Madras High Court orders arrest of Panama-flagged ship MV Zhong Peng You Yi

The Madras High Court recently ordered the arrest of a Panama-flagged ship, MV Zhong Pengi You Yi, at the Chennai port.

The Court passed the order on a plea filed by a Russian company and a Dubai company.

On March 18, Justice Senthilkumar Ramamoorthy, granted them interim relief by ordering the ship's arrest at the Chennai port.

"I am prima facie satisfied that the suit claim relates to a maritime claim as per the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017. It is also stated that the vessel is likely to sale out of the admiralty jurisdiction of this Court very soon. Therefore, I direct that a warrant of arrest be issued in accordance with the Admiralty Rules of this Court in respect of the vessel M/V ZHONG PENG YOU YI (IMO No.1016161)," the Court said.

The plea was filed alleging that the ship's owners owed dues amounting to about $2.6 billion (about ₹24 crores) to the Russian company that had chartered the ship in 2023.

The Russian company, Eurotrans Limited, later assigned its rights under the ship charter agreement to a Dubai-based entity named Ship Fuels & Trade DMCC.

Both companies (plaintiffs) filed an urgent plea before the Madras High Court to arrest the ship after it had arrived at the Chennai port for some cargo operations.

Their plea stated that earlier attempts to arrest the ship at Djibouti and Egypt had failed. The companies sought the Madras High Court's urgent intervention to detain the ship at Chennai before it could sail out.

The plaint before the Court said that Eurotrans and the ship's owner had entered into a time charter agreement in 2023 to hire out the ship to Eurotrans for a period of 12 months (plus 3 additional months if Eurotrans wishes to extend the hire period).

11 invoices were raised and paid between November 24, 2023, and May 7, 2024. However, in mid-May, the ship's owners told Eurotrans that the ship needs to sail to China for some repairs. In view of this, the ship was notified as being officially off-hire from May 26, 2024. However, the ship's owners then raised an invoice on May 30, 2024, seeking hire charges for a period that extended beyond May 26.

According to the plea, the ship's owners then unlawfully broke the time charter agreement and withdrew the ship, under the guise of getting it repaired in China.

As per the plaint, Eurotrans also came across information indicating that the ship was placed for hire with competitors. It contended that the ship's owners likely withdrew the ship so that it could be hired out at higher charter rates to others. In this regard, the plaintiffs also highlighted that market rates to charter ships have increased due to attacks on vessels by Houthis in the Red Sea.

Eurotrans and its assignee, Ship Fuels & Trade DMCC, have now sought dues of $2,675,036.65 (₹24,I7,60,138.29) from the ship's owners. This maritime claim includes damages for a breach of contract on account of the alleged unlawful withdrawal of the ship, a $100,000 deposit paid by Eurotrans when the ship was first delivered to it for hire, the value of bunkers aboard the ship when it was withdrawn, costs incurred for arbitral proceedings in Hong Kong and litigation costs in India.

The Court sought a response from the ship's owners by April 1.

Senior Advocate Prashanth Pratap and advocates Deepika Murali, Anila R, Nivea SR and Harinarayanan K represented the two plaintiff companies.

[Read Order]