Supreme Court of India· 25 September 2026

Is physical repossession of the vessel a pre-condition for termination of a demise charter under a BARECON bareboat charterparty?

Owners and Parties Interested in M.V. Nereus Progress v. Om Freight Forwarders Ltd

2026 INSC 1055 · SLP (C) No. 23834 OF 2026
Coram: Justice Surya Kant · Justice Joymalya Bagchi · Justice V. Mohana

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Answer

Physical repossession of the vessel is not a pre-condition for termination of a demise charter under a BARECON bareboat charterparty.

No. Under Clauses 31 and 32 of the BIMCO BARECON 2017 form, termination takes effect upon service of notice under Clause 31, and repossession is treated as a consequence flowing from a termination already accomplished. Clause 32 provides that, pending physical repossession, the charterers hold the vessel only as a gratuitous bailee to the owners, which is manifestly inconsistent with continuing demise charterer status, since a gratuitous bailee has no right of use, control or commercial employment. The deemed repossession on boarding only fixes when the owners resume operational responsibility. Treating repossession as a pre-condition would hold the owner's right of termination hostage to the very default that occasioned its exercise.

Headnote

Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 — s.5(1)(b) — s.5(2) — Arrest of vessel — Demise charterer — Termination of bareboat charterparty — Gratuitous bailee — Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 — s.5(2) — Sister-ship arrest — Conditions of s.5(1)(b) — Held: The power under Section 5(2) to arrest a vessel in lieu of the vessel against which the maritime claim arose is subject to sub-section (1); Section 5(1)(b)'s conditions must be satisfied independently in respect of the vessel sought to be arrested. (¶31, 32) BIMCO BARECON 2017 — Clauses 31 and 32 — Termination — Physical repossession not a pre-condition — Held further: A validly issued notice of termination under Clause 31(a) of a BARECON bareboat charter is sufficient to end the demise charter; physical repossession is only its consequence, and pending repossession the charterer holds the vessel as a gratuitous bailee, not as demise charterer. (¶35, 36, 37, 43) Persuasive foreign authority — Divergent streams — Language of the contract — Held further: Where persuasive foreign authorities diverge, the question turns on the express language of the contract and the relevant facts, not on a mechanical importation of one foreign precedent over the other. Arrest of the vessel vacated; appeal allowed. (¶27, 44, 45)

Headnote

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In the Court's own words

Paragraph 35The opening words of Clause 32, “in the event of the early termination of this Charter Party”, make it clear that repossession of the Vessel is treated by the parties as a consequence flowing from a termination already accomplished, and not as an event upon which the termination itself is dependent. Most pertinently, the Clause expressly stipulates that, pending physical repossession, the Charterers shall hold the Vessel “as gratuitous bailee only to the Owners”; a characterisation which is manifestly inconsistent with the continuance of demise charterer status.

Paragraph 36This characterisation is not a matter of semantics, but goes to the very nature of the possession held. A gratuitous bailee holds the property of another without any right of use, control or commercial employment of its own, whereas a demise charterer holds the vessel as though it were the owner for the time being, with full possession, control and the right to employ it commercially. Given this fundamental distinction, Nereides could not have simultaneously held the Vessel both as a ‘demise charterer’ and a ‘gratuitous bailee’. There can be no doubt that once the charterparty designates the charterers as ‘gratuitous bailees’ upon termination, it necessarily displaces any continuing status as ‘demise charterer’.

Paragraph 37Clauses 31 and 32 of the BBC, read together, unfold a coherent and internally consistent contractual scheme in which each clause performs a distinct function while operating in tandem with the other. Termination takes effect immediately upon service of notice under Clause 31, and such termination then alters the legal character of the charterers’ possession from that of a ‘demise charterer’ to that of a ‘gratuitous bailee’. Clause 32 thereafter regulates the practical mechanics by which the Owners recover physical control of the Vessel from a bailee who, at that stage, has no independent right of user left to assert.

Paragraph 38The deeming provision that the Vessel shall be deemed repossessed upon the boarding of the Owners’ representative merely fixes the point from which the Owners resume operational responsibility for the Vessel. It does not determine when the demise charter itself comes to an end. To hold otherwise would permit a clause designed to regulate the handover of an already-terminated charter to instead dictate the survival of that very charter, a result the parties could not have intended.

Paragraph 39We also cannot lose sight of the practical consequences of treating physical repossession as a pre-condition for termination, rather than its consequence. 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. 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. Such a construction, in our opinion, cannot have been the intention of the parties to a commercial instrument such as the underlying BBC.

Paragraph 43In light of these findings and analysis, we hold that a validly issued notice of termination under Clause 31(a) of the 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 validity of the Termination Notice, coupled with the demonstrably bona fide conduct of the Appellant in pursuing repossession, is sufficient to establish that Nereides had ceased to be the demise charterer of the Vessel well before the date of arrest, i.e., 04.12.2025. This conclusion is further reinforced by the absence of any assertion to the contrary by Nereides itself, which held the Vessel only as a gratuitous bailee under Clause 32.

Acts & Sections

s.5(1)(b) Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017s.5(2) Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017

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Also decided in this judgment

Must Section 5(1)(b)'s conditions be satisfied independently for a vessel arrested in lieu under Section 5(2) of the Admiralty Act, 2017?Must a question on which persuasive foreign authorities diverge turn on the express language of the contract, not mechanical importation of one precedent?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections