Chrisomar Corp (Chrisomar) supplied bunkers and other necessaries to the Nikolaos-S (the vessel) at the port of Durban in 1999 on terms agreed with the owners, Third Element Enterprises, a Cyprus company. Chrisomar then raised invoices for USD 94,611.25, which were not, and have not yet, been paid. On 6 January 2000, when the vessel entered the port of Haldia, Chrisomar applied to the Calcutta High Court to arrest the vessel.

Later that month, on 25 January 2000, Chrisomar informed the court of its intention not to proceed with the arrest as the parties had reached an out of court settlement. The Court accordingly vacated the interim arrest order and pronounced that the vessel would cease to be under arrest.

In the settlement agreement, the owners confirmed that they owed to Chrisomar USD 104,688.60 (comprising USD 94,611.25 for the originally invoiced amount, USD 2,177.35 for interest accrued and USD 7,900 for legal costs). The settlement agreement contained further representations by the owners, as well as provisions for what would happen if the settlement amount was not paid as agreed, or if the owners were in breach of any of their other representations. In particular it said ‘… then Chrisomar will be entitled to take all the appropriate legal steps including the arrest of the vessel…’.

On 2 May 2000, no payment had been made and Chrisomar’s claim remained unsatisfied. The vessel was accordingly rearrested.

MJR Steels Pvt Ltd (MJR) then alleged that it had purchased the vessel from One Fairsteel Corp (a Singapore company), who had purchased it from Eastern Wealth Investment Ltd, who in turn had purchased it from the original owners, Third Element Enterprises Shipping Ltd.

However, the Trial Judge concluded that there was no sale in favour of MJR.

MJR appealed to the Division Bench, arguing that the vessel’s ownership had changed hands, and that on the date of re-arrest, it was the owner. MJR succeeded, the Division Bench held the suit was liable to be dismissed, and the decision of the Single Judge (Trial Court) was reversed.

Chrisomar appealed to the Supreme Court.

Held: The appeal would be allowed.

On the facts, there was no proof of any of the alleged back-to-back sales, and MJR failed to prove that there was a change of ownership of the vessel in its favour on the date of arrest. The order of the High Court (Divisional Bench) would be set aside, and the order of the Trial Court would be restored.

The detailed reasoning of the Supreme Court was as follows:

1. The Court had jurisdiction to hear the case as it concerned a maritime claim. Even though India is not a signatory to the Arrest Convention 1952 (which contains a list of maritime claims in art 1 including in particular sub-clause (k), which states that important materials wherever supplied to a ship for her operation or maintenance fall within the definition of a maritime claim), the Supreme Court (previously in MV Elisabeth MANU/SC/0685/1993; AIR 1993 SC 1014) (CMI883) held that the provisions of this type of Convention should be regarded as part of international common law and these provisions ‘supplement’ and ‘complement’ Indian maritime laws and fill up the lacunae in the Merchant Shipping Act.

2. That said, a claim for necessities did not constitute a maritime lien under Indian law (Bailey Petroleum Company v Owners and parties interested in the vessel MV Dignity (1993) 2 CHN 208 approved, in which the Calcutta High Court applied the Privy Council’s decision in Rio Tinto (1884) 9 App Cas 356). The academic commentary from Roscoe, Admiralty Jurisdiction and Practice, 5th edn, was also cited with approval. Chrisomar’s claim would therefore not survive a (real) change of ownership of the vessel.

3. The relevant date on which ownership of the vessel was to be determined was the date of arrest and not the date of institution of the suit.

4. The unfulfilled settlement agreement read as a whole (in particular the ‘in the event of non-performance by the owners’ provisions) did not amount to a novation of the original agreement for the purposes of the Indian Contract Act. This was not a case of s 62 nor s 63 of the Indian Contract Act (although the Supreme Court took the opportunity to remind parties that consideration is not required to vary an Indian contract, unlike the position under English law).

5. As a matter of fact, on the date of the (second) arrest, May 2000, the original owners were still the owners of the vessel. Chrisomar was accordingly entitled to arrest the vessel, and the decree of the trial Judge would be restored.