Bombay HC Clarifies Time Charterers’ Liability in Maritime Disputes

Introduction

Can a vessel owned by a time charterer be arrested under the Admiralty Act to satisfy a maritime claim against such time charterer? This question is significant because of the nature of a ‘time charter’ – which gives operational control of a vessel to a time charterer without any ownership rights. The Bombay High Court in Cockette Marine Oil[1] has answered this in the affirmative. We briefly discuss this advance in admiralty law.

Brief Facts

Cockette Marine supplied bunker (fuel for ships) to 3 vessels - OSV Beas Dolphin, M.V. Sea Jaguar and M.V. ATH Melody, at the behest of the erstwhile time charterer of the vessels. The time charterer defaulted in paying the bunker supplier. Cockette Marine therefore sought to enforce its maritime claim against the vessel OSV Beas Dolphin by contending that OSV Beas Dolphin is beneficially owned by the time charterer of MV Sea Jaguar and MV ATH Melody. Cockette Marine accordingly sought summary judgment against OSV Beas Dolphin.?

Analysis

?The key question before the Bombay High Court was whether a vessel owned (or beneficially owned) by a time charterer can be arrested under the Admiralty Act to satisfy the maritime claim against the time charterer. The issue before the court was whether a vessel owned by a time charterer can be arrested to satisfy the dues of the time charterer in respect of a time-chartered vessel. This is crucial because Section 5 of the Admiralty Act as presently worded contemplates the arrest of a vessel as security for a maritime claim, where the relevant person is the “owner” or demise charterer of the vessel sought to be arrested. An arrest of a vessel owned by a time charterer is not explicitly contemplated by the Admiralty Act.

The Bombay High Court however interpreted Section 5(2) of the Admiralty Act to rule that once a maritime claim against a time charterer is established, any vessel owned by such time charterer can be arrested. Notably, the court concluded that the legislature did not intend to exclude the “time charterer” from the list of relevant persons. To support this conclusion, the court relied on the International Convention on Arrest of Ships, 1999 that permits arrest of a vessel owned by a time or voyage charterer.

The court’s reliance on the convention to support its decision when the law is clear and excluded a time charterer, though a positive development, may be vulnerable to challenge in appeal.

Interestingly, the court declined to grant summary judgement to the bunker supplier by reasoning that the issue of beneficial ownership was a mixed question of fact and law that could only be decided at trial.

Conclusion

This judgment provides critical insight into the liability of time charterers and their exposure to maritime claims. The court, while acknowledging the Convention’s relevance, reiterated that the Admiralty Act, should be interpreted such that it aligns with the internationally accepted principles of the Convention. The judgement affirms that both under the Convention and the Admiralty Act, vessels owned or beneficially owned by a time charter can be arrested to satisfy maritime claims against the charterer. The judgement is a positive development and advances admiralty law in India. But clearly the appeal court will have the last word on this given the lacuna in the drafting of the legislation.

[1] Order dated 23 August 2024 in Interim Application No. 2169 of 2022 in Commercial Admiralty Suit No.47 of 2021.