2018 (3) TMI 1637 - SC - Indian Laws

Recovery of amount through a Restraint Order - maritime claim against the charterer of a ship who is not the de jure owner of the ship - ship is owned by a third party - 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? - Section 1 of the Administration of Justice Act 1956. Held that - The various terms of the bareboat charter makes it quite clear that Reflect Geophysical 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 Reflect Geophysical - The contracts entered into with the Appellants by Reflect Geophysical are completely another set of charter hire agreements/contracts. The unpaid amounts under these contracts amount to claims against Reflect Geophysical. Thus if there was another vessel owned by Reflect Geophysical 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 Reflect Geophysical. Were the Respondent vessel put under the de jure ownership of Reflect Geophysical the Appellants would have been within their rights to seek a detention order against that vessel for recovery of their claims. In the facts of the present case the owners of the Respondent vessel in fact also have a claim against Reflect Geophysical 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 Reflect Geophysical which has gone into liquidation. The Appellants quite conscious of the limitations of any endeavour to recover the amount from Reflect Geophysical 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. 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 - There is a clear distinction between a beneficial ownership of a ship and the charterer of a ship. Reflect Geophysical cannot be said to be the beneficial owner in the capacity of a demised charterer of the Respondent ship. Reflect Geophysical 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 Orion Laxmi. Appeal dismissed - The interim order dated 17.5.2013 stands 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 Bombay High Court in pursuance of the interim order.

Summary

Issues Involved:

1. 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.
2. The legal implications of a bareboat charter and the status of Reflect Geophysical as a de facto or de jure owner.
3. The application of international conventions, specifically the 1999 Arrest Convention, in determining the validity of the maritime claim.
4. The distinction between beneficial ownership and possession/control under a demise charter.
5. The applicability of the 2017 Admiralty (Jurisdiction and Settlement of Maritime Claims) Act.

Detailed Analysis:

1. Maritime Claim and Admiralty Jurisdiction:

The core issue was whether the Appellants' claims against the Respondent ship could be categorized as maritime claims under admiralty jurisdiction. The Court noted that for a maritime claim to be maintained, the following must be established: the Plaintiff must have a maritime claim, the claim must be in respect of the vessel, the party liable in personam must be the owner of the vessel sought to be arrested. The Court concluded that the Appellants' claims were against Reflect Geophysical, not the owners of the Respondent vessel, thus disqualifying the claim as a maritime claim against the Respondent vessel.

2. Bareboat Charter and Ownership:

The Court elaborated on the nature of a bareboat charter, which transfers possession and control of the vessel to the charterer, making them the de facto owner for the duration of the charter. However, Reflect Geophysical was not the de jure owner of the Respondent vessel, as the option to purchase the vessel was never exercised. The Court emphasized that de facto ownership under a bareboat charter does not equate to de jure ownership, which is necessary for an action in personam.

3. International Conventions:

The Court referred to the 1999 Arrest Convention, noting that although India is not a signatory, its principles are applied in the interest of international comity. The Convention stipulates that a ship may only be arrested in respect of a maritime claim. The Court found that the Appellants' claims did not qualify as maritime claims under the Convention, as the claims were against Reflect Geophysical and not the owners of the Respondent vessel.

4. Beneficial Ownership vs. Possession/Control:

The Court discussed the distinction between beneficial ownership and mere possession/control under a demise charter. It referred to various judgments, including Medway Drydock & Engineering Co. Ltd. and I Congreso Del Partido, to conclude that mere possession and control do not confer beneficial ownership. The beneficial use of a chartered ship does not convert a charterer into a beneficial owner. The Court found that Reflect Geophysical, as a demise charterer, did not have beneficial ownership of the Respondent vessel.

5. 2017 Admiralty Act:

The Court noted that the 2017 Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, although not yet notified, aligns with the principles of the 1999 Convention. The Act specifies that a vessel may be arrested if the demise charterer is liable for the claim and is the demise charterer or the owner of the vessel when the arrest is effected. The Court concluded that Reflect Geophysical was not the owner of the Respondent vessel, and thus, the Appellants' claims could not be enforced against the Respondent vessel.

Conclusion:

The Court upheld the decisions of the lower courts, finding no reason to interfere. The Appellants' claims were against Reflect Geophysical, not the owners of the Respondent vessel. The Court dissolved the interim order and directed the return of the deposited amount to the owners of the Respondent vessel. The appeals were dismissed, and the parties were to bear their own costs.