In Intex Technologies India Ltd. v. Rugby Renergy Pvt. Ltd., 2024 SCC OnLine Del 1376, the Delhi High Court addressed the enforceability of commercial contracts where the consideration clause lacked clarity and certainty. This case highlights a recurring concern in Indian commercial contracting—whether the consideration is structured in a manner that is definite, determinable, and enforceable under the Indian Contract Act, 1872. The judgment affirms the foundational principle that contracts must reflect a clear meeting of minds on essential terms, especially consideration.
Background: Commercial Contracts for Windmill Sale
In this case, Intex Technologies India Ltd. and its promoter, Narendra Bansal (referred to as "Vendors"), entered into two contracts dated May 7 and May 9, 2019, with Rugby Renergy Pvt. Ltd. ("Rugby") for the sale of three windmills. The parties negotiated complex agreements that included the transfer of wind energy assets, operational rights, and receivables. The consideration for the deal was structured with multiple layers:
- A capped price of ₹7.61 crore;
- Deductions for revenue accrued from April 1, 2018, i.e., prior to contract execution;
- Further adjustments for maintenance costs and taxes.
The dispute arose when Rugby sought specific performance of the agreements, but the Vendors argued that the contracts were void due to the uncertainty in the consideration clause. The arbitral tribunal agreed with the Vendors and dismissed Rugby's claim. Rugby then filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside the arbitral award.
Legal Issues: Uncertain Consideration and Natural Justice
Two key legal issues were considered by the Delhi High Court:
- Whether the arbitral award should be set aside on grounds of breach of natural justice due to lack of notice for final hearing;
- Whether the tribunal was justified in declaring the contracts void due to uncertainty in the consideration clause.
The core issue turned on whether there was valid consideration under the Indian Contract Act and whether the contracts met the enforceability standards applicable to commercial agreements in India.
High Court's Ruling: Uncertainty Makes Contracts Void
The Delhi High Court upheld the arbitral award, dismissing Rugby's challenge. It held that there was no procedural breach in the arbitral process, as Rugby had voluntarily waived its right to further hearing and requested final adjudication. More importantly, the Court agreed with the arbitral tribunal's conclusion that the consideration clause lacked determinacy and was therefore unenforceable.
The phrase "shall not exceed ₹7.61 crore" was viewed as vague, failing to establish a firm price or a formula to determine it. The adjustments based on pre-contract revenues and undefined expenses introduced the possibility of a negative final price, which further indicated that the parties were not ad idem on the amount payable. In commercial contract law in India, this absence of clarity on an essential term renders a contract void. As per judicial precedents and Section 29 of the Indian Contract Act, agreements that are uncertain or incapable of being made certain are void.
Practical Insights: Drafting Valid and Enforceable Consideration Clauses
This judgment reinforces that consideration is not just a formality but a central pillar of contract validity. The ruling offers valuable lessons for businesses, general counsels, and contract drafters on how to ensure enforceability under Indian contract law.
- Certainty in Price Is Non-Negotiable
A contract must state a clear and determinable price. Terms such as "maximum cap," "subject to adjustment," or "approximate" create ambiguity if they are not linked to objective, measurable standards.
Drafting Tip: If the final price is subject to change, specify the formula or reference data (e.g., audited financials, third-party valuation) and timelines for calculation. - Avoid Unbounded and Vague Adjustment
Clauses
In this case, the court noted that the purchase price was subject to open-ended deductions without predefined limits. This created uncertainty and the potential for the seller to owe money to the buyer—a commercially absurd scenario.
Drafting Tip: Adjustments to consideration must be based on objective parameters, such as independently verified data. Caps and floors for adjustments should be clearly mentioned. - Do Not Permit Retroactive Adjustments Without
Clarity
Allowing deductions for events or revenues predating the contract can render the consideration speculative unless those amounts are specified or subject to verification.
Drafting Tip: If adjustments are to include historic performance, annex a data sheet or audited financial report specifying such figures. Avoid phrases like "to be mutually agreed" unless the mechanism for future agreement is clearly laid out. - Link Consideration to Completion Events with Defined
Triggers
In commercial contracts, parties often structure payment flows based on project milestones, asset transfers, or regulatory approvals. This is valid, but the completion triggers must be clearly defined.
Drafting Tip: Terms like "completion date" must have a specific definition, linked to objective deliverables (e.g., execution of transfer deeds, delivery of no-dues certificates), and specify the timeline and impact of any delay. - Ensure Commercial Logic and Flow of
Consideration
The Court rejected Rugby's claim that the sellers had to not only transfer the windmills but also make further payments to the buyer. This result, the Court observed, made the contract commercially incoherent.
Drafting Tip: Contracts should preserve a logical and equitable flow of consideration—payment must align with performance. Circular payment obligations or those that distort this balance may render the contract unenforceable. - Guard Against Contingency Overload
Overreliance on future events—such as revenue performance, regulatory changes, or asset efficiency—can create uncertainty if not anchored in specific procedures.
Drafting Tip: Define how and when contingencies are calculated, what evidence is needed, who verifies the figures, and what happens if data is unavailable or disputed. Dispute resolution mechanisms should address specific disagreements over consideration.
Contract Negotiation: Anchoring the Consideration
From a negotiation strategy perspective, the judgment also reinforces the behavioural economics concept of anchoring. When parties begin negotiations with a reference number or range—such as a price cap—they tend to psychologically centre their expectations around that value. While anchoring can be an effective tactic, it must be balanced with precision in drafting. In Intex v. Rugby, the ₹7.61 crore cap created an anchor but failed to crystallise the price, leading to ambiguity. Negotiators must ensure that anchoring figures are not only strategically placed but also substantiated by a clear mechanism to determine actual consideration. Without this, the anchor becomes a point of dispute rather than agreement.
Broader Implications for Contract Law in India
The Delhi High Court's ruling in Intex v. Rugby is a reminder that the validity of a contract under Indian law requires certainty of consideration. This is especially relevant in industries such as energy, infrastructure, real estate, and financial services, where performance-based pricing and deferred consideration models are common. Even in complex transactions, the validity of consideration under Indian Contract Act cannot be compromised for commercial flexibility. An agreement must reflect a clear meeting of minds on what will be paid, when, and under what conditions. Failing to do so invites the risk of the entire contract being declared void.
Relevance for Drafting Commercial Contracts in India
This case reinforces best practices for anyone drafting or reviewing commercial contracts under Indian law:
- Consideration must be lawful, certain, and not illusory.
- If the price is performance-linked, performance must be measurable.
- Parties should document negotiations and agreed metrics, especially where variable pricing is involved.
- Ambiguity around consideration can render even a carefully negotiated contract unenforceable.
- In transactional due diligence, focus on consideration clauses as a priority area.
The ruling also underscores the importance of legal review at the pre-signing stage. Poorly worded contracts, even when signed by sophisticated parties, are at risk of legal nullification if they lack certainty in essential terms.
Conclusion: Consideration Must Be Precise, Measurable, and Commercially Rational
The Delhi High Court's judgment in Intex Technologies v. Rugby Renergy underscores a key tenet of Indian contract law: a valid commercial contract must be built on a clear, determinable, and mutually agreed consideration. Vague caps, retrospective adjustments, or undefined future triggers introduce uncertainty that can nullify the contract altogether. For legal teams, in-house counsels, and business decision-makers, the lesson is clear—prioritise precision in drafting. Use defined economic metrics, clear adjustment mechanisms, and safeguards against commercial absurdities. In a legal ecosystem where courts place high importance on contractual certainty, especially in the context of specific performance and arbitration enforcement, clarity in consideration is non-negotiable.
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