The plaintiff agreed to purchase the MT Johar (ex the Vukovar) from the second defendant under a memorandum of agreement (MOA) dated 11 December 2010 at USD 486 per LT, on the basis of a light displacement tonnage (LDT) of 15,636 mt, with delivery at Karachi/Gadani Anchorage, Pakistan. The plaintiff opened a letter of credit, but alleged that the trim and stability booklet supplied showed an LDT of only 15,463 mt, and appeared to have been tampered with, and thus refused to take delivery when the notice of readiness was tendered. Claiming losses of USD 378,614 with interest, the plaintiff invoked the admiralty jurisdiction of the High Court of Gujarat, seeking the arrest and sale of the vessel as security pending arbitration under cl 8 of the MOA, to which the parties' disputes had already been referred.

The defendants raised a preliminary objection that there was no maritime claim: the Arrest Convention 1999, which covers disputes arising out of a contract for the sale of a ship, had not been ratified by India and no domestic legislation gave it effect; alternatively, on the authority of Liverpool & London SP & I Association Ltd v MV Sea Success I (2004) 9 SCC 512 [60] (CMI884), the Convention could be applied through interpretive changes only subject to domestic law and only for the enforcement of a contract involving a public law character, neither condition being satisfied by a purely commercial sale. The plaintiff replied that the Arrest Convention 1952, to which India was equally not a signatory, had nonetheless been accepted and applied by Indian courts, and relied on art 7 of the 1952 Convention regarding the jurisdiction of the courts of the country of arrest to determine the case on the merits, and invited the Court to refer the applicability of the Arrest Convention 1999 to a Larger Bench.

Held: Suit dismissed with no order as to costs.

The Court was bound by its own decision in Admiralty Suit No 10 of 2010, confirmed by a Division Bench in Croft Sales & Distribution Ltd v MV Basil (OJ Appeal No 6 of 2011, 17 February 2011) (CMI2790), where the same issue arose on a contract for the sale of a vessel and the applicability of the 1999 Convention was examined with reference to arts 1.1.v, 2.3, and 3.2. The Division Bench, noting that the Supreme Court in MV Sea Success had recorded the ratification position under art 14 and could not entertain the contention that the 1999 Convention was not in force, nevertheless read [59]-[60] of that decision as imposing two cumulative conditions: the application of the 1999 Convention is subject to domestic law enacted by Parliament; and 'it should be applied only for enforcement of a contract involving public law character'.

A contract for the sale of a ship is 'purely a commercial transaction', in no way connected with the nation, with no operation or involvement of the State or its instrumentality under art 12 of the Constitution of India. A contract may attract public law character where the State is directly or indirectly connected with its enforcement, or where questions of sovereignty, environment, pollution, or large public interest arise; none of these elements is present. The Full Bench decision of the Bombay High Court in JS Ocean Liner LLC v MV Golden Progress 2007 (2) Bom CR 1 (cp CMI2803) is of no assistance, as it had no occasion to consider the restriction in [60] of MV Sea Success.

The contention that the claim, having been brought to secure arbitration under the Arbitration and Conciliation Act 1996, was itself in the realm of public law character, was meritless: the Division Bench had considered and rejected the same issue, which likewise concerned securing a claim based on arbitration, and it was not open to the Court to reconsider it or to refer the case to a Larger Bench. Since the dispute arose out of a private MOA lacking any public law character, a suit filed on the basis of a maritime claim as defined in art 1.1.v of the Arrest Convention 1999 was not maintainable, and the merits of the contractual dispute were not to be gone into in the exercise of the admiralty jurisdiction.