Kerala HC seeks reduced security deposit of ₹1.2k crore from MSC to release arrested ship MSC Akiteta-II

The Kerala High Court has ordered the Mediterranean Shipping Company SA (MSC) to deposit a reduced amount of ₹1,227.62 crores as security for the release of its arrested vessel MSC Akiteta-II [State of Kerala v MV MSC Akiteta II & ors].

MSC is presently facing an admiralty suit filed by the Kerala government, which had sought the arrest of the vessel and damages for the widespread pollution and economic losses, caused by the sinking of MSC Elsa-3 near Kerala's coast.

On July 7, the High Court had ordered its conditional arrest and ordered that MSC has to deposit ₹9,531 crores if it wants to get the vessel released.

On Thursday, Justice MA Abdul Hakhim modified this interim order and reduced the security deposit amount to ₹1,227.62 crore instead.

"The Order dated 07.07.2025 in I.A. No.1/2025 in the above Admiralty Suit arresting the Respondent No.1 is modified by substituting the security amount of Rs.9,531 Crores with Rs.1,227.62 Crores. The order of arrest against the Respondent No.1 Vessel shall be until Rs.1,227.62 Crores is deposited by the Respondent No.1 in this Court or until security for the said amount is furnished by the Respondent No.1 to the satisfaction of the Court," the Court said.

The judge clarified that this interim order would not prevent the State from seeking additional security if circumstances emerge in future to justify increasing the security deposit. He also stated that the State had the right to seek the arrest of other sister vessels in future to secure such additional security.

The sinking of Liberian-flagged ship MSC Elsa-3 off the Alappuzha coast in Kerala had caused oil spills and widespread marine and coastal pollution on the Kerala coastline, severely affecting fisheries and public health.

The State of Kerala eventually sued the ship's owner, and sought compensation of ₹9,531.11 crores, with interest on the entire sum.

On July 7, the Court passed an interim order on this case, directing the arrest of MSC Akiteta II, the sister ship of MSC Elsa-3.

In its latest order, the Court also examined the following four issues:

- Whether the State was competent to institute the admiralty suit?

- Whether MSC Akiteta-II could be treated as a sister vessel of the sunken MSC Elsa-3?

- Whether a prima facie case for the compensation claims were made out?

- Whether a letter of undertaking from the vessel's insurer could be accepted instead of asking MSC to furnish a security deposit?

The Court observed that the State had the jurisdiction to institute an admiralty suit against the MSC, even though the company's ship sank 14.6 nautical miles from the coast which was within the Exclusive Economic Zone (EEZ).

It noted that the Section 4(1)(u) of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 (Admiralty Act) permitted maritime claims by a State for environmental damage and threats caused by a vessel within the territorial waters of the State.

Since oil spills and pollution from the shipwreck, in this case, extended to Kerala's territorial waters, the Court observed that the State was competent to sue MSC for damages.

"Even if the sinking of the vessel occurred outside the territorial waters, if the sinking of the vessel has its effect inside the territorial waters or threat to the territorial waters, the State is well competent to institute suit with respect to the maritime claim arising therefrom," the Court held.

The Court further accepted the State's contention that MSC operated its fleet through paper and shell companies registered under different names.

It found prima facie evidence that the registered owner for both MSC Elsa-3 and MSC Akiteta-II was MSC, as the ships shared the same company address.

This supported the State's plea that MSC Akiteta-II was indeed a sister vessel of MSC Elsa-3, and could be placed under arrest to secure claims arising from the sinking of MSC Elsa-3.

The Court, however, did not accept the State's compensation demand of  ₹9,531 crore as the basis for the security deposit.

It noted that the State's largest claim of ₹8,554 crore for oil pollution damage was based solely on the fact that MSC carried an insurance coverage of USD 1 Billion from the Protection and Insurance (P & I) Club Insurance.

Citing a lack of material evidence from the State to prove extensive oil pollution and considering the available data on the oil spills from the sunken vessel and its impact on the marine environment, the Court revised the claim amount to ₹500 crore, for the purpose of calculating how much should be demanded from MSC as a security deposit.

To this end, it further fixed a claim amount of ₹41.31 crore for pollution caused by plastic nurdles and other pollutants in the cargo carried by MSC Elsa-3, ₹1.38 crore to cover expenses already incurred by the Kerala State Pollution Control Board to combat the pollution and ₹3 crore for future preventive measures.

A ₹45 lakh amount was fixed as the claim for conducting fisheries impact studies. Remedial costs for plastic pollution were set at ₹150.45 crore and remedial costs for other pollutants was set at ₹56.10 crore.

The Court also included claims of ₹349 crore to compensate for economic loss due to market scare, ₹71 crore to compensate for losses from a six month fishing ban, and ₹54.93 crore for economic losses suffered by fishermen.

This brought the total claim amount to ₹1,227.62 crores as the Court-fixed basis for estimating how much MSC should pay as a security deposit to secure the release of its arrested ship.

The Court proceeded to reject MSC's plea to accept a letter of undertaking from MSC's P&I Club insurer, instead of continuing the arrest of its ship.

The Court observed that as such undertakings were not recognised under the Admiralty Act and could not safely ensure the execution of court orders against foreign entities.

Advocate general Gopalakrishna Kurup assisted by government pleader Parvathy Kottol appeared for the state.

Senior counsel Prashant S Pratap instructed by advocate Pranoy K Kottaram appeared for MSC.

Adani Vizhinjam Port Private Limited was represented by advocate Roshen D Alexander.

[Read Order]