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Report No. 76

2.23. Sectio.- Frustration of the contract.-

Before proceeding to deal with the next section, we would like to deal with certain matters of a general nature. First is the question of frustration. When a contract containing an arbitration clause is alleged to have been frustrated by reason of change of circumstances or otherwise terminated, two questions may arise; first whether the contract has become frustrated, and secondly, whether the question of frustration or termination itself can be adjudicated upon by the arbitrator.

2.24. It would appears1 that even where by frustration the principal contract is alleged to have come to an end, the contract could still be in existence for certain purposes, such as the resolution of disputes arising under or in connection with it. The question whether the contract becomes impossible of performance and was discharged under the doctrine of frustration would still have to be decided under the arbitration clause, which operates in respect of such purposes.

1. (a) Damodar Valley Corporation v. K.K. Kar, AIR 1974 SC 158;

(b) Naihati lute Mills v. Khyab Ram, AIR 1968 SC 525 (528).

Arbitration Act, 1940 Back

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