The Supreme Court has vacated the arrest of M.V. Nereus Progress, holding that its former bareboat charterer had ceased to be a demise charterer before the arrest order was passed. Under the terms of the charter, physical repossession was not required to complete a valid termination.

The Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana set aside the Madras High Court’s decision sustaining the vessel’s arrest and held that the charterer, Nereides Marine Services, held the ship only as a gratuitous bailee after the owner validly terminated the charter. Its continued physical custody did not preserve its status as a demise charterer.

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The registered owner of M.V. Nereus Progress had let the vessel to Nereides under a bareboat charterparty dated October 3, 2024. In a separate agreement, Om Freight Forwarders Ltd. had let its vessel, M.V. Bharadwaj, to Nereides.

Nereides defaulted on hire payments under both arrangements. The owner of M.V. Nereus Progress issued demands in September and October 2025; the Supreme Court noted that arrears identified in the September notices totalled USD 696,500. After giving Nereides a further three banking days to cure the default through an anti-technicality notice, the owner terminated the charter on November 13, 2025. It issued a repossession notice on November 19.

Meanwhile, Om Freight Forwarders brought an admiralty suit over the unpaid hire for M.V. Bharadwaj. It sought the arrest of M.V. Nereus Progress as another vessel connected to Nereides. On December 4, 2025, before its owner had physically taken back the ship at Tuticorin Port, the Madras High Court ordered its arrest. A Single Judge declined to recall that order, and a Division Bench upheld it on April 30, 2026.

The question before the Supreme Court was whether Nereides remained the demise charterer of M.V. Nereus Progress on the date of arrest merely because the owner had not yet taken physical possession.

The Supreme Court first found that the owner had complied with the charter’s requirements for termination. Nereides had not cleared the outstanding hire within the grace period, and the November 13 notice invoked the contractual right to terminate for non-payment. The Court also noted that Nereides had acknowledged the termination notice and discussed an orderly handover.

The decisive provision was Clause 32 of the bareboat charter. It addressed what would happen after early terminationand specified that, pending physical repossession, the charterer would hold the vessel as a gratuitous bailee for the owner. Reading that clause with the termination provision, the Court held that the notice ended the demise charter; repossession was the subsequent process of transferring physical control.

The distinction mattered because a demise charterer possesses and operates a vessel for its own commercial use, while a gratuitous bailee holds it for the owner without an independent right to use it. On the terms of this charter, Nereides could not retain both statuses after termination.

The Court also examined the owner’s efforts to recover the vessel. Its correspondence sought the ship’s location and handover details, while the vessel’s movements and reported technical difficulties delayed repossession. The owner’s inability to board the vessel before the arrest did not undo a termination that had already taken effect.

Om Freight Forwarders had relied on Section 5(1)(b), read with Section 5(2), of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017. The Supreme Court explained that an arrest on this basis required the statutory conditions concerning the liable demise charterer to be satisfied for the vessel sought to be arrested, including its status when the arrest was effected.

The claim arose from Nereides’ separate charter of M.V. Bharadwaj. By December 4, however, Nereides was no longer the demise charterer of M.V. Nereus Progress. The required basis for arresting that vessel was therefore absent.

The Supreme Court disagreed with the High Court’s treatment of physical redelivery as generally necessary to end demise charterer status. It noted differing approaches in foreign decisions and held that the express wording of this charter had to govern the dispute. In particular, the High Court had not given effect to Clause 32’s provision for the period between termination and repossession.

Allowing the owner’s appeal, the Supreme Court set aside the Madras High Court’s judgment and vacated the arrest order.

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