1. The notice of motion is taken out on behalf of defendant Nos.1 and 2 for return of security of Rs.65,71,141/- to the applicant together with interest accumulated thereon.

2. The applicant is seeking return of security on the basis that the suit was filed and security obtained for the plaintiff's claim in arbitration. It is the applicant's case that the defendant no.1 vessel and the vessel M.V. Eastern Light for which the plaintiff allegedly provided management services are not sister vessels and hence the first defendant vessel cannot be arrested. It is submitted that both these vessels are owned by different entities which are unconnected and assuming for the sake of argument both are part of the same group and have common beneficial ownership, still at best they could be considered as vessels owned by sister companies and not sister ships and for the Court to conclude that these are sister ships, the Court has to pierce the corporate veil. It is submitted that the plaintiff has not made out any case to pierce corporate veil.

3. Further the plaintiff has no cause of action against the defendant no.1 vessel and/or the applicant who is defendant no.2 as there is no arbitration agreement between the plaintiff and the applicant. It is submitted by the counsel for the applicant that the plaintiff can seek security against the applicant only if the plaintiff can show there exists a binding arbitration agreement between the plaintiff and the applicant relating to management services rendered to M.V. Eastern Light. The purported management agreement relying on which the plaintiff has instituted the present suit has not been entered into with the applicant but is an agreement between the plaintiff and the defendant no.3 and hence there is no arbitration agreement between the plaintiff and the applicant. Consequently, also the defendant no.1 vessel cannot be arrested.

4. Counsel for the applicant submitted that defendant no.1 and M.V. Eastern Light are not sister ships because both are owned by different legal entities. He further submitted that the identity of a company is distinct from its shareholders and assets of the company does not become asset of the shareholders and that the allegations of the plaintiff that the applicant, who is defendant no.2, and defendant no.3 are alter-egos of one another or enjoy same ownership or functional integrality are baseless. Hence, in these circumstances, the security furnished by the applicant has to be returned.

5. This court in a recent judgment in the matter of M/s. Universal Marine and Ramanand Padiyar Vs. M.T. Hartati & Anr. (Notice of Motion No. 1080 of 2013 in Admiralty Suit No.77 of 2012) [M.T. Hartati] has held that for two ships to be called sister ships, both the ships have to be registered under the same ownership. But if two ships are owned under two different owning companies, then, for them to be called sister ships corporate veil has to be pierced. For that not only common beneficial ownership has to be established but (a) fraud has to be alleged in the plaint, (b) mere bald allegation of fraud is not sufficient and (c) it has to be alleged with sufficient material to show that this allegation will be sustained at the time of trial. If the corporate veil is so pierced then even if the ships are registered in different names, then both the ships will be termed as sister ships.

6. Mr.Ramabhadran, counsel for the plaintiff fairly conceded that M.V. Eastern Light and defendant no.1 cannot straight away be called sister ships since they are not registered in the same name, but by piercing corporate veil both these ships can be called sister ships. Relying on the recent judgment of M.T. Hartati, the applicant submitted that the plaintiff has not even alleged anywhere that the companies that owned the 1st defendant and M.V. Eastern Light were formed to play a fraud on the plaintiff or the creditors.

7. Since the admitted position is both the ships are not owned by the same entity