SUNIL B. NAIK versus GEOWAVE COMMANDER on 9 March 2018

[2018] 5 S.C.R. 471

SUNIL B. NAIK

v.

GEOWAVE COMMANDER

(Civil Appeal No. 2617 of 2018)

MARCH 09, 2018

[J. CHELAMESWAR AND SANJAY KISHAN KAUL, JJ.]

Admiralty laws/Maritime laws: Admiralty jurisdiction – Arrestof vessel – Maritime claim against charterer of ship who is not dejureowner of ship – Recovery of amount through a restraint order againstthe ship owned by a third party – Maintainability of – On facts,award of contract by ONGC to a foreign company for carryingseismic survey operations off the coast of Gujarat – Foreigncompany in turn entered into a Charter Party Agreement to charterthe vessel-respondent vessel – Charterer further entered into contractwith two appellants for assistance in survey operations to beconducted by charterers seismic vessel – Invoices raised byappellants on Charterers from time to time but payment not made –Also non-payment of charter hire to owners of respondent vessel –Admiralty suit by appellants wherein separate order of arrest ofvessel passed – Thereafter, on application by respondent, vacationof ex parte stay by Single Judge of High Court – Upheld by theDivision Bench – On appeal, held: Maritime claim against thecharterer of a ship, who is not the de jure owner of the ship, cannotbe recovered through a restraint order against the ship owned by athird party – Maritime claim is not maintainable for an action inrem against the respondent vessel in respect of the dues of theappellants when the charterer himself is in default of the paymentto the owner – Maritime claim is in respect of the vessels which areowned by the appellants and the party liable in personam is charterer– There could not be a detention of a ship as a security andguarantee arising from its owner for a claim which is in respect ofa non-owner or a charterer of the ship – Amount deposited by theowners of the respondent vessel, along with accrued interest thereon,to be remitted back to the owner – International Convention onArrest of Ships, 1999.

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ADismissing the appeals, the Court

HELD: 1.1 The charter party is defined as a contract bywhich an entire ship, or some principal part thereof, is let by theowner to another person for a specified time or use. The Chartercan be of two kinds-(i) Charter of demise; and (ii) Contract ofBaffreightment. In the instant case, the concern is with the charterof demise by which the whole vessel is let to the charterer withthe transfer to him of its entire command and possession andconsequent control over its navigation. Such a charter is called abareboat charter. A demised charterer, like RG, who is the ownerfor services stipulated, assumes in large measures the customaryCrights and liabilities of vessel owners in relation to third persons,who have dealt with him or with the ship, illustratively, repairsand supplies ordered for the vessel, wages of seamen, etc. [Para14, 15] [484-H; 485-A-B; 486-G-H]

M.V. Elisabeth & Ors. v. Harwan Investment & TradingDPvt. Ltd. [1992] 1 SCR 1003 : AIR 1993 SC 1014 –referred to.

Commentary on “Bareboat Charters by Mark Davis 2[nd]Edn – referred to.

E1.2 The emphasis of the respondent is on the maritime claimbeing maintained against the owner of the ship and detention of aship as a sequitur thereto as security for a decree liable to bepassed against the owners of the ship in personam. It wassubmitted that since the claim is stated to be one against RG andnot against the owners, such a detention could not have beenFmade. RG in fact, has not even been made a party to the suit, theentity, which would be liable in personam. [Para 22] [494-B-C]

Liverpool & London S.P. & I Association Limited v. M.V.Sea Success I & Anr. [2003] 5 Suppl. SCR 851 : (2004)9 SCC 512 – referred to.

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1.3 In the interest of international comity, though India isnot a signatory to the Convention of 1999, the principles of thesame are utilized and applied to appropriate situations todetermine whether a ‘maritime claim’, as understood in theinternational context has arisen and whether the same warrants H

the arrest of the vessel in question as per its provisions.[Para 24] [495-B-C]

1.4 Article 1 of the Convention defines Maritime Claim.Article 2 stipulates the powers of arrest and sub-clause (2)clarifies that the ship may be arrested only respect a maritimeclaim. Sub-clause (3) stipulates that ship may be arrested forpurposes of obtaining security notwithstanding that by virtue of ajurisdiction clause or arbitration clause, it has to be adjudicatedin a State other than the State where it has been arrested. Article3 deals with the exercise of right of arrest. [Paras 25-27] [495-C-D, F-H; 496-C-D]

1.5 The endeavour of the appellants to bring the claim withinthe provisions is naturally opposed by the respondent on theground that the agreement between the appellants and RG isactually a charter hire agreement between RG and the twoappellants. It was contended that there were neither any goodssupplied nor services rendered and, in fact, the survey operationsnever commenced as the ships remained stationed at the port atplace O whereas the respondent vessel never arrived at placeO. RG is stated to have actually engaged the vessels of theappellant through a charter hire agreement and this cannot forma part of the maritime claim against the respondent ship. Thus,the plea is that the charter hire agreement is for use of theappellant’s vessel by RG. The respondent is not liable personallyfor the maritime claim and, thus, there can be no arrest of theship since the ship is not owned by RG. The charter agreementprovisions were referred to (extracted aforesaid) to substantiatethat at present, at best RG was only a de facto owner and not a dejure owner and that in order for RG to be de jure owner theprovisions provided how six months in advance of the expiry ofthe contract recourse could be had to the same. That occasionnever arose. [Paras 29, 30] [497-D-G; 498-D-E]

1.6 A reference was made to Article 3(3) of the Convention,which provides for arrest of the ship only if the judgment in respectof that claim can be enforced against the ship by judicial or forcedsale of that ship and in the absence of any provision under theIndian law by which the ship not owned by a person could bemade liable for a maritime claim, the arrest of the ship could not AB

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Atake place. The judgment could be obtained only under thecontract which would be against RG. [Para 31] [498-F-G]

Epoch Enterrepots v. M.V. Won Fu [2002] 3 Suppl. SCR507 : (2003) 1 SCC 305 – referred to.

Medway Drydock & Engineering Co. Ltd. v. M.V.BAndrea Ursula [1973] QB 265; The “Permina3001”(1979) Vol. 1 Lloyd’s Law Reports 327; The“Leoborg” (1962) Vol.. 2. Lloyd’s List Law Reports146 – referred to.

1.7 The essential ingredients for maintaining a maritimeCclaim for which a vessel may be detained were specified as underthat in order to ascertain whether in an action in rem filed in theAdmiralty jurisdiction of the court, the plaintiff is entitled to anorder of arrest of the Defendant vessel, the following needs tobe established: (a) The plaintiff has a maritime claim; (b) TheDvessel 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 vesselsought to be arrested.” [Para 37] [500-D-G]

1.8 The conclusion of the Single Judge, was that there wasEno principle or authority for proposition that a maritime claim forunpaid charter hire in respect of vessel ‘A’ against the hirerthereof can be enforced by arresting vessel ‘B’, which is onbareboat charter of the hirer of the former vessel vis-à-vis vessel‘A’. [Paras 38, 39] [500-G-H; 501-E-F]

Polestar Maritime Ltd. v. M.V. Qi Lin Men & Ors.FAdmiralty Suit (Lodging) No.3547/2008 decided on22.10.2008 – referred to.

Maritime law by Christopher Hill 5[th] Edn – referredto.

G1.9 Insofar as the respondent vessel is concerned, there isno agreement entered into by either of the two appellants and,thus, it cannot be a maritime claim in respect of Article 1(1)(f) ofthe Arrest Convention. Consequently, there would be no occasionto arrest the vessel under Article 3(1)(b) of the Arrest Convention H

as no maritime claim has resulted in the hands of the demisedcharterer with regard to the demised vessel. The maritime claimby either of the appellants could, thus, be enforced only byarresting another vessel owned by RG and the de facto ownership,could not be converted into a de jure ownership. In respect ofArticle 1(1)(l), it was, once again, held that there was no supplyof goods to the vessel or of supply of services to the vessel inquestion, which was the respondent vessel. Insofar as thereasoning in appellant’s case, so far as Article 1(1)(l) is concerned,it has been categorically found that it was not a case where goodshad been given on hire or for use of the respondent vessel.[Para42] [502-C-F]

2.1 It is clear from the various terms of the bareboat charterthat RG had the status of a de facto owner. The charter agreementdid contain a clause for conversion of the status into a de jureowner but the occasion for the same never arose. The option topurchase was to be exercised by an advance intimation of sixmonths prior to the end of the charter period and the purchaseprice was also specified as US$ 3,01,50,000. The charterer couldnot make any structural changes in the vessel or in the machinery,boilers, appurtenances or space parts thereof without firstsecuring the owner’s approval and the vessel had to be restoredto its former condition before the termination of the charter, if sorequired by the owners. This was, thus, a deed between the ownerof the respondent and RG. [Para 44] [502-G-H; 503-A-B]

2.2 The contracts entered into with the appellants by RGare completely another set of charter hire agreements/contracts.The unpaid amounts under these contracts amount to claimsagainst RG. Thus, if there was another vessel owned by RG, theappellants would have been well within their rights to seekdetention of that vessel as they have a maritime claim but not inrespect of the respondent vessel. The maritime claim is in respectof the vessels which are owned by the appellants and the partyliable in personam is RG. Were the respondent vessel put underthe de jure ownership of RG, the appellants would have been withintheir rights to seek a detention order against that vessel forrecovery of their claims. [Para 45] [503-C-E]

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A2.3 In the facts of the instant case, the owners of therespondent vessel, in fact, also have a claim against RG for unpaidcharter amount. Thus, unfortunately it is both the owner of therespondent vessel on the one hand and the appellants on theother, who have a maritime claim against RG, which has goneinto liquidation. The appellants quite conscious of the limitationsBof any endeavour to recover the amount from RG, have venturedinto this litigation to somehow recover the amount from, in effect,the owners of the respondent vessel by detention of therespondent vessel. That may also be the reason why the appellantsdid not even think it worth their while to implead RG againstCwhom they have their claim in personam, possibly envisaged as afutile exercise. [Para 46] [503-E-G]

2.4 The test of the ownership of both the ships as one andthe same is not satisfied in the instant case. The second situationenvisaged is where another ship owned by the charterer isDdetained, i.e., he has taken ‘A’ ship on charter where he has onlyde facto ownership and his ship ‘B’ is detained where chartererhas de jure ownership. It cannot be countenanced that where noin personam claim lies against an entity, still the ship of that entitytaken on bareboat charter can be detained to recover the dues.The owner of the respondent vessel is as much a creditor of RGEas the appellants. [Para 48] [504-A-C]

2.5 The arrest of the ship is regarded as a mere procedureto obtain security to satisfy the judgment. To that extent it isdistinguished from a right in personam to proceed against theowner but there has to be a liability of the ship owner and in thatFeventuality the legal proceedings commenced in rem wouldbecome a personal action in personam against the defendant whenhe enters appearance. There cannot be a detention of a ship as asecurity and guarantee arising from its owner for a claim which isin respect of a non-owner or a charterer of the ship. [Para 49]G[504-D-E]

2.6 On turning to the provisions of the Convention, amaritime claim is specified as relating to use or hire of a shipwhether contained in a charter party or otherwise [clause (f)].Insofar as clause (l) is concerned they relate inter alia to servicesHrendered to the ship. Such an order of detention can be in respect of a ship where there is identity of the owner against whom theclaim in personam lies and the owner of the ship. It cannot beused to arrest a ship of a third party or a non-owner. [Para 50][504-E-G]

2.7 For a claim against the owner of the vessel, a vesselmay be detained and not that somebody else’s vessel would bedetained for the said purpose. The crucial test would be ofownership, which in the instant case clearly does not vest withRG and the de facto ownership under their bareboat charter cannotbe equated to a de jure owner, which is necessary for an action inpersonam. [Para 51] [505-A-B]

2.8 Mere possession of the ship, however, complete andwhatever be the extent of the control was not found good enoughto confer the status of ownership. The “beneficial use” of achartered ship would not ipso facto convert the status of acharterer into a “beneficial owner.” The attention to the word“beneficial” in the Act of 1956 was, thus, attributed to therequirement to take into account the special English Institutionof Trust which forms no part of domestic law of other signatoriesto the Convention. [Para 59] [511-G-H; 512-A-B]

I Congreso Del Partido [1978] Q.B. 500; The “FatherThames” [1979] 2 Lloyd’s Rep. 364; Mount Royal/Walsh Inc. v. The Ship Jensen Star el al, [1990] 1 F.C199; Antares Shipping Corporation v. The Ship‘Capricorn’ et al. [1980] 1 S.C.R. 553 – referred to.

2.9 There is a clear distinction between a beneficialownership of a ship and the charterer of a ship. [Para 65] [514-C]

2.10 The Arrest Convention of 1999, Article 1 specifiesthat the maritime claim means a claim inter alia arising out of anagreement relating to use or hire of “the ship.” The connotationof “the ship” would mean the 16 trawlers or the OL vessel andnot the respondent ship. Thus, there is no maritime claim againstthe respondent ship. Article 3 deals with the exercise of rights ofarrest and the eventualities are specified thereunder. In termsof clause (2) of Article 3, the arrest is permissible of any othership (which would connote the respondent ship), which, whenthe arrest is effected is owned by the person who is liable for the A

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Amaritime claim. The liability of the maritime claim is RG and notthe owners of the respondent ship. In terms of sub-clause (b) ofclause (2) of Article 3, a demise charterer, time charterer orvoyage charterer of that ship is liable. The ship in question, isnot the respondent but the 16 trawlers or the OL. In view thereof,really speaking RG cannot be said to be the beneficial owner inBthe capacity of a demised charterer of the respondent ship. RG isnot the owner of the respondent ship and the owner cannot bemade liable for a maritime claim, which is against the trawlersand OL vessel. [Para 66] [514-C-G]

2.11 Clause 5(b) of the 2017 Act is in consonance with ArticleC3 of the 1999 Convention. The expression “the vessel”, “owner”and “demise charterer”, thus, must be read in the aforesaidcontext and the maritime claims in respect of 16 trawlers and OLcannot be converted into a maritime claim against the respondentship not owned by RG. [Para 68] [515-B-D]

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2.12 The appellants have neither any agreement with theowners of the respondent vessel nor any claim against therespondent vessel but their claim is on account of their ownvessels hired by the charterer of the respondent vessel. Thereis no claim against the owners of the respondent vessel. [ParaE69] [515-D-E]

2.13 The interim order is dissolved and the amount alongwith accrued interest thereon is to be remitted back to the ownersof the respondent vessel, who deposited the same before theHigh Court in pursuance of the interim order. [Para 71] [515-F]

FThe “Eschersheim” [1976] Vol. I Lloyd’s Law Reports81-referred to.

From the Judgment and Order dated 10.05.2013 of the High Courtof Judicature at Bombay in the Appeal (L) No. 209 of 2013

WITH

C. A. No. 2618 of 2018.

Shekhar Naphade, Sr. Adv., Mrs. Shubhangi Tuli, E. R. Kumar,Ms. Rukmini Bobde, Ms. Sonal Gupta, Ms. Anwesha Padhi,Ms. Aishwarya Bhati, M/s. Parekh & Co, Advs. for the Appellant.

Prashant S. Pratap, Sr. Adv. Siddhartha Dave, Ms. Jemtiben AO,Senthil Jagadeesan, Advs. for the Respondent.

The Judgment of the Court was delivered by SANJAY KISHAN KAUL, J. 1. Leave granted.

2. A maritime claim against the charterer of a ship, who is not thede jure owner of the ship, and the endeavor to recover that amountthrough a restraint order against the ship owned by a third party hasgiven 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 surveyoperations off the coast of Gujarat near the Okha Port in the year 2012.In order to facilitate the carrying out of its obligations, Reflect Geophysicalin turn entered into a Charter Party Agreement vide contract dated29.6.2012 to charter the vessel ‘Geowave Commander’, the registeredowner being Master and Commander AS Norway,(for short ‘GeowaveCommander’) for a period of three years. The said vessel is stated tobe a specialized ship equipped to carry out seismic survey operations.In terms of the said contract, it is defined as a ‘Bareboat Charter’. Thecharterer also has the option to purchase the vessel and the owners’seismic equipment provided the purchase option is declared by thecharterers to the owners in writing latest on 18.1.2015 being six monthsprior to the end of the charter period.

4. In order to fully appreciate the terms of the charter, it isnecessary to discuss/reproduce some of the clauses of the CharterAgreement:

“10. Maintained and Operation

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(a) (i) Maintenance and Repairs: - During the Charter Period theVessel shall be in the full possession and at the absolute disposalfor all purposes of the Charters and under their complete controlin every respect. The Charterers shall maintain the Vessel, hermachinery, boilers, appurtenances and spare parts in a good stateof repair. In efficient operating condition and in accordance withgood commercial maintenance practice and except as providedfor in Clause 14(1) if applicable at their own expense they shall atall times keep the Vessel’s class fully upto date and free of overduerecommendations and/or conditions with the classification.”

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“(ii) New Class and Other Safety Requirements– In the event ofany improvement, structural changes or new equipment becomingnecessary for the continued operation of the Vessel by reason ofnew class requirements or by compulsory legislation costing(excluding the Charterer’s loss of time) more than the percentagestated in Box 23 or if Box 23 is left blank, 5 per cent of the Vessel’sinsurance value as stated in Box 29 then the extent, if any, towhich the rate of hire shall be varied and the ratio in which thecost of compliance shall be shared between the parties concernedin order to achieve a reasonable distribution thereof as betweenthe Owners and the Charterers having regard, inter alia to thelength of the period remaining under this Charter shall, in theabsence of agreement, be referred to dispute resolution methodagree in Clause 30.

(iii) Financial Security:The Charterers shall maintain financialsecurity or responsibility in respect of third party liabilities asrequired by any government including federal state or municipalor other division or authority thereof to enable the Vessel withoutpenalty or charge, lawfully to enter, remain at or leave any port,place territorial or contiguous waters of any country, state ormunicipality in performance of this Charter without any delay.This obligation shall apply whether or not such requirements havebeen lawfully imposed by such government or division or authoritythereof. The Charterers shall make and maintain all arrangementsby bond or otherwise as may be necessary to satisfy suchrequirements 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 ownexpense and by their own procurement man, victual, navigate,operate, supply fuel and whenever required, repair the Vessel duringthe Charter Period and they shall pay all charges and expenses ofevery kind and nature whatsoever incidental, to their use andoperation of the Vessel under this Charter, including annual flagState fees and any foreign general municipality and/or state taxes.The master officers and crew of the Vessel shall be the servantsof the Charterers for all purpose whatsoever, even for any reasonappointed by the Owners.”

“(d) Flag and Name of Vessel:During the Charter period, theCharterers shall have the liberty to paint the Vessel in their owncolours, install and display their funnel insignia and fly their ownhouse flag. The Charterer shall also have the liberty, with theOwners’ and Mortgagee’s prior written consent, which shall notbe unreasonably withheld to change the flag and/or the name ofthe Vessel during the Charter Period. Painting and re-painting,installment and re-installment, registration and re-registration ifrequired by the Owners shall be at the Mortgage(s) bearing onthe Vessel that would be required as a result of a change of flaginitiated by the Charterers shall be Charterer’s cost.

(e) Changes to the Vessel:Subject to Clause 10(a)(ii) the Charterersshall make no structural changes in the Vessel or changes themachinery, boilers, appurtenances or spare parts thereof withoutin each instance first securing the Owners approval thereof, if theOwners so agree, the Charterers shall, if the Owners so require,restore the Vessel to its former condition before the terminationof this Charter.”

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“11. Hire

(a) The charterers shall pay hire due to the Owners punctually inaccordance with the terms of this Charter in respect of whichtime shall be of the essence.”

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[2018] 5 S.C.R.

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“17. Indemnity

(a) The Charterers shall indemnify the Owners against any loss,damage or expenses incurred by the Owners arising out of or inrelation to the operation of the Vessel by the Charterers, and againstany lien of whatsoever nature arising out of an event occurringduring the Charter Period. If the Vessel be arrested or otherwisedetained by reason of claims or liens arising out of her operationhereunder by the Charterers, the Charterers shall at their ownexpense take all reasonable steps to secure that within a reasonabletime the Vessel is released, including the provision of bail.

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Without prejudice to the generality of the foregoing, the Charterersagree to the indemnify the Owners against all consequences orliabilities arising from the Master, officers or agents signing Billsof Lading or other documents.

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(b) If the Vessel be arrested or otherwise detained by reason of aclaim or claims against the Owners the Owners shall at their ownexpenses take all reasonable steps to secure that within areasonable time the Vessel is released, including the provision ofbail.

EIn such circumstances the Owners shall indemnify the Charterersagainst any loss, damage or expense incurred by the Charterers(including hire paid under this Charter) as a direct consequenceof such arrest or detention.”

5. Reflect Geophysical entered into a Charter Hire Agreement onF30.10.2012 with M/s. Sunil B. Naik, the appellant in SLP(C) No.18845/2013, in terms whereof the said appellant agreed to supply 24 fishingtrawlers being the chase vessels to assist in survey operations to beconducted by the charterers seismic vessel Geowave Commander. Thecharter was initially for 16 chase vehicles out of 24 fishing trawlers.GThe said agreement contained a dispute resolution clause 18 providingfor arbitration, which reads as under:

“18. All disputes arising out of or in connection with this CharterHire Agreement shall be finally settled in Mumbai under the rulesof India Arbitration Act before three arbitrators appointed inaccordance with the said Rules. Each party shall appoint one such H

arbitrator and the two so appointed by the parties shall jointlyappoint the third.”

6. It is the case of the appellant that the 16 vessels were madeready for Reflect Geophysical to ensure that fishing vessels were keptwell clear of the towed in water seismic equipment so that their fishingequipment is not damaged. The daily hiring rate, as per the agreement,varies for the different nature of vehicles. The said appellant also claimsthat the vessels were mobilized at Okha port but the fact remains thatthe respondent ship never went to Okha and was at the Pipavav portfrom 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 towork in support with the survey vessel ‘Geowave Commander’ videcontract dated 1.10.2012. The purpose was to supply standby andemergency towing duties. The two appellants claim to have raised invoiceson Reflect Geophysical from time to time, which are stated not to havebeen paid. Reflect Geophysical also failed to pay the owners of therespondent vessel and consequently the owners gave a notice of defaultdated 4.3.2013 to the charterers, Reflect Geophysical, for non-paymentof charter hire aggregating to US$ 4,36,790 (approximately Rs.2.23crore). Reflect Geophysical, however, filed an application in theSingapore Court for placing the company under judicial management,which was published in a notification dated 15.3.2013 in the SingaporeGazette.

8. Sunil B. Naik issued a demand notice to Reflect Geophysicalfor payment of outstanding dues on 16.3.2013. Yusuf Abdul Gani is alsosaid to have raised various invoices to Reflect Geophysical in respect ofthe 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 asuit against the respondent vessel as an admiralty suit and obtained anorder on 15.3.2013 for arrest of the vessel. Similarly, on ReflectGeophysical expressing its inability to make payments on account oflack of funds, Sunil B. Naik, filed an admiralty suit and obtained an orderof arrest of vessel on 12.4.2013. As noted, the vessel was already underarrest in pursuance of the order passed in Yusuf Abdul Gani’s case.

10. The owners of the respondent vessel, Master and CommanderAS Norway, filed a notice of motion in the two proceedings for vacation A

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Aof the ex parte arrest of vessel. On hearing being held, the learnedsingle Judge on 17.4.2013 vacated the ex parte stay. The two appellants,as aggrieved parties, moved the Division Bench of the Bombay HighCourt, which dismissed the appeal on 10.5.2013. That is how the presentappeals were filed.

B11. In the present appeals while issuing notice on 17.5.2013 aninterim arrangement was made whereby the respondent was directed todeposit a sum of Rs.1 crore in each case as security before the BombayHigh Court and on such deposit the vessels were permitted to sail. Theamounts were directed to be kept in fixed deposits. We were informedthat these amounts were accordingly deposited and are lying in fixedCdeposits. The ship set sail. The question, thus, would be whether theappellants are entitled to appropriate this amount along with interest againsttheir dues or whether the respondent is entitled to release of the amountso deposited in Court.

The Legal Conundrum:

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12. We are faced with the aforesaid factual position where thereare actually three creditors of Reflect Geophysical, being the owners ofthe respondent ship and the appellants, who entered into contracts withReflect Geophysical to provide assistance in the operation of the taskfor which the ship was engaged.E

13. The first question, thus, which would arise is whether a maritimeclaim could be maintained under the admiralty jurisdiction of the HighCourt for an action in rem against the respondent ship in respect of thedues of the appellants when the charterer himself is in default of thepayment to the owner. The case of the appellants, on the one hand, isFthat there is a liability of the respondent vessel on account of the charteragreement and the rights and obligations of the charterer while therespondent, who has succeeded before both the forums, seeks to establishthat the claim of the appellants cannot be categorized as a maritimeclaim for invoking the admiralty jurisdiction of the High Court and thatGthe vessel, thus, could not be arrested to secure such a claim of theappellants.

Bareboat Charter:

14. The charter party is defined as a contract by which an entireship, or some principal part thereof, is let by the owner to another person H

for a specified time or use. The Charter can be of two kinds – (i)Charter of demise; and (ii) Contract of affreightment. In the presentcase, we are concerned with the charter of demise by which the wholevessel is let to the charterer with the transfer to him of its entire commandand possession and consequent control over its navigation. Such a charteris called a bareboat charter. It would be apposite at this stage to refer tothe Mark Davis’ Commentary on “Bareboat Charters” 2[nd] Edition wherethe nature and character of demised charters has been explained asfollows:

“A fundamental distinction is drawn under English law betweencharter parties which amount to a demise or lease of a ship, andthose which do not. The former category, known as charters bydemise, operate as a lease of the ship pursuant to which possessionand control passes from the owners to the charterers whilst thelatter, primarily comprising time and voyage charters, are in essencecontracts for the provision of services, including the use of thechartered ship. Under a lease, it is usual for the owners to supplytheir vessel “bare” of officers and crew, in which case thearrangement may correctly be termed a “bareboat” charter. Thecharterers 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 inthe judgment of Evans LJ in The Giuseppe di Vittorio [1998] 1Lloyd’s Rep 136 at p 156:

“What then is the demise charter? Its hallmarks, as it seems tome, are that the legal owner gives the charterer sufficient ofthe rights of possession and control which enable the transactionto be regarded as a letting – a lease, or demise, in real propertyterms – of the ship. Closely allied to this is the fact that thecharterer becomes the employer of the master and crew. Bothaspects are combined in the common description of a ‘bareboat’lease or hire arrangement.”

As indicated, charter parties which do not amount to a demise orlease of a ship (Including time charters and voyage charters) areclassified in English law as contracts of affreightment, pursuantto which the owners agree to carry goods by sea in return for a A

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Asum of money. Although the charterers have a right as againstthe owners to have their goods carried on the vessel, the ownershipand the possession of the ship remains with the owners throughthe master and crew who remain their servants.

Whether or not a charter party amounts to a demise charterBdepends in every case upon the precise terms of the charter, takingthe instrument as a whole. The test has been summarized asfollows:

“The question depends, where other things are not in the way,upon this: whether the owner has by the charter, where thereCis a charter, parted with the whole possession and control ofthe ship, and to this extent, that he has given to the charterer apower and right independent of him, and without reference tohim to do what he pleases with regard to the captain, the crew,and the management and employment of the ship. That hasbeen called a letter or demise of the ship. The right expressionDis that it is a parting with the whole possession and control ofthe ship.”

Thus, although time charters almost always contain words suchas “let”, “hire”, “delivery” and “redelivery”, the use of such wordsare inapt in such a context, and are not in any sense to be regardedEas conclusive, when determining the nature of the charter.

In Sea and Land Securities v. William Dickinson MacKinnon LJtraced the origin of these words to demise charters, and at page163 emphasised the difference between demise and time chartersthus: “there is all the difference between hiring a boat in which toFrow 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 fora row, in which case he merely renders services in rowing youabout.”

15. A demised charterer, like Reflect Geophysical, who is the ownerGfor services stipulated, assumes in large measures the customary rightsand liabilities of vessel owners in relation to third persons, who havedealt with him or with the ship, illustratively, repairs and supplies orderedfor the vessel, wages of seamen, etc.

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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 exerciseof the admiralty jurisdiction and consequently of an action in rem. TheAdmiralty Court Act, 1861, was referred to in this behalf but that wasstated not to inhibit the exercise of jurisdiction by the High Court subjectto its own rules, in exercise of its maritime jurisdiction. The fact that theHigh Court continues to enjoy the same jurisdiction as it had immediatelybefore the commencement of the Constitution (Article 225 of theConstitution of India) was to be read in the context of the judicialsovereignty of the country manifested in the jurisdiction of the HighCourts as superior courts, thus, though the colonial statutes may remainin force, by virtue of Article 372 of the Constitution of India, that wasobserved not to stultify the growth of law or blinker its vision or fetter itsarms. The latter Admiralty Act of 1890 was said not to incorporate anyparticular English statue into the Indian law for the purpose of conferringadmiralty jurisdiction, but to assimilate the competent courts in India tothe position of the English High Court. The lack of legislative exercisewas noted with regret. The said lament apparently has still not had itsfull impact!

17. The draft Admiralty Act of 1987, did not see the light of theday. Section 3 of that Act seeks to define the admiralty jurisdiction ofthe court. The fate was no different for the draft Admiralty Act of 1999,Section 5 of which defines the admiralty jurisdiction. Finally, we haveThe Admiralty (Jurisdiction and Settlement of Maritime Claims) Act,2017, which was passed by the Parliament and received the assent ofthe President of India on 9.8.2017 and was duly published in the Gazetteon the said date but the date of its coming into force has still not beennotified. Interestingly, the statement of object and reasons of this Actitself refers to the desirability of the codifying and clarifying the admiraltylaw 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 thenecessity of bringing into force the said Act!

18. We may note that these Acts were referred to by Mr. ShekharNaphade, learned Senior Advocate appearing for the appellant, Sunil B.Naik, for purposes of elucidating the expanding admiralty jurisdiction as 1 AIR 1993 SC 10142 supra A

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Aobserved in M.V. Elisabeth &Ors.[3]. Thus, Section 3(1)(h),( j) & (l) ofthe 1987 Act was referred, which reads as under:

“3. Admiralty Jurisdiction of the Court. – (1) The AdmiraltyJurisdiction of the Court shall be as follows, that is to sayJurisdiction to hear and determine any of the following questionsBor claims:

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(l) Any claim in respect of goods, materials, bunker or otherDnecessaries supplied to a ship for her operation of maintenance.”

19. The claim of the appellants was sought to be brought withinthe expression “or to use or hire of a ship”. The same aforesaid clauseof 1999 Act was also referred to state that the expression “operation ormaintenance” was specified “operation or maintenance.” The object, itEwas, thus, pleaded, in the expanding jurisdiction was to include anyservices rendered to the ship and it was claimed that the appellants hadactually rendered those services in the form of the agreement with ReflectGeophysical. Insofar as 2017 Act is concerned, the provision of Section4(1)(j) & (l) were referred to, which read as under:F“

“4. Maritime claim. – (1) The High Court may exercisejurisdiction to hear and determine any question on a maritime claim,against any vessel, arising out of any –

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(l) goods, materials, perishable or non-perishable provisions, bunkerfuel, equipment (including containers), supplied or services rendered 3 supraH

to the vessel for its operation, management, preservation ormaintenance including any fee payable or leviable.”

20. In respect of the aforesaid clause (l), once again, it is claimedthat the appellant rendered services to the vessel for its operation andmanagement. Section 6 of that Act also provides for admiralty jurisdictionin personam in respect of a maritime claim.

21. Mr. Prashant S. Pratap, learned Senior Advocate appearingfor 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 theobservations made in the said judgment. As to what is the object ofexercise of jurisdiction in rem and the manner of exercise is discussed inthe following paragraphs:

“44. “The law of admiralty, or maritime law, …. (is the) corpus ofrules, concepts, and legal practices governing … the business ofcarrying goods and passengers by water.” (Gilmore and Black,The Law of Admiralty, page 1). The vital significance and thedistinguishing feature of an admiralty action in rem is that thisjurisdiction can be assumed by the coastal authorities in respectof any maritime claim by arrest of the ship, irrespective of thenationality of the ship or that of its owners, or the place of businessor domicile or residence of its owners or the place where thecause of action arose wholly or in part.

45. … In admiralty the vessel has a juridicial personality, an almostcorporate capacity, having not only rights but liabilities (sometimesdistinct from those of the owner) which may be enforced by processand decree against the vessel, binding upon all interested in herand conclusive upon the world, for admiralty in appropriate casesadministers remedies in rem, i.e., against the property, as well asremedies 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 toproceed against the ship or cargo as distinguished from a right inpersonam to proceed against the owner. The arrest of the ship isregarded as a mere procedure to obtained security to satisfyjudgment. A successful plaintiff in an action in rem has a right to AB

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recover damages against the property of the defendant. “Theliability of the ship owner is not limited to the value of the resprimarily proceeded against …. An action … though originallycommenced in rem, becomes a personal action against a defendantupon appearance, and he becomes liable for the full amount of ajudgment unless protected by the statutory provisions for thelimitation of liability”.’ (Roscoe’s Admiralty Practice, 5th ed. p.29)

47. The foundation of an action in rem, which is a peculiarity of-the AngloAmerican law, arises from a maritime lien or claimimposing a personal liability upon the owner of the vessel. Adefendant in an admiralty action in personam is liable for the fullamount of the plaintiff’s established claim. Likewise, a defendantacknowledging service in an action in rem is liable to be saddledwith full liability even when the amount of the judgment exceedsthe value of the res or of the bail provided. An action in rem lies inthe English High Court in respect of matters regulated by theSupreme Court Act 1981, and in relation to a number of claimsthe jurisdiction can be invoked not only against the offending shipin question but also against a ‘sistership’ i.e., a ship in the samebeneficial ownership as the ship in regard to which the claim arose.

“The vessel which commits the aggression is treated as theoffender, as the guilty instrument or thing to which the forfeitureattaches, without any reference whatsoever to the character orconduct of the owner ….” (Per Justice Story, The United Statesv. The Big Malek Adhel [43 US (2 How) 210, 233 (1844)] ).

xxxx xxxx xxxx xxxxxxxx59. The real purpose of arrest in both the English and the CivilLaw systems is to obtain security as a guarantee for satisfactionof the decree,although arrest in England is the basis of assumptionof jurisdiction, unless the owner has submitted to jurisdiction. Inany event, once the arrest is made and the owner has enteredappearance, the proceedings continue in personam. All actions inthe civil law — whether maritime or not — are in personam, andarrest of a vessel is permitted even in respect of non-maritimeclaims, 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 ofany claim. [See D.C. Jackson, Enforcement of Maritime Claims,(1985) Appendix 5] [ See D.C. Jackson, Enforcement of MaritimeClaims, (1985) Appendix 5, p. 437 et seq.] . Admiralty actions inEngland, on the other hand, whether in rem or in personam, areconfined to well defined maritime liens or claims and directedagainst the res(ship, cargo and freight) which is the subject-matterof the dispute or any other ship in the same beneficial ownershipas the res in question.”

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“99. What then was the jurisdiction that the Court of Englandexercised in 1890? The law of Admiralty was developed by Englishcourts both as a matter of commercial expediency and due toequity and justice. Originally it was a part of common lawjurisdiction, but the difficulty of territorial limitations, constraintsof common law and the necessity to protect the rights and interestsof its own citizens resulted in growth of maritime lien a conceptdistinct from common law or equitable lien as it represents a chargeon maritime property of a nature unknown alike to the commonlaw or equity. The Privy Council explained it as ‘a claim or privilegeupon a thing to be carried into effect by legal process’ [Harmer v.Bell, (1851) 7 Moo PC 267 : 13 ER 884] . Law was shaped byexercise of discretion to what appeared just and proper in thecircumstances of the case. Jurisdiction was assumed for injuriousact done on high seas and the scope was extended, ‘not only toBritish subjects but even to aliens’ [Hailey (The), LR 2 PC 193] .Maritime law has been exercised all over the world by Maritimepowers. In England it was part of Municipal law but with rise ofBritain as empire the law grew and it is this law, that is, ‘MaritimeLaw that is administered by the Admiralty Court’ [Halsbury’s Lawsof England, 4th Edn., Vol. 1] . From the Maritime law sprang theright known as Maritime lien ascribing personality to a ship forpurposes of making good loss or damage done by it or its masteror owner in tort or contract. In England it grew and was developedin course of which its scope was widened from damage done bya ship to claims of salvor, wages, bottomry, supply of necessariesand even to bills of lading. Its effect was to give the claimant acharge on res from the moment the lien arose which follows the AB

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res even if it changed hands. In other words a maritime lienrepresented a charge on the maritime property. The advantagewhich accrued to the maritime lienee was that he was providedwith a security for his claim up to the value of the res. The essenceof right was to identify the ship as wrongdoer and compel it by thearrest to make good the loss. Although the historical review inEngland dates back to the 14th Century but its statutory recognitionwas much later and ‘maritime law came to jurisprudential maturityin the first half of the 19th Century’ [Maritime Liens by D.R.Thomas]. And the first statutory recognition of such right came in1840 when the Admiralty Court Act of 1840 was enactedempowering the admiralty court to decide all questions as to thetitle or ownership of any ship or vessel or the procedure thereofremaining in the territory arising in any cause of possession,salvage, damage, wages or bottomry. By clause (6) of the Actjurisdiction was extended to decide all claims and demandswhatsoever in the nature of salvage for services rendered to ordamage received by any ship or sea-going vessel or in the natureof towage or for necessaries supplied to any foreign ship or sea-going vessel and the payment thereof whether such ship or vesselmay have been within the body of a country or upon the high seasat the time when the services were rendered or damage receivedor necessary furnished in respect of such claims. But the mostimportant Act was passed in 1861 which expanded power andjurisdiction of courts and held the field till it was replaced byAdministration of Justice Act, 1920. The importance of the Actlay in introducing the statutory right to arrest the res on an actionin rem. Section 35 of the 1861 Act provided that the jurisdictionby the High Court of Admiralty could be exercised either byproceedings in rem or proceedings in personam. “The essence ofthe rem in procedure is that ‘res’ itself becomes, as one mightsay, the defendant, and ultimately the ‘res’ the ship may be arrestedby 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 theclaimant out of the res” [Maritime Lawby Christopher Hill] . Ifthe 1840 Act was important for providing statutory basis for varioustypes of claims then 1861 Act was a step forward in expandingthe jurisdiction to claims of bill of lading. Section 6 of the Act wasconstrued liberally so as to confer jurisdiction and the expression

‘carried into any port was’ was expanded to mean not only whenthe 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 asproviding additional remedy for breach of contract [ Carter: Historyof English Courts] . By the Jurisdiction Act of 1873 the court ofAdmiralty was merged in High Court of Justice. Result was thatit obtained jurisdiction over all maritime cases. Therefore whatwas covered by enactments could be taken cognisance of in themanner provided in the Act but there was no bar in respect of anycause of action which was otherwise cognizable and arose inAdmiralty. Section 6 of 1861 Act was confined to claim by theowner or consignee or assignee of any bill of lading of any goodscarried 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 orconsignee or assignee of any bill of lading in respect of cargocarried out of the port. Even if there was no provision in 1861Act, as such, the colonies could not be deprived under 1890 Actfrom exercising jurisdiction on those matters which were notprovided by 1861 Act but could be exercised or were otherwisecapable of being exercised by the High Court of England. ‘Thetheory was that all matters arising outside the jurisdiction ofcommon law i.e. outside the body of a country were inside thejurisdiction of Admiralty’ [Carter: History of English Courts]. ‘Thatthis Court had originally cognizance of all transaction civil andcriminal, upon the high seas, in which its own subjects wereconcerned, is no subject of controversy’ [ Lord Stowell in ‘TheHercules’ 2 Dod. 371] . To urge, therefore, that the Admiraltycourt exercising jurisdiction under 1890 Act could not travel beyond1861 Act would be going against explicit language of the Statute.Even now, the Admiralty jurisdiction of the High Court of Justicein England is derived ‘partly from Statute and partly from theinherent jurisdiction of Admiralty’ [Maritime Liens by D.R.Thomas] . Observations of Lord Diplock in Jade (The) [ SeeD.C. Jackson, Enforcement of Maritime Claims, (1985) Appendix5, p. 437 et seq.] that Admiralty jurisdiction was statutory onlyhave to be understood in the context they were made. By 1976the statutory law on Admiralty had become quite comprehensive.Brother Thommen, J., has dealt with it in detail. Therefore those AB

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Aobservations are not helpful in deciding the jurisdiction that wasexercised by the High Court in England in 1890.”

22. The emphasis of the respondent is, thus, on the maritime claimbeing maintained against the owner of the ship and detention of a ship asBa sequitur thereto as security for a decree liable to be passed against theowners of the ship in personam. Since the claim is stated to be oneagainst Reflect Geophysical and not against the owners, such a detentioncould not have been made, it was contended. Reflect Geophysical, infact, has not even been made a party to the suit, the entity, which wouldCbe liable in personam.

International Convention on Arrest of ship, 1999:

23. The provisions of the aforesaid Convention have been referredto especially keeping in mind the observations of this Court in Liverpool& London S.P. & I Association Limited v. M.V. Sea Success I &DAnr.[5],which read as under:

“57. This Court in M.V. Elisabeth [M.V. Elisabeth v. HarwanInvestment and Trading (P) Ltd., 1993 Supp (2) SCC 433]observed that Indian statutes lag behind any development ofinternational law and further it had not adopted the variousEconventions but opined that the provisions thereof having beenmade as a result of international unification and development ofthe maritime laws of the world should be regarded as theinternational common law or transnational law rooted in andevolved out of the general principles of national laws, which, inthe absence of any specific statutory provisions can be adoptedFand adapted by courts to supplement and complement nationalstatutes on this subject.”

“59.M.V. Elisabeth [M.V. Elisabeth v. Harwan Investment andGTrading (P) Ltd., 1993 Supp (2) SCC 433] is an authority for theproposition that the changing global scenario should be kept inmind having regard to the fact that there does not exist any primaryact touching the subject and in absence of any domestic legislationto the contrary; if the 1952 Arrest Convention had been applied,

SUNIL B. NAIK v. GEOWAVE COMMANDER[SANJAY KISHAN KAUL, J.]

although India was not a signatory thereto, there is obviously noreason as to why the 1999 Arrest Convention should not be applied.

60. Application of the 1999 Convention in the process of interpretivechanges, however, would be subject to: (1) domestic law whichmay be enacted by Parliament; and (2) it should be applied onlyfor enforcement of a contract involving public law character.”

24. Therefore, in the interest of international comity, though Indiais not a signatory to the Convention of 1999, the principles of the sameare utilized and applied to appropriate situations to determine whether a‘maritime claim’, as understood in the international context has arisenand whether the same warrants the arrest of the vessel in question asper 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 ofthe following:

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“(f) any agreement relating to the use or hire of the ship, whethercontained in a charter party or otherwise;”

“(l) goods, materials, provisions, bunkers, equipment (including containers) supplied or services rendered to the ship for itsoperation, 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 ofobtaining security notwithstanding that by virtue of a jurisdiction clauseor arbitration clause, it has to be adjudicated in a State other than theState where it has been arrested. For an elucidation we reproduce thesaid clauses:

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“Article 2

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2. A ship may only be arrested in respect of a maritime claim butin respect of no other claim.

3. A ship may be arrested for the purpose of obtaining securitynotwithstanding that, by virtue of a jurisdiction clause or arbitrationclause in any relevant contract, or otherwise, the maritime claimin respect of which the arrest is effected is to be adjudicated in aState other than the State where the arrest is effected, or is to bearbitrated, or is to be adjudicated subject to the law of anotherState.”

27. Article 3 deals with the exercise of right of arrest, which readsas under:

“Article 3

Exercise of right of arrest

1. Arrest is permissible of any ship in respect of which a maritimeclaim is asserted if:

(a) the person who owned the ship at the time when the maritimeclaim arose is liable for the claim and is owner of the ship whenthe arrest is effected; or (b) the demise charterer of the ship at the time when the maritimeclaim arose is liable for the claim and is demise charterer or ownerof the ship when the arrest is effected; or

(c) the claim is based upon a mortgage or a “hypothèque” or acharge 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 oroperator of the ship and is secured by a maritime lien which isgranted or arises under the law of the State where the arrest isapplied 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 isliable 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 thatship.

This provision does not apply to claims in respect of ownership orpossession of a ship.

3. Notwithstanding the provisions of paragraphs 1 and 2 of thisarticle, the arrest of a ship which is not owned by the person liablefor the claim shall be permissible only if, under the law of theState where the arrest is applied for, a judgment in respect of thatclaim can be enforced against that ship by judicial or forced saleof that ship.”

28. We may note that the claim of the appellant, Sunil B. Naik, isbased on the definition clause of the maritime claim clause (f) & (l) asdiscussed even in the impugned order while the claim of Yusuf AbdulGani is restricted to clause (f).

29. The endeavour of the appellants to bring the claim within theaforesaid provisions is naturally opposed by the respondent on the groundthat the agreement between the appellants and Reflect Geophysical isactually a charter hire agreement between Reflect Geophysical and thetwo appellants. It was contended that there were neither any goodssupplied nor services rendered and, in fact, the survey operations nevercommenced as the ships remained stationed at the port at Okha whereasthe respondent vessel never arrived at Okha. Reflect Geophysical isstated to have actually engaged the vessels of the appellant through acharter hire agreement and this cannot form a part of the maritime claimagainst the respondent ship. In this behalf, reference has been made tothe judgment in The “Eschersheim”[6]. The relevant portion, which isalso reproduced in the impugned judgment is extracted as under:

“In my opinion there is no good reason for excluding from theexpression “an agreement for the use or hire of a ship” anyagreement which an ordinary ASN 12/14 Appeal-209-13.docbusiness man would regard as being within it. If which an ordinarybusiness man would regard as being within it. If A and B make an 6 [1976] Vol. I Lloyd’s Law Reports 81

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Aagreement for A’s ship to be used for carrying out any operationfor B, I consider that the agreement is one for the use, if not forthe hire of the ship. Thus an agreement for a ship to be employedfor dredging, towing, cable laying and salvage would be anagreement for the use of the ship. But is an agreement for dredgingor towage or cable laying or salvage an agreement for the use ofBa ship if there is no express reference in the agreement to anysuch 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 aship. A towage agreement would therefore always come withinthe words. Dredging or cable laying could conceivably beCperformed by other means but in the great majority of cases itwould be so obvious that the use of a ship must be intended thatthis would be implied.....”

30. Thus, the plea is that the charter hire agreement is for use ofthe appellant’s vessel by Reflect Geophysical. The respondent is notDliable personally for the maritime claim and, thus, there can be no arrestof the ship since the ship is not owned by Reflect Geophysical. Thecharter agreement provisions were referred to (extracted aforesaid) tosubstantiate that at present, at best Reflect Geophysical was only a defacto owner and not a de jure owner and that in order for ReflectGeophysical to be de jure owner the provisions provided how six monthsEin advance of the expiry of the contract recourse could be had to thesame. That occasion never arose.

31. A reference was, thus, made to Article 3(3) of the aforesaidConvention, which provides for arrest of the ship only if the judgment inrespect of that claim can be enforced against the ship by judicial orFforced sale of that ship and in the absence of any provision under theIndian law by which the ship not owned by a person could be madeliable for a maritime claim, the arrest of the ship could not take place.The judgment could be obtained only under the contract which would beagainst Reflect Geophysical.

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32. Mr. Naphade, learned Senior Advocate for the appellants hasreferred to the judgment in Medway Drydock & Engineering Co. Ltd.v. M.V. Andrea Ursula[7] dealing with the action in rem on the questionwhether the ship under a demised charter is “beneficially owned asrespects all the shares therein” by the charterer, within the meaning ofH7 [1973] QB 265

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 personwho, whether or not he was the legal or equitable owner or not, lawfullyhad full possession and control of her, and, by virtue of such possessionand control, had all the benefit and use of her which a legal or equitableowner would ordinarily have.”

33. In the aforesaid context it may be noticed that in Section 1 ofthe Administration of Justice Act, 1956, the Admiralty jurisdiction couldbe 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 followingquestions or claims -

(h) any claim arising out of any agreement relating to the carriageof 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 portionof which reads as under:

“The question is what do the words “beneficially owned as respectsall the shares therein” mean in the context of the Act. Thesewords are not defined in the Act. Apart from authority, we wouldconstrue them to refer only to such ownership of a ship as isvested in a person who has the right to sell, dispose of or alienateall the shares in that ship. Our construction would clearly coverthe case of a ship owned by a person, who whether he is the legalowner or not, is in any case the equitable owner of all the sharestherein. It would not, in our opinion, cover the case of a shipwhich is in the full possession and control of a person who is notalso the equitable owner of all the shares therein. In our opinion,it would be a misuse of language to equate full possession andcontrol of a ship with beneficial ownership as respects all theshares in a ship. The word “ownership” connotes title, legal orequitable whereas the expression “possession and control”,however full and complete, is not related to title. Although a person 8 (1979) Vol. 1 Lloyd’s Law Reports 327

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B35. In an ex parte case in The “Leoborg”[9] the Admiralty Judgedealt with a claim of escorting services provided by a tug from outside aport into a port for services in the nature of towage.

36. The Appellants have also placed reliance on the case of EpochEnterrepots v. M.V. Won Fu[10]to differentiate between different typesCof charter parties and to assert that in the case of a demise charter, thecharterer 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 beforeDthe Courts below would show that the plea of no right of arrest of therespondent vessel was based on Reflect Geophysical not being the ownerbut only a charterer of the vessel. The essential ingredients for maintaininga maritime claim for which a vessel may be detained were specified asunder:

E“In order to ascertain whether in an action in rem filed in theAdmiralty jurisdiction of the court, the Plaintiff is entitled to anorder of arrest of the Defendant vessel, the following needs to beestablished:

(a) The plaintiff has a maritime claim;F(b) The vessel in respect of which the plaintiff has a maritimeclaim;

(c) The party liable in personam in respect of the maritimeclaim; and G(d) The party liable in personam is the owner of the vesselsought to be arrested.”

38. The learned single Judge opined that the claim in Yusuf AbdulGani’s case was in respect of use or hire of another ship Orion Laxmi 9 (1962) Vol.. 2. Lloyd’s List Law Reports 146H10 (2003) 1 SCC 305

and the claim, thus, could not be maintained against the respondent vessel.It was stated to be a claim in personam against Reflect Geophysicaland thus, only a vessel owned by Reflect Geophysical could have beenrestrained. The learned single Judge also records that it has not beenthe case of Yusuf Abdul Gani that Reflect Geophysical is a de factoowner of the ship sought to be arrested and the position of an owner ofa ship is different from a demised charter when it comes to the arrest ofa vessel owned or chartered. In this behalf a reference has been madeto the case of Polestar Maritime Ltd. v. M.V. Qi Lin Men & Ors.[11]where Article 3(2) of the Arrest Convention was elucidated specifyingthat a ship can be arrested in respect of a maritime claim against anothership 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, whichis taken on a demised charter then the liability can be recoveredby restraint of the ship owned by the charterer.

This view originally elucidated by the learned single Judge ofthe Bombay High Court found favour with the Division Benchwhen the appeal was dismissed vide order dated 6.1.2009 in Appeal(Lodging) No.772/2008. The Special Leave Petition filed againstthe same was also dismissed vide order dated 23.1.2009.

39. The conclusion, thus, was that there was no principle orauthority for proposition that a maritime claim for unpaid charter hire inrespect of vessel ‘A’ against the hirer thereof can be enforced by arrestingvessel ‘B’, which is on bareboat charter of the hirer of the former vesselvis-à-vis vessel ‘A’.

40. The order passed by the learned single Judge in Sunil B. Naik’scase merely referred to the said view adopted in Yusuf Abdul Gani’scase to vacate the injunction. The Division Bench affirmed the ordersof the learned single Judge by passing two separate orders in the appealsfiled. The orders are of the same date, i.e. 10.5.2013, which have beenassailed in the two appeals.

41. The Division Bench took note of the fact that though India isnot a signatory to the Arrest Convention, the same principles would applywhile determining whether a maritime claim has arisen causing for such 11 Admiralty Suit (Lodging) No.3547/2008 decided on 22.10.2008

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Adetention of the vessel. The Division Bench referred to the judgment inEpoch Enterrepots[12] to conclude that the distinction sought to be drawnbetween a bareboat charter and a demised charter was an issue nomore res integra. A reference was also made to the Commentary on“Maritime Law” 5[th] Edition by Christopher Hill, which explained that ina demised charter or bareboat charter the ship owner fades into theBbackground and merely collects its hire payment for the period of thecharter. It was stated to be akin to a lease of a ship, similar to a hirepurchase arrangement rather than a simple agreement for hire or use ofthe ship. Thus, the so-called de facto ownership of Reflect Geophysicalqua the respondent vessel was held to be immaterial in respect of aCmaritime claim arising from an agreement for use or hire of anothervessel, which is the situation in both the cases.

42. Insofar as the respondent vessel is concerned, there is noagreement entered into by either of the two appellants and, thus, it cannotbe a maritime claim in respect of Article 1(1)(f) of the Arrest Convention.DConsequently, there would be no occasion to arrest the vessel underArticle 3(1)(b) of the Arrest Convention as no maritime claim has resultedin the hands of the demised charterer with regard to the demised vessel.The maritime claim by either of the appellants could, thus, be enforcedonly by arresting another vessel owned by Reflect Geophysical and thede facto ownership, could not be converted into a de jure ownership.EIn respect of Article 1(1)(l), it was, once again, held that there was nosupply of goods to the vessel or of supply of services to the vessel inquestion, which was the respondent vessel. Insofar as the reasoning inSunil B. Naik’s case, so far as Article 1(1)(l) is concerned, it has beencategorically found that it was not a case where goods had been givenFon 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 andfind no reason to interfere in appeal.G

44. We have referred to the various terms of the bareboat charterwhich make it quite clear that Reflect Geophysical had the status of ade facto owner. The charter agreement did contain a clause forconversion of the status into a de jure owner but the occasion for the H12 supra same never arose. The option to purchase was to be exercised by anadvance intimation of six months prior to the end of the charter periodand the purchase price was also specified as US$ 3,01,50,000. Thecharterer could not make any structural changes in the vessel or in themachinery, boilers, appurtenances or space parts thereof without firstsecuring the owner’s approval and the vessel had to be restored to itsformer condition before the termination of the charter, if so required bythe owners. This was, thus, a deed between the owner of the respondentand Reflect Geophysical.

45. The contracts entered into with the appellants by ReflectGeophysical are completely another set of charter hire agreements/contracts. The unpaid amounts under these contracts amount to claimsagainst Reflect Geophysical. Thus, if there was another vessel ownedby Reflect Geophysical, the appellants would have been well within theirrights to seek detention of that vessel as they have a maritime claim butnot in respect of the respondent vessel. The maritime claim is in respectof the vessels which are owned by the appellants and the party liable inpersonam is Reflect Geophysical. Were the respondent vessel put underthe de jure ownership of Reflect Geophysical, the appellants would havebeen within their rights to seek a detention order against that vessel forrecovery of their claims.

46. In the facts of the present case the owners of the respondentvessel, in fact, also have a claim against Reflect Geophysical for unpaidcharter amount. Thus, unfortunately it is both the owner of therespondent vessel on the one hand and the appellants on the other, whohave a maritime claim against Reflect Geophysical, which has gone intoliquidation. The appellants quite conscious of the limitations of anyendeavour to recover the amount from Reflect Geophysical, haveventured into this litigation to somehow recover the amount from, ineffect, the owners of the respondent vessel by detention of the respondentvessel. That may also be the reason why the appellants did not eventhink it worth their while to implead Reflect Geophysical against whomthey have their claim in personam, possibly envisaged as a futile exercise.

47. It is in the aforesaid context that while discussing this issue inthe impugned order, the essential ingredients for detention of a vessel ina maritime claim were specified (para 37 aforesaid).

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A48. The aforesaid issue has also been discussed in PolestarMaritime 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 notsatisfied in the present case. The second situation envisaged is whereanother 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’ isBdetained where charterer has de jure ownership. It cannot becountenanced that where no in personam claim lies against an entity,still the ship of that entity taken on bareboat charter can be detained torecover the dues. The owner of the respondent vessel is as much acreditor of Reflect Geophysical as the appellants.C

49. Mr. Naphade, learned Senior Advocate while relying on thejudgment in M.V. Elisabeth &Ors.[14]had referred to the expandingjurisdiction of a maritime claim. However, the observations made in thesaid judgment reproduced hereinabove in para 21 would show that thearrest of the ship is regarded as a mere procedure to obtain security toDsatisfy the judgment. To that extent it is distinguished from a right inpersonam to proceed against the owner but there has to be a liability ofthe ship owner and in that eventuality the legal proceedings commencedin rem would become a personal action in personam against the defendantwhen he enters appearance. There cannot be a detention of a ship as asecurity and guarantee arising from its owner for a claim which is inErespect of a non-owner or a charterer of the ship.

50. On turning to the provisions of the Convention, a maritimeclaim is specified as relating to use or hire of a ship whether contained ina charter party or otherwise [clause (f)]. Insofar as clause (l) is concernedthey relate inter alia to services rendered to the ship. The question,Fhowever, is – which is the ship in question? Such an order of detentioncan be in respect of a ship where there is identity of the owner againstwhom the claim in personam lies and the owner of the ship. It cannotbe used to arrest a ship of a third party or a non-owner.

51. As an illustrative example if we consider the principles of aGgarnishee order where amounts held by a third party on behalf of adefendant can be injuncted or attached to satisfy the ultimate claim,which may arise against the defendant. It is not as if somebody else’smoney is attached in pursuance to a garnishee’s order. Similarly for a13 supraH14 supra claim against the owner of the vessel, a vessel may be detained and notthat somebody else’s vessel would be detained for the said purpose.The crucial test would be of ownership, which in the present case clearlydoes not vest with Reflect Geophysical and the de facto ownershipunder 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 thecontroversy, it is not really of much relevance that effectively no workwas carried out under the agreements between the appellants and ReflectGeophysical as the chartered ship never commenced its task and neverreached the port from where the task was to be commenced.

53. One of the contentions advanced by the learned SeniorAdvocate for the appellant recorded by us relates to the plea of “beneficialownership” of the respondent ship by Reflect Geophysical and, thus, theenforceability of a claim by the appellants against the respondent ship.In support of this plea reliance is placed on the judgment in MedwayDrydock & Engineering Co. Ltd.[15]. We must record at the inceptionitself that this issue appears not to have been raised either before thelearned single Judge or the Division Bench as there is no discussion onthis aspect. We, however, still feel necessary to deal with this aspectand in some detail largely based on our own foray into this area of lawrather than simply relying on the judgment referred to aforesaid.

54. United Kingdom became a signatory to two internationalconventions – ‘International Convention relating to Arrest of Sea GoingShips’ and ‘International Convention on certain Rules concerning CivilJurisdiction 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 deemedto be in the same ownership when all the shares therein are owned bythe same person or persons.” The context is, thus, the ownership of theship when a reference is made to “shares therein” and whether they areowned by the same person or not. “Shares” in a ship owes its originationto sailing vessels being expensive items and subject to unexpected lossand thus, were not owned by one person. Thus, more than one personcould own a share in a ship on the basis of capital tied up in the vessel.Such shares were fairly random but by mid 19[th] century it was usual forshares to be in multiples of 64 parts and, thus, ownership by 64[th] is still A

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Athe norm in England. The various requirements of a ship, for example,rope-maker, sail maker, etc. were parts of a share owner and such sharescould be sold or bought like any other commodity. Normally there wouldbe a main owner who would have a large investment and be responsiblefor the sail and working of the ship called “ship’s husband” while otherowners were simply cash investors. The profits and liabilities wereBaccordingly shared in the same ratio. This concept finds mention in TheMerchant Shipping Act, 1958 under Section 25, which deals with‘Register Book’ as under:

“25. Register book.¯Every registrar shall keep a book to becalled the register book and entries in that book shall be made inCaccordance with, the following provisions:¯

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(b) subject to the provisions of this Act with respect to joint ownersor owners by transmission, not more than ten individuals shall beDentitled to be registered at the same time as owners of any oneship; but this rule shall not affect the beneficial interest of anynumber of persons represented by or claiming under or throughany registered owner or joint owner;”

55. In view of United Kingdom signing the two ConventionsEreferred to aforesaid and giving legislative backing, Section 3 of TheAdministration of Justice Act, 1956, incorporated the same. In sub-section (4) of Section 3, while dealing with the invocation of an action inrem, the concept of “beneficially owned” vis-à-vis a ship was introducedand the right to invoke it against the same.

56. The observations in Medway Drydock & Engineering Co.FLtd.[16] referred to while recording the submissions of Mr. Naphade, haveto be appreciated in that context. However, a deeper study of the issueshows that this judgment has been dissented from even by the Queen’sBench itself in I Congreso Del Partido[17] by Robert Goff, J. Thisjudgment debates the concept of “beneficially owned” in respect of sharesGtherein within the meaning of Section 3(4) of The Administration ofJustice Act, 1956. There is a respectful disagreement with the line adoptedby Brandon, J. in the Medway Drydock & Engineering Co. Ltd.[18].

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17 [1978] Q.B. 500H18 supra

Thus, it is noticed that Brandon, J. construed the words “beneficiallyowned as respects all the shares therein” as not being restricted to legalor 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 thisconclusion was as follows: (1) The expression “beneficiallyowned” in section 3 (4) is capable of more than one meaning:either owned by someone who, whether he is the legal owner ornot, is in any case the equitable owner; or beneficially owned by aperson who, whether he was the legal or equitable owner or not,lawfully had full possession and control of her, and, by virtue ofsuch possession and control, had all the benefit and use of herwhich a legal or equitable owner would ordinarily have. An exampleof the latter would be such “ownership” as was conferred by ademise charter. A demise charterer has, because of the extent ofhis possession and control, often been described as the owner prohac vice or the temporary owner. (2) Since the meaning of thewords “beneficially owned” is not clear the court can and shouldlook at the terms of the Brussels Convention of 1952, section 3 ofthe Act of 1956 being intended to give effect to article 3 of theConvention; and having done so the court should so construe thestatute as to give effect, so far as possible, to the presumptionthat Parliament intended to fulfil, rather than to break, itsinternational obligations. If section 3 (4) of the Act is to give fulleffect to article 3, the expression “beneficially owned” in thesection must be given the second of the two meanings of which itis capable, which embraces not only a demise charterer, but alsoany other person with similar complete possession and control.(3) Although Hewson J. had reached a different conclusion inThe St. Merriel [1963] P. 247, Brandon J. felt justified in decliningto follow that decision having regard in particular to two points.First, Hewson J. had not been invited to look at the BrusselsConvention, because at that time it was commonly thought that itwas not permissible to do so unless the Act contained an expressreference to the Convention. Second, the view accepted byHewson J. in The St. Merriel was no different in principle fromone which was discussed and rejected by Lord Atkinson in Sir A

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AJohn Jackson Ltd. v. Steamship Blanche (Owners) (The HopperNo. 66) [1908] A.C. 126, 135–136.”

57. Robert Goff, J. then records the significant factor, i.e., thatMedway Drydock & Engineering Co. Ltd.[19] was decided on a motionby plaintiffs for judgment in an ex parte proceedings while he had theBbenefit of submissions of both the sides and Robert Goff, J. sought to bepersuaded by the counsel appearing for the ship Mr. Davenport in thefollowing manner:

“Mr. Davenport, for Mambisa, to whose argument I am muchindebted, has however urged me not to follow The Andrea UrsulaC[1973] Q.B. 265. The decision in that case is not binding upon meand, while of course I have the greatest respect for any decisionof Brandon J., I have reconsidered the matter and, having doneso, I have reached the conclusion that the words “beneficiallyowned as respects all the shares therein” refer only to cases ofequitable ownership, whether or not accompanied by legalDownership, and are not wide enough to include cases of possessionand control without ownership, however full and complete suchpossession and control may be. Since I have reached a differentconclusion to Brandon J., I think it right to point out that I havehad the benefit of a full argument by counsel for the defendants inEthis case, whereas The Andrea Ursula came before Brandon J.on a motion by plaintiffs for judgment in default of appearance, onwhich the defendants were not represented.”

58. Thereafter Robert Goff, J. records his conclusion in theFfollowing manner:

“My approach to the case before me is as follows. I start with thestatute, 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 myGjudgment, the natural and ordinary meaning of these words is thatthey 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 casethe equitable owner, in other words, the first of the two meaningsof which Brandon J. thought the words to be capable. Furthermore, on the natural and ordinary meaning of the words, I do not considerthem apt to apply to the case of a demise charterer or indeed anyother person who has only possession of the ship, however fulland complete such possession may be, and however much controlover the ship he may have.

Generally speaking, the essential characteristic of a demise charteris that it constitutes a contract of hire of the ship, under which thepossession of the ship passes to the charterer, the master of theship being the servant of the charterer, not of the owner. It is to becompared with the ordinary form of time charter, which is not acontract of hire but a contract of services, under which thepossession remains in the owner and the master is the servant ofthe owner: see Sea & Land Securities Ltd. v. William Dickinson& Co. Ltd . [1942] 2 K.B. 65, 69–70 per Mackinnon L.J. andScrutton on Charterparties, 18th ed. (1974), articles 24–26. It istrue that a demise charterer has in the past been described variouslyas “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 TheTasmania (1888) 13 P.D. 110, 118, per Sir James Hannen P.; or asa person who is “for the time the owner of the vessel:” seeSandeman v. Scurr (1866) L.R. 2 Q.B. 86, 96, per Cockburn C.J.;or as a person with “special and temporary ownership:” see TheHopper No. 66 [1908] A.C. 126, 136, per Lord Atkinson. I doubthowever if such language is much in use today; and its use shouldnot be allowed to disguise the true legal nature of a demise charter.Furthermore, no case has been drawn to my attention, and I amaware of more, in which a demise charterer has been describedas a “beneficial owner,” still less as a “beneficial owner as respectsall the shares in the vessel.” Indeed, any reference in this contextto ownership “as respects all the shares in the vessel” is, in myjudgment, inapt to describe the possession of a demise charterer;such words are only appropriate when describing ownership inthe ordinary sense of the word, and not possession which isconcerned with a physical relationship with the vessel foundedupon control and has nothing to do with shares in the vessel. Ademise charterer has, within limits defined by contract, thebeneficial use of the ship; he does not, however, have the beneficialownership as respects all the shares in the ship.

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Furthermore, I can find nothing in the remainder of the statute tocause 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 “co-owner” — as insection 1 (1) ( b ) — as referring in any way to demise charterers.Indeed in Part V of the Act, which is concerned with Admiraltyjurisdiction and arrestment of ships in Scotland, the equivalentprovision, section 47 (1) ( b ), requires that “all the shares in theship are owned by the defendant.” This provision, to which I canproperly 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” beingintroduced to allow for the peculiar English institution of the trust.”

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“Accordingly, I do not regard the words “beneficially owned asrespects all the shares therein” as being capable of more thanone meaning; in the absence of ambiguity this is not, on theprinciples established by the Court of Appeal in Salomon v. Customsand Excise Commissioners [1967] 2 Q.B. 116, Post Office v.Estuary Radio Ltd . [1968] 2 Q.B. 740 and by the House of Lordsin the Convention The Eschersheim [1976] 1 W.L.R. 430, anappropriate case in which to have recourse to the Convention.Even so, out of respect for the views of Brandon J., I propose toexamine the Convention. The relevant provisions of article 3 of(the International Convention Relating to the Arrest of Sea-goingShips 1952) are as follows:

“(1) Subject to the provisions of paragraph (4) of this articleand of article 10, a claimant may arrest either the particularship in respect of which the maritime claim arose, or any othership which is owned by the person who was, at the time whenthe maritime claim arose, the owner of the particular ship, eventhough the ship arrested be ready to sail; but no ship, otherthan the particular ship in respect of which the claim arose,may be arrested in respect of any of the maritime claimsenumerated in article 1, (1), ( o ), ( p ) or ( q ), (2) Ships shall bedeemed to be in the same ownership when all the shares thereinare owned by the same person or persons …. (4) When in thecase of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relatingto that ship, the claimant may arrest such ship or any othership in the ownership of the charterer by demise, subject to theprovisions of this Convention, but no other ship in the ownershipof the registered owner shall be liable to arrest in respect ofsuch maritime claims. The provisions of this paragraph shallapply to any case in which a person other than the registeredowner of a ship is liable in respect of a maritime claim relatingto that ship.”

As I read the Convention, article 3 (1), which is expressed to besubject to article 3 (4), provides for the arrest of either the particularship in respect of which the maritime claim arose, or (except incertain specified cases) any other ship which is owned by theperson who was, at the time when the maritime claim arose, ownerof the particular ship. Furthermore, despite the argument of Mr.Alexander for the plaintiffs to the contrary, in this context I readthe word “owner” as bearing its ordinary meaning, that is, theperson with title to the ship; am confirmed in this view by theprovision relating to ownership in article 3 (2) and by the fact thatarticle 3 (4), to which article 3 (1) is expressed to be subject,makes special provision for the case of the demise charterer andothers. It is to be observed that, if one puts article 3 (4) on oneside, the draftsman of the Act of 1956 appears to have been seekingto give effect to article 3 (1) and (2) of the Convention, subject tothe fact that he appears to have been concerned to extend theword “ownership” by the addition of the adjective “beneficial,”very possibly to take account of the special English institution ofthe trust which may form no part of the domestic laws of othersignatories to the Convention.”

59. We have been persuaded to extract in extensio from thejudgment in I Congreso Del Partido[20] on account of the clarity of theview expressed by Robert Goff, J. finding it difficult to be put in betterwords. Thus, mere possession of the ship, however, complete andwhatever be the extent of the control was not found good enough toconfer the status of ownership. The “beneficial use” of a chartered ship AB

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Awould not ipso facto convert the status of a charterer into a “beneficialowner.” The attention to the word “beneficial” in the Act of 1956 was,thus, attributed to the requirement to take into account the special EnglishInstitution of Trust which forms no part of domestic law of othersignatories to the Convention.

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60. In The “Father Thames”[21] Sheen J. also declined to followMedway Drydock & Engineering Co. Ltd.[22] and followedI Congreso Del Partido[23] 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 AppealCin the decision of The “Permina 3001”[24] has adopted the similar viewthat a ship in full possession and control of a person, who is also not anowner of all the shares therein cannot be utilized for the purposes ofrestraint of the ship.

D62. Even in Canada, the Federal Court of Appeal has taken thesame view on the import of the words “beneficial owner” in the contextof the Canadian ‘Federal Court Act 1985’ which confers courts with thejurisdiction to arrest a ship. In Mount Royal/Walsh Inc. v. The ShipJensen Star el al,[25 ]Marceau, J, writing on behalf of the Bench, statedas follows :E

“The problem, however, is that I simply do not see how a courtcould suppose that Parliament may have meant to include a demisecharterer 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 inFthe res itself, a title characterized essentially by the right to disposeof the res. The French corresponding word ‘proprietaire’ is equallyclear in that regard. These words are clearly inapt to describe thepossession of a demise charterer…. In my view, the expression‘beneficial owner’ was chosen to serve as an instruction, in aGsystem of registration of ownership rights, to look beyond the 21 [1979] 2 Lloyd’s Rep. 36422 supra23 supra24 supra25 [1990] 1 F.C 199.H

register in searching for the relevant person. But such searchcannot go so far as to encompass a demise charterer who has noequitable or proprietary interest which could burden the title ofthe registered owner of the registered owner. As I see it, theexpression ‘beneficial owner’ serves to include someone whostands behind the registered owner in situations where the latterfunctions merely as an intermediary, like a trustee, a legalrepresentative or an agent. The French corresponding expression‘veritable proprietaire’ leaves no doubt to that effect.”

63. The Supreme Court of Canada in Antares ShippingCorporation v. The Ship ‘Capricorn’ et al.[26] also referred to the conceptof beneficial ownership and cited with the approval, observations madein Halsbury’s Laws of England at para 15 as follows:

“Ownership in a British ship or share therein may be acquired inany of three ways – by transfer from a person entitled to transfer,by transmission or by building. Acquisition by transfer andtransmission have been the subject of statutory enactment.Acquisition by building is governed by the common law. Ownershipin a British ship or share therein is a question of fact and does notdepend upon registration of title. Whether registered orunregistered, a person in whom ownership in fact vests is regardedin law as the owner if registered, as the legal owner; ifunregistered, as the beneficial owner.”

64. The successor to the 1956 Act is the Supreme Court Act of1981. Section 21(4) of that Act of U.K. recognizes the discussion inview of Robert Goff, J. by the following provision:

“21. (4) In the case of any such claim as is mentioned in section20(2)(e) to (r), where (a) the claim arises in connection with a ship ; and (b) the person who would be liable on the claim in an action inpersonam (“ the relevant person “) was, when the cause of actionarose, the owner or charterer of, or in possession or in control of,the ship, 26 [1980] 1 S.C.R. 553

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Aan action in rem may (whether or not the claim gives rise to amaritime lien on that ship) be brought in the High Court against -

i) that ship, if at the time when the action is brought the relevantperson is either the beneficial owner of that ship as respects allthe shares in it or the charterer of it under a charter by demise ; or B

(ii) any other ship of which, at the time when the action is brought,the relevant person is the beneficial owner as respects all theshares in it.”

65. There is a clear distinction between a beneficial ownership ofa ship and the charterer of a ship.C

66. In the aforesaid context, now turning to the Arrest Conventionof 1999, Article 1 specifies that the maritime claim means a claim interalia 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 OrionLaxmi and not the respondent ship. Thus, there is no maritime claimDagainst the respondent ship. Article 3 deals with the exercise of rightsof arrest and the eventualities are specified thereunder. In terms ofclause (2) of Article 3 (these Articles are reproduced in paras 25 to 27above), the arrest is permissible of any other ship (which would connotethe respondent ship), which, when the arrest is effected is owned by theEperson who is liable for the maritime claim. The liability of the maritimeclaim 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 inquestion, as noticed above, is not the respondent but the 16 trawlers orthe Orion Laxmi. In view of the discussion aforesaid, really speakingFReflect Geophysical cannot be said to be the beneficial owner in thecapacity of a demised charterer of the respondent ship. ReflectGeophysical is not the owner of the respondent ship and the owner cannotbe made liable for a maritime claim, which is against the trawlers andOrion Laxmi.G67. 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 orderarrest of any vessel which is within its jurisdiction for the purposeof providing security against a maritime claim which is the subject H

of an admiralty proceeding, where the court has reason to believethat—

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(b) the demise charterer of the vessel at the time when the maritimeclaim arose is liable for the claim and is the demise charterer orthe owner of the vessel when the arrest is effected; or”

68. The aforesaid is in consonance with Article 3 of the 1999Convention and, thus, must be read in that context (incidentally the Billwas introduced on 21.11.2016 and passed by the Lok Sabha and theRajya Sabha on 10.3.2017 and 24.7.2017 respectively. It was publishedin the Gazette on 9.8.2017 but is still not notified). The incident in thisquestion is, thus, prior to beginning of this exercise. The expression “thevessel”, “owner” and “demise charterer”, thus, must be read in theaforesaid context and the maritime claims in respect of 16 trawlers andOrion Laxmi cannot be converted into a maritime claim against therespondent ship not owned by Reflect Geophysical.

69. The appellants have neither any agreement with the ownersof the respondent vessel nor any claim against the respondent vessel buttheir claim is on account of their own vessels hired by the charterer ofthe respondent vessel. There is no claim against the owners of therespondent vessel.

70. The result of the aforesaid is that the appeals are dismissedleaving the parties to bear their own costs.

71. The interim order dated 17.5.2013 stands dissolved and theamount along with accrued interest thereon is to be remitted back to theowners of the respondent vessel, who deposited the same before theBombay High Court in pursuance of the interim order.

Nidhi Jain

Appeals dismissed.

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