of beneficial ownership and cited with the approval,

observations made in Halsbury’s Laws of England at para 15 as

follows:

“Ownership in a British ship or share therein may be acquired

in any of three ways – by transfer from a person entitled to

transfer, by transmission or by building. Acquisition by

transfer and transmission have been the subject of statutory

enactment. Acquisition by building is governed by the

common law. Ownership in a British ship or share therein is a

question of fact and does not depend upon registration of title.

Whether registered or unregistered, a person in whom

ownership in fact vests is regarded in law as the owner if

registered, as the legal owner; if unregistered, as the beneficial

owner.”

(emphasis supplied)

64. The successor to the 1956 Act is the Supreme Court Act of 1981.

Section 21(4) of that Act of U.K. recognizes the discussion in view of

Robert Goff, J. by the following provision:

“21. (4) In the case of any such claim as is mentioned in

section 20(2)(e) to (r), where

26 [1980] 1 S.C.R. 553

Page 53 of 57

(a) the claim arises in connection with a ship ; and

(b) the person who would be liable on the claim in an action in

personam (” the relevant person “) was, when the cause of

action arose, the owner or charterer of, or in possession or in

control of, the ship,

an action in rem may (whether or not the claim gives rise to a

maritime lien on that ship) be brought in the High Court

against –

i) that ship, if at the time when the action is brought the

relevant person is either the beneficial owner of that ship as

respects all the shares in it or the charterer of it under a charter

by demise ; or

(ii) any other ship of which, at the time when the action is

brought, the relevant person is the beneficial owner as respects

all the shares in it.”

65. There is a clear distinction between a beneficial ownership of a

ship and the charterer of a ship.

66. In the aforesaid context, now turning to the Arrest Convention of

1999, Article 1 specifies that the maritime claim means a claim inter

alia arising out of an agreement relating to use or hire of “the ship.”

The connotation of “the ship” would mean the 16 trawlers or the Orion

Laxmi and not the respondent ship. Thus, there is no maritime claim

against the respondent ship. Article 3 deals with the exercise of rights

of arrest and the eventualities are specified thereunder. In terms of

Page 54 of 57

clause (2) of Article 3 (these Articles are reproduced in paras 25 to 27

above), the arrest is permissible of any other ship (which would

connote the respondent ship), which, when the arrest is effected is

owned by the person who is liable for the maritime claim. The liability

of the maritime claim is Reflect Geophysical and not the owners of the

respondent ship. In terms of sub-clause (b) of clause (2) of Article 3, a

demise charterer, time charterer or voyage charterer of that ship is

liable. The ship in question, as noticed above, is not the respondent but

the 16 trawlers or the Orion Laxmi. In view of the discussion

aforesaid, really speaking Reflect Geophysical cannot be said to be the

beneficial owner in the capacity of a demised charterer of the

respondent ship. Reflect Geophysical is not the owner of the

respondent ship and the owner cannot be made liable for a maritime

claim, which is against the trawlers and Orion Laxmi.

67. We may also note that in the 2017 Act in India clause 5(b) states

as under:

“5. Arrest of vessel in rem.—(1) The High Court may order

arrest of any vessel which is within its jurisdiction for the

purpose of providing security against a maritime claim which is

the subject of an admiralty proceeding, where the court has

reason to believe that—

Page 55 of 57

xxxx xxxx xxxx xxxx xxxx

(b) the demise charterer of the vessel at the time when the

maritime claim arose is liable for the claim and is the demise

charterer or the owner of the vessel when the arrest is effected;

or”

68. The aforesaid is in consonance with Article 3 of the 1999

Convention and, thus, must be read in that context (incidentally the

Bill was introduced on 21.11.2016 and passed by the Lok Sabha and

the Rajya Sabha on 10.3.2017 and 24.7.2017 respectively. It was

published in the Gazette on 9.8.2017 but is still not notified). The

incident in this question is, thus, prior to beginning of this exercise.

The expression “the vessel”, “owner” and “demise charterer”, thus,

must be read in the aforesaid context and the maritime claims in

respect of 16 trawlers and Orion Laxmi cannot be converted into a

maritime claim against the respondent ship not owned by Reflect

Geophysical.

69. The appellants have neither any agreement with the owners of

the respondent vessel nor any claim against the respondent vessel but

their claim is on account of their own vessels hired by the charterer of

the respondent vessel. There is no claim against the owners of the

Page 56 of 57

respondent vessel.

70. The result of the aforesaid is that the appeals are dismissed

leaving the parties to bear their own costs.

71. The interim order dated 17.5.2013 stands dissolved and the

amount along with accrued interest thereon is to be remitted back to

the owners of the respondent vessel, who deposited the same before the

Bombay High Court in pursuance of the interim order.

..….….…………………….J.

(J. Chelameswar)

………………………………J.

(Sanjay Kishan Kaul)

New Delhi.

March 09, 2018.

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