LLM Group 2 Business Law Fundamental Principles of Law of Contract and Allied Laws 2016 Question Paper with Solutions

The United Nations Commission on International Trade Law, established by the General Assembly in 1966 to promote the progressive harmonisation and unification of the law of international trade, produced three responses. The UNCITRAL Arbitration Rules, 1976, procedural rules which parties may adopt by contract for an ad hoc arbitration. The UNCITRAL Conciliation Rules, 1980. And the UNCITRAL Model Law on International Commercial Arbitration, adopted on 21 June 1985, which is not a treaty but a template for national legislation, so that a State which enacts it produces a law recognisable to any foreign party.

That is what makes the Model Law's role predominant rather than merely influential. A treaty binds States; a Model Law persuades legislatures, and its success is measured by how many enact it substantially unchanged. India is one of those States, and the Act says so.

The correspondence in the text is close and can be shown provision by provision. Section 7 reproduces Article 7; section 8 Article 8; section 11 Article 11; sections 12 and 13 Articles 12 and 13; section 16 Article 16, competence-competence and separability; section 18 Article 18; section 19 Article 19; sections 20 to 27 Articles 20 to 27; section 28 Article 28; sections 31 to 33 Articles 31 to 33; section 34 Article 34; and sections 35 and 36 Articles 35 and 36.

The Indian departures are what a good answer emphasises, because they show the role was influential and not mechanical.

Part I applies to domestic arbitration as well. The Model Law governs only international commercial arbitration. That single choice explains why India has had to develop a domestic-only ground of patent illegality in section 34(2A), for which the Model Law has no counterpart.

Part II consolidates the enforcement of foreign awards, a subject the Model Law does not address, that being the province of the New York Convention of 1958.

Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, is the clearest instance and should be given. In Bhatia International v. Bulk Trading SA, (2002) 4 SCC 105, the Supreme Court had held that Part I applies even to arbitrations seated abroad unless expressly or impliedly excluded, which allowed Indian courts to entertain section 34 challenges to foreign-seated awards. In BALCO a Constitution Bench overruled Bhatia International, relying on the territoriality principle in Article 1(2) of the Model Law, under which the Law applies only where the place of arbitration is in the territory of the enacting State. Section 2(2), it held, is the enactment of that principle and cannot be read as merely permissive. The ruling was made prospective, applying to arbitration agreements executed on or after 6 September 2012.

Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India, (2019) 15 SCC 131, used the Model Law together with the Law Commission's 246th Report to hold that the expansive reading of public policy in ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263, had been legislatively reversed by the 2015 amendment, and that the ground must be read as Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supplement (1) SCC 644, read it.

Defect: a rigid procedure borrowed from the courts. Objective: to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration. Implemented by section 19, which frees the tribunal from the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872, subject to the mandatory guarantee in section 18 that the parties be treated with equality and each be given a full opportunity to present his case.

Defect: unreasoned awards. The Act of 1940 required none, as Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721, confirmed. Objective: to provide that the arbitral tribunal gives reasons for its arbitral award, implemented by section 31(3).

Defect: no power in the tribunal to decide its own jurisdiction, so a jurisdictional objection stopped the arbitration and went to court. Objective: to ensure that the arbitral tribunal remains within the limits of its jurisdiction, implemented by section 16, which enacts competence-competence and separability, with an objection to be taken not later than the statement of defence, and by section 34(2)(a)(iv) which makes an award beyond the submission liable to be set aside.

Defect: a conciliated settlement was a mere contract requiring a suit to enforce. Objective: to provide that a settlement agreement reached as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms, implemented by section 74, now substituted, the function being performed by the Mediation Act, 2023.

Defect: foreign awards governed by two separate statutes. Objective: to provide that every arbitral award made in a country to which one of the two international Conventions applies will be treated as a foreign award, implemented by Part II, sections 44 to 52 and 53 to 60, with section 49 deeming an enforceable award a decree.

Three later objectives were added by amendment. The 2015 Amendment, on the Law Commission's 246th Report of August 2014, added timeliness through sections 29A and 29B, impartiality through section 12(5) and the Fifth and Seventh Schedules, and enforceability pending challenge through the substituted section 36. The 2019 Amendment added institutional arbitration through Part IA and section 11(3A). The 2021 Amendment added an unconditional stay where fraud or corruption is shown prima facie.

In interpretation the Model Law has decided the largest questions, most conspicuously in BALCO, where the territoriality principle in Article 1(2) held that Part I applies only to arbitrations seated in India, and in Ssangyong Engineering, where it supported the narrowing of the public policy ground. The Act's objectives, each answering a defect of the 1940 scheme, are comprehensive coverage, a fair and efficient procedure, reasoned awards, a tribunal kept within its jurisdiction, minimal court intervention, settlement during arbitration, enforcement as a decree, conciliated settlements with the status of awards, and effect given to both Conventions; and of the objectives added by amendment, timeliness, impartiality and enforceability pending challenge have been achieved while institutional arbitration has never been brought into operation.

The bargain theory holds that the law enforces not a promise but an exchange, a promise for which a price has been paid. It is the theory of consideration, and its Indian footprint is section 2(d) read with section 25.

The injurious reliance theory holds that a promise binds because the promisee has acted on it to his detriment. Its Indian footprint is section 25(2), the subscription cases such as Kedar Nath Bhattacharji v. Gorie Mahomed, (1886) Indian Law Reports 14 Calcutta 64, and the doctrine of promissory estoppel as developed in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, (1979) 2 SCC 409.

The equivalent theory holds that a promise binds when something of equivalent value was given. Indian law rejects it as a general rule in Explanation 2 to section 25, which says inadequacy does not void an agreement, and readmits it through section 16(3), section 23 and section 74.

The economic or instrumental account treats contract law as a device for allocating risk at least cost, and explains section 73 as an information forcing rule which puts unusual loss on the party who knew of it and should have disclosed it.

Reason one: no real consensus, which is the will theory at work

Where the parties have not agreed upon the same thing in the same sense there is no contract, and section 13 makes that a requirement. Section 20 carries it to its conclusion: where both parties are under a mistake as to a matter of fact essential to the agreement, the agreement is void, not voidable, because the minds never met and there is nothing to avoid. Section 22 confirms the reasoning by providing that a unilateral mistake does not vitiate, since the appearance of agreement holds.

The offer and acceptance machinery in sections 3 to 9 exists to locate consensus. Harvey v. Facey, [1893] Appeal Cases 552, shows an agreement failing because there was no proposal at all; Hyde v. Wrench, (1840) 3 Beavan 334, because a counter-offer destroyed the proposal; Lalman Shukla v. Gauri Datt, (1913) 11 Allahabad Law Journal 489, because acceptance in ignorance of the proposal is no acceptance.

The Indian rule is milder than the English one in three ways and each should be given: consideration may move from the promisee or any other person under section 2(d), so Chinnaya v. Ramayya, (1882) Indian Law Reports 4 Madras 137, allowed a stranger to sue; it may be past; and Explanation 2 makes adequacy irrelevant, Illustration (f) treating a horse worth a thousand rupees sold for ten as a contract. But it must move at the desire of the promisor: Durga Prasad v. Baldeo, (1880) Indian Law Reports 3 Allahabad 221.

Reason four: incapacity

Sections 10 and 11 make competence a condition of a contract coming into existence at all, and Mohori Bibee v. Dharmodas Ghose, (1903) 30 Indian Appeals 114, holds that a minor's agreement is void ab initio. It is an agreement in the fullest sense, offered, accepted and supported by consideration, and it is not a contract. It cannot be ratified, supports no estoppel, and is outside sections 64 and 65; the supplier of necessaries is relegated to section 68, which charges the minor's property and not his person.

Reason seven: expressly declared void

Sections 26 to 30 declare void, irrespective of consent, capacity and consideration, agreements in restraint of marriage, of trade and of legal proceedings, agreements uncertain in meaning, and wagers. Section 36 voids a contingent agreement on an impossible event and the first paragraph of section 56 an agreement to do an act impossible in itself.

Here the legislature has made a prior judgment of public policy, which no theory of contract explains. A wager under section 30 is an agreement made by competent parties with free consent for a consideration, and it is not a contract because Parliament said so. That is the clearest demonstration that enforceability is a quality conferred by law and not an inherent property of an agreement, which is exactly what section 2(h) asserts.

What the maxim shows about the theories

The maxim is, in the end, a statement that the law filters agreements, and the theories are competing accounts of the filter.

Conclusion. Every contract is an agreement because section 2(h) makes agreement the genus and enforceability the differentia, so nothing can be a contract that is not first an agreement under section 2(e). Every agreement is not a contract because section 10 imposes conditions of enforceability, and an agreement fails to become a contract for seven distinct reasons: absence of consensus under sections 13 and 20; absence of an intention to create legal relations, as Balfour v. Balfour shows; absence of consideration under section 25 subject to its three exceptions; incapacity under section 11 as Mohori Bibee construes it; unlawfulness of object or consideration under sections 23 and 24; an express statutory avoidance under sections 26 to 30, 36 and 56; and, in the special case of vitiated consent, the contract is formed but is voidable under sections 19 and 19A rather than not formed at all.

For full marks, cover: the definition in section 2(d) with its ingredients; then the statement, whose missing words must be identified before it can be examined; then the two limbs of privity taken separately, with England and India compared on each; the Indian exceptions; and a critical evaluation ending on the reform position.

The statement as printed is incomplete: "A stranger to contract cannot sue upon a contract but a stranger to can sue upon it." Two or three words have dropped out after the second "stranger to". The proposition the sentence is plainly making, and which is set in the same form in the standard textbooks, is that a stranger to the consideration may sue. The examination that follows proceeds on that reading and says so.

It may be past, present or future. The words "has done", "does" and "promises to do" cover all three, so a promise made in return for a service already rendered is supported in India.

It must be real and lawful. It must have some value in the eye of the law, though Explanation 2 provides that it need not be adequate, and by section 23 it must not be forbidden by law, defeat any law, be fraudulent, involve injury, or be immoral or opposed to public policy.

The English definition is different in emphasis. Currie v. Misa, (1875) Law Reports 10 Exchequer 153, defines a valuable consideration as consisting either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. English law thinks in terms of benefit and detriment; section 2(d) thinks in terms of an act or abstinence at the promisor's desire.

In India, section 2(d) expressly permits consideration to move from "the promisee or any other person". Chinnaya v. Ramayya, (1882) Indian Law Reports 4 Madras 137, applied it. An old lady made a gift of land to her daughter by a registered deed, on the express condition that the daughter should pay an annuity to the lady's sister. The daughter executed an agreement in the sister's favour and then refused to pay, arguing that the sister had furnished no consideration. The Madras High Court held that the sister could sue: the consideration for the daughter's promise had moved from the mother, and section 2(d) permits consideration to move from any person.

The Indian rule is therefore that a person who has given no consideration himself may nevertheless sue, provided he is a party to the agreement. That last condition is what the second limb is about.

The second limb: a stranger to the contract cannot sue

This limb is true in both systems, though the Indian Act nowhere states it.

The Indian position is therefore half the English rule. Section 2(d) rejects the first limb of Tweddle v. Atkinson, and the courts have accepted the second limb of Dunlop v. Selfridge. That asymmetry is exactly what the statement in this question is drawing attention to, and it should be stated in those terms.

The exceptions the Indian courts have built

Because the privity rule defeats the parties' own intention whenever they contract for a third person's benefit, the courts have built a long list of exceptions, and the length of the list is itself part of the critical evaluation.

Trust or charge on property. Khwaja Muhammad Khan v. Husaini Begum, (1910) 37 Indian Appeals 152: a father in law agreed with the father of a bride to pay her an allowance for betel leaf expenses and charged specified immovable property with the payment. The Privy Council held the wife entitled to enforce it though a stranger to the contract, because a charge had been created in her favour.

Family arrangement, partition and marriage settlement. A provision made for a member of a family in a partition or family arrangement may be enforced by that member, such arrangements being treated as creating an interest.

The second criticism is that the exceptions have swallowed the rule in all but form. Where the parties intended a benefit for a third person, a court that wishes to enforce it can almost always find a trust, a charge, a family arrangement or an estoppel. That is not a satisfactory way for a legal system to reach a result it plainly thinks correct, because it makes the outcome turn on the form of the transaction rather than on the parties' intention.

The third criticism is comparative and it is the strongest. England abolished the rule by the Contracts (Rights of Third Parties) Act 1999, under which a third party may enforce a term of a contract if the contract expressly so provides, or if the term purports to confer a benefit on him and it does not appear that the parties intended otherwise. The jurisdiction whose case law India imported has legislated the rule away; India, which had already rejected half of it in 1872, has not.

The fourth criticism is that reform has been recommended and ignored. The Law Commission of India, in its Thirteenth Report on the Indian Contract Act, 1872 (1958), recommended that section 2(d) be supplemented so that a third party for whose benefit a contract is made could enforce it. More than sixty years have passed and nothing has been done.

The statement in the question, read as it was plainly intended, states the Indian position exactly. A stranger to the consideration may sue, because section 2(d) permits consideration to move from any person, as Chinnaya v. Ramayya holds, and England denies this in Tweddle v. Atkinson. A stranger to the contract may not sue, as Dunlop v. Selfridge holds in England and M.C. Chacko v. State Bank of Travancore holds in India, subject to exceptions for a trust or charge as in Khwaja Muhammad Khan, for family arrangements, for acknowledgement and estoppel, for covenants running with land, and for agency.

Critically, India has taken the worse half of the English doctrine and left the better half behind. It rejected by statute in 1872 the limb that caused least injustice and adopted by decision the limb that causes most; the exceptions have grown so numerous that the rule survives in form rather than in substance; England abolished the rule by the Contracts (Rights of Third Parties) Act 1999; and the Law Commission of India recommended the same reform in 1958 and has been ignored ever since.

Three features of the section matter. It is a non obstante clause pointing outward, so it excludes not merely other arbitration law but every other source of jurisdiction. It applies to any judicial authority, not only to a court. And it is a positive list: intervention is permissible only where Part I provides for it, so the extent of the court's jurisdiction is measured by counting those provisions.

The map: every point at which a court may be approached

Before the arbitration begins.

Section 8: reference of a pending action. A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the date of submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. The 2015 amendment inserted the words "notwithstanding any judgment, decree or order of the Supreme Court or any Court" and confined the examination to a prima facie view. Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, states the standard: refer unless it is manifest that the claim is non-arbitrable or the agreement non-existent.

Section 14(2): termination of mandate. Where a controversy remains concerning any of the grounds in section 14(1), a party may apply to the Court to decide on the termination of the mandate. This is the route where an arbitrator is ineligible de jure under section 12(5), as TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, established.

Section 27: assistance in taking evidence. The tribunal, or a party with its approval, may apply to the Court, which may order that the evidence be provided directly to the tribunal and may issue the same processes to witnesses as it issues in suits, with the same penalties for default. This is the only provision by which the coercive power of the State reaches a stranger to the arbitration.

Section 29A(4) and (5): extension of the mandate. Where the twelve month period, extended by six months by consent, has expired, the mandate terminates unless the Court extends it, and the Court may substitute one or all of the arbitrators and may reduce fees by up to five per cent for each month of delay attributable to the tribunal.

In Part II, for foreign awards. Section 45 requires reference unless the agreement is null and void, inoperative or incapable of being performed; section 47 requires production of the award, the agreement and proof of foreignness to the High Court; section 48 contains the refusal grounds; section 49 deems an enforceable award a decree; and section 50 allows an appeal from a refusal to refer or to enforce, but not from an order enforcing.

Counting the map gives the answer to "to what extent". The court's jurisdiction is exhaustively enumerated and is exercisable at nine points in Part I and four in Part II, and at every one of those points the Act narrows what the court may consider: a prima facie view under section 8, the existence of an agreement under section 11(6A), the record of the tribunal under section 34(2)(a), and no review on the merits under Explanation 2 to section 34(2)(b).

The difference from the position under the 1940 Act

Under the Arbitration Act, 1940 the court was present at every stage, and the contrast is best drawn power by power.

Remission. Section 16 of the 1940 Act empowered the court to remit the award for reconsideration where a matter referred was left undetermined, where the award was so indefinite as to be incapable of execution, or where an objection to its legality was apparent on its face. Section 34(4) of the 1996 Act permits only an adjournment on a party's request so that the tribunal may itself take action to eliminate the ground for setting aside; the court does not remit of its own motion and does not direct what the tribunal must do.

Judgment and decree. Section 17 of the 1940 Act required the court, where it saw no cause to remit or set aside, to pronounce judgment according to the award, upon which a decree followed. Section 36 of the 1996 Act makes the award enforceable as if it were a decree, so no judgment and no decree are needed.

Supersession. Section 19 of the 1940 Act empowered the court, where it set aside an award or ordered that an arbitration agreement cease to have effect, to supersede the reference. The 1996 Act has no such power; setting aside under section 34 leaves the arbitration agreement standing, and the parties may commence a fresh reference.

Interim measures by the tribunal. Under the 1940 Act the tribunal had none of substance. Section 17 of the 1996 Act, as substituted in 2015, gives it the same power as a court under section 9, and section 17(2) makes its order enforceable as an order of the Court.

The verdict on the contrast should be given. The judicial criticism of the old position is in Guru Nanak Foundation v. Rattan Singh and Sons, (1981) 4 SCC 634, where D.A. Desai J. observed that the way in which proceedings under the Act were conducted and without exception challenged in courts "has made lawyers laugh and legal philosophers weep". The 1996 Act was written to end that, and the extent to which it has succeeded is a fair matter for argument: section 34 litigation remains extensive, and the arc from ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, through ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263, to the 2015 amendment and Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India, (2019) 15 SCC 131, shows the courts widening the public policy ground and Parliament having to narrow it again.

The position under the Arbitration Act, 1940 was the opposite in every respect. The award had to be filed under section 14; the court could modify under section 15, remit under section 16 and supersede under section 19; a judgment and decree were required under section 17; and misconduct in section 30 was read to include an error of law on the face of the award. The 1996 Act abolished each of those, gave the tribunal jurisdiction over its own jurisdiction in section 16 and enforceable interim powers in section 17, and made the award final and enforceable as a decree under sections 35 and 36. The one recent movement back towards the older position is Gayatri Balasamy (30 April 2025), which has restored a limited judicial power to modify an award.

Situation one, section 68: a shopkeeper supplies food and clothing to a person of unsound mind. If a person incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the supplier is entitled to be reimbursed from the property of such incapable person. There is no contract, because the recipient could not make one. There is no promise, express or implied. The liability is on the estate and not personal, which is what makes the section compatible with Mohori Bibee v. Dharmodas Ghose, (1903) 30 Indian Appeals 114. What counts as a necessary is a question of fact: Nash v. Inman, [1908] 2 King's Bench 1, held that eleven fancy waistcoats supplied to an undergraduate already adequately provided for were not necessaries.

Situation two, section 69: a lessee pays the arrears of revenue owed by his landlord to prevent the land being sold. A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed. The three conditions are cumulative: the payer must have an interest, he must not himself be bound, and the defendant must have been bound by law. The illustration to the section is exactly the case just described.

Situation five, section 72: a taxpayer pays a tax he did not owe. A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. Sales Tax Officer, Banaras v. Kanhaiya Lal Mukundlal Saraf, AIR 1959 SC 135, held that money paid under a mistake of law is recoverable, the word "mistake" in section 72 being unqualified.

The limit on that must be stated. In Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536, a Bench of nine judges held that a refund of indirect tax must ordinarily be claimed under the machinery of the taxing statute, and that the doctrine of unjust enrichment applies to the claimant too: a manufacturer who has passed the burden on to his buyers cannot recover, since he would then be enriched twice.

The theory drawn out of the five

What the five situations have in common is not agreement but three other things, and identifying them is the theory.

In each, the defendant has been enriched: by necessaries received, by a debt discharged, by work enjoyed, by goods held, by money kept.

In each, the enrichment came at the plaintiff's expense, and there is a direct transfer of value between them.

The nature of the obligation in English law

English law explained these obligations for two centuries as arising from a contract implied in law, and the explanation was forced on it by procedure. The forms of action recognised claims in contract and in tort and nothing else. When indebitatus assumpsit was extended to recover money the defendant ought in conscience to repay, the courts had to say that he had promised to repay, and since no promise existed, the promise was implied in law. The obligation was said to be quasi ex contractu, and the label "quasi contract" followed.

The fiction distorted results as well as reasoning. In Sinclair v. Brougham, [1914] Appeal Cases 398, the House of Lords used it to refuse recovery where no contract could lawfully have been implied, which showed the fiction dictating outcomes.

The Indian obligations are statutory and closed. English restitution is a developing body of common law with open categories; sections 68 to 72 are five defined situations, and a claim outside them must be brought under section 65, under the Specific Relief Act, 1963, or not at all.

The measure is supplied by the Act itself. The third paragraph of section 73 provides that when an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to the same compensation as if the person in default had contracted to discharge it.

Section 65 stands beside Chapter V and must be given with it: when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under it is bound to restore it or to make compensation for it. Mohori Bibee marks its limit, the section not assisting a lender who knew of the minority from the outset, because nothing was "discovered". Where section 65 fails, section 33 of the Specific Relief Act, 1963 permits a court adjudging cancellation to require restoration to the extent the defendant or his estate has benefited.

For full marks, cover: all five notes are written below though only three are required. Each carries about eight marks by the paper's own arithmetic.

(a) Distinguish between Coercion and Undue influence

Both vitiate free consent under section 14 of the Indian Contract Act, 1872 and both make the agreement voidable, and the distinction lies in six places.

Who may exercise it. Coercion may be exercised by a stranger and may be directed at any person whatever, not only the contracting party, as the words of section 15 make clear. Undue influence must be exercised by the party to the contract who occupies the dominant position.

Burden of proof, and this is the practically decisive difference. Section 16(3) provides that where a person in a position to dominate the will of another enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that the contract was not induced by undue influence lies on the dominant party. There is no such provision for coercion, where the party alleging it must prove it. Illustration (c) to section 16: A, being in debt to B, the moneylender of his village, contracts a fresh loan on terms which appear unconscionable; it lies on B to prove that the contract was not induced by undue influence.

Relief. Both make the contract voidable, coercion under section 19 and undue influence under section 19A; but section 19A adds a power the other lacks, allowing the Court to set the contract aside either absolutely or, if the party entitled to avoid it has received any benefit, upon such terms and conditions as to the Court may seem just. In addition, money or property obtained by coercion is separately recoverable under section 72.

Three incidents of that status follow. He is immune from suit for acts done in good faith in the discharge of his function. He becomes functus officio once the award is made, save for the powers in section 33. And he cannot be a judge in his own cause, which is why Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV, decided 30 August 2022, held that arbitrators cannot unilaterally fix or revise their own fees, that fees must be settled at the outset with the parties' consent or by the court, and that the Fourth Schedule ceiling applies per arbitrator and per claim.

Qualifications: the Act prescribes none. Section 11(1) provides that a person of any nationality may be an arbitrator unless otherwise agreed. The parties may prescribe qualifications; section 11(8) requires the appointing authority to have due regard to them, and section 12(3)(b) makes their absence a ground of challenge.

The 2019 Amendment inserted an Eighth Schedule of qualifications which never came into force and was then repealed. Section 14 of that Amendment Act was among the provisions left out of S.O. 3154(E) of 30 August 2019, and the Schedule was omitted by the 2021 Amendment, largely because it was read as excluding foreign lawyers and foreign qualified arbitrators.

Section 7(3) requires writing and section 7(4) defines what satisfies it: a signed document; an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means, the last phrase added in 2015; or an exchange of statements of claim and defence in which the existence of the agreement is alleged and not denied. Section 7(5) permits incorporation by reference where the contract is in writing and the reference is such as to make the clause part of it: M.R. Engineers and Contractors (P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696.

The essential ingredients are in K.K. Modi v. K.N. Modi, (1998) 3 SCC 573: writing; an intention that the decision be binding; determination of rights in an impartial and judicial manner after an opportunity to be heard; and an intention that the decision be enforceable in law. Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719, holds that a clause under which disputes "may" be referred lacks the present intention to be bound.

Ineligibility, section 12(5). Notwithstanding any prior agreement to the contrary, a person whose relationship with the parties, counsel or the subject matter falls within the Seventh Schedule is ineligible to be appointed, waivable only by an express agreement in writing after the dispute has arisen. The Schedule, drawn from the IBA Guidelines on Conflicts of Interest in International Arbitration, covers an employee, consultant or adviser of a party, a person with a business relationship with a party, a manager or director of a party, and a person with a close family relationship with a party or counsel.

The consequence is nullity, not challengeability. TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377: a clause naming the Managing Director of one party as arbitrator or his nominee failed entirely, since a person himself ineligible could not nominate another. Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760: extended to any clause giving a person interested in the outcome the sole power to appoint. Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), 2024 INSC 857, decided 8 November 2024: five judges held by three to two that the equality obligation in section 18 applies at the appointment stage, so a unilateral appointment or a curated panel is impermissible, applying the ruling prospectively under Article 142.

The relationship between the three closes the note. Because a person within the Seventh Schedule is ineligible de jure, the route is a section 14 application to the Court, not a section 13 challenge before the tribunal, which has been settled practice since TRF Ltd.

(e) Quasi contract and doctrine of restitution

A quasi contract is an obligation imposed by law, resembling a contractual obligation, which arises without any agreement between the parties. The English name records a fiction: the forms of action recognised only contract and tort, so when indebitatus assumpsit was extended to recover money the defendant ought in conscience to repay, the courts implied a promise in law and called the obligation quasi ex contractu. Lord Mansfield's statement in Moses v. Macferlan, (1760) 2 Burrow 1005, that the defendant is obliged by the ties of natural justice and equity to refund the money, is the classical formulation.

The fiction was abandoned in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd., [1943] Appeal Cases 32, where Lord Wright placed such claims in a third category of the common law, and finally in Lipkin Gorman v. Karpnale Ltd., [1991] 2 Appeal Cases 548.

The doctrine of restitution is the remedy the principle generates. Unjust enrichment states why the defendant must give something up; restitution states what, namely the benefit received, valued where the thing cannot be returned. It is gain based, measured by the defendant's receipt, whereas damages under section 73 are loss based. The three conditions of a restitutionary claim are that the defendant was enriched, that the enrichment was at the plaintiff's expense, and that its retention is unjust on a recognised ground.

The doctrine cuts both ways, and Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536, is the authority: a nine-judge Bench held that a manufacturer who has passed the burden of a duty on to his buyers cannot recover a refund, because he would then be enriched twice over.

Section 65 stands beside Chapter V, requiring restoration where an agreement is discovered to be void or a contract becomes void, and Mohori Bibee v. Dharmodas Ghose, (1903) 30 Indian Appeals 114, marks its limit, the section not assisting a lender who knew of the minority throughout.