High Court Cases

The substantive provisions of Contract Law give immense freedom to parties to decide on the terms of any agreement they might reach. There are a few provisions which are inflexible –- for example, an agreement to do something illegal is not, under any circumstances, a legally enforceable contract.

That being said, as long as parties do not go against the tenets of contract law, they have immense freedom to choose such things as the time of performance, the place of performance, the manner of performance, how disputes are to be settled etc.

One of the areas which parties can choose what works best for them is that which deals with the law that governs the contract. Indian courts, however, appear to have blown hot and cold on the issue, in a way. In most cases where contracts governed by a non-Indian law have come up before it, the courts have said that although they do have jurisdiction to try the case, they will not do so.

In the case of Messrs. Lakhinarayan Ramniwas v. Lloyd Triestino Societa Per Azinni (AIR 1960 Cal 155), the contract involved stated that if a dispute arose, the suit would be filed in Italy and tried according to Italian Law. The Calcutta High Court held that such a clause cannot oust the jurisdiction of the Indian courts to try the suit although considering the circumstances of the case, it stayed the suit instituted in India.

The Calcutta High Court reiterated this principle in the case of Swedish East Asia Co. Ltd. v. B P Herman and Mohatta (AIR 1962 Cal 601) in which a contract which chose Swedish law and courts was involved.

In Lakshminarayan Ramniwas v. Compagnia Genovese D’Esportazione (AIR 1960 Cal 545), a suit was brought in India regarding a Bill of Lading which limited jurisdiction to Italy. The suit was stayed but the Court said ‘if no proceedings are taken in Italy, the defendants will be at liberty to mention the matter for that purpose’. Quoting Dicey quoting The Fermarh (1957) 1 WLR 815, the judgment said:

“It is well established that where there is a provision in a contract providing that disputes are to be referred to a foreign tribunal, then prima facie, this court will stay proceedings instituted in this country in breach of such agreement, and will only allow them to proceed when satisfied that it is just and proper to do so.”

The clause of the contract involved in the case of Union of India v. Navigation Maritime Bulgare (AIR 1973 Cal 526) said, “Any dispute arising under this Bill of Lading to be decided in Bulgaria according to Bulgarian Law.” This forum selection clause was not interpreted to mean that the jurisdiction of the Courts of India was ousted. However, considering the balance of convenience and the law applicable, the court concluded that the dispute should be decided in a Bulgarian Court.

And in the case of Black Sea Steamship U L Lastochkina Odessa, USSR v. Union of India (AIR 1976 AP 103), a dispute arose in the course of the operation of an international trade contract which stated that disputes would be adjudicated in the USSR. Considering the small size of the claim and the availability of the defendant, the Vishakapatnam court decided that the balance of convenience and interest of justice were in favour of its deciding the suit. The jurisdiction clause in the contract involved in this case did not appear to choose any law though. It merely said, “All claims and disputes arising under and in connection with this bill of lading shall be judged in the USSR.”

Regarding the choice of law in a contract, as the Andhra Pradesh High Court pointed out, ‘the firm conclusion is that it is perfectly open to the court to consider the balance of convenience, and interests of justice and like circumstances when it decides the question of jurisdiction of a court in the light of a clause in the agreement between parties choosing one of several courts or forums which were available to them’.