Maritime law or shipping law in India, as elsewhere, is a wide ranging branch of the law which has within its’ boundaries, carriage of goods by sea; marine insurance; laws of ownership and registration of ships; ship sale and building contracts, ship financing, ship mortgages; manning of ships; the law of collisions, limitation of liability, salvage, towage and pilotage; maritime liens, claims and priority of the same; the law of marine pollution, as well as the Customs and Port laws. All these various aspects are covered by various legislations in India, which are founded on colonial British legislations on the subjects, as made applicable in India and as amended from time to time by the Indian Parliament. This paper aims to provide a general overview of the shipping laws in India and the highlights or peculiarities of the same, as developed over time.
Prior to delving into the subject of maritime law in India, it is pertinent to trace its origins in the English statutes on admiralty jurisdiction and the power exercised by the English Courts over foreign ships. The consolidation of the courts of common law and equity took place with the enactment of the Supreme Court of Judicature Act, 1873. The English Courts’ wide jurisdictional powers can be attributed to the ancient principles of maritime law developed by custom and practice in addition to subsequent statutes. Many of the statutes have incorporated provisions of International Conventions providing a synthesis with the several maritime countries. The international character of maritime law, although heavily indebted to general principles of international law is subject to local laws. This is true in India as well.
The modern maritime law of India has developed over a century, from colonial times, vide the Admiralty Offences (Colonial) Act, 1849, the Inland Steamvessels Act, 1917; the Coasting Vessels Act, 1838; the Indian Registration of Ships Act, 1841; the Indian Registration of Ships Act (1841) Amendment Act, 1850; Indian Ports Act, 1908; Indian Merchant Shipping Act, 1923; the Merchant Seamen (Litigation) Act, 1946; the Control of Shipping Act, 1947; and the Merchant Shipping Laws (Extension to Acceding States and Amendment) Act, 1949, Territorial Waters Jurisdiction Act, 1878 etc. In addition to these, a series of legislative Acts of British Parliament, promulgated between 1823 and 1940, governed various aspects of Indian shipping, including shipowners’ liability, salvage, certification of seafarers, safety and load line conventions.
By Clause 32 of the Letters Patent, 1862, the High Courts of Judicature at Madras, Bombay and Fort William in Bengal, were declared as Courts of Admiralty or of Vice Admiralty, and vested with jurisdiction for trial and adjudication of maritime questions arising in India, which was confirmed by the Colonial Courts of Admiralty (India) Act, 1891. By the Colonial Courts of Admiralty Act, 1890, the provisions of the Admiralty Court Act, 1840, and the Admiralty Court Act, 1861, were made applicable to courts in British India, as they were courts of law in British possession. By Section 22 of the Supreme Court of Judicature (Consolidation) Act, 1925, the questions or claims in relation to which the aforesaid High Courts shall have admiralty jurisdiction, were listed out, and those were the claims for which a claimant could approach the Admiralty Courts in India for reliefs.
The Supreme Court of India is the highest Court in India and it’s decisions are binding upon all courts and tribunals in India. Up till the time of the Supreme Court of India’s decision in the m.v. Elisabeth’s case, in 1993, the jurisdiction of Admiralty Courts in India, were restricted to the claims as enumerated in the aforestated British legislations. Vide the said decision, the Supreme Court of India, interalia, laid down that there is no reason to think that the jurisdiction of the Indian High Courts have stood frozen and atrophied on the date of the Colonial Courts of Admiralty Act, 1890, and that the High Courts in India are superior courts of records with unlimited jurisdiction with inherent and plenary powers to decide on their own jurisdiction to redress grievances according to what is perceived to be principles of justice, equity and good conscience, where statute is silent and judicial intervention is required. Accordingly, in view of there being no Indian Statute governing the Courts’ jurisdiction in regard to maritime claims, the Supreme Court made the principles of International Conventions on Maritime laws, applicable in India as part of India’s common law.
The Government of India has recently circulated a draft bill for an Admiralty Act, 2005, seeking to repeal all of the aforementioned obsolete legislations and instead and in their place, to bring into existence a comprehensive law to regulate the claims, jurisdiction, procedure, etc in Admiralty in India. This bill when passed by the Indian Parliament, would bring in a new comprehensive legislation in India in relation to maritime law.
In addition to the above, there are other legislations applicable in India in relation to maritime law, and they are the (Indian) Merchant Shipping Act, 1958, the (Indian) Carriage of Goods by Sea Act, 1925, the (Indian) Bills of Lading Act, 1856, the Multimodal Transportation of Goods Act, 1993, and the Major Port Trusts Act, 1963. There are further general statutes, like the Marine Insurance Act, 1963, the Contract Act, 1872, the Sale of Goods Act, 1930, the Evidence Act, 1872, the Indian Penal Code, 1860, the Transfer of Property Act, 1882, the Civil Procedure Code, 1908, the Criminal Procedure Code, 1973, the Limitation Act, 1963, the Companies Act, 1956, the Arbitration and Conciliation Act, 1996, the Maritime Zone of India Act, 1981, Territorial Waters Continental Shelf – Exclusive Economic Zone and Other Maritime Zones Act, 1976, etc. It is relevant to point out that the Indian Ports Act, 1908 and the Major Port Trusts Act, 1963 deal with the administration of the ports and the jurisdiction over ships in ports. The Customs Act, 1962, contains various regulatory measures in relation to ships, goods and persons, in connection with importation or exportation, clearance of goods for home consumption, exports, dutiability of goods, prohibitions, etc. In addition thereto, there are certain laws in relation to employment of labour and payment of compensation to seafarers, officers and crew in cases of death or disability etc., all of which would also be relevant in the context of the Indian maritime law.
Apart from these legislations, there are judgements of various courts in India, which has laid down general principles of maritime law as is recognised and practiced in India.
We will now examine some of the various domestic Indian statutes governing maritime law in India. This presentation is an attempt to provide a brief yet cohesive look at the significant statutes and their scope illustrated by landmark cases as well as how the law in India has developed by virtue of court decisions.
Merchant Shipping Act, 1958.
The present Merchant Shipping Act (hereafter, ‘MSA’) was adopted in 1958, repealing most of the earlier statutes in toto, and the Coasting Vessels Act, 1838, insofar as it applied to sea-going ships fitted with mechanical means of propulsion and to sailing vessels. The Inland Steam-vessels Act continues to be in force, with amendments, and is now called the Inland Vessels Act, 1917. Similarly, the Indian Ports Act, 1908 also continues to be in force. In addition to the MSA, the Indian Ports Act, 1908, the Major Ports Act, 1963, and the various State statutes governing minor and intermediate ports, together form the body of Indian maritime law as on date. The MSA itself underwent several amendments, the last one being in 2007. The MSA also provided for a Shipping Development Fund, but the same was abolished in 1986. Currently there are moves in India to get in a new M.S. Act to substitute the MSA. It is believed that the new Act, as and when passed by the Parliament, will update the Indian law to bring it in line with all the applicable International Conventions.
The MSA as it stands today establishes a National Shipping Board; provides for the general administration of Indian Shipping, by establishing the office of the Director General of Shipping (commonly referred to as the DG Shipping, or DGS), the Mercantile Marine Department, surveyors, radio inspectors, shipping offices, seamen’s employment offices and seaman’s welfare officers. It contains provisions for the registration and procedures thereof for Indian ships; regulates ownership of Indian vessels, contains regulations for certifications, classification and employment of seafarers and officers aswell as for vessels; regulations governing navigation and specific types of ships, including passenger ships, nuclear ships, sailing vessels and fishing boats; and provisions for investigations, inquiries and penalties.
The MSA incorporates safety and load line provisions; fixes liability for collisions and accidents at sea; provides for limitation of liability, liability for and preventive measures against marine pollution; provisions for wreck and salvage; provisions governing the coasting trade, and other miscellaneous provisions.
Though from the above account it would appear that the present MSA is comprehensive and up to date, it is far from being so. Problems arise out of some of the provisions having been carried verbatim from the older Acts, as well as being outmoded and behind the times, as compared with the position of law in other countries, and India’s obligations as a member of the International Maritime Organisation (IMO). In fact, it may be said that one problem with the MSA as it stands today is that it is excessively comprehensive.
All illustration of this would be Part VII of the MSA, dealing with seafarers and apprentices. The provisions of this part require agreements with seafarers for their engagement on board Indian ships, as well as on board foreign ships when the seafarer is engaged at an Indian Port, to be entered into before a shipping matter; the agreement is required to be read over and explained to the seaman by the shipping master, either in a language understood by the seaman, or in such other manner as to ascertain that he has understood it. The shipping master then has to attest each signature. Discharge and payment of wages are also to be made through the shipping master.
The above provisions made sense in the days gone by, when seamen were illiterate and unaware of their rights. In a day and age where educated, trained seamen are the norm, and are represented by powerful trade unions, the need for going before a shipping master ceased to make sense. Realising this, the DGS set up a Committee under the Chairmanship of the Principal Officer of the Mercantile Marine Department to explore avenues to modernise the process of engagement of seafarers. Based on the Committee’s recommendations, the DGS passed an Order in 2002 exempting seamen from those provisions, and providing for a new form of agreement, as well as a new procedure for signing the same, doing away with the need for going before the shipping master.
The Order met with resistance from trade union quarters initially, but has since survived with some amendments. What is more interesting than the Order itself, for our purpose, are the findings of the Committee. For example, the Committee found that the prescribed form of the agreement ran into 31 pages, and contained provisions of the Indian Merchant Shipping Act, 1923, which was repealed in 1958!
As stated hereinbefore, there is a proposal to replace the existing Merchant Shipping Act with a completely new one. This new Act is in the process of being drafted, and would, it is hoped, provide a comprehensive restatement of merchant shipping legislations in India commensurate with current International, and future, Conventions and practices.
In the case of British India Steam Navigation Company Co. Ltd., V/s Shanmughavilas Cashew Industries, reported in (1990) 3 SCC 481, the Supreme Court whilst considering the applicability of the MSA with reference to foreign vessels and foreign owners of such vessels, held, “In general , a statute extends territorially, unless the contrary is stated, throughout the country and will extend to the territorial waters, and such places as intention to that effect is shown. A statute extends to all persons within the country if that intention is shown. The Indian Parliament, therefore, has no authority to legislate for foreign vessels or foreigners in them on the high seas. Thus a foreign ship on the high seas, or her foreign owners or their agents in a foreign country, are not deprived of rights by our statutory enactment expressed in general terms unless it provides that a foreign ship entering an Indian port or territorial waters and thus coming within the territorial jurisdiction is to be covered …… … Without anything more, Indian statutes are ineffective against foreign property and foreigners out the jurisdiction.” This principle is reflected in Section 2(2) of the (Indian) MSA.
Limitation of Liability
An important aspect of maritime law is the nature and extent of a limitation action.
With several leading nations adopting the International Convention for the Unification of certain Rules relating to limited liability of owners of sea-going vessels in 1924 (commonly referred to as the Brussels Convention of 1924), an attempt to clarify and codify the principle were initiated. In 1957, a new convention on Limitation of Liability of Sea Going Vessels was drafted to replace the Brussels Convention of 1924. The new convention, commonly referred to as the Brussels Limitation Convention of 1957 was signed by many leading maritime states of the world, including India. The Convention fixes the limit of liability of an owner of a sea-going vessel on the basis of the tonnage of the vessel without regard to the vessel’s value. It was to incorporate this Convention in the Indian statute law that Part X A was inserted in the Merchant Shipping Act, 1958. Part X A governs the right of an owner to bring a limitation action under the Merchant Shipping Act, 1958. The purpose of limitation of liability is founded on providing protection to an owner against large claims, far exceeding the value of the ship and cargo, which can be made against him all over the world in case his ship meets with an accident causing damage to cargo, property, to another vessel or loss of personal life or personal injury.
By the Merchant Shipping (Amendment) Act, 2002, inter alia, Part X A of the MSA was amended by the Indian Government, to implement the provisions of the LLMC, 1976, and thus make the provisions of the said Convention as part of Indian Law. Pursuant to the said amendment, India is now a 1976 Convention country in respect of limitation of liability for maritime claims.
The amended Part X A of the MSA is para materia to the 1976 Convention. However, there is one omission in the Indian MSA, when compared to the Convention. Article 4 of the 1976 Convention provides for a person liable not to be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such laws would probably result. This Article 4 of the Convention does not find a place in the amended Part X A of the Indian MSA, which would lead one to believe that under Indian Law, the right to limit liability is absolute and therefore, it would be very difficult to break limitation in India.
Prior to the amendment, it was fairly easy, depending upon the facts and circumstances of the case, to break limitation, if it could be demonstrated that the owner’s actual fault and privity led to the incident in connection with which the owner seeks to limit liability. Further, the burden was on the owner i.e. the person seeking to limit liability, to demonstrate that the incident arose without his actual fault and privity.
The Supreme Court of India, in a case reported in AIR 1998 Supreme Court 2330, World Tanker Carrier Corporation V/s SNP Shipping Services Pvt. Ltd. and others, had an opportunity to deal with the issue of limitation of liability and the jurisdiction of Indian Courts to entertain such actions. It may be borne in mind that this case was heard and decided under the old limitation regime, prior to the 2002 amendment to the Act. In the said judgement, the Supreme Court of India has inter alia held, “a limitation action, though it is normally filed in the admiralty jurisdiction of a court, is slightly different from an ordinary admiralty action which normally begins with the arrest of the defaulting vessel. The vessel itself, through it’s master, is a party in the admiralty suit, and the plaintiff must have claims provable in admiralty against the vessel. In the case of an action for limitation of liability, it is the personal right of the owner of the vessel to file a limitation action or to use it as a defence to an action against him for liability. It is a “defensive” action against claims in admiralty filed by various claimants against the owner of the vessel and the vessel. A limitation action need not be filed in the same forum as a liability action. However, it must be a forum having jurisdiction to limit the extent of such claims and whose decree in the form of a limitation fund will bind all the claimants.”
After recording the history of limitation actions and the applicable provisions in relation to jurisdiction under Indian procedural laws, the Supreme Court has held, “a limitation action in admiralty jurisdiction cannot be filed in a Court where a part of the cause of action of arises when all claimants who are defendants to the action are foreigners who reside outside India, who do not carry on business in India and who have not submitted to the jurisdiction of any Court in India, and have not filed a liability action in India and are not likely to do so.” The Supreme Court, in the facts of that case, went on to hold that the concerned Indian High Court did not have jurisdiction to receive, entertain and try that limitation action inter alia on the ground that there was no likelihood of any claims being filed before the Courts in India.
Carriage of Goods by Sea Act, 1925
The Act applies to carriage of goods by sea under bills of lading or similar documents of title from a port in India, to any other port whether in or outside India (Section 2). The Act imposes responsibilities and liabilities and confers rights and immunities upon the carrier. The important point to note is that the substantive rights recognised by the statute are of equal application to foreign merchant ships as they are to Indian merchant ships. The Indian Carriage of Goods by Sea Act, 1925, is the substantive law in India on the subject of carriage of goods by sea where bills of lading or such document of title is issued. The enforcement of the rights of cargo interests for recovery of their claims including by arrest of foreign vessels found in Indian waters, is governed by the provisions of the Admiralty Courts Act, read with the judgement of the Supreme Court of India in the Elisabeth’s case. Recourse can also be taken under the Merchant Shipping Act. That Act, as stated earlier, confers a right to arrest a vessel in respect of any damage by a ship. This expression, if understood in a broader sense, effectively enables jurisdiction over a foreign ship for the enforcement of a substantive right recognised by law, would be no hindrance in finding a remedy for the right that law has conferred on the cargo owner. This would also be true in cases of charter party disputes.
Multimodal Transportation of Goods Act, 1993
In recognition of the increasing technological advancements in transportation systems and the rampant advent of containerisation in maritime transport and the use of more than one mode of transport for the carriage of goods within the country as well as to international destinations, the Multimodal Transportation of Goods Act was introduced in India in 1993. This Act applies to all cases where
two or more than two modes of transport are used in the course of transportation. The Act recognises multimodal transportation of goods being done under a single transport document which covers all the modes of transport and the multimodal transport operator remains liable and responsible to the cargo owner. The MTOGA provides for the multimodal transport operator to be liable when the goods are damaged when they are in his charge. However, an MTO will not be liable under the Act unless action against him is brought within 9 months of – the date of delivery of the goods; the date when the goods should have been delivered; or the date on and from which the party entitled to delivery of the goods has the right to treat the goods as lost..
Multimodal transportation of goods is now standard practice in many parts of the developed world and is gradually spreading over to developing nations. In order to ease control, simplify procedures and facilitate smooth flow of international trade and promotion of exports, the Government of India promulgated this Act, which has also amended the Carriage of Goods by Sea Act, 1925.
The important changes to the COGSA brought about by the MTOGA, are : (a) it provides for parties to agree on the extension of the one year period to bring suit for cargo claims; (b) it has increased the per package limitation to bring the Indian COGSA in line with the Hamburg Rules, i.e. the package limitation under Indian law is now 666.66 SDR per package or unit or 2 SDR per kilogram of gross weight of the goods lost or damaged, whichever is higher; and (c) the Indian law now expressly provides that neither the carrier nor the ship shall be entitled to the benefit of the package limitation of liability if it is proved that the damage resulted from an act or omission of the carrier done with intent to cause damage, or recklessly and with knowledge that damage would probably result.
The Supreme Court of India, whilst dealing with the one year period to bring Suits in connection with loss/damage to cargo under bills of lading, has held that the one year period provided by COGSA and the Bill of Lading is not a period of limitation, but the right to sue the carrier itself stands extinguished on the expiry of one year after delivery of the goods or from the date when the goods ought to have been delivered. See AIR 1960 SC 1058, which was followed and applied in AIR 1972 SC 1405, and recently in a case decided by the Madras High Court.
I will now turn to the Admiralty jurisdiction exercised by the courts in India. In rather simplistic terms, this can be stated as being the jurisdiction of courts over maritime claims, and the procedures relating thereto. This includes the arrest of ship; determination of claims and priorities; and of liabilities.
The modern admiralty law of India can be traced to developments between the late 1700s, when the Royal Charters established what are now the High Courts of Bombay, Calcutta and Madras, and the early 1900s. The Admiralty Court Act, 1861, read with the Colonial Courts of Admiralty Act, 1890 and the Colonial Courts of Admiralty (India) Act, 1891, all Acts of British Parliament, conferred the same admiralty jurisdiction on the above mentioned Presidency High Courts of Calcutta (which was then Fort William), Madras and Bombay, as was vested in the High Court of England. These High Courts were by Letters Patent conferred ordinary, original and civil jurisdiction. The Government of India Act, 1915, declared these Courts to be courts of record and confirmed the jurisdiction vested in them by the Letters Patent and the above mentioned Acts. The Colonial Courts of Admiralty in India also had criminal jurisdiction, under the Admiralty Offences (Colonial) Act, 1849, read with the Admiralty Jurisdiction (India) Act, 1860, over “admiralty offences”.
In India, it is only the High Courts of Bombay, Madras and Calcutta that exercise and/or have admiralty jurisdiction. By virtue of the State Re-organisation Act, the High Courts of the States carved out of the original Bombay, Madras and Bengal States/Presidencies, also have Admiralty jurisdiction, and accordingly, the High Courts of Gujarat, Andhra Pradesh, and Orissa also exercise Admiralty Jurisdiction. Further, these High Courts (Bombay, Madras, Calcutta, Gujarat, Andhra Pradesh, & Orissa) exercise admiralty jurisdiction concurrently over vessels found in the territorial waters of India.
In India, to enable a Claimant to approach the Admiralty Court for an arrest of the Defendant vessel in respect of a maritime claim, all that he has to do is to file a substantive Suit to the concerned Admiralty Court when the Defendant vessel is within the territorial waters of India, and make out a prima facie case and the arrest of the vessel would follow. Once the vessel is arrested, the owner or any party interested in the vessel can approach the Court and put up security for the release of the vessel in terms of the Warrant of Arrest issued by the Court and have the vessel released. Thereafter, the Suit in due course would be tried and decided by the Court. The High Courts vested and exercising Admiralty jurisdiction have framed rules in respect of various procedures, filing of caveats against arrest/release/payment out, for sale of the vessel, determination of priorities, etc. The recognised security to be furnished by the defendant for the release of the vessel, would either be by way of cash deposited in the registry of the concerned Admiralty Court or by way of a Bank Guarantee issued by a nationalised bank in favour of the Admiralty Registrar of the concerned Court. The quantum of such security would be in accordance with the Warrant of Arrest issued by the Court in the matter. P & I Club letter of guarantee, as security, is not recognised or accepted by the courts. Club Letter of Guarantee can be used as security only if the plaintiff agrees to accept the same as security for his claim in the suit.
In a case involving the vessel, m.v. Kapitan Kud, reported in AIR 1996 SC 516, the Supreme Court has interalia held that to enable a claimant to seek and get a vessel arrested in respect of any maritime claim, all that he has to do is to make out a prima facie case, and the arrest of the vessel shall be granted. At the time of the application for arrest, the Court will not go into the evidence in the matter and/or the probability of the Plaintiff succeeding in the Suit.
The traditional understanding of admiralty jurisdiction, insofar as it relates to claims arising out of the carriage of goods by sea, is illustrated in section 6 of the Admiralty Court Act, 1861, which reads:
“As to claims for damage to cargo imported:- The High Court of Admiralty shall have jurisdiction over any Claim by the Owner or Consignee or Assignee of any Bill of Lading of any Goods carried into any Port in England or Wales in any Ship, for damage done to the Goods or any Part thereof by the Negligence or Misconduct of or for any Breach of Duty or Breach of Contact on the Part of the Owner, Master, or Crew of the Ship, unless it is shown to the satisfaction of the Court that at the time of institution of the cause any owner or Part Owner of the Ship is domiciled in England or Wales…”
After Indian Independence, the Act mentioned above continued to remain in force, and do so even today, save and except the words “England or Wales” to be read as “India”. For a long time, Courts in India considered the above statutes as being definitive in terms of the nature of admiralty jurisdiction and of the Courts which exercised the same. Therefore, the traditional understanding prevailed till recently, notwithstanding tremendous progress internationally.
The Calcutta High Court, in Jayaswal Shipping Company v S.S.Leelavati, reported in AIR 1954 Cal 415 (now overruled) had held, “.. Courts of Admiralty are Courts of specific jurisdiction and if a controversy does not come within their specific jurisdiction, they cannot entertain it, and in that respect are unlike the Courts of residuary jurisdiction such as the Common Law Courts or in India the Courts of ordinary civil jurisdiction.”
The High Court reiterated its view in National Co Ltd. Vs. Asia Mariner, reported in (1968) 72 Cal WN 635 (now overruled), wherein it held, “The High Court at Calcutta as a Court of Admiralty is… a Court of prescribed jurisdiction. Its jurisdiction is prescribed by clause 26 of the Charter of 1774 and by Section 2(2) of the Colonial Courts of Admiralty Act, 1890. The jurisdiction has not been extended or modified by any statue. None of the subsequent British statutes by which the Admiralty jurisdiction of the High Court in England has been extended or affected have been made applicable in India.”
The Bombay High Court, in Kamalakar Bhaga v. Scindia Steam Shipping Navigation Co Ltd., reported in AIR 1961 Bom 186 (now overruled), held “… the High Court of Judicature at Bombay in particular being one of the Colonial Courts of Admiralty under Act 16 of 1891 today exercises the same admiralty jurisdiction as was exercised by the High Court of Admiralty in England in 1890 when the Colonial Courts of Admiralty Act was passed by the British Parliament. We have, therefore, to examine and ascertain as to what was the scope and nature of jurisdiction of the High Court of Admiralty in England either under any stature or otherwise in the year 1890, because, it would be just that jurisdiction which is exercisable by the High Court of Judicature at Bombay down to date.”
The effect of these observations was to limit the jurisdiction of Indian Courts, and resulted in the Courts refusing to exercise jurisdiction over disputes arising out of charterparties (section 6 of the Admiralty Court Act, 1861, only referred to claims arising out of Bills of Lading); disputes arising in connection with outbound carriage of goods by sea (since the above referred section 6 only referred to goods carried into England or Wales, now read India, in any Ship); etc.
It was perhaps inevitable that such a restrictive scheme of things would not continue forever, and eventually, the Supreme Court of India was approached for its pronouncement on the issue of admiralty jurisdiction, in the landmark case of MV.Elisabeth v. Harwan Investment and Trading Pvt Ltd., the decision being reported in AIR 1993 SC 1014. The Indian Supreme Court’s decision/ judgement in the Elisabeth case, has specifically overruled all of the aforesaid three decisions.
The Elisabeth case arose from a dispute in connection with an outbound carriage of goods by sea from a port in India. The m.v.Elisabeth, the foreign vessel in this case, left the Port of Marmagoa without issuing bills of lading or other documents for the goods shipped.
The shipper instituted a suit in the High Court of Andhra Pradesh, invoking its admiralty jurisdiction, by means of an action in rem. Pursuant to this, the vessel was arrested when it entered the Port of Visakhapatnam. The Defendants moved an application in the High Court raising a preliminary objection to the jurisdiction of the Hon’ble Court. The contention in the objection was that no Court in India had admiralty jurisdiction to proceed in rem against the ship when the cause of action related to outbound carriage of goods from an Indian port to a foreign port. The said objection was dismissed by the High Court, and the owner appealed to the Supreme Court of India, vide a Special Leave Petition.
The Hon’ble Supreme Court in admitting the Petition, found the opportunity to lay down the position of law in India relating to admiralty jurisdiction in finality. Counsel for the Appellant Defendants pointed to a catena of case law from the High Courts in India to support his argument that the jurisdiction of the Admiralty Courts in India, stood frozen as of 1861. Counsel for the Respondent-Plaintiffs, on the other hand, argued that the judgement of the High Court was sound and correct, as it was “based on a realistic appreciation of the need for liberal construction of statues so as to support an assumption of jurisdiction to render justice.. rather than resorting to a technical or narrow or pedantic construction resulting in a state of helplessness.”.
In the said case of Elisabeth, the Supreme Court of India, after a comprehensive examination of the statutory position, as well as the position taken by the High Courts of Bombay and Calcutta, accepted the argument of the Plaintiff’s Counsel, in what is considered a veritable thesis on the subject, which judgement paved the way for subsequent decisions of the High Courts which would appear to expand the admiralty jurisdiction exercised by the Admiralty High Courts in India in respect of a plethora of maritime claims and questions. The Supreme Court, in the Elisabeth’s case had held that the continued existence of the colonial statutes cannot be read to “stultify the growth of law”. The Hon’ble Court observed, “(t)here is … neither reason nor logic in imposing a fetter on the jurisdiction of these High Courts by limiting (the same) to the provisions of an Imperial Statue of 1861 and freezing any further growth of jurisdiction”.
Thus, the Hon’ble Court went on to extend admiralty jurisdiction also to claims arising out of outbound carriage of goods by sea. The Court, in reaching its conclusions, took into account the progress of admiralty jurisdiction the world over both in terms of legislation as well as International Conventions. This decision resulted in the application of the principles of various International Conventions in the maritime arena by Indian courts in exercising admiralty jurisdiction in respect of maritime claims.
The most serious difficulty in deciding the case, as the Hon’ble Court noted, was the lack of modern statutes and statutory definitions in India, in respect of ‘maritime claim(s)’. As a result, the Court had to rely on International Conventions and foreign statues ( for eg., the English Supreme Court Act, 1981) on various points; and while doing so, “express(ed) the hope that the unfortunate state of affairs shall be brought to an end at the earliest”. Therefore, while successive judgements have followed the Elisabeth’s case, the Court’s cautionary words regarding “the urgency of enacting up-to-date law on Admiralty” in India, still rings true, and there is much expectation that the bill for the new Admiralty Act, referred to earlier, will soon be passed by the Indian parliament.
In India, a ship can be arrested for a variety of claims including claims for necessaries supplied to any foreign ship or sea-going vessel; any claim for the building, equipping, or repairing of any ship; any claim for damage to cargo; any claim for damage done by any ship; for claims/questions arising in connection with the ownership, possession, employment and earnings of any ship; for claims arising out of or in connection with the use and hire of a ship, salvage services rendered to a ship, collision claims, etc. In view of the dicta of the Supreme Court in the Elisabeth case, that “principles of International Conventions are applicable as part of the Indian common law in maritime cases”, in India, vessels can also be arrested in admiralty actions for any and all claims enumerated in the Arrest Conventions.
The argument that a ship cannot be arrested for realising unpaid P & I calls was based on the view that such unpaid insurance premiums or P & I calls are not “necessaries” supplied to a ship. English courts have consistently held for long that unpaid insurance premia are not “necessaries” within the conventional sense of the term, ‘necessaries’. The English view is also followed in Australia, South Africa, Singapore and other common law countries. From this point of view, unpaid insurance premium would not be either a “necessary” or a “disbursement made on account of the ship”. This was the issue in the case of Liverpool & London Steamship Protection & Indemnity Association Ltd. v. m.v. Sea Success (reported in JT 2003 (9) SC 218). The Supreme Court of India has held that unpaid P & I Club calls would come within the purview of the expression “necessaries supplied to any ship” and thus, is a maritime claim enforceable in admiralty in India. A ship can now be arrested in India for recovery of unpaid P & I calls. With this decision of the Supreme Court of India, India too joins the list of jurisdictions where a ship may be arrested for non-payment of P & I calls and the recovery thereof.
In the judgement, the Court examined the history of the admiralty jurisdiction of the High Courts in India as well as the history in respect of “necessaries” as a maritime claim. The Court acknowledged the fact that the English courts never considered arrears of insurance premiums or P & I calls as a ‘necessary’, and also that courts in England maintained a distinction between maritime claims and maritime liens. However, the Court said, “the question as to whether unpaid insurance is a commercial necessity should be decided having regard to the changed scenario”. The changing scenario, according to the Court, is evidenced by the publication of the 1999 Arrest Convention. In the absence of Indian statutory law in the area, following it’s own earlier decision in the m. v Elisabeth case, the Court reaffirmed that interpretative changes must be made having regard to the ever changing global scenario. The Court also noted that the supply of necessaries is a maritime lien in the United States and that unpaid insurance premium was a “necessary” there, which principle if in consonance with Indian law, could be applied here. The Court examined the circulars issued by the various Indian Ports pursuant to a directive from the Mercantile Marine Department, making P & I cover mandatory, and followed the American decision in Equilease Corporation v. m.v. Sampson [793 F. 2d 598], in holding that because insurance is essential to keep the vessel in commerce, insurance is a “necessary”. Since a compulsory insurance regime has come into being in India as regards P & I cover, unpaid P & I calls would now come within the purview of the term “necessaries supplied to the ship.” Therefore, unpaid insurance premiums give rise to a maritime claim rendering ships liable to arrest for recovery thereof, and a claim for unpaid insurance premium is now enforceable in India as a maritime claim.
The Court, in this case, has used the term “insurance premium” to mean a P & I call, and at the same time, specifically refused to express a view on whether types of insurance other than P & I insurance would also amount to “necessities”. Till such time as the issue comes up before the Courts, it remains to be seen whether the non-payment of premium for hull and machinery insurance would also render a ship liable to arrest.
Following the dicta in the Elisabeth’s case, the Admiralty Courts in India, are now arresting ‘sisterships ’ in respect of maritime claims.
In a case reported in AIR 2002 BOMBAY 517, Islamic Republic of Iran Vs. m.v. Mehrab and Others, a Division Bench of the Bombay High Court has held that the High Court has the power to arrest a vessel simplicitor for security only to secure a claim in pending or future arbitration between the parties. Prior to this decision, in accordance with the procedural laws in India, no Suit purely for security would lie and such Admiralty Suit had to be a substantive Suit. However, with the above decision, even in cases where there is an agreement between the parties for referring disputes to arbitration or other dispute resolution forum, a party could approach the Admiralty Court for arrest of a vessel as security for their claim in such arbitration. Likewise, vessels can be arrested in execution of decrees and/or for payments under any award, etc. Courts in India are also now granting injunctions described as ‘mareva’ injunctions, as would be seen from cases reported in (1995) 3 SCC 33, (2000) 8 SCC 278 and AIR 2003 BOMBAY 417.
Thus, it would be noted that maritime law in India is not static and continuously developing; and the Supreme Court of India and the High Courts are very active and responsible for this continued development of the law in this area.
Sale deficit suits
A peculiar type of claim and suits are faced by vessel/carrier’s agents in India, from the major ports. These claims or suits are filed by the major ports, against the consignee/receiver of the cargo; the agents who enter vessels at the ports; as well as the slot charterers’ agents; for recovery of the deficit in the sale proceeds of uncleared cargoes. These cases relate to unclaimed and/or uncleared cargoes, the accrual of the ports’ charges thereon, and their sale/disposal by the port trusts and the subsequent demand for payment of the deficit in the sale proceeds made by the Port Trusts; and on non-payment thereof, suits for recovery of the deficit in the sale proceeds are filed by the Port Trusts.
Port Trusts file these suits for the recovery of the shortfall of their charges. Cargo landed and uncleared, is subject to port charges by way of ground rent (in case of containerised cargo), demurrage, etc. Section 61 of the Major Port Trusts Act provides that if goods landed into the ports’ custody are not cleared, the Port Trusts are entitled to sell such goods or so much thereof as is necessary, interalia, for recovery of the rates and rents payable to the Port Trusts. The said provision also describes the procedure to be adopted by the Port Trusts for this purpose. Though the provision provides for the Port Trusts to sell cargoes which remains uncleared in excess of two months from their respective arrivals and moving into the ports’ custody, the Port Trusts take their own time and follow their own procedures which are fraught with delays and laches, in selling such uncleared cargoes. There are several reasons for the delays that occur, but, predominantly, the reason is that the ports list the cargo for auction sale and when the port does not receive the minimum bids, the cargoes are not sold and put up for re-auction and it is eventually sold for only a minimum price. However, the ports continue to charge ground rent, demurrage, etc., throughout these periods and eventually, after the cargoes are sold, the sale proceeds are utilised first, to defray the cost of sale; thereafter, the Customs duty payable on the cargo; and the balance, if any, is used towards recovery of the port charges accrued on the cargo. In the event of any deficit therein, the ports file suits for recovery of the deficit, against the consignee/receivers as also against the agents of the line.
The Port Trusts seek to align the agents in the array of defendants in such suits on the ports’ contention in such suits that all these defendants including the agents, fall within the definition of “owners”, as defined by the Major Port Trusts Act, and consequently, the agents also, as such owners of the cargo, are liable for the payment of the deficit. Section 2(o) of the Major Port Trusts Act, 1963, defines “owner”, “(i) in relation to goods, includes any consignor, consignee, shipper or agent for the sale, custody, loading or unloading of such goods; (ii) in relation to any vessel or any aircraft making use of any port, includes any partowner, charterer, consignee, or mortgagee in possession thereof.” What the major Ports rely on in such suits, is the definition given under section 2 (o)(i), to contend that the vessels’/lines’ agents are agents for the custody, loading or unloading of the goods and therefore, “owner” and consequently, liable..
A clear and meaningful reading of the aforementioned definition would indicate that the Port Trusts’ said submission is incorrect in that a vessel’s agent does not fall within the said definition, inasmuch as he is not the agent for the sale, custody, loading or unloading of the goods that the vessels carry. It is submitted that the aforementioned definition would only refer to a Customs Clearing House Agent (CHA) who acts for and on behalf of the consignees/receivers (importers) of the goods, in relation to complying with all the formalities in relation to the import of the goods by the importers.
In cases reported in AIR 1995 SC 1922, AIR 1998 SC 92, AIR 1999 SC 2947, the Supreme Court of India has interalia observed that demurrage has to be recovered from the consignee and not from the steamer agents in cases where the steamer agents have issued ‘delivery orders’; and that the consignee, and not the steamer agent, is liable for the port charges.
However, it may noted that this issue is presently before the Supreme Court of India, which has referred this issue for decision to a larger Bench and pending decision. The Supreme Court’s verdict in this matter in due course in respect of Agent’s liability for the Port’s such claims, would finally put this issue to rest.
The Supreme Court in reported decision (AIR 1997 SC 544/ (1996) 8 Scale 505; also see AIR 1978 AP 306) has also held that ports in India are entitled to demand and obtain unconditional security before allowing a foreign vessel that has caused damage to port property from sailing out of the port, and such security would be based on the ports’ estimates of the damage as well as costs of repairs/replacement; and as per the wordings, i.e., unconditional security, as may be insisted by the ports. However, the quantum of the liability could be challenged by the owner by a civil suit subsequently.
Under the Admiralty Offences (Colonial) Act, 1849, recently, the Court of Sessions of Greater Mumbai, India, convicted 17 pirates who pirated a cargo vessel flying the Japanese flag, m.v. Alondra Rainbow, in the Indian Ocean. Upon receipt of information regarding the piracy of their vessel from the Japanese owners of the vessel, two vessels of the Indian Coast Guard intercepted the pirated vessel and apprehended the 17 pirates and escorted the vessel to the Mumbai port. On arrival at Mumbai, all the 17 pirates of Indonesian origin, were arrested and charged. The prosecution was successful in getting a conviction of the pirates inter alia under the provisions of the aforesaid Act. This was the first time in relation to piracy in the world that the pirates were not only arrested but were also successfully convicted.
Before I conclude this presentation, I will touch upon one more important aspect of shipping laws in India, which are Charter Party disputes. There are quite a few charter parties that are being entered into by Indian entities. In most cases, the Charter Party provides for English law to apply, with London Arbitration, in case of disputes arising out of or in connection with the Charter Party. But, where the charterer is an Indian Public Sector Company or the President of India or an Indian Statutory Corporation, the Charter Party provides for Indian law to apply and Arbitration in India. In such cases, the Charter Party terms/Contract are interpreted in accordance with the Indian Contract Act and the local case laws thereon. There are no much precedents in India in respect of interpretation of Charter Party terms, but more often then not, relevant English precedents are used in such proceedings, for persuasive value, to support the arguments canvassed by the parties. Such relevant English precedents are the basis for the interpretation of standard Charter Party terms and for the Tribunals to issue their awards. Challenge to the award, etc. are governed by the Arbitration and Conciliation Act, 1996.
In India, such arbitrations are usually held under the aegis of the Indian Council of Arbitration, New Delhi, which has framed rules for the conduct & resolution of maritime disputes.
It is hoped that a general idea in relation to shipping / maritime law in India, has been conveyed through this presentation. Each problem/issue is distinct and requires specific solution, which has to be found for each case specifically in the facts and circumstances of that case.