Cross Ocean Shipping Ltd (Cross Ocean) chartered the MV Ao Hong Ma (second defendant) to Siva Bulk Ltd (Siva), which in turn sub-chartered the vessel to Al Ghurair Resources LLC Dubai (Al Ghurair) for carriage of a cargo of wheat from Canada to the Persian Gulf. The vessel was arrested at Singapore en route to the port of discharge. The cargo was transshipped and loaded onto another vessel chartered by Al Ghurair, which claimed various amounts from Siva under their sub-charterparty.

Siva terminated its charterparty with Cross Ocean, claiming the losses and damages suffered by it as a result of Cross Ocean's breach of contract, and filed an in rem suit against an alleged sister ship of the second defendant, MV Aodabao (first defendant), pursuant to maritime claim(s) in connection with the charterparty. Article 3.1 of the International Convention on Arrest of Ships 1999 (Arrest Convention 1999) permits the arrest of a ship in respect of a maritime claim falling within certain categories. The arrest was made pursuant to an ex parte order dated 7 March 2016. The first defendant applied to ‘vacate and/or set aside the order of arrest', and for security for a claim for damages for wrongful arrest.

The judge unconditionally vacated the ex parte order of arrest by a judgment dated 6 June 2016 because the plaintiff failed to satisfy the test for maintaining the order of arrest. The plaintiff filed an application to appeal the decision but was summarily dismissed by an order dated 13 June 2016. The first defendant was at liberty to take out a fresh motion claiming the losses caused arising from the arrest, leading to the present case. The issue before this court was whether a suit should be kept pending or be dismissed, where the court had concluded that the arrested vessel was not a sister ship.

The plaintiff pleaded that it was entitled to proceed in rem against the vessel by arrest in order to obtain security for its claim, submitting that a court would continue to have jurisdiction once the court had correctly exercised jurisdiction, and relying on Wallace Pharmaceuticals Pvt Ltd v MV Bunga Bidara MANU/MH/1574/2013. The plaintiff averred that the MV Aodabao was a sister ship of the MV Ao Hong Ma and that their common beneficial owner was COSCO. The first defendant produced documents to demonstrate ex facie that the registered owner of the MV Aodabao was not China Ocean Shipping Company. In the pleadings, COSCO was identified by the plaintiff as ‘COSCO, Beijing, China’. This would refer to the China Ocean Shipping Company. However, upon the discovery that China Ocean Shipping Company (because of a merger, forming China COSCO Shipping Corporation Ltd) did not exist on the date of arrest, ie 7 March 2016, the plaintiff changed its position, referring to COSCO as Cross Ocean Shipping Company Ltd.

The first defendant submitted that the suit would have to be dismissed as against the vessel — the sole ground of jurisdiction for filing the admiralty suit against the vessel was the presence of the vessel which was under arrest. Once the arrest was set aside, the court ceased to have in rem admiralty jurisdiction.

Held: The judge vacated the arrest order unconditionally. This meant that the court was recalling its order exercising jurisdiction. Once this happened, the action in rem came to an end. Accordingly, the court had no jurisdiction to arrest the first defendant.

The judge distinguished the MV Bunga Bidara: the order of arrest obtained in MV Bunga Bidara was for breach of a contract of carriage or tort, but the present case found no evidence of the plaintiff having made out a prima facie case to maintain an action in breach of contract or in tort. The judge also observed that the critical word ‘correctly’ appeared in the reasoning of the judge in that case. The question arose as to whether the court has correctly exercised jurisdiction in this case. The judge again distinguished the MV Bunga Bidara: in that case, the in rem action was dismissed, but not the in personam actions; in the present case, this was purely an action in rem with no in personam defendant. Moreover, the plaintiff sought to play a fraud on the court and on the first defendant by deceiving the court that the first defendant vessel was owned by China Ocean Shipping Group Co as per the plaintiff’s own documents filed with the plaint. Furthermore, there was dishonest drafting. The plaintiff did this to create a false cause of action against the first defendant and secure an ex parte order of arrest to which it was not entitled. The plaintiff sought to take unfair advantage of the fact that the first defendant was not served/represented at that stage. Such a plaint ought to be summarily thrown out and the suit dismissed. Thus, the order of arrest was vacated on the ground that ‘plaintiff have miserably failed in establishing, even prima facie, that the Beneficial Owner of defendant No. 1 Vessel and defendant No. 2 is COSCO’. It was a jurisdictional requirement that the vessel must be a sister ship, but the plaintiff failed to satisfy this. Accordingly, the registered owner of the first defendant was not the owner of the second defendant, failing the jurisdictional test.

The plaintiff was unable to demonstrate the four requirements, flowing from the Arrest Convention 1999 and applied by the courts in India, which were the prerequisites to the exercise of jurisdiction:

1. The defendant vessel sought to be arrested was within the jurisdiction.
2. The plaintiff had a maritime claim as set out in art 1.1 of the Arrest Convention 1999.
3. The person who owned the ship at the time when the maritime claim arose was liable for the claim and was owner of the ship when the arrest was effected. In the event the maritime claim was also a maritime lien, then there was no need to show personal liability of the owner as a maritime lien attached to the vessel (res) irrespective of who the owner was (see art 3.1 of the Arrest Convention 1999).
4. Alternatively, plaintiff had to show that the vessel sought to be arrested was a sister ship of the vessel in respect of which the maritime claim arose (see art 3.2 of the Arrest Convention 1999).

Contrary to the plaintiff’s submission, the physical presence of the vessel, while mandatory and one of the requirements for the court to assume jurisdiction, was not the sole requirement.

Since the court assumed jurisdiction by an order of arrest granted ex parte, once the order of arrest in an action in rem was set aside because the arrested vessel was not a sister ship, the court would have no jurisdiction to proceed against the first defendant and this was itself sufficient for dismissal of the suit. Alternatively, it was open to the court to reject the plaint suo motu because it was barred by law and not disclosing any cause of action against the first defendant.