INTRODUCTION
Until 2016, Indian insolvency laws were fragmented across various statutes, including the SICA.[1], RDB Act[2], and provisions within the Companies Act[3]. This fragmentation led to a system characterized by inefficacy, ambiguity, and stalled legal procedures, hence compelling the Indian government to pass the Insolvency and Bankruptcy Code, 2016[4]. The IBC is a “code”, i.e., it codifies, unifies, and standardizes the entire field of insolvency law in India. It is a comprehensive legislation that establishes a straightforward, predictable, creditor-driven procedure for the winding down of companies in a time-bound manner. The code aims to maximize the value of assets of the debtor, promote entrepreneurship, ensure credit availability, and balance the interests of all stakeholders involved. It also enlists provisions concerning insolvent individuals.
MARITIME LAWS IN INDIA
Activities concerning the sea are regulated in India primarily by the Admiralty Act, 2017[5], Merchant Shipping Act, 1958[6] and the Major Ports Act, 2021[7]. The primary focus of this blog is on the Admiralty Act 2017, which consolidates provisions relating to vessels, their arrest, detention, sale, and other matters connected therewith. It replaced older colonial provisions such as the Admiralty Court Act, 1861[8] And the Colonial Courts of Admiralty Act, 1890.[9]
One of the primary goals of the act is to update and align the country’s legislation with international admiralty standards, such as the International Convention on Maritime Liens and Mortgages, 1993[10] And ICAS, 1999.[11]
HOW ARE VESSELS TREATED UNDER THE ACT?
An important aspect of the Admiralty Act Is the treatment of a vessel as a ‘juristic person’?[12] This entails that admiralty proceedings can be in rem or against the vessel itself, which is a crucial distinction from traditional civil cases that are generally in personam (or against an individual).
WHAT DOES THIS IMPLY?
If the law considers the ship to be a juristic person, it implies that it can sue or be sued, be arrested, and enter into contracts independent of its owner. The law essentially treats the ship as a separate legal person.
This distinction is an important aspect of maritime law, for it allows the creditor to pursue action against the ship due to non-fulfilment of liabilities by the owner until such claims are satisfied. Disputes arising over unpaid debts can result in maritime liens being placed against a vessel. Maritime lien is unique because it is attached directly to the vessel itself, not the owner, and follows the property even if it is sold. By the use of rem proceedings, the creditor initiates legal proceedings against the vessel, and thus, there is no personal liability of the owner to settle the plaintiff’s claims. This makes it a potent tool for claimants, as they can enforce the lien against the new owner in case the previous one defaults. The Court may also issue a warrant to seize or “arrest” the vessel (thereby preventing it from leaving the port) to secure the claimant’s dues. The proceedings ultimately target the ship itself, which may be sold to pay the claim if there is no appearance to defend the ship.[13] The Admiralty Act reserves the highest priority for maritime liens, followed by registered mortgages and other claims.[14]
THE CONFLICT BETWEEN IBC AND THE ADMIRALTY ACT
Both the Admiralty Act, 2017[15] and the IBC, 2016[16], deal with creditor interests and the procedure for claims. The proceedings under the Admiralty Act are an action in rem concerning the vessel in question (brought under a High Court’s jurisdiction). Contrastingly, proceedings under the IBC[17] Are actions in personam against the corporate debtor (filed in the NCLT or National Companies Law Tribunal). While the Admiralty Act follows the inter se priority model for distributing proceeds. The IBC has a non-obstante clause. And prescribes the “waterfall mechanism” for liquidated assets.
Complications manifest when a company owning a vessel becomes insolvent, and the two legal regimes intersect.
For instance, a shipping company, “A”, becomes insolvent, and action is pursued by the maritime claimants of A. The Court imposes a moratorium under Section 14 of the IBC, implying that all actions, suits, and recoveries against A stand suspended temporarily in order to preserve company assets during insolvency proceedings.[18]
Maritime creditors who have arrested vessels argue that their proceedings should continue unimpeded because they are proceeding against the vessel in rem, not against the owner in personam. On the other hand, insolvency practitioners contend that the moratorium should apply to all proceedings affecting the corporate debtor’s assets, including vessels, particularly since they are a crucial asset of the shipping company.
Certain important questions arise –
Scenario 1 – What if the ship of A had been arrested before the declaration of moratorium?
The Bombay High Court in 2020[19] Held that if a ship is arrested before the moratorium, the Admiralty Court retains control over it, and a subsequent moratorium will not affect those proceedings. The sale proceeds of the vessel are distributed according to the inter se priorities listed in the Admiralty Act.
Scenario 2– What if admiralty proceedings were initiated after the declaration of moratorium?
The suit by maritime claimants is in rem against the vessel itself, as opposed to the debtor in personam in the moratorium proceedings. Hence, it is altogether a separate case (since they are two separate entities)[20] And can thereby be entertained. If an order of arrest is made, the warrant of arrest will be executed against the vessel. However, if the owner enters an appearance and provides security, the suit becomes in personam, and the moratorium would then apply, halting the admiralty suit. Otherwise, provisions of the Admiralty statute are adhered to.
Even if in rem proceedings are initiated at the liquidation stage, the reasoning mentioned above is considered, and the claimant is entitled to the extent of the value of the res after obtaining an order of arrest and assuming the role of a secured creditor.
CONCLUSION
How can antimonies in the two laws be harmonized?
Throughout its analysis, the Bombay High Court in the Barge Madhwa case emphasized the principle of harmonious construction, seeking to interpret both the Insolvency and Bankruptcy Code and the Admiralty law in a manner that would give effect to the purposes of each without negating the other.
The Court recognized that the distinctive features of maritime liens reflect centuries of maritime legal tradition and serve important policy purposes in international commerce. Undermining these principles would place Indian maritime law at odds with international norms and could adversely affect India’s maritime trade and ship financing markets. [21]
It was observed that an admiralty action in rem can be initiated under the admiralty jurisdiction of a High Court, but cannot be continued beyond the arrest of the vessel since it would otherwise defeat the very purpose of the moratorium and insolvency process under the IBC.
The High Court also ruled that vessels arrested before the moratorium granted by the NCLT can only be released by the admiralty court, i.e., the High Court, upon full payment of security.[22]
It was additionally held that the determination of priorities under the Admiralty Act, 2017[23] It should be adopted in the resolution plan since it is actually in the interest of liquidators and financial creditors to have vessels sold through admiralty court proceedings. This ensures maximum value realization, which ultimately benefits all stakeholders in the insolvency process.
Author(s) Name: Khushi Sharath Varma (Dr. Ram Manohar Lohiya National Law University,
Lucknow)
References:
[1] Sick Industrial Companies (Special Provisions) Act 1985
[2] Recovery of Debts and Bankruptcy Act (RDB Act) 1993
[3] Companies Act 2013
[4] Insolvency and Bankruptcy Code 2016
[5] Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017
[6] Merchant Shipping Act 1958
[7] Major Ports Act 2021
[8] Admiralty Court Act 1861
[9] Colonial Courts of Admiralty Act 1890
[10] International Convention on Maritime Liens and Mortgages (adopted 6 May 1993, entered into force 5 September 2004) 2276 UNTS 3
[11] International Convention on Arrest of Ships (adopted 12 March 1999, entered into force 14 September 2011) 2797 UNTS 3
[12] M.V. Elisabeth v. Harwan Investment and Trading (P) Ltd. (1993) Supp (2) SCC 433.
[13] Dr. Padma Singh and Ankita Verma, ‘Maritime Lien, Maritime Claim and Conflict between Admiralty Law and Insolvency Law in India’ (Taxmann, 28 July 2023) < https://www.taxmann.com/research/ibc/top-story/105010000000023132/maritime-lien-maritime-claim-and-conflict-between-admiralty-law-and-insolvency-law-in-india-experts-opinion > accessed 12 October 2025
[14] Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017, s10
[15] Ibid
[16] Insolvency and Bankruptcy Code 2016
[17] Ibid
[18] The Insolvency and Bankruptcy Code 2016, ss 14, 33 (5), 238
[19] Raj Shipping Agencies v. Barge Madhwa (2020) SCC OnLine Bom 651
[20] Angre Port Pvt. Ltd. v. TAG 15 (IMO No. 9705550) (2020 SCC) OnLine Bom 5941
[21] Aaditya Bhatt, ‘The Interplay of insolvency and Admiralty Law’ (Bhatt & Joshi Associates, 7 October 2025) <https://bhattandjoshiassociates.com/the-interplay-of-ibc-and-admiralty-law/#The_Insolvency_and_Bankruptcy_Code_Framework > accessed 14 October 2025.
[22] Ibid.
[23] Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017, s10.
