Indian Merchant Shipping Bill, 2024: A Landmark Reform to Boost Indian Shipping Industry
The Indian government is taking significant steps to transform its maritime sector through the Merchant Shipping Bill, 2024, which aims to modernize the country’s shipping infrastructure and enhance its role in global maritime trade. The Bill, which seeks to replace the outdated Merchant Shipping Act, 1958, introduces several reforms to address the evolving needs of the industry, with a focus on expanding the scope of ship ownership, simplifying registration processes, and attracting investment into the sector.
Defining an Indian Vessel
Under the new Bill, a vessel can be considered Indian if it is owned by a range of entities. This includes Indian citizens, non-resident Indians (NRIs), overseas citizens of India (OCIs), or companies and bodies established under any central act that have their registered office or principal place of business in India. The government also holds the power to notify additional entities or individuals who can own Indian vessels. This expansion is designed to increase the flexibility of ownership structures, enabling a more inclusive and dynamic approach to ship registration.
The rules for registration will be formulated to specify the exact proportion of ownership required for vessels to be registered under the Indian flag. This flexibility will accommodate a wider range of ownership arrangements, including those by NRIs, OCIs, and Limited Liability Partnerships (LLPs). Such provisions are expected to attract foreign investments and boost the presence of Indian-owned vessels globally.
Streamlining Ship Registration and Ownership
A notable reform in the Bill is its potential to ease the nationality norms for ship registration. Currently, only vessels with full Indian ownership can register under the Indian flag. However, the Bill proposes a shift towards allowing vessels that are “substantially owned” by Indian entities or those with significant involvement from NRIs and OCIs to register in India. This relaxation is aimed at enhancing the country’s fleet size, reducing dependency on foreign ships, and strengthening its maritime presence.
Given that ownership requirements were previously stipulated in the Act, changes to these provisions required legislative intervention. By including rule-making powers within the Bill, the Ministry of Ports, Shipping, and Waterways can more flexibly adapt ownership rules, expanding the scope of eligible entities for registration as needed.
BBCD Financing and Ship Registration
A critical aspect of the Bill is its stance on Bareboat-cum-Demise Charter (BBCD) financing for ship acquisition. BBCD allows for the purchase of a vessel through a financing model where only a portion of the total cost is paid upfront, and the balance is settled through instalments over three to five years. Under the current framework, vessels purchased via BBCD can only be registered under the Indian flag after the final instalment is paid to the overseas owner.
However, the new Bill aims to change this by allowing vessels acquired through BBCD to be registered under the Indian flag even before the final instalment is settled. This reform is designed to simplify the acquisition process and encourage more ship owners to register under India’s flag earlier in the financing cycle.
Key Reforms and Objectives
The Merchant Shipping Bill, 2024, is designed with a focus on both expanding eligibility criteria for ship ownership and simplifying compliance procedures. One of the primary goals of the Bill is to create an environment that encourages investment in India’s maritime sector. By expanding the eligibility criteria for ship ownership and facilitating easier registration, the government hopes to boost India’s share in global shipping.
Additionally, the Bill seeks to promote ease of doing business by reducing the compliance burden on ship owners. This includes provisions for electronic registration, digital agreements, records, and payments. Moreover, the Bill introduces provisions for an electronic database to streamline inspections and create an efficient risk-based port state control mechanism. These changes are expected to improve operational efficiency and reduce bureaucratic hurdles, making India a more attractive destination for ship owners and investors.
Aiming for Growth in Global Shipping
India currently controls only 1.4% of global tonnage, ranking 18th in the world in terms of ship ownership. This share is significantly smaller than India’s share of global export-import (EXIM) trade, which stands at around 11%. The government envisions a rise in this figure to 30% by 2047, and the Merchant Shipping Bill, 2024, is expected to play a key role in achieving this goal.
Finance Minister Nirmala Sitharaman, in her Budget speech to Parliament in July 2023, outlined the government’s commitment to driving reforms in ship ownership, leasing, and flagging. These initiatives aim to increase the Indian fleet’s share of global trade, thus cutting dependence on foreign vessels to transport export-import cargo. The Bill reflects these ambitions, aiming to strengthen the Indian maritime industry and create more jobs in the sector.
To conclude, The Merchant Shipping Bill, 2024 is a forward-thinking piece of legislation that holds the potential to reshape the Indian shipping industry. By offering greater flexibility in ownership and registration, simplifying compliance processes, and encouraging investments, the Bill will help India expand its maritime capacity. These reforms are not just about increasing the number of ships flying the Indian flag but also about positioning India as a competitive player in global shipping, capable of handling an increasing share of the world’s maritime trade.
As India strives to strengthen its maritime presence, the Merchant Shipping Bill, 2024, is a crucial step toward revitalizing the nation’s shipping industry, enhancing its role in global commerce, and securing the economic future of its maritime sector.
Sister-Concern Vessel Arrest
Case analysis: Aurobindo Pharma Limited vs Nippon Yusen Kasushiki Kaisha & Ors.
(Commercial Appeal (L) No. 18060 of 2023)
By – Anshu Singh Rathore (Associate) and Rohan Janardhanan (Managing Partner)
Issue:
Whether a sister-concern Vessel be arrested under the Admiralty (Jurisdiction and Settlement
of Maritime Claims) Act (“Admiralty Law”)?
Facts:
The commercial appeal contests the Bombay High Court (“HC”) Order dated June 7, 2023,
in Interim Application No. 540 of 2020, part of Commercial Admiralty Suit No. 14 of 2020.
This Interim Application, filed by Respondent No. 1 (“original Defendant No. 2”), requested
the dismissal of the suit and the return of the security deposit made by the Defendants.
In this case the Appellant herein (“original Plaintiff”) had entrusted the Respondent No. 2
herein (“original Defendant no. 1 vessel”) for the carriage of its goods, however, while in
transit the vessel caught fire and the goods of Plaintiff were carried to its destination by
another vessel. In turn of events, the goods of the Plaintiff were shipped back to the load port
from the discharge port. Thus, Plaintiff preferred a Commercial Admiralty Suit against
Defendant No. 1 – a vessel, Defendant No. 2 – a corporate entity having its office in Japan
and Defendant No. 3 – a company incorporated in India; a subsidiary company of Defendant
No. 2.
The HC by way of the impugned Order dated 7th June 2023 had dismissed the Commercial
Admiralty Suit filed against the Defendant no. 1 vessel, as well as directed that the cash
deposit, as security against the arrest of the vessel be returned to Defendant no. 2 along with
interest accrued thereon and the suit to proceed as against the Defendant no. 2 and Defendant
no. 3. Hence, this present appeal.
Submissions:
Appellant’s Submission:
The Advocate for the Appellant submitted that the company called ‘NYK Theseus’ is the
registered owner of the Defendant No. 1 vessel. Thus, Defendant No. 1 and Defendant No. 2
are essentially the same entity. Therefore, the Defendant No. 1 vessel should be held
responsible for enforcing the liability of Defendant No. 3.
Respondent’s Submission:
Advocate for the Respondent submitted that the Defendant No. 1 vessel which ought to be
arrested by Plaintiff, and the vessel on which the goods of Plaintiff were carried from load
port to discharge port, both the vessels were owned by two different entities. Thus, the vessel
is not a sister concern.
Judgement:
The HC noted that under Admiralty law, a sister concern vessel can be arrested for enforcing
the maritime claim. However, in this case, as per the averments made in the Plaint neither the
vessel nor owner of the vessel which carried the said goods of the Plaintiff from the load port
has been made a party as defendant in the present suit. The HC rejected the claim made by
the Appellant that the Defendant No. 1 vessel should be considered as a sister vessel of the
vessel that carried the goods of Plaintiff from the load port because the owner of both the
vessels is a common company ‘NYK Line’. Further, after the perusal of the plaint, HC noted
that the owner of Defendant No. 1 vessel is not being joined in the plaint and the vessel on
which the goods were carried has not been made a party to the proceedings before this court.
Therefore, HC held that prima facie, there is no case made out by Plaintiff that Defendant No.
1 vessel is a sister concern of the vessel that carried the goods of Plaintiff. Hence, the HC
observed that the suit’s claim will not fall under the provisions of Section 5 (2) of the
Admiralty law. Therefore, in conclusion, the HC rejected the present appeal and upheld the
findings of its earlier Order dated 7th June 2023.
Our View:
It is to be noted that the concept of the sister ships is well incorporated under Section 5 of
Admiralty Law, as the arrest of sister ships is a significant tool in the arsenal of the claimant
to ensure that the claims involving maritime disputes and liabilities are enforced and settled.
However, at the same time, the claimant must note that establishing the ownership of the
sister ship can be a complex task and requires in-depth documentation and investigation.
Reference: Aurobindo Pharma Limited vs Nippon Yusen Kasushiki Kaisha & Ors.
(Commercial Appeal (L) No. 18060 of 2023)
writer.editor.GO_TO_TOPwriter.editor.GO_TO_BOTTOM
An Overview of Bills of Lading Bill 2024
Case analysis: Aurobindo Pharma Limited vs Nippon Yusen Kasushiki Kaisha & Ors. (Commercial Appeal (L) No. 18060 of 2023)
By – Anshu Singh Rathore (Associate) and Rohan Janardhanan (Managing Partner)
Issue: Whether a sister-concern Vessel be arrested under the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act (“Admiralty Law”)?
Facts:
The commercial appeal contests the Bombay High Court (“HC”) Order dated June 7, 2023, in Interim Application No. 540 of 2020, part of Commercial Admiralty Suit No. 14 of 2020. This Interim Application, filed by Respondent No. 1 (“original Defendant No. 2”), requested the dismissal of the suit and the return of the security deposit made by the Defendants. In this case the Appellant herein (“original Plaintiff”) had entrusted the Respondent No. 2 herein (“original Defendant no. 1 vessel”) for the carriage of its goods, however, while in transit the vessel caught fire and the goods of Plaintiff were carried to its destination by another vessel. In turn of events, the goods of the Plaintiff were shipped back to the load port from the discharge port. Thus, Plaintiff preferred a Commercial Admiralty Suit against Defendant No. 1 – a vessel, Defendant No. 2 – a corporate entity having its office in Japan and Defendant No. 3 – a company incorporated in India; a subsidiary company of Defendant No. 2. The HC by way of the impugned Order dated 7th June 2023 had dismissed the Commercial Admiralty Suit filed against the Defendant no. 1 vessel, as well as directed that the cash deposit, as security against the arrest of the vessel be returned to Defendant no. 2 along with interest accrued thereon and the suit to proceed as against the Defendant no. 2 and Defendant no. 3. Hence, this present appeal.
Submissions:
Appellant’s Submission:
The Advocate for the Appellant submitted that the company called ‘NYK Theseus’ is the registered owner of the Defendant No. 1 vessel. Thus, Defendant No. 1 and Defendant No. 2 are essentially the same entity. Therefore, the Defendant No. 1 vessel should be held responsible for enforcing the liability of Defendant No. 3.
Respondent’s Submission: Advocate for the Respondent submitted that the Defendant No. 1 vessel which ought to be arrested by Plaintiff, and the vessel on which the goods of Plaintiff were carried from load port to discharge port, both the vessels were owned by two different entities. Thus, the vessel is not a sister concern.
Judgement:
The HC noted that under Admiralty law, a sister concern vessel can be arrested for enforcing the maritime claim. However, in this case, as per the averments made in the Plaint neither the vessel nor owner of the vessel which carried the said goods of the Plaintiff from the load port has been made a party as defendant in the present suit. The HC rejected the claim made by the Appellant that the Defendant No. 1 vessel should be considered as a sister vessel of the vessel that carried the goods of Plaintiff from the load port because the owner of both the vessels is a common company ‘NYK Line’. Further, after the perusal of the plaint, HC noted that the owner of Defendant No. 1 vessel is not being joined in the plaint and the vessel on which the goods were carried has not been made a party to the proceedings before this court. Therefore, HC held that prima facie, there is no case made out by Plaintiff that Defendant No. 1 vessel is a sister concern of the vessel that carried the goods of Plaintiff. Hence, the HC observed that the suit’s claim will not fall under the provisions of Section 5 (2) of the Admiralty law. Therefore, in conclusion, the HC rejected the present appeal and upheld the findings of its earlier Order dated 7th June 2023.
Our View:
It is to be noted that the concept of the sister ships is well incorporated under Section 5 of Admiralty Law, as the arrest of sister ships is a significant tool in the arsenal of the claimant to ensure that the claims involving maritime disputes and liabilities are enforced and settled. However, at the same time, the claimant must note that establishing the ownership of the sister ship can be a complex task and requires in-depth documentation and investigation.
Reference: Aurobindo Pharma Limited vs Nippon Yusen Kasushiki Kaisha & Ors. (Commercial Appeal (L) No. 18060 of 2023) writer.editor.GO_TO_TOPwriter.editor.GO_TO_BOTTOM