Kerala High Court Says State Can Maintain Admiralty Suit Over MSC Elsa 3 Sinking But Slashes Security For Release Of Arrested Sister Vessel

The Kerala High Court has modified the security amount to be deposited for the release of sister ship of MSC Elsa 3 from Rs. 9531 crores to Rs. 1227.62 crores. Earlier, the Court had ordered for the conditional arrest of the MSC Akiteta II (1st defendant ship) in an admiralty suit filed by the government of Kerala (plaintiff).Justice M.A. Abdul Hakhim observed:“the Order dated 07.07.2025 in I.A. No.1/2025 in the above Admiralty Suit arresting the Respondent No.1 is modified by substituting the security amount of Rs.9,531 Crores with Rs.1,227.62 Crores. The order of arrest against the Respondent No.1 Vessel shall be until Rs.1,227.62 Crores is deposited by the Respondent No.1 in this Court or until security for the said amount is furnished by the Respondent No.1 to the satisfaction of the Court.”The State had claimed damages to the tune of Rs. 9531 crores caused as result of the sinking of the MSC Elsa 3 off the coast of Kerala on May 25, 2025. The damages claimed were under three heads: Rs. 8626.12 crores for damage caused to the environment, Rs. 378.48 crores towards costs for measures to prevent, minimise, remove damage to the environment and Rs. 526.51 crores towards economic loss caused to fishermen in Kerala.The interim arrest was ordered on an application filed by the state government and without hearing the 2nd defendant owner of the ship. The 1st defendant ship had been under arrest at Vizhinjam Port in Thiruvananthapuram since the interim order as the amount was not deposited.Upon completion of pleadings, the application was heard in detail. The Court considered four questions:“1. Whether the State of Kerala is competent to file the present Admiralty Suit?2. Whether Defendant No.1 is the sister vessel of the sunken vessel MSC ELSA 3?3. Whether the Applicant has made out a prima facie case or reasonably arguable best case with respect to the claims under various heads in the suit?4.Whether the Letter of Undertaking from the Protection and Insurance (P & I) Club Insurance can be accepted as the security for releasing the arrested vessel?”Competency of State to file the admiralty suitThe Court found that the state government is competent to file the present admiralty suit. It also observed that when there is discharge of pollutants, there will be profit loss to the State along with expenditure to take preventive measures and restoration. However, with the respect to the actual costs incurred/needed for these, the Court felt that these are matters of evidence in the trial in the suit.It opined:“The sunken vessel has not been removed even now. Admittedly, it is having fuel in the bunker, engine oil and hazardous substances as cargo. It is located near the territorial waters. It has been causing an imminent threat to the territorial waters. Even if the sinking of the vessel occurred outside the territorial waters, if the sinking of the vessel has its effect inside the territorial waters or threat to the territorial waters, the State is well competent to institute suit with respect to the maritime claim arising therefrom.”Prima facie, MSC Akittetta II is sister ship of MSC Elsa 3The Advocate General urged that though the registered ownership of MSC Elsa 3 is with Elsa 3 Maritime Inc. and that of MSC Akiteta II is Nairne Oceanway Ltd., the registered ownership is merely nominal and not indicative of true operational and financial control.Evidence was brought in to show that the addresses of all the different companies having ownership of the ships are that of the 2nd defendant, which is alleged to have set up shell companies with the intention of defrauding potential claims.The Court observed:“Whether the sunken vessel and Defendant No.1 are sister companies or not is a matter to be finally decided in the trial on the basis of the evidence adduced by the parties in the suit. Hence, I find prima facie that the Defendant No.1 vessel is the sister vessel of the sunken vessel MSC ELSA 3.”Heads of claimsThe Court opined that the amounts claimed under different heads of claims can be reduced for the purpose of security. Compensation for oil pollution, the amount claimed was Rs. 8554.39 crores was reduced to Rs. 500 crores for security. The remediation cost for hazardous chemical pollution, the claim was Rs. 152.10 crores, this was completely done away with. The compensation of Rs. 106.51 crores claimed under the head of economic loss to fishermen due to fishing ban was almost halved for security.The Court, thereafter, observed:“The fixation of Rs.1,227.62 as security for the release of the Respondent No.1 at present would not prevent the State Government from seeking an increase in the security on obtaining further materials to support such increase during the pendency of the suit. The Plaintiff has every right to seek the arrest of any other sister vessel of the sunken vessel in this suit itself to demand additional security on furnishing supporting materials for the increase. I reserve the right of the...

Kerala High Court Says State Can Maintain Admiralty Suit Over MSC Elsa 3 Sinking But Slashes Security For Release Of Arrested Sister Vessel

K. Salma Jennath

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