A defaulting charterer kept the ship, so a creditor had it arrested. The Supreme Court asks who the charterer actually was that day

On a question Indian courts had never settled, and on which four foreign courts split two-two, the Court holds that a valid termination notice ends a bareboat charter on its own — and vacates the arrest of the M.V. Nereus Progress at Tuticorin.

A ship can be arrested for somebody else’s debt. That is the point of arrest in rem, and under Section 5(1)(b) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 it reaches a vessel whose demise charterer — not its owner — is liable for the maritime claim. Section 5(2) goes further and allows a sister ship to be arrested in lieu of the vessel the claim actually arose against.

Both powers turn on a single question of status: was the person liable for the claim the demise charterer of this vessel when the arrest was effected? On 25 September 2026 a three-judge Bench of Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana had to answer it on a point Indian law had not decided — and the answer freed a ship that had been under arrest at Tuticorin since December.

One charterer, two ships, two owners

By a bareboat charterparty of 3 October 2024, executed on the BIMCO BARECON 2017 form, the appellant — the registered owner of the M.V. Nereus Progress — let the vessel on demise charter to Nereides Marine Services, a UAE-based operator. A demise charter hands over an empty ship: the charterer takes full possession, operational control and financial responsibility for the period of the agreement, holding the vessel as though it were the owner for the time being.

Separately, and independently, the respondent had chartered out its own vessel, the M.V. Bharadwaj, to the same Nereides under a bareboat charterparty of 24 July 2024. Nereides thus stood as demise charterer to two different owners under two unconnected contracts.

It defaulted on both.

The appellant’s exit, step by step

The appellant issued a series of demand notices between 22 September and 27 October 2025. The defaults continuing, it issued an anti-technicality notice on 6 November 2025, giving Nereides a three-day grace period to regularise — the mechanism a BARECON form builds in precisely so that a charter is not terminated on a trivial or accidental slip.

Nothing was paid. On 13 November 2025 the appellant issued a termination notice invoking Clause 31 of the charterparty, calling on Nereides to disclose the vessel’s whereabouts and place it at the appellant’s disposal. A repossession notice followed on 19 November under Clause 32, asserting the right to repossess the vessel when it berthed at Colombo.

Then the ship became hard to find. Between 20 and 28 November the appellant was told the vessel was near the Indian coast with an engine problem. On 2 December Nereides said it had reached Tuticorin and asked for instructions on redelivery at V.O. Chidambaranar Port within three or four days.

Before the appellant could take physical possession, the respondent moved first. Having its own maritime claim against Nereides arising from the default under the Bharadwaj charter, it filed Commercial Suit No. 314 of 2025 in the Madras High Court under Section 5(1)(b) read with Section 5(2) of the Admiralty Act and, on 4 December 2025, obtained an ex parte interim order arresting the Nereus Progress at Tuticorin — on the assertion that Nereides was still its demise charterer.

The owner applied to recall the order. A Single Judge dismissed the application on 6 February 2026 and sustained the arrest, relying on the Singapore High Court’s decision in The Chem Orchid and the Sri Lankan Court of Appeal’s in Navi-Bunkering Corp. A Division Bench affirmed on 30 April 2026. The owner came to the Supreme Court.

The two questions

The Bench framed the issues narrowly: whether the termination of the charterparty by the notice of 13 November 2025 was proper and valid; and if so, whether Nereides continued to be the demise charterer on 4 December 2025 in the absence of physical repossession by the owner.

The first was straightforward. The default in hire was admitted and continuing. The contractual pre-conditions in Clause 31(a), read with the anti-technicality mechanism, had been complied with — notices, then a grace period, then termination. Significantly, the Court recorded, at no stage in the correspondence did Nereides dispute the default. The termination was held proper and valid.

In reaching it the Court invoked its own recent decision in M/s Tomorrowland Limited v. Housing and Urban Development Corporation Limited, 2025 INSC 207, delivered by the Chief Justice: the sanctity of the terms of a bargain must be maintained, a commercial document must be read to give full effect to the parties’ original intention, and where the language is clear and the conduct consistent with it, a court’s task is to give effect to the bargain struck and not to rewrite it.

A question nobody in India had answered

The second issue was, as the Court put it, the more substantial one, and it began by acknowledging that the precise question — whether physical repossession is a prerequisite for effective termination of a demise charter, or whether a validly issued notice suffices — did not appear to have been authoritatively settled by an Indian court. Both sides argued from foreign jurisprudence, and the foreign courts were evenly divided.

On one side, the Singapore High Court in The Chem Orchid and the Sri Lankan Court of Appeal in Navi-Bunkering Corp held that a demise charterer’s status is not extinguished by the mere issuance of a termination or repossession notice, and subsists until actual physical possession is handed back. On that view the charterer keeps the liabilities of that status for as long as it keeps physical control, whatever notice has been served.

On the other, the Federal Court of Australia in The Hako Fortress and the Court of First Instance, Hong Kong in MV ‘Trident Dawn’ held that a termination clause of this kind operates of its own force on the stipulated default and service of notice. Termination and repossession are distinct: the first is complete on service, and the second is merely the mechanism by which the owner recovers physical control.

The Court declined to pick a side as such. Faced with two divergent streams of persuasive authority, neither binding, it held that the resolution must turn on the express language of the contract between these parties and the facts of this case, rather than on a mechanical importation of one foreign precedent over another — particularly where the text of the charterparties considered in those decisions had not been placed before it for comparison, and each was decided on its own facts.

Clause 32, which the High Court did not read

That method exposed what the Court identified as the error below. The Division Bench had treated Chem Orchid and Navi-Bunkering Corp as determinative without engaging with the contrary view in Hako Fortress or Trident Dawn — and, more importantly, without considering the specific language of Clause 32 of the charterparty before it.

Clause 32 addresses precisely the interval in dispute. It provides that on termination the owner shall have the right to repossess the vessel and that, pending physical repossession, the charterers shall hold the vessel as a gratuitous bailee to the owner and not as demise charterer. The foreign courts in the two decisions the High Court relied on were not dealing with a BIMCO BARECON contract containing such a clause. The High Court had missed that distinguishing fact.

The distinction the clause draws is not verbal. A gratuitous bailee holds another’s property with no right of use, control or commercial employment of its own. A demise charterer holds the vessel as though it were the owner for the time being, with full possession, control and the right to trade it. Nereides could not simultaneously be both. Once the charterparty designates the charterer a gratuitous bailee upon termination, that necessarily displaces any continuing status as demise charterer.

Read together, the Court held, Clauses 31 and 32 form a coherent scheme in which each does distinct work. Termination takes effect immediately on service of notice under Clause 31, and alters the legal character of the charterer’s possession from demise charterer to gratuitous bailee. Clause 32 then regulates the mechanics by which the owner recovers physical control from a bailee who at that stage has no independent right of user left to assert. The deeming provision that the vessel is repossessed when the owner’s representative boards merely fixes the point from which the owner resumes operational responsibility; it does not determine when the charter ends. To hold otherwise, the Court said, would let a clause designed to regulate the handover of an already-terminated charter dictate the survival of that charter — a result the parties could not have intended.

The consequence of the contrary rule

The Bench then set out why the rival construction is commercially untenable, and the passage is likely to be the most quoted in the judgment.

Physical repossession of a ship in the hands of a defaulting charterer may be delayed or frustrated for reasons wholly outside the owner’s control: where the vessel happens to be, genuine or contrived technical difficulties, non-cooperation of the charterer’s crew, the practical exigencies of berthing at a particular port. If demise status continued for as long as the charterer chooses or manages to withhold possession, despite a valid termination notice, the owner’s contractual right of termination would be held hostage to the very default that occasioned its exercise.

The facts illustrated the danger. The Court found the appellant had not been idle: the termination notice itself asked for the vessel’s location, the repossession notice followed six days later, and there was continuous follow-up between 20 November and 2 December seeking the vessel’s position, expected arrival and berthing particulars. The delay, it held, was writ large attributable to Nereides — first an unresolved technical issue, then a revised arrival time at Colombo, and finally the vessel at Tuticorin with repairs incomplete. The owner could not be penalised for a state of affairs brought about entirely by the party whose default had forced the termination.

Nereides’ own correspondence closed the question. On 14 November 2025 it acknowledged the termination notice and undertook to arrange an “orderly handover” if payment was not made within the extension it sought. On 3 December it stated that the charterparty had not concluded by efflux of time but had been terminated by the head owners, and asked where repossession was to take place. Those statements were volunteered, without compulsion — and they showed that from 13 November Nereides held the vessel only as a gratuitous bailee awaiting handover.

Why the arrest fell

The statutory analysis then followed mechanically. Section 5(2) extends the power of arrest to a sister vessel in lieu of the ship the claim arose against, but expressly makes that power subject to sub-section (1). The effect of that qualification, the Court held, is that the jurisdictional pre-conditions of Section 5(1)(b) must be independently satisfied in respect of the vessel actually arrested.

So the respondent had to show two things: that Nereides was the demise charterer of the Nereus Progress — as distinct from the Bharadwaj — when its maritime claim arose, and that Nereides was still the demise charterer of the Nereus Progress on 4 December 2025 when the arrest was effected. It failed on the second, for two independent reasons: the charterparty stood validly terminated with effect from 13 November 2025, well before the arrest; and Clause 32 independently converted Nereides’ possession into that of a gratuitous bailee once repossession was sought.

The foundational premise of the arrest was therefore displaced.

The directions

The impugned judgment was set aside and the appeal allowed. The Court held the termination of 13 November 2025 valid, preceded by due compliance with Clause 31(a) and the anti-technicality mechanism and founded on an admitted and continuing default in hire. It held that a validly issued notice of termination under Clause 31(a) was sufficient to bring the demise charter to an end, physical repossession thereafter operating only to complete the practical transfer of control. It held that the valid termination, the appellant’s demonstrably bona fide conduct in pursuing repossession, and the absence of any contrary assertion by Nereides together established that Nereides had ceased to be demise charterer well before 4 December 2025, holding the vessel from then only as a gratuitous bailee under Clause 32. And it vacated the order of arrest as resting on a contrary and unsustainable premise.

Shri Atmaram Nadkarni and Shri Shikhil Suri, Senior Counsel, appeared for the appellant; Shri Ashwin Shanker for the respondent, who had also argued that the owner was neither a necessary nor a proper party to a statutory proceeding in rem.

For a shipowner, the judgment restores the value of a termination clause: the right to end a charter cannot be neutralised by a charterer who simply declines to hand the ship back. For a maritime creditor, it sets a harder and more precise task — establishing charterer status as at the date of arrest, on the terms of the actual charterparty, rather than assuming that a charter continues until the ship physically changes hands. And for Indian admiralty practice, it answers a question that until this week had to be argued out of Singapore, Colombo, Sydney and Hong Kong.