When an Agent’s Indemnity Claim Can Lead to Vessel Arrest in India

Author - Vipin Sharma

Under India’s Admiralty Act, a maritime claim is any debt or liability connected to a ship that can give a court the power to arrest that ship. Section 4(1) of the Act lists what counts as maritime claims. These include things like damages from a collision, crew wages, salvage costs, and importantly for agents: supplies, port charges, and disbursements on behalf of the vessel. In plain terms, the Act says a ship can be held legally responsible for unpaid services or fees that keep it running or docked - whether those are paid directly by the ship or by an agent on its behalf.

Key Clauses: (l), (n) and (p) of Section 4(1)

Three parts of Section 4(1) are especially relevant for agents: -

• Clause (l): - Covers supplies and services to the ship - such as fuel (bunker), provisions, equipment or maintenance work. In practice, this means bills from suppliers (fuel, stores, repairs) can form a maritime claim.

• Clause (n): - Covers port and similar charges - any dues, harbour fees, canal or dock charges, light dues and the like. Port fees the ship owes fall squarely under this clause.

• Clause (p): - Covers disbursements on behalf of the vessel or its owners. An agent often pays such disbursements (like port dues, barge fees, canal tolls, or other expenses) expecting the owner to reimburse them.

Together, these clauses mean an agent who pays for the ship’s operation or port stay can treat any unreimbursed amounts as a maritime claim against the ship. For example, if an agent pays a port berth fee on behalf of the ship, that payment is a disbursement (clause p) connected to port charges (clause n) and supplies (clause l). These categories allow the High Court to entertain claims for those unpaid costs against the vessel itself.

What is an Indemnity Claim and Agent’s Liability

An indemnity claim is when one party (here, the agent) pays a debt or expense and then seeks reimbursement from the shipowner. In shipping, agents often give guarantees or undertakings to ports that they will cover port dues if the owner fails to pay. When the port demands payment, the agent becomes legally bound to pay. The agent then “claims indemnity” from the owner, saying “I paid this on your behalf, so you must reimburse me.”

Under Indian law, once an agent has an absolute promise or undertaking to pay port charges, that promise creates a liability. It doesn’t matter if the agent hasn’t actually paid yet. What matters is that the obligation to pay is real and unconditional. Courts have explained that “there is no need to pay the dues before suing the indemnifier” - it is enough that the agent has an “absolute liability” to pay on behalf of the ship. In short, if the agent is on the hook to pay, the ship can be held liable.

Arrest Rights Before Actual Payment

A key question is whether an agent can arrest the vessel before actually paying the port. Indian courts have said yes, if the liability is absolute. Since the law allows claims for port dues and related costs, an agent’s indemnity claim (based on its promise to pay) counts as a valid maritime claim even if the payment is still pending. The High Court noted that phrases like “dues in connection with port” are given a broad reading that covers an agent’s indemnity claim. In practice, this means an agent can seek arrest of the vessel to secure its claim once the ship’s unpaid port charges become its obligation.

Importantly, courts have also made clear that the port and the agent can each take separate action for the same unpaid dues. The port may have a maritime lien or statutory claim, and the agent has its own indemnity claim. Both can be pursued in parallel.

Practical Implications for Owners, Agents and Ports

• Shipowners:- Even if you haven’t directly run up port bills, you can still face arrest if your agent has promised to pay those bills and the dues remain unpaid. Owners should ensure all port dues and agency obligations are promptly met or provide alternative security (like bank guarantees) before departure.

• Ship Agents:- You now have a clear legal right to protect your money. If you have contractually guaranteed port costs, you can use admiralty arrest to secure your indemnity claim. But be mindful: arresting a vessel is serious and costly, so communicating with the owner or arranging payment first is still best practice.

• Ports and Authorities:- Ports still have their own claims (often protected by statutory liens). But an agent’s action adds pressure on owners to pay. Port officials should ensure that any port trust or statutory rules (like India Ports Act) and the Admiralty Act are followed when booking agents’ guarantees.

Avoiding Such Disputes

To reduce conflict, shipping stakeholders can take preventive steps:-

• Use clear agreements. Contracts between owners and agents should detail who pays what, when, and how reimbursement happens.

• Confirm guarantees in writing. When an agent signs an undertaking with the port, make sure the shipowner’s liability is spelled out and that funds or security are in place.

• Timely billing and payment. Agents should promptly invoice owners for any port fees or disbursements. Owners should clear dues or dispute them quickly before leaving port.

• Consider surety or escrow. In some cases, agents and owners use third-party guarantees (e.g. banks or P&I clubs) to secure port dues.

Speaking in Indian admiralty law, an agent’s indemnity claim for port charges is treated much like any other maritime claim. Even if the agent hasn’t paid yet, a firm promise to cover port dues makes the claim valid and can justify arresting the vessel. Owners, agents and ports must stay aware of these rules: agents can arrest ships to secure unpaid charges, and owners may be caught off-guard if dues aren’t cleared. Clear contracts and prompt settlement of port bills remain the best safeguard against such arrests.