Q. I work for a financial institution’s branch office in Bangladesh. I have recently joined this company and am a little nervous about my work responsibilities. Our head office will be sending two representatives next week and my supervising officer has asked me to prepare a presentation on the following issue: shipping mortgage security. Our head office is proposing to provide a credit facility to a company incorporated in India. The Indian company is the owner of a shipping vessel registered in Bangladesh, which it intends to place as security for the credit facility by way of a ship mortgage in Bangladesh. What is required in order to grant a mortgage over a Bangladeshi flagged vessel? Is there a standard Bangladeshi form of ship mortgage, or is the form of mortgage typically used in the international ship market sufficient? Also, what are the registration requirements?
Thank you for writing in to us. We will endeavour to answer your queries and hope that they provide you with some insight and assistance for the purposes of your presentation.
In order to perfect a mortgage over a Bangladeshi flagged vessel, the mortgagee is required to execute a standard form and produce the same before the registrar of the ship's port of registry for registration of the mortgage. Every mortgage so registered is referred to as a registered mortgage.
The owner of a vessel registered in Bangladesh may create a charge over the vessel by way of a mortgage under Section 40 of the Bangladesh Merchant Shipping Ordinance, 1983. A registered ship or a share therein may be made a security for a loan or other valuable consideration, and the instrument creating the security in the form of a mortgage is required to be registered with the registrar of the ship's port of registry.
There are standard Bangladeshi forms namely form 9A, 9B, etc used for creation of mortgage. The Mercantile Marine Department (the MMD), a subordinate office under the Department of Shipping based in Chittagong is responsible to maintain the register. An authorised person from the mortgagee (Bank) and a person not below the rank of Managing Director of the Company on behalf of the Shipping Company should be present at the time of mortgage registration at MMD. A Power of Attorney should also be executed in favour of the mortgagee (Bank) by the Owner of the ship. A Government fee of Tk6000 (+/-) will be charged as registration fee.
The Registrar shall record the mortgage in order of the time in which it was produced before him and not the time when the mortgage was created. However, it must be noted that the creation of a ship mortgage and the registration thereof does not create any ownership or possessory rights of the mortgagee over the vessel. Therefore, unless the collateral deed gives the mortgagee specific rights to interfere in the operation or management of the ship, the mortgagee has no inherent right to interfere unless his security is being impaired.
The required documents for registration of mortgages are executed appropriate Forms affixing common seal, supporting Board Resolution, letter from Mortgagee Bank, No Objection Certificates from Mortgagee Bank (in case if there is a pre-existing mortgage) and appropriate government fees, etc, are required to be submitted to the MMD for registration. The discharge of a mortgage registered as described above shall be discharged only upon the production of the mortgagee deed with a receipt for the mortgage money endorsed thereon, duly signed and attested, to the Registrar at which point of time, the Registrar will make the appropriate entry in the register to that effect.
The availability of these remedies to the mortgagee does not extinguish the rights of the mortgagee against the mortgagor in a civil suit for the recovery of the mortgage debt. The mortgagee may also seek an application for the arrest of the mortgaged vessel if the vessel is within Bangladeshi territorial waters. It must be noted that the application for the arrest of a vessel within Bangladeshi territorial waters may be made even if the mortgage is not registered in Bangladesh.
Accordingly, a foreign ship falls within the jurisdiction of the High Court where the vessel happens to be at the relevant time ie, at the time when the jurisdiction of the High Court is invoked, or, where the cause of action wholly or in part arises. The detention of a foreign ship is authorised in terms of Sections 360 and 491 of the Bangladesh Merchant Shipping Ordinance, 1983. Under Section 360, where any ship other than a Bangladesh Ship is detained where any proceedings are taken under this Part against the master or owner of any such ship, notice shall forthwith be served on the Consular Officer for the country to which the ship belongs at or nearest to the port where the ship is for the time being, and such notice shall specify the grounds on which the ship has been detained or the proceedings have been taken.
I hope the above is helpful for the purposes of your presentation. Please do not hesitate to get in touch if you require further clarification or assistance. Best of luck!