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IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts

A dispute arises between two Indian companies over a supply contract. The contract states that the matter will be resolved by arbitration, and one party nevertheless files a civil suit. A lawyer explains how statute law and case law fit within India's sources of law. Which statement is correct?

Statutes are enacted by the legislature, and courts interpret and apply them, with those interpretations forming binding precedent within the hierarchy. Courts do not override valid statutes merely for unfairness, and foreign decisions are only persuasive in India.

  1. AStatute law, such as the Arbitration and Conciliation Act, 1996, is enacted by the legislature and courts interpret and apply it, creating precedents on its meaningCorrect
  2. BCase law overrides statute law whenever a judge considers the statute unfair
  3. CStatute law has no role in contract disputes, which rely only on custom
  4. DCourts make statutes while the legislature only interprets them
  5. Precedents from foreign courts are automatically binding on Indian courts

Explanation

Legislatures enact statutes; courts interpret them and their rulings create precedent on meaning. Judges cannot override valid legislation simply because it seems unfair, though constitutional review is separate. Foreign decisions are at most persuasive in India.

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