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Indian Contract Act, 1872 · Chapter II: Of Contracts, Voidable Contracts and Void Agreements · Void agreements

Section 28: Agreements in restraint of legal proceeding void

In plain words

An agreement is void to the extent that it absolutely bars a party from enforcing contract rights through ordinary legal proceedings, limits the time for doing so, or extinguishes rights or discharges liability after a specified period.

  • This does not make illegal an agreement to refer future disputes on a subject to arbitration, with only the award being recoverable.
  • Nor does it affect a written agreement to refer an existing dispute to arbitration, or any law on arbitration.
  • It also does not affect a written guarantee by a bank or financial institution that ends rights or liability after a specified period of not less than one year from a specified event.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

1 Every agreement,—

(a) 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; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing 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 a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

2 * * * * *

Exception 2.—Saving of contract to refer questions 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 references to arbitration3.

4 Exception 3.—Saving of a guarantee agreement of a bank or a financial institution.—This section shall not render illegal a contract in writing by which any bank or financial institution stipulate a term in a guarantee or any agreement making a provision for guarantee for extinguishment of the rights or discharge of any party thereto from any liability under or in respect of such guarantee or agreement on the expiry of a specified period which is not less than one year from the date of occurring or non-occurring of a specified event for extinguishment or discharge of such party from the said liability.

Explanation.—(i) In Exception 3, the expression "bank" means—

(a) a "banking company" as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(b) "a corresponding new bank" as defined in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(c) "State Bank of India" constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);

(d) "a subsidiary bank" as defined in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);

(e) "a Regional Rural Bank" established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);

(f) "a Co-operative Bank" as defrined in clause (cci) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(g) "a multi-State co-operative bank" as defined in clause (cciiia) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); and

(ii) In Exception 3, the expression "a financial institution" means any public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956).

Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 28 makes void any agreement that absolutely restricts a party from enforcing contractual rights through the ordinary courts, that limits the time for doing so, or (since 1997) that extinguishes rights or discharges liability on expiry of a specified period. Arbitration agreements and, since 2013, certain bank guarantee clauses are saved.

What is void

  • An absolute bar on going to court.
  • A clause shortening the limitation period (for example, 'any suit must be filed within six months').
  • Since the 1997 amendment, a clause that extinguishes the right itself or discharges the liability after a specified period. Before 1997 courts had upheld such clauses on the ground that they extinguished the right rather than limited the remedy; the amendment closed that gap.

What is valid

  • Exclusive jurisdiction clauses choosing one of several courts that already have jurisdiction (this is not an absolute restraint).
  • Arbitration agreements, for future or existing disputes (Exceptions 1 and 2), including arbitration seated abroad.
  • Bank and financial institution guarantees fixing a claim period of at least one year from the specified event (Exception 3, added in 2013).

The jurisdiction-clause rule

Parties cannot confer jurisdiction on a court that has none, and cannot oust all courts. But where two or more courts have jurisdiction, they may agree to sue in only one of them. Such a clause is valid even without words like 'only' or 'exclusive'; the intention to exclude other courts can be inferred.

Key Supreme Court rulings

  • Food Corporation of India v. New India Assurance Co. 1994 INSC 70

    A clause in a fidelity guarantee requiring claims to be made within six months, which curtailed the statutory period of limitation, was void.

  • Swastik Gases (P) Ltd. v. Indian Oil Corporation Ltd. 2013 INSC 422

    A clause conferring jurisdiction on the courts at one place, which already had jurisdiction, excluded all other courts. It is not hit by section 23 or section 28, and the absence of words like 'alone', 'only' or 'exclusive' makes no material difference.

  • Atlas Export Industries v. Kotak and Company 1999 INSC 377

    An arbitration clause incorporated by reference, providing for arbitration abroad, was binding; a party who signed the contract could not object to its arbitration terms, and the foreign award was enforceable.

Common mistakes

  • Treating a valid exclusive jurisdiction clause as an ouster of courts.
  • Relying on pre-1997 cases that upheld clauses extinguishing rights after a fixed period.
  • Forgetting the 2013 bank guarantee exception.

Read with: Section 23 Indian Contract Act, 1872, Section 27 Indian Contract Act, 1872, Section 20 CPC

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 28