It is not an unearth fact that most of the dispute resolution with regards to international contracts do not take place in India. Parties usually prefer the London, Hong Kong and Singapore seats of arbitration with regards to ad-hoc proceedings of arbitration. The major reason as to why India is not preferred as lex loci arbitri is because of its shortcomings. It is a well-established fact that the Indian contract statues and laws are Victorian in nature and were constituted way back in 1860’s without much amendments.
The current analysis of the landmark Indian judgment of ‘Chikkam Amiraju v. Chikkam Seshamma’ which deals with free will, coercion and undue influence shows a perfect example as to how our Indian Contract Act, 1860 is backward in its understanding of third-party duress.
The case was decided way back in 1917 by the Hon’ble Madras High Court by 4-judge bench, of which 3 were British judges. Sec. 14 of Indian Contract Act, 1860 provides for free consent of the parties when it is not caused by:
- Undue influence,
The basic fundamental rule in contract law is that will or consent obtained from the parties must be free in nature and should not be coercive in nature. Sec. 15 of Indian Contract Act, 1860 coercion (or duress) as:
“committing, or threatening to commit, any act forbidden by the Indian Penal Code, 1860, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.”
Brief facts of the case
A land dispute with regards to revisionary rights occurred between the younger brothers of respondent’s husband and the wife. The husband threatened to commit suicide if the release deed (the contract) is not released in his brother’s favor. However, the important thing to note is that the contract was signed between husband’s mother and the younger brothers of the husband. The husband was excluded to be a party to the contract and therefore the important question of law that arose was that whether a ‘threat to commit suicide’ can amount to coercion under Sec. 14 of the Indian Contract Act, 1860.
Analysing the loophole
In this case, the Court refrained (if not failed) from answering the most significant question upon the major issue of the case was relied upon i.e. whether influence on part of the husband (third-party herein, as he is not a party to the contract) can amount to duress and undue influence. The Court extensively relied on cases and authorities like Askari Mirza v. Jai Kishori (1992) 16 I.C. 344, and well known books of Shephard and Pollock but could not delve into the aspect of third-party influence which has started to become a central ground of debate in international contracts.
Although the Court ably reasoned its holding by drawing analogies and drawing distinction between ‘punishment’ and ‘forbearance’ but only except Just. Moore could assert that the husband was in a position to dominate and influence the wife’s will. The Court reasoned that as the husband was not a party to contract there can be no question of undue influence and duress. However, if we look at two landmark judgments from abroad we can get to know about the shortcoming that prevails with the Indian contract laws.
The decision by House of Lords in Barclays Bank v O Brien  1 AC 180 is an excellent example of constituting the current case within the aspect of third-party undue influence. Also the American case of Gascho v. Scheurer Hospital, 2010, deals with third-party duress where the husband was in total control of influencing the wife’s (Gascho) will. Moreover, the contract was signed between the Hospital and Gascho and the dissenting opinion of one of the judges dealt with this scenario.
Author’s comment: It is high time that we now realize that the Indian contract law does not deal with such interesting and intriguing situation of law and as a law student, it is really necessary to understand the nitty-gritty of contracts with regards to international laws and international contracts.
The post has been contributed by Urmil Shah, BA-LLB (1st yr), Auro University, Surat.
Image from here.