The Indian Contract Act, 1872
28. Agreements in restrain of legal proceedings, void –
1[***]Every agreement, 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, is void to the 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 and amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.
Exception 2: Saving of contract to refer question 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 reference to arbitration. 3
Agreement restricting law of limitation
The clause in the agreement that the appellant would not have any right under the bond after the expiry of six months from the date of termination of the contract has been held not to be contrary to section 28 of the Act nor it imposed any restriction to file a suit within six months; Food Corporation of India v. New India Assurance Co. Ltd., AIR 1994 SC 1896.
Jurisdiction of the proper court
It has been held that it is not open to the parties by agreement to confer jurisdiction on any court which it did not otherwise possess under section 20 of Code of Civil Procedure; Patel Roadways v. Prasad Trading Company, AIR 1992 SC 1514.
1. Subs. by Act 1 of 1997, sec. 2, for certain words (w.e.f. 8-1-1997).
2. The second clause of Exception 1 rep. by Act 1 of 1877, sec. 2 and Sch.
3. Cf. the Arbitration Act, 1940 (10 of 1940) and the Companies Act, 1956 (1 of 1956), section 389.