Why in News?
The Supreme Court of India recently explained how courts should apply the doctrine of severability when enforcing contracts. In the Canara Bank vs. K.L. Rajgarhia case, a trial court attempted to direct the sale of flats built in violation of building regulations by removing the unlawful portions from the agreement. The apex court held that this approach amounted to rewriting the contract and clarified that only non‑essential terms can be severed. The ruling sparked discussion because the doctrine also underpins the constitutionality of laws and contracts in India.
Background
The doctrine of severability is a legal principle that allows a court to separate valid and invalid parts of a law or contract so that the lawful portion can survive. In constitutional law, it ensures that if one part of a statute is unconstitutional, the rest need not automatically fall. In contract law the idea is similar: if a particular clause is illegal or unenforceable, the remainder of the agreement may still stand. However, courts will not excise provisions if doing so alters the fundamental nature of the bargain. The doctrine developed in English common law and was adopted into Indian jurisprudence through cases like R.M.D. Chamarbaugwalla vs. Union of India and Mayawanti vs. Kaushalya Devi. It seeks to balance two values: respect for the parties’ intentions and the rule of law.
What the judgement clarified
- Essential terms cannot be severed: The Supreme Court observed that a court cannot remove core obligations and still enforce a contract. In the case of Canara Bank, the agreement centred on constructing flats that violated building rules. Eliminating the unlawful portion would have changed the very object of the contract; hence specific performance could not be ordered.
- No rewriting of contracts: Severability should not become a tool for rewriting commercial bargains. The judges cautioned that courts must respect the terms negotiated by the parties and should not create a new bargain under the guise of severance.
- Limited application in specific performance suits: The bench emphasised that severability is rarely applicable in suits seeking specific performance of contracts. Only when the illegal portion is clearly separable and non‑essential can enforcement proceed with the remainder.
- Continuity in constitutional law: The ruling reaffirmed that the doctrine remains vital in constitutional adjudication. Courts frequently strike down unconstitutional sections of statutes while preserving the rest to maintain legislative intent and continuity.
Why it matters
- Protecting contractual fairness: Clear guidance helps courts avoid overreach in commercial disputes and assures businesses that contractual terms will be upheld as agreed.
- Upholding the rule of law: By emphasising that unlawful provisions cannot be enforced, the judgement reinforces compliance with planning regulations and other public laws.
- Guidance for future cases: Lawyers and judges can rely on the ruling when assessing whether parts of agreements can be severed without altering the core bargain.
Sources: Verdictum