TMI Blog2018 (3) TMI 1637X X X X Extracts X X X X X X X X Extracts X X X X ..... without first securing the owner's approval and the vessel had to be restored to its former condition before the termination of the charter, if so required by the owners. This was, thus, a deed between the owner of the Respondent and Reflect Geophysical - The contracts entered into with the Appellants by Reflect Geophysical are completely another set of charter hire agreements/contracts. The unpaid amounts under these contracts amount to claims against Reflect Geophysical. Thus, if there was another vessel owned by Reflect Geophysical, the Appellants would have been well within their rights to seek detention of that vessel as they have a maritime claim but not in respect of the Respondent vessel. The maritime claim is in respect of the vessels which are owned by the Appellants and the party liable in personam is Reflect Geophysical. Were the Respondent vessel put under the de jure ownership of Reflect Geophysical, the Appellants would have been within their rights to seek a detention order against that vessel for recovery of their claims. In the facts of the present case the owners of the Respondent vessel, in fact, also have a claim against Reflect Geophysical for unpaid chart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the ship owned by a third party has given rise to the present appeal. 3. Oil and Natural Gas Corporation Limited (for short 'ONGC') awarded a contract to one Reflect Geophysical Pte. Ltd., Singapore (for short 'Reflect Geophysical') for carrying out seismic survey operations off the coast of Gujarat near the Okha Port in the year 2012. In order to facilitate the carrying out of its obligations, Reflect Geophysical in turn entered into a Charter Party Agreement vide contract dated 29.6.2012 to charter the vessel 'Geowave Commander', the registered owner being Master and Commander AS Norway,(for short 'Geowave Commander') for a period of three years. The said vessel is stated to be a specialized ship equipped to carry out seismic survey operations. In terms of the said contract, it is defined as a 'Bareboat Charter'. The charterer also has the option to purchase the vessel and the owners' seismic equipment provided the purchase option is declared by the charterers to the owners in writing latest on 18.1.2015 being six months prior to the end of the charter period. 4. In order to fully appreciate the terms of the charter, it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Charterers' sole expenses and the Charterers shall indemnify the Owners against all consequences whatsoever (including loss of time) for any failure or inability to do so. (b) Operation of the Vessel: The Charterers shall at their own expense and by their own procurement man, victual, navigate, operate, supply fuel and whenever required, repair the Vessel during the Charter Period and they shall pay all charges and expenses of every kind and nature whatsoever incidental, to their use and operation of the Vessel under this Charter, including annual flag State fees and any foreign general municipality and/or state taxes. The master officers and crew of the Vessel shall be the servants of the Charterers for all purpose whatsoever, even for any reason appointed by the Owners. xxxx xxxx xxxx xxxx xxxx (d) Flag and Name of Vessel: During the Charter period, the Charterers shall have the liberty to paint the Vessel in their own colours, install and display their funnel insignia and fly their own house flag. The Charterer shall also have the liberty, with the Owners' and Mortgagee's prior written consent, which shall not be unreasonably withheld to change the flag an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Sunil B. Naik, the Appellant in SLP(C) No. 18845/2013, in terms whereof the said Appellant agreed to supply 24 fishing trawlers being the chase vessels to assist in survey operations to be conducted by the charterers seismic vessel Geowave Commander. The charter was initially for 16 chase vehicles out of 24 fishing trawlers. The said agreement contained a dispute resolution Clause 18 providing for arbitration, which reads as under: 18. All disputes arising out of or in connection with this Charter Hire Agreement shall be finally settled in Mumbai under the Rules of India Arbitration Act before three arbitrators appointed in accordance with the said Rules. Each party shall appoint one such arbitrator and the two so appointed by the parties shall jointly appoint the third. 6. It is the case of the Appellant that the 16 vessels were made ready for Reflect Geophysical to ensure that fishing vessels were kept well clear of the towed in water seismic equipment so that their fishing equipment is not damaged. The daily hiring rate, as per the agreement, varies for the different nature of vehicles. The said Appellant also claims that the vessels were mobilized at Okha port but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 1 crore in each case as security before the Bombay High Court and on such deposit the vessels were permitted to sail. The amounts were directed to be kept in fixed deposits. We were informed that these amounts were accordingly deposited and are lying in fixed deposits. The ship set sail. The question, thus, would be whether the Appellants are entitled to appropriate this amount along with interest against their dues or whether the Respondent is entitled to release of the amount so deposited in Court. The Legal Conundrum: 12. We are faced with the aforesaid factual position where there are actually three creditors of Reflect Geophysical, being the owners of the Respondent ship and the Appellants, who entered into contracts with Reflect Geophysical to provide assistance in the operation of the task for which the ship was engaged. 13. The first question, thus, which would arise is 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 himself is in default of the payment to the owner. The case of the Appellants, on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as a letting - a lease, or demise, in real property terms - of the ship. Closely allied to this is the fact that the charterer becomes the employer of the master and crew. Both aspects are combined in the common description of a 'bareboat' lease or hire arrangement. As indicated, charter parties which do not amount to a demise or lease of a ship (Including time charters and voyage charters) are classified in English law as contracts of affreightment, pursuant to which the owners agree to carry goods by sea in return for a sum of money. Although the charterers have a right as against the owners to have their goods carried on the vessel, the ownership and the possession of the ship remains with the owners through the master and crew who remain their servants. Whether or not a charter party amounts to a demise charter depends in every case upon the precise terms of the charter, taking the instrument as a whole. The test has been summarized as follows: The question depends, where other things are not in the way, upon this: whether the owner has by the charter, where there is a charter, parted with the whole possession and control of the ship, and to this exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inker its vision or fetter its arms. The latter Admiralty Act of 1890 was said not to incorporate any particular English statue into the Indian law for the purpose of conferring admiralty jurisdiction, but to assimilate the competent courts in India to the position of the English High Court. The lack of legislative exercise was noted with regret. The said lament apparently has still not had its full impact! 17. The draft Admiralty Act of 1987, did not see the light of the day. Section 3 of that Act seeks to define the admiralty jurisdiction of the court. The fate was no different for the draft Admiralty Act of 1999, Section 5 of which defines the admiralty jurisdiction. Finally, we have The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, which was passed by the Parliament and received the assent of the President of India on 9.8.2017 and was duly published in the Gazette on the said date but the date of its coming into force has still not been notified. Interestingly, the statement of object and reasons of this Act itself refers to the desirability of the codifying and clarifying the admiralty law in view of the observations of this Court in M.V. Elisabeth a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ralty jurisdiction in personam in respect of a maritime claim. 21. Mr. Prashant S. Pratap, learned Senior Advocate appearing for the Respondent referred to the same judgment in M.V. Elisabeth and Ors.3 to emphasise that despite the expanding jurisdiction of the courts, certain fundamentals have to be kept in mind as reflected in the observations made in the said judgment. As to what is the object of exercise of jurisdiction in rem and the manner of exercise is discussed in the following paragraphs: 44. The law of admiralty, or maritime law, .... (is the) corpus of rules, concepts, and legal practices governing ... the business of carrying goods and passengers by water. (Gilmore and Black, The Law of Admiralty, page 1). The vital significance and the distinguishing feature of an admiralty action in rem is that this jurisdiction can be assumed by the coastal authorities in respect of any maritime claim by arrest of the ship, irrespective of the nationality of the ship or that of its owners, or the place of business or domicile or residence of its owners or the place where the cause of action arose wholly or in part. 45.... In admiralty the vessel has a juridical personalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Big Malek Adhel [43 US (2 How) 210, 233 (1844)]). xxxx xxxx xxxx xxxx xxxx 59. 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, although arrest in England is the basis of assumption of jurisdiction, unless the owner has submitted to jurisdiction. In any event, once the arrest is made and the owner has entered appearance, the proceedings continue in personam. All actions in the civil law -- whether maritime or not -- are in personam, and arrest of a vessel is permitted even in respect of non-maritime claims, and the vessel is treated as any other property of the owner, and its very presence within jurisdiction is sufficient to clothe the competent tribunal with jurisdiction over the owner in respect of any claim. [See D.C. Jackson, Enforcement of Maritime Claims, (1985) Appendix 5] [See D.C. Jackson, Enforcement of Maritime Claims, (1985) Appendix 5, p. 437 et seq.]. Admiralty actions in England, on the other hand, whether in rem or in personam, are confined to well defined maritime liens or claims and directed against the res (ship, cargo and freight) which is the subject-matter of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory recognition was much later and 'maritime law came to jurisprudential maturity in the first half of the 19th Century' [Maritime Liens by D.R. Thomas]. And the first statutory recognition of such right came in 1840 when the Admiralty Court Act of 1840 was enacted empowering the admiralty court to decide all questions as to the title or ownership of any ship or vessel or the procedure thereof remaining in the territory arising in any cause of possession, salvage, damage, wages or bottomry. By Clause (6) of the Act jurisdiction was extended to decide all claims and demands whatsoever in the nature of salvage for services rendered to or damage received by any ship or seagoing vessel or in the nature of towage or for necessaries supplied to any foreign ship or sea-going vessel and the payment thereof whether such ship or vessel may have been within the body of a country or upon the high seas at the time when the services were rendered or damage received or necessary furnished in respect of such claims. But the most important Act was passed in 1861 which expanded power and jurisdiction of courts and held the field till it was replaced by Administration of Justice Act, 1920. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admiralty' [Carter: History of English Courts]. 'That this Court had originally cognizance of all transaction civil and criminal, upon the high seas, in which its own subjects were concerned, is no subject of controversy' [Lord Stowell in 'The Hercules' 2 Dod. 371]. To urge, therefore, that the Admiralty court exercising jurisdiction under 1890 Act could not travel beyond 1861 Act would be going against explicit language of the Statute. Even now, the Admiralty jurisdiction of the High Court of Justice in England is derived 'partly from Statute and partly from the inherent jurisdiction of Admiralty' [Maritime Liens by D.R. Thomas]. Observations of Lord Diplock in Jade (The) [See D.C. Jackson, Enforcement of Maritime Claims, (1985) Appendix 5, p. 437 et seq.] that Admiralty jurisdiction was statutory only have to be understood in the context they were made. By 1976 the statutory law on Admiralty had become quite comprehensive. Brother Thommen, J., has dealt with it in detail. Therefore those observations are not helpful in deciding the jurisdiction that was exercised by the High Court in England in 1890. 22. The emphasis of the Respondent is, thus, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvention of 1999, the principles of the same are utilized and applied to appropriate situations to determine whether a 'maritime claim', as understood in the international context has arisen and whether the same warrants the arrest of the vessel in question as per its provisions. 25. Article 1 of the Convention defines 'Maritime Claim to include: Article 1 Definitions For the purposes of this Convention: 1. Maritime Claim means a claim arising out of one or more of the following: xxxx xxxx xxxx xxxx xxxx (f) any agreement relating to the use or hire of the ship, whether contained in a charter party or otherwise; xxxx xxxx xxxx xxxx xxxx (l) goods, materials, provisions, bunkers, equipment (including containers) supplied or services rendered to the ship for its operation, management, preservation or maintenance; 26. Article 2 stipulates the powers of arrest and Sub-clause (2) clarifies that the ship may be arrested only respect a maritime claim. Sub-clause (3) stipulates that ship may be arrested for purposes of obtaining security notwithstanding that by virtue of a jurisdiction Clause or arbitration clause, it has to be adjudicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by judicial or forced sale of that ship. 28. We may note that the claim of the Appellant, Sunil B. Naik, is based on the definition Clause of the maritime claim Clause (f) (l) as discussed even in the impugned order while the claim of Yusuf Abdul Gani is restricted to Clause (f). 29. The endeavour of the Appellants to bring the claim within the aforesaid provisions is naturally opposed by the Respondent on the ground that the agreement between the Appellants and Reflect Geophysical is actually a charter hire agreement between Reflect Geophysical and the two Appellants. It was contended that there were neither any goods supplied nor services rendered and, in fact, the survey operations never commenced as the ships remained stationed at the port at Okha whereas the Respondent vessel never arrived at Okha. Reflect Geophysical is stated to have actually engaged the vessels of the Appellant through a charter hire agreement and this cannot form a part of the maritime claim against the Respondent ship. In this behalf, reference has been made to the judgment in The Eschersheim [1976] Vol. I Lloyd's Law Reports 81. The relevant portion, which is also reproduced in the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 32. Mr. Naphade, learned Senior Advocate for the Appellants has referred to the judgment in Medway Drydock Engineering Co. Ltd. v. M.V. Andrea Ursula [1973] QB 265 dealing with the action in rem on the question whether the ship under a demised charter is beneficially owned as respects all the shares therein by the charterer, within the meaning of the expression in Section 3(4) of the Administration of Justice Act, 1956. It was observed that a ship would be beneficially owned by the person who, whether or not he was the legal or equitable owner or not, lawfully had full possession and control of her, and, by virtue of such possession and control, had all the benefit and use of her which a legal or equitable owner would ordinarily have. 33. In the aforesaid context it may be noticed that in Section 1 of the Administration of Justice Act, 1956, the Admiralty jurisdiction could be invoked inter alia in the following case: 1. Admiralty jurisdiction of the High Court (I) The Admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following questions or claims - xxxx xxxx xxxx xxxx xxxx (h) any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Courts below would show that the plea of no right of arrest of the Respondent vessel was based on Reflect Geophysical not being the owner but only a charterer of the vessel. The essential ingredients for maintaining a maritime claim for which a vessel may be detained were specified as under: In order to ascertain whether in an action in rem filed in the Admiralty jurisdiction of the court, the Plaintiff is entitled to an order of arrest of the Defendant vessel, the following needs to be established: (a) The Plaintiff has a maritime claim; (b) The vessel in respect of which the Plaintiff has a maritime claim; (c) The party liable in personam in respect of the maritime claim; and (d) The party liable in personam is the owner of the vessel sought to be arrested. 38. The learned single Judge opined that the claim in Yusuf Abdul Gani's case was in respect of use or hire of another ship Orion Laxmi and the claim, thus, could not be maintained against the Respondent vessel. It was stated to be a claim in personam against Reflect Geophysical and thus, only a vessel owned by Reflect Geophysical could have been restrained. The learned single Judge also records that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed charter or bareboat charter the ship owner fades into the background and merely collects its hire payment for the period of the charter. It was stated to be akin to a lease of a ship, similar to a hire purchase arrangement rather than a simple agreement for hire or use of the ship. Thus, the so-called de facto ownership of Reflect Geophysical qua the Respondent vessel was held to be immaterial in respect of a maritime claim arising from an agreement for use or hire of another vessel, which is the situation in both the cases. 42. Insofar as the Respondent vessel is concerned, there is no agreement entered into by either of the two Appellants and, thus, it cannot be a maritime claim in respect of Article 1(1)(f) of the Arrest Convention. Consequently, there would be no occasion to arrest the vessel Under Article 3(1)(b) of the Arrest Convention as no maritime claim has resulted in the hands of the demised charterer with regard to the demised vessel. The maritime claim by either of the Appellants could, thus, be enforced only by arresting another vessel owned by Reflect Geophysical and the de facto ownership, could not be converted into a de jure ownership. In respect of Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charter amount. Thus, unfortunately it is both the owner of the Respondent vessel on the one hand and the Appellants on the other, who have a maritime claim against Reflect Geophysical, which has gone into liquidation. The Appellants quite conscious of the limitations of any endeavour to recover the amount from Reflect Geophysical, have ventured into this litigation to somehow recover the amount from, in effect, the owners of the Respondent vessel by detention of the Respondent vessel. That may also be the reason why the Appellants did not even think it worth their while to implead Reflect Geophysical against whom they have their claim in personam, possibly envisaged as a futile exercise. 47. It is in the aforesaid context that while discussing this issue in the impugned order, the essential ingredients for detention of a vessel in a maritime claim were specified (para 37 aforesaid). 48. The aforesaid issue has also been discussed in Polestar Maritime Ltd.6 while dealing with Article 3(2) of the Arrest Convention. The test of the ownership of both the ships as one and the same is not satisfied in the present case. The second situation envisaged is where another ship owned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case clearly does not vest with Reflect Geophysical and the de facto ownership under their bareboat charter cannot be equated to a de jure owner, which is necessary for an action in personam. 52. We may note that for the purposes of determining the controversy, it is not really of much relevance that effectively no work was carried out under the agreements between the Appellants and Reflect Geophysical as the chartered ship never commenced its task and never reached the port from where the task was to be commenced. 53. One of the contentions advanced by the learned Senior Advocate for the Appellant recorded by us relates to the plea of beneficial ownership of the Respondent ship by Reflect Geophysical and, thus, the enforceability of a claim by the Appellants against the Respondent ship. In support of this plea reliance is placed on the judgment in Medway Drydock Engineering Co. Ltd.8. We must record at the inception itself that this issue appears not to have been raised either before the learned single Judge or the Division Bench as there is no discussion on this aspect. We, however, still feel necessary to deal with this aspect and in some detail largely bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... backing, Section 3 of The Administration of Justice Act, 1956, incorporated the same. In Sub-section (4) of Section 3, while dealing with the invocation of an action in rem, the concept of beneficially owned vis-a-vis a ship was introduced and the right to invoke it against the same. 56. The observations in Medway Drydock Engineering Co. Ltd.9 referred to while recording the submissions of Mr. Naphade, have to be appreciated in that context. However, a deeper study of the issue shows that this judgment has been dissented from even by the Queen's Bench itself in I Congreso Del Partido [1978] Q.B. 500 by Robert Goff, J. This judgment debates the concept of beneficially owned in respect of shares therein within the meaning of Section 3(4) of The Administration of Justice Act, 1956. There is a respectful disagreement with the line adopted by Brandon, J. in the Medway Drydock Engineering Co. Ltd.10. Thus, it is noticed that Brandon, J. construed the words beneficially owned as respects all the shares therein as not being restricted to legal or equitable ownership, but as being wide enough to include such ownership as is conferred by a demise charter. Robert Goff, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motion by Plaintiffs for judgment in an ex parte proceedings while he had the benefit of submissions of both the sides and Robert Goff, J. sought to be persuaded by the counsel appearing for the ship Mr. Davenport in the following manner: Mr. Davenport, for Mambisa, to whose argument I am much indebted, has however urged me not to follow The Andrea Ursula [1973] Q.B. 265. The decision in that case is not binding upon me and, while of course I have the greatest respect for any decision of Brandon J., I have reconsidered the matter and, having done so, I have reached the conclusion that the words beneficially owned as respects all the shares therein refer only to cases of equitable ownership, whether or not accompanied by legal ownership, and are not wide enough to include cases of possession and control without ownership, however full and complete such possession and control may be. Since I have reached a different conclusion to Brandon J., I think it right to point out that I have had the benefit of a full argument by counsel for the Defendants in this case, whereas The Andrea Ursula came before Brandon J. on a motion by Plaintiffs for judgment in default of appearance, on whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to my attention, and I am aware of more, in which a demise charterer has been described as a beneficial owner, still less as a beneficial owner as respects all the shares in the vessel. Indeed, any reference in this context to ownership as respects all the shares in the vessel is, in my judgment, inapt to describe the possession of a demise charterer; such words are only appropriate when describing ownership in the ordinary sense of the word, and not possession which is concerned with a physical relationship with the vessel founded upon control and has nothing to do with shares in the vessel. A demise charterer has, within limits defined by contract, the beneficial use of the ship; he does not, however, have the beneficial ownership as respects all the shares in the ship. Furthermore, I can find nothing in the remainder of the statute to cause me to reject the natural and ordinary meaning of the words; certainly, I would not construe other references in the statute to ownership -- as in Section 1(1)(a) -- or co-owner -- as in Section 1(1)(b) -- as referring in any way to demise charterers. Indeed in Part V of the Act, which is concerned with Admiralty jurisdiction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of a ship is liable in respect of a maritime claim relating to that ship. As I read the Convention, Article 3(1), which is expressed to be subject to Article 3(4), provides for the arrest of either the particular ship in respect of which the maritime claim arose, or (except in certain specified cases) any other ship which is owned by the person who was, at the time when the maritime claim arose, owner of the particular ship. Furthermore, despite the argument of Mr. Alexander for the Plaintiffs to the contrary, in this context I read the word owner as bearing its ordinary meaning, that is, the person with title to the ship; am confirmed in this view by the provision relating to ownership in Article 3(2) and by the fact that Article 3(4), to which Article 3(1) is expressed to be subject, makes special provision for the case of the demise charterer and others. It is to be observed that, if one puts Article 3(4) on one side, the draftsman of the Act of 1956 appears to have been seeking to give effect to Article 3(1) and (2) of the Convention, subject to the fact that he appears to have been concerned to extend the word ownership by the addition of the adjective beneficial, v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to describe the possession of a demise charterer.... In my view, the expression 'beneficial owner' was chosen to serve as an instruction, in a system of registration of ownership rights, to look beyond the register in searching for the relevant person. But such search cannot go so far as to encompass a demise charterer who has no equitable or proprietary interest which could burden the title of the registered owner of the registered owner. As I see it, the expression 'beneficial owner' serves to include someone who stands behind the registered owner in situations where the latter functions merely as an intermediary, like a trustee, a legal representative or an agent. The French corresponding expression 'veritable proprietaire' leaves no doubt to that effect. 63. The Supreme Court of Canada in Antares Shipping Corporation v. The Ship 'Capricorn' et al. [1980] 1 S.C.R. 553 also referred to the concept of beneficial ownership and cited with the approval, observations made in Halsbury's Laws of England at para 15 as follows: Ownership in a British ship or share therein may be acquired in any of three ways - by transfer from a person entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the maritime claim is Reflect Geophysical and not the owners of the Respondent ship. In terms of Sub-clause (b) of Clause (2) of Article 3, a demise charterer, time charterer or voyage charterer of that ship is liable. The ship in question, as noticed above, is not the Respondent but the 16 trawlers or the Orion Laxmi. In view of the discussion aforesaid, really speaking Reflect Geophysical cannot be said to be the beneficial owner in the capacity of a demised charterer of the Respondent ship. Reflect Geophysical is not the owner of the Respondent ship and the owner cannot be made liable for a maritime claim, which is against the trawlers and Orion Laxmi. 67. We may also note that in the 2017 Act in India Clause 5(b) states as under: 5. Arrest of vessel in rem .--(1) The High Court may order arrest of any vessel which is within its jurisdiction for the purpose of providing security against a maritime claim which is the subject of an admiralty proceeding, where the court has reason to believe that-- xxxx xxxx xxxx xxxx xxxx (b) the demise charterer of the vessel at the time when the maritime claim arose is liable for the claim and is the demise charterer or the owne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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