In a significant ruling on admiralty jurisdiction, the Supreme Court sets aside the Madras High Court’s order sustaining the arrest of M.V. Nereus Progress, holding that under the BIMCO BARECON 2017 form, a validly issued notice of termination under Clause 31(a) is sufficient to extinguish the charterer’s demise charterer status, and physical repossession under Clause 32 is merely a consequence, not a pre-condition of termination.
The Apex Court explained that under Clause 32 of the Bareboat Charterparty (BBC), once the charterparty is terminated, the charterer holds the vessel only as a ‘gratuitous bailee’ to the owner pending physical repossession, a characterisation fundamentally inconsistent with, and displacing, any continuing demise charterer status.
For sister-ship arrest under Section 5(2) read with Section 5(1)(b) of the Admiralty Act, 2017 to sustain, the arresting creditor must establish that the demise charterer continued to be the demise charterer or owner of the vessel at the time of arrest; failure to discharge this burden renders the arrest unsustainable, clarified the Apex Court, while emphasising that, the conduct of the charterer itself is a decisive factor, where the charterer acknowledges the termination notice, seeks an extension to arrange an ‘orderly handover’, and admits that the charterparty ‘has been terminated by the Head Owners’, it cannot thereafter be heard to claim continuing demise charterer status.
The Court also said that the foreign persuasive authority must be applied with caution where the contractual text under consideration differs materially, and decisions rendered on charterparty forms without a Clause 32 equivalent are of limited assistance in interpreting a BIMCO BARECON contract containing such a clause.
A Larger Bench comprising the Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana observed that the Appellant had complied with every contractual pre-condition before terminating the charter. Demand notices spanning nearly two months were issued, an Anti-Technicality Notice with a three-day grace period was afforded, and the Termination Notice was issued only upon Nereides’ continued default. Significantly, Nereides never disputed the factum of its default, in fact, in its communication dated Nov 14, 2025, it acknowledged the termination and undertook to arrange an ‘orderly handover’ of the vessel. In a subsequent communication dated Dec 03, 2025, Nereides itself admitted that the BBC ‘has not concluded by efflux of time but has been terminated by the Head Owners’.
The Court further observed that the High Court had failed to engage with the contrary line of foreign authority and had incorrectly relied on The Chem Orchid and Navi-Bunkering Corp, both of which were decided on materially different facts, notably, none of those cases dealt with a BIMCO BARECON contract containing a Clause 32 equivalent. The Court also noted that treating physical repossession as a pre-condition for termination would, in effect, hold the owner’s contractual right of termination hostage to the very default that occasioned its exercise, a construction that could not have been intended by commercial parties.
Briefly, the registered owner of the vessel M.V. Nereus Progress (Appellant) had let out the vessel on demise charter to Nereides Marine Services (Nereides), a UAE-based shipping operator, under a Bareboat Charterparty (BBC) dated Oct 03, 2024, executed on the BIMCO BARECON 2017 form. Nereides also had a separate bareboat charter with Om Freight Forwarders Ltd. (Respondent) in respect of another vessel, M.V. Bharadwaj, under a charterparty dated July 24, 2024. Nereides defaulted in payment of hire under both charters.
The Appellant issued a series of demand notices, followed by an Anti-Technicality Notice on Nov 06, 2025, granting a three-day grace period. Upon Nereides’ failure to pay, the Appellant issued a Termination Notice dated Nov 13, 2025, under Clause 31 of the BBC, and a Repossession Notice dated Nov 19, 2025, under Clause 32. Nereides thereafter informed the Appellant that the vessel had arrived at V.O. Chidambaranar Port, Tuticorin.
Before the Appellant could complete physical repossession, the Respondent, claiming a maritime lien against Nereides under its separate charter of M.V. Bharadwaj, obtained an ex-parte order of arrest of the Vessel on Dec 04, 2025, by invoking Section 5(1)(b) read with Section 5(2) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (sister-ship arrest). The Appellant’s application to recall the arrest was dismissed by the Single Judge, and the dismissal was upheld by the Division Bench of the Madras High Court.
