Contracts Contrary to Public Policy in Indian Contract Law

The rules governing public policy in Indian contract law have seen a considerable level of indigenization over the period that the Indian Contract Act 1872 (ICA) has been in force. Much of this indigenization has happened beneath the surface. At the level of principle, cases and commentaries on public policy in Indian contract law continue to draw on precedents and principles derived from English law. Nevertheless, this chapter argues that Indian contract law has come to differ materially from English law in three ways, which taken together reflect a distinctively Indian approach to balancing freedom of contract with public policy. The first of these is that in applying public policy, courts are guided by policies embedded in statutes rather than by their own sense of the situation or by uncodified common law principles. Public policy is, in essence, treated as a gap-filling tool which supplements the statutory framework. Secondly, the range of legal sources that inform public policy include the Indian constitution and, in particular, its social and legal values. Indian courts have used, and continue to use, public policy as a framework to incorporate these values into the governance of interpersonal relationships between private persons (and not just between the state and private persons). The third is that Indian courts are sensitive to the reality of social relations in India and in particular to the impact of asymmetric social relations on contracts. They treat the doctrine of public policy in contract law as part of a set of tools against the abuse of social power. This approach differs significantly from English law, but its roots lie in the legislative history of the ICA itself. Recognizing its distinctiveness is important, because it highlights the limitations of an excessive reliance on English legal principles in producing doctrinal accounts of Indian law and provides the basis for a clearer and more helpful restatement of the rules on public policy in Indian contract law.