# SUNIL B. NAIK v. GEOWAVE COMMANDER

- **Citation:** [2018] 5 S.C.R. 471
- **Court:** Supreme Court of India
- **Decided:** 2018-03-09
- **Case number:** Civil Appeal No. 2617 of 2018
- **Bench:** J. Chelameswar, Sanjay Kishan Kaul
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sunil-b-naik-v-geowave-commander-32927
- **Pages:** 45

## Headnote

Admiralty laws/Maritime laws: Admiralty jurisdiction - Arrest
of vessel - Maritime claim against charterer of ship who is not dejure
owner of ship - Recovery of amount through a restraint order against
the ship owned by a third party - Maintainability of - On facts,
award of contract by ONGC to a foreign company for carrying
seismic survey operations off the coast of Gujarat - Foreign
company in turn entered into a Charter Party Agreement to charter
the vessel-respondent vessel - Charterer further entered into contract
with two appellants for assistance in survey operations to be
conducted by charterers seismic vessel - Invoices raised by
appellants on Charterers from time to time but payment not made -
Also non-payment of charter hire to owners of respondent vessel -
Admiralty suit by appellants wherein separate order of arrest of
vessel passed - Thereafter, on application by respondent, vacation
of ex parte stay by Single Judge of High Court - Upheld by the
Division Bench - On appeal, held: Maritime claim against the
charterer of a ship, who is not the de jure owner of the ship, cannot
be recovered through a restraint order against the ship owned by a
third party - Maritime claim is not maintainable for an action in
rem against the respondent vessel in respect of the dues of the
appellants when the charterer himself is in default of the payment
to the owner - Maritime claim is in respect of the vessels which are
owned by the appellants and the party liable in personam is charterer
- There could not be a detention of a ship as a security and
guarantee arising from its owner for a claim which is in respect of
a non-owner or a charterer of the ship - Amount deposited by the
owners of the respondent vessel, along with accrued interest thereon,
to be remitted back to the owner - International Convention on
Arrest of Ships, 1999.
[2018] 5 S.C.R. 471
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Dismissing the appeals, the Court
HELD: 1.1 The charter party is defined as a contract by
which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use. The Charter
can be of two kinds-(i) Charter of demise; and (ii) Contract of
affreightment. In the instant case, the concern is with the charter
of demise by which the whole vessel is let to the charterer with
the transfer to him of its entire command and possession and
consequent control over its navigation. Such a charter is called a
bareboat charter. A demised charterer, like RG, who is the owner
for services stipulated, assumes in large measures the customary
rights and liabilities of vessel owners in relation to third persons,
who have dealt with him or with the ship, illustratively, repairs
and supplies ordered for the vessel, wages of seamen, etc. [Para
14, 15] [484-H; 485-A-B; 486-G-H]
M.V. Elisabeth & Ors. v. Harwan Investment & Trading
Pvt. Ltd. [1992] 1 SCR 1003 : AIR 1993 SC 1014 -
referred to.
Commentary on "Bareboat Charters by Mark Davis 2nd
Edn - referred to.
1.2 The emphasis of the respondent is on the maritime claim
being maintained against the owner of the ship and detention of a
ship as a sequitur thereto as security for a decree liable to be
passed against the owners of the ship in personam. It was
submitted that since the claim is stated to be one against RG and
not against the owners, such a detention could not have been
made. RG in fact, has not even been made a party to the suit, the
entity, which would be liable in personam. [Para 22] [494-B-C]
Liverpool & London S.P. & I Association Limited v. M.V.
Sea Success I & Anr. [2003] 5 Suppl. SCR 851 : (2004)
9 SCC 512 - referred to.
1.3 In the interest of international comity, though India is
not a signatory to the Convention 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 a

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SUNIL B. NAIK
v.
GEOWAVE COMMANDER
(Civil Appeal No. 2617 of 2018)
MARCH 09, 2018
[J. CHELAMESWAR AND SANJAY KISHAN KAUL, JJ.]
Admiralty laws/Maritime laws: Admiralty jurisdiction - Arrest
of vessel - Maritime claim against charterer of ship who is not dejure
owner of ship - Recovery of amount through a restraint order against
the ship owned by a third party - Maintainability of - On facts,
award of contract by ONGC to a foreign company for carrying
seismic survey operations off the coast of Gujarat - Foreign
company in turn entered into a Charter Party Agreement to charter
the vessel-respondent vessel - Charterer further entered into contract
with two appellants for assistance in survey operations to be
conducted by charterers seismic vessel - Invoices raised by
appellants on Charterers from time to time but payment not made -
Also non-payment of charter hire to owners of respondent vessel -
Admiralty suit by appellants wherein separate order of arrest of
vessel passed - Thereafter, on application by respondent, vacation
of ex parte stay by Single Judge of High Court - Upheld by the
Division Bench - On appeal, held: Maritime claim against the
charterer of a ship, who is not the de jure owner of the ship, cannot
be recovered through a restraint order against the ship owned by a
third party - Maritime claim is not maintainable for an action in
rem against the respondent vessel in respect of the dues of the
appellants when the charterer himself is in default of the payment
to the owner - Maritime claim is in respect of the vessels which are
owned by the appellants and the party liable in personam is charterer
- There could not be a detention of a ship as a security and
guarantee arising from its owner for a claim which is in respect of
a non-owner or a charterer of the ship - Amount deposited by the
owners of the respondent vessel, along with accrued interest thereon,
to be remitted back to the owner - International Convention on
Arrest of Ships, 1999.
[2018] 5 S.C.R. 471
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Dismissing the appeals, the Court
HELD: 1.1 The charter party is defined as a contract by
which an entire ship, or some principal part thereof, is let by the
owner to another person for a specified time or use. The Charter
can be of two kinds-(i) Charter of demise; and (ii) Contract of
affreightment. In the instant case, the concern is with the charter
of demise by which the whole vessel is let to the charterer with
the transfer to him of its entire command and possession and
consequent control over its navigation. Such a charter is called a
bareboat charter. A demised charterer, like RG, who is the owner
for services stipulated, assumes in large measures the customary
rights and liabilities of vessel owners in relation to third persons,
who have dealt with him or with the ship, illustratively, repairs
and supplies ordered for the vessel, wages of seamen, etc. [Para
14, 15] [484-H; 485-A-B; 486-G-H]
M.V. Elisabeth & Ors. v. Harwan Investment & Trading
Pvt. Ltd. [1992] 1 SCR 1003 : AIR 1993 SC 1014 -
referred to.
Commentary on "Bareboat Charters by Mark Davis 2nd
Edn - referred to.
1.2 The emphasis of the respondent is on the maritime claim
being maintained against the owner of the ship and detention of a
ship as a sequitur thereto as security for a decree liable to be
passed against the owners of the ship in personam. It was
submitted that since the claim is stated to be one against RG and
not against the owners, such a detention could not have been
made. RG in fact, has not even been made a party to the suit, the
entity, which would be liable in personam. [Para 22] [494-B-C]
Liverpool & London S.P. & I Association Limited v. M.V.
Sea Success I & Anr. [2003] 5 Suppl. SCR 851 : (2004)
9 SCC 512 - referred to.
1.3 In the interest of international comity, though India is
not a signatory to the Convention 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
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the arrest of the vessel in question as per its provisions.
[Para 24] [495-B-C]
1.4 Article 1 of the Convention defines Maritime Claim.
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
in a State other than the State where it has been arrested. Article
3 deals with the exercise of right of arrest. [Paras 25-27] [495-CD, F-H; 496-C-D]
1.5 The endeavour of the appellants to bring the claim within
the provisions is naturally opposed by the respondent on the
ground that the agreement between the appellants and RG is
actually a charter hire agreement between RG 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
place O whereas the respondent vessel never arrived at place
O. RG 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. Thus,
the plea is that the charter hire agreement is for use of the
appellant's vessel by RG. The respondent is not liable personally
for the maritime claim and, thus, there can be no arrest of the
ship since the ship is not owned by RG. The charter agreement
provisions were referred to (extracted aforesaid) to substantiate
that at present, at best RG was only a de facto owner and not a de
jure owner and that in order for RG to be de jure owner the
provisions provided how six months in advance of the expiry of
the contract recourse could be had to the same. That occasion
never arose. [Paras 29, 30] [497-D-G; 498-D-E]
1.6 A reference was made to Article 3(3) of the Convention,
which provides for arrest of the ship only if the judgment in respect
of that claim can be enforced against the ship by judicial or forced
sale of that ship and in the absence of any provision under the
Indian law by which the ship not owned by a person could be
made liable for a maritime claim, the arrest of the ship could not
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take place. The judgment could be obtained only under the
contract which would be against RG. [Para 31] [498-F-G]
Epoch Enterrepots v. M.V. Won Fu [2002] 3 Suppl. SCR
507 : (2003) 1 SCC 305 - referred to.
Medway Drydock & Engineering Co. Ltd. v. M.V.
Andrea Ursula [1973] QB 265; The "Permina
3001"(1979) Vol. 1 Lloyd's Law Reports 327; The
"Leoborg" (1962) Vol.. 2. Lloyd's List Law Reports
146 - referred to.
1.7 The essential ingredients for maintaining a maritime
claim for which a vessel may be detained were specified as under
that 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." [Para 37] [500-D-G]
1.8 The conclusion of the Single Judge, was that there was
no principle or authority for proposition that a maritime claim for
unpaid charter hire in respect of vessel 'A' against the hirer
thereof can be enforced by arresting vessel 'B', which is on
bareboat charter of the hirer of the former vessel vis-à-vis vessel
'A'. [Paras 38, 39] [500-G-H; 501-E-F]
Polestar Maritime Ltd. v. M.V. Qi Lin Men & Ors.
Admiralty Suit (Lodging) No.3547/2008 decided on
22.10.2008 - referred to.
Maritime law by Christopher Hill 5th Edn - referred
to.
1.9 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
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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 RG and the de facto ownership,
could not be converted into a de jure ownership. In respect of
Article 1(1)(l), it was, once again, held that there was no supply
of goods to the vessel or of supply of services to the vessel in
question, which was the respondent vessel. Insofar as the
reasoning in appellant's case, so far as Article 1(1)(l) is concerned,
it has been categorically found that it was not a case where goods
had been given on hire or for use of the respondent vessel.[Para
42] [502-C-F]
2.1 It is clear from the various terms of the bareboat charter
that RG had the status of a de facto owner. The charter agreement
did contain a clause for conversion of the status into a de jure
owner but the occasion for the same never arose. The option to
purchase was to be exercised by an advance intimation of six
months prior to the end of the charter period and the purchase
price was also specified as US$ 3,01,50,000. The charterer could
not make any structural changes in the vessel or in the machinery,
boilers, appurtenances or space parts thereof 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 RG. [Para 44] [502-G-H; 503-A-B]
2.2 The contracts entered into with the appellants by RG
are completely another set of charter hire agreements/contracts.
The unpaid amounts under these contracts amount to claims
against RG. Thus, if there was another vessel owned by RG, 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 RG. Were the respondent vessel put under
the de jure ownership of RG, the appellants would have been within
their rights to seek a detention order against that vessel for
recovery of their claims. [Para 45] [503-C-E]
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2.3 In the facts of the instant case, the owners of the
respondent vessel, in fact, also have a claim against RG for unpaid
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 RG, which has gone
into liquidation. The appellants quite conscious of the limitations
of any endeavour to recover the amount from RG, 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 RG against
whom they have their claim in personam, possibly envisaged as a
futile exercise. [Para 46] [503-E-G]
2.4 The test of the ownership of both the ships as one and
the same is not satisfied in the instant case. The second situation
envisaged is where another ship owned by the charterer is
detained, i.e., he has taken 'A' ship on charter where he has only
de facto ownership and his ship 'B' is detained where charterer
has de jure ownership. It cannot be countenanced that where no
in personam claim lies against an entity, still the ship of that entity
taken on bareboat charter can be detained to recover the dues.
The owner of the respondent vessel is as much a creditor of RG
as the appellants. [Para 48] [504-A-C]
2.5 The arrest of the ship is regarded as a mere procedure
to obtain security to satisfy the judgment. To that extent it is
distinguished from a right in personam to proceed against the
owner but there has to be a liability of the ship owner and in that
eventuality the legal proceedings commenced in rem would
become a personal action in personam against the defendant when
he enters appearance. There cannot be a detention of a ship as a
security and guarantee arising from its owner for a claim which is
in respect of a non-owner or a charterer of the ship. [Para 49]
[504-D-E]
2.6 On turning to the provisions of the Convention, a
maritime claim is specified as relating to use or hire of a ship
whether contained in a charter party or otherwise [clause (f)].
Insofar as clause (l) is concerned they relate inter alia to services
rendered to the ship. Such an order of detention can be in respect
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of a ship where there is identity of the owner against whom the
claim in personam lies and the owner of the ship. It cannot be
used to arrest a ship of a third party or a non-owner. [Para 50]
[504-E-G]
2.7 For a claim against the owner of the vessel, a vessel
may be detained and not that somebody else's vessel would be
detained for the said purpose. The crucial test would be of
ownership, which in the instant case clearly does not vest with
RG 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. [Para 51] [505-A-B]
2.8 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." The attention to the word
"beneficial" in the Act of 1956 was, thus, attributed to the
requirement to take into account the special English Institution
of Trust which forms no part of domestic law of other signatories
to the Convention. [Para 59] [511-G-H; 512-A-B]
I Congreso Del Partido [1978] Q.B. 500; The "Father
Thames" [1979] 2 Lloyd's Rep. 364; Mount Royal/
Walsh Inc. v. The Ship Jensen Star el al, [1990] 1 F.C
199; Antares Shipping Corporation v. The Ship
'Capricorn' et al. [1980] 1 S.C.R. 553 - referred to.
2.9 There is a clear distinction between a beneficial
ownership of a ship and the charterer of a ship. [Para 65] [514-C]
2.10 The Arrest Convention of 1999, Article 1 specifies
that the maritime claim means a claim inter alia arising out of an
agreement relating to use or hire of "the ship." The connotation
of "the ship" would mean the 16 trawlers or the OL vessel and
not the respondent ship. Thus, there is no maritime claim against
the respondent ship. Article 3 deals with the exercise of rights of
arrest and the eventualities are specified thereunder. In terms
of clause (2) of Article 3, the arrest is permissible of any other
ship (which would connote the respondent ship), which, when
the arrest is effected is owned by the person who is liable for the
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maritime claim. The liability of the maritime claim is RG 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, is
not the respondent but the 16 trawlers or the OL. In view thereof,
really speaking RG cannot be said to be the beneficial owner in
the capacity of a demised charterer of the respondent ship. RG 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 OL vessel. [Para 66] [514-C-G]
2.11 Clause 5(b) of the 2017 Act is in consonance with Article
3 of the 1999 Convention. The expression "the vessel", "owner"
and "demise charterer", thus, must be read in the aforesaid
context and the maritime claims in respect of 16 trawlers and OL
cannot be converted into a maritime claim against the respondent
ship not owned by RG. [Para 68] [515-B-D]
2.12 The appellants have neither any agreement with the
owners of the respondent vessel nor any claim against the
respondent vessel but their claim is on account of their own
vessels hired by the charterer of the respondent vessel. There
is no claim against the owners of the respondent vessel. [Para
69] [515-D-E]
2.13 The interim order is dissolved and the amount along
with accrued interest thereon is to be remitted back to the owners
of the respondent vessel, who deposited the same before the
High Court in pursuance of the interim order. [Para 71] [515-F]
The "Eschersheim" [1976] Vol. I Lloyd's Law Reports
81-referred to.
Case Law Reference
[1992] 1 SCR 1003
referred to
Para 16
[2003] 5 Suppl. SCR 851
referred to
Para 23
[2002] 3 Suppl. SCR 507
referred to
Para 36
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2617
of 2018.
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From the Judgment and Order dated 10.05.2013 of the High Court
of Judicature at Bombay in the Appeal (L) No. 209 of 2013
WITH
C. A. No. 2618 of 2018.
Shekhar Naphade, Sr. Adv., Mrs. Shubhangi Tuli, E. R. Kumar,
Ms. Rukmini Bobde, Ms. Sonal Gupta, Ms. Anwesha Padhi,
Ms. Aishwarya Bhati, M/s. Parekh & Co, Advs. for the Appellant.
Prashant S. Pratap, Sr. Adv. Siddhartha Dave, Ms. Jemtiben AO,
Senthil Jagadeesan, Advs. for the Respondent.
The Judgment of the Court was delivered by
SANJAY KISHAN KAUL, J. 1. Leave granted.
2. A maritime claim against the charterer of a ship, who is not the
de jure owner of the ship, and the endeavor to recover that amount
through a restraint order against 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
necessary to discuss/reproduce some of the clauses of the Charter
Agreement:
"10. Maintained and Operation
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(a)(i) Maintenance and Repairs: - During the Charter Period the
Vessel shall be in the full possession and at the absolute disposal
for all purposes of the Charters and under their complete control
in every respect. The Charterers shall maintain the Vessel, her
machinery, boilers, appurtenances and spare parts in a good state
of repair. In efficient operating condition and in accordance with
good commercial maintenance practice and except as provided
for in Clause 14(1) if applicable at their own expense they shall at
all times keep the Vessel's class fully upto date and free of overdue
recommendations and/or conditions with the classification."
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"(ii) New Class and Other Safety Requirements - In the event of
any improvement, structural changes or new equipment becoming
necessary for the continued operation of the Vessel by reason of
new class requirements or by compulsory legislation costing
(excluding the Charterer's loss of time) more than the percentage
stated in Box 23 or if Box 23 is left blank, 5 per cent of the Vessel's
insurance value as stated in Box 29 then the extent, if any, to
which the rate of hire shall be varied and the ratio in which the
cost of compliance shall be shared between the parties concerned
in order to achieve a reasonable distribution thereof as between
the Owners and the Charterers having regard, inter alia to the
length of the period remaining under this Charter shall, in the
absence of agreement, be referred to dispute resolution method
agree in Clause 30.
(iii) Financial Security: The Charterers shall maintain financial
security or responsibility in respect of third party liabilities as
required by any government including federal state or municipal
or other division or authority thereof to enable the Vessel without
penalty or charge, lawfully to enter, remain at or leave any port,
place territorial or contiguous waters of any country, state or
municipality in performance of this Charter without any delay.
This obligation shall apply whether or not such requirements have
been lawfully imposed by such government or division or authority
thereof. The Charterers shall make and maintain all arrangements
by bond or otherwise as may be necessary to satisfy such
requirements at the Charterers' sole expenses and the Charterers
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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."
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"(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 and/or the name of
the Vessel during the Charter Period. Painting and re-painting,
installment and re-installment, registration and re-registration if
required by the Owners shall be at the Mortgage(s) bearing on
the Vessel that would be required as a result of a change of flag
initiated by the Charterers shall be Charterer's cost.
(e) Changes to the Vessel: Subject to Clause 10(a)(ii) the Charterers
shall make no structural changes in the Vessel or changes the
machinery, boilers, appurtenances or spare parts thereof without
in each instance first securing the Owners approval thereof, if the
Owners so agree, the Charterers shall, if the Owners so require,
restore the Vessel to its former condition before the termination
of this Charter."
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"11. Hire
(a) The charterers shall pay hire due to the Owners punctually in
accordance with the terms of this Charter in respect of which
time shall be of the essence."
SUNIL B. NAIK v. GEOWAVE COMMANDER
[SANJAY KISHAN KAUL, J.]
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"17. Indemnity
(a) The Charterers shall indemnify the Owners against any loss,
damage or expenses incurred by the Owners arising out of or in
relation to the operation of the Vessel by the Charterers, and against
any lien of whatsoever nature arising out of an event occurring
during the Charter Period. If the Vessel be arrested or otherwise
detained by reason of claims or liens arising out of her operation
hereunder by the Charterers, the Charterers shall at their own
expense take all reasonable steps to secure that within a reasonable
time the Vessel is released, including the provision of bail.
Without prejudice to the generality of the foregoing, the Charterers
agree to the indemnify the Owners against all consequences or
liabilities arising from the Master, officers or agents signing Bills
of Lading or other documents.
(b) If the Vessel be arrested or otherwise detained by reason of a
claim or claims against the Owners the Owners shall at their own
expenses take all reasonable steps to secure that within a
reasonable time the Vessel is released, including the provision of
bail.
In such circumstances the Owners shall indemnify the Charterers
against any loss, damage or expense incurred by the Charterers
(including hire paid under this Charter) as a direct consequence
of such arrest or detention."
5. Reflect Geophysical entered into a Charter Hire Agreement on
30.10.2012 with M/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
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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 fact remains that
the respondent ship never went to Okha and was at the Pipavav port
from where it went to Mumbai.
7. Similarly Yusuf Abdul Gani, appellant in SLP(C) No.18899/
2013, agreed to give on hire the 'Orion Laxmi' to Reflect Geophysical to
work in support with the survey vessel 'Geowave Commander' vide
contract dated 1.10.2012. The purpose was to supply standby and
emergency towing duties. The two appellants claim to have raised invoices
on Reflect Geophysical from time to time, which are stated not to have
been paid. Reflect Geophysical also failed to pay the owners of the
respondent vessel and consequently the owners gave a notice of default
dated 4.3.2013 to the charterers, Reflect Geophysical, for non-payment
of charter hire aggregating to US$ 4,36,790 (approximately Rs.2.23
crore). Reflect Geophysical, however, filed an application in the
Singapore Court for placing the company under judicial management,
which was published in a notification dated 15.3.2013 in the Singapore
Gazette.
8. Sunil B. Naik issued a demand notice to Reflect Geophysical
for payment of outstanding dues on 16.3.2013. Yusuf Abdul Gani is also
said to have raised various invoices to Reflect Geophysical in respect of
the dues arising out of the contract, between 16.11.12 and 16.2.13.
9. Yusuf Abdul Gani, moved the Bombay High Court by filing a
suit against the respondent vessel as an admiralty suit and obtained an
order on 15.3.2013 for arrest of the vessel. Similarly, on Reflect
Geophysical expressing its inability to make payments on account of
lack of funds, Sunil B. Naik, filed an admiralty suit and obtained an order
of arrest of vessel on 12.4.2013. As noted, the vessel was already under
arrest in pursuance of the order passed in Yusuf Abdul Gani's case.
10. The owners of the respondent vessel, Master and Commander
AS Norway, filed a notice of motion in the two proceedings for vacation
SUNIL B. NAIK v. GEOWAVE COMMANDER
[SANJAY KISHAN KAUL, J.]
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of the ex parte arrest of vessel. On hearing being held, the learned
single Judge on 17.4.2013 vacated the ex parte stay. The two appellants,
as aggrieved parties, moved the Division Bench of the Bombay High
Court, which dismissed the appeal on 10.5.2013. That is how the present
appeals were filed.
11. In the present appeals while issuing notice on 17.5.2013 an
interim arrangement was made whereby the respondent was directed to
deposit a sum of Rs.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 one hand, is
that there is a liability of the respondent vessel on account of the charter
agreement and the rights and obligations of the charterer while the
respondent, who has succeeded before both the forums, seeks to establish
that the claim of the appellants cannot be categorized as a maritime
claim for invoking the admiralty jurisdiction of the High Court and that
the vessel, thus, could not be arrested to secure such a claim of the
appellants.
Bareboat Charter:
14. The charter party is defined as a contract by which an entire
ship, or some principal part thereof, is let by the owner to another person
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for a specified time or use. The Charter can be of two kinds - (i)
Charter of demise; and (ii) Contract of affreightment. In the present
case, we are concerned with the charter of demise by which the whole
vessel is let to the charterer with the transfer to him of its entire command
and possession and consequent control over its navigation. Such a charter
is called a bareboat charter. It would be apposite at this stage to refer to
the Mark Davis' Commentary on "Bareboat Charters" 2nd Edition where
the nature and character of demised charters has been explained as
follows:
"A fundamental distinction is drawn under English law between
charter parties which amount to a demise or lease of a ship, and
those which do not. The former category, known as charters by
demise, operate as a lease of the ship pursuant to which possession
and control passes from the owners to the charterers whilst the
latter, primarily comprising time and voyage charters, are in essence
contracts for the provision of services, including the use of the
chartered ship. Under a lease, it is usual for the owners to supply
their vessel "bare" of officers and crew, in which case the
arrangement may correctly be termed a "bareboat" charter. The
charterers become for the duration of the charter the de facto
"owners" of the vessel, the master and crew act under their orders,
and through them they have possession of the ship.
A statement of the hallmarks of a demise charter can be found in
the judgment of Evans LJ in The Giuseppe di Vittorio [1998] 1
Lloyd's Rep 136 at p 156:
"What then is the demise charter? Its hallmarks, as it seems to
me, are that the legal owner gives the charterer sufficient of
the rights of possession and control which enable the transaction
to be 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
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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 extent, that he has given to the charterer a
power and right independent of him, and without reference to
him to do what he pleases with regard to the captain, the crew,
and the management and employment of the ship. That has
been called a letter or demise of the ship. The right expression
is that it is a parting with the whole possession and control of
the ship."
Thus, although time charters almost always contain words such
as "let", "hire", "delivery" and "redelivery", the use of such words
are inapt in such a context, and are not in any sense to be regarded
as conclusive, when determining the nature of the charter.
In Sea and Land Securities v. William Dickinson MacKinnon LJ
traced the origin of these words to demise charters, and at page
163 emphasised the difference between demise and time charters
thus: "there is all the difference between hiring a boat in which to
row yourself about, in which case the boat is handed over to you,
and contracting with a man on the beach that he shall take you for
a row, in which case he merely renders services in rowing you
about."
15. A demised charterer, like Reflect Geophysical, who is the owner
for services stipulated, assumes in large measures the customary rights
and liabilities of vessel owners in relation to third persons, who have
dealt with him or with the ship, illustratively, repairs and supplies ordered
for the vessel, wages of seamen, etc.
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Maritime Claims & Admiralty Jurisdiction in India:
16. This Court in M.V. Elisabeth &Ors. v. Harwan Investment
& Trading Pvt. Ltd.1 had an opportunity to discuss the scope of exercise
of the admiralty jurisdiction and consequently of an action in rem. The
Admiralty Court Act, 1861, was referred to in this behalf but that was
stated not to inhibit the exercise of jurisdiction by the High Court subject
to its own rules, in exercise of its maritime jurisdiction. The fact that the
High Court continues to enjoy the same jurisdiction as it had immediately
before the commencement of the Constitution (Article 225 of the
Constitution of India) was to be read in the context of the judicial
sovereignty of the country manifested in the jurisdiction of the High
Courts as superior courts, thus, though the colonial statutes may remain
in force, by virtue of Article 372 of the Constitution of India, that was
observed not to stultify the growth of law or blinker 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 &Ors.2.
The present dispute is, once again, a reminder to the Government of the
necessity of bringing into force the said Act!
18. We may note that these Acts were referred to by Mr. Shekhar
Naphade, learned Senior Advocate appearing for the appellant, Sunil B.
Naik, for purposes of elucidating the expanding admiralty jurisdiction as
1 AIR 1993 SC 1014
2 supra
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observed in M.V. Elisabeth &Ors.3. Thus, Section 3(1)(h),( j) & (l) of
the 1987 Act was referred, which reads as under:
"3. Admiralty Jurisdiction of the Court. - (1) The Admiralty
Jurisdiction of the Court shall be as follows, that is to say
Jurisdiction to hear and determine any of the following questions
or claims:
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(h) Any claim arising out of any Agreement relating to the carriage
of goods in a ship or to the use or hire of a ship;
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(j) Any claim in the nature of towage in respect of a ship or any
aircraft;
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(l) Any claim in respect of goods, materials, bunker or other
necessaries supplied to a ship for her operation of maintenance."
19. The claim of the appellants was sought to be brought within
the expression "or to use or hire of a ship". The same aforesaid clause
of 1999 Act was also referred to state that the expression "operation or
maintenance" was specified "operation or maintenance." The object, it
was, thus, pleaded, in the expanding jurisdiction was to include any
services rendered to the ship and it was claimed that the appellants had
actually rendered those services in the form of the agreement with Reflect
Geophysical. Insofar as 2017 Act is concerned, the provision of Section
4(1)(j) & (l) were referred to, which read as under:
"4. Maritime claim. - (1) The High Court may exercise
jurisdiction to hear and determine any question on a maritime claim,
against any vessel, arising out of any -
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(j) towage;
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(l) goods, materials, perishable or non-perishable provisions, bunker
fuel, equipment (including containers), supplied or services rendered
3 supra
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to the vessel for its operation, management, preservation or
maintenance including any fee payable or leviable."
20.