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Legal Complexities for UK and US Businesses Regarding Breach of Contract and its Enforcement-3 | Top 10 FAQs on Contractual Disputes & Contract Enforcements
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Frequently Asked Questions
- Can the Enforcement of a UK Court Judgement against an Indian Company be statutorily viable?
Yes, one can enforce foreign judgments, but with certain limitations. Section 44A of Code of Civil Procedure, 1908 permits the enforcement of UK judgements if they meet specific criteria: The UK and India must be form a reciprocating Territory, the judgement is for a definite sum not related to taxes, penalties etc. and also subject to scrutiny by Indian Courts that whether such judgement violates Indian public policy or obtained by fraudulent means. Lastly, after such scrutiny, it will take around 12-18 months to be enforced. - What amounts to a Material breach under Indian law. Explain it with decided cases.
Under Indian law, Material breach means any act violating material terms and Non-performance of basic obligations and duties amounts to material breach. Material breach means the breach which goes to the root of the contract and fundamentally undermines its core purpose and formulation. In this regard, placing reliance upon Murlidhar Chiranjilal Vs Intl. Film Co., 1943, the honourable court established that a material breach is the breach which substantially affects the rights of the innocent parties and deprives such party of availing benefits under the agreement. Recently, I have been working with my UK manufacturing client, where the Indian suppliers delayed the delivery of a critical component by three months. It was deemed a material breach. - How is the application of the principle of Unconscionability different in the UK, the US and India?
In the UK, the principle of Unconscionability focuses on inequality in bargaining power as one party took an undue advantage of their position against the aggrieved party. Noteworthy, courts in the USA apply similar principles but more often with robust consumer protection, as both the UK and US apply these principles on the basis of power imbalance. However, Indian courts have shown reluctance to intervene in matters solely based on Unconscionability. It is crucial to furnish evidence of actual fraud, coercion, or under influence rather than a mere glimpse of inequality bargaining. - Is there any statutory limitation in filing cases related to breach of contract in India?
The Limitation Act governs the limitation period for filing suits in India. The standard period of limitation in India for filing a case related to contract breach is 3 years. However, it depends upon the nature of such a breach and claim. Nonetheless suit for specific performance of a contract has a time limitation of 3 years from the date fixed for performance (In case no date of performance is specified, then from such date when the claimant is aware of such non-performance). I always suggest that my clients be very prompt and proactive while filing such cases, as one of my clients lost valid claims because they waited for too long. Indian courts are very strict and always show reluctance to condone unexplained delay. - Can international contractual disputes be resolved through the small claims procedure?
The Indian court system lacks small causes or claims courts. Even Commercial courts resolve claims above Rs. 3,00,000 (Euro 2,800), even they follow typical procedures for CPC, which are time-consuming and ineffective. Rather, I suggest clients go for an ADR mechanism to resolve such small claims instead of going for litigation. Particularly, Online dispute resolution platforms or arbitration for such resolution, which may be cost-effective and fast. - What is the enforcement procedure of arbitral awards in India?
It is well-established that India is a signatory to the New York Convention, making foreign arbitral awards enforceable. The process involves the filing of an authenticated arbitral award, original arbitration agreement, and proof that the award is final. Moreover, the Arbitration and Conciliation Act, 1996 has limited grounds for the refusal of enforcement, such as the Arbitration agreement is invalid, notice is served in the prescribed manner, or the award was passed in violation of Indian Public Policy. The time period for enforcement of the award can be from 6-18 months. - Elucidate the remedies available for contract breach under the Specific Relief Act.
The said provides several key remedies for breach of the terms of the contract, including damages, specific performance of a contract. The act also provides injunctions, declaratory relief. However, the court, in its sole discretion after considering material on record, may deny specific performance if it finds that a contract is of a personal nature, where monetary compensation is sufficient and adequate, or situations where enforcement of such a contract is impractical. Recently, I successfully provided a relief of specific performance to one of my foreign clients over custom machinery. - How is the application of force majeure clauses different in the US and, UK compared to India?
Indian courts recognise such events as force majeure events, which are specifically enumerated under the agreement, as force majeure can only be triggered in specified cases. In this regard, placing reliance upon Energy Watchdog Vs CERC, 2017, where the court clarified that non-performance could be excused if only specified events get triggered, not otherwise. Post pandemic COVID-19, I had advised several US clients whose Indian business partners are avoiding performance on the basis of events which are not specified under the agreement. - What is the role of the Debt Recovery Tribunal in cases of resolving disputes pertaining to financial transactions in India?
The Recovery of Debts due to banks and Financial Institutions Act, 1993 is the cornerstone for the establishment of the Debt Recovery Tribunal, responsible for facilitating and recovering debt for banks and Financial institutions. DRTs offer a specialised form of dispute resolution mechanism for financial disputes which involves loans above Rs. 20,00,000. One can resolve disputes within 6 months, which may extend 1-2 years. Recently, I advised one client based in Chicago, and it still took 14 months to get resolved. Pertinently, one has to be very vigilant about jurisdiction and procedure in DRT before initiating any proceeding. - What can be the impact of a Free trade agreement between the UK and the USA on contract enforcement?
The Free Trade Agreement (FTA) will play a crucial role in contract enforcement, dispute resolution in a cost-effective manner, and also raise standards in regulatory or enforcement compliance. FTA also recognises the digital contracts, establishes a state-to-state dispute resolution mechanism for resolving minor disputes. Moreover, FTA enhances mutual cooperation, which may eliminate the contractual ambiguities. This incorporation will enhance the contract worthiness and certainty, and also eliminate the ambiguous transactions.
Authored by: Adv. Anant Sharma
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