The Supreme Court of India, on 9th March 2018, marked a milestone in the field of Admiralty law while deciding the case, Sunil B. Naik v. Geowave Commander by incorporating the principle that there cannot be an arrest or restraint of a vessel in possession of a non-owner, but owned by a complete third party, for a maritime claim against the former. The Admiralty law in India regarding this was silent. It was this huge uncertainty that was set aside by the apex court through the above decision.
The facts of the case are as follows-Oil and Natural Gas Corporation Ltd. awarded a contract to one Reflect Geophysical (a Singapore based company) to carry out seismic survey off the coast of Gujarat near Okha port in 2012. Reflect Geophysical then entered into a bareboat Charter Party Agreement dated 29.06.2012 to charter the vessel ‘Geowave Commander’ from Master and Commander AS, registered in Norway, for 3 three years.
Later, Reflect Geophysical contracted with one Yusuf Abdul Gani (on 01.10.2012) and one Sunil B Naik (on 30.10.2012), to give on hire the vessel ‘Orion Laxmi’ to work in support (like towage duty) and 24 fishing trawlers being the chase vessels to assist in survey operations to be conducted by chartered vessel Geowave Commander respectively. When payments due to Yusuf Gani and Sunil Naik were defaulted by Reflect Geophysical, they approached the Bombay High Court to enforce their claim against Reflect Geophysical by arresting the vessel Geowave Commander. Even though the court gave an ex parte decree to arrest the vessel, later it refused to order arrest, holding that Reflect Geophysical was not the owner of the vessel Geowave Commander, and hence the claims against Reflect Geophysical could not be enforced through the arrest of the chartered vessel.
On appeal by the two aggrieved parties, the Supreme Court bench consisting of Justice J. Chelameswar and Justice Sanjay Kishan Kaul, considered three important principles while adjudicating the matter. One being the precedent set by the SC itself in the landmark decision of MV Elisabeth &Ors. v. Harwan Investment & Trading Pvt. Ltd. “The foundation of an action in rem against a ship arises from a maritime lien or claim imposing a personal liability upon the owner of the vessel.” Here the claim was only against the charterer of the vessel and not against the de jure owner of the vessel. Thus the chartered ship cannot be arrested for a claim against its charterer. The court observed that “the crucial test would be of ownership, which in 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”.
The second point that crossed the Hon’ble Court was Article 3(3) of the International Convention on Arrest of Ships, 1999, which forbids the arrest of ships not owned by the person liable for the claim, except under a judgment based on a contrary law of the respective state. The Indian Admiralty law is silent on that matter, hence no judgment for arrest of such a ship could not take place. The SC itself has stated in the Elizabeth case (supra) that in the absence of any specific statutory provisions, maritime laws of the world can be adopted and adapted by Indian courts. Therefore, though India is not a signatory to the above convention the principles of the same can be utilized appropriately.
Finally, despite the fact that the court considered the plea of “beneficial ownership”, it didn’t really agree to it while adjudication. In Medway Drydock & Engineering Co. Ltd. v. M.V. Andrea Ursula, 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”. But the fact that the above judgment was dissented by the Queen’s Bench itself in l Congreso Del Partido was duly noticed by the court. From the latter case, the court concluded that “mere possession of the ship, however, complete and whatever be the extent of the control was not found good enough to confer the status of ownership. The “beneficial use” of a chartered ship would not ipso facto convert the status of a charterer into a “beneficial owner.”
Hence, the Apex Court of India laid down a strong precedent that there cannot be an arrest or detention of a vessel in possession of a non-owner, but owned by a complete third party, as a security for a maritime claim against the former. The fact that the most significant admiralty case of Elisabeth v. Harwan Investment & Trading was cited and International Convention on Arrest of Ships was referred, where India not being a signatory, are all fascinating points to be noted. It is also interesting to look into, how the plea of “beneficial ownership” wasn’t really given importance for adjudication.