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
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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.
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(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.
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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,
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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.
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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
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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.
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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
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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.”
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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
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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
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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.
Page 57 of 57
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.
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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
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(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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