India: Maritime Lien In India

Last Updated: 23 November 2012
Article by Niyati Nath

The maritime lien has been described as one of the most striking peculiarities of admiralty law. It gives rights against a vessel that survive the sale of the ship and that enjoy priority ahead of registered mortgages, even though the lien is not registered. It may afford rights against a vessel even if the lien is created by a charterer or manager of the vessel.

The existence of a maritime lien rests on the principle that the vessel is a legal entity itself, apart from its ownership. The lien is not a security interest arising from the personal obligation of the vessel's owner or operator under a contract, but instead the vessel itself owes obligations that may be breached.

In general, maritime liens arise out of maritime transactions and maritime accidents. They can arise from seafarers' liens for wages, tort liens, which are liens from maritime accidents such as collisions or damage to cargo and salvage liens.

A maritime lien is a privileged claim upon a maritime res or property in respect of services done to or injury caused by it. The maritime res can be the ship, its cargo, apparel, furniture, tackle or freight.

A maritime lien may be enforced by an action in rem – where the plaintiff seeks to enforce a claim to or against the res or property – or by an action in personam. In an action in rem, the plaintiff commences the proceeding by going after a specific property, whereas in an action in personam, the plaintiff may take the defendant's property to satisfy a judgment only after he has succeeded in the proceeding. The proceeding commences by issuing process on the ship and taking steps to arrest it, so that it does not move outside the court's jurisdiction. If no person appears in court to defend, the proceeding will continue against the ship and eventually, the ship may be sold by court order to satisfy the claim. An action in rem prevents a just claim from being defeated by the mere fact of the ship travelling beyond the court's jurisdiction. When the holder of a maritime lien obtains a judgment in his favour in an action in rem, the judgment binds all. The purchaser of the ship through this court process derives new title paramount to all previous interests.

A maritime lien attaches automatically to the res from the moment that it arises and after an action in rem is initiated in respect of the lien, the claim relates back to the time when it first attached. The lien travels with the res irrespective of change in ownership or possession of the res. It is immaterial that the person possessing the res is a bona fide purchaser for value without notice of the maritime lien. There is no system of public registration of maritime liens and therefore a subsequent owner of the res may have no notice of the lien, although his right may be defeated by it. Some associations and websites attempt to provide a central posting and search facility in relation to maritime liens.

The classification of claims as maritime liens varies around the world. International conventions have attempted to impose a degree of uniformity. The scope and extent of admiralty jurisdiction in India is the same as that of England. The Admiralty Bill, 2005 pending before the Indian parliament is substantially based on English admiralty law. The Indian judiciary has consistently followed English law principles in its exercise of admiralty jurisdiction.

Indian law does not specifically define maritime lien. India is a signatory to the International Convention on Maritime Liens and Mortgages 1993 (1993 Convention), which designates the following claims against the owner, demise charterer, manager or operator of a vessel as maritime liens:

  1. Claims for wages and other sums due to the master, officers and other members of the vessel's complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf
  2. Claims in respect of loss of life or personal injury occurring whether on land or on water in direct connection with the operation of the vessel
  3. Claims for reward for the salvage of the vessel
  4. Claims for port, canal and other waterway dues and pilotage dues
  5. Claims arising out of physical loss or damage caused by the operation of the vessel other than loss of or damage to cargo, containers and passenger's effects carried on the vessel

Claims under (b) and (e) above that result from damage in connection with the carriage of oil or other hazardous or noxious substance by sea for which compensation is payable to the claimants pursuant to international conventions or national law providing for strict liability and compulsory insurance or other means of securing the claims or claims that result from radioactive properties or a combination of radioactive properties with toxic, explosive or other hazardous properties of nuclear fuel or of radioactive products or waste, do not give rise to a maritime lien.

English law recognises the following maritime liens:

  1. Damage done by a ship
  2. Salvage
  3. Master's wages and disbursements
  4. Bottomry and respondentia

These have been recognised as maritime liens by English courts since ancient times. English courts have held that a maritime lien does not exist in respect of towage, necessaries or insurance contributions. Although U.S. law recognises a maritime lien in respect of pilotage dues, English law and Indian law do not.

Several countries, including England, entered into an international agreement called the Convention on Arrest of Sea-going Ships, signed in 1952 at Brussels (Brussels Convention). The Brussels Convention set out an agreed list of claims that may be enforced by arresting sea-going ships. These claims were incorporated into English statute. However, the expanded list of claims listed in the Brussels Convention introduced a number of claims that are additional to the claims based on ancient maritime liens. These additional "notional" liens are not recognised by English courts as maritime liens. They are commonly referred to as statutory liens. Claims for necessaries supplied to foreign ships, claims for towage, claims for building, equipping or repairing a ship, claims by holders of bills of lading of any goods carried into a port or for damage to such goods are all statutory liens.

Till date, Indian courts have recognised maritime liens only in respect of damage, seamen's wages, salvage of property and bottomry and respondentia bonds, rather than accepting those listed in the 1993 Convention or the Brussels Convention. However, the proposed legislation, the Admiralty Bill, 2005 contains an inclusive list of maritime liens that includes a number of claims that are presently regarded as statutory liens.

Unlike a maritime lien, a statutory lien comes into existence not when the event occurs that gives rise to the claim, but only when the legal proceeding for enforcement commences; therefore, if the defendant sells the ship before the legal proceeding has been initiated, the statutory lien cannot be enforced against the ship by an action in rem. A subsisting charge on the ship prevails over a statutory lien.

With the exception of maritime liens for salvage, maritime liens in the same category generally rank on an equal footing. In the case of competing salvage liens, the last in time prevails over liens for earlier salvage service. The rationale is that the late salvage services, by preserving the chattel, also preserve also the maritime liens of earlier salvors.

Difficult questions arise when ranking maritime liens of different categories. This is mainly due to the various public policy considerations upon which the different liens are based. The seamen's wages lien is supported by policy considerations aimed at protecting a vulnerable group from exploitation; salvage by a concern to promote and encourage efforts directed at saving property and life at sea; bottomry by a concern to furnish support for commercial ventures, and the damage lien by consideration for the encouragement of safe navigation. Traditionally the law attaches great importance to safe navigation at sea and accordingly a claim for damage done by a ship has the greatest priority. Next in importance is the preservation of property and so a claim for salvage is given a greater priority than a wages lien. Last of all is the lien for master's disbursements. This approach was challenged in an English case1 where the Court held that questions of priority are not capable of being compartmentalised in the form of strict rules of ranking. On the facts of the case, the wages claim was given priority over the collision damage claims.

Since shipping is inherently international, enforcing a maritime lien will almost certainly involve conflicts of law. The courts must look at whether the maritime lien involves a substantive right or whether it is a procedural device, before deciding whether it shall apply the law of the place where the lien arose (lex causae) or the law of the forum  where it is sought to be enforced (lex fori).  The answer to the question of whether a maritime lien is a substantive right or a procedural device can have dramatic implications for the enforceability of maritime liens in the forum court, especially if a foreign maritime lien is dissimilar to the maritime liens recognised by the law of the forum.  The general principle is that if a maritime lien is a substantive right, the law of the place where the lien arose ought to be applied.  If a maritime lien is a procedural device then the forum court will apply domestic law. The rationale is that otherwise foreign litigants would enjoy advantages in the conduct of litigation that are not enjoyed by domestic litigants who are bound by the civil procedure rules of the forum.

The courts have had to decide whether a maritime lien is substantive or procedural depending on the facts and circumstances of the case. This has resulted in a lack of certainty on the subject. The courts of England and India generally apply the lex fori while adjudicating maritime liens while U.S. courts typically hold that a maritime lien is a substantive right to be enforced in accordance with the law of the place where it has arisen.

While the Limitation Act, 1963 prescribes a three year period of limitation for a suit for seaman's wages, it does not prescribe a period of limitation for enforcement of a maritime lien. English courts have held that maritime liens other than those for collision between vessels, for salvage and for seamen's wages may be enforced at any time. The Admiralty Bill, 2005 provides that a maritime lien shall stand extinguished on the expiry of one year from the date of its creation, but the claim may, if not barred by limitation, be enforced by an action in personam. The Bill provides that the limitation period of one year may be extended by the court if the claimant is unable to commence an action to enforce the lien against the ship or its property for reasons beyond his control.

A maritime lien may be extinguished by arrest and sale of a ship in an action in rem, by giving bail or guarantee to secure release of the ship or prevent arrest, by laches, by failing to bring the action within the time fixed by a court in a proceeding for limitation of ship-owner's liability and by destruction of the ship.

The body of maritime lien law is riddled with exceptions, qualifications and conflicting judicial decisions. As a consequence, the law of maritime liens is a confusing mix of statute and case law. However, one cannot look only to statute and jurisprudence to assess the validity of a claim, as it is very often the mundane practicalities that arise for consideration from the facts of each case that eventually decide the matter.

This article was originally published by Bar & Bench.

Footnote

1. "The Ruta" [2000] 1 Lloyd's Reports p. 359

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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