The applicant sought a determination of priorities in respect of the sale proceeds of the MT Prem Mala, and for payment to the applicant in priority to other claimants. The applicant claimed to rank first in priority on the ground that it was the holder of a decree based on a registered mortgage over the vessel.

Held: Application dismissed.

The applicant claims priority by virtue of its registered ship mortgage, relying on the Merchant Shipping Act 1958 (the MSA). The scope of the MSA is regulatory, and covers the regulation of ships, seafarers, shipping administration, and connected maritime functions, matters concerning seafarers, shipping governance, ie powers and functions of shipping, authorities, safety, navigation, and related concerns. Rights under a ship mortgage are governed by s 51 of the MSA. Rights under a registered mortgage can be realised or enforced to recover the amount due under the mortgage by selling the ship even without coming to the High Court under its admiralty jurisdiction. Section 52 of the MSA further provides that a registered ship mortgage is not affected by the mortgagor's insolvency.

The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017 (the AA) is a statute governing maritime claims. It defines maritime claims and liens, and governs the procedure to enforce them by arrest of a vessel and its sale. The priorities of claims and liens are defined by the AA. Thus, the MSA provides for shipping rights and remedies, and is not equivalent to the AA. It cannot be said that the MSA is a special statute and should prevail over the AA.

'Maritime claim' is defined under s 2(f) of the AA to mean a claim referred to in s 4. A 'maritime lien' means a maritime claim against the owner, demise charterer, manager, or operator of the vessel referred to in s 9(1)(a)-(e) of the AA. A claim for loss or damage caused by the operation of a vessel is covered under s 4(d). Section 9 of the AA further governs the inter se priority of maritime liens.

The order of priority of maritime claims is provided under s 10 of the AA. Registered mortgages and charges of the same nature on the vessel are second in the rank of maritime claims. Maritime liens are first in rank in the order of priorities, as provided under s 10 of the AA. India Oil Corp (IOCL) has a claim for physical damage allegedly caused by the ship to its jetty in Kandla during oil discharge. According to IOCL, its claim constitutes a maritime lien and, therefore, by virtue of being a maritime lien, and by reason of s 10 of the AA, it has priority over the applicant's claim.

Not all maritime claims create a lien, but all liens arise from maritime claims. Therefore, maritime claims are broader. An order to arrest a vessel is intended to secure a maritime claim, but it does not automatically create priority. Therefore, whether IOCL's maritime claim can be considered as a maritime lien will depend upon the result of IOCL's claim.

The applicant further argues that, given the time bar in s 9(2) of the AA, IOCL's claim filed after the end of one year from the date of the claim came into existence was extinguished on the order of sale of the vessel and did not survive against the sale proceeds.

This Court in Raj Shipping Agencies v Barge Madhwa (CMI782) held that, as the sale proceeds represent the ship, the action continues in rem against the sale proceeds:

84. Once this fundamental distinction between an action in rem against a vessel which is a distinct and separate entity dehors its owner is recognized, it is easy to reconcile the ostensible conflict between Admiralty and Insolvency. Thus, an actionin rem against the ship is not an action against the owner of the ship who may be the corporate debtor as defined under the IBC. Neither is the action in rem considered as a proceeding against the asset of the owner/corporate debtor. It is a proceeding against the ship to recover the claim from the ship, not an action against the owner/corporate debtor to recover the claim by attachment of the asset of the owner/corporate debtor.

85. Also, to be borne in mind is the principle that an action in rem continues as an action in rem notwithstanding that the owner may have entered appearance, if security is not furnished for release of the vessel. The action will continue in rem against the ship which will be sold and the sale proceeds paid out to the successful claimants after determination of priorities amongst the various maritime claimants. As the sale proceeds represent the ship, the action continues in remagainst the sale proceeds and a notice is published inviting claims against the sale proceeds as per established Admiralty rules or procedure. Thus, whilst the judicial sale by the Admiralty Court extinguishes all maritime liens and the claims, thus giving a free and clear title to the purchasers, all those who have maritime liens and claims can still enforce them by filing an action against the sale proceeds. "

Section 9(2) of the AA provides that a maritime lien shall continue to exist over the vessel, and would be extinguished after expiry of a period of one year unless, prior to the expiry of such period, the vessel has been arrested or seized and such an arrest or seizure has led to a forced sale by the High Court. Here, the cause of action for IOCL was 17 October 2019. The sale of the vessel was ordered on 26 May 2020, and IOCL's suit was filed on 15 September 2020 against the sale proceeds. Therefore, IOCL's maritime lien was not extinguished.