Delhi High Court halts London arbitration in UN military cargo dispute

The Delhi High Court has issued an injunction restraining arbitration proceedings in London in connection with a dispute over the transportation of military cargo for the United Nations Peacekeeping Force (UNPKF) to Sudan [SARR freights Vs Agro Coal]

A Division Bench of Justices Vivek Chaudhary and Renu Bhatnagar found that the final transportation contract between SARR Freights and Argo Coral Maritime did not contain an arbitration clause.

The Court said that an arbitration clause appearing in earlier negotiations could not be read into an agreement signed later, especially when it expressly superseded previous arrangements.

"An anti-arbitration injunction is accordingly granted restraining the defendant/respondent, Argo Coral Maritime Ltd., from continuing, pursuing or taking any steps in the LMAA arbitration titled 'Argo Coral Maritime Ltd. v. SARR Freights Ltd/SARR Freights Corporation'," the Court directed.

The Court passed the order on an appeal by logistics and supply chain company SARR Freights Corporation and SARR Freights Ltd which had challenged a single-judge's order refusing to grant an interim anti-arbitration injunction against Netherlands-based Argo Coral Maritime Ltd.

The dispute arose from a contract to move military cargo from New Delhi to Sudan. The cargo was to be transported through Navaho Sheva Port in Mumbai before being shipped to Port Sudan.

A fixture recap (a summary document for the transportation) exchanged between the parties' agents provided for "English law and London arbitration". However, the booking note subsequently signed by the parties stated that only clauses 20 to 41 would apply.

The arbitration provision appeared only in clause 43, which referred to BIMCO dispute resolution, English law and LMAA terms and procedures.

The deal faced an abrupt end when the United Nations issued an advisory declaring cargo movement through Sudanese ports unsafe. Consequently, SARR cancelled the booking note by invoking force majeure.

This prompted Argo to initiate arbitration in London. A majority of the arbitral tribunal held that the reference to clauses 20-41 was a typographical error and should be read as clauses 20-43. It concluded that the parties had agreed to London arbitration.

The single bench agreed that a valid arbitration agreement could be inferred from the earlier fixture recap and rejected SARR's plea for an injunction.

The division bench, however, found that the booking note was the final agreement and had consciously altered several terms contained in the earlier fixture recap.

It further noted that the booking note expressly stated that its terms would "prevail over any previous arrangements".

The Court held that once parties reduce their agreement to a clear, written and signed contract, prior negotiations and correspondence cannot be relied upon to contradict, vary, add to or subtract from its terms.

"The parties specifically chose to incorporate only Clauses 20 to 41 and thus only the same shall apply," it ruled.

The Bench also observed that Indian law differs materially from English common law, under which prior negotiations may in some circumstances be examined to rectify a written instrument.

Finding no ambiguity in the booking note, the Court held that the arbitration clause could not be imported from the fixture recap and restrained Argo from pursuing the London arbitration.

Senior Advocate Dayan Krishnan appeared for SARR Freights along with Advocates Saurabh Seth, Shantanu Aggarwal, Sukrit Seth, Sumer Dev Seth, Neelampreet Kaur, Abhiroop Rathore, Kabir Dev and Sukhbir Singh.

Senior Advocate Sandeep Sethi appeared for Argo Coral Maritime along with Advocates Arvind K Gupta, Tripti Sharma, Krishna Gambhir, Shreya Sethi, Abhiesumat Gupta and Ashish Singh.

[Read Judgment]