Part II:

Simulation -1
1.Mr. Anil CEO of a Construction Company entered into a contract with Mr. Ramesh to construct a
house. Mr. Ramesh agreed to pay 2 crores as consideration if the building isconstructed with in a period
of one year. Mr. Anil started the construction work, in the meantime, lorry drivers went on strike for 5
months due to which the construction materials could not reach the construction site within the
stipulated time. As a result of which, the construction work was delayed and Mr. Anil took two years to
complete the construction. After completing the construction work, he asked 2 Crore as agreed by Mr.
Ramesh, but it was refused by Mr. Ramesh stating a reason of delay in completing the construction. An
arbitration clause was included in the contract.

Facts of the Case:

1. Parties Involved:
 Mr. Anil: CEO of a construction company and contractor.
 Mr. Ramesh: Client, who agreed to pay Mr. Anil for the construction of a house.
2. Contractual Agreement:
 Mr. Anil and Mr. Ramesh entered into a contract where Mr. Anil agreed to complete the
construction of the house within one year, with a consideration of 2 crores to be paid
by Mr. Ramesh if the building was completed within the stipulated time.
 The contract included an arbitration clause for dispute resolution.
3. Cause of Delay:
 During the construction, lorry drivers went on strike for five months, resulting in the
unavailability of construction materials.
 Due to this delay, Mr. Anil could not complete the construction within the agreed time
and eventually took two years to finish the project.
4. Dispute:
 After completing the construction, Mr. Anil demanded the agreed amount of 2 crores
from Mr. Ramesh.
 Mr. Ramesh refused to pay, citing the delay in completion as his reason.
Issues:
1. Whether Mr. Anil is entitled to receive the full payment of 2 crores despite the delay in
construction.
2. Whether the delay in completing the construction due to the strike could be considered an
exception under the doctrine of force majeure.

Relevant Legal Provisions:

1. Section 32 of the Indian Contract Act, 1872: Enforcement of contracts contingent on an event
happening. Contracts dependent on a future event become void if the event does not happen.
2. Section 56 of the Indian Contract Act, 1872: Doctrine of frustration or impossibility. If an
unforeseen event renders performance impossible, the contract may be discharged.
3. Arbitration and Conciliation Act, 1996: Since an arbitration clause exists, disputes must be
referred to arbitration.

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Judgment:
1. Determination of Liability:
 The delay was caused by an external factor (the strike), which was beyond Mr. Anil's
control.
 Under Section 56 (Doctrine of Frustration), the contract could potentially be
discharged if the event made performance impossible within the timeframe.
 If the contract explicitly included a force majeure clause covering delays due to strikes
or material shortages, Mr. Anil may be excused from strict adherence to the timeline.
2. Application of Arbitration:
 Since the contract contains an arbitration clause, this dispute would be referred to an
arbitrator.
 The arbitrator would assess if the delay due to the strike could be reasonably excused
and if Mr. Anil fulfilled his obligations to the best of his ability.
3. Possible Outcome:
 If the arbitrator finds that the delay due to the strike was justifiable and that Mr.
Anil took all reasonable steps to complete the project despite obstacles, Mr. Ramesh may
be directed to pay the agreed amount (2 crores), possibly with some adjustments for the
delay.
 If the arbitrator finds that the contract required strict adherence to the timeline,
Mr. Anil may be entitled to partial payment, or none if time was a fundamental
condition.
Conclusion:
In this case, the arbitrator will evaluate the circumstances of the delay and determine whether Mr. Anil
is entitled to payment based on factors like force majeure, reasonableness of the delay, and the nature
of the contract terms on timely completion.

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Facts of the Case
1. Parties Involved:
 Mr. Anil: CEO of a construction company who agreed to build a house.
 Mr. Ramesh: Client who agreed to pay Mr. Anil 2 crores as consideration upon
completion of the house within one year.
2. Contractual Agreement:
 Mr. Anil was to complete the construction within a one-year timeframe, with 2 crores as
payment upon timely completion.
 The contract included an arbitration clause for dispute resolution.
3. Delay Caused by Strike:
 During construction, a 5-month strike by lorry drivers disrupted the delivery of
construction materials, leading to delays.
 As a result, Mr. Anil completed the construction in two years instead of one.
4. Dispute:
 Upon completion, Mr. Anil requested the agreed payment, which Mr. Ramesh refused
due to the delay in meeting the stipulated timeline.
Issues
1. Whether Mr. Anil is entitled to the full payment of 2 crores despite the delay.
2. Whether the delay, caused by factors beyond Mr. Anil’s control (lorry driver strike), excuses the
delayed completion under the doctrine of frustration or force majeure.
Relevant Legal Provisions and Case Laws
1. Section 56 of the Indian Contract Act, 1872: Doctrine of Frustration or Impossibility. This
section applies if an unforeseen event makes contract performance impossible or unreasonably
difficult.
2. Section 32 of the Indian Contract Act, 1872: Contingent Contracts. If a contract is contingent
on the happening of a future event, and it does not occur, the contract may become void.
3. Relevant Case Laws:
 Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44: This case defined
the doctrine of frustration, indicating that when performance is made impossible by an
unforeseen event, the contract may be discharged.
 Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 SC 588: This case held that
difficulty in performance due to an unforeseen event does not necessarily discharge a
party from liability unless it is fundamentally impossible to perform the contract.
Judgment (Hypothetical)
As an arbitrator, after reviewing the facts and relevant legal provisions, the judgment is as follows:
1. Force Majeure and Unforeseen Delay:
 The 5-month strike was an unforeseen, uncontrollable event, leading to delays in
material delivery. While it affected the timeline, it did not make the performance
impossible but only delayed it.
2. Award Payment with Adjustments:
 Mr. Anil completed the construction with a delay. Given the circumstances, Mr. Anil
made reasonable efforts to complete the project despite uncontrollable delays.
 Mr. Ramesh’s refusal to pay the agreed amount is, therefore, not entirely justified.

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3. Decision:
 Mr. Anil is entitled to the agreed 2 crores, with a potential adjustment or compensation
deduction to account for the delay.
4. Award:
 Mr. Ramesh shall pay Mr. Anil the full amount (2 crores) if no adjustment was specified
in the contract. Alternatively, a fair reduction could be negotiated if the delay incurred
losses for Mr. Ramesh.
 Award: Mr. Ramesh is directed to pay Mr. Anil an amount of 1.6 crores as fair
compensation, accounting for the partial breach in the timeline due to an unforeseeable
delay.
Arbitration Process and Steps to Resolve
1. Notice of Arbitration: Issue formal notices to both parties and schedule an initial hearing.
2. Evidence Review: Obtain documentation of delays, communication logs, and any
correspondence with suppliers.
3. Hearings and Arguments: Allow both parties to present their claims, explaining the
uncontrollable nature of the delay.
4. Award and Decision: Issue an award detailing the payment terms and adjustments, citing
relevant contract and legal principles.

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Simulation-2

2. NK is a Biotech Company having several patents. It entered into a contract with another Biotech Company
VRK Pharmaceuticals on 20th September 2016 for 15 years. VRK Company had considerable experience in
medical applications related to the patents held by NK company. The parties included in their contract an
Arbitration clause stating that all disputes arising out of this contract would be resolved by a sole Arbitrator
appointed by both of them under Arbitration and Conciliation Act, 1996. Till 2020 March, Varun company
supplied its products according to the terms of the contract. But unfortunately, from 18 th March, 2020 onwards
Government announced complete Lockdown because of Corona pandemic. After lifting of 1st phase Lockdown
also VRK Company did not supply the products according to the contract because of lack of manpower and non-
availability of other raw material. NK terminated the contract alleging that VRK deliberately delaying the
development of the products according to the terms of the contract. Both of them approached Arbitrator to
resolve the dispute.

Assume that you are appointed as an Arbitrator and take necessary steps to resolve the
dispute and draft arbitral award

Facts of the Case

1. Parties Involved:
 NK Biotech: A biotech company that holds patents on various medical technologies and
products.
 VRK Pharmaceuticals: Another biotech company with expertise in medical applications related
to NK’s patents. It entered into a contract with NK for a term of 15 years starting on 20th
September 2016.
2. Contractual Agreement:
 NK and VRK entered into a long-term contract, with VRK responsible for the development and
supply of products related to NK’s patents.
 An arbitration clause was included in the contract, stipulating that any disputes would be
resolved through arbitration by a sole arbitrator, in accordance with the Arbitration and
Conciliation Act, 1996.
3. Interruption Due to COVID-19 Pandemic:
 VRK performed its contractual obligations until March 2020.
 From 18th March 2020, the government imposed a nationwide lockdown due to the COVID-19
pandemic, which disrupted VRK’s operations due to a shortage of manpower and lack of raw
materials.
 Even after the lockdown was partially lifted, VRK faced difficulties in resuming full-scale
production.
4. Termination of Contract:
 NK terminated the contract, alleging that VRK was deliberately delaying production and failing
to fulfill the contractual terms.
 Both parties approached an arbitrator to resolve the dispute.
Issues
1. Whether VRK’s delay in supplying products post-lockdown constitutes a breach of contract.

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2. Whether the lockdown and its aftereffects on VRK’s operations could be considered a force majeure
event, excusing VRK’s delay.
Relevant Legal Provisions and Case Laws
1. Section 56 of the Indian Contract Act, 1872 (Doctrine of Frustration): If an unforeseen event renders
the performance of a contract impossible, the contract may be considered void. In this case, VRK may
argue that the lockdown was an unforeseen event that temporarily frustrated their ability to supply
products.
2. Arbitration and Conciliation Act, 1996: Provides for resolving contractual disputes through
arbitration, as per the parties’ agreement.
3. Relevant Case Laws:
 Energy Watchdog v. CERC (2017): The Supreme Court held that force majeure clauses can
excuse non-performance if the event is beyond the parties’ control. However, if alternative
methods for performance exist, force majeure may not apply.
 Satyabrata Ghose v. Mugneeram Bangur & Co. (1954): Defined the doctrine of frustration,
stating that an event that makes performance impossible could discharge the contract.
 Standard Retail Pvt. Ltd. v. M/s G.S. Global Corp. & Ors. (2020): The Bombay High Court
observed that COVID-19 lockdowns could qualify as force majeure events, depending on the
circumstances, but may not necessarily discharge obligations unless explicitly stated.
Judgment (Hypothetical)
As the appointed arbitrator, based on the facts, applicable legal principles, and case law, the judgment is as
follows:
1. Consideration of Force Majeure and Delay Due to Lockdown:
 The lockdown due to the COVID-19 pandemic was an extraordinary and unforeseeable event
that impacted VRK’s ability to operate normally. Given the severe restrictions, it qualifies as a
force majeure event temporarily affecting VRK’s ability to meet supply commitments.
2. Assessment of Post-Lockdown Performance:
 While VRK resumed operations after the lockdown was lifted, it still faced workforce and raw
material shortages due to ongoing disruptions in the supply chain, which was beyond VRK's
immediate control.
 However, VRK had a duty to make reasonable efforts to minimize the delay. Evidence of VRK’s
actions to resolve these challenges will be considered.
3. Termination and Breach:
 NK’s unilateral decision to terminate the contract on the grounds of deliberate delay appears
premature, as the delay was largely due to pandemic-related disruptions.
 VRK’s failure to perform, in this case, is not deemed a deliberate breach but a consequence of
force majeure circumstances.
4. Decision:
 Contractual Obligations to Resume: VRK is directed to take all feasible measures to fulfill its
obligations under the contract within a reasonable timeframe.
 Non-Termination of Contract: NK’s termination of the contract is found to be unjustified under
the given circumstances. The contract will therefore be reinstated, with VRK given a specific
period to comply with resumed supply obligations.
5. Award:
 Reinstatement of Contract: NK and VRK shall continue their contract, with modified deadlines
if necessary.
 Future Contingency Clause: It is recommended that the parties include a modified force
majeure clause to handle future pandemic-related or unforeseen disruptions.
Conclusion

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In light of the COVID-19 force majeure event, the contract remains valid, with VRK expected to resume timely
supply as circumstances normalize. This decision balances NK’s need for performance and VRK’s unavoidable
pandemic-related constraints.