Admiralty Court Doesn’t Have Power To Arrest Cargo On Board Ship For Unrelated Claim: Bombay HC [Read Judgment]

In the matter of Pacific Gulf Shipping (Singapore) Pte Ltd v. SRK Chemicals Ltd & Anr, the Bombay High Court has held that an admiralty court does not have jurisdiction to arrest cargo on board a ship for an unrelated claim.

Justice SC Gupte was hearing a notice of motion filed by the defendants (SRK Chemicals) seeking release of 20,000 MT of salt that was kept as security at an open yard in Kutch, Gujarat, in lieu of cargo belonging to the defendants.

Case Background

The defendants are salt traders and exporters, while the plaintiffs are in the business of chartering vessels.

Plaintiffs claimed cost of $221,656.29 for carriage of salt belonging to the defendants in their vessel MV Pacific Pioneer from the load port of Kandla to the discharge port of Chittagong, towards outstanding demurrage charges, interest and other costs.

In an ex-parte order by a single bench of the high court dated February 10, 2017, the defendant’s cargo was arrested. On February 13, following the defendant’s request, the order of arrest was vacated and 20,000 MT of industrial salt belonging to the defendants was taken as security in lieu of the arrested cargo.

This order of arrest has now been challenged by the defendants in the notice of motion.

Court’s Observations and Final Order

Citing the International Arrest Convention of 1952 (for sea-going ships), the court noted that there were 17 claims under which arrest could be made, this list was revived with the Arrest Convention of 1999 and 6 new claims were added.

It was further noted that neither conventions “make any exception to the original principle that no property other than that directly connected to the cause of action could be arrested, save and except the case of a sister ship”.

Therefore, only that ship or cargo can be subjected to arrest, which is directly connected with the cause of action.

Counsel for the plaintiffs, Ashwin Shanker relied on American, Canadian and Australian statutes that permit arrest of cargo without reference to arrest of the ship. He also submitted that the principles in the Supreme Court’s MV Elisabeth vs Harwan Investment and Trading Co, read with the subsequent case of Liverpool & London SP & I Association Ltd. vs MV Sea Success I, stated that Indian courts should recognise the remedies adopted by American, Australian and Canadian maritime law.

The court did not accept this argument and laid down: “The principle of MV Elisabeth, which was reiterated by MV Sea Success I, for deriving powers of arrest from various International Conventions was that these conventions contain unified rules of law drawn from different legal systems and that although many of these conventions are yet to be ratified by India, they embody principles of law recognized by the generality of maritime states, and can therefore be regarded as part of our common law. It is one thing to adopt these principles recognized by the generality of maritime states as part of our common law, but quite another to actually incorporate statutory provisions of particular maritime nations as part of our law.”

It was further noted: “Arrest of cargo in connection with a claim unconnected with it would be a matter of substantive law and not just a procedural issue. It is a matter pertaining to jurisdiction. It must be shown that the Admiralty Court does have such jurisdiction, either with reference to a statute or the authority of a decided case of our Court. As I have explained above, neither law nor authority supports such a proposition.”

Thus, it was held that the arrest order was not maintainable.

A stay on the order was sought by the plaintiffs and defendants opposed such a stay. However, the court observed that since the arrest has been in place for six months, it could be extended for three more weeks subject to a cost of Rs.2 lakh to be deposited by the plaintiffs towards the defendant’s expenses.

The suit itself will be listed for hearing on September 22.