SUMMARY OF ARGUMENTS

ISSUE I: WHETHER DESI PUBLISHERS LLP IS ENTITLED TO RECEIVE THE

INITIAL INVESTMENT MADE BY THEM.

The contract was revoked by mutual consent of the parties on 25 July 1998 . However, a

difference arose regarding the initial investments made by Desi Publishers. The firm

invoked the guarantee agreement between the parties. On 27 August 1999, the firm sent a

notice to the Government officials asking them for the initial investment made by the

firm. The executive from the Government on 30 August 1999, via reply refused to pay the

initial investment by the firm, citing the limitation of liability clause under the guarantee

agreement. A writ petition was filed by Desi Publishers, WP 21/1999, before the High

Court against the Government’s refusal to honor the terms of the guarantee. The firm

challenged the limitation of liability clause in the guarantee as being violative of Section

28 of the Indian Contract Act, 1872.

 ARGUMENTS ADVANCED

ISSUE I: WHETHER DESI PUBLISHERS LLP IS ENTITLED TO RECEIVE THE

INITIAL INVESTMENT MADE BY THEM.

[A] WHETHER THE LIMITATION OF LIABILITY CLAUSE IN THE GUARANTEE

AGREEMENT VOILATIVE OF SECTION 28 OF THE INDIAN CONTRACT ACT 1872 OR

NOT.

1. Section 28 in The Indian Contract Act, 1872

28 Agreements in restraint of legal proceedings, void. — 17 [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.]

An agreement rendered void by this section is when an attempt is made by the parties to

restrict the time period within which an action may be brought so as to make it shorter than

that is prescribed by the law of limitation. According to the Limitation Act 1963, for

example, an action of breach of contract may be brought out within three years from the date
of breach. If there is clause in the contract that a no action be breach can be brought after one

year is void.

2. From the point of view of this case, Desi Publishers LLP and the Government of Pentos

entered into a Master Service Agreement (MSA) on 28 June 1996. However, the agreement

was effective from January 08, 1997. For almost two years the arrangement between the two

parties ran smoothly. But, around July 1998, differences arose between Desi Publishers and

the Government of Pentos regarding the contents of the creative assortments. On 25 July

1998, the MSA was revoked by mutual consent of the parties. A writ petition was filed by the

firm when, the Government refused to repay the initial investment made by them. The

Government cited the limitation of liability clause under the guarantee agreement.

3. The Guarantee Agreement was made in accordance with Master Service Agreement

(MSA). The agreement contained of a clause, which stated, “We are liable to pay the given

amount or any part thereof under this contract only and only if you serve upon us a written

claim or demand on or before 12 months from the date of default, breach or revocation under

this contract.” Since there was a limitation clause for claiming the initial investment by the

firm the contract is void under, Section 28 of the Contract Act which prohibits prescription of

shorter limitation than the one prescribed in the Limitation Act. An agreement which

provides that a suit should be brought for the breach of any terms of the agreement within a

time shorter than the period of limitation prescribed law is void to that extent. The reason

being that such an agreement is absolutely to restrict the parties from enforcing their rights

after the expiration of the stipulated period.

The MSA was revoked on 25 July 1998 and on 27 August 1999, the firm sent a notice to the

Government officials asking them to make good initial investments. Although the notice for

initial investment was sent after 12 months from the date of revocation, but under the
Limitation Act 1963 the firm was entitled to receive the initial investment as the period stated

by the act is three years. Hence, the Government of Pentos is liable to pay the firm.

4. The judgment of the Supreme Court in National Insurance Co. Ltd v. Sujir Ganesh Nayak

and Co. and Anr. MANU/SC/0491/1997 : [1997]3SCR202 ; It was held that an agreement

which curtails the period of limitation and prescribes a shorter period than prescribed by law

would be void as offending Section 28 of the Contract Act. This was so because such an

agreement would seek to restrict a party from enforcing his right in court after the period

prescribed under the agreement expires even though the period prescribed by law for

enforcement of his relief has yet not expired.