Central Inland Water Transport Corp v. Brojo Nath Ganguly

Facts

• A government corporation's standard employment contract contained a clause permitting termination of permanent employees without cause or notice, on brief notice
• Employees had no genuine opportunity to negotiate this term, given the corporation's dominant bargaining position and the employees' economic dependency
• Affected employees challenged this clause's validity

Issue

1. Whether a standard form contractual term, imposed through grossly unequal bargaining power and lacking any genuine negotiation, can be struck down as unconscionable, even absent traditional vitiating factors like fraud or coercion.

Held

• The Supreme Court held that unconscionable terms, resulting from grossly unequal bargaining power between the parties, could be struck down as opposed to public policy under Section 23 of the Indian Contract Act
• This did not require proof of traditional vitiating factors such as fraud, coercion, or undue influence in the classical sense
• The specific termination clause, given its unreasonable, one-sided character and the absence of genuine negotiation, was struck down

Ratio Decidendi

Courts may strike down unconscionable standard form contractual terms as opposed to public policy where they result from grossly unequal bargaining power and lack any genuine element of negotiation, extending public policy scrutiny beyond the traditional vitiating factors to address this specific modern contracting reality.