Croft Sales & Distribution Ltd (the plaintiff) brought an admiralty suit seeking the arrest of the Basil, owned by Diva Maritime Co (Diva), to secure a claim arising from the purchase of another vessel, the Axis (ex Max), from Bailey Shipping Ltd (Bailey), whose beneficial owner was Overseas Marine Enterprises (OME). The plaintiff alleged that Bailey had fraudulently provided a non-encumbrance certificate at the time of sale, when the particular ship was in fact subject to outstanding claims by Intermare Transport GmbH of Hamburg. The Axis was subsequently arrested by the Supreme Court of Bangladesh, prompting the sub-buyer, Sheema Steels of Bangladesh (Sheema), to seek recovery from the plaintiff. The plaintiff commenced arbitration against Bailey in London, and brought the present suit seeking arrest of the Basil as security.

The central issues were whether the Arrest Convention 1999 was applicable in India; whether the Basil could be arrested as a sister ship by lifting the corporate veil; and whether the plaintiff had a right in rem sufficient to invoke admiralty jurisdiction.

Held: Appeal dismissed.

The Court considered the Supreme Court's decision in Liverpool & London SP&I Association Ltd v MV Sea Success I (CMI884), which held that the Arrest Convention 1999 may be applied subject to two conditions: (i) consistency with domestic law enacted by Parliament; and (ii) the contract must involve a public law character. The Court held that neither condition was satisfied. The sale of the particular ship was a purely commercial transaction with no involvement of the State or any public interest element. Further, under the Code of Civil Procedure, an arrest order analogous to O 38 r 5 requires a prayer for realisation of a monetary decree, which was absent from the plaint.

On the sister ship question, art 3.2 of the Arrest Convention 1999 requires the available ship to be owned by the same person liable for the maritime claim. The Basil was owned by Diva, a separate company from Bailey. The plaintiff failed to establish that Diva was a subsidiary of Bailey, and no evidence was produced showing common shareholding. The Court held that the corporate veil could only be lifted where a corporate personality was used in a manner opposed to justice, public interest, or the interest of revenue or workers, none of which was established on the facts.

The Arrest Convention 1999 was inapplicable as the underlying contract lacked public law character and the domestic procedural requirements under the Code of Civil Procedure were not satisfied. The available ship could not be arrested as a sister ship, as it was owned by a separate legal entity and the conditions for lifting the corporate veil were not met. In the absence of a right in rem, admiralty jurisdiction could not be invoked. The suit was dismissed, and the interim arrest order was vacated.