The plaintiff applied for the arrest of the defendant vessel Dharti-24, presently in Indian waters at the Port of Visakhapatnam. The defendant applied for a referral of the dispute to arbitration in accordance with the arbitration clause in the relevant work order. The plaintiff was the registered owner of the MV Aqua Pride. The plaintiff entered into a charterparty with Dharti Dredging & Infrastructure Ltd (the owner of the defendant vessel). The owner of the defendant vessel issued a work order in favour of the plaintiff. Under the work order, the Aqua Pride was hired by the owner of the defendant vessel for towage purposes in respect of its operations at Kyaukphyu Port in Myanmar. The owner of the defendant vessel failed to make payments under the work order.

The defendant filed a counter-affidavit stating that the present suit was not maintainable because the contract was between the plaintiff and Dharti Dredging & Infrastructure Ltd, but the Dharti-24 was not owned by Dharti Dredging & Infrastructure Ltd. The defendant also submitted that the Court did not have territorial jurisdiction over this dispute, and that no part of the cause of action arose within the jurisdiction of the Court. In accordance with s 8 of the Arbitration and Conciliation Act 1996, any dispute arising out of a contract which contains an arbitration clause must be referred to the arbitrator.

Held: The plaintiff's application is allowed. The Registry is directed to issue a warrant of arrest of the vessel Dharti-24. The defendant's application is dismissed.

The defendant argues that since there is a dispute between the plaintiff and the owner of the defendant vessel in respect of the claim made by the plaintiff, this Court, by dismissing the application filed by the plaintiff, may refer the present dispute to arbitration in terms of the dispute resolute clause in the work order. However, the plaintiff argues that its claim is an action in rem, as the claim is made against the defendant vessel. Therefore, being an action in rem, the arbitration clause is not applicable to the present case. In this regard, the plaintiff relied on the judgment of the Full Bench of the Bombay High Court in JS Ocean Liner LLC v MV Golden Progress 2007 (2) Arb LR 104 (Bombay), LNIND 2007 BOM [31]:

(i) An application under Section 9 of the Arbitration and Conciliation Act, 1996 is not maintainable for the arrest of the vessel for obtaining security of an award that may be made in arbitration proceedings. The view of the contrary in M.V. Indurva Valley, to that extent is overruled.

(ii) An action in rem (in admiralty jurisdiction) for recovery of the claim and arrest of the vessel where they parties have agreed to submit the dispute to arbitration can be maintained and in such case if by way of an interim measure, the vessel is arrested or the security provided to obtain the release of the vessel, matter shall proceed in accord with Article VII of the International Convention on Arrest of Ships, 1999. ...

The plaintiff's towage claim is a maritime claim under art 1.1.j of the Arrest Convention 1999. The international Conventions have been made applicable as held by the Supreme Court in MV Elisabeth v Harwan Investment & Trading Pvt Ltd AIR 1993 SC 1014, (1993) 2 SCC 433, LNIND 1992 SC 194 (CMI883).

An action in rem will be converted into an action in personam if the owner of the vessel submits to the jurisdiction and obtains the release of the vessel by depositing security. Therefore, in the event of the owner of the vessel obtaining release of the vessel by depositing security, the action in rem will be converted into an action in personam. Only in that situation will the question of referring the dispute to the arbitration in terms of the dispute resolution clause in the work order arise. Therefore, the defendant's application under s 8 of the Arbitration and Conciliation Act to refer the present dispute to arbitration cannot be entertained at this stage.