Commercial contracts with Indian parties

Core law

Indian Contract Act 1872

Foreign awards

Part II, Arbitration Act 1996

Stamping

Within 3 months of receipt in India

Courts

Commercial Courts Act 2015

Choosing the governing law

Where one party is foreign, the parties are free to choose the law of another country to govern the contract, and Indian courts generally respect that choice. Even between two Indian parties, the Supreme Court in PASL Wind Solutions v. GE Power Conversion India (2021) upheld the choice of a foreign arbitral seat. Choosing Indian law is often sensible when the contract will be performed in India, the assets are in India and any dispute will end in an Indian court, because Indian judges and arbitrators then apply law they know.

Whatever law you choose, some Indian rules apply regardless: FEMA rules on payments and guarantees, competition law on exclusivity and resale price maintenance, stamp duty, labour law for people working in India, consumer protection for consumer contracts, data protection under the Digital Personal Data Protection Act 2023, and sector licensing. A clause that offends Indian public policy will not be enforced in India, whatever the governing law says.

The dispute clause: courts, India-seated or foreign-seated arbitration

For most foreign businesses dealing with an Indian counterparty, institutional arbitration is the safer choice, because a New York Convention award is far easier to enforce in India than a judgment of a non-reciprocating country. Our pages on international arbitration and enforcing foreign judgments explain the enforcement step.

Clauses that work differently under Indian law

• Non-compete and restraint of trade (section 27). Any agreement restraining a person from carrying on a lawful profession, trade or business is void, except on the sale of goodwill. Restrictions during the term of a distribution or employment relationship are generally upheld; post-termination non-competes are not. Use confidentiality, non-solicitation drafted carefully, and exclusivity during the term instead.
• Liquidated damages (section 74). Indian courts award reasonable compensation up to the stated amount, not the full sum automatically. Record how the figure was estimated.
• Indemnities (section 124). Contractual indemnities are enforceable and can be wider than damages; draft triggers and caps precisely.
• Limitation of legal proceedings (section 28). Clauses that cut short the statutory limitation period are void, but arbitration clauses are expressly saved.
• Specific performance. Since the 2018 amendment to the Specific Relief Act, specific performance is the general rule rather than an exception, which strengthens supply and transfer obligations.
• Termination for convenience and agency. India has no statutory compensation for commercial agents or distributors on termination, unlike some European laws, but courts look at notice periods and conduct.

Stamp duty and signing from abroad

Stamp duty is a state subject in India and is charged on instruments, not transactions. A contract signed outside India must be stamped within three months of its first receipt in India. If it is not, it cannot be admitted in evidence until the deficit and a penalty are paid. In In re Interplay between Arbitration Agreements and the Indian Stamp Act (2023), a seven-judge bench of the Supreme Court held that an unstamped arbitration agreement is not void and the defect is curable, but the practical lesson remains: stamp the contract when it arrives, not when the dispute starts.

Electronic signatures are valid under the Information Technology Act 2000 for commercial contracts, and counterparts signed in different countries are routinely accepted. Exceptions under the First Schedule of that Act include powers of attorney, trusts, wills and contracts for the sale or conveyance of immovable property, which need wet-ink signatures and, often, notarisation and apostille. We e-stamp for the Indian party's state and keep a record of the date of receipt in India.

Contracts we commonly prepare

• Distribution and reseller agreements: territory, exclusivity, minimum purchase, pricing freedom under the Competition Act 2002, trademark licence and stock buy-back on exit.
• Supply and manufacturing agreements: specifications, inspection, warranties, product liability under the Consumer Protection Act 2019, and import or export compliance.
• Services and outsourcing agreements: service levels, data processing terms, IP ownership in work product, and GST treatment of cross-border services.
• Technology and brand licences: royalties, withholding tax and treaty relief, and quality control to protect your Indian trademark.
• Joint venture and shareholders' agreements: board control, reserved matters, deadlock and exit, which must also be reflected in the company's articles to bind the company and transferees.

Payments to a foreign party for most current account transactions, such as royalties and service fees, are freely permitted through banks, subject to tax withholding and Forms 15CA and 15CB where required.

If a dispute reaches an Indian court

Commercial disputes above the specified value are heard by commercial courts or commercial divisions of High Courts under the Commercial Courts Act 2015, with strict timelines for written statements and case management. Unless urgent interim relief is sought, a plaintiff must first try pre-institution mediation under section 12A; the Supreme Court in Patil Automation v. Rakheja Engineers (2022) held this mandatory. Recovery of admitted debts can also proceed by summary suit. A foreign party does not need to travel: we act on a power of attorney or board authorisation, evidence can be given by affidavit, and witnesses can often be examined by video link.

Common drafting mistakes in India contracts

• Choosing courts of a country whose judgments are not enforceable in India.
• Arbitration clauses that name a venue but not a seat, or an institution that does not exist.
• Copying post-termination non-competes from a US or UK template.
• Leaving the contract unstamped until a dispute arises.
• Signing with an Indian company's representative who has no board authority; ask for the resolution.
• Ignoring tax withholding on payments, which shifts the cost unexpectedly.

Unpaid invoices under a well-drafted contract are easier to recover; see money recovery from India.

Documents you need

For a review or a new draft, send what you have:

• Current draft or the other side's template
• Term sheet, emails or proposal setting out the commercial deal
• Company details and authority documents of both parties
• Earlier contracts or purchase orders with the same party
• Details of products, services, territory and pricing
• Your standard terms and any group contracting policy
• Information about where assets and bank accounts of the Indian party are located

How we handle it for you

1. Brief call

   We understand the deal, the counterparty and your enforcement priorities in your time zone.

2. Risk note

   A short note on governing law, dispute clause, stamping and clauses that will not work in India.

3. Draft or mark-up

   A draft or tracked mark-up, with commentary you can share with the business team.

4. Negotiation support

   Calls with the Indian party or its lawyers, and revised drafts.

5. Execution and stamping

   Signing arrangements, e-stamping in the right state and a signed copy in your records.

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Frequently asked questions