This appeal arose from a claim against Reflect Geophysical (a Singapore company), which was the charterer of the Geowave Commander, a seismic survey vessel owned by Master and Commander AS Norway (respondent). Reflect Geophysical owed money to Sunil B Naik (appellant in SLP(C) No 18845/2013) and was unable to pay. Reflect Geophysical filed for judicial management in the Singapore High Court. The appellant endeavored to recover the money owing by arguing a maritime claim against the Geowave Commander arising from two related agreements.

The first was a charterparty dated 29 June 2012 between the respondent and Reflect Geophysical to charter the Geowave Commander for three years to carry out seismic survey operations off the coast of Gujarat near Okha port for Oil and Natural Gas Corp Ltd.

The second was a charterparty dated 30 October 2012 between the appellant and Reflect Geophysical for the appellant’s supply of 24 fishing trawlers as chase vessels to assist in the Geowave Commander's survey operations. Initially, the charter was for 16 chase vehicles out of 24 fishing trawlers. The appellant’s case was that the 16 vessels were prepared for Reflect Geophysical to ensure that fishing vessels were kept well clear of the seismic equipment so that their fishing equipment was not damaged, but the Geowave Commander never went to Okha and was at the Pipavav port from where it went to Mumbai.

There was a separate claim for money owed by Reflect Geophysical to Yusuf Abdul Gani (appellant in SLP(C) No 18899/2013) for the hire of the Orion Laxmi for the purposes of supplying standby and emergency towing duties. Gani filed an admiralty suit and arrested the Geowave Commander on 15 March 2013, before Nair, who also filed an admiralty suit and arrested the Geowave Commander on 12 April 2013. The respondent filed a notice of motion in the two proceedings to vacate the ex parte arrest of the Geowave Commander, which was granted on 17 April 2013. Naik and Gani (appellants) appealed against the decision, but their appeal was dismissed on 10 May 2013.

A sum was deposited in fixed deposit as security before the Geowave Commander was permitted to sail — the question arose as to whether the appellants were entitled to appropriate this amount, along with interest, against their dues, or whether the respondent was entitled to the release of the amount so deposited in court.

The legal issue was whether a maritime claim could be maintained under the admiralty jurisdiction of the High Court for an action in rem against the respondent ship in respect of the dues of the appellants when the charterer was itself in default of its payments to the shipowner. However, the International Convention on Arrest of Ships 1999 (Arrest Convention 1999) is not given effect in India as India is not a signatory to the Convention. Nevertheless, in the interests of international comity, its principles have been utilised and applied to appropriate situations to determine whether a ‘maritime claim’, as understood in the international context, has arisen to warrant the arrest of the vessel in question.

The appellants relied on the purported liability of the vessel on account of the charter agreements and the rights and obligations of the charterer. The respondent, who had succeeded before both the lower courts, sought to establish that the appellants' claims could not be categorised as maritime claims for invoking the admiralty jurisdiction of the High Court and accordingly, the vessel could not be arrested to secure those claims.

Held: The Supreme Court agreed with the lower courts and thus found no reason to interfere on appeal.

It was clear that Reflect Geophysical had the status of a de facto owner according to the various terms of the charterparty, because it could not make any structural changes without the respondent’s approval, and the vessel had to be restored to its former condition before the termination of the charter if so required. Notwithstanding that the charter agreement contained a clause for conversion of this status into that of a de jure owner through an option to purchase, that option was never exercised.

The Court therefore found that Reflect Geophysical was a demise charterer — it was the owner for services stipulated, and assumed in large measures the customary rights and liabilities of vessel owners in relation to third persons, who had dealt with it or with the ship, eg repairs and supplies ordered for the vessel, wages of seafarers, etc. However, the ‘beneficial use’ of a chartered ship would not ipso facto convert the status of a charterer into a ‘beneficial owner’ — mere possession of the ship, no matter how complete and whatever the extent of the control, was insufficient to confer the status of ownership. Accordingly, there was a clear distinction between beneficial ownership of a ship and a charterer of a ship.

Neither of the appellants had a maritime claim against the Geowave Commander. There was no agreement for the use or hire of the ship entered into by either of the two appellants, and therefore it could not have been a maritime claim (art 1.1.f, Arrest Convention 1999; ss 3(1)(h), draft Admiralty Act 1987; s 5, draft Admiralty Act 1999); the connotation of ‘the ship’ would mean the 16 fishing trawlers or the Orion Laxmi, not the Geowave Commander.

Notwithstanding that ‘operation or maintenance’ was pleaded to include any services rendered to the Geowave Commander, there was neither supply of goods nor services to the Geowave Commander (art 1.1.l, Arrest Convention 1999; s 3(1)(l), draft Admiralty Act 1987; s 5, draft Admiralty Act 1999; art 4(1)(l), Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017). Moreover, this was also not a case where goods had been given on hire or for use of the Geowave Commander. Furthermore, this article could not be used to arrest a ship of a third party or a non-owner. Accordingly, there was no occasion to arrest the vessel under art 3.1.b of the Arrest Convention as no maritime claim has resulted in the hands of the demise charterer with regards to the demised vessel.

The foundation of an action in rem, which is a peculiarity of the Anglo-American law, arises from a maritime lien or claim imposing a personal liability upon the owner of the vessel. The real purpose of arrest in both the English and the Civil Law systems is to obtain security as a guarantee for satisfaction of the decree, though arrest in England is the basis of assumption of jurisdiction, unless the owner has submitted to jurisdiction. In England it grew and was developed in course of which its scope was widened from damage done by a ship to claims of salvor, wages, bottomry, supply of necessaries and even to bills of lading. Its effect was to give the claimant a charge on res from the moment the lien arose which followed the res even if it changed hands.

A ship can be arrested in respect of a maritime claim against another ship when the owner of both ships are one and the same and in case a maritime claim existed qua the owner of a ship, which is taken on a demised charter then the liability can be recovered by restraint of the ship owned by the charterer (art 3.2, Arrest Convention 1999; Polestar Maritime Ltd v MV Qi Lin Men Admiralty Suit (Lodging) No 3547 of 2008). The use or hire of another ship, Orion Laxmi, in Yusuf Abdul Gani’s case, which was stated to be a claim in personam against Reflect Geophysical, could not be maintained against the Geowave Commander; only a vessel owned by Reflect Geophysical could have been arrested. Accordingly, the contracts entered into with the appellants by Reflect Geophysical are a completely different set of charter hire agreements/contracts. The unpaid amounts under these contracts amount to claims against Reflect Geophysical and thus the appellants were well within their rights to seek detention of another vessel owned by Reflect Geophysical. However, this is not the case for Geowave Commander, which was not owned by Reflect Geophysical, unless it were put under the de jure ownership of Reflect Geophysical.

There was also a reference made to art 3.3 of the Arrest Convention 1999 which provided for arrest of the ship only if the judgment in respect of that claim can be enforced against the ship by judicial or forced sale of that ship and in the absence of any provision under the Indian law by which a ship not owned by a person could be made liable for a maritime claim, the arrest of the ship could not take place; the judgment could be obtained only under the contract which would be against Reflect Geophysical.

It was desirable to codify and clarify admiralty law. The Admiralty Act 1890 was stated not to inhibit the exercise of jurisdiction by the High Court subject to its own rules, in exercise of its maritime jurisdiction. The Admiralty Act 1890 did not incorporate any particular English statute into Indian law to confer admiralty jurisdiction, but to assimilate the competent courts in India to the position of the English High Court. Section 3 of the draft Admiralty Act 1987 and s 5 of the draft Admiralty Act 1999 were unsuccessful attempts to define the admiralty jurisdiction of the court. Even though Parliament had passed the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017, and it had received Presidential assent, it was still not in force pending notification of an effective date. The present dispute served as a reminder of the necessity of bringing this Act into force.