Unconscionable Bargain

In Brojo Nath Ganguly, (1986) 3 SCC 156 this Court considered the concept of unconscionable bargain.

The word ‘unconscionable’ is defined in the Shorter Oxford English Dictionary, [Third Edition, Volume II, Page 2288] when used with reference to actions, etc. as “showing no regard for conscience; irreconcilable with what is right or reasonable”. An unconscionable bargain would, therefore, be one which is irreconcilable with what is right or reasonable.”

It was clearly held that contracts, which are the outcome of misrepresentation, cannot be enforced, and inequality of bargaining power merits the intervention of the Court. A term which exempts the stronger party from his ordinary common law liability should not be given effect except when it is reasonable, as observed in Levison v. Patent Steam Carpet Co. Ltd., (1949) 2 All ER 581 and relied upon in Brojo Nath Ganguly.

There can be myriad situations which result in unfair and unreasonable bargains, which are the outcome of an unequal bargaining power. Each case has to be seen on its own facts and circumstances.”

Hon’ble Justice Arun Mishra, Assistant General Manager, State Bank of India v. Radhey Shyam Pandey, [Civil Appeal No. 2463 of 2015].