Supreme Court Establishes Principles for Contract Interpretation in Landmark Decision
By Abhishek Jat, Advocate In a significant ruling that clarifies the principles of contract interpretation, the Supreme Court of India has delivered a comprehensive judgment in Annaya Kocha Shetty (Dead) Through LRs v. Laxmibai Narayan Satose Since Deceased Through LRs & Others (Civil Appeal No. 84 of 2019). The judgment, authored by Justice S.V.N. Bhatti, establishes a hierarchical framework for interpreting contractual agreements and elucidates the application of Sections 91 and 92 of the Indian Evidence Act, 1872. The Supreme Court has articulated a three-tiered approach to contractual interpretation. The primary approach involves interpreting contracts in their "plain, ordinary and literal meaning," serving as the foundational principle for judicial interpretation of contractual terms. When literal interpretation creates absurdity, courts may deviate from strict literal meanings under the "golden rule of construction," which permits reasonable modificat...