Divison Bench of Bombay High Court Reserved Judgment in Admiralty Appeal on Quantum of Security for Release of Arrested Vessel M.V. Nordlake; Order of Single Judge Requiring Full-Claim Security Challenged. The appellant foreign ship-owner contended that under the International Convention on Arrest of Ships, 1999 and Rule 954 of the Bombay High Court (Original Side) Rules, security should be limited to the vessel's value of Rs.47 crores, while the respondent Union of India argued that security must cover the full claim of Rs.1058 crores.

Appeal from order of Admiralty Judge (Single Judge) dismissing the appellant's application to release an arrested vessel upon furnishing security limited to the vessel's value.

The appellants (defendants) sought to have the arrested vessel released by providing security of Rs.20 crores (under limitation of liability) or alternatively security of the vessel's market value (Rs.47 crores). Before the learned Single Judge, they argued for security equal to the vessel's value. In appeal, they challenged the Single Judge's order that security must be for the entire claim of Rs.1058 crores.

The vessel was arrested in a damage suit arising from a collision between the 1st defendant vessel and the plaintiff's naval vessel INS Vindhyagiri, causing the plaintiff to claim damages of Rs.1058 crores. The defendants sought release of the vessel to avoid deterioration and high maintenance costs.

The Single Judge (Admiralty Judge) by order dated 16 November 2011 dismissed the Notice of Motion No.1525 of 2011, holding that under Rule 954 of the O.S. Rules and Section 443 of the Merchant Shipping Act, the defendants must give security for the entire claim. The vessel cannot be released on depositing the vessel's value.

Whether the Admiralty Court has discretion under Rule 954 of the Bombay High Court (Original Side) Rules to release an arrested vessel upon the defendants furnishing security for an amount less than the full claim in the suit, particularly limited to the current market value of the vessel, and whether the principle of limiting security to the lower of the claim or the vessel's value as per the International Convention on Arrest of Ships, 1999 applies.

Appellants: Relied on International Convention on Arrest of Ships 1999 Article 4, arguing security cannot exceed the value of the arrested ship; cited Liverpool & London S.P. & I Asson. Ltd. vs. M.V. Sea Success I and J.S. Ocean Liner LLC vs. M.V. Golden Progress to assert Convention's applicability in India; contended that under Rule 954 the phrase 'as the Court may direct' grants discretion to fix security below the claim amount; urged that even if the suit is decreed, the plaintiff will only realize the proceeds from the sale of the vessel, so security should be limited to its market value; stressed hardship due to long arrest causing deterioration and high maintenance costs. Respondent: Argued that Section 433 of the Merchant Shipping Act and Rule 954 mandate security for the full claim with interest and costs; the phrase 'as the Court may direct' only qualifies the form of security, not the amount; relied on Videsh Sanchar Nigam vs. M.V. Kapitan Kud and The Bazias 3 & 4 for the principle that security must cover the plaintiff's reasonably arguable best case; emphasized that a foreign ship leaving Indian territorial waters would make enforcement of any decree extremely difficult.

This appeal raises interesting question about the extent of minimum security which in Admiralty Court must require the owner of an arrested vessel (which has caused damage to the plaintiff's property) to furnish in order to get the vessel released from from the order of arrest passed by the Admiralty Court. the learned single Judge dismissed the Notice of Motion after holding that in view of the provisions of Rule 954 of the Bombay High Court (Original Side) Rules (the “O.S.Rules” and Section 443 of the Merchant Shipping Act, 1958 (the “MS Act”) and the two unreported judgments of this Court the defendants are bound to give security of the sum which represents the entire claim of the plaintiffs in the suit. if the foreign ship leaves the shore of Indian territorial water, it is difficult to get hold of it and it may not return to the jurisdiction of Indian courts. The claim thereby, even if successful would remain unexecutable or land in trouble in private international law in its enforcement.

On 23 February 2011, the 1st defendant vessel was arrested by order of the Admiralty Court in Admiralty Suit Lodging No. 436 of 2011, a suit for damages due to collision with INS Vindhyagiri on 30 January 2011. The 2nd defendant filed Admiralty Suit Lodging No. 1012 of 2011 to limit liability under Part XA of the Merchant Shipping Act, 1958. On 10 May 2011, the defendants filed Notice of Motion No. 1525 of 2011 seeking release of the vessel on furnishing security of Rs.20 crores (the limitation amount) or alternatively the market value of the vessel. By order dated 16 November 2011, the learned Admiralty Judge dismissed the notice of motion, directing that security must cover the entire claim. The defendants appealed by way of Appeal No. 30 of 2012. The Divison Bench heard arguments and reserved judgment on 1 February 2012, and pronounced judgment on 7 March 2012.

• Merchant Shipping Act, 1958: Section 352B, Section 352C, Section 352D, Section 433, Section 443, Part XA
• Bombay High Court (Original Side) Rules: Rule 948, Rule 950, Rule 954
• International Convention on Arrest of Ships, 1999: Article 4