Maintainability of sister ship arrest on the premise that each ship Is owned by distinct One Ship Company.

Brief Facts:

This issue was decided in the case of Aurobindo Pharma Limited V. NYK Theseus¹ . Aurobindo Pharma had entrusted Nippon Yusen Kabushiki Kaisha with carriage of pharmaceutical cargo from the port of Nhava-Sheva to London Gateway Port, UK. The cargo was shipped on board the vessel CCNI ARAUCO. Bill of Lading of issued by NYK Line (India) Pvt. Ltd on behalf of Nippon Yusen Kabushiki Kaisha. NYK Line (India) Pvt. Limited was an 100 % subsidiary of Nippon Yusen Kabushiki Kaisha.

En-route, the vessel, CCNI ARAUCO, caught fire at Hamburg port. Eventually, the cargo was transhipped by Nippon Yusen Kabushiki Kaisha on board another vessel and delivered to the consignee. the consignee rejected the cargo and returned the same to Aurobindo Pharma Limited.

Auribindo Pharma Limited applied to the Bombay High Court to seek arrest of the vessel, NYK Theseus on the premise that NYK Thesius was managed, operated, funded, and controlled entirely by Nippon Yusen Kabushiki Kaisha and, thus, for all practical purposes Nippon Yusen Kabushiki Kaisha was the owner and/or deemed owner of NYK Theseus.

Issue for arrest maintainability:

Whether NYK Thesius can be arrested for claims against CCNI ARAUCO on the premise that both these vessels were managed and controlled by Nippon Yusen Kabushiki Kaisha, while the owners of both these vessels being distinct one ship companies.

Application by Nippon Yusen Kabushiki Kaisha to vacate order of arrest and for discharge of security:

1. The registered owner of NYK Theseus, does not owe any personal liability and therefore in the absence of in personam liability of the registered owner in an action in rem against NYK Theseus is not tenable;
2. The claim of the Auribindo that Nippon Yusen Kabushiki Kaisha is the owner and/or deemed owner/true owner or real owner of NYK Thesius is stated to be a subterfuge to maintain an action in rem;
3. NYK Theseus is not the sister ship of M.V. CCNI ARAUCO 6327, in which Auribindos cargo was loaded.

Decision of the Bombay High Court:

The Bombay High Court allowed the motion to vacate the order of arrest/return of security on the following grounds (amongst others):

1. There is nothing so very wrong in one family setting up with common share holding multiple companies, each holding different assets. The mere commonality or common ownership, directorship or interlocking share-holding are by themselves not even prima facie evidence of one being the alter ego of the other. There must be an element of deceit, an attempt at fraud, something colourable.
2. No effort was made to show as to who was the registered owner of M.V. CCNI ARAUCO 6327 against whom the maritime claim primarily arose.
3. The plaint is conspicuously silent about the alleged claim of fraud or dishonest intent on the part of Nippon Yusen Kabushiki Kaisha so as to justify the lifting of the corporate veil.
4. Mere identity of the shareholders or directors or the fact that the companies operate from one and the same address, by itself, is not sufficient to lift the corporate veil. Nor a one ship company is a taboo.

Conclusion

The Bombay High Court took the correct approach in returning the security furnished by following the settled principles that corporate veil can lifted only in the premise of fraud or dishonest intent. The case also brings to fore the importance of careful drafting of the statement of claim/plaint to establish an action against the vessel. Mere assertions of commonality of shareholding are not sufficient grounds to establish sister ship arrest.

Footnote

^{1. 2023: BHC-OS:4474}