The plaintiff sought review of an order setting aside the arrest of the defendant vessel, the MV Lewek Altair, owned by the second defendant, Lewek Altair Shipping Pvt Ltd (LAS). The plaintiff owned the MV Crest Mercury 1 and the MV Crest Mercury 2, which were both bareboat chartered to Vision Projects Technologies Pvt Ltd (Vision Projects). A dispute arose between the plaintiff and Vision Projects under these demise charters. One Vision Maritime Pvt Ltd (One Vision), a wholly-owned subsidiary of Vision Projects, was the ISM Code manager of the defendant vessel. The plaintiff contended that Vision Projects was, in effect, the bareboat charterer of the defendant vessel, and it was thus entitled to arrest the defendant vessel in rem.

On 14 December 2021, the plaintiff moved for an ex parte order of arrest. Noting that the plaintiff's claim fell within the meaning of a ‘maritime claim’ as defined in s 4 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017 (the Act), the Court ordered the arrest of the defendant vessel. LAS applied for the arrest order to be set aside, contending that Vision Projects was neither the registered owner nor the demise charterer of the defendant vessel. The Court allowed the interim application and vacated the arrest. The plaintiff sought review and reinstatement of the arrest order.

Held: The plaintiff's review petition and interim application for arrest is denied.

A charterparty was executed between LAS and Vision Projects on 24 March 2019 in respect of the defendant vessel. The controversy, however, revolves around the nature of the charterparty. Was it a demise charter?

Section 5 of the Act provides the cases in which the High Court may order arrest of a vessel:

(1) The High Court may order arrest of any vessel which is within its jurisdiction for the purpose of providing security against a maritime claim which is the subject of an admiralty proceeding, where the court has reason to believe that - ...

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

(2) The High Court may also order arrest of any other vessel for the purpose of providing security against a maritime claim, in lieu of the vessel against which a maritime claim has been made under this Act, subject to the provisions of sub-section (1):

Provided that no vessel shall be arrested under this sub-section in respect of a maritime claim under clause (a) of sub-section (1) of section 4.

On a plain reading of s 5, the High Court would be justified in ordering the arrest of a vessel if it has reason to believe that there is a maritime claim, and the demise charterer of the vessel at the time when the maritime claim arose is liable for the claim, and is also the demise charterer or owner of the vessel when the arrest is effected. Section 5(2) empowers the High Court to also order arrest of any other vessel in lieu of the vessel against which a maritime claim has been made under this Act, subject to the provisions of s 5(1). This implies that even if the provisions contained in s 5(2) are invoked to arrest another vessel, it is obligatory to establish that the claim falls within any of the five clauses of s 5(1). In this case, it has to be seen whether Vision Projects was the demise charterer of the defendant vessel.

The distinction between a voyage charterparty, time charterparty, and charterparty by demise is well recognised, and was set out by the Supreme Court in The Great Eastern Shipping Co Ltd v State of Karnataka (2020) 3 SCC 354 and Epoch Enterrepots v MV Won Fu (2003) 1 SCC 305 (CMI887). Whether a charterparty operates as a demise charter is very often a question of construction of the charterparty agreement. In this case, the charter is titled 'Time Charter for vessel m.v. "LEWEK ALTAIR"'. It provides that Vision Projects entered into a agreement with LAS for the provision of the defendant vessel's services to Haliburton India Operations Pvt Ltd, its principal, who in turn had entered into a contract with Oil & Natural Gas Corp Ltd India (ONGC). It is trite that the nomenclature of the charterparty as a 'Time Charter' is not decisive. What is of critical significance is the legal relationship brought about by the agreement. The agreement in question, on its reading as a whole, does not indicate that it was a bareboat charter. Nor does it suggest that the master and crew were to be employed by the charterer. It does not appear that LAS divested all control over the ship or the master and crew. Nor there is any indication that the charterer undertook liability to third parties. On a meaningful reading of the charterparty as a whole, it is difficult to draw an inference that this was a demise charter.

In the absence of material to demonstrate that the charter was in the nature of a demise charter, an inference of demise cannot be drawn solely on the basis of the fact that the time charterer appointed its wholly-owned subsidiary as an ISM Code manager. On these facts, a consideration of the necessity of lifting the corporate veil is wholly unwarranted.

Counsel were also at odds as to whether the appropriate test at the stage of ship arrest was a 'reasonably arguable best case', or whether this test had been substantially eroded with the enactment of the Act under which 'the High Court ought to have reason to believe' the circumstances enumerated therein. In this case, the plaintiff has simply not succeeded in showing prima facie that Vision Projects was the demise charter of the defendant vessel. As a result, the semantics of 'reasonably arguable best case' or 'prima facie case' do not matter.