The plaintiff commenced proceedings to arrest bunkers (the first defendant) on the African Eagle (the second defendant) and freight as security pending arbitration of the plaintiff's charterparty claim. The plaintiff did not seek a court decree against the defendants for any compensation. The arrest order was granted. Claiming to be charterers of the vessel, Bulk Ship Management SEA (the third defendant) applied to vacate that order. The order arresting freight was vacated for lack of jurisdiction. As for the order arresting bunkers, the third defendant was directed to furnish security on a without prejudice basis: see Bulk Ship Management SEA v The Bunkers onboard the Ship MV African Eagle MANU/MH/0097/2013 (see also CMI2812). The third defendant thereafter applied for an order that the plaintiff pay compensation for losses suffered due to wrongful arrest of the bunkers. The plaintiff applied to stay that application pending arbitration proceedings.

The plaintiff argued that the application was premature because the issue relating to the arrest of bunkers remained open. However, the third defendant argued that the plaintiff had refused its offer, made right at the start, to secure the plaintiff's claim. Further, the plaintiff's plaint disclosed no cause of action because an inter partes suit only for security pending arbitration is not maintainable: Bharat Aluminium Co v Kaiser Aluminium Technical Service Inc (2012) 9 SCC 552 (BALCO). Because the plaintiff did not seek a court decree, a cause of action would arise only if the future arbitration award is in favour of the plaintiff. Because the plaintiff's cause of action is contingent and speculative, it is non-existent. The arrest was wrongful and the plaintiff's application for stay is to be dismissed.

The plaintiff argued that BALCO was applicable only to civil actions and not admiralty actions in rem. The plaintiff relied upon the JS Ocean Liner LLC v MV Golden Progress 2007 (2) Bom CR 1 (The Golden Progress) (CMI2803) to argue that an admiralty action in rem for obtaining security pending arbitration can be allowed. The third defendant countered that The Golden Progress was distinguishable because the plaintiffs in The Golden Progress had claimed that they were entitled to a decree and only sought, in the alternative, ship arrest to secure their arbitration claim overseas.

Held: Plaintiff's application dismissed.

The cause of action is non-existent. The plaintiff's plaint is not maintainable (BALCO) and must be rejected under O 7 r 11(a). BALCO applies to civil proceedings and admiralty proceedings. All suits, whether civil or admiralty suits, are liable to be rejected if they do not disclose a cause of action. The Court will hear the third defendant's application.

The Golden Progress is distinguishable. The Golden Progress [78(ii)] held that an admiralty action in rem for recovery of the claim and arrest of the vessel where the parties have agreed to submit the dispute to arbitration can be maintained. In such case if by way of an interim measure, the vessel is arrested or security is provided to obtain the release of the vessel, the matter shall proceed in accord with art 7 of the Arrest Convention 1999.

A ship may be arrested in the admiralty jurisdiction only to acquire/assume jurisdiction or to obtain security for satisfaction of the claim when decreed or in execution of a decree. Once the vessel is arrested, the suit must proceed to trial against the owner as in any other suit. See The Golden Progress [30], [38]; MV Elisabeth v Harwan Investment & Trading Pvt Ltd AIR 1993 SC 1014 (The MV Elisabeth) (CMI883); MV Sea Success 1 v Liverpool and London Steamship Protection and Indemnity Association Ltd 2002 (2) Bom CR (OS) 537 (see also CMI884).

Where the plaintiff had sought to invoke the admiralty jurisdiction not to obtain the hearing and determination of claim but for the purpose of obtaining security for an award for arbitration proceedings such an action cannot be maintained: The Golden Progress [39]–[42], referring to The Cap Bon [1967] 1 Lloyd's Rep 543; The Golden Trader [1974] 1 Lloyd's Rep 378 (CMI2725); The Rena K [1978] 1 Lloyd's Rep 545 (The Rena K) (CMI2198). The Court only has jurisdiction to retain an arrested ship to provide security for a judgment or settlement in the court action: The Rena K. An admiralty Court has no jurisdiction to arrest a ship when the arresting party intends not to obtain the hearing and determination of claim but for the purpose of obtaining security for an award for arbitration proceedings: The Golden Progress. In contrast, when the primary prayer for court proceedings is for a decree, parties may abandon arbitration and proceed with litigation if they so desire. The Court has jurisdiction to deal with such suits because it not inevitable that the matter will be referred to arbitration until the defendant insists on arbitration. See The Golden Progress [78(ii)], where 'recovery of the claim' refers to a suit by the plaintiff seeking a court decree.

An arbitration agreement does not by itself preclude a party from commencing court proceedings and procure the arrest of the ship. But the other party may apply to stay proceedings, which the Court is bound to grant. If the stay is granted, the Court may require, as a condition of granting a stay, the bail provided for release of the ship be made available to secure an award made in the arbitration proceedings. The Court has discretion to pass an appropriate order in that regard after taking into consideration all circumstances. This was what the judges in The Golden Progress had in mind when it held that 'retention of security shall remain a matter of discretion': The Golden Progress [78(iv)].