8 February, 2024

Disputes in Sale Contract and Legal Costs termed as Maritime Claims | Arbitration Clause not a hindrance to Admiralty Suit.

In the recent ruling of the Madras High Court in Value Shipping Limited v. Owners and Parties interested in Vessel MV Navdhenu Purna, several pivotal aspects of admiralty law and maritime claims were addressed. Here's a breakdown of the key points and rulings made by the court:

• Nature of Claim: The court affirmed that disputes stemming from a vessel sale contract can be considered maritime claims under Section 4 of the Admiralty Act 2017. The interpretation of "arising out of" in Section 4 encompasses such disputes.
• Attachment Before Judgment Test: The court clarified that the plaintiff doesn't need to meet the attachment before judgment test. The vessel's arrest is a statutory right under Section 5 for claims falling under Section 4 of the Admiralty Act, including maritime claims.
• Treatment of Legal Costs: The court ruled that legal costs incurred in enforcing a maritime claim are also considered a maritime claim and can be secured by an Admiralty Court. However, the court stressed securing realistic costs, especially under the Commercial Courts Act.
• Force Majeure Clause: The court determined that if the vessel sale agreement lacks a force majeure clause, a force majeure clause from another agreement (such as an escrow agreement) cannot justify the owner's default under the sale agreement.
• Arbitration Agreement: The presence of an arbitration agreement doesn't prevent an Admiralty Court from granting arrest. Since no security was provided, the action remained in rem and didn't convert into an action in personam.
• Breach of Agreement for Sale: The court found prima facie evidence of the owners breaching the sale agreement based on the presented facts.

This judgment offers clarity on various aspects of admiralty law, including the scope of maritime claims, vessel arrest procedures, treatment of legal costs, interpretation of force majeure clauses, and the relationship between arbitration agreements and admiralty proceedings.