No Arbitration Beyond the Final Agreement: Delhi HC Draws the Line Between Indian and English Law

The relevance of prior communications changes once parties execute a final written agreement. While English law may permit courts to examine such communications and rectify the agreement, Indian law adopts a stricter approach where the final contract is unambiguous, particularly where an arbitration clause appears in prior communications but is absent from the final agreement. The Delhi High Court’s decision in SARR Freights Corporation v. Argo Coral Maritime Ltd.¹ brings this distinction into sharp focus. The Division Bench clarified that, unlike the English approach, once the terms of an agreement have been reduced to a signed document and are unambiguous, evidence of prior communications cannot be relied upon to establish that the document was not intended to apply to the agreement. Applying this distinction between the two legal approaches, the Division Bench allowed the appeal and granted an anti-arbitration injunction restraining Argo Coral Maritime Ltd. from continuing, pursuing, or taking any further steps in the LMAA (London Maritime Arbitrators Association) arbitration

SARR Freights Corporation was engaged to transport military cargo for the United Nations Peacekeeping Force from New Delhi to Sudan, via Nhava Sheva Port, Mumbai, to Port Sudan. SARR and Argo’s prior communications provided for English law and London arbitration under clause 23 of the Fixture Recap. However, the Booking Note, signed on 05.04.2023, contained 43 clauses, with the arbitration provision in Clause 43, while a rider clause limited the applicable terms to Clauses 20 to 41.  On 18.04.2023, a UN advisory declared cargo movements through Sudanese ports unsafe. Following the advisory, Argo invoked Clause 43 and issued a notice of arbitration to which SARR agreed, subject to its right to challenge the tribunal’s jurisdiction. The LMAA tribunal applied the English Common Law and held that the reference to “41” was a typographical error and ought to be read as “43”, consistent with the parties’ intention reflected in the Fixture Recap. SARR subsequently approached the Delhi High Court seeking an anti-arbitration injunction. The Single Judge held that a valid arbitration agreement could be established from Clause 43 based on the parties’ prior communications and the Fixture Recap, relying on Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited.² SARR thereafter appealed to the Division Bench.

The appellants contended that section 91³ and 92⁴ of the Indian Evidence Act, 1872 (Section 94 and 95 of the Bharatiya Sakshya Adhiniyam, 2023) cover the present dispute and there is no scope for the applicability of English Law. It was further contended that the Special Terms Box of the Booking Note records that additional rider clauses 20-41 will apply and deliberately leaves out Clauses 42 and 43, which contained the arbitration clause. The Respondents argued that the Fixture Recap and Booking Note cannot be read in isolation and have to be read in continuation. Thus, the recording of Clause “20-41” is a typographical error, and Clause 43 containing the arbitration clause is intended to be part of the contractual agreement.

English Common Law vs. Indian Codified Law 

The Division Bench of the Court agreed with the appellants and observed that English law permits courts, in appropriate circumstances, to examine prior negotiation communications to determine whether the instrument correctly records the parties’ prior agreement and grant rectification where necessary. The Court observed that this position is materially different under Indian codified law. Examining Sections 91, 92, and 94⁵ of the Indian Evidence Act, the Court held that where a document is clear and unambiguous, the Court must give effect to the plain meaning of the terms agreed between the parties. In this regard, the Court relied on the Anglo American Metallurgical Coal Pty. Ltd. v. MMTC Ltd.⁶ case, wherein the Supreme Court, while examining the relevant provisions of the Indian Evidence Act, affirmed the longstanding position of Indian courts that where the language of a contract is clear and unambiguous, it must be given effect to. Since Indian law is well settled on the issue but materially different from the applicable foreign legal framework, the Division Bench, relying on the Supreme Court’s judgment in BSES Ltd. v. Fenner India,⁷ held that it could not decide the matter based on a judgment applying a foreign legal framework.

The Division Bench also rejected the position adopted by the Single Judge based on the Govind Rubber case. In Govind Rubber, there was no signed written agreement between the parties; therefore, the correspondence exchanged between them was examined to ascertain whether they had reached a consensus and intended to be bound by the terms therein. In the present case, however, the parties had executed a duly signed written agreement that categorically provided that it would prevail over any previous arrangement. Accordingly, the Division Bench held that Govind Rubber was inapplicable as its facts and circumstances were materially different from those of the present case and rejected the position adopted by the Single Judge.

No Arbitration Beyond the Agreed Terms 

Analyzing the Booking Note in light of the above settled position, the Court held that, in addition to the standard terms, the parties had agreed to the Special Terms Box, which was specifically filled in by the parties. The Special Terms Box contained four additional terms, one of which was the rider clause. This demonstrated that the parties had consciously recorded all the special terms agreed upon at the relevant time, and that the arbitration clause was not among them. Accordingly, there was no ambiguity regarding the parties’ intention as reflected in the Booking Note. The Division Bench further observed that Clause 23 of the Fixture Recap provided only for English law and London arbitration, whereas Clause 43 of the Booking Note contained a detailed set of rules and procedures that had never been agreed upon by the parties. Finally, the Court held that the argument that the terms agreed through exchanged emails or the Fixture Recap were not reflected in the Booking Note, and that this constituted a mistake in recording the parties’ earlier intention, may be a sound argument under English common law but could not be sustained under Indian codified law.

Drawing the Line

The Judgement draws an important distinction between the approach under English law and Indian codified Law, reaffirming the primacy of a clear and unambiguous written agreement under Indian law and limiting the circumstances in which prior communications may be relied upon to supplement or alter the terms of a concluded agreement. The judgment does not establish that prior communications are irrelevant in every contractual dispute. Rather, it states that its significance lies in the distinction between a situation where the final agreement is incomplete or ambiguous and one where the parties have reduced their agreement into a signed, clear and unambiguous document.

Citations

1. SARR Freights Corporation v. Argo Coral Maritime Ltd., 2026 SCC OnLine Del 7230. ↩︎
2. Govind Rubber Limited v. Louis Dreyfus Commodities Asia Private Limited, (2015) 13 SCC 477. ↩︎
3. The Indian Evidence Act, 1872, s. 91. ↩︎
4. The Indian Evidence Act, 1872, s. 92. ↩︎
5. The Indian Evidence Act, 1872, s. 94. ↩︎
6. Anglo American Metallurgical Coal Pty. Ltd. v. MMTC Ltd., (2021) 3 SCC 308. ↩︎
7. BSES Ltd. v. Fenner India Ltd., (2006) 2 SCC 728. ↩︎

Expositor(s): Adv. Siddharath Shrivastava