In a joint statement after their wide-ranging talks, the two leaders reiterated their commitment to the freedom of navigation and overflight and unimpeded commerce based on the principles of international law, as reflected in the United Nations Convention on the Law of the Sea (UNCLOS).
They urged all parties to resolve disputes "through peaceful means without resorting to threat or use of force, exercise self-restraint in the conduct of activities, and avoid unilateral actions that raise tensions."
While in Germany, Modi and Chancellor Angela Merkel had also touched upon the issue of freedom of navigation in international waters. However, the two leaders had not specifically mentioned the South China Sea issue.
"Both sides underlined the importance of freedom of navigation in international waters, the right of passage and other maritime rights and obligations in accordance with the UN Convention on the Law of the Sea and other principles of international law. Both Leaders attached particular importance to security, stability, connectivity and sustainable development of the blue economy in the Indian Ocean Region," a joint statement issued by India and Germany had said in Berlin.
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Vietnam, Malaysia, the Philippines, Brunei and Taiwan have counter claims.
China is engaged in hotly contested territorial disputes in both the South China Sea and the East China Sea. Beijing has built up and militarised many of the islands and reefs it controls in the region.
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Meanwhile, the two leaders expressed grave concern on North Korea's continued development of its nuclear weapons and ballistic missile programmes, including uranium enrichment activities, and strongly urged North Korea to refrain from such actions which adversely impact peace and stability in the Korean Peninsula, and to fully comply with its international obligations and commitments.
The two Prime Ministers reaffirmed their determination to cooperate in the relevant fora against proliferation activities posing a regional and global threat.
Modi and Rajoy also expressed their support for peace, stability, prosperity, security and integrity of Afghanistan. They called for early peace and reconciliation in Afghanistan through an Afghan-owned and Afghan-led process in keeping with internationally accepted redlines.
Spain and India also stressed on climate action with the two leaders reiterating their commitment to implementation of the United Nations Framework Convention on Climate Change, its Kyoto Protocol and the Paris Agreement.
Modi and Rajoy also stressed the urgency to implement a sustainable water management.
They agreed to foster the development of infrastructures and water services with the help of public-private partnerships, as well as to encourage the efficient use of water throughout the urban, rural and industrial sector and to promote waste water treatment to guarantee one basic human right, which is the access to drinking water and sanitation.