New Delhi, Sep 25 The Supreme Court on Friday held that a valid termination notice under a bareboat charterparty is sufficient to bring a demise charter or rental agreement to an end and that physical repossession of the vessel is not a prerequisite for termination.
A bareboat charterparty is a maritime contract where the shipowner leases an empty vessel to a charterer for a set period, with no crew, provisions, or master provided.
A demise charter is a rental agreement where the ship owner gives complete possession of a vessel to the charterer.
A bench comprising Chief Justice of India Surya Kant and justices Joymalya Bagchi and V Mohana delivered the judgement on the issue which was not dealt by any Indian court earlier.
“At the outset, we may note that the precise question, i.e., whether physical repossession of a vessel is a prerequisite for the effective termination of a demise charter, or whether a notice of termination validly issued under the charterparty is sufficient, does not appear to have been authoritatively settled by an Indian court. In aid of their respective persuasive submissions, both sides have drawn upon the jurisprudence of foreign courts,” the CJI, who authored the verdict, said.
The verdict set aside a judgment of the Madras High Court and vacated the arrest of the vessel MV Nereus Progress.
“We hold that a validly issued notice of termination under Clause 31(a) of the bareboat charterparty (BBC) was sufficient to bring the demise charter to an end, and that physical repossession thereafter operated only to complete the practical transfer of control of the vessel.”
The bench said it cannot lose sight of the practical consequences of treating physical repossession as a pre-condition for termination.
“Physical repossession of a vessel in the control of a defaulting charterer may be delayed or frustrated for reasons entirely outside the owner’s control. The vessel’s location at any given time, genuine or contrived technical difficulties, non-cooperation of the charterer’s crew, and the practical exigencies of berthing at a particular port are all matters that lie beyond the owner’s hands…,” it said.
If a charterer’s demise status were held to continue for as long as the charterer chooses or is able to withhold physical possession, despite a validly issued termination notice, the owner’s contractual right of termination would be held hostage to the very default that occasioned its exercise, it said.
“Such a construction, in our opinion, cannot have been the intention of the parties to a commercial instrument such as the underlying BBC,” it said.
The case arose from a dispute involving the vessel’s registered owner and Om Freight Forwarders Ltd, which had sought its arrest over dues allegedly owed by Nereides Marine Services, the vessel’s erstwhile demise charterer.
Nereides had entered into a bareboat charterparty with the vessel’s owner in October 2024.
After Nereides allegedly defaulted on payment of hire, the owner issued successive demand notices, followed by an anti-technicality notice granting a further three banking days to cure the default.
When the dues remained unpaid, the owner issued a termination notice on November 13, 2025, and subsequently a repossession notice.
Before the owner could physically repossess the vessel, which had arrived at Tuticorin, Om Freight Forwarders obtained an ex-parte order from the Madras High Court on December 4, 2025, seeking its arrest.
The arrest was sought on the basis that Nereides continued to be the demise charterer of the vessel and that the vessel could consequently be arrested under the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017.
The top court held that the termination of the bareboat charterparty was valid and noted that the owner had complied with the contractual requirements before exercising its right to terminate and that Nereides had not disputed its payment default.
(PTI News)
