SUNIL B. NAIK versus GEOWAVE COMMANDER

28. We may note that the claim of the appellant, Sunil B. Naik, is based on the definition clause of the maritime claim clause (f) & (l) as discussed even in the impugned order while the claim of Yusuf Abdul Gani is restricted to clause (f).

29. The endeavour of the appellants to bring the claim within the aforesaid provisions is naturally opposed by the respondent on the ground that the agreement between the appellants and Reflect Geophysical is actually a charter hire agreement between Reflect Geophysical 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 Okha whereas the respondent vessel never arrived at Okha. Reflect Geophysical 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. In this behalf, reference has been made to the judgment in The “Eschersheim”6. The relevant portion, which is also reproduced in the impugned judgment is extracted as under: “In my opinion there is no good reason for excluding from the expression “an agreement for the use or hire of a ship” any agreement which an ordinary ASN 12/14 Appeal-209-13.doc business man would regard as being within it. If which an ordinary business man would regard as being within it. If A and B make an 6 [1976] Vol. I Lloyd’s Law Reports 81 SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] agreement for A’s ship to be used for carrying out any operation for B, I consider that the agreement is one for the use, if not for the hire of the ship. Thus an agreement for a ship to be employed for dredging, towing, cable laying and salvage would be an agreement for the use of the ship. But is an agreement for dredging or towage or cable laying or salvage an agreement for the use of a ship if there is no express reference in the agreement to any such use. If the operation can only be carried by means of a ship. I consider that the agreement must be one for the use or hire of a ship. A towage agreement would therefore always come within the words. Dredging or cable laying could conceivably be performed by other means but in the great majority of cases it would be so obvious that the use of a ship must be intended that this would be implied…..”

30. Thus, the plea is that the charter hire agreement is for use of the appellant’s vessel by Reflect Geophysical. 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 Reflect Geophysical. The charter agreement provisions were referred to (extracted aforesaid) to substantiate that at present, at best Reflect Geophysical was only a de facto owner and not a de jure owner and that in order for Reflect Geophysical 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.

31. A reference was, thus, made to Article 3(3) of the aforesaid 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 take place. The judgment could be obtained only under the contract which would be against Reflect Geophysical.

32. Mr. Naphade, learned Senior Advocate for the appellants has referred to the judgment in Medway Drydock & Engineering Co. Ltd. v. M.V. Andrea Ursula7 dealing with the action in rem on the question whether the ship under a demised charter is “beneficially owned as respects all the shares therein” by the charterer, within the meaning of 7 [1973] QB 265 the expression in Section 3(4) of the Administration of Justice Act, 1956. It was observed that “a ship would be beneficially owned by the person who, whether or not he was the legal or equitable owner or not, lawfully had full possession and control of her, and, by virtue of such possession and control, had all the benefit and use of her which a legal or equitable owner would ordinarily have.”

33. In the aforesaid context it may be noticed that in Section 1 of the Administration of Justice Act, 1956, the Admiralty jurisdiction could be invoked inter alia in the following case: “1. Admiralty jurisdiction of the High Court (I) The Admiralty jurisdiction of the High Court shall be as follows, that is to say, jurisdiction to hear and determine any of the following questions or claims – xxxx xxxx xxxx xxxx xxxx (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;”

34. A reference, has, thus, also been made to the decision in The “Permina 3001”8 of the Singapore Court of Appeal, the relevant portion of which reads as under: “The question is what do the words “beneficially owned as respects all the shares therein” mean in the context of the Act. These words are not defined in the Act. Apart from authority, we would construe them to refer only to such ownership of a ship as is vested in a person who has the right to sell, dispose of or alienate all the shares in that ship. Our construction would clearly cover the case of a ship owned by a person, who whether he is the legal owner or not, is in any case the equitable owner of all the shares therein. It would not, in our opinion, cover the case of a ship which is in the full possession and control of a person who is not also the equitable owner of all the shares therein. In our opinion, it would be a misuse of language to equate full possession and control of a ship with beneficial ownership as respects all the shares in a ship. The word “ownership” connotes title, legal or equitable whereas the expression “possession and control”, however full and complete, is not related to title. Although a person 8 (1979) Vol. 1 Lloyd’s Law Reports 327 SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] with only full possession and control of a ship, such as a demise charterer, has the beneficial use of her, in our opinion he does not have the beneficial ownership as respects all the shares in the ship and the ship is not “beneficially owned as respects all the shares therein” by him within the meaning of s.4(4).”

35. In an ex parte case in The “Leoborg”9 the Admiralty Judge dealt with a claim of escorting services provided by a tug from outside a port into a port for services in the nature of towage.

36. The Appellants have also placed reliance on the case of Epoch Enterrepots v. M.V. Won Fu10to differentiate between different types of charter parties and to assert that in the case of a demise charter, the charterer has complete control of the vessel. The Legal view which prevailed with the Courts below:

37. The bedrock of the submissions of Mr. Prashant S. Pratap, learned Senior Advocate, who appeared even in the proceedings before the Courts below would show that the plea of no right of arrest of the respondent vessel was based on Reflect Geophysical not being the owner but only a charterer of the vessel. The essential ingredients for maintaining a maritime claim for which a vessel may be detained were specified as under: “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.”

38. The learned single Judge opined that the claim in Yusuf Abdul Gani’s case was in respect of use or hire of another ship Orion Laxmi 9 (1962) Vol.. 2. Lloyd’s List Law Reports 146 10 (2003) 1 SCC 305 and the claim, thus, could not be maintained against the respondent vessel. It was stated to be a claim in personam against Reflect Geophysical and thus, only a vessel owned by Reflect Geophysical could have been restrained. The learned single Judge also records that it has not been the case of Yusuf Abdul Gani that Reflect Geophysical is a de facto owner of the ship sought to be arrested and the position of an owner of a ship is different from a demised charter when it comes to the arrest of a vessel owned or chartered. In this behalf a reference has been made to the case of Polestar Maritime Ltd. v. M.V. Qi Lin Men & Ors.11 where Article 3(2) of the Arrest Convention was elucidated specifying that a ship can be arrested in respect of a maritime claim against another ship only in the following circumstances: (a) The owner of both the ships is one and the same. (b) In case a maritime claim exists qua the owner of a ship, which is taken on a demised charter then the liability can be recovered by restraint of the ship owned by the charterer. This view originally elucidated by the learned single Judge of the Bombay High Court found favour with the Division Bench when the appeal was dismissed vide order dated 6.1.2009 in Appeal (Lodging) No.772/2008. The Special Leave Petition filed against the same was also dismissed vide order dated 23.1.2009.

39. The conclusion, thus, 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’.

40. The order passed by the learned single Judge in Sunil B. Naik’s case merely referred to the said view adopted in Yusuf Abdul Gani’s case to vacate the injunction. The Division Bench affirmed the orders of the learned single Judge by passing two separate orders in the appeals filed. The orders are of the same date, i.e. 10.5.2013, which have been assailed in the two appeals.

41. The Division Bench took note of the fact that though India is not a signatory to the Arrest Convention, the same principles would apply while determining whether a maritime claim has arisen causing for such 11 Admiralty Suit (Lodging) No.3547/2008 decided on 22.10.2008 SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] detention of the vessel. The Division Bench referred to the judgment in Epoch Enterrepots12 to conclude that the distinction sought to be drawn between a bareboat charter and a demised charter was an issue no more res integra. A reference was also made to the Commentary on “Maritime Law” 5th Edition by Christopher Hill, which explained that in a demised charter or bareboat charter the ship owner fades into the background and merely collects its hire payment for the period of the charter. It was stated to be akin to a lease of a ship, similar to a hire purchase arrangement rather than a simple agreement for hire or use of the ship. Thus, the so-called de facto ownership of Reflect Geophysical qua the respondent vessel was held to be immaterial in respect of a maritime claim arising from an agreement for use or hire of another vessel, which is the situation in both the cases.

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. Naik’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. Conclusion:

43. 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 12 supra 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.

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.

47. It is in the aforesaid context that while discussing this issue in the impugned order, the essential ingredients for detention of a vessel in a maritime claim were specified (para 37 aforesaid). SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.]

48. The aforesaid issue has also been discussed in Polestar Maritime Ltd.13 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.14had 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 a non-owner or 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, is – which is the ship in question? Such an order of detention can be in respect 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.

51. As 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 else’s money is attached in pursuance to a garnishee’s order. Similarly for a 13 supra 14 supra 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 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.

52. We may note that for the purposes of determining the controversy, it is not really of much relevance that effectively no work was carried out under the agreements between the appellants and Reflect Geophysical as the chartered ship never commenced its task and never reached the port from where the task was to be commenced.

53. One of the contentions advanced by the learned Senior Advocate for the appellant recorded by us relates to the plea of “beneficial ownership” of the respondent ship by Reflect Geophysical and, thus, the enforceability of a claim by the appellants against the respondent ship. In support of this plea reliance is placed on the judgment in Medway Drydock & Engineering Co. Ltd.15. We must record at the inception itself that this issue appears not to have been raised either before the learned single Judge or the Division Bench as there is no discussion on this aspect. We, however, still feel necessary to deal with this aspect and in some detail largely based on our own foray into this area of law rather than simply relying on the judgment referred to aforesaid.

54. United Kingdom became a signatory to two international conventions – ‘International Convention relating to Arrest of Sea Going Ships’ and ‘International Convention on certain Rules concerning Civil Jurisdiction in matters of Collision’ signed at Brussels on 10.5.1952. Article 3 of the former in sub-clause (2) states that “Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons.” The context is, thus, the ownership of the ship when a reference is made to “shares therein” and whether they are owned by the same person or not. “Shares” in a ship owes its origination to sailing vessels being expensive items and subject to unexpected loss and thus, were not owned by one person. Thus, more than one person could own a share in a ship on the basis of capital tied up in the vessel. Such shares were fairly random but by mid 19th century it was usual for shares to be in multiples of 64 parts and, thus, ownership by 64th is still 15 supra SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] the norm in England. The various requirements of a ship, for example, rope-maker, sail maker, etc. were parts of a share owner and such shares could be sold or bought like any other commodity. Normally there would be a main owner who would have a large investment and be responsible for the sail and working of the ship called “ship’s husband” while other owners were simply cash investors. The profits and liabilities were accordingly shared in the same ratio. This concept finds mention in The Merchant Shipping Act, 1958 under Section 25, which deals with ‘Register Book’ as under: “25. Register book.¯Every registrar shall keep a book to be called the register book and entries in that book shall be made in accordance with, the following provisions:¯ xxxx xxxx xxxx xxxx xxxx (b) subject to the provisions of this Act with respect to joint owners or owners by transmission, not more than ten individuals shall be entitled to be registered at the same time as owners of any one ship; but this rule shall not affect the beneficial interest of any number of persons represented by or claiming under or through any registered owner or joint owner;”

55. In view of United Kingdom signing the two Conventions referred to aforesaid and giving legislative backing, Section 3 of The Administration of Justice Act, 1956, incorporated the same. In sub- section (4) of Section 3, while dealing with the invocation of an action in rem, the concept of “beneficially owned” vis-à-vis a ship was introduced and the right to invoke it against the same.

56. The observations in Medway Drydock & Engineering Co. Ltd.16 referred to while recording the submissions of Mr. Naphade, have to be appreciated in that context. However, a deeper study of the issue shows that this judgment has been dissented from even by the Queen’s Bench itself in I Congreso Del Partido17 by Robert Goff, J. This judgment debates the concept of “beneficially owned” in respect of shares therein within the meaning of Section 3(4) of The Administration of Justice Act, 1956. There is a respectful disagreement with the line adopted by Brandon, J. in the Medway Drydock & Engineering Co. Ltd.18. 16 supra 17 [1978] Q.B. 500 18 supra Thus, it is noticed that Brandon, J. construed the words “beneficially owned as respects all the shares therein” as not being restricted to legal or equitable ownership, but as being wide enough to include such “ownership” as is conferred by a demise charter. Robert Goff, J. recorded the reasoning of Brandon, J. for doing so as under: “The reasoning of Brandon J. which led him to reach this conclusion was as follows: (1) The expression “beneficially owned” in section 3 (4) is capable of more than one meaning: either owned by someone who, whether he is the legal owner or not, is in any case the equitable owner; or beneficially owned by a person who, whether he was the legal or equitable owner or not, lawfully had full possession and control of her, and, by virtue of such possession and control, had all the benefit and use of her which a legal or equitable owner would ordinarily have. An example of the latter would be such “ownership” as was conferred by a demise charter. A demise charterer has, because of the extent of his possession and control, often been described as the owner pro hac vice or the temporary owner. (2) Since the meaning of the words “beneficially owned” is not clear the court can and should look at the terms of the Brussels Convention of 1952, section 3 of the Act of 1956 being intended to give effect to article 3 of the Convention; and having done so the court should so construe the statute as to give effect, so far as possible, to the presumption that Parliament intended to fulfil, rather than to break, its international obligations. If section 3 (4) of the Act is to give full effect to article 3, the expression “beneficially owned” in the section must be given the second of the two meanings of which it is capable, which embraces not only a demise charterer, but also any other person with similar complete possession and control. (3) Although Hewson J. had reached a different conclusion in The St. Merriel [1963] P. 247, Brandon J. felt justified in declining to follow that decision having regard in particular to two points. First, Hewson J. had not been invited to look at the Brussels Convention, because at that time it was commonly thought that it was not permissible to do so unless the Act contained an express reference to the Convention. Second, the view accepted by Hewson J. in The St. Merriel was no different in principle from one which was discussed and rejected by Lord Atkinson in Sir SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] John Jackson Ltd. v. Steamship Blanche (Owners) (The Hopper No. 66) [1908] A.C. 126, 135–136.”

57. Robert Goff, J. then records the significant factor, i.e., that Medway Drydock & Engineering Co. Ltd.19 was decided on a motion by plaintiffs for judgment in an ex parte proceedings while he had the benefit of submissions of both the sides and Robert Goff, J. sought to be persuaded by the counsel appearing for the ship Mr. Davenport in the following manner: “Mr. Davenport, for Mambisa, to whose argument I am much indebted, has however urged me not to follow The Andrea Ursula [1973] Q.B. 265. The decision in that case is not binding upon me and, while of course I have the greatest respect for any decision of Brandon J., I have reconsidered the matter and, having done so, I have reached the conclusion that the words “beneficially owned as respects all the shares therein” refer only to cases of equitable ownership, whether or not accompanied by legal ownership, and are not wide enough to include cases of possession and control without ownership, however full and complete such possession and control may be. Since I have reached a different conclusion to Brandon J., I think it right to point out that I have had the benefit of a full argument by counsel for the defendants in this case, whereas The Andrea Ursula came before Brandon J. on a motion by plaintiffs for judgment in default of appearance, on which the defendants were not represented.” (emphasis supplied)

58. Thereafter Robert Goff, J. records his conclusion in the following manner: “My approach to the case before me is as follows. I start with the statute, and the words with which I am particularly concerned, and which I have to construe in the context of the statute, are “beneficially owned as respects all the shares therein.” In my judgment, the natural and ordinary meaning of these words is that they refer only to such ownership as is vested in a person who, whether or not he is the legal owner of the vessel, is in any case the equitable owner, in other words, the first of the two meanings of which Brandon J. thought the words to be capable. Furthermore, 19 supra on the natural and ordinary meaning of the words, I do not consider them apt to apply to the case of a demise charterer or indeed any other person who has only possession of the ship, however full and complete such possession may be, and however much control over the ship he may have. Generally speaking, the essential characteristic of a demise charter is that it constitutes a contract of hire of the ship, under which the possession of the ship passes to the charterer, the master of the ship being the servant of the charterer, not of the owner. It is to be compared with the ordinary form of time charter, which is not a contract of hire but a contract of services, under which the possession remains in the owner and the master is the servant of the owner: see Sea & Land Securities Ltd. v. William Dickinson & Co. Ltd . [1942] 2 K.B. 65, 69–70 per Mackinnon L.J. and Scrutton on Charterparties, 18th ed. (1974), articles 24–26. It is true that a demise charterer has in the past been described variously as “owner pro hac vice:” see, for example, Frazer v. Marsh (1811) 13 East 238, 239, per Lord Ellenbrough C.J., The Lemington (1874) 2 Asp.M.L.C. 475, 478, per Sir Robert Phillimore, and The Tasmania (1888) 13 P.D. 110, 118, per Sir James Hannen P.; or as a person who is “for the time the owner of the vessel:” see Sandeman v. Scurr (1866) L.R. 2 Q.B. 86, 96, per Cockburn C.J.; or as a person with “special and temporary ownership:” see The Hopper No. 66 [1908] A.C. 126, 136, per Lord Atkinson. I doubt however if such language is much in use today; and its use should not be allowed to disguise the true legal nature of a demise charter. Furthermore, no case has been drawn to my attention, and I am aware of more, in which a demise charterer has been described as a “beneficial owner,” still less as a “beneficial owner as respects all the shares in the vessel.” Indeed, any reference in this context to ownership “as respects all the shares in the vessel” is, in my judgment, inapt to describe the possession of a demise charterer; such words are only appropriate when describing ownership in the ordinary sense of the word, and not possession which is concerned with a physical relationship with the vessel founded upon control and has nothing to do with shares in the vessel. A demise charterer has, within limits defined by contract, the beneficial use of the ship; he does not, however, have the beneficial ownership as respects all the shares in the ship. SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] Furthermore, I can find nothing in the remainder of the statute to cause me to reject the natural and ordinary meaning of the words; certainly, I would not construe other references in the statute to “ownership” — as in section 1 (1) ( a ) — or “co-owner” — as in section 1 (1) ( b ) — as referring in any way to demise charterers. Indeed in Part V of the Act, which is concerned with Admiralty jurisdiction and arrestment of ships in Scotland, the equivalent provision, section 47 (1) ( b ), requires that “all the shares in the ship are owned by the defendant.” This provision, to which I can properly have regard: see The Eschersheim [1976] 1 W.L.R. 430, 436 per Lord Diplock, reinforces my conclusion that section 3 (4) of the Act is concerned with title, the word “beneficial” being introduced to allow for the peculiar English institution of the trust.” xxxx xxxx xxxx xxxx xxxx “Accordingly, I do not regard the words “beneficially owned as respects all the shares therein” as being capable of more than one meaning; in the absence of ambiguity this is not, on the principles established by the Court of Appeal in Salomon v. Customs and Excise Commissioners [1967] 2 Q.B. 116, Post Office v. Estuary Radio Ltd . [1968] 2 Q.B. 740 and by the House of Lords in the Convention The Eschersheim [1976] 1 W.L.R. 430, an appropriate case in which to have recourse to the Convention. Even so, out of respect for the views of Brandon J., I propose to examine the Convention. The relevant provisions of article 3 of (the International Convention Relating to the Arrest of Sea-going Ships 1952) are as follows: “(1) Subject to the provisions of paragraph (4) of this article and of article 10, a claimant may arrest either the particular ship in respect of which the maritime claim arose, or any other ship which is owned by the person who was, at the time when the maritime claim arose, the owner of the particular ship, even though the ship arrested be ready to sail; but no ship, other than the particular ship in respect of which the claim arose, may be arrested in respect of any of the maritime claims enumerated in article 1, (1), ( o ), ( p ) or ( q ), (2) Ships shall be deemed to be in the same ownership when all the shares therein are owned by the same person or persons …. (4) When in the case of a charter by demise of a ship the charterer and not the registered owner is liable in respect of a maritime claim relating to that ship, the claimant may arrest such ship or any other ship in the ownership of the charterer by demise, subject to the provisions of this Convention, but no other ship in the ownership of the registered owner shall be liable to arrest in respect of such maritime claims. The provisions of this paragraph shall apply to any case in which a person other than the registered owner of a ship is liable in respect of a maritime claim relating to that ship.” As I read the Convention, article 3 (1), which is expressed to be subject to article 3 (4), provides for the arrest of either the particular ship in respect of which the maritime claim arose, or (except in certain specified cases) any other ship which is owned by the person who was, at the time when the maritime claim arose, owner of the particular ship. Furthermore, despite the argument of Mr. Alexander for the plaintiffs to the contrary, in this context I read the word “owner” as bearing its ordinary meaning, that is, the person with title to the ship; am confirmed in this view by the provision relating to ownership in article 3 (2) and by the fact that article 3 (4), to which article 3 (1) is expressed to be subject, makes special provision for the case of the demise charterer and others. It is to be observed that, if one puts article 3 (4) on one side, the draftsman of the Act of 1956 appears to have been seeking to give effect to article 3 (1) and (2) of the Convention, subject to the fact that he appears to have been concerned to extend the word “ownership” by the addition of the adjective “beneficial,” very possibly to take account of the special English institution of the trust which may form no part of the domestic laws of other signatories to the Convention.” (emphasis supplied)

59. We have been persuaded to extract in extensio from the judgment in I Congreso Del Partido20 on account of the clarity of the view expressed by Robert Goff, J. finding it difficult to be put in better words. Thus, 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 20 supra SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] 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.

60. In The “Father Thames”21 Sheen J. also declined to follow Medway Drydock & Engineering Co. Ltd.22 and followed I Congreso Del Partido23 and held that the phrase “beneficially owned” in the 1956 Act did not apply to a demise charter.

61. Similarly Wee Chong Jin, C.J. of the Singapore Court of Appeal in the decision of The “Permina 3001”24 has adopted the similar view that a ship in full possession and control of a person, who is also not an owner of all the shares therein cannot be utilized for the purposes of restraint of the ship.

62. Even in Canada, the Federal Court of Appeal has taken the same view on the import of the words “beneficial owner” in the context of the Canadian ‘Federal Court Act 1985’ which confers courts with the jurisdiction to arrest a ship. In Mount Royal/Walsh Inc. v. The Ship Jensen Star el al,25 Marceau, J, writing on behalf of the Bench, stated as follows : “The problem, however, is that I simply do not see how a court could suppose that Parliament may have meant to include a demise charterer in the expression ‘beneficial owner’ as it appears in s-s. 43(3). Whatever be the meaning of the qualifying term ‘beneficial’, the word owner can only normally be used in reference to title in the res itself, a title characterized essentially by the right to dispose of the res. The French corresponding word ‘proprietaire’ is equally clear in that regard. 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 21 [1979] 2 Lloyd’s Rep. 364 22 supra 23 supra 24 supra 25 [1990] 1 F.C 199. 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.26 also referred to the concept of beneficial ownership and cited with the approval, observations made in Halsbury’s 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, 26 [1980] 1 S.C.R. 553 SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.] 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.

70. The result of the aforesaid is that the appeals are dismissed leaving the parties to bear their own costs.

71. 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. Nidhi Jain Appeals dismissed. SUNIL B. NAIK v. GEOWAVE COMMANDER [SANJAY KISHAN KAUL, J.]