This catchy title is given only to encourage and motivate the Students and legal practitioners new to this field not to get bewildered by the subject. In many ways, the concept of Admiralty law is more or less similar to the law relating to properties on land and only the terminologies used in Admiralty law are different. Any person having a basic knowledge of laws related to landed properties can easily learn and even master the Admiralty Law by putting in a little extra effort and through practical exposure in Admiralty litigation. While dealing with claims involving immovable properties, we deal with leases, mortgages, secured and unsecured creditors. Similarly, in claims involving Admiralty law, we deal with Charter parties, Ship Mortgages, Maritime claims and Maritime liens.
A lease under the Transfer of property law is akin to a Charter party under the shipping law. Just like we have different kinds of leases, we have different kinds of charter parties under the shipping trade. We have Time charter party, Voyage charter party and Demise charter party which is also called as a Bare Boat charter party. Time charter party is a charter party by which the Charterer takes a ship on hire for a specified period. For example, if the charterer wants the ship from the owner/operator for "n" number of days, the Charter party contract will specify the number of days the ship is given on hire to the charterer. It is somewhat akin to a short-term lease under the regular property law. Voyage Charter party is a charter party by which the charterer takes the ship on hire for a specified voyage or voyages. In a Voyage Charter party, the contract gets terminated only on the completion of the voyage or voyages specified under the charter party or due to any other condition stipulated under the Voyage charter Party. The concept of Voyage charter party is akin to a lease under the regular property law for a period till the completion of a project which the Lessee proposes to do in the same property or elsewhere. For example, if a person takes on lease a property to carry out mining operations in the said property, the lease is valid till the entire minerals specified under the lease contract are excavated or till the entire project is completed. Voyage charter party is somewhat similar to that. As far as bare boat charter party or demise charter party is concerned, the charterer takes the ship on hire on a long-term basis and the possession, control and management of the ship is with the charterer and in some cases the charterer has the option to purchase the ship on the expiry of the period of the charter from the owner. The bareboat charter party is akin to a perpetual lease under the Transfer of property act. To better understand the concept of Bare Boat Charter Party, though not in any way connected with shipping trade, we can also draw analogy between an Indian Citizen and an Overseas Citizen of India (OCI) card holder. As you all must be aware that an OCI is an immigration status permitting a foreign citizen of Indian origin to live and work in the Republic of India indefinitely. A Bareboat charterer is like the OCI card holder and the Indian Citizen is like the registered owner of the ship. Infact for all practical purposes, the Bareboat Charterer is considered as the owner of the vessel and that is why they are also called as a Demise charterer. Excepting for the fact that the ship is registered in the name of the real owner, for all practical purposes the Bareboat charterer is considered as the owner of the ship by the outside world and all contracts as regards the ship with regards to its navigation are entered into only with the Bareboat charterer.
When the entire ship is taken on hire, it is through a charter party but when a shipper of a cargo entrusts only a portion of the cargo and there are other shippers as well who have loaded their respective cargoes into the ship, the documentary receipt for the said cargo into the ship is issued by the ship/carrier which is known as the bill of lading. The bill of Lading is issued by the ship owner or any person authorized by the Ship owner to issue the same. The authorized person can include the Master, bareboat charterer, voyage charterer, time charterer or the steamer agent. The bill of lading is a document of title for the goods/cargo entrusted by the shipper to the ship. A bill of lading can be negotiable or non negotiable. A negotiable bill of lading instructs the carrier to deliver goods to anyone in possession of the original endorsed bill, which itself represents title to and control of the goods. A non-negotiable Bill of lading sets out a specific consignee to whom the goods are to be shipped. This is the reason in shipping trade negotiable bill of lading is preferred. The significance of a bill of lading for better understanding is similar to an Original sale Deed in an immovable property sale transaction. In immovable property sales, the purchaser as a condition for sale seeks delivery of the original sale deed from the Seller at the time of conclusion of the sale by a registered Sale Deed in his/her favour. Similarly in shipping trade, the buyer or his banker who has issued the Letter of credit for the cargo seeks delivery of the original bill of lading from the Seller to enable either of them as the case may be to obtain either by himself or to through his agent the delivery of the cargo from the ship which has carried the cargo meant for him. The ship also issues Delivery order and releases cargo only to the person who has surrendered the original bill of lading to the authorized person of the carrier who is entitled to issue the delivery order for the release of the cargo either to the consignee mentioned in the Bill of lading or to the order of the shipper depending upon the nature of the bill of lading. A negotiable bill of lading is a transferable document and can be assigned to a third party at anytime by endorsement made in the reverse of the bill of lading and in which event the endorsee on production of the original bill of lading is legally entitled to obtain delivery of the cargo from the ship . Once the bill of lading is assigned in favour of a party by making the required endorsement, the original holder of the bill of lading who is described as the consignee under the bill of lading loses the right to take delivery of the cargo. In some cases where the expected receiver of the cargo is unable to produce the original bill of lading due to unavoidable reasons, the Ship may release the cargo on getting a letter of undertaking/indemnity from the receiver. But it all depends on various factors and is entirely the discretion of the Carrier to accept a letter of indemnity or not.
Maritime claims are the only claims which are maintainable before an Admiralty court. All the maritime claims arise out of Contracts with specified ship/ships or for tortious acts committed by the Ship/ships. Just like a person may have a legal claim against a movable or immovable property, maritime claimant has a claim over the specified ship/ships for any Tortious Act or breach of contract committed by the specified ship/ships as the ship is considered to be the wrongdoer under the Admiralty law. Maritime liens are privileged liens. Maritime claim holders when they legally proceed against ship/ships to make a claim are known as Maritime claimants. But, being a privileged lien, maritime lien holders rank ahead of ordinary maritime claimants. In case of maritime lien, the lien attaches to the ship even if the ship is sold to a third party. Therefore, maritime lien holders under the Admiralty law are akin to secured creditors in case of immovable properties. Under the Admiralty law, all Maritime liens are Maritime claims whereas all Maritime claims are not Maritime liens. The claims which are general maritime claims and the claims which are maritime liens are listed and enumerated in the Admiralty(Jurisdiction & Settlement of Maritime claims)Act, 2017,( In short the Admiralty Act). There is one more type of a lien under the Admiralty Law which is commonly known as Statutory Lien and one such lien is a Ship mortgage. A claim which is having statutory protection even at the time of the inception of the contract is known as a statutory Lien. A ship mortgage lien also attaches to the ship even if there is a change of ownership. In the order of priority of claimants, Ship Mortgages rank immediately after the maritime lien holders but rank ahead of other claimants in the rank of priority. Next, we have the unsecured claims who are otherwise known as ordinary maritime claimants who do not possess any special privilege or statutory privilege under the Admiralty law. Examples of unsecured claimants are Ship chandlers (suppliers), ship repairers, and steamer agents. The unsecured claimants must however fall within any of the claims which are considered as Maritime claims under the Admiralty act.
The readers of this article having got a general idea about the various Maritime terms involved in shipping trade will now be better equipped to understand the Admiralty law in India. India, till the passage of the Admiralty jurisdiction and settlement of maritime claims act, 2017(in short the Admiralty Act) did not have a comprehensive Admiralty law covering all areas of Admiralty jurisprudence though some very old Admiralty legislations covering only certain areas in the field were available which did not sync with the march of Admiralty law by the passage of time. After the introduction of the Admiralty Act, the old and obsolete Admiralty Statutes namely the a) Admiralty court Act, 1840 b) Admiralty court Act, 1861 c) Colonial courts of Admiralty act, 1890 and d) Colonial courts of Admiralty( India) act, 1891 and the provisions of the Letters Patent, 1865 in so far as they apply to the Admiralty jurisdiction of Bombay, Calcutta and Madras High courts all came to be repealed.
The new Admiralty Act came into force on 1st April, 2018. Section 16(3) of the Admiralty Act makes it clear that until the rules are made by the Central government for carrying out the purposes of the act, all rules for the time being in force governing the exercise of Admiralty jurisdiction in the respective High Courts shall be applicable. Only some High courts which exercises Admiralty jurisdiction under the Admiralty Act have framed rules and have notified them. One such High Court is Bombay High Court. As far as Madras High Court is concerned, it is in the process of framing the new Admiralty rules and in all likelihood, the Admiralty rules will be framed and notified soon. Till then, the Madras High Court will continue to follow the existing Admiralty rules contained in Order XLII of the Madras High court Original Side rules in accordance with section 16(1) of the Admiralty Act.
As seen from Section 2(1) (e) of the Admiralty Act, all High courts having a coastline exercise Admiralty jurisdiction. Therefore the High Courts of Calcutta, Bombay, Madras, Karnataka, Gujarat, Orissa, Kerala and Andhra Pradesh which all have a coastline exercise Admiralty jurisdiction over the ships found in their respective jurisdictional waters. The Central Government is also empowered to notify any other High Court as an Admiralty court.
The list of maritime claims for which Admiralty jurisdiction can be exercised are enumerated in section 4(1) of the Admiralty Act and they are as follows:
- Dispute regarding the possession or ownership of a vessel or the ownership of any share therein;
- Dispute between the co-owners of a vessel as to the employment or earnings of the Vessel;
- Mortgage or a charge of the same nature on a vessel;
- Loss or damage caused by the operation of a vessel;
- Loss of life or personal injury occurring whether on land or in water, in direct connection with the operation of a vessel;
- Loss or damage to or in connection with any goods;
- Agreement relating to the carriage of goods or passengers on board a vessel, whether contained in the charter party or otherwise;
- Agreement relating to the use or hire of the vessel, whether contained in a charter party or otherwise;
- Salvage services, including, if applicable, special compensation relating to salvage services in respect of a vessel which by itself or its cargo threatens damage to the environment;
- Goods, materials, perishable or non-perishable provisions, bunker fuel, equipment( including containers), supplied or services rendered to the vessel for its operation, management, preservation or maintenance including any fee payable or leviable;
- Construction, reconstruction, repair, converting or equipping of the vessel;
- Dues in connection with any port, harbour, canal , dock or light tolls, other tolls, waterway or any charges of similar kind chargeable under any law for the time being in force;
- Claim by a Master or member of the crew of a Vessel or their heirs and dependents for wages or any sum due out of wages or adjudged to be due which may be recoverable as wages or cost of repatriation or social insurance contribution payable on their behalf or any amount an employer is under an obligation to pay to a person as an employee, whether the obligation arose out of a contract of employment or by operation of law (including operation of a law of any country) for the time being in force, and includes any claim arising under a Manning and Crew Agreement relating to Vessel, notwithstanding anything contained in the provisions of sections 150 and 151 of the Merchant Shipping Act( 44 of 1958).
p. Disbursements incurred on behalf of the vessel or its owners;
q. Particular average or General average
r. Dispute arising out of a contract for the sale of the vessel
S. Insurance premium (including mutual insurance calls) in respect of the Vessel, payable by or behalf the Vessel owner or demise charterer ;
t. Commission, brokerage or agency fees payable in respect of the vessel by or on behalf of the vessel owner or demise charter;
u. Damage or threat of damage caused by the Vessel to the environment, coastline or related interests; measures taken to prevent, minimise or remove such damage; Compensation for such damage; Costs of reasonable measures for the restoration of the environment actually undertaken or to be undertaken; loss incurred or likely to be incurred by third parties in connection with such damage; or any other damage, costs, or loss of a similar nature to those identified in this clause;
v. Costs or expenses relating to raising, removal, recovery, destruction or the rendering harmless of a vessel which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such vessel, and costs or expenses relating to the preservation of an abandoned vessel and maintenance of its crew; and
w. Maritime lien
Always, you will have to remember that only a claim falling under any of the aforementioned categories shall fall within the jurisdiction of an Admiralty Court. In all other cases, the Admiralty court will not have jurisdiction.
The Admiralty Act provides for both in rem and in personam proceedings. In rem proceedings are intiated against the Vessel itself which is considered to be the wrong doer under the Admiralty law. In rem proceedings under the Madras High Court Admiralty Rules are initiated by describing the defendant as "Owners and Parties interested in the Vessel MV/MT( Name of the Vessel) represented by its Master and is against the World at large i.e any person interested in the defendant vessel either as a claimant or as a defendant is put on notice about the arrest and the consequent sale if so ordered by the court. In personam proceedings are initiated against the entity which committed the breach of contract. It is like a normal civil suit though the claim must necessarily fall under any of the maritime claims enumerated in Section 4(1) of the Admiralty Act. Section 5 of the Act deals with in rem proceeding and Section 6 deals with in personam proceeding. Section 5 of the Act permits arrest of the either the same ship which committed breach of contract or its sister ship provided the owner/demise charterer of the ship at the time of the contract and at the time of arrest are one and the same. But there is an exception to this law in case of Maritime liens when even if there is change of ownership, the same vessel can be arrested as the Maritime Lien attaches to the ship. However there is a grey area in the statute as the Admiralty Act has not defined the term "Owner" because in shipping trade there is the concept of registered ownership in whose name the ship is registered and the beneficial ownership who is the real person who owns the ship. It would have been better if the Legislature had defined the term "Owner" in the definitions section to avoid any unnecessary and inconsistent interpretations by the Admiralty courts.
Under section 5 of the Admiralty Act, 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
- the person who owned the Vessel at the time when the maritime claim arose is liable for the claim and is the owner of the Vessel when the arrest is effected ; or
- 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 owner of the vessel when the arrest is effected; or
- the claim is based on a mortgage or a charge of the similar nature on the vessel; or
- the claim relates to the ownership or possession of the vessel; or
- the claim is against the owner, demise charterer, manager or operator of the vessel and is secured by a maritime lien as provided in section 9.
The High court may also order arrest of any other vessel( Sister ship) for the purpose of providing security against a maritime claim, in lieu of the Vessel against which a Maritime claim has been made , subject to the provisions of Sub-section (1) of Section 5.
Provided that no vessel shall be arrested under this sub-section in respect of a maritime claim under clause (a) of sub-section (1) of section 4. Therefore as far as claim arising out of a dispute regarding the possession or ownership of a vessel or the ownership of any share therein is concerned, the proviso makes it clear that there is a legal bar to arrest a Sister Ship for such a type of a claim.
Under Section 6 of the Act, In rem proceedings can be exercised in respect of any maritime claim enumerated in section 4 (1) of the Act. However, there are certain restrictions imposed under Section 7 of the Act. The restrictions are maritime claims arising in respect of a damage or loss of life or personal injury arising out of any (i) collision between vessels (ii) the carrying out of or omission to carry out, a manoeuvre in the case of one or more vessels (iii) non-compliance on the part of one or more vessels, with the collision regulations made in pursuance of section 285 of the Merchant Shipping Act, 1958. (44 of 1958),
the High Court shall not entertain any action against any defendant unless-
- the cause of action, wholly or in part, arises in India; or
- the defendant, at the time of commencement of the action by the High Court, actually and voluntarily resides or carries on business or personally works for gain in India:
Provided that action may be entertained in a case, where there are more defendants than one and where one of the defendants who does not actually and voluntarily reside or carry on business or personally works for gain in India is made a party to such action either with the leave of the Court, or each of the defendants acquiesces in such action.
The High Court shall also not entertain any action in personam to enforce a claim to which Section 7 applies until any proceedings previously brought by the plaintiff in any court outside India against the same defendant in respect of the same incident or series of incidents have been discontinued or have otherwise come to an end.
Another important provision of the Admiralty Act is that under Section 8 it is made clear that an Admiralty sale of a ship by the High Court in exercise of its Admiralty jurisdiction is free of all liens and encumbrances in favour of the successful auction purchaser. Once a ship is sold through a judicial sale by an Admiralty Court, the auction purchaser gets rid of all the encumbrances that were existing prior to the confirmation of the sale and all the arrests over the ship are automatically lifted as the subsisting arrests/encumbrances/liens over the ship merges with the sale proceeds which are lying to the credit of the Admiralty proceeding.
Section 9 of the Act deals with inter se priority between Maritime lien holders and they are as follows:
- claims for wages and other sums due to the Master, Officers and other members of the vessel's complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
- claims in respect of loss of life or personal injury occurring whether on land or on water in direct connection with the operation of the vessel:
- claims for reward for salvage services including special compensation relating thereto;
- claims for port canal and other waterway dues and pilotage dues and any other statutory dues related to the vessel:
- claims based on tort arising out of loss or damage caused by the operation of the vessel other than loss or damage to cargo and containers carried on the vessel.
Section 9(2) of the Act also makes it clear that the Maritime liens specified supra shall continue to exist on the vessel notwithstanding any change of ownership or of registration or of flag and shall be extinguished after expiry of a period of one year unless, prior to the expiry of such period, the vessel has been arrested or seized and such arrest or seizure has led to a forced sale by the High Court;
Provided that for a claim for wages and other related items mentioned in section 9(1)(a) of the Act, the period shall be two years from the date on which the wage, sum, cost of repatriation or social insurance contribution, falls due or becomes payable.
Section 9(3) stipulates that a maritime lien for wages and other connected claims shall commence upon the claimant's discharge from the vessel and in respect of other maritime liens mentioned in (b) to (e) of Section 9(1) of the Act, when the claim arises, and shall run continuously without any suspension or interruption; provided that the period during which the vessel was under arrest or seizure shall be excluded.
Section 9(4) of the Act has however made it clear that no maritime lien shall attach to a vessel to secure a claim which arises out of or results from-
- damage in connection with the carriage of oil or other hazardous or noxious substance by sea for which compensation is payable to the claimants pursuant to any law for the time being in force;
- the radio active properties or a combination of radio active properties with toxic, explosive or other hazardous properties of nuclear fuel or of radioactive products or waste.
Until now, the Indian Supreme Court and the High Courts have recognized that the crew of a ship can exercise their maritime lien over their ship irrespective of whether they are on board the ship or have been discharged/signed off from the ship. But the Admiralty Act under Section 9(3)(a) has introduced a baffling provision which states that the Maritime lien for crew wages shall commence upon the claimants being discharged from their Vessel. There seems to be a grey area with regard to this stipulation. In many cases, the crew are the last persons to make a claim over the vessel for their unpaid wages that too only when the owners have abandoned the ship. Therefore, the unpaid crew remain on board the vessel as there is no possibility for them to get discharged from the vessel due to the owners abandonment or callousness. The Legislature would never have contemplated to prohibit the unpaid crew from exercising their maritime lien unless and until they get discharged from the vessel. It has to be borne in mind that the crew wages which rank the highest in the order of priority should not be defeated in view of section 9 (3)(a) of the Admiralty Act. In my personal opinion, the Legislature will have to take a relook at section 9(3) (a) and amend it suitably to bring it in line with the settled Admiralty practice which existed prior to the passage of the Admiralty Act to enable the crew to exercise their maritime lien over the vessel whether they are on board the vessel or not. If section 9(3)(a) of the Admiralty Act is literally interpreted, the abandoned crew will never be able to recover their unpaid wages as by the time they are discharged from the vessel and are entitled to exercise their maritime lien, the other claimants may have laid their hands in the sale proceeds of the vessel leaving nothing for the crew. The rights of the distressed seamen to recover their wages are well established by decisions of Indian Supreme Court, High Courts and International conventions. In my personal opinion Section 9(3)(a) has put a spoke in the wheel of the crew contrary to the well established Admiralty practice to claim their statutory and undeterred right to claim their wages irrespective of whether they are on board the vessel or not.
In so far as the order of priority of all maritime claims are concerned, it is dealt with in section 10 of the Admiralty Act. Section 10 stipulates that the order of maritime claims determining the inter se priority in an Admiralty proceeding shall be as follows:
- claim on the vessel where there is a maritime lien;
- registered mortgages and charges of same nature on the vessel;
- all other claims
Section 10 has also enumerated the principles that shall be applied in determining the inter se priority of claims. They are as follows:
- if there are more claims than one in any single category of priority, they shall rank equally;
- claims for various salvages shall rank in inverse order of time when the claims thereto accrue.
Another significant feature of the Admiralty Act as seen from section 11 is that if the High Court deems it necessary as a condition for arrest of a vessel or for permitting an arrest already effected to be maintained, impose upon the claimant who seeks to arrest or who has procured the arrest of the vessel, an obligation to provide an unconditional undertaking to pay such sums of money as damages or such security of a kind for an amount and upon such terms as may be determined by the High court for any loss or damage which may be incurred by the defendant as a result of the arrest, and for which the claimant may be found liable, including but not restricted to the following, namely:
- the arrest having been wrongful or unjustified; or
- excessive security having been demanded and provided
section 11(3) of the Admiralty Act empowers the High Court to auction the vessel in case of abandonment by the owner or demise charterer after its arrest and the sale proceeds to be appropriated and dealt with in such manner as the court may deem fit within a period of 45 days from the date of arrest or abandonment.
Provided that the High Court shall, for reasons, to be recorded in writing extend the period of auction of the vessel for a further period of 30 days.
Section 12 of the Act provides that the code of civil procedure, 1908 shall apply in all the proceedings before the High Court in so far as they are not inconsistent with or contrary to the provisions of the Admiralty Act or the rules made thereunder.
Section 13 of the Act also empowers the Central Government to appoint by notification a list of assessors with such qualifications and experience in admiralty and maritime matters, the nature of duties to be performed by them, the fees to be paid to them and other ancillary or incidental matters for the purposes of the Admiralty Act in the manner as may be prescribed.
Section 14 of the Act stipulates that an Appeal shall lie from any judgment, decree or final order or interim order of a single judge of the High Court under the Act to a Division Bench of the High Court.
Section 15 of the Act empowers the Supreme Court on an application filed by any of the parties to transfer at any stage any admiralty proceeding from one High Court to any other High Court and the latter High Court shall proceed to try, hear and determine the matter from the stage at which it stood at the time of transfer.
After examining the provisions of the Admiralty Act, I am of the opinion that there seems to be a lacuna in the Act insofar as contracts containing an arbitration clause are concerned. In almost all shipping contracts, there will be an arbitration clause. Prior to the coming into force of the Admiralty Act, the Indian Courts were following the International conventions while exercising Admiralty jurisdiction whenever there was no corresponding Indian Law on the subject of the maritime dispute. The International convention on arrest of ships, 1999 is the latest of the such conventions on Arrest of ships. India is also a signatory to the said Convention. As per Article 2(3) of the said convention, a ship can be arrested for the purpose of obtaining security notwithstanding the existence of an arbitration clause.
The Admiralty Act is silent on seeking arrest of ships for the purpose of obtaining security when there is an arbitration clause in the disputed contract. It is settled International Admiralty practice as per Article 7(3),(4) and (5) that whenever there is an Arbitration clause in the Contract and the Admiralty Court finds that a prima facie case has been made out by the claimant for grant of arrest of the ship to obtain security pending arbitration, the Admiralty Court grants the order of arrest and if the defendant furnishes security in lieu of the arrest, the Court retains the security with it and directs the parties to go for arbitration in accordance with the arbitration clause and till the final result of the arbitration, the security is retained by the Admiralty Court. This is an important provision which has been left out in the Admiralty Act. Either the Legislature will have to amend the Admiralty Act to incorporate the relevant articles of the International Convention on arrest of ships, 1999 or the Courts will have to interpret the provisions of the Admiralty Act to bring the relevant articles of the International convention of arrest of ships, 1999 within its ambit to enable a party seeking arrest of the ship for obtaining security pending arbitration. This lacuna in the Admiralty Act will have to be plugged to avoid unnecessary hurdle to the aggrieved parties. In fact, this very same issue was raised before the Bombay High Court recently and the Division Bench of the Bombay High Court in the case of Altus Uber and others vs Siem Offshore Rederi AS and others reported in 2019(5) Bom CR 256 upheld the decision of the learned single judge and confirmed the order of the Learned Single judge granting order of arrest of the defendant vessel for the purpose of security pending arbitration. It is understood that the owners of the arrested vessel have challenged the judgment of the Division Bench of the Bombay High Court before the Supreme Court and it is pending there.
Having examined and analyzed the provisions of the Admiralty Act, I shall now deal with the guiding procedures for the effective implementation of the Admiralty Act in so far as Madras High court is concerned. As indicated earlier, the Central Government or the Madras High Court are yet to notify the rules required to be framed and notified as contemplated under Section 16 of the Admiralty Act. Till then as per section 16, Order XLII of the Original Side Rules of the Madras High Court which are the existing Admiralty rules of the Madras High court shall continue to remain applicable in so far as Madras High Court is concerned. But if we follow Order XLII of the Original side rules, once again there is a lacuna as the existing rules cover only in rem proceedings and not in personam proceedings. On the contrary, the new Admiralty Act empowers the Admiralty court to exercise both In rem and In personam proceedings but paradoxically as of now there are no procedural rules available for in personam proceedings. In such circumstances in the interest of the litigant public, the new Admiralty rules will have to be framed and notified at the earliest.
The salient features of Order XLII of the Madras High Court Original Side Rules(Admiralty rules) are that an Admiralty suit in case of in rem proceedings shall be instituted by describing the defendant as the owners and parties interested in the vessel M.V/M.T (Name of the vessel). The existing Admiralty rules under XLII of the Madras High Court Admiralty Rules describes the methodology for serving the summons as well as for effecting the order of arrest on the defendant vessel. The forms for warrant of arrest as well as for release are also prescribed therein. The procedure for registering caveats against arrest of vessels as well as for release is also given. Another salient feature of the Admiralty rules is that under Order XLII Rule 11 any person not named in the suit can intervene as a party interested in the vessel at any stage of the admiralty proceeding. One more significant rule is Order XLII Rule 12 and 13 which enables the Admiralty court to order for sale of the vessel in case the defendant fails to defend the suit within 12 days from the return of the warrant of arrest on the defendant vessel and the claim of the plaintiff is also well founded.
Having examined and analyzed the substantive and procedural aspects of Admiralty Law, I shall now consider the Judicial precedents of Indian Courts with emphasis on Supreme Court Judgments.
The need for the Admiralty act came about after the scathing observations made by the Supreme Court in the landmark judgement of M.V Elisabeth reported in 1993 Supp(2) SCC 433 about the non-existence of any comprehensive codified Admiralty law in India. M.V Elisabeth judgment is considered an encyclopedia on Admiralty law. It deals with the entire gamut of Admiralty law both substantive and procedural. Therefore it is imperative for any newcomer to the field of Admiralty law to read MV Elisabeth judgment for better understanding of Admiralty law.
The Supreme Court in the case of O.Konavalov vs. Commander, Coast Guard Region and others reported in (2006) 4 SCC 620 held that confiscation of a ship under the customs Act will not extinguish the maritime lien of the crew. Therefore it is settled law that the claim crew wages is a paramount maritime lien.
The Supreme Court in Liverpool and London S.P.& I Association Limited vs. M.V.Sea Success I and another reported in (2004) 9 SCC 512 held that claims as to unpaid insurance premium of P&I Club come within the definition of "necessaries" and hence, it is a maritime claim and the maritime claimant is entitled to arrest the ship for the said claim. The Supreme Court also held that the Court can borrow the principles laid down in foreign decisions, if the same is in consonance with Indian Law keeping in view the changing global scenario.
The Supreme Court in the case of Petro Marine Products Limited vs. Ocean Marine Service Company Limited and another reported in (2015) 7 SCC 229 held that when an Admiralty suit is filed before High Court having jurisdiction over the vessel in question and that Court passes order for arrest and sale of a vessel pursuant to which sale is effected, the vessel and sale proceeds become custodia legis of that Court and no subsequent proceeding by any other party interested can be maintained before another court without leave of the jurisdictional Court. In the case dealt with by the Supreme Court, the vessel was situated at Chennai and the Madras High Court was the first Court to order arrest of the vessel. Subsequent to the said arrest, the Bombay High Court also exercised admiralty jurisdiction and arrested the same vessel situated at Chennai. Subsequent to the arrest, the Madras High Court ordered sale of the vessel and the sale was also confirmed in favour of the auction purchaser and the sale proceeds were also distributed to the claimants who had approached the Madras High Court. The claimant before the Bombay High Court also obtained orders from the Bombay High Court for attachment of the funds to the extent of their claim which was lying to the credit of the suit filed before the Madras High Court. Ignoring the attachment, the Madras High Court distributed the funds to the claimants who had approached the Madras High Court for the recovery of their dues. This was put under challenge by the claimant who had approached the Bombay High Court and also obtained orders of attachment of the funds to the extent of their claim amount which was rejected by the Supreme Court for the reason indicated earlier in the beginning of this paragraph. But with the coming into force of the new Admiralty Act, this confusion has been put to rest as it has been made clear that only jurisdictional High Court over the waters where the ship is situated is alone empowered to exercise admiralty jurisdiction over the concerned ship.
The Supreme Court in Bank of Sharjah vs. Joplin Overseas Investments Private Limited and another reported in (2015) 11 SCC 486 is a case involving multiple Admiralty suits filed before the Bombay High Court and one suit alone filed before the Gujarat High Court against the same vessel situated in a Port at Gujarat and the claimant before the Gujarat High Court having acquiesced by submitting to the jurisdiction of the Bombay High Court held that the claimant before Gujarat High Court cannot seek transfer of all the suits pending on the file of the Bombay High Court to the Gujarat High Court, despite the fact that the vessel is lying at a Port in Gujarat and the Supreme Court transferred the only suit pending before the Gujarat High Court to the Bombay High Court and directed the Bombay High Court to dispose of all the suits together.
The Supreme Court in the case of Sunil B. Naik vs. Geowave Commander reported in (2018) 5 SCC 505 applied the International Convention on Arrest of Ships, 1999 and held that since there was no agreement entered into by the claimants with the respondent vessel, they are not entitled for arrest eventhough they may be entitled for an action in personam against the company which owns the respondent vessel.
The Supreme Court in the case of Chrisomar Corporation vs. MJR Steels Private Limited and another reported in (2018) 16 SCC 117 held that (a) claim for supply of necessaries is a maritime claim but not a maritime lien (b) since the respondent has failed to prove that there was a change of ownership of the vessel in its favour on the date of arrest i.e., on 02.05.2000, the plaintiff is entitled for continuation of the arrest against the vessel.
A Division Bench of the Madras High Court in the case of Glints Global Pvt. Limited and others vs. Eisa Trading Inc., Mediterranean Shipping Company (UK) Limited and others reported in MANU/TN/0222/2014 while confirming the decision of the learned Single Judge held that the person who is holding the original bill of lading in his name is alone entitled to take delivery of the cargo, despite the fact that the carrier had earlier issued duly signed draft bills of lading in favour of another third party who had also paid the entire sale consideration for the cargo.
The Supreme Court in the case of Videsh Sanchar Nigam Limited vs. M.V. Kapitan Kud and others reported in (1996) 7 SCC 127 held that when there is a strong triable case, conditions will have to be imposed for the release of the vessel. In that case, a vessel was suspected to have damaged the underground cables in the sea belonging to Videsh Sanchar Nigam Limited. The Supreme Court held that the defendant ship being a foreign ship and if it leaves the shores of the Indian Terricorial Waters, it will be difficult to get hold of it and it may not return to the jurisdiction of the Indian Court. The claim thereby even if successful, would remain inexecutable or land in trouble in private international law in its enforcement. Under these circumstances the Supreme Court released the vessel on condition that (a) the respondent shall deposit sum of Rs.10 crores (b) the Ukrainain Government shall give an undertaking through its accredited authority, more particularly may be its Ambassador to its embassy in India in writing duly undertaking that in the event of suit being decreed, they would comply with the decree without reference to the execution (c) the under taking should be for balance amount of Rs 18 crores and towards costs and other expenses roughly put at Rs.25 crores.
The Supreme Court in the case of Booz allen and Hamilton Inc., vs. SBI Home Finance Limited and others reported in (2011) 5 SCC 532 held that an action in rem is not arbitrable. The Madras High Court following Booz Allen's case in the case of M/s Aqua Marie offShore Services vs. Owners and Parties interested in the vessel Dharti-24 reported in 2015-1-LW.49 rejected an application filed under Section 8 of the Arbitration and Conciliation Act, 1996 seeking for reference to Arbitration on the ground that an action in rem is not arbitrable and the Madras High Court made the order of arrest against the vessel absolute.
A Full Bench of the Bombay High court in the case of J.S Ocean Liner LLC, Bur Dubai (U.A.E) vs M.V Golden Progress reported in (2007) 2 Mah LJ 410(FB) held that an application under Section 9 of the Arbitration and conciliation Act,1996 is not maintainable for the arrest of a vessel for obtaining security of an award that may be passed in arbitration proceedings.The Full Bench of the Bombay High Court also held that an action in rem(in admiralty jurisdiction) for recovery of the claim and arrest of the vessel where the parties have agreed to submit the dispute to arbitration can be maintained and in such a case if by way of an interim measure, a vessel is arrested or the security provided to obtain release of the vessel, matter shall proceed in accordance with Article VII of the International Convention on Arrest of Ships,1999.
A Division Bench of the Madras High Court in the case of Pratibha Shipping Company Limited vs Praxis Energy Agents S.A, and others reported in 2019(5)CTC 450 confirmed the decision of the Learned Single Judge by holding that in cases where Owner of the ship has been wound up by orders of the Court/Tribunal, leave of the High Court/Tribunal under Section 446 of the Companies Act,1956 is not necessary as the Admiralty proceedings are in rem proceedings and the Admiralty Act is a special law which overrides the requirement of leave under Section 446 of the Companies Act. The Bombay High court in its recent decision in the case of Raj Shipping Agencies vs Barge Madhwa and another reported in 2020 SCC Online Bom 651 also followed the decision of the Division Bench of the Madras High Court.
In Interaccess Marine Bunkering Ltd. Vs. M.V.Neamonitisa reported in (2009) 6 MLJ 158 rendered by Justice V.Ramasubramaniam (presently Supreme Court Judge) is the only comprehensive decision of the Madras High Court dealing with Maritime priorities between claimants has also applied the International Convention on Arrest of Ships, 1999 for the purpose of determining priorities. It will be useful for any student or legal practitioner to read the entire judgment for understanding Maritime priorities.
Apart from having knowledge of Admiralty jurisdiction exercised by courts, as practitioners in the field of Admiralty law, lawyers must also get themselves acquainted with other shipping related legislations like Merchant Shipping Act, 1958, Major Port Trust Act, Indian Bills of Lading Act, Carriage of Goods by Sea Act, Multi Modal Transportation of Goods Act, 1993, Marine Insurance Act, 1963 and relevant sections of the Customs Act, 1962 concerning import and export of goods. I have given an over view of the Admiralty law. As students and practitioners interested in this field, I am confident with the aid of this broad outline by doing some extra research and with practical litigation exposure, you can become an expert in this field.
Views are personal only.
(Author is a sitting Judge at Madras High Court)