Your guide to the law relating to international commerce in India. Contents. 1. About Us

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1 Your guide to the law relating to international commerce in India Contents 1. About Us 2. Gujarat Update - The Limited Applicability of the 1999 Arrest Convention, 3. Bombay Update :- The Antonis P Lemos followed in India 4. Arbitration Update bmc@bosemitraco.com bmc@hathway.com 44- A, Mittal Court, A Wing 4 th Floor, Nariman Point Mumbai

2 About Us We are a boutique maritime law firm in India with offices at Mumbai and Kolkata (Calcutta) and are complimented by a team of accomplished associates across India. Mr. Subir Majumdar, Senior Partner is an English Qualified Solicitor who opened a Maritime law firm in London, under the banner of Majumdar & Mogilnicki, which was wound up in the year 2001 since the demand in India became greater. Mr. Amitava Majumdar (also known in the industry as Raja) holds a degree in Maritime Law, from the University of Plymouth and heads the Mumbai office. Our Bombay office is headed by Mr. Amitava Majumdar (Raja) and boasts of a team of highly qualified lawyers having LLM degree in Maritime law from prestigious Universities in the UK. Our lawyers have experience working in overseas jurisdictions such as England and Singapore in firms such as Bentleys, Stokes and Lowless, Richards Butler (currently known as Reed Smith), Clyde & Co, Rodgers & Co, Allen & Gledhill, and P & I clubs such as the Shipowners P & I club, and the North of England P & I club. We are rated as a Band 1 law firm by Chambers & Partners and Legal 500. Our firm has also recently been awarded the Maritime and Shipping Law Firm of the Year Award by The Legal Era Magazine & The Indian Business Law Journal (A Hong Kong based Legal Magazine). Mr Amitava Majumdar (Raja) has been ranked as a Band 1 lawyer by Chambers & Partners and we also find a place in Who s Who Legal and India Legal

3 Gujarat Update The Limited Applicability of the 1999 Arrest Convention, Croft Sales and Distribution Ltd v. M.V. Basil MANU/GJ/0136/2011 Introduction The Division Bench of the Gujarat High Court (Appellate Court) concluded that it does not have admiralty jurisdiction to arrest a ship for a dispute arising under a ship sale purchase contract. Facts Disputes arose between Croft Sales and Distribution Limited ( Plaintiffs ) and Bailey Shipping Limited ( Sellers ) under a Memorandum of Agreement ( MOA ) for the purchase of M.V. MAX (renamed as M.V. AXIS) ( the Vessel ) for a sum of USD 13,624,814. The Plaintiffs had a alleged claim against the Sellers for a breach of warranty under the MOA where the Sellers were to deliver the Vessel free from all encumbrances. Following the delivery of the Vessel to the Plaintiffs they had sold the Vessel to Sheema Steels of Bangladesh ( Sheema Steels ). However, following the Plaintiffs delivery of the Vessel to Sheema Steels, M/s. Intermare Transport GMBH had arrested the Vessel in Bangladesh to secure its claim under a Charterparty with the Sellers relating to the Vessel. Sheema Steels immediately lodged a claim against the Plaintiff and commenced arbitration proceedings against the Sellers in London. The Plaintiffs contended that the dispute pertained to sale of the vessel and fell within the ambit of Article 1(v) of International Convention on the Arrest of Ships, Geneva ( 1999 Arrest Convention ) and, therefore they could invoke the Admiralty Jurisdiction of the Gujarat High Court to arrest the ship. The Plaintiff obtained an order of arrest on the basis that their claim fell within the ambit of Article 1(v) and that MV Basil was a sister ship of the Vessel. Judgment The scope and applicability of the 1999 Arrest Convention? (a) The Court recorded the submissions of the owners of M.V. Basil that the 1999 Arrest Convention was yet to come into force internationally. 1 The Court in its interpretation of the judgement of the Supreme Court of India in the case of Liverpool and London S.O. & I Association Limited v. M.V. Sea Success I (2004) 9 SCC 512 held that the 1999 Arrest Convention would only apply to a contract involving public law character and would always be subject to Indian law. The Court had taken the view that an example of a contract involving public law character would be a case when an arm of the Indian Government enters into the contract. The Court stated that a dispute under the MoA for sale of ships is a purely commercial 1 Note: Since the passing of the instant judgment, the 1999 Convention has come into force internationally. However, it must be noted that India is not signatory to the 1999 Arrest Convention. 2

4 transaction and could not be classified as a contract involving public law character, and accordingly the Court did not have the admiralty jurisdiction to arrest the ship. (b) As a consequence of this judgement the 1999 Arrest Convention would have very limited application in the Gujarat High Court as it would apply only to a contract to which the Indian Government or an entity controlled by the Indian Government is party to. Hence, a Plaintiff can obtain an order of arrest from the Gujarat High Court for a claim under an MOA for the sale of a vessel if an entity controlled by the Indian Government is party to the MOA. However, as a general rule a Plaintiff cannot arrest a vessel for a claim under a MOA where neither party to the MOA is an entity controlled by the Indian Government. (c) However, the Division Bench of the Bombay High Court (Appellate Court of Appeal) in the recent judgment of the Great Pacific Navigation (Holdings) Corporation Ltd. v. M. V. Tongli Yantai Appeal No. 559 of 2011 has taken contra view and has held that the regime contemplated under the 1999 Arrest Convention would apply in totality. That said, the instant case would still serve as a binding precedent before the Gujarat High Court. Under what circumstances are two vessels sister vessels? (a) The court came to the finding that the two vessels were not sister ships as the registered owners of both vessels were independent and distinct corporate and juristic entities. Admittedly, the registered owners MV Basil and the Vessel were different corporate entities. It was the Plaintiffs case that registered owners of both vessels were single dollar companies which are subsidiaries of a company called Overseas Maritime Enterprises ( OME ). The Plaintiff admittedly did not have a claim against OME. (b) The Plaintiff had not made out a case of fraud for the Court to disregard the corporate form of the registered owners of the both vessels. The Court stated that it could only lift the corporate veil and enter into an investigation on the beneficial owners of both vessel in exceptional circumstances where the corporate entities are used to perpetrate fraud, opposed to justice, convenience and interest of revenue or workman or against public interest which did not present themselves in the present case. Whether a Plaintiff can arrest a vessel in circumstances where the Plaintiff was not the Owner or Charter of the Vessel at the time when the claim arose? 3

5 The Court had come to a finding that the cause of action had arisen in the instant case at a time when Sheema Steels lodged a claim against the Plaintiff. The Plaintiff was neither the owner or charterer of the Vessel at the time when Sheema Steels lodged a claim against the Plaintiff. The Court came to a finding that the Plaintiff did not have a claim in admiralty against the Sellers albeit they may have an alleged claim in the arbitration against the Sellers as a claim in admiralty can only arise qua a vessel at the time the claim arose. Whether the Plaintiff can arrest a vessel for a indemnity claim in relation to anticipated future losses? In the instant case, the Plaintiff claim was in the nature of an indemnity for the losses they would incur in an event Sheema Steels succeed in the arbitration against the Plaintiff. The entire claim was contingent on the outcome of the arbitration proceedings. The Plaintiffs were not out of pocket in any manner whatsoever. The Court held that the Plaintiff could not arrest a ship to secure a claim for anticipated future losses which the Plaintiff were yet to incur. This Article is contributed by Mr. Amitava Majumdar (Raja), Partner and Mr. Aditya Krishnamurthy, Associate. 4

6 The Bombay Update The Antonis P Lemos 2 followed in India Sinoriches Enterprises V. M.V. Xin Xiang An [2012 (114) BomLR 264] The Bombay High Court, despite there being no privity of contract, allowed a sub-sub charterer to commence an action against the head owner under Article 1(d) of the Arrest Convention, 1952 and allowed arrest of the vessel of the head owner for its alleged claim arising out of an alleged breach of duty owed by the head owner to the sub-sub charterer, relating to the use or hire of any ship whether by charterparty or otherwise, following the dicta of the The Antonis P Lemos. Facts: The dispute arises out a chain of charterparties entered into on the standard NYPE Form 93. In about 2011, disputes arose between parties regarding the payment of hire. One of the parties at the top of the contractual chain exercised its rights of withdrawal and withdrew the vessel from its charterers. This resulted in the Vessel being withdrawn from the Plaintiff, the end charterer of the vessel. The Plaintiff arrested the vessel as security for its claim in tort against the head owners. It was contended that head owners owed a duty of care towards the Plaintiff and the exercise of withdrawal had caused tremendous losses to the Plaintiffs. On the basis of the plea, the high court passed an order of arrest of the vessel. The owners of the vessel filed an application opposing the arrest inter alia on the ground that (a) there was no privity of contract between the Plaintiffs and them, (b) there was no right to arrest in tort under Article 1(d) of the 1952 Arrest Convention which was related to 2 [1985] A.C. 711 contracts and there was no privity of contract as between the Plaintiff and the Defendant. The Ld. Single Judge dismissed the application opposing the application of arrest on the ground that a vessel can be arrested for a claim in tort [relying on the judgment of The Antonis P Lemos). A filed an appeal to the Division Bench. JUDGMENT The Division Bench held that the question of whether a particular claim is a maritime claim or not must be considered at the stage of the trial and not in an interlocutory stage. The withdrawal of the vessel had an impact on the claim of the Plaintiff and accordingly the Plaintiff had a prima facie right to proceed against the vessel. Conclusion: The said judgment is likely to have serious commercial repercussions on the shipping industry. In particular, the judgment will affect the ability to time charter/ sub charter vessels and render otiose, the well settled right of an owner to withdraw a vessel from a charter for non-payment of hire notwithstanding that the charterer might have sub chartered the vessel to a third party. This case will open the flood gates for enabling parties to arrest a ship even in the absence of a contractual relationship with the owner/bareboat charterer of the ship although there is no privity. While the judgment may make commercial transactions unviable, the judgment does not consider the following issues:- First, the judgment fails to appreciate that both the 1952 Arrest Convention and 1999 Arrest Convention have a requirement of personal liability for initiating an action in rem for a for the maritime claim set out in Article 1 (except maritime liens). In this regard, the reference to the Antonis P Lemos is clearly 5

7 distinguishable on the facts of the present case. Second, the finding that whether a particular claim is a maritime claim or not must be considered at the stage of trial, is questionable, since the prerequisite of invoking an admiralty action is the existence of a maritime claim. Another interesting point in the case is that the Plaintiffs pleaded their claim under the 1952 Arrest Convention and not the 1999 Arrest Convention. It was orally argued (though not recorded) that since the 1999 Arrest Convention does not expressly repeal or over-ride the 1952 Arrest Convention both would simultaneously have the force of law in India. While this argument may seem academic at first glance, the issue need to be considered and adjudged by the Apex Court since various parts of the Arrest Convention(s) differ / contradict each other. The case is presently pending trial and the Court has left all issues including whether the claim of the Plaintiff is a maritime claim or not open for adjudication. This Article is contributed by Mr. Amitava Majumdar (Raja), Partner and Siddharth Ranka, Associate. 6

8 Arbitration Update INDIA OPENS ITS GATES TO ALLOW ENFORCEMENT OF AWARDS FROM CHINA AND HONG KONG India gazettes China and Hong Kong as countries having reciprocal treaties for enforcement of foreign awards. The last few years have been a roller coaster ride for arbitration in India. While on one end India has been internationally criticized to be breach of its obligations under the BIT with Australia the other end has seen reduction in the scope of judicial intervention relating to foreign arbitral awards. Recently, another significant development has taken place in India with regard to international commercial arbitration. After gazetting Australia in 2008, the Indian government has finally gazetted China and Hong Kong vide a notification published on It will be noted that the Indian Arbitration & Conciliation Act, 1996 in Part II has specific provisions for enforcement of foreign awards. While India is party to the New York Convention, it has made an express reservation on the recognition of foreign awards. Accordingly, only foreign awards which are made in territories notified under section 44 (Part II) of the Act are enforceable in India. The Indian government has now notified China and Hong Kong as reciprocating territories under section 44 of the Indian Arbitration & Conciliation Act, Accordingly, Chinese and Hong Kong awards are now enforceable in India under Part II of the Indian Arbitration Act, This is a much awaited and required development in arbitration in India considering the growth in the trade sector between China and India. Further, the addition of Hong Kong as a reciprocal country would further boost the already flourishing arbitration practice in Hong Kong. This Article is contributed by Mr. Amitava Majumdar (Raja), Partner and Siddharth Ranka, Associate. The information contained in this Newsletter was complied for its clients by Bose & Mitra & Co as a summary of the subject matter covered and is intended to be a general guide only and not to be comprehensive, not to provide legal advice. Bose & Mitra & Co accepts no responsibility whatsoever for loss which may arise on information contained in this Newsletter. This Newsletter was complied up to and including April If you wish to obtain any further information, clarification or advice on subject matter briefly covered in this newsletter please feel free to contact us at bmc@bosemitraco.com. 7