- Introduction: Landmark Clarification on Ship Arrest Jurisdiction
- Factual Background and Procedural History
- Substantive Legal Issues in Dispute
- Arguments of the Parties
- Statutory Framework: Admiralty Act, 2017
- Critical Analysis: Demise Charter vs Time Charter
- Legal Status of Disponent Owner
- Burden of Proof in Ship Arrest Proceedings
- Court's Legal Reasoning and Analysis
- Legal Implications and Practical Significance
- Conclusion: Strengthening Admiralty Jurisprudence
I. Introduction: Landmark Clarification on Ship Arrest Jurisdiction
In a seminal judgment that significantly clarifies the legal boundaries of ship arrest in India, the Division Bench of the High Court of Karnataka at Bengaluru has delivered a comprehensive ruling in Zurbagan Shipping LLC vs. C.S. Flourish & Ors. The judgment, pronounced on October 31, 2025, upholds the Single Judge's decision to vacate the arrest of the vessel 'C.S. Flourish' and provides meticulous analysis of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017. This ruling establishes crucial jurisprudential distinctions between time charters and demise charters for the purpose of enforcing maritime claims in rem, offering much-needed clarity to maritime practitioners and shipping companies alike.
The court's interpretation of Section 5 of the Admiralty Act reinforces that ship arrest is a precise statutory remedy that requires strict compliance with statutory conditions, particularly regarding the status of the party against whom the claim is made. By emphatically distinguishing between the liability of registered owners, demise charterers, and time charterers, the judgment protects vessel owners from having their assets arrested for claims arising from disputes to which they are not contractual parties.
The Karnataka High Court has unequivocally held that a vessel cannot be arrested for claims against a time charterer who is not a demise charterer. The distinction between time charters and demise charters is fundamental to determining whether a maritime claim can be enforced against the vessel itself through arrest proceedings.
II. Factual Background and Procedural History
The legal dispute originated from a Time Charter Party agreement dated January 6, 2023, executed between Zurbagan Shipping LLC (Appellant), a UAE-based entity, and Continental Dry Bulk Limited (Respondent No. 3), a Marshall Islands-based company described as the "disponent owner" in the charter agreement. Under this arrangement, Respondent No. 3 chartered the vessel to Zurbagan for commercial operations.
Zurbagan alleged that Respondent No. 3 failed to deliver the vessel 'C.S. Flourish' within the stipulated time frame, resulting in substantial commercial losses. Consequently, Zurbagan initiated arbitration proceedings against Respondent No. 3 and simultaneously filed a petition under Sections 3 and 5 of the Admiralty Act, 2017, before the High Court of Karnataka. The petition sought the arrest of the vessel 'C.S. Flourish' (Respondent No. 1) as security for its claim amounting to approximately ?14.96 crores (USD 1,615,290.26 and EUR 158,918.87), plus costs and interest at 18% per annum.
January 6, 2023: Execution of Time Charter Party between Zurbagan and Respondent No.3
July 24, 2024: Single Judge grants ex-parte arrest order
August 5, 2024: Vessel released upon deposit of ?15,13,25,036/- security
July 24, 2025: Single Judge vacates arrest order in I.A.No.1/2025
October 31, 2025: Division Bench dismisses appeal, upholding Single Judge's decision
The Learned Single Judge (Hon'ble Mr. Justice C.M. Poonacha) initially granted an ex-parte order for the arrest of the vessel on July 24, 2024. Subsequently, the vessel's owners secured its release by depositing a security amount of ?15,13,25,036/- with the Court Registry, as per the order dated August 5, 2024. This security deposit was made without prejudice to the rights and contentions of the parties.
The substantive legal contest emerged when the vessel's owners filed I.A.No.1/2025 seeking to vacate the arrest order and release the security amount. Their fundamental contention was that Zurbagan had no maritime claim against the vessel itself or its registered owners, as the liability, if any, was exclusively that of Respondent No. 3, with whom Zurbagan had a direct contractual relationship.
The Single Judge, after extensive hearings and consideration of legal precedents, allowed I.A.No.1/2025 on July 24, 2025, holding that Zurbagan had failed to establish a prima facie case for the arrest of the vessel. Aggrieved by this decision, Zurbagan filed the present appeal before the Division Bench.
III. Substantive Legal Issues in Dispute
The appeal before the Division Bench raised several complex legal issues concerning the interpretation and application of the Admiralty Act, 2017:
A. Nature of Charter Party Agreements
The primary legal issue concerned the characterization of the charter party agreement between the registered owner (Respondent No. 1) and Respondent No. 3. The appellant contended that this agreement constituted a demise charter, while the respondents maintained it was a standard time charter.
B. Jurisdictional Requirements for Ship Arrest
The court examined whether the conditions prescribed under Section 5 of the Admiralty Act, 2017, for ordering the arrest of a vessel were satisfied in the present case.
C. Legal Status of Disponent Owner
A significant issue involved determining the legal liability of a "disponent owner" and whether claims against such an entity could justify the arrest of the vessel.
D. Distinction Between In Personam and In Rem Claims
The court analyzed whether an action in rem against the vessel could be maintained for what was essentially an in personam liability of the time charterer.
E. Burden of Proof in Arrest Proceedings
The judgment clarified the evidentiary standard required for obtaining and maintaining an order of arrest, particularly the requirement of establishing a prima facie case.
The Division Bench identified the core question as: "Whether the required criteria is satisfied in the present case seeking arrest of the Vessel or not?" This question encompassed multiple sub-issues regarding contractual characterization, statutory interpretation, and evidentiary standards.
IV. Arguments of the Parties
A. Appellant's Contentions (Zurbagan Shipping LLC)
Mr. Dhyan Chinnappa, learned Senior Counsel appearing for Zurbagan, advanced several substantive arguments:
1. Nature of Head Charter as Demise: The central argument advanced by the appellant was that the charter party agreement between the registered owner (Respondent No. 1) and Respondent No. 3 was, in "essence and effect," a demise charter. Counsel argued that if this characterization was accepted, Respondent No. 3 would qualify as a demise charterer, and under Section 5(1)(b) of the Admiralty Act, a claim against a demise charterer could justify the arrest of the vessel.
2. Disponent Owner's Status: The appellant contended that Respondent No. 3, as a disponent owner by virtue of its charter from the registered owner, stood in the shoes of the owner for commercial purposes. Therefore, a maritime claim against the disponent owner should be enforceable against the vessel through arrest proceedings.
3. Belated Production of Document: Zurbagan objected to the Time Charter Party between Respondent No. 1 and Respondent No. 3 (Annexure-R10) being considered at the interim stage, arguing it was produced belatedly and its proper interpretation was a matter for trial rather than interim proceedings.
4. Invocation of Section 5(b): The appellant insisted that its claim constituted a valid maritime claim and that it was entitled to invoke Section 5(b) of the Admiralty Act to seek the vessel's arrest as security pending arbitration.
B. Respondent's Contentions (Vessel Owners)
Learned counsel for the vessel, Sri Prathamesh Kamat, supported by Smt. Dhanya T. Mallar, presented compelling counter-arguments:
1. Absence of Privity of Contract: The fundamental defense emphasized that there was no privity of contract between Zurbagan and the registered owners of the vessel. The contractual relationship existed exclusively between Zurbagan and Respondent No. 3.
2. Time Charter vs. Demise Charter: The respondents vehemently disputed the characterization of the charter as a demise. They relied extensively on Clause 26 of the very Time Charter Party (Annexure-E) that Zurbagan had signed, which explicitly stipulated: "Nothing herein stated is to be construed as a demise of the vessel to the Time Charterers. The owners to remain responsible for the navigation of the vessel, insurance, crew, and all other matters..." This clause, they argued, constituted a complete contractual negation of a demise charter arrangement.
3. Action in rem for in personam Liability: The respondents asserted that Zurbagan had improperly instituted an action in rem (against the vessel) to secure what was essentially an in personam liability of Respondent No. 3. They argued this was not permissible under the Admiralty Act unless the strict conditions of Section 5 were satisfied.
4. Failure to Establish Prima Facie Case: The respondents contended that Zurbagan failed to discharge the initial burden of demonstrating a prima facie case or a "reasonably arguable best case" for the arrest, which is a fundamental prerequisite under established admiralty law principles.
V. Statutory Framework: Admiralty Act, 2017
The Division Bench conducted a meticulous analysis of the statutory provisions governing ship arrest in India, with particular focus on Section 5 of the Admiralty Act, 2017.
"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
(a) the person who owned the vessel at the time when the maritime claim arose is liable for the claim and is the owner of the vessel when the arrest is effected; or
(b) the demise charterer of the vessel at the time when the maritime claim arose is liable for the claim and is the demise charterer or the owner of the vessel when the arrest is effected."
The Court provided crucial clarifications regarding the interpretation and application of Section 5:
Section 5(1)(a) Application: The Court emphasized that under clause (a) of sub-section (1) of Section 5, arrest can be ordered in a maritime claim only if the Court has reason to believe that the owner of the vessel would be liable for the claim. If the maritime claim is not against the owner of the vessel, then arrest cannot be ordered under this provision.
Section 5(1)(b) Application: Regarding clause (b) of sub-section (1) of Section 5, the Court clarified that arrest of the vessel can be ordered for a claim against the demise charterer of the vessel at the time when the maritime claim arises. If the claim is against the demise charterer, then arrest can be effected against the demise charterer or the owner of the vessel.
The Court further explained that if there is a demise charter between the registered owner and the disponent owner of the vessel, arrest can be ordered if the charterer against whom the maritime claim has been filed is either a demise charterer or the owner of the vessel.
The Division Bench reinforced that ship arrest under the Admiralty Act, 2017 is a statutory remedy that must strictly comply with the conditions prescribed in Section 5. The court cannot exercise its admiralty jurisdiction beyond the statutory framework, regardless of the apparent merits of the underlying claim.
VI. Critical Analysis: Demise Charter vs Time Charter
The Division Bench conducted an exhaustive analysis of the jurisprudential distinction between demise charters and time charters, heavily relying on the Supreme Court's landmark judgment in Epoch Enterrepots v. M.V. Won Fu, (2003) 1 SCC 305.
The Supreme Court authoritatively held: "...Whereas in demise charter, the vessel is given to the charterer who thereafter takes complete control of the vessel including manning the same, in both voyage charter and time charter, master and crew are engaged by the owner who act under the owner's instructions but under the charterer's directions."
The Division Bench affirmed and elaborated on this fundamental distinction:
A. Demise Charter (Bareboat Charter)
In a demise charter, also known as a bareboat charter, the charterer takes complete possession, control, and command of the vessel. The charterer effectively becomes the "owner" for the charter period, assuming full responsibility for the vessel's operation, including:
- Manning the vessel with its own crew
- Maintaining and operating the vessel
- Assuming all operational costs and liabilities
- Exercising complete navigational control
B. Time Charter
In contrast, in a time charter arrangement:
- The registered owner retains possession and control over the vessel's navigation and management
- The owner provides the crew and remains responsible for their actions
- The charterer obtains the right to use the vessel's carrying capacity for a specified period
- The charterer directs the commercial employment of the vessel but not its navigation
| Aspect | Demise Charter | Time Charter |
|---|---|---|
| Possession and Control | Charterer has complete possession and control | Owner retains possession and control |
| Crew Management | Charterer provides and manages crew | Owner provides and manages crew |
| Navigation Responsibility | Charterer responsible for navigation | Owner responsible for navigation |
| Operational Costs | Charterer bears most operational costs | Owner bears vessel operating costs |
| Liability for Arrest | Vessel can be arrested for charterer's claims | Vessel generally not arrestable for charterer's claims |
The Court found that the charter parties in question, both Annexure-E (between Zurbagan and Respondent No. 3) and Annexure-R10 (between Respondent No. 1 and Respondent No. 3), were standard time charter forms. Crucially, both contained Clause 26, which explicitly stated that the agreement was not a demise and that the owners remained responsible for the crew, navigation, and insurance.
"Nothing herein stated is to be construed as a demise of the vessel to the Time Charterers. The owners to remain responsible for the navigation of the vessel, insurance, crew, and all other matters, same as when trading for their own account."
The Court emphasized that this explicit contractual language conclusively established the nature of the charter as a time charter rather than a demise charter.
VII. Legal Status of Disponent Owner
The Division Bench addressed Zurbagan's argument regarding Respondent No. 3's status as a "disponent owner" in considerable detail. The Court referred to authoritative legal commentaries and precedents to clarify the legal position.
The Court cited Time Charters (Informa, London 2008) which defines a disponent owner as:
"A disponent owner is very often a person who contracts as owner under a time charter but is neither the registered owner nor the operator of the ship, but is himself a time charterer under another charter."
Similarly, the Court referenced Shipping Law by Simon Baughen (2nd Edition), which states:
"Disponent Owner. A charterer who sub charters the vessel. Under the sub charterparty the charterer will assume rights and obligations of a shipowner, as regards the sub charterer."
However, the Court emphasized a crucial legal distinction: merely being a disponent owner does not equate to being a demise charterer. A time charterer can act as a disponent owner when entering into sub-charters, but this commercial arrangement does not transfer the legal possession and control required for a demise charter.
The Court concurred with the findings in Sierra International Shipping Corp. v. M.V. Umka, AIR 2003 Bom 265, and M.V. Leonis v. Libra Shipping Services LLC, 2009 SCC OnLine Guj 8718, which held that in the absence of a demise, an action in rem against the vessel for a claim against a time charterer/disponent owner is not maintainable.
The Bombay High Court held: "Even in case where there is a maritime lien, there is a further requirement viz. the plaintiff approaching the court must have a demise in favour of the defendant. In the absence of such a demise the action would not be maintainable... If this not be the position, then an action in rem would not be maintainable."
The Court further noted that the petitioner had not even pleaded in its original petition that Respondent No. 3 was a demise charterer. This argument was raised only at a belated stage of the proceedings and was contradicted by the explicit terms of the charter party agreement that the appellant itself relied upon.
VIII. Burden of Proof in Ship Arrest Proceedings
The Division Bench provided important clarifications regarding the burden of proof in ship arrest proceedings, affirming the Single Judge's application of the principle that a plaintiff seeking arrest must demonstrate a prima facie case or a "reasonably arguable best case."
The Court referenced the Bombay High Court's judgment in M/s Kimberly-Clark Lever Private Ltd. v. M.V. Eagle Excellence, which elaborated on the evidentiary standard required:
"While applying the test of reasonably arguable best case, the Court will have to ascertain whether the plaintiff has prima facie case or not, and in that regard the Court will have to analyse the materials on record. Though the provisions of Orders 38 and 39 of the Code of Civil Procedure would not be directly applicable, the principles thereunder could not be forgotten while dealing with the matter at the stage where the defendant having released the ship on furnishing the security applies for release of security on the ground that the plaintiff has no prima facie case or reasonably arguable best case."
The Bench found that Zurbagan had failed to meet this burden for several reasons:
A. Lack of Pleadings on Demise Charter
The Court noted that nowhere in the petition filed by the petitioner/appellant was there a claim made that Respondent No. 3 was a demise charterer of Respondent No. 1-Vessel. This fundamental allegation was conspicuously absent from the original pleadings.
B. Contradiction by Contractual Terms
The appellant's belated attempt to characterize the charter as a demise was directly contradicted by the explicit terms of Clause 26 in the Time Charter Party that they themselves had relied upon.
C. Failure to Establish Jurisdictional Requirements
The appellant failed to demonstrate that the conditions under Section 5(1)(b) of the Admiralty Act were satisfied, particularly the requirement that the claim must be against a demise charterer.
The Division Bench reinforced that while the test for ship arrest is not as stringent as proof at trial, the claimant must nevertheless establish a prima facie case that satisfies the statutory requirements under the Admiralty Act. Mere assertion of a maritime claim is insufficient without demonstrating compliance with the jurisdictional conditions prescribed in Section 5.
IX. Court's Legal Reasoning and Analysis
The Division Bench's reasoning process demonstrates a methodical approach to statutory interpretation and application of established admiralty principles:
A. Textual Interpretation of Statute
The Court began with a plain reading of Section 5 of the Admiralty Act, emphasizing that the statutory language clearly distinguishes between claims against owners and claims against demise charterers. The absence of any reference to time charterers in the provisions was noted as significant.
B. Contractual Interpretation Principles
The Court applied standard contractual interpretation principles to the charter party agreements, giving effect to the explicit language of Clause 26 that negated any intention to create a demise charter.
C. Precedential Analysis
The judgment comprehensively analyzed relevant precedents, particularly the Supreme Court's decision in Epoch Enterrepots, and demonstrated how these principles applied to the facts of the present case.
D. Commercial Context Consideration
While focusing on legal principles, the Court also considered the commercial context of charter arrangements and the practical implications of allowing arrest for claims against time charterers.
The Court summarized its reasoning as follows:
"Having considered the aforementioned judgments and the submissions made by the learned counsel appearing for the parties, we are of the view that there is no error in the impugned judgement passed by the learned Single Judge and therefore, we find no merit in the present appeal."
X. Legal Implications and Practical Significance
This landmark judgment carries profound implications for maritime law practice in India and establishes several important principles:
A. Clarity on Ship Arrest Jurisdiction
The judgment reaffirms that the power to arrest a vessel under the Admiralty Act, 2017, is a precise statutory remedy, not a general tool for securing any maritime claim. The conditions under Section 5 must be strictly construed and satisfied, providing greater predictability in admiralty practice.
B. Sanctity of Contractual Terms
The ruling underscores that courts will give effect to the explicit terms of charter party agreements. The presence of a "non-demise" clause (like Clause 26) will be a decisive factor in determining the nature of the charter and, consequently, the availability of ship arrest as a remedy.
C. Protection for Vessel Owners
The judgment protects vessel owners from having their assets arrested for claims arising from disputes to which they are not a party, especially those involving sub-charters where the owner has no direct contractual relationship with the claimant. This reinforces the principle that ship arrest should not be used as a leverage in purely contractual disputes between commercial parties.
D. Strategic Considerations for Claimants
Claimants must conduct rigorous due diligence to identify the correct party be it the registered owner or a genuine demise charterer against whom a maritime claim can be enforced in rem. A claim against a simple time charterer must be pursued in personam through arbitration or litigation, without the leverage of a ship arrest.
E. Importance of Precise Pleadings
The judgment highlights the critical importance of precise and comprehensive pleadings in admiralty actions. Failure to properly allege essential facts, such as the status of the charter as a demise, may prove fatal to the claim at the interim stage itself.
Maritime practitioners should carefully examine charter party agreements for clauses that define the nature of the charter arrangement. The presence of a "non-demise" clause similar to Clause 26 will significantly impact the availability of ship arrest as a remedy for claims against charterers.
XI. Strengthening Admiralty Jurisprudence
The Karnataka High Court's judgment in Zurbagan Shipping LLC vs. C.S. Flourish represents a significant contribution to Indian admiralty jurisprudence. By providing clear distinctions between time charters and demise charters in the context of ship arrest, the judgment brings much-needed certainty to this specialized area of law.
This ruling reinforces that ship arrest under the Admiralty Act, 2017, is not an automatic remedy for all maritime claims but a precise statutory tool with carefully defined parameters. The strict interpretation of Section 5 ensures that this powerful remedy is employed judiciously and in strict conformity with the law, balancing the interests of claimants and vessel owners.
For the maritime industry, this judgment provides valuable guidance on contractual drafting, particularly the importance of clear language regarding the nature of charter arrangements. The explicit inclusion of "non-demise" clauses in time charters will now carry even greater legal significance.
As India continues to develop as a major maritime nation with ambitious port development and shipping initiatives, such clarifications in admiralty law are essential for creating a predictable legal environment that supports commercial activity while protecting legitimate interests. The Karnataka High Court's judgment strengthens this framework and will undoubtedly be cited as authoritative precedent in future admiralty disputes.
The continued evolution of India's admiralty jurisprudence, as demonstrated by this judgment, enhances the country's position as a reliable forum for maritime dispute resolution and contributes to the development of a robust legal framework for the maritime industry.