Mortgage or Hypothecation
- By a mortgage the mortgagee acquires a right to the ownership of a
vessel in a certain event, namely, on default of payment of principal and
interest, since it is a transfer of all the mortgagor's interest by way of
security for the payment of a loan. Mortgagee by reason of his mortgage
shall not be deemed to be the owner of the ship, the mortgagor remains the
dominus of the ship with regard to everything connected with its
employment until the moment arrives when the mortgagee takes possession.
The mortgagor therefore does not cease to be the owner of such mortgaged
ship except so far as may be necessary for making it available as a
security for the mortgage debt. From this it necessarily follows that a
mortgagee cannot bring an action of restraint as if he were a co-owner.
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- The mortgagee under a mortgage of a ship becomes entitled to have as
part of his security all the articles necessary to the navigation of the
vessel, such as sails, lights, whether on board at the date of the
mortgage, or placed on board subsequently and he becomes entitled to to
the freight due when he takes actual or constructive possession of his
security, he cannot, therefore, recover from the mortgagor any freight
which he has allowed him to receive since the date of the loan, and before
he take possession. Nor can the charterers take from the freight payable
by them any sum in respect of advances which the master has agreed shall
be deducted from such freight, for the sum which it is agreed by the
charterparty shall be advanced and taken from the freight is the only
amount by which the freight may be reduced. Nor can suppliers of coal
obtain a deduction of the price thereof from freight, even though the coal
was consumed in earning it, where the coal was sold to and was the
property of the mortgagees.
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- Article 1 of the Brussel Arrest Convention and also of the Geneva
Arrest Convention deals with the above subject maritime claim although the
conventions has not been adopted by legislation, the principles
incorporated are applicable as per Supreme Court of India judgments to
invoke admiralty jurisdiction for ship arrest in India read with Admiralty
Court Act, 1861.
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- Any claim in respect of any mortgage duly registered according to the
provisions of the (Indian) Merchant Shipping Act, 1958, whether the ship
or the proceeds thereof be under arrest of the Court or not."
Section 51 of the Merchant Shipping Act 1958, regarding the rights of a
registered mortgagee of a ship, which is as follows:
"(1) A registered mortgagee of a ship or share shall be entitled to
recover the amount due under the mortgage in the High Court, and when
passing a decree or thereafter the High Court may direct that the
mortgaged ship or share be sold in execution of the decree.
(2) Subject to the provisions of Sub-s. (1), no such mortgagee shall
merely by virtue of the mortgage be entitled to sell or otherwise dispose
of the mortgaged ship or share."
The "High Court" referred to in the section by definition in the Act means
the High Court within the limits of whose appellate jurisdiction (a) the
port or registry of the ship is situate; or (b) the ship is for the time
being; or (c) the cause of action wholly or in part arises. The High Court
need not be one having Admiralty jurisdiction and the sale of the ship
which the High Court directs to be sold will not extinguish all the claims
to or liens on the ship so as to give the purchaser a free and clear title
to the ship.
- BCAS: 2102-1013
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