Undertaking Not Security: Gujarat High Court Mandates Arrest for Maritime Claims : Segal Ships v. M.V. Tulsi Sagar 1

I. The Fallacy of Undertaking in Admiralty Jurisdiction

For decades, admiralty courts in India have proceeded on the bedrock principle that the vessel is the primary defendant. The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 codified the power to arrest any vessel within Indian territorial waters for the purpose of providing security against a maritime claim. Yet, in December 2025, a learned Single Judge of the Gujarat High Court (Honble Mrs. Justice Mauna M. Bhatt) passed two orders first on 10.12.2025 and then on 18.12.2025 where, instead of ordering arrest of the defendant vessels, the Court accepted an undertaking by the owner that defendant Nos.2 and 5 shall not leave the territorial jurisdiction and restrained creation of charge. This prompted the plaintiff, Segal Ships Private Limited, to file an intracourt appeal (O.J. Appeal No.8/2025). The Division Bench comprising Justice A.Y. Kogje and Justice J.L. Oddra delivered a path-breaking oral judgment on 24 December 2025 (uploaded officially thereafter), holding that such a course is alien to the Admiralty Act, and that arrest is mandatory once a prima facie maritime claim exists.

In the words of the Division Bench: Once the maritime claim is averred, it is for the High Court to order the arrest of the vessel, which in the facts of the present case, the Single Judge has not proceeded to, but has accepted the assurance given at bar to secure the maritime claim. This in the opinion of the Court, is not an exercise recognized under the proceedings of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.

II. Background: Charter-Cum-Sale Agreements and Alleged Breach

The plaintiff (Segal Ships) had entered into five separate Vessel Charter Cum Sale Agreements dated 16 August 2025 with defendant No.6 (owner of vessels defendant Nos.1 to 5). Each agreement provided for a 12-year charter period commencing from the date of delivery after joint survey and furnishing of bank guarantees. The plaintiff claimed that despite repeated emails (from September to November 2025) seeking readiness dates and documents for joint survey, the owner failed to cooperate. On 8 November 2025, the owner for the first time raised disputes concerning earlier transactions between group companies, which were extraneous to the fresh agreements. The plaintiff apprehended that the owner was chartering the vessels to third parties in breach of the agreement. By legal notice dated 2 December 2025 and further clarifications, the plaintiff expressed readiness to perform its obligations, but the owner remained evasive. Consequently, on 9 December 2025, the plaintiff filed Admiralty Suit No.93/2025 seeking arrest of all five vessels and damages for loss of profits (computed at INR 132.26 crores).

III. The Erroneous Path Adopted by the Single Judge

When the suit came up before the Single Judge on 10 December 2025, the advocate for the defendant (appearing virtually on caveat) submitted that an undertaking shall be filed that defendant Nos.1 and 2 (later corrected to defendant Nos.2 and 5) shall not leave territorial jurisdiction. Without examining the statutory mandate, the Single Judge recorded: Defendant No.6 has agreed that an undertaking shall be filed that Defendant No.1 - M.V.Tulsi Sagar and Defendant No.2 - M.V.Vraj Sagar shall not leave the territorial jurisdiction of this Court. Defendant No.6 is restrained to create any charge over the subject vessel (Defendant Nos.1 and 2) till the next date of hearing. Remarkably, the court also observed that separate court fees might be required for each vessel a procedural query that does not defeat the right to arrest.

On 18 December 2025, the plaintiff filed Civil Application seeking directions for joint survey. The Single Judge again did not order arrest, instead recorded the defendants assurance that none of the vessel (all 5 total) shall leave the territorial waters of India and that the defendants shall not raise jurisdiction objections. The matter was adjourned to 6 January 2026. Aggrieved by this refusal to arrest, the plaintiff preferred an appeal before the Division Bench.

IV. Ratio Decidendi: Arrest is Mandatory, Not Discretionary

The Division Bench relied upon two foundational Supreme Court judgments: Videsh Sanchar Nigam Ltd. v. M.V. Kapitan Kud (1996) 7 SCC 127 and M.V. Elisabeth v. Harwan Investment and Trading Pvt Ltd 1993 Supp (2) SCC 433. In VSNL, the apex court held that if the plaintiff has an arguable case, even a difficult one, the admiralty action must be allowed to proceed and the vessel must be arrested. The court cannot stay the action or refuse arrest on the ground that the claim may ultimately fail. The Division Bench in Segal Ships emphasised: When the action is against defendant Nos.1 to 5, which are vessels, action qua defendant Nos.1 to 5 still continues to be action in rem and therefore, action which is essential to secure maritime claim. Thereafter, only manner in which such arrest could be released is by securing maritime claim given on behalf of defendant Nos.1 to 5.

The Bench further clarified that the appearance of the owner (defendant No.6) does not automatically convert the proceeding into in personam; the in rem character persists until security is furnished. Accepting an undertaking amounts to a premature conversion and defeats the very purpose of admiralty jurisdiction.

V. Rejection of Defences: Maritime Claim Exists

The defendants argued that since the charter period was to commence from date of delivery (which had not taken place), there was no agreement relating to use or hire under Section 4(1)(h). The Division Bench rejected this by pointing to Clause 8(a) of the agreement, which stated that the Effective date of agreement is the date of execution and signing (16.08.2025). The Bench held: Section 4(h) would therefore cover the Agreement cum Sale within this definition as even though the charter is to commence from the date of delivery of the vessel, it still does not take out Agreement cum Sale from the definition of Agreement relating to use or hire of the vessel. Therefore, dispute presently raised would squarely fall in the definition of maritime claim.

On the objection of joinder of five vessels in one suit (Order 2 Rule 3 CPC), the Division Bench refused to decide it at this stage, noting that the Admiralty Act is a complete code and the suit is brought under admiralty jurisdiction; the defendants are free to raise maintainability before the Single Judge. However, the Bench observed that defendant No.6 is the common owner and the claims arise from identical agreements, making a strong case for joint trial.

VI. The Appeal Allowed: Warrant of Arrest for Five Vessels

By order dated 24 December 2025, the Division Bench allowed the appeal and issued the following directions:

• Registrar of the High Court to issue warrant of arrest for M.V. Tulsi Sagar (IMO 9992842), M.V. Vraj Sagar (IMO 9992830), M.V. Kurma (IMO 1039759), M.V. Kalki (IMO 1039735), and M.V. Parthsharthi (IMO 1039747).
• The Port Officer and Customs Authorities at Navlakhi Port, Bhavnagar Port, and Deendayal Port (Kandla) to effect immediate arrest.
• In the event the defendants deposit security of INR 132,26,85,117 plus interest @12% p.a. on the principal claim, the warrants shall not be executed.
• The plaintiff gave an undertaking in writing to pay damages if the arrest causes prejudice and the suit ultimately fails.
• Direct service permitted; e-mail copy of the order to be acted upon by port authorities.

The Bench also took on record the plaintiffs undertaking to pay compensation in case of wrongful arrest, thereby balancing the equities and protecting the defendant owners interest. This structural safeguard undertaking by plaintiff is standard in admiralty practice, but it does not replace the need for arrest.

VII. Comparative Analysis: Why P&I Club Undertakings Are Not a Substitute

In many admiralty jurisdictions, a shipowner tenders a letter of undertaking (LoU) from its P&I Club to obtain release of the vessel. That is a post-arrest mechanism, not a pre-arrest replacement. The Gujarat High Courts judgment makes it clear that a mere assurance before arrest whether by the owner or by a Club that the vessel will not sail does not secure the claim . A LoU, if furnished, must be for the full amount of the claim and acceptable to the plaintiff. But the court cannot, prior to arrest, accept an oral or even written undertaking not to sail and then refuse arrest. The Division Bench explicitly observed: The defendants have assured the Court that no charge will be created and the vessels shall not leave territorial jurisdiction. This is not a valid security under the Act. The plaintiff is entitled to an order of arrest.

Thus, shipowners and their P&I clubs cannot avoid arrest by offering promises; they must either allow the arrest to take place and then apply for release upon furnishing security, or the court must issue the warrant. The judgment restores the legal position that arrest is the primary remedy and undertakings are no substitute.

VIII. Dissecting the Single Judges Orders: Two Errors

The Division Bench did not expressly set aside the Single Judges orders but supplemented them with directions for arrest. However, in effect, the Single Judges deviation was corrected. The two glaring errors were: (i) accepting an undertaking in lieu of arrest on 10 December 2025 for only two vessels, and (ii) on 18 December 2025, merely recording an assurance for all five vessels without passing an arrest order. The Single Judge also raised a query regarding separate court fees, which is not a ground to delay or deny arrest. The Division Bench noted that the plaintiff has already paid court fees. The appellate court stressed that admiralty jurisdiction is sui generis and procedural technicalities under CPC cannot override the express provisions of the Admiralty Act, 2017.

IX. The Plaintiffs Undertaking as to Damages

A noteworthy feature of the Division Bench order is that while it directed arrest, it also required the plaintiff to file an undertaking in writing to pay such sums by way of damages as the court may award in the event the defendant vessels sustain any prejudice by the arrest order. This follows the time-honoured practice in ship arrest: an ex parte arrest is granted on the plaintiffs undertaking to compensate the owner for wrongful arrest. The Single Judge had not even proceeded to arrest, so no such undertaking was called for. The Division Bench restored the correct balance: arrest with counter-balancing undertaking, rather than no arrest at all.

X. Practical Guidance for Admiralty Practitioners

Following the Segal Ships ruling, practitioners should note the following best practices:

• Do not accept assurances: If the defendant offers an undertaking not to sail or not to create charge, insist on arrest. The Division Bench has declared such assurances invalid.
• File an undertaking as to damages: In every arrest application, include a draft undertaking to pay compensation for wrongful arrest. This strengthens the request for arrest.
• Prima facie case documents: Place on record the charterparty, invoices, emails, and evidence of breach to satisfy the court of an arguable case.
• Urgent listing: For vessels that are about to sail, mention for immediate hearing and rely on paragraphs 27 28 of the Division Bench judgment (citing VSNL).
• Joint arrest of multiple vessels: Where the owner is common and claims arise from same transaction, file a single suit; the court will not refuse arrest on maintainability grounds at the initial stage.

XI. A Resounding Affirmation of Action in Rem

The Gujarat High Courts judgment in Segal Ships Pvt Ltd v. M.V. Tulsi Sagar & Ors. closes the door on a dangerous practice substituting ship arrest with hollow undertakings. The Division Bench has restored the primacy of the in rem remedy, ensuring that maritime claimants can obtain tangible security. For shipowners and P&I clubs, the message is unambiguous: an undertaking not to sail is not security; if you wish to avoid arrest, tender bank guarantee or a club LoU for the full claim amount. Courts will not short-circuit the statutory scheme by accepting promises that leave the plaintiff unprotected.

This ruling, coming close on the heels of the Supreme Courts pro-arbitration decision in Porto Emporios v. IOCL, demonstrates Indias mature and robust maritime legal framework. With experienced admiralty counsel like Dr. Shrikant Hathi and chambers such as Brus Chambers, parties can enforce their rights efficiently. The Segal Ships case will be cited for years as the authority that undertakings cannot replace arrest warrants.