Indian contract law addresses unconscionable or oppressive clauses through the principle of unconscionability, which allows courts to refuse enforcement of such clauses or portions of the contract. The concept of unconscionability is closely linked to fairness and the potential for exploitation, particularly in cases where one party has a dominant position or unequal bargaining power.

Unconscionable Contracts:
Indian courts recognize that contracts can be deemed unconscionable if they are unfair or oppressive to one party, often due to unequal bargaining power or a dominant party exploiting a weaker one.
Remedies:
If a contract is found to be unconscionable, the court has the power to refuse to enforce the entire contract, enforce it without the unconscionable term, or limit the application of that term to make it more equitable.
Judicial Scrutiny:
Indian courts actively scrutinize contracts for signs of coercion, undue influence, or other factors that could lead to unconscionability.
Section 23 of the Indian Contract Act:
The Supreme Court has recognized that unfair or unconscionable clauses can be declared void under Section 23, which addresses contracts that are against public policy.
Public Policy:
The principle of unconscionability aligns with the broader concept of public policy, as it seeks to prevent exploitation and ensure fairness in contractual relationships.
Unequal Bargaining Power:
The court will often consider whether one party had significantly more bargaining power than the other, as this can be a key factor in determining if a contract is unconscionable.
Examples:
Unconscionable clauses may include those that impose unreasonable termination clauses on employees, restrict liability for negligence without justification, or involve exploitative pricing practices.
Section 16 (Undue Influence):
This section specifically addresses contracts induced by undue influence, where one party has a dominant position and uses it to obtain an unfair advantage over the other.
Burden of Proof:
If a contract appears to be unconscionable due to undue influence, the burden of proving that the contract was not induced by such influence rests on the party in the dominant position.
In essence, Indian contract law strives to prevent exploitation and ensure fairness by allowing courts to intervene in cases where contracts are deemed unconscionable due to oppressive or unfair terms, particularly when unequal bargaining power or undue influence is present.

Treatment of Unconscionable or Oppressive Clauses under Indian Contract Law
Indian Contract Law, primarily governed by the Indian Contract Act, 1872 (ICA), does not explicitly use the term "unconscionability" (unlike the UCC in the U.S.). However, courts intervene to strike down unfair clauses using:

Doctrine of Free Consent (Sections 10, 13–22, ICA)

Public Policy & Void Agreements (Section 23, ICA)

Judicial Interpretation & Equity

1. Doctrine of Free Consent (Sections 13–22, ICA)
A contract is valid only if entered into with free consent. Oppressive clauses may be challenged if consent was vitiated by:

Coercion (Section 15) – Threat of harm.

Undue Influence (Section 16) – Exploitation of a dominant position (e.g., lender-borrower, employer-employee).

Fraud (Section 17) or Misrepresentation (Section 18) – Deceptive terms.

Key Cases:
Lloyd’s Bank v Bundy [1975] (UK, persuasive in India) – A father pressured into an unfair guarantee had no free consent.

Subhas Chandra v Ganga Prasad (1967, SC) – Unfair terms in mortgage agreements set aside due to undue influence.

2. Void Agreements (Section 23, ICA)
A contract is void if it is:

Against public policy (e.g., exploitative employment contracts).

Unfairly one-sided (unconscionable bargains) – Courts examine bargaining power and fairness.

Key Cases:
Central Inland Water Transport Corp. v Brojo Nath Ganguly (1986, SC)

An oppressive termination clause in an employment contract was struck down as unconscionable and against public policy.

The court held that grossly unequal bargaining power can render a clause void.

LIC of India v Consumer Education & Research Centre (1995, SC)

Exclusion clauses in insurance contracts were scrutinized for fairness.

3. Judicial Intervention Based on Equity
Even if a contract is technically valid, courts may refuse enforcement if:

The clause is shockingly unfair (e.g., excessive penalties, waivers of fundamental rights).

No real negotiation occurred (standard form contracts).

Key Cases:
ONGC v Streamline Shipping (2002, SC) – Unfair arbitration clauses can be modified.

Vodafone International v Union of India (2012, SC) – Tax demands must not be oppressive.