Sister Ship Arrest under Indian Jurisdiction

Introduction

Understanding of Maritime Law in a country like India, considering that it has a 7500 km coastline with more than 200 ports, is inescapable for its stakeholders. All major ports in India handled more than 650 million tons of cargo traffic in Financial Year 2022.[1] Hence, it is crucial for the stakeholders to have a grasp of admiralty and maritime law. Also, to boost the maritime industry in the country it is necessary that the courts with admiralty jurisdiction stay abreast with the international legal developments; as rightly noted by Roscoe Pound that flexibility is the virtue of the law courts. In this article, we discuss law on the arrest of a sister ship for enforcement of decree or order of an admiralty court.

What Does Arrest of Ship Mean?

Article 1 of the International Convention Relating to the Arrest of Sea-Going Ships, 1952 defines the term arrest as the following: “(2) “Arrest” means the detention of a ship by judicial process to secure a maritime claim, but does not include the seizure of a ship in execution or satisfaction of a judgment.”

What Is a Sister-Ship?

‘Sister-ship’ i.e., a ship in the same beneficial ownership as the ship in regard to which the claim arose. So, the claimant may arrest a ship other than the one-to-which maritime lien is attached. However, legally such maritime lien is not attached to the sister-ship.

When Can a Claimant Get Sister-Ship Arrested?

Berlingieri on Arrest of Ships (5^th edition) published by INFORMA under the auspices of Committee Maritime International, is established as the source of information for all aspects of ship arrest and is an authority relied upon by Indian courts having admiralty jurisdiction. As per Berlingieri, arrest or re-arrest or multiple arrest can be done under the 1952 Arrest Convention, and 1999 Arrest Convention as the grounds are similar and as follows:-

1. If a ship has been released after security has been provided in place of arrest, but under local currency regulation money is not freely transferable; [para 12.12].

2. ‘A good cause’ either for maintaining or for granting a second arrest may be granted in case of ‘bankruptcy of the guarantor’, a situation where the actual amount of the claim proves to be higher than that originally estimated for which the arrest was requested and security was obtained; [para 12.14].

3. Arrest of the ship could be granted even after bail had been provided by the owner because the Defendant had declined expressly to agree to the jurisdiction of the Court. [para 12.15].

4. A ship under arrest is sailing away and therefore re-arrested in another country; [para 12.16].

5. ‘A good cause’ for second arrest would also be made if the proceeds of the sale are distributed amongst several Claimants and the claim of the arrestor is not wholly satisfied. [para 12.21]

These points were highlighted by Mr. VK Ramabhadran who was appointed as amicus curiae by the Bombay High Court in the case of Praxis Energy Agents SA v. m.t. Pratibha Neera, for his expert knowledge in admiralty cases. It was pointed out that second arrest or multiple arrest is to obtain security towards the claimant’s claim, and it cannot extend if the ship-owning company is in liquidation.  

In the case of Praxis Energy Agents SA v. m.t. Pratibha Neera, the plaintiff sought to implead the sister vessels of defendant vessel/other vessels of its beneficial owner and in the case where sister vessels have been sold, to implead the sale proceeds of those vessels as defendants

It was noted that by virtue of the Arrest Convention, 1952, a Claimant could arrest not only the offending ship but any other ship owned by the same owner in order to secure his claim against the offending ship or its owner. However, the cause of action of the Claimant continues to be vested only against the offending ship and the owner and not against any other ship owned by the same owner. Thus, plaintiff can either arrest the particular ship or a sister ship. Plaintiff cannot arrest both ships or multiple ships.

So, there exists no cause of action to a Claimant against a sister ship, except to arrest for the purpose of security.

The following situations were also clarified in the case-

1. Since the purpose of impleading another ship as a Defendant is only to secure plaintiff’s claim, question of impleading sale proceeds does not arise since a Claimant is not entitled to obtain monetary decree.
2. The question of obtaining security by arresting the second ship do not arise in a case where the company is already in liquidation.
3. All the properties including the ships vest with the official liquidator once the winding up proceedings had commenced and no Claimant would have a preferential claim over any vessel subsequent to the commencement of winding up, unless the Claimant is a secured creditor by way of mortgage, or the Claimant has a maritime lien like salvage.
4. If the vessel cannot be arrested subsequent to the commencement of winding up proceedings, there is no question of impleading the sale proceeds of the vessel of a company which is in liquidation.

Can Claimant Recover from Sister-Ship?

Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, Section 5 provides that the High Court may order the arrest of any vessel in respect of a maritime claim if the person who owned the vessel is liable for the claim and is the owner of the vessel when arrested.

Section 5(2) provides that the High Court may also order the arrest of any other vessel in lieu of the vessel against which a maritime claim has been made. Thus, under this Act too, a plaintiff can get arrested either the particular vessel or a sister vessel. Only one vessel can be arrested and not multiple vessels.

It was held in Praxis Energy Agents SA v. m.t. Pratibha Neera that purpose of impleadment is to assert a claim against the sister vessels and seek a decree against the vessels and/or sale proceeds. Consequently, if the relief of arrest of the sister ship cannot be granted then the sister ship or its sale proceeds cannot be proceeded against and a decree granted. Hence no question arises of impleadment of the sister vessels.

Can Claimant Recover If the Ship Owning Company is in Liquidation?

• No, in the case of Praxis Energy, it was noted that the right to second arrest or multiple arrest does not extend if the ship-owning company is in liquidation.
• This is because first when a ship-owning company is in liquidation there is no question of Claimant obtaining any security towards its claim and
• Secondly, once the ship-owning company is in liquidation, the distribution of the assets could only be in consonance with the provisions of the Companies Act, 2013.
• However, if the claimant has executed a warrant of arrest against the ship prior to the commencement of winding up proceedings then liquidator’s right to distribute the sale proceeds is subject to plaintiff’s charges.

Can a Claimant Arrest Multiple Ships to Recover Claim?

In the case of Banco before the English Court of Appeal, it was held by Lord Denning that the plaintiff can either arrest the particular ship or a sister ship and thus the plaintiff cannot arrest both ships or multiple ships. So, only one ship of the same owner may be arrested. This decision was based on Administration of Justice Act, 1956 which was enacted to give effect to Brussels Arrest Convention, 1952.

Similarly, as per Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, a reading of Section 5 of the Act makes it clear that Admiralty High Court may order the arrest of any ship or vessel in respect of a maritime claim. This is when the person who owned the vessel is liable for the claim and is the owner of the vessel when arrested. Further, as per Section 5(2), the High Court may order the arrest of any other vessel in lieu of the vessel against which a maritime claim has been made. Hence, here also, only one vessel can be arrested and not multiple vessels. This understanding was implemented by the Supreme Court in the case of Chrisomar Corporation v. MJR Steels Pvt. Ltd.

Conclusion

From the above discussion, it can be deduced that under Indian law, a claimant can proceed against the arrest of a sister-ship to secure his claim. His maritime lien nonetheless still remains attached to the main ship vessel and doesn’t get transferred to the sister-ship. Also, the claimant cannot proceed against arrest of multiple vessels unless backed by law.