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Case Law Details

Case Name : Veeraboina Yadaiah Vs Ramakanth Dande (Telangana High Court)
Appeal Number : Arbitration Application No. 93 of 2021
Date of Judgement/Order : 01/07/2022
Related Assessment Year :
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Veeraboina Yadaiah Vs Ramakanth Dande (Telangana High Court)

Learned counsel for the respondents has placed reliance on the doctrine of frustration and submits that because of reasons beyond the control of the respondents, all business activities during the lockdown period had come to a grinding halt. The situation which evolved was beyond the control of respondents. Therefore, it was impossible for the respondents to meet the claim of the applicants for the period under consideration. He further submits that given the precarious economic condition of the respondents it would be more appropriate if the parties resort to mediation rather than being referred to expensive arbitration. In this connection, learned counsel for the respondents has relied upon a Division Bench decision of this Court in A. P. Mineral Development Corporation Limited v. Pottem Brothers.

It is true that the lease deed dated 06.12.2018 contains an arbitration clause which is clause 25 providing for reference of disputes to an arbitrator to be appointed under the 1996 Act. However as per the legal notice dated 22.07.2020 claim lodged by the applicants was for the period from February, 2020 to July, 2020. Judicial notice can be taken of the fact that Covid-19 pandemic had broken out in the month of February, 2020 whereafter a nationwide lockdown was declared from 25.03.2020 bringing the entire country to a grinding halt. Most economic activities had come to a standstill. Subsequently steps were taken by the Central Government as well as by the State Government for gradual lifting of the lockdown but the lockdown continued in one form or the other till July, 2020 and even beyond.

Section 56 of the Indian Contract Act deals with an agreement to do an act. It says that an agreement to do an act impossible in itself is void. As per the first statutory explanation, a contract to do an act which after the contract is made becomes impossible or by reason of some event which the promisor could not prevent, becomes void when the act becomes impossible or unlawful.

It has been held that the first paragraph of Section 56 of the Indian Contract Act provides that an agreement to do an act impossible in itself is void. The second paragraph provides that a contract to do an act becomes unenforceable if the act becomes impossible or for reason of some event which the promisor could not prevent. It has been further held that Section 56 also provides that it becomes so unenforceable when the act becomes impossible or unlawful.

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