In Brief
NAFED, a state export agency, contracted to supply groundnut to an Italian firm under a FOSFA contract containing a clause providing that government prohibition of export would cancel the contract. After partial shipment in the first season, NAFED sought to carry forward unshipped quantities to the next season, but the Government of India refused permission due to export quotas and price escalation. When NAFED could not supply, arbitration followed. The arbitrator awarded damages against NAFED. The Supreme Court held the award unenforceable: the contract became void when the Government refused the requisite export permission, triggering Clause 14's cancellation provision. Performance would have violated export policy. Enforcing the award would contradict India's fundamental export law and public policy.
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