Case: Sunil B. Naik Vs. Geowave Commander

These words are clearly inapt to describe the possession of a demise charterer.... In my view, the expression beneficial owner was chosen to serve as an instruction, in a system of registration of ownership rights, to look beyond the register in searching for the relevant person. But such search cannot go so far as to encompass a demise charterer who has no equitable or proprietary interest which could burden the title of the registered owner of the registered owner. As I see it, the expression beneficial owner serves to include someone who stands behind the registered owner in situations where the latter functions merely as an intermediary, like a trustee, a legal representative or an agent. The French corresponding expression veritable proprietaire leaves no doubt to that effect." 63. The Supreme Court of Canada in Antares Shipping Corporation v. The Ship `Capricorn et al.,also referred to the concept of beneficial ownership and cited with the approval, observations made in Halsburys Laws of England at para 15 as follows: "Ownership in a British ship or share therein may be acquired in any of three ways - by transfer from a person entitled to transfer, by transmission or by building. Acquisition by transfer and transmission have been the subject of statutory enactment. Acquisition by building is governed by the common law. Ownership in a British ship or share therein is a question of fact and does not depend upon registration of title. Whether registered or unregistered, a person in whom ownership in fact vests is regarded in law as the owner if registered, as the legal owner; if unregistered, as the beneficial owner." (emphasis supplied) 64. The successor to the 1956 Act is the Supreme Court Act of 1981. Section 21(4) of that Act of U.K. recognizes the discussion in view of Robert Goff, J. by the following provision: "21. (4) In the case of any such claim as is mentioned in section 20(2)(e) to (r), where(a) the claim arises in connection with a ship ; and(b) the person who would be liable on the claim in an action in personam ("the relevant person") was, when the cause of action arose, the owner or charterer of, or in possession or in control of, the ship,an action in rem may (whether or not the claim gives rise to a maritime lien on that ship) be brought in the High Court against -i) that ship, if at the time when the action is brought the relevant person is either the beneficial owner of that ship as respects all the shares in it or the charterer of it under a charter by demise ; or(ii) any other ship of which, at the time when the action is brought, the relevant person is the beneficial owner as respects all the shares in it." 65. There is a clear distinction between a beneficial ownership of a ship and the charterer of a ship.66. In the aforesaid context, now turning to 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 Orion Laxmi 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 (these Articles are reproduced in paras 25 to 27 above), 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 maritime claim. The liability of the maritime claim is Reflect Geophysical 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, as noticed above, is not the respondent but the 16 trawlers or the Orion Laxmi. In view of the discussion aforesaid, really speaking 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.67. We may also note that in the 2017 Act in India clause 5(b) states as under: "5. Arrest of vessel in rem.-(1) 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-xxxx xxxx xxxx xxxx xxxx(b) 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" 68. The aforesaid is in consonance with Article 3 of the 1999 Convention and, thus, must be read in that context (incidentally the Bill was introduced on 21.11.2016 and passed by the Lok Sabha and the Rajya Sabha on 10.3.2017 and 24.7.2017 respectively. It was published in the Gazette on 9.8.2017 but is still not notified). The incident in this question is, thus, prior to beginning of this exercise. 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 Orion Laxmi cannot be converted into a maritime claim against the respondent ship not owned by Reflect Geophysical.69. 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]42. 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 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 Reflect Geophysical 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 Sunil B. Naiks 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.On giving our thoughtful consideration to the issue at hand, we are in full agreement with the view taken by the Courts below and find no reason to interfere in appeal.44. We have referred to the various terms of the bareboat charter which make 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 owners 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.45. 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.46. 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. That may also be the reason why the appellants did not even think it worth their while to implead Reflect Geophysical against whom they have their claim in personam, possibly envisaged as a futile exercise.The aforesaid issue has also been discussed in Polestar Maritime Ltd.,while dealing with Article 3(2) of the Arrest Convention. The test of the ownership of both the ships as one and the same is not satisfied in the present 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 Reflect Geophysical as the appellants.49. Mr. Naphade, learned Senior Advocate while relying on the judgment in M.V. Elisabeth & Ors.,had referred to the expanding jurisdiction of a maritime claim. However, the observations made in the said judgment reproduced hereinabove in para 21 would show that 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 aor a charterer of the ship.50. 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. The question, however, isAs an illustrative example if we consider the principles of a garnishee order where amounts held by a third party on behalf of a defendant can be injuncted or attached to satisfy the ultimate claim, which may arise against the defendant. It is not as if somebody elses money is attached in pursuance to a garnishees order. Similarly for a claim against the owner of the vessel, a vessel may be detained and not that somebody elses vessel would be detained for the said purpose. The crucial test would be of ownership, which in the present case clearly does not vest with Reflect Geophysical 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.There is a clear distinction between a beneficial ownership of a ship and the charterer of a ship.66. In the aforesaid context, now turning to 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 Orion Laxmi 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 (these Articles are reproduced in paras 25 to 27 above), 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 maritime claim. The liability of the maritime claim is Reflect Geophysical and not the owners of the respondent ship. In terms of(b) of clause (2) of Article 3, a demise charterer, time charterer or voyage charterer of that ship is liable. The ship in question, as noticed above, is not the respondent but the 16 trawlers or the Orion Laxmi. In view of the discussion aforesaid, really speaking 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.67. We may also note that in the 2017 Act in India clause 5(b) states asArrest of vessel inThe 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 believexxxx xxxx xxxx xxxx(b) 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;The aforesaid is in consonance with Article 3 of the 1999 Convention and, thus, must be read in that context (incidentally the Bill was introduced on 21.11.2016 and passed by the Lok Sabha and the Rajya Sabha on 10.3.2017 and 24.7.2017 respectively. It was published in the Gazette on 9.8.2017 but is still not notified). The incident in this question is, thus, prior to beginning of this exercise. 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 Orion Laxmi cannot be converted into a maritime claim against the respondent ship not owned by Reflect Geophysical.69. 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.