SOCIOLOGY

EMERGENCE OF SOCIOLOGY & THE

CONTRIBUTION OF THE FOUNDING
FATHERS

Submitted To: Submitted By:

Prof. (Dr.) HONEY MALIK Neelesh Chandra

Roll no. 18212

1st semester 2018-2019

Group no- 4
INDEX

Acknowledgement

1. Introduction

2. Indian Contracts Act

3. Constraint Of Legal proceedings

4. The Unrest Legal Position

5. Courts Views

6. Conclusion
ACKNOWLEDGEMENT

I would like express my special thanks of gratitude to all those who helped and supported me
during writing of this project.
I am deeply indebted to my teacher Prof. (Dr.) Sangeeta Taak who has been my guide in making
of this project right from the very beginning.

I would like to thank all my batchmates and seniors with whom I had productive discussion on
this topic.

I would also like to thank my Institution and the faculty members without whom this project
would have been a distant reality. I also express a heartfelt thanks to my family members.

Neelesh Chandra

1st semester

2018-19
INTRODUCTION

Section 28 declares the following two kinds of agreements void:

1. An agreement by which a party is restricted absolutely from taking usual legal

proceedings, in respect of any rights arising from a contract.

2. An agreement which limits the time within which one may enforce his contract rights,
without regard to the time allowed by the Limitation Act.

Restriction on Legal Proceedings :

As stated above Section 28 renders every agreement in restraint of legal proceedings void.
This is in furtherance of what we studied under the definition of a 'contract', namely,
agreement plus enforceability at law is a contract. Thus if an agreement inter-alia provides
that no party shall go to a court of law, in case of breach, there is no contract and the
agreement is void ab-initio. In this connection, the following points must also be borne in
mind:

(a) The Section applies only to rights arising from a contract. It does not apply to cases of
civil or criminal wrongs or torts.

(b) This Section does not affect the law relating to arbitration e.g., if the parties agree to
refer to arbitration any dispute which may arise between them under the contract, such a
contract is valid (Exceptions 1 and 2, Section 28).

(c) The section does not affect an agreement whereby parties agree 'not to file an appeal'
in a higher court. Thus where it was agreed that neither party shall appeal against the trial
court's decision, the agreement was held valid, for, section 28 applied only to absolute
restriction on taking the legal proceedings, whereas here the restriction is only partial as
the parties can go to court of law alright and the only restriction is that the losing party
cannot file an appeal (Kedar Nath vs. Sita Ram).

(d) Lastly, this Section does not prevent the parties to a contract from selecting one of the
two courts which are equally competent to try the suit. Thus in A. Milton & Co. vs. Ojha
Automobile Engineering Company's Case, there was an agreement which inter-alia
provided - "Any litigation arising out of this agreement shall be settled in the High Court
of Judicature at Calcutta, and in no other court whatsoever," The defendants filed a suit
in Agra whereas the plaintiff brought a suit in Calcutta. It was held that the agreement
was binding between the parties and it was not open to the defendants to proceed with
their suit in Agra.

Such agreements qualify restrictions of two types:

1. Agreements wholly or partially restricting the enforcing of rights in a Court of Law, for example,
where a contract contains a stipulation that no action shall be brought upon it, would be void as
ousting the jurisdiction of the Court.
2. Agreements limiting the time allowed by the law of limitation.

In both cases, an agreement would be void as an agreement in restraint of legal proceedings. This
article applies to agreements which wholly or partially prohibit the parties from having recourse
to a Court of Law.

Every individual has a right to sue in any Court and enforce his rights within the time allowed by
the limitation Act. Any restriction or restraint limiting the time shorter than the period of limitation
prescribed by law is void to that extent. For example, an action on dishonored promissory note
may be brought within 3 years under the limitation Act. If parties agree that action shall be brought
within 2 years such an agreement limiting the time of enforcement of a right shall be void.

An agreement extending the time of limitation for enforcing the rights, though not covered by this
section with, however, be void under section 23 of the Act as intending to defeat the provisions of
he Limitations Act, 1963.
Exceptions:

(1) The section shall not render illegal a contract by which two or more persons agree that my
dispute which may arise between them in respect of any subject or class of subjects shall be
referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable
in respect of the dispute so referred.
(2) This section shall not render illegal any contract in writing by which two or more persons agree
to refer to arbitration by question between them which has already arisen.
(3) An agreement will be valid if it restricts the right of either party to sue in a particular Court or
refer the dispute to arbitration. It should be, however, noted that in Hakam Singh v Gammon
(India) Ltd(AIR-1971-S.C. 740) the Supreme Court observed that it is not open to the parties by
agreement to confer jurisdiction on a Court which it does not possess under the Civil Procedure
Code.

Illustrations:

(a) A, in Bombay, enters into a contract with B in Madras with a condition that all disputes will be
subject to Bombay jurisdiction. This limits the right of B to sue only in Bombay Court in case of
dispute. Such an agreement is valid.
(b) Where two courts have jurisdiction to try a suit and parties agree that the suit shall be filed only
in one of these Courts, such a stipulation is valid.
(c) Agreements which do not limit the time for enforcing any rights, but only provide that failure
to enforce them within the stipulated time shall operate as a release or forfeiture of such rights are
binding between the parties.

According to the Indian Limitation Act, the time limit for bringing an action for breach of contract
is 3 years from the date of breach. A clause restricting this right below the stipulated period is void.
Therefore, if the clause states that no suit to recover under the life insurance policy shall be brought
after one year from the death of the assured, such clause shall be void.
However, if a clause in the policy provides that if s suit is not commenced within one year of the
rejection of claim, all benefits under the policy shall be forfeited, is valid. This is because the effect
of the agreement is not to limit the time but to provide for the surrender of right of no action was
brought within that time. A condition in the contract that the right there under accruing to a party
will be forfeited or released if he does not sue within a time limit will not offend section 28.
Curtailment of the period of limitation is not permissible but extinction of the right itself unless
exercised within specified time is permissible and can be enforced. But an agreement relinquishing
the remedy only by providing that if a suit is to be filed that should be filed within the time limit,
being shorter than the period of limitation provided by Limitation Act, will be hit by section 28.
Similarly in a Government contract where a clause provided that the President of India shall be
discharged from all liability under the contract unless arbitration or a suit is commenced within 6
months from the expiration of the period is valid. Where jurisdiction vests in more than one Court
having jurisdiction, contract to vest jurisdiction in one of them is not against public policy. The
court explained the distinction between extinction of rights and limitations of time in the following
words: the distinction may be fine but it is nevertheless a fundamental distinction. The arrangement
in one case takes it for granted that the right as well as the liability exists but the time for enforcing
it is to be limited. While in the other case the parties agree that the right as well as liability shall
stand extinguished if a particular event occurs.

INDIAN CONTRACT ACT 1872

28. Agreements in restraint of legal proceedings, void

11
[Every agreement,-

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect
of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time
within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto from any
liability, under or in respect of any contract on the expiry of a specified period so as to restrict any
party from enforcing his rights, is void to that extent.]

Exception 1 : Saving of contract to refer to arbitration dispute that may arise: This section shall
not render illegal contract, by which two or more persons agree that any dispute which may arise
between them in respect of any subject or class of subject shall be referred to arbitration, and that
only the amount awarded in such arbitration shall be recoverable in respect of the dispute so
referred . 12[* * *]

Exception,2 : Saving of contract to refer questions that have already arisen : Nor shall this section
render illegal any contract in writing, by which two or more persons agree to refer to arbitration
any question between them which has already arisen, or affect any provision of any law in force
for the time being as to references to arbitration.

CONSTRAINT OF LEGAL PROCEEDING

The legal arena has faced several dimensions over how to construe the clause of “agreement in
restraint of legal proceedings” incorporated in Insurance agreement in specific and other
agreements in general which was made clear by the Parliament by amending Section 28 of the
Indian Contract Act but, still there seems to be some uncomfortableness on this issue. There have
been instances where Courts have interpreted this clause in the lines of National Insurance
Company case which have roots primarily in English law, which may not appreciate the well
established mischief rule of interpretation and the intention behind the legislation.

This article endeavors to answer the above issue faced by lawyers and the courts for some time
now, that is, the question of whether or not to follow the law laid down by the Supreme Court
in National Insurance Co. Ltd case in the light of the Amendment to Section 28 of the Indian
Contract Act.
Is waiver of a claim to sue under an agreement valid in the light of Section 28(b) of the Indian
Contract Act?
This question has a controversial and very interesting history behind it and squarely falls within
the ambit of Section 28 of the Contract Act. Section 28 declares any agreement that absolutely
restrains a person from enforcing a contract as void but it has been the general practice of Insurance
and other companies to incorporate clauses in their agreement to such effect, for example, ‘‘if a
claim be made and rejected an action or suit cannot be commenced within 6 months or 1 year after
the rejection of the claim”. These kinds of clauses have been held to be in conformity with Section
28 of the Contract Act by the courts time and again.

The law on this point has been interpreted in the following manner so as to enforce such an
agreement which amounts, in reality, to an agreement in restraint of legal proceedings. There is
undoubtedly a marked distinction between a condition which so limits the time within which
a suit may be brought to enforce rights and one which provides that there shall no longer be
any rights to enforce. Such a condition is not illegal in itself. This position was given legal
sanctity by the Supreme Court in the case of National Insurance Co. ltd., which held that “an
agreement which in effect seeks to curtail the period of limitation and prescribes a shorter period
than that prescribed by the law would be void as offending Section 28 of the Contract Act. This is
because such an agreement would seek to restrict the party from enforcing his rights in Court after
the period prescribed under the agreement has expired even though the period prescribed by law
for the enforcement of his rights would have not yet expired. There could, however, be agreements
which do not seek to curtail the time for enforcement of rights but which provide for the forfeiture
or waiver of rights if no action is commenced within the period stipulated by such agreement. Such
a clause in the agreement would not fall within the mischief of Section 28 of the Contract Act[2].
The relevant aspect of this judgment is based on the provisions of Section 28[3] of the Contract
Act that stood prior to the Amendment. An amendment was made to Section 28[4] of the Indian
Contract Act and a new clause was added.

The unrest legal position –

Even though the phraseology of Section 28 is explicit and strikes at the very root by declaring any
agreement curtailing the normal statutory period of limitation to be void courts in India having
been influenced by the distinction drawn by English Courts in case of ‘extinction of rights by
agreement’ and ‘curtailment of limitation’[5] which was done by drawing a distinction between
forfeiture of rights by terms of contract and curtailment of time for enforcement of contract, with
the former being barred and the latter not being barred by Section 28.
The settled position of law before the Amendment was that Section 28 would invalidate only a
clause in an agreement which restricts a party from enforcing his right absolutely or which limits
the time within which he may enforce his right. Section 28 before the Amendment, did not come
into operation when contractual terms spelt out the extension of right of a party to sue or spelt out
the discharge of a party from any liabilities[6].
A distinction is assumed to exist between remedy and right and this distinction is the basis on
which a clause barring remedy is void, but a clause extinguishing rights is valid. This approach
may be sound in theory, but in practice it causes serious hardship and might even be abused. In
order to remove these anomalies, Section 28 was amended by the Indian Contract (Amendment)
Act 1996 (Act 1 of 1997)[7]. Thus, the artificial distinction between a clause providing for
extinction of rights after a specified period has been eliminated[8], however, there are cases
wherein it has been held that clauses filed after the specified period of limitation in the agreement
would be void because the Amendment to Section 28 (b) does not have any retrospective
operation[9].

Courts view on ‘agreement in restraint of legal

proceedings’ clause–
The effect of the Amendment to Section 28 made it clear that any clause extinguishing the right
of a party or discharging any party from the liability in respect of any contract on expiry of a
specific period would be void[10]. An arbitration agreement limiting the time during which a claim
can be made by a party, was held to be clearly against public policy and in view of Section 28 of
the Contract Act, void[11].
In the case of Explore Computers, [12] the Delhi High Court held, “it is not open to contend that
if any suit or claim is not filed within one month of the expiry of the bank guarantee, the right of
the plaintiff to institute any legal proceedings itself is extinguished. Such a plea would fly in the
face of the amended Section 28 and cannot be discharged from the liability nor can the rights of
the plaintiff be extinguished by inclusion of the clause providing so”.
The contention that the contractor’s right to claim arbitration comes to an end after the expiry of
90 days from the date of intimation was also held to be not sustainable[13]. In the case of Pandit
Construction[14], the Court held that in view of the said pronouncement, the reasoning of the
learned arbitrator could not be sustained that the claim was time – barred. The award to the extent
that it holds that the claim of the petitioner is barred by time would, thus, be liable to be set aside.
An understanding of the above judgments thus, makes it amply clear that Court’s should consider
the ramifications of the Amendment to Section 28 of the Indian Contract Act and refrain from
ignoring the intention behind the Amendment which is the mandate of the legislature.

However, very recently the Supreme Court in the case of H.P. State Forest Co. [15] endorsed the
view and held that “curtailment of the period of limitation is not permissible in view of Section 28
but extinction of the right itself unless exercised within a specified time is permissible and can be
enforced. If the policy of insurance provides that if a claim is made and rejected and no action is
commenced within the time stated in the policy, the benefits flowing from the policy shall stand
extinguished and any subsequent action would be time-barred. Such a clause would fall outside
the scope of Section 28 of the Contract Act. This, in brief, seems to be the settled legal
position[16]”.
When the issue of Section 28 (b) vis-à-vis a negative covenant was raised before the Supreme
Court in the Unit Trust of India case,[17] the Court went on to say that “it is not necessary for us
to enter into the question as to whether clause 7.5 of the agreement is hit by Section 28 of the
Indian Contract Act or not” – the High Court, however, held that the disputed clause would be hit
by Section 28 of the Indian Contract Act and kept silent on this particular issue.
Thus, after reading the above two Hon’ble Supreme Court judgments there seems to be some
unrestness with regard to Section 28 (b) of the Act, which results in untold inconvenience to the
many hapless individuals who enter into Standard Form Contracts with absolutely zero negotiating
power. This unrestness may be interpreted in a manner close to the contractual rights of citizens.
It would be sensible, therefore, to avoid any blanket rule applicable to limitation clauses and leave
examination of such clauses to the context of the legislation[18]. The provisions of the Limitation
Act are based on public policy and if a contract is made fettering or cutting down the period of
limitation, such a contract being against the provisions of the Limitation Act should be construed
as being opposed to the principles of public policy. Such a clause would then be hit by Section 23
of the Indian Contract Act. Hence, such a stipulation in a contract, fettering or curtailing the period
of limitation ought to be considered to being operative and even if such a stipulation were present,
the option to institute legal proceedings within the period of limitation prescribed by the Limitation
Act should be made available.[19]
The Madras High Court in the case of Oriental Insurance Co[20]held, It is clear that by the Indian
Contract (Amendment) Act, 1997, the original Section 28 has been replaced by a new paragraph
in which extinction of right unless exercised within specific period of time, the law stands after
this Amendment not only the curtailment of limitation period is permissible, but also the extinction
of right, if sought to be brought by the agreement within a specific period, which period is less
than the period of limitation prescribed for the suit under the contract in question is also rendered
void. The period of limitation is three years[21]. The National Insurance Co. judgment dealt with
the unamended part of Section 28 (b) and therefore does not hold good in law[22].
The Amendment to Section 28 prohibits clauses which seek to extinguish the rights of any party
thereto, or discharge any party thereto from any liability, under or in respect of any contract on the
expiry of a specified period so as to restrict any party from enforcing his rights to such extent, is
void.[23]. Thus, the law as it now stands after this Amendment, can be stated thus-not only is the
curtailment of limitation period impermissible, but also the extinction of rights, if sought to be
brought by an agreement within a specified period, which period is less that the period of limitation
prescribed for the suit under the contract in question is also rendered void[24].
Intention behind the Amendment-

It is imperative to understand the history behind the enactment of Section 28 (b) of the Contract
Act in order to appreciate the real and proper intention behind it. It was intensively debated in
Parliament, particularly the anomaly caused by Section 28 and the real need to bring in an
Amendment. The Union Law Minister who presented the Bill said “Presently, Section 28 allows
parties to an agreement to substitute their own period of limitation in place of the period laid down
in the general law of limitation. But they are free to provide that if a party does not sue within a
specified period, within the rights accruing under the contract, it shall be forfeited or extinguished
or that party shall be discharged from all liability under the contract. This distinction is very fine
and a number of litigating contracting parties have found it difficult in practice to ascertain
this very fine difference between what is meant by extinguishing of a right and what is meant by
extinction of a remedy. This anomaly is sought to be cleared by virtue of this Section 28”[25].
Section 28 of the Indian contract Act has been substituted by a new paragraph. The impact of this
new paragraph is considerable, because it changes the entire basis of the original Section 28. The
Amendment has a very chequered history. It was first introduced in the Rajya Sabha on 27-07-
1992 as “The Indian Contract (Amendment) Bill 1992. However, after the chequered history in
Parliament, the Bill became a Statute in 1996 and received the assent of the President and was
published in the Gazette of India, Extraordinary, Part – II dated 8-01-1997h and come into force
with effect from that date[26].The statement of objects and reasons of the Amendment Bill reads
as follows:
“The Law commission of India has recommended in its 97th report[27] that Section 28 of the
Indian Contract Act, may be amended so that the anomalous situation created by the existing
Section may be rectified:
It has been held by the courts that the said Section 28 shall invalidate only a clause in any
agreement which restricts any party thereto from enforcing his rights absolutely or which limits
the time within he may enforce his rights. The courts have, however, held that this Section shall
not come into operation when the contractual term spells out an extinction of the right of a party
to sue or spells out the discharge of a party from all liability in respect of the claim. What is thus
hit by Section 28 is an agreement relinquishing the remedy only i.e., where the time-limit specified
in the agreement is shorter than the period of limitation provided by law. A distinction is assumed
to exist between remedy and right and this distinction is the basis of the present position under
which a clause barring a remedy is void, but a clause extinguishing the right is valid. This approach
may be sound in theory but in practice it caused serious hardship and might even be abused. It is
felt that Section 28 of the Indian Contract Act of 1872 should be amended as it harms the interest
of the consumer dealing with big corporations and causes serious hardship to those who are
economically dis-advantaged. The Bill seeks to achieve the above objects”[28].
While construing a Statute, the Court is not bound to forget the history behind the legislation and
the surrounding circumstances, which existed at the time, and the mischief[29] which the new
enactment intended to cure. Historical back ground (Law Commission’s recommendations) may
have to be looked in to discover the real intent of legislature[30]. The main purpose of
interpretation of an Act is to ascertain the real and actual intention behind the legislation and the
Courts cannot override the legislative intent specifically expressed in the enactment[31]. If the
intention of the legislature is clear, that intention constitutes the law.
Committee reports are among the most useful sources of enacting history. As to the statutory
objective of particular provisions of an Act, a report leading to the Act is likely to be the most
potent aid; it would be mere obscurantism not to avail of it[32]. Where the Act has been laid before
parliament and the legislation is introduced in consequence of that report, the report itself may be
looked at by the court for the limited purpose of identifying the mischief that the Act was intended
to remedy, and for such assistance as is derivable from this knowledge in giving the right purposive
construction to the Act[33]. It would be very clear after a perusal of the Objects and reasons for
the Amendment, the Law commission report and also the Parliamentary debate, that the real
intention in bringing in an Amendment to Section 28 of the Indian Contract Act. While ascertaining
the true canon of construction applicable to Section 28 (b) of the Indian Contract Act, these aspects
stare us in the face.
What would be the consequences if there is a settlement etc. after a breach of contract. Will Section
28 (b) have any application?

A very interesting question that arises in the light of the legal uncertainty is as to the consequences
when a settlement has been arrived at between the parties after a breach of contract, and the parties
have agreed not to raise any dispute regarding the settlement in the Courts of law, with respect to
the application of Section 28 (b) to any dispute to the settlement which has been arrived.

Where an agreement for compromise and entire claim of maintenance on receipt of full and final
settlement was accepted by the parties, the Court held, giving effect to an agreement which
overrides this provision of law, i.e., Section125 of the Cr. P.C., would be tantamount to not only
giving recognition to something which is opposed to public policy but would also amount to a
negation of it[34]. That is what exactly Section 23 of the Contract Act provides for the agreement
pleaded being opposed to public policy and against the clear intendment of Section 125 of the Cr.
P.C cannot be enforced or be a shield in Court of law[35].
However, if under a particular bargain, the rights of the parties were extinguished, that would be
permissible and, that will not hit the provisions of Section 28 of the Contract Act and as such
would not be violative of Section 23 of the Contract Act. But if rights are not extinguished but
only the remedies are barred different consideration would apply[36].
The general principle is that everyone has a right to waive and to agree to waive the advantage of
a law or rule made solely for the benefit and protection of the individual in his private capacity
which may be dispensed with without infringing any public right or public policy[37]
As a general rule, any person can enter into a binding contract to waive the benefits conferred upon
him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be
shown that such an agreement is in the circumstances of the particular case contrary to public
policy. Statutory conditions may, however, be imposed in such terms that they cannot be waived
by agreement, and, in certain circumstances, the legislature has expressly provided that any such
agreement shall be void[38].
The Madras High court held that in the view of Section 28 of the Contract Act, which prohibits
agreements which have, for their object, restraining independence from enjoying the fundamental
right of resorting to Court of law for redressal of relief., the agreement did not restrain the
Contractor from taking legal recourse or compelled him to have his right to take legal remedy[39].
Thus, from the above judgments, it may be inferred that where through a settlement after a breach
of contract, one of the parties to an agreement waives or forfeits his right to adequate consideration,
it is valid provided he does not waive away or abridge a right provided under an Act or law which
may be considered as void to that extent. Therefore, a person cannot forfeit his right to approach
the court through a settlement which is arrived at after the breach of the contract which is
prohibited by Section 28 of the Indian Contract Act[40]. It is thus clear, that the object of this new
paragraph in Section 28 is to declare that when any clause in an agreement not only bars a remedy,
but also extinguishes the right, it shall be void to that extent. Therefore, many earlier decisions of
different High Courts and of the Supreme Court in which a clause which does not debar the
remedy, but extinguishes the right is held to be valid shall no longer be treated as a good law.[41]

Conclusion-
The argument that the curtailment of the period of limitation is not permissible in view of Section
28 (b) but extinction of the right itself unless exercised within a specified time is permissible and
can be enforced is sound in common law or it is backed by judicial decisions is a negation of the
fundamental right to approach the Court and would fly away in the light of the Amendment to
Section 28 of the Indian Contract Act. The law declared by the Supreme Court in National
Insurance case is no more the binding law and Section 28 (b) which is self explanatory, a plain
reading of which leads to the construction that limiting the period lesser than as prescribed by the
statue is void, time has now arisen to evolve a jurisprudence close to the lives of the citizens by
protecting their right to move the Court.

The Amendment rectifying the defect in Section 28 of the Indian Contract Act should be given a
literal and logical interpretation by properly appreciating the intention of the legislature in the light
of Parliamentary debates, objects and reasons for the Amendment, Law commission report and
thereby upholding the intention behind the enactment of Section 28 (b) of the Indian Contract Act.