The Delhi High Court has restrained a London arbitration arising from a dispute over the transportation of military cargo for the United Nations Peacekeeping Force in Sudan, holding that an arbitration clause contained in an earlier negotiation could not be inserted into the parties’ final contract.
A Division Bench comprising Justices Vivek Chaudhary and Renu Bhatnagar found that the final booking note executed between SARR Freights Corporation/SARR Freights Ltd and Argo Coral Maritime Ltd did not incorporate an arbitration agreement.
The dispute concerned an arrangement for transporting military cargo from New Delhi to Sudan, with the shipment scheduled to pass through Nhava Sheva Port in Mumbai before reaching Port Sudan.
During the negotiations, the parties’ agents exchanged a fixture recap containing a provision for English law and arbitration in London. The subsequently executed booking note, however, specified that only Clauses 20 to 41 would form part of the agreement.
The arbitration provision was contained in Clause 43, which referred to BIMCO dispute-resolution provisions, English law and the London Maritime Arbitrators Association (LMAA) terms.
The transportation arrangement later fell apart after the United Nations issued an advisory warning that movement of cargo through Sudanese ports was unsafe. SARR invoked force majeure and cancelled the booking.
Argo Coral thereafter commenced arbitration proceedings in London.
A majority of the arbitral tribunal took the view that the reference to Clauses 20 to 41 in the booking note was a typographical mistake and should instead have referred to Clauses 20 to 43. On that basis, it concluded that the parties had agreed to arbitration in London.
SARR approached the Delhi High Court seeking to stop the arbitration. A single judge had earlier declined to grant an anti-arbitration injunction, relying in part on the arbitration understanding reflected in the earlier fixture recap.
The Division Bench took a different view after examining the final booking note.
The Court noted that the booking note was the document ultimately signed by the parties and that it expressly provided that its terms would prevail over earlier arrangements.
Against that backdrop, the Bench held that the arbitration clause in the earlier fixture recap could not simply be carried forward into the final agreement when the signed document specifically incorporated only Clauses 20 to 41.
“The parties specifically chose to incorporate only Clauses 20 to 41 and thus only the same shall apply,” the Court held.
The Bench also stressed the significance of the written contract finally executed between the parties. Once parties have reduced their agreement into a clear and signed document, earlier negotiations and correspondence cannot ordinarily be used to contradict, modify, add to or remove terms from that final agreement.
The Court further pointed out that the position under Indian law is materially different from the approach under English common law, where earlier negotiations may, in certain circumstances, be considered for rectification of a written instrument.
Finding no ambiguity in the booking note, the Bench concluded that there was no basis to import the arbitration provision from the earlier fixture recap.
It consequently granted an anti-arbitration injunction and restrained Argo Coral Maritime from continuing or taking further steps in the LMAA arbitration titled Argo Coral Maritime Ltd. v. SARR Freights Ltd/SARR Freights Corporation.
The ruling effectively turned on the distinction between what the parties discussed during negotiations and what they ultimately chose to put into their signed contract.