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Report No. 199

Supreme Court on Contracts by Government and Public Institutions and Art 14: Judicial Review under Art 226 of the Constitution:

Yet another angle to these contracts arises not only from the traditional aspect of consent or unconscionability, but also from the point of arbitrariness, where the contract is entered into by a department of Government, or a public sector undertaking or other public body. Here, in as much as the party so stipulating is a Government or public sector undertaking, the question can arise if the aggrieved party can resort to Article 14 of the Constitution of India and the 'arbitrariness' doctrine laid down in Royappa's case (AIR 1974 SC 555).

But, here parties could go to the High Court under Art 226 of the Constitution or under Art 32 to the Supreme Court. While views have been expressed, particularly in the Central Inland Water Transport Corporation case (AIR 1986 SC 1571), and in Delhi Transportation case (AIR 1991 SC 101), that such unreasonable clauses in contracts of employment could be struck down by the courts, it has, however, been stated in these very cases by the Supreme Court that the Court is not prepared to extend the principle of 'arbitrariness' to 'commercial contracts' in the same manner as it has extended the principle to terms imposed unilaterally by a statutory employer on its employee.



Unfair (Procedural and Substantive) Terms in Contract Back




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