NTPC v. Singer Company

This is the most authoritative Indian statement of the proper law of a contract, and it does two examinable things in a single passage: it confirms the three-tier ladder — express choice, implied choice, imputed connection — and it holds that renvoi has no place in contract.

The second proposition closes a question Module 1 leaves open. Renvoi is argued at length for succession and for capacity; in contract the Supreme Court shuts it down.

An Indian corporation contracted with a foreign company for the supply and erection of works in India. The general conditions provided:

"The laws applicable to this contract shall be the laws in force in India. The courts of Delhi shall have exclusive jurisdiction in all matters arising artier this contract"

(Read arising under for arising artier.)

The contract also referred disputes to arbitration under ICC rules, with the venue left to the arbitrators, who chose London. The Delhi High Court held the award to be a foreign award which only the English courts could set aside.

The Supreme Court reversed. Its statement of the doctrine:

"Proper law is thus the law which the parties have expressly or impliedly chosen, or which is imputed to them by reason of its closest and most intimate connection with the contract It must, however. be clarified that the expression 'proper law' refers to the substantive principles of the domestic law of the chosen system and not to its conflict of laws rules. The law of contract is not affected by the doctrine of renvoi."

Step one: read the express clause for what it says. The parties chose the laws in force in India and the exclusive jurisdiction of the courts at Delhi. An express choice, bona fide and legal, governs.

Step two: do not let the seat swallow the choice. The arbitrators' selection of London as venue was a matter of convenience delegated to them; it was not a choice of the law governing the contract, which the parties had already made. The High Court's error was to let the place of the hearing displace the parties' own stipulation and convert the award into a foreign one.

Step three: state the ladder. Express choice; failing that, implied choice; failing that, the law imputed by closest and most intimate connection. That is the structure of the whole head, confirmed by the Supreme Court.

Step four: exclude renvoi, and learn the reason and not only the rule. The reference to the chosen law is a reference to its internal rules. Renvoi exists to resolve disagreements between systems about the right connecting factor; in contract the connecting factor is the parties' own choice, so there is nothing for renvoi to resolve. A party who chooses Indian law has chosen Indian contract law, not an Indian instruction to consult somebody else.

It opens: What is the proper law of a contract? — quote the passage, then unpack the three tiers; and Does renvoi apply to contracts? — the answer is no, and this is the Indian authority.

Pair it with the two classical definitions that the Supreme Court's formulation gathers up: Lord Wright in Mount Albert Borough Council, proper law is "that law which the English or other Court is to apply in determining the obligations under the contract"; and Lord Simonds in Bonython, "the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connexion". The Indian definition from Indian General Investment Trust v. Raja of Kholikote says the same thing: the law which the court is to apply in determining the obligation under the contract.

Note the convergence point, which is worth a sentence in an essay. Article 15 of the Rome Convention excludes the application of renvoi over contractual obligations, and the Supreme Court reached the same result by reasoning, without the Convention. That shows the rule is not a European peculiarity but a consequence of what choice of law in contract is for.

And a caution to state expressly. India is not a party to the Rome Convention, and this case decides the Indian law of the proper law without reference to it. The defensible statement is that Indian law has arrived independently at the same three-tier structure and the same exclusion of renvoi — not that the Convention applies in India.

It does not decide: the limits on party autonomy, for which go to Vita Food Products and, for India, to British India Steam Navigation Co. v. Shanmugha Vilas Cashew Industries; nor capacity to contract, which is not governed by the parties' choice; nor what the court does when the contract is silent, which is Delhi Cloth and General Mills Co. v. Harnam Singh.