When an arrested vessel is sold in India, the fund rarely meets every claim. Its distribution is not a matter of practice or judicial sympathy: sections 9 and 10 of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 fix a closed hierarchy. Recovery turns on three questions: where the claim ranks, whether its security has survived, and whether the owner is insolvent.

The framework

The 2017 Act vests admiralty jurisdiction in the High Courts it names or the Central Government notifies, over any vessel within their territorial waters, whatever the owner’s domicile. Registration of Indian vessels and mortgages is now governed by the Merchant Shipping Act, 2025, which replaced the 1958 Act.

Section 5 permits arrest in rem where the court has reason to believe that the person liable when the claim arose, as owner or demise charterer, still holds that position at arrest; or that the claim rests on a mortgage, or concerns ownership or possession; or that it is secured by a maritime lien.

What a maritime lien is

A maritime lien is a charge on the ship that arises with the claim, without registration or possession, and follows her into any hands. A statutory right in rem, by contrast, bites only on arrest, and only while the person liable still owns the vessel. The list in section 9 is closed and tracks the International Convention on Maritime Liens and Mortgages, 1993 rather than English law: it adds distinct liens for personal injury and port dues, while master’s disbursements and necessaries of every kind carry no lien. Whether an Indian court will give effect to a lien that exists under foreign law but is absent from section 9, such as a United States necessaries lien, remains undecided.

The closed statutory list points to the lex fori. On that view the claimant ranks only as an ordinary maritime claim under section 4, behind registered mortgages; and because section 5(1) then governs arrest, it loses the right in rem altogether once the vessel changes hands.

The order of payment

Rank	Claim	Source
,	Sheriff’s or Admiralty Marshal’s costs of arrest, custody, preservation and sale	Custodia legis; paid before any claimant
1	Maritime liens, inter se in this order: (a) wages and other sums due to master, officers and crew, including repatriation and social insurance contributions (b) loss of life or personal injury in direct connection with the operation of the vessel (c) salvage reward, including special compensation (d) port, canal, waterway and pilotage dues and other statutory dues (e) tort claims for loss or damage caused by the operation of the vessel, other than to cargo and containers carried	Sections 9(1) and 10(1)(a)
2	Registered mortgages and charges of the same nature	Section 10(1)(b)
3	All other maritime claims: cargo, bunkers and necessaries, repairs, towage, general average, charterparty claims, insurance premia and P&I calls, agency fees	Section 10(1)(c)

Section 10(2) adds two rules: claims within a single category rank equally, and competing salvage claims rank in inverse order of accrual, so the last salvor is paid first. Four consequences follow.

Every maritime lien outranks a registered mortgage, however promptly the mortgagee acts.
A collision or other damage claim carries a lien and outranks the mortgagee; a cargo claim does not.
General average is a maritime claim under section 4(1)(q), not a lien. It ranks behind the mortgagee, not alongside salvage.
Within the residual tier, claims rank pari passu; the first to arrest gains no precedence.

Survival of the lien

A lien survives any change of ownership, registration or flag, but under section 9 it is extinguished after one year unless, before expiry, the vessel is arrested or seized and that arrest leads to a forced sale. For wage claims the period is two years from the date the sum falls due; for other liens time runs from when the claim arises. Any period under arrest is excluded. A lien-holder who delays forfeits priority and, if the vessel has changed hands, may lose the claim in rem altogether. A registered mortgage suffers no comparable erosion.

Subrogated claims

A subrogated claim takes the rank of the claim it displaces: an insurer recovering a collision loss from the colliding vessel stands in its assured’s tort lien and ranks ahead of that vessel’s mortgagee. The Act is silent on those who pay the crew. On established admiralty principle, a third party who pays wages with the court’s leave may stand in the crew’s priority; a voluntary payment made without leave carries no lien. Where the court directs that sums advanced during arrest for wages, maintenance or repatriation be treated as the Sheriff’s or Admiralty Marshal’s expenses, they are paid ahead of every claimant, outside section 10 altogether.

A P&I club’s claim for unpaid calls is a residual-tier maritime claim under section 4(1)(s).

Unsettled questions

Eight years on, two points remain open.

Competing mortgages. Under the Merchant Shipping Act, 2025, mortgages over an Indian-registered vessel rank by the date and time of their recording, notwithstanding notice. Read literally, section 10(2)(a) would rank them equally. The better view is that it yields to the specific provision: the Admiralty Act contains no general overriding clause, and where Parliament meant to displace merchant shipping legislation it said so expressly, as section 4(1)(o) does for crew wage claims. The 2025 Act also confines competing mortgagees to recovery in the High Court (section 27(2)); a priority rule that dissolved in the one forum the Act permits them would be pointless. The point is untested.
Possessory liens. The Act is silent on a repairer’s possessory lien. At common law it ranks behind maritime liens attaching before it arose but ahead of mortgages; whether that survives the codification is untested.

Insolvency of the owner

Where the owner is an Indian company in the corporate insolvency resolution process, the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 does not bar an action in rem. The Bombay High Court has held that such an action lies against the vessel, not the corporate debtor, so the vessel may be arrested before or during the moratorium, and even in liquidation. The suit proceeds no further than arrest while the insolvency process runs, although the court may sell a vessel that is inadequately manned or maintained, is accruing unpaid port charges or poses a navigational hazard, and hold the proceeds. The arresting claimant is treated as a secured creditor.

Its claim is dealt with under any resolution plan; if the process ends in liquidation, it may realise its security under section 52, and the proceeds are distributed under the Admiralty Act rather than the section 53 waterfall. The ruling is under appeal to the Supreme Court.

Security and sale

Security furnished to release the vessel answers the particular claim alone, so a claimant who obtains it steps out of the queue for the sale proceeds entirely.

Absent security, the vessel is appraised and sold. A judicial sale passes title free of all liens and encumbrances, which attach instead to the proceeds. The court then invites claims against the fund; a claimant who fails to lodge within the time fixed risks exclusion, whatever its rank.

Conclusion

The fund therefore pays, in order, the costs of producing it; crew; personal injury claimants; salvors, latest first; port and pilotage dues; damage claimants; registered mortgagees; and then all other claimants rateably. What a claimant controls is preservation: arresting within the lien period, obtaining security for its own claim, lodging against the fund in time, and watching for the owner’s insolvency.