Does Non-Stamping of a Contract Render an Arbitration Clause Contained in it Unenforceable? The Supreme Court Says Yes
India Corporate Law » Contract Law
by Raunak Dhillon and Ananya Choudhury
1y ago
SC says unstamped contracts make underlying arbitration clause unenforceable Does the arbitration clause in a commercial contract becomes unenforceable due to non-payment of stamp duty, or it is preserved by the separability doctrine? This question has riddled the Supreme Court of India (“SC”) repeatedly and has resulted in contrary views being adopted by various three-judge benches. The issue has been finally laid to rest by a constitution bench of the SC through its judgment dated April 25, 2023 in M/s N. N. Global Mercantile Private Limited v. M/s. Indo Unique Flame Ltd. & Ors.[i] , whe ..read more
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Enforceability of Put Options under SCRA – Bombay HC’s latest judgment finally clears the air!  
India Corporate Law » Contract Law
by Bharat Vasani and Varun Kannan
1y ago
Historical Background The legal position with respect to enforceability of put option clauses has not been a glorious chapter in the history of India’s securities law. The genesis of this vexed issue lies in – (i) the erstwhile Section 20 of the Securities Contracts (Regulation) Act, 1956 (“SCRA”) which had provided that all options in securities shall be illegal[1]; and (ii) a notification issued by the Ministry of Finance in 1969, which inter alia provided that any contract for sale or purchase of securities, other than such spot delivery contract or contract for cash or hand delivery or spe ..read more
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Restitution Under the Contracts Act: The In Pari Delicto Exception
India Corporate Law » Contract Law
by Aditya Mehta, Pritvish Shetty and Shreya Bansal
2y ago
Introduction In its recent judgement of Loop Telecom and Trading Limited v Union of India and Another[1], the Supreme Court denied the Appellant restitution of certain sums paid by it under a void agreement. The Court, while rejecting the claim for restitution u/s 65[2] of the Indian Contract Act, 1872 (“Act”), placed reliance on the doctrine of ‘in pari delicto’, and reiterated that courts shall not assist a party who has paid the money or handed over the property in pursuance of an illegal or immoral contract[3]. Factual Background The Appellant was awarded Unified Access Services Licenses ..read more
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Vitiating Elements of Free Consent: A ‘How to Plead Guide’
India Corporate Law » Contract Law
by Aditya Mehta, Pritvish Shetty and Saloni Jain
2y ago
The concept of freedom of contract has two meanings; first is the freedom of a party to enter into a contract on whatever terms it may consider advantageous to its interests, or to choose not to, and second, that there should be no liability without consent being embodied in a valid contract.[1] Under the Indian Contract Act, 1872 (the Act), a contract entered into between the parties is required to be consensual for it to be valid. The Act further contemplates that even if both parties have consented to the contract, consent of one of them may not be said to be free/ or can be said to be tai ..read more
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Relational Contracts and Implied Term of Good Faith
India Corporate Law » Contract Law
by Anuradha Mukherjee, Jyoti Dastidar and Shuchita Choudhry
3y ago
While there is sparse literature and judicial references to the concept of Relational Contracts in jurisdictions today, the concept of Relational Contracts has been well recognised in a few decisions by the courts in England. The concept of Relational Contracts is an emerging one, which will fundamentally alter the underpinnings of parties’ obligations to one another, in order to give business efficacy to their arrangement, even in a commercial context, while also incorporating an implied duty to act with honesty and good faith in all respects. Relational Contracts are long term contracts, ex ..read more
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Rapid Metro Judgment: Reinforcing the Sanctity of Contracts and Public Good
India Corporate Law » Contract Law
by Subhojit Sadhu and Aayushi Bindal
3y ago
The premise of project financing lies in financing of infrastructure projects undertaken by a special purpose vehicle (“Borrower”), the repayment of which is broadly dependent on the cash flows generated by the projects itself rather than the balance sheet of the Borrower or its promoter/sponsor. The onset of public private partnership (“PPP”) regime in the project financing space in India has been instrumental in implementation of multiple commercially viable projects. The PPP projects are projects based on a contract or concession agreement, between Government or statutory entity on one sid ..read more
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Supreme Court Clarifies that Acceptance of a Conditional Offer with a Further Condition does not Result in a Concluded Contract
India Corporate Law » Contract Law
by Aditya Mehta and Ria Lulla
3y ago
Introduction In M/s. Padia Timber Company (P) Ltd. v. The Board of Trustees of Vishakhapatnam Port Trust[1], the Supreme Court has reiterated that the acceptance of a conditional offer with a further condition does not result in a concluded contract. The Court has observed that when the acceptor attaches a new condition while accepting the contract already signed by the proposer, the contract is not complete until the proposer accepts the new condition.  Factual Matrix   On or about July 17, 1990, the Vishakhapatnam Port Trust (“the Respondent”) floated a tender for supply of wooden ..read more
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Competition or unlawful contractual interference: The line continues to remain blurred
India Corporate Law » Contract Law
by Aditya Mehta, Arjun Sreenivas and Swagata Ghosh
3y ago
  In a recent decision, the Delhi High Court dealt with the tort of unlawful interference in contractual relationships and inter alia held that the said tort has no place in India in view of Section 27 of the Indian Contract Act, 1872 (“Contract Act”).[1] Background The developer of a certain property at Amritsar agreed to lease the said property to the Plaintiff for fifteen years, by way of a term sheet. The Plaintiff paid a security deposit to the developer as per the term sheet and proceeded to draw up the main transaction document. Upon learning that the Defendant (a competitor of th ..read more
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Do parties have an unfettered right to exclude or limit their liability for breach of contract? – Part II
India Corporate Law » Contract Law
by Aditya Mehta, Arjun Sreenivas and Tanya Singh
3y ago
  In Part I of this post, we had discussed the concept of exclusion or limitation of liability clauses and the position in India. In this part, we will examine the position of such clauses in England and provide our views on such clauses.  Position in England  The application of clauses excluding or limiting liability in England is more consistent. When faced with standard form contracts or contracts where there is inequality of bargaining power, English courts apply the test of fairness or reasonableness of clauses in such contracts and refuse to enforce provisions of contract ..read more
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Do parties have an unfettered right to exclude or limit their liability for breach of contract? – Part I
India Corporate Law » Contract Law
by Aditya Mehta, Arjun Sreenivas and Tanya Singh
3y ago
Introduction The law of damages in India is codified in Sections 73 and 74 of the Indian Contract Act, 1872 (“Contract Act”). Section 73 of the Contract Act provides that a party that suffers breach of contract is entitled to receive from the party that has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract, to be likely to result from a breach. Section 73 of the Contract Act bars the grant of compensation for remote and indirect loss or dama ..read more
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